Swati PiramalPiramal Lifesciences, the drug research company of the Piramal Group, will invest Rs 200 crore in the next two years for developing new medicines, said a top group executive.

An investment in new drug development research (NDDR) is a risky affair, but pays rich dividends, if company succeeds in developing a new popular drug. Few Indian pharma companies such as Sun Pharma and Piramal Healthcare had hived off their research division into separate companies to improve the balance sheet of the parent company.

“Annually, we invest about Rs 100 crore. About 90% of the Rs 200-crore funding for the next two years will be raised through debt,” Swati Piramal, director at the Piramal Group told pharmaques.biz. The company can also raise funds through Piramal Healthcare that holds an 18% equity in Piramal Lifesciences. The other option is to invest some of the royalty earned by Piramal Lifesciences from other pharma companies.

On Monday, the public-listed Piramal Lifesciences reported a net loss of Rs 31 crore for the quarter ended September 30. The net sales stood at Rs 2.5 crore for the quarter. The Mumbai-based company, formed in 2008, expects to launch its first drug by 2011-12. But, Ms Piramal said the company would not hazard a guess on when it can break-even because even after launch drugs can fail.

Typically, the process of new drug development takes about 10-12 years and costs about $1 billion globally. In India, the costs are significantly lower, and Ms Piramal said the company will try to develop cancer drugs, which are less expensive, to develop at about $100 million.

She added that the company will also have an additional revenue stream from the launch of its phythopharma and herbal products over the next 3-4 years. At present, the company has one molecule (a head and neck cancer drugs) and four phythopharma molecules at the phase-II trials stage.

The company said it would consider outlicensing non-cancer molecules to global pharma companies, but only after completing the initial phase-II trials.