Malvinder Singh, MD and CEO of Ranbaxy Laboratories said the Merck deal has a milestone payment of over USD 100 million for each molecule.  

The royalty gained from the Merck deal could be in double-digits, he said. The deal with Merck is in the area of anti-infectives. Talking on the rupee, he said it may weaken further as a short-term phenomenon.  

Ranbaxy plans to have FTF launch every year. The company will be able to launch Aricept in H2CY10 only after getting the nod. They are confident of converting FCCBs by 2011. They will focus on strategic alliances and acquisitions in India and other emerging markets.

Excerpts from CNBC-TV18's exclusive interview with Malvinder SIngh:

Q: Give us one word on the tie up that you now have with GSK and Merck, what is it that you are penciling in by way of possible milestone payments and maybe even royalties down the line?

A: In terms of the milestone payments, we will be getting over a USD 100 million for each drug candidate that we take through in the Merck deal, which is similar again to the GSK deal where we have a similar amount of milestone payments. In terms of royalties for the Merck alliance, we can go upto double digits. So I think both these research alliances are extremely important for us. We at Ranbaxy were really the first Indian company to move out and create these risk reward relationships with big pharmaceutical companies. We had expanded the one for GSK last year and this one with Merck is in the area of anti-infectives. So I think it really positions us well to partner effectively with big pharma to leverage our scales to provide our capabilities to them, but also leverage their knowledge and capabilities to move up the value chain in the area of NCE development.

Q: I believe there is also an undisclosed amount over a five-year period while I am sure you will not talk about this specific figure, just explain to us whether or not this comes in on an equal basis for the five years whether it is frontloaded, how is it going to work out?

A: The milestone payments of USD 100 million plus are really spread upon different events, which will get triggered off in terms of the discovery and development phase of R&D. But there is an upfront amount which we have not disclosed, will be coming into this quarter and then based on the success, we will be getting milestones. The work that Ranbaxy will be doing will be right through these group of concepts which is to the completion of Phase II A and after that work will take the development forward and then eventually will be commercializing these products in the markets globally.

From our viewpoint I think this is really good that we have this alliance with us to have GlaxoSmithKline (GSK) and Merck both very globally reputed brands and companies to work along with and would like to carry on and do more such alliances as we move into the future.

Q: Significant amount for this quarter?

A: I would just say it is undisclosed.

Q: I just want to talk a little bit about how the currency has been moving as well, it’s being a spate of weakness for the rupee. Have you right now any reason to relook your revenue targets?

A: No. In my assessment this is a temporary movement. In terms of weakening over a medium-long term, might I certainly say that the rupee is strengthening. But yes as it does move up there will be benefits to people that will accrue. But I don’t believe this would be sustainable.

Q: Given the kind of exclusivity pipeline you have over the next four-five years, are you now going to be looking at bigger deals in terms of the money you get from these exclusivity contracts? For example, the next same deal is about USD 1.5 billion, there is another one you are working on, is it going to be an excess of quarter to about a billion dollars?

A: I think in many of the products where we have exclusivity, these are products, which are over a billion dollars each. So the opportunity is very significant for us, either to win the litigation through the strong IP that we have and launch these products where there will be significant gains for us or on a case by case basis where we believe an out of court settlement is most appropriate, follow that route, bring in greater visibility, bring in greater certainty and also reflect that in the topline and bottomline, which we have shown for the next many years into the future what the strong performers of the US market would look like with these launches. So I think having the second largest FTF pipeline globally and being able to optimally leverage that with a mix of strategies in terms of IP litigation and settlements I think we are extremely well positioned to ensure that we are able to bring at least one FTF product into the markets every single year.

Q: Could you update us on Aricept, what is the status of the case as of now we believe it is still with Esai? 

A: We don’t have a litigation on that; we are the first to launch on that product we have a tentative approval and if things continue to remain where they are, we would be adding this to our launch basket and should be able to launch this in Q4 of 2010. So this will be another product that is going to bring in more certainty and more visibility and this product is over USD 1.5.

Q: There have been some concerns raised about what happens to the FCCB plans. I know it is deeply out of the money and there is a long gestation period to it as well, but the fear is that when they are indeed redeemed there might be a hit, how have you read the entire move of the currency with specific reference to your FCCB plans?

A: I do not think there will be any negative impact on us. The conversion happens in February 2011, we have a slew of five-six FTF products that we will be launching before that. I am very confident and very certain that the conversion will happen at that point in time. So there is no concern in my mind at all on that point.

Q: I also want to talk a little bit about the tie up that you now have with Orchid, will Ranbaxy be looking to close your Cephalosporin plant in Mohali and integrating operations with Orchid?

A: We would be leveraging each other strengths in Cephalosporin amongst many more therapeutic areas that we are working on. We and Orchid both are amongst the top five largest Cephalosporin producers and marketers globally. We both have different strengths, some of them are overlapping. So we would certainly work closely to leverage our capabilities, to strengthen our global market positions, to leverage our scale, cost efficiencies, technologies and product flow to maximize benefits for both companies.

Q: There have been some pricing changes underway in Romania, but any Eastern European assets that Ranbaxy might be looking to acquire or looking at carefully for the rest of this year?

A: I think my acquisition focus is more in emerging markets and hopefully look at doing some more things in the Indian market either through acquisitions or through creating strategic alliances. I certainly believe that the consolidation in the Indian market as I have said before is far overdue. We need a shakeout here and I am certainly going to work towards that.