He's optimistic : Braingain's Kalsi

None of them is called TuTube (not yet), but the phenomenal success of YouTube (a video-sharing website) globally has inevitably spawned a couple of desi avatars. There's meravideo.com and apnatube.com, the former launched by Kanwaldeep S. Kalsi, 31, who heads Braingain Entertainment, a media company that produces TV programmes. apnatube.com was launched by three Indian friends based in the us. The video-sharing sites allow users to upload and view videos, in short, provide entertainment on the net. In addition to serving as an entertainment platform, MeraVideo also helps users earn money by giving them a platform to share and distribute their videos. Kalsi has already spent Rs 25 lakh on the site since inception six months ago. He shells out 2 lakh per month for bandwidth alone, which he expects to scale up, going by the demand. Kalsi recently was able to raise $200,000 with the help of angel investors like Sasha Mirchandani, Director, Imercius Healthcare (of Onida Group) and several ex-IITians. Revenues are expected to accrue from subscription, mobile downloads, sale of content as well as DVDs and VCDs of the videos to other content providers and advertisements. Apart from negotiating with Indian studios for content (promotions and songs), Kalsi is in advanced talks with mobile content providers.

Kalsi is confident of procuring another $2 million before the year-end, although recent negotiations for funding with Matrix Partners did not work out. "The internet in India is not convenient," shrugs Avnish Bajaj, founding MD, Matrix Partners. Mirchandani is optimistic. "MeraVideo will be a cult site in India. Kalsi's business model is unique, and MeraVideo will soon make profits." Before the real McCoy does.

-Pallavi Srivastava

When the Deal Goes Down...
Sahara wants Jet to buy it at a higher price or compensate it.

Sahara's Roy: Battling it out

Jet airways might have called off its $500 million (Rs 2,300 crore) deal to acquire Air Sahara but the battle is far from over. The deal, which was initially inked on January 20 this year, was called off in June amidst considerable controversy.

Now, Air Sahara has filed a petition in London and has asked the arbitrators to direct Jet to honour its commitment to buy over Air Sahara. The price tag that Air Sahara is asking for: Rs 3,020 crore, which is 31 per cent more than what Jet had initially agreed to pay. Air Sahara's contention, it is gathered, is that the increased amount is a direct result of business revenue that Jet is said to have earned through the sale of Air Sahara's tickets, some operating expenses and an interest charge.

If Jet does not go ahead with the deal, Air Sahara has sought damages to the extent of Rs 1,931 crore as compensation which includes an interest component calculable from the date on which the deal between the two parties was inked. Jet, on its part, is said to have asked Air Sahara for a refund of the Rs 500 crore that it paid as an advance for the deal. Air Sahara's official spokesperson, when contacted by BT, declined to comment while Jet Airways' Executive Director, Saroj Datta also declined to comment. A three- member arbitration panel, headed by Lord Stein, a British judge, is expected to come out with an order early next year. Both the parties are said to have filed their pleas with the panel in London.

-Krishna Gopalan

Quest for the Magic Pill
The Tatas cotton onto the huge opportunity in drug discovery.

Ratan Tata: Discovering drugs

When Rashmi Barbhaiya chucked up his job as head of Ranbaxy Labs' research division, few would have expected him to go on to head an organisation that would soon be collaborating with America's #4 drug maker. That's exactly what Barbhaiya, along with another former Ranbaxy scientist Kasim Mookhtiar, is doing at the helm of Advinus Therapeutics, a drug discovery play that's funded by the Tatas. With an eye on the potentially lucrative drug discovery outsourcing market, estimated to be as large as $7.3 billion (Rs 32,850 crore) in India and China, last fortnight Advinus announced a drug discovery collaboration with Merck to develop two of Merck's clinically validated drug candidates for metabolic disorders. The Tata company stands to rake in $150 million (Rs 675 crore) via upfront and milestone payments for the two targets, with Merck retaining the right to advance the targets into late-stage clinical trials and Advinus entitled to royalties on the sale of products that result from the collaboration.

Taking the molecule to market is of course a long shot, but for now it's a win-win situation for both the start-up and Merck. "While we will get access to Merck's technology, Merck will get a catalyst in the tremendously risky and painstaking process of drug discovery," says Barbhaiya, CEO and MD, Advinus. Company officials add that any patents emerging during the collaboration would remain with the Indian company. "This will be an ongoing collaboration, and we have the option to take up more targets," says Barbhaiya, adding that Advinus will remain focussed on drug discovery.

The Advinus model may be pretty unique, but to be sure it's not the only Indian company that's in search of the magic pill. The upside is huge-as much as $1 billion (Rs 4,500 crore) in revenues annually-but then the risk too is substantial, as molecules could fail clinical trials after years of R&D, and after hundreds of millions of dollars have been spent. Outsourcing the development part of the drug discovery process, to that extent, helps minimise risks (although the upside, if the drug reaches the market, will have to be shared). For their part Indian pharma companies have little choice but to chase innovation. Says Saion Mukherjee, a pharma analyst with Brics Securities: "The entry barrier in generics has fallen and Indian companies now have no option but to go the innovation way."

Glenmark Pharmaceuticals is another Mumbai-based company that, in the quest for a new molecule, is licensing out its development activities. But the Mumbai-based pharma major's model differs from Advinus to the extent that the initial research on the target molecule has been done by the Glenmark R&D team itself. Glenmark has researched six molecules and recently signed three deals for developing and marketing two of its lead molecules, Oglemilast (for asthma) and GRC 8200 (for type II diabetes), with foreign firms. For Oglemilast, the company has tied up with Forest Laboratories for a deal that involves upfront and milestone payments of $190 million (Rs 855 crore), giving Forest the rights to the North America market, and with Teijin Pharma in Japan for $53 million (Rs 238.5 crore), giving it the rights for the Japanese market. In the case of GRC 8200, Glenmark has entered into a deal with Merck KGAA, Germany, for a m190 million deal, giving it the rights to the North America, Europe and Japan markets. "The whole idea is to partner out for the us, Europe and Japan markets, which is 85 per cent of world market, and keep the rest of the world rights with us, either exclusively or for co-commercialisation," says Glenmark's MD and CEO Glenn Saldanha. He is clear about the logic behind such deals. "Phase two and three are very expensive for India right now. In money terms it could involve investing $70 million (Rs 315 crore), while the risk-reward profile doesn't justify the expense."

-Shivani Lath

Not the Doctor's Order
German buyout makes little impact on DRL earnings.

DRL's Prasad: Bottom line pressure

Betapharm, Dr Reddy's Laboratories (DRL) big-bang buyout of $571 million (Rs 2,569.5 crore) in February, may prove to be a damp squib-at least in the near term. When the Hyderabad-headquartered pharma major acquired Germany's fourth largest generics company with $200 million (Rs 900 crore) in revenues and around 25 per cent operating margins, the rationale was to get a foothold in the largest generics market of Europe (with 55 per cent penetration levels). However, since betapharm came under DRL's umbrella, the pricing environment in Germany has turned awry. In May, the government passed an Act that sought to reduce healthcare costs substantially for the country's ageing population. It mandated all pharma companies to cut prices of their top-selling drugs and also restricted them from raising prices. And another round of healthcare reforms is in the offing, which is expected to bring down prices further. Rivals like Hexal and Stada have already cut prices by 40-50 per cent and betapharm has had to follow suit. DRL, in fact, has indicated an effective price cut of 10-24 per cent across the portfolio.

This puts DRL's consolidated bottom line under tremendous pressure. "betapharm contributed around 20 per cent to the top line in the quarter ended September 2006 but its contribution to the bottom line was zilch," says an equity analyst based in Mumbai, adding there is little scope of any improvement in the two quarters that remain. "While betapharm's volumes will continue to grow, it is not likely to make any significant contribution to DRL's earnings, which is not good news for the company whose debt liability has shot up," he adds. Indeed, before the acquisition DRL had a cash surplus of around $170 million (Rs 765 crore), whereas now it has a debt liability in excess of $600 million (Rs 2,700 crore).

Last fortnight, DRL raised $200 million by selling 12.5 million American Depository Shares to the public. Says G.V. Prasad, Vice Chairman and CEO, DRL: "The funds raised will be used to expand DRL's geographical presence, organically as well as inorganically, and to finance capital expenditure in the immediate future." A section of analysts, however, suspects that a portion of the funds might be used to service a part of its debt liability.

Remove betapharm from the picture, and DRL is on a good wicket. Prasad asserts the company will meet its 2006-07 target of $1 billion (Rs 4,500 crore) sales before the year end. But then the uncertain shadow of betapharm looms large over the DRL bottom-line. Prasad insists it is a long-term strategic investment for the company. "Performance over one or two quarters is not the right parameter to measure its strength or the weakness," he says.

-Archna Shukla