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UPDATE 1-India's Nicholas Piramal to spin off research unit

Mon Aug 27, 2007 10:49am EDT

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MUMBAI, Aug 27 (Reuters) - Drug maker Nicholas Piramal India Ltd NICH.BO on Monday said it planned to spin off its novel drug discovery unit as part of a restructure of its research and development.

The board of the Mumbai-based company would meet on Aug. 31 to consider the proposal, Nicholas Piramal said in a statement.

Leading Indian drug firms Dr. Reddy's Laboratories Ltd (REDY.BO) and Sun Pharmaceutical Industries Ltd (SUN.BO) have hived off their research units into separate entities, a step which lowers the parent's risk exposure to drug development costs and can help it realise some of the value of the unit.

"This is not unexpected. Almost all drug firms are doing this," Shahina Mukadam, analyst with IDBI Capital Market said.

"This will help the company to unlock value and pursue other opportunities."

Last week, the Mint paper reported that Ranbaxy Laboratories Ltd (RANB.BO) was considering spinning off some of their research and development operations.

A spokesman for Nicholas Piramal said the research unit was working on developing new molecules, including one undergoing initial stage trials as a possible cancer treatment and molecules for pain management and anti-infection which were in mid-stage trials.

The unit was also working on taking Eli Lilly & Co's (LLY.N) drug candidate for metabolic disorders through the first and mid-stage trials in exchange for milestone payments if certain targets were met.

The spokesman said Nicholas Piramal did not separately report the expenditure of the new drug development unit, but said the company's total research and development spending for 2006/07 was 5.1 percent of its total income.

Ahead of the news, Nicholas Piramal shares closed 4.4 percent higher at 247.95 rupees in a Mumbai market that rose 2.9 percent.

((Reporting by Bharghavi Nagaraju; editing by Harish Nambiar and John Mair; Reuters Messaging: bharghavi.nagaraju.reuters.com@reuters.net; +91 22 6636 9059))

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