Mumbai, Aug. 27: The board of drug company Nicholas Piramal India will meet on Friday to decide on spinning off its drug research unit into a separate entity.

The Ajay Piramal group company is adopting a strategy similar to rival Sun Pharmaceuticals, which had demerged its research unit in February.

Under a scheme of arrangement, Nicholas plans to demerge its new chemical entity research unit into a separate outfit.

Company officials said Nicholas was developing 13 compounds, of which three were in the stage of clinical trials.

The research and development team is working on four therapeutic areas, with specific targets for each segment.

They are oncology, inflammation, diabetes/metabolic syndrome and infectious diseases. Oncology is the company’s most successful programme, with clinical trials on the P276 lead molecule being carried out in Canada and India.

In infectious diseases, Nicholas is researching on antibiotics and antifungals.

Sun Pharmaceuticals had formed a separate unit for its research division called Sun Pharma Advanced Research Company (Sparc).

The demerger was seen as a shareholder-friendly move as it unlocked the potential value in the division. Sparc was listed on July 18, becoming the first pure drug research firm to be traded on bourses.

It got listed at Rs 87.15 on the Bombay Stock Exchange compared with its base price of Rs 72.70, a gain of nearly 20 per cent.

Research activities of Sun include development of new chemical entities and novel drug delivery systems. Shareholders had got one share of Sparc for every one held in Sun Pharma.

Sparc is now quoting at Rs 70.80, off its 52-week high of Rs 125.45.

Analysts feel benefits to Sun Pharmaceuticals’ shareholders are likely to accrue only in the medium to long term.

The company had earlier indicated that Phase III clinical trials for three of its drugs were likely to be concluded only in 2009.

The four new chemical entities that Sparc has in its portfolio include Sun-1334H used in the treatment of allergic rhinitis; Sun-461 used in asthma; Sun-44 used to treat seizures; and Sun-09 used in muscle spasticity.

The global market size of all these segments is more than $14 billion.

Nicholas Piramal is India's second largest pharmaceutical healthcare company and has a major presence in cardio-vascular and anti-diabetics segments. It is also present in antibiotics and respiratory segments, pain management and neuro-psychiatry.