Dr Reddy’s signs off a forgettable year

Guides 25% growth for FY '09, reorients business into three buckets 'May you live in interesting times – Chinese proverb, and curse.'

Dr Reddy’s Laboratories vice chairman and CEO G V Prasad admitted 2007-08 was “interesting” for the company.

Not surprising considering India’s second biggest drug-maker reported a massive 50% drop in net profit for the year ending March 31, 2008, at Rs 468 crore and 23% drop in total revenues to Rs 5,001 crore or $1.25 billion.

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This was on account of impact of multiple pressures like growing competition in generics, writeoffs on account of German acquisition betapharm and forex hits.

But it is significant to note that the growth in FY08 has come without any upsides during the year and despite difficulties in our German acquisition betapharm and purely on organic growth witnessed by base business which has logged $100 million per month during the year, Prasad added, sharing the numbers for the full year and Q4 of FY '08.

While the natural tendency would be to compare FY '08 to FY '07 one should remember the later year was a bumper one when it had multiple upsides from marketing authorisations it may not be comparing apples to oranges the company suggested.

“As far as we are concerned it was a great year as were able to do over $1 billion in revenues without any upsides,” pitched in managing director, Satish Reddy.

The numbers may not have been great compared to the previous year but the focus was clearly on consolidating core business and building future sustainability.

During the year, India, the US and Germany (betapharm) contributed $200 million each during the year while Russia added $100 million.

Prasad went on to elaborate on the distinctive business model comprise three buckets of businesses namely global generics, APIs and CPs and innovation business including biologics, specialty pharma and discovery and development.

Terming the reorientation in the company a part restructuring and part repositioning of the businesses, Prasad went on to add Dr Reddy’s has built up a global R&D and supply chain infrastructure to support these businesses.

Dr Reddy’s capped FY '08 with three rapid fire acquisitions which though small in size compared to betapharm, nevertheless were strategic aimed at providing the company the global reach and infrastructure which Prasad spoke of.

It had acquired a small Italian company Jet Generici and a UK based R&D arm of Dow Chemcials apart from the custom pharmaceuticals business of another multinational BASF in the US. “We are on the look out for more such niche but strategic acquisitions,” he added.

Guiding a revenue growth of 25% in FY '09, the honcho of the Hyderabad based company said the number one priority this year would be to deliver strong financial performance with substantial improvement in profitability.

Significantly, while it launched 11 products in FY '08, Dr Reddy’s will launch about 15 new products in the US markets this year including a huge upside from the sale of GlaxoSmithKline (GSK), blockbuster anti-migrane drug, Imitrex, generically known as Sumatriptan Succinate which is worth around $1 billion in sales per year.

The two companies had settled the patent litigation with Dr Reddy’s being granted an authorised generic status for its copycat drug in the US market ahead of the patent expiry in February 2009. After Merck’s blockbuster drugs, Zocor and Proscar, Imitrex is the third in a row to fall in DRL expanding authorized generic portfolio.

This apart the company will also make its debut into the fast growing US dermatology market with three products this year.

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“It is a small business but an important one,” Prasad said. In a further pointer to a possible robust FY '09 Dr Reddy’s has 70 ANDAs in US pending of which 15 are first-to-file and 40 Para IV challenges.

Clearly, then, from now on we will focus on sustained and predictable growth and there will be only positive surprises in the future, Prasad asserted, signing off to an interesting though, according to some, a particularly forgettable year for the company.

Under license from www.3dsyndication.com

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