THE CHALLENGES & DR. REDDY’S RESPONSE
Regulatory Concerns
The company says some of these problems are procedural in nature and need better people capabilities; it is also strengthening its documentation and laboratory systems
No new significant product approval in the US
It is talking about building a healthy product pipeline of its own, apart from products acquired from Teva, to drive growth in the US
Needs high-value launches to make any substantial difference in the US business
Is betting on products in the pipeline such as generic versions of NuvaRing (a contraceptive), Copaxone (for multiple sclerosis), Aloxi (anti-nausea) and Suboxone Films (for opioid dependence) – each with a revenue potential of $40-100 million per annum
Structural changes in the US market, which is seeing channel consolidation, pricing pressures and increased competition
The company is talking about geographical expansion and deepening presence in Europe and emerging markets to build growth momentum
The proprietary business (the innovations it does on existing generic drugs), under which it launched two products in the US in April and June 2016, had negative EBITDA last year
Dr. Reddy’s hopes its “rich pipeline of assets in late-stage clinical development, including some high-value assets” will help this business report positive cash flows in the next 3-4 years and build a $500 million business by 2021/22
Challenges in India due to uncertainty around GST, the new rule on generic drug prescription and price controls
Still, the company hopes to grow by 9-10 per cent in 2017/18
Outside the US, which contributes 50 per cent to revenues, there are challenges related to product approvals and marketing in diverse emerging markets
The company hopes that biosimilar business in emerging markets will drive growth over the next three to five years
Dr. Reddy's, in spite of being an early entrant in biosimilars, gets around 2 per cent revenue from the segment
It is hoping to see the biologics business contribute substantially to the bottom line by 2020. Expects to increase revenue from biologics from over $40 million at present to $150-200 million in 2019/20