Dr Reddy's Laboratories eyes place among top five domestic pharma players

Hyderabad-based Dr Reddy’s Laboratories (DRL) is aiming to be among the top-five pharma players in the domestic market by focusing on the chronic therapy segment. The US would continue to remain an important geography, but the firm says it hopes to double its revenues from China and grow revenues five-fold in Brazil in the next five years.

The firm has outlined an ambitious strategy for its next leg of growth where it says by 2027; at least 25 per cent of its products will be “first to market” generics, which means they will be affordable versions of innovator products. (see box) It also aims to launch three innovative products that improve standards of treatment every year.

GV Prasad, co-chairman and MD of Dr Reddy’s Laboratories (DRL), told Business Standard, “In India we want to increase our share in the chronic market where we are under-represented, and we may invest there for inorganic expansion if we find the right fit in terms of size and price, etc. We have already done some, like the Novartis cardio-vascular product.”

Prasad added, “We want to expand in India in the relevant spaces for us, and wish to do that organically and inorganically.”

He said they diversified their efforts from the US to other markets, and moved their capital allocation to markets like India. “In India, we have been making brand acquisitions in the last few years. We continue to work in the US, but we have allocated more capital into India,” Prasad said.

The US has been a focus market for DRL for years, and still contributes to about 35 per cent of its consolidated revenues. But, other markets are fast catching up — together the India and emerging markets have a turnover of $1 billion, about the same size of the US revenues.

The US business has clocked a 5 per cent CAGR between FY19 and FY22, and DRL has a portfolio of 335 products, of which over 160 are commercialised, and the rest are in various stages of development.

However, the generics market in the US has faced competition and price erosion with the entry of more players. The Indian market, on the other hand, is a branded generic market. While it takes time to build a brand, once one has a strong brand, the returns are fairly stable.

“In India, the price remains stable and the brand continues to grow. Even in mature brands there is growth. In the US you don’t have pricing power. When you have a brand you have pricing power. But in generics (like in the US), when a new player comes in, you can quickly lose market share.”

He added that one can also gain share in a generics market very fast. “Nobody can exit the US market as it's one of the largest markets in the world, and the growth is also good,” he said.

DRL is planning to move up the value chain in the US — of the pipeline of 175 products, about 40 per cent are injectables or sterile products and around 25 are complex products.

This apart, China is another key market where DRL aims to do well now with a faster regulatory approval process.

“Chinese regulations now allow that if a product is approved in the US, then based on that the product can be approved in China as well. The process takes about two to three years,” Prasad says, adding that it’s mostly the US pipeline that they are taking to China. Russia, which is largely an over-the-counter (OTC) market, is also growing fast, Prasad says. “Around 35-40 percent of that market is OTC and thus if one has a field force, it's possible to gain market share in Russia. We will continue to launch products there,” he adds.