The Hindu Business Line : Betapharm losses drag Dr Reddy’s Q4 net down 68%

Hyderabad, May 20 India’s No. 1 pharmaceutical company for the year 2006-07, Dr Reddy’s Laboratories Ltd slipped from its position as its revenue and net profit dropped significantly in 2007-08.

Absence of upsides (revenues arising out of marketing exclusivity of authorised generics), continuing loss from its German subsidiary Betapharm and raw material problems in Mexico dragged down the turnover and net profit of the company, Mr G.V. Prasad, Vice-Chairman and Chief Executive Officer, told newspersons here on Tuesday.

The Hyderabad-based company’s net profit dropped 68 per cent in the fourth quarter ended March 2008 at Rs 102 crore compared with Rs 325 crore in the corresponding quarter of previous fiscal on a turnover of Rs 1,325 crore and Rs 1,557 crore respectively.

According to Mr K. Satish Reddy, Chief Operating Officer and Managing Director, the performance of the company in the last fiscal year reflected the core strength of its business.

“We could cross one billion dollar mark in revenues without any upsides or first to file opportunities unlike FY07 which is noteworthy. From now onwards we expect a steady growth,” he said.

Three major markets, US, India and Germany with over $200 million business and Russia with $100 million would ensure steady growth for company, he added.

As part of its strategy to bail out Betapharm, Dr Reddy’s has gained considerable independence from its contract manufacturing partner for raw materials, Salutus, during the year and shifted majority of product manufacturing to India.

“By June 2008, we expect Betapharm to be out of losses and the impact would be felt on this year’s business,” he added.

The key growth drivers for the company were 39 per cent sales growth in the US followed by 16 per cent and 13 per cent growth in India and Russia respectively.

The growth in these markets was due to good performance by key brands (such as Omez, Stanlo, Atocor and Razo) and launch of new products, he said.

Dermatology Foray

During fiscal 2009, Dr Reddy’s will be foraying into dermatology segment in the US by launching three products. “While the financial implications of this foray may not be significant, it is a strategic move by us to have an own brand image,” Mr Prasad said. The company is on the look out for a suitable partner in this regard.

RESTRUCTURING

Dr Reddy’s has also “repositioned/restructured” its business focus. “We have rather simplified our focus into three major segments of global generics, pharmaceutical services and active ingredients and innovation in biologics, specialty and drug discovery,” the CEO said.

The company would also invest significantly in biologics and global generics, he added.

OUT LOOK

In 2008-09, Dr Reddy’s is expecting a 25 per cent growth in sales and net profit. “This will be based on significant improvement in performance of Betapharm and new product launches including Sumatriptan as an Authorised Generic with exclusivity,” Mr Prasad said.

The board of directors of the company which met here on Tuesday recommended a final dividend of 75 per cent (Rs 3.75 per share of the face value of Rs 5) subject to the shareholders approval.