Description
It describes about Industry Trends in Pharmaceutical industry, PEST Analysis of Pharmaceutical Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the Dr. Reddy's laboratories it's Finance performance, SWOT analysis of Dr. Reddy's Laboratories and Various Strategies employed.
Dr. Reddy’s Laboratories Established in 1984, Dr. Reddy's Laboratories Ltd. is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs). Industry Analysis: Industry Trends: Local and Global The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (around 330 in the organised sector). The top ten companies make up for more than a third of the market. The Indian pharma industry grew by a robust 18% YoY in 2011 to ` 565 bn (approx. US$ 12.5 bn). It accounts for about 1.4% of the world's pharma industry in value terms and 10% in volume terms. Besides the domestic market, Indian pharma companies also have a large chunk of their revenues coming from exports. While some are focusing on the generics market in the US, Europe and semi-regulated markets, others are focusing on custom manufacturing for innovator companies. Biopharmaceuticals is also increasingly becoming an area of interest given the complexity in manufacture and limited competition. The drug price control order (DPCO) continues to be a menace for the industry. There are three tiers of regulations - on bulk drugs, on formulations and on overall profitability. This has made the profitability of the sector susceptible to the whims and fancies of the pricing authority. The new Pharmaceutical Policy 2006, which proposes to bring 354 essential drugs under price control has not been officially passed as yet and has been stiffly opposed by the pharmaceutical industry. The R&D spends of the top five companies is about 5% to 10% of revenues. This ratio is still way below the global average of 15% to 20% of sales. Indian companies have adopted various strategies for their R&D efforts. Some have entered into collaboration and partnership agreements with innovator companies; others have out-licensed their molecules for milestone payments. Hiving off R&D units into separate companies has also become a preferred option for many Indian pharma players. That said, given that the research pipelines of Big Pharma are drying up, they have now begun to dabble in generics. In this regard, these innovator companies are either buying out Indian firms or are forging alliances with them.
Alongside India, the Chinese Pharmaceutical market also has a positive trend in progress. The Chinese Pharmaceutical Market Trend has remained positive for the last 15-20 years since the time China started using drugs that are used worldwide. The Chinese Pharmaceutical Industry growth in the last few years have remained nearly10 percent. American Pharmaceutical Industry is the biggest in the world with sales around $250 billion. The American Pharmaceutical Industry Trend has remained positive throughout and by the end of last year, it was around 6 percent. Recent happenings in Pharma sector: • • • • • • Increased generic penetration Outsourcing in the fields of Research and Development The fields of Bio-Technology FMHG (Fast Moving Health Goods) Non-allopathic medication Export of bulk-drugs
Recent News in Pharma sector: • • • • • • • • • • • WHO & UNFPA approves Female Condoms of Cupid Ltd Ipca Laboratories receives approval from USFDA for Madhya Pradesh facility Cadila Healthcare inks license deal with Somaxon, ProCom One No gifts or incentives for doctors: Pharma industry TPG to buy Par Pharma Mumbai to host 3rd annual BIO India International Conference to be held from Sept 12-13 Dr Reddy's unveils Atorvastatin calcium tablets in US IPC to introduce IP 2014 by end of next year Pharmexcil to hold seminar for pharma export Aamir Khan should popularise generic medicines in Bihar US FDA issues draft guidance on organ-specific warnings
Pest Analysis: Political Factors: • The minister in charge of the industry has been threatening to impose stringent price control on the industry than before • In Pharma Industry there is huge PSU segment which is chronically sick and highly inefficient
Economic Factors: • India spends a very small proportion of its GDP in healthcare sector( 1%). • Per capita income of an individual is low, hence a small portion is pend on healthcare • The incidence of taxes are very high, no. medical practitioners are less, medical shops are less. • The global economic crisis still exists yet government reports still show that the spend on healthcare per capital continues to grow. • The reduction in consumer disposable income will have an impact on those countries using health insurance models particularly where part payment is required. • Increased pressure from shareholders has caused a consolidation of the industry: more mergers and acquisitions will take place over the coming years. Social Factors: • Poor sanitation and polluted water sources prematurely end the life of about 1 million children every year • In India people make use of household treatment for common ailments • Increasing pollution is adding to healthcare problem • There is also the problem of the increasing obesity amongst the population and its associated health risks. • The increasing aging population offers a range of opportunities and threats to the pharmaceutical industry Technological Factors: • Advanced automated machines have increased the output and reduced the cost • Computerization has increased the efficiency of Pharma industry • Advances in Bio-technology and stem cell research have broaden the horizons of this industry • Social Media for Healthcare. • Direct to patient communications. • New info and Communications technologies. Porter Five Force Model for Pharma Sector: 1. Threat of New Entrants: High entry barriers due to costs associated with research & development of new drugs (i.e. years of investment in R&D for a drug that may/may not work),Government regulation (i.e. FDA),The threat of entry posed by new or potential competitor is a LOW competitive force due to the above entry barriers & regulatory constraints.
2. Power of Suppliers: Sales for the pharmaceutical industry concentrate in a handful of large players and that has decreased the bargaining power of suppliers.The bargaining power of suppliers is a LOW competitive force 3. Power of Buyers: Hospitals & other health care organizations buy in bulk quantities and exert pressure on pharmaceutical companies to keep prices in check,Regular patients have lost bargaining power due to price increases in generic drugs,The bargaining power of buyers is a medium competitive force. 4. Availability of Substitutes: Demand for generic versus brand name drugs has increased because of the costs. Generic drug companies do not have the high costs associated with the research & development of new drugs and that allows them to sell at cheaper prices. The closeness of substitute products is a HIGH competitive force 5. Competitive Rivalry: High rivalry among main companies in the industry. For example the current rivalry in the erectile dysfunction space where Bayer & GlaxoSmithKline claim that Levitra works faster or Eli Lilly & ICOS claim that Cialis works longer than Pfizer’s Viagra.The degree of rivalry among existing firms is a high competitive force. SWOT Analysis: Strengths: • Availability of Cheap raw material (most economical raw material in the world after China) • Availability of professional manpower with good technical expertise • Low cost of production. • Large pool of installed capacities • Efficient technologies for large number of Generics. • Large pool of skilled technical manpower. • Increasing liberalization of government policies. Weakness: • Bad brand image of Indian Pharmaceutical Products in USA, UK & other western countries which is hampering exports • Lack of Research & Development (R&D) orientation of Indian Pharmaceutical Companies • Fragmentation of installed capacities. • Low technology level of Capital Goods of this section. • Non-availability of major intermediaries for bulk drugs. • Lack of experience to exploit efficiently the new patent regime. • Very low key R&D.
• • •
Low share of India in World Pharmaceutical Production (1.2% of world production but having 16.1% of world's population). Very low level of Biotechnology in India and also for New Drug Discovery Systems. Lack of experience in International Trade. 9. Low level of strategic planning for future and also for technology forecasting.
Opportunities: • Very lucrative high profit making market with high chances of growth • Increased awareness amongst people about Health Prodcuts • Aging of the world population. • Growing incomes. • Growing attention for health. • New diagnoses and new social diseases. • Spreading prophylactic approaches. • Saturation point of market is far away. • New therapy approaches. • New delivery systems. • Spreading attitude for soft medication (OTC drugs). • Spreading use of Generic Drugs. • Globalization • Easier international trading. • New markets are opening. Threats: • Entry of other foreign competitors in the Indian market • Other Business Risks • Containment of rising health-care cost. • High Cost of discovering new products and fewer discoveries. • Stricter registration procedures. • High entry cost in newer markets. • High cost of sales and marketing. • Competition, particularly from generic products. • More potential new drugs and more efficient therapies. • Switching over form process patent to product patent.
Company Analysis Company Description: Dr. Reddy's Laboratories Ltd. is one of India's leading pharmaceutical companies withglobal ambitions. The company has departed from the Indian pharmaceutical marketmainstream of copying patented drugs to pursue the development of its own--patentable--molecules. As such, the company has already achieved success with a number of promising anti-diabetic molecules. At the same time, Dr. Reddy's is pursuing a share of the lucrative, but highly competitive, U.S. generics market, including the higher-margin"branded generic" market. Dr. Reddy's operates through several strategic business units,including: Branded Finished Dosages; Generic Finished Dosages; Bulk Actives; CustomChemicals; Biotechnology; Diagnostics; Critical Care; and Discovery Research. A leader in its domestic market, the company is also active on the international scene, whichaccounted for 64 percent of the company's total sales of Rs 18 billion ($392 million) in2003. North America contributed 32 percent of sales, while Russia added 28 percent. Therest of the company's international revenues were generated through the Asian, African,and South American markets. Dr. Reddy's is led by founder and Chairman Dr. AnjiReddy and CEO (and Reddy's son-in-law) G.V. Prasad. Dr. Reddy's Laboratories was thefirst Asian pharmaceutical company, excluding Japan, to list on the New York Stock Exchange Established in 1984, Dr. Reddy's Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs). Dr. Reddy’s Businesses: PSAI-Pharmaceutical Services and Active Ingredients: Humanity’s health needs are greater than any one company’s ability to solve them; yet we can work with others to bring new drugs quickly to the market and provide the building blocks of affordable medicines. Through our PSAI business, which comprises the Active Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS) businesses, we offer IP advantaged, speedy product development and cost-effective manufacturing services to our customers – generic companies and innovators. This allows us to help make good medicines
• • • • • •
available to more people around the world. The core strengths of our PSAI business are the state-of-the-art infrastructure, resources and skills we are able to offer to our customers: Large and diverse product portfolio Eight FDA-inspected plants and three technology centers World class chemistry expertise Robust, large-scale manufacturing capabilities Intellectual Property (IP) driven product development for freedom to operate Total, seamless supply chain management Global Generics: Both in the developing and developed world, it is a grim fact that millions of people suffer from treatable illnesses and disease simply because they cannot afford the medicines that will restore them to health. Even in high income countries like the US, brand name drugs are often prohibitively expensive, particularly for the growing numbers of uninsured. Around the world, having access to lower-cost generic medicines can mean the difference between health and sickness, solvency and bankruptcy for countless people. Generic drugs hold great promise for the future. Growing acceptance of generics and favorable legislation in many geographies, combined with the large volume of branded products losing patent protection over the coming years is expanding the generic pharmaceuticals market. Through our branded and unbranded Global Generics business, we fulfill our purpose of providing affordable medicines to more people around the world by offering lower-cost alternatives to highly-priced innovator brands both directly and through key partnerships. Our capabilities span the entire value chain – from process development of the active pharmaceutical ingredient (API) to submission of the finished dosage dossier to the regulatory agencies – giving us control over the supply chain and the ability to offer high quality products at the right time and at competitive prices. Our state-of-the-art manufacturing facilities are ISO14001 and ISO9001 certified and have an excellent record of regulatory compliance. Our generics business is supported by our integrated Product Development Infrastructure which is dedicated to bringing new medicines to the market. Today, we have a strong presence both in highly regulated markets like the US, UK and Germany and in emerging markets, including India, Russia, Venezuela, Romania, and CIS (Belarus, Ukraine and Kazakhstan). Moreover, we are steadily building our presence in other key markets.
Proprietary Products: Science and innovation hold the key to unlocking the mysteries of diseases that continue to afflict humanity. While scientific advances have either obliterated many deadly diseases or brought them under control, there are still far too many diseases that lack satisfactory treatments or cures. These unmet medical needs of humanity drive our research enterprise. Our Proprietary Products business comprises NCE research, Biologics and Differentiated Formulations. In each of these areas, we are building worldclass capabilities and partnerships to accelerate the discovery and development of new and improved therapies. Within our highly advanced and integrated R&D infrastructure, scientists with diverse functional expertise seek innovative solutions to medical needs in the therapeutic areas of metabolic diseases, anti-infectives and inflammatory disease. Our scientific capabilities span a wide range of areas, such as medicinal chemistry, analytical chemistry, pharmacology, genomics, proteomics, molecular biology, microbiology, toxicology, formulation and clinical development. General Information about the company: Location of the Headquarters: Door No 8-2-337, Road No 3, Banjara Hills, Hyderabad - 500034. Andhra Pradesh Contact Details: Tel: +91-40-49002900 Fax: +91-40-49002999 Visit: www.drreddys.com Subsidiaries: Aurantis Farmaceutica Ltda (Brazil; 50%); Aurigene DiscoveryTechnologies Inc. (U.S.A.); Aurigene Discovery Technologies Limited; Cheminor DrugsLimited; Compact Electric Limited; Dr. Reddy's Exports Limited (22%); Dr. Reddy'sFarmaceutica Do Brazil Ltda.; Dr. Reddy's Laboratories (EU) Limited (U. K.); Dr.Reddy's Laboratories (Proprietary) (South Africa); Dr. Reddy's Laboratori es (UK)Limited; Dr. Reddy's Laboratories Inc. (U.S.A.); DRL Investments Limite d India;Kunshan Rotam Reddy Pharmaceutical Co. Limited (China; 51%); OOO J V ReddyBiomed Limited (Russia); Pathnet India Private Limited (49%); Reddy
Antilles N.V. (Antilles); Reddy Cheminor S.A. (France); Reddy Netherlands B.V.; ReddyPharmaceuticals Hong Kong Limited; Reddy Pharmaceuticals Singapore; Reddy USTherapeutics Inc.; Zenovus Biotech Limited. Principal Competitors: RPG Enterprises; GlaxoSmithKline Consumer Healthcare Ltd.;East India Pharmaceutical Works Ltd.; Cipla Ltd.; Concept Pharmaceuticals Ltd.;Khandelwal Laboratories Ltd.; Dabur India Ltd.
Shareholding pattern - Dr. Reddy's Laboratories Ltd. Holder's Name Promoters ForeignInstitutions GeneralPublic FinancialInstitutions OtherCompanies NBanksMutualFunds ForeignNRI Others ForeignIndustries No. of employees: 14900+ Top Management: Chairman Vice Chairman & CEO Managing Director & COO Director K Anji Reddy G V Prasad Satish Reddy Anupam Puri No of Shares 43417812 43934372 14080107 13048803 12575331 11477032 2518825 239425 3400 % Share Holding 25.57% 25.87% 8.29% 7.68% 7.41% 6.76% 1.48% 0.14% 0.00%
Financial Performance:
Profit & Loss account of Dr Reddys Laboratories Mar '12 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 6,780.20 93.90 6,686.30 -191.90 104.80 6,599.20 2,122.90 177.50 831.20 163.10 1,554.40 80.30 0.00 4,929.40 Mar '12 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra1,861.70 1,669.80 69.20 1,600.60 301.10 40.30 1,259.20 -0.30 1,258.90
------------------- in Rs. Cr. ------------------Mar '11 12 mths 5,285.80 97.30 5,188.50 117.00 79.00 5,384.50 1,749.50 144.60 702.70 129.50 1,256.70 65.00 0.00 4,048.00 Mar '11 12 mths 1,219.50 1,336.50 9.90 1,326.60 247.90 26.80 1,051.90 -0.40 1,051.50 Mar '10 12 mths 4,469.60 74.00 4,395.60 254.00 117.30 4,766.90 1,599.40 104.10 516.40 117.30 1,036.60 50.60 0.00 3,424.40 Mar '10 12 mths 1,088.50 1,342.50 16.00 1,326.50 222.40 19.30 1,084.80 -0.10 1,084.70 Mar '09 12 mths 4,080.40 80.90 3,999.50 212.20 64.10 4,275.80 1,534.00 90.00 412.50 105.90 1,117.90 45.30 0.00 3,305.60 Mar '09 12 mths 758.00 970.20 27.40 942.80 193.60 19.70 729.50 -0.10 729.40
Mar
12 m
3,42 84.5 3,34 197. 93.8 3,63
1,34 77.1 366.
130.
896.
37.4
0.00
2,85 Mar
12 m
582. 779. 14.6 765. 161. 20.7 582.
-0.06
582.
ord Items) Tax 346.80 158.50 238.70 168.60 Reported Net 912.40 893.40 846.10 560.90 Profit Total Value 2,806.50 2,298.50 1,825.00 1,771.60 Addition Preference 0.00 0.00 0.00 0.00 Dividend Equity Dividend 233.10 190.40 190.00 105.30 Corporate Dividend 37.80 115.20 31.60 17.80 Tax Per share data (annualised) Shares in issue 1,695.60 1,692.53 1,688.45 1,684.69 (lakhs) Earning Per Share 53.81 52.78 50.11 33.29 (Rs) Equity Dividend 275.00 225.00 225.00 125.00 (%) Book Value (Rs) 396.19 355.69 350.30 312.17 FY2012 has been a good year for the Company. The key financial results were: Consolidated revenues increased by 30% to Rs. 96.7 billion in FY2012. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 55% to Rs. 25.4 billion. Profit after Tax (PAT) grew by 45% to Rs. 15.3 billion. Diluted Earnings per Share (EPS) increased from Rs. 64.9 in FY2011 to Rs. 83.8 in FY2012. Segment Wise Performance: • • • Revenues from Global Generics segment at Rs19.1 bn in Q1 FY13,yearon-year growth of 32% driven by key markets of North America, Russia & other emerging markets. Revenues from North America at Rs7.9 billion in Q1 FY13grew by 27% in USD terms, over previous year. Revenues in Russia and Other CIS markets at Rs4.2 bn in Q1 FY13represented year-on-year growth of 38%. Revenues in Russia at Rs3.5 billion in Q1 FY13was the highest ever from this market and represented year-on-year growth of 30% in Rouble terms. Revenues in Other CIS markets at Rs0.65billion in Q1 FY13 grew by 22% over previous year. Revenues in India at Rs3.5 billion in Q1FY13 grew by 19% over previous year.
108.
475.
1,50
0.00
63.0
10.7
1,68
28.2
75.0
286.
• •
• • •
Revenues from Europe at Rs2.2 billion in Q1 FY13 grew by 14% over previous year. Revenues from Germany at Rs1.5 billion in Q1 FY13grew by 17% in Euro terms over previous year. Pharmaceutical Services and Active Ingredients (PSAI) Revenues from PSAI are at Rs5.5 billion in Q1 FY 13, year-on-year growth of 14%. During the quarter, 7 DMFswere filed globally, with 1each in the US and Europe. The cumulative DMF filings as of 30th June 2012 are 550.
SWOT Analysis: Strengths: • • • • • • • • Capabilities in Major Chemistries-24 Wholly owned subsidiaries in US and Europe Six FDA-Inspected plants in India More than 2.3 million litresreaction volume Manufacture and market over 250 medicines targeting a wide range of therapies Low cost base Wide range of anti-cancer drugs developed Employees and scientists spread in the entire globe and are dedicated towards new drug discovery
Weakness: • • • • • • High amount of revenues from overseas Drug discovery is unpredictable business Cost of innovation is very high and for Dr Reddy’s ithas to be funded from a Generic business where the margins are low. Over-reliance on partnerships Smallest portion of revenues from generics at around 20% Lack of resources similar to US and Europe based competitors to develop a drug to marketing stage
Opportunities: • • • Niche Therapeutic Area - Global Oncology Strong Biologics & Cytotoxic Manufacturing Infrastructure to address the need of Oncology Market Partnerships to accelerate the discovery and development o new therapies focusing on Bio-similar development Take a molecule from its pipeline all the way to the market place costeffectively market
•
Buy back of the integrated drug development company from ICICI Ventures and Citigroup
Threats: • • • • • Needs to gain FDA approval for all sources and products. Products have to pass strict FDA trials before going to market, which can be costly and time consuming Competition from US and European Companies Litigation charges Being in Generic business achieving critical mass is a challenge. USA market is getting overcrowded by Indian players
Various Strategies employed by the company in the past 2 years: • • • • • • • • • • • Crossed USD 2 billion in revenues and is the fastest in Indian Pharma to reach this milestone in 2012. GlaxoSmithKline and Dr. Reddy’s agrees to the sale of US penicillin facility and products FUJIFILM and Dr. Reddy’s establishes an exclusive joint venture for developing, manufacturing and promoting generic drugs in Japan Expands its R&D centre in Cambridge, United Kingdom Approval and launch of fondaparinux Approval and launch of olanzapine 20 mg tablets The first Indian company to celebrate its 10-year anniversary at the NYSE on 15 April 2011 Launches darbepoetin alfa in India under the brand name ‘Cresp®’world’s first generic darbepoetin alfa and the only one in India in 2010 Industry leading chemistry skills which has resulted in several niche product opportunities (eg: fondaparinux, fexofenadine?pseudoephedrine, omeprazole mg, lansoprazole) Cumulative global filings at 543. US ??>187; Europe ??>152; Canada ??>66; RoW ??>138 Maximizing value opportunities through large partnerships (GSK Alliance) & successful history of monetizing IP.
Referenceshttp://www.equitymaster.com/research-it/sector-info/pharma/PharmaceuticalsSector-Analysis-Report.asphttp://www.economywatch.com/world-industries/pharmaceutical/trends.htmlhttp://news.indiamart.com/pharmaceutical-news.htmlhttp://www.drreddys.com/aboutus/pharma-services-active-ingredients.htmlhttp://economictimes.indiatimes.com/dr-reddy's-laboratoriesltd/shareholding/companyid-13841.cmshttp://www.indiainfoline.com/Markets/News/Dr.-Reddys-Q1-net-profit-at-Rs3.36bn/5465170095http://www.drreddys.com/investors/pdf/annualreport2012.pdfhttp://www.drreddys.com/media/pdf/Corporate-Presentation.pdf
doc_170541519.doc
It describes about Industry Trends in Pharmaceutical industry, PEST Analysis of Pharmaceutical Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the Dr. Reddy's laboratories it's Finance performance, SWOT analysis of Dr. Reddy's Laboratories and Various Strategies employed.
Dr. Reddy’s Laboratories Established in 1984, Dr. Reddy's Laboratories Ltd. is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs). Industry Analysis: Industry Trends: Local and Global The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (around 330 in the organised sector). The top ten companies make up for more than a third of the market. The Indian pharma industry grew by a robust 18% YoY in 2011 to ` 565 bn (approx. US$ 12.5 bn). It accounts for about 1.4% of the world's pharma industry in value terms and 10% in volume terms. Besides the domestic market, Indian pharma companies also have a large chunk of their revenues coming from exports. While some are focusing on the generics market in the US, Europe and semi-regulated markets, others are focusing on custom manufacturing for innovator companies. Biopharmaceuticals is also increasingly becoming an area of interest given the complexity in manufacture and limited competition. The drug price control order (DPCO) continues to be a menace for the industry. There are three tiers of regulations - on bulk drugs, on formulations and on overall profitability. This has made the profitability of the sector susceptible to the whims and fancies of the pricing authority. The new Pharmaceutical Policy 2006, which proposes to bring 354 essential drugs under price control has not been officially passed as yet and has been stiffly opposed by the pharmaceutical industry. The R&D spends of the top five companies is about 5% to 10% of revenues. This ratio is still way below the global average of 15% to 20% of sales. Indian companies have adopted various strategies for their R&D efforts. Some have entered into collaboration and partnership agreements with innovator companies; others have out-licensed their molecules for milestone payments. Hiving off R&D units into separate companies has also become a preferred option for many Indian pharma players. That said, given that the research pipelines of Big Pharma are drying up, they have now begun to dabble in generics. In this regard, these innovator companies are either buying out Indian firms or are forging alliances with them.
Alongside India, the Chinese Pharmaceutical market also has a positive trend in progress. The Chinese Pharmaceutical Market Trend has remained positive for the last 15-20 years since the time China started using drugs that are used worldwide. The Chinese Pharmaceutical Industry growth in the last few years have remained nearly10 percent. American Pharmaceutical Industry is the biggest in the world with sales around $250 billion. The American Pharmaceutical Industry Trend has remained positive throughout and by the end of last year, it was around 6 percent. Recent happenings in Pharma sector: • • • • • • Increased generic penetration Outsourcing in the fields of Research and Development The fields of Bio-Technology FMHG (Fast Moving Health Goods) Non-allopathic medication Export of bulk-drugs
Recent News in Pharma sector: • • • • • • • • • • • WHO & UNFPA approves Female Condoms of Cupid Ltd Ipca Laboratories receives approval from USFDA for Madhya Pradesh facility Cadila Healthcare inks license deal with Somaxon, ProCom One No gifts or incentives for doctors: Pharma industry TPG to buy Par Pharma Mumbai to host 3rd annual BIO India International Conference to be held from Sept 12-13 Dr Reddy's unveils Atorvastatin calcium tablets in US IPC to introduce IP 2014 by end of next year Pharmexcil to hold seminar for pharma export Aamir Khan should popularise generic medicines in Bihar US FDA issues draft guidance on organ-specific warnings
Pest Analysis: Political Factors: • The minister in charge of the industry has been threatening to impose stringent price control on the industry than before • In Pharma Industry there is huge PSU segment which is chronically sick and highly inefficient
Economic Factors: • India spends a very small proportion of its GDP in healthcare sector( 1%). • Per capita income of an individual is low, hence a small portion is pend on healthcare • The incidence of taxes are very high, no. medical practitioners are less, medical shops are less. • The global economic crisis still exists yet government reports still show that the spend on healthcare per capital continues to grow. • The reduction in consumer disposable income will have an impact on those countries using health insurance models particularly where part payment is required. • Increased pressure from shareholders has caused a consolidation of the industry: more mergers and acquisitions will take place over the coming years. Social Factors: • Poor sanitation and polluted water sources prematurely end the life of about 1 million children every year • In India people make use of household treatment for common ailments • Increasing pollution is adding to healthcare problem • There is also the problem of the increasing obesity amongst the population and its associated health risks. • The increasing aging population offers a range of opportunities and threats to the pharmaceutical industry Technological Factors: • Advanced automated machines have increased the output and reduced the cost • Computerization has increased the efficiency of Pharma industry • Advances in Bio-technology and stem cell research have broaden the horizons of this industry • Social Media for Healthcare. • Direct to patient communications. • New info and Communications technologies. Porter Five Force Model for Pharma Sector: 1. Threat of New Entrants: High entry barriers due to costs associated with research & development of new drugs (i.e. years of investment in R&D for a drug that may/may not work),Government regulation (i.e. FDA),The threat of entry posed by new or potential competitor is a LOW competitive force due to the above entry barriers & regulatory constraints.
2. Power of Suppliers: Sales for the pharmaceutical industry concentrate in a handful of large players and that has decreased the bargaining power of suppliers.The bargaining power of suppliers is a LOW competitive force 3. Power of Buyers: Hospitals & other health care organizations buy in bulk quantities and exert pressure on pharmaceutical companies to keep prices in check,Regular patients have lost bargaining power due to price increases in generic drugs,The bargaining power of buyers is a medium competitive force. 4. Availability of Substitutes: Demand for generic versus brand name drugs has increased because of the costs. Generic drug companies do not have the high costs associated with the research & development of new drugs and that allows them to sell at cheaper prices. The closeness of substitute products is a HIGH competitive force 5. Competitive Rivalry: High rivalry among main companies in the industry. For example the current rivalry in the erectile dysfunction space where Bayer & GlaxoSmithKline claim that Levitra works faster or Eli Lilly & ICOS claim that Cialis works longer than Pfizer’s Viagra.The degree of rivalry among existing firms is a high competitive force. SWOT Analysis: Strengths: • Availability of Cheap raw material (most economical raw material in the world after China) • Availability of professional manpower with good technical expertise • Low cost of production. • Large pool of installed capacities • Efficient technologies for large number of Generics. • Large pool of skilled technical manpower. • Increasing liberalization of government policies. Weakness: • Bad brand image of Indian Pharmaceutical Products in USA, UK & other western countries which is hampering exports • Lack of Research & Development (R&D) orientation of Indian Pharmaceutical Companies • Fragmentation of installed capacities. • Low technology level of Capital Goods of this section. • Non-availability of major intermediaries for bulk drugs. • Lack of experience to exploit efficiently the new patent regime. • Very low key R&D.
• • •
Low share of India in World Pharmaceutical Production (1.2% of world production but having 16.1% of world's population). Very low level of Biotechnology in India and also for New Drug Discovery Systems. Lack of experience in International Trade. 9. Low level of strategic planning for future and also for technology forecasting.
Opportunities: • Very lucrative high profit making market with high chances of growth • Increased awareness amongst people about Health Prodcuts • Aging of the world population. • Growing incomes. • Growing attention for health. • New diagnoses and new social diseases. • Spreading prophylactic approaches. • Saturation point of market is far away. • New therapy approaches. • New delivery systems. • Spreading attitude for soft medication (OTC drugs). • Spreading use of Generic Drugs. • Globalization • Easier international trading. • New markets are opening. Threats: • Entry of other foreign competitors in the Indian market • Other Business Risks • Containment of rising health-care cost. • High Cost of discovering new products and fewer discoveries. • Stricter registration procedures. • High entry cost in newer markets. • High cost of sales and marketing. • Competition, particularly from generic products. • More potential new drugs and more efficient therapies. • Switching over form process patent to product patent.
Company Analysis Company Description: Dr. Reddy's Laboratories Ltd. is one of India's leading pharmaceutical companies withglobal ambitions. The company has departed from the Indian pharmaceutical marketmainstream of copying patented drugs to pursue the development of its own--patentable--molecules. As such, the company has already achieved success with a number of promising anti-diabetic molecules. At the same time, Dr. Reddy's is pursuing a share of the lucrative, but highly competitive, U.S. generics market, including the higher-margin"branded generic" market. Dr. Reddy's operates through several strategic business units,including: Branded Finished Dosages; Generic Finished Dosages; Bulk Actives; CustomChemicals; Biotechnology; Diagnostics; Critical Care; and Discovery Research. A leader in its domestic market, the company is also active on the international scene, whichaccounted for 64 percent of the company's total sales of Rs 18 billion ($392 million) in2003. North America contributed 32 percent of sales, while Russia added 28 percent. Therest of the company's international revenues were generated through the Asian, African,and South American markets. Dr. Reddy's is led by founder and Chairman Dr. AnjiReddy and CEO (and Reddy's son-in-law) G.V. Prasad. Dr. Reddy's Laboratories was thefirst Asian pharmaceutical company, excluding Japan, to list on the New York Stock Exchange Established in 1984, Dr. Reddy's Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs). Dr. Reddy’s Businesses: PSAI-Pharmaceutical Services and Active Ingredients: Humanity’s health needs are greater than any one company’s ability to solve them; yet we can work with others to bring new drugs quickly to the market and provide the building blocks of affordable medicines. Through our PSAI business, which comprises the Active Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS) businesses, we offer IP advantaged, speedy product development and cost-effective manufacturing services to our customers – generic companies and innovators. This allows us to help make good medicines
• • • • • •
available to more people around the world. The core strengths of our PSAI business are the state-of-the-art infrastructure, resources and skills we are able to offer to our customers: Large and diverse product portfolio Eight FDA-inspected plants and three technology centers World class chemistry expertise Robust, large-scale manufacturing capabilities Intellectual Property (IP) driven product development for freedom to operate Total, seamless supply chain management Global Generics: Both in the developing and developed world, it is a grim fact that millions of people suffer from treatable illnesses and disease simply because they cannot afford the medicines that will restore them to health. Even in high income countries like the US, brand name drugs are often prohibitively expensive, particularly for the growing numbers of uninsured. Around the world, having access to lower-cost generic medicines can mean the difference between health and sickness, solvency and bankruptcy for countless people. Generic drugs hold great promise for the future. Growing acceptance of generics and favorable legislation in many geographies, combined with the large volume of branded products losing patent protection over the coming years is expanding the generic pharmaceuticals market. Through our branded and unbranded Global Generics business, we fulfill our purpose of providing affordable medicines to more people around the world by offering lower-cost alternatives to highly-priced innovator brands both directly and through key partnerships. Our capabilities span the entire value chain – from process development of the active pharmaceutical ingredient (API) to submission of the finished dosage dossier to the regulatory agencies – giving us control over the supply chain and the ability to offer high quality products at the right time and at competitive prices. Our state-of-the-art manufacturing facilities are ISO14001 and ISO9001 certified and have an excellent record of regulatory compliance. Our generics business is supported by our integrated Product Development Infrastructure which is dedicated to bringing new medicines to the market. Today, we have a strong presence both in highly regulated markets like the US, UK and Germany and in emerging markets, including India, Russia, Venezuela, Romania, and CIS (Belarus, Ukraine and Kazakhstan). Moreover, we are steadily building our presence in other key markets.
Proprietary Products: Science and innovation hold the key to unlocking the mysteries of diseases that continue to afflict humanity. While scientific advances have either obliterated many deadly diseases or brought them under control, there are still far too many diseases that lack satisfactory treatments or cures. These unmet medical needs of humanity drive our research enterprise. Our Proprietary Products business comprises NCE research, Biologics and Differentiated Formulations. In each of these areas, we are building worldclass capabilities and partnerships to accelerate the discovery and development of new and improved therapies. Within our highly advanced and integrated R&D infrastructure, scientists with diverse functional expertise seek innovative solutions to medical needs in the therapeutic areas of metabolic diseases, anti-infectives and inflammatory disease. Our scientific capabilities span a wide range of areas, such as medicinal chemistry, analytical chemistry, pharmacology, genomics, proteomics, molecular biology, microbiology, toxicology, formulation and clinical development. General Information about the company: Location of the Headquarters: Door No 8-2-337, Road No 3, Banjara Hills, Hyderabad - 500034. Andhra Pradesh Contact Details: Tel: +91-40-49002900 Fax: +91-40-49002999 Visit: www.drreddys.com Subsidiaries: Aurantis Farmaceutica Ltda (Brazil; 50%); Aurigene DiscoveryTechnologies Inc. (U.S.A.); Aurigene Discovery Technologies Limited; Cheminor DrugsLimited; Compact Electric Limited; Dr. Reddy's Exports Limited (22%); Dr. Reddy'sFarmaceutica Do Brazil Ltda.; Dr. Reddy's Laboratories (EU) Limited (U. K.); Dr.Reddy's Laboratories (Proprietary) (South Africa); Dr. Reddy's Laboratori es (UK)Limited; Dr. Reddy's Laboratories Inc. (U.S.A.); DRL Investments Limite d India;Kunshan Rotam Reddy Pharmaceutical Co. Limited (China; 51%); OOO J V ReddyBiomed Limited (Russia); Pathnet India Private Limited (49%); Reddy
Antilles N.V. (Antilles); Reddy Cheminor S.A. (France); Reddy Netherlands B.V.; ReddyPharmaceuticals Hong Kong Limited; Reddy Pharmaceuticals Singapore; Reddy USTherapeutics Inc.; Zenovus Biotech Limited. Principal Competitors: RPG Enterprises; GlaxoSmithKline Consumer Healthcare Ltd.;East India Pharmaceutical Works Ltd.; Cipla Ltd.; Concept Pharmaceuticals Ltd.;Khandelwal Laboratories Ltd.; Dabur India Ltd.
Shareholding pattern - Dr. Reddy's Laboratories Ltd. Holder's Name Promoters ForeignInstitutions GeneralPublic FinancialInstitutions OtherCompanies NBanksMutualFunds ForeignNRI Others ForeignIndustries No. of employees: 14900+ Top Management: Chairman Vice Chairman & CEO Managing Director & COO Director K Anji Reddy G V Prasad Satish Reddy Anupam Puri No of Shares 43417812 43934372 14080107 13048803 12575331 11477032 2518825 239425 3400 % Share Holding 25.57% 25.87% 8.29% 7.68% 7.41% 6.76% 1.48% 0.14% 0.00%
Financial Performance:
Profit & Loss account of Dr Reddys Laboratories Mar '12 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 6,780.20 93.90 6,686.30 -191.90 104.80 6,599.20 2,122.90 177.50 831.20 163.10 1,554.40 80.30 0.00 4,929.40 Mar '12 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra1,861.70 1,669.80 69.20 1,600.60 301.10 40.30 1,259.20 -0.30 1,258.90
------------------- in Rs. Cr. ------------------Mar '11 12 mths 5,285.80 97.30 5,188.50 117.00 79.00 5,384.50 1,749.50 144.60 702.70 129.50 1,256.70 65.00 0.00 4,048.00 Mar '11 12 mths 1,219.50 1,336.50 9.90 1,326.60 247.90 26.80 1,051.90 -0.40 1,051.50 Mar '10 12 mths 4,469.60 74.00 4,395.60 254.00 117.30 4,766.90 1,599.40 104.10 516.40 117.30 1,036.60 50.60 0.00 3,424.40 Mar '10 12 mths 1,088.50 1,342.50 16.00 1,326.50 222.40 19.30 1,084.80 -0.10 1,084.70 Mar '09 12 mths 4,080.40 80.90 3,999.50 212.20 64.10 4,275.80 1,534.00 90.00 412.50 105.90 1,117.90 45.30 0.00 3,305.60 Mar '09 12 mths 758.00 970.20 27.40 942.80 193.60 19.70 729.50 -0.10 729.40
Mar
12 m
3,42 84.5 3,34 197. 93.8 3,63
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-0.06
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ord Items) Tax 346.80 158.50 238.70 168.60 Reported Net 912.40 893.40 846.10 560.90 Profit Total Value 2,806.50 2,298.50 1,825.00 1,771.60 Addition Preference 0.00 0.00 0.00 0.00 Dividend Equity Dividend 233.10 190.40 190.00 105.30 Corporate Dividend 37.80 115.20 31.60 17.80 Tax Per share data (annualised) Shares in issue 1,695.60 1,692.53 1,688.45 1,684.69 (lakhs) Earning Per Share 53.81 52.78 50.11 33.29 (Rs) Equity Dividend 275.00 225.00 225.00 125.00 (%) Book Value (Rs) 396.19 355.69 350.30 312.17 FY2012 has been a good year for the Company. The key financial results were: Consolidated revenues increased by 30% to Rs. 96.7 billion in FY2012. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 55% to Rs. 25.4 billion. Profit after Tax (PAT) grew by 45% to Rs. 15.3 billion. Diluted Earnings per Share (EPS) increased from Rs. 64.9 in FY2011 to Rs. 83.8 in FY2012. Segment Wise Performance: • • • Revenues from Global Generics segment at Rs19.1 bn in Q1 FY13,yearon-year growth of 32% driven by key markets of North America, Russia & other emerging markets. Revenues from North America at Rs7.9 billion in Q1 FY13grew by 27% in USD terms, over previous year. Revenues in Russia and Other CIS markets at Rs4.2 bn in Q1 FY13represented year-on-year growth of 38%. Revenues in Russia at Rs3.5 billion in Q1 FY13was the highest ever from this market and represented year-on-year growth of 30% in Rouble terms. Revenues in Other CIS markets at Rs0.65billion in Q1 FY13 grew by 22% over previous year. Revenues in India at Rs3.5 billion in Q1FY13 grew by 19% over previous year.
108.
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1,50
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63.0
10.7
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286.
• •
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Revenues from Europe at Rs2.2 billion in Q1 FY13 grew by 14% over previous year. Revenues from Germany at Rs1.5 billion in Q1 FY13grew by 17% in Euro terms over previous year. Pharmaceutical Services and Active Ingredients (PSAI) Revenues from PSAI are at Rs5.5 billion in Q1 FY 13, year-on-year growth of 14%. During the quarter, 7 DMFswere filed globally, with 1each in the US and Europe. The cumulative DMF filings as of 30th June 2012 are 550.
SWOT Analysis: Strengths: • • • • • • • • Capabilities in Major Chemistries-24 Wholly owned subsidiaries in US and Europe Six FDA-Inspected plants in India More than 2.3 million litresreaction volume Manufacture and market over 250 medicines targeting a wide range of therapies Low cost base Wide range of anti-cancer drugs developed Employees and scientists spread in the entire globe and are dedicated towards new drug discovery
Weakness: • • • • • • High amount of revenues from overseas Drug discovery is unpredictable business Cost of innovation is very high and for Dr Reddy’s ithas to be funded from a Generic business where the margins are low. Over-reliance on partnerships Smallest portion of revenues from generics at around 20% Lack of resources similar to US and Europe based competitors to develop a drug to marketing stage
Opportunities: • • • Niche Therapeutic Area - Global Oncology Strong Biologics & Cytotoxic Manufacturing Infrastructure to address the need of Oncology Market Partnerships to accelerate the discovery and development o new therapies focusing on Bio-similar development Take a molecule from its pipeline all the way to the market place costeffectively market
•
Buy back of the integrated drug development company from ICICI Ventures and Citigroup
Threats: • • • • • Needs to gain FDA approval for all sources and products. Products have to pass strict FDA trials before going to market, which can be costly and time consuming Competition from US and European Companies Litigation charges Being in Generic business achieving critical mass is a challenge. USA market is getting overcrowded by Indian players
Various Strategies employed by the company in the past 2 years: • • • • • • • • • • • Crossed USD 2 billion in revenues and is the fastest in Indian Pharma to reach this milestone in 2012. GlaxoSmithKline and Dr. Reddy’s agrees to the sale of US penicillin facility and products FUJIFILM and Dr. Reddy’s establishes an exclusive joint venture for developing, manufacturing and promoting generic drugs in Japan Expands its R&D centre in Cambridge, United Kingdom Approval and launch of fondaparinux Approval and launch of olanzapine 20 mg tablets The first Indian company to celebrate its 10-year anniversary at the NYSE on 15 April 2011 Launches darbepoetin alfa in India under the brand name ‘Cresp®’world’s first generic darbepoetin alfa and the only one in India in 2010 Industry leading chemistry skills which has resulted in several niche product opportunities (eg: fondaparinux, fexofenadine?pseudoephedrine, omeprazole mg, lansoprazole) Cumulative global filings at 543. US ??>187; Europe ??>152; Canada ??>66; RoW ??>138 Maximizing value opportunities through large partnerships (GSK Alliance) & successful history of monetizing IP.
Referenceshttp://www.equitymaster.com/research-it/sector-info/pharma/PharmaceuticalsSector-Analysis-Report.asphttp://www.economywatch.com/world-industries/pharmaceutical/trends.htmlhttp://news.indiamart.com/pharmaceutical-news.htmlhttp://www.drreddys.com/aboutus/pharma-services-active-ingredients.htmlhttp://economictimes.indiatimes.com/dr-reddy's-laboratoriesltd/shareholding/companyid-13841.cmshttp://www.indiainfoline.com/Markets/News/Dr.-Reddys-Q1-net-profit-at-Rs3.36bn/5465170095http://www.drreddys.com/investors/pdf/annualreport2012.pdfhttp://www.drreddys.com/media/pdf/Corporate-Presentation.pdf
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