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| Dr Reddy's: The right prescription |
| Shobhana Subramanian / Mumbai Jun 17, 2009, 00:32 IST |
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It makes sense for the drug firm to team up with GSK Pharma to access emerging markets.
 Few details are available on the strategic alliance that Dr.Reddy’s Laboratories has entered into with GSK Pharma, to sell its products in emerging markets, except that it’s a revenue-sharing deal. Nevertheless, on the face of it, it’s seems to be a good way for the Hyderabad-based firm to leverage its extensive branded formulations portfolio without incurring costs on distribution. While profitability from revenues earned through this partnership may be lower than that on Dr.Reddy’s own branded business, the company will nevertheless make money without investing too much.
For some time now, the drug major has been talking about not having a front-end presence in too many markets, which is not a bad idea at all. The Dr.Reddy’s stock rose just over 5 per cent in early trades on Tuesday but had given up most of the gains by the end of the day to close at Rs 713.
Essentially, GSK Pharma will distribute the Indian drug firm’s products in the emerging markets of Africa, Latin America, the Middle East and the Asia Pacific region excluding India.These are big markets withgrowth potential and Dr.Reddy’s hasn’t really accessed them. So, teaming up with GSK Pharma is a good way of getting a share of the spoils. After all, there can’t be a better name in the business than GSK Pharma—its distribution and brand strengths are unquestionable. In that sense, Dr. Reddy’s couldn’t have asked for a better or more committed partner.
Dr.Reddy’s has about 100 products across various therapeutic areas including the cardio-vascular space, oncology, diabetes, pain management and the gastro segment.The management says there’s nothing more than this alliance on the cards at present. The Street, however, would like to believe that there could be more than just a marketing deal in the future.
Meanwhile, the process of turning around Betapharm, a drug firm that Dr.Reddy’s acquired in Germany in 2006, continues. The market in Germany, the management points out, has changed completely since the time of the acquisition having become more tenders-driven and far more competitive. It hopes to realign costs to make the business more profitable.
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