Dr Reddy's aims at double-digit profit growth this year

Foreign exchange fluctuations and delay in regulatory nods for new generics products in the US are coming in the way of posting higher profits

Dr Reddy's Laboratories Limited co-chairman and chief executive officer G V Prasad said foreign exchange fluctuations and delay in regulatory approvals for new generics products in the US were coming in the way of posting higher profits.

"A couple of factors beyond our control are exchange rates and approvals," Prasad said while explaining the reasons behind the single-digit growth in net profit this year.

However, he said the company was targeting double-digit growth in the current year as it was looking to launch more products. It also expects the impact of foreign exchange fluctuations to subside to a large extent going forward. "The branded markets are steadily growing. Going forward, the foreign exchange turbulence would not be that much. So we expect a double-digit growth in net profit," he said.

For the year ending March, 2015, the company was able to register a 3 per cent increase in net profit at Rs 2,217.86 core as compared with Rs 2,151.20 crore last year.

The European market has now turned profitable for the company on the back of new launches, according to him. The current year would also see more launches due to the spillover effect of the delayed approvals expected in 2014-15.

Responding to a question on the growing R&D expenditure of the company, he said most of these expenses had gone into filing of the new ANDAs (abbreviated new drug applications) and partly into biosimilars, the first of which is expected to enter the regulatory markets in 2018 or so.

The R&D expenses saw a 29 per cent increase in the fourth quarter comprising 11 per cent of the revenues. Prasad expects this to be over 12 per cent in the coming quarters.

On the not-so-successful attempts at expanding its footprint in the Japanese market, he said they would enter the world's second largest pharmaceutical market only through the partnership, that too product-specific partnerships.

On acquisitions, Prasad said they would look at such opportunities on an ongoing basis particularly with regard to "mid-size transactions of several hundred millions of dollars". With regard to the US Food and Drug Administration (US FDA)'s alerts on the company's Visakhapatnam plant, he said they had already sent two updates on the issues raised by the US regulator and believe that they were now in compliance while awaiting the official response.

Dr Reddy's would be making new capital investments in the range of Rs 1000 core to Rs 1,200 crore in the current year partly on new technologies and mostly on capacity expansion to service larger markets like India, according to Soumen Chakraborty, chief financial officer of the company.