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Dr Reddy's Labs acquiring products but not marketing most of them

In 5 of 9 asset buys made in 2014-16, Dr Reddy's is yet to put them to use; it spent Rs 38.82 bn on the acquisitions

B Dasarath Reddy  |  Hyderabad 

reddy, dr reddy's

Indian drug manufacturer Dr Reddy's Laboratories is yet to translate a majority of product acquisitions it made between 2014 and 2016 into commercial opportunities. Some products were stuck over approvals, the company said, while a few others remained in the realm of the firm’s long-term opportunities.

According to a latest filing with the US Securities and Exchange Commission, Dr Reddy's has so far been able to take products to the stage of commercial launch in just four out of nine asset acquisitions. The firm had spent a staggering Rs 42.17 billion on these buys.

The biggest buy was the product portfolio from Pharmaceutical Industries, acquired in June 2016 for $350 million, or Rs 23 billion according to the exchange rate at the time. The portfolio was a mix of six ANDAs (abbreviated new drug applications) that were pending approval, one approved and one with tentative approval comprising complex generic products. The combined market size of the branded versions of these products was estimated to be about $3.5 billion in the US market.

Of these, Dr Reddy's was able to launch just one product — the anti-cholesterol Vytorin — in April last year, even though the company had said it was planning to launch at least four of the eight generic drugs acquired from the Israeli pharmaceutical major by 2017-18.

Any delay in product launch means more competition in that particular product segment and lower price realisation for Indian generic players, as has been witnessed in the US market.

The company, however, said this was not unusual but admitted there had been delays due to reasons outside its control. "Of all these acquisitions, the product acquisition was the latest one. While generic Vytorin was performing better than we expected, the patent of Novolin expired only in April last year. Coming to Suboxone, we are still awaiting IP and exclusivity-related clarifications for the approval to come through. These two products are going to be our two big launches in 2018-19," Dr Reddy's Chief Financial Officer Soumen Chakraborty told Business Standard.

While the Habitrol brand, the single acquisition in 2014 from Novartis, has been in the market for quite some time, two of the three product acquisitions made in 2015, and four of the five made in 2016 (except Vytorin in portfolio) have not yet been contributing anything to the company’s top line.

Xeglize, a head lice product, got stuck because the active ingredient of the product is manufactured at the company's Srikakulam plant, one of the three plants cited in the warning letter issued by the US Food and Drug Administration in November 2015.

As for the acquisitions from and Eisai, the clinical development of these chemical entities and biologic agents involve long-term work before they can be taken to the approval stage, officials from the company said.

Dr Reddy's had reported a 3 per cent increase in consolidated revenues at Rs 38.06 billion for the three months ended December 2017. Its revenues from the US market in global generics declined 3 per cent. Net profit fell 29 per cent to Rs 33.44 billion during the period mainly due to steep price erosion in the US market.



*For undisclosed up-front and milestone payments; **Abbreviated new drug applications; OTC: Over-the-counter; Source: Dr Reddy's filings with US Securities and Exchanges Commission

First Published: Tue, February 06 2018. 05:59 IST