The Hyderabad-based pharmaceutical company Dr Reddy’s Laboratories Ltd (DRL) is expecting its revenue growth in the US to decline from next year as patent expiries peaked this year.
“The US will continue to drive the growth in the current year. However, patent expiries peaked this year and will decrease over the next few years. As a result, growth rates will decline,” G V Prasad, vice-chairman and chief executive officer of DRL, told the annual general meeting here on Friday.
He, however, assured the shareholders the company would come up with strategies to protect the net profit from the impact of this revenue slowdown. The fewer patent expiries would mean diminished opportunities for new launches.
The company's revenue growth in the US has largely been driven by new product launches.
According to the company’s annual report, the year 2012 will have patent expiries worth $ 44 billion (Rs 2.4 lakh crore) in sales in the US, more than double compared to last year. The sales value of the patent expiries due next year is just about $ 15 billion, which will subsequently rise to a maximum level of $ 22 billion in 2015, it said.
The management’s outlook on the US market throws up a significant challenge to the company in terms of sustaining growth in the near-to-medium term as US forms the single largest market, contributing 45 per cent to the total revenues and 36 per cent to the net profit last year.
While Prasad holds the US market to drive the company’s growth in the global generics revenues this year, the first quarter results announced by the company yesterday showed a 27 per cent growth in revenues from North America, compared to a full-year growth of 68 per cent from the US market in 2011-12.
The company yesterday said it would improve the revenue growth in the US market by undertaking more number of launches, particularly in the second half of the current financial year.
About 42 per cent of the total global generic drug revenues of Rs 1,906 crore for the quarter ended June had come from the US market, a two per cent increase over the corresponding previous quarter.
Prasad, who chaired the AGM in the absence of the company Chairman K Anji Reddy, said that Dr Reddy's was currently focusing more on research and development, partnerships with technology-based companies to develop and launch complex molecules and drugs in novel treatment areas, besides pushing bio-similar drugs in alliance with Merck Serono SA.
The company will try and improve the product portfolio with the launch of complex molecules to fight the price erosion in the generics drug space in the US and elsewhere, according to him.
