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Dr Reddys Laboratories
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 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 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 tendersdriven and far more competitive. It hopes to realign costs to make the business more profitable.
source - BS

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Dr Reddys Laboratories
After outperforming the market for about a year the Rs 5,006 crore Dr Reddy’s Laboratories has lost some 8 per cent in a month. One reason for this could be that revenues from the Russian and CIS markets are expected to be hurt by the depreciation of the rouble, point out analysts.
These markets may bring in just about 12 per cent of the firm’s revenues but they contribute around a fifth of the profits. Sales from these regions, were up a smart 33 per cent in the December 2008 quarter but the momentum could slow down somewhat.

In the past, there have also been some concerns relating to delays in receivables from the Russian geography and the company is understood to have suffered as a result of these delays. Its not just Russian market that will stymie Dr Reddys growth. Already Europe, which fetches a fourth of the revenues, saw a drop in revenues in the December 2008 quarter, could see sales slow down next year. That’s because of delays in contracts to be awarded by aleading insurer that caters to 40 per cent of the German population.

Given that the market is competitive even the eight existing wins might not fetch Dr Reddy’s very attractive prices. The US business, which fetches just over a fifth of revenues, too could suffer marginally with added competition from Teva and Ranbaxy for Imitrex (anti-migraine). After all, the December quarter’s 49 per cent top line growth was driven by exclusive sales of Imitrex. Dr Reddy’s has also been struggling in the home market due to supply chain issues but those should be sorted out. Analysts estimate that net sales growth could taper off to sub 10 per cent levels in 2009-10 from an expected Rs 6,300 crore this year while net profits could stay flat or drop slightly because of foreign exchange losses. Given this, the stock might yield some ground because it is a tad expensive at 17 times estimated 2009-10 earnings.
source - businessstandard

Dr Reddys Laboratories
Betapharm continues to be a bit of headache for Dr Reddy’s Laboratories, which has been forced to write off a notional Rs 1,400 crore on account of its German subsidiary.

A sum of Rs 316 crore has been written off towards intangible assets and another Rs 1,086 crore for goodwill. That left the Hyderabad-based drug major reeling with a loss of Rs 520crore last year, though adjusted for these losses, net profits were up a robust 89 per cent to Rs 850 crore.

Revenues grew a handsome 39 per cent y-o-y to Rs 6,940 crore, driven by sales of the generic version of Glaxo’s anti-migraine drug, Imitrex (sumatriptan), which was launched in the US in November 2008. Even excluding this, sales grew a reasonably strong 24 per cent.

The US market, which fetches the firm about a fifth of its revenues, has been a good hunting ground for it with sales at Rs 1,980 crore on the back of 25 per cent jump in volumes.

The bigger surprise, though, were the Russian and CIS markets, which did well despite crosscurrency pressures. These markets may bring in just about 12 per cent of the firm’s revenues but they contribute around a fifth of the profits. The home market didn’t fare as well - sales were up a lacklustre 5 per cent.

Also, had it not been for Imitrex, profitability wouldn’t have been as strong.Gross margins of 50 per cent for Dr Reddy’s core businesses were somewhat disappointing. And that was despite a weakening rupee. The management believes it can grow revenues by 10 per cent in the current year driven mainly by sumatriptan and the antacid drug omeprazole. Also Betapharm is likely to start supplying drugs to insurer AoK in Germany next month. However, analysts say net profits could stay flat or even fall slightly. At Rs 590, the stock trades at just around 13.5 times 2009-10 estimated earnings.
source - businessstandard