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Home , Generic drug, Ranbaxy Laboratories, Sun Pharma

Dr Reddy’s prescription to stay ahead of the generic pack The company has differentiated itself by focusing on internal processes and staying away from costly acquisitions. Now, it has other plans to fend off the competition

B DASARATH REDDY Hyderabad, 8 August BATTLE OF THE GENERICS As the cliff in the US levels off, generic makers will face increasing pressure to develop other kinds of products he revenues of Hyderabad- Revenues in 2011-12 (Actual) Revenue for top-three Indian based maker, Pharma companies T Dr Reddy's Laboratories, is expected to surpass those of ~ crore  Revenue  Net profit ~ crore  2012-13  2013-14* , the largest Ranbaxy 9,977 Ranbaxy 11,309 Indian generic drug company, and Laboratories* -2,900 Laboratories 12,615 now a subsidiary of Japan’s Daiichi Dr Reddy's 9,674 Dr Reddy's 11,286 Sankyo, sometime next year. Laboratories** 1,426 Laboratories 12,663 Barclays Equity Research projects 8,006 9,694 Dr Reddy’s revenues for FY14 at Sun Pharmaceutical Sun Pharmaceutical 2,587 11,472 ~12,663 crore, slightly higher than Industries** Industries Ranbaxy’s (at ~12,615 crore). *Calendar year 2011, **FY ended March 2012 *Estimates This would be big news for any company battling it out in a chal- ANDA* pipeline of top-three companies Global pharmacy lenging industry. However, the  Approved  Pending Share of consolidated revenues for Dr Reddy's in the year ‘11-12 generic-drug business is more than just that. It’s a fiercely com- 241 petitive business, driven by vol- umes and characterised by con- 148 148 stantly falling prices and, 101 therefore, steep margins. As a 83 79 result, product differentiation is minimal, and the only way to drive sales is by lowering prices — Ranbaxy Dr Reddy's which, ironically, threatens the *Abbreviated very survival of the business.

Tooth and nail US product portfolio (products in numbers) USFDA-approved facilities (in numbers) Generic companies are doing Ranbaxy 67 Dr Reddy's 14 everything in their power to gain Dr Reddy’s 64 Sun Pharma 11 a competitive edge. For example, 146 4 Sun Pharma recently appointed Sun Pharma Ranbaxy ex-Teva CEO Israel Makov as its chairman, because of his ability to leverage his global expertise to improve the capabilities within the Vohra cites the example of Dr launches of and strokes, and to treat peripheral Also, the 180-day marketing coming years, Dr Reddy’s needs to drive growth and tap new mar- organisation, as against buying a Reddy’s biologic product, Ziprasidone, both antipsychotic vascular disease and claudica- exclusivity period is like a very drive sales in emerging markets. kets. Acquisitions and alliances company in some market which Rituximab, a that had 180-day marketing tion), both cornered a $6-billion short, exotic vacation that you will "They will need to make acquisi- in the industry have also become increases your turnover. That is used in cancer and anti-rejection exclusivity periods. Olanzapine generic opportunity each. But the never take again. Once this period tions. But, they should stick to the key to driving sales. Sun’s acqui- defensive,” he says. “Second, if you treatments. When the company alone had contributed $100 mil- company still sees a substantial is over, competition brings down US and Russia and not go any- sition of Taro, for instance, look at the chart of patent expiries, launched it at 50 per cent of the lion to its US revenues last year. upside from products like the price to 0-5 per cent of the where else. They should keep away expanded the company’s product there was a huge amount of poten- original price in , the market Launches are critical to the com- Escitalopram (for anxiety disor- innovator drug in the US market. from Japan, because it is going to base to 148 in the US, besides tial. In that scenario, we said we expanded 10 times, he says. In pany — a little more than 50 per ders) and (for The company plans to beat this be a tough market. At best, they adding 23 abbreviated new drug would focus more on executing 2010-11, the domestic revenues cent of its US revenues come from stomach and duodenal ulcers), price erosion by targeting complex can think of Latin America, which applications (ANDAs) to its well because there was enough from it grew 75 per cent, to touch new products. scheduled to be launched in the generics, with sophisticated for- is growing fast," advises Barclays pipeline; it also provided access to opportunity in the market. When ~40.5 crore. The biggest concern articulated next two years. The company has mulation processes, and by Prasad. complementary therapeutic those opportunities begin to die, Vohra believes the company by analysts is that the patent cliff also put more effort in expanding delayed actions and modified Not surprisingly, Vohra says Dr areas, like dermatology. acquisitions would anyway be has possibly one of the best-qual- in the US is soon going to level off. the over-the-counter (OTC) prod- releases. Reddy’s is already looking to Curiously, Dr Reddy’s has done available,” he adds. ity product pipelines, which can- The year 2012 was particularly uct portfolio, as this gives a wider The company is also betting big increase its presence in Germany, little of both, and that has been its The four smaller acquisitions not only be measured by the num- exceptional in terms of small mol- reach, compared with prescrip- on , the generic equiv- the CIS countries, South Africa and biggest differentiator from the the company made after ber of ANDAs filed with the ecule patent expiries worth $44 tion drugs. alents of prod- Venezuela through the GSK part- other generic biggies. Says Balaji Betapharm, including the recent USFDA. “I can tell you we never billion, of which Lipitor accounted ucts, a class of proteins used in nership. Other strategies include V Prasad of Barclays Research, “I $40-million one of a dermatology want to be the highest filers in for $10 billion. But, Vohra feels the The road ahead treating complex diseases like dia- diversifying into the OTC segment do not attach much importance to brand in the US, were largely done India. Not this year, not in the past next four years still present ample Maintaining a competitive edge betes and cancer. It expects its in some markets and working on the tags of first and second. But, it with an intent of getting more and not in the future.” opportunities — worth over $70 will not be easy for Dr Reddy’s. Its biosimilars to start generating sub- cost models to save resources for is very important for Dr Reddy's capabilities. "After these baby billion, pretty much the same as alliances — one with GSK for Latin stantial revenues from 2017 funding the business of propri- to find new sources of revenues. steps, I think we have today Relying on Uncle Sam in the previous four. "Forget about America, with Merck Serono for onwards, coinciding with the etary products. The company, Sun is already planning just that.” reached a situation where we are Much like other generic firms, Dr the patent cliff, the opportunity co-developing and commercialis- patent expiries of the category in Vohra says, will now look at acquir- Yet, Umang Vohra, executive more confident of an acquisition Reddy’s relies heavily on selling there is still going to be enormous ing compounds; and a the US. Besides the therapeutic ing properties that have complex vice-president and chief financial strategy going forward," he says. its drugs all over the world. Its for companies like ours in the US," joint venture with Fuji Film to areas of gastro-intestinal, cardio- products. "We will look for brands officer of Dr Reddy’s, insists his The other difference that sets global revenues grew 32 per cent he says. design and develop generic drugs vascular, diabetes, and in Russia’s OTC segment, possibly company's ‘defensive strategy’ has Dr Reddy’s apart is its conscious last year to over ~7,000 crore in There are no blockbuster drugs for the Japanese market — and pain management, the company some brands in India also. We con- served it well. "After Betapharm, decision, made a year and a half 2011-12, driven mainly by the US comparable to (for biosimilars have a long way to go is actively pursuing the dermatol- tinue to look at opportunities even we came down to the fact that you ago to target more complex prod- market, which saw 16 launches. high cholesterol) and before making any meaningful ogy segment. within the US, But they are strate- should make acquisitions that ucts, few are capable of making. This includes the first-to-file Bisulfate (for heart attacks, contribution to the top line. To survive the onslaught of the gic, not opportunistic."