Dr.Reddy's ��• Hyderabad - 500 034, Telangana, India
Total Page:16
File Type:pdf, Size:1020Kb
Dr. Reddy's Laboratories Ltd. •·· 8-2-337, Road No. 3, Banjara Hills, Dr.Reddy's ��• Hyderabad - 500 034, Telangana, India. CIN: L85195TG1984PLC004507 Tel :+91 40 4900 2900 Fax : +91 40 4900 2999 Email : [email protected] www.drreddys.com August 6, 2018 To The Secretary BSE Ltd. National Stock Exchange of India Ltd. Dear Sir/Madam, Sub: Annual Report forthe financialyear 2017-18 In furtherance to our letter dated July 4, 2018 and pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, please find enclosed herewith the Annual Report for the Financial Year 2017-18. This Annual Report was adopted by the shareholders at the 34th AGM of the Company held on July 27, 2018. This is for your informationand records. With regards, Encl: as above Can’t Wait Good Health Annual Report 2017-18 DR. REDDY’S LABORATORIES LIMITED | Annual Report 2017-18 Good Health Can’t Wait “We should not settle for anything short of excellence in everything we do in reaching our vision.” Dr. K Anji Reddy In this Report 01 - 21 22 - 98 99 - 250 CORPORATE OVERVIEW STATUTORY REPORTS FINANCIAL STATEMENTS Letter from the Chairman and 02 Business responsibility report 22 Standalone fi nancial 99 Co-Chairman statements (Ind AS) Management discussion 34 Our businesses 04 and analysis Consolidated fi nancial 161 statements (Ind AS) Key performance indicators 06 Five years at a glance 46 and ratio analysis Extract of audited IFRS 233 Good health can’t wait 07 consolidated fi nancial statements Corporate governance 48 Delivering on our promises 08 Glossary 236 Additional shareholders’ 66 Board of directors 16 information Notice of the 34th annual 237 Management council 20 general meeting Board’s report 77 Our Promises Our fi ve promises clarify what we do, what we offer and the commitments we make to our stakeholders. Our patients trust our medicines. We focus our energies on renewing this trust every day. As we keep the interests of our patients at the center of all that we do, our promises drive us to reach higher levels of excellence. Enabling and Bringing helping our Addressing Helping patients Working with expensive partners ensure unmet patient manage disease partners to help medicines within that our medicines needs better them succeed reach are available where needed 2 Corporate Overview Letter from the Chairman and Co-Chairman Dear Shareholder, First, the US market, which accounts for these three sites and has had follow-up 52% of your company’s global generics meetings with the regulator. The USFDA Let us begin with your company’s sales and 42% of all sales, continued to re-inspected these facilities during performance in FY2018. witness further consolidation of sales February-April, 2017. Based on their Consolidated revenues were at channels, which has given the fewer observations, further corrective actions ` 142 billion, which was ~1% more big US buyers even greater pricing were undertaken, and such information compared to the previous year. power. The negative price effects of was shared with the regulator. Post substantial channel consolidation have this inspection, Miryalaguda API Consolidated gross profi t was ` 76.3 been further aggravated by intense manufacturing facility received an EIR billion, or 2.6% less vis-à-vis the price competition among multiple indicating closure of the audit. However previous fi nancial year. suppliers for each generic product. Over for the other two plants, there is no The gross profi t margin was 53.7%, the last three years, the average price change in status vis-a-vis the USFDA. versus 55.6% in FY2017. decline for generic drugs in the USA Consequently, launches of key has not only been high, but has also EBITDA reduced to ` 24.1 billion, molecules, injectables, as well as certain signifi cantly increased in every passing a fall of 5.5% compared to the APIs from these sites have been delayed. year. Moreover, growing competition previous year. Although your company has successfully from various international suppliers has secured regulatory and customer Profi t before taxes (PBT) was ` 14.3 made it very diffi cult, if not impossible, approvals to transfer the production of billion, compared to ` 14.7 billion in to overcome the price fall by volume some of these products to alternative the previous year. increases. These factors are not unique facilities, the outcome has been a to Dr. Reddy’s. They have negatively Profi t after taxes (PAT) was ` 9.8 signifi cant loss of revenue from the USA affected all major pharmaceutical billion, versus ` 12 billion in FY2017. for both FY2017 and FY2018. companies exporting to the USA. Frankly, these are disappointing results There was also a regulatory hiccup Second, we have been affected by — especially coming after a fi nancially when the Federal Institute for Drugs regulatory interventions, especially from diffi cult year in FY2017. and Medical Devices (BfArM) of the USA. As you know, in November, Germany audited your company’s Last year, we described the reasons 2015, the USFDA issued a warning formulation unit 2 (FTO-2) at Bachupally, for your company’s unfortunate letter regarding three plants: an API Hyderabad (Telangana). This resulted performance as the consequence of a manufacturing facility at Miryalaguda in the good manufacturing practices ‘perfect storm’ when a host of negative (Telangana), another API plant at (GMP) compliance certifi cate not being factors simultaneously came into play. Srikakulam (Andhra Pradesh), and an renewed in August, 2017. Corrective We had then hoped that some of the oncology formulation manufacturing work was immediately undertaken. dark clouds would disappear and make facility at Duvvada, near Visakhapatnam After a follow-up audit, the GMP way for better performance in FY2018. (Andhra Pradesh). non-compliance status was withdrawn in Unfortunately, that has not happened. In consultation with international experts January, 2018. However, stoppage in sale It is important to highlight the negative and the USFDA, your company has to Europe for four months led to lesser factors. continuously worked on instituting revenues. Thankfully, this is over, and we corrective and preventive actions across expect to increase sales in FY2019. Dr. Reddy’s Laboratories Limited Letter from the Chairman and Co-Chairman 3 Third, during India’s transition to the which include improvements in rigor of Though small, the proprietary product GST regime from 1 July 2017, your investigations and document control (PP) business has done well. The two company’s performance was impacted systems, standardization of instrument new products that were launched in due to reduction in channel inventory calibrations, strengthening shop-fl oor FY2017 — ZEMBRACETM SYMTOUCHTM and absorption of higher tax on drugs level IT controls as well as shop fl oor (a 3 mg sumatriptan injection for that were not in the National List of training programs, and simplifying acute migraine) and SERNIVOTM Essential Medicines (NLEM). Moreover, and standardizing standard operating (a betamethasone dipropionate 0.05% price controls under India’s drug price procedures and batch records. We have spray to treat mild-to-moderate plaque control orders affected revenue across requested the USFDA to schedule an psoriasis) have found market traction. selected products. As a result, sales inspection of the oncology formulation In FY2018, the USFDA approved a performance in India was more muted manufacturing facility at Duvvada. third product, IMPOYZTM (clobetasol than it should have been. Hopefully, the regulator will recognize propionate) cream. We expect to see the scale and scope of improvements greater revenues in the USA driven undertaken at the facilities and give us by these three products. Towards the WHERE DO WE GO FROM HERE? the green light. end of the year we have fi led our lead Regarding pricing pressures in the migraine candidate DFN-02 with the There exist signifi cant opportunities in USA, it is diffi cult to predict how long USFDA. Emerging Markets, which are now on these trends will last. Instead, our task a longer-term upswing. We should be A positive upshot of the revenue crunch should be to overcome this reality. The able to increase revenues from these in FY2017 and FY2018, has been your only way of doing so is to have a strong geographies through greater sales company’s attention to costs. From the pipeline of diffi cult-to-manufacture of simple and complex generics as beginning of FY2018 there has been complex formulations that address key well as hospital and institutional sales a totally focused drive on eliminating therapeutic needs — one that allows of oncological biosimilars. There are needless layers and unnecessary costs. us to introduce several value-added also major prospects in key emerging This will continue throughout FY2019 products each year, so that each such markets for speciality generics and and thereafter, with the aim to create a launch steps-up revenues to combat biosimilars, and your company will be leaner, internationally cost-competitive the price erosion in those products that doing its utmost to increase its market and more nimble organization. were brought to the market earlier. presence in these countries. Your company’s management has Your company has such a pipeline. In With the German regulatory problem accepted several challenging goals FY2018, we fi led 19 new abbreviated behind us, we expect to increase our for FY2019. These involve better plant new drug applications (ANDAs) and sales to that country as well as Romania. management; an unwavering focus one new drug application (NDA) under Moreover, having opened operations on institutionalizing best-in-class 505(b)(2) route with the USFDA. As of 31 in France, Italy and Spain, we should be manufacturing and quality practices; March 2018, we had 110 generic fi lings working on generating higher revenues bringing about greater effi ciency pending approval from the USFDA, from these countries, and to increase in R&D, product development, and comprising 107 ANDAs and three new our market presence in Europe in the speed-to-market for new products; drug applications (NDAs) fi led under the near future.