Dr. Reddy’s Laboratories, based in Hyderabad, is now aiming to be among the top five pharmaceutical players in the domestic market with a focus on the chronic therapy segment. The United States would remain an important geographic area, but the company says it hopes to double its revenue from China and increase its revenue in Brazil fivefold over the next five years.
The company has set an ambitious strategy for its next stage of growth where it says by 2027; at least 25% of its products would be “first-to-market” generics, meaning they would be affordable versions of innovative products. Moreover, by 2030, it aims to triple the number of patient lives it touches to 1.5 billion people. It also aims to launch three innovative products that improve processing standards every year.
GV Prasad, Co-Chairman and Managing Director of Dr Reddy Laboratories (DRL), told Business Standard: “In India, we want to increase our share of the chronic market where we are underrepresented, and we could invest there for a inorganic expansion if we find the right solution in terms of size and price etc. We’ve done it before, like Novartis’ cardiovascular product.
Prasad added, “We want to grow in India in the spaces that are relevant to us, and we want to do that both organically and inorganically.”
He says the company has diversified its efforts from the United States to other markets and shifted capital allocation to markets like India. “In India, we have made brand acquisitions over the past few years. We continue to work in the United States, but we have allocated more capital to India,” says Prasad.
The United States has been a priority market for DRL for years and still contributes around 35% of its consolidated revenue. But other markets are catching up fast – India and emerging markets together have $1 billion in revenue, roughly the same size as US revenue.
The US company recorded a CAGR of 5% between FY19 and FY22, and DRL has an extensive portfolio of 335 products, of which more than 160 are in the market, and the rest are in various stages of development.
However, the generic market in the United States has faced competition and price erosion with the entry of new players. The Indian market, on the other hand, is a market for branded generics. Although it takes time to build a brand, once one has a strong brand, the returns are quite steady.
Prasad explains: “In India, the price remains stable and the brand continues to grow. Even in mature brands, there is growth. In the United States, you don’t have pricing power. When you have a brand, you have pricing power. But in generics (like in the US), when a new player comes in, you can quickly lose market share.
But he quickly adds that you can also gain market share very quickly in a generics market. “No one can leave the US market because it’s one of the biggest markets in the world, and the growth is also good,” he says.
DRL thus plans to move up the value chain in the United States – out of the pipeline of 175 products, around 40% are injectable or sterile products and around 25 are complex products.
That aside, China is another key market where DRL aims to do well now with a faster regulatory approval process.
“Chinese regulations now allow that if a product is approved in the United States, then on that basis the product can also be approved in China. The process takes about two to three years,” says Prasad, adding that it is mainly the US pipeline that they take to China. Russia, which is largely an over-the-counter (OTC) market, is also growing rapidly, says Prasad. “About 35 to 40% of this market is OTC and so if you have a force on the ground, it is possible to gain market share in Russia. We will continue to launch products there,” he added.