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Dr. Reddy's Laboratories
Global generics play
Event
Dr Reddy’s Laboratories (DRRD), headquartered in Hyderabad, India, is
one of the largest pharma companies in India. DRRD is vertically integrated
with a presence across the pharma value chain. It has a presence in more
than 100 countries with wholly-owned subsidiaries in the US, UK, Russia,
Germany and Brazil. DRRD’s research specialization includes diabetes,
cardiovascular, anti-infectives, inflammation and cancer therapies.
Stable business, steady growth: DRRD has evolved a stable business
model with a presence across the pharmaceutical value chain. Global
generics (69% of revenue) and pharmaceutical services and active
ingredients (30% of revenue) are the key segments. We expect more than
20% earnings CAGR for DRRD between FY10A–13E.
Impact
US business top priority: DRRD has set a target of becoming a leader
among Tier II generic players in the United States by FY13 by leveraging its
robust pipeline, which has visibility into niche opportunistic launches each
year for the next five years. DRRD posted US$106m sales in US in 3QFY11.
Ramp-up of market share in key products and new launches helped built the
momentum. Data on Fondaparinux remains key.
Proxy for emerging market play: India, Russia & CIS and RoW contribute ~
35% of top-line. We believe the GSK deal, supply for which is slowly rampingup,
positions DRRD on a strong foot to unlock other emerging market growth
(FY13 and beyond).
Powering India: DRRD has expanded its sales force (current
strength~3000). Currently India contributes~15% of the total revenue.
DRRD expects to grow in high-teens over the medium term.
Russia business contributes ~ 10% of its total revenue: DRRD is
ranked among the top 15 players in terms of sales in Russia with a
market-share of ~1.2%. DRRD’s top-line has grown at a 28% sales cagr
in Russia over the last 5 years. We see high teen growth in Russia is
possible over the medium term.
ROW: business is reaching critical mass in most of the countries and we
expect the margins to expand significantly. Contributes ~5% of total sales.
Action and recommendation
Adjusting for the exclusivity earnings and acquired intangible amortisation
DRRD is now trading at a valuation of ~17.8x FY12E earnings.
Dr. Reddy's Laboratories Aide Memoire
Company
1. What is the update on the FY13 guidance?
2. US contributing US$1bn, would mean US$250m/qtr in FY13. Can you please explain how you would reach there in 5-6
quarters (given US$106m in 3QFY11)?
3. Update on Fondaparinux?
4. What is DRRD strategy in SRM? Expansion or focus on profitability?
5. What is the update on Biosimilars products launched in India and products in the pipeline?
6. What is the current Debt to equity ratio? Cost of debt?
7. Future capex plan?
8. Outlook for the PSAI business from 1-2 years perspective?
9. Any acquisition plans in near future?
10. Update on the NCE/NBE pipeline?
Industry
1. How attractive are the emerging markets (Russia, LATAM, South Africa etc) from a 3-5 years perspective? What would be
yours strategy going forward? How is the regulatory framework in each of these markets?
2. Is profitability/margins in Indian markets sustainable? How do you want yourself to position in Indian markets from a 3-5
years perspective? What will drive growth going forward?
3. What is the outlook on API business for Indian players from a timeframe of 2-3 years?
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dr. Reddy's Laboratories
Global generics play
Event
Dr Reddy’s Laboratories (DRRD), headquartered in Hyderabad, India, is
one of the largest pharma companies in India. DRRD is vertically integrated
with a presence across the pharma value chain. It has a presence in more
than 100 countries with wholly-owned subsidiaries in the US, UK, Russia,
Germany and Brazil. DRRD’s research specialization includes diabetes,
cardiovascular, anti-infectives, inflammation and cancer therapies.
Stable business, steady growth: DRRD has evolved a stable business
model with a presence across the pharmaceutical value chain. Global
generics (69% of revenue) and pharmaceutical services and active
ingredients (30% of revenue) are the key segments. We expect more than
20% earnings CAGR for DRRD between FY10A–13E.
Impact
US business top priority: DRRD has set a target of becoming a leader
among Tier II generic players in the United States by FY13 by leveraging its
robust pipeline, which has visibility into niche opportunistic launches each
year for the next five years. DRRD posted US$106m sales in US in 3QFY11.
Ramp-up of market share in key products and new launches helped built the
momentum. Data on Fondaparinux remains key.
Proxy for emerging market play: India, Russia & CIS and RoW contribute ~
35% of top-line. We believe the GSK deal, supply for which is slowly rampingup,
positions DRRD on a strong foot to unlock other emerging market growth
(FY13 and beyond).
Powering India: DRRD has expanded its sales force (current
strength~3000). Currently India contributes~15% of the total revenue.
DRRD expects to grow in high-teens over the medium term.
Russia business contributes ~ 10% of its total revenue: DRRD is
ranked among the top 15 players in terms of sales in Russia with a
market-share of ~1.2%. DRRD’s top-line has grown at a 28% sales cagr
in Russia over the last 5 years. We see high teen growth in Russia is
possible over the medium term.
ROW: business is reaching critical mass in most of the countries and we
expect the margins to expand significantly. Contributes ~5% of total sales.
Action and recommendation
Adjusting for the exclusivity earnings and acquired intangible amortisation
DRRD is now trading at a valuation of ~17.8x FY12E earnings.
Dr. Reddy's Laboratories Aide Memoire
Company
1. What is the update on the FY13 guidance?
2. US contributing US$1bn, would mean US$250m/qtr in FY13. Can you please explain how you would reach there in 5-6
quarters (given US$106m in 3QFY11)?
3. Update on Fondaparinux?
4. What is DRRD strategy in SRM? Expansion or focus on profitability?
5. What is the update on Biosimilars products launched in India and products in the pipeline?
6. What is the current Debt to equity ratio? Cost of debt?
7. Future capex plan?
8. Outlook for the PSAI business from 1-2 years perspective?
9. Any acquisition plans in near future?
10. Update on the NCE/NBE pipeline?
Industry
1. How attractive are the emerging markets (Russia, LATAM, South Africa etc) from a 3-5 years perspective? What would be
yours strategy going forward? How is the regulatory framework in each of these markets?
2. Is profitability/margins in Indian markets sustainable? How do you want yourself to position in Indian markets from a 3-5
years perspective? What will drive growth going forward?
3. What is the outlook on API business for Indian players from a timeframe of 2-3 years?
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