MIRA INFORM REPORT

 

 

Report Date :

20.06.2008

 

IDENTIFICATION DETAILS

 

Correct Name :

DR. REDDYS LABORATORIES LIMITED

 

 

Registered Office :

7-1-27, Ameerpet, Hyderabad – 500 016, Andhra Pradesh

 

 

Country :

India

 

 

Financials (as on) :

31.03.2007

 

 

Date of Incorporation :

24.02.1984

 

 

Com. Reg. No.:

01-4507

 

 

CIN No.:

[Company Identification No.]

L85195AP1984PLC004507

 

 

TAN No.:

[Tax Deduction & Collection Account No.]

HYDD00080D

 

 

Legal Form :

Public limited liability company. The company’s shares are listed on the Stock Exchanges.

 

 

Line of Business :

Manufacturers and Sellers of Bulk Drugs, Formulations and Diagnostic Reagents and Kits.

 

 

RATING & COMMENTS

 

MIRA’s Rating :

Aa

 

RATING

STATUS

PROPOSED CREDIT LINE

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

Large

 

Maximum Credit Limit :

USD 219000000

 

 

Status :

Excellent

 

 

Payment Behaviour :

Regular

 

 

Litigation :

Clear

 

 

Comments :

Subject is an old, well-established and reputed company engaged in manufacturing and marketing of pharmaceuticals.  The company manufactures wide range of pharmaceutical products in India and overseas.  The company is making satisfactory progress in its business and profitability.  Directors are well-experienced and resourceful businessmen.  Their trade relations are fair.  Payments are usually correct and as per commitments. 

 

It can be considered good for business dealings at usual trade terms and conditions.

 

 

LOCATIONS

 

Registered Office / Corporate Office :

7-1-27, Ameerpet, Hyderabad – 500 016, Andhra Pradesh, India

Tel. No.:

91-40-23731946/23731397/26511723

Fax No.:

91-40-23731955/23734504

E-Mail :

drl@hd1.vsnl.net.in

corpcom@drreddys.com

vasudevan@drreddys.com

pavanknvs@drreddys.com

Website :

http://www.drreddys.com

 

 

Administrative Office:

Generics Survey No. 41, FTO Unit, 3 Bachupally Ranga Reddy Disc, Hyderabad - 500123, Andhra Pradesh, India

 

 

Plants (In India) :

Bulk Drugs – I, II, III and IV

·         Plot Nos. 137, 138 & 146, IDA Bollarum, Jinnaram Mandal, Medak District  - 502 320, Andhra Pradesh

 

·         Plot Nos. 110 & 111, IDA Bollarum, Jinnaram Mandal, Medak District  - 502 320, Andhra Pradesh

 

·         Plot Nos. 116, IDA Bollarum, Jinnaram Mandal, Medak District  - 502 320, Andhra Pradesh

 

·         Plot No. 9/A, Phase III, IDA Jeedimetla Ranga Reddy District – 500 055, Andhra Pradesh

 

·         Bulk Drugs – V

Peddadevulapally, Tripuraram Mandal, Nalgonda District – 508207, Andhra Pradesh, India

 

·         Bulk Drugs – VI

IDA Pydibheemavaram, Ransthal Mandal, Srikakulam District – 532409, Andhra Pradesh

 

·         Bulk Drugs – IX

IDA Pydibheemavaram, Ransthal Mandal, Srikakularrf Dist, AP 532 409

 

Formulations

 

·         I – IDA Bollaram Jinnaram Mandal, Medak District – 502320, Andhra Pradesh, India

 

·         II- Survey No. 42, Bachupally Quthbullapur Mandal, Ranga Reddy District – 500123, Andhra Pradesh, India

 

·         III – R S No. 63/3 and 63/4, Thiruvandarkoil Mannvipet, Pondicherry – 605102, Tamil Nadu, India

 

·         IV – Ward – F, Block –4, Adavipolam, Yanam, Pondicherry – 533465, Tamil Nadu, India

 

·         V – Plot No. A-3 to A-6, Phase 1-A, Verna Industiral Estate, Verna, Goa – 403722

 

·         VI – Khol, Nalagarh, Solan, Nalagarh Road, Baddi – 173205, Himachal

 Pradesh

 

Generics

·         Survey No. 41, Bachupally Quthbullapur Mandal, Ranga Reddy District – 500043, Andhra Pradesh, India

 

Boitech/Critical Care/Diagnostics

·         Survey No.47, Bachupally Quthbullapur Mandal, Ranga Reddy District – 500043, Andhra Pradesh, India

 

Custom Chemical Services/Discovery Research

·         Bollaram Road, Miyapure, Hyderabad – 500050, Andhra Pradesh, India

 

 

Plants (Outside India) :

Riverview Road, Beverly, East Yorkshire, HU 17 Old United Kingdom

 

Huangpujiangzhonglu Kunshan Economic and Technologica Development Zone, Jiangsu Province, China

 

208-214, York Road, Battersea, London, SW 11-3SD, United Kingdom

 

 

DIRECTORS

 

Name :

Dr. K. Anji Reddy

Designation :

Executive Chairman

 

 

Name :

Mr. G.V. Prasad

Designation :

Vice Chariman and Chief Executive Officer

 

 

Name :

Mr. Satish Reddy

Designation :

Director

 

 

Name :

Dr. P. Satyanarayana Rao

Designation :

Director

 

 

Name :

Dr. V. Mohan

Designation :

Director

 

 

Name :

Dr. Omkar Goswami

Designation :

Director

 

 

Name :

Mr. Ravi Bhoothalingam

Designation :

Director

 

 

Name :

Mr. P.N. Devarajan

Designation :

Director

 

 

Name :

Dr. A. Venkateswarlu

Designation :

Director

 

 

Name :

Mr. Krishna G. Palepu

Designation :

Director

 

 

Name :

Mr. Anupam Puri

Designation :

Non – Executive Director

 

 

Name :

Mr. J P Moreau

Designation :

Director

 

 

Name :

Mrs. Kalpana Morparia

Designation :

Director

 

 

KEY EXECUTIVES

 

Name

Mr. K. Satish Reddy

Designation

Managing Director & Chief Operating Officer

Age

33 Years

Qualification

B. Tech., M. S.

Experience

9 Years

Date of Joining

18th January, 1993

Previous Employment

Director – Globe Organics Limited

Other Directorships

1.       Diana Hotels Limited

2.       DRL Investments Limited

3.       Compact Electric Limited

4.       Cheminor Investments Limited

 

Name

Dr. K. Anji Reddy

Designation

Executive Chairman

Age

61 Years

Qualification

B. Sc. (Tech.), Ph. D.

Experience

31 Years

Date of Joining

1st September, 1986

Previous Employment

Managing Director – Standard Organics Limited

Other Directorships

1.       Diana Hotels Limited

2.       ICICI Venture Funds

3.       Deccan Hospitals Corporation Limited

4.       Biotech Consortium India Limited

5.       Viral Therapeutic, Inc.

 

 

Name

Mr. G V. Prasad

Designation

Executive Vice Chairman and CEO

 

 

Name

Mr. V. S. Vasudevan

Designation

Chief Financial Officer

Name

Dr. R. Rajagopalan

Designation

President

 

 

Name

Mr. Arun Sawhney

Designation

President

 

 

Name

Mr. Abhijit Mukherjee

Designation

President

 

 

Name

Mr. K. B. Sankara Rao

Designation

Executive Vice President

 

 

Name

Mr. Saumen Chakraborthy

Designation

Executive Vice President

 

 

Name

Mr. S. Venkatraman

Designation

Senior Vice President

 

 

Name

Mr. Vilas M. Dholye

Designation

Senior Vice President

 

 

Name

Mr. Ashwani Kumar Malhotra

Designation

Senior Vice President

 

 

Name

Mr. C. V. Narayana Rao

Designation

Vice President

 

 

Name

Mr. Ranjan Chakraborthy

Designation

Vice President

 

 

Name

Dr. N. R. Srinivas

Designation

Vice President

 

 

Name

Dr. Javed Iqbal

Designation

Distinguish Research Scientist

 

 

Name

Mr. Jaspal Singh Bajwa

Designation

President

 

 

Name

Dr. Jayaram Chigurupati

Designation

Executive Vice President

 

 

Name

Dr. G. Om Reddy

Designation

Senior Vice President

 

 

Name

Mr. B.R. Reddy

Designation

Senior Vice President

 

 

Name

Mr. Arvind Vasudeva

Designation

Vice President

 

 

Name

Dr. M. Satyanarayana Reddy

Designation

Vice President

 

 

Name

Dr. R. Buchi Reddy

Designation

General Manager

 

Brief Profile of Dr. K. Anji Reddy:

 

He is the founder and the Executive Chairman of Dr. Reddy’s Laboratories Limited. He is also the founder of the Dr. Reddy’s Group, Dr. Reddy’s Research Foundation and Dr. Reddy’s Foundation for Human and Social Development. He is the chairman of the Academy of Human Resources Development and chairman of the Research and Development Committee of the Federation of Indian Chamber of Commerce and Industry (FICCI). He is a member of both the Board of Trade and the Task Force on pharmaceuticals and knowledge-based industries, which was instituted by the Prime Minister. He has been recently honoured with the Padmashree by the Government of India, for his distinguished service in the field of trade and commerce.

 

 

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

 

As on 30.05.2008 :-

 

Category

 
No. of shares
% of shareholding

promoters’ holdings

 

 

Individuals

4479484

2.66

Companies

37798290

22.48

 

 

 

Indian Financial Institutions

21326158

12.68

Banks

412900

0.25

Mutual funds

10241938

6.09

 

 

 

Foreign Holdings

 

 

Foreign Institutional Investors

42244567

25.12

NRIs

3204573

1.91

American Depository Receipts / Foreign National

27665081

16.45

 

 

 

Indian Public and Corporate

20831095

12.38

 

 

 

Grand Total

168204086

100.00

 

 

BUSINESS DETAILS

 

Line of Business :

Manufacturers and Sellers of Bulk Drugs, Formulations and Diagnostic Reagents and Kits.

 

 

Products :

Item Code No. [ITC Code]                          29419003

Product Description                                    Ciprofloxacin Hydrochloride

                                                                               

Item Code No. [ITC Code]                          29420001

Product Description                                    Norfloxacin

                                                                               

Item Code No. [ITC Code]                          30049038

Product Description                                    Omerprazole

 

 

Exports :

 

Products :

API’s Finished Formulations

Countries :

All Countries

 

 

Imports :

 

Products :

Chemicals, Packaging Materials, Packaging Machinery

 

PRODUCTION STATUS

 

Class of Goods

Unit

Actual Production

Formulations

Million Units

2816

Active Pharmaceutical ingredients and intermediates [API]

Tones

3101

Generics

Million Units

1939.48

Biotechnology – on single shift basis

Grams

73

Custom Pharmaceutical Services

Kilograms

219200

 

GENERAL INFORMATION

 

No. of Employees :

1449

 

 

Bankers :
  • Allahabad Bank, Industrial Finance Branch, Secunderabad, Andhra Pradesh, India
  • Bank of Baroda, Khairatabad Branch, Hyderabad, Andhra Pradesh, India
  • Canara Bank, Basheer Bagh, Hyderabad, Andhra Pradesh, India
  • Canara Bank, India
  • Citibank, Hyderabad, Andhra Pradesh, India
  • Global Trust Bank, Secunderabad, Andhra Pradesh, India
  • HDFC Bank, Hyderabad, Andhra Pradesh, India
  • The Hongkong & Shanghai Banking Corporation Limited, Hyderabad, Andhra Pradesh, India
  • State Bank of Hyderabad, Overseas Branch, Hyderabad, Andhra Pradesh, India
  • State Bank of India, Industrial Finance Branch, Hyderabad, Andhra Pradesh, India
  • State Bank of Mysore, Industrial Finance Branch, Hyderabad, Andhra Pradesh, India
  • Standard Chartered Grindlays Bank Limited, Hyderabad, Andhra Pradesh, India
  • Andhra Bank, Balanagar Branch, Hyderabad – 500016, Andhra Pradesh, India

 

 

Banking Relations :

Good

 

 

Auditors :

Bharat S. Raut and Company

Chartered Accountants

 

 

Associates :
  • Pathnet India Private Limited
  • Aurantis Farmaceutica Limited
  • Compact Electric Limited
  • APR LLC
  • Standard Organics Limited
  • Dr. Reddy’s Exports Limited
  • Sol Pharmaceuticals Limited

 

 

Subsidiaries :
  • OOO JV Reddy Biomed Limited, Russia
  • Reddy Pharmaceuticals Hong Kong Limited, Hong Kong
  • Dr. Reddy’s Laboratories Inc., USA
  • Reddy’s Cheminor S.A., France
  • Reddy Antilles N.V.
  • Aurigene Discovery Technologies Limited, India
  • Dr. Reddy’s Laboratories {EU} Limited, UK [Formerly known as BMS Laboratories Limited, UK]
  • Dr. Reddy’s Laboratories {EU} Limited, UK [Formerly known as Meridian Healthcare, UK]
  • Chemnior Investments Limited, India
  • DRL Investments Limited, India
  • OOO Dr. Reddy’s Laboratories Limited
  • Dr. Reddy’s Laboratories [Proprietory] Limited, South Africa
  • Dr. Reddy’s Biosciences Limited
  • Reddy Netherlands B.V. , Netherlands
  • Reddy Pharmaceuticals Singapore Pte. Limited, Singapore
  • Reddy US Therapeutics Inc., USA
  • AMPNH Inc.
  • Zenovus Biotech Private Limited, India
  • Compact Electric Limited, India
  • Dr. Reddy’s Pharmaceutical Do Brasil Limited
  • Kunshan Rotam Reddy Pharmaceutical Company Limited
  • Globe Enterprises [a partnership firm in India]
  • BMU Laboratories Limited
  • Meridian Healthcare (U.K.) Limited

 

 

Membership :
  • Confederation of Indian Industry

 

 

CAPITAL STRUCTURE

 

(As on 31.03.2007):-

 

Authorised Capital :

No. of Shares

Type

Value

Amount

100000000

Equity Shares

Rs. 5/- each

Rs. 500.000 millions

 

Issued, Subscribed & Paid-up Capital :

No. of Shares

Type

Value

Amount

83960000

Equity Shares

Rs.10/- each

Rs.839.600 millions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL DATA

[all figures are in Rupees Millions]

 

ABRIDGED BALANCE SHEET

 

SOURCES OF FUNDS

 

31.03.2007

31.03.2006

31.03.2005

SHAREHOLDERS FUNDS

 

 

 

1] Share Capital

839.600

388.473

382.600

2] Share Application Money

0.000

0.000

0.000

3] Reserves & Surplus

42894.000

22237.944

20358.200

4] (Accumulated Losses)

0.000

0.000

0.000

NETWORTH

43733.600

22626.417

20740.800

LOAN FUNDS

 

 

 

1] Secured Loans

19.200

1451.285

32.700

2] Unsecured Loans

3279.800

7787.410

2699.700

TOTAL BORROWING

3299.000

9238.695

2732.400

DEFERRED TAX LIABILITIES

0..000

530.847

0.000

 

 

 

 

TOTAL

47032.600

32390.959

23473.200

 

 

 

 

APPLICATION OF FUNDS

 

 

 

 

 

 

 

FIXED ASSETS [Net Block]

6820.400

5618.151

5625.400

Capital work-in-progress

2806.100

1129.160

601.300

 

 

 

 

INVESTMENT

8302.100

8217.937

3584.600

DEFERREX TAX ASSETS

0.000

0.000

0.000

 

 

 

 

CURRENT ASSETS, LOANS & ADVANCES

 

 

 

 

Inventories
4875.800

4430.968

3038.100

 

Sundry Debtors
10557.000

5812.160

4176.400

 

Cash & Bank Balances
14567.100

6509.429

8917.200

 

Other Current Assets
0.000

0.000

0.000

 

Loans & Advances
10285.600

6776.456

2679.000

Total Current Assets
40285.500
23529.013

18810.700

Less : CURRENT LIABILITIES & PROVISIONS
 

 

 

 

Current Liabilities
7319.500

5532.648

4515.000

 

Provisions
3862.000

570.654

633.800

Total Current Liabilities
11181.500

6103.302

5148.800

Net Current Assets
29104.000

17425.711

13661.900

 

 

 

 

MISCELLANEOUS EXPENSES

0.000

0.000

0.000

 

 

 

 

TOTAL

47032.600

32390.959

23473.200

 

PROFIT & LOSS ACCOUNT

 

PARTICULARS

 

31.03.2007

31.03.2006

31.03.2005

Sales Turnover

40472.200

21365.711

17299.700

Other Income

1150.300

0.000

0.000

Total Income

41622.500

21365.711

17299.700

 

 

 

 

Profit/(Loss) Before Tax

13658.500

2637.646

443.600

Provision for Taxation

1889.900

526.407

(211.000)

Profit/(Loss) After Tax

11768.600

2111.239

654.600

 

 

 

 

Export Value

NA

12100.041

9197.355

 

 

 

 

Import Value

NA

2744.535

2282.872

 

 

 

 

Expenditures :

 

 

 

 

Cost of Goods Sold

 

 

 

 

Manufacturing Expenses

2971.900

1720.500

1422.200

 

Administrative Expenses and Selling Expenses

7532.400

5487.700

5052.000

 

Raw Material Consumed

1040.18

7166.700

5039.600

 

Excise Duty

896.600

987.200

768.000

 

Employee Cost

2616.100

1524.165

1771.300

 

Interest and Financial Charges

519.600

246.200

127.400

 

Power & Fuel

578.300

482.300

432.000

 

Depreciation & Amortization

1335.000

1113.300

924.600

 

Other Expenditure         

10473.920

NA

1319.000

Total Expenditure

27964.000

18728.065

16856.100

 

QUARTERLY RESULTS

 

Year

30.06.2007

30.09.2007

31.12.2007

 

31.03.2008

 

Type

1st Quarter

2nd Quarter

3rd Quarter

4thQuarter

Sales Turnover

7398.800

8655.600

7755.500

9842.300

Other Income

598.500

518.500

355.000

439.300

Total Income

7997.300

9174.100

8110.500

10281.600

Total Expenditure

5863.600

7308.100

7074.100

7754.700

Operating Profit

2133.700

1866.000

1036.400

2526.900

Interest

58.200

18.200

20.700

4.900

Gross Profit

2075.500

1847.800

1015.700

2522.000

Depreciation

349.600

386.900

407.100

476.400

Tax

127.400

97.000

146.500

426.500

Reported PAT

1456.900

1250.000

422.900

1622.600

 

KEY RATIOS

 

PARTICULARS

 

31.03.2007

31.03.2006

31.03.2005

Debt Equity Ratio

0.19

0.28

0.08

Long Term Debt Equity Ratio

0.02

0.04

0.01

Current Ratio

2.20

1.85

2.64

TURNOVER RATIOS

 

 

 

Fixed Assets

3.45

2.05

1.79

Inventory

8.70

5.64

5.79

Debtors

4.94

4.21

3.78

Interest Cover Ratio

27.29

10.39

4.48

Operating Profit Margin (%)

38.33

17.44

9.19

Profit Before Interest and Tax Margin (%)

35.03

12.15

3.51

Cash Profit Margin (%)

32.38

14.12

9.71

Adjusted Net Profit Margin (%)

29.08

8.83

4.02

Return on Capital Employed (%)

35.94

9.24

2.56

Return on Net Worth (%)

35.47

8.57

3.18

 

 

 

 

 

LOCAL AGENCY FURTHER INFORMATION

 

Company Details:

Subject established in 1984, is a leading Indian pharmaceutical company with vertically integrated operations. The company develops, manufactures and markets a wide range of pharmaceutical products in India and overseas. Dr. Reddy's produces finished dosage forms, active pharmaceutical ingredients, diagnostic kits, critical care and biotechnology products. The company has over 190 finished dosage brands and 60 active pharmaceutical ingredients currently in production. 


Subject actively pursues a basic research programme under the aegis of Dr. Reddy's Research Foundation (DRF). DRF focuses on cancer, diabetes, bacterial infections and pain management. The company has several pharmaceutical products in development, three of which are in clinical trials and two have completed pre-clinical testing. 

 
The merger with Cheminor Drugs (the swap ratio at nine shares of Dr. Reddy's Laboratories for 25 shares of Cheminor), has made Subject the third largest pharmaceutical company in India with participation in every element of the value chain. Subjects a major player in the domestic finished dosages market and many of its brands are leaders. The company has a formidable presence in the highly regulated markets of the US, the EU and Japan and it exports its products to 60 countries.

  
The company has successfully entered the US with both Active Pharmaceuticals Ingredients(API) and Generic Formulations. The company has two US-FDA approved plants. It has been exporting its products to the UK, Switzerland, Germany, Spain, Italy and the Netherlands. It also started exporting its formulations in a big way to Russia and has set up an office there. SUBJECT has signed a joint venture agreement with the Khetan group, Nepal, for setting up a joint venture for the manufacture and marketing of finished formulations in Nepal and other neighbouring countries. It also signed a marketing and distribution agreement with Organics, Israel, for a wide range of sophisticated diagnostic kits. The products are recognized by WHO and other leading organisations in the healthcare industry.

  
 The company issued 4301076 GDSs representing 4301076 equity shares of the Company, par value Rs.10 ('Shares'). The GDSs are listed on the Luxembourg Stock Exchange and each GDS represents one Share. As of May 4, 2001, there were 1789285 GDSs outstanding representing 1789285 Shares.

  
 The company entered the global generic market with exports of Ranitidine-75 mg and Fluoxetine to North America. The company has entered into an exclusive co-marketing and development agreement with Par Pharmaceuticals Inc. covering fourteen generic pharmaceuticals products. This will strengthen the company's position in the US generic market and it will get a substantial cost advantage on account of its vertical integration capabilities. 


In April 2001, as a first step towards taking its molecules through clinical development on its own, Dr. Reddy's Laboratories has selected Simbec Research Limited, a well-known UK-based Clinical Research Organization (CRO), for conducting clinical trials of DRF 4832. DRF 4832 is a PPAR agonist for treatment of cardiovascular complications.  


In May 2001, Novartis Pharma AG and Dr. Reddy's Laboratories announced that they have entered a licensing agreement for a novel anti-diabetes agent. Under terms of the agreement Dr. Reddy's will grant Novartis worldwide exclusive rights to development and commercialisation of their insulin sensitiser DRF 4158 in type 2 diabetes, in return for up to USD 55 million in upfront and milestone payments for specific clinical and regulatory endpoints, as well as royalties. Dr. Reddy's will have co-promotion rights for DRF 4158 in India. The agreement has received US regulatory clearance and has become effective from July 30, 2001. This event has triggered an upfront payment of 5 million US dollars from Novartis. Dr. Reddy's has received this payment. 

 
In May 2002, subject has completed phase I clinical trials on its anti-cancer compound DRF-1042. This is company’s first new chemical entity (NCE) in the cancer area. With the approval of Shareholders the Face value of the company shares has been reduced to Rs.5 per share . The Scheme of merger with erstwhile American Remedies Limited  was fully completed and shares were exchanged for one share of the company for every 12 shares in erstwhile ARL. 


In April 2004 the company has launched Redotil, the first anti-hypersecretory agent for the management of acute diarrhea and the first Dutas for the treatment of enlarged prostate, which is a oral treatment, in India.

  
 During September 2005 the company has planned about the formation of India's first integrated drug development company Perlecan Pharma Private Limited with the equity capital commitment of USD 52.5 Million from India's leading Captial Ventures.

  
In the year 2005 the company has entered into a partnership with ICICI Venture Funds Management Company for commericalisation of the company's US ANDAs in the generics business. The company has acquired Trigenesis Therapeutics, Inc., a US based R and D Company which is privately owned dermatology in April 2004. The company has also entered into a multi-product agreement with Pharmascience Group for the development and marketing of generic products in Canada. Also the company has alliance with a biotechnology company for the development of a bio-generics portfolio. 

 
The company has increased its installed capacity of Biotechnology by 30 Grams and with this the total installed capacity of Biotechnology has increased to 370 Grams. 


In 2006, The company involved de-bottlenecking of existing capacities and adding new lines, especially to meet growing international demand for generics and customs pharmaceuticals services. During the year company has made two major acquisitions. The first was the purchase of Roche's API Business, its order-book and its manufacturing plant at Cuernavaca in Mexico. The another acquisition was that a betapharm, Germany.

 

SHARE CAPITAL 

The paid up Share Capital of the Company increased by Rs. 456.088 millions in the financial year ended March 31, 2007

 

MANAGEMENT DISCUSSION AND ANALYSIS 

2006-07 has been a memorable year for Dr. Reddy's. The predominant story has been its excellent financial performance. It grew the topline more than two and a half times to achieve a consolidated revenue of Rs. 65095 million - thus crossing the historic U.S.$. 1.5 billion milestone1. Profit after tax (or net income in US GAAP parlance) increased more than four times to Rs. 9327 million (U.S.$. 216 million) in 2006-07. This performance has made Dr. Reddy's the largest and most profitable pharmaceutical company of India for 2006-07. The Company is now well entrenched to secure a permanent place as one of the top 10 generic players of the world. 
 
This performance has been due to the interplay of several factors - all of which have been due to the Company's successes in leveraging the different building blocks of growth. 


 There are many such building blocks: creating a lean manufacturing organization across all its businesses; strengthening Dr. Reddy's position in existing markets, in developing new geographies; building infrastructure to drive greater production; creating a significantly faster and more focused product development process; creating wider technical capabilities; leveraging the new acquisitions; and optimizing efforts across the entire Company through proactive and seamless information technology networks. 

 

While Dr. Reddy's core businesses recorded consistent year-on-year growth - and the German and Mexican acquisitions widened the Company's market presence and customer portfolio - the key highlight of 2006-07 has been the success of new launches in U.S. Generics market. Displaying innovative deal making capabilities, the Company's business development team ensured that North American Generics contributed to approximately a third of Dr. Reddy's consolidated revenues. This was significantly driven by new launches in the U.S. Here are the details: 

 

In June 2006, the Company launched simvastatin and finasteride, the generic versions of Zocor(R) and Proscar(R) respectively, as authorized generic products of Merck. This authorized generic transaction was the first of its kind - not only by an Indian company in the U.S. market, but also for a large U.S.$. 4 billion innovator drug (Zocor(R)). Though Dr. Reddy's did not have the 180-day exclusivity for these products, it was able to secure a mutually rewarding partnership with Merck to sell the generic versions during the exclusivity period. These products alone contributed to Rs. 15813 million, or 24 per cent of the Company's total revenues. Even after the end of 180-day period in December 2006 and the subsequent entry of multiple players, Dr. Reddy's maintained a market share of 24 per cent for simvastatin, and 18 per cent for finasteride. 

 

·         In December 2006, Dr. Reddy's launched in the U.S., the generic version of Zofran(R), under the 180-day exclusivity provisions of the Hatch Waxman Act. Earlier in the year, the Company had signed a settlement for Para- IV litigation for this product with its innovator, GSK, which had increased the certainty of a very rewarding 180-day opportunity for this product. By the end of the financial year, ondansetron contributed Rs. 2890 million in revenues. The timely launch of this product despite extremely stretched deadlines demonstrates how well several teams within Dr. Reddy's coordinated between different locations and functions and interfaced with the regulators to deliver an extraordinary breakthrough opportunity. As on March 31, 2007, the Company's market share for this product was 62 per cent. In fact, after the ondansetron in current year and fluoxetine in 2001, Dr. Reddy's along with Ranbaxy are the only Indian companies to get two 180-day exclusivities in the U.S. Generics market. 

 

·         Among other launches, the key one was fexofenadine, the generic version of Allegra(R), which was a launch at risk'. The Company's market share at the end of the year was 11 per cent, and the product contributed significantly to the revenues and profitability. Dr. Reddy's has good reasons to believe that the U.S. Courts will ultimately decide in favor of the generic companies that have launched at risk'. 

 

While the financial results speak for themselves, the Company's underlying business drivers have also been strengthened. Here are some facts: 

 

·         Dr. Reddy's cumulative Drug Master File (DMF) and Abbreviated New Drug Application (ANDA) filings in the U.S. crossed 100 during this year. As on March 31, 2007, there are 69 ANDAs pending for approval at the U.S. Food and Drug Authority (FDA), addressing an innovator sales of U.S.$. 57 billion (IMS Dec. 06). 
 
The Formulations business continues to achieve high double-digit growth across all key geographies. Within India, AC Nelsen in its recent survey has rated Dr. Reddy's as the fourth best in terms of image and perception across all specialties. In fact, at 16 per cent, Dr. Reddy's is the second fastest growing company among the Top-10 players in India. International markets of Formulations showed even faster revenue growth of 34 per cent - driven primarily by growth in Russia, CIS countries, Romania and Venezuela. 
 
In the Active Pharmaceutical Ingredients (API or Bulk Drugs') business, customer relationships were deepened and the product mix for the year was targeted in favor of high margin regulated markets. This helped to offset the pricing volatility in the less regulated markets. This helped revenues from API to grow by 44 per cent in 2006-07. 

 

The acquisitions in Germany and Mexico, which were made in the latter part of 2005-06, have been integrated into Dr. Reddy's fold, and are operating as full-fledged group companies. These two acquisitions contributed revenues of Rs. 13,401 million, or 21 per cent of overall revenues. 

 

During the year, the Company invested Rs. 4,477 million on manufacturing, RandD facilities and other capital expenditure - the highest level of investment in a single financial year up to date These investments will create the capacity to support Dr. Reddy's strategic growth agenda. The formulations manufacturing facility at Baddi (Himachal Pradesh) is now fully operational, and is expected to generate significant tax savings for the future. 

 
To support high growth and fund new organic and inorganic initiatives, the Company issued additional American Depositary Shares (ADSs) under the accelerated filing procedure mandated by the U.S. Securities Exchange Commission (SEC), which generated net funds of Rs. 10,030 million. The liquidity position is healthy, as most of the higher cost, shorter term debt has been retired out of the operational cash surplus generated during the year. 


 Detailed discussion of business-wise performance occur in later sections. 

 

 

 

 

 

 

TRENDS IN GLOBAL MARKETS 

 

Note: Global market share numbers referred to in this and subsequent sections are based on latest available reports from market research agencies such as IMS Health Inc. 


In calendar year 2006, the global pharmaceutical market grew 7 per cent, at constant exchange rates, to U.S.$. 643 billion. There was a rebound in growth to 8.3 per cent in the U.S., mainly on account of an increase in prescribing volume due to Medicare Part D and new drugs in oncology. 

 

Pharmaceutical growth continued to be driven by increased longevity, strong economic performances throughout OECD countries and emerging markets, and innovative new products. During 2006, 31 new molecular entities were launched in key markets. Overall, products launched between 2001 and 2005 contributed revenue of U.S.$. 13.5 billion in 2006. 


 There has been a visible shift in growth from mature to emerging markets, and from primary care classes to biotech and specialist-driven therapies. As an example, in 2006, specialist-driven products contributed 62 per cent of the world market's growth, compared to 35 per cent in 2000. Generics represented more than half of the volume of pharmaceutical products sold in seven key world markets - the U.S., Canada, France, Germany, Italy, Spain, and the UK. This trend reflects the changing balance between new and old products, and the growing genericization' of many primary care categories. 


GLOBAL REGIONAL PERFORMANCE 

In 2006, North America, which accounts for 45 per cent of global pharmaceutical sales, grew by 8.3 per cent to U.S.$. 290 billion. This strong growth - up from 5.4 per cent in the previous year - was due to Medicare Part D benefit and resulting increase in prescribing volume, as well as solid 7.6 per cent growth in Canada. 

 
The five major European markets (France, Germany, Italy, Spain and the UK) experienced 4.4 per cent growth to U.S.$. 123 billion. Sales in Latin America grew 12.7 per cent to U.S.$. 33.6 billion, while Asia Pacific (other than Japan) and Africa grew at 10.5 per cent to U.S.$. 66 billion. 


Japan experienced a 0.4 per cent decline from a year earlier, to U.S.$. 64 billion - the result of the government's biennial price cuts.

   
Pharmaceutical sales in China grew 12.3 per cent to U.S.$. 13.4 billion in 2006, compared with 20.5 per cent growth in the previous year. This slowdown was due to the government's introduction of a campaign to limit physician promotion of pharmaceuticals. 

 

India was one of the fastest growing markets in 2006, with pharmaceutical sales increasing 17.5 per cent to over U.S.$. 7 billion, which transformed it from a developing' market to an emerging one. Several factors, including the acceptance of intellectual property rights, a robust economy and the country's burgeoning healthcare needs have contributed to accelerated growth in India.

  
Overall, 27 per cent of total market growth is now coming from countries which have per capita Gross National Income of less than U.S.$. 20,000. In 2001, these lower-income countries contributed to just 13 per cent of growth. 


Despite continued expansion of global pharmaceutical markets, underlying dynamics continue to alter the landscape. In 2006, products with sales in excess of U.S.$. 18 billion lost their patent protection in seven key markets - including the U.S., which accounted for over U.S.$. 14 billion of such sales. With lower-cost therapies replacing branded products in classes such as lipid regulators, antidepressants, platelet aggregation inhibitors, anti-emetics and respiratory agents, generics will assume a more central role, as payers seek to restrict the growth of healthcare expenditures. Another factor influencing the market is the increasingly active role of patients and insurance funds, as they take charge of their health and demand greater access to therapies that will improve or prolong their lives. 

 

 

 

 

TRENDS IN INDIA 

 

Note: Information in this section is based on the Indian Pharmaceutical Overview Report, published by ORG IMS Research Private Limited for the year ended December 2006. 


Compared to single-digit growth in the global market, India showed an outstanding growth of 17.5 per cent for the year ended December 2006. All the growth influencers - new introductions and price/volume growth of the older products - showed positive trends. 


At the level of corporations, there were some changes in the ranking of companies in the Indian market. Ranbaxy (ranked number 3 in 2005) displaced Cipla for the number 2 slot. Dr. Reddy's once again entered the Top-10.

   
Despite its high base, acute segment bounced back with high growth rates, while the chronic segment continued with its double-digit growth thanks to new introductions, price increase and greater volumes of existing products. The acute segment grew by 18 per cent during 2006, versus 6 per cent and 8 per cent in 2004 and 2005, respectively; the chronic segment grew by 17 per cent, compared to 11 per cent growth for the previous two years.

 
During 2006, rural markets increased their share in total Indian sales to 21 per cent - up from 16 per cent in 2004, and 18 per cent in 2005. As rural incomes continue to increase, especially in the north, west and south of India, this segment is expected to grow over time. 

 

DR. REDDY'S MARKET PERFORMANCE 

REVENUES 

The Company's consolidated revenues grew by 168 per cent to Rs. 65095 million in 2006-07, or U.S.$. 1.5 billion. Revenue growth was driven by authorized generic products, contribution from the acquisitions in Germany and Mexico, as well as growth across all businesses and geographies, including API, Formulations and Custom Pharmaceuticals Services. 

 

Excluding authorized generics and acquisitions, revenues grew by 58 per cent, from Rs. 22757 million in 2005-06 to Rs. 35881 million in 2006-07. 

 

The Company witnessed major shifts in its revenue composition. International operations accounted for 86 per cent of total revenues in 2006-07, compared to 66 per cent a year earlier. North America (U.S. and Canada) contributed to 44 per cent of total revenues in 2006-07, versus 16 per cent in 2005-06. Europe (excluding Russia and the Commonwealth of Independent States (CIS) accounted for 23 per cent of total revenue in 2006-07, as against 18 per cent in 2005-06. Despite high growth, Russia and other countries in the CIS contributed to 8 per cent of the total in 2006-07, compared to 15 per cent in 2005-06. 

 

India contributed to 14 per cent of total revenues in 2006-07, versus 34 in 2005-06.  

 

GENERICS 
Generics revenues increased from Rs. 4056 million in 2005-06 to Rs. 33224 million in 2006-07. This was primarily due to contribution from authorized generic products, revenues from new product launches in North America, and full year consolidation of revenues from the betapharm acquisition in Germany. 

 
North American revenue increased from Rs. 1631 million in 2005-06 to Rs. 23617 million in 2006-07, thanks to authorized generics and new product launches. Simvastatin and finastride, launched as authorized generic versions of Zocor(R) and Proscar(R) respectively (under the agreement with Merck), contributed Rs. 15813 million. After the end of 180-day exclusivity period, the Company launched its own generic version of simvastatin. In 2006-07, company acquired an average share of 24 per cent of the simvastatin market. 

 
New products, other than authorized generics, launched during the year contributed Rs. 5657 million to revenue. The most prominent launches were ondansetron and fexofenadine. Ondansetron, the generic version of Zofran(R), was launched in the last week of December 2006 with 180-day marketing exclusivity, and contributed Rs. 2890 million. Dr. Reddy's has already acquired 62 per cent market share, despite the presence of an authorised generics version launched by Sandoz. Fexofenadine, the generic version of Allegra(R), contributed Rs. 2429 million. The rest of the Company's North American generics portfolio witnessed significant volume growth which more than offset pricing pressure. 


Revenues from Europe grew from Rs. 2422 million in 2005-06 to Rs. 9603 million in 2006-07 - largely on account of the full year's revenue from betapharm in Germany, compared to 28 days during 2005-06. Excluding betapharm and new operations in Spain, European revenues decreased by 7 per cent to Rs. 1599 million in 2006-07, on account of severe pricing pressure. Over the last several months, the German Government has been driving significant reforms to reduce the healthcare costs. In early 2006, the Economic Optimization of Pharmaceutical Care Act (AVWG) was introduced which reduced reference prices, banned free goods and introduced the concept of co-payment waiver. The industry reacted by reducing prices in excess of those mandated by the new reference prices and the insurance funds tested the concept of co-payment waiver for 79 substances. Subsequently in October 2006, the insurance funds further leveraged the power of co-payment waiver to include additional substances and the industry followed with a reduction in prices. 

 
As of April 1, 2007, an additional law to regulate the German health care system took effect. This law due to its comprehensive regulations is likely to lead to significant structural changes of the German health care system and the market structures which depend on it. The new law empowers insurance companies to enter into contracts with suppliers of generics. It also requires the doctors to prescribe and pharmacists to dispense drugs covered by contracts with insurance companies.


CUSTOM PHARMACEUTICAL SERVICES (CPS) 

 Revenue in this segment increased from Rs. 1327 million in 2005-06 to Rs. 6600 million in 2006-07. Current year sales include the full year's revenues of the Mexican acquisition amounting to Rs. 5397 million - versus one quarter's revenue of Rs. 805 million last year. On an annualized basis, growth of revenues in Mexico works out to 67 per cent. The Mexican acquisition has proved to be extremely value creating for the Company, and has helped achieve the CPS business a critical mass in terms of product portfolio. Excluding the revenues from acquisition in Mexico, revenues increased by 134 per cent to Rs. 1203 million

 

OUTLOOK 
 Compared to the superlative financial performance in 2006-07, the year 2007-08 poses challenges. In 2006-07, Dr. Reddy's enjoyed benefits of multiple upsides in the form of exclusivities and semi exclusivities in its Generics and API businesses. Similar upsides will be limited in 2007-08. However, the base business will continue to show strong growth in line with the capabilities and resources that have been built up over the years. 

 
The Company's core businesses of API and Formulations are expected to be consistent in their revenue growth and consequent margin contribution. North American Generics is also expected to strengthen its position as a standalone profitable business with a number of new launches planned in 2007-08. Generics business in Europe also will see consolidation and stabilization after the price cuts of 2006-07. Moreover, the Company's initiative to shift some of the betapharm's supplies to India, as a result of the amended Salutas agreement, should lead to an unlocking of some of the synergies that were expected at the time of making the acquisition. The CPS business, aided by very successful operations in Mexico, is expected to grow further on the back of excellent relationships and franchise created with customers. 


In line with its stated philosophy and strategy, Dr. Reddy's will continue to pursue both the organic as well as inorganic options to achieve faster growth. It expects to create value for the shareholders with focused efforts in business development, mutually rewarding partnerships and pipeline enhancement. Further, the Company has committed significant investments in the infrastructure and facilities for almost all its businesses to support potential revenue scale-ups in the near future. In addition, there have been major initiatives at improving productivity, systems and practices as a part of execution excellence throughout the entire operations. 
 
All the building blocks for growth are in place. Therefore, the outlook for 2007-08 is encouraging. And the Company looks forward to continuing a healthy financial performance in the future. 

 

 

 

 

 

 

 

PRESS RELEASE:

 

Dr. Reddy’s acquires Jet Generici Srl. Acquisition to establish Generics business in Italy.

 

Hyderabad, India, April 3, 2008:

 

Dr. Reddy’s Laboratories Limited (NYSE:RDY) announced today that it has acquired Jet Generici Srl, a company engaged in the sale of generic finished dosages in Italy The deal has been completed via Dr Reddy’s Italian subsidiary, Reddy Pharma Italia SpA, which has been engaged in building a pipeline of registrations since its incorporation. The acquisition provides access to an essential product portfolio, a pipeline of registration applications, and a sales and marketing organisation. Financial terms and conditions of the transaction are not being disclosed.

 

Commenting on the acquisition, Mr VS Vasudevan, President & Head – Europe Operations said, "Dr Reddy’s has taken a significant step forward by establishing its business in the third largest pharmaceutical market in Europe. The acquisition has been well timed, since Dr Reddy’s will be able to immediately supplement the Jet Generici portfolio via its own pipeline. We already have registration for one significant Dr Reddy’s product, and a strong pipeline of registration applications. We believe that this strategic investment will generate substantial opportunities for long-term value creation in one of the fastest growing generic markets of the world.”

 

Disclaimer

 

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

 

About Dr. Reddy’s

Dr. Reddy’s Laboratories was established in 1984 in Hyderabad, India, and is a global pharmaceutical company with proven research capabilities. Dr. Reddy’s conducts research in the areas of diabetes, obesity, cardiovascular diseases, anti-infectives and inflammation. The Indian based company produces finished dosage forms, active pharmaceutical ingredients and biotechnology products which are marketed globally, with focus on India, US, Europe and Russia.

 

Dr. Reddy’s signs definitive agreement to acquire Dowpharma Small Molecules business associated with Dow’s Mirfield and Cambridge, UK Sites

 

Hyderabad, India, April 1, 2008:

 

Dr. Reddy’s Laboratories (NYSE:RDY) today announced that it has entered into a definitive agreement with The Dow Chemical Company (NYSE:DOW) to acquire a portion of Dowpharma Small Molecules business associated with its United Kingdom sites in Mirfield and Cambridge. The financial terms and conditions of the transaction are not being disclosed at this point in time. The transaction is scheduled to close on April 30, 2008 pending regulatory approval.

 

The acquistion will include the relevant business, customer contracts, associated products, process technology, intellectual property, trademarks as well as the transfer of the facilities at Mirfield and Cambridge in the United Kingdom. The two sites and the business employ around 80 people. Dr. Reddy’s will also have a non-exclusive license to Dow’s Pfēnex Expression Technology™ for biocatalysis development.


Satish Reddy, Managing Director & Chief Operating Officer, Dr. Reddy’s Laboratories, said, “The proprietary chiral and biocatalysis technology at the Cambridge site and the scale up capability in the Mirfield site will add significant value to the company. This acquisition will also bring strengths in industrial synthesis of complex prostaglandins and carbohydrate chemistry. These newer capabilities will add to our existing R&D and commercial infrastructure to position Dr. Reddy’s as a leading provider of Custom Pharmaceutical Services globally.”

 

About The Dow Chemical Company

 

With annual sales of $54 billion and 46000 employees worldwide, Dow is a diversified chemical company that combines the power of science and technology with the "Human Element” to constantly improve what is essential to human progress. The Company delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. References to “Dow” or the “Company” mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.       

 

May 29, 2008, Hyderabad :

 

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) has launched Atocor-R (Atorvastatin + Ramipril) in India. It is the first such combination to be approved by DCGI and has completed a multicentre clinical trial data on Indian Patients.

 

It is a one of its kind combination that has two blockbuster molecules, Atorvastatin and Ramipril combined together for the first time as a fixed dose combination. Atocor-R It is used in the treatment of patients with both essential hypertension and hypercholesterolemia. It is available in two fixed dose combinations of Atocor-R 2.5 (Atorvastatin 10mg + Ramipril 2.5 mg ) and Atocor-R 5 (Atorvastatin 10mg + ramipril 5 mg) and comes is packs of 10.

 

Notes to the Editor:

 

·         Atorvastatin market is currently valued at ~ Rs 3000.000 millions growing at over 34% annually

 

·         Ramipril market is about Rs 1450.000 millions growing at over 15% annually

 

Brief mode of action of Atocor - R:

 

·         Atocor (atorvastatin) is an HMG CoA reductase (3-hydroxy-3-methyl-glutaryl-CoA reductase enzyme) proven in lipid management and in secondary prevention of Cardiovascular events.

 

·         Ramipril (cardiopril) is a proven cardioprotective agent.

 

·         Atocor-R acts by inhibiting cholesterol synthesis in the liver and also by inhibiting the angiotensin 2 production in the tissue.

 

·         Dr. Reddy’s is a leader in the Cardiovascular segment in India. Other brands of Dr. Reddy’s in the Cardiovascular segment are Atocor, Atocor –E and Atocor-N.

 

Disclaimer
This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

 

 

 

 

 

About Dr. Reddy’s

 

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global pharmaceutical company with proven research capabilities. The Company is vertically integrated with a presence across the pharmaceutical value chain. It produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The Company conducts research in the areas of diabetes, cardiovascular, anti-infectives, inflammation and cancer.

 

May 22, 2008, Hyderabad :

 

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) has launched Omez Insta (Omeprazole 20mg + Sodium bicarbonate 1680mg buffer), an innovative powder formulation that offers instant relief with a lasting effect in acute gastritis and is also ideal for critically ill patients on Ryle’s tube feeding.


It is an advanced formulation of Omeprazole, internationally referred to as IR –Ome (Immediate Release Omeprazole). IR-Ome is the first and only immediate release oral Proton Pump Inhibitor (PPI) available as powder for oral suspension with significantly improved pharmacokinetic profile. The formulation is approved by the USFDA and is available in the US market since October 2004. It reduces the intragastric acidity (acid concentration in stomach) by 78% within first 30 mins of ingestion.


Omez Insta fills the gap which was present in the PPI market by offering a PPI formulation available in drinkable form. It is available in sachets in a pleasant mint flavor.

 

Notes to the Editor:

 

·         The PPI market is about Rs 5400.000 millions growing at the rate of 14%.(Source: ORG IMS)

 

Brief mode of action of Omez Insta:

 

·         Omez Insta raises intragastric pH and thereby protects Omeprazole from acid degradation.

 

·         This leads to fast and effective absorption of Omeprazole resulting in rapid inhibition of acid secretion.

 

·         Buffer present in Omez Insta stimulates gastrin release which in turn stimulates parietal cells and switch on the proton pumps which enable Omeprazole to shut these pumps more effectively.

 

·         It provides instant relief with a lasting effect by bringing up the pH level to > 6 within a minute.

 

·         Omez is the leading brand of Dr. Reddy’s in the Gastrointestinal segment and is the number one brand in 14 countries.

·         Other brands of Dr.Reddy’s in the Gastrointestinal segment are Omez-Dsr, Omez FF, Razo and Razo-D.

 

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

 

About Dr. Reddy’s

 

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global pharmaceutical company with proven research capabilities. The Company is vertically integrated with a presence across the pharmaceutical value chain. It produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The Company conducts research in the areas of diabetes, cardiovascular, anti-infectives, inflammation and cancer.

 

Dr. Reddy’s FY08 Revenue at Rs. 50,006 million;

 

EBITDA at Rs. 9,736 million

 

Hyderabad, India, May 20, 2008: Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its audited financial results for the year ended March 31, 2008.


FY08 Key highlights

 

·         Revenues at Rs. 50 billion ($1,250 million) in FY08 as against Rs. 65 billion ($1,627 million) in FY07.

 

·         EBITDA at Rs. 10 billion ($243 million) in FY08 as against Rs. 16 billion ($408 million) in FY07.

 

·         PAT at Rs. 4.7 billion ($117 million) in FY08 as against Rs. 9.3 billion ($233 million) in FY07

 

·         Revenues in India (finished dosage) cross $200 million in FY08.

 

 

 

 

 

 

 

 

·         In North America, revenues at Rs. 8 billion ($201 million) in FY08 as against Rs. 23.6 billion in FY07.

 

 

·         Revenues from Germany (betapharm) at Rs. 8.2 billion ($205 million) & EBITDA at $27 million in FY08. YoY sales volume growth of 26%.

 

 

 

·         Revenues from organic segment of custom pharmaceuticals services business increase by 53% to Rs. 1.9 billion ($47 million) in FY08 from Rs. 1.2 billion ($31 million) in FY07.

 

·         Revenues in API at Rs. 12 billion ($295 million) in FY08. Growth across key markets offset by upsides from sertraline & rabeprazole in FY07.

 

·         During the year, the Company launched 89 generic products and made 397 filings across all markets.

 

All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs 40.02

 

Extracted from the Audited Income Statement for the year ended March 31, 2008

 

 

FY 08

 

FY 07

 

 

Particulars

($)

(Rs.)

%

($)

(Rs.)

(%)

Growth %

Total Revenues

1250

50006

100

1627

65095

100

(23)

Cost of revenues

615

24598

49

855

34220

53

(28)

 

 

 

 

 

 

 

 

Gross profit

635

25408

51

772

30876

47

(18)

 

 

 

 

 

 

 

 

Selling, General &
Administrative Expenses

379

15175

30

351

14051

22

8

R & D Expenses (1)

88

3533

7

62

2463

4

43

Amortization Expenses

40

1615

3

39

1571

2

3

Write down of Intangible assets

62

2489

5

44

1770

3

41

Impairment of Goodwill

2

90

0

-

-

-

 

Foreign Exchange (gain)/loss, net

(19)

(745)

(1)

(3)

(137)

(0)

445

Other operating
(income)/expense net

(3)

(107)

(0)

(2)

(67)

(0)

59

 

 

 

 

 

 

 

 

Operating income/ (loss)

84

3,358

7

280

11,224

17

(70)

 

 

 

 

 

 

 

 

Equity in (loss)/income of affiliates, net

0

2

0

(2)

(63)

(0)

 

Other income/(expenses), net

1

30

0

(17)

(661)

(1)

 

 

 

 

 

 

 

 

 

Income before income taxes and minority interest

85

3390

7

262

10,500

16

(68)

 

 

 

 

 

 

 

 

Income taxes (expense)/benefit

32

1279

3

(29)

(1177)

(2)

 

Minority interest

0

9

0

0

3

0

147

 

 

 

 

 

 

 

 

Net income

117

4,678

9

233

9327

14

(50)

 

 

 

 

 

 

 

 

DEPS

0.69

27.73

 

1.46

58.56

 

 

 

 

 

 

 

 

 

 

Exchange rate

 

40.02

 

 

40.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Balance Sheet Items

 

As on 31st Mar 08

 

As on 31st Mar 07

Cash and cash equivalents

185

7421

 

464

18588

Investment in securities (current & non-current)

119

4756

 

28

1105

Borrowings from Banks (short+long)

488

19542

 

619

24754

Accounts receivable, net of allowances

171

6824

 

188

7519

Inventories

278

11133

 

189

7546

Property, Plant and equipment, net

419

16765

 

311

12428


Income recognition under Generics R & D partnership with ICICI Venture amounted to Rs. nil in FY08 compared to Rs. 453 million in FY07. Reimbursement of expenses from Perlecan Pharma Private Limited of Rs. 90 million in FY08 as against Rs 373 million in FY07.

 

SEGMENTAL ANALYSIS

 

Active Pharmaceutical Ingredients (APIs)

 

·         Revenues at Rs. 11805 million in FY08 as against Rs. 11883 million in FY07. Revenues in FY07 included the benefit of upsides in sertraline & rabeprazole.

 

·         Revenues outside India at Rs. 9.5 billion in FY 08 as against Rs. 9.8 billion in FY07.

 

·         Revenues in North America increase by 88% to Rs. 3.8 billion in FY08 from Rs. 2 billion in FY07 primarily led by sales of certain development products & commercialized products.

 

·         Revenues in India at Rs 2.4 billion in FY08 as against Rs 2.1 billion in FY07. YoY growth of 13% primarily on account of increase in sales of ramipril.

 

·         Revenues in rest of the world decrease to Rs. 3.1 billion in FY08 from Rs. 5.7 billion in FY07. Growth in key markets offset by normalization of sales in sertraline in FY08 following the upside in FY07.

 

·         Revenues in Europe at Rs. 2.5 billion in FY08 as against Rs. 2.1 billion in FY07. YOY growth of 19% led by increase in sales of certain development products & commercialized products.

 

·         The Company filed 23 US DMFs during the year taking the total filings to 127. The company also filed 9 DMFs in Canada, 13 DMFs in Europe and 11 DMFs in RoW.

 

Generic Finished Dosages

 

·         Revenues in this segment at Rs. 17.8 billion in FY08 as against Rs. 33.2 billion in FY07.

 

·         North America contributed 45% and Europe contributed 55% to the segment revenues.

 

·         In North America, revenues at Rs. 8 billion ($ 201 million) in FY08 as against Rs. 23.6 billion in FY07.

 

o        Revenues increase by 39% to Rs. 7.7 billion in FY08 from Rs. 5.6 billion in FY07 excluding the benefit of upsides from Authorized Generics & ondansetron exclusivity.

 

o        Revenues from new products launches at Rs. 617 million in FY08; 11 new products (including 2 OTC products) launched in FY 08.

 

o        Commenced sales of OTC products ; Revenues for FY08 at Rs. 267 million.

 

o        Combined revenues of fexofenadine & finasteride at Rs. 3,871 million in FY 08.

 

o        During the year, the Company filed 18 ANDAs taking the total filings to 122. Total of 58 ANDAs pending at the USFDA addressing innovator sales of $ 78 billion as per IMS December 2007. During the year, the company also received 20 approvals including tentative approvals.

 

·         In Europe revenues at Rs. 9.7 billion in FY08 as against Rs. 9.6 billion in FY07.

 

o        Revenues from betapharm (Germany) at Rs. 8.2 billion ($205 million) in FY08 as against Rs. 8 billion in FY07. YoY sales volume growth of 26%.

 

§         FY08 revenues reflect the impact of (a) higher rebates to insurance companies being deducted from revenues from FY08 onwards ; (b) pricing pressure ; (c) supply constraints for a large part of the year

 

§         Improvement in the supply situation in Q4 FY08 results in increase in market share of betapharm to 2.96% in Mar 08 as against 1.74% in Apr 07. (Source: Market Report NVI volume, March 2008)

 

§         8 new products launched during the year.

 

o        Revenues from UK market remains unchanged at Rs. 1.4 billion in FY08.

 

o        Revenues from Spain at Rs. 51 million in FY08 as against Rs. 61 million in FY07.

 

o        During the year the company filed 16 dossiers across Europe.

 

Branded Finished Dosages – International

 

·         Revenues at Rs. 7.2 billion, an increase of 17% over FY07. This growth was primarily driven by the performance of Russia, Romania, Venezuela & Other CIS markets.

 

·         Revenues in Russia increase by 13% to Rs. 4.1 billion ($102 million) in FY 08 as against Rs 3.6 billion in FY07. This growth was primarily driven by increase in sales of key brands of Keterol, Bion, Omez and new products launches.

 

 

 

 

 

 

 

·         Revenues in RoW markets increase by 16% to Rs. 1.2 billion as against Rs. 1 billion in FY07. The growth was primarily driven by increase in sales from key markets.

 

·         Revenues in Central and Eastern Europe increase by 33% to Rs. 501 million as against Rs. 377 million in FY07.

 

·         Revenues in Romania at Rs. 466 million ($12 million) representing a growth of 38% over the previous year.

 

During the year, the company filed 307 dossiers.

 

Branded Finished Dosages – India

 

·         Revenues in India cross $200 million milestone in FY08.

 

·         Revenues in India increase by 16% to Rs. 8.1 billion in FY08 from Rs. 7 billion in FY07. Growth was primarily driven by key brands of Omez, Razo, Stamlo Beta and Reditux.

 

 

 

·         20 new products launched during the year, contributing Rs. 309 million in revenues.

 

 

Custom Pharmaceutical Services (CPS)

 

·         Revenues from CPS business at Rs. 4.8 billion in FY08 as against Rs. 6.6 billion in FY07.

 

·         Revenues from organic business increase from Rs. 1.2 billion in FY07 to Rs. 1.9 billion in FY08, driven by growth in customer base and product portfolio. YoY growth of 53%.

 

·         Revenues from Mexico at Rs. 3 billion in FY08 as against Rs. 5.4 billion in FY07.

 

Income Statement Highlights

·         Gross profit at Rs. 25.4 billion in FY08 as against Rs. 30.9 billion in FY07. Gross profit margins on total revenues at 51% as against 47% in FY07. In FY07 revenues from authorized generics contributed 22% to total revenues and earned gross margin significantly below company average gross margin.

 

·         R & D investments (net) at 7% of total revenues in FY08 as against 4% in FY07. Gross R & D investments increase by 10% to Rs. 3.6 billion in FY08 as against Rs. 3.3 billion in FY07. During the year, the Company recognized Rs. 90 million under its R&D partnerships as a benefit to the R&D line item as compared to Rs. 826 million in FY07.

 

·         Selling, General & Administration (SG&A) expenses increase by 8% to Rs. 15.2 billion in FY08 from Rs. 14.1 billion in FY07. The SG&A ratio to revenue is at 30% in FY08 as against 22% in FY07.

 

·         Other income (net) at Rs. 30 million in FY08 as against other expenses (net) of Rs. 661 million in FY07. This is primarily on account of net interest expense of Rs. 378 million in FY08 as against net interest expense of Rs. 1,055 million in FY07.

 

·         Write down of intangibles & impairment of goodwill amounting to Rs. 2.6 billion in FY08 comprising :

 

o        Write down of Rs. 128 million of product related intangibles at Spain, recorded in Q4 FY08.

 

o        Impairment of goodwill of Rs. 90 million relating to the subsidiary in Atlanta, recorded in Q4 FY08.

 

o        Write down of Rs. 2.4 billion of product related intangibles at betapharm, recorded in Q3 FY08.

 

·         Amortization expenses are at Rs. 1.62 billion as compared to Rs. 1.57 billion in FY07. This largely relates to amortization of intangibles in betapharm, Spain (acquisition of products) and acquisition in Mexico.

 

·         Net income at Rs. 4.7 billion (9% of total revenues) as against Rs. 9.3 billion (14% of total revenues) in FY07. This translates to a diluted EPS of Rs. 27.73 as against Rs. 58.56 in FY07.

 

·         During FY08, the Company incurred capital expenditure (net) of Rs. 5.6 billion.

 

 

All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs 40.02

 

Q4FY08 Financial Snapshot

 

Extracted from the Audited Income Statement for the Quarter ended 31st March, 2008

 

 

FY 08

 

FY 07

 

 

Particulars

($)

(Rs.)

%

($)

(Rs.)

(%)

Growth %

 

 

 

 

 

 

 

 

Total Revenues

331

13252

100

389

15,573

100

(15)

Cost of revenues

156

6229

47

145

5818

37

7

 

 

 

 

 

 

 

 

Gross profit

175

7023

53

244

9755

63

(28)

 

 

 

 

 

 

 

 

Selling, General &
Administrative Expenses

107

4275

32

86

3433

22

24

R & D Expenses (1)

26

1023

8

21

852

5

20

Amortization Expenses

12

475

4

11

451

3

5

Write down of Intangible assets

3

128

1

44

1770

11

(93)

Impairment of Goodwill

2

90

 

-

-

0

 

Foreign Exchange (gain)/loss, net

(3)

(118)

(1)

(5)

(205)

(1)

(43)

Other operating (income)/expense net

(3)

(106)

(1)

1

25

0

 

 

 

 

 

 

 

 

 

Operating income/ (loss)

31

1,257

9

86

3429

22

(63)

 

 

 

 

 

 

 

 

Equity in (loss)/income of affiliates, net

(0)

(0)

(0)

(0)

(14)

(0)

(97)

Other income/(expenses), net

(2)

(62)

(0)

2

98

1

(164)

 

 

 

 

 

 

 

 

Income before income taxes and minority interest

30

1194

9

88

3513

23

(66)

 

 

 

 

 

 

 

 

Income Taxes (expense)/ benefit

(4)

(168)

(1)

(6)

(260)

(2)

(35)

Minority interest

0

2

0

(0)

(1)

(0)

(274)

 

 

 

 

 

 

 

 

Net income

26

1028

8

81

3252

21

(68)

 

 

 

 

 

 

 

 

DEPS

0.15

6.09

 

0.51

20.42

 

 

 

 

 

 

 

 

 

 

Exchange rate

 

40.02

 

 

40.02

 

 

 

  1. Reimbursement of expenses from Perlecan Pharma Private Limited of Rs. 17 million in Q4 FY08 as against Rs. 85 million in Q4 FY07.

 

 

 

 

 

 

 

Business Highlights

 

Overall global revenues at Rs. 13.2 billion in Q4 FY08 as against Rs. 15.6 billion in Q4 FY07, representing a decrease of 15%.

 

Overall EBITDA at Rs. 2.6 billion ($65 million) in Q4 FY08 as against Rs. 6.2 billion ($156 million) in Q4 FY07.

 

Revenues from North America generics business at Rs. 2.5 billion in Q4 FY08 as against Rs. 5.6 billion in Q4 FY07.

 

Revenues in branded formulations business increase by 22% to Rs. 3.5 billion in Q4 FY08 from Rs. 2.9 billion in Q4 FY07 driven by growth across key markets.

 

Revenues from India increase by 24% to Rs. 2 billion in Q4 FY08, driven by growth in key brands.

 

Revenues from international markets increase by 19% to Rs. 1.5 billion in Q4 FY08, driven by growth in Romania & other CIS markets.

 

Revenues from organic Custom Pharmaceuticals Services (CPS) business increase by 60% at Rs. 698 million in Q4 FY08 as against Rs. 437 million in Q4 FY07.

 

Overall revenues from CPS business at Rs. 1.4 billion in Q4 FY08 as against Rs. 1.9 billion in Q4 FY07.

Revenues from betapharm at Rs. 2.4 billion in Q4 FY08 as against Rs. 747 million in Q4 FY 07.

 

Income Statement Highlights

 

·         Gross profit at Rs. 7 billion in Q4 FY08 as against Rs. 9.8 billion in Q4 FY07. Gross profit margins on total revenues at 53% as against 63% in Q4 FY07. In Q4 FY07 revenues from ondansetron exclusivity contributed 16% to total revenues & earned gross margins significantly above company average gross margin.

 

·         R & D investments (net) at 8% of total revenues in Q4 FY08 as against 5% in Q4 FY07, an increase of 20%. Gross

 

·         R & D investments increase by 11% to Rs. 1040 million in Q4 FY08 as against Rs. 937 million in Q4 FY07. During the quarter, the Company recognized Rs. 17 million under its R & D partnerships as a benefit to the R & D line item as compared to Rs. 85 million in Q4 FY07.

 

·         Selling, General & Administration (SG&A) expenses increase by 24% to Rs. 4.3 billion in Q4 FY08 as against Rs. 3.4 billion in Q4 FY07. The SG & A ratio to revenue is at 32% in Q4 FY08 as against 22% in Q4 FY07.

 

·         Other expenses (net) at Rs. 62 million in Q4 FY08 as against other income (net) of Rs. 98 million in Q4 FY07.

 

·         Amortization expenses at Rs. 475 million in Q4 FY08 as compared to Rs. 451 million in Q4 FY07. This majorly relates to intangibles in betapharm, Spain (acquisition of products) and acquisition in Mexico.

 

·         Net income at Rs. 1 billion (8% of total revenues) as against Rs. 3.3 billion (21% of total revenues) in Q4 FY07.

 

About Dr. Reddy's

 

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global pharmaceutical company with proven research capabilities. The Company is vertically integrated with a presence across the pharmaceutical value chain. It produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The Company conducts research in the areas of cancer, diabetes, cardiovascular, inflammation and bacterial infection.

 

 

 

Disclaimer

 

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors Include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

 

 

CMT REPORT (Corruption, Money Laundering & Terrorism]

 

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

 

1]         INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

 

2]         Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

 

3]         Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

 

4]         Record on Financial Crime :

            Charges or conviction registered against subject:                                                  None

 

5]         Records on Violation of Anti-Corruption Laws :

            Charges or investigation registered against subject:                                                          None

 

6]         Records on Int’l Anti-Money Laundering Laws/Standards :

            Charges or investigation registered against subject:                                                          None

 

7]         Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

 

8]         Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

 

9]         Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

 

10]        Press Report :

            No press reports / filings exists on the subject.

 

 

CORPORATE GOVERNANCE

 

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

 

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

 

 

CONTRAVENTION

 

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

 

 

FOREIGN EXCHANGE RATES

 

Currency
Unit

Indian Rupees

US Dollar

1

Rs.42.93

UK Pound

1

Rs.84.17

Euro

1

Rs.66.82

 

 

SCORE & RATING EXPLANATIONS

 

SCORE FACTORS

 

RANGE

POINTS

HISTORY

1~10

9

PAID-UP CAPITAL

1~10

9

OPERATING SCALE

1~10

9

FINANCIAL CONDITION

 

 

--BUSINESS SCALE

1~10

10

--PROFITABILIRY

1~10

8

--LIQUIDITY

1~10

9

--LEVERAGE

1~10

9

--RESERVES

1~10

9

--CREDIT LINES

1~10

9

--MARGINS

-5~5

--

DEMERIT POINTS

 

 

--BANK CHARGES

YES/NO

YES

--LITIGATION

YES/NO

NO

--OTHER ADVERSE INFORMATION

YES/NO

NO

MERIT POINTS

 

 

--SOLE DISTRIBUTORSHIP

YES/NO

YES

--EXPORT ACTIVITIES

YES/NO

YES

--AFFILIATION

YES/NO

YES

--LISTED

YES/NO

YES

--OTHER MERIT FACTORS

YES/NO

YES

TOTAL

 

81

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)            Ownership background (20%)                 Payment record (10%)

Credit history (10%)                    Market trend (10%)                                Operational size (10%)

 

 

RATING EXPLANATIONS

 

RATING

STATUS

 

 

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

 

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

 

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

 

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

 

Satisfactory

26-40

B

Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.

 

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

 

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

 

 

Credit not recommended

NR

In view of the lack of information, we have no basis upon which to recommend credit dealings

No Rating

 

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions