After perfect storm, Dr Reddy's seeks recovery this fiscal

New Delhi: After facing a "perfect storm" of adverse developments, Dr Reddy's Laboratories expects better financial performance this fiscal with cost reductions and new product launches.

The Hyderabad-based firm saw its consolidated revenue dip by 9 per cent last fiscal to Rs 14,367.6 crore as it faced a multitude of issues, including USFDA's warning letters to three of its manufacturing units.

It also faced intensive growth of competition in the US from several other global generics players, delays in approvals from USFDA and pricing pressure in various markets including India.

The company also witnesses economic crisis taking a toll on its once extremely profitable emerging market - Venezuela. Besides, its active pharmaceutical ingredients business was impacted due to lower off take of some key molecules.

"Broadly speaking, the company went through what is called a 'perfect storm' when several negative factors simultaneously came into play," Dr Reddy's Labs Chairman K Satish Reddy and Co-Chairman G V Prasad said in their joint address to shareholders in the company's Annual Report for 2016-17.

Plagued by these issues, the company's net profit for 2016-17 fiscal saw a dip of 39.35 per cent to Rs 1,292.1 crore from Rs 2,130.6 crore in the previous fiscal.

The senior management, however, remained optimistic for a turnaround in the company's fortunes in the current financial year.

"No chairman of a company listed in India and the US should ever make forward-looking statements. Even so, we are tempted to believe that our company's performance in 2017-18 will be better than what we saw in last fiscal," Reddy informed shareholders.

Elaborating on the steps being taken by the company, Reddy and Prasad said the topline crunch in 2016-17 forced it to carefully look at all elements of costs and administrative layers.

"We have started multiple, company-wide projects to lop off costs without affecting productivity and, in doing so, recreate a leaner and more nimble global enterprise," they said.

On plans for the US market, they said the company expects pricing pressures to be less severe and more calibrated in the ongoing fiscal.

"We also have an excellent pipeline of complex generics to be introduced to the country in this fiscal, and expect to do better through this effective upgrade of our portfolio mix," they said.

On Indian market, the duo said despite government induced pricing pressures on pharmaceutical products, it remained a high growth market.

"Post normalisation (GST impact), we expect to grow at low double-digits in 2017-18 and for the foreseeable future," they said.

The company also remained bullish on enormous opportunities across emerging markets where it is trying to increase its presence through complex generics and biosimilars, they added.

Besides, the Russian and CIS markets are on a moderate upswing, they said.

"Though threats of government-induced pricing pressure remain, we are seeing greater offtake of generics - both relatively simple and complex - and oncological biosimilars, the latter through greater hospital and institutional sales. We believe that emerging markets will again get back to double-digit growth," they added.

On prospects of growth in European market, they said: "Having striven to widen our European footprint from the UK and Germany to France, Italy and Spain, we expect more significant growth from the continent in the years to come."

Dr Reddy's has commercial presence across 26 countries and employs around 26,000 people globally.