- DRL's growth outlook for U.S. market
- Plans on India business and more
Watch CEO MV Ramana in conversation with Monal Sanghvi. #Q3WithNDTVProfit
Read: https://bit.ly/42g9fAZ
- Plans on India business and more
Watch CEO MV Ramana in conversation with Monal Sanghvi. #Q3WithNDTVProfit
Read: https://bit.ly/42g9fAZ
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TVTranscript
00:00 Hello and welcome to NDTV Profit.
00:02 Our guest today is Mr. M.V.
00:04 Ramana, the CEO of India and Emerging Markets at Dr. Reddy's.
00:09 Welcome to the show, sir.
00:11 Thank you.
00:12 It's been a wonderful quarter.
00:14 Profits have risen 11% in line with estimates.
00:18 Revenues have come in around 7% up.
00:23 Margins at 21.8 versus a 28.7.
00:26 And the analysts had pegged it at around a 28.4.
00:29 So slight marginal weakness there.
00:33 Apart from that EBITDA is up 4%.
00:36 So I'm going to break down this performance and begin with the US TETRI because I think
00:41 that is what is attracting a lot of interest and investors want to know.
00:44 So what exactly, how much is the rev limit contribution and what is happening to the
00:50 base business?
00:51 Because I believe the last conversation we had, we were experiencing some relief on the
00:57 price erosion front.
00:59 And this time we've again mentioned that there has been some upsetting that's happened because
01:02 of price erosion.
01:03 So what's happening on that front?
01:07 So what's good in terms of the US business is both the base business is growing and also
01:14 the contribution of the generic rev limit is also continues to be meaningful.
01:20 In terms of the price erosion that is quite connected to the industry that we are in.
01:29 So that continues but overall the performance of US has been strong for the quarter.
01:35 So also there's a lot of acquisitions that have happened.
01:39 Four new launches and then you've announced the acquisition of a women related portfolio.
01:45 Also something on the medicine for the nervous system.
01:51 So what exactly is happening?
01:53 What is the kind of launch pipeline that we have for the next two to three years in the
01:57 US?
01:58 Also on Rituzimab, the Bajopalli facility we've said that we are expecting a revert.
02:04 Still there's no revert but what is the kind of timeline that you have in mind for the
02:07 product?
02:10 So when it comes to the acquisition of Minolabs, this is a company that has products which
02:18 is a combination of probiotics and natural ingredients for menopause.
02:24 Women's health is a category that we picked up as far as the consumer health is concerned.
02:28 As you know in terms of our effort on Horizon 2, consumer health is a focus for us in the
02:35 US.
02:36 So within that the women's health is growing and we felt that it is meaningful for us to
02:41 pick up this opportunity with the acquisition of Minolabs.
02:47 The other I think is a collaboration that we have done with Koya which is for a specific
02:53 indication, neurodegenerative disease of ALS.
02:58 That is where we have got rights for certain markets and we've invested some amount to
03:05 fund the clinical trial that product is expected to get into phase 2.
03:10 So a lot of what I've said is to look at opportunities to grow the US business beyond the generics.
03:18 Having said that, there are several products that we are working on, products that matter
03:24 for the US and we expect to take them into the US market over the next several quarters.
03:32 So what is the kind of run rate that we could expect and the growth that you would see in
03:36 the US market in the next 2 to 3 years?
03:38 This is excluding the rev limit.
03:42 So as you would remember, we had said that we would target a certain high single digit
03:52 growth in terms of our business.
03:56 We are continuing to launch several products in the US.
04:02 Our expectation is to launch about 25 products every year in the US.
04:06 We will continue to work on them and they will obviously be driving the growth other
04:10 than the growth of our base portfolio which is where we have been also gaining the market
04:17 share.
04:18 Sure sir.
04:19 Sir, India business growth has been slightly muted at 5% and I believe the last time it
04:28 was because of a delay in the acute season, also pressure from NLEM.
04:33 Just wanted an outlook on what is going to happen on the India front because this time
04:38 also it's been the same thing and also the WPI index in the coming year is splattered
04:44 so NLEM impact on that will also remain.
04:48 How do you see the whole of India business panning out?
04:52 So India business has been on the lower side in terms of growth because of two issues that
04:59 have impacted us.
05:00 One is a planned decrease of prices of sigmas and second is an impact in terms of the divestment
05:07 income that we had last year.
05:10 So there are three apart from the fact that the efforts to grow the core business continues,
05:16 the three levers that we are adding to the India business, one is how do we get access
05:21 to innovative assets whether they are NCs or NBs or CARTI.
05:27 The second is in terms of the consumer health, both OTC as well as Nutra and third is the
05:33 area of digital.
05:35 In that two experiments are already in the market, one is a T2C platform for diabetic
05:41 patients and the second one is digital therapeutics and adibio which has started to receive traction
05:48 from the patients who have used the product and also repurchased it.
05:54 And third digital initiative we should be getting into the market in the month of February.
06:00 So the way I look into this, these three innovative growth levers should help us to propel Dr.
06:09 Reddy's India business into the top five.
06:12 The aspiration is to bring in innovative medicine to ensure that within the existing therapeutic
06:21 areas where we have endowment, we will be able to offer a comprehensive portfolio that
06:26 covers both innovative assets and the current branded genetics.
06:32 Should there be any inorganic opportunities that come our way and make strategic sense,
06:38 makes a strategic fit for us, we will continue to look for those opportunities.
06:43 Otherwise in the coming quarters you will see India getting back into the double digit
06:50 growth.
06:51 Okay, sir.
06:52 So, sir, this would be at par with the market growth or do we have any idea where we can
06:59 outpace the market because IPM growth is somewhere between 8 to 10 percent.
07:03 So what's the target?
07:04 So if you are going to grow according to the market, I don't think we will be able to change
07:09 the rank as our aspiration is to change ranks.
07:12 The endeavor would be to beat the market.
07:15 Okay, sir.
07:17 So there is a fund infusion plan that you have in place, 650 crore which you are planning
07:22 to infuse in your subsidiary and a further infusion in the step down subsidiary.
07:29 So can you throw some light on what exactly is the plan?
07:33 What kind of CAPEX are you looking at and what are you planning to do on that front?
07:37 I mean is it going to be a product, is it going to be a new research?
07:40 What is happening?
07:43 So we are investing into Origin Oncology which is a 100 percent subsidiary of Dr. Ateez and
07:49 Origin Oncology has in turn a subsidiary which is into the CDMO business.
07:57 So this money is basically to fund for increased CAPEX both in terms of R&D as well as in manufacturing
08:07 and to some extent pay back some of the loan that the separate subsidiary of Origin had
08:14 towards Origin.
08:16 Okay, sir.
08:19 And so on the margin front, how do you view this current year?
08:24 I think you had said that we will close at around 25 percent.
08:28 So does the margin guidance stay or are we expecting to close slightly higher than the
08:32 guidance and what would be your view for FY25?
08:37 So as you know we do not provide forward guidance in terms of the margin, but whenever we have
08:43 spoken to the investors we have always said that our aspiration going forward is to look
08:50 at an EBITDA around 25 percent on multiple quarter basis.
08:58 You could have ups and downs within the quarter because we are also investing for the future.
09:06 Yes, sir.
09:09 Thank you.
09:10 Thank you so much for joining us today.
09:11 It was wonderful chatting with you as always.
09:14 Thank you.
09:15 Thank you so much.
09:16 [Music]