January 2008

When betapharm was bagged by Dr Reddy’s two years ago no one could imagine what was coming. In less than two months after the deal was bagged (after a hot chase from fellow Indian company Ranbaxy), the German government came out with its sweeping generic drug pricing reforms.

Branded generics became less attractive and the power of prescription generation virtually shifted from doctors to pharmacists. With sales of around 140 million euros annually, betapharm suddenly looked very expensive at a deal value of 480 million euros. 

The dynamics of the new generic pricing put Dr Reddy’s in its toughest situation ever. The siutation cannot get worse than what we saw last week. Dr Reddy’s had to write down losses to the tune of RS 231 crore due to betapharm and the company slipped in the red with losses of Rs 85 crore for its third quarter of 07-08.

When asked if Dr Reddy’s was doing the fire fighting to save betapharm, an ever-positive G V Prasad rephrased the word smartly saying it was “problem solving”.  For those who have worked with G V Prasad regard him as the most potent weapon in the armoury of Dr Reddy’s.  G V Prasad has orchaestrated many successes for Dr Reddy’s global expansions and for sure betapharm will also be tackled with his sharp management skills.

As part of the drive, Vasudevan, now Europe’s head of Dr Reddy’s is busy moving most of the Salutas (the contract manufacturer for betapharm) products to India. This move may save huge costs and de-bottleneck the supplies to betapharm.  G V Prasad says by the end of 2009,  about 80% of betapharm products will be sourced from India. When that happens, costs will be under control and a turnaround can become visible for the beleaguered betapharm.

Dr Reddy’s has by now developed an uncanny ability to bounce back. When Novartis and Novo Nordisk, returned two molecules back to Dr Reddy’s many years ago as a fallout of adverse clinical findings, the morale in Dr Reddy’s turned very low.  Scientists left and many painted a gloomy picture of the company

Then came the part-separation of the discovery research unit (a novel idea and a brain work of G V Prasad again),  and some swift moves like the authorised generic deals with Merck on Zocor and Proscar. Dr Reddy’s managed to cross the billion dollar sales mark and grew stronger. Through the betapharm problems, Dr Reddy’s even looked at a possibility of buying Merck’s generic unit. Short term blips did not impact the company’s long term vision.

betapharm may now be seen as a painful association for the company but its a management challenge to see that the company make profits. With G V Prasad’s deftness, betapharm over the next few quarters, may well become an enviable asset.  Through the entire phase of the betapharm gloom, Prasad  has never shown signs of cracking. He looks composed and in control while tackling those tough questions and that says something subtle. 


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