The next fiscal will be driven by core generics and API business, said GV Prasad, Co-Chairman & CEO of Dr Reddy’s Laboratories, who was honoured the CNBC Asia Business Leader of the Year at the 10th IBLA ceremony.
Staying bullish on 2015 prospects, Prasad said a lot of growth is seen in emerging markets. However, he agrees that rouble depreciation will impact company negatively by around Rs 100 crore.
In an interview to CNBC-TV18, Prasad said the Diovan generic nod got impacted due to Form 483 at API unit, but the Valcyte generic has been picking up market share. The company has not scaled down US guidance as yet and is hopeful to grow above the market in India. “Margins remain healthy. There has been no pressure as of now,” Prasad said.
Below is the transcript of GV Prasad's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Your thoughts on winning the award?A: It is always a nice feeling to receive awards as awards are recognition of our successes and our efforts. So it’s extremely motivating to be awarded this recognition. Sonia: Dr. Reddys Laboratories (DRL) is expected to be one of the big bets of 2015 within the analyst who track the pharmaceutical space. Can you tell us what plan you have charted out for the company in the next fiscal?A: The next fiscal is largely driven by our core businesses which continue to be global generics both branded and unbranded as well as our active pharmaceutical ingredients (API) business. Our newer businesses will take another couple of years to start showing up in our financial statements but we are excited about the opportunity, there is lot of growth happening in emerging markets while the currency volatility is hitting us as we speak also there is a lot of opportunity opening up. So, we are quite bullish on 2015.
Sonia: You were talking about the currency fluctuations. What is the impact of the rouble depreciation on the profit and loss (P&L), something that has worried your investors for a while?A: I cannot give an exact number but it is quite significant. It will be a number in couple of 100 crore at least and it should show up in Q3.
Sonia: What about the P&L, where on the P&L will it show the most, the topline, the EBITDA or on the profits?A: It will impact somewhat the topline and the bottomline both because the value of the sale will come down but we have some hedges, which will mitigate some part of that at least for this quarter.
Latha: How will the stronger USD if at all mitigate the impact on your P&L?A: The US dollar is stronger but the ruble has depreciated quite rapidly and given where the oil prices are headed, there is a period of uncertainty especially in two of our markets – Russia and Venezuela. I am not sure the total impact will be absorbed by the dollar strengthening.Latha: Besides the currency impact how at all is Russia doing for you as market, has there been any remarkable slowdown in sales or any other disruptive changes in operations?A: Russia has still a good market for us. The rupee-rouble rate not withstanding, there is growth both on the unit side as well as in terms of market share. In rouble terms we continue to grow there rapidly. Sonia: You told us that a couple of 100 crore is the impact that you would see because of the ruble depreciation but similarly what is the impact of the Venezuelan currency depreciation on your P&L and impact on your sales?A: Venezuela is also impacted by the depreciation largely driven by lower oil prices and the current account deficit that they have but the market is growing at phenomenal rates. There is a vacuum in the market and we been able to stay there and service our customers there and build up a strong market presence. Net-net though there has been a depreciation in the currency there, there has been significant growth overall there. Latha: What is the combined impact of Venezuela and Russia - negative for P&L?A: At the top level Venezuela is not a hit because the growth has offset the depreciation. The Russian business will take certain hit.
Sonia: The market is quite concerned that the 483 at the Srikakulam facility may delay approvals from the US, your thoughts on that.A: We are in close touch with Food and Drug Administration (FDA). There have been some manufacturing issues in that site and we have responded and we are implementing corrective and preventive actions and we hope to get back as soon as possible to approvals from the site.Sonia: What is the exact status of the 483 at the Srikakulam API plant?A: It is very early days. We just responded and we are in touch with the FDA in terms of giving them updates about the corrective and preventive actions we have taken. So it is too early to predict.Latha: Dr. Reddy’s Lab has not got the final approval for Diovan generic, isn’t it? When do you expect it?A: That is somewhat related to the site and hence unless this inspection report is closed, we will not get the approval.Latha: What is the status on Nexium generic?A: We have to await the discussion with the FDA.Sonia: Do you see a slowdown in the US on account of 483?A: I cannot tell answer this time. We are in touch with FDA and we will keep you informed as things develop.
Sonia: How much of an upside do you expect from Valcyte generic and what are the other US launches that one can look forward to?A: Valganciclovir we have launched and it is doing well. We are picking up good market share and numbers of other launches are waiting approval as we get approval we will launch. The pipeline is healthy for US. Latha: I want an overall guidance. What is the overall growth rate expected in the US and have you scaled down the growth guidance for the US in particular?A: Not at this time. We have responded to 483 and we hope that we can address all the issues effectively.Sonia: What about the rest of the world and India – that has been robust in the last three quarters. What is the guidance going forward?A: We continue to grow above the market in India and that will continue. The rest of the world – there is some volatility in Russia but other than that we are growing in all other markets. Latha: The pharmaceutical services and active ingredients (PSAI) has been sluggish. When do you expect that to pick up?A: It is going to take some time. We are looking at a couple of years before that becomes growth driver again. Latha: Can you reiterate for us your guidance on margins. What is the range you are expecting?A: Margins remain healthy; there is no pressure on margins at this time.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
