Hope to commercialise 4 products acquired from Teva by FY18: DRL

Dr Reddy's Laboratories acquired eight abbreviated new drug applications (ANDAs) from Teva Pharma and an affiliate of Allergan Plc in the US. The pharma major acquired products portfolio on a cash-free and debt-free basis. It expects to finance the transaction using a combination of cash on hand and available borrowings under existing credit facilities.Throwing more light on the acquisition, Saumen Chakraborty, CFO of the company, told CNBC-TV18 that it hopes to commercialise four out of the eight products by FY18. He said all the eight products are expected to have limited competition.The company is also planning to launch 8-10 products in the near-term, said Chakraborty. Out of the 8 products, one is already approved and 7 are pending with FDA, said the company.Talking about growth outlook, he said first half of FY17 is likely to be challenging but expects second half of FY17 to make up for the challenging first half, adding that FY18 should be a good year for growth.Below is the verbatim transcript of Saumen Chakraborty's interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18. Mangalam: Tell us a little about the revenue potential from all these 8 products and when is the company likely to realise them? A: We are not sharing the financial detail, but this will start from FY18. Four of the eight molecules we hoped to commercialise in FY18 and then remaining in FY19 and subsequently. Reema: If you could at least tell us what the competition is for each of the 8 products, in how many of them do you have very limited competition just so that we get a sense of the potential and opportunity. A: All these are expected to have limited competition. These were complex generic products in softgel topical and respiratory (STaR) kind of a segment. Mangalam: Since there is limited competition can we expect the margins on these 8 products to be higher, if yes how much would they be in the band of? A: We expect good margins. It also helps in terms of enhancing overall commercial capability of Dr Reddy’s. The customers are now quite consolidated. The big four customers between themselves have more than 75 percent of the market share. Reema: There is one brokerage report which anticipates about revenues of about USD 170-180 million FY18 onwards with margins of 50 percent plus, is that a fair assessment according to you. Are we at least in the right ballpark? A: I am not commenting right now on the financials. Reema: What about USD 350 million you have said that you will be using part of your cash as well as part of the existing credit lines that you have. Could you help us break that on the funding? A: Yes, that is correct. We will use the combination of cash on hand as well as available borrowings under the existing credit facility, but let me tell you that this entire thing is contingent to both Teva Allergen deal going through and its approval, so only then this deal get closed. Mangalam: We also learn that 7 of the 8 products require approval from the USFDA, while one already has it so, any timeline when can we expect these approvals to come by? A: As I said, half of them - four we will expect to commercialise in FY18, so we will expect approvals prior to that and there are different timelines for approval and launch for different molecules. Reema: Since we have you in the conference call you indicated that we should expect a brisk pace of launches in H2 of FY17. Could you give us an update what should be the key launches that we should expect from Dr Reddy’s? A: Again, we do not discuss the specific product in our portfolio. In second half we expect some good launches and in terms of number of launches it could be about 8 to 10 launches we can expect. Mangalam: If you could give us any update that you have from the US regulator with regards to the warning letter that came by for your plant? A: We have given an update in the last week of May and we will be seeking face to face meeting with USFDA after giving another update within a month or so. Mangalam: Have they granted you the appointment date? A: No, we will be giving another update and simultaneously we will be seeking the meeting. Reema: And the next update should be in the month of July you said next month. A: That’s right. I think end of June or beginning of July. Mangalam: Could you also tell us what your market share in Nexium generic is because we earlier learn that your market share in Nexium generic has risen quite considerably. A: It has run past 10 percent now. Reema: And this quarter how is Venezuela shaped for you since that was the problem area for you in the prior quarter? A: Venezuela we are continuing with the same line of action in terms of no more dispatch unless and until we get some cash. We haven’t got any cash, so we are not dispatching. Mangalam: If you could tell us FY18, FY17 revenue growth as well as profitability outlook? A: FY17 as I said first half will be very challenging. Emerging markets (EM) even though currency now is more stable compared to previous year, but year on year (YoY) comparison in a local constant currency we expect good growth in EM market. So the first half we in most likelihood there will be some decline, but the second half we feel it will more than compensate the decline in the first half, but FY18 we feel would be much better year for us in terms of growth.