US, Russia & API boost Dr Reddy's as busy year looms

Speaking to CNBC-TV18 after announcing results for the quarter, GV Prasad, VC & CEO, Dr Reddy's Laboratories, explains that the reason for company's good performance for the quarter and year is the 68% growth in the US, the 23% growth in Russia and the 21% growth posted by  the API business.

He adds that the company's growth in Germany is flat and the management is taking all efforts to bring the Indian business back to form. Prasad is upbeat as the company has plans to launch a slew of products this year and is confident of maintaining a rate of growth similar to last fiscal. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.  Q: What is the impact of the write-off of Rs 104 crore, in terms of intangibles, on your German business?
A: This is an accounting adjustment based on the carrying value of the asset and we had to write it down because of more products entering the tenders. So this is a non-cash impairment of about Rs 104 crore for this quarter.
Overall, the business continues to be under pressure because of the increasing number of tenders. One of our major customers Barmer moved to a tender and that caused some of this write-down. Q: Can you just give us the performance of the German business in Q4?
A: The German business has been relatively flattish and actually has declined a little bit. But overall, the German business is not as material as it used to be in the past. It is less than about 6%-7% of our overall revenue.
The real stories for the quarter are the growth in the US, overall for the year the growth in the US is 68%. The Russian business grew at a healthy 23% and the API business also grew around 21%. These were the reasons for the good performance of the year and the quarter. Q: I was just coming to the US business because that performed well because of the exclusivities. Just give us a sense on how exactly did Olanzapine perform with your share being below USD 2 million. Is that a concern and how did Geodon Generic contribute?
A: Coming to the performance on Olanzapine, it is slightly less than what we internally thought. But it is not a matter or concern. Overall, we made about USD 100 million from the product during the exclusivity period which is in line with the overall sales during the exclusivity period accounted for the authorised generics.
At times it is hard to predict what market share we would take and what the competition would take. But it is not such a bad result considering everything.
The other products continue to do well. Fexofenadine was a big contributor to both sales and profitability. Lansoprazole as well as the OTC products have turned in a smart performance in the US market. Q: The other big surprise this quarter was the API business. A lot of exclusivities were over and hence the upside. What is the guidance that can be expected and what is the forecast for FY13?
A: The API business grew by over 20 percentage points this year driven by the large number of patent expiries in the US and in the European market. The trend is going to continue even in the current year. So, we remain hopeful of performing well in the current year for the API business. Q: What is your outlook for the Indian business? Is there a pick-up in the secondary sales market?
A: We are still not very happy with our performance in India. We are attempting a turnaround in performance and plan to post better results this year. Q: What can be expected in terms of guidance on the topline, bottomline and EBITDA?
A: We don't give specific guidance on revenue or on profitability, but our outlook remains robust. We plan to record similar rates of growth, as posted in FY12, in FY13 too. Q: Does your target of achieving a topline of USD 2.7 billion remain?
A: We do not provide specific revenue guidance, but given the outlook, both in terms of the growth as well as number of products for which the patents are expiring, we should maintain growth rates similar to those posted in FY12. Q: What sort of launches can we expect in the US business? I understand Lipitor is to be launched in May?
A: Lipitor is not an exclusivity-driven opportunity. There are a couple of products, which we could get exclusivity through the patent challenge route. We have a very large number of launches.
This year is going to be a busier year than last year. So overall the outlook in the US is very positive.