Emerging markets like India will gain capital allocation: Dr Reddy’s GV Prasad

Dr Reddy’s Laboratory’s Rs 1,850-crore acquisition of Wockhardt Pharma’s branded generics business in India is reportedly being viewed as a de-risk strategy from regulatory actions in the United States.

“India is a strategic market for us. Future capital allocation will come into emerging markets (EMs) such as India,” GV Prasad, CEO of Dr Reddy's told The Economic Times. He added that the opportunity with Wockhardt would allow them to accelerate growth.

Dr Reddy’s, on February 12, announced it acquired Wockhardt’s domestic business, which also included international markets such as Bhutan, Nepal, Maldives and Sri Lanka.

Prasad said that the acquisition happened as they wanted to grow in the India market, but their business size and reputation here was comparatively small. “So, we looked at inorganic options. With this deal we will jump a few ranks in the Indian pharma space,” he told ET.

The acquisition helps the company jump two places to the 12th position on rankings of Indian pharmaceutical market by sales, and will eventually help it to break into top 10.

The portfolio acquired by Dr Reddy's comprises 62 brands in multiple therapy areas such as respiratory, neurology, VMS, dermatology, gastroenterology, pain and vaccines. Besides, it would also take over the related sales and marketing teams and the manufacturing plant located in Baddi, Himachal Pradesh with all plant employees. The business undertaking is being transferred on a slump sale basis.

Prasad, however, did not specify how much capital allocation would be considered but added that the strategy would be to “diversify away from the commodity market, where we had disproportionately invested in the past three years.”

The acquired portfolio shall enhance Dr Reddy’s presence in the high growth therapy areas with market-leading brands such as Practin, Zedex, Bro-zedex, Tryptomer and Biovac.