dr. reddy's analyst meet presentation - 2009
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Dr. Reddy’s Laboratories Ltd
Investors and Analysts Meet, MumbaiMay 21, 2009
2
Safe Harbor Statement
This presentation contains forward-looking statements and information that involve risks, uncertainties and
assumptions. Forward-looking statements are all statements that concern
plans, objectives, goals, strategies, future events or performance and underlying assumptions and other
statements that are other than statements of historical fact, including, but not limited to, those that are identified
by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,”
“projects” and similar expressions. Risks and uncertainties that could affect us include, without limitation:
General economic and business conditions in India;
The ability to successfully implement our strategy, our research and development efforts, growth and
expansion plans and technological changes;
Changes in the value of the Rupee and other currency changes;
Changes in the Indian and international interest rates;
Allocations of funds by the Government;
Changes in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industry;
Increasing competition in and the conditions of our customers, suppliers and the pharmaceutical industry; and
Changes in political conditions in India.
Should one or more of such risks and uncertainties materialize, or should any underlying assumption prove
incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking
statements. Any forward-looking statement or information contained in this presentation speaks only as of the
date of the statement.
We are not required to update any such statement or information to either reflect events or circumstances that
occur after the date the statement or information is made or to account for unanticipated events.
3
GV PrasadVice Chairman & Chief Executive Officer
4
Overview
Emerging global company with 25 years of existence
Amongst the largest Indian pharmaceutical companies
• Revenue $1.4 bn FY09 ; CAGR 25% - FY00 to FY09
• International (ex-India) revenue 40% in FY00 to ~ 85% today
Strong portfolio, vertically integrated: businesses, geographies &
products
• Pharmaceutical Services & Active Ingredients
• Global Generics Businesses
• Proprietary Products
Manufacturing infrastructure of 16 facilities
5
Purpose
Providing affordable and innovative medicines for healthier lives
Strategy
Leverage industry-leading science & technology, product offering, and
customer service with execution excellence
6
The Last decadeAchieved scale and global presence
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
183 234
338 380 463 447
546
1,510
1,250
1,365 Revenue USD Mn
Built business viability, moved up the value chain
Strengthened capabilities
Established global presence
Scale and inorganic growth
7
Going Forward
Focus on consistent earnings & profitable growth
Build leadership position in Global Generics and Pharmaceutical Services
& Active Ingredients
Create levers of growth for future through Proprietary Products
8
Key Questions
I. What are our aspirations ?
II. How will we deliver consistent profitability ?
III. Why do we believe we will succeed ?
9
I. What are our aspirations ?
Improve depth in key
markets through portfolio
expansion and supply chain
excellence
Create compelling value for
customers by leveraging
IP, technology and cost
leadership
Calibrate investments to
create a self sustainable
model
Global Generics
Pharmaceutical
Services
& Active
Ingredients
Proprietary
Products
Leadership
position
in key markets
Partner of
Choice
Viable
Proprietary
Products
business
10
II. How will we deliver consistent profitability ?
Addressing performance issues in Germany & India
Focus on key markets and ensure delivery of limited competition
opportunities consistently
Calibrate investments in Proprietary Products and other high risk R&D
with overall intent to accelerate path to financial sustainability
11
Proprietary products re-organizationMerger of Aurigene and Discovery research
Why
Existing structure does not fully optimize the infrastructure and resources at our
Discovery Research facility
Increasing demand from Aurigene‟s existing and new partners
Objectives
Utilize the DR infrastructure to generate near-term profitability
Allow proprietary products to partner for Discovery capabilities with Aurigene or
other third parties on an as-needed arm‟s-length basis
Enhance / complement Aurigene‟s capabilities with the addition of turn-key fully-
staffed facility
12
III. Why do we believe we will succeed ?
Focus & Depth
Key markets
Supply chain excellence
Vertical integration with
cost, technology & IP leverage
Product delivery engine
13
Financial Targets FY13
Revenues
$3 bn
RoCE
25%
14
FY10 GuidanceContinuing growth on a high base of FY09
Revenue
RoCE
Growth 10%
(in rupee terms, on a high base of FY09)
Mid to high teens
Second half expected to perform better than first
15
Satish ReddyManaging Director & Chief Operating Officer
16
Priorities for Global Generics
Deepening market presence
Widening the scope of portfolio offering
Improving cash cycle
Supply chain excellence
Addressing the need for infrastructure / capacity increase
17
India
Last two years: Lagged industry growth
Inadequate portfolio coverage
Limited impact of new product introductions
Northern & Eastern regions continue to lag our peers
Recent change to replenishment based system
FY05 FY06 FY07 FY08 FY09
436 598
697 806 848
Revenue [Rs Crs]
18
What are our strengths ?
Ability to build & sustain Mega Brands
• 7 brands among Top 300 brands
• Omez achieves sales of Rs 100 crs per annum
Strong equity with GPs / CPs
• 55 – 70% of our Top 10 molecules are prescribed by GPs/CPs
• 16% of GPs / CPs prescribe more than 4 of our products per
prescription
Ability to establish new brands despite late launches in the
market
• Leon (38 5th rank), Niltan (33 7th rank), Z&D (13 3rd
rank), Pecef (47 11th rank), Telsartan
Emerging leadership presence in niche areas
• Dental, oncology & dermatology
19
Therapy MS - Mar 09 Rank
Gastrointestinal 4.7% 2
Cardiovascular 4.0% 12
Pain / Analgesics 4.1% 6
Anti-infective 0.9% 25
Anti-diabetic 2.4% 14
Vitamins / Minerals / Nutrients 1.6% 18
Dermatology 1.9% 11
Stomatologicals 17.1% 2
Respiratory 1.1% 21
Urology 4.9% 8
Gynaecology 0.7% 34
Neurology / CNS 0.2% 48
Therapy Rankings in India
20
India: Strategy
Improving portfolio coverage
• Launch biosimilars and Differentiated products
• Address the portfolio gap with a combination of in-house &
licensed-in products especially in CV and Diabetes
Increasing market share
• Improve execution and coverage in Northern & Eastern India
• Increase overlap of doctors covered by specialist MRs
• Scale up presence in rural
Delivering supply chain excellence
• Improve availability
21
Russia
Portfolio
• 22 brands 12 brands in Top 3
o Omez, Nise, Ketorol & Ciprolet Rank 1
• OTC Segment 11% of total sales
Customer
• Top 4 Distributors > 80% of revenues
• Operations within strict credit limits
Market Attractiveness
• High growth potential & attractive margins
• 80% of products vertically integrated
22
Russia: Sales growth
FY05 FY06 FY07 FY08 FY09
48 60
79 101
125
Revenue [USD Mn]
Market Rank
• Pharma16th (improvement from 22nd in 2005)
• Generics 7th
Omez, Nise & Keterol > 50% market share
Above nos are at average USD – INR rates
23
Russia: Top 10 brands contribute to 79%
# Brand Molecule OTC/RX2006 2007 2008 Rank in INN
Value ( USD mn) 2006 2008
1 OMEZ OMEPRAZOLE RX 16.4 21.1 25.7 1 1
2 NISE NIMESULIDE RX 11.6 18.0 24.1 1 1
3 KETOROL KETOROLAC RX 11.9 17.8 22.3 1 1
4 CIPROLET CIPROFLOXACIN RX 12.4 14.9 15.5 1 1
5 CETRINE CETIRIZINE OTC 3.2 4.7 7.1 2 2
6 ENAM ENALAPRIL RX 4.9 5.6 5.8 4 4
7 EXIFINE TERBINAFINE OTC 2.8 3.6 4.9 5 3
8 BION 3 ~ - 0.3 2.0 3.9 7 6
9 NISE GEL NIMESULIDE OTC 0.3 1.2 2.1 12 7
10 MYCOFLUCAN FLUCONAZOLE OTC 1.0 1.2 1.6 7 6
11 NORMASE LACTULOSE OTC 0.2 0.6 1.5 2 2
Top 4 brands at No. 1 in their respective INNs
Rank
increase
24
Russia: Strategy
Coverage
• Improve market share in Moscow & St Petersburg
• Expand hospital coverage
Portfolio
• Focus on cardiovascular & oncology
• Product introductions in all major molecules (INN)
• Expansion in OTC segment
Delivering supply chain excellence
• Improve availability
25
Presence in other major markets
25
MarketGeneric
Market Size
Nature
of Market
Dr. Reddy’s
RevenuesMargins
Our Ability
to Compete
UK $4 bn INN ~ $40 mn
CIS $4 bn Branded ~ $40 mn
Venezuela $2 bn Branded ~ $12 mn
Romania $1 bn Branded ~ $12 mn
26
All ‘emerging’ markets expected to show
significant growth in the next decade
Source : IMS
Dr. Reddy’sPresence
Participate
through API
Building
presence
Achieved
significant
presence
27
Amit PatelHead - North America Generics
28
US Generics: Snapshot
Marketed Portfolio ~ 50 products
• Critical mass established with over $400 million in FY09
• 20 products Top 3 position,15 products better than fair share of market
• 3/4th of portfolio vertically integrated API
Product Pipeline
• 140 ANDAs filed to date 68 pending approvals [38 P-IVs and 18 FTFs]
• Continue to build core strength in solid oral dose
• Early activity in injectable, cytotoxic, liquids, etc.
• 3/4th of pipeline vertically integrated API
Capabilities
• Supply chain excellence
• FDA approved manufacturing facilities in India and Shreveport, USA
• Channel expansion activities in private label OTC and government sectors
• Key partnerships in place for product development, packaging and logistics
0
150
300
450
Teva/Barr Mylan Sandoz Watson Mallinckrodt Apotex Corp Qualitest Greenstone Actavis US Lupin Dr. Reddy's Par Ranbaxy KV Lannett
23.1% 12.5% 7.8% 7.7% 3.9% 3.8% 3.6% 3.4% 3.0% 2.5%Mkt.Share
TRxsmn
2.1% 2.1% 2.1% 1.9% 1.6%
29
Top US generics companies
Tier I Tier II
Source : IMS Health, National Prescription Audit, Dec 2008
Currently ranked 11th, intend to be amongst Top 5
30
Leading player in Tier II FY13
„Company of choice‟ for customers and partners
I. Better than fair market share
II. „Leading‟ development pipeline and wide coverage of patent expiries
o comprehensive solid oral market coverage
o injectable, cytotoxic, liquids & biosimilars pipeline
III. Strategic deals
IV. Growing annuity of upsides
Service levels and supply chain excellence
First to launch and last to exit
31
I. Better than fair market share – customers
Major Wholesalers
Other Retailers, Pharmacy Benefit Managers, Mail, etc.
National Retail Chains
HD Smith, Anda, etc.
Duane Reade, Kaiser, Kinray, Kroger, Omnicare, SuperValue, Others
32
I. Better than fair market share – products
Source : IMS Health, Mar 2009
0%
10%
20%
30%
40%
50%
60%
70%
80%
Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09
ONDANSETRON (Dec 06)
DR REDDYS MYLAN NOVARTIS GLENMARK
GSK SUN TEVA DAIICHI
ACTAVIS AUROBINDO HIKMA APOTEX
PERRIGO
0%
10%
20%
30%
40%
50%
Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09
FEXOFENADINE (Jun 06)
DR REDDYS PRASCO TEVA MYLAN SANOFI
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09
TEVA LUPIN DR REDDYS
AUROBINDO ZYDUS CADILA DAIICHI
COBALT MYLAN MERCK
COVIDIEN NOVARTIS
SIMVASTATIN (Jun 06)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sep 08 Dec 08 Mar 09
SUMATRIPTAN (Dec 08)
DR REDDYS GSK TEVA DAIICHI
33
$0
$5
$10
$15
$20
$25
$30
$35
2007 2008 2009 2010 2011 2012 2013
$0
$5
$10
$15
$20
$25
$30
$35
2007 2008 2009 2010 2011 2012 2013
II. Leading development pipeline coverage of expires
Brand expirations (universe)
covered by Dr. Reddy’s PipelineBrand expirations (addressable market)
covered by Dr. Reddy’s Pipeline
(in bn) (in bn)
Dr. Reddy’s coverage Dr. Reddy’s coverage
0 50 100 150 200
Par
Watson
Dr. Reddy's
Ranbaxy
Sun
Mylan
Sandoz
Teva - Barr
0 50 100 150
Par
Sun
Ranbaxy
Mylan
Dr. Reddy's
Watson
Sandoz
Teva - Barr
34
II. Leading development pipeline comparison to peers
by Pending ANDAs by Para IVs
0 50 100
Watson
Par
Sun
Dr. Reddy's
Ranbaxy
Sandoz
Mylan
Teva - Barr
by FTFs
35
III. Strategic deals
• Alchemia
• BioPharm
• Indicus
• Invagen
• Others
Pipeline Development
• Desloratadine Schering / Sepracor
• Finasteride 1mg Merck
• Rivastigmine Novartis
• Sumatriptan GSK (via settlement)
Para IV Settlements
• Finasteride 5mg Merck
• Simvastatin Merck
• Sumatriptan GSK (via settlement)
Authorized Generic Deals
36
Para IV – Assured 180 days exclusivity FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Fluoxetine (FY02)
Ondansetron X
Product A X
Product B X
Product C X
Product D X
Product E X
Para IV – Settlement / Go-Early FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Sumatriptan X
Rivastigmine X
Desloratadine ODT X
Desloratadine + Pseudoephedrine X
Finasteride 1 mg X
Para IV – Summary Judgment FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Omeprazole Mg OTC X
Para IV – At Risk Launch FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Fexofenadine X
IV. Growing annuity of upsides
37
Difficult/Limited Source Possibilities FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Divalproex Sprinkles X
Fondaparinux ?
Product M ?
Para IV – Possible Launches FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Product F ?
Product G ?
Product H ?
Product I ?
Product J ?
Product K ?
Product L ?
IV. Growing annuity of upsides
38
Michael EwersHead - betapharm
39
Germany Tough play yet good potential
Generic Market Size ~ $ 9 bn ; Among the largest generic market
globally
SHIs majority expected to move to the tender route
Model High volume, low margins and sales growth to be driven by
volumes as well as new launches
40
Market Dynamics
INN - Generic segment approx € 4.7 bn
Non protected Branded business approx € 3 bn
“Substitutable Generic Market” € 7.7 bn
New launches up to 2012 will contribute € 2.2 bn incremental sales
SHIs will strengthen their position via increased tender activity which is
Govt supported
SHIs likely to move towards “managed care” to reduce overall “therapy
costs”
Wholesaler/pharmacies need to align with the new business model
Physicians will align with SHIs for “managed care”
Customer Dynamics
41
Portfolio Coverage
78%73%73%
65%64%57%
61%54%
62%
53%
61%
49%43%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
top 100 in % top 200 in %
Competitor AnalysisPortfolio coverage of Top 100 + Top 200 German molecules
Hexal
Ratio
Stada
Aliud
Beta
Merck dura
Teva
• Competitive portfolio compared to the market leaders
• Portfolio coverage out of Top 100 molecules in Germany 62%, Portfolio coverage of Top 200
molecules in Germany 53%
42
Pipeline
0
100
200
300
400
500
600
700
2010 2011 2012
Patent expiries in Germany
(Values in € Mn)
Dr. Reddy’s coverage
92%95%
88%
43
Addressing new reality of the market and
restructuring cost bases
Continuing optimization of sales force
[Mar-06 = 250, Mar-08 = 160, Sep-08 = 120, Sep-09 = 60]
Transfer of manufacturing and select functions to India
Optimization of operating expenses
44
Game Plan
New product launchesOptimizing vertical
integration Adopting lean &
flexible cost structures
Near Term
Sustaining current levels of sales &
profitability
Increase cost effectiveness
Maximize new product launches
Long Term
Expand market share as players
consolidate
Focus on absolute profitability
Superior execution model & higher
pharmacy shelf space
45
Abhijit Mukherjee
Head - Pharmaceutical Services & Active Ingredients
Aspiration to be a robust and profitable
business on a global scale
Chemistry
Engineering & Scale-up
Intellectual Property
Supply Chain Management
Infrastructure (Plants)
Product Portfolio
CUSTOMERS
Innovators Generics
API: 3 Key Forces at work
API
business
Price Erosion
Cost Management New Product launches
Sustainable margins driven by continuous cost management & new
product launches which more than offset price erosion
• Ongoing price decrease
• Dictated by both Market and Customers
• New products to be developed and launched constantly
• Cost Improvement Programs
• Process Efficiency improvements
Delivery to Customers
Regulatory Support
IP Driven Product Dvpmt
Supply Chain Mgmt
Global Access to Customers
Capacity Mgmt
Compliant Mfg
API: Managing complexity at scale
148
83
12
US DMF
EU DMF
Japan DMF
Filings as of April 30, 2009
Dr. Reddy’s has coverage of 60 – 80% of the value of products going
off patent in US over next few years
Product Region Market Share
Finasteride US 64%
Gemcitabine EU 42%
Ramipril EU 32%
Naproxen Global 40%
Pipeline & Performance validates our strategy
Top 2 leadership position globally in generic APIs
The Custom Pharmaceutical Services model has
evolved over the years
Custom Chemical Services - 2003
Big Pharma Progress with pipeline to
manufacturing
Pipeline DvptServices
API manufacturing
Big Pharma, Mid Sized Pharma , Emerging Pharma, Biotech
Pipeline dvpt
services – API &
dosage
API, Dosage
mfgNiche
technology
capabilities
Mature API,
intermediates
Misc mfg,
intermediates
Wide Net Approach
Custom Pharmaceutical Services - 2008
1. Product service
• Leverage strengths as a generic company to provide
services
2. Technology leveraged manufacturing services
• Chiral technology
• Steroids, peptides & prostaglandins
• General chemistry expertise
• Scale up and engineering skills
CPS two-pronged strategy
52
Cartikeya Reddy
Head - Biologics
53
What will differentiate Dr. Reddy’s in Biosimilars ?
First Indian company to fully develop a biosimilar in-house
First to systematically tackle complex mammalian cell cultured derived
products Targeting Capabilities
First company to develop and launch a biosimilar monoclonal antibody
‘Reditux’
Pipeline to drive sustained product launches Four products in late stage
development
Investments in capacity expansion Large scale mammalian cell culture
plant
Cell LineDevelopment
ProcessDevpt
ToxStudy
ClinicalMfg
ClinicalStudy
54
Pipeline
Industry-leading portfolio of 9 products dominantly based on
mammalian cell culture
Global brand sales of pipeline > $30 bn
Product AExp Launch
FY10
Product BExp Launch
FY10
Product CExp Launch
FY11
Product DExp Launch
FY12
Product E
Product F
Product G
55
Market Strategy
Emerging Markets
Aggressive alliancing efforts outside
core Dr. Reddy‟s territories to
leverage sole generic position.
Variable approval pathways and
patent situation means that potential
of pipeline will begin to be evident
from FY12.
Vertically integrated, India-based
development and manufacturing
create a high margin portfolio for Dr.
Reddy‟s.
Regulated Markets
Regulatory clarity is emerging
though market dynamics will take
some time to mature.
Emerging markets strategy will
create „clinically proven‟ full width
portfolio of biosimilar products.
Retain strategic flexibility to alliance
for detailing-driven market
dynamics; prepare for substitution-
driven price competition (de-facto).
56
Raghav Chari
Proprietary Products
57
Long Term Vision
Establish a leadership position in at least one of the chosen TAs / specialty
physician audiences
Achieve critical mass in terms of late-stage R&D and new product launches
within our target TAs across both major markets and key current markets
Reach industry leading levels of productivity
58
Near Term Deliverables
Create a critical mass of 3-5 high quality clinical stage programs at any given
time with a specialty orientation
Build a steady state pipeline of 2 quality INDs/year by FY11 across NCEs and
Differentiated Formulations
Generate sufficient deal flow from out-licensing to cover costs and turn pre-
phase II PoC R&D business profitable
File for registration with 1 product per year in India starting FY12
59
Key Development-stage Assets
AssetExploratory
stagePreclinical
testing
GLP tox/IND-enabling studies
Phase I Phase II Phase III
Balaglitazone
DRL-2546 (COPD)
DRL-17822(dyslipidemia)
DRL-21994 (dyslipidemia)
DRL-21995(dyslipidemia)
Dyslipidemia/CV –undisclosed NCE
60
GV PrasadVice Chairman & Chief Executive Officer
61
What are our aspirations ?
Improve depth in key
markets through portfolio
expansion and supply chain
excellence
Create compelling value for
customers by leveraging
IP, technology and cost
leadership
Calibrate investments to
create a self sustainable
model
Global Generics
Pharmaceutical
Services
& Active
Ingredients
Proprietary
Products
Leadership
position
in key markets
Partner of
Choice
Viable
Proprietary
Products
business
62
Financial Targets FY13
Revenues
$3 bn
RoCE
25%
Thank You
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