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Dr Reddys Laboratories
BSE: 500124|NSE: DRREDDY|ISIN: INE089A01023|SECTOR: Pharmaceuticals
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« Mar 12
Chairman's Speech (Dr Reddys Laboratories) Year : Mar '13
Dear shareholders,
 
 On 15 March 2013, we lost Dr. K Anji Reddy, Founder Chairman of your
 Company. You know what a great visionary he was, and the energy and
 zeal with which he built this Company. The finest tribute that we can
 pay to him is to continue along the path of profitable growth, be
 recognized as a best-in-class global pharmaceuticals major, keep
 building deep science, technology and R&D skills, and continually
 innovate to improve the lives of patients around the world.
 
 Let me begin by touching upon the results for FY2013, and then move on
 to describing some key developments which should play their role in
 defining the trajectory of your Company over the next few years.
 
 - The consolidated revenue of your Company for FY2013 was R116.3
 billion, and recorded a year-on-year growth of 20%. In terms of US
 dollars, this amounted to USD 2.23 billion (based on an average
 realized rate of 1 USD = R52.10)
 
 - This growth was primarily driven by North America and Emerging
 Markets in Global Generics; and by the overall performance of the
 Pharmaceutical Services and Active Ingredients (PSAI) segment
 
 - Earnings before interest, taxes, depreciation and amortization
 (EBITDA) grew by 9.5% to R27.8 billion, or 24% of consolidated revenues
 
 - Profits after tax (PAT) adjusted for impairment of intangibles and
 its corresponding tax impact increased by 17% to R17.6 billion, or 15%
 of consolidated revenues
 
 - During FY2013, your Company globally launched 104 new generic
 products, and filed 56 new product registrations and 47 new drug master
 files (DMFs)
 
 Revenue from Global Generics for FY2013 increased by 18% to R82.6
 billion—of which North America accounted for R37.8 billion, with a
 growth of 19%. If one were to exclude the beneficial impact of
 olanzapine exclusivity of the earlier year and compare like-to-like,
 the growth was 38%.  Several new product launches contributed
 significantly to revenues.
 
 Global Generics also performed well in Emerging Markets with a 31%
 top-line growth and R22.4 billion of revenue. Each key market—Russia,
 CIS, and the Rest of the World territories—grew impressively.
 
 I am especially pleased with Global Generics'' Indian revenues. After
 some years of difficulties, your Company has stepped up its Indian
 operations. This has led to a 13% growth in the generics revenue, which
 rose to R14.6 billion. This business must continue growing and doing
 well.
 
 The PSAI business has also done well.  Revenue grew by 29% to R 30.7
 billion, mostly on increased sales to generic customers, greater
 lock-ins and larger orders in the custom pharmaceuticals services
 business.
 
 Let me now move on to a few key areas of importance.
 
 Over the foreseeable future, double- digit growth with appropriate
 returns on capital will depend upon your Company''s ability to
 consistently succeed in introducing differentiated and hard-to-produce
 medicine in global markets. This involves excellence in several
 elements: (i) the right choice of molecules; (ii) Quality by Design
 (QbD);
 
 (iii) creating global R&D partnerships;
 
 (iv) having top class manufacturing operations which not only meet all
 global standards but also ensure that all launch dates are met with
 success; (v) successful plays in biosimilars and proprietary products;
 and (vi) building a best-in-class leadership team that is always hungry
 for victory.
 
 We have started getting our early successes on these fronts. In large
 measure, your Company''s good business results in FY2013 are due to
 appreciable improvements made in operations—building on a company-
 wide consolidated theme of ''Safety, Quality and Productivity''. As an
 example, in the year, products worth over USD 310 million were
 developed based on the principles of Quality by Design. This will
 increase appreciably over the future.
 
 We are selecting the right products—namely, those with great
 therapeutic upsides and having significant technical challenges—so as
 to carve high quality niches and also create technology-based future
 barriers to entry.  And we are successfully manufacturing them.
 
 We are building deep science and technology skills—both in-house and
 through global R&D partnerships. We have our own R&D presence in some
 of the leading innovation centers of the world:
 
 - At the Chirotech Technology Center in Cambridge, UK, which is a
 Center of Excellence (CoE) for catalysis
 
 - At OctoPlus in Leiden, Netherlands, which your Company acquired in
 FY2013.  OctoPlus has significant in-house expertise in the development
 and creation of micro-spheres and liposomes that enhance and enable
 controlled release of active pharmaceutical ingredient into humans.
 
 It is also well known for formulating complex injectables
 
 - At Princeton, USA, which is a CoE for developing oral solid dosages
 
 In our search for alternate molecules as well as dosage forms like
 injectables, topicals, patches and inhalers, we have created R&D
 partnerships with several other entities, both abroad and in
 India—including our subsidiary Aurigene and Dr. Reddy''s Institute of
 Life Sciences.
 
 Our biosimilars play is a major investment for the future. These
 products give us the opportunity to provide affordable and innovative
 medicines to patients across the globe. It is clear that any
 significant pharmaceutical player will need strong biologics
 development, manufacturing and commercialization capabilities. Your
 Company already has successfully produced four biosimilars: (i)
 rituximab called RedituxTM, which has been in India for more than five
 years, (ii) filgrastim, called Grafeel® (iii) darbepoetin alpha called
 Cresp®, and (iv) peg-filgrastim, which goes under the name of
 Peg-Grafeel®.
 
 To further strengthen biosimilars, the Company entered into an alliance
 with Merck Serono, a division of Merck KGaA, Darmstadt, Germany in June
 2012. Merck KGaA is a global pharmaceutical company with proven
 expertise in developing, manufacturing, and commercializing
 biopharmaceuticals and chemical compounds. The partnership is to
 co-develop and globally commercialize a portfolio of biosimilar
 compounds in oncology, primarily focused on monoclonal antibodies
 (MAbs).
 
 All these are parts of an exciting, yet complex j ourney. On occasions,
 the path will be difficult, as it must since the payoffs are so much
 greater. However, we have with us—and are constantly creating—a
 world class global management team to execute these challenging goals.
 Through our people, we will continue to focus on safety, quality,
 productivity and supply chain reliability and flexibility. These
 initiatives, along with our investments in R&D, biosimilars and
 proprietary products should help deliver good growth and healthy
 shareholder returns.
 
 I thank my colleagues and fellow employees for all that they do—day
 in and out—to better the performance of your Company. And my thanks
 to you for your good wishes.
 
 With best regards,
 
 G V PRASAD
 
 CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Source : Dion Global Solutions Limited
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