MUMBAI, July 29: Pharma major Dr Reddys Laboratories, which has significant presence in the US, is hopeful of the lingering price erosion in that market to end in the near future.
The US, which is the worlds largest drug market, accounts for 52 per cent of Dr Reddys global generics sales and 42 per cent of its total sales, has been witnessing a significant price correction during the past three years impacting it bottomline and topline.
Over the past three years, the average price decline for generic drugs in the US has not only been high but has also been going up significantly annually due to channel consolidation forcing suppliers to cut prices generic product, chairman K Satish Reddy said in the annual report.
Another reason for the price cuts is the growing competition from various international suppliers. These factors have negatively affected all major pharma companies exporting to the US.
“The fiscal 2018 was challenging due to a significant price erosion in the US market. While, price competitiveness will remain the leitmotif in the US, we believe the rate of price erosion has already peaked and ought to taper down now,” he said added.
In FY18, its consolidated revenue just inched up 1 per cent at Rs 14,200 crore, due to the significant price cuts in the US market and lower contribution from India due to GST transition. This massively pulled down its net income to Rs 980 crore from Rs 1,200 crore in FY17.
“It is difficult to predict how long the US pricing pressure will last. We need to have a strong pipeline of difficult-to-manufacture complex formulations that address key therapeutic needs. This will allow us to introduce several value-added products each year and help combat price erosion, Reddy said.
In FY18, it filed 19 new abbreviated new drug applications (Andas) and one new drug application (NDA) in the US. It now has 110 generic filings pending approval from the FDA, comprising 107 Andas and three NDAs, he said.
Dr Reddys operations have been hit by regulatory interventions, especially by the US which has issued warning letters regarding its three plants–an API manufacturing facility at Miryalaguda in Telangana, an API plant at Srikakulam in Andhra Pradesh, and an oncology formulation facility at Duvvada, near Visakhapatnam.
Consequently, launches of key molecules, injectables, as well as certain APIs from these sites have been delayed.
Although it has successfully secured regulatory and customer approvals to transfer production of some of these products to alternative facilities, it led to a significant revenue loss from the US for both FY17 and FY18, he said.
Bu he sounded optimistic about emerging markets. “We should be able to increase revenue from these geographies through simple and complex generics as well as hospital and institutional sales of oncological biosimilars,” he said. (PTI)
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