US accounts for half of the drug maker's revenues; analysts say co expecting some price erosion in two generic products
Dr Reddy's Laboratories expects price cuts in some of its generic products in the US, notably in injectables space, as more rivals enter.
Abhijit Mukherjee, chief operating officer, said the contribution from the injectable products sustained through the first quarter as there was no noticeable competitive entry.
However, with more competitors entering the market, there are possibilities of price erosion in all generic products, he said. "The other ones is a part of the business but we don't expect very large impact in there. But injectables would be the biggest hit, if more people (rivals) come in," he said during the first quarter earnings conference call with analysts.
The company posted better-than-expected first quarter results, with net profit increasing 52% year on year to Rs 550 crore during the April-June quarter.
Net sales grew 23.6% yoy to Rs 3,518 crore. North America, which contributes around 47% to the company's overall revenues, saw a 51% growth in sales, driven mostly by niche and limited-competition generics products such as Toprol XL, Zenatane, Geodon and the injectable segment.
On rising competition, he said, "It's been a good run since our launch. There are three or four products that are in the limited competition space. We hear about a competition in one of the assets soon, though not yet in the market. But would it be an onslaught of number of competitors? We don't think so as yet. But like in all generic products, a gradual erosion is expected as more people come in."
Commenting on the distribution channel consolidation underway in the US, Mukherjee said, "We've seen erosion in certain products in some places. In few cases, we've given up, but again in quite a few cases, we've retained, but there is a substantial cost. The US market is also governed by factors of some price increases, some shared increases, and some erosions, and sum total of these three governs the base business, and the launches add to the growth. Broadly between these three factors, which I've mentioned, we've been able to keep it somewhat neutral."
Ranjit Kapadia, senior VP – pharma, Centrum Broking, said Dr Reddy's is expecting some price erosion in two generic products though they have not given out the names. "It is quite obvious that if more players come in for a particular product, price will definitely fall. But the US is a big market for the company, and so even if there are some price cuts they will not be very substantial," he said.
Hitesh Mahida, pharma analyst with Antique Stock Broking, said, "As more players join the market, price erosion will happen. But usually for Dr Reddy's, most of their products are in the limited-competition space. So even if there are some price erosion, it would be slow and gradual."
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