Dr Reddy’s Laboratories takes fresh shot at Russia M&A

Dr Reddy’s Laboratories, whose deal to acquire popular drug brands of JB Chemicals in Russia fell through recently, is now eyeing brands of other companies in that market and also mulling a manufacturing facility there.

According to sources, the drug maker is looking to acquire brands to strengthen its over-the-counter (OTC) drugs market in that country.

It is also evaluating the option of either setting up a facility in Russia or acquiring an existing one to have an edge in manufacturing as well.

Russia is already a key market for Dr Reddy’s, which is working on building a strong OTC business there.

The company derives 15% revenues from Russia and CIS markets.

On account of talk of regulatory activity for drug price control in Russia, pharma companies players are focusing on the OTC segment instead of depending on the prescription channels, sources said.

“It is a fact that we are open to more in-licensing deals and interested in brands in the Russian market. However, there is no deal that can be talked about at this point,” a company official told DNA.

The company currently gets about 30% of its Russian revenues through the OTC segment. According to the company officials, it is being decked up to reach about 40-45% shortly.

In the first quarter ended June 2011, Dr Reddy’s secured Rs249 crore in revenue in Russia with its key products like Omez, Keterol, Cetrine and Senade driving sales. The fiscal 2011 revenues from Russia and other CIS markets were at Rs1,090 crore out of its total revenues of Rs7,469 crore.

In fact, the company is currently ranked at 13 in the Russian market. Dr Reddy’s entered Russia in 1992 and consolidated its position during the turbulent currency crisis of the late 1990s.

Dr Reddy’s recently tried to acquire about 20 brands from JB Chemicals, mostly in the prescription segment and the deal was expected to help Dr Reddy’s expand its footprint in the market.

However, the deal was called off due to certain operational issues and disagreement over the way the supplies would happen from JB Chemicals.