(Adds details, share price, byline)
By Sumeet Chatterjee
BANGALORE Aug 29 Indian drug maker Dr Reddy's
Laboratories Ltd (REDY.BO) is facing significant pressure on
its business in Germany as regulations and growing competition
drive down prices, its chief executive said on Friday.
Betapharm, which Dr Reddy's bought in 2006 for $572
million, has been a drag on earnings due to supply constraints
and falling prices. It has moved Betapharm's main manufacturing
to India and to other facilities in Europe to lower costs.
"While we can say that cost of goods is lower from India,
prices going down is not a good thing for anybody," CEO G.V.
Prasad told Reuters in a phone interview from the company's
headquarters in the south Indian city of Hyderabad.
"Volumes are going up, but the prices are under pressure,"
he said. "I think it will take us a year or two when we will
see significant growth and value there."
HSBC said on Tuesday the declining prices and eroding
margins of drug makers in Germany were a result of government
intervention through public healthcare insurance firms that are
increasing the number of drugs covered by discount contracts.
Top German state health insurer, Allgemeine
Ortskrankenkasse (AOK), last year started to secure drug
supplies for its clients via tenders, and Prasad said this
would lead to commoditisation of products and more pressure on
Betapharm's top selling drugs are Simvabeta for cholesterol
lowering, Omebeta for gastro-intestinal disorders, and
Alendronbeta for Osteoporosis.
Prasad said Dr Reddy's (RDY.N), the only Indian drug maker
listed in New York, was on track to meet its guidance of 25
percent revenue growth for the year to March, but margins were
under pressure due to price falls and rising raw material
Global demand for generic drugs produced by firms such as
Dr Reddy's and local rival Ranbaxy Laboratories RANB.BO is
booming as nations around the world battle rising healthcare
But export-driven Indian companies are facing stiff pricing
pressure as more drug makers enter into the generics space.
NOT FOR SALE
Prasad said Dr Reddy's would continue to launch 10 to 12
products a year in the United States, one of its key markets,
and the company had about 80 products pending regulatory
The launch of its acute migraine drug sumatriptan, a
generic of GlaxoSmithKline's (GSK.L) Imitrex, in the December
quarter should help boost growth, he said.
Promius Pharma, a wholly owned speciality dermatology drug
unit, would start operations in the United States with two
products in October, and more will be launched in a phased
manner, the chief executive said.
After a deal announced in June where Japan's Daiichi Sankyo
(4568.T) will pay up to $4.6 billion for control of Ranbaxy,
India's top drug maker by sales, analysts have said other
family-controlled firms may be buyout targets.
But Prasad said Dr Reddy's was not for sale.
"I think we view ourselves we are neither going to
participate as a consolidator today because we want to build up
our organisation a little more organically on the generics
side, nor do we think we are available for sale for somebody
Shares in Dr Reddy's, which has a market value of $2
billion, rose 1.8 percent to 579.25 rupees in a Mumbai market
that rose 3.7 percent.
(Editing by John Mair)