Dr. Reddy's Laboratories is a global pharmaceutical company based in Hyderabad, specializing in generic and branded drugs across various therapeutic areas. The company has experienced significant growth, with total sales of $2.1 billion in 2013 and a 14.6% year-over-year increase, while also facing challenges such as high competition and regulatory hurdles. Strategic goals include enhancing R&D capabilities and expanding its market presence, particularly in generics, to secure its position as a leading pharmaceutical entity in India.

1. Dr. Reddy’s Laboratories Ltd :
Chasing A Daring Vision
U113190 Aniroodh Ganeriwala
U113191 Arjun Agrawal
U113192 Ashish R Jena
U113193 Guneet Singh
U113194 Bhabani S Lenka
U113195 Avinash Kumar
U113196 Bibhu Prasad
U113197 Chiranjeeb Mohanty
U113198 Chitrali Nag

2. Introduction & Briefing
• Dr Reddy’s Laboratories is a global pharmaceutical
company based out in Hyderabad.
• Dr. Reddy's Laboratories develops and manufactures
branded and unbranded generic drugs and bulk
pharmaceutical ingredients. Its stable of products includes
ulcer medicines (branded product Omez is a leading seller ),
antibiotics, antidepressants (generic version of Eli Lilly's
Prozac), pain relievers, diabetes treatments, and
cardiovascular drugs. Dr. Reddy's
• Dr. Reddy's Laboratories also makes generic biotech
products

3. Introduction & Briefing contd…
• Its custom pharmaceutical services unit provides contract
discovery, development, and manufacturing services to
other drug makers
• The firm sells its products in more than 100 countries
through direct sales entities and third-party distribution
partners.
• Its total sales in year ending March 2013 was $2,127.7 mn.
• The growth is 14.6% year-wise (2012-13 data)
• In the same period its net income was $307.9 mn and
income growth was 12.1%

4. Industry Classification
Pharma
Bulk Drugs (API)
Contract
Research
Formulations
Patented Generics
Generic
generics
Branded
generics

5. Confidential | Copyright ©
Larsen & Toubro Infotech Ltd.
5
Industry Analysis – Porters 5 Forces Model
SUPPLIER POWER
Low to Moderate
• High no of suppliers
• At times, use of single supplier as sole source for
particular material
• Delay in supplying materials hampers their ability to
deliver products
BUYER POWER
Moderate to High
• For generics and OTC drugs its high
• Need to keep buyer’s satisfied otherwise will risk to
lose to competitors
• For some of the patented and Life saving drugs
buyer power will be moderate
BARRIERS TO ENTRY
Moderate to High
• High no. Of legal procedures and
licences
• High capital requirement for mfg,
supply chain & R&D
• Low success ratio in R&D
• Patent issues
• Barriers are moderate in case of
generics as R&D expenses are low
• Exports require high regulatory
clearances
THREAT OF SUBSTITUTES AND
COMPLEMENTS
Moderate to High
• For R&D intensive drugs threat
is moderate
• For generics and off patent
drugs threat is very high
• Alternative medicines like
auyrveda, Unani posing threat
COMPETITION
Very High – Generics , Very Low - R&D Intensive
• High competition across companies for generics
• Very less differentiation points in generics
• Price discounting and margin pressures in generics
• For patented drugs it acts almost as monopoly
5

6. STRATEGIC GROUPS IN THE INDIAN PHARMA
INDUSTRY
Applied R & D Basic R & D
Local
Branding
Global
Branding
CIPLA
Torrent
NOVO
NORDISK
Glaxo
Smithkline
SANOFI-AVENTIS
DR. REDDY’S LAB
RANBAXY
Generics
International
Formulation
Domestic
Formulation
TORRENT
CIPLA

7. Generics Overview
• Major players – Sun Pharma, Ranbaxy, Dr Reddy’s, Cadilla,
Cipla
• India to become 10th largest market by 2015 with market size
of US$ 20 bn
~ US$50bn
~ US$90bn
Increasing Genericisation Value of Drugs going off patent
US$bnUS$bn

8. Generics Continued
• Key growth drivers
– Significant patents expires through 2011
– Government priority to rationalize healthcare
costs
– Cost Competitiveness
• Key Challenges
– Foreign currency fluctuations
– Increasing costs and cost of capital

9. New Drug Discovery and Product
Development Process

10. SWOT Analysis of Dr. Reddy’s
Strengths
•Partnerships with key players in the
market keeps its cost base down
•Research Driven & Global
Weaknesses
•Over-reliance on partnerships
•Lack of resources similar to US and
Europe based competitors to
develop a drug to marketing
Opportunities
•Take a drug all the way to market
•Take a molecule from its pipeline all
the way to the market place cost-
effectively market
•Increase domestic footprint in
generics
Threats
•Needs to gain FDA approval for all
sources and products
•Products have to pass strict FDA
trials before going to market, which
can be costly and time consuming

11. DRL
BUSINESS
synergies
Active
Pharmaceutical
Ingredients (APIs)
Drug discovery research
Dr.
Reddy’s Research
Foundation (DRF)
Discovery research
facility for R&D
deptt.s of other
drug discovery
companies
Branded
Generics

12. DRL’s Strategic Goals
Global
Pharmaceutical
company
Integrated global
mid sized
pharmaceutical
company
Diversified emerging generics
& specialty company
Longer Term (6-7 years)
Mid Term (3-6 years)
Today

13. Financial Analysis
• Company has a very high current ratio, which indicates good liquidity position.
However it also indicates that the company is not using current assets efficiently .
• Capital gearing is decreasing over the years , which shows the cautiousness of the
company .
•Dividend pay out ratio also has come down over years , which may not be good for
financial prospects of the company .
•The company is sitting on a huge pile of cash of $158 million , which can be invested
otherwise to get long term(expansion) as well as short term(current investment)
benefits for the company.
•The R&D expenditure at 7.6% of revenue falls short of global standard of 12-16% and
addition of new patents has also come down from high of 18.3% of revenue.
•Company needs to allocate more and more resources to R&D to position itself as a
drug discovery Pharma company and also to give cover from TRIPS .
1999 2000 2001 2002 2003
Current ratio 1.13 1.02 1.18 5.03 4.87
Debt equity ratio 1.11 1.41 1.26 0.23 0.23
Debt equity ratio(long term debt) 0.182 0.250 0.191 0.003 0.002
net margin -2.74 3.59 6.76 29.99 19.55
return on equity -3.97 6.11 14.16 31.84 18.76
Dividend payout ratio - 49.0% 18.0% 11.4% 5.5%
Cash inflow 3005 -1707 100660 47044
Net addition of intangibles 31386 435 10083 9164
Net addition as % of Revenue - 18.31% 0.18% 2.83% 2.33%
R&D as % of revenue 4.06% 4.45% 4.64% 4.52% 7.61%

14. Dr. Reddy’s Dilemmas
• How can we be imitator [in the generics
business] and an innovator [in the discovery
business] at the same time?
• How can we be forge out licensing alliances
with large pharmaceutical companies [in the
drug discovery business] and at the same time
challenge their patents around the world [in
the specialty and generics businesses]?

15. Paper: On Choices of Innovation Strategy of Chinese Pharmaceutical Enterprises
from Perspective of ‘Wise Pig Game’ - Shuzhen Chu, Zhijun Han -Economics &
Management School, Nanjing
University of Science and Technology
• Concept of Imitated Innovation - Pharmaceutical enterprises should insist
on the combination of imitation and innovation, and aim at manufacturing
products with “higher technologies, better curative effects, higher added
values, and new forms”, and decreasing the costs of products. Emphasize
the high-tech research and the new-form research of imitated medicine,
which can consume less material and possess higher quality, being safe
and effective.
• How to do it?
• Construct a perfect information management system and obtain useful
information timely and rightly. Building an information system for
technological research and development that can help to collect
information from relevant researching programs, institutions and relevant
regulations, laws, and patent materials in other countries that can collect,
process, analyze, transfer, and communicate information and an
effective feedback mechanism for evaluation of innovation, what can
provide with information support for the whole process of enterprises’
technological innovation.

16. • Deal with the relationship between imitation and copy properly.
Pharmaceutical enterprises’ imitated innovation is to absorb others’
successful experiences and lessons by learning from their
innovative thoughts and activities, introduce and interpret the core
technologies and technological secrets, and make improvement.
• Merge and purchase is a main way for cooperative innovation. In
the long run, the cooperation after pharmaceutical enterprises’
merge and purchase will undoubtedly inspire innovation.
– Horizontally merge and purchase: Economy of scale i.e. a decrease of
production cost and a increase of return per unit in certain enterprise
due to enlarging production scale
– Vertically merge and purchase. Enterprises in one merge and purchase
action locate in different stages of production and circulation. They
connect with each other by materials’ production, supply, processing,
and sale.
– Mixed merge and purchase

17. Recent Trends in Pharma Industry
& Dr Reddy’s Contribution:
• Indian pharma has experienced a boom and it has reached
$20bn in 2013 from $6bn in 2005.
• It is expected to grow to $55bn by 2020 (McKinsey&Co
report)
• It is growing at the compounded rate of 14% per annum.
• But recently Indian pharma industry is grappled with
quality issue and US FDA has imposed several restrictions
on import of Indian drugs.
• Increasing recalls, warning letters and import alerts to
manufacturing facilities of domestic drug makers have
raised concerns about the manufacturing practices
followed by Indian companies.

18. • US FDA imposed ban on Dr Reddy’s Mexico plant in 2011,
after FDA chastised the plant for failing to validate API
testing method and hygiene issue, which was alter lifted
after a year.
• Post this, DR Reddy’s has never faced any issue and is
growing at a phenomenal rate of 26% YOY (2012-13 data).
• Dr Reddy’s (66.86 bn INR) has already surpassed Ranbaxy
(63.03 bn INR) and has become the 2nd largest Indian
Pharma company after Cipla (Net sales=69.77 bn INR).
• By 2020, it is expected to be the number one Indian
pharma company.

19. Dr Reddy’s Infrastructure &
Capabilities :
Pharma services &
Active ingredients
• 6- FDA approved
plants in India
• 1 Cytotoxic facility
• 1 Plant in mexico
• 1 FDA approved plant
in Mirfield, UK
• 4 Technology
Development
Centres ( 2 in
Hyderabad, 1 in
Cambridge, and 1 in
Leiden, Netherlands
Global Generics
• 7 Formulations
plants in India (US
FDA inspected)
• 2 FDA inspected
plants in USA
Product Development
• Integrated product
development
capabilities that
include API
development,
Formulations
development and
analytical
development skills.
• One integrated
Product
Development facility
in Hyderabad, India.

20. New Chemical
Entities (NCEs)
• Research in
the areas of
metabolic,
cardiovascular,
anti-bacterials,
and pain &
inflammation.
Biologies
• Biological
development
centre
• GMP
production
• E coli and
mammalian
cell platforms
Plan
• To set up R&D
centre at New
Jersey, USA
• GSK-Dr
Reddy’s
alliance to
register their
1st product in
the EU in 2014