 "Dr Reddy's plans to pursue inorganic opportunities")
Hyderabad-based pharmaceuticals major Dr Reddy's Laboratories Limited (Dr Reddy's), which currently has free cash flows of about Rs 2,500 crore, has set a growth agenda for organic and inorganic opportunities, according to its chief financial officer Saumen Chakraborty.
"We have enough in our balance sheet today that we can leverage for such acquisition(s). But having said that, we are treating each of the opportunity on its own merit. Just because we have cash, it does not mean that we will dilute the criteria that we have set for ourselves for meaningful acquisition. But if acquisitions are not there we may think of any other corporate action(s)."
Chakraborty was replying to a query during the company's Q3 FY16 earnings call, on whether Dr Reddy's was looking at utilising the free cash flows to increase the dividend payout or look at new acquisitions.
Venezuela challenge
Dr Reddy's net profit for Q3 of FY16 was hit due to a foreign exchange loss of Rs 63.70 crore on account of increasing risk of currency devaluation in Venezuela. While it continued to book revenues at VEF (Venezuelan currency) 6.3, other pharma companies have devalued or booking at an exchange rate as high as VEF 200.
"We continue to evaluate the arrangement entered into with the government of Venezuela, which may facilitate the repatriation at a preferential rate of VEF 6.3 per dollar. If future developments indicate that the CENCOEX rate (dollar at the official exchange rate of VEF 6.3) is no longer appropriate, this could have a significant impact on the consolidated financial statement of the company," Dr Reddy's had earlier said in a statement.
Stating that there was $60.7 million pending for repatriation while the sales booked during the quarter stood at $18 million, Chakraborty said the company was staying quite hopeful that it got some repatriation during this quarter.
"If that does not happen, then we will have to reconsider what will be the right kind of rate for future accounting consideration," he added.
The company is calibrating the dispatch (to Venezuela) and sales also. "We have stopped manufacturing six months back. Whatever inventories are there - are being tapered out, the sales are pretty much going to drop to a very, very low level by the end of this quarter," he said.
Approval delays
Dr Reddy's received a warning letter from the US FDA in early November 2015 for three of its sites, post which it has submitted a comprehensive corrective and preventive action plan (CAPA) in December 2015 to address the issues raised.
On the impact of the warning letter, chief operating officer Abhijit Mukherjee said it was a little bit of a lean patch in development with few approvals slightly getting delayed. "Esomerazole tablets (brand name Nexium) now got delayed by about six months, very expensive for us. Xeloda (capecitabine tablets) was all set but it is not going to come in because both are from the impacted sites," he said.
Dr Reddy's currently has approximately 79 pending ANDAs (abbreviated new drug applications), many of which are with certain later dates based on intellectual property (IP) etc. It lost ANDAs with near-term dates because of the warning letter.
"The rest of the ones we are trying very hard to ensure that the delay is not due to the site. Of course, remediation of the site is always a priority one and all the efforts are going in, but specifically on those approvals we are trying to see what we can transfer before that becomes a bottleneck for the coming sets," Mukherjee said.
On its multiple sclerosis drug Copaxone's 20 mg, used for treatment of patients with relapsing forms of multiple sclerosis, Mukherjee said it was slowly getting into trial batches and getting into optimised scale up.
Declining to draw any time line for the launch of Copaxone, he said the company was trying to do a deep decent science job on it.
"We do not want to rush it whatever time gets lost because pretty much similar things would come up in the next asset as well. So, I would certainly not comment on the timing of the launch, but we are trying to do a very good work on our side on the science part of it."