Company will emerge more stronger and resilient: Dr Reddy's chairman

The ongoing regulatory issues took center stage at the annual general meeting of Dr Reddy's Laboratories on Wednesday as clearing of three manufacturing facilities by the US Food and Drug Administration (USFDA) over quality issues cited in the November warning letter became increasingly critical to restore revenue growth in the US market.

“I only want to say what I have always maintained — that every time your company has faced challenges in the past, it has always emerged stronger and more resilient. I am absolutely sure that this will be no different,” Dr Reddy's chairman K Satish Reddy told the shareholders while referring to the warning letter.

 

The company on Tuesday revealed that it was in the process of writing to the USFDA for re-inspection of the three manufacturing sites as remediation efforts have almost come to a close.

Reddy said the company had undergone more than 50 audits, beginning with the first such audit for Methyldopa way back in October 1987, and these events only helped the company to build on the quality standards as a responsible and ethical manufacturer. 

But the challenges to revenue growth in the short-to-medium term are not just confined to the warning letter as there were no immediate answers to the ongoing pricing pressures being faced by generics drug makers as a whole, according to him.

Besides the drug price control order, the channel consolidation has been the other big reason for pricing pressures in countries such as the US. According to Reddy, this is occurring primarily because governments across the globe are trying to contain rising healthcare costs. 

Consequently, in order to protect their margins, channel partners are resorting to activities like vertical integration, aggregating purchase of generic drugs as there are more profitable than branded drugs and leveraging scale benefits and introducing private labels in the pharmacy supply chain, according to Reddy.

“In summation, the need of the hour for the industry today is to focus on quality systems, negotiating the effects of price controls, as well as meeting the challenges of narrower margins and channel consolidation,” he said. To address these issues, the company has been putting efforts on achieving operation excellence, continued focus on product innovation and leveraging human talent, he added.

Reassuring the shareholders over the regulatory concerns, the company CEO GV Prasad said the ongoing efforts will not only addresses the immediate remediation requirements of the warning letter, but would also set the company for a much stronger quality system by the end of this year.

“This year will witness the further unfolding of our complex generics and biosimilar journey with many exciting product filing, geographic expansion into LTAM, North Africa and Asia Pacific. The other dimension of our growth strategy is our focus on creating our own portfolio of internally conceptualised and developed novel products,” Prasad said.