Dr Reddy: FDA leg-up

Dr Reddy's entry into the US anti-fungal segment would prop its base in the country

Dr Reddy's Laboratories has received tentative approval from the US Food and Drug Administration (FDA) to sell its version of the anti-fungal drug, fluconazole, in the United States.

Currently, Pfizer holds the patent on the product under the brand Diflucan and this drug is scheduled to go off patent on July 29 this year.

The pharma major has been keen to expand its overseas product offering rapidly due to a combination of factors "" revenues from its European operations declined by 20 per cent to Rs 19.8 crore in Q3 FY04, due to increased competition in its bulk drug Omeprazole.

And it has not had any big product launch since its exclusive marketing rights for a generic version of Eli Lilly & Co's anti-depressant Prozac, ended two years ago. Also margins at Dr Reddy's bulk Ramipril exports are showing signs of coming under pressure due to growing competition.

An entry into the anti-fungal segment would also provide Dr Reddy's synergies in its American operations. The Hyderabad based company had recently acquired US-based Trigenesis which has a strong product pipeline in the dermatology segment.

Analysts point that anti fungal and dermatological medication are often prescribed by the same doctor / medical practitioner, and this would enable Dr Reddy to leverage the existing marketing network of its American acquisition.

The size of the anti-fungal market is currently estimated at approximately $750 million annually and it is estimated to be growing at around 10-12 per cent.

Analysts point out that Dr Reddy's version of the anti-fungal drug fluconazole margins could have margins of an estimated 25-30 per cent. Large marketing costs are usually incurred to grow overseas sales, but the savings from operational efficiency in America would flow directly into the bottomline of Dr Reddy.

Dr Reddy's revenue from the American market in the first 9 months of FY04 are approximately Rs 432 crore and it should go up due to the recent measures by the company.

However, as analysts expect generic manufacturers from other countries like Brazil, Ireland to also enter the American anti fungal segment, a lot depends on how quickly the company can introduce its product in the market.

With contributions by Amriteshwar Mathur