Hyderabad: India’s second largest drug maker, Dr Reddy’s Laboratories Ltd (DRL) posted a net loss of Rs517 crore for the year to 31 March as its 2006 German buy Betapharm Arzneimittel GmbH lost in value.
The company had to write down Rs316.7 crore in value of intangible assets and Rs1,085.6 crore in value of goodwill arising from the Betapharm acquisition. Despite this, DRL—which had expected a growth of 25% for the full year—grew 39%, with its revenue rising from Rs5,000 crore in the previous financial year to Rs6,944 crore in fiscal 2009. Profits rose 89% to Rs850 crore in 2008-09 from Rs450 crore in fiscal 2008 .
Exclusive marketing rights for Sumatriptan, launched in November in North America, contributed significantly to DRL’s revenue growth. The company expects to grow 10% in the year to March.
DRL’s growth continued to be anaemic in the Indian market, where it grew by just 5%. “Future growth is expected to come from upsides in the North American market and Russia,” said Chirag Dagli, analyst with equities research firm Pinc Research.
DRL bought Betapharm in early 2006 for €480 million (Rs3,110 crore), but based on current market conditions and future prospects, the firm is valued at around €210 million.
“It is a non-cash charge,” said chief operating officer Satish Reddy, explaining that this does not have any bearing on the operational aspects of the company. Reddy said that the management does not expect any significant impact in future from Betapharm write-downs, if any, on the firm’s accounts.
Chief executive G.V. Prasad said that the initial valuation of Betapharm might have been on the higher side due to competitor pressure at the time of acquisition. The market model in Germany also changed rapidly, which was not foreseen at the time of purchase, Prasad said.