New Delhi/Mumbai: In what could be a big opportunity for India’s second largest drug maker, Dr Reddy’s Laboratories Ltd (DRL) has entered into a strategic marketing partnership with GlaxoSmithKline Plc (GSK) which will allow it to pursue opportunities in markets where it is either not present or has a negligible presence.
Under the terms of the agreement, which is effective immediately, GSK will gain access to Dr Reddy’s portfolio and future pipeline of around 100 branded pharmaceuticals in fast growing therapeutic segments such as cardiovascular, diabetes, oncology, gastroenterology and pain management, the company said in a press release.
It further stated that the products will be manufactured by Dr. Reddy’s and will be licensed and supplied to GSK in various emerging markets such as Africa, West Asia, Latin America and Asia Pacific excluding India. In certain markets products will be co-marketed by Dr. Reddy’s and GSK.
More access: DRL’s managing director and COO Satish Reddy.
“More than just financial numbers, which is obviously value-adding, what this deal really does to us is that it gives access to us in emerging markets and small markets. GSK, because of its innovator products is already present in these markets in a big enough way. But for us these markets were small since ours is a generics business. More importantly, there are large markets like Mexico and Turkey that we were not present in. We had also pulled out of some markets and did not want to open up to newer markets either. This deal will now give us access to all those markets,” Satish Reddy, managing director and chief operating officer (COO), DRL said. Emerging markets revenue for DRL in fiscal year 2009 was Rs950 crore out of a total revenue of almost Rs7,000 crore. Analysts are optimistic about the impact of the deal for DRL.
“In principle, it looks like a good deal because DRL has a good basket of products. This deal allows them to leverage those products in markets they were not present without having to bend resources. GSK is a strong company and has been focused on emerging markets so, DRL can be sure that GSK will push these products,” said an analyst who did not want to be identified as he is not allowed to speak to the media.
“This will obviously not be as profitable as the branded things they do on their own but it increases the quantum of profit at very limited incremental investment,” he added.
“This is another significant step forward in our strategy to grow and diversify GSK’s business in emerging markets. Growth in both population and economic prosperity is leading to increased demand for branded pharmaceuticals. This new alliance will combine Dr. Reddy’s portfolio of high quality branded pharmaceuticals together with GSK’s extensive sales and marketing capabilities,” said Abbas Hussain, president emerging markets, GlaxoSmithKline in the press release.
In March this year, DRL, as part of the realigning of its global generics strategy had announced that it would gradually exit some of the very small distributor driven markets.