Hyderabad: Drug maker Dr Reddy’s Laboratories Ltd reported a consolidated net loss of Rs233 crore for the quarter ended December. In an interview, vice-chairman and chief executive officer G.V. Prasad spoke about the quarter gone by and the road ahead. Edited excerpts:
What is this goodwill impairment cost that you have taken? Do you expect more such costs to come in the future?
The impairment is a process by which we test the value of the company that we are carrying on our books every quarter, depending on events that trigger such an action. Last time around, the big price decreases were the trigger to lower the valuations.
Evaluating losses: Dr Reddy’s VC and MD G.V. Prasad.
The most recent impairment ...of about €109 million (Rs710.68 crore) is based on our assumption of the future, as to how it will pan out, based on the fact that our model has moved completely to tenders. (Germany in 2008 implemented a drug procurement law that mandated inviting of competitive tenders from generic drug suppliers.)
As such the value of the brands that we carry on our books has diminished and hence we have estimated the value and taken the impairment of €109 million. Now the carrying value of the Betapharm organization has come down quite significantly as a result of the successive write-downs and it is now around €90 million. (Betapharm Arzneimittel GmbH is the German unit of Dr Reddy’s.)
At this level I am comfortable that it reflects the value of the business as it is now and we shouldn’t need to take other write-downs. But then I cannot say this categorically.
Give us details on the growth that you have seen in the global generics business and how you expect it to grow.
We had spectacular growth in Russia as a result of the environment there turning positive as well as the price increases we took there. So that has done well. India has gone quite well again as a result of increased focus on the India market. The US has been kind of flattish this quarter and there are reasons for that. It is flattish if you exclude the (migraine drug) Sumatriptan of last year. Sumatriptan was a one-time opportunity but even if you exclude that, we were kind of flat this quarter.
This was because of the recall that we had, which was a warranty recall last quarter. As a result of that we slowed down production, put in a number of actions in terms of processes to ensure that the quality issues don’t really recur. As a result there has been a slowdown in the US market. That is the reason it was flattish. But otherwise it should have grown quite significantly.
We expect the growth in the US to return during this quarter as well as continue growth very significantly on the back of interesting launches in the next fiscal year. Apart from that, I think, Germany is the only spot which was troubled because of the situation there.