Dr. Reddy's Laboratories' CEO Discusses Q4 2012 Results - Earnings Call Transcript

Dr. Reddy's Laboratories (RDY)

Q4 2012 Earnings Call

May 11, 2012 9:00 am ET

Executives

Kedar Upadhye - Former Director

Gunupati Venkateswara Prasad - Executive Vice Chairman, Chief Executive Officer, Member of Management Council, Chairman of Investment Committee, Member of Strategy Committee, Member of Shareholders Grievance Committee and Member of Management Committee

Umang Vohra - Chief Financial Officer, Executive Vice President and Member of Management Council

Kallam Satish Reddy - Managing Director, Chief Operating Officer, Executive Director, Member of the Management Council, Chairman of Management Committee, Member of Shareholders Grievance Committee, Member of Investment Committee and Member of Strategy Committee

Analysts

Anubhav Aggarwal - Crédit Suisse AG, Research Division

Bhavin Shah - Dolat Investments Ltd., Research Division

Unknown Analyst

Girish Bakhru - HSBC, Research Division

Prakash Agarwal - RBS Research

Sameer Baisiwala - Morgan Stanley, Research Division

Ashwin Agarwal

Ranjit Kapadia - Centrum Broking Private Limited, Research Division

Chirag Dagli - ICICI Securities Ltd., Research Division

Hardik Bora

Bhagwan Singh Chaudhary - IndiaNivesh Securities Pvt Ltd., Research Division

Alok Dalal - BNP Paribas, Research Division

Sonal Gupta - UBS Investment Bank, Research Division

Chirag Talati - Espirito Santo Investment Bank, Research Division

Abhay Shanbhag - Deutsche Bank AG, Research Division

Nitin Agarwal - IDFC Securities Ltd., Research Division

Kartik A. Mehta - Daiwa Securities Capital Markets Co. Ltd., Research Division

Aditya Khemka - Nomura Securities Co. Ltd., Research Division

Saion Mukherjee - Nomura Securities Co. Ltd., Research Division

Priti Arora - Kotak Securities Ltd., Research Division

Rahul Sharma - KARVY Stock Broking Limited, Research Division

Ravi Agrawal - Standard Chartered plc, Research Division

Presentation

Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY '12 Earnings Conference Call of Dr. Reddy's Laboratories Ltd. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kedar Upadhye. Thank you, and over to you, sir.

Kedar Upadhye

Good morning, and good evening to all, and thank you for joining us today for Dr. Reddy's Earnings Call for the Fourth Quarter and Full Year Ended March 31, 2012. Earlier during the day, we have released our results and the same are also posted on our website. We are conducting a live webcast of this call, and a transcript shall be available on our website soon. The discussion and analysis in this call will be based on IFRS consolidated financials.

To discuss the business performance and outlook, we have today G.V. Prasad, our Chief Executive Officer; Satish Reddy, our Chief Operating Officer; Umang Vohra, our Chief Financial Officer; , President and Head of Global Generates and the Investor Relations team. Please note that today's call is copyrighted material of Dr. Reddy's and cannot be rebroadcast or attributed in press or media outlet without the company's expressed written consent.

Before we proceed with the call, I would like to remind everyone that the Safe Harbor language contained in today's press release also pertains to this conference call and the webcast. After the end of the call, in case any additional clarifications are required, please feel free to get in touch with the IR team. I also wanted to inform you that a new member, Sharnat Stala [ph] had joined our investor relations team and his contact details are available on our website.

Now, I would like to turn the call over to Mr. Prasad for his opening remarks.

Gunupati Venkateswara Prasad

Thank you, Kedar. Good morning, and good evening to all of you. I welcome you all to our quarter 4 earnings call. I am pleased to mention that we have ended fiscal 2012 by crossing the $2 billion mark in sales, of course, at our average billion-dollar rates. And we are [indiscernible] company to do so. The strong performance this year was mainly on account of the contribution by our U.S. generics business, the ATI business and Russia. In India, we've continued to target enhanced field cost activity, as well as improvement in the prescription share of key brands. I am confident that our India business will now grow at industry growth rates for the next year. Other emerging market performance also was healthy on the back of increased focus in South Africa and Venezuela. In addition, the Pharmaceutical Services and Active Ingredients segment performance was very encouraging.

Apart from the strong recovery in sales, this segment was supported -- has supported the surge in volumes of internal requirements for our Generic segment, thereby providing competitive cost position for our various markets.

I'm happy to see a few emerging teams shaping across the organization this year. The OTC franchise in U.S. and Russia CIS markets have been a success story in a quick span of time. OTC has been an important lever in risk diversification in Russia and now constitutes about 30% of sales in our portfolio in Russia. In U.S. for FY '12, the OTC business was 25% of all our U.S. sales, and helped extend [ph] our market revenues. In the Indian market, we are in the pilot phase with a couple of OTC products. And depending on the outcome of this experiment, we will expand this initiative.

The second thing that has shaped up well over the last couple of years is our limited competition product portfolio in the U.S. As we have been indicating in the past, we have consciously oriented our generic R&D efforts towards more complex molecules. We are now beginning to see meaningful revenues from this pipeline.

Between the top 5 limited competition products Tacrolimus, Lansoprazol, Omeprazole, Magnesium OTC, Fexofenadine basket and Fondaparinux, the revenue are in excess of 10% of the overall company's revenues. We have plans to expand the basket further to grow faster in the coming year. On propriety products, a lot of good work has gone in the recent years from product selection and development. I want an early read of the prime results for the developing [indiscernible] product was not encouraging, and we now plan to drop the product. There are a series of main stage assets poised for pivotal registration studies and a large pipeline of preclinical assets in the area of pain and dermatology, which we believe can produce a steady stream of INDs and filings in the coming months.

Read the rest of this transcript for free on seekingalpha.com

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