Dr Reddy's is all set to report its September quarter results for the financial year 2018-19 later in the day with investors watching out for management commentary on what to expect on the Duvvada facility near Vizag that is awaiting clearance from the US drug regulator US Food and Drug Administration (USFDA). The pharma major had posted a robust performance in the June quarter of FY19, largely aided by the launch in the US of gSuboxone, the generic version of the drug to deal opioid addiction.
As the company has been vocal about various initiatives it has taken to rein in costs, investors will focus on company's cost saving strategies and how the management intends to implement those. Equally important will be their commentary on when will these measures start reflecting in the financial numbers, and by when they expect the pipeline to pick up in the US. All of these gain importance especially because Erez Israeli, company's high-profile senior leader, has been with the company for over six months as chief operating officer and global head of generics & PSAI, based out of Hyderabad. He comes with long years (some 23 years) of experience with Teva Pharmaceuticals Limited, where he held several positions of responsibility including vice president marketing & sales for North America, vice president Asia Operations, president Teva API, group executive vice president, head of global quality, and president & CEO growth markets.
Some of the leading analysts have maintained for quite some time that the company is moving towards higher end of the cost curve compared to its peers. One of the recent moves in this direction has been its efforts at rationalising its manufacturing capacities. This month alone has seen two major developments on this front. One, being the move to sell its antibiotic manufacturing facility in Bristol, Tennessee to Neopharma Inc., a wholly-owned subsidiary of a leading pharmaceutical maker from the UAE. The other being the sale of its API (active pharmaceutical ingredient) making facility in Hyderabad to Therapiva Private Ltd. The stated intent of these initiatives has been to optimise the cost structures and to focus on business priorities that drive growth. Therefore, it is but natural to expect the company to state what these priorities are and by when they start reflecting in the financial numbers of the company. For the moment, with no major launches lined up in the US and in India, the analysts that Business Today spoke to, did not seem to expect the Q2 results to throw any surprises. However, they added if the company's cost-efficiency measures do make an impact and its Duvvada facility also gets a clearance from USFDA, things could start looking up. Till then, the same set of questions remains.