Dr Reddy's Laboratories renews focus on chronic segment; gets India head

Hyderabad-based Dr Reddy’s Laboratories (DRL) is trying to reform its domestic business with a renewed focus on the chronic segment. As a part of the strategy, the company is putting in place a new senior leadership team for India, including a new India business head and a marketing head, focussing on improving sales force productivity and adding marketing capabilities. 

Domestic branded sales account for nearly 20 per cent of DRL’s overall sales. According to analysts, DRL’s domestic revenue grew by 15 per cent in the first nine months of FY19, which is better than the domestic pharma industry, which is growing around 10 per cent 
year on year. 

In October last year, DRL had brought in Sandeep Khandelwal as its India business head. Sources said this was done to enhance focus on marketing branded products. Khandelwal has worked with Abbott and Marico prior joining DRL. A new marketing head was also brought in together with leadership restructuring in the firm’s chronic business.
An email sent to the company remained unanswered. 

Analysts pointed out the management was keen to improve medical representative (MR) productivity and has renewed focus on its chronic business. The marketing team is working on integrating customer relationship management systems to gain sales capability. “The average MR productivity for DRL is around ~3-3.5 lakh per MR a month. The firm is trying to boost that. Focus on the chronic segment would help achieve this,” said an analyst, who tracks DRL but did not wish to be named. 

Around 30 per cent of DRL’s domestic portfolio comes from chronic therapies, but it was growing at low-single digits in the past few years. Around 45 per cent of its chronic portfolio comes from cardiovascular while anti-diabetes accounts for 25 per cent of the portfolio. After gastroenterology, cardiovascular is DRL’s largest therapy area in the domestic market, accounting for nearly 14 per cent of its domestic sales, according to Edelweiss. It has been clocking an 8 per cent compounded growth over the past five years or so. The growth rate fell around FY17 after price control dented its margins in its largest cardio franchise Stamlo. “Recognising this slow growth, DRL introduced structural changes in its chronic portfolio in FY19. Following these changes, DRL’s cardiac and anti-diabetic portfolios are now tracking well,” Edelweiss pointed out. 

In gastroenterology, its largest brands Omez and Omez D have been growing slower than the overall therapy, analysts said. “Part of this is because of price control and partly because there has been a shift in demand from short-acting to long-acting therapies. New launches like Econorm and Razo D have been growing faster than the therapy,” said an analyst. 

DRL thus wants to take the slow-growing brands like Omez to new geographies, regions beyond urban. Another idea to increase the depth of prescription for the faster-growing brands beyond gastroenterologists. 

Apart from India, DRL has also got a new head for its US business — Marc Kikuchi joined as the chief executive officer of the North America generics business in February from Zydus Pharmaceuticals. The company has been undergoing significant restructuring exercise in the past one year or so. 

DRL had sold its anti-biotic manufacturing facility at Bristol in the US to optimise and streamline its global cost structures. Since, Erez Israeli joined as DRL's chief operating officer in April last year and things started moving in a decisive way. DRL recently divested three dermatology brands — Sernivo, Promiseb & Trianex — in the US to Encore Pharma. This led to rationalisation of 60 marketing representatives. As a cost rationalisation measure, the firm had asked some of its employees to leave (on performance grounds) last year. It had also slightly cut down on research and development costs in the first two quarters of FY19. It sold off its bulk drug manufacturing facility in Hyderabad last October as well its Cloderm topical cream in the US. 

Analysts expect the results of these overhauling exercises to show in the coming quarters.

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