Indian
drug maker Dr Reddy's Laboratories (DRL) has split a key
marketing division into two parts in a bid to resurrect its ailing domestic
business. But analysts remain skeptical whether the move can help the company
strengthen foothold in the intensely competitive domestic drug market.
The Hyderabad-based drugmaker, which has been struggling to grow in the domestic market, has split its marketing division Acura into Acura High Growth and Acura Sustained Growth Products to give a push to some of its popular brands such as Omez and Nise. "Last four years we have grown our market share, but this year due to aggressive expansion by multinationals we got hit," said Managing Director Satish Reddy.
The impact of the move will be reflected in the fourth quarter earnings, he said. However, experts are doubtful whether the initiative will help DRL make significant gains in the domestic market. "They have matured brands and there is intense competition in those segments," said Ranjit Kapadia, vice president at brokerage Centrum Capital. "So unless they look for newer geographies and increase their reach, it will be difficult for them to grow," he said.
According to data from industry association, All India Organisation of Chemists and Druggists (AIOCD), DRL has been growing at 7% in the last three months, nearly half of the industry average. During the period, the company lost significant market share to smaller players such as Mankind and McLeod's Pharma. DRL's revenues took a beating after the health ministry this year banned its popular pain killer Nimusilide, sold under brand Nise, for children's usage, a decision that was later revoked by Madras High Court. But the company said the bad publicity for the drug led to lower consumption by adults as well.
However, analysts are betting big on the stock due to its growth prospects in overseas markets such as US and Russia, which together contribute a major chunk of its total revenue. Elara Capital has been positive on the stock, but said it has discounted the domestic business in its view. "The company has tried pull-andpush strategy in the past, but ultimately all these strategies should make the brands perform, which we haven't seen," said Surjit Pal, analyst at Elara Capital. In the past, other domestic drugmakers such as Cipla have undertaken similar changes in their domestic business in an effort to boost revenue.
In September 2011, Cipla disbanded its key marketing units and merged it with the parent company to squeeze out better productivity from its existing brands. In the past two months, domestic pharma market has been posting double-digit growth, forcing firms to focus on back home. In November, domestic drugmakers posted sales of Rs 4,912 crore compared with Rs 4,668 crore in October. Even multinational pharma firms have lined up acquisitions and tie-ups to expand in the Indian market.
The Hyderabad-based drugmaker, which has been struggling to grow in the domestic market, has split its marketing division Acura into Acura High Growth and Acura Sustained Growth Products to give a push to some of its popular brands such as Omez and Nise. "Last four years we have grown our market share, but this year due to aggressive expansion by multinationals we got hit," said Managing Director Satish Reddy.
The impact of the move will be reflected in the fourth quarter earnings, he said. However, experts are doubtful whether the initiative will help DRL make significant gains in the domestic market. "They have matured brands and there is intense competition in those segments," said Ranjit Kapadia, vice president at brokerage Centrum Capital. "So unless they look for newer geographies and increase their reach, it will be difficult for them to grow," he said.
According to data from industry association, All India Organisation of Chemists and Druggists (AIOCD), DRL has been growing at 7% in the last three months, nearly half of the industry average. During the period, the company lost significant market share to smaller players such as Mankind and McLeod's Pharma. DRL's revenues took a beating after the health ministry this year banned its popular pain killer Nimusilide, sold under brand Nise, for children's usage, a decision that was later revoked by Madras High Court. But the company said the bad publicity for the drug led to lower consumption by adults as well.
However, analysts are betting big on the stock due to its growth prospects in overseas markets such as US and Russia, which together contribute a major chunk of its total revenue. Elara Capital has been positive on the stock, but said it has discounted the domestic business in its view. "The company has tried pull-andpush strategy in the past, but ultimately all these strategies should make the brands perform, which we haven't seen," said Surjit Pal, analyst at Elara Capital. In the past, other domestic drugmakers such as Cipla have undertaken similar changes in their domestic business in an effort to boost revenue.
In September 2011, Cipla disbanded its key marketing units and merged it with the parent company to squeeze out better productivity from its existing brands. In the past two months, domestic pharma market has been posting double-digit growth, forcing firms to focus on back home. In November, domestic drugmakers posted sales of Rs 4,912 crore compared with Rs 4,668 crore in October. Even multinational pharma firms have lined up acquisitions and tie-ups to expand in the Indian market.
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