Dr Reddy’s lines up Rs 1,500 crore capex to focus on biosimilars and injectables

Dr Reddy’s Laboratories has earmarked a capex of around Rs 1,500 crore for FY23 with major part of it slated to go into building capacities for its biosimilar and injectable businesses, according to Chief Financial Officer (CFO) Parag Agarwal.

The drug major also plans to utilise the capital for adding capacities to the existing plants, firm up R&D activities and further invest in digitisation projects.

“The capex for the full year is likely to be around Rs 1,500 crore in that range, and a lot of this capex is towards building capacity for our biosimilar business and for our injectable business,” the CFO said in an analyst call.

He was replying to a query about the company’s capex plans for ongoing financial year.

“When we say capex, obviously, it is not all going into building new plants. So, there will be several additions to existing plants, there will be maintenance capex, there will be capex on digitalisation projects, on R&D facility. So, it is all put together,” Amit Agarwal, Head, Investor Relations, Dr Reddy’s Laboratories, said.

Elaborating on the overall strategies, Erez Israeli, CEO, Dr Reddy’s Laboratories, said the company’s R&D is focussing on creating “as much as possible on differentiated products, on biosimilars, on products that have bigger potential.”

“So, we are trying to target not 30-40 products per year, but rather maybe a lower number around 20-25 products per year, but those products with the potential to be first-to-market, meaningful growth, etc. So, what you see here is also a combination of timing as well as focus on R&D across markets, not just for the US market,” he noted.

The products, especially injectables, which the company has developed for the US are also being introduced in other markets, he added.

“So, actually the value that can be derived from the R&D should be higher in the future,” Israeli said.

In the domestic market, the company has identified certain segments that the company wants to focus on, he said.

“As part of this, we are divesting brands as well as focussing on brands, for example, the brands that we acquired recently as well as licensed out in the area of diabetes, cardiovascular and more chronic in nature,” Israeli said.

He further said, “We do have some brands that did not do well, and we are fixing those. And I’m very confident that this will happen as well. So, bottom line, I’m very confident that we are going to see very solid and we are reiterating that we are going to be among the top five players in India, and we are planning to achieve that.”

Israeli stated that the company in the last few years has built a well-diversified business model, which allows it to have multiple growth drivers and reduces the risk of being dependent on a single market or event.

“We believe in the current environment of geopolitical and economic uncertainties, inflationary pressure and FOREX volatility, our strategy is allowing us to grow,” he noted.

While there may be some fluctuation quarter-on-quarter, the drugmaker is focussing on building a portfolio pipeline across markets, driving productivity and investing for innovation, Israeli said.

“We believe that our strategy, along with a net cash surplus position, will enable us to drive sustainable growth in line with our aspirations,” he added.

Dr Reddy’s Laboratories reported a consolidated Profit After Tax (PAT) of Rs 1,113 crore and revenue of Rs 6,306 crore for September quarter 2022-23.