Dr Reddy's Laboratories is leading an Indian charge of the $130 billion Chinese pharma market, which is the world's second largest. The likely liberalisation of the market by the Chinese regulator CFDA will benefit Indian pharma companies that have a solid presence in China, which is the world's second largest pharma market, a report by Edelweiss Group says.
Dr Reddy's, which maintains a robust presence in China through a joint venture, is evolving a strategic plan to increase its revenue from the current $100 million. The company plans to achieve this by introducing new products and including more segments.
The market has responded positively to the report with pharma stocks continuing their strong rally in the National Stock Exchange (NSE). Nifty Pharma sectoral benchmark hit a high of 9,278.70 after opening at 9,193.30. The index that benefited from the strong showing of Glenmark, Lupin and Aurobindo Pharma closed at about 9,263, up about 83 points or 0.91 per cent. Dr Reddy's surged to an intraday high of 2792.55 from the previous close of 2765.20 to close 4.80 or 0.17 per cent up at 2,770.
The company will strengthen its presence by scaling up the joint venture business and increasing the number of "dossier submissions and entries into new therapeutic areas," MV Ramana, CEO, branded markets (India and emerging markets) of Dr Reddy's, told Financial Express. According to Edelweiss, Dr Reddy's, the largest foreign player in China, is poised to benefit from regulatory changes in the country. Dr Reddy's plans to launch about 60 products and improve revenue significantly over the next seven to eight years, according to the report.
The company's strong local partnerships have helped it commercialise some of the imported brands, the report says. The company's revenue in FY18 was $100 million, with the help of its Canada-based joint venture Kunshan Rotam Reddy.
"The size and growth of the market, our long presence and also the recent changes in China's regulatory framework make this an attractive space for Dr Reddy's. In terms of market size and expanded generic opportunity, China is the second largest pharma market with $130 billion in size, and generics form 65 per cent of the hospital market. About 22 per cent of the market is with off-patent innovators. While shortening the market access and reimbursement timelines for innovative drugs, China intends to replace the off-patent innovators with high-quality generics that opens up this share of the market to generic firms,'' Ramana said.
Dr Reddy's US/EU portfolio mostly comply with Chinese regulations, while additional China-specific studies might be required in the case of some. "While in the past five years, we have had some good pipeline of filings, the plan is to scale this up and file a good number of dossiers in next few years,'' he said.
The Edelweiss report states that a growing Chinese pharma market and a relaxed Chinese drug regulator, CFDA, are likely to attract many Indian generic players. The relaxed norms may allow Indian companies to file their USFDA-approved products in China and get CFDA approval within months in the normal course. Among the drugs in demand, the most prominent are those for obesity, diabetes, respiratory illness and cancer.
"While the regulations have been aligned with International Council of Harmonisation (ICH), there are China-specific requirements, which could pose challenges. Dr Reddy's will continue to work to build strong regulatory capability and build on our experience to increase the probability of success for any new filing,'' the report quoted Ramana as saying.
