Dr Reddys beats Aurobindo Pharma to become second biggest drug maker in India: Report

According to a recent media report in Live Mint, Dr Reddys and Cipla Ltd beat Aurobindo Pharma to become the country's second and third biggest drug makers (respectively) by sales in the three months to 30 September.

As per the daily, Dr Reddy's reported a revenue of Rs 6,331.8 crore in the September quarter, while Aurobindo saw its revenue slip to Rs 5,739.4 crore. Mumbai-based Cipla posted a revenue of Rs 5,828.5 crore in the period.

Meanwhile, Sun Pharmaceuticals retained the position as the largest drug maker in India, with sales of Rs 10,809 crore for the three months ended 30 September.

According to an analyst at Axis Securities, the star performance of Dr. Reddy's and Cipla was aided by sales of the generic version of the oral cancer drug Revlimid, which accounted for a little over a third of Dr. Reddy's total business in the US. Cipla has not disclosed new business from the blood cancer drug.

The first few companies to submit an application that meets the US drugs regulator's requirements get the coveted 180 days of selling the drug in the US without any competition from generic rivals. In this case, Cipla and Dr Reddy's got approval from the USFDA for their generic versions after the patent for Revlimid, developed by Bristol Myers Squibb, ended last year.

Also Read: Dr Reddy's Labs Unveils Cancer Drug Lenalidomide In US

"Dr Reddy's is currently investing in various businesses that could provide growth in the long term," as written in a note dated November 1 by Ankush Mahajan, an analyst at Axis Securities, quoted by Live Mint. "While high inflation and price erosion could reduce margins, the company is proactively building a global pipeline of biosimilars, developing NCE (novel chemical entities) for Immuno-oncology, and building up a neutraceuticals portfolio, vaccines, CDMO (contract development and manufacturing organization), and digital healthcare platforms."

Until a few years ago, Lupin Ltd was the 2nd largest pharma firm before Aurobindo displaced the Mumbai-headquartered firm in January-March period of 2015. Subsequently, both Cipla and Dr Reddy's also overtook Lupin, which is now the fifth largest pharma firm by sales.

Aurobindo has been mired by weak sales and price decline for its current formulation business in the US, which accounted for 46% of total sales. Aurobindo's revenue declined sequentially for the second time in nine months after sales slipped 3.2% in January-March.

"We cut our FY23-25E EPS estimate by 10-17% to factor in lower margins and US sales. Aurobindo Pharma's performance was weak in H1FY23, given cost headwinds and lower US sales," Param Desai and Akshaya Shinde, analysts at Prabhudas Lilladher, wrote in a note dated 16 November. "However, pick-up in US sales hinge on timely niche approvals along with stabilization of pricing pressure in the base business."

Earlier this month, Aurobindo saw one of its directors (the son of the company's co-founder Ram Prasad Reddy), P. Sarath Chandra Reddy, arrested by the Enforcement Directorate. The central agency alleged Sarath Reddy, through a privately held firm, paid bribes to win rights to sell liquor in Delhi. This development made investor Abu Dhabi Investment Authority (ADIA) reprimand Aurobindo's management. ADIA is the world's third-largest sovereign wealth fund, with over USD 790 billion in assets under management.

Also Read: Court Sends Aurobindo Pharma Director Sarath Chandra Reddy To Judicial Custody Till 5 December In Delhi Excise Policy Case

"(On) corporate governance, you know, serious work needs to be done there about what directors are doing," Prashant Poddar, a portfolio manager at ADIA told Live Mint, in an investor interaction with Aurobindo on 14 November. "Just because some of them are promoters, they cannot do anything they want, right? I mean, such a responsible position—that of a director of a large company, which is making more than $400 million Ebitda and such large responsibility as an exporter—it is disappointing, you know, because this would not even work well with your buyers. I mean, they would also want you to abide by certain corporate governance, I would believe."