Dr Reddy’s is busy rationalising manufacturing capacities

Dr Redd

 

In an attempt at reining in costs, Dr Reddy’s is on a drive to prune its seemingly excess manufacturing capacities. the company announced that it has entered into an agreement with Therapiva Private Ltd, for the sale of its API (Active Pharmaceutical Ingredient) manufacturing business unit, located in Hyderabad. “The divestiture of our API manufacturing business unit is a step towards streamlining our manufacturing operations and optimising our cost structures,” says Sanjay Sharma, executive vice president and head, global manufacturing operations, Dr Reddy’s.

The press note issued by the company describes the divestiture as one done by way of slump sale (as a going concern) and includes all related fixed assets (land and building), current assets, current liabilities, and its employees. Earlier in the month Dr Reddy’s had announced the closure of the sale of its antibiotic manufacturing facility and related assets in Bristol, Tennessee to Neopharma Inc, a wholly owned subsidiary of the UAE’s largest pharmaceutical manufacturer headquartered in Abu Dhabi. Under the terms of the agreement, Dr. Reddy’s sold all the issued and outstanding membership interests in Dr. Reddy’s Laboratories Tennessee, LLC and certain related assets. Even then the company had emphasised on the need for optimising cost structures. “This sale is in line with our stated priority to streamline and optimise our global cost structures and help us focus on other business priorities to drive growth,” Chief Operating Officer, Erez Israeli, had said while announcing the earlier sale. According to analysts, who have looked at Dr Reddy’s over the years, the company tends to be broadly on the higher end of the cost curve with a relatively higher cost structure as compared to some of its peers. When quizzed about the sale of its API plant, analysts say that any company selling an API plant would have perhaps thought about the cost and other implications, considering that the cost equations for APIs getting rewritten in the light of the regulatory curbs imposed in China, which is impacting the cost structures of many players. Dr Reddy’s apparently does not buy the APIs from China but would be importing some of the chemicals and intermediates, which are used to make the APIs.

Source : www.businesstoday.in

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