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Rediff.com  » Business » Dr Reddy's joins race for Doktor Mom

Dr Reddy's joins race for Doktor Mom

May 10, 2011 09:11 IST

TabletsThe race for acquiring Doktor Mom, one of the largest-selling over-the-counter range of drugs in Russia & the Commonwealth of Independent States, is getting intense.

Dr Reddy's Labs, India's second-largest pharmaceutical company, has entered the fray.

Global pharmaceutical company Johnson & Johnson is also in talks to buy Doktor Mom.

Doktor Mom, a range of cough and cold products, is owned by Mumbai-based JB Chemicals & Pharmaceuticals.

With annual sales of Rs 200 crore (Rs 2 billion), it is the company's largest OTC brand.

According to people in the know, the deal could be in the range of $250-300 million.

Though the talks between J&J and JB Chemicals have been on for a while, DRL has joined the race only recently, say people close to the development.

The range is marketed in Russia and the CIS countries by Unique Pharmaceutical Laboratories, a JB Chemicals subsidiary.

A DRL spokesperson said, "Dr. Reddy's does not comment on market speculation."

A mail to JB Chemicals chairman JB Mody did not elicit any response.

Analysts said government intervention was a big worry for generic pharmaceutical companies in Russia.

The government there is implementing a centralised reimbursement programme, named DLO, which will provide prescription drugs free of cost to people with low incomes.

It has ordered that prices of a few essential products be cut.

According to a recent Standard Chartered report, DRL is trying to de-risk Russian business by increasing focus on OTC brands, whose prices are not controlled.

"Dr Reddy's could consider a local acquisition or a tie-up with a local partner to get a larger share of DLO contracts," said the report.

Russia & the CIS countries contributed 13 per cent to DRL's revenue in 2009-10. India contributed 18 per cent.

Last year, DRL entered into an agreement with Cipla for exclusive rights to market a portfolio of OTC and prescription products in Russia and Ukraine.

It has signed a similar agreement with UK-based Vitabiotics Ltd for a range of nutraceutical products for Russia and some CIS countries.

According to an HDFC Securities report, the OTC market in Central & Eastern European  countries grew 8-9 per cent to Euro10 billion ($15 billion) in 2009.

Russia dominated with 50 per cent market share.

In 2009-10, DRL recorded sales of Rs 910 crore (Rs 9.1 billion) in Russia & the CIS markets as against Rs 762 crore (Rs 7.62 billion) in 2008-09.

According to analysts, DRL's sales in Russia will grow 21 per cent to Rs 1,100 crore (Rs 11 billion) in 2010-11.

The contribution from Russia & the CIS markets is expected to grow to 15 per cent.

In 2009-10, the share of international revenue was 82 per cent. North America contributed 30 per cent, Europe 24 per cent and Russia and the CIS countries 13 per cent.

Reghu Balakrishnan in Mumbai
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