Dr Reddy's Laboratories: Growing Pains
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Case Code: BSTR403 Case Length: 16 Pages Period: 2006-2011 Pub Date: 2012 Teaching Note: Not Available |
Price: Rs.500 Organization: Dr. Reddy's Laboratories. Industry: Pharmaceuticals Countries: Global; India; US; Europe Themes: International Management, Corporate Strategy, Strategy Implementation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
On July 22, 2011, the stock price of India-based pharmaceutical major, Dr Reddy's Laboratories Ltd. (DRL), fell 2% to Rs. 1568 on the Bombay Stock Exchange after the company posted disappointing first quarter results for the fiscal 2011-12. Both the revenue and profits were below market expectations. "This I think was somewhat of a mixed quarter for us. While we are not satisfied with the start to the year, we hope to recover the lost ground in the second half of the year," said Satish Reddy, COO of DRL. Established in 1984, DRL was a diversified global pharmaceutical company with a presence in over 100 countries. It operated under three core business segments - Pharmaceutical Services and Active Ingredients, Global Generics, and Proprietary Products.
The company's products, which included antibiotics, pain relievers, antidepressants, and cardiovascular drugs, were marketed globally in key markets such as the US, Russia, the UK, Germany, and India. Since early 2006, the DRL found itself facing a spate of troubles. The risky acquisition of the German generics company betapharm Arzneimittel GmbH (betapharm), patent litigations in the US market, quality problems at its Mexico unit, falling revenues in key markets, and a string of fatal accidents at its facilities were some of the serious issues nagging the company. The problems cast a shadow on the stock price of the company, giving its shareholders sleepless nights as they saw no end in sight to the company's woes. Some analysts commented that DRL, which used to be one of the top pharmaceuticals companies in India, had lost sight of the domestic market in a bid to become a global company. The challenge before CEO GV Prasad and Satish Reddy was how to stem the rot and orchestrate a turnaround....
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