DRIVIN G ROWTH - Dr. Reddy's

articulation of its corporate vision — that of
becoming a discovery-led global
pharmaceutical company.
In the following pages, we will share with
you the developments during 2001-02
regarding global as well as the domestic
pharmaceutical markets, Dr. Reddy’s
performance in these markets, its
developments in R&D and drug discovery,
and its financials. We will also discuss
opportunities and threats that face the
Company.
markets
IT IS USEFUL TO BEGIN with a
thumb-nail sketch of the global and Indian
pharmaceutical business before moving on
to Dr. Reddy’s performance in these
markets.
THE GLOBAL PHARMACEUTICAL
MARKET
THE WORLD PHARMACEUTICAL
market is estimated at US$ 364 billion (1)
and
is expected to grow to US$ 550 billion by
2005. With an inflation adjusted compound
annual growth rate of 20 per cent over the
last two decades, growth of this market has
significantly outstripped global economic
growth. Developed countries represent not
only the largest, but in some cases, also the
fastest growing market. The US is the
largest single homogenous market,
currently generating around US$ 182 (1)
billion in annual pharmaceutical sales. This
is followed by Europe and Japan, each of
which account for sales worth US$ 88
billion (1)
and US$ 48 billion (1)
respectively.
Chart A gives the region-wise share of the
global pharmaceuticals market.
Despite the huge, and growing, size of the
global market, the industry continues to
enjoy consistently high return on invested
capital — even after capitalising the huge
R&D investments. Several factors have
contributed to these high returns, but the
chief among them are low levels of
competition. This shows up at several levels.
First, there are huge entry barriers, and
over the last few years there has been a
contraction in the number of international
players owing to consolidation and
concerted M&As. Second, in sharp contrast
to other industries, any two given drug
companies usually only narrowly compete
with each other. There are more
complementarities in product portfolios
than direct substitutes. Third, patents create
significant periods of product protection
from generic products. Thus, in a particular
therapeutic segment, the typical global
scenario is one where only three or four
CHART A
DR. REDDY’S LABORATORIES LTD. | MANAGEMENT DISCUSSION AND ANALYSIS | ANNUAL REPORT 2001-2002
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