Dr Reddy’s Global Strides — Will the Success Story Continue?

Abstract

In February 2006, Dr Reddy’s Laboratories Limited (DRL) acquired the fourth largest generic pharmaceutical company in Germany, Betapharm Arzneimittel GmbH (Betapharm) from the 3i Group PLC (3i) paying US $570 million (€480 million). This acquisition was funded through a combination of internal accruals and borrowings. Immediately after the deal, health care reforms took place in Germany setting lower reference prices for drugs, forcing companies to cut prices. Many analysts felt that DRL had paid too much for the acquisition as the valuation of the deal was approximated to be more than thrice the annual sales of Betapharm. Would DRL be able to prove the critics wrong and realise their ambition of becoming a US $1 billion mid-size global pharmaceutical company by 2008?