Dr Reddy’s gearing up for future growth levers through Horizon 2 businesses
On Investor Day 2022, Dr Reddy's defined its short-to-medium term plan to leverage current Horizon 1 core businesses and invest in futuristic Horizon 2 business for sustainable growth.
Dr Reddy's defined Horizon 1 space to be the core driver in the short to medium term mainly comprising 1) Generics, 2) API, 3) Branded Generics, 4) OTC and 5) Biosimilars. Horizon 2 is earmarked for long term mainly comprising 1) Immuno-Oncology NCEs, 2) Biologics & CGT, 3) Nutraceuticals, 4) CDMO (small and large molecules), 5) Disease management, 6) D2C and 7) Digital services. The company aspires to continue 1) double digit revenue growth and 2) 25% EBITDA margin and 25% RoCE while keeping on investing in Horizon 2 opportunities for future. In Horizon 2 areas, Dr Reddy’s will look to scale up in immuno-onco NCEs, nutraceuticals and CDMO while investing to enter new areas of biologics and cell gene therapy, differentiated formulations, disease management and preventive & primary care platform SVAAS.
Dr Reddy's has embarked upon the next phase of its strategy in alignment with the changing context in the industry and emerging opportunities and trends. Although this definite transition to Horizon-2 will require investments in near to medium term directionally, it provides a well thought out strategy for the next five years. Dr Reddy’s is expecting an increase in investments by 50-100 bps of sales for Horizon 2 while R&D expenses are expected to be around 10% of sales. Horizon 2 is likely to contribute 15% to topline by FY27. We believe this transition backed by 1) leadership in core areas, 2) innovation through partnerships and 3) better productivity through operational excellence, can propel Dr Reddy’s to keep investing in emerging opportunities without hampering its strong balance sheet.
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