Dr Reddy’s Laboratories nets Rs 85-cr loss in Q3

HYDERABAD: New York-listed Dr Reddy’s Laboratories (DRL) suffered an unexpected net loss of Rs 85 crore in the third quarter after writing down the intangible value of the products of its German acquisition, Betapharm, and seeing a sharp fall in revenues from generic drugs. Pricing pressures in Germany and the United States also pulled down revenues for the quarter ended December by 20% year-on-year.

The company said on Friday it expected to revert to revenue and profit growth in 2008-09, when India and Russia should fuel demand for its products. The US and Europe will continue to be important markets too, top officials said.

Dr Reddy’s reported a net loss of Rs 85 crore following amortization of the value of Betapharm’s products to the tune of Rs 236.1 crore. But for the write-down, net profit would have been Rs 103.4 crore, still nearly a fifth lower than average estimates of four brokerages reported by ET.

Explaining the changing dynamics in the German market that impacted Dr Reddy’s financials, Satish Reddy, managing director and chief operating officer, said the rebates paid by manufacturers to insurance companies are rising.

“The new price reforms in Germany from April last year have given insurance companies more leverage to negotiate higher rebates from manufacturers as pharmacists are mandated to dispense only products under rebate,” he said. “We will recognise revenues after deducting such rebates.”

In fact, DRL’s purchase of Betapharm in 2006 for 480 million euros, touted as one of India’s biggest overseas acquisitions then, has impacted the company’s revenues from Germany for a third successive quarter. Revenues from that country declined to Rs 200 crore in the latest quarter, from Rs 260 crore in the year-ago period.

“The short-term outlook is clouded by severe pricing pressure in Germany and US,” a senior pharmaceutical analyst said. “The Betapharm acquisition has been a drag on earnings because of supply constraints and the appreciation of the rupee against the Euro. However, the company is expected to gain from their acquisitions in the long term.”

Other analysts said the financials were not a big surprise, if the impact of the write-down were to be excluded. Though further price cuts are expected in Germany by March, the company has also been shifting drug manufacturing to India, thus saving on costs. About 60-65% of manufacturing should have come to India by March, enabling Dr Reddy’s to stabilise profit margins, said Angel Broking vice-president for research Sarabjit Kour Nangra.

Dr Reddy’s third quarter revenues dropped to Rs 1,232 crore. Revenues from authorised generics fell by about 45% to Rs 420 crore. But the company hopes to turn around its German business in the coming fiscal year, even as it focuses on India and Russia.

“We expect sustained profit and sales growth in APIs (active pharma ingredients) and branded generics business in India and Russia. We also expect to benefit from the potential launch of Sumatriptan in the US in the third quarter of FY 09. Germany continues to be an important market for us,” said DRL vice-chairman and CEO G V Prasad. He said the company continues to scan the US market for acquiring a branded formulation company.

For Babies With Heart Defects, Death Risk Is Far Lower At Most Experienced Hospitals

Each year, thousands of babies are born with severe heart defects that must be operated on within days or weeks of their birth. And though the odds for these infants are much better now than they were even 10 years ago, a new study suggests that there may be a way to give them an even better chance at living: Get them to the hospitals that are the most experienced at handling such cases.

In the first national study of this issue, a team of University of Michigan researchers found that infants with specific complex heart defects are much less likely to die before leaving the hospital if they are treated at the centers that treat the largest numbers of these patients. This relationship between hospital volume and mortality has been seen in adult heart operations, but the new study suggests it holds true for infants as well.

“A generation ago, we were just happy when these patients lived, but that’s not good enough anymore,” says lead author Jennifer Hirsch, M.D., a U-M pediatric cardiac surgeon and member of the Michigan Congenital Heart Center. “Although mortality rates are much lower, there is still a significant variation between centers. This study indicates that it may be time to selectively regionalize these patients’ care, to give them the best chance at a good outcome.”

The study is published online in the journal Pediatric Cardiology. Hirsch and her colleagues based their study on data from the 2003 Kids’ Inpatient Database, a national database sponsored by the Agency for Healthcare Research and Quality that includes information on children hospitalized in 36 states.

They analyzed data for two of the most severe congenital heart defects: transposition of the great arteries (TGA), in which the major blood vessels leading between the heart and lungs are switched, and hypoplastic left heart syndrome (HLHS), in which the left side of the heart does not develop properly.

Both defects are lethal if not treated within a few weeks of birth, with operations called the arterial switch operation for TGA and the Norwood procedure for HLHS. Infants may need additional operations later in life, but these initial open-heart procedures are critical for their survival.

The study shows that an infant’s risk of dying in the hospital during or after their operation varied greatly depending on the number of each procedure performed that year at the hospital where they were treated. Mortality rates ranged from more than 10 percent to less than 1 percent for the arterial switch operation, and from more than 35 percent to around 10 percent for the Norwood procedure.

“The relationship between hospital volume and risk of dying was significant across the spectrum for both defects, though in the case of arterial switch operations the difference dwindled among hospitals that performed about 15 or more in a year,” says Hirsch, a Lecturer in the Section of Cardiac Surgery at the U-M Medical School who performs operations at the U-M C.S. Mott Children’s Hospital. “For the Norwood, the trend to decreased mortality did not level off.”

The researchers chose the two conditions for their study not because the operations themselves vary in difficulty — both require skilled surgeons and operating room teams — but because of differences in the difficulty of pre- and post-surgical care. TGA care is considered somewhat less tricky than HLHS care. Even after the Norwood operation, babies with HLHS will still need at least two more operations in their first years of life to palliate their defect.

“All of the surgeons who operate on congenital heart defects are incredibly well trained,” says Hirsch, noting that pediatric cardiac surgeons must complete more than 10 years of surgical training after four years of college and four years of medical school to operate on the tiny hearts of infants and children. “It’s a matter of exposure to these complex cases not just for the surgeon, but also for the anesthesiologist, the surgical nurses and perfusionists, the intensive care unit staff, and the social workers and floor nurses who help prepare parents to take care of these children at home.”

The new results suggest that for these most rare and complex of cases, infants have the best outcomes when treated at hospitals whose teams are accustomed to caring for TGA and HLHS babies. The Michigan Congenital Heart Center, for example, handles more than 60 Norwood cases and 20 arterial switch cases each year, along with hundreds of other children with lesser defects.

Selectively regionalizing the care of these more severely ill infants, the researchers conclude, may be warranted based on the difference in mortality seen in the new study. But making sure that babies get to the most experienced centers in time for their operation will require commitments of resources and logistics, and a commitment by smaller congenital heart programs to refer the most complex patients early.

More research is also needed on the factors that influence a baby’s likelihood of dying after being discharged from the hospital following a Norwood procedure, but before he or she has the second- or third-stage operations for HLHS. Currently, this inter-stage mortality is estimated at 15 percent. The U-M has launched a new effort — the Michigan Congenital Heart Outcomes Research & Discovery program — that will allow researchers to collect and analyze much more detailed data about U-M congenital heart patients than ever before, to help answer these questions and more.

The newly published study differs in several major ways from previous studies that examined the relationship between in-hospital mortality and hospital volume for congenital heart patients. Other United States studies, performed in the 1990s when congenital heart operations and post-surgical care were still evolving at a rapid pace, used data for all heart conditions in one or two states.

Although these studies found a relationship between the number of infants treated and their risk of dying, the major thresholds were seen at the 100- to 200-patient level. Hirsch and her colleagues note that these studies included data from patients with much less severe heart defects, who had operations that carry a much lower risk of death during and after surgery.

“For the more routine congenital heart surgery, outcomes are excellent everywhere,” says Hirsch. “But when it comes to a child with a complex defect, it’s important to send him or her to a center of excellence. And the parents of these children are often so overwhelmed by their sudden situation, it will be important to develop the systems and support that will help them get to the right place.”

In addition to Hirsch, the paper’s authors are pediatric heart surgeon Richard G. Ohye, M.D., and James Gurney, Ph.D. and Janet Donohue, MPH of the U-M Child Health Evaluation and Research Unit.

Adapted from materials provided by University of Michigan Health System.

Scientists Overcome Major Obstacles To Stem Cell Heart Repair

Scientists at Imperial College London have overcome two significant obstacles on the road to harnessing stem cells to build patches for damaged hearts. Presenting the research at a UK Stem Cell Initiative conference December 13 in Coventry, research leader Professor Sian Harding has explained how her group have made significant progress in maturing beating heart cells (cardiomyocytes) derived from embryonic stem cells and in developing the physical scaffolding that would be needed to hold the patch in place in the heart in any future clinical application.

From the outset the Imperial College researchers have been aiming to solve two problems in the development of a stem cell heart patch. The first is undesirable side effects, such as arrhythmia, that can result from immature and undeveloped cardiomyocytes being introduced to the heart. The second is the need for a scaffold that is biocompatible with the heart and able to hold the new cardiomyocytes in place while they integrate into the existing heart tissue. Matching the material to human heart muscle is also hoped to prevent deterioration of heart function before the cells take over.

The stem cell team, led by Dr Nadire Ali, co-investigator on the grant*, have managed to follow beating embryonic stem cell-derived cardiomyocytes for up to seven months in the laboratory and demonstrate that these cells do mature. In this period the cells have coordinated beating activity, and they adopt the mature controls found in the adult heart by approximately four months after their generation from embryonic stem cells. These developed cardiomyocytes will then be more compatible with adult heart and less likely to cause arrhythmias.

The team have also overcome hurdles in the development of a biocompatible scaffold. Working closely with a group of biomaterial engineers, led by Dr Aldo Boccaccini and Dr Qizhi Chen, co-investigators on the grant, in the Department of Materials, Imperial College London, they have developed a new biomaterial with high level of biocompatibility with human tissue, tailored elasticity and programmable degradation. The latter quality is important as any application in the heart needs to be able to hold cells in place long enough for them to integrate with the organ but then degrade safely away. The researchers have found that their material, which shares the elastic characteristics of heart tissue, can be programmed to degrade in anything from two weeks upwards depending on the temperatures used during synthesis.

Professor Harding said: “Although we are still some way from having a treatment in the clinic we have made excellent progress on solving some of the basic problems with stem cell heart therapies. The work we have done represents a step forward in both understanding how stem cell-derived developing heart cells can be matured in the laboratory and how materials could be synthesised to form a patch to deliver them to damaged areas of the heart.

“A significant amount of hard work and research remains to be done before we will see this being used in patients but the heart is an area where stem cell therapies offer promise. We know that the stem cell-derived cardiomyocytes will grow on these materials, and the next step is to see how the material and cell combination behave in the long term.”

Professor Nigel Brown, BBSRC Director of Science and Technology, commented: “This research shows that although embryonic stem cell therapies are still some way away from the clinic, progress is being made on the basic biological developments. As with all new biomedical applications, an understanding of the underpinning fundamental science is essential to successfully moving forward.”

*This research was funded by the Biotechnology and Biological Sciences Research Council.

Nokia locates first “satellite” studio in India to design mobile phones

Finnish mobile-phone maker Nokia on Wednesday opened a global design studio in India to stay ahead of rivals such as Motorola in the world’s fastest-growing wireless market.

The studio will be located in Bangalore, known as India’s Silicon Valley, and will be the first of a series of “satellite” design centres being established by Nokia, which plans to open the next in Rio de Janeiro, Brazil.

The world’s second-most populous nation is adding six million mobile-phone users every month, and the location of the studio testifies to the impact that India is having on the development of handsets, Nokia officials said.

“Design is not just about the look and feel of the handset but equally important is what it can do for people and how it fits into their lives,” said Hannu Nieminen, head of innovations at Nokia Design.

“Designers must be exposed to how people live and work in different places around the world,” Nieminen told a news conference here.

India’s mobile revolution is mainly confined to cities, but the real prize for phone companies is the vast rural market where nearly 70 percent of the population lives, analysts say.

Telephone penetration is around 25 per 100 people in urban areas, and as low as 1.6 per 100 in rural areas, leaving vast room for growth.

Nokia designers will work with students at the Bangalore-based Srishti School of Art, Design and Technology to conceive new handsets for India and global markets in the Internet era.

The studio will explore design trends and themes including research into colour and material trends in India, mobile use of the Internet and its implications for design, including new features and uses for mobiles.

“The first experience of the Internet for many future users will be on the mobile phone,” said Nieminen. “India will play a crucial role in designing handsets for them.”

The Indian studio involves a “considerable investment,” said Bangalore-based Jan Blom, senior designer manager at Nokia Design.

“We really want to optimise the way our product is geared to Indian needs,” said Blom, adding the Bangalore centre would help Nokia tailor products for the local market.

India, along with China and the United States, is among the three biggest markets for Nokia.

The first mobile-phone call made in India in 1995 was on a Nokia phone on a Nokia network.

The Finnish company introduced the first Hindi-language mobile menu in 2000, following it up with the first camera phone in 2002, and Hindi short messaging system in 2004.

“Nokia’s decision to open its first design satellite studio in India underscores our commitment to the market and strengthens our presence in the country – distribution and sales, research, manufacturing and now design,” said D. Shivakumar, vice-president and general manager of Nokia India.

Nokia, with a 6,000-strong workforce in India, is competing with global handset makers including Motorola of the US and Ericsson of Sweden in an expanding market that has 157 million cellular subscribers.

Ericsson in July won a US$2 billion order from Bharti Airtel, India’s biggest mobile-phone services provider, to expand its network into rural areas.

It came on the heels of a US$900 million memorandum of understanding that Finnish-German joint venture Nokia Siemens struck earlier in July with Bharti to expand its network

India to be hub of KPO industry

It’s the sector that holds most promise in the outsourcing pie. And now a report predicts it’s poised for big times ahead. The report says the knowledge process outsourcing industry (KPO) will be worth $16.7 billion by 2010-11. With an annual growth rate of 39% for the next four years, it will grow even faster than the BPO sector globally. What’s more, while in 2006-07 KPOs employed 106,000 professionals worldwide, their numbers are expected to grow and touch 350,000 by 2010-11.

But the real good news is for India. India will be the future hub of KPO sector and competitors — China, Philippines, Russia — will be spokes of the industry. These predictions are made by Alok Aggarwal, chairman Evalueserve in his yet to be released report, ‘India’s Knowledge Process Outsourcing Sector: Origin, Current State, and Future Direction’.
“There is a substantial momentum in the growth of KPO industry in India and although attrition is becoming quite poor, there are still enough new graduates that are joining this industry who can keep this momentum going,” says Aggarwal.

Its earnings went up from $1.2 billion in 2003-04 to $4.4 billion in 2006-07 — that is an annual growth of 54% worldwide. Similarly, the number of employees too grew from 34,000 in 2003-4 to 106,000 in 2006-07. In comparison, BPO revenues moved from $7.7 billion in 2003-04 to $15.8 billion in 2006-07, that is an annual growth rate of 27%. In the next four years, it’s expected to grow at 26% annually and generate $39.8 billion.

In India, KPOs employed around 9,000 professionals in 2000-01. By 2006-07 their numbers had scaled up to 75,400 generating $3.05 billion.

Aggarwal says, “KPO growth was triggered in 2004 when the issues like attrition, health in the call-centre industry in India became evident. In fact, KPO growth too can be hindered significantly by attrition, and it may come down from a projected revenue of $11.2 billion in 2010-11 to $9.9 billion or even lower if attrition continues to be a big problem. “As for competitors, probably the Philippines would be the closest followed by China,” he added.

KPO is likely to be driven by factors like breadth and depth of coverage, domain expertise, location advantage, sales and marketing capabilities etc. Therefore, it is quite likely that firms both with own captives and those using third party vendors may use a ‘hub and spoke’ model where a provider in India may constitute ‘centre’ whereas other units in the world may provide appropriate ’spokes.’