Dr Reddy's Laboratories (DRL), a Rs.14,800 crore plus second largest Indian pharma company which received US FDA warning letter recently, has failed to improve its working during the third quarter ended December 2015 due to lower sales of pharmaceutical services and active ingredients (PSAI) and unfavorable macro-economic conditions in Europe as well as emerging markets, and particularly in Venezuela. Its consolidated net profit improved only by 0.7 per cent to Rs.579 crore from Rs.575 crore in the corresponding period of last year. Its net sales also increased only by 3.3 per cent to Rs.3,968 crore from Rs.3,843 crore. DRL's R&D expenditure declined by 5.1 per cent to Rs.410 crore from Rs.432 crore. Due to lower growth in profits, EPS worked out to Rs.33.95 as against Rs.33.72 in the last period.
The pressure on margins put pressure on DRL share movements and it declined sharply by over Rs.110 to Rs.2960 in the afternoon session on BSE. DRL scrip touched to yearly high level at Rs.4382.95 in October 2015.
DRL's sales of global generics increased by 7.1 per cent to Rs.3,356 crore from Rs.3,134 crore in the same quarter of last year and global generics contributed almost 84 per cent of its net sales. The sales of PSAI, however, declined sharply by 20.8 per cent to Rs.633 crore from Rs.799 crore with contribution of 16 per cent. Proprietary products sales improved by 12.2 per cent to Rs.65.4 crore and other sales moved up by 62.5 per cent to Rs.39 crore.
The company's net sales in US increased by 17.8 per cent to Rs.2,045 crore from Rs.1,736 crore in the similar period of last year mainly due to sustained performance of the injectable franchise and market share gains in key molecules. It filed four ANDAs in US during the quarter and its cumulative approval pending with US FDA reached at 82 ANDAs. Out of these 52 are Para IVs out of which it believe 18 have 'First to File' status. The company filed 21 DMFs globally and 3 in the US. The cumulative number of DMF filings reached at 774 as at the end of December 2015.
Its domestic revenue surged by 21.8 per cent to Rs.643 crore from Rs.528 crore due to continued momentum of mega brands and portfolio acquired from UCB. However, sales in Europe declined by 10.4 per cent to Rs.389 crore from Rs.434 crore and that in RoW declined sharply by 24.9 per cent to Rs.787 crore from Rs.1,047 crore.
The generic sales in North America improved by 18 per cent to Rs.1,942 crore from Rs.1,646 crore and that of PSAI moved up by 16 per cent to Rs.104 crore from Rs.89 crore. DRL's generics sales in Europe went up by 13.8 per cent to Rs.194 crore from Rs.170 crore due to higher sales of aripiprazole and pregaballn. However, its PSAI sales declined sharply by 26.1 per cent to Rs.195 crore from Rs.264 crore. Generic sales in domestic market has taken a jump of 34.1 per cent and touched to Rs.581 crore from Rs.433 crore. The generic sales in emerging markets declined by 27.6 per cent to Rs.640 crore from Rs.884 crore and that of PSAI moved down by 9.7 per cent to Rs.147 crore from Rs.163 crore.
G V Prasad, co-chairman and CEO, said, “Despite multiple challenges we have had a satisfactory quarter in terms of our financial performance. All of our key markets continue to perform well and show health growth. However, our performance has been impacted due to adverse macro-economic conditions across key emerging market territories. The two approvals and one tentative approval of our NDAs in the very first review cycle has been a positive development and lays the foundation for building a strong and sustainable proprietary products business. Enhancing our quality management practices and meeting the US FDA expectations continues to be our highest priority.”
For the first nine months ended December 2015, DRL's consolidated net sales increased by 7 per cent to Rs.11,715 crore from Rs.10,949 crore in the corresponding period of last year. Its net profit moved up by 13.4 per cent to Rs.1,927 crore from Rs.1,699 crore. EPS worked out to Rs.112.99 as against Rs.99.77 in the last period.
Its generics sales increased by 12.6 per cent to Rs.6,562 crore from Rs.5,827 crore. However, the sales of PSAI declined by 18.4 per cent to Rs.1,671 crore from Rs.2,049 crore. R&D expenditure increased by 5.4 per cent to Rs.1,296 crore from Rs.1,230 crore.