Dr Reddy's Laboratories, a Rs.15,800 crore plus second largest pharma company in India, has suffered heavy setback during the fourth quarter ended March 2016 on account of lower sales, US FDA warning letter, higher provision for tax as well as interest burden. Its consolidated net profit declined sharply by 86 per cent to Rs.74.6 crore during the fourth quarter ended March 2016 from Rs.518.8 crore in the corresponding quarter of last year. Its consolidated net sales declined by 2.9 per cent to Rs.3,756 crore from Rs.3,870 crore. With lower net profit, its EPS declined sharply to Rs.4.37 from Rs.30.45 in the last period.
The board of directors has recommended dividend of Rs.20 per share of face value of Rs.5 each for the year 2015-16.
DRL's sales from Pharmaceutical Services and Active Ingredients (PSAI) declined by 16.8 per cent during the quarter under review to Rs.725.8 crore from Rs.871.9 crore in the same period of last year. Similarly, global generics' sales remained stagnant at Rs.3077.5 crore as compared to Rs.3071.7 crore. Income from proprietary products increased to Rs.64.5 crore from Rs.30 crore. The company acquired select portfolio of established products business of UCB in the territories of India, Nepal Sri Lanka and Maldives which is pertains to its global generics segment.
DRL received warning letters on November 5, 2015 from the US FDA in respect of product quality from Srikakulam and API facility at Duvvada in Andhra Pradesh and Miryalaguda facility in Telangana. The company has provided an update to the US FDA on the progress of remediation in January 2016 and March 2016.
Due to change in exchange rates by Venezuelan government on March 9, 2016, the company has to provide Rs.430.9 crore towards part of finance expenses. Its net finance cost for the quarter ended March 2016 increased to Rs.264.6 crore from Rs.23.3 crore in the similar period of last year. The tax provision also went up to Rs.173.9 crore from Rs.74.2 crore.
Its research and development expenditure declined to Rs.487.9 crore from Rs.514.4 crore. The company received two final approvals and one tentative approval of the NDAs filed by the proprietary products business.
G V Prasad, co-chairman and CEO, said, “It's been a challenging quarter for Dr Reddy's. While there has been a marginal decline in revenues, there has been a greater impact on profitability. This is mainly due to the provision, made as a matter of abundant precaution, to write down our outstanding receivables from Venezuela. We will continue to actively engage with the Venezuelan Government to provide affordable medicine to fulfill the need of people of the country, subject to repatriation of funds.”
“Our bio-similars business is gaining traction, as we have started to receive approvals and building partnerships for our products in the emerging markets. Our topmost priority continues to be the strengthening of our quality management processes across the organisation.” he added.
For the full year ended March 2016, DRL's consolidated net sales increased only by 4.4 per cent to Rs.15,471 crore from Rs.14,819 crore in the previous year. The sales of global generics went up by 7.3 per cent to Rs.12,806 crore from Rs.11,940 crore. However, the sales of PSAI declined by 14 per cent to Rs.2,783 crore from Rs.3,236 crore. The sales of proprietary products improved by 22. 6 per cent to Rs.266 crore from Rs.217 crore.
The sales of Global generics in North America increased by 18.7 per cent to Rs.7,545 crore from Rs.6,356 crore in the previous year due to sustained performance of the injectable franchise and market share gains n key molecules. Similarly, generic sales in Europe increased by 19.3 per cent to Rs.773 crore from Rs.648 crore. Its domestic sales of generic went up by 19.1 per cent to Rs.2,129 crore from Rs.1,787 crore. However, its sales in emerging markets declined by 25.1 per cent to Rs.2,359 crore from Rs.3,148 crore.
The sales of Pharmaceutical Services and Active Ingredients in North America declined sharply by 34 per cent to Rs.305 crore from Rs.460 crore and that in Europe also declined by 11 per cent to Rs.931 crore from Rs.1,051 crore. The Indian sales of PSAI division declined by 20 per cent to Rs.262 crore from Rs.329 crore. Its sales in RoW moved up by 5 per cent to Rs.740 crore from Rs.706 crore.
Its R&D expenditure increased marginally by 2.2 per cent to Rs.1,783 crore from Rs.1,745 crore in the previous year. It filed 14 ANDAs in US. It is awaiting approval for total 82 generic. Its net interest cost increased to Rs.270.80 crore as against interest income of Rs.168.2 crore. Tax expenditure went up to Rs.712.7 crore from Rs.598.4 crore. Due to higher interest and taxation, its net profit declined by 9.8 per cent to Rs.2,001 crore from Rs.2,218 crore. The foreign exchange loss amounted to Rs.413.3 crore in FY'16 due to Venezuela related adjustments as against foreign exchange gain of Rs.85.8 crore in the previous year. EPS for the full year 2015-16 worked out to Rs.117.34 as against Rs.130.22 in the previous year.