Dr Reddy's Laboratories (DRL), a second largest Indian pharma giant with net sales of Rs.15,248 crore, has suffered heavy setback during the second quarter ended September 2016 due to US warning letter, currency devaluation and dismissal of writ petition in Bombay High Court. Its consolidated net profit declined sharply by 60.1 per cent to Rs.309 crore from Rs.775 crore in the similar period of last year. The consolidated net sales also declined by 10 per cent to Rs.3,529 crore from Rs.3,921 crore. With lower net profit, EPS declined to Rs.18.64 from Rs.45.42 in the last period.
Despite poor performance, DRL scrip opened higher in the morning at Rs.3,090 and moved by over Rs.50 to Rs.3,143.
The sales of global generics declined by 15 per cent to Rs.2,919 crore from Rs.3,436 crore due to lower sales in North America and loss of sales from Venezuela. However, the sales of pharmaceutical services and active ingredients (PSAI) increased by 24.4 per cent to Rs.754 crore from Rs.606 crore. Its sales of proprietary products declined by 11.9 per cent to Rs.59 crore from Rs.67 crore and other sales declined by 19.4 per cent to Rs.50 crore from Rs.62 crore.
The generics sales in North America declined by 13.1 per cent to Rs.1,613 crore from Rs.1,856 crore due to increased competition in valgancyclovir and injectable franchise, coupled with pricing pressure and moderation in volumes off-take. The company filed total 85 generic for approval with the US FDA, which includes 83 ANDAs and 2 NDAs. The company launched four new products viz. Omeprazole sodium bi-carbonate, nitroglycerin SLT, paricalcitol injection and bupropion SR.
Its sales in Europe by 16 per cent to Rs.178 crore from Rs.212 crore. Further, the sales of generics in emerging market declined by 27 per cent to Rs.483 crore from Rs.662 crore. However, generic sales in India improved by 14.5 per cent to Rs.625 crore from Rs.546 crore.
The PSAI sales in North America moved up strongly by 64 per cent to Rs.113.5 crore from Rs.69.2 crore, but declined in Europe by 13.6 per cent to Rs.209.5 crore from Rs.242.6 crore. The company filed 15 DMFs during the quarter globally of which 3 were in the US. The cumulative number of DMF filings reached at 797. Even domestic sales of PSAI declined by 20.6 per cent to Rs.57.5 crore from Rs.72.4 crore. The PSAI sales in rest of world was under pressure and declined by 4.7 per cent to Rs.197.9 crore from Rs.207.6 crore.
The company incurred a foreign exchange gain of Rs.3.7 crore for the quarter ended September 2016. Its R&D expenditure increased by 16.6 per cent to Rs.521.4 crore from Rs.447.3 crore and worked out to 14.5 per cent of its total revenue. Its staff cost went up only by 3.7 per cent to Rs.816 crore from Rs.787 crore. Its provision for taxation declined to Rs.88.5 crore from Rs.188 crore in the corresponding quarter of last year. The company provided Rs.34.4 crore towards a potential liability including the interest thereon in respect dismissal of writ petition.
G V Prasad, co-chairman and CEO, said, “All our major businesses have shown sequential improvement over the previous quarter with revenues growing by 11 per cent and EBITDA by 61 per cent. We have made considerable progress in our remediation efforts and continue to work on addressing the concerns of the regulators. Looking ahead we will continue to focus on launching new products in our generics business, improving productivity and strengthening our quality management systems.”
For the first half ended September 2016, DRL's consolidated net sales declined by 12.1 per cent to Rs.6,714 crore from Rs.7,642 crore in the corresponding period of last year. Its consolidated net profit declined sharply by 67.5 per cent to Rs.462 crore from Rs.1,422 crore. EPS worked out to Rs.27.59 as against Rs.83.41 in the same period of last year.