Dr Reddy's Laboratories (DRL), the second largest pharmaceutical company in India with consolidated net sales of Rs.9,425 crore plus, has posted strong financial results during the year ended March 2012. With strong reserves position, higher approvals from regulatory authorities, investment in research and development, tie-ups with international players and better products pipeline, DRL scrip of Rs.5 each is quoting around Rs.1,650 with its 52-weeks highest level of Rs.1,818 on April 20, 2012. The scrip touched its yearly low level at Rs.1,387 in August 2011. The full market capitalisation worked out to Rs.27,910 crore on July 12.

The company stepped up its equity dividend with handsome offer of 275 per cent (Rs.13.75 per share of Rs.5 each) as compared to 225 per cent in the preceding year. Dividend absorbed an amount of Rs.233 crore as against Rs.190 crore and dividend tax worked out to Rs.37.8 crore as compared to Rs.30.9 crore. With strong growth in bottom line, its basic earnings per share registered strong growth and touched to Rs.84.16 from Rs.65.28.

DRL's business is organized on a worldwide basis into pharmaceutical services and API (PSAI), global generics and proprietary products. The proprietary product segment involves the discovery of new chemical entities for subsequent commercialization and out-licensing. With incorporation of three new subsidiaries in New York, Ukraine and Canada during 2011-12, its total number of subsidiaries went up to 48.

The company's consolidated net sales went up smartly by 30.3 per cent to Rs.9,433 crore during the year ended March 2012 from Rs.7,237 crore in the previous year. Further its service income, which primarily relate to contract research, increased to Rs.234 crore from Rs.174 crore, license fees to Rs.42 crore from Rs.12 crore, other operating income to Rs.106 crore from Rs.74 crore and other income to Rs.132 crore from Rs.52 crore. Thus the income from other sources went up by 65 per cent to Rs.514 crore from Rs.312 crore.

The company's global generics business net sales increased by 32.8 per cent to Rs.7,038 crore during the year ended March 2012 from Rs.5,300 crore in the previous year. Generics business contributed nearly 74.6 per cent of its total consolidated revenue. The sales of PSAI division registered a growth of 28.2 per cent to Rs.2821 crore from Rs.2200 crore and that of proprietary products increased to Rs.108 crore from Rs.52 crore.

The company's sales in North America contributed nearly 40 per cent of its total sales and went up sharply by 66 per cent to Rs.3,750 crore from Rs.2,256 crore in the previous year. Its sales in Europe increased by nine per cent to Rs.1,719 crore from Rs.1,577 crore and that in Russia and other CIS countries increased by 22 per cent to Rs.1,326 crore from Rs.1,086 crore. Europe, Russia and CIS countries contributed 32 per cent in sales during 2011-12 as compared to 36 per cent in the last year. The company's domestic sales improved by 14.2 per cent to Rs.1,480 crore from Rs.1,296 crore.

The EBDITA has taken quantum jump of 59.7 per cent during FY'12 to Rs.2,563 crore from Rs.1,606 crore in the previous year. However, higher interest burden, higher provision for depreciation and taxation put pressure on net profit which improved modestly by 30.2 per cent. Its interest burden increased to Rs.106 crore from Rs.25 crore and depreciation provision reached at Rs.518 crore from Rs.398 crore. The company provided Rs.504 crore for taxation as compared to Rs.184 crore in the previous year. Further, it's exceptional items, in respect of goodwill and intangibles, amounted to Rs.135 crore as against nil in the previous year.

DRL is now focusing on R&D activities and incurred higher expenditure of Rs.624 crore during the year ended March 2012 as compared to Rs.592 crore in the previous year. This worked out to 9.4 per cent and 11.3 per cent of its turnover in respective year. The company successfully launched olanzapine 20 mg tablets, the generic version of the brand Zyprexa, with 180-days marketing exclusivity in US market. This product contributed around US$ 100 million to its revenues in 2011-12. It filed 17 ANDAs with US FDA during 2011-12 and its total approvals reached at 194 ANDAs. Further, its 80 ANDAs are pending with the US FDA of which 41 are para-IV filings. Similarly, the company filed 68 DMFs in the global market it cumulative filings reached at 543 DMFs. The company received approval for nine ANDAs from US FDA during the first half of 2012.

DRL is taking steps to enter Japan, the second largest pharmaceutical market in the world, with launch of first generic product in next three to four years through its joint venture setup with Fujifilm. DRL is holding 49 per cent stake in this JV. Similarly, DRL and Merck Serono, a division of Merck KGaA, Germany, have entered into partnership to co-develop a portfolio of biosimilar compounds in oncology. DRL. Recently the company launched ibandronate sodium tablets (150 mg), olanzapine tablets and generic RequipXL tablets in US markets.

Thus, the strong growth for generic products in highly regulated markets and the expected expiration of patent to the tune of US$ 73 billion in next three-four years will offer better opportunities to DRL. The emerging markets will also contribute significantly in near future. Though the stiff competition and exchange rate will play key role in growth, the overall financial position of DRL with total reserves of Rs.4,900 crore will offer better returns in near future.


DRL's Financial Highlights (Consolidated – Rs crore) March 2012