On November 1, 2019 Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) reported its consolidated financial results for the quarter and the half year ended September 30, 2019 under International Financial Reporting Standards (IFRS) (Press release, Dr Reddy’s, NOV 1, 2019, View Source [SID1234550168]).
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Commenting on the results, Co-Chairman and MD, GV Prasad said, "I am pleased with our performance across the businesses and strong cash generation during the quarter. We are progressing well in execution of our strategy and in our transformation journey on quality and efficiency."
All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs. 70.64
Global Generics (GG)
Revenues from GG segment at Rs. 32.8 billion. Year-on-year growth of 7%, primarily driven by Europe, Emerging Markets and India. Sequentially declined by 1%.
Revenues from North America at Rs. 14.3 billion. Year-on-year revenues remained flat. Sequential decline of 13%, on account of price erosion and lower volumes. Further impact on account of voluntary recall of ranitidine and temporary disruption in supplies due to logistics issues faced during this quarter. We launched eight new products during the quarter, which are Carboprost, Ramelteon, Fosaprepitant, Pregabalin, Vigabatrin, Docetaxel 160mg, Bupropion SR and OTC Guaif / Psuedo.
As of 30th September 2019, cumulatively 99 generic filings are pending for approval with the USFDA (96 ANDAs and 3 NDAs under 505(b)(2) route). Of these 96 ANDAs, 55 are Para IVs out of which we believe 31 have ‘First to File’ status.
Revenues from Europe at Rs. 2.8 billion. Year-on-year growth of 44%, primarily on account of new products and volume traction in base business partly offset by lower realizations. Sequential growth is 15%.
Revenues from India at Rs. 7.5 billion. Year-on-year growth of 9%, driven by new products, improved realizations and volume traction in base business. Sequential growth is 8%.
Revenues from Emerging Markets at Rs. 8.3 billion. Year-on-year growth is 10%. Sequential growth is 13%.
Revenues from Russia at Rs. 4.1 billion. Year-on-year growth of 8%. Growth primarily driven by increase in volumes coupled with better realizations in some of the key molecules.
Revenues from other CIS countries and Romania at Rs. 1.7 billion. Year-on-year growth of 16% largely driven by new products and better realizations in some of the key molecules.
Revenues from Rest of World (RoW) markets at Rs. 2.5 billion. Year-on-year growth of 11%, primarily driven by new products, volume traction partly offset by price erosions in some of the key molecules.
Pharmaceutical Services and Active Ingredients (PSAI)
Revenues from PSAI at Rs. 7.1 billion. Year-on-year growth of 18% and sequential growth of 57%. Growth largely driven by increase in volumes from existing products.
Proprietary Products (PP)
Revenues from PP at Rs. 7.4 billion. It includes Rs. 7.2 billion towards license fee for selling US and select territory rights for two of our Neurology brands ZEMBRACE SYMTOUCH (sumatriptan injection) 3 mg and TOSYMRATM (sumatriptan nasal spray) 10 mg, to Upsher-Smith Laboratories, LLC. The costs associated with this transaction are Rs. 328 million.
Income Statement Highlights:
Gross profit margin at 57.5%, improved by ~590 bps sequentially and ~250 bps over that of previous year. Gross profit margin for GG and PSAI business segments are at 55.5% and 24.6% respectively.
gross margin is benefitted due to revenue recognition of the PP Neuro brands
partly impacted by certain one-off’s, including but not restricted to the impact of the voluntary recall of Ranitidine in the US market
adjusted for one-off’s, normalized gross profit margin is ~51.5%
on a normalized base, the year on year decline is primarily on account of price erosion in the US.
SG&A expenses at Rs. 16.8 billion, an increase of 36% on a year-on-year basis and 39% sequentially. This includes an amount of Rs. 3.6 billion recognized as an impairment charge on three product related intangibles (viz., Ramelteon, Tobramycin and Imiquimod). There have been certain additional one-offs including but not restricted to the costs associated with the sale of two neurology brands. Adjusted for the one-offs, the normalized SG&A expenses are lower compared to the previous quarter.
R&D expenses at Rs. 3.7 billion. As % to Revenues- Q2 FY20: 7.6% | Q1 FY 20: 9.4% | Q2 FY19: 10.8%. We continue to focus on building a healthy development pipeline across all our focused markets.
Other operating income at Rs. 135 million compared to Rs. 641 million in Q2 FY19 and Rs. 3,759 million in Q1 FY 20. Previous year includes gain of Rs. 464 million on account of sale of rights relating to Cloderm brand (including its authorized generic) and profit on sale of antibiotic manufacturing facility in Bristol, US. Q1 FY 20 includes Rs. 3,457 million received from Celgene pursuant to an agreement entered towards settlement of any claim the Company or its affiliates may have had for damages under section 8 of the Canadian Patented Medicines (Notice of Compliance) Regulations in regard to the Company’s ANDS for a generic version of REVLIMID brand capsules, (Lenalidomide) pending before Health Canada.
Net Finance income at Rs. 231 million compared to Rs. 625 million in Q2 FY19 and Rs. 393 million in Q1 FY 20. The year-on-year decline is primarily on account of lower foreign exchange gain, partly offset by higher profit on sale of investments during the quarter.
Profit after Tax at Rs. 10.9 billion. The net tax for the quarter is a benefit of Rs. 3.3 billion; due to recognition of deferred tax assets of Rs. 5.2 billion, primarily related to the MAT credit.
Diluted earnings per share is at Rs. 65.8.
Capital expenditure is at Rs. 1.1 billion.
Earnings Call Details (06:30 pm IST, 09:00 am EDT, November 1, 2019)
The Company will host an earnings call to discuss the performance and answer any questions from participants.
Audio conference Participants can dial-in on the numbers below:
Universal Access Number:
+91 22 6280 1219
Secondary number:
+91 22 7115 8120
Local Access number:
+91 70456 71221
(Available all over India)
International Toll Free Number
USA
1 866 746 2133
UK
0 808 101 1573
Singapore
800 101 2045
Hong Kong
800 964 448
Playback of call:
+91 22 7194 5757, +91 22 6663 5757
Conference ID:
31923
Transcript of the event will be available at www.drreddys.com. Playback will be available after the earnings call, till November 8, 2019.