October 28, 2022: Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY | NSEIFSC: DRREDDY) reported its consolidated financial results for the quarter and the half year ended September 30, 2022 (Press release, Dr Reddy’s, OCT 28, 2022, View Source [SID1234622567]). The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).
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Revenue Analysis
Global Generics (GG)
Revenues from GG segment at Rs. 55.9 billion:
Ø Year-on-year growth of 18% and sequential quarter growth of 26% driven by launch of the Lenalidomide capsules in the US market (as part of the volume limited settlement with innovator) and sequential quarter improvement in Russia sales. However, the growth was partly offset by price erosion in our generic markets and higher base due to covid product sales in previous year.
North America
Revenues from North America at Rs. 28.0 billion:
Ø Year-on-year growth of 48% and sequential quarter growth of 57%, driven by launch and scale up of new products and favorable movement of forex rates, which was partly offset by price erosion in some of our key molecules.
Ø During this quarter, we launched 7 new products. These were Lenalidomide capsules (as part of the volume limited settlement with innovator), Fesoterodine Fumarate tablets, Bortezomib Inj 3.5 mg, Neostigmine PFS, Potassium Chloride UD, Fexofenadine HCl + Pseudoephedrine HCl ER tablets, and Oxaliplatin Inj in Canada.
Ø We filed one ANDA during the quarter. As of 30th September 2022, cumulatively 81 generic filings are pending for approval with the USFDA (78 ANDAs and 3 NDAs under 505(b)(2) route). Out of these 81 pending filings, 42 are Para IVs and we believe 22 have ‘First to File’ status.
Europe
Revenues from Europe at Rs. 4.2 billion, with year-on-year growth of 2% and sequential quarter growth of 1%. This was driven by volume traction in base business and new product launches across our markets, however, it was partially offset by price erosion in some molecules and the impact of adverse forex rates during the quarter. We launched ten new products across countries during this quarter.
India
Revenues from India at Rs. 11.5 billion:
Ø Year-on-year growth of 1% impacted due to higher base of Q1 FY22, which included contribution from covid product sales. Adjusted for this, we have grown in double digit.
Ø Sequential quarter declined by 14% primarily on account of high base impact, as we had recognized divestment income of a few non-core brands in Q1 FY23.
Ø We launched two new products during the quarter. These were Curaprox and Stig.
Emerging Markets
Revenues from Emerging Markets at Rs. 12.2 billion. Year-on-year decline of 6% and sequential quarter growth of 36%:
Ø Revenues for Russia at Rs. 5.9 billion. Year-on-year growth of 4% was on account of new product launches, increase in sales prices and favorable movement of forex rates, partly offset by reduction in base volumes. Sequential quarter growth of 85% was primarily due to lower sales base of Q1 FY23, which was impacted due to channel inventory normalization.
Ø Revenues from other CIS countries and Romania at Rs. 2.2 billion. Year-on-year decline of 1% due to reduction in base volumes and adverse movement of forex rates, partly offset by increase in sales prices and new product launches. Sequential quarter growth of 13% was driven by increase in base volumes and new product launches, partly offset by adverse movement of forex rates.
Ø Revenues from Rest of World (RoW) markets at Rs. 4.1 billion. Year-on-year decline of 18% was on account of reduction in the covid product sales in current quarter vs. last year, decrease in sales prices, which was partly offset by new product launches. Sequential growth of 6% was driven by new product launches, partly offset by a reduction in base volumes and sales price of some of our products.
Pharmaceutical Services and Active Ingredients (PSAI)
Revenues from PSAI at Rs. 6.4 billion with a year-on-year decline of 23% and sequential decline of 9%.
Ø Year-on-year decline was primarily on account lower volumes due to higher base in Q2 FY22 which had covid product sales, partly offset by new product sales and favorable forex rates.
Ø sequential decline was majorly due to lower traction in the volumes for some of our products, partly offset by new product sales.
Ø During the quarter we filed three DMFs in the US.
Income Statement Highlights:
Ø Gross profit margin for the quarter at 59.1%:
– Increased by ~565 bps over previous year and ~920 bps sequentially, majorly driven due to product mix (including new products), accruals related to production linked incentive scheme, which was partly offset by price erosion and provision made on inventory for covid products.
– Gross profit margin for GG and PSAI business segments are at 65.4% and 3.6% respectively. Gross profit margin of PSAI have been impacted due to covid inventory provision and adverse impact of manufacturing overheads which are at similar levels over lower sales base.
Ø Selling, general & administrative (SG&A) expenses at Rs. 16.6 billion, increased by 4% on a year-on-year basis and by 7% sequentially, in line with the business growth.
Ø Research & development (R&D) expenses at Rs. 4.9 billion. As % to revenues – Q2 FY23: 7.7% | Q1 FY23: 8.3% | Q2 FY22: 7.7%. We continue to invest in R&D to build a healthy pipeline of products across our markets.
Ø Other operating income at Rs. 0.3 billion compared to Rs. 1.7 billion in Q2 FY22. Q2 FY22 was higher on account of recognition of income towards sale of rights relating to anti-cancer agent E7777 (denileukin diftitox).
Ø Net Finance expense at Rs. 156 million compared to net finance income of Rs. 319 million in Q2 FY22.
Ø Profit before Tax at Rs. 16.1 billion, increased by 27% year-on-year and by 10% sequentially.
Ø Profit after Tax at Rs. 11.1 billion. The effective tax rate is 30.9% for the quarter.
Ø Diluted earnings per share is at Rs. 66.89.
Other Highlights:
Ø EBITDA is at Rs. 19.3 billion and the EBITDA margin is 30.6%.
Ø Capital expenditure is at Rs. 2.5 billion.
Ø Free cash flow is at Rs. 5.8 billion.
ØNet cash surplus for the company is at Rs. 13.7 billion as on September 30, 2022. Consequently, net debt to equity ratio is (0.07).
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Transcript: Transcript of the Earnings call will be available on the Company’s website: www.drreddys.com