Dr. Reddy’s Laboratories reports financial results for third-quarter ended December 31, 2009

Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) today announced its unaudited financial results for the third quarter ended December 31, 2009 under International Financial Reporting Standards (IFRS).

Key Highlights

• Consolidated revenues at Rs. 17.3 billion ($373 million) in Q3 FY10 as against Rs. 18.4 billion ($397 million) in Q3 FY09, representing a decline of 6%. Excluding revenues from sumatriptan in the previous year, the 17% growth is largely driven by the key markets of India and Russia in Global Generics and PSAI.
  • Consolidated revenues for nine months FY10 at Rs. 53.9 billion ($1.2 billion); YoY growth of 9%.
• EBITDA at Rs. 3.7 billion ($79 million) in Q3 FY10. EBITDA for nine months FY10 at Rs. 11.8 billion ($255 million) represents a YoY growth of 31%. Adjusted PBT for the quarter is at Rs. 2.6 billion ($56 million).
• During the quarter, many healthcare insurance providers in Germany announced their final tender results indicating a higher pace of transition to the tender based model in the German generics pharmaceutical market, with an associated significant deterioration in prices from the previous year’s levels. As a result of this, the carrying value of betapharm’s goodwill and intangibles were tested for impairment. A non-cash write-down of intangible assets and ‘beta’ brand amounting to Euro 48 million and a non-cash write-down of goodwill amounting to Euro 76 million were recorded for the quarter. The overall net impact on Income Statement was Euro 109 million after a reversal of deferred tax liability relating to intangibles and ‘beta’ brand.
• Loss for the quarter is at Rs. 5.2 billion ($112 million) while Adjusted Profits after tax (PAT) for the quarter is at Rs. 2.3 billion ($50 million). Adjusted PAT for nine months of this fiscal is at Rs. 7.3 billion ($158 million) as against adjusted PAT of Rs. 5.1 billion ($110 million) in the same period for previous year, representing a growth of 43%.
• During the quarter, the company launched 27 new generic products, filed 16 new product registrations and filed 11 DMFs globally.

Segmental Analysis

Global Generics

Revenues of Global Generics for the nine months at Rs. 37.4 billion ($807 million) represent a growth of 7%. Revenues from Global Generics business at Rs. 11.7 billion ($253 million) in Q3 FY10 as against Rs. 13.7 billion ($295 million) in Q3 FY09. Excluding the revenues from sumatriptan the growth is at 16% driven by the key markets of India and Russia.

• Revenues from North America at Rs. 3.0 billion ($64 million) in Q3 FY10 as against Rs. 6.7 billion ($143 million) in Q3 FY09. Excluding the revenues from sumatriptan the growth is flat.
  • The total cumulative ANDA filings are 141. 62 ANDAs are pending approval at the USFDA of which 35 are Para IVs and 13 are FTFs.
• Revenues from Europe at Rs. 2.6 billion ($56 million) in Q3 FY10 as against Rs. 2.5 billion ($54 million) in Q3 FY09, representing a growth of 3%.
  • Revenues from Germany increase by 2% to Rs. 2.0 billion ($44 million) in Q3 FY10.
  • Revenues from Rest of Europe grew by 6% to Rs. 534 million ($12 million) in Q3 FY10.
• Revenues from Russia & Other CIS markets at Rs. 2.8 billion ($60 million) in Q3 FY10 as against Rs. 2.0 billion ($43 million) in Q3 FY09, representing a growth of 38%.
  • Revenues in Russia at Rs. 2.3 billion ($49 million) in Q3 FY10 as against Rs. 1.6 billion ($34 million) in Q3 FY09 representing a YoY growth of 45%.
    • The secondary prescription sales trend as per Pharmexpert for the eight months of April to November compared to same period last year indicates a dollar growth of 13% for Dr. Reddy’s as against the industry’s growth of 2%.
  • Revenues in Other CIS markets increase by 13% to Rs. 488 million ($11 million) in Q3 FY10 as against Rs. 434 million ($9 million) in Q3 FY09.

• Revenues in India at Rs. 2.6 billion ($57 million) in Q3 FY10 from Rs. 2.0 billion ($42 million), representing a growth of 34% led by key brands of Omez, Nise, Stamlo Beta, Reditux & Stamlo.
  • The YoY growth of 34%, is largely driven by volume growth of 29% from existing portfolio and 7% by new product launches.
  • The secondary sales trend as per ORG IMS for the eight months April to November 2009 indicates a growth of 20% for Dr. Reddy’s as against an industry growth of 16% and the Top 10 Companies growth of 19%.
  • 18 new products launched during the quarter. 56 new products launched in the nine months FY10 contributed 4% to nine months sales.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from Pharmaceutical Services & Active Ingredients for the nine months at Rs. 15.5 billion ($334 million) represent a growth of 11%. Revenues from (PSAI) at Rs. 5.2 billion ($113 million) in Q3 FY10 as against Rs. 4.4 billion ($96 million) in Q3 FY09 ; YoY growth of 17% driven by the regions of India and RoW.

• During the quarter, 11 DMFs were filed globally, with 3 in US and 8 in Europe. The cumulative DMF filings as of Dec 09 are 388.

Income Statement Highlights:

• Gross profit at Rs. 8.8 billion ($190 million) in Q3 FY10 represents a margin of 51% to revenues as against 56% in Q3 FY09. This change in gross margins is on account of a favorable mix of high margin revenues from sumatriptan in the previous year.
• Selling, General & Administration (SG&A) expenses excluding amortization for the quarter at Rs. 5.1 billion ($117 million), remained flat as compared to both previous year and sequentially.
• Amortization expenses for the quarter at Rs. 374 million ($8 million) showed a modest growth from previous year of Rs. 340 million ($7 million).
• Other operating income of Rs. 171 million in Q3 FY10 as against Other operating expenses of Rs. 110 million in Q3 FY09. The movement is largely on account of the fact that in Q3 FY09, a provision for damages payable of Rs. 224 million was recorded on account of the German court upholding the validity of the olanzapine patent of the innovator in Germany.
• R&D expenses at Rs. 892 million in Q3 FY10 represent 5% of revenues.
• Finance costs (net) are at Rs. 50 million in Q3 FY10 as against Rs. 699 million in Q3 FY09. The change is mainly on account of :
  • Net forex loss of Rs. 44 million in Q3 FY10 as against Rs. 493 million in Q3 FY09.
  • Net interest expense of Rs. 19 million in Q3 FY10 as against Rs. 215 million in Q3 FY09.
• Loss for the quarter is at Rs. 5.2 billion ($112 million) and Adjusted PAT for the quarter is at Rs. 2.3 billion ($50 million). Adjusted PAT for nine months FY10 is at Rs. 7.3 billion ($158 million) as against adjusted PAT of Rs. 5.1 billion ($110 million) in the previous year, representing a growth of 43%.
• The adjusted effective tax rate for the nine months is at 19%.
• Adjusted diluted EPS is at Rs. 13.6 (29 cents) for the quarter and Rs. 43.3 (93 cents) for nine months FY10.
• Capital expenditure for nine months FY10 is at Rs. 2.6 billion ($56 million).

Source: Dr. Reddy’s Laboratories Ltd.