Dr. Reddy's Laboratories

Dr. Reddy's Laboratories Q3'FY12 net sales grew by robust 46% YoY to Rs 2769.19 crore largely driven by the sharp 133% growth in North America generic business (40% of sales) to Rs 1111.4 crore on the back of 180 day exclusivity launch of Olanzapine (launched in October 2011 in 20 mg strength later ODT strength). Also, helped by strong volume growth contributed from key products such as lansoprazole (market share 40%), tacrolimus (29%), and omeprazole Mg OTC (16%) and Shreveport products. The Olanzapine sales also include US 99 million from the Teva as part of the collaboration agreement to counter the authorized generic player in the market. As part of the agreement it would supply Olanzapine 20 mg tablets to Teva in response to revenue share based on ultimate net sale proceeds. It indicated that price erosion happened is same as that for the any other 180-day exclusivity product is around 45-50% for Olanzapine. Further, It clarified that exclusivity benefit will there in next quarter may not be with same intensity.

Also new launches of fondaprinaux and antibiotics helped the growth in sales of North America generic business. It indicated that the fondaprinux production issues not fully resolved but able to address the current requirements. However, it expects another quarter to resolve it fully and then after that plans for launch of Fondaprinaux on the hospital side. However, The Fondaprinuax (retail side) prescription occupied considerable 18% market share.

Moreover, The Overall revenue is also well supported by the rupee depreciation (revenues realized at Rs 53.01) during the quarter. Further, The growth in business came on the back of 57% growth in Generic business (73% sales), 19% growth in PSAI business (24% of sales) and helped by the sharp 100% growth in the Proprietary products business. Also, gross margins expanded by 500 bps YoY to 59.9% led to robust 59% growth in gross profit to Rs 1657.48 crore. Further, there was steep 1140 bps rise in OPM YoY to 31.4% on the back of fall in consumption cost (330 bps YoY), Other expenses (230 bps), SG&A expenses (260 bps YoY), Staff cost (240 bps YoY) and R&D expenses (140 bps YoY) as percentage to sales and net of stock adjustments led to 129% jump in the operating profit to Rs 868.82 crore.

Net interest income was Rs 17.37 crore (factored Rs 28.5 core forex gain, interest cost Rs 15.5 crore and EO gain Rs 4.4 crore) compared to interest cost Rs 4.98 crore then after combined with 23% rise in the depreciation to 130.58 crore led to 168% jump in PBT to Rs 772.09 crore. However, the sharp 2860 bps rise in effective tax rate to 33.9% (on account of the Olanzapine launch) reduced the growth in PAT to 87% to Rs 510.41 crore. After accounting for Rs 2.55 crore as share of profit in account affiliate compared to loss Rs 0.07 crore in the corresponding previous period, there was 88% YoY growth in net profit to Rs 512.96 crore.

Global Generics:

Revenues from Global Generics business grew by robust 57% YoY to Rs 2128.66 crore for the quarter ended December 2011 led by North America business on the back of launch of Olanzapine 20 mg coupled with new products launched in the last twelve months and also with the strong volume growth across the key products. At PBIT level, segment margins expanded by 110 bps YoY to 66.2% led to strong 59% growth in segment profit to Rs 1409.65 crore.

North America:

Revenues grew by sharp 133% to Rs 1111.4 crore for the quarter ended December 2011. Significantly, Two new products Olanzapine 20 mg and Olanzapine ODT were launched. During the quarter, 3 ANDAs were filed taking the cumulative filings to 187 as on 31^st December 2011. Out of which 79 ANDAs are pending for the approval with the US FDA of which 40 are Para IVs and 10 are FTFs.

Russia & Other CIS:

The Revenues from the Russian & CIS business (12% of net sales) grew by 11% to Rs 331.7 crore in Q3'FY 12. Revenues in Russia were at Rs 280 crore for the same period. Also the Company's secondary sales growth was at 23% continued to outperform industry growth of 19%. Further, OTC portfolio also grew by robust 24% on YoY basis.

The Revenues from the Other CIS markets were at Rs 55.7 crore in Q3'FY 12 largely driven by the Ukraine and Kazakhstan.

India:

Revenues from domestic business (12% of net sales) grew by moderate 11% YoY to Rs 333.3 crore in Q3'FY11 driven by volume increase in key products such as Stamlo, Reditus, Omez D & Razo coupled with new launches in the last twelve months. As, it has launched 6 new products (23 for the nine months) during the quarter. Notably, the Bisosimislars portfolio grew by 25% on YoY basis.

The lower growth in the domestic market compared to industry growth rate on the back of territory alignments and field force issues. However, it expects the normal growth rate after two quarters.

Also, Revenues from the RoW markets grew by robust 34% YoY to Rs 109.7 crore for the quarter ended December 2011.

Europe:

Revenues from the Europe (9% of net sales) grew by 14% to Rs 242.6 crore for the quarter ended December 2011 includes Rs 150 crore revenues from the Germany. The growth in new products launches outside the scope of the market was offset by price erosion in products with in tenders in Germany. In the rest of the Europe growth was driven by new launches in Italy.

PSAI Business:

Revenues from the Pharmaceutical Services and Active Ingredients (PSAI) grew by 19% YoY to Rs 695.77 crore (3% decline on Q-o-Q basis) for the quarter ended December 2011 largely benefited from the rupee depreciation. Also, The growth was driven by key products and interestingly there was growing trends of order books and customer lock-ins. Also, Segment margins improved by 350 bps to 27.7% led to 36% growth in segment profit to Rs 192.84 crore. During the quarter, it has filed 7 DMFs (2 in North America, 2 in Europe & 3 in other markets) taking total cumulative DMFs to 513 (178 in US, 143 in Europe, 192 in RoW).

Geography wise the revenue growth was driven by robust 52% YoY growth on weak base from North America in Q3'FY 12 to Rs 117 crore. Also, domestic business grew by 39% to Rs 86.2 crore. However, RoW markets witnessed moderate 7% growth to Rs 188 crore for the same period. Notably, Revenues from European business (there was sharp 28% fall on Q-o-Q basis) fell by 10% to Rs 165.1 crore.

Interestingly, Revenues from the Proprietary products grew by robust 100% to 32.38 crore for the quarter ended December 2011.

Overall Geography Revenue Break-up:

Revenues from North America (46% of net sales) grew by sharp 120% to Rs 1282.6 crore for the quarter ended December 2011 on the back of 133% growth in Generic business and 52% growth in the PSAI business. Europe (16% of net sales) grew by moderate 6% growth to Rs 432.5 crore was affected by the unimpressive performance from the PSAI business. However, Overall domestic business grew by 16% to Rs 419.4 crore but on Q-o-Q basis the growth was flat during the quarter. Further, Russia&CIS markets (12% of net sales) grew by 15% to Rs 331.7 crore. 

Consolidated Nine Months Performance:

Net sales grew by 29% YoY to Rs 7015.29 crore for the nine months ended December 2011. Also, Gross margins improved by 230 bps YoY to 56.1% led to 34% growth in gross profit to Rs 3933.49 crore. Further, OPM expanded by 400 bps YoY to 24.7% led to robust 54% growth in the operating profit to Rs 1732.21 crore. With 6% decline in other income to Rs 56.70 crore the growth reduced to 51% to Rs 1788.91 crore. There was interest income of Rs 7.77 crore compared to interest cost of Rs 26.21 crore in the corresponding previous period. Also, Depreciation & amortization increased by 23% to Rs 380.81 crore. Consequent to this there was sharp 66% growth in PBT to Rs 1415.87 crore. However, the steep 1400 bps YoY increase to 23.8% (largely on account of Olanzapine launch) reduced the growth in PAT to 40% to Rs 1079.22 crore. Further, after accounting for share of profit from the associates Rs 4.28 crore compared to Rs 0.70 crore in the corresponding previous period there was 41% growth in the net profit to Rs 1083.50 crore. Further, after accounting for share of profit from the associates Rs 4.28 crore compared to Rs 0.70 crore in the corresponding previous period, there was 41% growth in net profit to Rs 1083.50 crore.

Other Information:

• The scrip was up by 2.16% to Rs 1670.50 at BSE, India on 03^rd February 2012.
• Cash and cash equivalents are at Rs 1658.7 crore as on 31^st December 2011 compared to Rs 759.6 crore as on 30^th September 2011. Further Loans and Borrowings (current & non-current) were at Rs 3850.2 crore as on 31^st December 2011 compared to Rs 3130.3 crore as on 30^th September 2011.

Dr.Reddy's Laboratories - Consolidated Financial Results

Consolidated Segment Results: Dr.Reddy's Laboratories

Revenue Mix by Segment: Dr.Reddy's Laboratories

Revenue Mix by Geography: Dr.Reddy's Laboratories