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Informist, Saturday, Jul 27, 2024

By Narayana Krishna

HYDERABAD - Dr Reddy's Laboratories Ltd reported better than expected earnings for the quarter ended June, despite higher costs and pricing pressure in some markets. The company reported a consolidated net profit of 13.92 bln rupees, down 1% on year, but higher than the Street's view of 13.22 bln rupees. Its revenue for the quarter grew 14% on year to 76.96 bln rupees, also higher than the expected 72.6 bln rupees.

During the quarter, the company's global generics business saw 15% on-year growth at 68.86 bln rupees. This growth was supported by a rise in volume due to new launches and integration of the recently in-licensed Sanofi's vaccine portfolio in India, the company's management said in a post-earnings conference call. Dr Reddy's said the generics business witnessed pricing pressure during the quarter in the US and Europe and some regions of the emerging markets.

Dr Reddy's North America sales, mainly led by the US, and make up for around 50% of the total sales, were up 20% on year at 38.46 bln rupees. This was due to an increase in volumes of its base business and contribution from new launches, the company said.

Cancer drug generic Revlimid continued its contribution to the US sales, the management said. The company launched three new products in the US during the quarter.

In the emerging markets segment, the company reported a 3% on-year rise in sales at 11.9 bln rupees. Within emerging markets, revenue from Russia fell 2% on year to 5.5 bln rupees and that from the Commonwealth of Independent States declined 2% to 1.9 bln rupees. Russia is one of the key markets for the company.

Its domestic sales for the quarter increased by 15% on year to 13.3 bln rupees, aided by the integration of Sanofi's vaccine business, Dr Reddy's management said. The company now emerged as the 10th-largest pharmaceutical company in terms of market share. The company launched 13 new brands in the country.

In Europe, the drugmaker's revenue rose 4% on year to 5.3 bln rupees in Apr-Jun, primarily due to an improvement in its base business and new product launches. The company launched 12 new products in Europe during the quarter. Its pharmaceutical services and active ingredients business saw a 14% rise on year to 7.66 bln rupees.

MARGINS

Dr Reddy's earnings before interest, tax, depreciation and amortisation margin was under pressure for the quarter. For Apr-Jun, the company reported an EBITDA margin of 28.2%, as against 31.7% a year ago. The decline was primarily because of increased operational costs and pricing pressure in some regions.

Dr Reddy's reported 22.7 bln rupees of selling and general administration expenses for the quarter, an increase of 28% on year. The company's management said the increase in expenses is primarily on account of investments made in new business initiatives, growth opportunities. Increased freight costs also impacted the margins for the quarter, the company said.

Dr Reddy's spending on research and development increased to 6.2 bln rupees, 8.1% of the total sales. The rise in R&D spending is mainly on account of a pipeline of products in biosimilars and new product development activity for generic drugs, including oncology products, to support future growth.

The company has a net cash surplus of 67.3 bln rupees as on Jun 30. The management said it will continue to look for in-organic growth opportunities and is open to buy brands, assets and collaborations. On Friday, shares of Dr Reddy's ended at 6,878.65 rupees on the National Stock Exchange, up 0.4%.  End

Edited by Aditya Sakorkar

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