Dr Reddy’s posts Q3 loss, lowers FY revenue outlook

Dr Reddy’s posts Q3 loss, lowers FY revenue outlook
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First Published: Wed, Jan 20 2010. 11 00 PM IST

Ahmed Raza Khan / Mint
Ahmed Raza Khan / Mint
Updated: Wed, Jan 20 2010. 11 00 PM IST
Hyderabad: A drop in revenue in the US and write-downs in its German business has led to India’s second-largest drug maker by sales, Dr Reddy’s Laboratories Ltd, posting an unexpected Rs521.7 crore loss for the three months ended 31 December.
The firm also lowered its revenue outlook for the full year to low single-digit growth from its earlier expectation of a double-digit rise.
Ahmed Raza Khan / Mint
Dr Reddy’s had a net profit of Rs159.16 crore in the year-ago third quarter. Its latest quarterly revenue dropped 6% to Rs1,729.6 crore.
A Mint poll of four brokerages had forecast an average 2.3% rise in sales and 0.33% growth in net profit.
Shares of the firm dropped 3.47% in intraday trading, but regained to end the day at Rs1,201.50, up 1.76%, on the Bombay Stock Exchange (BSE). The Sensex, BSE’s benchmark index, ended flat at 17,474.49 points.
“The fall in US generic revenue was mainly on account of expiration of migraine drug, Sumatriptan, which contributed Rs357 crore of sales in the quarter to December 2008,” said vice-chairman and chief executive G.V. Prasad. He also blamed the recall of some products from the US.
Generic sales from the North American market fell to Rs297 crore in the latest third quarter from Rs665 crore a year ago, which included Sumatriptan.
In its German business, write-downs of intangible assets and goodwill amounted to €109 million (about Rs708 crore).
The write-down “was too high a loss for the company than what was expected this quarter,” said an analyst with a foreign brokerage, asking not to be identified. “So the guidance for the full year seems to be in the range of 4-5% as against 9% that it posted so far.”
Prasad said there was a significant deterioration in drug prices in Germany after several healthcare insurers pushed for a faster transition to a tender-based model in the country’s generics pharmaceutical market.
Umang Vohra, chief financial officer, said generic drug prices in Germany fell 30% over the previous year, while the overall market covered by tenders now stood at 80% from 40% earlier.
“We had to go in for write-downs as we lost several tenders in the German market and the business is a lot lower in terms of its worth,” said Vohra.
He added that Dr Reddy’s German subsidiary Betapharm GmbH, which it bought for €480 million, is now estimated to be worth €90 million after it lost several tenders.
Managing director and chief operating officer Satish Reddy said that from the April-June quarter onwards, the firm expects gains from its stomach ulcer and reflux drug Omeprazole.
He added that Dr Reddy’s business in markets such as Russia and India is also expected to be encouraging, with 38% and 34% growth in sales, respectively, in the latest third quarter.
(C.H. Unnikrishnan in Mumbai contributed to this story.)
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First Published: Wed, Jan 20 2010. 11 00 PM IST
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