Dr Reddy’s reports 31% increase in Q1 profit, but revenue dips

Dr Reddy’s reports 31% increase in Q1 profit, but revenue dips
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First Published: Mon, Jul 23 2007. 11 04 PM IST
Updated: Mon, Jul 23 2007. 11 04 PM IST
Hyderabad: Dr Reddy’s Laboratories Ltd, India’s largest pharmaceutical company by revenue, has reported a rise of 31% in net profit to Rs182.5 crore in the first quarter of fiscal 2008 on the back of improved margins. The net profit in the year-ago quarter was Rs139.8 crore.
But lower sales of non-patented drugs, especially in North American markets, have lowered revenues by 14.5% for the June quarter.
The Hyderabad-based company had revenues of Rs1,201.8 crore in April-June, down from Rs1,404.9 crore in the same quarter of fiscal 2007. The big spoilsport this quarter were international markets which had sales of Rs940 crore, a sharp dip from the Rs1,170 crore in the April-June quarter last year. The segment contributed 78% to total revenue, compared with 83% in the year-ago period when Dr Reddy’s was selling the cholesterol drugs Zocor and Proscar with limited competition in US owing to its “authorized generics” agreement with Merck & Co., the US patent holder on the medicines.
As a consequence, sales of the finished dosage forms of non-patented drugs too have declined by over 37% to Rs420 crore this year. North America, which contributed 42% to the segment—Europe contributed the rest—was the major contributor in this fall, with revenues at Rs180 crore this quarter against Rs430 crore in the year-ago ­quarter.
Mehta Partners India’s head of research Nimish Mehta said the dip in revenues was expected in the US markets, but “a positive effect on the results is due to reduction in sales, general and administration expenditure, which has come as a surprise.”
A Mumbai-based analyst also pointed out that the same quarter last year had a one-time spike of revenues from authorized generics deal—a benefit that elapsed in end of 2006—and hence the effect of an unusually higher base needed to be discounted from these results.
“In the absence of upside of authorized generics sales, which enable very low margins, the company could improve its margins during current quarter,” said Satish Reddy, managing director, Dr Reddy’s. Although, Dr Reddy’s had the right to sell nausea drug Ondensetron in US with limited competition in the last quarter, the benefits could not compensate the upside that Zocor and Proscar had given last year, he explained.
Ondensetron has added Rs6.6 crore and fexofenadine, the non-patented generic version of Allegra, Rs51.7 crore to sales. This point is borne out if one were to exclude the upsides from these authorized generics products from both the quarters. Revenues then increase by 10% to Rs1,180 crore in the quarter gone by from Rs1,070 crore in first quarter of last fiscal.
Some industry experts were expecting Dr Reddy’s to be hit by the 6%-plus appreciation of the rupee against the dollar. The company, however, made a forex gain of Rs28.5 crore in the quarter owing to effective hedging against dollar inflows.
While German acquisition Betapharm Arzneimittel GmbH has turned in revenues of Rs210 crore in the June quarter, up from Rs190 crore in the year-ago period, revenues from Europe are largely flat at Rs250 crore.
In the coming quarters, the company expects to launch at least 10 new products, apart from possible launch of an “over the counter” business in North American markets. Stating that the plans for transferring European Union generics products to the Indian facilities were progressing as planned, Dr Reddy’s chief executive G.V. Prasad said that the entire process would be completed in another couple of quarters.
Dr Reddy’s shares dip marginally by 0.17% to close at Rs667.10 on the Bombay Stock Exchange on Monday.
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First Published: Mon, Jul 23 2007. 11 04 PM IST