Lower generics income dents Dr Reddy’s profit

Lower generics income dents Dr Reddy’s profit
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First Published: Thu, Oct 25 2007. 12 26 AM IST

G.V. Prasad, vice-chairman and CEO, Dr Reddy’s.
G.V. Prasad, vice-chairman and CEO, Dr Reddy’s.
Updated: Thu, Oct 25 2007. 12 26 AM IST
Absence of revenues from authorized generics, a strong rupee versus the dollar and pressure on German subsidiary Betapharm Arzneimittel GmbH’s margins have all pulled down revenues and net profit of Dr Reddy’s Laboratories Ltd by 37% and 5%, respectively, during July-September quarter this year.
G.V. Prasad, vice-chairman and CEO, Dr Reddy’s.
The pharmaceutical company posted revenues of Rs1,267 crore during the quarter, compared with Rs2,003 crore in the corresponding quarter last fiscal. The company posted anet profit of Rs267.2 crore against Rs279.8 crore in the year-ago quarter.
Dr Reddy’s net profit would have been far less than announced in the absence of the benefit of reversal of deferred tax liability relating to Betapharm to the tune of Rs150 crore in the quarter.
“If one excludes the tax write-back and foreign exchange gains, the net profit works out to be Rs118 crore, which is below my estimates,” said Vikas Sonewale, sector analyst with Religare Securities Ltd. A decline in the generics business in the US and Europe by 64% and custom pharmaceutical business by 30% over last year have depressed the company’s performance at the operating level, he added.
A Mint poll of five analyst firms had predicted a revenue of Rs1,310.63 crore and profit of Rs175.2 crore. The pharma giant’s stocks closed on Wednesday at Rs629.95—down 0.78% lower on the Bombay Stock Exchange. The benefit in income tax through deferred tax liability was primarily on account of lowering of the tax rate to 30% from 39% at the time of Betapharm’s acquisition, said Satish Reddy, Dr Reddy’s managing director.
He said the company’s revenue grew 20% in dollar terms excluding the upsides of Rs780 crore from authorized generics in second quarter of last fiscal.
Authorized generics had accounted for 39% of the company’s revenues in the second quarter of last year, where it sold generic versions of Proscar and Zocor during the 180-day market exclusivity period in the US.
G.V. Prasad, vice-chairman and chief executive, said Betapharm suffered a 12% decline in sales to Rs188 crore during the quarter owing to ongoing supply constraints and rupee appreciation.
To deal with the issues, the company already has started shifting drug manufacturing to India and has obtained approvals for Simvastatin and Omeprazol.
Dr Reddy’s clocked a decline of 175% in revenues from generic finished dosages at Rs440 crore—down from Rs1,210 crore in year-ago period.
Dr Reddy’s custom pharmaceutical services posted a decline of Rs120 crore—down from Rs170 crore in the corresponding quarter last year. The company showed a forex gain of Rs25.6 crore in Q2.
c.sukumar@livemint.com
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First Published: Thu, Oct 25 2007. 12 26 AM IST