Hyderabad/ New Delhi: One of the two top Indian drug makers, Dr Reddy’s Laboratories Ltd (DRL) has reported revenues in the December quarter that are 20% lower than sales in the year-ago period and incurred losses in the latest quarter mainly due to write-offs on operations at its German unit Betapharm Arzneimittel GmbH.
The drug maker posted revenues of Rs1,232 crore in the just gone by quarter, the third in its financial year, down from Rs1,543.4 crore in the comparable three months of the previous fiscal. It reported an operating loss of Rs127.1 crore in the latest quarter versus comparable operating profits of Rs210.5 crore a year ago, and a net loss of Rs84.7 crore in the December quarter as against a net profit of Rs187.9 crore in the third quarter of fiscal 2007.
DRL had Rs361 crore of shared-exclusivity drug sales in the US in the December quarter of the previous fiscal, benefits of which were absent in the latest quarter. Without this one-time effect, the company’s revenues in the US have risen to Rs170 crore in the latest quarter from Rs100 crore in the third quarter of fiscal 2007, the company’s managing director and chief operating officer K. Satish Reddy said.
The Hyderabad company suffered from reduced generic drug prices, increasing rebates to insurers and change in composition of its portfolio in Germany, senior DRL executives said. Betapharm’s revenues fell to Rs200 crore in the December quarter from Rs260 crore a year ago. “Without the amortization of Rs236.1 crore in addition to the regular amortization expenses of Rs37.9 crore, the company’s net profit for the quarter would have been at Rs103.4 crore,” said G.V. Prasad, vice-chairman and chief executive officer.
Prasad said the Betapharm business would turn around in the coming years. The immediate priority is to rework suppliers and transfer products from its major suppliers to facilities in India and to other manufacturers in Europe, he added, agreeing that fresh price cuts from April in Germany would pressure Betapharm further.
On the business outlook for the next fiscal, Reddy said his firm expects active pharmaceutical ingredients and branded generic products business in India and Russia to drive overall growth.
Drug analyst at Kotak Securities LtdAwadhesh Garg said he expected “Betapharm will continue to be a drag on DRL’s bottom line”, adding that the custom manufacturing business in Mexico will also be a laggard and benefits of shifting drug manufacturing to India will take time to accrue.
Another analyst at a Mumbai equity firm predicted more write-offs at Betapharm. “The movement from branded drugs to generic ones has just begun there and will continue,” he said, asking he or his employer not be named.
Shares of DRL closed Friday trades at Rs605.40 each on the Bombay Stock Exchange rising 6.73%, and tracking the bourse’s benchmark index, the Sensex. The firm’s results were announced after market hours.