Dr. Reddy’s net profit falls 57%, Glenmark’s profit soars 47% in Q1
Mumbai: Drug makers Dr. Reddy’s Laboratories Ltd and Glenmark Pharmaceuticals Ltd reported June quarter earnings on Thursday, with the former missing market expectations and the latter beating them.
Dr. Reddy’s net profit plunged 56.6% while Glenmark’s net profit rose 47%.
Price erosion in the US and destocking ahead of the implementation of goods and services tax (GST) in India hit Dr. Reddy’s earnings in the quarter ended June, while Glenmark benefited from Zetia generic sales and new product approvals in the US.
Dr. Reddy’s reported consolidated net profit of Rs66.6 crore in the June quarter, as against Rs153.5 crore in the same period a year ago. Sales were up 2% on year at Rs3,248.9 crore, compared with Rs3,185.7 crore last year.
Meanwhile, Glenmark’s consolidated net profit rose to Rs333.4 crore from Rs226.8 crore a year ago. Net sales increased 22% to Rs2,329.4 crore.
A Bloomberg poll of 13 brokerages estimated Dr. Reddy’s net profit at Rs296.8 crore and sales at Rs3,442.9 crore, while a poll of 12 broking houses pegged Glenmark’s profit at Rs294.8 crore and sales at Rs2,325.4 crore.
Shares of Dr. Reddy’s ended down 3.3% at Rs2,621.45 on the BSE. Glenmark’s results were declared post market hours. The company’s stock ended up 1.3% at Rs715.75. The benchmark Sensex index closed unchanged at 32,383.30 points.
“Our first quarter’s results of FY18 have been below expectations. While headwinds in the form of price erosion due to US customer consolidation continue, a lower contribution from new product launches in the US and GST implementation in India also impacted our performance,” G.V. Prasad, co-chairman and chief executive of Dr. Reddy’s said in a press release.
The company’s generic drug sales in North America declined 4% to Rs1,494.6 crore and sales in the domestic market dropped 10% to Rs468.7 crore. However, sales in emerging markets and Europe were up 34% and 28%, respectively.
Price erosion and increased competition in key products like valganciclovir, decitabine, azacitidine hurt the US business, Dr. Reddy’s said.
Dr. Reddy’s profit declined due to lower operational performance, higher depreciation and lower interest income. Earnings before interest, tax, depreciation and amortization (Ebitda) was down on account of lower gross margins and higher research and development (R&D) expenses, broking firm ICICI Securities said in a note.
Dr. Reddy’s R&D spend was Rs510 crore, which is 15.3% of revenue. In the same quarter last year, the corresponding figure was 14.8%.
Glenmark’s sales in the US surged 49.7% to Rs1,045.0 crore. The company benefited from marketing exclusivity for the generic version of cholesterol drug Zetia. The company launched three products and got approval for two products during the quarter.
Glenmark’s domestic sales increased 15.2% to Rs616.4 crore, while sales in Europe rose 8.1% to Rs162.1 crore.
Although GST-related destocking affected Glenmark’s sales in the month of June, strong growth witnessed during April and May pushed up the overall sales numbers for the quarter, said an analyst, who did not wish to be identified.
“Despite challenges in India and US markets, the performance of these businesses has been good. In India, we continue to be one of the fastest growing companies in the pharma market. In the US, after a steady stream of product approvals in the first quarter, the base business has rebounded well,” Glenn Saldanha, chairman and managing director of Glenmark said in a press release.