Drug maker Dr Reddy’s Laboratories Ltd’s (DRL) December quarter results appear disappointing at first sight. Consolidated revenues (prepared using International Financial Reporting Standards) declined 6% to Rs1,730 crore and it reported a loss of Rs522 crore compared with a profit of Rs245 crore a year ago. But a few exceptional factors caused this decline in performance, and its underlying performance was relatively better.
That brings alive the prospect of the company doing much better in future quarters, partly explaining why its stock price was up by nearly 2% despite poor headline numbers.
DRL’s US sales in the December 2008 quarter included revenues during the 180-day exclusivity period, from sumatriptan. Once it lost exclusivity, more firms entered, leading to a fall in revenues.
Excluding this product’s revenues, DRL’s overall sales grew by 17% over the same period last year. Its net profit, however, was hit because of a write-down in its Betapharm Arzneimittel GmbH operations. This is a non-cash expenditure of Rs860 crore to cover impairment of intangible assets and goodwill.
After excluding sumatriptan, US generic revenues were flat due to product recalls that affected its normal supplies. There have also been delays in a few product launches, which the firm expects early next fiscal. Thus, the US market should do much better in future quarters.
Meanwhile, Russia, India and its pharmaceutical services and active ingredients business are driving performance. With most of the negatives out of the way, its performance can be expected to improve from here on.
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