Dr. Reddy’s posts 59% decline in net profit
Hyderabad: Dr.Reddy’s Laboratories Ltd, India’s second largest drug maker by sales, on Tuesday said September-quarter net profit fell 59% because of weak sales in North America and loss of business in Venezuela.
Net profit fell to Rs295 crore in the quarter to September from Rs721.8 crore a year ago while net sales fell 10% to Rs3,585.7crore.
The results were below analyst estimates. A Bloomberg poll of 26 analysts estimated net profit at Rs346.7 crore, while 27 analysts estimated net sales at Rs3,547.4 crore.
The drug maker said all its major businesses showed a sequential improvement, with revenue growing 11% and earnings before interest, tax, depreciation and amortization (Ebitda) by 61%. “We have (made) considerable progress in our remediation efforts and continue to work on addressing the concerns of the regulators,” said G.V. Prasad, co-chairman and chief executive of Dr. Reddy’s. “Looking ahead, we will continue to focus on launching new products in our generics business, improving productivity and strengthening our quality management systems.”
The North America business, which contributes more than half of generic sales, declined 13% to Rs1,613.4 crore, primarily on increased competition coupled with pricing pressure and moderation in volume sales, the firm said.
During the quarter, the firm launched heartburn pill omeprazole sodium bicarbonate, cardiovascular drug nitroglycerin SLT, vitamin-D paricalcitol injection and antidepressant bupropion SR.
As on 30 September, Dr.Reddy’s cumulatively had 85 generic filings pending for approval with the US Food and Drug Administration (FDA).
Sales in the emerging markets business, that includes Russia and Venezuela, declined 27% to Rs480 crore. The Russian generic business dropped 8% to Rs270 crore and rest-of-the world (RoW) declined 53%, primarily on account of no sales in Venezuela. Venezuela, which was Dr. Reddy’s fourth largest contributor with sales of $136 million in fiscal 2015, has imposed curbs on transferring money out of the country after it ran short of foreign exchange due to a slump in crude oil prices and a worsening economy.
Revenue from India grew 14% to Rs630 crore. Dr.Reddy’s spent Rs520 crore, or 14.5% of revenue, in the second quarter on research and development.
Dr.Reddy’s said it completed remediation work at three of its plants that are under the FDA scanner and that it had requested a re-inspection.
“We are expecting the agency to inspect our plants,” said Abhijit Mukherjee, chief operating officer. It has spent about $40 million on external consultants for remediation.
Dr Reddy’s said last month Canadian drug regulator Health Canada had inspected and cleared CTO Unit-VI at Srikakulam that produces active pharmaceutical ingredient (APIs). The Srikakulam plant was earlier cleared by the Australian regulator—Therapeutic Goods Administration (TGA).
Srikakulam is Dr.Reddy’s key API plant that contributed about 10-12% of total sales.
The firm last November received a warning from FDA for alleged violations of manufacturing standards at its API plants at Srikakulam in Andhra Pradesh, Miryalaguda in Telangana, and an oncology formulations facility in Visakhapatnam (Andhra Pradesh).
Mukherjee said the firm is expecting more product approvals in the second half.
“Dr Reddy’s posted results lower than expected on net profit front, while the sales were marginally higher than expected and operating profits, much lower than expected,” said Sarabjit Kour Nangra, vice president, research – pharma at Angel Broking Ltd.
Shares of Dr.Reddy’s gained 3.59% to close at Rs.3,200.45 on the Bombay Stock Exchange on Tuesday, while the benchmark Sensex declined 0.31% to 28,091.42 points.