Dr Reddy’s returns to profit with Rs166 cr gain

Dr Reddy’s returns to profit with Rs166 cr gain

Hyderabad: India’s second largest drugmaker by sales, Dr Reddy’s Laboratories Ltd, returned to quarterly profits and was optimistic for the fiscal, but that did little to cheer analysts worried about its sales.

The firm didn’t do well in the US and Europe, key markets for Indian generic drug makers, but it made up with improved sales from India and Russia.

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Even its launch of a generic version of omeprazole, used to treat stomach ulcers and acid reflux, in the US in December failed to give its revenue a boost. The drug was expected to add to its fourth-quarter revenue, but sales have not increased and gains will only be seen in the coming months, Dr Reddy’s said.

Dr Reddy’s posted a profit of Rs166 crore for the three months to 31 March against a loss of Rs977 crore a year ago, when it had huge one-time write-offs related to its acquisition in Germany. Revenue fell 17% to Rs1,624 crore.

A Reuters poll of brokerages had estimated quarterly profit at Rs202 crore on a revenue of Rs1,754 crore.

“We think the worst is over," vice-chairman and chief executive G.V. Prasad said announcing the results. “We do not expect any further degrowth or impairment at the moment."

For the full year, Dr Reddy’s saw a muted revenue growth of 1% to Rs7,028 crore because of multiple product recalls and as an exclusive sales period in the US for anti-migrane drug sumatriptan ended.

It posted a net profit of Rs106.8 crore against a loss of Rs516.8 crore the previous year. Adjusting for a non-cash impairment charge of Rs860 crore, workforce restructuring costs at its German operations of Rs49.6 crore and other one-time charges, net profit for 2009-10 rose 10% to Rs920 crore.

Revenue of Dr Reddy’s global generics operation, though, fell 2% because of a 15% drop in US sales after the exclusivity for sumatriptan ended.

Sales at its German operations fell 26% because of a shift to a tender-based market.

In India, though, Dr Reddy’s, which saw the highest number of product launches in fiscal 2010 at 62, registered a 20% growth in domestic sales, higher than the industry average of 18%.

Sales in Russia rose 38% for the year in rouble terms, driven by price increases.

In fiscal 2011, Dr Reddy’s expects growth from other limited-competition launches such as anti-allergic drug Allegra D-24 (fexofenadine), anti-coagulant drug fondaparinux and anti-ulcer medicine Omez.

“We expect to maintain this level of profitability in FY11, driven by the Indian, Russian and US markets," said Prasad.

The company affirmed its outlook of $3 billion (Rs13,620 crore) revenue by 2013.

Analyst Hemant Bakhru of brokerage CLSA Asia-Pacific Markets says the $3 billion target will be difficult to touch without further one-off opportunities.

“The number of ANDA (abbreviated new drug applications) filings last year was low at 12 and this will impact the sales over the next 2-3 years," he said. “Even if the target sales for 2013 is met, it might be tough to sustain."