Dr Reddy's Q3 net profit rises 11% to ₹1,378.9 crore

New Delhi: Pharmaceuticals major Dr Reddy’s Laboratories Ltd. (DRL) on Tuesday beat analyst expectations to report a net profit of ₹1,378.9 crore in the third quarter ended December (Q3FY24), an 11% year-on-year rise, helped by market-share gains.

The Hyderabad-based company’s revenue rose 7% during the period to ₹7,214.8 crore.

Analysts polled by Bloomberg had estimated revenues of ₹6,981.8 crore and a net profit of ₹1,313.2 crore for the quarter.

“We delivered another quarter of highest-ever sales and robust financial performance, aided by new products performance and base business market share gain in the US, new products launch momentum, and strong performance in Europe,” said GV Prasad, co-chairman and managing director, Dr Reddy’s in a filing.

Earnings before interest, taxes, depreciation, and amortization (Ebitda) stood at ₹2,110.7 crore, translating to an Ebitda margin of 29.3% during the December quarter. R&D expenses came in at ₹556.5 crore, driven by the ongoing clinical trials and development efforts for a diverse product pipeline, including small molecules and biosimilars. Capital expenditure for the quarter was ₹310 crore, with a free cash flow of ₹20 crore and a net cash surplus of ₹5,910 crore, it said in an exchange filing.

Global generics, the company’s mainstay, reported a 7% increase in revenue to ₹6,310 crore. Domestic generics sales comprised 16% of global sales, with a revenue of ₹1,180 crore, marking a 5% increase due to new product launches in India. The company launched three new brands in the Indian market during Q3FY24. “The planned reduction in CIDMUS (cardiovascular drug) prices along with divestments had an impact,” MV Ramana, CEO of branded markets (India & emerging markets) of DRL, told Mint while explaining the slower performance in the country.

However, the company believes it will return to double-digit growth in the coming quarters in India. “We anticipate a return to double-digit growth in the coming quarters, through three growth drivers. Firstly, our innovative products segment is progressing well, with successful in-licensing of assets and a commitment to expanding our presence in untapped therapeutic areas.

Secondly, we aim to strengthen our position in consumer health, encompassing over-the-counter products and nutrition. Thirdly, our foray into digital space, currently in the experimental phase, includes digital therapeutics and direct-to-consumer initiatives, along with a focus on condition management,” Ramana added. “The outcomes of these will be assessed in FY25, with successful endeavors scaled up, and the primary pillars for growth being innovative products and consumer health.”

North America was a key contributor, accounting for 46% of global sales at ₹3,350 crore, a 9% increase. This growth was led by market-share expansion in key products, and revenue from new product launches, although it was partly offset by price erosion. The company introduced four new products in North America during this quarter.

The revlimid drug, which is used to treat adults with multiple myeloma, remains a meaningful product for the company even outside the North American markets, Erez Israeli, CEO of DRL, said. The company also has glucagon-like peptide-1 (GLP-1) products – semaglutide and liraglutide in the pipeline for all markets, including India.

Europe generics contributed 7% to total global sales, with revenues of ₹500 crore, up 15% year-on-year, propelled by six new product launches and improvements in base business volumes, despite some price erosion. Germany led the growth in Europe, with a 21% increase in revenue at ₹270 crore. It also announced that it received approval from the UK MHRA for the proposed bevacizumab biosimilar.

Emerging markets experienced a 2% decline in revenue at ₹1,280 crore, hurt by unfavorable foreign exchange movements. Revenue from Russia dropped 14% to ₹590 crore, attributed to a high base business and adverse currency exchange rates. “Currently, our growth is evident in emerging markets, particularly in certain regions of Central America where our products are gaining traction. We plan to capitalize on the ongoing product development efforts for the US and Europe, extending their reach into these emerging markets. This approach allows us to efficiently leverage our research and development initiatives for a broader global impact,” Ramana said.

Pharmaceutical services and active ingredients (PSAI) segment reported a modest 1% year-on-year growth in revenue to ₹780 crore. New product revenues and favorable foreign exchange gains were offset by price declines and lower business volumes.

During the quarter, the company acquired MenoLabs branded portfolio of women’s health-focused supplements from the US-based Amyris Inc. It earlier also announced a strategic collaboration with Coya Therapeutics for the development and commercialization of COYA 302 for the treatment of amyotrophic lateral sclerosis (ALS).