Dr. Reddy’s Q3 FY19 Financial Results

HYDERABAD, India--(BUSINESS WIRE)-- Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter ended December 31, 2018 under International Financial Reporting Standards (IFRS).

Commenting on the results, CEO and Co-chairman, G.V. Prasad said “We continued to improve our performance in the third quarter of FY 19, supported by significant growth in emerging markets and India, pickup in new product launches, and improvements in cost structure. We are on track towards delivering sustainable & profitable growth.”

All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.69.58

* ~ Rs. 930 million impact on account of reforms in US tax laws

* Includes income from Investments

All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.69.58

Segmental Analysis

Global Generics (GG)

Revenues from GG segment at Rs.31.3 billion. Year-on-year growth of 4%, primarily driven by contributions from Emerging Markets, India and favorable forex. Sequentially the sales grew by 3%.

• Revenues from North America at Rs.14.8 billion. Year-on-year decline of 8%. Sequential growth of 4%, aided by higher volume offtake, new launches and favorable forex offset by higher price erosion in some of the key molecules.

  During the quarter, 10 new products were launched and we have filed 3 ANDAs with the USFDA.

  As of 31^st Dec 2018, cumulatively 103 generic filings are pending for approval with the USFDA (100 ANDAs and 3 NDAs under 505(b)(2) route). Of these 100 ANDAs, 59 are Para IVs, and we believe 33 have ‘First to File’ status.

• Revenues from Emerging Markets at Rs.7.7 billion. Year-on-year growth is 31%, primarily on account of new launches, traction in new markets and improved volume offtake in our existing markets. Sequential growth is 3%.
  • Revenues from Russia at Rs.4.1 billion. Year-on-year growth of 22%, driven by both new launches and improvement in base business, marginally offset by unfavorable forex.
  • Revenues from other CIS countries and Romania market at Rs.1.4 billion. Year-on-year growth of 45%, driven by new products and volume uptake in the base business.
  • Revenues from Rest of World (RoW) territories at Rs.2.2 billion. Year-on-year growth of 43%, primarily driven by new products, traction in new markets and volume uptake in base business.

• Revenues from India at Rs.6.7 billion. Year-on-year growth of 10%, primarily driven by volume traction and new products. Sequentially the revenues declined by 2%.

• Revenues from Europe at Rs.2.0 billion. Year-on-year growth of 1%, primarily on account of new products and volume uptake largely offset by higher price erosion in some of the key molecules. Sequential growth is 6%.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI at Rs.5.9 billion, with year-on-year growth of 9% and sequential decline of 2%. The YoY growth is largely driven by custom pharmaceutical services business.

Proprietary Products (PP)

• Revenues from PP at Rs.735 million, with year-on-year decline of 66% and sequential decline of 5%. The YoY decline is largely due to one-time milestone income of Rs.1.3 billion recorded during Q3 FY18.

Income Statement Highlights:

• Gross profit margin at 53.9%.
  • Declined by ~240 bps over that of previous year and by ~110 bps sequentially
  • Decline in gross profit margins both year-on-year and sequentially is largely on account of price erosion in some of our key molecules in the US partly offset by favorable foreign exchange and better manufacturing overhead leverage.
  • Gross profit margin for GG and PSAI business segments are at 57.6% and 30.8% respectively.

• SG&A expenses at Rs.12.0 billion, remained flat on a year-on-year basis and declined by 3% sequentially. Spend control is largely on account of cost optimization and productivity improvement initiatives.
• R&D expenses at Rs.3.7 billion, year-on-year decline of 21%. Decline is largely on account of timing variation in development related activities coupled with productivity improvement measures. As % to revenues- Q3 FY19: 9.5% | Q2 FY 19: 10.8% | Q3 FY18: 12.3%.

• Other (income)/expense, net includes gain of Rs.423 million on account of sale of the API business manufacturing unit located at Jeedimetla, Hyderabad.
• Net finance expense at Rs.13 million compared to net finance income of Rs.851 million in Q3 FY18. The movement is largely due to higher income from investments, in the previous year.
• Profit after Tax at Rs.4.9 billion. Effective tax rate for the quarter is 16.4%. Lower rate is primarily on account of reduction of the federal income tax rate from 35% to 21% in the United States and claim of deduction of an item in the current quarter, which was previously disallowed for tax purpose.
• Diluted earnings per share is at Rs.29.21
• Capital expenditure is at Rs.1.5 billion.

Earnings Call Details (06:30 pm IST, 08:00 am EST, February 1, 2019)

About Dr. Reddy’s: Dr. Reddy’s Laboratories Ltd. (BSE: 500124, NSE: DRREDDY, NYSE: RDY) is an integrated pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Our major therapeutic areas of focus are gastrointestinal, cardiovascular, diabetology, oncology, pain management and dermatology. Dr. Reddy’s operates in markets across the globe. Our major markets include – USA, India, Russia & CIS countries, and Europe. For more information, log on to: www.drreddys.com

Disclaimer: This press release may include statements of future expectations and other forward-looking statements that are based on the management’s current views and assumptions and involve known or unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to without limitation, (i) general economic conditions such as performance of financial markets, credit defaults , currency exchange rates , interest rates , persistency levels and frequency / severity of insured loss events (ii) mortality and morbidity levels and trends, (iii) changing levels of competition and general competitive factors, (iv) changes in laws and regulations and in the policies of central banks and/or governments, (v) the impact of acquisitions or reorganisation , including related integration issues.

The company assumes no obligation to update any information contained herein.

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