Dr. Reddy’s Q1 FY10 Results

HYDERABAD, India--(BUSINESS WIRE)--Dr. Reddy’s Laboratories Ltd. (NYSE:RDY) today announced its unaudited financial results for the first quarter ended June 30, 2009 under International Financial Reporting Standards (IFRS).

Q1 FY10 Key Highlights

• Overall revenues at Rs. 18.2 billion ($381 million) in Q1 FY10 as against Rs. 15.0 billion ($315 million) in Q1 FY09, representing a growth of 21%.
  • The growth was largely driven by sumatriptan and by the key markets of North America and India.
  • Excluding revenues from sumatriptan, the YoY growth is at 7%.
• EBITDA at Rs. 4.4 billion ($91 million) in Q1 FY10 as against Rs. 2.3 billion ($48 million) in Q1 FY09, representing a growth of 90%.
• PAT at Rs. 2.4 billion ($51 million) in Q1 FY10 as against Rs. 1.1 billion ($23 million) in Q1 FY09, representing a growth of 120%. This translates to an EPS of Rs. 14.4 ($0.3) in Q1 FY10.
• PAT adjusted for exceptional items is at Rs. 2.8 billion ($60 million) in Q1 FY10 as against Rs. 1.3 billion ($28 million) in Q1 FY09. This translates to an adjusted EPS of Rs. 16.8 ($0.4) in Q1 FY10.
• Revenues from Global Generics business at Rs. 13.0 billion ($273 million) in Q1 FY10 as against Rs. 10.3 billion ($215 million) in Q1 FY09. YoY growth of 27% driven by sumatriptan and key markets of North America and India.
• Revenues from Pharmaceutical Services & Active Ingredients (PSAI) increase by 6% to Rs. 4.9 billion ($102 million) in Q1 FY10 as against Rs. 4.6 billion ($97 million) in Q1 FY09.

• During the quarter, the company launched 24 new generic products, filed 22 new generic product registrations and filed 4 DMFs globally.

All figures in millions, except EPS				All dollar figures based on convenience translation rate of 1USD = Rs 47.74
Dr. Reddy’s Laboratories Limited and Subsidiaries
Unaudited Condensed Consolidated Income Statement
				Q1 FY10						Q1 FY09
Particulars		Index		($)		(Rs.)		%		($)		(Rs.)		%		Growth %
Revenue		A		381		18,189		100		315		15,038		100		21
Cost of revenues		B		168		8,017		44		158		7,544		50		6
Gross profit		C = A-B		213		10,172		56		157		7,494		50		36
Operating Expenses
Selling, general & administrative expenses(a)		D		124		5,927		33		107		5,085		34		17
Research and development expenses, net		E		21		985		5		22		1,050		7		(6)
Write down of intangible assets		F		-		-		-		-		-		-		-
Write down of goodwill		G		-		-		-		-		-		-		-
Other (income)/expenses, net		H		(1)		(35)		(0)		5		241		2		-
Total Operating Expenses		I= D+E+F+G+H		144		6,877		38		134		6,376		42		8
Results from operating activities		J = C-I		69		3,295		18		23		1,118		7		195
Finance income (b)		K		(2)		(88)		(0)		(7)		(320)		(2)		(73)
Finance expenses (c)		L		5		223		1		5		243		2		(8)
Finance expenses, net		M = K+L		3		135		1		(2)		(77)		(1)		(275)
Share of profit/(loss) of equity accounted investees		N		0		11		0		-		-		-		-
Profit before income tax		O = J-M+N		66		3,171		17		25		1,195		8		165
Income tax expense		P		(15)		(726)		(4)		(2)		(84)		(1)		764
Profit for the period		Q = O+P		51		2,445		13		23		1,111		7		120
Attributable to :
Equity holders of the company		R		51		2,445		13		23		1,111		7		120
Minority interest		S		-		-		-		-		-		-		-
Profit for the period		T = R+S		51		2,445		13		23		1,111		7		120
Weighted average no. of shares o/s		U				168.9						168.9
Diluted EPS		V = R/U		0.3		14.5				0.1		6.6

Notes:

(a) Includes amortization charges of Rs. 507 million in Q1 FY10 and Rs. 377 million in Q1 FY09.

(b) Includes forex gain of Rs. 176 million in Q1 FY09.

(c) Includes forex loss of Rs. 84 million in Q1 FY10.

Key Balance Sheet Items		(in millions)
Particulars		As on 30th June 09				As on 31st Mar 09
		($)		(Rs.)		($)		(Rs.)
Cash and cash equivalents		130		6,184		117		5,596
Trade and other receivables		280		13,374		306		14,592
Inventories		292		13,933		277		13,226
Property, plant and equipment		439		20,970		437		20,882
Goodwill and Other Intangible assets		456		21,768		465		22,179
Loans and borrowings (current & non current)		337		16,108		413		19,701
Trade accounts payable		144		6,873		125		5,987
Equity (including reserves)		939		44,832		881		42,045

Business Highlights

• Overall revenues at Rs. 18.2 billion ($381 million) in Q1 FY10 as against Rs. 15.0 billion ($315 million) in Q1 FY09, representing a growth of 21%.
  • The growth was largely driven by sumatriptan.
  • Excluding revenues from sumatriptan, the YoY growth is at 7%, driven by the key markets of North America and India.
• Operating income is at Rs. 3.3 billion ($69 million) in Q1 FY10 as against Rs. 1.1 billion ($23 million) in Q1 FY09.
• EBITDA at Rs. 4.4 billion ($91 million) in Q1 FY10 as against Rs. 2.3 billion ($48 million) in Q1 FY09, representing a growth of 90%.
• Revenues from Global Generics business at Rs. 13.0 billion ($273 million) in Q1 FY10 as against Rs. 10.3 billion ($215 million) in Q1 FY09. YoY growth of 27% driven by sumatriptan and key markets of North America and India.
• Revenues from Pharmaceutical Services & Active Ingredients (PSAI) increase by 6% to Rs. 4.9 billion ($102 million) in Q1 FY10 as against Rs. 4.6 billion ($97 million) in Q1 FY09.

• During the quarter, the company launched 24 new generic products, filed 22 new generic product registrations and filed 4 DMFs globally.

Segmental Analysis

Global Generics

• Revenues from Global Generics business at Rs. 13.0 billion ($273 million) in Q1 FY10 as against Rs. 10.3 billion ($215 million) in Q1 FY09. YoY growth of 27% driven by sumatriptan and key markets of North America and India.
• Revenues from North America at Rs. 6.0 billion ($126 million) in Q1 FY10 as against Rs. 2.8 billion ($59 million) in Q1 FY09.
  • Excluding revenues from Sumatriptan, the growth of 42% in North America was driven by high volume growth across existing products.
  • The cumulative ANDA filings are 139. Total of 67 ANDAs pending at the USFDA addressing innovator sales of $68 billion, of which 28 are Para IVs and 16 are FTFs.
• Revenues from Europe at Rs. 2.1 billion ($44 million) in Q1 FY10 as against Rs. 3.0 billion ($63 million) in Q1 FY09, representing a degrowth of 30%.
  • Revenues from betapharm decrease by 36% to Rs. 1.6 billion ($34 million) in Q1 FY10 from Rs. 2.5 billion ($53 million) in Q1 FY09. This decrease is on account of the effect of destocking in the market.
    • Supplies for AOK tender have commenced, with AOK products witnessing significant increase in volumes, while the volumes for non-AOK product have fallen.
    • The sales force at betapharm was restructured to reduce to approximately 50 as of June 2009 from 110 as of March 2009.
  • Revenues from Rest of Europe grew by 6% to Rs. 503 million ($11 million) in Q1 FY10. The growth is largely contributed by UK with sales of Rs. 362 million ($8 million) representing a growth of 23%.
• Revenues from Russia & Other CIS markets at Rs. 1.9 billion ($39 million) in Q1 FY10 as against Rs. 1.9 billion ($40 million) in Q1 FY09, representing a degrowth of 3%.
  • Revenues in Russia remain at Rs. 1.5 billion ($32 million) in Q1 FY10 as against Rs. 1.5 billion ($31 million) in Q1 FY09; YoY growth of 2%. However in rouble terms, the growth is at 18% YoY and 5% sequentially.
    • Despite a degrowth in volumes, the secondary sales trend for April & May indicates a rouble growth of 46% vis-à-vis industry’s growth of 34%.
  • Revenues in Other CIS markets decrease to Rs. 342 million ($7 million) in Q1 FY10 as against Rs. 429 million ($9 million) in Q1 FY09. YoY degrowth of 20%.
• Revenues in India increase to Rs. 2.4 billion ($50 million) in Q1 FY10 from Rs. 2.2 billion ($46 million), representing a growth of 9% largely on account of key brands, Omez, Nise, Omez-DSR and Razo.
  • Sequential growth of 15% largely contributed by volume growth of 14%.
  • The secondary sales trend for April & May indicate a growth of 11.4% for Dr. Reddy’s as against the industry growth of 10.4%.
  • 14 new products launched during the quarter.

Pharmaceutical Services and Active Ingredients

• Revenues from Pharmaceutical Services & Active Ingredients (PSAI) increase by 6% to Rs. 4.9 billion ($102 million) in Q1 FY10 as against Rs. 4.6 billion ($97 million) in Q1 FY09; YoY growth of 6% driven by the regions of Europe and RoW as well as the benefit of rupee depreciation against the dollar.
  • Growth was driven by products of Gemcitabine, Montelukast, Sumatriptan and Levetiracetam.
  • The order book status of active ingredients as of June 2009 is up by 27% from March 2009.
  • During the quarter, 4 DMFs were filed globally, with 3 in Canada and 1 in RoW. The cumulative DMF filings till date are 355.

Income Statement Highlights:

• Gross profit increase by 36% to Rs. 10.2 billion ($213 million) in Q1 FY10 as against Rs. 7.5 billion ($157 million) in Q1 FY09. Gross profit margins on total revenues at 56% as against 50% in Q1 FY09, largely driven by higher margins on sumatriptan.
• Selling, General & Administration (SG&A) expenses increase to Rs. 5.9 billion ($124 million) in Q1 FY10 from Rs. 5.1 billion ($107 million) in Q1 FY09; YoY growth of 17%.
  • However excluding the exit costs of sales force at betapharm amounting to Euros 7.2 million and the costs related to closure of the Atlanta research facility amounting to $1.5 million, the SG&A expenses grew by 6%.
• Other operating income of Rs. 35 million in Q1 FY10 as against Other operating expenses of Rs. 242 million in Q1 FY09. The change is on account of :
  • Provision for damages of Rs. 515 million in Q1 FY09 on account of the German court upholding the validity of the olanzapine patent in Germany.
  • Benefit of negative goodwill of Rs. 150 million in Q1 FY09, relating to the acquisition of facilities from Dow Pharma.
• R&D expenses remain at Rs. 985 million in Q1 FY10.
• Finance costs (net) are at Rs. 135 million in Q1 FY10 as against Finance income (net) at Rs. 77 million in Q1 FY09. The change is mainly on account of :
  • Net forex loss of Rs. 84 million in Q1 FY10 as against net forex gain of Rs. 176 million in Q1 FY09.
  • Net interest expense of Rs. 59 million in Q1 FY10 as against Rs. 174 million in Q1 FY09.
• PAT at Rs. 2.4 billion ($51 million) in Q1 FY10 as against Rs. 1.1 billion ($23 million), representing a growth of 120%.
• PAT adjusted for exceptions is at Rs. 2.8 billion ($60 million) as against Rs. 1.3 billion ($28 million) in Q1 FY09, representing a growth of 116%.
• EPS of Rs. 14.4 ($0.3) in Q1 FY10 as against Rs. 6.6 ($0.1) in Q1 FY09.
• Capital expenditure for Q1 FY10 is at Rs. 692 million ($14 million).

About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE:RDY) is an emerging global pharmaceutical company with proven research capabilities. The Company is vertically integrated with a presence across the pharmaceutical value chain. It produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The Company conducts research in the areas of cancer, diabetes, cardiovascular, inflammation and bacterial infection.

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

Notes

1.  Financial discussions are on a consolidated basis as per IFRS.

2.  Detailed analysis of the financials is available on the Company’s website at www.drreddys.com.