Dr. Reddy’s Q3 & 9M FY20 Financial Results

HYDERABAD, India--()--Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter ended December 31, 2019 under International Financial Reporting Standards (IFRS).

Q3 Performance Summary

     

9M Performance Summary

Rs. 4,384 Cr

   

Rs.13,028 Cr

Revenue

   

Revenue

[Down: 9% QoQ; Up: 14% YoY]

   

 [Up: 15% YoY]

 

   

54.1%

   

54.7%

Gross Margin

   

Gross Margin

[Q2 FY20: 57.5%; Q3 FY19: 53.9%]

   

[9M FY19: 54.9%]

 

   

Rs.1,267 Cr

   

Rs.3,795 Cr

SGNA expenses

   

SGNA expenses

[Down: 4% QoQ, Up: 5% YoY]

   

[Up: 4% YoY]

 

   

Rs.395 Cr

   

Rs.1,122 Cr

R&D expenses

   

R&D expenses

[9.0% of Revenues]

   

[8.6% of Revenues]

 

   

Rs.1,074 Cr

   

Rs.3,642 Cr

EBITDA

   

EBITDA

[Down: 25% QoQ; Up: 24% YoY]

   

[Up: 44% YoY]

 

   

Rs. (527 Cr)*

   

Rs.1,089 Cr

Profit before Tax

   

Profit before Tax

[Down: 169% QoQ; 191% YoY]

   

[Down: 34% YoY]

* Excluding intangibles impairment of Rs. 1,320 Cr; Profit before tax is Rs. 793 Cr

Note: Financials include other income of Rs. 3.5 billion received from Celgene pursuant to settlement for Lenalidomide

Commenting on the results, Co-Chairman and MD, GV Prasad said “The current quarter performance has been good across all our businesses and we achieved strong EBITDA margins. The profits were impacted due to trigger based impairment charge taken on a few products including gNuvaring. We continue to focus on execution and have made significant progress on quality systems and operational efficiencies”.

All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs.71.36

Dr. Reddy’s Laboratories Limited and Subsidiaries

Consolidated Income Statement

Particulars

Q3 FY20

Q3 FY19

YoY
Gr %

Q2 FY20

QoQ
Gr%

($)

(Rs.)

($)

(Rs.)

($)

(Rs.)

Revenues

614

43,838

540

38,500

14

673

48,009

(9)

Cost of Revenues

282

20,116

249

17,748

13

286

20,389

(1)

Gross Profit

332

23,722

291

20,752

14

387

27,620

(14)

Operating Expenses

 

 

 

 

 

 

 

 

Selling, General & Administrative expenses

178

12,670

169

12,036

5

185

13,217

(4)

Research and Development expenses

55

3,949

51

3,668

8

51

3,662

8

Impairment of non-current assets

185

13,200

-

-

 

50

3,560

271

Other operating (income)

(3)

(228)

(10)

(681)

(67)

(2)

(135)

68

Results from operating activities

(82)

(5,869)

80

5,729

(202)

103

7,316

(180)

Net finance (income)

(6)

(419)

0

13

 

(3)

(231)

81

Share of (profit) / loss of equity accounted investees

(2)

(176)

(1)

(89)

98

(2)

(117)

50

Profit before income tax

(74)

(5,274)

81

5,805

(191)

107

7,664

(169)

Income tax expense

6

423

13

953

(56)

(46)

(3,261)

(113)

Profit for the period

(80)

(5,697)

68

4,852

(217)

153

10,925

(152)

 

 

 

 

 

 

 

 

Diluted Earnings Per Share (EPS)

(0.48)

(34.37)

0.41

29.21

(217)

0.92

65.82

(152)

As % to Revenues

Q3 FY20

Q3 FY19

Q2

FY20

Gross Profit

54.1

53.9

57.5

SG&A

28.9

31.3

34.9

R&D

9.0

9.5

7.6

EBITDA

 

24.5

 

22.5

 

 

29.9

 

PBT*

(12.0)

15.1

16.0

PAT

(13.0)

12.6

22.8

*Excluding intangibles impairment Q3 FY20 PBT @ 18.1%

EBITDA Computation

Particulars

Q3 FY20

Q3 FY19

Q2 FY20

($)

(Rs.)

($)

(Rs.)

($)

(Rs.)

Profit before Income Tax

(74)

(5,274)

81

5,805

107

7,664

Interest (income) net*

(4)

(274)

(4)

(260)

(3)

(226)

Depreciation

30

2,130

29

2,073

32

2,306

Amortization

13

955

14

1,035

14

1,033

Impairment

185

13,200

 

-

-

 

50

3,561

EBITDA

150

10,737

121

8,652

201

14,338

* Includes income from Investments

Note: Q3 FY20 Financials include an impairment charge of Rs. 13,200 million on some of the Company’s products forming part of Global Generics and Proprietary Products segments

Q2 FY20 Financials include Rs. 6,901 million from the out-licensing income, net of expenses related to Neuro products of Proprietary Products

Q2 FY20 Financials include an impairment charge of Rs. 3,561 million on some of the Company’s products forming part of Global Generics segment

 

Key Balance Sheet Items

Particulars

As on 31st Dec,
2019

As on 30th Sep
2019

As on 31st Dec
2018

($)

(Rs.)

($)

(Rs.)

($)

(Rs.)

Cash and cash equivalents and other investments

287

20,457

427

30,446

359

25,593

Trade receivables (current & non-current)

646

46,095

591

42,153

523

37,302

Inventories

529

37,746

491

35,033

475

33,911

Property, plant and equipment

739

52,709

743

53,008

776

55,344

Goodwill and Other Intangible assets

432

30,847

621

44,340

690

49,205

Loans and borrowings (current & non-current)

229

16,320

442

31,545

614

43,836

Trade payables

250

17,810

216

15,434

223

15,939

Equity

2,083

1,48,672

2,155

1,53,816

1,902

1,35,708

Revenue Mix by Segment

Particulars

Q3 FY20

Q3 FY19

YoY
Growth %

Q2 FY20

QoQ
Growth %

(Rs.)

(Rs.)

(Rs.)

Global Generics

35,927

31,347

15%

32,816

9%

North America

15,999

14,832

8%

14,265

12%

Europe

3,093

2,030

52%

2,764

12%

India

7,636

6,741

13%

7,511

2%

Emerging Markets

9,199

7,744

19%

8,276

11%

Pharmaceutical Services and Active Ingredients (PSAI)

6,906

5,937

16%

7,107

-3%

Proprietary Products & Others

1,005

1,216

(18%)

8,086

(88%)

Total

43,838

38,500

14%

48,009

(9%)

Revenue analysis (Segment wise)

Sales for the quarter is Rs. 43.8 billion with a year-on-year growth of 14%. Sequentially, it has declined by 9%. In Q2 FY 20, we had out-licensed 2 neuro products of the proprietary products business and recognized a revenue of Rs.7.2 billion. Adjusted for this, the sequential quarter growth is 7%, and is highest ever quarterly sales from operations, without any one-off item.

Global Generics (GG)

Revenues from GG segment at Rs.35.9 billion. Year-on-year growth of 15%, primarily driven by Europe, Emerging Markets and India. Sequential growth of 9%, primarily driven by NAG, Europe and EM.

  • Revenues from North America at Rs.16.0 billion. Year-on-year revenues grew by 8%. Sequential growth of 12%, largely on account of higher volumes in some of our key molecules partly offset by price erosion in some of our key molecules. We launched five new products (Bortezomib injection, Doxercalciferol, Deferasirox dispersable tabs, Deferasirox film coated tabs, Sodium Nitroprusside injection) during the quarter.

    As of 31st December 2019, cumulatively 101 generic filings are pending for approval with the USFDA (99 ANDAs and 2 NDAs under 505(b)(2) route). Of these 99 ANDAs, 53 are Para IVs out of which we believe 32 have ‘First to File’ status.
  • Revenues from Emerging Markets at Rs.9.2 billion. Year-on-year growth is 19%. Sequential growth is 11%.
    - Revenues from Russia at Rs.4.9 billion. Year-on-year growth of 20%. Growth primarily driven by increase in volumes coupled with better realizations in some of the key molecules.
    - Revenues from other CIS countries and Romania market at Rs.1.8 billion. Year-on-year growth of 26% largely driven by new products and volume traction.
    - Revenues from Rest of World (RoW) territories at Rs.2.5 billion. Year-on-year growth of 12%, primarily driven by new products coupled with volume traction partly offset by price erosions in some of the key molecules.
  • Revenues from India at Rs.7.6 billion. Year-on-year growth of 13%, driven by new products, improved realizations in base business and volume traction. Sequential growth is 2% due to improved realizations and launch of new products.
  • Revenues from Europe at Rs.3.1 billion. Year-on-year growth of 52%, primarily on account of new products and volume traction in base business partly offset by lower realizations as few key molecules entered tenders. Sequential growth is 12% due to improvement in the sales of base business.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs.6.9 billion. Year-on-year growth of 16% largely driven by increase in volumes of API business. There is a sequential decline of 3% due to lower volumes pick up compared to Q2.

Proprietary Products Segment (PP)

  • Revenues from PP at Rs.0.2 billion, as against Rs.0.7 billion in Q3 FY 19 and Rs.7.4 billion in Q2 FY 20, as we had out-licensed our commercialized derma products in Q4 FY 19 and commercialized neuro products in Q2 FY 20.

Income Statement Highlights:

  • Gross profit margin at 54.1% vs. Q3 FY 19 margin of 53.9% and Q2 FY 20 margin of 57.5%
    - Gross profit margin for GG and PSAI business segments are at 58.2% and 30.0% respectively.
    - Year on year gross profit margins marginally improved on account of new products contribution with better margins and manufacturing leverage offset by higher price erosion in some of the key molecules in the US, Europe and RoW markets.
    - Sequentially there is a decline in margin as during the last quarter we recognized revenue from the out-licencing of PP Neuro products. On a like to like basis, the margins improved by ~260 bps due to manufacturing leverage and business mix.
  • SG&A expenses at Rs.12.7 billion, an increase of 5% on a year-on-year basis and decline of 4% sequentially. SG&A as % to sales improved by 240 bps on a year-on-year basis and on a like-to-like basis leverage improved sequentially as well.
  • In December, 2019 there has been a generic launch and an authorized generic launch for the product Nuvaring®, which has led to a considerable erosion in the value of this product for us, and accordingly we have taken an impairment charge of Rs.11.1 billion ($ 156.5 mn). In addition to this, considering the current market dynamics, we have taken an impairment charge of Rs.2.1 billion on the intangibles pertaining to other products. In total, we have taken an impairment of Rs.13.2 billion on the intangible assets for this quarter. In Q2 FY 20, we had an impairment charge of Rs.3.6 billion.
  • R&D expenses at Rs.3.9 billion. As % to Revenues- Q3 FY20: 9.0% | Q2 FY 20: 7.6% | Q3 FY19: 9.5%. Focus continues on building healthy pipeline of products across our markets.
  • Other operating income at Rs.228 million compared to Rs.681 million in Q3 FY19. Previous year includes Rs.423 million on account of sale of API business manufacturing unit located at Jeedimetla, Hyderabad.
  • Net Finance income at Rs.419 million compared to net finance expense of Rs.13 million in Q3 FY19. The increase is primarily on account of foreign exchange gain in current quarter compared to loss in Q3 FY19.
  • Loss before Tax at Rs.5.3 billion, loss is primarily on account of impairment of intangible assets. Excluding impairment, profit before tax is at Rs.7.9 billion.
  • The net tax for the quarter is at Rs.0.42 billion.
  • Diluted loss per share is at Rs.34.4
  • Capital expenditure is at Rs.1.2 billion.

     

Earnings Call Details (06:30 pm IST, 08:00 am EST, January 27, 2020)

The Company will host an earnings call to discuss the performance and answer any questions from participants.

Audio conference Participants can dial-in on the numbers below:

Universal Access Number:

   

 

   

+91 22 6280 1219

Secondary number:

   

 

   

+91 22 7115 8120

 

   

 

   

 

Local Access number:

   

 

   

+91 70456 71221

(Available all over India)

   

 

   

 

 

   

 

   

 

International Toll Free Number

   

USA

   

1 866 746 2133

 

   

UK

   

0 808 101 1573

 

   

Singapore

   

800 101 2045

 

   

Hong Kong

   

800 964 448

 

   

 

   

 

 

   

 

   

 

Playback of call:

 

   

 

 

   

+91 22 7194 5757,

+91 22 6663 5757

Conference ID:

   

 

   

58113

Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.

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.

Contacts

INVESTOR RELATIONS
AMIT AGARWAL amita@drreddys.com
(Ph: +91-40-4900 2135)

MEDIA RELATIONS
DEEP GHATAK deepghatak@drreddys.com
(Ph: +91-40-4900 2121)

Contacts

INVESTOR RELATIONS
AMIT AGARWAL amita@drreddys.com
(Ph: +91-40-4900 2135)

MEDIA RELATIONS
DEEP GHATAK deepghatak@drreddys.com
(Ph: +91-40-4900 2121)