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Dr. Reddy's Q3 and 9M FY17 Financial Results
[February 04, 2017]

Dr. Reddy's Q3 and 9M FY17 Financial Results

Dr. Reddy's Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the third quarter and nine months ended December 31, 2016 under International Financial Reporting Standards (IFRS).

Q3 FY17: Key Highlights

  • Revenues at Rs. 37.1 billion: QoQ growth: 3%
    • YoY decline: 7%
  • Gross Profit Margin at 59.1%.
  • Research & Development (R&D) spend at Rs. 5.0 billion. [13.4% of Revenues]
  • Selling, general & administrative (SG&A) expenses at Rs. 11.3 billion [YoY decline: 6%]
  • EBITDA at Rs. 8.8 billion [23.7% of Revenues]
  • Profit after tax at Rs. 4.7 billion [12.7% of Revenues]

9M FY17: Key Highlights

  • Revenues at Rs. 105.3 billion: YoY decline: 10%
  • Gross Profit Margin at 57.2%.
  • Research & Development (R&D) spend at Rs. 15.0 billion. [14.2% of Revenues]
  • Selling, general & administrative (SG&A) expenses at Rs. 35.4 billion [YoY increase: 4%]
  • EBITDA at Rs. 19.2 billion [18.2% of Revenues]
  • Profit after tax at Rs. 8.9 billion [8.5% of Revenues]

Commenting on the results, Co-chairman and CEO, G V Prasad said "Our performance in Q3 has delivered a modest sequential revenue growth of 3% over the previous quarter. Our EBITDA has improved significantly from the last quarter to Rs. 8.8 billion, on the back of enhanced emphasis on operational efficiencies and controlling of SG&A costs across all our businesses."



All amounts in millions, except EPS

       

All US dollar amounts based on convenience translation rate of I USD = Rs. 67.92


     

Dr. Reddy's Laboratories Limited and Subsidiaries

Consolidated Income Statement

 
Particulars Q3 FY17 Q3 FY16 Growth %
  ($)   (Rs.)   %   ($)   (Rs.)   %  
Revenue 546   37,065   100.0 584   39,679   100.0 (7)
Cost of revenues   223   15,166   40.9   237   16,089   40.5   (6)
Gross profit   322   21,899   59.1   347   23,590   59.5   (7)
Operating Expenses
Selling, general & administrative expenses 167 11,341 30.6 177 12,039 30.3 (6)
Research and development expenses 73 4,956 13.4 60 4,095 10.3 21
Other operating income   (3)   (187)   (0.5)   (2)   (122)   (0.3)   53
Results from operating activities   85   5,789   15.6   112   7,578   19.1   (24)
Net finance (income) / expense (1) (44) (0.1) 1 62 0.2 171
Share of profit of equity accounted investees   (1)   (89)   (0.2)   (1)   (64)   (0.2)   38
Profit before income tax   87   5,922   16.0   112   7,580   19.1   (22)
Income tax expense   18   1,221   3.3   26   1,788   4.5   (32)
Profit for the period   69   4,701   12.7   85   5,792   14.6   (19)
       

-

         

-

       
Diluted EPS   0.42   28.32       0.50   33.86       (16)
 
   

EBITDA Computation

 
Particulars Q3 FY 17   Q3 FY 16
  $   Rs.   $   Rs.
Profit before income tax 87   5,922 112   7,580
Interest income, net* (1) (53) (3) (236)
Depreciation 29 1,936 25 1,685
Amortization / Impairment   15   988   16   1086
EBITDA   129   8,793   149   10,115
EBITDA% to Revenues       23.7%       25.5%

* Includes income from Investments

 
   

Key Balance Sheet Items

 
Particulars As on 31st Dec 16   As on 30th Sep 16
  ($)   (Rs.)   ($)   (Rs.)
Cash and cash equivalents and Other current Investments   297   20,145   315   21,379
Trade Receivables   605   41,119   544   36,939
Inventories   442   30,052   420   28,516
Property, plant and equipment   842   57,209   825   56,052
Goodwill and Other Intangible assets   736   49,977   747   50,766
Loans and borrowings (current & non-current)   854   57,999   890   60,480
Trade & other payables   196   13,308   181   12,281
Equity   1,782   121,040   1,697   115,264
   

All amounts in millions, except EPS

       

All US dollar amounts based on convenience translation rate of I USD = Rs. 67.92

     

Revenue Mix by Segment [Year on year]

 
Particulars Q3 FY17   Q3 FY16 Growth %
  ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics   451   30,638   83   494   33,558   84   -9
North America       16,595           19,417       -15
Europe*       2,148           1,937       11
India       5,947           5,805       2
Emerging Markets#       5,948           6,399       -7
PSAI   80   5,400   14   75   5,082   13   6
North America       1,259           1,037       21
Europe       1,828           1,951       -6
India       409           622       -34
Rest of World       1,904           1,472       29
Proprietary Products & Others   15   1,027   3   15   1,039   3   -1
Total   546   37,065   100   584   39,679   100   -7
       
     

Revenue Mix by Segment [Sequential]

 
Particulars Q3 FY 17 Q2 FY 17 Growth %
  ($)   (Rs.)   %   ($)   (Rs.)   %  
Global Generics   451   30,638   83   427   28,995   81   6
North America       16,595           16,134       3
Europe*       2,148           1,776       21
India       5,947           6,251       -5
Emerging Markets#       5,948           4,834       23
PSAI   80   5,400   14   85   5,784   16   -7
North America       1,259           1,135       11
Europe       1,828           2,095       -13
India       409           575       -29
Rest of World       1,904           1,979       -4
Proprietary Products & Others   15   1,027   3   16   1,078   3   -5
Total   546   37,065   100   528   35,857   100   3
       

* Europe primarily includes Germany, UK and out licensing sales business

# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela

 

Segmental Analysis

Global Generics (GG)

Revenues from GG segment at Rs. 30.6 billion, year-on-year decline of 9%; primarily on account of lower contribution from North America and Venezuela. However, it grew by 6% sequentially.

  • Revenues from North America at Rs. 16.6 billion. Year-on-year decline of 15%, primarily on account of increased competition in valgancyclovir and our injectables franchise coupled with continuing pricing pressure.

    During the quarter we launched 5 new products i.e. Aripiprazole, Lamotrigene ODT, Fluoxetine Tabs, Raloxifene HCl and Nystatin - Triamcinolone Cream.

    As of 31st December 2016, cumulatively 92 generic filings are pending for approval with the USFDA (90 ANDAs and 2 NDAs under 505(b)(2) route). Of these 90 ANDAs, 59 are Para IVs out of which we believe 20 have 'First to File' status. Further, these 90 ANDAs include 7 ANDAs, acquired from Teva, of which 6 are Para IVs.
  • Revenues from Emerging Markets at Rs. 5.9 billion, year-on-year decline of 7%. [Ex-Venezuela: growth of 7%]
    • Revenues from Russia at Rs. 3.1 billion, year-on-year decline of 2%. In constant currency it declined by 5%.
    • Revenues from other CIS countries and Romania market at Rs. 1.0 billion, year-on-year growth of 16%.
    • Revenues from Rest of World (RoW) territories at Rs. 1.8 billion, year-on-year decline of 23% primarily on account of sales decline in Venezuela.
  • Revenues from India at Rs. 5.9 billion, year-on-year growth: 2.4%.
  • Revenues from Europe at Rs. 2.1 billion, year-on-year growth: 11%.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at Rs. 5.4 billion, year-on-year growth of 6%. On a sequential basis revenues declined by 7%.
  • During the quarter, 16 DMFs were filed globally of which 1 was in the US. The cumulative number of DMF filings as of 31st December, 2016 was 782.

Proprietary Products (PP)

Zembrace™Sym Touch ™(Suma 3 mg) injection and Sernivo™ (betamethasone dipropionate) Spray, 0.05% are gradually gaining traction in prescriptions.

Income Statement Highlights:

  • Gross profit margin at 59.1% and declined by ~40 bps over that of previous year, primarily on account of price erosion in the US. This has been caused due to new competitor's entry in some of key molecules. Gross profit margin for GG and PSAI business segments are at 64.1% and 28.3% respectively.
  • SG&A expenses at Rs. 11.3 billion, year-on-year decline by 6%. After normalization of the Venezuela base effect and the settlement charge paid to Novartis wrt zoledronic acid in previous year, there is a marginal increase which is largely attributable to normal salary increments, headcount and other costs.

    Sequentially, there is a decline of 4%. Normalized for the NPPA charge that we took last quarter, there is no major variance.
  • Research & development expenses at Rs. 5.0 billion. As a % to Revenues- Q3 FY 17:13.4% | Q2 FY 17: 14.5% | Q1 FY 17: 14.8%]. Current quarter also includes spend towards the IPR&D assets in-licensed from Xenoport and Eisai. Focus continues on building complex generics, biosimilars and differentiated products pipeline.
  • Net Finance income at Rs. 44 million compared to the net finance expense of Rs. 62 million in Q3FY16. The incremental benefit of Rs. 106 million is on account of:
    • Net foreign exchange loss of Rs. 10 million in the current quarter vs net foreign exchange loss of Rs. 297 million in the previous year
    • Increase in profit on sales of investments by Rs. 36 million.
    • Net increase in interest expense of Rs. 218 million.
  • Profit after Tax at Rs. 4.7 billion
  • Diluted earnings per share is at Rs. 28.32
  • Capital expenditure is at Rs. 3.0 billion.

Earnings Call Details (06:30 pm IST, 08:00 am EST, February 4, 2017)

The Company will host an earnings call to discuss the performance and answer any questions from participants. This call will be accessible through an audio dial-in and a web-cast.

Audio conference Participants can dial-in on the numbers below

Primary number:    

91 22 3960 0616

International Toll Free Number

USA

18667462133

 

UK

08081011573

 

Singapore

8001012045

 

Hong Kong

800964448

 
Playback of call:

91 22 3065 2322, 91 22 6181 3322

Conference ID:

375#

Web-cast

More details will be provided through our website, www.drreddys.com

 

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 gastro-intestinal, cardiovascular, diabetology, oncology, pain management and dermatology. Dr. Reddy's operates in markets across the globe. Our major markets include - USA, India, Russia and other CIS countries. 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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