Dr Reddy’s Q3 PAT rises slightly; Indian operations grow by 34 per cent

Telangana based integrated pharmaceuticals company Dr Reddy’s Laboratories posted its Q3FY16 results on Tuesday. Company posted a marginal increase in profits for the quarter, whereas sales revenue for the quarter increased by 3 per cent Y-O-Y (year on year).

Consolidated sales revenue for the quarter ending December 2015 increased by 3.2 per cent to Rs 3968 crore as against Rs 3843 crore achieved during the same period in the previous fiscal. The sales growth was mainly driven by strong performance witnessed in European and Indian operations.

EBITDA for the quarter in review increased by 8.1 per cent to Rs 1022.7 crore as against Rs 946 crore Y-O-Y. Margins in Q3 increased by 118 basis points to 25.8 per cent. Improvement in margins were on back of reduction in the prices of raw material, which declined by 30 per cent on a Y-O-Y basis. However, selling and administrative expenses for the quarter increased by 8 per cent Y-O-Y. The cost was on a higher side due to the remediation cost on account of settlement of litigation with Novartis. Dr Reddy’s profit for the third quarter increased marginally by 0.81 per cent to Rs 579.2 crore as against Rs 574.53 crore attained in the corresponding quarter of the previous fiscal.

Company's Research & Development (R&D), saw a fall of 5.1 per cent Y-O-Y to Rs 409.5 crore. Generic business continued to be a major revenue driver as its total share of revenues stands at 84 per cent for Q3. North America and India were the main generic markets for the company as they added 58 and 17 per cent respectively towards the total revenue from generic drug sales. Indian business grew by a strong 34 per cent Y-O-Y. North American business grew by 18 per cent for the quarter mainly on account of sustained performance of the injectable franchise, despite US FDA concerns. Emerging markets continued to drag down as it declined by 28 per cent Y-O-Y.

Dr Reddy’s filed for four new generics with the US FDA during the quarter. Cumulatively, 82 generic filings are pending for the approval with the regulator, out of which 18 have ‘First to file’ status.

Company in a note informed about the ongoing talks with the Venezuela government to facilitate the payments related to import of pharmaceuticals products.

Reacting to the muted set of numbers and fears related to future approval of drugs from the US FDA, the stock plunged more than 4 per cent to hit an intra-day low of Rs 2948 before closing the day at Rs 2952, down 3.85 per cent on NSE.