Dr. Reddy's Q2 FY10 Results

Revenues at Rs. 18,368 million, up by 14%

EBITDA at Rs. 3,797 million, up by 51%

PAT at Rs. 2,173 million, up by 106%

• Press Release
• Source: Dr. Reddy’s Laboratories Ltd.
• On 5:47 am EDT, Friday October 23, 2009

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

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Key Highlights

• Consolidated revenues at Rs. 18.4 billion ($382 million) in Q2 FY10 as against Rs. 16.2 billion ($336 million) in Q2 FY09, representing a growth of 14%. The growth is largely driven by Global Generics.
  • Consolidated revenues for H1 FY10 at Rs. 36.6 billion represent a YoY growth of 17%.
  • Sequentially, as compared to Q1 FY10, the revenues excluding sumatriptan have grown by 11%.
• Operating income at Rs. 2.6 billion ($53 million) in Q2 FY10 as against Rs. 1.8 billion ($37 million) in Q2 FY09.
• EBITDA at Rs. 3.8 billion ($79 million) in Q2 FY10 as against Rs. 2.5 billion ($52 million) in Q2 FY09, representing a growth of 51%.
  • EBITDA for H1 FY10 at Rs. 8.2 billion represents a YoY growth of 70%.
• Revenues from Global Generics business at Rs. 12.7 billion ($264 million) in Q2 FY10 as against Rs. 11.1 billion ($231 million) in Q2 FY09. YoY growth of 14% driven by key markets of North America, Russia and India.
  • Revenues for H1 FY10 at Rs. 25.7 billion represent a YoY growth of 20%.
• Revenues from Pharmaceutical Services & Active Ingredients (PSAI) increase by 11% to Rs. 5.4 billion ($112 million) in Q2 FY10 as against Rs. 4.8 billion ($100 million) in Q2 FY09.
  • Revenues for H1 FY10 at Rs. 10.2 billion represent a YoY growth of 9%.
• During the quarter, the company launched 39 new generic products, filed 24 new product registrations and filed 5 DMFs globally.

Notes:

(a) Includes amortization charges of Rs. 329 million in Q2 FY10 and Rs. 472 million in Q2 FY09.

(b) Includes forex gain of Rs. 244 million in Q2 FY10.

(c) Includes forex loss of Rs. 296 million in Q2 FY09.

Segmental Analysis

Global Generics

• Revenues from Global Generics business at Rs. 12.7 billion ($264 million) in Q2 FY10 as against Rs. 11.1 billion ($231 million) in Q2 FY09. YoY growth of 14% driven by key markets of North America, Russia and India.
  • Revenues from North America at Rs. 4.3 billion ($89 million) in Q2 FY10 as against Rs. 3.1 billion ($65 million) in Q2 FY09. The YoY growth of 36% continues to be driven by high volume growth across existing products and new product launches in the last 12 months.
  • The total cumulative ANDA filings are 141. 62 ANDAs are pending approval at the USFDA of which 27 are Para IVs and 16 are FTFs.
• Revenues from Europe at Rs. 2.8 billion ($59 million) in Q2 FY10 as against Rs. 3.3 billion ($68 million) in Q2 FY09, representing a fall of 13%.
  • Revenues from Germany decrease by 21% to Rs. 2.2 billion ($46 million) in Q2 FY10 from Rs. 2.8 billion ($58 million) in Q2 FY09. This decrease is on account of the lower sales due to the AOK tender and the pricing pressure in the market.
    • The sequential growth of 37% in Q2 FY10 is due to one-time seasonal vaccine sales.
    • Pursuant to the ongoing reforms in the German generics pharmaceutical market, further tenders were announced by several of the public health insurance companies during the period. The Company has participated / intends to participate in these tenders through its wholly owned subsidiary betapharm. The final results of a majority of these tenders are yet to be announced. The results of these tenders may impact betapharm's business.
  • Revenues from Rest of Europe grew by 29% to Rs. 654 million ($14 million) in Q2 FY10. The growth is largely contributed by UK with sales of Rs. 436 million ($9 million) representing a growth of 20%.
• Revenues from Russia & Other CIS markets at Rs. 2.3 billion ($49 million) in Q2 FY10 as against Rs. 1.9 billion ($39 million) in Q2 FY09, representing a growth of 26%.
  • Revenues in Russia at Rs. 1.8 billion ($38 million) in Q2 FY10 as against Rs. 1.3 billion ($28 million) in Q2 FY09 representing a YoY growth of 39%.
    • The secondary prescription sales trend as per Pharmexpert for the five months of April to August compared to same period last year indicates a de-growth of 6% in dollar value for the industry as against Dr. Reddy’s growth of 7% in dollar value terms.
  • Revenues in Other CIS markets fall by 4% to Rs. 502 million ($10 million) in Q2 FY10 as against Rs. 525 million ($11 million) in Q2 FY09.

• Revenues in India at Rs. 2.5 billion ($52 million) in Q2 FY10 from Rs. 2.2 billion ($47 million), representing a growth of 13% led by key brands of Omez, Omez-DSR and Razo.
  • Sequential growth of 5% over Q1 FY10 is led by volume growth.
  • The secondary sales trend as per ORG IMS for the five months April to August indicates a growth of 17% for Dr. Reddy’s as against an industry growth of 14% and the Top 10 Companies growth of 16%.
  • 17 new products launched during the quarter.

Pharmaceutical Services and Active Ingredients

• Revenues from Pharmaceutical Services & Active Ingredients (PSAI) at Rs. 5.4 billion ($112 million) in Q2 FY10 as against Rs. 4.8 billion ($100 million) in Q2 FY09 ; YoY growth of 11% driven by the regions of Europe and the benefit of rupee depreciation against the dollar.
  • During the quarter, 5 DMFs were filed globally, with 2 in US, 2 in Europe and 1 in RoW. The cumulative DMF filings as of Sep 09 are 361.

Income Statement Highlights:

• Gross profit at Rs. 8.7 billion ($181 million) in Q2 FY10 represents a margin of 47% to revenues as against 49% in Q2 FY09. The current quarter margins have been impacted by one-time inventory provisions of €6 million in betapharm on account of non-moving stocks and $4 million in the US for inventory valuation adjustments of sumatriptan stocks lying with the company. Excluding these non-recurring items, the adjusted margins are at 51%.
• Selling, General & Administration (SG&A) expenses including amortization for the quarter are at $111 million, remained flat as compared to previous year. This expense includes the benefit of decrease in amortization charge due to the impairment of betapharm intangibles recorded in March 2009.
• Other operating income of Rs. 125 million in Q2 FY10 as against Other operating expenses of Rs. 88 million in Q2 FY09. The movement is largely on account of the fact that in Q2 FY09, a provision for damages of Rs. 230 million was recorded on account of the German court upholding the validity of the olanzapine patent of the innovator in Germany.
• R&D expenses at Rs. 963 million in Q2 FY10 represent 5% of revenues.
• Finance income (net) are at Rs. 208 million in Q2 FY10 as against Finance costs (net) at Rs. 482 million in Q2 FY09. The change is mainly on account of :
  • Net forex gain of Rs. 244 million in Q2 FY10 as against net forex loss of Rs. 296 million in Q2 FY09.
  • Net interest expense of Rs. 42 million in Q2 FY10 as against Rs. 228 million in Q2 FY09.
• PAT at Rs. 2.2 billion ($45 million) in Q2 FY10 as against Rs. 1.1 billion ($22 million), representing a growth of 106%.
• PAT adjusted for exceptions in the previous year, represented a growth of 79%.
• EPS of Rs. 12.8 ($0.3) in Q2 FY10 as against Rs. 6.2 ($0.1) in Q2 FY09.
• Capital expenditure for H1 FY10 is at Rs. 1.4 billion ($30 million).

General Information

The company today announced that the board of directors has appointed Dr. Ashok Ganguly as an additional director on the board of Dr. Reddy’s Laboratories Ltd.

Dr. Ashok Ganguly is the Chairman of Firstsource Solutions Ltd. (formerly ICICI OneSource Ltd) and ABP Pvt. Ltd. (Ananda Bazar Patrika Group), and has been a Director on the Central Board of the Reserve Bank of India since November 2000. He also serves as a non-executive director of Mahindra & Mahindra, Wipro Ltd., Tata AIG Life Insurance Co Ltd., and a Director on the Advisory Board of Microsoft Corporation (India) Pvt Ltd and the Blackstone Group.

Dr. Ganguly is a recipient of the Padma Bhushan, one of India’s highest honours (1987) and the Padma Vibhushan, India’s second highest civilian award. He was awarded the CBE (Hon) by the United Kingdom in 2006 and the Economic Times Lifetime Achievement Award in 2008.

About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE:RDY - News) 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.

Dr. Reddy’s Laboratories Ltd.
Investors and Financial Analysts:
Kedar Upadhye, +91-40-66834297
kedaru@drreddys.com
Raghavender R, +91-40-66511529
raghavenderr@drreddys.com
Milan Kalawadia (North America), +1-9082034931
mkalawadia@drreddys.com
Media:
M Mythili, +91-40-66511620
mythilim@drreddys.com
Rajan S, +91-40-66511725
rajans@drreddys.com