Dr. Reddy's Misses on Earnings, Revs

Zacks

Dr. Reddy’s Laboratories (RDY) reported first quarter fiscal 2014 earnings per American Depositary Share (ADS) of 40 cents, below the Zacks Consensus Estimate of 44 cents, but above the year-ago earnings of 30 cents per ADS.

The company reported revenues of $478 million during the quarter, reflecting year-over-year increase of 12%. Revenues during the quarter were, however, well below the Zacks Consensus Estimate of $551 million.

Dr. Reddy’s launched 23 new generic products, filed 12 registrations for new products and also filed 5 drug master files (DMFs) globally in the first quarter.

Quarter in Detail

Dr. Reddy’s reports revenues under three segments – Global Generics, Pharmaceutical Services & Active Ingredients (:PSAI) and Proprietary Products and Others. Revenues at the Global Generics segment were up 15% to $368 million. Strong sales in North America and emerging markets led to the growth at the Global Generics division.

Generics revenues increased in North America (up 37%), Russia and other CIS (Commonwealth of Independent States) markets (up 8%), and the rest of the world, or RoW (up 12%) while it was flat in India and down 28% in Europe. Revenues in India were affected by trade strike in Maharashtra and the new pricing policy which led to lower inventory levels.

PSAI revenues climbed 6% to $99 million during the quarter. The slight growth in this segment was due to a fewer number of new product launches. Revenues in the Proprietary Products and Others segment declined 16% to $11 million during the quarter.

Selling, general and administration (SG&A) expenses including amortization amounted to $148 million, reflecting an increase of 6% year over year. The increase was due to normal salary increments and rupee depreciation against many currencies. Research and development (R&D) expenses increased 55% to $41 million driven by planned R&D activities.

During the quarter, Dr. Reddy’s launched 2 new products - generic versions of Novartis AG’s (NVS) Reclast and GlaxoSmithKline plc's (GSK) Lamictal XR. Dr. Reddy’s also filed 2 abbreviated new drug applications (ANDAs) with the U.S. Food and Drug Administration (:FDA). The company has 64 ANDAs pending approval with the FDA, of which 38 are Para IV filings and 8 are first-to-file.

Dr. Reddy’s carries a Zacks Rank #3 (Hold). Actavis, Inc. (ACT) currently looks well positioned with a Zacks Rank #2 (Buy). 

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