Dr. Reddy's (RDY) Q2 Earnings Fall, Revenues Up Y/Y
Dr. Reddy’s Laboratories (RDY) reported second-quarter fiscal 2015 earnings per American Depositary Share (ADS) of 54 cents, down 17% from the year-ago quarter.
The company reported revenues of $579 million during the quarter, up 7% from the year-ago quarter.
The Quarter in Detail
Dr. Reddy’s reports revenues under three segments – Global Generics, Pharmaceutical Services & Active Ingredients (:PSAI) and Proprietary Products and Others.
Global Generics segment revenues grew 9% year over year to $466 million. Strong sales in North America, India, emerging markets (excluding Russia) and the rest of the world, particularly Venezuela, boosted the Global Generics segment revenues.
In North America, injectable products performed well due to limited competition. Additionally, the company increased market share for some of its key products including the generic versions of Toprol and Geodon.
In the reported quarter, PSAI revenues remained flat year over year at $103 million. Dr. Reddy’s expects PSAI revenues to improve in the second half of fiscal 2015.
Revenues in the Proprietary Products and Others segment fell 1% to $10 million. The company intends to file the first new drug application on a candidate in its Proprietary Products portfolio by the end of fiscal 2015.
Selling, general and administrative (SG&A) expenses amounted to $172 million, up 10% year over year. The increase was due to annual increments, additional labor deployment and marketing expenses. Research and development (R&D) expenses increased 37% to $66 million driven by planned R&D activities.
In the reported quarter, Dr. Reddy’s filed 2 abbreviated new drug applications (ANDAs). Till the date of announcement of the 2QFY15 results, the company had 72 ANDAs pending FDA approval, of which 45 were Para IV filings and 11 were “first-to-file”.
Additionally, during the quarter, Dr. Reddy’s launched its generic versions of 9 products. Moreover, on Oct 18, 2014, the company signed an asset purchase agreement with Novartis AG (NVS) to acquire the title and rights to the latter’s Habitrol and to commercialize the product in the U.S.
Dr. Reddy’s carries a Zacks Rank #4 (Sell). The company's second quarter earnings declined. We are concerned about the lesser number of launches in the U.S. along gradual rise in competition for some of the generic products. Moreover, the performance was affected by the slowdown of sales in North America.
Some better-ranked stocks in the health care sector are Actavis plc (ACT), Mylan, Inc. (MYL) and Mallinckrodt plc (MNK). While Actavis and Mylan carry a Zacks Rank #1 (Strong Buy), Mallinckrodt holds a Zacks Rank #2 (Buy).
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