U.S. Markets closed

Dr. Reddy's Beats on Earnings and Revenues

Zacks Equity Research

Dr. Reddy's Laboratories (RDY) reported third-quarter fiscal 2014 (ended Dec 31, 2013) earnings per American Depositary Share (ADS) of 59 cents, beating the Zacks Consensus Estimate of  42 cents and the year-ago earnings of 36 cents per ADS.

The company reported revenues of $571 million during the quarter, reflecting year-over-year increase of 23%. Revenues surpassed the Zacks Consensus Estimate of $558 million.

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 rose 41% to $475 million. Strong sales in North America and emerging markets led to the upside at the Global Generics division. Strong sales of the generic versions of Vidaza, Dacogen, Aricept, Toprol XL and Depakote ER boosted segmental results.

Generics revenues increased in North America (76%), Russia and other CIS (Commonwealth of Independent States) markets (21%), rest of the world or RoW (35%) and India (5%). Revenues in India were however tempered by the new pricing policy. Revenues in Europe declined 4%.

PSAI revenues fell 29% to $82 million during the quarter. The decline in this segment was due to fewer number of new product launches. Revenues in the Proprietary Products and Others segment increased 26% to $14 million during the quarter.

Selling, general and administration (SG&A) expenses including amortization amounted to $169 million, reflecting an increase of 22% year over year. The rise in SG&A can be attributed to select brand building activities in the Emerging Markets and also higher labor cost. Research and development (R&D) expenses increased 47% to $48 million.

Dr. Reddy’s launched 7 new generic products and filed 4 registrations for new products, apart from filing 19 drug master files (DMFs) across the globe in the third quarter.

Dr. Reddy’s filed 2 abbreviated new drug applications (ANDAs) with the U.S. Food and Drug Administration (:FDA) in the reported quarter. The company has 62 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 #1 (Strong Buy). We are pleased with the Generic segment’s performance in North America. Recent launches have also contributed to growth. Dr. Reddy’s is progressing towards a greater mix of complex generics and limited competition products in its portfolio.

Investors may also consider companies like Lannett Company, Inc. (LCI), Endocyte Inc. (ECYT) and Forest Laboratories Inc. (FRX), all of which carry a comparable Zacks Rank #1.

Read the Full Research Report on RDY
Read the Full Research Report on ECYT
Read the Full Research Report on FRX
Read the Full Research Report on LCI

Zacks Investment Research