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Dr. Reddy's Earnings Increase Y/Y

Zacks Equity Research

Dr. Reddy’s Laboratories (RDY) reported fourth quarter fiscal 2013 earnings per American Depositary Share (ADS) of 60 cents above the year-ago earnings of 40 cents per ADS.

The company reported revenues of $613 million during the quarter, reflecting a year-over-year increase of 26%. Revenues during the quarter were, however, well below the Zacks Consensus Estimate of $636 million.

For fiscal year 2013, Dr. Reddy’s earnings were $1.80 per ADS, up 17% year over year but below the Zacks Consensus Estimate of $1.90. Revenues for fiscal year 2013 were $2.1 billion, up 20% year over year but nominally below the Zacks Consensus Estimate of $2.2 billion.

Dr. Reddy’s launched 18 new generic products, filed 14 registrations for new products and also filed 17 drug master files (DMFs) globally in the fourth quarter.

2013 in Details

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 17.5% to $1.5 billion. Strong sales in North America and emerging markets were primarily responsible for the growth displayed by the Global Generics division.

Generics revenue increased in North America (up 19%), Russia (up 27%), other CIS (Commonwealth of Independent States) markets (up 28%), India (up 13%) and the rest of the world/RoW (up 42%).  

PSAI revenues climbed 28.8% to $563 million during the year. Revenues in the Proprietary Products and Others segment climbed 12.2% to $55 million during the year. Dr. Reddy’s expects continued growth in this segment on the back of new product launches and new contracts.

Selling, general and administration (SG&A) expenses including amortization amounted to $616 million, reflecting an increase of 16.4%. The increase was due to normal salary increments, rupee depreciation against dollar and Octoplus acquisition expenses. Research and development (R&D) expenses increased 30.6% to $141 million driven by planned R&D activities.

During the fiscal year, Dr. Reddy’s launched 14 new products and filed 18 abbreviated new drug applications (ANDAs) and 1 new drug applications (:NDA) with the US Food and Drug Administration (:FDA). The company has 65 ANDAs pending approval with the FDA, of which 38 are Para IV filings and 8 are first-to-file.

The stock carries a Zacks Rank #3 (Hold). Other generic players also carry Zacks Rank #3. Currently, companies in the pharma space like Santarus, Inc. (SNTS), Jazz Pharmaceuticals plc (JAZZ) and Catalyst Pharmaceutical Partners Inc. (CPRX) look more attractive with a Zacks Rank #1 (Strong Buy).

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