 "Dr Reddy's Q1 net down 76% at Rs 154 cr")
Impacted by multiple headwinds, pharmaceutical major Dr Reddy’s Laboratories has reported a sharp 80 per cent decline in consolidated net profit at Rs 126.3 core for the June quarter, compared with net profit of Rs 625.7 crore in the corresponding period a year ago.
The company presented these numbers according to the International Financial Reporting Standards (IFRS). It has also filed a separate set of numbers as per the Indian Accounting Standards (IndAS), as required under Section 133 of the Companies Act, 2013. While under IndAS, profit before tax was at Rs 199 crore, it was Rs 171 crore under IFRS.
Total revenues for the quarter under review declined 14 per cent to Rs 3,234.5 crore, from Rs 3,757.8 crore in the year-ago period. “We have come through a very difficult first quarter, with our top and bottomlines impacted by a decline in volume growth, particularly in the US market and the loss of business in Venezuela. We also faced a number of challenges in the quarter, including price erosion and delayed launches as a result of the warning letter, which significantly impacted our earnings. However, we continue to make actions that focus on remediation, strengthening our quality systems and executing on our strong product pipeline. We remain focused on generating long term, sustainable growth,” said G V Prasad, co-chairman and chief executive officer.
Explaining the reasons for impact on revenues and profits, Dr Reddy’s chief operating officer Abhijit Mukhierjee said there was a harsh and deep erosion in value of the assets in the US market, including the value of some of the top products like Valcyte and Vidaza, with a 12-13 per cent impact on revenues. As there were no new launches or approvals, which normally compensate the pricing pressures arising from the existing products in the market, the impact was huge. There was a 16 per cent decline in revenues from North America at Rs 1,552.3 crore, compared with Rs 1,851.6 crore in the year-ago period.
“We were impacted by four headwinds, namely lack of new approvals, erosion of value, nil revenues from Venezuela and the Ruble crash, all played to the full in this quarter. We do not see anything more (severe) beyond this in coming quarters,” Mukherjee told reporters.
Going forward, the new launches, expansion into new countries like Columbia and Brazil, and the launch of anti-cancer biologic product Retuximab more emerging markets would turn the tide in the company’s favour, said Mukherjee.
During the quarter, the company’s gross profit margin declined by 490 basis points to 56.2 per cent, compared with 61.1 per cent in the year-ago period. Global generics revenues saw a 14 per cent decline at Rs 2,663.8 crore, while its smaller PSAI (pharmaceutical services and active ingredients) segment revenues were down 16 per cent at Rs 469 crore. Proprietary products remained flat at Rs 101.5 crore. However, revenues in India grew 10 per cent on the back of strong performance of the company’s big products.
Asked, when the products acquired from Teva will start adding to the top line, chief financial officer Saumen Chakraborty said it was unlikely in the current year. The total portfolio of eight products bought from Teva by Dr Reddy’s has a market size of $8.5 billion, according to him. The company hopes to launch some of these products in 2018 and the remaining in 2019 in the US market.
On the ongoing remediation efforts, Mukherjee said the company would send a formal request to the US Food and Drug Administration in a few days for re-inspection of the three manufacturing facilities that had received warning letters in November last year. The company has already sent the last update on the remediation efforts, he added.
