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Hyderabad, India, January 25, 2011  
 


Dr. Reddy’s Q3 FY11 Financial Results:
Revenues at Rs. 19.0 billion ($424 million), YoY growth of 10%; EBITDA at Rs. 4.0 billion ($90 million), YoY growth of 10%; Profit after Tax at Rs. 2.7 billion ($61 million), YoY adjusted growth of 19%*

Hyderabad, India, January 25th, 2011: Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited financial results for the quarter ended December 31st, 2010 under International Financial Reporting Standards (IFRS).

Key Highlights

  • Consolidated revenues are at Rs. 19.0 billion ($424 million) in Q3 FY11 versus Rs. 17.3 billion ($386 million) in Q3 FY10, year-on-year growth of 10%.
    • Revenues from Global Generics for Q3 FY11 are at Rs. 13.6 bn ($303 mn), year-on-year growth of 16%.
    • Revenues from PSAI are at Rs. 5.0 billion ($111 million) in Q3 FY11, year-on-year decline of 5%.
  • EBITDA of Rs. 4.0 billion ($90 million) in Q3 FY11, is at 21% of revenues with year-on-year growth of 10%.
  • Profit before Tax for Q3 FY11 is at Rs. 2.9 billion ($64 million), year-on-year adjusted growth of 11%*.
  • Profit after Tax for Q3 FY11 is at Rs. 2.7 billion ($61 million), is at 14% of revenues with year-on-year adjusted growth of 19%.
  • During the quarter, the company launched 42 new generic products, filed 21 new product registrations and filed 9 DMFs globally.

Litigation settlements in US:

Today the Company announces that it has entered into two settlement agreements with AstraZeneca in US relating to the ANDA filed for the generic versions of AstraZeneca’s Nexium® (esomeprazole) and Accolate® (zafirlukast). Under the terms of the esomeprazole agreement, AstraZeneca has granted Dr. Reddy’s a license, subject to regulatory approval, to launch a generic version of esomeprazole delayed-release capsules on May 27, 2014, or earlier in certain circumstances. The terms of this agreement have not been disclosed. The zafirlukast agreement ends all litigation related to the product and allows Dr. Reddy’s to continue selling the product without risk. Dr. Reddy’s launched its zafirlukast product on November 18, 2010 following a favorable summary judgment decision.

*Note: Adjustment in the previous year represents one-time impairment charge of intangibles & goodwill of Rs. 8,603 million and associated tax impact.

 All figures in millions, except EPS
All $ figures based on convenience translation rate of 1USD = Rs 44.80

Dr. Reddy's Laboratories Limited and Subsidiaries

Unaudited Consolidated Income Statement

Particulars Q3 FY11 Q3 FY 10 Growth %
($) (Rs.) % ($) (Rs.) (%)
Revenue 424 18,985 100 386 17,296 100 10
Cost of revenues 191 8,571 45 189 8,487 49 1
Gross profit 232 10,414 55 197 8,809 51 18
Operating Expenses              
Selling, general & administrative Expenses(a) 142 6,374 34 121 5,431 31 17
Research & development expenses, net 29 1306 7 20 892 5 46
Write down of intangible assets 0 0 0 77 3,456 20  
Write down of goodwill 0 0 0 115 5,147 30  
Other operating expenses (4) (199) (1) (4) (171) (1) 17
Total Operating Expenses 167 7,480 39 329 14,755 85 (49)
Results from operating activities 65 2,934 15 (133) (5946) (34)  
Finance expenses, net(b) 1 49 0 1 50 0 (2)
Share of profit/(loss) of equity accounted investees (0) (1) (0) 0 2 0  
Profit before income tax 64 2,884 15 (134) (5,994) (35)  
Income tax expense (3) (152) (1) (17) (777) (4)  
Profit for the period 61 2,732 14 (116) (5,217) (30)  

Diluted EPS 0.4 16.1   (0.7) (30.9)    


Notes:  
(a)
Includes amortization charge of Rs. 307 million ($7 million) in Q3 FY11 and Rs. 374 million ($8 million) in Q3 FY10.
(b)
Includes forex gain of Rs. 45 million ($1 million) in Q3 FY11 and forex loss of Rs. 44 million ($1 million) in Q3 FY10.

Segmental Analysis

Global Generics

Revenues from Global Generics segment are at Rs. 13.6 billion ($303 million) in Q3 FY11, year-on-year growth of 16% driven largely by our key market of North America.

  • Revenues from North America at Rs. 4.8 billion ($106 million) in Q3 FY11 versus Rs. 3.0 billion ($66 million) in Q3 FY10, represents growth of 60% in rupee terms and 66% in dollar terms.
    • Q3 FY11 is the fourth consecutive quarter demonstrating strong sequential growth in the revenues.
    • Growth driven by new products launched in the last one year and market share expansion in vertically integral products.
    • New launches during the quarter of Lansoprazole, Zafirlukast & Valacyclovir.
    • As of December 31, 2010, total cumulative ANDA filings are 165. Total ANDAs pending approval at the USFDA are 74 of which 32 are Para IVs and 12 are FTFs.
  • Revenues from Europe at Rs. 2.1 billion ($47 million) in Q3 FY11 versus Rs. 2.6 billion ($58 million) in Q3 FY10, year-on-year decline of 18%.
    • Revenues from Germany at Rs. 1.4 billion ($31 million) in Q3 FY11. The decline of 33% in rupee terms or 24% in Euro terms is largely due to price erosions caused by the tenders.
    • Revenues from Rest of Europe grew by 39% to Rs. 744 million ($17 million) in Q3 FY11.
  • Revenues from Russia & Other CIS markets at Rs. 2.9 billion ($64 million) in Q3 FY11 versus Rs. 2.8 billion ($62 million) in Q3 FY10, growth of 4%.
    • Revenues in Russia at Rs. 2.4 billion ($55 million) in Q3 FY11 versus Rs. 2.3 billion ($51 million) in Q3 FY10, year-on-year growth of 7% in rupee terms and 11% in dollar terms.
      • Growth on the high base of previous year is driven by volume increase across key brands and new launches in the last twelve months.
      • Dr. Reddy’s secondary prescription sales growth stands at 21% (volume growth of 33%) versus industry’s growth of 8% (volume growth of 12%). (Source: Pharmexpert April-November 2010)
    • Revenues in Other CIS markets decreased by 11% to Rs. 434 million ($10 million) in Q3 FY11 versus Rs. 488 million ($11 million) in Q3 FY10.
  • Revenues in India at Rs. 3.0 billion ($67 million) in Q3 FY11 versus Rs. 2.6 billion ($59 million) in Q3 FY10, growth of 14%, consisting of volume growth of existing products of approx 8% and new products contribution (last 12 month launches) of 6%.
    • 16 new products launched during the quarter.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI are at Rs. 5.0 billion ($111 million) in Q3 FY11, year-on-year decline of 5% and sequential growth of 8%.

  • Growth in Active Ingredients business on the back of new launches and an improved order books status was offset by the decline in the Pharmaceutical Services segment.
  • During the quarter 9 DMFs including 2 US DMFs were filed globally. The cumulative DMF filings as of Dec 10 are 436 including 159 US DMFs.

Income Statement Highlights:

  • Gross profit at Rs. 10.4 billion ($232 million) in Q3 FY11, gross margin of 55% to revenues versus 51% in Q3 FY10. This improvement in gross margin is largely on account of contribution in this quarter from new product launches in the US over the last one year.
    • Gross margins for Global Generics and Pharmaceutical Services and Active Ingredients are at 65% and 28% versus 60% and 31% respectively, in the previous year.
  • Selling, General & Administration (SG&A) expenses including amortization for the quarter, are at Rs. 6.4 billion ($142 million), increase of 17% over the previous year.
    • A part of the spend in this quarter is on account of one-time litigation costs in US and higher selling and marketing costs linked to the seasonality in the branded markets of India and OTC portfolio related spend in Russia.
  • R&D expenses at Rs. 1,306 million ($29 million) in Q3 FY11, increase of 46%.
  • Other Income of Rs. 199 million ($4 million) in Q3 FY11 versus Rs. 171 million ($4 million) in Q3 FY10.
  • Net Finance costs are at Rs. 49 million ($1 million) in Q3 FY11 versus Rs. 50 million ($1 million) in Q3 FY10.
    • Include net forex gain of Rs. 45 million ($1 million) in Q3 FY11 versus net forex loss of Rs. 44 million ($1 million) in Q3 FY10.
  • EBITDA at Rs. 4.0 billion ($90 million) in Q3 FY11 is at 21% of sales with year-on-year growth of 10%.
  • Net Profit after Tax for Q3 FY11 is at Rs. 2.7 billion ($61 million) is at 14% of sales with year-on-year adjusted growth of 19%.
  • Diluted EPS is at Rs. 16.1 ($0.4) in Q3 FY11 versus adjusted Rs. 13.7 in Q3 FY10.
  • Capital expenditure for the quarter is at Rs. 2.3 billion ($52 million).

*Note: Adjustment in the previous year represents one-time impairment charge of intangibles & goodwill of Rs. 8,603 million and associated tax impact.

Appendix 1:  Q3 FY11 Key Balance Sheet Items                                                                                                       (in millions)

Particulars As on 31st Dec 10 As on 30th Sep 10
($) (Rs.) ($) (Rs.)
Cash and cash equivalents 92 4,126 138 6,196
Trade receivables 315 14,093 299 13,376
Inventories 340 15,244 329 14,728
Property, plant and equipment 605 27,102 567 25,412
Goodwill and other intangible assets 291 13,017 302 13,511
Loans and borrowings (current & non-current) 308 13,808 324 14,493
Trade payables 165 7,395 221 9,907
Equity 1,075 48,151 1010 45,245

Appendix 2:  Q3 FY11 Revenue Mix by Segment                                                                                                   (in millions)

Particulars Q3 FY11 Q3 FY10 Growth %
($) (Rs.) % ($) (Rs.) %
Global Generics 303 13,589 72 262 11,723 68 16
North America 106 4,765 35 66 2,974 25 60
Europe 47 2,123 16 58 2,579 22 (18)
India 67 3,007 22 59 2,627 22 14
Russia & Other CIS 64 2,875 21 62 2,766 24 4
RoW 18 819 6 17 778 7 5
PSAI 111 4,979 26 117 5,237 30 (5)
North America 17 770 15 16 723 14 7
Europe 41 1,830 37 48 2,161 41 (15)
India 14 622 12 13 602 12 3
RoW 39 1,758 35 39 1,751 33 0
Proprietary Products 9 417 2 7 336 2 24
Total 424 18,985 100 386 17,296 100 10

 

Appendix 3:  Q3 FY11 Revenue Mix by Geography                                                                                             (in Rs. millions)

Particulars Q3 FY11 Q3 FY10 Growth %
($) (Rs.) % ($) (Rs.) %
North America 130 5,823 31 88 3,933 23 48
Europe 91 4,078 21 108 4,836 28 (16)
India 81 3,632 19 72 3,232 19 12
Russia & Other CIS 64 2,875 15 62 2,766 16 4
Others 58 2,577 14 56 2,529 15 2
Total 424 18,985 100 386 17,296 100 10

 

About Dr. Reddy's
Established in 1984, Dr. Reddy’s Laboratories (NYSE: RDY) is a global pharmaceutical company. We fulfill our purpose of providing affordable and innovative medicines through three core businesses: Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products.
 
Disclaimer
This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

Contact Information

Investors and Financial Analysts:

Kedar Upadhye at kedaru@drreddys.com or on +91-40-66834297
Raghavender R at raghavenderr@drreddys.com or on +91-40-66511529
Milan Kalawadia (North America) at mkalawadia@drreddys.com or on +1-9082034931

Media
Rajan S at rajans@drreddys.com or on +91-40-66511725