Dr Reddy’s sees 3-fold jump in Q4 net

Hyderabad: Global drug major Dr Reddy’s Laboratories Ltd has reported consolidated net profit of Rs 312.5 crore for the fourth quarter ended March 2017, a three-fold jump from Rs 74 crore in the previous corresponding quarter.

The consolidated revenues for the fourth quarter were Rs 3,554.2 crore, a 5.3 percent drop from Rs 3,756.2 crore in the previous corresponding quarter, mainly owing to the 16 percent drop in business in the US. Revenues for FY17 were Rs14,080.9 crore, a nine percent drop on YoY, while profit after tax (PAT) was Rs1,203.9crore amounting 8.5 percent of the revenues.

The drug major suffered 10 percent drop in generics business on account of lower sales in the US, while improving sales in other markets. Revenues from Indian market rose nine percent and eight percent to Rs2,300crore for FY17 and Rs540crore in Q4 respectively.

The company also recorded nine percent growth in Russia. The drop in operating expenses helped the company improve net profit. Lower foreign exchange loss primarily related to its business in Venezuela, besides the lowering of tax expenses also further added to net profit.

However, Dr Reddy’s was able to register a growth in the global generics business across Europe, India and other emerging markets. The price pressure in the North American generics business reduced the gross profit margin by 400bps to 55.6 percent for FY17.

The capital expenditure was Rs1,170 crore and Rs240 crore for FY17 and fourth quarter respectively. The board of directors has recommended for a dividend of Rs20 per share (Rs5 face value).

“We have launched 10 products in the US during the year, while the number was in the range of 70-100 in other global markets. There’s pressure on business in the North America as there was lack of approvals. Getting approvals and launching new products are critical for us to drive sales in the US. I hope to get more approvals. We have global expansion plan.

We have expanded into Chile and China, where we established a representative office. We’re increasing presence in emerging markets. We have invested $70million in proprietary products as this business will be major one for us.

The capital expenditure is expected to be Rs1,200 crore for FY18. The US continues to be the major market for us. However, we expect revenues from other markets will go up in next five years,” GV Prasad, Co-Chairman & CEO, Dr Reddy’s Laboratories, told the media after announcing financial results for fourth quarter and FY-17 here on Friday.

“FY17 has been a challenging year due to lack of new product approvals for the US market. But other geographies delivered good performance with several new product launches. We expanded global access to our Biosimilars and witnessed successful registrations in emerging markets.

We continue to focus on rationalization of cost structures and quality parameters. I wouldn’t say we’re slow in expansion. We’re investing in proprietary products. We continue to explore new markets,” adds Prasad.

Responding to a question on US FDA inspections on manufacturing units, Prasad said that lot of inspections happening these days as the US regulator increased inspections. “Three units received warning letters from US FDA and these facilities have been re-inspected.

However, the observations were marginal. We have already fixed the observations at all the three plants. Batchupally plant received 11 observations and Duvvada plant is also under consideration. We have sought timeline on this and are working on this,” said Prasad.

Company’s CFO Saumen Chakraborty along with COO Abhijit Mukherjee, said that “Dr Reddy’s filed 26 ANDAs with US FDA during FY17 including 13 ANDAS in Q4.” He attributed the reson for 16 percent drop YoY in revenues from North America to increased competition.

Dr Reddy’s filed 82 Drug Master Files (DMFs) globally including nine in the US. With this, the cumulative DMF filings by March 2017 reached to 754.