Dr Reddy’s Q1 net falls 53% to 59.1 cr

Hyderabad: Dr Reddy’s Laboratories Ltd (DRL) on Thursday reported 53 per cent decline its consolidated net profit to Rs 59.1 crore in the first quary ended on June 30, 2017, owing to price erosion in the US market and implementation of GST in India.The city-based drug maker posted a net profit of Rs 126.3 crore in the same quarter a year ago.

• 99 generic filings pending with US FDA
• 26 of Para-IV filings have ‘first to file’ status
• Several FDA inspections successfully completed

Sales of generics fell four per cent in North America. Sales in Indian market too dropped by 10 per cent, while revenues from pharma services and active ingredients marginally eased by one per cent. The consolidated net profit during the quarter as per Indian accounting standards (Ind AS), was also eased to Rs 66.6 crore as against Rs 153.5 crore during the corresponding quarter last year. Its revenues for the period marginally rose three per cent to Rs 3,316 crore against nearly Rs 3,235 crore during the April-June quarter of FY17.

GV Prasad, company’s co-Chairman and CEO, said the results were below their expectations. “Our first quarter results of FY18 have been below expectations. While headwinds in the form of price erosion due to the US customer consolidation continue, a lower contribution from new product launches in the US and the GST implementation in India also impacted our performance,” Prasad said.

Prasad holds positive view that they are in their journey of quality maintenance, as several inspections by the US FDA teams have successfully completed. The company spent Rs 510 crore on research and development (R&D) during the first quarter. Saumen Chakraborty, President, CFO and Global Head of HR, told the media that the impact of GST may not continue in the coming quarters.

"There was significant de-stocking by the channels (sales channel partners) due to GST transition in June. Trade was sceptical about the implementation of GST. They did not lift stock despite discounts offered by the company. It is expected to be normalised over a period. I think it was limited to the first quarter," Chakraborty said.

Replying to a query, he said the customer consolidation that led the pricing erosion has affected most of the generic drug industry and it may continue further. On the status of US FDA inspections of some of their plants, he said they are expecting re-inspection of Duvvada (AP) plant, while the one at Srikakulam is awaiting the regulator's response as the inspection was over.

Revenues from Global Generics segment were at Rs 2,750 crore, a growth of three per cent year-on-year. "Growth was primarily driven by higher volume uptake in Emerging Market and Europe and new launches across major markets. This was partially offset by price erosion in North America and channel de-stocking in India due to GST transition," he added.

The sale of generics from North America was down by four per cent to Rs 1,495 crore in Q1 of FY18 against Rs 1,552 crore in the same quarter last year. The sale from Indian market was negatively impacted by 10 per cent to Rs 469 crore against Rs 522 crore in Q1 FY17. The revenue from pharmaceutical services and active ingredients stood at Rs 465 crore, marginally down by 1 per cent.

As on June 30, 99 generic filings were pending before the US FDA , of which 97 are ANDAs (including 59 Para-IV filings). The company further said it believes that out of the total Para-IV filings, 26 have ‘first to file’ status.

Mcap dips by Rs 1,488 cr

The shares of Dr Reddy’s Lab closed 3.29 percent or Rs89.05 lower at Rs2,621.45 on BSE after the company reported the first quarter results. it dipped 4.22 per cent to Rs 2,596. At NSE, the stock fell Rs108.35 or four percent to Rs2,599. The stock was the worst performer on both the key indices. The company’s market valuation also fell by Rs 1,487.95 crore to Rs 43,452.05 crore.