On January 29, 2021 Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY | NSEIFSC: DRREDDY) reported its consolidated financial results for the quarter and the nine months ended December 31, 2020 (Press release, Dr Reddy’s, JAN 29, 2021, View Source [SID1234574405]). The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).
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*Excluding the impairment charge in Q3 FY21, the Profit before Tax is Rs. 882 cr
**Q3 FY21 Profit after Tax was impacted primarily due to non-recognition of deferred tax asset on impairment
Commenting on the results, Co-chairman & MD, G V Prasad said, "We continued with our growth momentum while maintaining EBITDA margins. The profits were impacted due to trigger based impairment charge taken on a few acquired products including Nuvaring. We are progressing well on the phase 3 clinical trials for Sputnik V vaccine in India. We continue to focus on enhancing our product offerings to our patients to serve them better."
All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs. 73.01
All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs. 73.01
Revenue Analysis
Global Generics (GG)
Revenues from GG segment at Rs. 40.8 billion:
Year-on-year growth of 13% and sequential quarter growth of 2%, primarily driven by new product launches and integration of the acquired portfolio from Wockhardt in India. The volume growth in the base business was largely offset by price erosion.
North America
Revenues from North America at Rs. 17.4 billion:
Year-on-year growth of 9%, driven by new products launches, increase in volumes of our base business and a favorable forex rate, which was partially offset by price erosion.
Sequential decline of 5%, primarily due to price erosion in some of the key molecules.
We launched four new products during the quarter. This included Cinacalcet Tablets, Sapropterin Dihydrochloride Tablets and Succinylcholine Chloride Injection in the US along with Daptomycin Injection in Canada. We also re-launched one product in US – OTC Famotidine.
We filed two new ANDAs during the quarter. As of 31st December 2020, cumulatively 89 generic filings are pending for approval with the USFDA (87 ANDAs and 2 NDAs under 505(b)(2) route). Of the 89 ANDAs, 48 are Para IVs and we believe 24 have ‘First to File’ status.
Europe
Revenues from Europe at Rs. 4.1 billion:
Year-on-year growth of 34% and sequential growth of 10%, which were driven by new product launches, favorable forex movement and volume traction, offset partly by price erosion.
India
Revenues from India at Rs. 9.6 billion:
Year-on-year growth of 26% and sequential growth of 5%. YoY growth is on account of revenues from the acquired portfolio of Wockhardt and contribution from new product launches. QoQ growth was driven by volume traction.
Emerging Markets
Revenues from Emerging Markets at Rs. 9.6 billion. Year-on-year growth of 5%. Sequential growth of 11%:
Revenues from Russia at Rs. 4.5 billion. Year-on-year decline of 8% is primarily due to weakening Ruble. Sequential growth of 14% contributed by increased volumes
Revenues from other CIS countries and Romania market at Rs. 2.1 billion. Year-on-year growth of 18% and sequential growth of 8% driven by both base business and new product launches.
Revenues from Rest of World (RoW) territories at Rs. 3.0 billion. Year-on-year growth of 20% and sequential growth of 10% is due to volume traction in the base business and new product launches.
Pharmaceutical Services and Active Ingredients (PSAI)
Revenues from PSAI at Rs. 7.0 billion:
Year-on-year growth of 1% driven by new products and favorable forex rate, offset by lower volumes for some products.
Sequential decline of 18% on account of lower volumes of certain products.
During the quarter we filed DMF for five products in the US.
Proprietary Products (PP) & Others
Revenues from PP & Others at Rs. 1.5 billion:
Year-on-year growth of 53% and sequential growth of 147%. The growth was driven by milestone income received for the compound AUR102.
Income Statement Highlights:
Gross profit margin at 53.8%:
Decline of 30 bps over previous year and 10 bps sequentially, which was primarily impacted due to price erosion and lower export benefits, partially offset by the milestone income received for the compound AUR102.
Gross profit margin for GG and PSAI business segments are at 57.6% and 25.3% respectively.
SG&A expenses at Rs. 14.4 billion, increased by 14% year-on-year primarily due to incremental costs post the integration of the acquired portfolio from Wockhardt in this year and increased freight expenses. Sequentially, it increased by 10% primarily due to pickup in sales & marketing activities in branded markets and increase in freight expenses.
Impairment charge of Rs. 6.0 billion. In January, 2021 there has been an additional generic launch for the product Nuvaring, which has led to a considerable erosion in the value of this product for us, and accordingly we have taken an impairment charge of Rs. 3.2 billion. In addition to this, considering the current market dynamics, we have taken an additional impairment charge of Rs. 2.8 billion on the intangibles pertaining to other products. We had an impairment charge of Rs. 13.2 billion in Q3 FY 20 and Rs. 781 million in Q2 FY21.
R&D expenses at Rs. 4.1 billion. As % to revenues these are: Q3 FY21: 8.3% | Q2 FY 21: 8.9% | Q3 FY20: 9.0%. Our focus continues on building a healthy pipeline of new products across our markets including development of products pertaining to COVID-19 treatment.
Other operating income at Rs. 128 million compared to Rs. 228 million in Q3 FY20.
Net Finance income at Rs. 493 million compared to Rs. 419 million in Q3 FY20.
Profit before Tax at Rs. 2.8 billion, which is 5.8% of revenues.
Profit after Tax at Rs. 198 million. The effective tax rate is ~93.0% for the quarter, impacted primarily due to non-recognition of deferred tax asset on impairment.
Diluted earnings per share is at Rs. 1.19.
Other Highlights:
EBITDA at Rs. 11.9 billion and the EBITDA margin is 24.0%
Capital expenditure is at Rs. 2.9 billion.
Free cash-flow: Net out-flow during the quarter stood at Rs. 580 million.
Net cash surplus for the company is at Rs. 839 million as on December 31, 2020. Consequently, net debt to equity ratio is (0.005).
Earnings Call Details (05:30 pm IST, 07:00 am EST, Jan 29, 2021)
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