On July 27, 2021 Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY | NSEIFSC: DRREDDY) reported its consolidated financial results for the quarter ended June 30, 2021 (Press release, Dr Reddy’s, JUL 27, 2021, View Source [SID1234585225]). The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).
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* Q4 FY21 financials have been adjusted with an additional charge of Rs. 191 Cr ($ 26.25 mn) arising out of the arbitration award in favor of Hatchtech towards the Xeglyze product as an adjusting subsequent event for filing IFRS financials with US SEC in Form 20F on June 30, 2021.
Commenting on the results, Co-Chairman & MD, G V Prasad said "The financial performance of the quarter has been driven by healthy sales growth. I am confident about improving our margins in the upcoming quarters which will be led by the scale up of recent launches, new product launches and productivity. While we continue to sharpen execution in our core business, we are also conducting pilots in areas such as Nutrition, Direct-to-Customer, and Digital Health & Wellness, which can be future growth drivers".
COVID portfolio
We continue to play our role in the fight against Covid-19 by acting proactively to bring multiple preventive and curative treatment options, including a vaccine. Some of our major Covid-19 products are:
Sputnik V vaccine: We launched the vaccine in India in May 2021 after receiving Emergency Use Authorization (EUA) in April 2021. We are working with RDIF for ramping up supplies. We are also working with six CMOs in India for manufacturing readiness. We have launched it across 80 cities and 2.5+ Lakh people have been vaccinated so far. We are also working on Sputnik Light, for which Russia phase 3 trials will be leveraged for India approval as per recommendation from SEC.
Remdesivir: We launched it in India and ramped up our supplies in this quarter to meet with the higher demand due to surge of the COVID cases during the second wave in India.
Avigan (Favipiravir): We launched it in India and also in few other markets.
2-deoxy-D-glucose (2-DG): We developed it in collaboration with DRDO lab and received EUA as adjunct therapy for hospitalized moderate to severe Covid-19 patients. We have launched it in India in June 2021.
Molnupiravir: We are collaborating with 5 other pharmaceutical companies for the clinical trial of the investigational oral anti-viral drug for the treatment of mild Covid-19 in an outpatient setting in India.
Other Covid drugs: We are also working on Baricitinib and several other covid drugs for treatment ranging from mild to severe conditions.
Revenue Analysis
Global Generics (GG)
Revenues from GG segment at Rs. 41.1 billion:
ØYear-on-year growth of 17% was driven primarily by branded markets (India and emerging markets) and Europe. The overall growth was on account of new product launches and volume traction in the base business, partly offset by price erosion in some of our products and adverse forex rates.
ØSequential growth of 6% driven by higher sales in India. The overall growth was attributable to higher volumes and new product launches, offset partially due to price erosion in certain products.
North America
Revenues from North America at Rs. 17.4 billion:
ØYear-on-year growth of 1%, driven by launch of new products and increase in volumes of certain of our existing products, which was offset by price erosion in some molecules and adverse forex rates.
ØSequential decline of 1%, on account of price erosion in some of our products, partially offset by volume traction and new products launched.
ØDuring this quarter, we launched 6 new products. These were Sapropterin Dihydrochloride Powder, Albendazole Tablets, Ertapenem Injection and Icosapent Ethyl Capsules in the US and two products in Canada.
ØWe filed two new ANDAs during the quarter. As of 30th June 2021, cumulatively 93 generic filings are pending for approval with the USFDA (90 ANDAs and 3 NDAs under 505(b)(2) route). Out of these 93 pending filings, 47 are Para IVs and we believe 24 have ‘First to File’ status.
Europe
Revenues from Europe at Rs. 4.0 billion. Year-on-year growth of 12% and sequential growth of 1% was primarily on account of volume traction in base business and new product launches across our markets, which was partially offset by price erosion.
India
Revenues from India at Rs. 10.6 billion:
ØYear-on-year growth of 69% and sequential growth of 26% was primarily driven by increase in sales volumes of our existing products, led by increase in sale of covid drugs due to the severe second wave witnessed in India. The growth was also aided by contribution from new product launches and increase in sales prices of our existing products.
ØWe launched six new products during the quarter including Sputnik-V vaccine and 2-deoxy-D-glucose for covid. We also launched Curhealth, a nutritional health mix for building immunity.
Emerging Markets
Revenues from Emerging Markets at Rs. 9.1 billion. Year-on-year growth of 14% and sequential growth of 3%:
ØRevenues for Russia at Rs. 3.5 billion. Year-on-year growth of 8% was on account of increase in volumes and sales prices in our existing products and new products launches. Sequential decline of 13% was on account of lower volumes, offset partly by increase in sales price of certain products and new products launched.
ØRevenues from other CIS countries and Romania at Rs. 1.4 billion. Year-on-year growth of 4% driven by new product launches, offset partially by a reduction in sales volumes and prices of certain of our existing products. Sequential decline of 24% was on account of reduction in volumes and price of some of our existing products, offset partly by new products launched.
ØRevenues from Rest of World (RoW) territories at Rs. 4.2 billion. Year-on-year growth of 25% and sequential growth of 43% was largely attributable to new products launched and volume traction in our base business, partially offset by a reduction in sales prices of some of our products.
Pharmaceutical Services and Active Ingredients (PSAI)
Revenues from PSAI at Rs. 7.5 billion. Year-on-year decline of 12% and sequential decline of 5%.
ØThe decline was on account of a decrease in sales volumes and prices of our existing products, partially offset by new products launched. Year-on-year was also impacted due to customer stocking up in last year.
ØDuring the quarter we filed DMFs for two products in the US.
Proprietary Products (PP) & Others
Revenues from PP & Others at Rs. 541 million. Year-on-year growth of 1% and sequential decline of 14%.
Income Statement Highlights:
ØGross profit margin for the year at 52.2%:
-Decreased by ~380 bps over previous year and by ~150 bps sequentially, majorly on account of price erosion and increase in inventory provisions related to few products. Q1 FY 21 was higher due to higher export incentives and favourable product mix.
-Gross profit margin for GG and PSAI business segments are at 57.7% and 21.6% respectively.
ØSelling, general & administrative (SG&A) expenses at Rs. 15.0 billion, increased by 18% on a year-on-year basis and by 5% sequentially. This increase was primarily attributable to investments being done towards marketing of some of our key brands, investments in digitalization and annual increments. The year-on-year increase is also due to additional expenses incurred with the integration of Wockhardt acquired portfolio.
ØResearch & development (R&D) expenses at Rs. 4.5 billion. As % to revenues – Q1 FY22: 9.2% | Q4 FY21: 8.7% | Q1 FY21: 9.0%. We continue our focus on investing in R&D to build a healthy pipeline of new products across our markets including development of biosimilars and products pertaining to COVID-19 treatment.
ØOther operating income at Rs. 487 million compared to Rs. 118 million in Q1 FY21. The increase was on account of certain settlements and other income during the quarter.
ØNet Finance income at Rs. 652 million compared to Rs. 605 million in Q1 FY21.
ØProfit before Tax at Rs. 7.4 billion, declined by 16% year-on-year and increased by 21% sequentially.
ØProfit after Tax at Rs. 5.7 billion. The effective tax rate is 23.1% for the quarter.
ØDiluted earnings per share is at Rs. 34.34.
Other Highlights:
ØEBITDA is at Rs. 10.2 billion and the EBITDA margin is 20.7%.
ØCapital expenditure is at Rs. 3.2 billion.
ØFree cash-outflow is at Rs. 6.8 billion.
ØNet cash surplus for the company is at Rs. 451 million as on June 30, 2021. Consequently, net debt to equity ratio is (0.003).
Earnings Call Details (05:30 pm IST, 08:00 am EDT, July 27, 2021)
The management of the Company will host an earnings call to discuss the Company’s financial performance and answer any questions from the participants.
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Transcript: Transcript of the Earnings call will be available on the Company’s website: www.drreddys.com