On January 28, 2022 Dr. Reddy’s Laboratories Ltd. reported its consolidated financial results for the quarter and the nine months ended December 31, 2021 (Press release, Dr Reddy’s, JAN 28, 2022, View Source [SID1234607469]). The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).
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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. Our major Covid-19 products launched till now include Sputnik V vaccine, Remdesivir, Avigan (Favipiravir), 2-deoxy-D-glucose (2-DG) and Molnupiravir. We have commercialized all these products in India and few of these products in overseas markets. We have conducted clinical trials for Sputnik Light and are also developing several other covid related drugs for treatment ranging from mild to severe conditions.
Revenue Analysis
Global Generics (GG) Revenues from GG segment at Rs. 44.5 billion: Year-on-year growth of 9% was primarily driven by new product launches and higher sales volume, offset partially due to price erosion in the base business. Sequential decline of 6% was due to lower volumes and price erosion in some of our products.
North America
Revenues from North America at Rs. 18.6 billion: Year-on-year growth of 7%, 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 1%, primarily due to price erosion in some of our products. We launched four new products in US during the quarter. These were Carmustine Injection, Ephedrine Sulphate Injection, Valsartan tablets and Venlafaxine ER tablets. We filed one new ANDA during the quarter.
As of 31st December 2021, cumulatively 91 generic filings are pending for approval with the USFDA (88 ANDAs and 3 NDAs under 505(b)(2) route). Out of these 91 pending filings, 45 are Para IVs and we believe 24 have ‘First to File’ status. Europe Revenues from Europe at Rs. 4.1 billion: Year-on-year and sequential quarter decline of 2% each, which was primarily due to price erosion in some of our existing products, partially offset by volume traction in the base business and sales from new products launched. India Revenues from India at Rs. 10.3 billion: Year-on-year growth of 7% which was on account of an increase in sales prices of some of our existing products and revenues from new products launched, offset partially by a decrease in the sales volume of covid-related products. Sequential decline of 10%, primarily due to a reduction in sales volumes of covid-related products. 5 Emerging Markets Revenues from Emerging Markets at Rs. 11.5 billion. Year-on-year growth of 20%. Sequential decline of 11%: Year-on-year growth of 20% attributable to the revenues from launch of new products and volume traction in the base business. Sequential decline of 11% witnessed due lower volumes and price erosion in some products and higher covid-related product sales in last quarter.
The decline was offset partially by sales contribution from new product launches. Revenues from Russia at Rs. 4.7 billion. Year-on-year growth of 5% was driven by revenues from new products launched, a favorable forex rate and increase in prices of some our products, offset partially by a reduction in sales volumes in our base business. Sequential decline of 17% was on account of a reduction in volumes of some of our products. Revenues from other CIS countries and Romania market at Rs. 2.4 billion. Year-on-year growth of 11% driven by launch of new products, offset partially due to lower volumes in the base business. Sequential growth of 9% driven by higher sales volume in the base business. Revenues from Rest of World (RoW) territories at Rs. 4.4 billion. Year-on-year growth of 50% was driven by new product launches and higher sales volume in base business, offset partially by price erosion in some of our key products. Sequential decline of 13% was due to lower Covid portfolio sales and lower volumes and price erosion in our base business, which was partially offset by sales from launch of new products. Pharmaceutical Services and Active Ingredients (PSAI) Revenues from PSAI at Rs. 7.3 billion: Year-on-year growth of 4% was driven majorly by new product launches. Sequential decline of 13% on account of lower volumes of certain products including covid-related products, offset partially due to new products launched. During the quarter we filed two DMFs in the US. Proprietary Products (PP) & Others Revenues from PP & Others at Rs. 1.4 billion: Year-on-year decline of 8% and sequential decline of 22%. The sequential decline was primarily on account of recognition of a license fee associated with the sale of our U.S. and Canada territory rights for ELYXYB (celecoxib oral solution) 25 mg/ml, to BioDelivery Sciences International, Inc in Q2 FY22. 6 Income Statement Highlights: Gross profit margin at 53.8%: The margin has remained flat over previous year. While there has been an improvement in the margins on account of favorable product mix and reduction of procurement costs for certain products, this was offset by price erosion in the base business. Sequentially the gross margin increased by 40 bps primarily on account of a favorable product mix which was partially offset by price erosion in the base business.
Gross profit margin for GG and PSAI business segments are at 57.8% and 22.5% respectively. SG&A expenses at Rs. 15.4 billion, increased by 7% year-on-year. This increase was in line with the business growth and primarily attributable to investments in sales & marketing of our key brands and annual increments. Sequentially the SG&A expenses decreased by 3% majorly due to lower royalty on sales in this quarter. R&D expenses at Rs. 4.2 billion. As % to revenues-Q3 FY22: 7.8% | Q2 FY 22: 7.7% | Q3 FY21: 8.3%. Our focus continues in building a healthy pipeline of new products across our markets. Impairment charge of Rs. 47 million as compared to Rs. 6.0 billion charge in Q3 FY21 taken on intangibles pertaining to certain products. Other operating income at Rs. 240 million compared to Rs. 128 million in Q3 FY21.
Net Finance income at Rs. 289 million compared to Rs. 493 million in Q3 FY21. Profit before Tax at Rs. 9.7 billion, which is 18.3% of revenues. The profit before tax increased by 242% year-on-year and declined by 23% sequentially. Profit after Tax at Rs. 7.1 billion. The effective tax rate is ~27.2% for the quarter. Diluted earnings per share is at Rs. 42.48. Other Highlights: EBITDA at Rs. 12.7 billion and the EBITDA margin is 23.8% Capital expenditure is at Rs. 4.1 billion. Free cash-flow is at Rs. 12.7 billion. Net cash surplus for the company is at Rs. 10.0 billion as on December 31, 2021. Consequently, net debt to equity ratio is (0.05).
ROCE for the company is 23.9% (annualized). 7 Earnings Call Details (06:30 pm IST, 08:00 am EST, Jan 28, 2022) The management of the Company will host an earnings call to discuss the Company’s financial performance and answer any questions from the participants.