Dr. Reddy’s Q2 and H1 FY15 Financial Results

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended September 30, 2014 under International Financial Reporting Standards (IFRS).

Key Highlights (Q2 FY15)

• Consolidated revenues at Rs. 35.9 billion, year-on-year growth of 7%.
  • Revenues from the Global Generics (GG) segment at Rs. 28.9 billion, YoY growth of 9%
  • Revenues from the Pharmaceutical Services and Active Ingredients (PSAI) segment at Rs. 6.4 billion.
• Gross Profit Margin at 58.5% versus 58.0% as in Q2 FY14.
• Research & Development (R&D) expenses at Rs. 4.1 billion, 11.5% to revenues versus 9.0% to revenues as in Q2 FY14.
• Selling, general & administrative (SG&A) expenses at Rs. 10.7 billion, 29.7% to revenues.
• EBITDA of Rs. 8.7 billion, 24% of revenues.
• Profit after tax at Rs. 5.7 billion, 16% of revenues.
• During the quarter the company launched 9 new generic products, filed 10 new product registrations and 28 DMFs globally.

On 18 October 2014, the Company entered into an asset purchase agreement with Novartis Consumer Health Inc. to acquire the title and rights to Habitrol® franchise (an over-the-counter nicotine replacement therapy transdermal patch) and to market the product in the U.S. territory. The agreement is subject to FTC review and the transfer of asset will happen post FTC clearance.

All amounts in millions, except EPS
All US dollar amounts based on convenience translation rate of 1 USD = Rs. 61.92

Segmental Analysis

Global Generics

Revenues are at Rs. 28.9 billion, year-on-year growth of 9%, primarily driven by India, Rest of the World market territories (primarily Venezuela) and North America.

• Revenues from North America at Rs. 14.3 billion, year-on-year growth of 8%.
  • Sustained performance of FY14 ‘limited competition’ launches, namely decitabine, azacitidine, and divalproex sodium ER.
  • Progress on market share expansion of key molecules, namely divalproex sodium ER, metoprolol succinate and ziprasidone.
  • 1 new product launched during the quarter.
  • 2 ANDA filings during the quarter. Cumulatively, 72 ANDAs are pending for approval with the USFDA of which 45 are Para IVs, and we believe 11 to have ‘First To File’ status.
• Revenues from Emerging Markets at Rs. 8.3 billion, year-on-year growth of 14%.
  • Revenues from Russia at Rs. 4.1 billion, year-on-year decline of 11% primarily on account of the Rouble devaluation. In constant currency the growth is flat.
  • Emerging Markets Ex-Russia at Rs. 4.2 billion recorded year-on-year growth of 57% primarily driven by strong performance in Venezuela Market.
• Revenues from India at Rs. 4.8 billion, year-on-year growth of 14%.
  • Growth is driven by healthy volume expansion in our focus brands, some of which are also listed under the NLEM portfolio.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI at Rs. 6.4 billion.
• During the quarter 28 DMFs were filed globally, filed 3 in the US, 19 in the ROW and 6 in Europe. The cumulative number of DMF filings as of September 30, 2014 is 703.

Income Statement Highlights:

• Gross profit margin at 58.5% registered a 50 basis points improvement over Q2 FY14. Gross profit margin for GG and PSAI business segments are at 65.6% and 26.8% respectively.

• SG&A expenses at Rs. 10.7 billion, year-on-year increase of 10%. The increase is largely due to annual increments, additional manpower deployment in the past 12 months and other sales and marketing spend for events specific to this quarter.
• R&D expenses at Rs. 4.1 billion, year-on-year growth of 37%. 11.5% of revenues in Q2 FY15 as compared to 9.0% of revenues in Q2 FY14. The increase is in line with our planned scale-up in development activities.
• Net Finance income at Rs. 421 million compared to Rs. 291 million in Q2 FY14. The increase is on account of:
  • Net reduction in forex benefit of Rs. 118 million
  • Net Incremental interest benefit of Rs. 247 million
• EBITDA at Rs. 8.7 billion, year-on-year decline of 8%; 24% of revenues.
• Profit after Tax at Rs. 5.7 billion, year-on-year decline of 17%; 16% of revenues.
• Diluted earnings per share in Q2 FY15 at Rs. 33.60
• Capital expenditure for Q2 FY15 is Rs. 2.3 billion.

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.

About Dr. Reddy's

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Major therapeutic focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management and anti-infective. Major markets include India, USA, Russia-CIS and Europe apart from other select geographies within Emerging Markets.

For more information, log on to: www.drreddys.com

Note: All discussions in this release are based on unaudited consolidated IFRS financials.