Dr Reddy's June qtr net surges over six-fold at Rs 4.56 bn on turnaround

Revenues grew 12% to Rs 37.21 bn due to a healthy 30% growth in domestic sales and a 16% rise in revenue contribution from emerging markets in generics

Dr Reddy's Laboratories Limited has reported more than a 6-fold increase in consolidated net profit at Rs 4.56 billion for the quarter ended June, 2018 over an exceptionally lower base of Rs 0.6 billion in the corresponding quarter previous year, on the back of a turnaround helped by a combination of revenue growth and cost control.

Revenues grew 12 per cent at Rs 37.21 billion as compared to Rs Rs 33.16 billion in the year ago period due to a healthy 30 per cent growth in Indian sales and a 16 per cent growth in revenue contribution from emerging markets led by Russia in global generics. 

North American business, which has accounted for 43 per cent of the total revenues, saw a 6 per cent rise at Rs 15.90 billion in global generics on the back of a brief 2-3 day sale of generic Suboxone drug, which had to be withdrawn from the market owing to the court orders. Revenues from Europe declined 3 per cent at Rs 2.0 billion, primarily on account of higher price erosion in some of the key molecules, according to the company.

Dr Reddy's co-chairman G V Prasad said the focus on operational efficiencies has helped in significantly improving the company's margin profile and hoped to maintain a similar margin trend going forward.  "While we continue to experience price erosion in the North America Generics market, we will also continue to drive growth and cost efficiencies, at the same time, enhancing our quality management systems and building healthy portfolios across the markets we serve," he said.

The company has maintained visible control over the costs right from manufacturing costs to general selling and R&D expenses for the second consecutive quarter and this has contributed to the improved gross profit margins. The overall costs remained flat compared to the corresponding previous quarter. The company's gross profit margins improved by 410 basis points to 55.7 per cent during the quarter under review.

Though the benefit of Suboxone is not expected to be back in the next few quarters, the company hopes to keep the momentum by making 15-20 new product launches during this financial year, according to its chief financial officer Saumen Chakraborty.

Responding to a question on rising costs drug intermediates being imported from China, Dr Reddy's chief operating officer Erez Israeli said the company was in the process of de-risking the rise in import costs with steps like bringing the manufacturing of some of these inputs to India and talking to the suppliers.

Removal of 150-200 people at senior management level

On reported retrenchments in the company, Dr Reddy's co-chairman G V Prasad said they had identified 150-200 people at senior management level for removal as part of redesigning the organisational structure currently underway. However he denied retrenchments at any other level.