Dr Reddy's net rises 32%

Slowdown in outsourcing affects API business

Pharmaceutical major Dr Reddy’s Laboratories reported a 31.93 per cent increase in net profit to Rs 286.7 crore for the quarter ended September 30 as compared with Rs 217.3 crore during the same time last year. Its revenues were Rs 1,870.4 crore, up two per cent from Rs 1,836.8 crore last year.

DRL chief executive officer GV Prasad attributed the increase in profitability to launch of new products and increased sales in the US and other markets.

However, revenues grew at a lower-than-expected pace due to slowdown in generic and active pharmaceutical ingredient markets as outsourcing has been reduced. The company could also not launch some products as scheduled.

The selling, general and administrative expenses increased to Rs 570.9 crore, seven per cent more from Rs 533.6 crore, as the company increased its network in Russia, particularly for the over-the-counter (OTC) segment.

At Rs 1,366.7 crore, generics revenues are about eight per cent more than Rs 1,270.6 crore last year. The revenues from active pharmaceutical ingredients fell 14 per cent to Rs 461.7 crore this quarter from Rs 537.5 crore last year.

Of all geographies, India had the best 21 per cent growth, contributing Rs 381.3 crore, as compared with Rs 3,150 crore last year. Russia and CIS markets also did well with 17 per cent increase in revenue contribution to Rs 275.1 crore this year compared to Rs 235.1 crore last year. The growth in North America fell two per cent to Rs 546.4 crore from Rs 558.8 crore and in Europe by 14 per cent to Rs 410.2 crore from Rs 474.3 crore last year.

Chief operating officer K Satish Reddy said the company could not launch a flu vaccine in the key markets and this affected the top line. He said Germany, notwithstanding the inventory provision this quarter, would be a key market from next year. The company expects price erosion to stop and profits to increase from the next financial year.

“It will take two more quarter. The prices have almost bottomed out. We expect them to rise,’’ he said, adding the company was also bidding in the second phase of the AOK tenders.

Giving the outlook for the second half of the year, Reddy said growth would be better on the back of new product launches. It was getting ready to launch its fourth biosimilar in India. The efforts to ink partnerships to enter Japan were still in early stages, he said. In the two quarters, the company’s capital expenditure was about Rs 400 crore, he said.