Dr Reddy's posts Rs 570-cr net loss due to heavy impairment charge

Firm takes a Rs 1,110 crore hit with generic versions of its Nuvaring drug hitting the market; financial results run completely contra to analyst expectations

In a complete reversal of analyst expectations, drug major Dr Reddy’s Laboratories (DRL) reported a net loss of Rs 569.7 crore for the quarter (Q3) ended December 31, 2019. This is due to an impairment charge of Rs 1,320 crore despite a reasonable growth in revenues during the period. Loss before tax stood at Rs 527.4 crore during the period. 

The company’s profit before tax was Rs 580.5 crore and net profit stood at Rs 485.2 crore in the corresponding quarter of the previous year.

According to the company, launch of generic and authorised generic roll outs for the product Nuvaring in December 2019 led to a considerable erosion in the value of DRL’s generic Nuvaring product.

Accordingly, the company has taken an impairment charge of Rs 1,110 crore. In addition, it has taken an impairment charge of Rs 210 crore on other products, considering the current market dynamics, the company said.

Revenues rose 14 per cent to Rs 4,383.8 crore. This was driven by global generics business in emerging markets, India and the European market that have delivered a growth of 19 per cent, 13 per cent and 52 per cent, respectively. 

Global generics sales in the US market, which accounts for 36 per cent of the total revenues, grew 8 per cent at Rs 1,599.9 crore compared to Rs 1,483.2 crore in the year ago period.  

Revenues from the pharmaceutical services and active ingredients (PSAI) segment increased 16 per cent to Rs 690.6 crore. The proprietary products segment’s revenues declined 18 per cent to Rs 100 crore from Rs 121 crore in the corresponding previous quarter.

On a sequential basis, sales revenues of Rs 4,383.8 crore declined 9 per cent as there was a one off revenue of Rs 720 crore from the out-licensing of its two neuro products during the September 2019 quarter. 

“Adjusted for this, the sequential quarter growth is 7 per cent and is the highest ever quarterly sales from operations, without any one-off items,” Dr Reddy’s said.

The revenues of Rs 3,509 crore from global generics segment represent a 15 per cent growth year-on-year (YoY) and 9 per cent growth on a sequential basis. 

The company’s North America revenues grew 8 per cent compared to the year ago period while registering a 12 per cent growth sequentially. 

This is largely on account of higher volumes in some of the company’s key molecules, partly offset by price erosion in some key molecules.

In emerging markets, revenues from Russia and CIS countries as well as Romania grew 20 per cent and 26 per cent at Rs 490 crore and Rs 180 crore, respectively. 

Domestic revenues of Rs 760 crore with a YoY growth of 13 per cent came on the back of improved realisations in base business and volume traction, the company said.