Dr Reddy's Q1 net zooms 120% at Rs 244 cr

Hyderabad-based global pharmaceutical company Dr Reddy's Laboratories (DRL) saw a 120.07 per cent increase in net profit to Rs 244.5 crore for the first quarter ended June 30, 2009, as compared with Rs 111.1 crore during the corresponding period last year. Revenues during the quarter increased 21 per cent to Rs 1,818.9 crore as compared with Rs 1,503.9 crore last year.

The increase in profit and revenues was largely due to the upsides from sumatriptan (drug used in the treatment of migraine), business from North America and India and cost restructuring. Though the costs increased by about 6 per cent, revenues went up 21 per cent resulting in higher margins, said group Vice-Chairman and Chief Executive Officer GV Prasad.

The growth in pharmaceutical services and active ingredient business too added to the revenues. However, the upsides from sumatriptan would reduce after August 10 as the exclusivity period would end.

The company was on track to achieve its FY10 forecast of 10 per cent growth, he said.

During the quarter, the company made a provision of Rs 280 crore for implementing a social plan for betapharm employees and for closure of its Atlanta facility. The closure of the Atlanta plant would result in a saving of about $6 million (Rs 300 crore) a year.

According to Prasad, the profit margins were under pressure as more countries were taking the tender-based pricing model, which was first started by AOK tenders in Germany. "Other state health insurance agencies may be inviting tenders in Europe and DRL would bid for them. We would try to bring down the costs further to be competitive," he said.

The company has won contracts for eight products in the AOK tenders and has started supplying them from June. Though this resulted in increasing the volume of sale, revenues declined by about 38 per cent, he added.

The company is now focusing on India to regain its lost market share with more new launches. It had already rolled out a new supply chain model to increase the business and was stringent on the credit extended. "The focus is on profits,'' Prasad said.

"The order book is healthy and we expect the sales to be higher in the second half of the year,'' said Chief Operating Officer Satish Reddy.

DRL has completed the land acquisition for its two SEZs coming up in Srikakulam and Medak districts in the state at a combined investment of about $200 million (about Rs 1,000 crore).

During the quarter, the company launched 24 new generic products, filed 22 new generic product registrations and filed four drug master files. Its capex for the financial year 2009-10 stood at about Rs 69.2 crore.

The company has entered into an arrangement with GSK to leverage its product portfolio and processes. It has also tied up with city-based Natco, which is focused on oncology segment. Natco would develop and manufacture the products while DRL would market them, particularly in the US on a revenue sharing model.