Dr Reddy's Q2 net up 77% to Rs 5 bn on one-off gains, forex movement

Revenues up 7% to Rs 38 bn despite a flat-to-negative growth in US and European sales; Emerging markets and India compensate

Drug major Dr Reddy's Laboratories Limited has reported a 77 per cent jump in net profit to Rs 5.04 billion for the quarter ended September 2018 as compared with Rs 2.9 billion in the corresponding quarter previous year on the back of certain one-off gains and a favourable Forex movement.

The company's revenues rose 7 per cent to Rs 37.97  billion in the quarter under review despite a flat to negative growth in US and European sales with emerging markets and India compensating well for the subdued performance in other markets.

Despite the currency leverage, revenues from North America remained flat at Rs 14.27 billion in the absence of Suboxone, the product the company had to withdraw from the market in an ongoing court litigation, and price erosion of some of the top performing products, according to Dr Reddy's chief financial officer Saumen Chakraborty.

Global generics contributed Rs 30.5 billion to the total revenues while the remaining Rs 7.4 billion has come from pharmaceutical services an active ingredients (PSAI) and proprietary products segments during the quarter under review.

Responding to a question on one-off gains, Chakraborty said the company has received a profit of close to Rs 600 million from the sale of Bristol manufacturing facility and the rights of Cloderm cream.

Relatively small European operations registered a further 21 per cent decline in revenues at Rs 1.92 billion in this quarter while the contribution from the merging markets grew a healthy 36 per cent to Rs 7.49 billion surpassing the Indian revenues. The domestic market revenues grew 8 per cent at Rs 6.86 billion during this period.

 Gross profit margin improved 170 basis points at 55 per cent for this period compared to the year-ago period while there was a sequential decline of 70 basis points compared to the April-June quarter, according to the company.

Commenting on the results, Dr Reddy's co-chairman and CEO G V Prasad said, " I am encouraged with our performance and progress in the second quarter. Our continuous focus on execution, operational efficiency and cost optimisation are showing results".

The US Food and Drug Administration (USFDA) is currently doing a reinspection of the company's formulations manufacturing facility at Duvvada in Visakhapatnam. This is among the three manufacturing facilities of the company slapped with a warning letter by the US drug regulator over serious deviations back in November 2015. The company said the top priority was to resolve the pending regulatory issues.