Dr. Reddy's Labs trades flat as Q2 profit spikes on one-time tax gain

Dr. Reddy's Laboratories reported 117% jump in net profit to Rs 1,093 crore on a 26% increase in revenue to Rs 4,801 crore in Q2 September 2019 over Q2 September 2018.

Shares of Dr.Reddy's Laboratories were down 0.44% at Rs 2770.70. So far during the day, it has traded in the range of Rs 2736.15 and Rs 2829. On the BSE, 60,945 shares were traded in the counter so far compared with average daily volumes of 9,209 shares in the past two weeks.

The drugmaker's revenue was aided by a tax write-back of Rs 330 crore and a licence fee worth Rs 720 crore for selling territory rights for two neurology brands to U.S.-based Upsher-Smith Laboratories, the filing said.

The drug maker reported a 33% increase in profit before tax to Rs 766 crore in Q2 FY20 compared with the corresponding quarter in the last fiscal year.

The revenue from pharmaceutical services and active ingredients (PSAI) rose 18% to Rs 710 crore. Growth was largely driven by increase in volumes from existing products.

Revenues from Europe (up 44%), emerging markets (up 10%) and India (up 9%) showed considerable improvement while the revenues from North America remained flat.

Gross margin stood at 57.5% in Q2 FY20 as against 51.7% in Q1 FY20 and 55% during Q2 FY19.

The R&D expenses at Rs 366 crore, represented 7.6% of the revenues of the company in Q2 September 2019 as against 9.4% in Q1 June 2019 and 10.8% in Q2 September 2018.

The company received a warning letter, dated 5 November 2015 from the U.S. FDA, regarding deviations with current good manufacturing practices (GMP) at its API manufacturing facilities in Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as regarding violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. Based on the subsequent discussion with the U.S FDA, a re-inspection would be conducted for the site.

Dr. Reddy's Laboratories is an integrated pharmaceutical company.

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