Dr Reddy's net trebles at Rs 280cr

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Fuelled by newly acquired businesses, the Hyderabad-based domestic pharma major Dr Reddy's Laboratories today reported 214 per cent (more than treble) increase in net profit at Rs 280 crore for the quarter ended September 30, 2006, compared with Rs 89 crore in the previous corresponding quarter.

Revenues for the second quarter of the current financial year also shot up 245 per cent at Rs 2,003.9 crore from Rs 580.4 crore in the corresponding quarter last year. The second-quarter performance has turned Dr Reddy's into a truly global company with 88 per cent of the total revenues coming in from foreign markets.

Effecting the geographical shift in the company's growth, the revenues from North America, which accounted for more than half (51 per cent) of the total revenues, grew to Rs 1,020 crore for the September 2006 quarter from just Rs 88 crore, a 15 per cent share in total revenues, in the corresponding quarter last year.

Satish Reddy, managing director of the company, said the landmark growth for the second quarter, both in terms of revenues and profits, was generated by the strength of the company's core businesses, besides overseas acquisitions.

According to him, the core businesses, excluding the contribution from authorised generics and acquisitions, rose 42 per cent to Rs 82 crore from Rs 58 crore in the same quarter last year. The acquisitions in Mexico and Germany contributed as high as 20 per cent to total revenues for the quarter under review.

Even the best-ever quarterly performance of the company, as termed by its MD, was not devoid of the general concern of the falling revenue margins. The company's gross margins declined to 15 per cent in Q2 from 18 per cent in Q2 of 2005-06. Responding to a question in this regard, G V Prasad, vice-chairman and chief executive officer, said, "The pricing pressure continues to be there on the business. That's why we have focused our efforts on volume growth. That's how we achieved this growth."

The good news, according to Prasad, has been that each market accessed by Dr Reddy's has contributed to the second quarter growth.

"Now, one cannot say we are neglecting Indian business as the revenues from the country too have increased 16 per cent in this quarter," he said, adding that the overall market growth in the country was only 15 per cent.

The contribution of its India operations to total revenues has, however, come down to 12 per cent in the quarter ended September 2006 from 39 per cent in the previous corresponding quarter.

According to a company statement, revenues of the North America generics finished dosage business, which grew to Rs 908 crore in the quarter from just Rs 29 crore in the corresponding quarter last financial year, was primarily driven by combined revenues of Rs 780 crore from Simvastatin and Finasteride, which contributed 39 per cent to total revenues.

"It is difficult to maintain the same levels of business in this segment, as the authorised generics is a six-month operation. However, the same level is expected to continue next quarter as well," Prasad said.

According to him, the company has recently entered into a co-development agreement with a European CRO (contract research organisation) on a risk and reward sharing model on an oncology molecule. Prasad also said Dr Reddy's was close to entering the third phase trials of Balaglitazone, which would be ready for marketing by 2010-11.