Dr Reddy's Q3 profit down 29% at Rs 3.3 bn on higher price erosion

Indian pharmaceutical major Dr. Reddy's Laboratories Limited has reported a 29 per cent decline in consolidated net profit at Rs 3.34 billion for the quarter ended December 2017, compared with Rs 4.70 billion a year earlier,  on the back of higher price erosion, increased competition and the impact of adverse foreign exchange in the US and European markets.

However, the company was able to post a 3 per cent increase in consolidated revenues at Rs 38.06 billion during the third quarter under review as compared with Rs 37.07 billion in the corresponding quarter previous year.

"We had a satisfactory third quarter performance with all our key markets performing well. We recorded sequential revenue growth of 7 per cent despite continuing challenges such as price erosion in the USA. Our first-cycle NDA approval of Impoyz is a significant milestone in the commercialisation of four proprietary products pipeline. We will continue our focus on operational excellence and controlling of SG&A (selling, general and administrative) costs across the organisation," Dr Reddy's CEO and co-chairman G V Prasad said.

The share of global generics in the company's overall revenues declined to 79 per cent in the quarter under review from 83 per cent, while its revenue contribution fell 2 per cent to Rs 30.1 billion as revenues marginally decreased across all the markets except India.

Revenues from the Indian market, which is the second largest grosser for the company in global generics segment during the quarter, registered a 3 per cent increase at Rs 6.12 billion during the quarter.

On a sequential basis, global generics grew 5 per cent as compared to Rs 28.62 billion in the quarter ended September, 2017.

On the other hand, pharmaceutical services and active ingredients (PSAI) segment has registered a one per cent growth at Rs 5.44 billion in the third quarter as revenues from India and the rest of the world (other than North America and Europe) increased substantially. The revenue from proprietary products rose to 2.52 billion during the quarter from Rs 1.19 billion in the year-ago period.

The gross profit margin declined by 280 basis points over that of previous year primarily on account of higher price erosions, increased competitive intensity in some of the key molecules in the US, the company said.

SG&A expenses at Rs 12 billion was an increase of 6 percent over that of the previous year. During the quarter, a settlement agreement was entered into with the US Department of Justice on litigation involving packaging against a payout of Rs 319 million.

The company has reported a finance income of 0.85 billion for the quarter as compared to Rs 44 million in the corresponding previous quarter.