Dr Reddy’s Laboratories (DRL) has suffered major setback and its consolidated net profit for the first quarter ended June 2016 declined sharply by 77 per cent to Rs. 146.2 crore from Rs. 642.5 crore due to impact of US FDA warning letters received in in November 2015 regarding cGMP.. EBDITA also moved down to Rs. 457 crore from Rs. 1,063 crore. The company’s net sales declined by 14.5 per cent to Rs. 3,164 crore from Rs. 3,701 crore. With lower profit, EPS declined to Rs. 9.06 from Rs. 37.99 crore. The company bought back and extinguished 50.77 lakh equity shares for an aggregate purchase price of Rs. 1,569 crore.
The poor performance impacted the scrip movements on BSE and DRL scrip declined by almost 5 per cent or Rs. 162 in the afternoon session to Rs. 3,312.75 and likely to go down further in few more sessions.
The sales of global generic business declined sharply by 17.4 per cent to Rs. 2,646 crore from Rs. 3,203 crore. Global generic sales contributed 78.3 per cent to its revenues. Similarly, sales of proprietary products declined to Rs. 62 crore from Rs. 69 crore. However, pharmaceutical services and active ingredients (PSAI) sales increased by 10.9 per cent to Rs. 631 crore from Rs. 569 crore.
Its generic sales in North America declined by 16 per cent to Rs. 1,552 crore from Rs. 1,852 crore in the corresponding period of last year basically due to increased competition in valgancyclovir and asacitidine, coupled with pricing pressure and moderation in volumes off-take. Similarly, generic sales in Europe also declined by 16 per cent to Rs. 162 crore from Rs. 191 crore. Its sales in Russia improved slightly by 2 per cent to Rs. 230 crore. However, its generic sales in India improved by 10 per cent to Rs. 522 crore from Rs. 476 crore.
The sales of PSAI in North America improved by 11 per cent to Rs. 64 crore from Rs. 58 crore. PSAI sales in Europe declined by 17 per cent to Rs. 195 crore from Rs. 235 crore and that in India also moved down by 44 per cent to Rs. 37 crore from Rs. 67 crore. PSAI sales in RoW declined by 14 per cent to Rs. 173 crore from Rs. 201 crore.
Other expenditure for the quarter includes foreign exchange loss of Rs. 384.5 crore on account of currency devaluation and translation of monetary assets and liabilities using SIMADI/DICOM rate pertaining to the company’s Venezuelan subsidiary.
Its R&D expenditure increased by 9 per cent to Rs. 48 crore and R&D expenditure stood at 14.8 per cent of sales. Cumulatively 78 generic filings are pending for approval with the US FDA. Of these 76 ANDAs, are Para IVs out of which it believe 18 have ‘First to File’ status. During the quarter ended June 2016, DRL filed 19 DMFs and its cumulative number of DMF filings reached at 784.
G V Prasad, co-chairman and CEO, said, “We have come through a very difficult first quarter, with our top and bottom lines impacted by a decline in volume growth, particularly in the US market and the loss of business in Venezuela. WE also faced a number of challenges in the quarter including price erosion and delayed launches as a result of the warning letter, which significantly impacted our earnings. However, we continue to take actions that focus on remediation, strengthening our quality systems and executing on our strong product pipeline. We remain focused on generating long term, sustainable growth.”