Dr Reddy's Labs Q2 profit falls 30% to Rs 762 crore, global generics business up 21%

Pharma major Dr Reddy's Laboratories on October 28 reported a 30.2 percent year-on-year decline in consolidated profit in the Sepetmber quarter.

The company's consolidated profit declined to Rs 762 crore from Rs 1,092.5 crore in the year-ago period but increased 32 percent sequentially. The YoY decline was higher than CNBC-TV18 poll estimate of Rs 646 crore.

The company had a tax credit of Rs 326.1 crore in year-ago period. The effective tax rate was around 11.6 percent (Rs 99.8 crore tax expenses) for the quarter, which was lower primarily due to recognition of deferred tax assets for one of subsidiaries, said company.

Consolidated revenue during the quarter increased 2 percent to Rs 4,896.7 crore YoY as there was proprietary products out-licensing income in Q2FY20, and the same grew by 11 percent QoQ.

The Q2FY21 YoY revenue growth stood at 20 percent after adjusted for proprietary products out-licensing income in the previous year, the company said in its BSE filing.

"We are pleased to report continued growth across all the markets and improved productivity which is reflected in the healthy EBITDA margin and RoCE," Co-chairman & MD G V Prasad said.

The global generics business registered a 21 percent YoY growth, with North America rising 28 percent, Europe 36 percent and India 21 percent in the quarter ended September 2020.

"The growth in global generics business was driven primarily on account of new product launches, volume traction in the base business and integration of the acquired business from Wockhardt in India," said Dr Reddy's.

The company launched nine new products in North America including Ciprofloxacin and Dexamethasone Otic suspension, Fulvestrant injection, OTC Diclofenac and OTC Olapatadine.

It filed two new ANDAs in the quarter. As of September 2020, "cumulatively 94 generic filings are pending for approval with the USFDA", the company said.

India business grew primarily on account of revenues from the acquired business of Wockhardt and contribution from new products including the Avigan (favipiravir) and remdesivir launched for the treatment of COVID-19.

It further strengthened the development pipeline for COVID-19 treatment drugs including the vaccine candidate Sputnik V.

Revenue from pharmaceutical services and active ingredients (PSAI) segment grew by 20 percent at Rs 850.5 crore in Q2FY21.

Proprietary products and other revenue fell 92 percent YoY to Rs 62.1 crore as the year-ago quarter received income from sale of the US and select territory rights for two of neurology franchise products.

"During the quarter, we saw gradual recovery in the market demand across India, Russia and other markets after a low demand in Ql FY 21, although the demand is yet to fully recover to pre-COVID levels," Dr Reddy's said.

At the operating level, its earnings before interest, tax, depreciation and amortisation (EBITDA) fell 11 percent year-on-year to Rs 1,276.3 crore and margin declined 400 bps YoY to 25.9 percent in Q2FY21, but were ahead of CNBC-TV18 poll estimates of Rs 1,115 crore and 24 percent respectively.

"Gross profit margin declined 360 bps over previous year, impacted due to inclusion of revenue from sale of Neurology franchise products in the previous year, partially offset by improvement in productivity and favourable forex rates," company said.

Sequentially the margin reduced by 210 bps, primarily on account of lower export incentives, adverse forex and product mix, it added.