Dr. Reddy’s Q1 net profit up 52.5% at Rs550 crore

Dr. Reddy’s Q1 net profit up 52.5% at Rs550 crore

Dr. Reddy’s Laboratories Ltd on Wednesday reported a 52.5% jump in net profit for the quarter ended 30 June as it sold more medicines in North America and Russia. Net profit rose to Rs.550.4 crore in the first quarter, from Rs.360.9 crore in the year-ago period. Income from sales rose 23.7% to Rs.3,517.54 crore. Revenue from North America, which contributes 57% of global generic sales, grew 51% to Rs.1,647 crore. The sales growth in North America was due to sustained performance from molecules with limited competition—decitabine, azacitadine, zoledronic acid injection, donepezil 23mg and divalproex—and market share expansion of some key molecules, the firm said. Dr. Reddy’s said it launched four new generic products in North America in the first quarter. “Normally first quarter goes a little lean on filings but we are reasonably satisfied by few of the assets filed in the first quarter,” chief operating officer Abhijit Mukherjee said. The impact of launches will be felt in the coming quarters, he said. Dr. Reddy’s has 70 new drug applications pending for approval at US Food and Drug Administration, of which eight have first-to-file status that gives them 180-day market exclusivity in the country. Emerging markets grew at 19% to Rs.710 crore, of which sales from Russia grew at 18% to Rs.420 crore, driven by higher volumes in the over-the-counter segment. Dr. Reddy’s said its alliance with GlaxoSmithKline plc (GSK) for emerging markets outside India hasn’t been up to its expectations. “Our own estimates were little high,” Mukherjee said. “The picture is clear that we will be selective, will do value accretive products in some markets but it will not be a large.” Dr. Reddy’s and GSK formed an alliance in June 2009 to develop and market select products across emerging markets outside India. Under the terms of the agreement, GSK will gain access to Dr. Reddy’s portfolio and future pipeline of more than 100 branded pharmaceuticals in fast growing therapeutic segments such as cardiovascular, diabetes, oncology, gastroenterology and pain management. The company said it is now looking at marketing around 25-30 products as part of the alliance. Sales in India grew at 15% to Rs.400 crore, while the active pharmaceutical ingredients and services business recorded a decline of 6% to Rs.550 crore. The sales growth in India was driven by healthy volume expansion in our focus brands, some of which are also listed under the national list of essential medicines portfolio, the company said. Dr. Reddy’s said the latest decision by the pharmaceutical pricing regulator the National Pharmaceutical Pricing Authority capping the prices of 50 drugs used to treat diabetes and heart diseases will have negligible impact on its India business. “We are yet to quantify the impact, but it will not be significant,” said Saumen Chakraborty, president and chief financial officer. The research and development (R&D) expenses of the company grew 59% to Rs.390 crore compared with the previous year, while selling, general and administrative expenses increased 21% to Rs.1,067.9 crore. Dr. Reddy’s spends about 11% of its sales on R&D as it invests on complex generics, proprietary products and biosimilars to stay ahead of competition in generics space The company said it plans to file at least two new drug applications in a year from now. “Biologics could take some more time,” said Mukherjee. A biosimilar or biologic is a generic version of a biopharmaceutical drug, an area of interest for pharma firms, especially generic companies such as Dr Reddy’s, as a new driver for growth. To lower risk in biosimilar development, Dr Reddy’s partnered with German biotech firm Merck Serono, a division of Merck KGaA, in June 2012 to develop and manufacture biosimilar compounds that go off-patent to treat cancer. “Dr. Reddy’s results are in line with our expectation,” said Sarabjit Kour Nangra, vice- president, research at Mumbai-based brokerage house Angel Broking Ltd. The generic market growth was on back of the North America and India, which grew by 51% y-o-y and 15% y-o-y respectively, Nangra said. “The sales growth in North America could moderate in coming quarters, as competition intensifies,” Nangra said. Shares of Dr. Reddy’s gained 2.01% to Rs.2,822.25 on BSE, while the benchmark Sensex gained 0.37% to 26,087.42 points.