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.
