Dr. Reddy’s Q1 FY15 Financial Results

HYDERABAD, India

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended June 30, 2014 under International Financial Reporting Standards (IFRS).

Key Highlights (Q1 FY15)

• Consolidated revenues at Rs.35.2 billion, year-on-year growth of 24%.
  • Revenues from the Global Generics (GG) segment at Rs.29.0 billion, year-on-year growth of 32%.
  • Revenues from the Pharmaceutical Services and Active Ingredients (PSAI) segment at Rs.5.5 billion, year-on-year decline of 6%.
• Gross Profit Margin at 59.3% versus 52.8% as in Q1 FY 14.
• Research & Development (R&D) expenses at Rs.3.9 billion, year-on-year increase of 59%. Expenses at 11.0% of revenues versus 8.5% of revenues as in Q1 FY14.
• Selling, general & administrative (SG&A) expenses at Rs.10.7 billion, year-on-year increase of 21%. Expenses at 30.4% of revenues versus 30.9% of revenues as in Q1 FY14.
• EBITDA at Rs.8.9 billion, 25% of revenues; year-on-year growth of 56%.
• Profit after tax at Rs.5.5 billion, 16% of revenues; year-on-year growth of 52%.
• During the quarter the company launched 25 new generic products, filed 27 new product applications and 20 DMFs globally.

All amounts in millions, except EPS

All US dollar amounts based on convenience translation rate of 1 USD = Rs.60.06

Segmental Analysis

Global Generics

Revenues at Rs.29.0 billion, year-on-year growth of 32%, primarily driven by North America, select Emerging Market territories and India.

• Revenues from North America at Rs.16.5 billion, year-on-year growth of 51%.
  • Sustained performance from limited competition launches namely decitabine, azacitadine, zoledronic acid injection 5mg/100mL, donepezil 23mg and divalproex ER.
  • Progress on market share expansion of key base molecules namely metoprolol succinate and ziprasidone.
  • 4 new products were launched during the quarter.
  • 9 product filings in the US in the Q1 FY15. Cumulatively, 70 ANDAs are pending for approval with the USFDA of which 42 are Para IVs, and we believe 8 to have ‘First To File’ status.
• Revenues from Emerging Markets at Rs.7.1 billion, year-on-year growth of 19%.
  • Revenues from Russia at Rs.4.2 billion, year-on-year growth of 18% in local currency, largely driven by higher volumes in the OTC segment and certain key products in prescription segment.
  • Emerging Markets (Ex-Russia) at Rs.2.9 billion recorded year-on-year growth of 25% primarily driven by Venezuela Market.
• Revenues from India at Rs.4.0 billion, year-on-year growth of 15%.
  • Growth is driven by healthy volume expansion in our focus brands, some of which are also listed under the NLEM portfolio.
  • IMS June ’14, Dr Reddy’s MAT Gr% 9.6% versus IPM MAT Gr% of 9.4%. (Source: IMS).

Pharmaceutical Services and Active Ingredients

• Revenues from PSAI at Rs.5.5 billion, year-on-year decline of 6%.
• During the quarter 20 DMFs were filed globally, of which 5 were filed in the US. The cumulative number of DMF filings as of June 30, 2014 is 678.

Income Statement Highlights:

• Gross profit margin at 59.3% and improved by approximately 650 basis points over Q1 FY14. Gross profit margin for GG and PSAI business segments are at 66.5% and 22.3% respectively.
  GG gross profit margin improved primarily on account of better product mix.

• SG&A expenses at Rs.10.7 billion increased by 21% on a year-on-year basis. However there is a 55 basis points improvement wrt revenues. Increase in absolute value is largely due to depreciation of the rupee against multiple currencies, annual increment, additional manpower deployment in the past 12 months and other sales and marketing spend for events specific to this quarter.
• R&D expenses at Rs.3.9 billion, year-on-year growth of 59%. 11.0% of revenues in Q1 FY15 as compared to 8.5% of revenues in Q1 FY14. The increase is in line with our planned scale-up in development activities.
• Net Finance income of Rs.481 million compared to Net Finance expense of Rs.70 million in Q1 FY14. The change is on account of :
  • Net incremental forex benefit of Rs.606 million.
  • Net Incremental interest expense of Rs.56 million.
• EBITDA at Rs.8.9 billion, year-on-year growth of 56%; 25% of revenues.
• Profit after Tax at Rs.5.5 billion, year-on-year growth of 52%; 16% of revenues.
• Diluted earnings per share in Q1 FY 15 at Rs.32.24.
• Capital expenditure for Q1 FY15 is Rs.2.2 billion.