Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY) today announced its consolidated financial results for the quarter ended December 31, 2019 under International Financial Reporting Standards (IFRS).
* Excluding intangibles impairment of Rs. 1,320 Cr; Profit before tax is Rs. 793 Cr
Commenting on the results, Co-Chairman and MD, GV Prasad said “The current quarter performance has been good across all our businesses and we achieved strong EBITDA margins. The profits were impacted due to trigger based impairment charge taken on a few products including gNuvaring. We continue to focus on execution and have made significant progress on quality systems and operational efficiencies”.
All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.71.36
Dr. Reddy’s Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars Q3 FY20 Q3 FY19 YoY
Gr % Q2 FY20 QoQ
Gr%
($) (Rs.) ($) (Rs.) ($) (Rs.)
Revenues 614 43,838 540 38,500 14 673 48,009 (9)
Cost of Revenues 282 20,116 249 17,748 13 286 20,389 (1)
Gross Profit 332 23,722 291 20,752 14 387 27,620 (14)
Operating Expenses
Selling, General & Administrative expenses 178 12,670 169 12,036 5 185 13,217 (4)
Research and Development expenses 55 3,949 51 3,668 8 51 3,662 8
Impairment of non-current assets 185 13,200 – – 50 3,560 271
Other operating (income) (3) (228) (10) (681) (67) (2) (135) 68
Results from operating activities (82) (5,869) 80 5,729 (202) 103 7,316 (180)
Net finance (income) (6) (419) 0 13 (3) (231) 81
Share of (profit) / loss of equity accounted investees (2) (176) (1) (89) 98 (2) (117) 50
Profit before income tax (74) (5,274) 81 5,805 (191) 107 7,664 (169)
Income tax expense 6 423 13 953 (56) (46) (3,261) (113)
Profit for the period (80) (5,697) 68 4,852 (217) 153 10,925 (152)
Diluted Earnings Per Share (EPS) (0.48) (34.37) 0.41 29.21 (217) 0.92 65.82 (152)
As % to Revenues Q3 FY20 Q3 FY19 Q2
FY20
Gross Profit 54.1 53.9 57.5
SG&A 28.9 31.3 34.9
R&D 9.0 9.5 7.6
EBITDA 24.5 22.5 29.9
PBT* (12.0) 15.1 16.0
PAT (13.0) 12.6 22.8
*Excluding intangibles impairment Q3 FY20 PBT @ 18.1%
EBITDA Computation
Particulars Q3 FY20 Q3 FY19 Q2 FY20
($) (Rs.) ($) (Rs.) ($) (Rs.)
Profit before Income Tax (74) (5,274) 81 5,805 107 7,664
Interest (income) net* (4) (274) (4) (260) (3) (226)
Depreciation 30 2,130 29 2,073 32 2,306
Amortization 13 955 14 1,035 14 1,033
Impairment 185 13,200 – – 50 3,561
EBITDA 150 10,737 121 8,652 201 14,338
* Includes income from Investments
All amounts in millions, except EPS All US dollar amounts based on convenience translation rate of I USD = Rs.71.36
Key Balance Sheet Items
Particulars As on 31st Dec, 2019 As on 30th Sep 2019 As on 31st Dec 2018
($) (Rs.) ($) (Rs.) ($) (Rs.)
Cash and cash equivalents and other investments 287 20,457 427 30,446 359 25,593
Trade receivables (current & non-current) 646 46,095 591 42,153 523 37,302
Inventories 529 37,746 491 35,033 475 33,911
Property, plant and equipment 739 52,709 743 53,008 776 55,344
Goodwill and Other Intangible assets 432 30,847 621 44,340 690 49,205
Loans and borrowings (current & non-current) 229 16,320 442 31,545 614 43,836
Trade payables 250 17,810 216 15,434 223 15,939
Equity 2,083 1,48,672 2,155 1,53,816 1,902 1,35,708
Revenue Mix by Segment
Particulars Q3 FY20 Q3 FY19 YoY
Growth % Q2 FY20 QoQ
Growth %
(Rs.) (Rs.) (Rs.)
Global Generics 35,927 31,347 15% 32,816 9%
North America 15,999 14,832 8% 14,265 12%
Europe 3,093 2,030 52% 2,764 12%
India 7,636 6,741 13% 7,511 2%
Emerging Markets 9,199 7,744 19% 8,276 11%
Pharmaceutical Services and Active Ingredients (PSAI) 6,906 5,937 16% 7,107 -3%
Proprietary Products & Others 1,005 1,216 (18%) 8,086 (88%)
Total 43,838 38,500 14% 48,009 (9%)
Revenue analysis (Segment wise)
Sales for the quarter is Rs. 43.8 billion with a year-on-year growth of 14%. Sequentially, it has declined by 9%. In Q2 FY 20, we had out-licensed 2 neuro products of the proprietary products business and recognized a revenue of Rs.7.2 billion. Adjusted for this, the sequential quarter growth is 7%, and is highest ever quarterly sales from operations, without any one-off item.
Global Generics (GG)
Revenues from GG segment at Rs.35.9 billion. Year-on-year growth of 15%, primarily driven by Europe, Emerging Markets and India. Sequential growth of 9%, primarily driven by NAG, Europe and EM.
• Revenues from North America at Rs.16.0 billion. Year-on-year revenues grew by 8%. Sequential growth of 12%, largely on account of higher volumes in some of our key molecules partly offset by price erosion in some of our key molecules. We launched five new products (Bortezomib injection, Doxercalciferol, Deferasirox dispersable tabs, Deferasirox film coated tabs, Sodium Nitroprusside injection) during the quarter.
As of 31st December 2019, cumulatively 101 generic filings are pending for approval with the USFDA (99 ANDAs and 2 NDAs under 505(b)(2) route). Of these 99 ANDAs, 53 are Para IVs out of which we believe 32 have ‘First to File’ status.
• Revenues from Emerging Markets at Rs.9.2 billion. Year-on-year growth is 19%. Sequential growth is 11%.
– Revenues from Russia at Rs.4.9 billion. Year-on-year growth of 20%. Growth primarily driven by increase in volumes coupled with better realizations in some of the key molecules.
– Revenues from other CIS countries and Romania market at Rs.1.8 billion. Year-on-year growth of 26% largely driven by new products and volume traction.
– Revenues from Rest of World (RoW) territories at Rs.2.5 billion. Year-on-year growth of 12%, primarily driven by new products coupled with volume traction partly offset by price erosions in some of the key molecules.
• Revenues from India at Rs.7.6 billion. Year-on-year growth of 13%, driven by new products, improved realizations in base business and volume traction. Sequential growth is 2% due to improved realizations and launch of new products.
• Revenues from Europe at Rs.3.1 billion. Year-on-year growth of 52%, primarily on account of new products and volume traction in base business partly offset by lower realizations as few key molecules entered tenders. Sequential growth is 12% due to improvement in the sales of base business.
Pharmaceutical Services and Active Ingredients (PSAI)
• Revenues from PSAI at Rs.6.9 billion. Year-on-year growth of 16% largely driven by increase in volumes of API business. There is a sequential decline of 3% due to lower volumes pick up compared to Q2.
Proprietary Products Segment (PP)
• Revenues from PP at Rs.0.2 billion, as against Rs.0.7 billion in Q3 FY 19 and Rs.7.4 billion in Q2 FY 20, as we had out-licensed our commercialized derma products in Q4 FY 19 and commercialized neuro products in Q2 FY 20.
Income Statement Highlights:
• Gross profit margin at 54.1% vs. Q3 FY 19 margin of 53.9% and Q2 FY 20 margin of 57.5%
– Gross profit margin for GG and PSAI business segments are at 58.2% and 30.0% respectively.
– Year on year gross profit margins marginally improved on account of new products contribution with better margins and manufacturing leverage offset by higher price erosion in some of the key molecules in the US, Europe and RoW markets.
– Sequentially there is a decline in margin as during the last quarter we recognized revenue from the out-licencing of PP Neuro products. On a like to like basis, the margins improved by ~260 bps due to manufacturing leverage and business mix.
• SG&A expenses at Rs.12.7 billion, an increase of 5% on a year-on-year basis and decline of 4% sequentially. SG&A as % to sales improved by 240 bps on a year-on-year basis and on a like-to-like basis leverage improved sequentially as well.
• In December, 2019 there has been a generic launch and an authorized generic launch for the product Nuvaring®, which has led to a considerable erosion in the value of this product for us, and accordingly we have taken an impairment charge of Rs.11.1 billion ($ 156.5 mn). In addition to this, considering the current market dynamics, we have taken an impairment charge of Rs.2.1 billion on the intangibles pertaining to other products. In total, we have taken an impairment of Rs.13.2 billion on the intangible assets for this quarter. In Q2 FY 20, we had an impairment charge of Rs.3.6 billion.
• R&D expenses at Rs.3.9 billion. As % to Revenues- Q3 FY20: 9.0% | Q2 FY 20: 7.6% | Q3 FY19: 9.5%. Focus continues on building healthy pipeline of products across our markets.
• Other operating income at Rs.228 million compared to Rs.681 million in Q3 FY19. Previous year includes Rs.423 million on account of sale of API business manufacturing unit located at Jeedimetla, Hyderabad.
• Net Finance income at Rs.419 million compared to net finance expense of Rs.13 million in Q3 FY19. The increase is primarily on account of foreign exchange gain in current quarter compared to loss in Q3 FY19.
• Loss before Tax at Rs.5.3 billion, loss is primarily on account of impairment of intangible assets. Excluding impairment, profit before tax is at Rs.7.9 billion.
• The net tax for the quarter is at Rs.0.42 billion.
• Diluted loss per share is at Rs.34.4
• Capital expenditure is at Rs.1.2 billion.
Earnings Call Details (06:30 pm IST, 08:00 am EST, January 27, 2020)
The Company will host an earnings call to discuss the performance and answer any questions from participants.
Audio conference Participants can dial-in on the numbers below:
Universal Access Number: +91 22 6280 1219
Secondary number: +91 22 7115 8120
Local Access number: +91 70456 71221
(Available all over India)
International Toll Free Number USA 1 866 746 2133
UK 0 808 101 1573
Singapore 800 101 2045
Hong Kong 800 964 448
Playback of call: +91 22 7194 5757, +91 22 6663 5757
Conference ID: 58113
Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.
