Recently, Dr Reddy’s Laboratories (RDY) announced third quarter loss per ADS of 70 cents after a write-down of $174 million associated with its betapharm business in Germany and other intangibles. Excluding these, the company reported adjusted earnings per share of 29 cents, lower than the Zacks Consensus Estimate of 37 cents.
Dr Reddy’s reported revenues of $373 million, a 6% decline from $397 million reported in the year-ago period. Revenues grew 17% excluding the contribution from sumatriptan in the previous year. Earlier, in November 2008, Dr Reddy’s launched the authorized generic version of GlaxoSmithKline’s (GSK) Imitrex (sumatriptan succinate) tablets in the US . Dr Reddy’s being the first company to launch the authorized generic version of the drug, enjoyed exclusivity till August 2009 after which other players entered the market. Following the expiry of this period, the company suffered both in its top line as well as on the margin front.
The two segments of Dr Reddy’s – Global Generics and Pharmaceutical Services and Active Ingredients (PSAI) recorded revenues of $253 million and $113 million, respectively. While revenues from the former declined 14.2%, PSAI recorded a growth of 17.7% compared to the year-ago period.
Generics revenues from the US (55% decline), Europe, Russia & other CIS markets and India were $64 million, $56 million (3% growth), $60 million (38% growth) and $57 million (34% growth), respectively. The US Generics market was the only one having experienced a decline in growth. However, excluding the impact of sumatriptan revenues of 2008, the growth in US was flat.
Gross profit margin during the reported quarter came down to 51% compared to 56% in the same period last year. The decline was primarily on account of a favorable mix of high margin revenues from sumatriptan in the previous year. Write down of intangible assets and goodwill raised operating expenses considerably during the third quarter. Dr Reddy’s expects to post low single digit revenue growth in fiscal 2010 (ending in March), down from the earlier forecast of 10% growth. However, the company reiterated its $3 billion revenue target for 2013. It is hoping to tap the huge potential in the US generics market in the next 2-3 years as drugs with sales of about $75 billion are slated to lose their patents.
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