Lack of US launches eats into DRLs Sept quarter profits

Written by fe Bureau | Hyderabad | Updated: Oct 30 2014, 07:45am hrs
Pharma major Dr Reddys Laboratories (DRL) has reported a 16.8% decline in its consolidated net profit to R574.10 crore in the September quarter compared to R690.25 crore a year earlier. The fall in profit was due to lack of new product launches in the US market and price erosion of some of its key products.

However, total revenues increased from R3,421.12 crore compared to R3,614.37 crore a year ago. The company had reported a net profit of R550.39 crore and revenues of R3,517.54 crore in the June quarter this fiscal.

Saumen Chakraborty, CFO, said that the company launched only one product in the US in the quarter against four launches in the June quarter. The US market is launch-dependant. This, coupled with delayed approvals for some generic products, hit the profit margins. However, we expect a few meaningful launches in the next quarter, he said. There was customer consolidation too in the US, causing rebidding, thereby leading to price erosion,he said. The price erosion for some products was one of the harshest in the generics industry, he added.

The company said its selling, general and administrative (SGA) expenses increased to R1,067.33 crore against R973.68 crore in the year-ago period. Expenses on R&D stood at R411.3 crore, an increase of 37% on a y-o-y basis.

Giving a breakup of its businesses, DRL said that revenues from global generics business stood at R2,890 crore, up 9%, driven mainly by India and rest of the world, primarily Venezuela and North America. While North American revenues were at R1,430 crore, up 8% from R1,324 crore, emerging markets contributed R830 crore, up 14%. Revenues from Russia saw a decline of 11% y-o-y primarily on account of the rouble devaluation.

The domestic market reported a 14% growth from R421 crore to R480 crore, driven by volume expansion in certain brands and some of which are also listed under the National List of Essential Medicines (NLEM) portfolio. This quarter was also the highest-ever quarterly revenues from India for the company. Revenues from the pharmaceutical services and active ingredients (PSAI) segment was nearly flat from R640 crore to R639 crore. In the quarter, 28 drug master files (DMFs) were filed globally, taking the cumulative number of filings to 703.

Meanwhile, DRL said it has entered into an asset purchase agreement with Novartis Consumer Health to acquire the title and rights to Habitrol franchise (an over-the-counter nicotine replacement therapy transdermal patch) and market the product in the US. However, it is subject to Federal Trade Commission review and the transfer of asset will happen post-FTC clearance.