Price erosion pricks Dr Reddy’s PAT; Profits flat at Rs 571 Cr in Q1

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July 27, 2021 6:28 PM

Parag Agarwal, Chief Financial Officer of Dr Reddy's, said the revenues during the quarter grew by 11 per cent to Rs 4,919.4 crore. It was Rs 4,417 crore in Q1FY21.

ncome from Pharmaceutical Services and Active Ingredients was down by 12 per cent during the quarter at Rs 750 crore.ncome from Pharmaceutical Services and Active Ingredients was down by 12 per cent during the quarter at Rs 750 crore.

Dr Reddy’s Laboratoriess consolidated Profit After Tax for the quarter ended June 30 was down by one per cent to Rs 570.8 crore compared to Rs 579.3 crore during the corresponding quarter a year ago, a senior official of the company said on Tuesday. Parag Agarwal, Chief Financial Officer of Dr Reddy’s, said the revenues during the quarter grew by 11 per cent to Rs 4,919.4 crore. It was Rs 4,417 crore in Q1FY21.

“There are two or three key drivers for this (flat growth in PAT). One is the price erosion impact in North America as it is pointed out. It was in a select few products because of the comparative intensity,” Agarwal told reporters. The company has also been making some investments on some brands in emerging markets and India as it sees strong growth, he said, attributing the reasons for no growth in PAT.

“We do expect these investments will drive higher sales in the coming quarters. We expect our profit margins to come back to what we have been saying in the last few quarters,” he added. Commenting on the results, Co-Chairman and MD, G V Prasad in a press release said the financial performance of the quarter has been driven by healthy sales growth.

Revenues from Global Generics witnessed a Year-on-Year growth of 17 per cent, driven primarily by branded markets (India and emerging markets) and Europe. The overall growth was on account of new product launches and volume traction in the base business, partly offset by price erosion in some of our products and adverse forex rates, he said. Revenues from India grew at 69 per cent to Rs 1,060 crore in Q1, primarily driven by increase in sales volumes of existing products, led by increase in sale of covid drugs due to the severe second wave witnessed in the country. The growth was also aided by contribution from new product launches and increase in sales prices of existing products, a press release from the company said. Income from Pharmaceutical Services and Active Ingredients was down by 12 per cent during the quarter at Rs 750 crore.

The decline was on account of a decrease in sales volumes and prices of the company’s existing products, partially offset by new products launched. Year-on-Year was also impacted due to customer stocking up last year. The drug maker, in a filing with BSE, said it has commenced a detailed investigation into an anonymous complaint, alleging that healthcare professionals in Ukraine and potentially in other countries were provided with improper payments by or on behalf of the company in violation of U.S. anti-corruption laws, specifically the U.S. Foreign Corrupt Practices Act. A U.S. law firm is conducting the investigation at the instruction of a committee of the Company’s Board of Directors.

“The investigation is ongoing…On July 6, 2021 the Company received a subpoena from the SEC (U.S.Securities and Exchange Commission) for the production of documents pertaining to certain CIS geographies and the Company is in the process of responding to the same,” Dr Reddys said. While the matter may result in government enforcement actions against the Company in the United States and/or foreign jurisdictions, which could lead to civil and criminal sanctions under relevant laws, the probability of such action and the outcome are not reasonably ascertainable at this time, it added.

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