Dr. Reddy's Q3 and 9M FY16 Financial Results

HYDERABAD, India--(BUSINESS WIRE)--

Dr. Reddy's Laboratories Ltd. RDY today announced its consolidated financial results for the quarter ended December 31, 2015 under International Financial Reporting Standards (IFRS).

Q3 FY16: Key Highlights

• Consolidated revenues at Rs. 39.7 billion, year-on-year growth of 3%. Growth is driven by healthy performance in NAG, Europe and India; partially offset by Emerging markets, which were impacted by unfavorable macro-economic conditions.
• Gross Profit Margin at 59.5%, improved by ~130 bps over last year
• Research & Development (R&D) spend at Rs. 4.1 billion. Continued focus on building complex generics and differentiated products pipeline.
• Selling, general & administrative (SG&A) expenses at Rs. 12.0 billion
• EBITDA at Rs. 10.1 billion, 25.5% of revenues.
• Profit after tax at Rs. 5.8 billion. Diluted EPS at Rs. 33.9

9M FY16: Key Highlights

• Consolidated revenues at Rs. 117.1 billion, year-on-year growth of 7%
• Gross Profit Margin at 60.6%, improved by ~200 bps over last year
• Research & Development (R&D) spend at Rs. 13.0 billion. Continued focus on building complex generics and differentiated products pipeline.
• Selling, general & administrative (SG&A) expenses at Rs. 34.1 billion
• EBITDA at Rs. 31.4 billion, 26.8% of revenues
• Profit after tax at Rs. 19.3 billion. Diluted EPS at Rs. 112.6

Commenting on the company's third quarter results, Co-chairman and CEO, G V Prasad said, "Despite multiple challenges, we have had a satisfactory quarter in terms of our financial performance. All of our key markets continue to perform well and show healthy growth. However, our performance has been impacted due to adverse macro-economic conditions across key emerging market territories. The two approvals and one tentative approval of our NDAs in the very first review cycle has been a positive development and lays the foundation for building a strong and sustainable proprietary products business. Enhancing our quality management practices and meeting the US FDA expectations continues to be our highest priority."

All amounts in millions, except EPS
All US dollar amounts based on convenience translation rate of 1 USD = Rs. 66.19
Dr. Reddy's Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars			Q3 FY 16									Q3 FY 15									Growth %
			($)			(Rs.)			%			($)			(Rs.)			%
Revenues			599			39,679			100.0			581			38,431			100.0			3
Cost of revenues			243			16,089			40.5			243			16,079			41.8			0
Gross profit			356			23,590			59.5			338			22,352			58.2			6
Operating Expenses
Selling, general & administrative expenses			182			12,039			30.3			168			11,151			29.0			8
Research and development expenses			62			4,095			10.3			65			4,316			11.2			(5)
Other operating expense / (income)			(2)			(122)			(0.3)			(5)			(341)			(0.9)			(64)
Results from operating activities			114			7,578			19.1			109			7,226			18.8			5
Finance expense / (income), net			1			62			0.2			(15)			(1,013)			(2.6)			NA
Share of profit of equity accounted investees, net of income tax			(1)			(64)			(0.2)			(1)			(47)			(0.1)			38
Profit before income tax			115			7,580			19.1			125			8,286			21.6			(9)
Income tax expense			27			1,788			4.5			38			2,541			6.6			(30)
Profit for the period			88			5,792			14.6			87			5,745			15.0			1
Diluted EPS			0.51			33.86						0.51			33.61						1

EBITDA Computation
Particulars				Q3 FY 16				Q3 FY 15
				($)		(Rs.)		($)		(Rs.)
Profit before tax				115		7,580		125		8,286
Interest (income) / expense net*				(4)		(236)		(5)		(347)
Depreciation				25		1,685		22		1,462
Amortization				13		892		9		579
Impairment				3		194		8		534
EBITDA				153		10,115		159		10,515
EBITDA (% to sales)						25.5				27.4

* Includes income from investments

All amounts in millions, except EPS
All US dollar amounts based on convenience translation rate of 1 USD = Rs. 66.19
Key Balance Sheet Items
Particulars			As on 31st Dec 15						As on 30th Sep 15
			($)			(Rs.)			($)			(Rs.)
Cash and cash equivalents and Other current Investments			575			38,028			514			34,050
Trade receivables			633			41,904			647			42,840
Inventories			403			26,689			410			27,147
Property, plant and equipment			797			52,736			771			51,055
Goodwill and Other Intangible assets			374			24,739			365			24,155
Loans and borrowings (current & non-current)			511			33,801			560			37,072
Trade payables			179			11,833			193			12,766
Equity			1,944			128,681			1,836			121,499

Revenue Mix by Segment
Particulars				Q3 FY 16									Q3 FY 15									Growth %
				($)			(Rs.)			%			($)			(Rs.)			%
Global Generics				507			33,558			84			473			31,335			81			7
North America							19,417									16,462						18
Europe*							1,937									1,702						14
India							5,805									4,328						34
Emerging Markets#							6,399									8,843						(28)
PSAI				77			5,082			13			92			6,112			16			(17)
North America							1,037									894						16
Europe							1,951									2,639						(26)
India							622									948						(34)
Rest of World							1,472									1,631						(10)
Proprietary Products & Others				16			1,039			3			15			984			3			6
Total				599			39,679			100			581			38,431			100			3

* Europe primarily includes Germany, UK and out licensing sales business

# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets including Venezuela

Note: Effective Q1 FY 16, there was a change in the monitoring of performance of one product from Global Generics to Proprietary Products. Consequently, revenues and related costs of this product for the previous periods have been reclassified to conform to such change.

Segmental Analysis

Global Generics

Revenues from Global Generics segment for Q3 FY16 are at Rs. 33.6 billion, year-on-year growth of 7%, primarily driven by North America, Europe and India.

• Revenues from North America for Q3 FY16 at Rs. 19.4 billion, year-on-year growth of 18%. Growth primarily on account of sustained performance of the injectable franchise and market share gains in key molecules
  
  Four new generics filings in the US during the quarter (3 ANDAs and 1 NDA). Cumulatively, 82 generic filings are pending for approval with the USFDA (79 ANDAs and 3 NDAs under 505(b)(2) route). Of these 79 ANDAs, 52 are Para IVs out of which we believe 18 have ‘First to File' status.
• Revenues from Emerging Markets for Q3 FY16 at Rs. 6.4 billion, year-on-year decline of 28%.
  • Revenues from Russia at Rs. 3.1 billion, year-on-year decline of 21% primarily on account of depreciation of rouble. In constant currency revenues grew by 5% year-on-year over a high base in previous year
  • Revenues from other CIS countries and Romania market at Rs. 0.9 billion, year-on-year decline of 17%.
  • Revenues from Rest of World (RoW) territories at Rs. 2.4 billion, year-on-year decline of 38% primarily on account of calibrated sales in Venezuela.
• Revenues from India for Q3 FY16 at Rs. 5.8 billion, year-on-year growth of 34%.
  • Continued momentum of mega brands.
  • Portfolio acquired from UCB well-integrated into our supply chain

  Normalizing for contribution from the UCB portfolio, growth of the base business during the quarter is healthy and in line with expectations

• Revenues from Europe for Q3 FY16 at Rs. 1.9 billion, year-on-year growth of 14%. Growth was primarily driven by aripiprazole and pregabalin.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI at Rs. 5.1 billion, and declined by 17% year-on-year.
• During the quarter, 21 DMFs were filed globally and 3 in the US. The cumulative number of DMF filings as of December 31, 2015 was 774.

Income Statement Highlights:

• Gross profit margin at 59.5% and improved by ~130 bps over that of previous year. Gross profit margin for Global Generics (GG) and PSAI business segments are at 65.6% and 17.4% respectively.
• SG&A expenses at Rs. 12.0 billion, year-on-year growth of 8%. This increase is largely due to the ongoing remediation activities related to the USFDA's observations and Warning Letter, settlement of ongoing patent litigation with Novartis on zoledronic acid and certain routine items related to manpower and other spends.

• Research & development expenses at Rs. 4.1 billion, year-on-year decline of 5%. As a % to sales R&D expenses stood at 10.3% in Q3 FY16 as compared to 11.2% in Q3 FY15. The decline is largely due to the receipt of our share of development costs and other contractual amounts from Merck Serono for biosimilars development program.
• Net Finance expense at Rs. 62 million compared to the net finance income of Rs. 1,013 million in Q3 FY15. The incremental charge of Rs. 1,075 million is on account of:
  • Net foreign exchange gain of Rs. 339 million in the current quarter vs net foreign exchange gain of Rs. 666 million in the previous year
  • Certain monetary assets and liabilities of the Venezuelan subsidiary that may not qualify for translation at the CENCOEX rate of VEF 6.3 per USD, have been translated at the SIMADI rate of VEF 198.5 per USD and the resultant charge of Rs. 637 million has been recorded as foreign exchange loss.
  • Decline in profit on sales of investments by Rs. 139 million.
  • Net increase in interest income of Rs. 29 million.
• Profit after Tax at Rs. 5.8 billion, 14.6% of revenues, year-on-year growth of 1%.
• Diluted earnings per share is at Rs. 33.9
• Capital expenditure is at Rs. 3.1 billion.

Earnings Call Details (06.30 pm IST, February 9, 2016)

The Company will host an earnings call at 06.30 pm IST on February 9, 2016, to discuss the performance and answer any questions from participants. This call will be accessible through an audio dial-in and a web-cast.

Audio conference Participants can dial-in on the numbers below

Primary number:						91 22 3960 0616
Secondary number:						91 22 6746 5826
International Toll Free Number			USA			18667462133
			UK			08081011573
			Singapore			8001012045
			Hong Kong			800964448

Playback of call:				91 22 3065 2322, 91 22 6181 3322
Conference ID:				375#
Web-cast				More details will be provided through our website, www.drreddys.com
Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.

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About Dr. Reddy's: Dr. Reddy's Laboratories Ltd. RDY is an integrated pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy's offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Our major therapeutic areas of focus are gastro-intestinal, cardiovascular, diabetology, oncology, pain management and anti-infectives. Dr. Reddy's operates in markets across the globe. Our major markets include – USA, Russia & CIS, Venezuela and India. For more information, log on to: www.drreddys.com

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Disclaimer: This press release may include statements of future expectations and other forward-looking statements that are based on the management's current views and assumptions and involve known or unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may," "will," "should," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to without limitation, (i) general economic conditions such as performance of financial markets, credit defaults, currency exchange rates, interest rates, persistency levels and frequency / severity of insured loss events (ii) mortality and morbidity levels and trends, (iii) changing levels of competition and general competitive factors, (iv) changes in laws and regulations and in the policies of central banks and/or governments, (v) the impact of acquisitions or reorganisation, including related integration issues.

The company assumes no obligation to update any information contained herein.

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