The Hindu Business Line : Dr Reddy's net down 27%; to pay 100 pc

DESPITE recording a growth of 11 per cent in total revenues and five per cent in gross profit for the fiscal ended March 31, 2004, Dr Reddy's Laboratories Ltd has suffered a significant fall of 35 per cent in operating profit and 27 per cent in net profit.

According to the US GAAP financials adopted by Dr Reddy's board on Friday, the company recorded higher revenues of Rs 2,008.1 crore for the year under review compared to Rs 1,807 crore in the previous fiscal and earned a gross profit of Rs 1,073.5 crore (Rs 1,022.2 crore).

The board has recommended a dividend of 100 per cent (Rs 5 per share) for the year ended March 31, 2004, subject to the approval of the shareholders.

The company suffered a fall in operating profit at Rs 208 crore (Rs 321.8 crore), while the net profit dipped to Rs 247.4 crore (Rs 340.4 crore). This results in net profit margin falling to 12 per cent from 19 per cent in the previous fiscal.

The Dr Reddy's Vice-Chairman and Chief Executive Officer, Mr G.V. Prasad, attributed the fall in profits to various factors including increased selling, general and administrative expenses and expenses on R&D and on AmVaz where the company lost the legal battle in the US courts. He told Business Line that the short-term challenge pertained to increase in revenues corresponding to substantial investments in pipeline of products.

He said the company looks ahead to increasing its revenues, while pinning hopes on success in the US generics market. The company expects a favourable decision on Olanzapine, the drug indicated for the treatment of psychotic disorders. Having first-to-file status on the drug, the company has challenged the patents held by Eli Lilly on its product Zyproxa, which had sales of $675-million in the US market.

"If the company succeeds in this legal battle, it can record significant improvement in both turnover and net profit," Mr Prasad said.

For the fiscal under review, the company incurred cost of revenues of Rs 934.6 crore (Rs 784.8 crore), total operating expenses of Rs 865.5 crore (Rs 700.4 crore) and equity in loss at Rs 4.4 crore (Rs 9.2 crore). As a percentage of revenues, the R&D expenses increased to 10 per cent from eight per cent in the previous fiscal.

In a release here, the company said it has commenced clinical trials on two new chemical entities during the year - DRF-10945 in Canada and DRF-1644 in India. It also filed 16 drug master files, taking the total to 56. Further, the company submitted 13 abbreviated new drug applications (ANDAs) including eight para-IV filings, taking the total ANDAs pending before the US Food and Drugs Administration (US FDA) to 35. Of this, 24 include para-IV filings.

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