The Hindu Business Line : Dr Reddy's Q2 net trebles on record sales

In what is being termed as the highest-ever quarterly sales by an Indian pharma company, Dr Reddy's Laboratories Ltd has reported a sales turnover of Rs 2,004 crore and a net profit of Rs 280 crore for the second quarter of current fiscal ended September 2006.

This represents a growth of 245 per cent in sales turnover and 214 per cent in net profit over the corresponding quarter of the previous fiscal, which stood at Rs 580 crore and Rs 89 crore respectively. The EPS for the quarter under review improved to Rs 18.15 (Rs 5.81).

Improved Performance

Addressing newspersons here on Friday, Dr Reddy's Managing Director and COO, Mr K. Satish Reddy, attributed the improved performance mainly to acquisitions and authorised generic sales.

The acquisitions in Mexico and Germany have contributed 20 per cent to total revenues in the quarter under review.

While revenues in Germany improved to Rs 255.4 crore (Rs 199.8 crore), the Mexico acquisition contributed Rs 143.4 crore during the quarter compared with Rs 124.1 crore in the previous quarter.

However, he said, the company could improve its core businesses by 42 per cent excluding authorised generic sales and acquisitions during the quarter under review.

Revenues from international markets reported a growth of 391 per cent to reach Rs 1,760 crore, contributing 88 per cent to total revenues compared with 62 per cent in the corresponding quarter of the previous fiscal.

The Vice-Chairman and CEO, Mr G.V. Prasad, attributed the fall in gross profit margin from 52 per cent to 41 per cent and net profit margin from 15 per cent to 14 per cent mainly to high volume and low margin nature of authorised generic sales, which contributed significantly to the overall revenues.

Drug Policy

As to how the company managed to improve the performance of the German entity in the absence of any changes in the drug price policy there, he said the growth was achieved through improved volumes and new product launches.

He admitted that the pricing pressure in Germany continued.

Responding to a query on the patent litigation settlement entered into with GlaxoSmithKline recently relating to sumatriptan succinate tablets, he said the company is always open to settlements with inventors.

"However, we will continue our patent challenging programme. Unless we challenge patents, we cannot have settlements," he said.

Risk-reward Model

Stating that the company is currently in the process of unfolding a new strategy for its drug discovery programme, Mr Prasad said the company plans to shift towards risk-reward sharing model from the existing outlicensing model.

The company has also lined up several molecules that are in currently different phases of clinical trials.

Further, referring to Balaglitazone, the key molecule that completed carcinogenecity studies, he said Dr Reddy's has become the only pharma company in the country to have a drug candidate close to phase-III trials.

He hoped that the drug might complete trials and hit the market sometime by 2010-11.

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