The Hindu Business Line : Dr Reddy’s net down 26% at Rs 134 cr

Hyderabad, July 21 Pharma major Dr Reddy’s Laboratories Ltd’s net profit decreased 26 per cent at Rs 134.6 crore in the first quarter ended June 30, 2008 compared with Rs 182.5 crore in the corresponding quarter for last fiscal year.

However, due to good revenue growth in North America, Germany and Russia, the total revenues grew by 25 per cent to Rs 1,503 crore (Rs 1,198 crore).

Despite increased revenues, the net profit was down due to 50 per cent increase in selling, general and administrative expenses (Rs 469.8 crore) and research and development costs, Mr G.V. Prasad, Chief Executive Officer and Vice-Chairman, Dr Reddy’s Labs, told newspersons here on Monday.

As the company launched 26 new generic products during the quarter, the marketing expenses were high. “This is not necessarily a trend for the subsequent quarters and we expect these expenses to come down,” Mr K Satish Reddy, Chief Operating Officer and Managing Director, said.

The Hyderabad-based company was also negatively impacted by “not so buoyant” growth in the domestic market which had seen 9 per cent growth in revenue.

The business in India had not grown on the expected lines as the older products of the company did not show anticipated growth and the yields from products launched were yet to pour in, Mr Reddy said.

“This will be limited only to the first quarter. On the whole, we maintained the 25 per cent growth as per our guidance announced earlier. We will stick to it for the remaining quarters,” Mr Prasad said.

The German market, which was a concern for the company in the recent past, is turning around and there are no problems with the Betapharm supplies. The German revenues increased 25 per cent during the quarter.

PERLECAN PHARMA

Dr Reddy’s would buyback equity from ICICI Venture Funds Management Company and Citigroup Venture Capital to make Perlecan Pharma Private Ltd a 100 per cent subsidiary.

“We have agreed to pay $9 million each to ICICI and Citgroup. The transaction will be completed in the days to come,” Mr Prasad said.

Both ICICI and Citigroup invested $22.5 million in Perlecan which was formed in 2005 as an integrated drug development company with 43 per cent equity each for ICICI and Citigroup and14 per cent equity for Dr Reddy’s.

The buyback of Perlecan became necessary “as both the investors had a limited investment horizon and wanted to exit. Certain rights held by Perlecan, its assets and R&D are also vital to for our R&D focus,” he added.

The company would use its cash reserves for the deal. As Perlecan has a cash balance of $9.5 million, it needs to pay less than $9 million.

Currently, Perlecan has three molecules in cardiovascular and anti-diabetes segment out of which one is out-licensed and two are in the development stage.

Dr Reddy’s scrip gained 1.72 per cent and ended at Rs 675.65 on Monday at the BSE.

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