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Despite reporting net loss during the quarter ended December 2019, pharma major Dr Reddy’s has continued to put up an improved set of numbers across its business segments. The consolidated net loss of the company stood at ₹570 crore during the quarter due to impairment charges as against a profit of ₹485 crore in the same quarter last year. The total impairment charges stood at ₹1,320 crore during the quarter — ₹1,114 crore towards the generic of Nuvaring and ₹206 crore towards other product related intangibles. The consolidated total revenue of the company rose 14 per cent to ₹4,384 crore during the third quarter of FY20 against ₹3,850 crore in the year-ago period.
Growth prospects
Having resolved the regulatory issues at most of its key facilities, the performance of the company saw an improvement in the recent quarters led by approvals in the US, new launches and product-level cost optimisation. Over the past two years, divestment of non-core assets, trimming of workforce and rationalisation of R&D have also led to an improvement in margins and return ratios of the company. Its focus on biosimilars, along with its foray into the Chinese generic market, further improved its profitability.
Dr Reddy’s US business, which registered negative or flat growth in the past quarters, grew 8 per cent y-o-y this quarter due to the higher volume growth in the existing products. The pricing pressure is likely to subside going ahead, given its low product-revenue concentration and new launches of complex and limited-competition products. The company has been one of the best Para IV ANDA (abbreviated new drug application) filing entities in the industry. Of the 99 pending ANDAs, 53 are Para IV filings and 32 have FTF (first to file) status (as of 31 December 2019). The company has guided for creating a stable and diversified business model in the US by increasing the number of products in the US to 250 from 120 currently.
Strong domestic market
Dr Reddy’s domestic business, which contributes 16 per cent to the total revenue, grew 13 per cent y-o-y driven by new products, improved realisations in base business and volume traction. Revenues from Emerging Markets grew 19 per cent y-o-y, driven by improved volume offtake in existing markets. Revenues from Europe grew significantly by 52 per cent y-o-y on account of new products launches and volume traction in base business.
The operating profit margin expanded to 24.5 per cent during the quarter from 22.5 per cent in the same quarter last year.
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