Dr. Reddy’s Q4 & FY15 Financial Results

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) (BSE: 500124) (NSE:DRREDDY) today announced its consolidated financial results for the fourth quarter and full year ended March 31, 2015 under International Financial Reporting Standards (IFRS).

FY15: Key Highlights

• Three NDAs filed in our Proprietary Products business.
• Consolidated revenues for FY15 at Rs. 148.2 billion, year-on-year growth of 12%.
• Gross Profit Margin for FY15 at 57.6% versus 57.4% as in FY14.
• Research & Development (R&D) expenses for FY15 at Rs. 17.4 billion, year-on-year increase of 41%.
• Selling, general & administrative (SG&A) expenses for FY15 at Rs. 42.6 billion, year-on-year increase of 10%.
• EBITDA for FY15 at Rs. 36.2 billion, 24% of revenues; year-on-year growth of 9%.
• Profit after tax for FY15 at Rs. 22.2 billion, 15% of revenues; year-on-year growth of 3%

Q4 FY15: Key Highlights

• Consolidated revenues for Q4 FY15 at Rs. 38.7 billion, year-on-year growth of 11%.
• EBITDA for Q4 FY15 at Rs. 8.1 billion, 21% of revenues. During Q4 FY15 we have recorded a foreign exchange translation loss of Rs. 843 million on certain net monetary assets in Venezuela.
• Profit after tax for Q4 FY15 at Rs. 5.2 billion, 13% of revenues.

Dr. Reddy’s Co-chairman and CEO, GV Prasad commented, “We are pleased with the progress on our financial and non-financial parameters, which we delivered despite currency volatility in some of our Emerging Market geographies. Our commitment to R&D continues to show results, with the filings of NDAs in our Proprietary Products business during the quarter and continued filings of complex generics assets. Overall, our results demonstrate our commitment to execute on our strategy, across businesses, as we constantly strengthen our focus on patients and providing them access to affordable medicines."

Note:

Selling, general & administrative expenses, as above, includes an impairment charge Rs. 510 million [in FY15] and impairment reversal of Rs. 497 million [in FY14]

Research & Development expenses, as above, includes an impairment charge of Rs. 119 million in [FY15]

Segmental Analysis

Global Generics

Revenues from Global Generics segment for FY15 are at Rs. 120.6 billion, year-on-year growth of 15%, primarily driven by North America, Venezuela and India.

• Revenues from North America for FY15 at Rs. 64.7 billion, year-on-year growth of 17%.
  • Current year growth is shaped by scale-up of the injectable franchise and market share gains in select molecules
  • 12 new products were launched during the financial year
  • Current year includes three months revenues from Habitrol®
  • 13 new product filings in the US during the year. Cumulatively, 68 ANDAs are pending for approval with the USFDA of which 43 are Para IVs out of which we believe 13 to have ‘First To File’ status.
• Revenues from Emerging Markets for FY15 at Rs. 30.8 billion, year-on-year growth of 13%.
  • Revenues from Russia at Rs. 14.9 billion, year-on-year growth of 13% in local currency terms despite macro-economic uncertainty. After considering the impact of currency depreciation the rupee revenues declined by 9%.
  • Revenues from CIS markets at Rs. 2.8 billion, year-on-year decline of 20% primarily on account of currency depreciation.
  • Revenues from Rest of World (RoW) territories at Rs. 13.1 billion recorded year-on-year growth of 77%. Of this Venezuela delivered strong growth on the back of continuing volume uptake.
• Revenues from India for FY15 at Rs. 17.9 billion, year-on-year growth of 14%.
  • Growth is driven by continued focus on new product launches and prescription growth.
• Revenues from Europe for FY15 at Rs. 7.2 billion, year-on-year of 10% in local currency terms.
• As per IMS Mar’15, Dr Reddy’s MQT Gr% at 21.4% versus market MQT Gr% of 15.4%.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI for FY15 at Rs. 25.5 billion, year-on-year growth of 6%.
• During the year, 77 DMFs were filed globally, including 12 in the US and 16 in Europe. The cumulative number of DMF filings as of March 31, 2015 is 735.

Income Statement Highlights:

• Gross profit margin in FY15 stood at 57.6% and registered marginal improvement over previous year. Gross profit margin for Global Generics (GG) and PSAI business segments for FY15 are at 65.2% and 22.4% respectively.
• Selling, General and Administration (SG&A) expenses at Rs. 42.6 billion, year-on-year increase of 10%. The increase is primarily on account of annual increments, additional manpower deployment in select areas, sales & marketing spend for events specific to the year, marginally offset by currency devaluation in EM markets.
• Research & development expenses at Rs. 17.4 billion, year-on-year growth of 41%. 11.8% of revenues in FY15 as compared to 9.4% of revenues in FY14. The increase is in line with our planned scale-up in development activities.
• Net Finance income at Rs. 1,682 million compared to Rs. 400 million in FY15. The increase is on account of:
  • Incremental forex benefit of Rs. 1,430 million
  • During Q4 FY15, pursuant to the modification of the currency exchange systems by the government of Venezuela in February 2015, the Company re-evaluated its economic position and determined that it is appropriate to use the SIMADI rate (which is bolivars 193 per USD) to translate the surplus monetary assets and liabilities, other than those which qualify for the CENCOEX rate of 6.3 bolivars per USD. Accordingly, during the quarter ended 31 March 2015, an amount of Rs. 843 million was recorded as foreign exchange loss.
  • Incremental profit on sales of investments of Rs. 539 million
  • Net increase in interest income of Rs. 158 million primarily due to reduction in Interest expense by Rs. 182 million offset set by decline in interest income by Rs. 24 million.
• EBITDA for FY15 at Rs. 36.2 billion, year-on-year growth of 9%; 24% of revenues.
• Profit after Tax in FY15 at Rs. 22.2 billion, year-on-year growth of 3%; 15% of revenues.
• Diluted earnings per share in FY15 at Rs. 130
• Capital expenditure for FY15 is Rs. 9.3 billion.

The Board has recommended payment of a dividend of Rs. 20 per equity share of face value Rs. 5/- each (400% of face value) for the year ended March 31, 2015, subject to approval of members.

About Dr. Reddy’s: Dr. Reddy’s Laboratories Ltd. (NYSE: 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.

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.