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Pharma major Dr Reddy’s has delivered a stable set of numbers in the first quarter of 2018-19, primarily driven by strong sale of newly launched products in the US coupled with healthy performance in emerging markets.
Year-on-year, the company’s consolidated net profit for the quarter grew 672 per cent to ₹456 crore from ₹59 crore in the same period last year, thanks to the low base in the same quarter last year due to GST disruption and windfall gain from the sale of Suboxone drug in the US now.
Consolidated total revenue of the company rose 12 per cent to ₹ 3,721 crore during the quarter from ₹3,326 crore in the year-ago period.
Launches help in US
The company’s US business, that contributes 43 per cent to the overall revenue, grew 6 per cent Y-o-Y during the quarter. The new launches particularly, Suboxone, drove growth in the US. This partly offset the pricing pressure in the base business.
In mid-June 2018, the company had launched the Suboxone generic drug (indicated for the treatment of opioid dependence) in the US and enjoyed a windfall gain of $15-20 million till the company received a temporary restraining order from the US court.
The US District Court of New Jersey had granted a preliminary injunction against Dr Reddy’s, preventing it from selling Suboxone drug in the US while a patent-infringement lawsuit is pending.
Though the company appeals against the order, the delay in monetisation would lower its revenue in future quarters as more competitors are likely to enter the market.
Strong domestic growth
The company’s domestic business that contributes around 16 per cent of the overall revenue, reported a strong growth of 30 per cent Y-o-Y in the first quarter due to a low base of last year, which was impacted on the back of GST implementation.
Revenue from the emerging markets, including Russia, registered 16 per cent Y-o-Y growth during the quarter, primarily driven by new launches and volume traction in some of the key molecules.
Consolidated operating profit margin expanded significantly to 20 per cent during the quarter against 9 per cent in the first quarter of FY18 due to better product mix and higher Suboxone sales.
Outlook
The company has guided for 15 more generic drugs approvals in the US in FY19. However, there seems to be a low visibility on lucrative product launches in the near term in the US due to delay in key product launches such as Nuvaring and Copaxone as well as the restraint on Suboxone.
On the regulatory front, while the company has requested USFDA for inspection at Duvvada facility, the data investigation and analysis at Srikakulam site are expected to be completed by September 2018. On the domestic front, the company expects double-digit growth in India business. The company also plans to grow its biosimilar portfolio in the Indian market.
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