Dr. Reddy's - Q3FY10 Reckoner

8/14/2019 Dr. Reddy's - Q3FY10 Reckoner

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ReckonerQ3FY10

January 20, 2010

Dr. Reddys Laboratories Ltd.www.drreddys.com


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Revenues rom Global Generics business at Rs. 11.7 billion ($253 million) in Q3 FY10 as against Rs. 13.7 billion ($295 million)in Q3 FY09. Excluding revenues rom sumatriptan, growth o 16% driven by the key markets o India and Russia.

Revenues o Global Generics or the nine months at Rs. 37.4 billion ($807 million) represent a growth o 7%.Revenues rom North America at Rs. 3.0 billion ($64 million) in Q3 FY10 as against Rs. 6.7 billion ($143 million) in Q3 FY09.Excluding revenues rom sumatriptan the growth is at.Revenues rom Europe at Rs. 2.6 billion ($56 million) in Q3 FY10 as against Rs. 2.5 billion ($54 million) in Q3 FY09, representinga growth o 3%.

Revenues rom Germany increase by 2% to Rs. 2.0 billion ($44 million) in Q3 FY10.

Revenues rom Rest o Europe grew by 6% to Rs. 534 million ($12 million) in Q3 FY10.Revenues rom Russia & Other CIS markets at Rs. 2.8 billion ($60 million) in Q3 FY10 as against Rs. 2.0 billion ($43 million) inQ3 FY09, representing a growth o 38%.

Revenues in Russia at Rs. 2.3 billion ($49 million) in Q3 FY10 as against Rs. 1.6 billion ($34 million) in Q3 FY09 representing a YoY growth o 45%.Revenues in Other CIS markets increase by 13% to Rs. 488 million ($11 million) in Q3 FY10 as against Rs. 434 million($9 million) in Q3 FY09.

Revenues in India at Rs. 2.6 billion ($57 million) in Q3 FY10 rom Rs. 2.0 billion ($42 million), representing a growth o 34% ledby key brands o Omez, Nise, Stamlo Beta, Reditux & Stamlo.

The YoY growth o 34% is largely driven by volume growth o 29% rom existing portolio and 7% by new productlaunches. Sequentially, the value growth is at 4% largely driven by volume growth across products.

Dr. Reddys Laboratories Ltd.

www.drreddys.com

Business Highlights

Consolidated revenues at Rs. 17.3 bn ($373 mn) in Q3 FY10 as against Rs. 18.4 bn ($397 mn) in Q3 FY09, represent-ing a decline o 6%.

Excluding revenues rom sumatriptan in the previous year, the 17% growth is largely driven by

the key businesses o PSAI, India and Russia.Consolidated revenues or nine months FY10 at Rs. 53.9 bn ($1.2 bn) represent a YoY growth o 9%.

EBITDA at Rs. 3.7 bn ($79 mn) in Q3 FY10. EBITDA or nine months FY10 at Rs. 11.8 bn ($255 mn) represents a YoYgrowth o 31%.Loss or the quarter is at Rs. 5.2 bn ($112 mn) and Adjusted PAT or the quarter is at Rs. 2.3 bn ($50 mn). AdjustedPAT or nine months this fscal is at Rs. 7.3 bn ($158 mn) as against adjusted PAT o Rs. 5.1 bn ($110 mn) in theprevious year, representing a growth o 43%.During the quarter, 27 new generic products launched, 16 new product registrations and 11 DMFs fled globally.

Global Generics

Pharmaceutical Services & Active Ingredients (PSAI)

Revenues rom Pharmaceutical Services & Active Ingredients (PSAI) at Rs. 5.2 billion ($113 million) in Q3 FY10 as against Rs. 4.4billion ($96 million) in Q3 FY09; YoY growth o 17% driven by the regions o India and RoW.

Revenues o PSAI or the nine months at Rs. 15.5 billion ($334 million) represent a growth o 11%.During the quarter, 11 DMFs were fled globally, with 3 in US and 8 in Europe. The cumulative DMF flings as o Dec 09 are 388.

Q3FY10

During the quarter, a number o insurance companies in Germany announced their fnal results indicating a higher pace otransition to the tender based model with an associated signifcant deterioration in prices rom the previous years levels. Asa result o this, the carrying value o betapharms goodwill and intangibles were tested or impairment. A non-cash write-down o intangible assets and beta brand amounting to Euros 48 million and a non-cash write-down o goodwill amounting

to Euros 76 million were recorded or the quarter. The overall net impact on Income Statement was Euros 109 million atera reversal o deerred tax liability relating to intangibles and beta brand.


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RevenueCost o RevenuesGross ProftOperating ExpensesSelling, general & administrative expenses(a)

Reserach and development expenses, netWrite down o intangible assetsWrite down o goodwillOther (income)/expenses, net

Total Operating ExpensesResults rom operating activitiesFinance income(b)

Finance expenses(c)

Finance expenses, netShare o proft/ (loss) o equity accountedinvesteesProft beore income taxIncome tax expenseProft or the periodAttributable to:Equity holders o the company

Minority interestProft or the period

Diluted EPS

Q3 FY10

% % Growth%

Q3 FY09

373183190

1171974111(4)

318(128)

(1)210

(129)17

(112)

(112)

-(112)

(0.7) 0.3(30.9) 14.5

397175221

11622--2

14081(2)17150

66(13)53

53

-53

17,2968,4878,809

5,431892

3,4565,147(171)

14,755(5,946)

(47)97502

(5,994)777

(5,217)

(5,217)

-(5,217)

18,4018,12910,272

5,3821,027

--

110

6,5193,753(89)7886998

3,062(617)2,445

2,445

-2,445

1004951

315

2030(1)

85(34)(0)100

(35)4

(30)

(30)

-(30)

1004456

296--1

3520(0)440

17(3)13

13

-13

(6)4

(14)

1(13)

All fgures in millions, except EPSAll dollar fgures based on convenience translation rate o 1USD = Rs 46.40

Dr. Reddys Laboratories Ltd. and SubsidiariesUnaudited Condensed Consolitated Income Statement

(a) Includes amortization charges o Rs. 374 million in Q3 FY10 and Rs. 340 million in Q3 FY09.

(b) Includes orex loss o Rs. 44 million in Q3 FY10.

(c) Includes orex loss o Rs. 493 million in Q3 FY09.

Financial Updates

($)Particulars ($)(Rs.) (Rs.)

Q3

FY10


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Gross proft at Rs. 8.8 billion ($190 million) in Q3 FY10 represents a margin o 51% to revenues as against 56% in Q3 FY09. Thischange in gross margins is on account o a avorable mix o one-time upside rom sumatriptan in the previous year.Selling, General & Administration (SG&A) expenses excluding amortization or the quarter at Rs. 5.1 billion ($117 million), re-mained at as compared to both previous year and sequentially.Amortization expenses or the quarter at Rs. 374 million ($8 mn) showed a modest growth rom previous year o Rs. 340 million($7 mn).Other operating income o Rs. 171 million in Q3 FY10 as against other operating expenses o Rs. 110 million in Q3 FY09. Themovement is largely on account o the act that in Q3 FY09, a provision or damages o Rs. 224 million was recorded on accounto the German court upholding the validity o the olanzapine patent o the innovator in Germany.R&D expenses at Rs. 892 million in Q3 FY10 represent 5% o revenues.Finance costs (net) are at Rs. 50 million in Q3 FY10 as against Rs. 699 million in Q3 FY09. The change is mainly on account o :

Net orex loss o Rs. 44 million in Q3 FY10 as against Rs. 493 million in Q3 FY09.

Net interest expense o Rs. 19 million in Q3 FY10 as against Rs. 215 million in Q3 FY09.Loss or the quarter is at Rs. 5.2 billion ($112 million) and Adjusted PAT or the quarter is at Rs. 2.3 billion ($50 million). AdjustedPAT or nine months FY10 is at Rs. 7.3 billion ($158 million) as against adjusted PAT o Rs. 5.1 billion ($110 million) in the previ-ous year, representing a growth o 43%.The adjusted eective tax rate or the nine months is at 19%.Adjusted diluted EPS is at Rs. 13.6 (29 cents) or the quarter and Rs. 43.3 (93 cents) or nine months FY10.Capital expenditure or nine months FY10 is at Rs. 2.6 billion ($56 million).


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Cash and cash equivalentsTrade and other receivablesInventoriesProperty, plant and equipmentGoodwill and Other intangible assetsLoans and borrowings (current & non-current)Trade accounts payableEquity (including reserves)

As on 31st Dec 09 As on 30th Sept 09

119250278461268270127874

133284283459475313155984

5,53911,60812,90721,40712,41512,5175,91440,533

6,14913,15513,13621,27822,05714,5167,19845,648

(in millions)Key Balance Sheet Items

Particulars

Financial Updates

($) ($)(Rs.)(Rs.)

Income Statement Highlights

Revenue Mix by Geography (in millions)Q3 FY10 Q3 FY10 as a Q3 FY09 Q3 FY09 as a Growth

$ INR % $ INR % %

North America

Europe

India

Russia & other CIS

Others

TOTAL

Q3

FY10

85

104

70

60

54

373

3,933

4,827

3,241

2,769

2,527

17,296

23

28

19

16

15

100

164

95

52

43

42

397

7,609

4,409

2,433

2,006

1,944

18,401

41

24

13

11

11

100

(48)

9

33

38

30

(6)


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Financial Update

North America=72

Europe=215

India=60

Row=176

Rs. Crs

Rs. Crs

PSAI

Q3 FY10 Q3 FY10 as a Q3 FY09 Q3 FY09 as a Growth$ INR % $ INR % %

2536456576017113164613387

373

11,7232,9742,5792,6322,769770

5,237722

2,152607

1,757336

17,296

68252222247

30144112342

100

7449181415424193910311

100

(14)(55)

334383917

(16)23302629(6)

2951435442431296183810306

397

13,6836,6512,5061,9672,006553

4,458857

1,744466

1,391260

18,401

Revenue Mix by Segment (in millions)

Global Generics

Key Financial Highlights - 9 months FY10

Rs. 1,730 Crs.

OthersRs. 34 Crs.

Consolidated Revenue

orth America = 297

Europe = 258

g=Growth

g=-55%

g=3%

g=34%

g=38%

g=39%

g=-16%

g=23%

g=30%

g=26%India = 263

Russia & CIS = 277

RoW = 77

PSAIRs. 524 Crs.

g-->17%

Global GenericsRs. 1,172 Crs.

g--> -14%

Q3

FY10

Global GenericsNorth AmericaEuropeIndiaRussia & other CISOthersPSAI (Pharmaceutical Services & Active Ingredients)North AmericaEuropeIndiaOthersProprietary Products & OthersTotal

EBITDA Adjusted PATRevenues

Rs. 5,385 CrsYoY growth --> 9%

Rs. 1,183 CrsYoY growth --> 31%

Rs. 734 CrsYoY growth --> 43%


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Quick Facts - Q3 FY10

Global Generics - Key Markets

Pharmaceutical Services & Active Ingredients

Russia

North America

Q3 FY09

308

357

297

(Sumatriptan)

Rs. Cr

Rs. Cr

Q3 FY10

Germany

$ growth o 1%, excluding one-time upside rom sumatriptan in Q3 FY09

Successul inspection o two generic acilities by US FDA in Nov 2009Launch o Omeprazole Mg OTC in Dec 20091 ANDA fling and 2 approvals (including 1 tentative)ANDA Pipeline: Total Filed: 141

Pending approvals --> 62 out o which 35 are Para IVs and 13 FTFs

YoY decline o 4% in Euro terms5th largest in volumes among generic companies with 3.2% market share as o Nov 09New tender outcomes continue to put pressure on pricing & businessDiscussions with Works Council or urther restructuring o workorce by Mar 2010

YoY growth: Volume --> 29% & New Products --> 7%Growth driven by key brands o Omez, Nise, Stamlo Beta, Reditux & StamloExpected launch o one biosimilar in Q4 FY10 contingent upon regulatory approvalNew Product Launches:

18 new Launches in Q3,Key Launch --> Reswas (cough syrup)

56 Launches in 9 months (4% to sales)Secondary Sales Growth : Dr. Reddys --> 20%, Industry --> 16%, Top 10 --> 19%Source: ORG IMS (Apr to Nov 09)

YoY $ growth o 64% & QoQ $ growth o 28%Growth driven by season eect & price increases taken in previous yearAggressive portolio expansion through OTC diversifcation, in-licensing deals & otheradvantaged products where the competition is lowerSecondary Sales Growth: Dr. Reddys --> 13%, Industry --> 2%Pharmexpert (Apr to Nov 09)

YoY $ growth o 23%Growth driven by improving order book status & lower base in the previous year11 DMFs fled in Q3 (8 in Europe & 3 in US)Customer trends in CPS business seeing a healthy revivalCumulative DMFs: 388

US --> 146Europe --> 116Canada --> 58RoW --> 68

Q3

FY10

India

200 204

Q3 FY09 Q3 FY10

2%

Q3 FY09

Q3 FY09

Q3 FY10

Q3 FY10

197

446

263

524

34%

17%

Rs. Cr

Rs. Cr

Rs. Cr

157

228

Q3 FY09 Q3 FY10

45%

-55%


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Key Company UpdatesQ3

FY10

Dr. Reddys announces expansion plan o its Shreveport, Louisiana acility

Sustainability Report 2009 launched

Dr. Reddys signed a Memorandum o Understanding with the stateo Louisiana on 7th December 2009 to expand its Shreveport opera-tions with incentives and support rom state and local government.The project aims to retain over 160 jobs while adding approximately73 new jobs and represents up to $16.5 million in capital invest-ment.

The 300,000-square-oot Shreveport acility is the largest producero Silver Suladiazine Cream and the second-largest producer o Ibu-proen or the North American market. This phase o expansion willallow Dr. Reddys to support multiple new products at the site.

- Expansion represents up to $16.5 million in capital investment.

Dr. Reddys successully completed the USFDA audit or its two Formulation manuacturing acilities at Bachupally, Hyderabadand Vizag, Andhra Pradesh. The unit at Vizag had zero observations while the Bachupally unit had one minor observation.

Dr. Reddys joined the Green Chemistry Institute Pharmaceutical Roundtable o the American Chemical Society (ACS) as an Associ-ate member. Dr. Reddys is one o the worlds frst generic pharmaceutical companies to join the Roundtable as an associate member.

Dr. Reddys started supply o Omeprazole Mg OTC in the US. The com-pany had received the USFDA approval o its ANDA in June 2009. Omepra-zole Mg is indicated or the treatment o heartburn. Dr. Reddys ormula-tion contains 20.6mg Omeprazole Mg and the dosage orm is a capsule.

Dr. Reddys aunched its 2009 Sustainability Report with Our Collectiveactions as this years theme. Dr. Reddys was the frst Indian Pharma company toreport its Sustainability practices when it released its frst Sustainability Report in 2004.

Dr. Reddys and Rheoscience, a subsidiary o Nordic Bioscience A/S announced the headline results rom the frst phase IIIstudy or their investigational agent, Balaglitazone (DRF-2593). The study (Study 307) was a phase III clinical study to deter-mine the efcacy and saety o balaglitazone. The study showed that the trial met its primary endpoint o reduction in HbA1c.

USFDA audit successully completed

Dr. Reddys joined ACS Green Chemistry Institute Pharmaceutical Roundtable

Omeprazole Mg OTC Launched in US

Dr. Reddys & Rheoscience announced headline results rom First Phase III trial o Balaglitazone

Amit Patel, Senior Vice President & Head - North America Generics withState o Louisiana Gov. Bobby Jindal


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RecognitionsQ3

FY10

Dr. Reddys was conerred the Corporate Social Responsibility Awardat the CNBC TV18s India Business Leader Awards (IBLA) 2009 ata high profle ceremony held on December 4 in New Delhi. SatishReddy - MD & COO, Dr. Reddys received the award on behal othe company.

Dr. Reddys won the NASSCOM CNBC IT User Award 2009 in thePharmaceutical vertical or the 2nd year in a row.

The IT User Awards are a benchmark in terms o their scale, processes & participation,and recognize the IT adoption leaders across industry sectors and market segmentsin India. Their objective is to provide a platorm or organizations among short-listedverticals that are using IT to deliver high business value to their customers.

The Dr. Reddys Annual Report was adjudged as the recipient o Merit Award or the year2008 in the category Manuacturing Sector by the South Asian Federation o Accountants.

Dr. Reddys was declared as the winner o Golden Peacock Award or Excellence in CorporateGovernance or the year 2009 by the Golden Peacock Awards Jury, under the Chairmanship oJustice P N Bhagwati, ormer Chie Justice o India and Member, UN Human Rights Commission.

Satish Reddy, MD and COO - Dr. Reddys receiving the award on behal o Dr. Reddys.

Dr. Reddys lauded or Corporate Social

Responsibility at the CNBC - IBLA 2009

Dr Reddys bags the NASSCOM-CNBC IT User Award again!

Dr. Reddys bags award at the SAFA Best Presented Accounts Awards 2008!

Dr. Reddys bags Golden Peacock Award or Excellence in Corporate Governance - 2009


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Sustainability thinking @ Dr. Reddys

Each one o us has a role to play in lie. Every positive contribution - big or small - at an individual level is an element o the bigger

picture, weaving together or the greater good. This has been an underlying philosophy at Dr. Reddys, and it comes to the orewhere our sustainability eorts are concerned.

Collective Actions form the DNA of Sustainability- rom which evolves a range o joint initiatives and synchronized eorts thatpromote access to aordable, innovative medicines. This also helps us remain an employer o choice and supplements our eortstowards working in harmony with the environment and society.

We work towards building a more just and sustainable world by focusing on the following areas:

Our Collective Actions

Q3

FY10

Providing Aordable and Innovative Medicines: We are generatingsolutions to make medicines more aordable while also innovating at everystage o our processes to meet unmet and under-met medical needs.

Environmental Management & Climate Change: We design products,processes and plants ensuring they have a minimal environmental implication.We also minimize and manage the adverse impact o our existing ootprintthrough innovative options or treatment, recycling and sae disposal o wasteand euents. We have set goals towards energy conservation and track themwith seriousness.

Being an Employer o Choice: Our employees work as One Team,collectively ideating, innovating and interacting, to ulfll our purpose. To

enable them in this pursuit, we oer a conducive working environmentthat taps ones potential while oering reedom to question, innovateand fnd that better way.

Product Responsibility: We make certain there is No scope or errorin anything we do by addressing Quality Management, Regulatory Com-pliance, Product Saety requirements and ollow stringent procedures orpackaging & promotional materials. We have well laid out processes tosupport patient saety goals. Right frst time and designing or qualityare core to our product development and manuacturing.

Environment

Our specifc Green House Gases (GHG) emissions(Metric Ton CO

2e / INR million sales) or FY 2008-09

was 6.60, representing a 5% decrease over 2007-08.Our specifc water consumption (water consumed perunit o sales) reduced by 14% over the previous yearand by 41% over the base year o 2003-04.

During 2008-09, we disposed 240 tons o organicresidues to the Cement Industry or use as eedstock inthe cement manuacturing process.

Patient

Sparsh, our patient assistance program routes the entire range oDr. Reddys oncology products to needy patients through patron-oncologists across India. Since its inception in 2006, over 1500cancer patients have been given ree medication under the Sparshprogram through 120 Oncologists.


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Q3

FY10

- We channel our wide network o social activities through our very own Dr. Reddys Foundation (DRF) and address healtheducation needs and patient care activities through Dr. Reddys Foundation or Heath Education (DRFHE)

- To beneft individuals and society at large, we also support non-proft organizations like Center or Social Initiative andManagement (CSIM) and Naandi Foundation.

- To progress and provide or the community around us, we have introduced various development initiatives to enhancehealthcare and education in areas around our manuacturing units.

- Through The Power o 10TM - our employee giving program, we provide assistance to the Naandi Foundation, one o Indiaslargest social sector organizations. The employees contribution is matched by the organization resulting in an impactulendowment every year.

Caring or Communities: Dr. Reddys ocuses on the ollowing areas or sustainable community development:

Sustainable Sourcing: We encourage our Business Partners to conduct their business in a responsible manner. We minimizeour environmental impact by:

- Purchasing green products / services- Streamlining our sourcing processes to achieve resource conservation and reduction o our carbon ootprint

To know more about Sustainability @ Dr. Reddys, visit

seek to enhance value or our stakeholders

aim to emerge as an employer o choiceinitiate various measures to minimize our environmental impactinitiate community development initiatives to support various social concernsWe

Society

OurLABS (Livelihood Advancement Business School)has trained over 200,000 aspirants so ar, channeling their energytowards socially purposeul and economically benefcial ends. LABSprovided skill-based training to 46473 aspirants spread over 109districts in 20 states in FY 2008-09, out o which 36664 (78.89%)

aspirants were placed in various sectors and set up micro-enterprises.

ThroughThe Power of 10TM- Employee giving program,Employees contributed Rs. 2,072,677.00, and an equivalent sumwas put in by the Company, resulting in an annual corpus o Rs.4,145,354.00 or the year 2008-09. The unds have been used orhealth and education programs such as School Child Health Programcatering to the health needs o over 52,000 children in 285 schools.

www.drreddys.com/sustainability


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Inrastructure and Capabilities

Infrastruct

ure

Pharmaceutical Services & Active Ingredients

6 FDA-approved plants in INDIA

1 Cytotoxic acility

1 FDA-approved plant in Mexico

1 FDA-approved plant in Mirfeld, UK

3 Technology development centers

(2 in Hyderabad, INDIA; 1 in Cambridge, UK)

Product Development

Integrated Product development Capa-bilities that includes API development,Formulations development and analyticaldevelopment skills.

One Integrated Product developmentacility in Hyderbad, INDIA.

New Chemical Entities (NCEs)

Research in the areas o metabolic,cardiovascular, anti-bacterials, andpain & inammation.

Ca

pabilities

Biologics

Biologics development center

GMP production

E coli and mammalian cell platorms

Global Generics

6 Formulation plants in INDIA

(1 USFDA inspected)

1 USFDA inspected plant in USA

Q3

FY10


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General InormationAbout Dr. Reddys

Established in 1984, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global pharmaceutical company.As a ully integrated pharmaceutical company, our purpose is to provide aordable and innovative medicines through our three core busi-

nesses o:- Pharmaceutical Services and Active Ingredients: comprising o Active Pharmaceutical Ingredients and Custom Pharmaceutical Services- Global Generics, which includes branded and unbranded generics- Proprietary Products, which includes New Chemical Entities (NCEs), Dierentiated Formulations, and Generic Biopharmaceuticals.

Our products are marketed globally, with a ocus on India, US, Europe and Russia. Dr. Reddys conducts NCE research in the areas o meta-

bolic disorders, cardiovascular indications, anti-inectives and inammation.

Sae Harbor

This presentation contains orward-looking statements and inormation that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals, strategies, uture events or perormance and underlying as-sumptions and other statements that are other than statements o historical act, including, but not limited to, those that are identifedby the use o words such as anticipates, believes, estimates, expects, intends, plans, predicts, projects and similarexpressions. Risks and uncertainties that could aect us include, without limitation:

General economic and business conditions in IndiaThe ability to successully implement our strategy, our research and development eorts, growth and expansion plans and technlogical changesChanges in the value o the Rupee and other currency changesChanges in the Indian and international interest ratesAllocations o unds by the GovernmentChanges in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industryIncreasing competition in and the conditions o our customers, suppliers and the pharmaceutical industry

Changes in political conditions in India

Should one or more o such risks and uncertainties materialize, or should any underlying assumption prove incorrect, actual outcomesmay vary materially rom those indicated in the applicable orward-looking statements. Any orward-looking statement or inormationcontained in this presentation speaks only as o the date o the statement.

We are not required to update any such statement or inormation to either reect events or circumstances that occur ater the date thestatement or inormation is made or to account or unanticipated events.

Contact Inormation

Media Relations

Mythili MamidannaPh: +91-40-66511620Fax: +91-40-23731955Email: [email protected]

Kedar UpadhyayPh: +91-40-66834297Fax: +91-40-23731955Email: [email protected]

Raghavender RPh: +91-40-66511529

Email: [email protected]

Milan KalawadiaPh: +1 - 9082034931


Rajan SPh: +91-40-66511725


Investor Relations

Q3

FY10

Dr. Reddy's - Q3FY10 Reckoner

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