Dr. Reddy's Laboratories
) reported fiscal 2012 (ended March 31) earnings per American
Depositary Share (ADS) of $1.60, above the year-ago earnings of
$1.30 per ADS. Higher revenues boosted earnings. The Zacks
Consensus Estimate for fiscal 2012 was $1.87 per ADS.
Year at a Glance
The company reported revenues of $1.90 billion during the year,
reflecting a year-over-year increase of 30%. Dr. Reddy's reports
revenues under two segments - Global Generics and Pharmaceutical
Services & Active Ingredients (PSAI). While revenues at the
Global Generics segment jumped 32% to $1.38 billion, PSAI revenues
climbed 21% to $468 million during the year, driven by significant
new product launches.
Generics revenues soared 68% in North America, 22% in Russia and
other CIS (Commonwealth of Independent States) markets and 11% in
India. Growth was mainly driven by new generic launches aided by an
increase in the sales volume.
However, in Europe, sales declined 2%, primarily due to exchange
rate fluctuation and the pricing pressure in the German market.
Gross margin at Dr. Reddy's inched up to 55% from 54% in the
year-ago period. Gross margin improved due to higher revenues and
exchange rate fluctuation.
Selling, general and administration (SG&A) expenses amounted
to $142 million, reflecting an increase of 22%. Higher manpower and
distribution costs along with exchange rate fluctuation led to the
rise in SG&A costs.
Increased research and development (R&D) activities led to a
17% surge in R&D expenses, which came in at $34 million.
During the year, Dr. Reddy's launched 16 new generic products,
filed 17 abbreviated new drug applications (ANDAs) with the U.S.
Food and Drug Administration (FDA). Cumulatively 80 ANDAs are
pending for approval with the FDA, of which 41 are Para IV filings
and 7 are first-to-file.
Additionally, during the year, 68 drug master files (DMF) were
filed globally, 14 each in the U.S. and Europe. The cumulative DMF
filings as of March 31, 2012 were 543.
We currently have a Neutral recommendation on Dr. Reddy's. We
believe that the company is in a strong position to benefit from
the huge potential presented by the U.S. generics market, as quite
a few blockbuster drugs such as
Johnson & Johnson
) Concerta and
) Lipitor have lost patent exclusivity and more drugs are slated to
go off-patent in the coming years.
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