Dr. Reddy's Laboratories
) reported first quarter fiscal 2013 earnings per American
Depositary Share (ADS) of 40 cents, well above the year-ago
earnings of 30 cents per ADS. Higher revenues boosted earnings.
The company reported revenues of $457 million during the
quarter, reflecting a year-over-year increase of 28%.
Quarter in Detail
Dr. Reddy's reports revenues under two segments - Global
Generics and Pharmaceutical Services & Active Ingredients
(PSAI). While revenue at the Global Generics segment jumped 32% to
$343 million, PSAI revenue climbed 14% to $99 million during the
Generics revenue soared 38% in both North America and Russia and
other CIS (Commonwealth of Independent States) markets and 19% in
India. Growth was attributable to new generic launches aided by an
increase in sales volume.
Though sales declined in Europe in the fourth quarter of fiscal
2012, sales climbed up 14% year-over-year in the first quarter of
fiscal 2013. Growth was primarily due to an increase in revenue
from Germany due to products supplied under the AOK tender which
the company won last year.
Gross margin at Dr. Reddy's remained flat at 53% compared to
last year's figure. Selling, general and administration (SG&A)
expenses amounted to $149 million, reflecting an increase of 23%.
Salary increments, higher sales and marketing costs along with
exchange rate fluctuation led to the rise in SG&A costs.
Research and development (R&D) expenses increased 31% to $28
During the quarter, Dr. Reddy's launched 33 new generic products
and filed four abbreviated new drug applications (ANDAs) with the
US Food and Drug Administration (FDA). Cumulatively, 73 ANDAs are
pending approval with the FDA, of which 36 are Para IV filings and
6 are first-to-file.
In June, Dr. Reddy's entered into a collaborative agreement with
Merck Serono, a division of
) for the co-development of biosimilar compounds in oncology. This
deal should drive long term growth at Dr. Reddy's.
We currently have a Neutral recommendation on Dr. Reddy's, which
carries a Zacks #3 Rank (short-term Hold rating). We believe that
Dr. Reddy's is in a strong position to benefit from the huge
potential presented by the new launches in the US generics market.
The company should benefit from the launch of its generic versions
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