Dr. Reddy's Laboratories
) reported second quarter fiscal 2013 earnings per American
Depositary Share (ADS) of 50 cents, well above the year-ago
earnings of 30 cents per ADS. Higher revenues boosted earnings.
The company reported revenues of $544 million during the quarter,
reflecting a year-over-year increase of 27%.
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 25% to $380
million, PSAI revenue climbed 33% to $149 million during the
Generics revenue soared in North America (up 47%), driven by
limited competition for the company's generic version of
) Geodon (ziprasidone), Astellas Pharma's Prograf
) Arixtra (fondaparinux) and
Bristol-Myers Squibb Company
) Plavix (clopidogrel). Revenues were also boosted by products
from Shreveport facility and the ramp-up in the antibiotics
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Generics revenues also increased in Russia and other CIS
(Commonwealth of Independent States) markets (up 14%), India (up
12%) and the rest of the world/RoW (up 50%). However, generic
revenues declined 16% in Europe due to disappointing performance
Gross margin at Dr. Reddy's remained flat at 53.1%. Selling,
general and administration (SG&A) expenses amounted to $151
million, reflecting an increase of 11%. Research and development
(R&D) expenses increased 21% to $33 million.
During the quarter, Dr. Reddy's launched 4 new generic products
and filed 4 abbreviated new drug applications (ANDAs) with the US
Food and Drug Administration (FDA). The company has 63 ANDAs
pending approval with the FDA, of which 33 are Para IV filings
and 7 are first-to-file.
A few days back, the company had announced its intention to
acquire Netherlands-based specialty pharmaceutical company,
OctoPlus N.V. Dr. Reddy's has offered €27.39 million for all
issued and outstanding ordinary shares of OctoPlus, representing
a 30% premium over the latter's closing share price on October
19, 2012. We believe that the acquisition will benefit Dr.
Reddy's complex injectables pipeline. Dr. Reddy's expect the deal
to close by the end of the current fiscal year.
We are pleased with Dr. Reddy's geographic reach and product
depth along with a robust generic product pipeline. However, the
company's performance in the Europe remains a concern.
We currently have a Neutral recommendation on Dr. Reddy's, which
carries a Zacks #2 Rank (short-term Buy rating).