Headlines: Dr. Reddy’s plunges into the red
Source: Business Standard

Dr Reddy’s Laboratories reported a net loss of Rs 3.54 crore for the third quarter ended December 31, 2004, compared with a net profit of Rs 57.68 crore for the comparable quarter last fiscal.

This was on a nearly 11 per cent fall in total income to Rs 455.57 crore from Rs 509.79 crore.

As per US GAAP, the company’s bottomline fell 93 per cent to Rs 4 crore compared with Rs 59.2 crore for the corresponding quarter last year.

Total revenues for the quarter slid eight per cent to touch Rs 470 crore as compared with Rs 513.8 crore for the same period in the last financial year.

Significantly, Dr Reddy’s reported an operating loss of Rs 9.7 crore for the third quarter. The company was able to report a net profit for the quarter partly due to other income of Rs 1.23 crore and an income tax benefit of Rs 2.7 crore.

The company had to absorb a forex loss of Rs 4.8 crore during the quarter under consideration. Operating income before R&D and forex losses was Rs 65.7 crore as against Rs 103 crore for the corresponding quarter last year, representing a 36 per cent drop.

The reason for the disappointing performance remained the same. A drop in sales, increased spending on research and development efforts and higher sales and marketing costs.

On a sequential quarter basis, net profit for the third quarter slid 92 per cent as compared to a net profit of Rs 51 crore reported for the second quarter ended September 30, 2004, of the current financial year.

Total revenues slid 13 per cent on a sequential basis from Rs 540 crore reported for the second quarter of the current financial year. R&D investments in the third quarter increased 37 per cent to Rs 70.5 crore as against Rs 51.6 crore for the same period last year.

As a per centage of revenues, R&D expenditure was 15 per cent of revenues as against 10 per cent in the corresponding quarter last year.

The company has not had any major generic drug launch since its exclusive marketing rights for a version of Eli Lilly & Co’s anti-depressant Prozac ended in early 2002.

Selling, general & administration (SG&A) expenses during the third quarter increased to Rs 170 crore from Rs 150 crore for the same period last year.

The increase according to a company statement is primarily on account of higher marketing expenses in the branded formulations and an increases in overall manpower costs.

During the third quarter the company filed four U.S. DMFs (drug master files) taking the cumulative filings to 63. The company has also filed six ANDAs (abbreviated new drug applications) with the US FDA.