Business Wire | Jan 29, 2021 04:37AM EST

Dr. Reddy's Q3 & 9M FY21 Financial Results

Jan. 29, 2021

HYDERABAD, India--(BUSINESS WIRE)--Jan. 29, 2021--Dr. Reddy's Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY | NSEIFSC: DRREDDY) today announced its consolidated financial results for the quarter and the nine months ended December 31, 2020. The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).

Q3 Performance Summary 9M Performance Summary



Rs. 4,930 Cr Rs. 14,244 Cr

Revenue Revenue

[Up: 12% YoY; 1% QoQ] [Up: 9% YoY]



53.8% 54.6%

Gross Margin Gross Margin

[Q3 FY20: 54.1%; Q2 FY21: 53.9%] [9M FY20: 54.7%]



Rs.1,439 Cr Rs. 4,028 Cr

SGNA expenses SGNA expenses

[Up: 14% YoY; 10% QoQ] [Up: 6% YoY]



Rs. 411 Cr Rs. 1,245 Cr

R&D expenses R&D expenses

[8.3% of Revenues] [8.7% of Revenues]



Rs. 1,185 Cr Rs. 3,615 Cr

EBITDA EBITDA

[24.0% of Revenues] [25.4% of Revenues]



Rs. 284 Cr* Rs. 2,025 Cr

Profit before Tax Profit before Tax

[5.8% of Revenues] [14.2% of Revenues]



Rs. 20 Cr** Rs. 1,361 Cr

Profit after Tax Profit after Tax

[0.4% of Revenues] [9.6% of Revenues]

*Excluding the impairment charge in Q3 FY21, the Profit before Tax is Rs. 882 cr **Q3 FY21 Profit after Tax was impacted primarily due to non-recognition of deferred tax asset on impairment

Commenting on the results, Co-chairman & MD, G V Prasad said, "We continued with our growth momentum while maintaining EBITDA margins. The profits were impacted due to trigger based impairment charge taken on a few acquired products including Nuvaring. We are progressing well on the phase 3 clinical trials for Sputnik V vaccine in India. We continue to focus on enhancing our product offerings to our patients to serve them better."

All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs. 73.01

Dr. Reddy's Laboratories Limited and Subsidiaries

Consolidated Income Statement

Q3 FY21 Q3 FY20 YoY Q2 FY21 QoQParticulars Gr % Gr % ($) (Rs.) ($) (Rs.) ($) (Rs.)

Revenues 675 49,296 600 43,838 12 671 48,967 1

Cost of Revenues 312 22,758 276 20,116 13 309 22,558 1

Gross Profit 363 26,538 325 23,722 12 362 26,409 0

Operating Expenses

Selling, General &Administrative 197 14,387 174 12,670 14 180 13,107 10 expenses

Research andDevelopment 56 4,108 54 3,949 4 60 4,359 (6 )expenses

Impairment of 82 5,972 181 13,200 (55 ) 11 781 665 non-current assets

Other operating (2 ) (128 ) (3 ) (228 ) (44 ) (2 ) (149 ) (14 )income

Results fromoperating 30 2,199 (80 ) (5,869 ) - 114 8,311 (74 )activities

Net finance income (7 ) (493 ) (6 ) (419 ) 18 (3 ) (237 ) 108

Share of profit ofequity accounted (2 ) (151 ) (2 ) (176 ) (14 ) (1 ) (73 ) 107 investees

Profit / (loss) 39 2,843 (72 ) (5,274 ) - 118 8,621 (67 )before Income Tax

Income Tax 36 2,645 6 423 525 14 998 165

Profit / (loss) 3 198 (78 ) (5,697 ) - 104 7,623 (97 )for the period

Diluted Earnings 0.02 1.19 (0.47 ) (34.37 ) - 0.63 45.83 (97 )Per Share (EPS)

As % to revenues

Q3 FY21

Q3 FY20

Q2 FY21

Gross Profit

53.8

54.1

53.9

SG&A

29.2

28.9

26.8

R&D

8.3

9.0

8.9

EBITDA

24.0

24.5

25.9

PBT

5.8

(12.0

)

17.6

PAT

0.4

(13.0

)

15.6

As % to revenues Q3 FY21 Q3 FY20 Q2 FY21

Gross Profit 53.8 54.1 53.9

SG&A 29.2 28.9 26.8

R&D 8.3 9.0 8.9

EBITDA 24.0 24.5 25.9

PBT 5.8 (12.0 ) 17.6

PAT 0.4 (13.0 ) 15.6

EBITDA Computation

Particulars

Q3 FY21

Q3 FY20

Q2 FY21

($)

(Rs.)

($)

(Rs.)

($)

(Rs.)

Profit before Income Tax

39

2,843

(72

)

(5,274

)

118

8,621

Interest income (net)*

(2

)

(180

)

(4

)

(274

)

(0

)

(1

)

Depreciation

29

2,131

29

2,130

30

2,188

Amortization

15

1,086

13

955

15

1,084

Impairment

82

5,972

181

13,200

11

781

EBITDA

162

11,851

147

10,737

174

12,673

* Includes income from Investments

All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs. 73.01

EBITDA Computation

Q3 FY21 Q3 FY20 Q2 FY21Particulars ($) (Rs.) ($) (Rs.) ($) (Rs.)

Profit before Income Tax 39 2,843 (72 ) (5,274 ) 118 8,621

Interest income (net)* (2 ) (180 ) (4 ) (274 ) (0 ) (1 )

Depreciation 29 2,131 29 2,130 30 2,188

Amortization 15 1,086 13 955 15 1,084

Impairment 82 5,972 181 13,200 11 781

EBITDA 162 11,851 147 10,737 174 12,673

* Includes income from Investments

All amounts in millions, except EPS. All US dollar amounts based on convenience translation rate of I USD = Rs. 73.01

Key Balance Sheet Items



As on 31st Dec As on 30th Sep As on 31st DecParticulars 2020 2020 2019

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

Cash and cash equivalents and 291 21,282 357 26,074 280 20,457current investments

Trade receivables (current & 732 53,408 689 50,335 631 46,095non-current)

Inventories 607 44,309 563 41,134 517 37,746

Property, plant and equipment 771 56,263 754 55,026 722 52,709

Goodwill and Other Intangible 562 41,062 624 45,553 423 30,847assets

Loans and borrowings (current & 280 20,443 376 27,429 224 16,320non-current)

Trade payables 316 23,072 313 22,833 244 17,810

Equity 2,320 1,69,395 2,265 1,65,337 2,036 1,48,672



Revenue Mix by Segment

Segment

Q3 FY21

Q3 FY20

YoY Gr %

Q2 FY21

QoQ Gr %

(Rs.)

(Rs.)

(Rs.)

Global Generics

40,751

35,927

13

39,841

2

North America

17,394

15,999

9

18,328

(5

)

Europe

4,143

3,093

34

3,754

10

India

9,591

7,636

26

9,123

5

Emerging Markets

9,623

9,199

5

8,636

11

Pharmaceutical Services and Active Ingredients (PSAI)

7,009

6,906

1

8,505

(18

)

Proprietary Products & Others

1,536

1,005

53

621

147

Total

49,296

43,838

12

48,967

1

Revenue Analysis

Global Generics (GG)

Revenues from GG segment at Rs. 40.8 billion:

* Year-on-year growth of 13% and sequential quarter growth of 2%, primarily driven by new product launches and integration of the acquired portfolio from Wockhardt in India. The volume growth in the base business was largely offset by price erosion.

North America

Revenues from North America at Rs. 17.4 billion:

* Year-on-year growth of 9%, driven by new products launches, increase in volumes of our base business and a favorable forex rate, which was partially offset by price erosion. * Sequential decline of 5%, primarily due to price erosion in some of the key molecules. * We launched four new products during the quarter. This included Cinacalcet Tablets, Sapropterin Dihydrochloride Tablets and Succinylcholine Chloride Injection in the US along with Daptomycin Injection in Canada. We also re-launched one product in US - OTC Famotidine. * We filed two new ANDAs during the quarter. As of 31st December 2020, cumulatively 89 generic filings are pending for approval with the USFDA (87 ANDAs and 2 NDAs under 505(b)(2) route). Of the 89 ANDAs, 48 are Para IVs and we believe 24 have 'First to File' status.

Europe

Revenues from Europe at Rs. 4.1 billion:

* Year-on-year growth of 34% and sequential growth of 10%, which were driven by new product launches, favorable forex movement and volume traction, offset partly by price erosion.

India

Revenues from India at Rs. 9.6 billion:

* Year-on-year growth of 26% and sequential growth of 5%. YoY growth is on account of revenues from the acquired portfolio of Wockhardt and contribution from new product launches. QoQ growth was driven by volume traction.

Emerging Markets

Revenues from Emerging Markets at Rs. 9.6 billion. Year-on-year growth of 5%. Sequential growth of 11%:

* Revenues from Russia at Rs. 4.5 billion. Year-on-year decline of 8% is primarily due to weakening Ruble. Sequential growth of 14% contributed by increased volumes * Revenues from other CIS countries and Romania market at Rs. 2.1 billion. Year-on-year growth of 18% and sequential growth of 8% driven by both base business and new product launches. * Revenues from Rest of World (RoW) territories at Rs. 3.0 billion. Year-on-year growth of 20% and sequential growth of 10% is due to volume traction in the base business and new product launches.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI at Rs. 7.0 billion:

* Year-on-year growth of 1% driven by new products and favorable forex rate, offset by lower volumes for some products. * Sequential decline of 18% on account of lower volumes of certain products. * During the quarter we filed DMF for five products in the US.

Proprietary Products (PP) & Others

Revenues from PP & Others at Rs. 1.5 billion:

* Year-on-year growth of 53% and sequential growth of 147%. The growth was driven by milestone income received for the compound AUR102.

Income Statement Highlights:

* Gross profit margin at 53.8%: Decline of 30 bps over previous year and 10 bps sequentially, which was primarily impacted due to price erosion and lower export benefits, partially offset by the milestone income received for the compound AUR102. Gross profit margin for GG and PSAI business segments are at 57.6% and 25.3% respectively.

* SG&A expenses at Rs. 14.4 billion, increased by 14% year-on-year primarily due to incremental costs post the integration of the acquired portfolio from Wockhardt in this year and increased freight expenses. Sequentially, it increased by 10% primarily due to pickup in sales & marketing activities in branded markets and increase in freight expenses. * Impairment charge of Rs. 6.0 billion. In January, 2021 there has been an additional generic launch for the product Nuvaring(r), which has led to a considerable erosion in the value of this product for us, and accordingly we have taken an impairment charge of Rs. 3.2 billion. In addition to this, considering the current market dynamics, we have taken an additional impairment charge of Rs. 2.8 billion on the intangibles pertaining to other products. We had an impairment charge of Rs. 13.2 billion in Q3 FY 20 and Rs. 781 million in Q2 FY21. * R&D expenses at Rs. 4.1 billion. As % to revenues these are: Q3 FY21: 8.3% | Q2 FY 21: 8.9% | Q3 FY20: 9.0%. Our focus continues on building a healthy pipeline of new products across our markets including development of products pertaining to COVID-19 treatment. * Other operating income at Rs. 128 million compared to Rs. 228 million in Q3 FY20. * Net Finance income at Rs. 493 million compared to Rs. 419 million in Q3 FY20. * Profit before Tax at Rs. 2.8 billion, which is 5.8% of revenues. * Profit after Tax at Rs. 198 million. The effective tax rate is ~93.0% for the quarter, impacted primarily due to non-recognition of deferred tax asset on impairment. * Diluted earnings per share is at Rs. 1.19.

Other Highlights:

* EBITDA at Rs. 11.9 billion and the EBITDA margin is 24.0% * Capital expenditure is at Rs. 2.9 billion. * Free cash-flow: Net out-flow during the quarter stood at Rs. 580 million. * Net cash surplus for the company is at Rs. 839 million as on December 31, 2020. Consequently, net debt to equity ratio is (0.005).

Earnings Call Details (05:30 pm IST, 07:00 am EST, Jan 29, 2021)

The management of the Company will host an earnings call to discuss the Company's financial performance and answer any questions from the participants.

Revenue Mix by Segment



Q3 Q3 Q2Segment FY21 FY20 YoY FY21 QoQ Gr % Gr % (Rs.) (Rs.) (Rs.)

Global Generics 40,751 35,927 13 39,841 2

North America 17,394 15,999 9 18,328 (5 )

Europe 4,143 3,093 34 3,754 10

India 9,591 7,636 26 9,123 5

Emerging Markets 9,623 9,199 5 8,636 11

Pharmaceutical Services and Active Ingredients 7,009 6,906 1 8,505 (18 )(PSAI)

Proprietary Products & Others 1,536 1,005 53 621 147

Total 49,296 43,838 12 48,967 1



Revenue Analysis

Global Generics (GG)

Revenues from GG segment at Rs. 40.8 billion:

* Year-on-year growth of 13% and sequential quarter growth of 2%, primarily driven by new product launches and integration of the acquired portfolio from Wockhardt in India. The volume growth in the base business was largely offset by price erosion.

North America

Revenues from North America at Rs. 17.4 billion:

* Year-on-year growth of 9%, driven by new products launches, increase in volumes of our base business and a favorable forex rate, which was partially offset by price erosion. * Sequential decline of 5%, primarily due to price erosion in some of the key molecules. * We launched four new products during the quarter. This included Cinacalcet Tablets, Sapropterin Dihydrochloride Tablets and Succinylcholine Chloride Injection in the US along with Daptomycin Injection in Canada. We also re-launched one product in US - OTC Famotidine. * We filed two new ANDAs during the quarter. As of 31st December 2020, cumulatively 89 generic filings are pending for approval with the USFDA (87 ANDAs and 2 NDAs under 505(b)(2) route). Of the 89 ANDAs, 48 are Para IVs and we believe 24 have 'First to File' status.

Europe

Revenues from Europe at Rs. 4.1 billion:

* Year-on-year growth of 34% and sequential growth of 10%, which were driven by new product launches, favorable forex movement and volume traction, offset partly by price erosion.

India

Revenues from India at Rs. 9.6 billion:

* Year-on-year growth of 26% and sequential growth of 5%. YoY growth is on account of revenues from the acquired portfolio of Wockhardt and contribution from new product launches. QoQ growth was driven by volume traction.

Emerging Markets

Revenues from Emerging Markets at Rs. 9.6 billion. Year-on-year growth of 5%. Sequential growth of 11%:

* Revenues from Russia at Rs. 4.5 billion. Year-on-year decline of 8% is primarily due to weakening Ruble. Sequential growth of 14% contributed by increased volumes * Revenues from other CIS countries and Romania market at Rs. 2.1 billion. Year-on-year growth of 18% and sequential growth of 8% driven by both base business and new product launches. * Revenues from Rest of World (RoW) territories at Rs. 3.0 billion. Year-on-year growth of 20% and sequential growth of 10% is due to volume traction in the base business and new product launches.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI at Rs. 7.0 billion:

* Year-on-year growth of 1% driven by new products and favorable forex rate, offset by lower volumes for some products. * Sequential decline of 18% on account of lower volumes of certain products. * During the quarter we filed DMF for five products in the US.

Proprietary Products (PP) & Others

Revenues from PP & Others at Rs. 1.5 billion:

* Year-on-year growth of 53% and sequential growth of 147%. The growth was driven by milestone income received for the compound AUR102.

Income Statement Highlights:

* Gross profit margin at 53.8%: Decline of 30 bps over previous year and 10 bps sequentially, which was primarily impacted due to price erosion and lower export benefits, partially offset by the milestone income received for the compound AUR102. Gross profit margin for GG and PSAI business segments are at 57.6% and 25.3% respectively.

* SG&A expenses at Rs. 14.4 billion, increased by 14% year-on-year primarily due to incremental costs post the integration of the acquired portfolio from Wockhardt in this year and increased freight expenses. Sequentially, it increased by 10% primarily due to pickup in sales & marketing activities in branded markets and increase in freight expenses. * Impairment charge of Rs. 6.0 billion. In January, 2021 there has been an additional generic launch for the product Nuvaring(r), which has led to a considerable erosion in the value of this product for us, and accordingly we have taken an impairment charge of Rs. 3.2 billion. In addition to this, considering the current market dynamics, we have taken an additional impairment charge of Rs. 2.8 billion on the intangibles pertaining to other products. We had an impairment charge of Rs. 13.2 billion in Q3 FY 20 and Rs. 781 million in Q2 FY21. * R&D expenses at Rs. 4.1 billion. As % to revenues these are: Q3 FY21: 8.3% | Q2 FY 21: 8.9% | Q3 FY20: 9.0%. Our focus continues on building a healthy pipeline of new products across our markets including development of products pertaining to COVID-19 treatment. * Other operating income at Rs. 128 million compared to Rs. 228 million in Q3 FY20. * Net Finance income at Rs. 493 million compared to Rs. 419 million in Q3 FY20. * Profit before Tax at Rs. 2.8 billion, which is 5.8% of revenues. * Profit after Tax at Rs. 198 million. The effective tax rate is ~93.0% for the quarter, impacted primarily due to non-recognition of deferred tax asset on impairment. * Diluted earnings per share is at Rs. 1.19.

Other Highlights:

* EBITDA at Rs. 11.9 billion and the EBITDA margin is 24.0% * Capital expenditure is at Rs. 2.9 billion. * Free cash-flow: Net out-flow during the quarter stood at Rs. 580 million. * Net cash surplus for the company is at Rs. 839 million as on December 31, 2020. Consequently, net debt to equity ratio is (0.005).

Earnings Call Details (05:30 pm IST, 07:00 am EST, Jan 29, 2021)

The management of the Company will host an earnings call to discuss the Company's financial performance and answer any questions from the participants.

Conference Joining Information

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Option 2: Join through below Dial-In Numbers

+91 22 6280 1219Universal Access Number: +91 22 7115 8120

Local Access Number: +91 70456 71221Available all over India

USA: 1 866 746 2133

UK: 0 808 101 1573International Toll Free Number: Singapore: 800 101 2045

Hong Kong: 800 964 448

No password/pin number is necessary to dial in to any of the above numbers. The operator will provide instructions on asking questions before and during the call.

Play Back: The play back will be available after the earnings call, till February 5th, 2021. For play back dial in phone No: +91 22 7194 5757 | +91 22 6663 5757, and Playback Code is 37918.

Transcript: Transcript of the Earnings call will be available on the Company's website: www.drreddys.com

About Dr. Reddy's: Dr. Reddy's Laboratories Ltd. (BSE: 500124, NSE: DRREDDY, NYSE: RDY) is an integrated pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses - Pharmaceutical Services & Active Ingredients, Global Generics and Proprietary Products - Dr. Reddy's offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars and differentiated formulations. Our major therapeutic areas of focus are gastrointestinal, cardiovascular, diabetology, oncology, pain management and dermatology. Dr. Reddy's operates in markets across the globe. Our major markets include - USA, India, Russia & CIS countries, and Europe. For more information, log on to: www.drreddys.com

Disclaimer: This press release may include statements of future expectations and other forward-looking statements that are based on the management's current views and assumptions and involve known or unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to without limitation, (i) general economic conditions such as performance of financial markets, credit defaults , currency exchange rates , interest rates , persistency levels and frequency / severity of insured loss events (ii) mortality and morbidity levels and trends, (iii) changing levels of competition and general competitive factors, (iv) changes in laws and regulations and in the policies of central banks and/or governments, (v) the impact of acquisitions or reorganization , including related integration issues, (vi) the susceptibility of our industry and the markets addressed by our, and our customers', products and services to economic downturns as a result of natural disasters, epidemics, pandemics or other widespread illness, including coronavirus (or COVID-19), and (vii) other risks and uncertainties identified in our public filings with the Securities and Exchange Commission, including those listed under the "Risk Factors" and "Forward-Looking Statements" sections of our Annual Report on Form 20-F for the year ended March 31, 2020. The company assumes no obligation to update any information contained herein.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210129005174/en/

CONTACT: INVESTOR RELATIONS AMIT AGARWAL amita@drreddys.com (Ph: +91-40-4900 2135)

CONTACT: MEDIA RELATIONS APARNA TEKURI aparnatekuri@drreddys.com (Ph: +91-40-4900 2446)