betapharm write-down hurts Dr Reddy’s Q3 FY 2010 net profits

Dr Reddy’s Laboratories, India’s second largest pharma firm, has reported a consolidated net loss of Rs 233 crore for the quarter ended December 31, 2009, compared to a net profit of Rs 159 crore in the same period last year, mainly on account of write down of goodwill amount of Rs 514.7 crore on consolidated basis.

The total income of Dr Reddy’s decreased to Rs 1,767 crore for the quarter ended December 31, against Rs 1,855.28 crore in the same period previous fiscal, as per Indian accounting standards, Dr Reddy’s said in a filing to the Bombay Stock Exchange.

On standalone basis, the company has posted a net profit of Rs 168.4 crore for the December quarter, a growth of 62.45 per cent over the year-ago period.

A non-cash write-down of intangible assets and ‘beta’ brand amounting to Euro 48 million and a non-cash write-down of goodwill amounting to Euro 76 million were recorded for the quarter.

The overall net impact on income statement was Euro 109 million after a reversal of deferred tax liability relating to intangibles and ‘beta’ brand.

The decline in prices in Germany and significant fall in revenues in North America impacted the overall working adversely.

Dr Reddy’s net sales also declined by 6 per cent to Rs 1,730 crore during the quarter under review from Rs 1,840 crore in the similar period of last year.

Dr Reddy’s total generic sales declined to Rs 1,170 crore from Rs 1,370 crore in the corresponding period of last year and its sales of Pharmaceutical Services and Active Ingredients (PSAI) improved by 18.8 per cent to Rs 520 crore from Rs 440 crore mainly due to higher sales in India and Russia.

Gross profit before selling, general & administrative expenses, R&D expenses and write down declined by 14 per cent to Rs 880.9 crore from Rs 1,027 crore. Its R&D expenditure declined by 13 per cent to Rs 89.2 crore from Rs 102.7 crore in the similar period of last year. The company has cut down its net interest burden to Rs 5 crore from Rs 69.9 crore.

Dr Reddy’s launched 27 new generic product during the quarter. Dr Reddy’s filed 16 new product registrations and filed 11 DMFs globally. The cumulative of ANDAs filing reached at 141 and its 62 ANDAs are awaiting approval at the USFDA.

Its sales in North America declined sharply by 48.3 per cent to Rs 393.3 crore from Rs 760.90 crore and that in Europe improved by 9 per cent to Rs 482.7 crore from Rs 440.9 crore. Its revenues in India improved by 33 per cent to Rs 324.1 crore from Rs 243.3 crore.

Similarly, revenues in Russia and other CIS countries went up by 38 per cent to Rs 276.9 crore from Rs 200.6 crore in the corresponding period of last year. Thus, the overall international revenues declined to Rs 1405.50 crore from Rs 1596.80 crore.

For the first three quarters of 2009-10, Dr Reddy’s revenues increased by 8.6 per cent to Rs 5,385 crore from Rs 4,959 crore in the corresponding period of last year.

Dr Reddy’s aggregate net loss for the three quarters amounted to Rs 59.90 crore as against a net profit of Rs 460 crore.

Dr Reddy’s revenues in North America for the nine months period ended December 2009 reached at Rs 1,670 crore from Rs 1,587 crore, a growth of 5.2 per cent. Its European revenues remained almost flat at Rs 1319 crore. However, its revenues in India and Russia moved up by 14.1 per cent and 20.7 per cent to Rs 941 crore and Rs 699 crore respectively.