The Hindu Business Line : Dr Reddy’s posts net loss of Rs 85 cr in third quarter

Hyderabad, Jan. 25 India’s top drug maker, Dr Reddy’s Laboratories has suffered a net loss of Rs 85 crore for the third quarter of fiscal 2007-08, owing to a poor performance in Germany.

The Hyderabad-based pharma major had earned a net profit of Rs 188 crores in the comparative quarter of the previous fiscal.

The total revenues came down by about 20.4 per cent to Rs 1, 232 crore (Rs 1,543.4 crore).

The lack-lustre performance of the Hyderabad-based company was also due to an additional amortisation of Rs 236 crore due to the impact of several price reforms in Germany (introduced from April 1, 2007), increasing rebates to insurance companies and change in the composition of its top products in Germany, Mr G.V. Prasad, Vice-Chairman and Chief Executive Officer, Dr Reddy’s told newspersons here on Friday.

The Betapharm revenues declined 9 per cent during the quarter at €36 million.

“The shifting of key Betapharm product manufacturing to India and streamlining of supply chain is in progress. By June 2008, all the Betapharm issues would be addressed,” Mr K. Satish Reddy, Managing Director and Chief Operating Officer, said.

The Hyderabad-based company was also bracing up to face a second round of price cut (8 per cent) in Germany very soon, he added.

What saved the company from a bigger debacle was the good performance of its core businesses in non-German markets.

“APIs sales grew eight per cent in the quarter backed by 16 per cent and 12 per cent growth in India and Russia. The year-on-year growth in the US generics was 69 per cent. The high margin organic custom pharmaceuticals (CPS) revenue partially offset the decline in CPS Mexican revenue,” Mr Reddy said.

OUTLOOK

In the next fiscal year (2009), Dr Reddy’s is expecting an over all growth in revenue and profits to be driven by growth in India and Russia due to investments already made in API product pipeline.

“In the US too, there will be 10-15 launches with a potential upside launch opportunity in Sumatriptan (GSK’s Lmitrex),” Mr Prasad said.

From the third quarter, the company had switched over to a new accounting treatment in which revenue would be reported net of rebate. “Till recently rebate amounts are insignificant. As they have grown now we have adopted new accounting in line with the US GAAP,” Mr Prasad said. Meanwhile the company has informed the BSE that its board of directors at its meeting today approved raise of further equity by way of preferential issue of share warrants up to 5 per cent of the existing equity of the company exercisable into equal number of equity shares of Rs 5 each to the Promoters/Promoter Group as per SEBI Guidelines.

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