Dr. Reddy’s Q4 & FY19 Financial Results

HYDERABAD, India–(BUSINESS WIRE)–Dr. Reddy’s Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY | NYSE: RDY)
today announced its consolidated financial results for the fourth
quarter and full year ended March 31, 2019 under International Financial
Reporting Standards (IFRS).

Q4 Performance Summary				FY19 Performance Summary
Rs.4,017 Cr				Rs.15,385 Cr
Revenue				Revenue
[Up: 14% YoY]				[Up: 8% YoY]
52.4%				54.2%
Gross Margin				Gross Margin
[Q4 FY18: 53.5%]				[FY18: 53.7%]
Rs.1,238 Cr				Rs.4,889 Cr
SGNA expenses				SGNA expenses
[Up: 3% YoY]				[Up: 4% YoY]
Rs.366 Cr				Rs.1,561 Cr
R&D expenses				R&D expenses
[9.1% of Revenues]				[10.1% of Revenues]
Rs.585 Cr				Rs.2,244 Cr
Profit before Tax				Profit before Tax
[14.6% of Revenues]				[14.6% of Revenues]
Rs.434 Cr				Rs.1,880 Cr
Profit after Tax				Profit after Tax
[10.8% of Revenues]				[12.2% of Revenues]

Commenting on the results, CEO and Co-chairman, G.V. Prasad said “It
has been a good year with a significant turnaround in the financial
performance and steady progress on the quality front. Looking
ahead, we will focus on profitable growth, continue the emphasis on
operational excellence and drive innovation to deliver value to patients
and healthcare systems worldwide.”

All amounts in millions, except EPS
All US dollar amounts
based on convenience translation rate of I USD = Rs. 69.16

Dr. Reddy’s Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars		Q4 FY19				Q4 FY18				YoY Gr %		Q3 FY19				QoQ Gr%
		($)		(Rs.)		($)		(Rs.)				($)		(Rs.)
Revenues		581		40,166		511		35,349		14		557		38,500		4
Cost of Revenues		276		19,113		238		16,454		16		257		17,748		8
Gross Profit		304		21,053		273		18,895		11		300		20,752		1
Operating Expenses
Selling, General & Administrative expenses		179		12,376		174		12,067		3		174		12,036		3
Research and Development expenses		53		3,662		63		4,348		(16)		53		3,668		(0)
Other operating (income)		(5)		(330)		(2)		(167)		97		(10)		(681)		(51)
Results from operating activities		77		5,345		38		2,647		102		83		5,729		(7)
Net finance (income) / expense		(5)		(349)		(15)		(1,032)		(66)		0		13		–
Share of (profit) / loss of equity accounted investees		(2)		(157)		(1)		(69)		127		(1)		(89)		77
Profit before income tax		85		5,851		54		3,748		56		84		5,805		1
Income tax expense		22		1,507		11		726		107		14		953		58
Profit for the period		63		4,344		44		3,022		44		70		4,852		(10)
				–				–						–
Diluted Earnings Per Share (EPS)		0.38		26.16		0.26		18.18		44		0.42		29.21		(10)

As % to Revenues		Q4 FY19		Q4 FY18			Q3 FY19
Gross Profit		52.4		53.5			53.9
SG&A		30.8		34.1			31.3
R&D		9.1		12.3			9.5
PBT		14.6		10.6			15.1
PAT		10.8		8.5			12.6

EBITDA Computation
Particulars	Q4 FY19				Q4 FY18				Q3 FY19
	($)		(Rs.)		($)		(Rs.)		($)		(Rs.)
Profit before Income Tax	85		5,851		54		3,748		84		5,805
Interest (income) net*	(3)		(215)		(14)		(1,001)		(4)		(260)
Depreciation #	31		2,136		31		2,109		30		2,073
Amortization #	15		1,047		13		921		15		1,035
EBITDA	128		8,819		84		5,777		125		8,653
EBITDA (% to revenues)			22.0				16.3				22.5
* – Includes income from Investments # includes impairment charge

Revenue Mix by Segment
Particulars		Q4 FY19		Q4 FY18		YoY Growth %		Q3 FY19		QoQ Growth %
		(Rs.)		(Rs.)				(Rs.)
Global Generics		30,384		27,836		9		31,347		(3)
North America		14,957		14,487		3		14,832		1
Europe*		1,912		1,711		12		2,030		(6)
India		6,505		6,138		6		6,741		(4)
Emerging Markets #		7,010		5,500		27		7,744		(9)
Pharmaceutical Services and Active Ingredients (PSAI)		6,765		6,251		8		5,937		14
Proprietary Products & Others		3,017		1,262		139		1,216		148
Total		40,166		35,349		14		38,500		4
* Europe primarily includes Germany and UK
# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets

Dr. Reddy’s Laboratories Limited and Subsidiaries
Consolidated Income Statement
Particulars		FY 19						FY 18						Growth %
		($)		(Rs.)		%		($)		(Rs.)		%
Revenues		2,225		1,53,851		100.0		2,054		1,42,028		100.0		8
Cost of Revenues		1,018		70,421		45.8		950		65,724		46.3		7
Gross Profit		1,206		83,430		54.2		1,103		76,304		53.7		9
Operating Expenses
Selling, General & Administrative expenses		707		48,890		31.8		678		46,910		33.0		4
Research and Development expenses		226		15,607		10.1		264		18,265		12.9		(15)
Other operating (income)		(28)		(1,955)		(1.3)		(11)		(788)		(0.6)		148
Results from operating activities		302		20,888		13.6		172		11,917		8.4		75
Finance (income), net		(16)		(1,117)		(0.7)		(30)		(2,080)		(1.5)		(46)
Share of (profit) of equity accounted investees, net of income tax		(6)		(438)		(0.3)		(5)		(344)		(0.2)		27
Profit before income tax		325		22,443		14.6		207		14,341		10.1		56
Income tax expense		53		3,648		2.4		66		4,535		3.2		(20)
Profit for the period		272		18,795		12.2		142		9,806		6.9		92
Diluted Earnings Per Share (EPS)		1.64		113.09				0.85		59.00				92

EBITDA Computation
Particulars		FY 19				FY 18
		($)		(Rs.)		($)		(Rs.)
Profit before income tax		325		22,443		207		14,341
Interest (income) / expense net*		(9)		(654)		(29)		(2,022)
Depreciation #		122		8,456		120		8,285
Amortization #		57		3,944		50		3,477
EBITDA		494		34,189		348		24,081
EBITDA (% to revenues)				22.2				17.0
* – Includes income from Investments # includes impairment charge

Key Balance Sheet Items
Particulars		As on 31st Mar 2019			As on 31st Dec 2018			As on 31st Mar 2018
		($)	(Rs.)		($)	(Rs.)		($)	(Rs.)
Cash & cash equivalents and investments		370	25,570		370	25,593		340	23,517
Trade receivables (current & non-current)		578	39,982		539	37,302		590	40,786
Inventories		486	33,579		490	33,911		421	29,089
Property, plant and equipment		782	54,088		800	55,344		837	57,869
Goodwill and Other Intangible assets		698	48,269		711	49,205		703	48,610
Loans and borrowings (current & non-current)		555	38,381		634	43,836		733	50,714
Trade payables		210	14,553		230	15,939		232	16,052
Equity		2,027	1,40,197		1,962	1,35,708		1,829	1,26,460

Revenue Mix by Segment [Year on year]
Particulars		FY 19						FY 18						Growth %
		($)		(Rs.)		%		($)		(Rs.)		%
Global Generics		1,777		1,22,903		79.9		1,649		1,14,014		80.3		8
North America				59,957						59,822				0.2
Europe*				7,873						8,217				(4)
India				26,179						23,322				12
Emerging Markets#				28,894						22,653				28
Pharmaceutical Services and Active Ingredients (PSAI)		349		24,140		15.7		318		21,992		15.5		10
Proprietary Products & Others		98		6,808		4.4		87		6,022		4.2		13
Total		2,225		1,53,851		100		2,054		1,42,028		100		8
* Europe primarily includes Germany and UK
# Emerging Markets refers to Russia, other CIS countries, Romania and Rest of the World markets

Segmental Analysis [Full Year and Q4 FY 19]

Global Generics (GG)

Revenues from GG segment at Rs.123 billion. Year-on-year (YoY)
growth of 8%

Growth on account of higher contribution from Emerging Markets and
India; primarily due to volume gains, new launches and scale up of new
markets.

• Revenues from North America for the year at Rs.60.0 billion,
  and remained flat on a YoY basis. The year was benefited by new
  launches, market share gains for existing products and a favorable
  forex rate, which was offset by price erosion in some of our key
  molecules.
• Revenues for the Q4 at Rs.15.0 billion, YoY growth of 3% and
  sequential growth of 1%. During this quarter, we launched 5 new
  products – major ones being Propofol injection and Tadalafil (Adcirca
  and Cialis).

As of 31^st March 2019, cumulatively 110 generic filings are
pending for approval with the USFDA (107 ANDAs and 3 NDAs under
505(b)(2) route). Of these 107 ANDAs, 60 are Para IVs out of which we
believe 34 have ‘First to File’ status.

• Revenues from Emerging Markets for the year at Rs.28.9 billion,
  YoY growth of 28%.
  • Revenues from Russia for the year at Rs.15.3 billion, YoY
    growth of 21%. Growth was majorly driven by scale up of Nasivin
    launched during FY 18 and improvement in base business, partially
    offset by adverse exchange rate movement.
  • Revenues for the Q4 at Rs.3.6 billion, YoY growth of 41%. Growth
    primarily driven by better volume traction as previous year was
    impacted by lower volume off-take by the channel.
  • Revenues from other CIS countries and Romania for the year
    at Rs.5.2 billion, YoY growth of 34%.
  • Revenues from Rest of World (RoW) territories for the year
    at Rs.8.4 billion, YoY growth of 36%. Growth primarily on account
    of new launches and volume traction in key products.

• Revenues from India for the year at Rs.26.2 billion, YoY
  growth of 12%, with a growth in base business and new product
  launches. Revenues for Q4 at Rs.6.5 billion, YoY growth of 6%.
• Revenues from Europe for the year at Rs.7.9 billion, YoY
  decline of 4% impacted by price erosion. Revenues for Q4 at Rs.1.9
  billion, YoY growth of 12%, primarily on account of new launches.

Pharmaceutical Services and Active Ingredients (PSAI)

• Revenues from PSAI for the year at Rs.24.1 billion, YoY growth
  of 10%. Growth driven by sales from key molecules and favorable forex.
  Revenues for the Q4 at Rs.6.8 billion, YoY growth of 8%
• During the quarter, we have filed 4 DMFs in the US.

Proprietary Products (PP)

• Revenues from PP for the year at Rs.4.7 billion, YoY growth of
  12%. Revenues include Rs.1.8 billion, realized from the sale of derma
  brands. In previous year, we had a milestone revenue of Rs.1.5 billion.

Income Statement Highlights [Full Year and Q4 FY 19]

• Gross profit margin for the year at 54.2%: Improved by ~50 bps over
  previous year primarily on account of new launches, leverage on
  manufacturing overheads, favorable forex rates, offset largely by
  higher price erosions in the US and Europe markets. Gross profit
  margin for GG and PSAI business segments are at 58.5% and 25.4%
  respectively.
• Gross profit margin for the Q4 at 52.4% (GG: 56.0%, PSAI: 21.0%).
  • YoY basis the gross margin declined by ~100 bps, primarily on
    account of price erosion, partially offset by new launches and
    favorable forex rates
  • QoQ basis the gross margin declined by ~150 bps, primarily on
    account of adverse forex rate from Q3 to Q4, change in the
    business mix, higher manufacturing overheads due to certain
    one-off charges and overhead impact on inventory movement. The
    decline in gross margin was partially offset due to revenue
    recognition on PP Derma products.
• SG&A expenses at Rs.48.9 billion, YoY increase of 4%. SG&A expenses
  for the Q4 at Rs.12.4 billion, year-on-year increase at 3%. We
  continue to focus on cost optimization and productivity improvement.

• Research & development (R&D) expenses at Rs.15.6 billion. As % to
  Revenues – FY19: 10.1% | FY 18: 12.9%. Focus continues on building
  complex generics, biosimilars and differentiated products pipeline.
  R&D expenses for the Q4 at Rs.3.7 billion, as % to revenues stood at
  9.1%.
• Net Finance income for the year at Rs.1.1 billion compared to Rs.2.1
  billion in FY18. The decline is primarily on account of higher income
  from profit on sales of investments by Rs.1.5 billion in previous year.
• Profit after Tax at Rs.18.8 billion. Effective tax rate at 16.3%.
  Profit after tax for the Q4 at Rs.4.3 billion. Effective tax rate
  during the quarter at 25.8%.
• Diluted earnings per share for the year is at Rs.113.1. Diluted
  earnings per share for Q4 is at Rs.26.2
• Capital expenditure for FY19 is at Rs.7.0 billion. Capital expenditure
  for Q4 FY18 is at Rs.1.8 billion.

The Board has recommended payment of a dividend of Rs.20 per equity
share of face value Rs.5/- each (400% of face value) for the year ended
March 31, 2019 subject to approval of members.

Other Matters

As a subsequent event, the company has entered into a settlement
agreement with Celgene, pursuant to which the Company received a
one-time payment of USD 50 million in settlement of any claim the
Company or its affiliates may have had for damages under section 8 of
the Canadian Patented Medicines (Notice of Compliance) Regulations in
regard to the Company’s ANDS for a generic version of REVLIMID brand
capsules, (Lenalidomide) pending before Health Canada.

Earnings Call Details (06:00 pm IST, 08:30 am EDT, May 17, 2019)

						The Company will host an earnings call to discuss the performance and answer any questions from participants.
						Audio conference Participants can dial-in on the numbers below:
						Universal Access Number:					+91 22 6280 1219
						Secondary number:					+91 22 7115 8120
						Local Access number:					+91 70456 71221
						(Available all over India)
						International Toll Free Number				USA	1 866 746 2133
										UK	0 808 101 1573
										Singapore	800 101 2045
										Hong Kong	800 964 448
						Playback of call:	+91 22 7194 5757, +91 22 6663 5757
						Conference ID:	04147
						Transcript of the event will be available at www.drreddys.com. Playback will be available for a few days.

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
gastro-intestinal, cardiovascular, diabetology, oncology, pain
management and dermatology. Dr. Reddy’s operates in markets across the
globe. Our major markets include – USA, India, Russia and other CIS
countries. 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 reorganisation ,
including related integration issues.

The company assumes no obligation to update any information contained
herein.

Contacts

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

MEDIA RELATIONS
MITALI SARKAR
mitali.sarkar@drreddys.com
(Ph:
+91-40-4900 2121)