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Dr. Reddy's (RDY) Earnings & Revenues Decline Y/Y in Q2
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Dr. Reddy's Laboratories Ltd. (RDY - Free Report) reported second-quarter fiscal 2017 earnings per American Depositary Share (ADS) of 27 cents, down 57.1% year over year.
Moreover, quarterly revenues declined 10% year over year to $539 million primarily due to lower contribution from all its segments. Nevertheless, reported revenues were up on a sequential basis
Quarter in Detail
Dr. Reddy’s reports revenues under three segments – Global Generics, Pharmaceutical Services & Active Ingredients (PSAI), and Proprietary Products and Others.
Global Generics revenues fell almost 12% year over year to $435 million, due to lower contribution from North America and loss of sales in Venezuela. Like the previous quarters, the company recorded negligible revenues in Venezuela. On a sequential basis, however, revenues were up 9%.
Revenues in North America declined 13% (in local currency) due to increased competition for Valcyte, Vidaza and the injectable franchise, pricing pressure, and moderation in volume uptake.
In the Emerging Markets, the company recorded a 27% (in local currency) decline in revenues.
However, India continued to perform well. Revenues from the region grew 14% year over year on the back of the integration of the portfolio acquired from UCB S.A. (UCBJF - Free Report) in the company’s supply chain.
Meanwhile, sales in Europe declined 16% in local currency.
PSAI revenues were down 2% to $87 million. However, revenues were surged 23% from the prior quarter on the back of improved order flow and supply situations.
Revenues at the Proprietary Products and Others segment came in at $16 million, down 10% year over year but up 6% sequentially. The sequential upside was driven by the addition of two new brands – Zembrace (acute migraine) and Sernivo (mild to moderate plaque).
In the reported quarter, the company launched four new products – omeprazole sodium bi-carbonate, nitroglycerin SLT, paricalcitol injection and bupropion SR - in the U.S.
Research and development expenses increased 16.4% year over year to $78 million. This increase was due to expenses associated with the IPR&D assets in-licensed from Xenoport and Eisai.
Selling, general and administrative expenses were $177 million, up 6.6%, primarily due to higher employee costs and marketing expenses for events in the quarter.
As of Sep 30, the company has 85 generic filings pending FDA approval (83 abbreviated New Drug Applications (ANDAs) and 2 NDAs filed under the 505(b)(2) route), of which 56 were Para IV filings and 19 had “first-to-file” status.
Our Take
Dr. Reddy’s witnessed year-over-year declines in both the top line and the bottom line in the second quarter of fiscal 2017. However all its segments recorded a sequential improvement, which is encouraging. The year-over-year deterioration was primarily due to competitive dynamics of the U.S. business and negligible contribution from Venezuela.
Higher expenses related to product launches at Proprietary Products and Others, along with reduced remediation costs, would put pressure on profits, going forward.
Nevertheless, we remain positive on the company’s efforts to expand its biosimilar portfolio, particularly in the emerging markets over the next few years.
Dr Reddy currently has a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the healthcare sector include Infinity Pharmaceuticals, Inc. and BioMarin Pharmaceutical Inc. (BMRN - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Infinity’s loss estimates narrowed from $3.84 to $3.79 for 2016 and remained stable for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.
BioMarin’s loss estimates narrowed from 28 cents to 25 cents for 2016 and from $1.16 to $1.11 for 2017 over the last 60 days.
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Dr. Reddy's (RDY) Earnings & Revenues Decline Y/Y in Q2
Dr. Reddy's Laboratories Ltd. (RDY - Free Report) reported second-quarter fiscal 2017 earnings per American Depositary Share (ADS) of 27 cents, down 57.1% year over year.
Moreover, quarterly revenues declined 10% year over year to $539 million primarily due to lower contribution from all its segments. Nevertheless, reported revenues were up on a sequential basis
Quarter in Detail
Dr. Reddy’s reports revenues under three segments – Global Generics, Pharmaceutical Services & Active Ingredients (PSAI), and Proprietary Products and Others.
Global Generics revenues fell almost 12% year over year to $435 million, due to lower contribution from North America and loss of sales in Venezuela. Like the previous quarters, the company recorded negligible revenues in Venezuela. On a sequential basis, however, revenues were up 9%.
Revenues in North America declined 13% (in local currency) due to increased competition for Valcyte, Vidaza and the injectable franchise, pricing pressure, and moderation in volume uptake.
In the Emerging Markets, the company recorded a 27% (in local currency) decline in revenues.
However, India continued to perform well. Revenues from the region grew 14% year over year on the back of the integration of the portfolio acquired from UCB S.A. (UCBJF - Free Report) in the company’s supply chain.
Meanwhile, sales in Europe declined 16% in local currency.
PSAI revenues were down 2% to $87 million. However, revenues were surged 23% from the prior quarter on the back of improved order flow and supply situations.
Revenues at the Proprietary Products and Others segment came in at $16 million, down 10% year over year but up 6% sequentially. The sequential upside was driven by the addition of two new brands – Zembrace (acute migraine) and Sernivo (mild to moderate plaque).
In the reported quarter, the company launched four new products – omeprazole sodium bi-carbonate, nitroglycerin SLT, paricalcitol injection and bupropion SR - in the U.S.
Research and development expenses increased 16.4% year over year to $78 million. This increase was due to expenses associated with the IPR&D assets in-licensed from Xenoport and Eisai.
Selling, general and administrative expenses were $177 million, up 6.6%, primarily due to higher employee costs and marketing expenses for events in the quarter.
As of Sep 30, the company has 85 generic filings pending FDA approval (83 abbreviated New Drug Applications (ANDAs) and 2 NDAs filed under the 505(b)(2) route), of which 56 were Para IV filings and 19 had “first-to-file” status.
Our Take
Dr. Reddy’s witnessed year-over-year declines in both the top line and the bottom line in the second quarter of fiscal 2017. However all its segments recorded a sequential improvement, which is encouraging. The year-over-year deterioration was primarily due to competitive dynamics of the U.S. business and negligible contribution from Venezuela.
Higher expenses related to product launches at Proprietary Products and Others, along with reduced remediation costs, would put pressure on profits, going forward.
Nevertheless, we remain positive on the company’s efforts to expand its biosimilar portfolio, particularly in the emerging markets over the next few years.
DOCTOR REDDYS Price
DOCTOR REDDYS Price | DOCTOR REDDYS Quote
Zacks Rank & Stocks to Consider
Dr Reddy currently has a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the healthcare sector include Infinity Pharmaceuticals, Inc. and BioMarin Pharmaceutical Inc. (BMRN - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity’s loss estimates narrowed from $3.84 to $3.79 for 2016 and remained stable for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.
BioMarin’s loss estimates narrowed from 28 cents to 25 cents for 2016 and from $1.16 to $1.11 for 2017 over the last 60 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>