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Dr. Reddy's (RDY) Q2 Earnings, Sales Increase Year Over Year

Dr. Reddy's Laboratories Limited RDY reported second-quarter fiscal 2022 earnings of 80 cents per American Depositary Share compared with 62 cents in the year-ago quarter.

In second-quarter fiscal 2022, revenues grew 18% year over year to $777 million.

Shares of the company have plunged 13.8% so far this year compared with the industry’s decrease of 9.4%.

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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 were INR 47.4 billion, up 19% year over year, in the fiscal second quarter. Growth was led by the company’s COVID portfolio, new product launches and base business volume in key markets.

Dr. Reddy’s remains focused in its fight against COVID-19 by launching several preventive and curative treatment options, including a vaccine. The company has launched the Sputnik V vaccine, Remdesivir, Avigan (Favipiravir) and 2-deoxy-D-glucose (2-DG) in India as well as overseas markets.

The company launched four products in North America, including Chlordiazepoxide Hydrochloride + Clidinium Bromide Capsules in the United States and Lenalidomide capsules, Ertapenem injection and Dasatinib tablets in Canada.

PSAI revenues were INR 8.4 billion, down 2% from the year-ago quarter.

Revenues in the Proprietary Products segment came in at INR 1.8 billion, reflecting a significant increase year over year. This huge growth was due to a license fee recognized from the sale of its United States and Canada territory rights for Elyxyb (celecoxib oral solution, 25 mg/mL) to BioDelivery Sciences International, Inc. BDSI.

Research and development expenses increased 2% year over year to $60 million. The company is undertaking the development of new products for biosimilars and generics businesses.

Selling, general and administrative expenses were $215 million, up 22% year over year due to royalty on sales, annual increments as well as higher investments in sales and marketing.

As of Sep 30, cumulatively, 93 generic filings were pending approval from the FDA (90 abbreviated New Drug Applications [ANDAs] and three new drug applications). Of these 93 ANDAs, 46 are Para IVs and 23 have first-to-file status.

Our Take

In second-quarter fiscal 2022, Dr. Reddy’s top line registered year-over-year growth and the bottom line too increased on a year-over-year basis.

During the quarter, the company witnessed growth in its COVID portfolio as well as increase in volumes and sales across India, Russia and other emerging markets.

However, the company continues to face price erosion, especially in the North America generics market, which is adversely impacting sales.

Zacks Rank & Stocks to Consider

Dr. Reddy’s currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the biotech sector include Amicus Therapeutics, Inc. FOLD and Athenex, Inc. ATNX, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amicus Therapeutics’ loss per share estimates have narrowed 1.3% for 2021 and 37.5% for 2022, over the past 60 days.

Athenex’s loss per share estimates have narrowed 9% for 2021 and 9.2% for 2022, over the past 60 days.

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