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Dr. Reddy's (RDY) Q4 Earnings & Revenues Decline Y/Y

Dr. Reddy's Laboratories Ltd. RDY reported fourth-quarter fiscal 2016 earnings per American Depositary Share (ADS) of 7 cents, down 52.2% from the year-ago quarter.
The company’s revenues of $567 million also fell 3% primarily due to a decline in the ruble and continued constrained operations in Venezuela.

The 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 inched up 0.2% year over year to $465 million.

Revenues from North America were boosted by the performance of the injectable franchise and higher market share in key molecules.

In emerging markets, Russia, other CIS countries and Romania, and the Rest of World (RoW) territories recorded a decline in revenues due to unfavorable macroeconomic conditions. India, on the other hand, continued to perform well, with the portfolio acquired from UCB S.A. UCBJF well-integrated in the company’s supply chain.

PSAI revenues were down 22.3% to $87 million, reflecting the impact of delayed dispatches on account of ongoing remedies and activities related to the FDA’s observations.
Revenues at the Proprietary Products and Others segment, however, surged 87.5% to $15 million.

Research and development expenses decreased 5.1% year over year to $74 million while selling, general and administrative expenses amounted to $176 million, up 15.8%. This increase was primarily due to quality improvement initiatives and expenses related to the launches of Zembrace and Sernivo.

To date the company has 82 Abbreviated New Drug Applications (ANDAs) pending FDA approval (79 ANDAs and 3 NDAs filed under the 505(b)(2) route), of which 52 were Para IV filings and 18 had “first-to-file” status.

Fiscal 2016 Results

Dr. Reddy’s reported earnings of $1.77 per share in fiscal 2016, narrower than the year-ago figure of $1.96. Full-year revenues surged 4.4% to $2.3 billion.

Our Take
Dr. Reddy’s witnessed a year-over-year decline in both earnings and revenues during the fourth quarter of fiscal 2016. Macroeconomic concerns in some regions of the emerging markets and a depreciating ruble remain major concerns, going ahead. However, we are positive on the company’s efforts to expand its biosimilar portfolio, particularly in emerging markets over the next few years.
Dr. Reddy’s currently has a Zacks Rank #5 (Strong Sell). A couple of better-ranked stocks in the health care sector are Bristol-Myers Squibb Company BMY and ANI Pharmaceuticals, Inc. ANIP, both sporting a Zack Rank #1 (Strong Buy).

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