dr. reddy's reckoner q1 fy10

8/14/2019 Dr. Reddy's Reckoner Q1 FY10

1/13

ReckonerQ1FY10

July 21, 2009Dr. Reddys Laboratories Ltd.

www.drreddys.com


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Revenues rom Global Generics business at Rs. 13.0 bn ($273 mn) in Q1 FY10 as against Rs. 10.3 bn ($215 mn) in Q1 FY09growth o 27% driven by sumatriptan and key markets o North America and India.Revenues rom North America at Rs. 6.0 bn ($126 mn) in Q1 FY10 as against Rs. 2.8 bn ($59 mn) in Q1 FY09.

Excluding revenues rom Sumatriptan, growth o 42% in North America driven by high volume growth across exiRevenues rom Europe at Rs. 2.1 bn ($44 mn) in Q1 FY10 as against Rs. 3.0 bn ($63 mn) in Q1 FY09, representing a de Revenues rom betapharm decrease by 36% to Rs. 1.6 billion ($34 mn) in Q1 FY10 rom Rs. 2.5 bn ($53 mn) in Q

This decrease was on account o the e ect o destocking in the market.Supplies or AOK tender have commenced, with AOK products witnessing signi cant increase in volumes,while the volumes or non-AOK product have allen.

Revenues rom Rest o Europe grew by 6% to Rs. 503 mn ($11 mn) in Q1 FY10. The growth is largely contributedUK with sales o Rs. 362 mn ($8 mn) representing a growth o 23%.

Revenues rom Russia & Other CIS markets at Rs. 1.9 bn ($39 mn) in Q1 FY10 as against Rs. 1.9 bn ($40 mn) in Q1 FY09resenting a degrowth o 3%.Revenues in Russia remain at Rs. 1.5 bn ($32 mn) in Q1 FY10 as against Rs. 1.5 bn ($31 mn) in Q1 FY09; YoY groo 2%. However in rouble terms, the growth is at 18% YoY and 5% sequentially.

Despite a degrowth in volumes, the secondary sales trend or April & May indicates a rouble growth o 46vis--vis industrys growth o 34%.

Revenues in Other CIS markets decrease to Rs. 342 mn ($7 mn) in Q1 FY10 as against Rs. 429 mn ($9 mn) in YoY degrowth o 20%.

Revenues in India increase to Rs. 2.4 bn ($50 mn) in Q1 FY10 rom Rs. 2.2 bn ($46 mn), representing a growth o 9% largeaccount o key brands o Omez, Nise, Omez-DSR and Razo.

Sequential growth o 15% largely contributed by volume growth o 14%.14 new products launched during the quarter.

Dr. Reddys Laboratories Ltd.www.drreddys.com

Business Highlights

Overall revenues at Rs. 18.2 billion ($381 million) in Q1 FY10 as against Rs. 15.0 billion ($315 million) in Q1 FYrepresenting a growth o 21%.

The growth was largely driven by sumatriptan.Excluding revenues rom sumatriptan, the YoY growth is at 7%, driven by the key markets o North Americaand India.

Operating income is at Rs. 3.3 billion ($69 million) in Q1 FY10 as against Rs. 1.1 billion ($23 million) in Q1 FY0EBITDA at Rs. 4.4 billion ($91 million) in Q1 FY10 as against Rs. 2.3 billion ($48 million) in Q1 FY09, represengrowth o 90%.During the quarter, the company launched 24 new generic products, led 22 new generic product registrations and

led 4 DMFs globally.

Global Generics

Pharmaceutical Services & Active Ingredients (PSAI)Revenues rom PSAI increase by 6% to Rs. 4.9 bn ($102 mn) in Q1 FY10 as against Rs. 4.6 bn ($97 mn) in Q1 FY09; driven by the regions o Europe and RoW as well as the beneft o rupee depreciation against the dollar.

Growth was driven by products o Gemcitabine, Montelukast, Sumatriptan and Levetiracetam. The order book status o active ingredients as o June 2009 is up by 27% rom March 2009.

During the quarter, 4 DMFs were fled globally, with 3 in Canada and 1 in RoW. The cumulative DMF flings till

Q1FY10


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RevenueCost o RevenuesGross ProftOperating ExpensesSelling, general & administrative expenses(a)Reserach and development expenses, netWrite down o intangible assetsWrite down o goodwillOther (income)/expenses, netTotal Operating ExpensesResults rom operating activitiesFinance income(b)Finance expenses(c)Finance expenses, netShare o pro t/ (loss) o equity accountedinvesteesProft be ore income taxIncome tax expenseProft or the periodAttributable to: Equity holders o the company

Minority interestProft or the period

Weighted average no. o shares o/sDiluted EPS

Q1 FY10

% % Growth%

Q1 FY09

381168213

12421--

(1)14469(2)530

66(15)51

51

-51

0.3 0.1168.914.5

168.96.6

315158157

10722--5

13423(7)5

(2)-

25(2)23

23

-23

18,1898,017

10,172

5,927985

--

(35)6,8773,295(88)22313511

3,171(726)2,445

2,445

-2,445

15,0397,5437,496

5,0861,050

--

2426,3781,118(320)243(77)

-

1,195(84)

1,111

1,111

-1,111

1004456

335--

(0)3818(0)110

17(4)13

13

-13

1005050

347--2427

(2)2

(1)-

8(1)7

7

-7

216

36

17(6)---8

195(73)(8)

(275)-

165764120

120

-120

All gures in millions, except EPSAll dollar gures based on convenience translation rate o 1USD = Rs 47.74

Dr. Reddys Laboratories Ltd. and SubsidiariesUnaudited Condensed Consolitated Income Statement

(a) Includes amortization charges o Rs. 507 million in Q1 FY10 and Rs. 377 million in Q1 FY09.

(b) Includes orex gain o Rs. 176 million in Q1 FY09.

(c) Includes orex loss o Rs. 84 million in Q1 FY10.

Financial Updates

($)Particulars ($)(Rs.) (Rs.)

Q 1 F Y 1 0


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Gross pro t increase by 36% to Rs. 10.2 bn ($213 mn) in Q1 FY10 as against Rs. 7.5 bn ($157 mn) in Q1 FY09. Gross prmargins on total revenues at 56% as against 50% in Q1 FY09, largely driven by higher margins on sumatriptan and currenbene t.Selling, General & Administration (SG&A) expenses increase to Rs. 5.9 bn ($124 mn) in Q1 FY10 rom Rs. 5.1 bn ($107 mnFY09; YoY growth o 17%.

However excluding the exit costs o sales orce at betapharm amounting to Euros 7.2 mn and the costs related toclosure o the Atlanta research acility amounting to $1.5 million, the SG&A expenses grew by 6%.

Other operating income o Rs. 35 million in Q1 FY10 as against other operating expenses o Rs. 242 mn in Q1 FY09. The chis on account o :

Provision or damages o Rs. 515 mn in Q1 FY09 on account o the German court upholding the validity o theolanzapine patent in Germany.Bene t o negative goodwill o Rs. 150 mn in Q1 FY09, relating to the acquisition o acilities rom Dow Pharma

R&D expenses are at Rs. 985 mn in Q1 FY10.Finance costs (net) are at Rs. 135 mn in Q1 FY10 as against Finance income (net) at Rs. 77 mn in Q1 FY09. The change is maon account o :

Net orex loss o Rs. 84 mn in Q1 FY10 as against net orex gain o Rs. 176 mn in Q1 FY09.Net interest expense o Rs. 59 mn in Q1 FY10 as against net interest expense o Rs. 174 mn in Q1 FY09.

PAT at Rs. 2.5 billion ($51 mn) in Q1 FY10 as against Rs. 1.1 bn ($23 mn), representing a growth o 120%.PAT adjusted or exceptions is at Rs. 2.8 bn ($60 mn) as against Rs. 1.3 bn ($28 mn) in Q1 FY09, representing a groEPS o Rs. 14.4 ($0.3) in Q1 FY10 as against Rs. 6.6 ($0.1) in Q1 FY09.Capital expenditure or Q1 FY10 is at Rs. 692 mn ($14 mn).


Cash and cash equivalentsTrade and other receivablesInventoriesProperty, plant and equipmentGoodwill and Other intangible assetsLoans and borrowings (current & non-current)Trade accounts payableEquity (including reserves)

As on 30th June 09 As on 31st Mar 09

130280292439456337144939

117306277437465413125881

6,18413,37413,93320,97021,76816,1086,87344,832

5,59614,59213,22620,88222,17919,7015,98742,045

(in millions)Key Balance Sheet Items

Particulars

Financial Updates

($) ($)(Rs.)(Rs.)

Income Statement Highlights

Revenue Mix by Geography (in millions)Q1 FY10 Q1 FY10 as a Q1 FY09 Q1 FY09 as a Growth

$ INR % $ INR % %

North AmericaEuropeIndiaRussia & other CISOthersTOTAL

Q 1 F Y 1 0

15076633952

381

7,1823,6193,0211,8712,496

18,189

3920171014

100

8387614044

315

3,9574,1472,9241,9282,082

15,038

2628191314

100

82(13)3(3)2021


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Financial Update

Global GenericsNorth AmericaEuropeIndiaRussia & other CISOthersPSAI(Pharmaceutical Services & Active Ingredients)North AmericaEuropeIndiaOthersProprietary ProductsOthersTotal

North America=100

Europe=137

India=63

Row=188

Rs. Crs

Rs. Crs

PSAI

Q1 FY10 Q1 FY10 as a Q1 FY09 Q1 FY09 as a Growth$ INR % $ INR % %

273126445039131022129133960

381

13,0206,0262,1092,3931,871621

4,870995

1,371629

1,875300

018,189

72461618145

272028133920

100

68272921193312423163710

100

27115(30)

9(3)756

(8)27

(13)9

118(100)

21

215596346407

972323153630

315

10,2872,8082,9942,2021,928355

4,6131,0851,080722

1,726138

015,038

Revenue Mix by Segment (in millions)

Global Generics

Key P&L Items or FY10

Rs. 1,819 Crs.g --> 21%

Others Rs. 30 Crs.

Consolidated Revenue

North America603

Europe211

g=Growth

g=115%

g=-30%

g=9%

g=-3%

g=75%

g=-8%

Rs. 1,819 CrsYoY growth --> 21%

Rs. 1,017 Crs56% to sales

YoY growth--> 36%

Rs. 245 Crs13% to sales

YoY growth --> 120%

Rs. 436 Crs24% to sales

YoY growth --> 90%

Revenue

EBITDA PAT

Gross Margins

g=27%

g=-13%

g=9%India239

Russia & CIS187

RoW62

PSAI Rs. 487 Crs.

g-->6%

Global Generics Rs. 1,302 Crs.

g-->27%

Q 1 F Y 1 0


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Driving Sustainable Long-term growthOutlook and Strategic Initiatives

Filings26

NewLaunches

24

ANDAs0

Europe3

NorthAmerica

0

India14

RoW7

Specialty0

ANDS0

Dossiers(Europe)

2

Dossiers(RoW)

20

DMFs4

= =+ + + + + + ++

Global Launches & Filings in Q1 FY10

FY10 Guidance on track

- Risks to Guidance --> Headwinds in Russia & Germany

- H2 Sales higher than H1

Rollout o excellence in supply chain model across our businesses and geographies --> Good progress

SEZs investment; Land acquisition completed

Launch o two biosimilars in India and one specialty product in Promius

Q 1 F Y 1 0

The Last Decade: Consistent Growth momentum

Revenue USD Million

183234

338 CA G R - -

> 2 5 %380463

447546

1,510 1,2501,365

FY00 FY01 FY02 FY03 FY04 FY07FY06FY05 FY08 FY09

Achieved scale & Global presence


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Quick Facts - FY09

Global Generics - Key Markets

Pharmaceutical Services & Active Ingredients

Russia

North America

Q1 FY09

281397Base Business

Sumatriptan205

603Rs. Cr

Rs. Cr

Q1 FY10Germany

$ growth o 21% excluding SumatriptanVolume growth o 14% across existing productsSumatriptan --> continue to hold ~ 50% market shareReceived USFDA approval or Omeprazole Mg OTC. Expected launch by mid Q2 ANDAs: Total Filed: 139

Pending approvals --> 67 addressing innovator sales o $68 bn out o which28 are Para IVs and 16 FTFs

YoY degrowth o 38% in Euro terms on account o destocking in the marketCommencement o supplies to AOK tender

Reduction o sales orce rom 110 in March 09 to 50 in June 09One time severance costs --> Euros 7.2 mn

Market trend --> Increasing tender activities by other insurance companies

Growth driven by major brands --> Omez, Nise, Omez DSR & RazoSequential growth -->15%, Volume growth -->14%Secondary sales trend --> April & May

Dr. Reddys growth --> 11.4%, Industry growth --> 10.4%14 new product launchesRollout o excellence in supply chain model progressing well

Growth driven by Nise brandRouble growth :

YoY --> 18%, QoQ --> 5%Volumes have degrown

Secondary sales trend --> April & May(in Rouble terms )Dr. Reddys growth --> 46%, Industrys growth --> 34%

Ongoing nancial crisis has impacted liquidity in the market

Growth driven by products o Gemcitabine, Montelukast, Sumatriptan& LevetiracetamImprovement in order books --> 27%Cumulative DMFs: 355

US --> 148Europe --> 83Canada --> 57RoW --> 67

Q 1 F Y 1 0

India

115%

252 161

Q1 FY09 Q1 FY10

(36%)

Q1 FY09

Q1 FY09

Q1 FY10

Q1 FY10

220

461

239

487

9%

6%

Rs. Cr

Rs. Cr

Rs. Cr

150 153

Q1 FY09 Q1 FY10

2%


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Key Company Updates Q 1 F Y 1 0

Dr. Reddys announced strategic alliance with GSK or Emerging Markets

Dr. Reddys realigned its Global Generics geography portfolio

We realigned our Global Generics nished dosages strategy to ocus on certain key geographies and gradually exit some o very small distributor driven markets. This move represents an important new ocus to consolidate and grow the Companys p

ence in the key geographies where it already had a considerable presence. The exercise would result in reduction o complexo operations on one hand and help in signi cantly enhanced customer service and market share on the other. The markets beinexited had an overall contribution o less than 1% to the topline. In addition to the US, India, Russia & CIS and Germany whereoperations are already very large, the company will continue operations in 10-15 markets where sales are growing signi cantly

Dr. Reddys announced reorganization o its Drug Discovery Operations

E ective July 1, 2009 the companys Drug Discovery operations at Hyderabad have been absorbed into Aurigene, a wholly oindependent subsidiary o the company. Aurigene is a partnership based Drug Discovery biotech headquartered in Bangalore. Discovery Research resources - employees, acility and in rastructure are now resources o Aurigene, which will operate out sites - Bangalore and Hyderabad.

A new group has been created to ocus on Proprietary Products development, which will be responsible or building the proetary, branded R&D port olio in collaboration with various partners and service providers. This organization will work with Agene and other Discovery Biotechs to ensure e ective management o the ongoing and uture drug discovery programs. Aexisting Intellectual Property will be owned and managed by this new unit. This group also has responsibility or the developmport olio and the companys di erentiated ormulations e orts. As part o the reorganization, the company closed the AResearch acility in the US.

Announced ANDA approval o Omeprazole Mg OTC

Dr. Reddys announced the USFDA approval o the companys Abbreviated New Drug Application (ANDA) or OmeprazOTC. Shipment o the product will be phased over the remainder o the scal year 2010 with the rst shipment likely to commin the middle o Q2 FY10. Omeprazole Mg is indicated or the treatment o heartburn. Dr. Reddys ormulation contains 2Omeprazole Mg and is available in a capsule orm.

We entered into a partnership with GlaxoSmith-Kline (GSK) to develop and market select productsacross emerging markets outside India. Under theagreement, GSK will gain access to ourport olio and uture pipeline o over 100branded pharmaceuticals in ast growing thera-peutic segments such as cardiovascular, diabetes,oncology, gastroenterology and pain management.

The products will be manu actured byDr. Reddys and will be licensed and supplied to GSK in

various emerging markets such as A rica, the MiddleEast, Latin America and Asia Paci c excluding India.Revenues will be reported by GSK and will be sharedwith Dr. Reddys as per agreed terms. In certain marketsproducts will be co-marketed by Dr. Reddys and GSK.GV Prasad, Vice-Chairman & CEO, Dr. Reddys and Abbas Hussain, President

Emerging Markets, GSK during the signing of the deal.


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Recognitions Q 1 F Y 1 0

Dr. Reddys was or the second consecutive year ranked theBest Workplace in the biotech/ pharmaceutical industry in In-dia in a survey conducted by The Economic Times and the GreatPlace to Work Institute. The industry-wise best employers listwas drawn rom the Top 50 in the Best Workplaces list.

Elixir, the house magazine o Dr. Reddys won the award orBest Imperative Content at the inaugural edition o In-houseCommunications Excellence (ICE) Awardsinstituted by theShailaja Nair Foundation.

The American India Foundation (AIF) honored our Chairman, DK Anji Reddy with the prestigious AIF Annual Spring awardThis award was con erred on Dr. Reddy as a Salute to his visionary leadership in business and philanthropy through Dr. Reddys

Foundation and Naandi Foundation.

Dr. Reddys won ve awards at the annual Public RelationsCouncil o India (PRCI) Corporate Collateral Awards competitioalong with the Overall Excellence Award or CommunicationCollaterals.

Chairman Dr. K Anji Reddy receiving the award from Victor Menezes,Co-Chair AIF


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Social Initiatives

Dr. Reddys Foundation or Health Education (DRFHE) was created witha vision to develop pro essionally quali ed Patient Educators. The pro-grams o ered by the oundation are aimed towards creating pro essionals(health educators) who would work with the medical raternity to o er anintegrated, multi-disciplinary approach to good health.

The programs also aim at building necessary so t skills capabilities amongthe existing nurses, doctors assistants and doctors with the objective o strengthening the healthcare delivery system or better patient care.

The activities o DRFHE are classi ed under three broad categories:

DRFHE endeavors to go beyond the traditional charity-centric de nition o CSR by adding value to both the healthcare systand society as a whole.

Education Initiatives

PGCHM (Post Graduate Cer-ti cate in Healthcare Man-agement)CPCC (Certi cate Program inCancer Counseling)

Sarathi - AssistantsAbhilasha - NursesInner Circle - DoctorsSanjeevani - Chemists

Li e at Your DoorstepLiving Well

Training Initiatives Patient Initiatives

Dr. Reddys Foundation or Health Education

Graduating to better patient care

Education Initiatives

CPCC is a month long training program which enables participants rom Bioscience backgroundemerge as a knowledgeable, skilled and competent individuals specialized in cancer counselingCandidates are trained in various areas like Medicine, Nutrition, Psychology, Sociology, Physitherapy and So t Skills. They also undergo training rom doctors at cancer hospitals besides topportunity to counsel patients directly. The program started in Dec 2007.

PGCHM (Post Graduate Certifcate in Healthcare Management)

The one year Post Graduate Certi cate in Healthcare Management (PGCHM) was launched in 20with an endeavor to bridge the requirement o Patient Education in the healthcare services sectoThe Program is targeted towards dieticians, graduates in nutrition, pharmacy and biosciences.A PGCHM-certi ed patient educator would be a combination o Physicians Assistant, PatiCounselor and Health Educator.

CPCC (Certifcate Program in Cancer Counseling)

FHREDDY - The DRFHE Mascot

Q 1 F Y 1 0


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Li e At Your DoorstepDRFHE launched Li e At Your Doorstep in January 2008. Basedthe principle o Home Care aspect o palliative care, it attempts timprove the quality o li e o terminally ill patients with provisio access to physical, psychological, emotional, social and spirituasupport in a culturally appropriate manner. A well-equipped medi-cal van with a team consisting o a doctor, nurse and patient coun-selor reach the patients doorstep to provide home care service.

Q 1 F Y 1 0

Dr. Reddys Foundation or Health Education6-3-864/5, RPAS Chambers, Opp. Green Park Hotel, Ameerpet, Hyderabad 500 016

Phone: 040 66511584/88; e-mail: dr [email protected], website: www.dr he.com

Social InitiativesTraining Initiatives

AbhilashaAbhilasha is a two-day contact program aimed at helpingnurses understand the true importance o their work, show-ing them how they can per orm their work more e ectivelywhile boosting their sel -con dence and motivation.

Sarathi

Introduced in year 2006, Sarathi is a two day comprehen-sive training program that enables a doctors assistant toemerge as a sharper, smarter and a motivated individual.

Inner CircleInitiated in the year 2007, Inner Circle is a program aimed at young doctors who are in the early stageo their careers. The main objective o this program is to give these young doctors the skills necessary success ul career. While these doctors, having completed their medical studies airly recently, have a ggrasp o the medical knowledge required, The Inner Circle aims to augment this medical knowledge wso t skills that will enable them to plan and build their careers appropriately.

SanjeevaniSanjeevani is a one day training program or the pharmacists to make them realize the impor-tance o their job and understand how they can add more value responsibly. The objective o theprogram is to ensure that the pharmacists develop sel -con dence and empathy towards theircustomers and improve various skills required in e ective prescription dispensation.

Living WellLiving Well attempts to help the patients ensure compliance withtherapy, addresses social and psychological challenges aced bythem while providing hope. DRFHE conducts this program in partnership with Art O Living with an aim or helping people redurisk actors, increase their protective actors through awarenessand li estyle modi cation, and to manage their chronic conditionthrough a sel management support system.

Patient Initiatives


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Dr. Reddys Laboratories Ltd.www drreddys com

General In ormationAbout Dr. Reddys

Established in 1984, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global pharmaceutical company.As a ully integrated pharmaceutical company, our purpose is to provide a ordable and innovative medicines through our three core businesses o :- Pharmaceutical Services and Active Ingredients: comprising o Active Pharmaceutical Ingredients and Custom Pharmaceutical Services- Global Generics, which includes branded and unbranded generics- Proprietary Products, which includes New Chemical Entities (NCEs), Di erentiated Formulations, and Generic Biopharmaceuticals.

Our products are marketed globally, with a ocus on India, US, Europe and Russia. Dr. Reddys conducts NCE research in the areas o me

bolic disorders, cardiovascular indications, anti-in ectives and infammation.

Sa e Harbor

This presentation contains orward-looking statements and in ormation that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals, strategies, uture events or per ormance and underlying as-sumptions and other statements that are other than statements o historical act, including, but not limited to, those that are identi edby the use o words such as anticipates, believes, estimates, expects, intends, plans, predicts, projects and similarexpressions. Risks and uncertainties that could a ect us include, without limitation:

General economic and business conditions in IndiaThe ability to success ully implement our strategy, our research and development e orts, growth and expansion plans and technlogical changesChanges in the value o the Rupee and other currency changesChanges in the Indian and international interest ratesAllocations o unds by the GovernmentChanges in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industryIncreasing competition in and the conditions o our customers, suppliers and the pharmaceutical industryChanges in political conditions in India

Should one or more o such risks and uncertainties materialize, or should any underlying assumption prove incorrect, actual outcomesmay vary materially rom those indicated in the applicable orward-looking statements. Any orward-looking statement or in ormationcontained in this presentation speaks only as o the date o the statement.

We are not required to update any such statement or in ormation to either refect events or circumstances that occur a ter the date thestatement or in ormation is made or to account or unanticipated events.

Contact In ormationMedia Relations

Mythili MamidannaPh: +91-40-66511620Fax: +91-40-23731955Email: [email protected]

Kedar UpadhyayPh: +91-40-66834297Fax: +91-40-23731955Email: [email protected]

Raghavender RPh: +91-40-66511529Email: [email protected]

Milan KalawadiaPh: +1 - 9082034931Email: [email protected]

Rajan SPh: +91-40-66511725Email: [email protected]

Investor Relations

Q 1 F Y 1 0

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