Dr. Reddy's Q2 FY09 Revenue at Rs. 16,151 Million, EBITDA at Rs. 2,746 Million, PAT...

Dr. Reddy's Q2 FY09 Revenue at Rs. 16,151 Million, EBITDA at Rs. 2,746 Million, PAT at Rs. 1,212 Million

HYDERABAD, India--(Business Wire)--
Dr. Reddy's Laboratories Ltd. (NYSE:RDY) today announced its
unaudited financial results for the quarter ended September 30, 2008.

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-- Starting Q2 FY09, in line with best in class reporting practices,
the company's financial reporting has changed from USGAAP to IFRS.
This makes Dr. Reddy's Laboratories Limited the first Indian
pharmaceutical company to adopt IFRS reporting.

-- There is no significant difference in net profit between IFRS
and USGAAP for Q2 FY09.

-- The accounting adjustments for FY07 and FY08 resulting from the
transition from USGAAP to IFRS have been incorporated in the
opening equity line item as on 1st April 2007 and 1st April
2008 respectively.

-- During Q3 FY08, the company recorded accelerated amortization of
product related intangibles amounting to Rs 240 crores as per
USGAAP. This has increased under IFRS to Rs 295 crores. During
FY07, we impaired beta brand-value by Rs 60 crores as per
USGAAP. Under the IFRS, the assessment is examined at a Gross
Business level and has thus been restored.
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Q2 FY09 Key Highlights

-- Overall revenues at Rs. 16.2 billion ($348 million) in Q2 FY09
as against Rs. 12.5 billion ($268 million) in Q2 FY08,
representing a growth of 30%.

-- Operating income at Rs. 2 billion ($43 million) in Q2 FY09 as
against Rs. 1.1 billion ($24 million) in Q2 FY08, representing
a growth of 78%.

-- EBITDA at Rs. 2.7 billion ($59 million) in Q2 FY09 as against
Rs. 2.2 billion ($47 million) in Q2 FY08, representing a
growth of 25%.

-- PAT for Q2 FY09 at Rs. 1.2 billion as against adjusted PAT of
Rs. 1.0 billion in Q2 FY08, representing a growth of 19%.

-- Revenues from Global Generics business at Rs. 11.2 billion
($240 million) in Q2 FY09 as against Rs. 8.0 billion ($172
million) in Q2 FY08. YoY growth of 40% driven by key markets
of North America, Russia and Germany.

-- Revenues from Pharmaceutical Services & Active Ingredients
(PSAI) increase by 10% to Rs. 4.8 billion ($104 million) in Q2
FY09 as against Rs. 4.4 billion ($95 million) in Q2 FY08.

-- During the quarter, the company launched 35 new generic
products, filed 24 new generic product registrations and filed
21 DMFs globally.

All figures in millions, except EPS

All dollar figures based on convenience translation rate of 1USD =
Rs 46.45

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Dr. Reddy's Laboratories Limited and Subsidiaries

Unaudited Condensed Consolidated Interim Income Statement

Q2 FY09 Q2 FY08
--------------------- ---------- -------------- --------------- ------
Growth
Particulars Index ($) (Rs.) % ($) (Rs.) % %
--------------------- ---------- -------------- --------------- ------
Revenue A 348 16,151 100 268 12,451 100 30
--------------------- ---------- -------------- --------------- ------
Cost of revenues B 176 8,187 51 133 6,170 50 33
--------------------- ---------- -------------- --------------- ------
Gross profit C = A-B 171 7,964 49 135 6,282 50 27
--------------------- ---------- -------------- --------------- ------
Operating Expenses
--------------------- ---------- -------------- --------------- ------
Selling, general &
administrative
expenses D 104 4,814 30 86 4,012 32 20
--------------------- ---------- -------------- --------------- ------
Research and
development
expenses, net E 18 825 5 17 810 7 2
--------------------- ---------- -------------- --------------- ------
Amortization Expenses F 10 472 3 9 406 3 16
--------------------- ---------- -------------- --------------- ------
Other operating
expenses G 0 0 0 1 24 0 (99)
--------------------- ---------- -------------- --------------- ------
Other operating
income H (3) (142) (1) (2) (93) (1) 53
--------------------- ---------- -------------- --------------- ------
Total Operating I =
Expenses D+E+F+G+H 128 5,968 37 111 5,158 41 16
--------------------- ---------- -------------- --------------- ------
Results from
operating activities J = C-I 43 1,995 12 24 1,123 9 78
--------------------- ---------- -------------- --------------- ------
Finance Costs, net
--------------------- ---------- -------------- --------------- ------
Finance income (a) K (2) (93) (1) (10) (478) (4) (81)
--------------------- ---------- -------------- --------------- ------
Finance expenses (b) L 12 575 4 4 176 1 227
--------------------- ---------- -------------- --------------- ------
Net finance costs M = K+L 10 482 3 (6) (302) (2) -
--------------------- ---------- -------------- --------------- ------
Share of profit of
equity accounted
investees N 0 2 0 0 3 0 (49)
--------------------- ---------- -------------- --------------- ------
Profit before income
tax O = J-M+N 33 1,515 9 31 1,428 11 6
--------------------- ---------- -------------- --------------- ------
Income tax
(expense)/gain (c) P (7) (303) (2) 24 1,099 9 -
--------------------- ---------- -------------- --------------- ------
Profit for the year Q = O-P 26 1,212 8 54 2,527 20 (52)
--------------------- ---------- -------------- --------------- ------
Attributable to :
--------------------- ---------- -------------- --------------- ------
Equity holders of the
company R 26 1,212 8 54 2,528 20 (52)
--------------------- ---------- -------------- --------------- ------
Minority interest S - - 0 (0) (1) (0) -
--------------------- ---------- -------------- --------------- ------
Profit for the year T = R+S 26 1,212 8 54 2,527 20 (52)
--------------------- ---------- -------------- --------------- ------

----------------------------------------------------------------------
Weighted average no.
of shares o/s U 168.9 168.6
--------------------- ---------- -------------- --------------- ------
Diluted EPS V = R/U 0.2 7.2 0.3 15.0
--------------------- ---------- -------------- --------------- ------
Exchange rate 46.45 46.45
--------------------- ---------- -------------- --------------- ------

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Notes:

(a) Includes forex gain of Rs. 259 million in Q2 FY08.

(b) Includes forex loss of Rs. 296 million in Q2 FY09.

(c) Includes tax benefit of Rs. 1,506 million in Q2 FY08.

Q2 Convenience Translation Rate : Rs. 46.45

Q2 Average Rate : Rs. 43.78

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Key Balance Sheet Items (in millions)
----------------------------------------------------------------------
As on 30th Sep 08 As on 30th Jun 08
Particulars ----------------- -----------------
($) (Rs.) ($) (Rs.)
---------------------------------- ----------------- -----------------
Cash and cash equivalents 110 5,120 80 3,724
---------------------------------- ----------------- -----------------
Investments (current & non
current) 29 1,329 70 3,268
---------------------------------- ----------------- -----------------
Trade and other receivables 226 10,480 193 8,973
---------------------------------- ----------------- -----------------
Inventories 331 15,376 281 13,042
---------------------------------- ----------------- -----------------
Property, plant and equipment 435 20,219 415 19,296
---------------------------------- ----------------- -----------------
Loans and borrowings (current &
non current) 481 22,360 410 19,036
---------------------------------- ----------------- -----------------
Trade accounts payable 175 8,108 165 7,683
---------------------------------- ----------------- -----------------
Equity 1,080 50,147 1,068 49,595
---------------------------------- ----------------- -----------------
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Segmental Analysis

Global Generics

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-- Revenues from Global Generics business at Rs. 11.2 billion ($240
million) in Q2 FY09 as against Rs. 8.0 billion ($172 million) in
Q2 FY08. YoY growth of 40% driven by key markets of North America,
Russia and Germany.

-- Revenues from North America at Rs. 3.2 billion ($69 million) in Q2
FY09 as against Rs. 2.1 billion ($45 million) in Q2 FY08.

-- YoY growth of 54% driven by a combination of volume growth in
key existing products, new product launches in the last 12
months and acquisition of Shreveport facility.

-- Revenue from Shreveport facility at Rs. 428 million ($9 million)
in Q2 FY09.

-- 3 new products launched in Q2 FY09.

-- During the quarter, the Company filed 2 ANDAs taking the total
filings to 128. Total of 66 ANDAs pending at the USFDA
addressing innovator sales of $48 billion as per IMS December
2007.

-- Revenues from Europe at Rs. 3.2 billion ($69 million) in Q2 FY09 as
against Rs. 2.2 billion ($47 million) in Q2 FY08.

-- Revenues from betapharm increase by 68% to Rs. 2.8 billion ($60
million) in Q2 FY09 from Rs. 1.7 billion ($36 million) in Q2
FY08. This growth was driven by the contribution from the
launch of a seasonal vaccine (in-licensed) as well as volume
growth in existing products.

-- Revenues from Rest of Europe at Rs. 392 million ($8 million) in
Q2 FY09 from Rs. 426 million ($9 million) in Q2 FY08.

-- During the quarter, the company launched 9 new products and
filed 12 dossiers across Europe.

-- Revenues from Russia & Other CIS markets at Rs. 1.9 billion ($40
million) in Q2 FY09 as against Rs. 1.3 billion ($28 million) in Q2
FY08.

-- Revenues in Russia increase to Rs. 1.3 billion ($29 million) in
Q2 FY09 as against Rs. 1 billion ($22 million) in Q2 FY08. YoY
growth of 36% driven by key brands of Nise, Ketorol and
Cetrine.

-- Dr. Reddy's growth rate at 36.2% in line with the industry
growth rate of 36.3%. (Source: Pharmexpert MAT Jun 08)

-- Combined revenues from OTC & Hospital segment contributed 28%
to total revenues in Q2 FY09.

-- Revenues in Other CIS markets increase to Rs. 525 million ($11
million) in Q2 FY09 as against Rs. 322 million ($7 million) in
Q2 FY08. YoY growth of 63% contributed mainly by Kazaksthan.

-- Revenues in India increase by 9% to Rs. 2.2 billion in Q2 FY09 from
Rs. 2.1 billion in Q2 FY08. Growth was primarily driven by brands
of Omez-DSR, Atocor, Razo, Razo D and Stamlo.

-- Foray into the inhaler segment with 4 products

-- New product launches in the last 36 months contribute 22% to
total revenues in Q2 FY09.

-- Fastest growing company in the dermatology segment. (Source: IMS
ORG MAT Aug 08)
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Pharmaceutical Services and Active Ingredients

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-- Revenues from this segment increase to Rs. 4.8 billion ($104
million) in Q2 FY09 as against Rs. 4.4 billion ($95 million) in
Q2 FY08; YoY growth of 10% driven by growth in North America and
RoW markets.

-- Revenue from the business & facility acquired from Dow Pharma
at Rs. 298 million ($6 million) in Q2 FY09.
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Income Statement Highlights:

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-- Gross profit increase by 27% to Rs. 8.0 billion in Q2 FY09 as
against Rs. 6.3 billion in Q2 FY08. Gross profit margins on total
revenues at 49% as against 50% in Q2 FY08.

-- Selling, General & Administration (SG&A) expenses increase to Rs.
4.8 billion (30% of revenues) in Q2 FY09 from Rs. 4.0 billion in
Q2 FY08 (32% of revenues). SG&A expenses recorded a YoY growth of
20% lower than the revenue growth of 30%.

-- R&D investments at 5% of total revenues in Q2 FY09 as against 7% in
Q2 FY08.

-- Amortization expenses are at Rs. 472 million as compared to Rs. 406
million in Q2 FY08. The YoY increase of Rs. 66 million and the
sequential increase of Rs. 95 million largely relate to
amortization of intangibles in the recently acquired entities and
a one time charge on account of early termination of Salutas
contract in betapharm.

-- Finance costs (net) are at Rs. 482 million in Q2 FY09 as against
Finance income (net) at Rs. 302 million in Q2 FY08. The variance
is mainly on account of :

-- Net forex loss of Rs. 296 million in Q2 FY09 as against net
forex gain of Rs. 259 million in Q2 FY08

-- Net interest expense of Rs. 229 million in Q2 FY09 as against
net interest income of Rs. 42 million in Q2 FY08.

-- Net income at Rs. 1.2 billion (8% of total revenues) as against Rs.
2.5 billion (20% of total revenues) in Q2 FY08. This translates to
a diluted EPS of Rs. 7.2 in Q2 FY09 as against Rs. 15.0 in Q2
FY08.

-- Q2 FY08 includes tax benefit of Rs. 1,506 million.

-- Capital expenditure for H1 FY09 is at Rs. 2,570 million.
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About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE:RDY) is an
emerging global pharmaceutical company with proven research
capabilities. The Company is vertically integrated with a presence
across the pharmaceutical value chain. It produces finished dosage
forms, active pharmaceutical ingredients and biotechnology products
and markets them globally, with focus on India, US, Europe and Russia.
The Company conducts research in the areas of cancer, diabetes,
cardiovascular, inflammation and bacterial infection.

Disclaimer

This press release includes forward-looking statements, as defined
in the U.S. Private Securities Litigation Reform Act of 1995. We have
based these forward-looking statements on our current expectations and
projections about future events. Such statements involve known and
unknown risks, uncertainties and other factors that may cause actual
results to differ materially. Such factors include, but are not
limited to, changes in local and global economic conditions, our
ability to successfully implement our strategy, the market acceptance
of and demand for our products, our growth and expansion,
technological change and our exposure to market risks. By their
nature, these expectations and projections are only estimates and
could be materially different from actual results in the future.

Notes

1. Financial discussions are on a consolidated basis as per IFRS.

2. Detailed analysis of the financials is available on the
Company's website at www.drreddys.com.

Dr. Reddy's Laboratories Ltd.
Investors and Financial Analysts:
Nikhil Shah, +91-40-66511532
nikhilshah@drreddys.com
Milan Kalawadia, +1-9082034931 (North America)
mkalawadia@drreddys.com
Media:
M Mythili, +91-40-66511620
mythilim@drreddys.com

Copyright Business Wire 2008