January 20, 2009 / 12:36 PM / 10 years ago

UPDATE 2-Dr Reddy's swings to profit, sees f'cast on track

* Reports 1.92 billion rupees profit in Dec qtr

* To achieve FY09 revenue growth forecast - CEO

* Betapharm hurts earnings from Europe; director quits (Adds comments from company CEO, byline)

By Sumeet Chatterjee

BANGALORE, Jan 20 (Reuters) - Indian drug maker Dr Reddy’s Laboratories (REDY.BO) posted a quarterly net profit, from a loss a year ago, lifted by the U.S. launch of a new generic, but missed forecasts due to lower earnings from Europe.

Chief Executive G.V. Prasad said the company was on track to meet its 25 percent revenue growth guidance for the full year to March, helped by the launch of new products in India and key overseas markets such as the United States and Russia.

“Overall we have such a large enough portfolio that every year we will have at least one significant product driving our growth. We see lot of headroom for growth in the U.S. and certain other markets,” Prasad told Reuters.

“Overall, the outlook is quite optimistic.”

The company launched its acute migraine drug Sumatriptan, a generic of GlaxoSmithKline’s (GSK.L) Imitrex, in the U.S. market in the December quarter, helping it almost quadruple its revenue from North America to $137 million.

Earnings from Dr Reddy’s (RDY.N) Europe business fell, mainly due to a drop of 2 percent in Betapharm revenue to $41 million as volume growth in existing products was offset by declining prices, said a company statement.

Germany’s Betapharm, which Dr Reddy’s bought in 2006 for $572 million, has been facing supply constraints and falling prices. Dr Reddy’s has moved Betapharm’s main manufacturing unit to India and other facilities in Europe to cut costs.

“Germany continues to be a market under transition and margins are under pressure,” Prasad said.

“We have to be a little patient here because the business model is changing and we have to realign to the new reality.”

In December, Betapharm preliminarily won eight supply contracts in a tender by Germany’s largest health insurer, Allgemeine Ortskrankenkasse (AOK), that the company had said would boost volumes but at lower margins.

GENERICS BOOST

Dr Reddy’s posted a net profit of 1.92 billion rupees ($39 million) for its fiscal third-quarter ended Dec. 31, compared with a net loss of 1.21 billion rupees in the year-ago period under the international financial regulatory standards.

A Reuters survey of eight brokerages had forecast net profit at 2.01 billion rupees. Estimates ranged from 1.10 billion rupees to 3.19 billion rupees.

For details, see: here shot.pdf

Revenue rose 49 percent to 18.40 billion rupees from 12.32 billion a year ago, mainly boosted by a 71 percent jump in its generics business and growth in its key markets of North America and Russia.

Global demand for generic drugs produced by company’s such as Dr Reddy’s and local rival Ranbaxy Laboratories RANB.BO is booming as nations around the world battle rising healthcare costs.

But export-driven Indian companies are facing stiff pricing pressure as more drug makers jump into the generics market.

Dr Reddy’s said Krishna Palepu has resigned from his post of non-executive director on its board with immediate effect, but did not give any reason. Palepu resigned from the board of fraud-hit Satyam Computer Services SATY.BO last month.

Ahead of the announcement, shares in Dr Reddy’s ended 2.6 percent higher at 467.90 rupees in a weak Mumbai market.

Shares in Dr Reddy's, which has a market value of $1.6 billion, fell 7.7 percent during the December quarter, less than a 19 percent drop in the healthcare index .BSEHC and a 25 percent slump in the benchmark index .BSESN. ($1=49 rupees) (Editing by Mark Williams and Andrew Macdonald)

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