Dr. Reddy’s Q3 FY12 Financial Results Highest ever quarterly sales and profit

Hyderabad, India, February 03, 2012: Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its unaudited consolidated financial results for the quarter ended December 31, 2011 under International Financial Reporting Standards (IFRS).

Key Highlights

• Launch of olanzapine 20 mg (generic version of Eli Lilly’s Zyprexa® 20 mg) in the US, another key milestone in consistently delivering limited competition opportunities
• Revenues for Q3 FY12 at ₹ 27.7 billion ($522 million), YoY growth of 46%
  • Revenues for nine months FY12 at ₹70.2 billion ($1.3 billion), YoY growth of 29%.
• EBITDA for Q3 FY12 at ₹ 9.2 billion ($174 million), 33% to sales, YoY growth of 127%
  • EBITDA for nine months FY12 at ₹18.6 billion ($351 million), 27% to sales, YoY growth of 59%.
• Adjusted* PAT for Q3 FY12 at ₹ 5.2 billion ($98 million), YoY growth of 91%
  • Adjusted* PAT for nine months FY12 at ₹11.1 billion ($209 million), YoY growth of 44%.
• Q3 FY12 – 33 new generic launches, 16 new generic filings and 7 DMF filings

*Note: Adjustments on account of interest on bonus debentures (net of tax)

All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = ₹ 53.01

Dr. Reddy’s Laboratories Limited and Subsidiaries

Unaudited Consolidated Income Statement

Profit Computation: (In millions)

Key Balance Sheet Items (In millions)

Q3 FY12 Revenue Mix by Segment (In millions)

Segmental Analysis

Global Generics: North America

Revenues from North America were at ₹ 11.1 billion in Q3 FY12 versus ₹ 4.8 billion in Q3 FY11. Growth was led by the high value launch of olanzapine 20 mg, new products launched in the last twelve months and strong volume growth across key products.

• 2 new products launched during the quarter – olanzapine 20 mg and olanzapine ODT.
• Strong volume growth contributed by key products such as lansoprazole, tacrolimus, omeprazole Mg OTC and Shreveport products and last twelve months new launches of fondaparinux and antibiotics portfolio.
• 26 prescription products feature among the Top 3 in market share (Source: IMS Volumes November 2011).
• During the quarter, 3 ANDAs were filed. The cumulative ANDA filings as of 31st December, 2011 are 187. A total of 79 ANDAs are pending for approval with the USFDA of which 40 are Para IVs and 10 are FTFs.

Global Generics: Russia & Other CIS

Revenues in Russia & Other CIS markets were at ₹ 3.3 billion in Q3 FY12 versus ₹ 2.9 billion in Q3 FY11.

• Revenues in Russia were at ₹ 2.8 billion in Q3 FY12. Growth was largely driven by rupee depreciation.
  • The company’s secondary sales growth at 23% continued to outperform industry’s growth of 19%. (Source: Pharmexpert Prescription Sales November 2011).
  • Top 5 products feature among Top 2 ranks in market share.
  • OTC portfolio grew by 24% over previous year.
• Revenues in Other CIS markets were at ₹ 557 million in Q3 FY12, driven largely by Ukraine and Kazakhstan.

Global Generics: India

Revenues in India were at ₹ 3.3 billion in Q3 FY12 versus ₹ 3.0 billion in Q3 FY11, driven by volume increase in key products and new product launches in the last twelve months.

• 6 new products launched during the quarter.
• Biosimilars portfolio grew by 25% over previous year

Global Generics: Europe

Revenues from Europe were at ₹ 2.4 billion in Q3 FY12 versus ₹ 2.1 billion in Q3 FY11.

• Revenues from Germany were at ₹ 1.5 billion in Q3 FY12. Growth in new product launches outside the scope of tender was offset by price erosion in products within tenders.
• Revenues from Rest of Europe were at ₹ 881million

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI were at ₹ 5.6 billion in Q3 FY12 versus ₹ 5.0 billion in Q3 FY11. Growth was largely driven by Pharmaceutical Services segment and benefit of rupee depreciation.

• During the quarter, 7 DMFs were filed globally including 2 in US, 2 in Europe and 3 in rest of the markets. The cumulative DMF filings as of 31st December 2011 are 513 globally.

Income Statement Highlights:

• Gross profit margin 60% to revenues in Q3 FY12, increased largely on account of a favorable mix of high margin olanzapine revenues and benefit of rupee depreciation.
• Selling, General & Administration (SG&A) expenses including amortization at ₹ 7.7 billion ($145 million) increased by 20% over Q3 FY11. This increase is on account of higher manpower and freight costs and the effect of rupee depreciation against multiple currencies.
• Net Finance income at ₹ 174 million ($3 million) in Q3 FY12 versus net Finance cost of ₹ 49 million ($1 million) in Q3 FY11. The change is on account of.
  • Net forex gain of ₹ 285 million ($5 million) in Q3 FY12 versus net forex loss of ₹ 45 million ($1 million) in Q3 FY11.
  • Net interest expense of ₹ 155 million ($3 million) in Q3 FY12 versus ₹ 98 million ($2 million) in Q3 FY11.
  • Profit on sale of investments of ₹ 44 million ($1 million) in Q3 FY12 versus ₹ 4 million in Q3 FY11.
• EBITDA of ₹ 9.2 billion ($174 million) in Q3 FY12, represents 33% of revenues and recorded a year-on-year growth of 127%. EBITDA of ₹ 18.6 billion ($351 million) for nine months ended December 2011, represents 27% of revenues and recorded a year-on-year growth of 59%.
• Profit after Tax adjusted for interest on bonus debentures (net of tax), was at ₹ 5.2 billion ($98 million) in Q3 FY12, 19% of revenues and year-on-year growth of 91%. Adjusted PAT for nine months ended December 2011 was ₹ 11.1 billion ($209 million) and recorded year-on-year growth of 44%.
• Adjusted EPS for Q3 FY12 was ₹ 30.6 ($0.6) versus ₹ 16.1 ($0.3) in Q3 FY11. Adjusted EPS for nine months ended December 2011 was ₹ 65.1 ($1.2).
• Capital expenditure for nine months ended December 2011, was ₹ 5.0 billion ($94 million).

Consolidated Income Statement: Nine months ending December 2011

All figures in millions, except EPS
All US dollar figures based on convenience translation rate of 1USD = ₹ 53.01

Diluted EPS

Profit Computation (in millions)

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Through its three businesses – Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – Dr. Reddy’s offers a portfolio of products and services including APIs, custom pharmaceutical services, generics, biosimilars, differentiated formulations and NCEs. Therapeutic focus is on gastro-intestinal, cardiovascular, diabetology, oncology, pain management, anti-infective and pediatrics. Major markets include India, USA, Russia and CIS, Germany, UK, Venezuela, S. Africa, Romania, and New Zealand.

Note: All discussions in this release are based on unaudited consolidated IFRS financials.

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