Here’s Analysts’ Take On Dr. Reddy’s Q2 Earnings
Bottles of Reditux are arranged for a picture in one of Dr. Reddy’s Laboratories Ltd. bio-tech labs outside of Hyderabad. (Photographer: Scott Eells/Bloomberg News)

Here’s Analysts’ Take On Dr. Reddy’s Q2 Earnings

Dr Reddy’s Laboratories Ltd.’s second-quarter profit more than doubled beating estimates on a one-time tax write-back and a licensing fee.

The drugmaker wrote back Rs 326-crore tax and received a licence fee worth Rs 723 crore for selling territory rights for two neurology brands to U.S.-based Upsher-Smith Laboratories.

While revenue grew in most geographies, it fell 13 percent sequentially in the North American market as competition-led price erosion continues and the company recalled heartburn drug Ranitidine. It also faced disruption in supplies in the region. Management maintained guidance citing cost controls and a global presence.

Here’s what brokerages said about Dr. Reddy’s second quarter earnings:

CLSA

  • Sequential decline in U.S. sales despite new launches is a negative
  • Improving traction in India and emerging markets.

Credit Suisse

  • Normalised growth, excluding one-offs, was in line with estimates.
  • High erosion in U.S. but anti-opioid Suboxone could present good opportunity and should more than compensate for Ranitidine impact.
  • U.S. sales are low even after accounting for temporary supply disruption and Ranitidine recall.

Edelweiss

  • Broad-based growth across geographies although U.S. was weak
  • Lowers estimates due to lack of certainty on FY21 launch of generic versions of NuvaRing (contraceptive) and Copaxone (multiple sclerosis).

Goldman Sachs

  • Operational challenges in the U.S. business to subside.
  • Gross margins shy of internal aspirations due to unfavourable business mix.

JPMorgan

  • Earnings below expectations, impacted by several one-offs.
  • Bright spot was continued growth in ex-U.S. generics and pharmaceuticals services and active ingredients recovery.
  • Improvement in reported profitability will be the key trigger for the stock.

Macquarie

  • One-offs are increasingly becoming the norm; impairment was a negative.
  • Strong launch pipeline and continued strength in non-U.S. markets reason to be upbeat
  • Expect strategy of lowering concentration risk to bear fruit.

Prabhudas Lilladhar

  • Problems continue in the U.S.
  • A long list of launches to drive growth over price erosion.

UBS

  • Issues around drug pipeline persist.
  • Cost controls central to offset U.S. generic price erosion.
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