Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) today announced its audited financial results for the year ended March 31, 2008.

FY08 Key highlights
o Revenues at Rs. 50 billion ($1,250 million) in FY08 as against Rs. 65 billion ($1,627 million) in FY07.
o EBITDA at Rs. 10 billion ($243 million) in FY08 as against Rs. 16 billion ($408 million) in FY07.
o PAT at Rs. 4.7 billion ($117 million) in FY08 as against Rs. 9.3 billion ($233 million) in FY07
o Revenues in India (finished dosage) cross $200 million in FY08.
o Revenues increase by 16% to Rs. 8 billion ($201 million) in FY08 from Rs. 7 billion ($174 million) in FY07, driven by performance of key brands as well as new product launches.
o Reditux, launched in April 2007, contributes Rs. 154 million in revenues.
o Company ranked 10th in India. (Source: ORG IMS MAT Mar 08)

o Revenues in Russia (finished dosage) cross $100 million in FY08.

o Revenues increase by 13% ($ growth rate of 22%) to Rs. 4.1 billion ($102 million) in FY08 from Rs. 3.6 billion ($90 million) in FY07 driven by growth in key brands as well as contribution from new product launches.

o Company ranked among the fastest growing international branded generic companies in volume terms. (Source: Pharmexpert MAT Dec 07)

o Improvement in market rank to 14th position (Source: Pharmexpert MQT Mar 08)

o In North America, revenues at Rs. 8 billion ($201 million) in FY08 as against Rs. 23.6 billion in FY07.

o Revenues increase by 39% ($ growth rate of 49%) to Rs. 7.7 billion ($193 million) excluding the benefit of upsides from authorized generics and ondansetron exclusivity in FY07 of Rs. 18.1 billion.

o Revenues from Germany (betapharm) at Rs. 8.2 billion ($205 million) & EBITDA at $27 million in FY08. YoY sales volume growth of 26%.

o FY08 revenues reflect the impact of (a) higher rebates to insurance companies being deducted from revenues from FY08 onwards ; (b) pricing pressure ; (c) supply constraints for a large part of the year

o Improvement in the supply situation in Q4 FY08 results in increase in market share of betapharm to 2.96% in Mar 08 as against 1.74% in Apr 07. (Source: Market Report NVI volume, March 2008)

o Revenues from organic segment of custom pharmaceuticals services business increase by 53% to Rs. 1.9 billion ($47 million) in FY08 from Rs. 1.2 billion ($31 million) in FY07.

o Revenues in API at Rs. 12 billion ($295 million) in FY08. Growth across key markets offset by upsides from sertraline & rabeprazole in FY07.

o During the year, the Company launched 89 generic products and made 397 filings across all markets.

SEGMENTAL ANALYSIS

Active Pharmaceutical Ingredients (APIs)

o Revenues at Rs. 11,805 million in FY08 as against Rs. 11,883 million in FY07. Revenues in FY07 included the benefit of upsides in sertraline & rabeprazole.

o Revenues outside India at Rs. 9.5 billion in FY 08 as against Rs. 9.8 billion in FY07.

o Revenues in North America increase by 88% to Rs. 3.8 billion in FY08 from Rs. 2 billion in FY07 primarily led by sales of certain development products & commercialized products.

o Revenues in India at Rs 2.4 billion in FY08 as against Rs 2.1 billion in FY07. YoY growth of 13% primarily on account of increase in sales of ramipril.

o Revenues in rest of the world decrease to Rs. 3.1 billion in FY08 from Rs. 5.7 billion in FY07. Growth in key markets offset by normalization of sales in sertraline in FY08 following the upside in FY07.

o Revenues in Europe at Rs. 2.5 billion in FY08 as against Rs. 2.1 billion in FY07. YOY growth of 19% led by increase in sales of certain development products & commercialized products.

o The Company filed 23 US DMFs during the year taking the total filings to 127. The company also filed 9 DMFs in Canada, 13 DMFs in Europe and 11 DMFs in RoW.

Generic Finished Dosages

* Revenues in this segment at Rs. 17.8 billion in FY08 as against Rs. 33.2 billion in FY07.
* North America contributed 45% and Europe contributed 55% to the segment revenues.
* In North America, revenues at Rs. 8 billion ($ 201 million) in FY08 as against Rs. 23.6 billion in FY07.

o Revenues increase by 39% to Rs. 7.7 billion in FY08 from Rs. 5.6 billion in FY07 excluding the benefit of upsides from Authorized Generics & ondansetron exclusivity.

o Revenues from new products launches at Rs. 617 million in FY08; 11 new products (including 2 OTC products) launched in FY 08.

o Commenced sales of OTC products ; Revenues for FY08 at Rs. 267 million.

o Combined revenues of fexofenadine & finasteride at Rs. 3,871 million in FY 08.

o During the year, the Company filed 18 ANDAs taking the total filings to 122. Total of 58 ANDAs pending at the USFDA addressing innovator sales of $ 78 billion as per IMS December 2007. During the year, the company also received 20 approvals including tentative approvals.

* In Europe revenues at Rs. 9.7 billion in FY08 as against Rs. 9.6 billion in FY07.

o Revenues from betapharm (Germany) at Rs. 8.2 billion ($205 million) in FY08 as against Rs. 8 billion in FY07. YoY sales volume growth of 26%.

o FY08 revenues reflect the impact of (a) higher rebates to insurance companies being deducted from revenues from FY08 onwards ; (b) pricing pressure ; (c) supply constraints for a large part of the year

o Improvement in the supply situation in Q4 FY08 results in increase in market share of betapharm to 2.96% in Mar 08 as against 1.74% in Apr 07. (Source: Market Report NVI volume, March 2008)

o 8 new products launched during the year.

o Revenues from UK market remains unchanged at Rs. 1.4 billion in FY08.

o Revenues from Spain at Rs. 51 million in FY08 as against Rs. 61 million in FY07.

o During the year the company filed 16 dossiers across Europe.

Branded Finished Dosages – International

o Revenues at Rs. 7.2 billion, an increase of 17% over FY07. This growth was primarily driven by the performance of Russia, Romania, Venezuela & Other CIS markets.

o Revenues in Russia increase by 13% to Rs. 4.1 billion ($102 million) in FY 08 as against Rs 3.6 billion in FY07. This growth was primarily driven by increase in sales of key brands of Keterol, Bion, Omez and new products launches.

o Revenues from Russia in FY08 cross $100 million milestone.

o Combined revenues in OTC & Hospital segment contributed 28% to total revenues in FY08.

o Improvement in market rank to 14th position. (Source: Pharmexpert MQT March 2008)

o The company recorded 18% growth as against the market growth of 17%. (Source: Pharmexpert MAT Dec 2007, retail segment)

o Revenues in the CIS markets increase by 25% to Rs 1.5 billion in FY08 as against Rs 1.2 billion in FY07. This growth was primarily driven by increase in sales from Ukraine, Kazakhistan & Belarus.

o Revenues in Ukraine at Rs. 768 million ($19 million) for FY08 representing a growth of 25% over the previous year.

o Revenues in RoW markets increase by 16% to Rs. 1.2 billion as against Rs. 1 billion in FY07. The growth was primarily driven by increase in sales from key markets.

o Revenues in Central and Eastern Europe increase by 33% to Rs. 501 million as against Rs. 377 million in FY07.

o Revenues in Romania at Rs. 466 million ($12 million) representing a growth of 38% over the previous year.

o During the year, the company filed 307 dossiers.

Branded Finished Dosages – India

* Revenues in India cross $200 million milestone in FY08.
* Revenues in India increase by 16% to Rs. 8.1 billion in FY08 from Rs. 7 billion in FY07. Growth was primarily driven by key brands of Omez, Razo, Stamlo Beta and Reditux.

o Revenues from Reditux launched in April 2007 at Rs. 154 million in FY08.

o In the rabeprazole category, Razo is the no. 1 prescribed brand among the gastroenterologists as per CMARC Nov-Feb 08.

* 20 new products launched during the year, contributing Rs. 309 million in revenues.

o New product launches in the last 30 months contributed 18% to total revenues in FY08.

Custom Pharmaceutical Services (CPS)

Revenues from CPS business at Rs. 4.8 billion in FY08 as against Rs. 6.6 billion in FY07.

o Revenues from organic business increase from Rs. 1.2 billion in FY07 to Rs. 1.9 billion in FY08, driven by growth in customer base and product portfolio. YoY growth of 53%.

o Revenues from Mexico at Rs. 3 billion in FY08 as against Rs. 5.4 billion in FY07.

Income Statement Highlights

o Gross profit at Rs. 25.4 billion in FY08 as against Rs. 30.9 billion in FY07. Gross profit margins on total revenues at 51% as against 47% in FY07. In FY07 revenues from authorized generics contributed 22% to total revenues and earned gross margin significantly below company average gross margin.

o R&D investments (net) at 7% of total revenues in FY08 as against 4% in FY07. Gross R&D investments increase by 10% to Rs. 3.6 billion in FY08 as against Rs. 3.3 billion in FY07. During the year, the Company recognized Rs. 90 million under its R&D partnerships as a benefit to the R&D line item as compared to Rs. 826 million in FY07.

o Selling, General & Administration (SG&A) expenses increase by 8% to Rs. 15.2 billion in FY08 from Rs. 14.1 billion in FY07. The SG&A ratio to revenue is at 30% in FY08 as against 22% in FY07.

o Other income (net) at Rs. 30 million in FY08 as against other expenses (net) of Rs. 661 million in FY07. This is primarily on account of net interest expense of Rs. 378 million in FY08 as against net interest expense of Rs. 1,055 million in FY07.

o Write down of intangibles & impairment of goodwill amounting to Rs. 2.6 billion in FY08 comprising :

o Write down of Rs. 128 million of product related intangibles at Spain, recorded in Q4 FY08.

o Impairment of goodwill of Rs. 90 million relating to the subsidiary in Atlanta, recorded in Q4 FY08.

o Write down of Rs. 2.4 billion of product related intangibles at betapharm, recorded in Q3 FY08.

o Amortization expenses are at Rs. 1.62 billion as compared to Rs. 1.57 billion in FY07. This largely relates to amortization of intangibles in betapharm, Spain (acquisition of products) and acquisition in Mexico.

o Net income at Rs. 4.7 billion (9% of total revenues) as against Rs. 9.3 billion (14% of total revenues) in FY07. This translates to a diluted EPS of Rs. 27.73 as against Rs. 58.56 in FY07.

o During FY08, the Company incurred capital expenditure (net) of Rs. 5.6 billion.

Reimbursement of expenses from Perlecan Pharma Private Limited of Rs. 17 million in Q4 FY08 as against Rs. 85 million in Q4 FY07.
Business Highlights

o Overall global revenues at Rs. 13.2 billion in Q4 FY08 as against Rs. 15.6 billion in Q4 FY07, representing a decrease of 15%.

o Overall EBITDA at Rs. 2.6 billion ($65 million) in Q4 FY08 as against Rs. 6.2 billion ($156 million) in Q4 FY07.

o Revenues from North America generics business at Rs. 2.5 billion in Q4 FY08 as against Rs. 5.6 billion in Q4 FY07.

o Revenues in branded formulations business increase by 22% to Rs. 3.5 billion in Q4 FY08 from Rs. 2.9 billion in Q4 FY07 driven by growth across key markets.

o Revenues from India increase by 24% to Rs. 2 billion in Q4 FY08, driven by growth in key brands.

o Revenues from international markets increase by 19% to Rs. 1.5 billion in Q4 FY08, driven by growth in Romania & other CIS markets.

o Revenues from organic Custom Pharmaceuticals Services (CPS) business increase by 60% at Rs. 698 million in Q4 FY08 as against Rs. 437 million in Q4 FY07.

o Overall revenues from CPS business at Rs. 1.4 billion in Q4 FY08 as against Rs. 1.9 billion in Q4 FY07.

o Revenues from betapharm at Rs. 2.4 billion in Q4 FY08 as against Rs. 747 million in Q4 FY 07.

Income Statement Highlights

o Gross profit at Rs. 7 billion in Q4 FY08 as against Rs. 9.8 billion in Q4 FY07. Gross profit margins on total revenues at 53% as against 63% in Q4 FY07. In Q4 FY07 revenues from ondansetron exclusivity contributed 16% to total revenues & earned gross margins significantly above company average gross margin.

o R&D investments (net) at 8% of total revenues in Q4 FY08 as against 5% in Q4 FY07, an increase of 20%. Gross R&D investments increase by 11% to Rs. 1,040 million in Q4 FY08 as against Rs. 937 million in Q4 FY07. During the quarter, the Company recognized Rs. 17 million under its R&D partnerships as a benefit to the R&D line item as compared to Rs. 85 million in Q4 FY07.

o Selling, General & Administration (SG&A) expenses increase by 24% to Rs. 4.3 billion in Q4 FY08 as against Rs. 3.4 billion in Q4 FY07. The SG&A ratio to revenue is at 32% in Q4 FY08 as against 22% in Q4 FY07.

o Other expenses (net) at Rs. 62 million in Q4 FY08 as against other income (net) of Rs. 98 million in Q4 FY07.

o Amortization expenses at Rs. 475 million in Q4 FY08 as compared to Rs. 451 million in Q4 FY07. This majorly relates to intangibles in betapharm, Spain (acquisition of products) and acquisition in Mexico.

*
Net income at Rs. 1 billion (8% of total revenues) as against Rs. 3.3 billion (21% of total revenues) in Q4 FY07.

Sourced From: Dr. Reddy’s Laboratories Ltd

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