• Consolidated Revenue: INR8,016 crore (USD957 million), 17% YoY growth, 4% sequential growth.
• Gross Profit Margin: 59.6%, increased by 92 basis points YoY, decreased by 81 basis points sequentially.
• SG&A Expenses: INR2,301 crore (USD275 million), 22% YoY increase, 1% sequential increase.
• R&D Spend: INR727 crore (USD87 million), 33% YoY increase, 17% sequential increase, 9.1% of sales.
• EBITDA: INR2,280 crore (USD272 million), 5% YoY increase, 6% sequential increase, EBITDA margin at 28.4%.
• Profit Before Tax (PBT): INR1,917 crore (USD229 million), PBT margin at 23.9%.
• Profit After Tax (PAT): INR1,342 crore (USD160 million), PAT margin at 16.7% of revenues.
• Free Cash Flow: INR204 crore (USD24 million).
• Net Cash Surplus: INR1,889 crore (USD226 million) as of September 30, 2024.
• North America Generic Revenue: USD445 million, 16% YoY growth, 4% sequential decline.
• European Generic Revenue: EUR63 million, 7% YoY and sequential growth.
• Emerging Markets Generic Revenue: INR1,455 crore, 20% YoY growth, 23% sequential growth.
• India Business Revenue: INR1,397 crore, 18% YoY growth, 5% sequential growth.
• PSAI Business Revenue: USD100 million, 18% YoY growth, 9% sequential growth.

• Warning! GuruFocus has detected 5 Warning Sign with ADUS.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dr Reddy's Laboratories Ltd (NYSE:RDY) reported a strong performance with a 17% year-over-year revenue growth, reaching USD 957 million.
• The company achieved its highest ever quarterly sales, driven by broad-based topline growth and healthy operating margins.
• Successful completion of acquisitions, including the Nicotine portfolio and a joint venture with Nestle India, is expected to enhance future growth.
• The company secured marketing authorization from the European Commission for its rituximab biosimilar, marking its first such approval in Europe.
• Dr Reddy's Laboratories Ltd (NYSE:RDY) continues to focus on developing a robust pipeline of small molecules, biosimilars, and innovative products, with significant R&D investments.

Negative Points

• There was a sequential decline of 4% in the North America generic business, attributed to supply chain adjustments and inventory management.
• The company faced a 100% impairment loss on intangibles related to a product in the main portfolio due to procurement constraints from contract manufacturers.
• SG&A expenses increased by 22% year-over-year, driven by investments in new business initiatives and acquisition-related costs.
• The effective tax rate for the quarter was high at 30%, impacted by amendments in the Finance Act 2024.
• The company's emerging markets business, while showing strong growth, is subject to currency fluctuations, particularly in regions like Russia.

Q & A Highlights

Q: Regarding the North America business, is the sequential decline due to volume, and was pricing stable? A: Erez Israeli, CEO: Prices were relatively stable, and the decline was mainly due to supply chain behavior affecting inventory levels. We expect growth in the next quarter.

Q: Excluding the Sanofi vaccine business, did the India business achieve double-digit growth? A: Erez Israeli, CEO: Yes, the growth was nearly 9% even without the vaccine, indicating an improvement from single-digit to low double-digit growth.

Q: When can we expect high-value product launches in the US, and how does the increased R&D spend reflect in filings? A: Erez Israeli, CEO: We anticipate some high-value launches by Q3, pending approvals. Our R&D focus is on high-quality, high-value products globally, not just in the US, which should eventually reflect in our numbers.

Q: What is the status of the rituximab biosimilar launch in Europe and the US? A: Erez Israeli, CEO: The European launch is planned for February 2025. In the US, we await FDA approval, likely in the first part of FY26.

Q: Can you provide insights into the Nicotinell business integration and growth plans? A: Erez Israeli, CEO: We plan to manage 80% of sales within 12-14 months, starting with the UK in April. We aim to focus on brand investment, market expansion, and innovation to drive growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.