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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