Dr Reddy Labs Q3 2022 Concall Highlights

  • Revenue for the quarter was ₹5320 Cr ($715 million). Growth of 8% YoY and declined 8% sequentially. YoY growth is due to good performance across all segments. Sequential decline due to high base in Q2 which had a higher contribution from COVID related products. 
  • Gross Profit margin for the quarter was 53.8%, increase of 40 bps QoQ. Gross margins for Global Generics were at 57.8% and PSAI were 22.5%.
  • SG&A spend for the quarter was ₹1541 Cr ($207 million). Increase of 7% YoY and decline of 3% QoQ. YoY increase is due to business expansion and increased spend on sales and marketing activities. 
  • R&D spend for the quarter is ₹416 Cr ($66 million) at 7.8% of sales. R&D spend increased by 1% YoY and declined 7% QoQ. 
  • EBITDA for the quarter was at ₹1266Cr ($170 million). EBITDA margins for the quarter were 23.8%. EBITDA margins for 9 months is at 24% and is closely tracking full year guidance of 25%.
  • PAT ₹970 Cr ($131 million) for the quarter. This is a growth of 242% for the year and a decline of 23% QoQ. Adjusting for impairment charges, PAT grew 10% over previous year.
  • The industry faced headwinds of high input prices, price erosion across generics segment in the US market and higher freight costs. 
  • They have signed an agreement for the commercialization of their biosimilars in the US. They are also developing 5-7 other biosimilars in their portfolio. 
  • They received DCGI approval for the launch of Molnupiravir in India. They are ready with capacities to manufacture Sputnik in India. They are actively working with the Government of India to register Sputnik as a vaccine. They have also submitted a proposal to DCGI to conduct clinical trials to test Sputnik as a booster to other vaccines.
  •  They managed to offset the price erosion in generics with new products, increase in market share and productivity.
  • There are no restrictions to export Sputnik and other COVID related products. There were no exports of COVID products by the company in Q3.
  • They are expecting that the worst of the RM price increases are behind them. They do not anticipate any more price increases from here. Some RM prices have started to normalize but some have not yet come down.
  • The strategy for the next few years is to continue to invest in India and other Emerging Markets. They will be launching products already in the US portfolio and use the same fixed assets. So these markets will grow faster than the US.
  • Russia is a very important market for them. If there is any adversity there due to the Russia-Ukraine conflict, it may affect the business negatively. So far there has been no impact on the business.
  • They are in the last stages of finishing their Health Tech platform. They have done a pilot and will begin to roll out in a phased manner. They are currently in 5 cities and will be moving to 10 cities over the next few weeks.
  • They believe that taking a booster dose of the COVID vaccine every 6 months will become a regular part of our lives. They are working with the government to register Sputnik as a booster dose. If it does play out that way, it will be a nice opportunity for them.
  • The price erosion in the US is not top-down or bottom-up across all products. It is more product specific. The products that are seeing increased competition saw price erosion. In their case, most of their products faced price erosion.

81 thoughts on “Dr Reddy Labs Q3 2022 Concall Highlights”

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