Dr Reddy Laboratories : . Reddy’s Q1 FY22 Financial Results

Press Release

DR. REDDY'S LABORATORIES LTD.			CONTACT
	INVESTOR RELATIONS			MEDIA RELATIONS
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	AMIT AGARWAL			USHA IYER
Hyderabad - 500034. Telangana, India.
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Dr. Reddy's Q1 FY22 Financial Results

Hyderabad, India, July 27, 2021: Dr. Reddy's Laboratories Ltd. (BSE: 500124 | NSE: DRREDDY |

NYSE: RDY | NSEIFSC: DRREDDY) today announced its consolidated financial results for the quarter ended June 30, 2021. The information mentioned in this release is on the basis of consolidated financial statements under International Financial Reporting Standards (IFRS).

Revenues	Rs. 4,919 Cr
	[Up: 11% YoY; Up: 4% QoQ]
Gross Margin	52.2%
	[Q1 FY21: 56.0%; Q4 FY21: 53.7%]
SG&A Expenses	Rs. 1,505 Cr
	[Up: 18% YoY; Up: 5% QoQ]
R&D Expenses	Rs. 453 Cr
	[9.2% of Revenues]
EBITDA	Rs. 1,019 Cr
	[20.7% of Revenues]
Profit before Tax*	Rs. 743 Cr
	[Down: 16% YoY; Up: 21% QoQ]
Profit after Tax*	Rs. 571 Cr
	[Down: 1% YoY; Up: 58% QoQ]

• Q4 FY21 financials have been adjusted with an additional charge of Rs. 191 Cr ($ 26.25 mn) arising out of the arbitration award in favor of Hatchtech towards the Xeglyze product as an adjusting subsequent event for filing IFRS financials with US SEC in Form 20F on June 30, 2021.

Commenting on the results, Co-Chairman & MD, G V Prasad said "The financial performance of the quarter has been driven by healthy sales growth. I am confident about improving our margins in the upcoming quarters which will be led by the scale up of recent launches, new product launches and productivity. While we continue to sharpen execution in our core business, we are also conducting pilots in areas such as Nutrition, Direct-to-Customer, and Digital Health & Wellness, which can be future growth drivers".

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All amounts in millions, except EPSAll US dollar amounts based on convenience translation rate of I USD = Rs. 74.33

Dr. Reddy's Laboratories Limited and Subsidiaries

Consolidated Income Statement

	Particulars			Q1 FY22			Q1 FY21			YoY			Q4 FY21			QoQ
			($)			(Rs.)			($)			(Rs.)			Gr %			($)			(Rs.)			Gr%
	Revenues	662		49,194		594		44,175		11		636		47,284		4
	Cost of Revenues	316		23,495		261		19,420		21		295		21,909		7
	Gross Profit			346			25,699			333			24,755		4			341			25,375		1
	Operating Expenses
	Selling, General & Administrative	202		15,045		172		12,786		18		193		14,370		5
	expenses
	Research and Development	61		4,534		54		3,980		14		55		4,094		11
	expenses
	Impairment of non-current assets	-		-		-		-		-		25		1,835		(100)
	Other operating income	(7)		(487)		(2)		(118)		313		(8)		(587)		(17)
	Results from operating activities			89			6,607			109			8,107		(19)			76			5,663		17
	Net finance income	(9)		(652)		(8)		(605)		8		(4)		(318)		105
	Share of profit of equity accounted	(2)		(166)		(1)		(77)		116		(2)		(179)		(7)
	investees
	Profit before income tax			100			7,425			118			8,789		(16)			83			6,160		21
	Income tax (benefit) / expense	23		1,717		40		2996		(43)		34		2,536		(32)
	Profit for the period			77			5,708			78			5,793		(1)			49			3,624		58
	Diluted Earnings Per Share (EPS)			0.46			34.34			0.47			34.86		(1)			0.29			21.80		58
	As % to revenues						Q1 FY22				Q1 FY21							Q4 FY21
	Gross Profit					52.2					56.0								53.7
	SG&A					30.6					28.9								30.4
	R&D					9.2					9.0								8.7
	EBITDA					20.7					26.3								23.8
	PBT					15.1					19.9								13.0
	PAT					11.6					13.1								7.7

EBITDA Computation

	Particulars			Q1 FY22				Q1 FY21				Q4 FY21
			($)			(Rs.)				($)			(Rs.)				($)			(Rs.)
	Profit before Income Tax	100		7,425			118		8,789			83		6,160
	Interest (income) / expense (net)*	(2)		(142)			(4)		(306)			1		75
	Depreciation	27		1,973			29		2,120			28		2,089
	Amortization	13		932			14		1,020			15		1,080
	Impairment	-		-			-		-			25		1,835
	EBITDA			137			10,188				156			11,622				151			11,239

* Includes income from Investments

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All amounts in millions, except EPSAll US dollar amounts based on convenience translation rate of I USD = Rs. 74.33

Key Balance Sheet Items

		As on 30th Jun		As on 31st Mar		As on 30th Jun
	Particulars		2021		2021		2020
		($)		(Rs.)		($)		(Rs.)		($)		(Rs.)
	Cash and cash equivalents and other	462		34,356		532		39,531		380		28,227
	investments
	Trade receivables (current & non-current)	823		61,148		669		49,759		650		48,316
	Inventories	683		50,771		611		45,412		527		39,148
	Property, plant and equipment	789		58,636		768		57,111		729		54,183
	Goodwill and Other Intangible assets	535		39,746		541		40,216		619		45,991
	Loans and borrowings (current & non-current)	449		33,373		408		30,308		425		31,582
	Trade payables	385		28,607		319		23,744		256		19,038
	Equity	2,396		1,78,114		2,328		1,73,062		2,176		1,61,748

Revenue Mix by Segment

	Segment			Q1 FY22			Q1 FY21			YoY			Q4 FY21			QoQ
			(Rs.)			(Rs.)			Gr %			(Rs.)			Gr %
	Global Generics	41,113		35,075		17		38,737		6
	North America	17,390		17,282		1		17,491		(1)
	Europe	3,994		3,551		12		3,956		1
	India	10,600		6,260		69		8,445		26
	Emerging Markets	9,129		7,984		14		8,845		3
	Pharmaceutical Services and Active	7,540		8,553		(12)		7,915		(5)
	Ingredients (PSAI)
	Proprietary Products & Others	541		547		(1)		632		(14)
	Total			49,194			44,175			11			47,284			4

Q1 FY22 Sales Mix

15%	1%		North America

		35%		Europe
			India
19%
			Emerging Markets
	22%	8%		PSAI
			Proprietary Products &
				Others

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COVID portfolio

We continue to play our role in the fight against Covid-19 by acting proactively to bring multiple preventive and curative treatment options, including a vaccine. Some of our major Covid-19 products are:

Sputnik V vaccine: We launched the vaccine in India in May 2021 after receiving Emergency Use Authorization (EUA) in April 2021. We are working with RDIF for ramping up supplies. We are also working with six CMOs in India for manufacturing readiness. We have launched it across 80 cities and 2.5+ Lakh people have been vaccinated so far. We are also working on Sputnik Light, for which Russia phase 3 trials will be leveraged for India approval as per recommendation from SEC.

Remdesivir: We launched it in India and ramped up our supplies in this quarter to meet with the higher demand due to surge of the COVID cases during the second wave in India.

Avigan® (Favipiravir): We launched it in India and also in few other markets.

2-deoxy-D-glucose (2-DG): We developed it in collaboration with DRDO lab and received EUA as adjunct therapy for hospitalized moderate to severe Covid-19 patients. We have launched it in India in June 2021.

Molnupiravir:We are collaborating with 5 other pharmaceutical companies for the clinical trial of the investigational oral anti-viral drug for the treatment of mild Covid-19 in an outpatient setting in India.

Other Covid drugs:We are also working on Baricitinib and several other covid drugs for treatment ranging from mild to severe conditions.

Revenue Analysis

Global Generics (GG)

Revenues from GG segment at Rs. 41.1 billion:

• Year-on-yeargrowth of 17% was driven primarily by branded markets (India and emerging markets) and Europe. The overall growth was on account of new product launches and volume traction in the base business, partly offset by price erosion in some of our products and adverse forex rates.
• Sequential growth of 6% driven by higher sales in India. The overall growth was attributable to higher volumes and new product launches, offset partially due to price erosion in certain products.

North America

Revenues from North America at Rs. 17.4 billion:

• Year-on-yeargrowth of 1%, driven by launch of new products and increase in volumes of certain of our existing products, which was offset by price erosion in some molecules and adverse forex rates.
• Sequential decline of 1%, on account of price erosion in some of our products, partially offset by volume traction and new products launched.
• During this quarter, we launched 6 new products. These were Sapropterin Dihydrochloride Powder, Albendazole Tablets, Ertapenem Injection and Icosapent Ethyl Capsules in the US and two products in Canada.

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• We filed two new ANDAs during the quarter. As of 30th June 2021, cumulatively 93 generic filings are pending for approval with the USFDA (90 ANDAs and 3 NDAs under 505(b)(2) route). Out of these 93 pending filings, 47 are Para IVs and we believe 24 have 'First to File' status.

Europe

Revenues from Europe at Rs. 4.0 billion. Year-on-year growth of 12% and sequential growth of 1% was primarily on account of volume traction in base business and new product launches across our markets, which was partially offset by price erosion.

India

Revenues from India at Rs. 10.6 billion:

• Year-on-yeargrowth of 69% and sequential growth of 26% was primarily driven by increase in sales volumes of our existing products, led by increase in sale of covid drugs due to the severe second wave witnessed in India. The growth was also aided by contribution from new product launches and increase in sales prices of our existing products.
• We launched six new products during the quarter including Sputnik-V vaccine and 2-deoxy-D-glucose for covid. We also launched Curhealth™, a nutritional health mix for building immunity.

Emerging Markets

Revenues from Emerging Markets at Rs. 9.1 billion. Year-on-year growth of 14% and sequential growth of 3%:

• Revenues for Russia at Rs. 3.5 billion. Year-on-year growth of 8% was on account of increase in volumes and sales prices in our existing products and new products launches. Sequential decline of 13% was on account of lower volumes, offset partly by increase in sales price of certain products and new products launched.
• Revenues from other CIS countries and Romania at Rs. 1.4 billion. Year-on-year growth of 4% driven by new product launches, offset partially by a reduction in sales volumes and prices of certain of our existing products. Sequential decline of 24% was on account of reduction in volumes and price of some of our existing products, offset partly by new products launched.
• Revenues from Rest of World (RoW) territories at Rs. 4.2 billion. Year-on-year growth of 25% and sequential growth of 43% was largely attributable to new products launched and volume traction in our base business, partially offset by a reduction in sales prices of some of our products.

Pharmaceutical Services and Active Ingredients (PSAI)

Revenues from PSAI at Rs. 7.5 billion. Year-on-year decline of 12% and sequential decline of 5%.

• The decline was on account of a decrease in sales volumes and prices of our existing products, partially offset by new products launched. Year-on-year was also impacted due to customer stocking up in last year.
• During the quarter we filed DMFs for two products in the US.

Proprietary Products (PP) & Others

Revenues from PP & Others at Rs. 541 million. Year-on-year growth of 1% and sequential decline of 14%.

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