Dr. Reddy's Laboratories Ltd. RDY reported third-quarter fiscal 2018 earnings per American Depositary Share (ADS) of 32 cents, down 27.3% from 44 cents earned in the year-ago quarter. However, earnings include a one-time charge of $14.6 million (Rs. 930 million) due to recent tax law change in the United States. The Zacks Consensus reported earnings of 41 cents per share.
However, revenues increased 2.6% year over year to $596 million.
Quarter in Detail
Dr. Reddy’s reported revenues under three segments — Global Generics, Pharmaceutical Services & Active Ingredients (“PSAI”), and Proprietary Products and Others.
Global Generics revenues fell about 2% year over year to $472 million during the third quarter. The decline was attributed to adverse foreign exchange as the US dollar depreciated by about 4% and lower contribution from Europe generics market. On a sequential basis, the segment registered growth of 5% driven by the United States and Emerging Markets.
PSAI revenues were $85 million on par with the year-ago quarter figure.
Revenues at the Proprietary Products and Others segment came in at $39 million, up 145% from the year-ago quarter.
Further, research and development expenses were down 6% year over year to $73 million.
Also, selling, general and administrative expenses were $189 million, up 6% year over year.
As of Dec 31, 2017, Dr. Reddy has 102 generic filings (99 abbreviated New Drug Applications (ANDAs) and three new drug applications) that are pending for the FDA approval. Of these 99 ANDAs, 59 were Para IV filings and 29 have first-to-file status.
Our Take
In third-quarter fiscal 2018, though Dr. Reddy’s bottom line suffered a year-over-year decline, the top line witnessed an increase. Earnings were below expectations due to price erosion, and increased competition. The company remains focused on launching of new products, as well as on improving operational efficiencies and quality management systems. The company’s first-cycle NDA approval of high potency topical steroid Impoyz for the treatment of moderate to severe plaque psoriasis in patients 18 years of age or older is a significant milestone in the commercialization of its proprietary products pipeline.
Zacks Rank & Stocks to Consider
Dr. Reddy’s has a Zacks Rank #3 (Hold).
Some better-ranked stocks from the health care space are Exelixis, Inc. EXEL, XOMA Corporation XOMA and Sucampo Pharmaceuticals SCMP. WhileExelixis and XOMA sport a Zacks Rank #1 (Strong Buy), Sucampo carries a Zacks Rank#2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Exelixis’ earnings per share estimates have moved up from 72 cents to 73 cents for 2018 over the last 60 days. The company delivered a positive earnings surprise in the last four quarters, with an average beat of 572.92%. Share price of the company has surged 52.1% over a year.
XOMA’s loss per share estimates have narrowed from 99 cents to 42 cents for 2018 in the last 60 days. The company pulled off a positive earnings surprise in one of the last four quarters, with an average beat of 47.92%. Share price of the company skyrocketed 601.4% over a year.
Sucampo’s earnings per share estimates have moved up from $1.15 to $1.19 for 2018 in the last 60 days. The company delivered a positive earnings surprise in three of the last four quarters, with an average beat of 15.63%. Share price of the company has surged 52.5% over a year.
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