Impairment loss dents Dr. Reddy's Q3 net

Drugmaker posts consolidated net profit of ₹ 27.9 crore on total income of over ₹ 5,000 crore

Pharma major Dr. Reddy’s Laboratories has posted a consolidated net profit of ₹ 27.9 crore for the quarter ended December on the back of recording impairment loss of nearly ₹ 600 crore.

“The profits were impacted due to trigger based impairment charge taken on a few acquired products, including gNuvaring,” co-chairman and MD G.V. Prasad said in a statement.

In the corresponding period of previous fiscal, the company had reported a loss of ₹ 538.4 crore. The ₹ 27.9 crore net profit is a sharp decline on a sequential basis. The drugmaker had registered a net profit of ₹ 771.8 crore in the quarter ended September 2020.

According to the results prepared as per Indian Accounting Standards (Ind AS), total revenue from operations in the third quarter increased by over 12% to ₹ 4,941.9 crore (₹ 4,397.1 crore). Total income also grew in the same range to ₹ 5,012.4 crore (₹ 4464.4 crore).

Notes accompanying the results said during the quarter there were significant changes to the market conditions for certain products forming part of the company’s global generics and proprietary products segments. They include the launch by competitor of generic version of the product, decrease in market potential of products primarily due to higher than expected price erosion and increased competition as well as higher than expected value erosion.

“Due to these adverse market developments, the company recorded an impairment loss of ₹ 318 crore relating to Ethinyl estradiol / Ethenogestral vaginal ring (a generic equivalent to NuvaRing); ₹ 158.7 crore relating to Saxagliptin and metformin (generic version of Kombiglyze-XR) and Phentennine and Topiramate (generic version of Qsymia); and ₹ 115.9 crore relating to other intangible assets forming part of the two business segments.

An amount of ₹ 4.6 crore was recorded as impairment loss pertaining to property, plant and equipment on write down of assets to fair value less costs to sell forming part of the company’s global generics segment. (An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount, according to the MCA website.)

Segment results wise, Dr. Reddy’s registered a ₹ 2345.4 crore gross profit in the global generics segment during the quarter or an increase of 12% from the ₹ 2091 crore of the year earlier period. On a sequential basis, it was a decline. In September quarter, the gross profit from the mainstay segment was ₹ 2368.5 crore. In the pharmaceutical services and active ingredients segment, the gross profit was ₹ 177.6 crore (₹ 207.9 crore).

The share of global generics to the revenue was ₹ 4077.8 crore (₹ 3595.6 crore), while that of PSAI stood at ₹ 884.1 crore (₹ 865.4 crore).

On the clinical trial of Russia’s Sputnik V vaccine, which Dr. Reddy’s is conducting in India, Mr. Prasad said, “We are progressing well on the phase 3 clinical trials for Sputnik V vaccine in India.”

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