Dr. Reddy's (RDY) Earnings and Revenues Improve Y/Y in Q3

Dr. Reddy's Laboratories Ltd. RDY reported third-quarter fiscal 2019 earnings of 41 cents per share, up from 29 cents in the year-ago quarter, per American Depositary Share (ADS).

Moreover, revenues increased 1.1% year over year to $553 million. Revenues also surpassed the Zacks Consensus Estimate of $535 million.

Year to date, shares of the company have increased 22.8%, against the industry’s decline of 12.9%.

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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 were INR31.3 billion ($450.5 million), up 4% year over year in local currency during the third quarter. Growth was led by contributions from Emerging Markets, India and favorable foreign exchange.

PSAI revenues were INR5.9 billion ($85.3 million), up 9% in local currency from the year-ago quarter.

Revenues at the Proprietary Products and Others segment came in at INR735 million ($17.5 million), down 52% in local currency.

Further, research and development expenses were down 21% year over year to $53 million.

Selling, general and administrative expenses were $173 million, flat year over year.

As of Oct 31, 2018, Dr. Reddy’s has 103 generic filings (100 abbreviated New Drug Applications [ANDAs] and three new drug applications) that are pending FDA approval. Of these ANDAs, 59 were Para IV filings and 33 have first-to-file status.

Our Take

In third-quarter fiscal 2019, Dr. Reddy’s top and bottom lines registered year-over-year growth. This was supported by significant growth in emerging markets and India, pickup in product launches, and improvements in cost structure. However, the company expects to experience price erosion in the North America Generics market. The European market is also witnessing a higher price erosion in some of the key molecules.

Zacks Rank & Stocks to Consider

Dr. Reddy’s has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the biotech sector are Mallinckrodt Public Limited Co. MNK, Voyager Therapeutics, Inc. VYGR and Zynerba Pharmaceuticals, Inc. ZYNE. All of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mallinckrodt’s earnings per share estimates have moved up from $7.00 to $7.09 for 2018 in the past 90 days. The company delivered a positive earnings surprise in all of the trailing four quarters, with average beat of 17.75%.         

Voyager Therapeutics’ loss per share estimates have narrowed from $2.74 to $2.73 for 2018 and from $3.17 to $3.13 for 2019 in the past 60 days. The company delivered a positive earnings surprise in two of the trailing four quarters, with average beat of 7.48%.         

Zynerba’s loss per share estimates have narrowed from $3.03 to $2.87 for 2018 and from $2.61 to $2.43 over the past 90 days.

Dr. Reddy's Laboratories Ltd Price, Consensus and EPS Surprise

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