Highlights:

Q1FY07 Q4FY06 Sales 4422 3928 EBIRDTA 852 775 EBIDTA 675 628 Net Income 338 362

This consolidated net income is after charging for the following incremental expenses over the sequential quarter:

1. Increase in Research and Development expenses to a level of Rs. 177 million as against Rs. 147 million in the immediate preceding quarter – an increase of Rs.30 million (20%).
2. Additional expense of Rs.15 million for employee benefits as per the revised Accounting Standard 15.
3. Loss registered in the Joint venture – Fine Chemicals Corporation (FCC) of Rs.23 million (50% share), thereby having an adverse impact of Rs.37 million over the last quarter. This was primarily due to certain quality issues related to physical parameters in one of the products and the same has been since resolved. Even though the quality issue is not due to FCC’s fault, this return was accepted considering the importance of the customer for the overall Matrix's group.
4. Increase in Interest costs of Rs.27 million
5. Increase in Depreciation charge of Rs.33 million

Business Segment Analysis

Company's efforts to diversify the revenue streams have yielded results and the business segment-wise break up in revenues for the last quarter is as follows:

% to total Generic APIs 29 ARVs 23 Finished Dosage Forms  26 Hospital Products 14 CRAM 8

Generic API Business

The generic API business contributed Rs.1270 million to the consolidated net sales for the quarter under review as against Rs.1287 million recorded in the preceding quarter. The marginal shortfall in sales in this segment is due to less than anticipated off-take of certain key products both in Matrix-India and FCC. During the quarter, the company filed 4 DMFs in US, taking the total tally to 64. In addition, European DMFs have been filed for 3 APIs. The company has also filed 4 patent during the year, taking the total tally to 56.

The Company had a successful audit from the US FDA in one of its API manufacturing facilities (Unit VIII) located at Vishakapatnam, during the first quarter.

ARV Business

Consolidated sales in the ARV portfolio stands at Rs.1030 million for quarter under review, as against Rs.828 million recorded in the preceding quarter with a growth of 24%.

The company witnessed robust growth in this segment form all the existing major customers in both the first and second line regimen APIs. The Company is in the process of working with Aspen for filing for regulatory approvals for Atazanavir, a product in-licensed from BMS, during the current year.

Finished Dosage Business

Docpharma, NV, a 100% subsidiary of the company recorded revenue of Euro 28.24 million for the quarter under review, which represents a growth of 8% over the previous year (Corresponding period Euro 26.19 million). This slow growth is due to delay in receiving regulatory approvals for key products in Belgium, the key market for the company. Docpharma recorded net income of EUR 2.2 million for three months ended 30th June 2006 (Corresponding period EUR 0.85 million).

Docpharma has been performing well in its core markets of Belgium and Netherlands and has successfully launched some key products in Netherlands.

Matrix-India successfully finalized a supply agreement with a US generic company for development, manufacture and supply of a range of finished dosage products, during the quarter. This portfolio consists of a mix of off-patent and soon to go off-patent products. The company has filed its second ANDA with the US FDA and has taken exhibit batches for a number of products.

CRAM Business

Revenues out of CRAM business stands at Rs.331 million for the quarter under review as against Rs.161 million of the corresponding period last year, a growth of 106%. The multiple projects under CRAM business initiated with leading pharma companies are responsible for this growth and this trend is expected to add robust growth to this segment during the remaining quarters of the current year.

In the financial year 2006-07, the company is focusing on consolidation and initiated various measures for capturing synergies that would arise from the strategic initiatives completed in the previous year” said Mr. Rajiv Malik, Chief Executive Officer, Matrix Laboratories Limited.