Dr. Reddy’s Q3 Profit Misses Estimates, Margins Fall

Dr. Reddy’s Laboratories Ltd. reported a lower-than-estimated quarterly profit on a one-time charge and pricing and regulatory pressure in the U.S., the drugmaker’s largest market.

Net profit declined 37.3 percent on a yearly basis to Rs 303 crore in the quarter ended December, according to its exchange filing. That compares with Rs 337 crore estimated by analysts tracked by Bloomberg. The drugmaker also took a one-time charge of Rs 93 crore during the quarter. Revenue rose 2.9 percent to Rs 3,830 crore, higher than the Rs 3,688 crore estimate.

Indian pharmaceutical companies have been under pressure due to competition-driven price erosion and regulatory pressures in the American market. Revenues from the U.S. are expected to drop 5-10 percent over the past year, analysts from multiple brokerages estimated. And competitive pricing is hurting margins.

Dr. Reddy’s earnings before interest, tax and depreciation fell 8 percent to Rs 792.5 crore while Ebitda margin contracted to 20.7 percent 23.2 percent. The drop in margin, however, was not as steep as the analysts had estimated 18.8 percent.

The fall in revenue in the U.S. and Europe was offset by a growth in the domestic market. Sales of both the generics and pharmaceutical services and active ingredients businesses rose in India.

Generics Business

• North America revenue fell 2 percent.
• Europe fell 3 percent.
• India rose 3 percent.
• Emerging Markets fell 1 percent.

Pharmaceutical Services And Active Ingredients

• North America revenue fell 31 percent.
• Europe fell 14 percent.
• India grew 53 percent.
• Rest of the world grew 25 percent.

Shares of Dr. Reddy’s fell as much as 2.5 percent after a spike that followed the earnings announcement. That compares with a 0.4 percent decline in the benchmark S&P BSE Healthcare Index.