Dr. Reddy’s Laboratories reported a more than 38% decline in third-quarter profit as price erosion and regulatory issues in key markets, as well as a one-time charge of ₹93 crore made in the wake of the Tax Cuts and Jobs Act of 2017 in the U.S., weighed on sales and earnings.
Net profit fell to ₹302.7 crore in the three months ended December, from ₹492.3 crore in the year-earlier period, the Hyderabad-based pharmaceutical major said on Thursday.
Total revenue from operations rose 2.97% to ₹3,834.10 crore, from ₹3,723.2 crore, according to the results prepared as per Indian Accounting Standards.
CFO Saumen Chakraborty said a 2% year-on-year decline in the global generics segment was primarily on account of the U.S. dollar’s depreciation, and also a lower contribution from the European generics market.
In North America, where the decline was 3%, the factors were higher price erosion due to channel consolidation and increased competition in “some of the key molecules and impact of adverse foreign exchange,” Mr. Chakraborty said. New products partly offset the impact, he said, adding the company had launched three new products and made an equal number of filings. Cumulatively, as of December 31, 2017, 102 generic filings made by the company are with the USFDA, pending approval.
In the EU, sales were hit after the German regulator, in August, withheld renewal of the GMP compliance certificate for the firm’s formulations unit-2 in Bachupally, Hyderabad.
The regulator’s recent decision to withdraw the EU GMP non-compliance status would help in a recovery that should happen from the next fiscal, Abhijit Mukherjee, chief operating officer, told a media briefing.
India’s generics market, however, was a lone exception for the company contributing to 3% growth.
On new products, Dr. Reddy’s would be introducing 10-15 in the current fiscal, Mr. Chakraborty said, adding the firm expected to do better in the next fiscal. To a query, Mr. Mukherjee said four biosimilar products would be introduced in new emerging markets.
With regard to the one-time charges, the drugmaker said it had reappraised its U.S. deferred tax assets and liabilities following the new tax law. The law includes significant changes to the U.S. corporate tax system, including a reduction in the federal corporate tax rate from 35% to 21%.
