Dr. Reddy's Q4 profit, revenue miss expectations on lower sales in US, Europe

Dr. Reddy's Laboratories announced Tuesday that fourth-quarter profit declined 3.3 percent year-over-year to 3 billion rupees ($44 million), missing analyst estimates of around 3.8 billion rupees ($56 million). Sales in the three-month period fell less than 1 percent to 35.3 billion rupees ($519 million), below forecasts of about 37.1 billion rupees ($544 million).

CEO G.V. Prasad said "we concluded a challenging year…with a relatively muted fourth quarter's performance." The executive explained "this was mainly on account of continuing headwinds in the US markets and a temporary drop in sales in Russia, attributable to a shift in the channel purchasing pattern."

In the quarter, overall sales of generic medicines slipped 4 percent to 27.8 billion rupees ($409 million), with revenue in North America dropping 6 percent to 14.5 billion rupees ($213 million). Dr. Reddy's noted that sales in North America were hit by higher price erosion due to channel consolidation, as well as increased competition for some key drugs, including azacitidine, decitabine and valganciclovir.

Meanwhile, quarterly sales of generic drugs in Europe slumped 17 percent to 1.7 billion rupees ($25 million), mainly due to higher price erosion and supply disruptions, with revenue in emerging markets falling 9 percent to 5.5 billion rupees ($81 million). In addition, sales in India increased 7 percent year-over-year to 6.1 billion rupees ($90 million).

Commenting on the results, Sharekhan analyst Purvi Shah remarked "the numbers were below our expectations and we knew that the weakness would continue mainly due to the pressure they are facing in the US. We expect the pricing pressure to continue but on a case-to-case basis."

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