Dr. Reddy's swings to loss in third quarter on NuvaRing impairment charge

Headline results for the third quarter:

Revenue

INR 43.8 billion ($613 million; forecasts of INR 41.9 billion)

+14%

Loss

INR 5.7 billion ($80 million; profit forecasts of INR 4.9 billion)

Versus profit of INR 4.9 billion ($69 million)

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

"The current quarter performance has been good across all our businesses," remarked co-chairman GV Prasad, although "profits were impacted due to trigger based impairment charge taken on a few products including NuvaRing."

Dr. Reddy's Laboratories noted that the FDA approval in December of Amneal Pharmaceuticals' generic version of Merck & Co.'s vaginal ring contraceptive NuvaRing "led to a considerable erosion in the value of this product," with an associated impairment charge of INR 11.1 billion ($155 million). The US regulator previously issued Dr. Reddy's a complete response letter for its generic version of NuvaRing.

The Indian drugmaker added that due to "current market dynamics" an impairment charge of INR 2.1 billion ($29 million) has also been taken on other products, leading to total impairments of INR 13.2 billion ($185 million) in the quarter.

Other results:

  • Global generics revenue: INR 35.9 billion ($502 million), up 15%
    • North American generics revenue: INR 16 billion ($224 million), up 8%, boosted by higher volumes for some key products, partly offset by price erosion for some drugs
    • Generics sales in emerging markets: INR 9.2 billion ($129 million), up 19%, with revenue in Russia rising 20% and sales in other CIS countries and Romania climbing 26%
    • Generics sales in India: INR 7.6 billion ($106 million), up 13%, driven by new products, improved realisations in base business and volume traction
    • European generics revenue: INR 3.1 billion ($43 million), up 52%, due to new products and volume traction in base business, partly offset by lower realisations as fewer key drugs entered tenders
  • Sales from Pharmaceutical Services and Active Ingredients: INR 6.9 billion ($97 million), up 16%, led by an increase in volumes from the API business
  • Propriety products: INR 1 billion ($14 million), down 18%, following the out-licensing of neuro products

What analysts said:

"The numbers are in line with street's expectations with a beat on the margin front," commented Ashika Stock Broking analyst Shrikant Akolkar, adding "the NuvaRring impairment is due to their competitor Amneal launching a similar drug but I would not read much into that as numbers are good operationally as well."

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