Dr Reddy's saw API revenues slide in FY Q1 2018
India-based Dr Reddy's reported total revenue of INR33.16bn ($513m) for its fiscal first quarter, which is up 3% year-on-year.
Generic pharmaceuticals brought in revenue of INR27.45bn, up 3%, while branded drugs generated INR512m, down from INR620m.
API business
The contribution from active pharmaceutical ingredients (APIs) and development services declined nearly 1% to INR4.65bn.
During the firm’s conference call CEO GV Prasad explained that efforts during the quarter to address problems at manufacturing sites had impacted production.
“We were very focused on lot of remediation activities which sort of certainly had some disruptive effect on manufacturing and supplies.”
Remediation actions
Dr Reddy’s manufacturing network has been the subject of considerable US Food and Drug Administration (FDA) criticism.
This year alone the US regulator has issued Dr Reddy’s with Form 483s for its sites in Miryalaguda, Duvvada, Srikakulam and Bachupally.
Only one facility – the API plant in Miryalaguda – has been issued with an Establishment Inspection Report (EIR) indicating the problems have been addressed.
Prasad told analysts Dr Reddy’s will focus on bringing the remaining sites up to, explaining it is the firm’s “first priority to ensure that our manufacturing systems meet the highest level of quality and compliance.
“We will need to modernize some of our infrastructure, systematically implement our new quality management system and automate some of the critical manufacturing and quality related processes.
He added that: “To accomplish this, a number of initiatives have been taken up across all locations and this would take us a few more quarters to complete.”
Profits down
Dr Reddy’s profits fell 53% to INR772m. Operating profit – which is gross profit minus SG&A, R&D and other costs - was INR453m, down 63% from the first quarter in fiscal 2017.
CEO GV Prasad attributed the profit decline to “Delays in approvals, additional competition, regulatory actions” which he told analysts had “combined to put significant pressure on our performance.”
However, remediation costs did not reduce profits according to a Dr Reddy’s spokeswoman.
She explained that ‘regulatory actions’ referred to “delayed ANDA approvals coupled with the hold up in the product approvals pending site clearances by the US FDA.”
