Dr. Reddy’s Laboratories Ltd. plunged in Mumbai on concerns that competitive pressures in the U.S., which helped cut profit last quarter by nearly 80 percent, may linger for the balance of the year.
The stock dropped as much as 9 percent to 3020.10 rupees as of 9.09 a.m. in Mumbai. That follows on a nearly 5 percent drop Tuesday, when the drugmaker, India’s second largest by sales, reported lower quarterly results. Analysts, including those at Credit Suisse Group AG, cut their ratings on Dr. Reddy’s stock after the earnings report.
Dr. Reddy’s "results confirmed our fears of a sharp earnings hit for Indian generics given the increased pricing pressure and concentrated portfolio in U.S.," Piyush Nahar, an analyst at Jefferies India Private Ltd. wrote in a note Wednesday downgrading the stock to underperform from hold. "Management indicated that there are more headwinds ahead."
Dr. Reddy’s U.S. business has come under pressure as increased competition eroded revenue that has been hard to replace after the company received a warning letter from the Food and Drug Administration last year over potential violations at three Indian facilities supplying the U.S. Such warnings can slow approval of new drugs intended for the U.S. market.
On a conference call Tuesday, Dr. Reddy’s executives said they had completed remediation efforts on the plants and were prepared to ask the FDA for a reinspection.
To contact the reporter on this story: Ari Altstedter in Mumbai at aaltstedter@bloomberg.net. To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net, Candice Zachariahs
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