Shares of Dr Reddy’s Laboratories (DRL) fell nearly 7 per cent to the day’s low of Rs 5,370 on the NSE on Monday after the US Food & Drug Administration (USFDA) made observations on the company’s R&D center in Bachupally, Hyderabad, following its inspection between December 4 and 8.
In a filing to the exchanges on Friday, Dr Reddy’s informed about the development and added that it will address the issues raised by USFDA within a stipulated timeline.
With today’s losses, the stock has seen price value getting eroded by Rs 400 per share in two sessions. The stock had ended with declines on Friday.
The leading pharma player Dr Reddy’s consolidated net profit rose 33% year-on-year (YoY) to Rs 1,480 crore in the July-September period. The profit figure beat the ET Now poll estimate of Rs 1,246 crore. Revenue from operations in the second quarter increased 9% YoY to Rs 6,880 crore.
The company reported an EBITDA of Rs 2,181 crore in the September quarter, higher by 13% YoY. EBITDA margins in the same period came in at 31.7%.
India sales stood at Rs 1,190 crore up 3% year-on-year, largely led by pricing, new launches, and offset by NLEM (National List of Essential Medicines Impact) and muted demand due to weak acute season. Excluding NLEM, operational sales rose in the mid-single digit.
Brokerage firm Antique believes that some of the observations issued by the USFDA can lead to a warning letter for the Bachupally facility.
It further said that the observations 1, 2, 4, 5, 6, 8 and 9 highlight issues such as out of specification microbial contamination, data integrity and market complaints.
Dr Reddy’s Bachupally unit contributes to 30% of its overall revenue from the US and manufactures four out of the top 10 products like Ciprodex, Nexium, Valcyote and Toprol generic.
Antique believes that the FTO-03 site remains key for Dr Reddy’s as it manufactures over 100 products.
The brokerage has maintained its sell rating on Dr Reddy’s with a price target of Rs 4,766.
Shares of Dr Reddy’s have risen 6% over the last month and has gained nearly 40% so far in 2023.
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