India's Dr Reddy's Q2 profit drops on acquisition cost, impairment charge

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By Rishika Sadam and Kashish Tandon

HYDERABAD/BENGALURU (Reuters) -Indian generic drugmaker Dr Reddy's Laboratories' second-quarter profit was hit by one-time charges related to its joint venture with Nestle India and Nicotinell acquisition, the company said on Tuesday.

The company also reported an impairment charge due to supply chain constraints in U.S. affecting a particular generic medical product.

Reddy's reported a 9.5% fall in its consolidated net profit after tax to 13.42 billion rupees ($159.6 million) for the quarter ended Sept. 30.

Analysts on average had estimated a profit of 14.01 billion rupees, as per data compiled by LSEG.

To diversify its portfolio beyond generic drugs and boost its consumer health business, the drugmaker invested 7.34 billion rupees during the quarter in a joint venture with Nestle India, announced in April, to make vitamin supplements.

The company also acquired nicotine replacement product, Nicotinell, from Haleon in June.

During the quarter, the company had charged off a debt tax asset following a change in government's land tax laws which also hit the profit, Chief Financial Officer MV Narasimham said on the post-earnings call.

The drugmaker's total revenue jumped 16.5% to 80.38 billion rupees, surpassing analysts' estimates of an 11% rise, as its revenue from North America climbed 17%.

Generic drugmakers such as Dr Reddy's, Cipla and Zydus have been struggling in their key United States market with lower pricing issues amid stiff competition, termed as price erosion.

However, the company said the impact of price erosion was low during the quarter, aiding to double-digit growth of its business in North America.

Generic drugmakers have also been benefitting from strong sales across North America for their generic versions of Bristol-Myers Squibb's popular cancer treatment drug Revlimid since its launch in 2022. Their diabetic drug portfolio has also been contributing to growth in North America.

Revenue from the India business, the company's second-biggest market, climbed 18% to 13.97 billion rupees.

($1 = 84.0710 Indian rupees)

(Reporting by Kashish Tandon and Rishika Sadam in Bengaluru; Editing by Savio D'Souza, Janane Venkatraman and Vijay Kishore)