Venezuelan crisis hits Dr. Reddy’s profits, shares

The Dollar Business Bureau

India’s leading drug manufacturer, Dr. Reddy’s Laboratories is gearing up for a path full of challenges in the US market. Dr. Reddy’s was denied drug approvals by the USFDA, citing underperformance on various parameters.

The pharma major’s Q4 results showed the underperformance on various parameters and the challenges faced by the company.

After a warning issued by USFDA regarding non-adherence to the standard manufacturing process and quality, Dr. Reddy’s is mulling plans to bring 3 plants back to India.

The firm is due to send its response on measures taken to reach the expected standards to the USFDA by May. The US based plants contribute 12% of the total earnings of the firm. The firm which dominates the Indian market cannot launch its new products in the US until the conflicts are resolved.

The shares of the company plunged by 2.9%, reporting drastic decline of 85.6% to Rs.74 cr in net profits for the fourth quarter ended March in FY16. The firm recorded Rs.518.8 cr net profit for Q4 ended in FY15. The reason attributed to the declining profits was the outstanding receivables from the Venezuelan market.

However, the COO of the firm, Abhijeet Mukherjee believes that the tide would turn and new product launches in the US in current fiscal will be ‘eventful.’

Mukherjee stated that the sales in emerging markets is likely to grow by 10% in current fiscal. Protests erupted in crisis-hit Venezuela, which is facing scarcity of food, power cuts and sinking oil prices. Besides Dr.Reddy’s, other major companies are also trying to recover their funds from Venezuela, which is an OPEC member nation.

Dr. Reddy’s took a write-off from Venezuela, which resulted in declining profits. While the revenue from North America and India rose by 12% and 11% respectively, Dr. Reddy’s faced a decline in emerging markets and Europe.