(Reuters) -Shares of Dr Reddy’s Laboratories dropped 6% on Friday and were on track for their worst session in nearly nine months, after missing its third-quarter profit estimates on lower sales and pricing pressures in the key North American market.
The generic drugmaker was the top loser on the Nifty Pharma index and the benchmark Nifty 50 index. The pharma index was down 1.1% and the Nifty was up 0.5%, as of 11:45 a.m. IST. [.BO]
“The drop in shares comes as market sees near-term concerns over the company’s muted U.S. sales,” said Sumit Gupta, analyst at Centrum Broking.
Indian generic drugmakers are struggling with slower sales in the United States, delayed approvals for new drug applications and lower pricing amid stiff competition.
Reddy’s growth will remain tepid over the next two years due to its high dependence on its generic version of Revlimid, a popular cancer treatment drug by Bristol-Myers Squibb, said Kunal Lakhan, an analyst at CLSA said.
On Thursday, the company flagged slower sales of the generic cancer drug, Lenalidomide, weighing on its North America business. The region contributes about 41% of Reddy’s overall revenue.
Analysts at Nuvama said in a note the drug’s sales were “nearing the cliff” due to increased competition in the region.
“Investor attention is on how Dr. Reddy’s offsets the gRevlimid impact on earnings,” Nuvama analysts said.
Nuvama cut its target price on stock to 1,533 rupees from 1,553 rupees earlier, it retained “buy” rating.
Reddy’s North America sales rose 1% on-year but dropped 9% sequentially in the quarter.
The company’s India sales, which boosted its overall revenue, reflected growth slowdown due to subdued sales in its gastro and cardio segments, Macquarie said in a note.
At least four brokerages slashed price targets on the stock, while three cut their ratings, LSEG data showed.
($1 = 86.2950 Indian rupees)
(Reporting by Manvi Pant in Bengaluru; Editing by Savio D’Souza and Eileen Soreng)
