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Dr. Reddy's quarterly profit exceeds estimates on India, emerging market sales

The drugmaker's North America business, however, slips

An employee talks on mobile phone outside Dr. Reddy's Laboratories, drug manufacturing plant at Bollaram, outskirts of Hyderabad, India, Wednesday, Dec. 22, 2010. Police said a suspected gas leak in the drug manufacturing plant in southern India has killed at least two workers.(AP Photo/Mahesh Kumar A.)   © AP

MUMBAI (NewsRise) -- Dr. Reddy's Laboratories reported a better-than-expected 77% jump in second-quarter net profit, as the drug maker gained from a surge in revenue from India and emerging markets.

Consolidated net income for the quarter ended in September stood at 5.04 billion rupees ($69 million), compared with 2.85 billion rupees a year earlier, the company said in an exchange filing on Friday. Analysts were expecting a net profit of 3.52 billion rupees, according to Refinitiv data.

Revenue grew 7.1% to 37.98 billion rupees. Sales in North America marginally declined during the quarter, weighed by competitive pressure on some key drug molecules, Dr. Reddy's said. Europe too saw a 21% decline in sales.

The company's North America business was hurt by the absence of sales of generic version of the U.K.-based Indivior's opioid treatment Suboxone film. Dr. Reddy's had received the regulatory approval for the drug in June, but a U.S. court temporarily blocked it from selling the drug the next month. The company launched four drugs in the U.S. last quarter, Saumen Chakraborty, chief financial officer and president of Dr. Reddy's, said at a news conference.

Revenue from emerging markets such as Russia, Romania, and the rest of the world surged 36%, while the company saw an 8% increase in India sales driven by new products and existing drugs.

The profit expansion was also aided by the favorable currency movements and cost controls, Chakraborty said. The Indian rupee fell on average 4.5% against the U.S. dollar during the quarter.

Dr. Reddy's and most Indian drug makers are grappling with falling drug prices in the U.S., where the Food and Drug Administration has expedited its approval rate for generics, paving the way for more competition.

To be sure, over the past few quarters, the pressure on prices eased a bit after several global generic drug makers, including Teva Pharmaceutical Industries and Novartis, shifted focus to more profitable drugs and exited some of the highly competitive generic drug portfolios.

"Our priority will be to resolve pending regulatory issues, and continue to work on execution and cost structures that will enable affordable medicines for more patients," Dr. Reddy's Co-chairman and Chief Executive G.V. Prasad said in the statement.

In 2015, the U.S. drug regulator issued a warning letter to three of the company's plants, citing quality issues and violations of good manufacturing practices. Until Dr. Reddy's fixes the problems, it won't receive U.S. approvals for drugs made at these plants, which account for 10%-12% of its sales.

The company has been transferring the production of several critical products out of the affected plants.

Shares of Dr. Reddy's gained 0.4% in Mumbai trading, while the benchmark S&P BSE Sensex lost 1%.

--Dhanya Ann Thoppil

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