Dr Reddy's Labs slumps 8% as US FDA issues CRL for its version of NuvaRing

Shares of Dr. Reddy's Laboratories Limited cracked 8 per cent on the BSE in Wednesday's early morning trade on reports that the company has received a Complete Response Letter (CRL) from the US Food and Drug Administration for its generic version of contraceptive NuvaRing. According to a CNBC report, brokerage firm Citi believes that the NuvaRing launch is unlikely to happen before mid CY20.

A CRL is issued when the FDA decides not to approve new or generic drug application for marketing in its present form.

The company said it is preparing a response to the drug regulator’s letter, it did not give much clarity on how much time it would take, a Bloomberg report said regarding the CRL.

At 10:06 AM, the stock was trading 5.86 per cent lower as compared to 0.36 per cent gain in the benchmark S&P BSE Sensex.

Dr Reddy’s performance in the Q1FY20 was lower than expected, led by a temporary disruption in the manufacturing of the active ingredient. 

Pharmaceutical services and Active Ingredients (PSAI) segment reported a 10 per cent decline in sales on a year-on-year basis and 33 per cent sequentially.

Global Generics sales grew 8 per cent year-on-year and 9 per cent sequentially. India and Emerging markets contributed well to the growth momentum. The North American sales (43 per cent of overall) though grew three percent year-on-year however was on a large base too. 

The company's revenues at Rs 3,843.5 crore, though up 3 per cent year-on-year, came lower than consensus analysts estimates. The company’s earnings were driven by oncology products Revlimid settlement income of Rs 345 crore.

The management, however, guided for a strong comeback of pharmaceutical services and active ingredient sales in the September quarter, on the back of a healthy order book and resolution of certain product-related issues in an API plant. Inventory adjustments are also not a matter of worry, according to analysts. The company in anticipation of some product launches manufactures drugs which are adjusted if there are delays.

Aftere the results, analysts at Antique Stock Broking had said Dr Reddy’s portfolio of generic injectables (Daptomycin, pulmonary hypertension treatment Remodulin in the near-term, and Copaxone in FY21) are likely to be more than $25 million opportunities each. Other small products also have no competition and hence, can become a steady revenue stream with revenue potential in excess of $10 million annually, they said.