Divi's Labs Q1 profit slumps on drug pricing pressures

livemint.com:

HYDERABAD : Indian pharmaceutical company Divi's Laboratories reported a 49.2% fall in quarterly profit, missing analysts' estimates, as the generic drug maker grappled with pricing pressures in key markets like the United States. The company reported a consolidated profit of 3.56 billion rupees ($42.9 million) for the first quarter ended June 30, compared to 7.02 billion rupees a year ago. Analysts, on an average, had expected a profit of 4.17 billion rupees, according to Refinitiv data.

Revenue from operations fell 21.2% to 17.78 billion rupees. The Hyderabad-based company's core business is manufacturing of active pharmaceutical ingredients (API), which are chemical compounds in a drug that help produce desired health effects. Divi's Labs is also involved in the contract manufacturing of APIs and intermediates for global companies.

Exports to the U.S. and Europe contribute to over 60% of revenue. In May, the company said there were pricing pressures in some generic APIs, with some firms after the pandemic struggling to get rid of huge stocks of dosages of generic drugs before their expiry date.

This, in turn, hurt prices and demand for generic APIs. Divi's Labs said it expects prices to stabilize in the coming quarters. The company also saw a 6.41% rise in costs of materials consumed during the quarter, it said.

Shares of Divi's Labs were trading 0.84% lower at 3,648.25 rupees on Monday after its results, compared to a 0.44% fall in the Nifty pharma index. Smaller rival Laurus Labs last month reported a fall in quarterly profit and revenue, citing reasons including demand softness in its API business. The company's core profit margins sank to a 19-quarter low.