Dr Reddy’s revenue growth remained sedate at 7 per cent (₹3,588 crore) due to weak performance in the US, and geo-political crisis in the CIS markets.

Growth in the US generics segment (revenues) moderated to 8 per cent, from healthy double digit levels over the last few quarters. Slowdown in the pace of new launches (one product launched during the quarter against four launches in the June quarter) due to longer approval timelines by the US drug regulator and higher price erosion in select products impacted growth in this geography. On a high base on 2013-14, revenue growth in the US may continue to remain modest in the second half of the fiscal.

Russia and CIS, which are critical markets, continued to struggle during the quarter. Geopolitical crisis in the CIS region particularly Ukraine, led to flat constant currency growth in this market. Further, adverse movement in the currency — Rouble, resulted in a 13 per cent decline in the revenues from this region.

However, Dr Reddy’s managed to sustain mid-teen growth in the Indian market (14 per cent). Higher drug sales (volume) more than compensated for lower realisation, following to implementation of the new drug pricing policy last year.

Efforts to improve the profitability of its pharma services and active ingredient segment, by exiting low margin products and rationalising costs, helped the 0.5 percentage point improvement in Dr Reddy’s overall gross profit margin to 58.5 per cent.

However, higher research spend (11.5 per cent of total revenues this quarter against 9.5 per cent for the same period last year) and increased selling and administrative costs, ate into the operating profit margin, which declined by 4 percentage points year-on-year to 24.3 per cent.

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