Struggling Indian pharmaceutical company, Divi's, fails to meet profit expectations for Q2 due to weak pricing in the US market.
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Divi's Laboratories, one of India's largest manufacturers of active pharmaceutical ingredients (APIs), reported a consolidated net profit of 5.45 billion rupees for the first quarter ended June 30, 20XX - a figure lower than the estimated 5.75 billion rupees, as per analysts' data compiled by LSEG. The profit decline is attributed to pricing pressures in the key U.S. market.
The U.S. market has been a significant challenge for Indian generic drugmakers, including Divi's. They have been facing weak pricing and stiff competition. Pricing pressures, amplified by potential tariffs and high compliance costs, pose a serious challenge to these firms.
Divi's is seeking to capitalize on demand from manufacturers of diabetes and weight-loss drugs, such as Eli Lilly. The company aims to increase its market share by launching molecules as they get off patent. However, the downturn in the share price was in tandem with other pharma stocks due to U.S. President Donald Trump's potential tariff threat.
The U.S. heavily relies on India for generic drugs, sourcing about 50% or more of generics from Indian companies. Disruption from pricing pressures or tariffs could impact drug availability and affordability in the U.S., affecting patient care.
To mitigate risk, some Indian firms are setting up U.S.-based manufacturing facilities to circumvent tariffs and maintain access to the market. This reflects a shift to local production as a hedge against trade uncertainties.
Despite the challenges, Indian pharma's strong regulatory compliance and cost advantages make them irreplaceable in the U.S. generics market for at least 3-5 years, even as the U.S. explores expanding its domestic capabilities.
Divi's Laboratories has announced a bonus issue and reported a 14% increase in revenue from operations for the quarter, amounting to 24.10 billion rupees. The company exports its products to more than 100 countries, with the U.S. and Europe being its core markets.
Other Indian generic drugmakers, such as Cipla and Dr Reddy's, also reported subdued sales in the U.S. during the June quarter. The revenue figure is lower than the analysts' estimated 24.56 billion rupees. The company's shares were down 2.5% before the news, not related to the profit report. Subsequently, the stock price of Divi's Laboratories decreased by 3.3% due to the reported lower profit.
In conclusion, Indian pharma companies must strategically balance cost structures, potential local production, and regulatory compliance to sustain their crucial role in providing affordable medicines in the large U.S. generic drug market.
Finance in the U.S. market has been a challenging sector for Indian generic drug manufacturers, such as Divi's Laboratories, due to weak pricing and stiff competition. To maintain access to the market and circumvent tariffs, some Indian firms are setting up U.S.-based manufacturing facilities (business). Despite these challenges, the strong regulatory compliance and cost advantages of Indian pharma make them irreplaceable in the U.S. generics market for at least 3-5 years (finance).
