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Dr Reddy’s Lab Market Cap Falls Rs 20,000 Crore in a Month
Pharma News

Shares in Dr Reddy’s Lab, India’s second biggest drugmaker, slumped 7 per cent on Thursday, before staging a sharp recovery. At its day low, Dr Reddy’s shares had shed 25 per cent in last one month, leading to a Rs 20,000-crore reduction in market capitalisation.

Here are the 10 things to know:

1) The trigger for the sharp fall in Dr Reddy’s shares on Thursday was a class-action suit filed by a US law firm, traders said. A class action lawsuit involves one or several persons sueing a company on behalf of a larger group of persons.

2) According to the suit filed by Lundin Law PC, Dr Reddy’s has allegedly violated US federal securities laws related to certain statements concerning the company’s financial performance.

3) Dr Reddy’s has refuted the allegations. In a statement to the Bombay Stock Exchange, the company said, “Dr. Reddy’s has always adhered to all disclosure requirements both of the Securities and Exchange Commission (SECs) and Indian stock exchanges.”

4) Pharma industry expert Kewal Handa told NDTV that market is making too much of this development. “This (Lundin Law Pc) is just a private law firm which is making an enquiry. It has nothing to do with the regulators. Fundamentally there is nothing wrong in the company,” he said.

5) Earlier this month on November 10, Dr Reddy’s said a US court had barred it from selling its generic form of blockbuster heartburn drug Nexium in the country.

6) The generic version of Nexium launched by Dr. Reddy’s could have added about $25 million to $35 million to its fiscal 2016 net profits, analysts said.

7) Dr Reddy’s shares have come selling pressure since November 6, when the company received a warning letter from the US drug regulator for inadequate quality control measures at three of its manufacturing plants in India.

8) The warning letter means Dr Reddy’s will not receive US Food and Drug Administration’s approvals to sell drugs manufactured at the plants for now, a blow for business at a company which relies on the US for a majority of its sales. The plants make a significant contribution to company sales, with one alone accounting for 10-12 per cent.

9) The US is one of the biggest generics market for domestic drugmakers and it contributed over 50 per cent to Dr Reddy’s revenues in the September quarter.

10) Dr Reddy’s shares pared losses and ended down 2 per cent at Rs 3,298.85 today. Despite recovery, the stock underperformed the broader markets, which closed 1.43 per cent higher.

Courtesy – NDTV

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