Dr. Reddy's grows U.S. sales even in face of FDA action

Three of Dr. Reddy's Laboratories' key plants were singled out in a warning letter after FDA inspectors tallied up a host of data manipulation and contamination violations. But India's third-largest drugmaker was still able to grow sales in the U.S. last quarter even with production at the three facilities interrupted by remediation efforts.

The drugmaker today announced earnings for the last quarter in which sales in North America were up 18% to Rs 19.4 billion ($285.4 million), driven by its sterile injectables business. Total revenues for the quarter were Rs 33.6 billion ($494.3 million) up just 3%, as significant declines in emerging markets held back growth.

Dr. Reddy's CEO G.V. Prasad

CEO G. V. Prasad called the quarter satisfactory while acknowledging the company faced challenges. He pointed out the drugmaker continues to win FDA approvals. Last week it got a nod for its generic ZembraceSymTouch injection for adults with migraines, but he also said the company's key focus is winning FDA approval for its manufacturing standards.

"Enhancing our quality management practices and meeting the US FDA expectations continues to be our highest priority," Prasad said in a statement.

The FDA cited Dr. Reddy's ($RDY) active ingredient plants in Srikakulam and Miryalaguda, as well as its Oncology Formulation manufacturing facility at Duvvada in the warning letter. The missive outlined a number of common concerns it has found with other Indian drugmakers, involving excluding batch test failures that might keep products out of the market. In Dr. Reddy's case, however, there was something more. Inspectors uncovered a secret quality control lab that had been used for years just for that purpose.

Other Indian drugmakers like Wockhardt, Sun Pharmaceutical, and Ranbaxy Laboratories--which Sun acquired last year--have all seen these kinds of FDA interventions eventually take a significant bite out of their revenues as products are kept off the market and costs for fixing problems mount.

- here's the earnings release