The announcement is significant given that this is the first Indian molecule to reach this stage, and also due to the huge market size. However, it is early to take a call on what the gains will be for Dr Reddy’s. The HbA1c test is carried out to test blood sugar levels. The results (of test carried out on 409 patients) indicate that while Dr Reddy’s compound is better tolerated than competing drug Pioglitazone, both drugs are as effective.
The company will have to prove the superiority of its molecule over Pioglitazone, a $3 billion drug launched a decade ago in trials, if it is to have a chance of commercial launch which is estimated to be at least two years from now.
The data will now be submitted to the European and US regulatory authorities and the company will take a call on the next set of trials. Since further trials will involve a larger number of patients and hence higher costs, it is not surprising that Dr Reddy’s is looking out for a third research partner to share the cost and take the molecule to the last stage.
What’s more important is that unless the molecule clears all tests successfully, it will not result in monetary gains for the stakeholders. Also for Dr Reddy’s, a lot is expected from this molecule as the company’s other four new chemical entities (NCEs) are still in the first phase of clinical trials.
The second announcement of Dr Reddy’s is a tie-up with Indian biotechnology company Transgene Biotek to manufacture and market Orlistat, an obesity management drug. The market size for obesity management drugs accounts for $2 billion worldwide with pancreatic lipase inhibitors such as Orlistat contributing to about half of this.
Dr Reddy’s product could be one of the first generic in the category (the patent expired over six months ago) to be marketed in the US. The drug is currently sold in the US market by GlaxoSmithkline Pharma (GSK) and Roche Pharma.
Analysts say, the company’s sales for 2009-10 are likely to cross the Rs 7,000 crore mark helped by strong North American sales, including the one-off exclusivity on Sumatriptan, alliance with GSK to sell generics in emerging markets and FDA approval for over the counter drug, Omeprazole.
However, pricing pressures in the German market and the lack of product-specific triggers in the US is an area of concern. At Rs 1,185, the stock is trading 21 times its 2010-11 estimated earnings per share of Rs 57, leaving little scope for further gains.
source - business standard
Dr Reddys Laboratories (updated - 12 Jan 2010)
The share price of Dr Reddy’s Laboratories continues its northward movement, outperforming the markets and hitting all-time highs, completely immune to the vagaries of the market place. Unaffected by the volatile climate, the share price has been on the rise since March 31, gaining 35 per cent from the Rs 1,135level to the highs of Rs 1,500-levels. The shift from aspecific therapeutic areabased approach to a massmarket strategy seems to be paying.
Incrementally, it has been found that therapeutic specific products are being prescribed by generalists, say analysts at Nomura. The company is filling in the gaps in the current product portfolio and that is reflected in 62 launches in financial year 2010, from 36 launches in the previous year. Traction was also provided by the US markets. Financial results showing sustained revival in the domestic formulation business further catalysed the upside. The horror of Beta Pharma, its European arm, which dented last year’s results, seems to be over with one-ime write offs.
DRL is aggressive towards domestic growth. In the March quarter,it grew its domestic business by 26 per cent to Rs 550 crore. It plans launches of new branded formulations and further additions to its field force that had already reached 3,000 in the last quarter, more than double from the previous year. Operating margins in excess of 20 percent are expected to be maintained by the company. Due to absence of revenue from any exclusive product, the generic business reported a decline of 45 per cent in the March quarter. However, the generic business opportunity will be attractive, as blockbuster drugs worth $25-30 billion go off-patent every year over the next three years. The company has already indicated a likelihood of return on capital employed at 25 per cent and this is a significant number. Its enterprise value is 3.2 times its 200910 sales and this is considered attractive by analysts, as Sun Pharma has the same multiple at 7.9 times and Piramal’s sale to Abbot happened at almost nine times.
The mass market approach has seen the company launch aslew of products and also get revenue traction
source - business standard
Dr Reddys Laboratories (updated - 08 Jan 2010)
The Dr Reddy’s stock surged about 4 per cent since the start of the week on announcements of encouraging Phase III trials of an anti-diabetic drug and tie-up for manufacturing obesity management drug, Orlistat. On Monday, Dr Reddy’s and its research partner, Rheoscience (a subsidiary of Nordic Bioscience A/S), announced that the initial trials of phase III stage of its anti-diabetic compound, Balaglitazone is effective in reduction of HbA1C.
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The two compensated for the muted growth seen in other geographies and helped Dr Reddy’s post 25 per cent y-oygrowth in revenues at `1,870 crore. Higher other income component (up 75 per cent) and lower tax provisioning buoyed net profit by 32 per cent y-o-y to `287 crore.
The company also benefited from the restructuring of field operations and 13 new launches in the September quarter. Analysts reckon DRL’s increasing rural penetration will be a key growth driver. Analysts at Emkay estimate the domestic business to grow to `1,570 crore by 2012-13. The Russian and CIS revenue growth is also likely to be strong, propelled by focus on launches of bio-similar products on over-thecounter segment.
DRL’s tie-up with GlaxoSmithKline Consumer Healthcare for supplying branded products in the emerging markets imparts long-term visibility to the stock. It has already started its first shipment of four products to Mexico, Brazil and has filed over 100 dossiers in various markets under this alliance.
Dr Reddy's Laboratories (updated - 27 Oct 2010)
Dr Reddy’s (DRL’s) domestic formulation business, which was subdued for quite some time, marked 25 per cent year-onyear (y-o-y) growth at `252 crore in the September quarter. The Russia/Commonwealth of Independent States (CIS) business also put up a good show, growing 17 per cent to `235 crore.
The full impact on revenues from this deal will be visible only in the next two-three years, say analysts. Traction in the branded formulations, the US businesses and focus on improving profitability will be key growth drivers over the next two years, states a report from Motilal Oswal.
With the selling, general and administrative expenses in beta pharma down nearly 67 per cent to ¤1.5 million per month, margins are set to expand further. For 2010-11, analysts expect the company to report an adjusted net profit of `1,293 crore (up 53.3 per cent y-oy), while revenues should rise 23.8 per cent to `8,302 crore.
The stock, at `1,651.8, trades at 24x 2010-11E and 21.6x 2011-12E core earnings.
source - business standard
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Dr Reddy's Laboratories (updated - 27 Nov 2010)
Already having a deal with GlaxoSmithKline (GSK) for marketing its products in various emerging markets, Dr Reddys Laboratories (DRL) had this week inked an agreement to buy the latters oral penicillin manufacturing facility at Tennessee in the US. Though the financial terms were not disclosed, the transaction is expected to be closed within the first half of calendar 2011.
The deal marks DRLs entry into a new therapeutic segment, of penicillin-containing antibacterial generics, in the US and with manufacturing capabilities, by getting GSKs Bristol-based penicillin manufacturing units. DRLs revenues in this new segment will be boosted by the marketing rights of GSKs brands, Augmentin (Amoxicillin Clavunate) and Amoxil (Amoxicillin), that had generated $73 million (`330 crore) in 2009 in the US, as shown in IMS data. Analysts at India Infoline see this portfolio add $40 million to DRLs top line in 2011-12, with Sandoz already marketing the generics of AmoxiClav.
Last week, DRL also received success in the antiasthmatic segment. After a US court set aside the plea by AstraZeneca that markets Accolate (Zafirlukast), the Food and Drug Administration (USFDA) gave its nod to DRL for the launch of Zafirlukast generics. According to IMS Health, the 12-month sales for the medicine had, till August 31, touched $50 million ( `225 crore) in the US.
With all these events, Dr Reddys is gearing to achieve $1 billion ( `4,500 crore) sales in the US by 2012-13, as compared to $350 million in 2009-10. This would mean acompounded annual 42 per cent growth over 201013. Entry into the penicillin segment would help: the aim is to be further achieved by new launches in low-competition products as well as patent challenge ones.
The recently launched Lanzoprazole generics in the US have only three competitors and no new entrant is likely during the next 18 months. Analysts at Motilal Oswal expect the company to report a net profit of `24.9 crore in 2010-11 and `100 crore in 2011-12 from the product.
DRL plans at least one launch every year in the low competition/patent challenge segments.. In addition, it has apipeline of 12 first-to-file (FTF) opportunities that will give six months exclusivity at launch. Innovator market size of these products stands at $9 billion.
Thus, with strong prospects in the US, coupled with robust domestic formulations growth and CIS/Russia revenues, analysts at IIFL peg revenues for 2010-11 at `7,613.1 crore (up 8.3 per cent year-on-year), while the net profit is expected at `1,117.9 crore. The stock ended 0.75 per cent higher at `1,784.6 on Friday over its previous close in an overall weak market and trades at 25.5 times 2010-11 and 16.7 times 2011-12 estimated earnings.
source - business standard
