Dr. Reddy’s: Positive news flow continues - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Dr. Reddy’s: Positive news flow continues

Jul 20, 2001

Dr. Reddy's case for marketing fluoxetine (Prozac) 40 mg capsules has moved in the right direction. The U.S. appeals court has rejected the original patent holders case for rehearing regarding Prozac. Meanwhile Dr. Reddy’s was also successful in tying up the final outcome of its litigation with that of Barr Labs. It may be recalled that Barr Labs has ANDA for launching 10/20 mg fluoxetine and it recently won the litigation against Eli Lilly, the original patent holder of the drug for marketing the same with six months exclusivity. While Barr case was for 10 mg / 20 mg exclusivity, Dr. Reddy’s had a similar case (for the same drug) for 40 mg dosage.

It now effectively means that Dr. Reddy would be able to market 40 mg fluoxetine capsules with six-month exclusivity. It would be first time that an Indian company would market a drug with marketing exclusivity. The potential for Dr. Reddy’s is huge given the fact that the annual branded sales for fluoxetine are in the range of US $ 275 m. It is expected that fluoxetine sales would add an incremental net profit of US $ 16-17 m for the company. Dr. Reddy’s recorded a net profit of US $ 28 m for FY01.

In another positive development, Novartis and Novo Nordisk announced an agreement on the commercialization of the company’s diabetes molecule (DRF 2725 which is out licensed to Novo Nordisk). This agreement entitles Novartis exclusive marketing rights for US, Canada and Mexico while Novo Nordisk would continue to be responsible for the development and global regulatory approval. This agreement reinforces Novo Nordisk’s confidence in the molecule and priority it is attaching to it. The royalty payment to Dr. Reddy’s that would be spread over the commercial life of the molecule (if Novo Nordisk is successful to get it to market) could be eye popping.

At the current market price of Rs 1665, the stock is trading at 47x FY01 earnings. Dr. Reddy’s strong research and ANDA pipeline is capable of giving further such pleasant surprises in future. Further, ADR funds deployment for in-organic growth could be another trigger for the stock in coming weeks. Dr. Reddy’s plans to acquire a marketing company in the US. However, we reiterate that at the current valuations, markets have built in a lot of expectations from the company. Internationally, pharma companies see drastic fall in valuations on failure of molecules, as the markets tend to discount the gains ahead of the launch. The flip side thus for Dr. Reddy’s is any negative development could trigger a steep fall in valuations.

Equitymaster requests your view! Post a comment on "Dr. Reddy’s: Positive news flow continues". Click here!


More Views on News

5 Stocks to Watch Out for Amid the Omicron Outbreak (Views On News)

Dec 3, 2021

As the new variant of Covid-19 emerges, keep an eye on these stocks.

This Stock Just Made a Historical Debut on the Exchanges (Views On News)

Nov 15, 2021

Shares of the company listed at premium of 253% from its IPO price, the highest ever.

3 Indian Pharma Companies that are Investing Big Time for the Future (Views On News)

Nov 9, 2021

In 2021, R&D of pharma companies roared to life in a never-before-seen way.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

Block Deal Disappoints Max Healthcare Shareholders. Stock Falls 6% (Views On News)

Sep 30, 2021

The divestment of 6.6% stake by the promoter is considered to be one of the largest block deals of the market.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms