Stock Review: DR REDDY’S ABORATORIES

 

Dr Reddy's Laboratories' scrip jumped three per cent after the company announced it had received the US Food and Drug Administration (FDA) go-ahead to market Fondaparinux Sodium injections in the US. Approval for the drug, used in treating deep vein thrombosis, will help the company target the $340 million market. Sarabjit Kour Nangra, who tracks pharma at Angel Broking, believes the launch would generate $50 million ( `225 crore) in sales, and $25-28 million ( `112 crore) in net profit, on an annualised basis.

Dr Reddy's had filed an application to launch the generic version of the GlaxoSmithKline Pharma patented drug Arixtra (Fondaparinux Sodium ) in March 2009. The FDA approval got delayed due to the drug's complex manufacturing process involving 50 stages and large-scale synthesis.

The generic version, developed by Dr Reddy's, uses a patented process of Australiabased Alchemia. Dr Reddy's had paid the latter $1.6 million for marketing the drug in the US. The agreement between the two was further extended in July 2010, covering marketing for Europe, too. Reports indicate Dr Reddy's has spent around $20 million to develop the product.

The approved injection covers various doses of the drug in pre-filled, colour-coded, single-dose syringes, with automatic needle safety device. This will add to patient compliance, apart from being a limited competition drug, due to complexities involved in its development.

Dr Reddy's scrip had touched a low of `1,492 on June 26, due to concerns over the FDA alert on its Mexico facilities. However, analysts believe this will have a minimal impact. With positive news on US approvals, first of Fexofinadine (anti-allergic drug) and now Fondaparinux, have helped the stock gain almost 6.5 percent. A Pioneer Intermediaries report has estimated that revenues will fall by a marginal 1.1 and 1.4 per cent in FY12 and FY13, respectively. A new trigger could come from the approval of anti-psychotic drug Olanzapine, anticipated in the September quarter. Most analysts remain positive on the stock, and have a 12month consensus target of 1,769.88, which translates into a 11 per cent upside from current levels.