Analysts at CLSA say recent launches like Toprol XL, Zenatane and Reclast / Zometa are likely to help Dr Reddy’s report mid-teens growth in the US generics business on a large base. The US business accounts for about 45 per cent of Dr Reddy’s consolidated sales. Analysts at Kotak Securities, too, have increased their FY14/15 estimated earnings per share (EPS) by four-six per cent primarily due to higher gross margin in the PSAI (pharmaceutical services and active ingredients) segment and updated currency assumptions. They raised their target price to Rs 2,400 for the stock trading at Rs 2,164 levels. Analysts at CLSA have a target price of Rs 2,350. According to Bloomberg data, of the 12 analysts polled in June, eight have ‘buy’ ratings, while four have ‘hold’ ratings with target price ranging from Rs 2,200 to Rs 2,400.
The injectables contribution for Dr Reddy’s stood at $60-65 million in FY13 and comprised just 9-10 per cent of its US sales. However, it is likely to grow fast after the recent generic launch (in injectable form) of osteoporosis drug, Zumeta and Reclast in March-April this year. While Zumeta is a $10-15 million product, Reclast is likely to contribute around $30-40 million to Dr Reddy’s sales in FY14. The contribution from these two products itself should help Dr Reddy’s injectables segment revenues to almost double from current levels.
The company had also acquired OptoPlus, the Netherlands-based injectables major, in February 2013, which is likely to help Dr Reddy’s strengthen its injectables business. Analysts at Kotak Securities observe the acquisition of OctoPlus is likely to play a key role in accelerating the development timeline for long acting injectables and liposomal formulations. Long acting injectables are a key opportunity over the next five years and the acquisition should help the company to be among the early generic entrants.
While the company has seven known filings in the injectables segment, in the near-term the market is awaiting the launch of generic drugs for leukaemia treatment (Vidaza and Dacogen).
The company on Wednesday announced the launch of a generic drug to treat epilepsy. In a four-five players market, the product is estimated to be a $5-10 million per annum opportunity for Dr Reddy’s. The respite from competition, however, comes from the fact that Wockhardt, which had also received approvals for the launch, now may not be able to launch the product due to its Indian facilities facing US FDA issues.