Dr Reddy's Laboratories: The wait for launching a key drug just got longer

Litigation issues, more competition could mean diminishing returns

From its 52-week highs at the start of December on improving outlook, the stock of Dr Reddy’s Laboratories has corrected more than 5 per cent. 

The Street remains watchful of developments related to the re-launch of blockbuster drug Subaxone generics used to counter opioid addiction and aid in pain management. 

While a favourable preliminary injunction ruling in November led to optimism about an impending launch, the company has so far not received the go-ahead. 

With the innovator expected to file a petition, the wait is expected to continue. Along with litigation-related uncertainties, the monetisation is increasingly getting pushed out into the future, which, given the danger of higher competition, could diminish the opportunity. 

Dr Reddy’s had received the US drug regulator’s approval for Suboxone generics in June 2018. 

However, it had to, soon after the launch, stop selling the drug given restraining court orders. The company did get a relief in November as a US Court of Appeals lifted the preliminary injunction blocking Dr Reddy’s from selling the blockbuster generics. 

The favourable ruling also made analysts feel that there was a higher probability of a positive outcome on the litigation front. 

“If Dr Reddy’s wins the patent litigation, it will be entitled a compensation in terms of loss in profit due to blocked sales during the injunction period,” according to analysts at Elara Capital.  

The delay also means the chance of higher competition and lower gains than earlier expected. 

 

Apart from Dr Reddy’s, Mylan had also received the USFDA’s approval to sell the drug and settled with innovator Indivior on patents. 

Even Par settled the case with Indivior for a launch on a later date. 

In addition, there are two more players Teva and Alvogen who are awaiting an opportunity to enter the market. 

Analysts say that the US appeal court verdict could open the path for Mylan’s entry, along with likely authorised generic (AG) launch from the innovator and two other players exploring their chances. 

Overall, while many may have expected gains in excess of $150 million for Dr Reddy’s in FY20, others are conservatively expecting them to be lower. Ranvir Singh at Systematix Shares expects $95 million gains for Dr Reddy’s during FY20, while Elara Capital has built in $100 million sales.