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Edelweiss Financial Services has a buy call on Dr.
Reddy's Laboratories with a target price of Rs 3350.
The current market price of Dr.
Reddy's Laboratories is Rs 2,598.95.
Time period given by the brokerage is one year when Dr.
Reddy's Laboratories price can reach the defined target.
Investment rationale by the brokerage:On 20 November 2018, the US Court of Appeals for the Federal Circuit lifted a preliminary injunction that blocked Dr.
Reddy’s Laboratories (DRRD) from launching its gSuboxone film (USD800mn) at-risk.
The court said in a two-to-one ruling that “the patent in case (‘305), which was filed in April 2018, is not very different from an earlier patent (‘514) that was found not to be infringed in a separate case.” This ruling is in line with our earlier commentary, which indicated that the ‘305 patent is weak.
While DRRD can resume at-risk sales of gSuboxone and receive reimbursement from loss of sales in the form of penalties from Indivior, the underlying litigation for the ‘305 patent will continue in the interim.
Reimbursement to DRRD could be up to $70mn.
Three launch scenarios probableDRRD received the US FDA’s approval for gSuboxone in June 2018, and is the only one to have received it for all four doses, i.e.
2mg, 4mg, 8mg and 12mg.
Mylan has approval for the 8mg and 12mg doses while Teva has approval for its 505(b)(2) called Cassipa, which is a higher dose version (16mg) of Suboxone.
Indivior has been trying to shift the market to the once-monthly injectable Sublocade.
However, the latter’s uptake has been slow and there exists a possibility of an authorised generic (AG) launch.
We envisage one of the following three launch scenarios could arise:
Scenario 1: DRRD and Mylan launch at-risk together in a two-generic market; sales potential for DRRD would be about USD100mn.
Scenario 2: DRRD, Mylan and AG launch together in a three-generic market; sales potential for DRRD would be about USD60mn.
Scenario 3: DRRD, Mylan and AG launch together, followed by the eventual entry of Teva and Alvogen, in a five-generic market; sales potential for DRRD would be USD30–40mn.
gDiprivan approval adds to the charm: DRRD also received the US FDA’s approval for the generic version of Fresenius Kabi’s Diprivan (propafol).
This is an injectable with a market size of USD300mn with four approved generics – DRRD, Hospira, Sagent and Watson.
We forecast USD40–45mn in annual sales for DRRD.
