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Upcoming triggers
Dr Reddy’s has three key triggers over the coming six months that will help the
stock perform relative to other pharma companies. While the US revenues for Dr
Reddy’s would come down in immediate quarter (as Allegra D24 goes away), we
expect branded formulations segment to sustain momentum. Authorized generic
launches of the US penicillin facility products (by Sept 2011) should also support
reported growth. Dr Reddy’s trades at attractive valuations on reported earnings in
comparison to the peer group. Maintain BUY.
Three key triggers over next six months
q We expect the stock to perform on back of three major product approvals and
launch. Each of these three products (Allegra D 24 OTC, Arixtra (fondaparinux)
and Zyprexa) would result in 5%+ upgrade to FY12 EPS.
q While the earnings in 1Q and 2QFY12 might not be as much as this quarter, we
expect strong YoY performance to be maintained. The quarterly earnings could
look even better as and when the approvals come in for above three products.
Key driver: US generics
q Revenues from North America grew 68% YoY and 24% QoQ for the quarter helped
by market share gain in Prilosec OTC, Prevacid and Allegra D 24 launch.
q While Allegra D24 will go away as the market has moved to OTC version where Dr
Reddy’s approval is awaited, we expect continued strength in the US revenues
based on ramp up in Prevacid, Prilosec OTC and Allegra OTC.
Except India, branded formulations growth sustains
q India formulations for the quarter grew only 5% YoY way below market average
due to high price discounts (bonus products) by competitors. The company
introduced 48 products during FY11 including one biosimilar.
q Branded export formulations grew 20% YoY led by strong performance in Russia
(OTC portfolio representing 25% of business there grew strongly).
q Margins were slightly lower during the quarter due to higher than expected R&D
spend. The company filed 20 ANDAs during the year higher than in FY10.
Valuations reasonable, exponential earnings growth
q Dr Reddy’s trades at reasonable valuations in comparison to some of the other
large cap pharma names and with a number of niche prospects going forward
valuations on reported basis look attractive.
q We expect c. 40% reported profit growth over FY11-13CL. Major opportunities like
Zyprexa and Geodon provide substantial uptick to FY12 profits. Approval of
fondaparinux ANDA could provide an immediate trigger.
q Authorized generic launches of the products from the US penicillin facility (by Sept
2011) should also support reported growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Upcoming triggers
Dr Reddy’s has three key triggers over the coming six months that will help the
stock perform relative to other pharma companies. While the US revenues for Dr
Reddy’s would come down in immediate quarter (as Allegra D24 goes away), we
expect branded formulations segment to sustain momentum. Authorized generic
launches of the US penicillin facility products (by Sept 2011) should also support
reported growth. Dr Reddy’s trades at attractive valuations on reported earnings in
comparison to the peer group. Maintain BUY.
Three key triggers over next six months
q We expect the stock to perform on back of three major product approvals and
launch. Each of these three products (Allegra D 24 OTC, Arixtra (fondaparinux)
and Zyprexa) would result in 5%+ upgrade to FY12 EPS.
q While the earnings in 1Q and 2QFY12 might not be as much as this quarter, we
expect strong YoY performance to be maintained. The quarterly earnings could
look even better as and when the approvals come in for above three products.
Key driver: US generics
q Revenues from North America grew 68% YoY and 24% QoQ for the quarter helped
by market share gain in Prilosec OTC, Prevacid and Allegra D 24 launch.
q While Allegra D24 will go away as the market has moved to OTC version where Dr
Reddy’s approval is awaited, we expect continued strength in the US revenues
based on ramp up in Prevacid, Prilosec OTC and Allegra OTC.
Except India, branded formulations growth sustains
q India formulations for the quarter grew only 5% YoY way below market average
due to high price discounts (bonus products) by competitors. The company
introduced 48 products during FY11 including one biosimilar.
q Branded export formulations grew 20% YoY led by strong performance in Russia
(OTC portfolio representing 25% of business there grew strongly).
q Margins were slightly lower during the quarter due to higher than expected R&D
spend. The company filed 20 ANDAs during the year higher than in FY10.
Valuations reasonable, exponential earnings growth
q Dr Reddy’s trades at reasonable valuations in comparison to some of the other
large cap pharma names and with a number of niche prospects going forward
valuations on reported basis look attractive.
q We expect c. 40% reported profit growth over FY11-13CL. Major opportunities like
Zyprexa and Geodon provide substantial uptick to FY12 profits. Approval of
fondaparinux ANDA could provide an immediate trigger.
q Authorized generic launches of the products from the US penicillin facility (by Sept
2011) should also support reported growth.
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