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Dr Reddys (DRL) has tied up with Teva to market its gZyprexa 20mg exclusivity to protect market
share loss due to a possible AG launch. Teva would now market all strengths but ensure that
DRL doesn't lose out on its upside. This accounts for 20% of FY12F PAT forecasts, already
factored in, in our view.
Teva (TEVA US) in its 2Q concall yesterday stated that they have entered an agreement on
olanzapine (generic (g) zyprexa) with DRL. To recap, Teva has 'FTF' (first-to-file) rights on all
strengths except for 20mg for which DRL is the FTF.
This we believe is most likely to address the possibility of losing market share to a potential
Authorised Generic (AG) generic. Lilly (which owns branded zyprexa) said on a call on
26.7.2011 that they had not decided on an AG but did not rule out such a possibility.
We believe Teva would now market all strength of olanzapine (generic zyprexa) as it has a
superior distribution network and thus would lead to better market share. We believe that the
deal is structured in a such a manner that DRL gets a share on total profits (i.e. on all
strengths) which would be equal to the profit it might have made on selling 20mg alone -
based on mutually agreed upon assumptions.
CY10 sales of Zyprexa were US$ 2.5bn (of which 20mg was US$ 950m).
Our current forecasts factor in revenue upside of Rs5.1bn (based on 40% price erosion and
40% market share) and earnings upside of Rs2.75bn (based on 67% margin and 20% tax
rate) from this product for DRL.
We highlight that while these contribution are factored in as one-offs in our financial
estimates, it would have significant contribution on reported financials - it represents 5% and
20% of our FY12F revenues and PAT respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dr Reddys (DRL) has tied up with Teva to market its gZyprexa 20mg exclusivity to protect market
share loss due to a possible AG launch. Teva would now market all strengths but ensure that
DRL doesn't lose out on its upside. This accounts for 20% of FY12F PAT forecasts, already
factored in, in our view.
Teva (TEVA US) in its 2Q concall yesterday stated that they have entered an agreement on
olanzapine (generic (g) zyprexa) with DRL. To recap, Teva has 'FTF' (first-to-file) rights on all
strengths except for 20mg for which DRL is the FTF.
This we believe is most likely to address the possibility of losing market share to a potential
Authorised Generic (AG) generic. Lilly (which owns branded zyprexa) said on a call on
26.7.2011 that they had not decided on an AG but did not rule out such a possibility.
We believe Teva would now market all strength of olanzapine (generic zyprexa) as it has a
superior distribution network and thus would lead to better market share. We believe that the
deal is structured in a such a manner that DRL gets a share on total profits (i.e. on all
strengths) which would be equal to the profit it might have made on selling 20mg alone -
based on mutually agreed upon assumptions.
CY10 sales of Zyprexa were US$ 2.5bn (of which 20mg was US$ 950m).
Our current forecasts factor in revenue upside of Rs5.1bn (based on 40% price erosion and
40% market share) and earnings upside of Rs2.75bn (based on 67% margin and 20% tax
rate) from this product for DRL.
We highlight that while these contribution are factored in as one-offs in our financial
estimates, it would have significant contribution on reported financials - it represents 5% and
20% of our FY12F revenues and PAT respectively.
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