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Dr Reddys launched gAllegra D24 OTC after some delay due to OTC switching strategy by
Sanofi Aventis. This launch post OTC switch could result in lower upside than expected due to
market/ pricing erosion (OTC not included in re-imbursements category, lower pricing than Rx,
competing under store brand).
Dr Reddys finally launches Allegra D24 OTC
Dr. Reddys (DRL) today launched its over-the-counter (OTC) Fexofenadine HCl and
Pseudoephedrine HCl tablets 180 /240 mg (generic (g) Allegra D24). Dr. Reddys will market the
product under store brand labels in the US market. The product is a bioequivalent version of
Sanofi-Aventis' Allegra D24 Hour extended release tablets.
Reason for the delay in launch
On 28 January 2011, the U.S. District Court of New Jersey filed a Stipulation and Order lifting an
earlier motion for preliminary injunction (PI) and clearing the sale of Dr. Reddy's generic product
version of Allegra D24 (fexofenadine hydrochloride / pseudoephedrine hydrochloride 180mg /
240mg extended release tablet), which was approved by the FDA on March 16, 2010.
However, with Sanofi-Aventis (Innovator Company) having received USFDA approvals to shift all
Allegra prescriptions (including D-24) to over the counter (OTC) on 24 January 2011, Dr Reddys'
was made to delay its generic launch of gAllegra D-24 as DRL had to seek USFDA approval
which it received on 22 June, 2011. However, DRL launch was further delayed as it awaited
approvals from the Narcotics division (both India and US).
Upside could be lower than earlier expected
With approvals in place, Dr Reddys finally launched Allegra D24 OTC - but we believe that the
upside could be lower than earlier expected due to the OTC switching strategy adopted by Sanofi
Aventis. We have estimated Rs2.7bn of revenues (Rs 1bn for FY12F) from the sale of OTC
Allegra D-24, spread over FY12- FY14F (assuming 50% price erosion and 30% market share on
branded sales of US$200m earlier recorded by Sanofi Aventis Allegra D-24 in US) in our
forecasts as core earnings. However we believe this OTC switching strategy adopted by Sanofi
Aventis could see significant market/ pricing erosion as these products are now OTC, they would not come under re-imbursements category and hence
lose market sales
Our channel checks suggest that OTC drug prices are 20-25% lower than prescription (Rx) drug.
Also, DRL generic OTC would be 20-25% cheaper than sanofi's Allegra D-24 in branded OTC
format marketed by its OTC partner Chattem vs it marketing under store brand label
We believe DRL would also have to make additional efforts in increasing OTC field force to
compete and gain reasonable market share given Chattem's (Sanofi's consumer healthcare
division in US) superior sales and marketing channels in the US. We note that DRL has some
presence in the US OTC market as it already has 6-7 (excluding omeprazole) OTC products with
annual sales of US $30m.
We have a Sell rating on Dr Reddys with TP of Rs1,360, derived by valuing its core business at
Rs1,309 (FY12F PE of 21.4x) and Para-IV pipeline at Rs51.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dr Reddys launched gAllegra D24 OTC after some delay due to OTC switching strategy by
Sanofi Aventis. This launch post OTC switch could result in lower upside than expected due to
market/ pricing erosion (OTC not included in re-imbursements category, lower pricing than Rx,
competing under store brand).
Dr Reddys finally launches Allegra D24 OTC
Dr. Reddys (DRL) today launched its over-the-counter (OTC) Fexofenadine HCl and
Pseudoephedrine HCl tablets 180 /240 mg (generic (g) Allegra D24). Dr. Reddys will market the
product under store brand labels in the US market. The product is a bioequivalent version of
Sanofi-Aventis' Allegra D24 Hour extended release tablets.
Reason for the delay in launch
On 28 January 2011, the U.S. District Court of New Jersey filed a Stipulation and Order lifting an
earlier motion for preliminary injunction (PI) and clearing the sale of Dr. Reddy's generic product
version of Allegra D24 (fexofenadine hydrochloride / pseudoephedrine hydrochloride 180mg /
240mg extended release tablet), which was approved by the FDA on March 16, 2010.
However, with Sanofi-Aventis (Innovator Company) having received USFDA approvals to shift all
Allegra prescriptions (including D-24) to over the counter (OTC) on 24 January 2011, Dr Reddys'
was made to delay its generic launch of gAllegra D-24 as DRL had to seek USFDA approval
which it received on 22 June, 2011. However, DRL launch was further delayed as it awaited
approvals from the Narcotics division (both India and US).
Upside could be lower than earlier expected
With approvals in place, Dr Reddys finally launched Allegra D24 OTC - but we believe that the
upside could be lower than earlier expected due to the OTC switching strategy adopted by Sanofi
Aventis. We have estimated Rs2.7bn of revenues (Rs 1bn for FY12F) from the sale of OTC
Allegra D-24, spread over FY12- FY14F (assuming 50% price erosion and 30% market share on
branded sales of US$200m earlier recorded by Sanofi Aventis Allegra D-24 in US) in our
forecasts as core earnings. However we believe this OTC switching strategy adopted by Sanofi
Aventis could see significant market/ pricing erosion as these products are now OTC, they would not come under re-imbursements category and hence
lose market sales
Our channel checks suggest that OTC drug prices are 20-25% lower than prescription (Rx) drug.
Also, DRL generic OTC would be 20-25% cheaper than sanofi's Allegra D-24 in branded OTC
format marketed by its OTC partner Chattem vs it marketing under store brand label
We believe DRL would also have to make additional efforts in increasing OTC field force to
compete and gain reasonable market share given Chattem's (Sanofi's consumer healthcare
division in US) superior sales and marketing channels in the US. We note that DRL has some
presence in the US OTC market as it already has 6-7 (excluding omeprazole) OTC products with
annual sales of US $30m.
We have a Sell rating on Dr Reddys with TP of Rs1,360, derived by valuing its core business at
Rs1,309 (FY12F PE of 21.4x) and Para-IV pipeline at Rs51.
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