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Dr Reddy’s Lab (DRRD)
OW: US generics pipeline is underestimated
US sales to remain robust in lieu of blockbuster generic
launches in FY13e, and sustain y-o-y growth on base sales
(excluding FTF) beyond
US to form one-third sales in USD2.7bn guidance in FY13e
(cUSD900m). Execution in large generics to play a big role
Russia outlook intact, bulk business set to be strong in
FY13. Reiterate OW with unchanged TP of INR1,950. An Asia
Super Ten portfolio stock
Company confident of close to USD2.7bn sales in FY13e: We met the management of
Dr Reddy’s recently to get a better sense of opportunities in the US beyond the “patent
cliff”. We remain excited about the product pipeline in the US, which includes a slew of
limited competition opportunities over the next nine months. With 1HFY12 turnover at
cUSD900m and stronger than expected 2HFY12 (contribution from generic Zyprexa),
overall sales are expected to cross USD2bn. We forecast US sales of USD950m and
USD840m in FY13 and FY14 respectively.
US base revenues to grow sequentially in FY14e: Management is confident of
sequential y-o-y growth in base revenues in FY14 on the back of new launches that
include a healthy mix of para-III and para-IV. Despite significant competition in
blockbuster generics, our US base sale (excluding contribution from FTF opportunities
including Zyprexa and Geodon) growth assumptions don’t forecast a decline y-o-y. We
believe execution of some of the large generic opportunities will play a decisive role.
Reiterate OW, preferred pick in the sector: We believe Dr Reddy’s is best positioned
to capture a large share of bolus patent expirations in 2012. With healthy market share
gains in tacrolimus, lansoprazole and recently olanzapine ODT, we remain confident of its
execution capabilities. Russia remains stable on a long-term basis and India should do
better in FY13. We value the stock at 20x Sep-13e EPS of INR96.3 plus para-IV value of
INR20 to arrive at our TP of INR1,950. Key risks include a slower recovery in India and
delays in approvals and poor execution in the US generics opportunities.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dr Reddy’s Lab (DRRD)
OW: US generics pipeline is underestimated
US sales to remain robust in lieu of blockbuster generic
launches in FY13e, and sustain y-o-y growth on base sales
(excluding FTF) beyond
US to form one-third sales in USD2.7bn guidance in FY13e
(cUSD900m). Execution in large generics to play a big role
Russia outlook intact, bulk business set to be strong in
FY13. Reiterate OW with unchanged TP of INR1,950. An Asia
Super Ten portfolio stock
Company confident of close to USD2.7bn sales in FY13e: We met the management of
Dr Reddy’s recently to get a better sense of opportunities in the US beyond the “patent
cliff”. We remain excited about the product pipeline in the US, which includes a slew of
limited competition opportunities over the next nine months. With 1HFY12 turnover at
cUSD900m and stronger than expected 2HFY12 (contribution from generic Zyprexa),
overall sales are expected to cross USD2bn. We forecast US sales of USD950m and
USD840m in FY13 and FY14 respectively.
US base revenues to grow sequentially in FY14e: Management is confident of
sequential y-o-y growth in base revenues in FY14 on the back of new launches that
include a healthy mix of para-III and para-IV. Despite significant competition in
blockbuster generics, our US base sale (excluding contribution from FTF opportunities
including Zyprexa and Geodon) growth assumptions don’t forecast a decline y-o-y. We
believe execution of some of the large generic opportunities will play a decisive role.
Reiterate OW, preferred pick in the sector: We believe Dr Reddy’s is best positioned
to capture a large share of bolus patent expirations in 2012. With healthy market share
gains in tacrolimus, lansoprazole and recently olanzapine ODT, we remain confident of its
execution capabilities. Russia remains stable on a long-term basis and India should do
better in FY13. We value the stock at 20x Sep-13e EPS of INR96.3 plus para-IV value of
INR20 to arrive at our TP of INR1,950. Key risks include a slower recovery in India and
delays in approvals and poor execution in the US generics opportunities.
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