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Dr. Reddy's Lab (DRRD IN)
OW: Strong start to gGeodon, Seroquel generic in sight
Generics companies gain 12% share in first week of generic
launch of Geodon. Dr. Reddy’s leads with c45% share of all
generics followed by Pfizer and Lupin
Generic Seroquel launch four days away, future pipeline to
be reflected in base sales
Reiterate Overweight rating and TP of INR1,950; an Asia
Super Ten portfolio constituent
Generic companies gain 12% TRx share in first week of gGeodon launch: The latest
weekly IMS prescription data indicate that generics have a c12% share in Geodon. Dr.
Reddy’s (DRRD) has the leading prescription share with c45% of total generics followed by
Pfizer’s generic at 33% and Lupin at 22%. Although it is still too early to comment given the
generic approval only came on 2 March 2012 and only one week’s data is available for the
generics in the market, we believe DRRD is off to a good start. We have built cUSD20mn
sales from this product into our model for 4QFY12 with overall sales during the exclusivity
period of cUSD90mn (assuming a c40% share and 50% price erosion).
Next catalyst is launch of generic Seroquel on 26 March 2012: Innovator AstraZeneca
(AZN, not rated) has filed a suit against the FDA for denying citizen petitions asking for a
block on the approval of generics expected on 26 March (when paediatric exclusivity on
base patent ‘288 expires). However, we believe generic entry is likely with participation
from three companies which already have tentative approval from the FDA (Teva, DRRD
and Roxane). In its suit AZN contends that the FDA should not grant final approval to
ANDAs unless generic labels include data pertaining to the risk of hyperglycemia (high
glucose level in the blood). AZN has further argued the court should prohibit the FDA from
granting final approval until the data exclusivity pertaining to clinical trials surrounding the
Seroquel and Seroquel XR expires (2 December 2012). Additionally, it has presented cases
where the FDA has previously granted citizen petitions asking ANDAs to include the same
label as the original product. The Seroquel brand has annual US sales of cUSD3.4bn while
XR has annual sales of cUSD779mn in 2011.
Seroquel is non-FTF opportunity and so is the future pipeline: We have modelled
cUSD40mn sales from gSeroquel for Dr. Reddy’s assuming a mere 5% market share with
80% price erosion, to which we believe there could be upside if it is limited to only three
generic approvals. Unlike Zyprexa and Geodon, Seroquel is the first non-FTF (first-to-file)
opportunity this year. Future catalysts include generic launches of Lipitor, Plavix, Actos,
Propecia and Singulair. We remain Overweight on DRRD with a Sep-12 target price of
INR1,950, which is derived using 20x (in line with sector and five-year historical sector
average) Sep-13e EPS of INR96 and adding INR20 for para-IV opportunities. The key risks
are higher price erosion in upcoming big launches, a slower ramp-up in market share of
launched products and a slower recovery in the domestic formulation market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dr. Reddy's Lab (DRRD IN)
OW: Strong start to gGeodon, Seroquel generic in sight
Generics companies gain 12% share in first week of generic
launch of Geodon. Dr. Reddy’s leads with c45% share of all
generics followed by Pfizer and Lupin
Generic Seroquel launch four days away, future pipeline to
be reflected in base sales
Reiterate Overweight rating and TP of INR1,950; an Asia
Super Ten portfolio constituent
Generic companies gain 12% TRx share in first week of gGeodon launch: The latest
weekly IMS prescription data indicate that generics have a c12% share in Geodon. Dr.
Reddy’s (DRRD) has the leading prescription share with c45% of total generics followed by
Pfizer’s generic at 33% and Lupin at 22%. Although it is still too early to comment given the
generic approval only came on 2 March 2012 and only one week’s data is available for the
generics in the market, we believe DRRD is off to a good start. We have built cUSD20mn
sales from this product into our model for 4QFY12 with overall sales during the exclusivity
period of cUSD90mn (assuming a c40% share and 50% price erosion).
Next catalyst is launch of generic Seroquel on 26 March 2012: Innovator AstraZeneca
(AZN, not rated) has filed a suit against the FDA for denying citizen petitions asking for a
block on the approval of generics expected on 26 March (when paediatric exclusivity on
base patent ‘288 expires). However, we believe generic entry is likely with participation
from three companies which already have tentative approval from the FDA (Teva, DRRD
and Roxane). In its suit AZN contends that the FDA should not grant final approval to
ANDAs unless generic labels include data pertaining to the risk of hyperglycemia (high
glucose level in the blood). AZN has further argued the court should prohibit the FDA from
granting final approval until the data exclusivity pertaining to clinical trials surrounding the
Seroquel and Seroquel XR expires (2 December 2012). Additionally, it has presented cases
where the FDA has previously granted citizen petitions asking ANDAs to include the same
label as the original product. The Seroquel brand has annual US sales of cUSD3.4bn while
XR has annual sales of cUSD779mn in 2011.
Seroquel is non-FTF opportunity and so is the future pipeline: We have modelled
cUSD40mn sales from gSeroquel for Dr. Reddy’s assuming a mere 5% market share with
80% price erosion, to which we believe there could be upside if it is limited to only three
generic approvals. Unlike Zyprexa and Geodon, Seroquel is the first non-FTF (first-to-file)
opportunity this year. Future catalysts include generic launches of Lipitor, Plavix, Actos,
Propecia and Singulair. We remain Overweight on DRRD with a Sep-12 target price of
INR1,950, which is derived using 20x (in line with sector and five-year historical sector
average) Sep-13e EPS of INR96 and adding INR20 for para-IV opportunities. The key risks
are higher price erosion in upcoming big launches, a slower ramp-up in market share of
launched products and a slower recovery in the domestic formulation market.
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