Dr. Reddy's Laboratories RDY announced that it has entered into a license agreement with XenoPort, Inc. XNPT.
As per the agreement, Dr. Reddy’s will be granted exclusive U.S. rights for the development and commercialization of XenoPort’s clinical-stage candidate, XP23829, for various indications.
Dr. Reddy’s plans to develop XP23829 for the treatment of moderate-to-severe chronic plaque psoriasis. The company may also develop the candidate for relapsing forms of multiple sclerosis (MS).
In lieu of these rights, XenoPort will receive an upfront payment of $47.5 million and an additional $2.5 million for the transfer of certain clinical trial materials.
Additionally, XenoPort is eligible to receive milestone payments of up to $190 million. It will also receive up to $250 million upon the achievement of commercial milestones, along with royalty payments, based on potential net sales of XP23829 in the U.S. The company plans to initiate a registration program on XP23829 shortly.
We note that Dr Reddy’s is currently facing challenging business conditions. The company’s revenues are being hurt by persisting macroeconomic issues in some territories of emerging markets (comprising Russia, The Commonwealth of Independent States, Romania and the rest of the world including Venezuela). Depreciation of the ruble is affecting sales adversely in Russia. Moreover, the Venezuelan market is still weak and will continue to dampen the top line in the upcoming quarters.
Meanwhile, fiscal 2016 has been a tepid year for the company in terms of generic launches, thereby impacting sales and increasing competitive pressure for other businesses.
Dr. Reddy’s currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Actelion Ltd ALIOF and AMAG Pharmaceuticals, Inc. AMAG. Both sport a Zacks Rank #1 (Strong Buy).
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