Dr. Reddy’s Laboratories (RDY) recently announced the launch of three generic products in the US. The company launched the generic versions of Pfizer Inc.’s (PFE) anti-depressant, Effexor XR, Eisai Co. Ltd.’s Alzheimer’s treatment, Aricept, and Novartis AG’s (NVS) breast cancer treatment, Femara.
Dr Reddy’s abbreviated new drug application (ANDA) for the generic version of Effexor XR (venlafaxine hydrochloride extended release capsules; 37.5 mg, 75 mg and 150 mg), was approved by the US Food and Drug Application (FDA) on May 5, 2011. According to IMS Health, total US sales of Effexor XR and its generic version amounted to $2.3 billion for the twelve months ended March 31, 2011.
The company’s ANDA for the generic version of Aricept, (donepezil hydrochloride tablets; 5 mg and 10 mg), was approved by the FDA on May 31, 2011. According to IMS Health, total US sales of Aricept and its generic version amounted to $2.3 billion for the twelve months ended March 31, 2011.
Finally, Dr. Reddy’s ANDA for the generic version of Femara (letrozole tablets; 2.5 mg) was approved by the FDA on June 3, 2011. Total US sales of Femara amounted to $702 million for the twelve months ended March 31, 2011, according to IMS Health.
We believe that the launches of these generic drugs will bring in additional revenues for Dr. Reddy’s Global Generics segment, which recorded sales of $1.2 billion in fiscal 2011, reflecting a year-over-year increase of 10%.
We note that while generics revenues increased 18% in North America, 19% in Russia and other CIS (Commonwealth of Independent States) markets, and 15% in India, they deteriorated 13% in Europe in fiscal 2011. In the European market, Germany was worst hit, with a 25% drop (due to a decline in the Euro currency), partly mitigated by the rest of Europe experiencing a 27% rise.
During fiscal 2011, Dr. Reddy’s launched 135 new generic products, filed 107 new product registrations, and 56 drug master files (DMF) globally. At the end of fiscal 2011, total ANDAs awaiting FDA approval were 75, of which 37 were paragraph IV filings and 10 were first-to-file.
Our Take
We currently have a Zacks #2 Rank (short-term Buy rating) on Dr. Reddy’s. We believe the company is in a strong position to benefit from the huge potential represented by the US generics market, as drugs with sales of about $75 billion are slated to lose patent exclusivity in the coming years.
Longer-term, we have a Neutral recommendation on Dr. Reddy’s.
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