Dr. Reddy’s Laboratories (RDY) recently announced having entered into an agreement with JB Chemicals & Pharmaceuticals based in India to acquire the latter’s pharmaceutical prescription portfolio in Russia and other CIS (Commonwealth of Independent States) regions for about $34.85 million. Additionally, as a part of this agreement, Dr. Reddy’s will get rights to 20 branded drugs, the most important ones being Metrogyl and Jocet.
The companies also entered into a supply agreement, under which JB Chemicals will manufacture and supply the acquired products to Dr. Reddy’s.
We note that this acquisition will help Dr. Reddy’s expand its prescription, hospital and over-the-counter (OTC) portfolio in Russia & other CIS regions. The company will also gain access to several hospital products, (some being the first generic to launch) and will enter the cold and cough market with Jocet.
Last week, Dr. Reddy’s reported financial results for the first quarter fiscal 2012. For the quarter, the company posted earnings per American Depositary Share (ADS) of 33 cents compared with 28 cents per ADS posted in the year-ago quarter. Revenues amounted to $444 million during the quarter, reflecting a year-over-year increase of 18%.
Dr. Reddy’s, which reports revenues under two segments – Global Generics and Pharmaceutical Services & Active Ingredients (PSAI), experienced a 21% increase in revenues for the Global Generics segment and a 7% jump for the PSAI segment.
Moreover, during the quarter, the company launched 39 new generic products, filed 31 new product registrations, and 9 drug master files (DMF) globally. The total number of abbreviated new drug applications (ANDA) awaiting US Food and Drug Administration (FDA) approval were 76 at the end of first quarter of fiscal 2012. Of the 76 ANDAs, 36 are Para IV filings and 11 are first-to-file.
Neutral on Dr. Reddy’s
We currently have a Neutral recommendation on Dr. Reddy’s. The stock carries a Zacks #3 Rank (Hold rating) in the short run. We believe the company is in a strong position to benefit from the huge potential presented by the US generics market, as quite a few drugs are slated to lose patent exclusivity in the coming years.
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