Dr Reddy's falls 5% as rival firm beats Co to US FDA approval for EluRyng

Shares of Dr Reddy’s Laboratories slipped 5 per cent to Rs 2,773 on the National Stock Exchange (NSE) on Friday after rival firm Amneal Pharma received Abbreviated New Drug Application (ANDA) approval for generic birth-control product NuvaRing from the US Food and Drug Administration (US FDA). The stock was the biggest loser among the Nifty 50 pack in an otherwise strong market.

Amneal said on Thursday that it has initiated commercialisation activities for EluRyng, which is being manufactured internally. NuvaRing US annual sales for the 12 months ended October 31, 2019 were approximately $976 million, according to IQVIA, a leading healthcare data and analytics provider.

Besides Amneal, Mayne Pharma and Dr.Reddy's Labs had applied for the licence to launch the first generic drug in the US Teva.

Analyst at Antique Stock Broking said, Dr.Reddy's (4QFY21 launch assumed) being one of the 4 filers in gNuvaring is now likely to be 12 months behind Amneal and 8-10 months behind Teva, in our view.

"While the Amneal launch is a negative, we believe the inherent drug device complexity is likely to keep competition to 4-5 players in the next couple of years. As a result, we see NuvaRing market to be in the range of USD 220-280 million in FY22 (assuming 60-70 per cent price erosion) making it an attractive market for late-entrants," the brokerage firm said in event update.

The analysts, however, remain positive on the stock on the back of a fast growing domestic franchise, improving quality of US launches (Vitamin K1, Hemabate, Zenatane, bortezomib), high-quality EM business, strong cost control and a leaner balance sheet. The brokerage firm maintains ‘buy’ rating on the stock with a target price of Rs 3,100 per share.

At 01:15 pm, Dr Reddy’s recovered its partial losses and was trading 3 per cent lower at Rs 2,818 on the NSE. In comparison, the benchmark Nifty50 index was up 0.86 per cent at 12,074 points.

PSAI segment decline pulls down Dr Reddy's Q1 show

Dr Reddy’s below than expected performance for the June quarter was led by a temporary disruption in the manufacturing of the active ingredient. Pharmaceutical services and Active Ingredients (PSAI) segment reported a 10 per cent decline in sales on a year-on-year basis and 33 per cent sequentially. The management, however, said that segments sales would normalize in the September quarter.

Global Generics sales grew 8 per cent year-on-year and 9 per cent sequentially. India and Emerging markets contributed well to the growth momentum. The North American sales (43 per cent of overall) though grew three percent year-on-year however was on a large base too. Nevertheless, the 9 per cent sequential improvement was impressive, said analysts. 

The company is also streamlining its product portfolio to focus only on limited competition and niche products. It had sold some proprietary products recently and will continue getting royalties. During the quarter, the company launched five new products (antibiotics Daptomycin and Tobramycin, Vitamin K & OTC calcium carbonate along with hormone Testosterone gel) and re-launched acne treatment lsotretinoin during the quarter.

The company is also concentrating its efforts on domestic sales and a strong 15 per cent year-on-year growth (higher than Industry growth) is impressive. This was driven by volume traction and improved realizations in base business and new product launches. While India contributed about 18 per cent to overall, Emerging markets (fifth of overall) too reported a strong 10 per cent growth.

The company's revenues at Rs 3843.5 crore though up 3 per cent year-on-year came lower than consensus analysts estimates of Rs 4004 crore as indicated by Bloomberg. The company’s earnings were driven by oncology products Revlimid settlement income of Rs 345 crore.

The company continues to impress with improved free cash flows and sequential improvement in profitability, say analysts. Approval for key products will act as a catalyst, they added.