 "Dr Reddy's: Strong US portfolio to aid revenue growth")
Wockhardt's loss is Dr Reddy's gain. The Hyderabad-based company which has one of the strongest drug portfolios in the US market is expected to make gains after Wockhardt's Chikalthana plant was placed under a import alert. The stock was up 1.15% due to expected gains from supply issues at Wockhardt as well as a strong US portfolio. While the big gains could come from Toprol, a limited competition product used in treating hypertension, the company also stands to gain from Lamictal (epilepsy drug) as well as Prevacid (heartburn).
Given the import alert and Wockhardt not being able to supply Toprol, Actavis, Mylan and Dr Reddy's will be the beneficiaries of the over $250-300 million product. Dr Reddy's which has a 13% share could take a piece of Wockhardt's $120 million sales from the product. Prashant Nair of Citi Research believes that if Wockhardt's share gets evenly divided among the three players even without assuming any pricing power, it could translate in a $40 million incremental and higher profitable revenues which would translate to 5-6% sales from the product for Dr Reddy's. The research firm has a buy on the company with a target price of Rs 3,145.
Kotak Institutional Securities analyst Krishna Prasad says that while Dr Reddy's ramp up in in Toprol-XL has been below expectations given competitive dyanmics and price erosion, the exit of Wockhardt could help Dr Reddy's gain additional market share. The research firm which has identified Dr Reddy's as the top pick in the pharma space believes that the company will be able to sustain its sales momentum in the US market for the rest of the current fiscal.
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In addition to the recent limited competition launches such as Dacogen and Vidaza (to treat cancer), the company has seen additional upsides due to issues with its competitors. there have also been additional upsides due to supply issues from competition. “Dr. Reddy’s has been the prime beneficiary of the US FDA issues for Wockhardt in Lamictal XR and Divalproex XR (tab),” he says. While Vidaza sales were modest, Dacogen saw sales of $22 million in the September quarter.
A upside for Dr Reddy's comes from the fact that a large part of its US sales going ahead will come from limited competition, high margin-products. Prasad believes that between 51-52% of its FY14 and FY15 estimated sales in the US will come from products which have limited competition. The same in FY10 was 15% jumping to 43% in FY13. Of the 206 abbreviated new drug applications filed 62 are yet to get the US FDA approval. Of this 9 are are first to files which could give the company rights to market the drugs with limited competition for a 6-month period. The research firm has a target price of Rs 2,700.