Dr Reddy's extends gain ; up 9% in one week

The company on Monday, December 11, announced that it has received EIR from the US drug regulator for its facility in Bachupally, Hyderabad following the audit in April

Dr Reddy’s Laboratories moved higher by 3% to Rs 2,380, gaining 9% during the week. The pharmaceutical company is the top weekly gainer among the S&P BSE Sensex stocks.

The company on Monday, December 11, 2017 announced that it has received Establishment Inspection Report (EIR) from the US drug regulator for its facility in Bachupally, Hyderabad following the audit in April. 

“We have received EIR from the US Food and Drug Administration (USFDA) on December 11, 2017 as closure of audit, for formulations manufacturing plant-3 at Bachupally, Hyderabad,” Dr Reddy’s Laboratories said in a statement.

The above-referred facility was audited by USFDA in April 2017, wherein it issued a form 483 with 11 observations.

“These observations were mostly procedural in nature, reflecting the need to improve people capabilities and strengthen documentation and laboratory systems,” Dr Reddy Lab had said.

Earlier in December 1, the company had received EIR for Miyapur facility, Hyderabad, Telangana. The audit of the said facility has been completed by USFDA in September with zero observations.

The Bachupally facility is a key plant contributing to its existing US sales. This removes the overhang of this escalating to warning letter (WL), according to analysts at JP Morgan.

The brokerage firm believe regulatory news flow around the other pending facilities (Srikakulam API, Duvvada under WL) will be a key trigger for the stock over the near term.

“Besides this, Dr. Reddy’s product pipeline does provide a pathway to grow the business with the limited-competition opportunities expected in the next 12 months with upcoming TADs/litigation outcome for the large assets another catalyst for the stock. We factor in launches of these assets in 2HFY19 and believe that, at a 16x FY19E P/E, the stock provides a good entry opportunity to play the potential upside from this pipeline,” JP Morgan said in recent report with ‘overweight’ rating on stock and target price of Rs 2,900.