Dr Reddy's gets FDA nod to sell nausea antidote

Dr Reddy's Laboratories Ltd got approval to sell a generic copy of GlaxoSmithKline's nausea antidote Zofran in the US without other generic competition, which will help boost profit.

Dr Reddy's was allowed by the Food and Drug Administration to sell tablets of ondansetron, or generic Zofran in multiple strengths, the Hyderabad-based company said today in a statement to the Bombay Stock Exchange. Zofran is a drug used to suppress nausea caused by chemotherapy administered to cancer patients.

The US approval allows Dr Reddy's a six-month lead time during which the company has exclusive rights to sell a generic copy of the drug after which rival companies will be allowed to enter the market.

Dr Reddy's may earn about $30 million in profit after tax from its Zofran copy in the six months of exclusivity, said Rajesh Vora, an analyst with ICICI Securities Ltd. in Mumbai.

"This is big news,'' said Vora, who has a "buy'' rating on the stock. "The margins will be much better here compared with Zocor and Proscar because there's no sharing of revenue and profit with anyone.''

Dr Reddy's margins on Zocor and Proscar were lower because the company was selling Merck's product with the Whitehouse Station, New Jersey-based drugmaker's permission as a generic under a revenue sharing agreement.

Dr Reddy's shares rose Rs 5.40, or 0.7 per cent, to Rs 807.55 at the 3:30 p.m. close on the Bombay Stock Exchange.

The approval will help maintain sales and profit growth after Dr Reddy's this month started facing rivals for its version of Merck's cholesterol-lowering drug Zocor, which it sold with limited competition in the US for six months starting June.

Dr Reddy's started selling authorised versions of Proscar and Zocor after the patents of the originals expired on June 20 and June 23. Teva also sells generic Proscar and all dosages of generic Zocor other than the 80-milligram strength, which is sold by Ranbaxy Laboratories. The three companies were the only sellers of the medicines for six months before other generics were allowed.

The US Food and Drug Administration grants six months of exclusive selling rights to generic drugmakers which first challenge a patent. That's when the companies make the most money because prices plunge when other drugmakers start selling rival versions.

Zofran had global sales of $1.56 billion in 2005, of which US sales accounted for 76 per cent. The patent on Zofran expired December 24.

Dr Reddy's plans to start shipping the drug ``shortly'', it said.