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Srividhya Sivakumar

BL Research Bureau

With the decks cleared for Dr Reddy's to launch the generic version of Sanofi-Aventis' anti-allergy drug Allegra D24, it opens up a sizeable opportunity for the company and could lift its FY12 earnings.

This follows the US District Court of New Jersey lifting an earlier motion for a preliminary injunction against it.

Incidentally, Dr Reddy's had in March 2010 received the US FDA's approval to make and sell generic Allegra D-24. It was, however, restrained by the US Court following the filing of a preliminary injunction by Sanofi-Aventis and Albany Molecular Research in June 2010.

While Sanofi would most likely appeal this decision, it nevertheless opens up a good revenue opportunity for DRL. Dr Reddy's has the first-to-file exclusivity position on this $150-million (about Rs 700 crore) market-sized drug. An immediate launch of the generic can provide DRL potential revenue of $30-35 million in FY12. This would translate into an upside of Rs 5-6 in earnings per share in FY12.

That the Court has also ordered Sanofi-Aventis and Albany Molecular Research to pay Dr Reddy's $40 million (about Rs 180 crore) towards the possibility that the injunction had been wrongfully granted may also add to DRL's coffers.

Prospects of incremental earnings helped the stock price close 3.7 per cent higher at Rs 1,625 on Monday.

The way forward for Dr Reddy's may not be without challenges and could even be short-lived. Sanofi, which has recently obtained FDA's approval to launch the OTC version of its drug from March 2011, may change the market dynamics when it makes the OTC switch.

While DRL will have the benefit of a first-mover in this space — in case of an immediate launch — it will remain to be seen what strategy Sanofi adopts for its OTC version. Besides, Perrigo too is in line to launch its OTC Allegra product.

But to DRL's advantage, it may take a while before the transition from prescription to OTC is made. This will provide it with a window of ‘limited competition' to garner incremental market share. Even so, as Sanofi doesn't have any exclusivity on the OTC extension, it may probably only be a matter of time before DRL follows suit.

DRL nonetheless has a very strong product pipeline with over 74 pending abbreviated new drug applications, including 32 Para IVs and 12 FTFs. Notably, launch of the generic version of GlaxoSmithKline's antithrombotic drug Arixtra (fondaparinux) is the next most-awaited limited-competition opportunity that DRL could benefit from in coming year. The timing of its launch is, however, subject to approval.

More Stories on : Stocks | IPR | Pharmaceuticals | Dr. Reddy's Laboratories Ltd

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