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| Edited By: C Chitti Pantulu |Source: |Updated: Sep 14, 2017, 04:25 PM IST
HYDERABAD: Compared with the exceptional performance in the last fiscal, Dr Reddy’s Laboratories expects its earnings expectations for this fiscal to be subdued.
However, the company could still spring some surprises given that it is sitting on a potential upside of significance from several generics. Of the 31 Para IV applications it has filed, 18 are first-to-file (FTF) challenges, totalling up to a whopping $10 billion in innovator brand sales.
GV Prasad, vice-chairman and CEO, Dr Reddy’s Laboratories, told DNA Money that much would depend on the outcome of the litigation and court decisions. One should not factor in too much from them, he added.
With the loss from the negative ruling in the challenge for Japanese company Eisai Co’s heartburn drug Achiphex still very fresh, the reaction is understandable. But the importance of potential upsides from FTFs is not lost.
The Para IVs from Dr Reddy’s include at least two of the 10 largest-selling drugs globally — including Sanofi Aventis Plavix (generic clopidogrel) which had sales of $4.8 billion in 2005.
The other generic products include Bayer’s sinusitis drug Avelox ($261 million), Jansen’s schizophrenia drug Risperdal-M, BMS’s sinusitis drug Tequin ($53 million) and most significant of all GSK’s Type II diabetes drug Avandia (Rosiglitazone).
While brokerage firm CLSA, which has given an outperform call on the scrip, said earnings will decline in this fiscal compared with last year before recovering in 2009 fiscal in the absence of significant near-term earnings triggers.
Market focus will shift to core earnings and risk from the German market, said analyst Anshu Govil at the firm. Likewise Citigroup analyst Anshu Govil felt the Street exaggerates the impact of Para IV wins/losses on valuations.
While positive for the business, these “one-offs” rarely act as more than trading triggers for the stock, he said in a report maintaining a buy call on the scrip.
The company’s well-diversified business and expanding pipeline of products/markets in each segment would drive sustained growth, he said.
Equity research firm Edelweiss, however, said it was not changing its earnings estimates for fiscal 2008 or fiscal 2009. Everybody has concerns about the German market but Dr Reddy’s has managed to address these concerns upfront, it said.
There is a possibility that betapharm, its German arm, may surprise on the positive side. We would like to wait and watch this space more closely, analysts Nimish Mehta and Amod Karanjikar said.
“At CMP of Rs 666, the stock trades at a P/E of 18.1x on our FY08E earnings with possible upside triggers from monetising of Para IVs. Hence, we maintain our ‘accumulate’ recommendation on the stock,” they said in a report.
