Dr. Reddy's Laboratories Ltd. share price target

Dr Reddy's reported a decent 2Q with strong performance in India (Wockhardt portfolio integration and COVID products) and US (new launches). However, lower export incentive, higher price erosion, change in product mix and adverse currency impacted gross margins (54% in 2Q vs 56% in 1Q), in line with estimates. Adjusting for the impairment charge of Rs781mn for intangibles, EBITDA margins came in line at 24.3%. Further, lower tax rate (deferred tax benefit) aided profitability at Rs7.6bn (vs our estimate of Rs5.7bn)....

The recent approval for gRevlimid could create a peak oppportunity of USD $250 mn USD $300 revenue per year during the period FY23E-FY25E. Therfore, we have increased our Target Price INR 6,200 for DRRD (PE multiple of 28x to FY23E earnings).

FY23E and, 4) gVascepa could be a near-term opportunity after receiving favorable outcome from the court with expected EPS contribution of Rs4.5/1.60/0.50 in FY21/22/23E. We incorporate benefits from new launches and roll forward our base year of valuation to FY23E (from FY22E) though maintained our assigned PE 24x, given its sustainability of improved earnings visibility led by new host of launches. Our new TP is Rs5,648 (earlier Rs4,326) with gRevlimid benefit contributing Rs262/share (assigning 1x(PE) to discounted cash flow of gRevlimid benefit over FY23E-26E). We also change...

We increase our target price to Rs5,054 to factor gRevlimid launch in FY23 and maintain our ADD rating. Key catalysts are launch of gVascepa, approval for gCopaxone and gNuvaring. Meaningful addition: Dr. Reddys settles patent litigation with Celgene (Bristol Myers Squibb) in the US for gRevlimid (USD7.6bn). The drug is indicated for multiple myeloma (cancer). As per the settlement terms, Dr. Reddys is licensed to sell volume-limited quantity after Mar 2022 and without volume-restriction after Jan 31, 2026 subject to product approval from the US FDA. While the details pertaining to launch date and market share are not disclosed, the opportunity can add an NPV of Rs384/share to our target price in a base case scenario (assuming 5-20% market share, 30-45% price erosion between FY23-26).

Dr Reddy's (DRL) has announced the settlement of its Revlimid capsules (Lenalidomide) patent litigation with Celgene [Bristol Myers Squibb (BMS)] in the US. This makes DRL the third player after Natco and Alvogen to sign a settlement agreement with the innovator for gRevlimid. Under the terms of the settlement, Celgene will provide DRL with a license to sell generic volume-limited amounts of gRevlimid capsules in the US after Natco's launch in March 2022 subject to regulatory approval. This limited volume constraint will be applicable till January 31, 2026 post which DRL will be able...

Dr Reddy's settles with BMS on multiple myeloma drug, Revlimid for a limited volume launch during FY23-26, post which the volume cap will be lifted. Dr Reddy's is the third company to settle post Natco and Alvogen, though details of the settlement term are not known yet. The key...

Dr Reddy's (DRRD) has announced a key settlement of the patent litigation with Celgene for US Revlimid (lenalidomide capsules) used to treat multiple myeloma.

We increase our EPS forecast by 7-8% for FY21/22 to factor gVascepa launch and our target multiple to 22x (from 20x earlier) to factor improved visibility in the US and API business. We upgrade Dr Reddys to ADD (from REDUCE) and increase TP to Rs4,670. The growth visibility of the US business has improved with the strong momentum of new launches (12 launches in YTD FY21) including niche ones such as gCiprodex (first to market). The dependence of gCopaxone and gNuvaring on FY22 earnings reduces with the new product flow and favourable ruling of gVascepa (now in our estimates). Structural tailwinds in the API business (15% of revenues) will lead to double digit growth over the next few years.