Maintain 'buy' on Dr. Reddy's - TP Rs.1803 - Geojit BNP Paribas Financial Services

- Company has received US FDA approval for 25mg and 50mg strengths of generic Toprol XL.

- Toprol XL is an anti-hypertensive product with a market size of USD1.5 billion and Dr.Reddy's two strengths address 60% of the market (USD 900 million.

- Company is waiting for approval for the other two strengths of 100 mg and 200 mg.

- Toprol XL is a limited competition product with four generic competitors in the market. The price erosion so far is 50%. Company is expected to generate sales of USD20-30 million per annum for the next two years on a sustainable basis.

- Approval for Toprol XL gives further confidence of a revival in the US sales over the next three quarters after the disappointing performance in1QFY13.

- The company is looking at sales close to USD 800 million from the US in FY13 with potential upside from one or two large sized products which are yet to be disclosed.

- It seems that the approval for these products and the subsequent launch will be the key driver for the stock's performance from here on.

- Delays in key product approval for the US and pricing pressure in Russia are key risks to the target price.

Source : Equity Bulls

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