Dr. Reddy's Laboratories - Sandoz to launch Vidaza AG; enhance the competition for Dr Reddy-Still upside to Earnings in our view - Antique

Event

Sandoz has announced the US launch of azacitidine injection, an authorized generic version of Celgene's Vidaza. Dr Reddy had recently received approval for gVidaza (on 17th of September 2013). Dr Reddy till now was expected to be the sole generic player for a while, as the next filer was Teva which has filed its DMF two years after the Dr Reddy's . We were expecting the market is likely to be a two way market for ~2 years.

Background

Dr Reddy has received a final USFDA approval for azacitidine injection 100 mg/vial in US, a generic version of Celgene's Vidaza on 17th September.

According to IMS, the Vidaza brand has annual US sales of ~USD 378.5 mn. Dr Reddy became the first company to launch gVidaza. There was no patent/ exclusivity outstanding for the product and Dr Reddy's was likely to be the sole generic.

This highlighted another significant achievement by Dr Reddy's of securing for products that are challenging in terms of chemistry and not the IP battle alone.

Dr Reddy's had secured a similar exclusive approval for decitabine ( USD 260mn product) earlier in the year

Impact

Post Sandoz gVidaza AG launch, we now expect the market to be a 3 player market for two years before Teva generic launch.

The obvious implication of this is greater competition leading to slightly lower market share and higher price erosion.

We still expect our base case scenario to be intact though the possibility of Bull case scenario panning outlook diminished.(Look @ the exhibit below).

We still assume (30% Markestshare,55%EBITDA margins from the product), the earnings upside from the product can be 10% for FY15.

Source : Equity Bulls

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