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Dr. Reddy's Laboratories Ltd. (RDY - Snapshot Report) recently announced that it has launched its generic version of Merck & Co., Inc.’s (MRK - Analyst Report) Clarinex Reditabs (desloratadine 2.5 mg and 5 mg) in the US.

Clarinex Reditabs is indicated for the treatment of seasonal allergic rhinitis, perennial allergic rhinitis and chronic idiopathic urticaria. According to IMS Health, Clarinex Reditabs generated US revenues of approximately $5.3 million for the 12 months ending Nov 2012.

Earlier this month, Dr. Reddy's also launched its generic version of Merck’s Propecia (finasteride) 1 mg. Propecia is approved for the treatment of male pattern hair loss. According to IMS Health, Propecia generated US revenues of approximately $136 million for the 12 months ending Oct 31, 2012.

We are pleased with Dr. Reddy’s geographic reach and product depth. Dr. Reddy’s also has a robust generic product pipeline. At the end of the second quarter of 2013, Dr. Reddy’s had 63 ANDAs pending approval with the FDA, of which 33 are Para IV filings and 7 are first-to-file. Dr. Reddy’s Global Generics segment revenues jumped 25% to $380 million in the second quarter of 2013. Generics revenue soared in North America (up 47%), driven by limited competition.

However, the company’s performance in Europe due to the continued economic weakness in the region remains a concern.

During the period 2017-2018, most of the large branded drugs are due to lose patent exclusivity and so we have little visibility on the growth prospects of generic companies like Dr. Reddy’s beyond that timeframe.

In view of these challenges, we see limited upside from current levels at Dr. Reddy’s. The stock carries a Zacks Rank #3 (Hold).

Other generic players in the market are Mylan Inc. (MYL - Analyst Report) and Pernix Therapeutics Holdings, Inc. , which currently hold a Zacks Rank #2 (Buy).

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