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Here's Why You Should Add Dr. Reddy's (RDY) to Your Portfolio
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Dr. Reddy’s Laboratories (RDY - Free Report) markets generic drugs in different countries like the United States, the U.K., Germany and India, operating through three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Proprietary Products and Others.
The Global Generics business segment consists of unbranded prescription drugs along with over-the-counter drugs. It includes the operations of the company’s biologics business. The PSAI segment is composed of active pharmaceutical ingredients and custom pharmaceutical services. Finally, the Proprietary Products and Others segment involves the new chemical entities, differentiated formulations business and a dermatology specialty business.
Let’s delve deeper to discuss four reasons why adding Dr. Reddy’s stock to your portfolio may prove beneficial in 2023.
Stock Performance: Shares of Dr. Reddy’s have gained 38% compared with the industry’s 31.4% climb.
Image Source: Zacks Investment Research
Strong Generic Pipeline: RDY enjoys a strong position in the generics market. As of Jun 30, cumulatively, 85 generic filings were pending approval from the FDA (82 abbreviated new drug applications and three new drug applications). Of these 85 pending filings, 43 are Para IVs and 17 have first-to-file status.
Our estimates for revenues from the Global Generics business unit suggest a CAGR of 5.9% over the next three years.
In the first quarter of fiscal 2024, the company continued to witness positive traction in base business and recent launches in North America. The company launched eight new products in North America (six in the United States and two in Canada) in the last reported quarter and expected the momentum to continue into the upcoming quarters.
Biosimilars Market to Boost Revenues: Dr. Reddy’s has already expanded its biosimilars facility in India to meet growing demand in emerging markets. RDY launched Hervycta (trastuzumab), a biosimilar of Roche’s Herceptin in India, which was indicated for the treatment of HER2-positive cancers (early breast cancer, metastatic breast cancer and metastatic gastric cancer). The company remains focused on building a global pipeline of valued products, including several generic injectables and biosimilars.
In the first quarter of fiscal 2024, the company’s regadenoson Injection, a therapeutic equivalent generic version of Lexiscan (Regadenoson) Injection and Treprostinil Injection, a therapeutic equivalent generic version of Remodulin (treprostinil) Injection in the United States, were approved by the FDA.
Strategic Initiatives: The company is undertaking some strategic measures to combat the ongoing challenges. It plans to modernize some of its infrastructures, systematically implement its new quality management system and automate some of the critical manufacturing and quality-related processes.
To revitalize growth, Dr. Reddy’s remains focused on accelerating the development of its complex generics portfolio and is also making efforts to ensure that the approvals come in time through appropriate risk management and proactive measures to deal with possible deficiencies.
In March 2023, RDY signed a deal to divest certain non-core brands of the company in the dermatology segments to Eris Lifesciences Limited in India as part of a strategic decision to focus on strengthening its core business.
In June 2023, the company announced the launch of its new dedicated division, RGenX, to enter the trade generics business in India. This division is tasked with providing patients with access to a wider range of products and increased affordability.
Despite RDY’s prowess in the global generics market, the company faces significant rivalry due to the crowded nature of the generics market and pricing pressure in North America. Competition looms large on the company from players like Viatris, Teva, and Sandoz and Aurobindo Pharma among others. Competition is fierce as generic companies strive to be the first to launch a generic version once a brand product loses exclusivity so that it can capture a significant market share.
Additionally, Dr. Reddy’s North American base business is witnessing pricing pressures for the last few years due to increased competitive pressure on sales of some of its key generic products. In the Global Generics segment, year-over-year growth has been partially offset by a decline in revenues in Emerging Markets, which is a concern.
However, the company’s deep pipeline of generic drugs, accompanied by efforts to strengthen its position in the generic and biosimilars market, should provide the company the edge it needs over its competitors. The pending FDA filings should roll out soon in the upcoming quarters and enable Dr. Reddy’s to maintain its superiority in the market.
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JNJ beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 5.58%.
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ACST beat estimates in the last reported quarter, delivering an earnings surprise of 46.03%.
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Here's Why You Should Add Dr. Reddy's (RDY) to Your Portfolio
Dr. Reddy’s Laboratories (RDY - Free Report) markets generic drugs in different countries like the United States, the U.K., Germany and India, operating through three segments — Global Generics, Pharmaceutical Services & Active Ingredients (PSAI) and Proprietary Products and Others.
The Global Generics business segment consists of unbranded prescription drugs along with over-the-counter drugs. It includes the operations of the company’s biologics business. The PSAI segment is composed of active pharmaceutical ingredients and custom pharmaceutical services. Finally, the Proprietary Products and Others segment involves the new chemical entities, differentiated formulations business and a dermatology specialty business.
Let’s delve deeper to discuss four reasons why adding Dr. Reddy’s stock to your portfolio may prove beneficial in 2023.
Stock Performance: Shares of Dr. Reddy’s have gained 38% compared with the industry’s 31.4% climb.
Image Source: Zacks Investment Research
Strong Generic Pipeline: RDY enjoys a strong position in the generics market. As of Jun 30, cumulatively, 85 generic filings were pending approval from the FDA (82 abbreviated new drug applications and three new drug applications). Of these 85 pending filings, 43 are Para IVs and 17 have first-to-file status.
Our estimates for revenues from the Global Generics business unit suggest a CAGR of 5.9% over the next three years.
In the first quarter of fiscal 2024, the company continued to witness positive traction in base business and recent launches in North America. The company launched eight new products in North America (six in the United States and two in Canada) in the last reported quarter and expected the momentum to continue into the upcoming quarters.
Biosimilars Market to Boost Revenues: Dr. Reddy’s has already expanded its biosimilars facility in India to meet growing demand in emerging markets. RDY launched Hervycta (trastuzumab), a biosimilar of Roche’s Herceptin in India, which was indicated for the treatment of HER2-positive cancers (early breast cancer, metastatic breast cancer and metastatic gastric cancer). The company remains focused on building a global pipeline of valued products, including several generic injectables and biosimilars.
In the first quarter of fiscal 2024, the company’s regadenoson Injection, a therapeutic equivalent generic version of Lexiscan (Regadenoson) Injection and Treprostinil Injection, a therapeutic equivalent generic version of Remodulin (treprostinil) Injection in the United States, were approved by the FDA.
Strategic Initiatives: The company is undertaking some strategic measures to combat the ongoing challenges. It plans to modernize some of its infrastructures, systematically implement its new quality management system and automate some of the critical manufacturing and quality-related processes.
To revitalize growth, Dr. Reddy’s remains focused on accelerating the development of its complex generics portfolio and is also making efforts to ensure that the approvals come in time through appropriate risk management and proactive measures to deal with possible deficiencies.
In March 2023, RDY signed a deal to divest certain non-core brands of the company in the dermatology segments to Eris Lifesciences Limited in India as part of a strategic decision to focus on strengthening its core business.
In June 2023, the company announced the launch of its new dedicated division, RGenX, to enter the trade generics business in India. This division is tasked with providing patients with access to a wider range of products and increased affordability.
Despite RDY’s prowess in the global generics market, the company faces significant rivalry due to the crowded nature of the generics market and pricing pressure in North America. Competition looms large on the company from players like Viatris, Teva, and Sandoz and Aurobindo Pharma among others. Competition is fierce as generic companies strive to be the first to launch a generic version once a brand product loses exclusivity so that it can capture a significant market share.
Additionally, Dr. Reddy’s North American base business is witnessing pricing pressures for the last few years due to increased competitive pressure on sales of some of its key generic products. In the Global Generics segment, year-over-year growth has been partially offset by a decline in revenues in Emerging Markets, which is a concern.
However, the company’s deep pipeline of generic drugs, accompanied by efforts to strengthen its position in the generic and biosimilars market, should provide the company the edge it needs over its competitors. The pending FDA filings should roll out soon in the upcoming quarters and enable Dr. Reddy’s to maintain its superiority in the market.
Dr. Reddy's Laboratories Ltd Price and Consensus
Dr. Reddy's Laboratories Ltd price-consensus-chart | Dr. Reddy's Laboratories Ltd Quote
Zacks Rank & Other Stocks to Consider
Dr. Reddy’s sports a Zacks Rank #1 (Strong Buy) at present.
Some other top-ranked stocks in the pharma/biotech sector are J&J (JNJ - Free Report) , Corcept Therapeutics (CORT - Free Report) and Acasti Pharma (ACST - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 90 days, the Zacks Consensus Estimate for J&J’s 2023 earnings per share has increased from $10.67 to $10.75. During the same period, the estimate for JNJ’s 2024 earnings per share has increased from $11.01 to $11.29. Year to date, shares of JNJ have lost 1.5%.
JNJ beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 5.58%.
In the past 90 days, the Zacks Consensus Estimate for Corcept has gone up from earnings of 66 cents per share to 78 cents for 2023. The bottom-line estimate has also improved from 64 cents to 83 cents for 2024 during the same time frame. Shares of the company have rallied 50.2% year to date.
CORT’s earnings beat estimates in two of the trailing four quarters and missed the mark in the other two, delivering an average surprise of 6.99%.
In the past 90 days, the Zacks Consensus Estimate for Acasti Pharma’s 2023 loss per share has narrowed from $2.49 to $1.97. During the same period, the estimate for Acasti Pharma’s 2024 loss per share narrowed from $2.91 to $1.70. Year to date, shares of ACST have lost 28.5%.
ACST beat estimates in the last reported quarter, delivering an earnings surprise of 46.03%.