Shares of Dr. Reddy’s Laboratories are expected to take a hit after the US court has stopped the company from selling the gSuboxone film (Buprenorphine and Naloxone Sublingual Film) in the US market. The company had launched this product in the US market in the last month, however had received temporary setback which got converted in prohibiting the Indian company from selling this drug in the US market until the outcome of the patent litigation related to the ‘305 patent.
Due to its size ($1.86bn for 12-month period ended April-2018), gSuboxone is an important generic drug for Dr. Reddy’s Lab. The drug, due to the recent court order, may get launched if there is a positive patent litigation outcome for Dr. Reddy’s Lab. The setback in the US however, changes the competitive scenario as there are three to four filers already on this product. Mylan and Par Pharma have settlement with Indivior (Suboxone’s innovator) while Alvogen and Teva are also seeking to launch this drug but pending for the USFDA approval.
Why is this important
With the three to four-way generic competition, the drug can become a $60-65mn product for Dr. Reddy’s Lab. If there is no generic competition to Dr. Reddy’s, sales from this generic be reach more than $100mn. Due to the court order, gSuboxone opportunity is likely to have halved for Dr. Reddy’s Lab and competition may gear up when Dr. Reddy’s finally launches its version in the US market.
Stock to be impacted
The stock, however, is expected to remain weak due to the setback in the US courts.
Dr Reddy’s Labs (CMP: Rs 2111, MCap: Rs 35,049 crs, 14.3x FY2021E P/E)