Dr Reddys Lab

Targeting Sputnik V import by June; to be priced at $10 – Dr Reddy’s Lab

Update on the Indian Equity Market:

On Thursday, the Nifty index ended with gains of 0.8% at 14,406 levels led by Metals and Financials. Within NIFTY50, WIPRO (+3.5%), ICICIBANK (+3.45%), and TATASTEEL (+3.2%) were the top gainers, while SHREECEM (-2.8%), TITAN(-2.7%), and TATACONSUM (-1.9%) were the top losing stocks. Among the sectoral indices, FMCG (-0.7%), PHARMA (-0.4%) and IT (-0.2%) were the losers, and BANK (+2.2%), FINSERVICE (+2.1%) AND MEDIA (+1.9%) were the top gainers.

Targeting May end or early June for Sputnik V import; vaccine to be priced at $10, says Dr Reddy’s Lab

Excerpts of an interview with Mr. G V Prasad, Co Chairman and Managing Director, Dr Reddy’s Laboratories (DRL), aired on CNBC-TV18 dated on 20th April 2021:

  • V Prasad, Co-Chairman and MD at Dr Reddy’s Laboratories (DRL), on Tuesday, said that the target for the import of Sputnik V vaccine, against COVID-19, is May end or early June.
  • DRL is doing its best to accelerate the import and expects to get products launched in Q1FY22E. The cold chain and logistics are in place as they talk to the Russian Direct Investment Fund (RDIF) to accelerate the shipments.
  • He also mentioned that the launch of the India-made Sputnik V vaccine is likely to be in the Q2FY22E. Each manufacturer is in a different stage of the manufacturing process. But he hopes that in Q2 India will have Indian manufactured vaccine available at least from one-two players. So, overall Q2 should see the launch of the Indian vaccine.
  • Prasad clarified the pricing on the vaccine and said it would be uniform across the globe. He added that starting with the imported vaccine, the Russian organization has a uniform price of US $10 across the world. So, when it comes in, it will be priced at the same price that this product is offered anywhere else in the world.
  • The Pharma companies manufacturing the vaccines along with the government will have to come up with a price, which he hopes to be less than the imported price. He assured that the companies will not make profit out of this vaccine and expects the vaccine price not to be higher than US$10. 2 doses of vaccines are required and Mr. Prasad doesn’t think price would be an issue and people are willing to pay this price and don’t need to be subsidized.
  • Meanwhile, he welcomed the government’s announcement of liberalized and accelerated Phase 3 strategy of COVID-19 vaccination from May 1. The government said that anyone above 18 years of age will be eligible for vaccination from May 1. This announcement was a very major move by the government which will improve availability, by decentralizing the whole process, the logistics will be much better and it will be market-driven. So, he is optimistic about the way forward.
  • He believed that the private sector can now fully participate in the vaccine drive now and India will see a rise in availability. A rise in private organizations setting up vaccination centers will be seen and the imported vaccine will immediately relieve some pressure. People will also have the choice to get vaccinated with their choice of vaccines.
  • Last, he noted that there will not be any shortage of Remdesivir in the coming weeks. He said that Favipiravir is still available as it is not in much demand. He thinks there has been a significant overuse of Remdesivir. There is a gap in the market as the shortage was sudden and DRL is doing its best to improve the supply of Remdesivir and from next week onwards, they will have a good number of supplies for this product.
  • On April 5, the RDIF and drug firm Panacea Biotec had said that they had agreed to produce 100 million doses per year of Sputnik V COVID-19 vaccine in India.
  • The efficacy of Sputnik V is 91.6 percent as confirmed by the data published in the leading medical journal, Lancet. It has been registered in 59 countries globally, the statement said. The price of Sputnik V is US $10 per shot, it added.

Asset Multiplier Comments

  • Although DRL denied to comment on the profit margins expected from the vaccine and said they are not here to make profits out of this situation we feel that Pharma sector as a whole will see a high single digit or low double-digit growth in FY22E led by covid’s second wave related opportunities.
  • The increasing cases and lockdowns in major states in India will impact the market sentiment. The investors will rush back to the defensives and Pharma sector being one of them is likely to benefit.

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of DRREDDY was ₹ 5,200 as of 22-April-2021. It traded at 26x/ 22x the consensus EPS estimate of ₹ 196/233 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 5,491/- implies a PE multiple of 23x on FY23E EPS of ₹233/-.


Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


Not working on Remdesivir generic; eyeing HCQ opportunity: Mr G V Prasad, Chief Executive Officer (CEO) and Co-Chairman of Dr Reddy’s Labs (DRL)

Update on the Indian Equity Market:

On Friday, NIFTY ended up 273 pts (+3.05%) above 9200 level as Reserve Bank announced a slew of liquidity-boosting measures to support the economy during the coronavirus crisis. The RBI further eased bad-loan rules, froze dividend payments by lenders and pushed banks to lend more by cutting the reverse repo rate by 25 basis points.

Among the sectoral indices, PVTBANK (7.4%), BANK (6.6%) and FIN SERVICE (5.5%) were among the top gainers while FMCG (-1.1%) and PHARMA (-0.5%) were the losers. AXISBANK (13.9%), EICHERMOT (+9.9%) and ICICIBANK (+9.7%) were the top gainers. NESTLEIND (-2.9%), HUL (-2%) and INFRATEL (-1.9%) were the top losers.

Not working on Remdesivir generic; eyeing HCQ opportunity: Mr G V Prasad, Chief Executive Officer (CEO) and Co-Chairman of Dr Reddy’s Labs (DRL) edited excerpts of an interview dated 16th April 2020:

DRL shares have risen over the past few days on speculation about the company being in the early stages of developing a generic version of anti-viral Remdesivir, owned by Gilead. The stock has risen around 32% over the last month and is at a 52-week high. Remdesivir is an experimental anti-viral drug being studied for Ebola, and in some cases, used on a compassionate ground against COVID-19.

DRL had no rights to work on a generic version of Remdesivir as Gilead still owned the patent. Prasad also said his company was not in talks with Gilead for contract manufacturing of Remdesivir, or for any licensing agreement.

DRL was looking at opportunities in other drugs which are being explored for treating COVID-19. Anti-malarial drug hydroxychloroquine or HCQS is one such. DRL is currently selling it in the US through a local partner. So far, DRL had not been selling it in India, but could look at it if there is strong demand. Besides the HCQS the company sells in the US, there is no COVID-19 drug that DRL is associated with.

DRL was facing a shortage of the active pharmaceutical ingredients (APIs) for HCQS, since its supplier is in Europe. But for the industry in general, supply was not an issue.

The other drug which is being explored as a cure for COVID-19 is ivermectin which is currently used for treating head lice. Exploring this drug as a cure for COVID-19 is at early stages with human trials not having commenced.

DRL continued to explore all non-patented drugs. Mr Prasad is of the view that for finding a cure to COVID-19, one needs to reposition existing drugs first, followed by vaccines and try novel drugs only as the last resort.

Drug repositioning is a drug development strategy predicated on the reuse of existing licensed drugs for new medical indications. According to Mr Prasad, repositioning existing drugs already might have a higher chance of success and novel drugs won’t be an immediate solution. The novel drugs being tested for COVID-19 include Gilead’s Remdesivir and Fujifilm’s influenza antiviral drug Avigan.

On manufacturing, DRL US sites and factories were functioning normally, and the staff at the offices were working from home. In India, there were some logistics issues in the initial days of the lockdown, but those have been overcome and the factories are now operating at “good” capacity.

He said the pace of approvals for its US drugs were progressing at a ‘normal’ rate. Similarly, Mr Prasad said too much should not be read into the recent spate of Establishment Inspection Reports received by multiple Indian facilities over the past few days. The EIRs received according to Mr Prasad were for the facilities which had ‘reasonably good’ inspections. For the industry as a whole, the quality of systems and level of compliance have matured resulting in these successful inspections.

On the fundamentals of the business, Mr Prasad said due to the recent disruptions, his company was slightly late in responding to the queries issued by the USFDA on their two key drugs in the US pipeline — contraceptive drug Nuvaring generic and multiple sclerosis drug Copaxone generic. They are in the process of finishing some work in order to reply to the queries on these two drugs within a few weeks. There is a renewed focus on India, Prasad said. This would not be acquisitions alone but through pipeline development and marketing as well.

Consensus Estimate: (Source: market screener, investing.com websites)

The closing price of Dr Reddy’s was ₹ 3,940/- as of 17-April-20. It traded at 34.4x/ 27x/ 23.2x the consensus EPS estimate of ₹ 112/ 143/ 167 for FY20E/ FY21E/ FY22E respectively.
Consensus target price of ₹ 3442/- implies a PE multiple of 20.6x on FY22E EPS of ₹ 167/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”