InvestorQ : What is the outlook on Dr. Reddy Labs?
swati Bakhda made post

What is the outlook on Dr. Reddy Labs?

Answer
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Dia Deshpande answered.
1 year ago


Reddy Labs based out of Hyderabad is one of the top pharma companies in India with a major exposure to the US markets and a strong position in the generics space. The company was recently in the news after it had entered into an agreement to acquire a portfolio of 42 approved, non-marketed ANDAs. ANDA is short for Abbreviated New Drug Applications in the US. These are existing formulations that go out of patent and can be manufactured at much lower cost as generics. The overall ANDA portfolio includes 30 generic inject able products which will require to be technology transferred and these are expected to be launched in one or two years. In the US currently, the total addressable market is worth $645 million which makes it a huge opportunity for Reddy Labs. However, one needs to remember that India pharma companies have been under pressure from the US Food & Drug Administration (FDA) due to questions over standards of protocol and hygiene at its factories and its testing centres.

Dr. Reddy has had traction in its favour in the last few months. The stock is perhaps the only pharma stocks that are quoting very close to its 52-week highs. Reddy Labs has rallied over 50% in the last 2 months. Even in valuation terms, the stock is quoting at around 37 times trailing earnings which is much cheaper than the industry average P/E. In terms of pedigree, earnings traction and growth prospects in the US, Reddy Labs makes a good Buy case for medium to long term investors.