Based on industry sources, it appears that Wockhardts product (38% prescription share) is likely affected by its import alert. Based on the trade channel feedback, we believe current incumbents have taken a 400-800% price increase (similar to doxycycline price increase in February, 2013 benefiting Sun), which together could make the target market for Dr Reddys very lucrative.
Divalproex ER tablet market is about $193 million, of which generics is about $120 million. Assuming a 400% price increase, this could potentially be a $500 million market, and excluding rebates, about $300-350 million market opportunity.
Assuming market dynamics dont change and 10-15% market share for Dr Reddys, this could potentially be a US$30-50 miilion revenue opportunity, with high margins, on a 12 month basis. As per USFDA orange book, Cadila has ANDA approved, but doesnt seem to be active in the market.
We reiterate our overweight rating, citing steady growth outlook (India, US, RoW), longer-term growth drivers (especially complex generics), and inexpensive valuations.
Building capabilities in complex injectables, patches, topicals and bio-similars should keep multiples healthy.