Dr Reddy’s Laboratories (DRL) has disclosed that it has made three NDA filings with the US FDA, more than its earlier indications for 1-2 NDA filings by end-FY15. Unlike ANDAs, the timeline for approval of NDAs is shorter, hence approval can come through in around 18 months.
Therefore, these products can potentially be launched in FY17F. DRL’s new drug development efforts are geared towards new formulations of existing molecules and not new molecules. Thus, there is less regulatory risk and relatively more clarity on market potential. Some of these products may earn limited exclusivity period. DRL had earlier disclosed that each of its NDAs that are under development have peak revenue potential of $30-300 million. We believe peak sales could take 2-5 years to achieve as they need to be promoted. DRL has a sales force of 40 in the US, which may be increased to promote migraine/neurology products. DRL has 8-9 additional products (NDAs) under development/clinical trials.
DRL is one of the largest spenders on R&D at 11-12% of sales. Almost 40-45% of the R&D spend is on new products (NDAs) and biosimilars.
Given low visibility, the market is not attributing any significant value for these investments. This development is not likely to have any material impact in the near term, although clarity on the pipeline could help to expand the P/E multiple, in our view.