Dr Reddy’s Labs investors get heartburn after adverse ruling

Dr Reddy’s Labs investors get heartburn after adverse ruling
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First Published: Tue, May 15 2007. 12 42 AM IST
Updated: Tue, May 15 2007. 12 42 AM IST
New Delhi: Shares of Dr Reddy’s Laboratories Ltd dropped 4.71% on Monday as investors reacted to a New York judge’s ruling against the drug compa-ny’s challenge of a patent held by Japanese drug maker Eisai Co., Ltd.
The ruling meant that Dr Reddy’s will miss out on the opportunity to sell copies of the $1.3 billion (Rs5,330 crore) stomach ulcer drug,Aciphex (rabeprazole sodium), with limited competition in the US.
Dr Reddy’s and Israel’s Teva Pharmaceutical Industries on Friday lost the patent case filed against Eisai’s anti-ulcer drug Aciphex 20mg tablets. The court upheld Eisai’s patent, which expires in 2013.
The Hyderabad-based company said it was considering whether or not to appeal the court decision.
“There are several steps to deciding to launch the product and the lower court decision was one of them,” G.V. Prasad, Dr Reddy’s vice-chairman said in an email. “So, it does not result in any immediate loss of opportunity.”
Teva said it intends to appeal the ruling.
Aciphex is used for the treatment of persistent heartburn and other symptoms associated with “acid reflux” disease.
The patent case began in November 2003 when Eisai sued Teva and Dr Reddy’s on an aciphex patent challenge. Johnson & Johnson co-markets the drug with Eisai in the US.
Shares of Dr Reddy’s closed at Rs651.25 a share, down Rs32.20, on the Bombay Stock Exchange. Investors had factored in “a Rs15 per share upside (on the Eisai drug) and that is gone now,” said Rahul D. Sharma, analyst at Karvy Stock Broking Ltd.
In October last year, the same US court had given a favourable summary judgement for Teva and Dr Reddy’s, raising market expectations.
The ruling comes ahead of Dr Reddy’s quarterly results, due Friday. Analysts expect revenues of Rs1,300 crore to Rs1,420 crore and net profit in the range of Rs168 crore to Rs178 crore, helped by sales of a variant of cholesterol drug Zocor as authorized by its patent-holder Merck & Co. and a six-month exclusivity on Ondansetron, a copy of nausea drug Zofran by GlaxoSmithKline.
Meanwhile, trouble has been brewing over the Hyderabad company’s German acquisition Betapharm Arzneimittel GmbH which, at $570 million, is the largest global buy by an Indian drug maker. The government there has undertaken two rounds of price cuts for generic drugs, squeezing that unit’s profit margins.
Prasad said earlier this year that Betapharm had taken a 10-15% hit on the top line on the change in government regulations.
However, he said the benefits of the acquisition were going to start flowing into Dr Reddy’s in about 18 months by which time a lot of Betapharm manufacturing would have been shifted to India.
Y.V. Phani Raj in Hyderabad contributed to this story.
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First Published: Tue, May 15 2007. 12 42 AM IST
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