Even though other vaccines have already been launched in the country, there is likely to be strong demand for vaccine committed by Dr Reddy’s given the higher number of covid-19 cases in India
Dr Reddy's Laboratories Ltd continues to remain in the spotlight with positive news flow around the vaccine. The peer-reviewed phase-3 trial results of Russia's Sputnik V vaccine showed it to be 91.6% effective against covid-19. The probability of results showing high efficacy in Indian trials has increased with this development, say analysts. The phase III trial on 1500 volunteers in India is underway and the data is expected by March.
Dr Reddy’s had tied up with the Russian Direct Investment Fund (RDIF) for manufacturing and distributing its covid-19 vaccine – Sputnik V - in India. The successful completion of trials and regulatory approval for Sputnik-V and higher efficacy being shown now means the vaccine offers substantial growth opportunities. Even though other vaccines have already been launched in the country, there is likely to be strong demand for vaccine committed by Dr Reddy’s given the higher number of covid-19 cases in India.
For supplies of 125 million doses of Sputnik Vaccine in India, revenues could be around $625 million (assuming $5 per dose average price for government and private market) say analysts at B&K Securities India Pvt Ltd. Assuming 20% Ebitda margins the opportunity is worth $125 million at Ebitda level or 15% upside to FY22 estimated Ebitda they add.
The opportunity remains big and has improved earnings prospects of Dr Reddy’s. In another positive development company has launched Epilepsy treatment drug Sabril generics in the US. The company is also to enjoy 180-day exclusivity before competition sets in and analysts estimate the company could garner $15-20 million revenues during the exclusivity period.
Not surprising the stock has gained more than 5% during the last three trading sessions. The news flow has lifted street sentiments after the company disappointed with softer than anticipated US growth during the December quarter. Though India and Emerging Market performance remained strong, nevertheless pricing pressure in some key products in the US had led to some pressure on US sales growth during Q3. The analysts had been incorporating $10 million impact of 3QFY21 ($40 million annualized) due to higher competition. The same however is to be taken care by new opportunities emerging for the company.