Top India Stock Pick 2007
Asian Pharmaceutical Company Listed On NYSE As RDY
Dr. Reddy's Laboratories looks to grow annual profits by over 20% during the next 5 years as worldwide sales of branded and generic drugs soar.
Rising demand for pharmaceutical products and more specifically lower-priced generic drugs are compelling trends in international trade. Generic drug sales now account for close to 60% of prescriptions written in the United States, and are expected to increase by about 15% per year.
Dr. Reddy's Laboratories
One India-based company, Dr. Reddy's Laboratories (RDY on NYSE), is uniquely positioned to benefit from accelerating revenues from its well-established branded pharmaceuticals (44% of 2006 revenues) plus the firm's ever-widening pipeline of generic drugs (17%). RDY also makes active pharmaceutical ingredients (34%) and develops biotechnology and critical care products (5%).
Dr. Reddy's operates in over 100 countries worldwide, growing its annual total revenues by 24% to U.S. $546 million in fiscal 2006.
The global pharmaceutical & drug development firm generated its revenues from:
- India (34% of total revenues in fiscal 2006)
- Europe (18%)
- North America (16%)
- Russia (15%)
- Other countries led by Israel, Turkey, Mexico, Brazil & Germany (17% ).
RDY's major research & development facilities and manufacturing plants are in India and Mexico. Worldwide marketing satellite firms can be found in India, Russia, America, the United Kingdom, Brazil and Germany.
Dr. Reddy's Growth Plans
In 2007, Dr. Reddy's plans to increase sales of its branded drugs particularly in Russia, South Africa, Brazil and China. Beyond North America and the United Kingdom, RDY has targeted Germany, Spain, Italy and France as key markets in which to expand the firm's generics footprint. Key to RDY's growth in generic drug sales was the US$580-million acquisition of Betapharm, Germany's fourth-largest generics firm, in March 2006.
RDY has over 150 outstanding drug product filings. More than half of the filings are in America, with 42 in Europe and 28 in Canada. Generics under review by the Federal Drug Administration (FDA) include versions of nausea-preventing NOFRAN and acute migraine medication Imitrex.
Global Drug Patents
India has recognized product patents since January 1, 2005 under an agreement with the World Trade Organization. Therefore, Dr. Reddy's can no longer legally copy drugs patented on or after that date for sale in India. Most analysts agree that drug product patents will also be recognized in other emerging economies.
Dr. Reddy's is prepared to excel in an international trade environment governed by drug patents. RDY continues to explore joint ventures, strategic alliances and licensing arrangements with major players in the global pharmaceutical industry.
Custom Pharmaceutical Services
In late 2005, Dr. Reddy's acquired a custom pharmaceutical services business in Mexico from industry giant Roche which specializes in active pharmaceutical ingredients. RDY plans to develop into a partner of choice for major global drug companies in need of outsourced services and products. Dr. Reddy's sees its custom pharmaceutical services growing ten-fold to about US$100 million in sales by July 2007.
Dr. Reddy's Stock On NYSE
Some experts believe that RDY's share price of US$15.25 represents a potential 30% gain to $20 within the next year or so.
Sources For This Article
This article presents independent calculations and insights based on data drawn from source material on drreddys.com. For more details, see the company's annual report.
