Monday, January 31, 2011

Allegara OTC Approval - Potential EPS impact for Reddy`s

Allegra D-24 approval for Dr. Reddy`s generic version has come in very timelY. The branded sales for Allegra D-24 is $180m in the US. As Dr. Reddy`s would be sole generic player, EPS for the upcoming quarter should be positively impacted by this launch, but the extent of impact depends on the amount of existing inventory for Allegra D-24, that Reddy`s currenlty holds. The company has disclosed that it would just sell the existing inventory in hand and would not manufacture additional quantities. The company has expressed so, because it is also planning to go for an OTC switch for its D-24 version and an application would be submitted in the next two months. Allegra D-24 OTC if approved would be the second OTC in market for Dr. Reddy`s after omeprazole. In case Dr. Reddy is able to get a 20% share in the OTC market, the valule of the opportunity on an NPV basis should translate in Rs. 50 per share.

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