Zacks_Analysts' Blog : Dr. Reddy's, JB Chemicals End Deal - Analyst Blog

Dr. Reddy’s Laboratories (RDY) recently announced that its deal with JB Chemicals & Pharmaceuticals regarding the latter’s prescription portfolio has been mutually terminated.

According to the deal, which the companies had entered into in July 2011, Dr. Reddy’s was to acquire JB Chemicals’ pharmaceutical prescription portfolio in Russia and other CIS (Commonwealth of Independent States) regions for about $34.85 million. Additionally, as a part of this agreement, Dr. Reddy’s was to get rights to 20 branded drugs, the most important ones being Metrogyl and Jocet.

The companies had also entered into a supply agreement, under which JB Chemicals was to manufacture and supply the acquired products to Dr. Reddy’s.

We note that this acquisition would have helped Dr. Reddy’s expand its prescription, hospital and over-the-counter (OTC) portfolio in Russia & other CIS regions. The company would have also gained access to several hospital products, (some being the first generic to launch) and would have entered the cold and cough market with Jocet.

Dr. Reddy’s has been in news quite frequently lately, with the company launching the generic version of Novartis AG’s (NVS) Exelon in the US last week. The drug is available worldwide as a treatment for Alzheimer’s disease dementia and dementia associated with Parkinson's disease.

Moreover, last month, Dr. Reddy’s announced the initiation of dosing of DRL-17822 in patients suffering from dyslipidemia. The drug is being studied for the prevention or treatment of dyslipidemia, atherosclerosis and associated cardiovascular disease.

DRL-17822 is currently in a phase II study, which is being conducted in a number of countries in Europe. The study is designed to evaluate the efficacy and safety of DRL-17822 in patients with type-II dyslipidemia.

Neutral on Dr. Reddy’s

We currently have a Neutral recommendation on Dr. Reddy’s. We believe the company is in a strong position to benefit from the huge potential presented by the US generics market, as quite a few drugs are slated to lose patent exclusivity in the coming years.