Dr. Reddy's Inks Deal to Sell Neurology Branded Products

Shares of Dr. Reddy’s Laboratories Limited RDY fell about 2%, when the company announced that it has entered a definitive asset purchase agreement with Upsher-Smith Laboratories, LLC to sell its neurology branded products. Per the agreement, Dr. Reddy’s will sell its U.S. and select territory rights for Zembrace  Symtouch (sumatriptan injection) 3 mg and Tosymra (sumatriptan nasal spray) 10 mg to Upsher-Smith Laboratories, LLC, which are commercialized through its wholly-owned subsidiary, Promius Pharma, LLC.

Shares of the company have lost 1.5% year to date compared with the industry’s decline of 16.9%.

Under the agreement, Dr Reddy's will receive $70 million as upfront consideration, $40.5 million in near term milestones and additional financial considerations, including existing contractual obligation and inventory. The closing of the transaction is subject to various customary closing conditions.

Tosymra and Zembrace were designed and developed to address unmet needs of patients suffering from episodic migraine, who need options other than their current therapies.

The agreement is in sync with the company’s strategy to deliver solutions for patients' unmet needs and Upsher-Smith has established a strong presence in neurology.

In sync with its strategy to strengthen its portfolio and tocater to the unmet medical need, the company has been selling or acquiring products.

In April 2019, Dr. Reddy’s along with its subsidiaries, through its wholly-owned subsidiary Promius Pharma, LLC, announced the sale of its rights to Sernivo (betamethasone dipropionate) Spray 0.05%, and assignment of its rights to market and distribute Promiseb Topical Cream and Trianex 0.05% (Triamcinolone Acetonide Ointment, USP) in the United States to Encore Dermatology. Per the agreement, Promius Pharma is eligible to receive an upfront payment and future milestone payments, contingent upon achievement of certain commercial objectives.

In April 2019, Dr. Reddy’s entered a definitive agreement to acquire the yet-to-be-marketed portfolio of 42 non-marketed ANDAs in the United States. The portfolio includes more than 30 generic injectable products. These products will be technology transferred and ready for launch within the next two years. The deal is in sync with the company’s strategy to strengthen its portfolio in its chosen growth markets. This transaction will help the company expand its injectable products portfolio in the U.S. market and globally.

Dr. Reddy’s enjoys a strong position in the generics market. As of Mar 31, 2019, the company had 110 generic filings (107 abbreviated New Drug Applications [ANDAs] and three new drug applications) that are pending FDA approval. Of these ANDAs, 60 were Para IV filings and 34 have first-to-file status. New product launches, especially complex generics, should help drive the generics business over regular intervals.

Dr. Reddy's Laboratories Ltd Price

Dr. Reddy's Laboratories Ltd price | Dr. Reddy's Laboratories Ltd Quote

Zacks Rank and Stocks to Consider

Dr. Reddy’s currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the worth considering are Anika Therapeutics Inc. ANIK, Applied Genetics Technologies Corp. AGTC and Acorda Therapeutics Inc. ACOR. All of them carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Anika’s earnings per share estimates have moved up from $1.21 to $1.31 for 2019 and from $1.21 to $1.33 for 2020 in the past 60 days. The company delivered a positive earnings surprise in the trailing four quarters, with average beat of 72.00%.         

Applied Genetics’ loss per share estimates have narrowed from $1.25 to 1 cent for 2019 and from $2.39 to $2.15 for 2020 in the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with average beat of 83.47%.    

Acorda’s loss per share estimates have narrowed from $3.84 to $3.59 for 2019 and from $3.32 to $3.09 for 2020 in the past 60 days. The company delivered a positive earnings surprise in the trailing four quarters, with average beat of 79.32%.    

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