Dr Reddy’s Lab shares hit new 52-wk high on patent suit settlement with Celgene; more than doubles in 6 months

Dr. Reddy’s Laboratories share price hit a fresh 52-week high of Rs 5,044 apiece, rising over 4.5 per cent on BSE in early trade on Friday. Yesterday, the company announced the settlement of US Revlimid® (lenalidomide) capsules patent litigation with Celgene, a Bristol Myers Squibb. So far this week, Dr. Reddy’s Laboratories shares have rallied 15.55 per cent, in comparison, S&P BSE Sensex gained just 1.14 per cent. The stock has surpassed its previous high of Rs 4,845.55, touched in the previous session. “The settlement provides better visibility to Dr. Reddy’s Laboratories. We factor Rs 270 per share as NPV based on the settlement agreements of Dr. Reddy’s Laboratories and other generic players with the innovator,” said analysts at Motilal Oswal Financial Services. The stock has more than doubled from its March low of Rs 2,497.60, surging 101.95 per cent till today’s high.

At around 9.40 AM, Dr. Reddy’s Laboratories shares were trading 4.39 per cent higher at Rs 5,038.45 apiece, as compared to a 0.35 per cent rise in BSE Sensex. The company in a BSE filing informed that in settlement of all outstanding claims in the litigation, Celgene has agreed to provide Dr. Reddy’s with a license to sell volume-limited amounts of generic lenalidomide capsules in the US beginning on a confidential date after March 2022. The agreed-upon percentages are confidential. “With limited price erosion in the base business/robust ANDA launches in the US segment, improving benefit from cost rationalization, favorable demand in the PSAI segment, and synergy benefit through the addition of the Wockhardt portfolio, Dr. Reddy’s Laboratories is well-placed to deliver a 21% earnings CAGR over FY20–22,” the brokerage firm added.

Motilal Oswal in its report highlighted that in FY20, Dr. Reddy’s Laboratories had settled the litigation with the innovator on g-Revlimid sales in Canada and received a payment of Rs 350 crore as a part of the settlement. Cipla, Sun Pharma, Lupin, Aurobindo Pharma, Cadila Healthcare, Mylan, Apotex, Eugia, and Hetero are other companies currently in patent challenges with the innovator on Revlimid. Yesterday, The Russian Direct Investment Fund (RDIF) and Dr. Reddy’s Laboratories agreed to cooperate on clinical trials and distribution of Sputnik V vaccine in India, which fuelled the up move in the stock. Upon regulatory approval in India, RDIF shall supply to Dr. Reddy’s 10 crore doses of the vaccine.