Date:15/05/2007 URL: http://www.thehindubusinessline.com/2007/05/15/stories/2007051503881500.htm

Spate of bad news brings Dr Reddy's scrip down

Our Bureau

Mumbai May 14 Dr Reddy's Laboratories had a spate of bad news over the weekend, with two cases in the US not going in its favour.

A double legal blow was dealt on the Hyderabad-based company, with a US court ruling upholding an Eisai patent on its ulcer drug Aciphex, thus blocking generics from challengers such as Dr Reddy's and Israel's Teva Pharmaceutical Industries.

And though both companies have indicated that they would review the ruling and then act, Dr Reddy's shares fell as much 5.2 per cent on the BSE.

Court rulings

Aciphex is the brand name under which rabeprazole is sold and the drug has annual sales of about $1.3 billion. The product's patent is set to expire on May 8, 2013, unless the generic challengers are able to shorten that period of exclusivity. Japan-based Eisai co-promotes the drug with Johnson & Johnson (J&J).

In another case, J&J won a court ruling that blocked Mylan Pharmaceuticals Inc from selling a generic version of its schizophrenia treatment Risperdal until June 2008. Dr Reddy's too had challenged the validity of J&J's patent.

Given the latest development, Dr Reddy's would have to put off the launch of the generic copy of this drug till later next year, an analyst said. Risperdal had clocked revenues of over $4 billion and more than half of this was in the US.

Concern

Dr Reddy's shares closed on the BSE at Rs 651.25, down 4.71 per cent. An analyst indicated that 5.79 lakh shares had been traded on the BSE on Monday, over three times the weekly average of shares traded. This indicated concern in the market on the earnings potential of the company's strategy to challenge patents, an analyst said.

Investors are also concerned about another development, where the company terminated a 15-year exclusive marketing agreement with US food supplement company Leiner Health Products. With Dr Reddy's looking to develop and market over-the-counter product in the US directly, Leiner is reportedly set to sue the company for the premature termination of the agreement.