Shares of Dr. Reddy’s Laboratories are in focus today, Friday, after JPMorgan maintained an ‘Underweight’ rating on the stock with a target price of Rs 1,170, citing continued regulatory challenges in the company’s US biosimilars portfolio.
JPMorgan highlighted that Dr. Reddy’s has received a Complete Response Letter (CRL) from the US Food and Drug Administration (USFDA) for its biosimilar Denosumab, which is being developed in partnership with Alvotech. The CRL followed a facility inspection, resulting in a delay in the approval process.
While the brokerage noted that this regulatory setback does not have a material impact on near-term earnings, it delays Dr. Reddy’s planned entry into the US biosimilars market. JPMorgan added that this also affects the company’s ability to build early commercial experience ahead of its key pipeline asset Abatacept, which contributes around 10% to its FY28 earnings estimates.
The brokerage also pointed out that this is not the first regulatory hurdle for Dr. Reddy’s biosimilar portfolio. The company had earlier received a CRL for its biosimilar Rituximab in April 2024, underlining the persistent regulatory risks associated with bringing biosimilar assets to the US market.
At current levels, Dr. Reddy’s Laboratories trades at around 26x FY27 and 23x FY28 price-to-earnings, based on JPMorgan’s estimates.
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