Friday, Jan 2: Shares of Dr Reddy’s Laboratories slipped nearly 2% in Friday’s session after JPMorgan reiterated its ‘Underweight’ rating on the stock and set a target price of Rs 1,170, citing regulatory challenges in the company’s biosimilar pipeline.
The brokerage 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 follows a facility inspection, delaying the company’s entry into the US biosimilars market.
JPMorgan noted that while the setback does not impact near-term earnings, it postpones Dr Reddy’s opportunity to build commercial experience in the US biosimilars space ahead of key pipeline assets such as Abatacept, which the brokerage estimates could contribute around 10% of FY28 earnings.
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, underscoring persistent regulatory challenges in bringing biosimilar products to the US market.
At current levels, JPMorgan said the stock is trading at 26x and 23x price-to-earnings multiples based on its FY27 and FY28 estimates, which it views as demanding given the execution and regulatory risks.
As of the latest trade, Dr Reddy’s shares were down nearly 2% on the NSE.
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