Dr Reddy’s Lab shares surge on Russia covid vaccine agreement

Shares of Dr Reddy’s Laboratories today surged over 4% after the drugmaker and Russian Direct Investment Fund (RDIF) agreed to cooperate on clinical trials and distribution of Sputnik V vaccine in India. Upon regulatory approval in India, RDIF shall supply to Dr. Reddys 100 million doses of the vaccine.

The stock jumped 4.24 per cent to close at 4,631.55 on the BSE. On the NSE, it closed 4.17 per cent higher at 4,442.35.

On August 11, the Sputnik V vaccine developed by the Gamaleya National Research Institute of Epidemiology and Microbiology was registered by the Ministry of Health of Russia and became the world’s first registered vaccine against COVID-19 based on the human adenoviral vectors platform.

“Dr Reddys’ would carry out Phase 3 trials in India and, once approved, we understand opportunity can be large and result in one time revenue gain (if trials successful); albeit, there is no certainty on trial outcome and more importantly pricing would be keenly watched by govt. We note several vaccine efforts are underway globally and Sputnik would be likely one amongst several competing candidates,” Bhavesh Gandhi, Lead Analyst – Institutional Equities of Yes Securities.

Deliveries could potentially begin in late 2020 subject to completion of successful trials and registration of the vaccine by regulatory authorities in India, the statement added.

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The statement, however, did not provide any financial details of the agreement between the partners.

The Sputnik V vaccine is undergoing clinical trials for the coronavirus pandemic, it said.

“We are very pleased to partner with Dr. Reddy’s in India… India is amongst most severely impacted countries from COVID-19 and we believe our human adenovirus dual vector platform will provide a safe and scientifically validated option to India in the battle against COVID 19,” RDIF CEO Kirill Dmitriev said.

Dr Reddy’s Laboratories Co-Chairman and MD G V Prasad said that the company is pleased to partner with RDIF to bring the vaccine to India. The Phase I and II clinical trials have shown promising results.

“We will be conducting Phase-III trials in India to ensure safety and efficacy for the Indian population and to meet the requirements of the Indian regulators. Sputnik V vaccine could provide a credible option in our fight against COVID 19 in India,” he added.

HDFC Securities had earlier this week upgraded Dr Reddy’s to add, saying that growth visibility of the US business has improved with the strong momentum of new launches (12 launches in YTD FY21) including niche ones such as gCiprodex (first to market).

“The dependence of gCopaxone and gNuvaring on FY22 earnings reduces with the new product flow and favourable ruling of gVascepa (now in our estimates). Structural tailwinds in the API business (15% of revenues) will lead to double digit growth over the next few years. We increase our EPS forecast by 7-8% for FY21/22 to factor gVascepa launch and our target multiple to 22x (from 20x earlier) to factor improved visibility in the US and API business,” the brokerage said. (With Agency Inputs)

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