Goldman Sachs has started Dr.Reddy's Laboratories Ltd (ADR) RDY with a Neutral rating and its price target of Rs.3,334.00 represents an upside of 8 percent.
"[W]e believe upside from current levels will depend more on when the company can resolve cGMP issues at warning letter plants (Srikakulam, Miryalaguda, Duvvuda; 12%-15% of FY16E sales), than on its pipeline in which launches have been consequently delayed," analyst Shyam Srinivasan wrote in a note.
Notably, the analyst said the company's key products like gXeloda, gCopaxone and gGleevec (accounting for 4 percent of FY16E-FY19E sales), will now launch later than originally expected. According to Srinivasan, gGLEEVEC, gXELODA, gZEVAVOD, gDIPRIVAN should collectively contribute above US$160 million in sales over FY17-FY18.
Though the analyst is encouraged by the recent in-licensing of Ph II psoriasis molecule XP23829, he said "there remain more hurdles to cross before commercialization, which should take at least two years from now, in a best-case scenario."
Moreover, the warning letter on the plants remains a key overhang on the stock, and the analyst said he expects a resolution could take until late FY17.
ADRs of Dr.Reddy's were down 1.73 percent to $44.81.
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