Setback For Dr. Reddy’s As U.S. FDA Hands Out Complete Response Letter For NuvaRing
Workers check automatic packaging of medicine tablets manufactured at Dr Reddy’s plant in Bachupally, Andra Pradesh state, India. (Photographer: Amit Bhargava/Bloomberg News)

Setback For Dr. Reddy’s As U.S. FDA Hands Out Complete Response Letter For NuvaRing

Shares of Dr. Reddy’s Laboratories Ltd. fell to their lowest in six months after the drugmaker’s plans to launch a generic version of a female contraceptive in the U.S. hit a roadblock.

In a statement on its website, the Hyderabad-based drugmaker said it has received a Complete Response Letter from the U.S. Food and Drug Administration for its version of gNuvaRing—a vaginal ring to prevent pregnancy.

While the company said it is preparing a response to the drug regulator’s letter, it did not give much clarity on how much time it would take. The FDA issues a complete response letter to an applicant if the agency determines that it will not approve the application or abbreviated application in its present form for one or more reasons.

Responding to the clarification sought by the exchanges on the BloombergQuint report, the drugmaker said it had anticipated the CRL in the “ordinary course” of business. “We do not have a practice of disclosing any CRL from U.S. FDA on any product.”

Erez Israeli, chief executive officer of Dr. Reddy’s had told BloombergQuint after first-quarter earnings that they expected some additional queries from the FDA on the drug.

Developed by Merck & Co., NuvaRing at present doesn’t have any approved generic variants in the U.S. A CLSA report pegs its market size in the country at $790 million. Along with Dr. Reddy’s, Teva Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd. and Amneal Pharmaceuticals Inc. have applied to the U.S. FDA to make the generic for the American market.

Also read: What Brokerages Have To Say About Dr. Reddy’s Q1 Results

Analysts’ Take

It’s unlikely that Dr. Reddy’s will be able to launch the NuvaRing before the middle of 2020, Citi Research’s Prasant Nair wrote in a note. The pharma analyst has reduced its price target on the stock to Rs 2,375 from Rs 2,540 factoring in the delay.

Nair has cut Dr. Reddy’s earnings per share estimates for FY20 by 8 percent and for FY21 by 6 percent.

Meanwhile, Investec’s Pharma Analyst Anshuman Gupta, too, expects an eight-12 months delay and EPS cuts for the stock. He said it also raised uncertainty around approval of the drug amid possibility of more competition.

Both Nair and Gupta said the U.S. agency’s letter contains major queries whereby further delay cannot be ruled out.

Amneal and Mayne Pharma in post-earnings conference calls highlighted that their approvals are delayed, Teva said that they expect an approval later this year. Dr. Reddy's is yet to respond to BloombergQuint's emailed queries.

Shares of Dr. Reddy’s dropped as much as 8 percent to Rs 2,351.20 apiece—its lowest since Feb. 15—after the announcement. That compares with a 2.63 percent fall in the benchmark NSE Nifty Pharma Index.

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