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Dr Reddy’s Lab shares jump 8% in 2 days as firm announces deal with Russia

Dr Reddy’s Laboratories shares have surged over 8% in the last two trading sessions nudged by the pharma company’s decision to join hands with The Russian Direct Investment Fund for the clinical trials and distribution of Sputnik V vaccine in India. On Thursday, just over an hour before closing the stock was up 3% to trade at Rs 4,774 per share. The company was already looking strong with 12 new drug launches so far this fiscal and the added benefit of partnering to manufacture and distribute the possible coronavirus vaccine in India has only boosted the stock further. With the recent surge, the stock is now up 82% from its March lows.

The Sputnik V vaccine will undergo phase three trials in India and then if successful will be sold in the country. “Deliveries could potentially begin in late 2020 subject to completion of successful trials and registration of the vaccine by regulatory authorities in India,” Dr Reddy’s said in a regulatory filing yesterday. G V Prasad, Co-Chairman & Managing Director of Dr. Reddy’s Laboratories said that the Phase I and II clinical trials have shown promising results. The pharma company could end up with 100 million doses of the vaccine upon regulatory approval.

However, apart from this Dr Reddy’s has been gaining favourable recommendation from analysts on the street. Earlier this week, HDFC Securities upgraded the stock from ‘Reduce’ to ‘Add’ with a target price of Rs 4,670 which the stock has already crossed. The firm has also seen improvements in growth prospects in the United States market. “Limited competition products such as gCiprodex, gVoltaren OTC (launched), gKuvan (settled for Oct-20 launch), gVascepa (launch likely towards end FY21) adds good growth visibility to the US revenues,” HDFC Securities said.

The brokerage firm values Dr Reddy’s at 22x FY22 EPS (from 20x earlier) to factor increased visibility of niche launches in the US and improved outlook for API business. Key risks aligned with the stock include delay in key approvals, higher price erosion in the US, adverse outcome on drug price fixing lawsuit in US, and delay in turnaround of Wockhardt portfolio.

ICICI Direct, on the other hand has a target price of Rs 5,150 per share based on its ‘Three factor model for stocks filtration’. “The stock has shown significant resilience in intermediate market corrections and no major delivery based selling was seen. The price distribution is also suggesting limited downside movements in the stock. The lowest reading for stock is in the -2% to -3% range,” ICICI Direct said. Financial Express