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The Zacks Analyst Blog Highlights: Dr. Reddy's Laboratories, Eli Lilly, Johnson & Johnson, Pfizer and AstraZeneca

Tue, 02/07/2012 - 4:45am
The Associated Press

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-- WITH PHOTO -- TO BUSINESS, AND HEALTH EDITORS:

The Zacks Analyst Blog Highlights: Dr. Reddy's Laboratories, Eli

Lilly, Johnson & Johnson, Pfizer and AstraZeneca

CHICAGO, Feb. 7, 2012 /PRNewswire/ -- Zacks.com announces the list of

stocks featured in the Analyst Blog. Every day the Zacks Equity

Research analysts discuss the latest news and events impacting stocks

and the financial markets. Stocks recently featured in the blog

includeDr. Reddy's Laboratories (NYSE: RDY), Eli Lilly & Co. (NYSE:

LLY), Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) and

AstraZeneca (NYSE: AZN).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free

Profit from the Pros newsletter: http://at.zacks.com/?id5513

Here are highlights from Monday's Analyst Blog:

Dr. Reddy's Going Strong

Dr. Reddy's Laboratories (NYSE: RDY) reported third quarter fiscal

2012 earnings per American Depositary Share (ADS) of 60 cents,

significantly above the year-ago earnings of 30 cents per ADS. Higher

revenues boosted earnings.

Quarter at a Glance

The company reported revenues of $522 million during the quarter,

reflecting a year-over-year increase of 46%. Dr. Reddy's reports

revenues under two segments - Global Generics and Pharmaceutical

Services & Active Ingredients (PSAI). While revenues at the Global

Generics segment jumped 57% to $402 million, PSAI revenues climbed 12%

to $105 million during the quarter.

Generics revenues soared 133% in North America, 15% in Russia and

other CIS (Commonwealth of Independent States) markets, 14% in Europe

and 11% in India. Growth was mainly driven by the launch of a generic

version of Eli Lilly & Co.'s (NYSE: LLY) Zyprexa (olanzapine) 20 mg.

Dr. Reddy's currently has 180-day marketing exclusivity for the

generic drug. Since generic Zyprexa was launched in the third quarter

of fiscal 2012, the exclusivity runs till the fourth quarter of fiscal

2012. The company expects the Generic segment revenues to benefit from

the generic launch even in the fourth quarter but not as much as in

the third quarter.

Additionally, new product launches aided Generic segment revenues and

the Pharmaceutical Services segment mainly contributed to PSAI

revenues. Both the segments gained from exchange rate fluctuation.

Gross margin at Dr. Reddy's inched up from 59% in the year-ago quarter

to 60% in the reported quarter. Gross margin improved due to higher

revenues and exchange rate fluctuation.

Selling, general and administration (SG&A) expenses amounted to $145

million, reflecting an increase of 20%. Higher freight charges,

increased manpower and exchange rate fluctuation led to the rise in

SG&A costs.

Increased research and development (R&D) activities led to a 16% surge

in R&D expenses, which came in at $29 million.

During the quarter, Dr. Reddy's launched 33 new generic products,

filed 16 new product registrations, and 7 drug master files (DMF)

globally. The total number of abbreviated new drug applications

(ANDAs) awaiting US Food and Drug Administration (FDA) approval were

79 at the end of the quarter. Of the 79 ANDAs, 40 were Para IV filings

and 10 are first-to-file.

Our Take

We currently have a Neutral recommendation on Dr. Reddy's. The stock

carries a Zacks ?2 Rank (Buy rating) in the short-run. We expect

generic Zyprexa to continue contributing to the company's revenues,

given the drug's exclusivity till the fourth quarter of fiscal 2012.

Moreover, we believe Dr. Reddy's is in a strong position to benefit

from the huge potential presented by the US generics market, as quite

a few blockbuster drugs such as Johnson & Johnson's (NYSE: JNJ)

Concerta and Pfizer Inc.'s (NYSE: PFE) Lipitor have lost patent

exclusivity and more drugs are slated to go off-patent in the coming

years.

AstraZeneca Beats by a Whisker

AstraZeneca (NYSE: AZN) reported fourth-quarter 2011 core adjusted

earnings of $1.61 per American Depositary Share ("ADS"), a penny above

the Zacks Consensus Estimate of $1.60. Earnings were up 12% (at

constant exchange rates CER) year over year, benefiting from share

repurchases, lower tax rate and lower net finance expense.

AstraZeneca's quarterly revenues remained flat (at CER) year over year

at $8.7 billion, owing to intense generic competition and government

price interventions. However, revenues were just above the Zacks

Consensus Estimate of $8.6 billion.

Full year earnings came in at $7.28 per share, ahead of the Zacks

Consensus Estimate of $7.25 and 7% (at CER) above the year-ago

earnings. Full year revenues fell 2% (at CER) to $33.6 billion, just

above the Zacks Consensus Estimate of $33.5 billion.

All growth rates mentioned below are on a year-on-year basis and at

constant exchange rates.

Neutral on AstraZeneca

We currently have a Neutral recommendation on AstraZeneca. The stock

carries a Zacks ?3 Rank (Hold rating) in the short run. Even though we

are encouraged by the strong cardiovascular franchise at AstraZeneca

and the company's focus on the high-potential emerging markets, we

remain concerned about the generic competition faced by its key

products. The company is looking to lessen the impact of

genericization by reducing its cost structure through restructuring

initiatives.

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SOURCE Zacks Investment Research, Inc.

-0- 02/07/2012

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