Dr Reddy’s gets to launch Allegra D-24, stock up 2.7%

Dr Reddy’s Laboratories can now launch the generic version of Allegra D-24, an extended release version of blockbuster drug Allegra. It won a key case in the US courts which will allow it to go ahead with a launch, with the possibility of a compensation being awarded by the court, but with the risk of an appeal, which could see the matter well drag on further.

The innovator company Albany Molecular Research Inc, and the license-owner for marketing the drug, Sanofi-Aventis, had filed a case in the US District Court of New Jersey in March 2010. The court granted a preliminary injunction in June, preventing Dr Reddy’s from launching the drug. That was a key disappointment for investors, as this drug was supposed to give a big boost to revenues for the company. The market size for this drug is estimated to be about $200 million or about Rs 900 crore in the US market.

Dr Reddy’s announced that the US district court had lifted its injunction and allowed the sale of the drug. And, it also said that AMRI and Sanofi-Aventis have been asked to deposit a security of $40 million with the court ‘towards the possibility that the injunction has been wrongfully granted.’ The statement also adds that since it was precluded from launching the drug since June 2010, the company will pursue the award of this security.

The first patent on Allegra D-24, whose generic name is fexofenadine hydrochloride 180 mg and pseudoephedrine 240 mg, expires only in 2014. Thus, Dr Reddy’s will be the only player in the market apart from the innovator, unless they choose to launch an authorised generic to queer the pitch. When the innovator company licenses the launch of a drug on which it holds a patent, to a third party, it is called an authorised generic. Innovator companies, at times, issue these licenses to their own generic arms too.

The Dr Reddy’s stock was up by 2.7% on Monday, at the time of posting, which is understandable, as it was down by about 4% when the news of the preliminary injunction was announced in June. The company will get a share of the $200 million market for this drug, which will add to sales, and significantly to its profits, till patent expiry.

There is only one hitch. If Sanofi-Aventis and AMRI decide to appeal this order, then litigation may drag on for a longer period, and since the outcome is uncertain, that will be a minor concern for shareholders as well.

Read the Dr Reddy’s Laboratories statement here and a statement from AMRI when the preliminary injunction was granted in June.

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