Dr. Reddy's Laboratories RDY announced that it has entered into a licensing agreement with Eisai Co., Ltd, Japan.
Per the terms of the agreement, Dr. Reddy’s will be granted exclusive worldwide development and commercialization rights (excluding Japan and Asia) for Eisai’s experimental anticancer agent, E7777. Dr Reddy’s will also have the option for rights to develop and market the agent in India.
In exchange, Eisai will be responsible for the development and marketing of E7777 in Japan and Asia and will receive milestone payments.
The companies entered into a licensing agreement to develop and maximize the value of the candidate as they believe E7777 has significant potential as an important component of systemic therapy for cutaneous T-cell lymphoma.
We note that a phase II study on E7777 in patients with cutaneous T-cell lymphoma or peripheral T-cell lymphoma is currently underway in Japan. Eisai is also planning a phase III study in patients with cutaneous T-cell lymphoma in the United States.
Dr. Reddy’s has been pretty active in entering into collaborations of late. Last week, it entered into a license agreement with XenoPort, Inc. XNPT whereby the former will be granted exclusive rights for the development and commercialization of XenoPort’s clinical-stage candidate, XP23829, for various indications in the U.S. Dr. Reddy’s plans to develop XP23829 for the treatment of moderate-to-severe chronic plaque psoriasis.
We note that Dr Reddy’s is currently facing challenging business conditions. The company’s revenues are being hurt by persisting macroeconomic issues in some territories of emerging markets (comprising Russia, The Commonwealth of Independent States, Romania and the rest of the world including Venezuela). Depreciation of the ruble is affecting sales adversely in Russia. Moreover, the Venezuelan market is still weak and will continue to dampen the top line in the upcoming quarters.
Meanwhile, fiscal 2016 has been a tepid year for the company in terms of generic launches, thereby impacting sales and increasing competitive pressure for other businesses.
Dr. Reddy’s currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Actelion Ltd ALIOF and AMAG Pharmaceuticals, Inc. AMAG. Both sport a Zacks Rank #1 (Strong Buy).
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