Analyst Note| Soo Romanoff |
No-moat Dr. Reddy reported third-quarter results that were short of consensus expectations as tracked by FactSet. Market expectations continue to anticipate the international generic with limited capabilities to significantly outperform the overall generic market. Although management is a strong generic operator with above average gross margins, the company does not have the wherewithal to compete in a fierce market. The company is also playing catch-up through its recent acquisitions, but the market continues to evolve, and the increasing stakes require differentiation. We anticipate the company will continue to compete in the low-rung niche of the generic market. Based on the strong quarter, we have increased our fair value estimate to $35 per share from $30.