Dr. Reddy’s Laboratories (RDY – Snapshot Report) recently said that it completed the acquisition of GlaxoSmithKline plc’s (GSK – Analyst Report) United States oral penicillin facility along with the product portfolio. The companies had first announced the deal in November 2010.

Following the completion of the acquisition, Dr. Reddy’s will own the penicillin manufacturing site in Bristol, Tennessee, United States, and the US rights to the Augmentin and Amoxil brands. Glaxo will retain the ex-US rights to these brands.

Earlier in the week, Dr. Reddy’s was in the news for the US launch of its generic version of UCB’s (UCBJF) Xyzal. The drug is marketed in the US for the relief of symptoms associated with seasonal and perennial allergic rhinitis and the treatment of uncomplicated skin manifestations of chronic idiopathic urticaria.

The company received US Food and Drug Administration (FDA) approval for the 5 mg dosage strength of its generic version in February.

In January this year, Dr. Reddy’s reported third quarter fiscal 2011 earnings per American Depository Share (ADS) of 40 cents compared with a loss per ADS of 70 cents in the year-ago period. Higher revenues helped boost earnings.

The company reported quarterly revenues of $424 million, up 10%. Dr. Reddy’s reports revenues under two segments – Global Generics and Pharmaceutical Services & Active Ingredients (PSAI). Revenues at the Global Generics segment went up 16% (on INR basis) to $303 million, while PSAI revenues declined 5% (on INR basis) to $111 million, during the third quarter.

Our Take

We currently have a Neutral recommendation on Dr. Reddy’s. We believe the company is in a strong position to benefit from the huge potential in the US generics market, as drugs representing sales of about $75 billion are slated to lose patent exclusivity in the coming years.