Seeking Alpha
Long only, growth at reasonable price
Profile| Send Message|
( followers)

As a continuation of my previous piece on Perrigo Company (NYSE:PRGO), the second health care company I would recommend is Dr. Reddy's Laboratories (NYSE:RDY). The company is based in India and has been a major player in the generic drug business for some time. It is not as large as TEVA (NYSE:TEVA) or Barr Pharmaceuticals (BRL) but is on the next tier down, ranking in the top 12 generic drug manufacturers in the U.S.

Dr. Reddy's products are positioned mainly against prescription pharmaceuticals. Although they produce some over-the-counter products, for the most part they cover a different segment of the market than Perrigo.

The company also conducts research on their own behalf in the areas of cancer, diabetes, metabolic disorders, and cardiovascular diseases. But their main business is creating generic products when the patents of mainstream drugs produced by the major pharmaceutical companies expire.

Overall, their pipeline looks promising with several new drugs at an advanced stage of development.

The company has over 11,000 employees worldwide. Most of their facilities are in India but they also have manufacturing operations in the U.S. and Mexico. They have over 160 products marketed in the U.S.

The stock has been constrained by a long-standing patent infringement case brought against them by AstraZeneca (NYSE:AZN). However, Dr. Reddy's recently received a favorable summary judgment ruling and since then the stock has begun to recover from the low of $7.27 reached during the March meltdown. It closed on Friday at $15.30. The added benefit of this company is that it is located in India so you can play the Indian resurgence story as a by-product of this trade.

Dr. Reddy's reported fiscal year-end results on March 31. Revenue grew by 39% over 2008 with all divisions contributing. EBITDA was up by a very healthy 50%. The company pays a small dividend (9c per share annually) but the main opportunity here lies in its continued ability to grow. To my mind, it's the right kind of company, in the right part of the world, if you're looking for ways to profit from President Obama's proposed health care revolution.

Action now: Buy.

Source: Dr. Reddy's: Benefit from Obama and India with One Stock