Result date: 19^and May 2022
Recommendation: buy
Target Price: Rs5,000

Dr. Reddy’s Laboratories (Dr. Reddy’s) could experience 3% sequential revenue growth in the US in the March 2022 quarter. It captured ~13.5% market share in Vascepa during the quarter under review, up from ~9% in Dec 2021, i.e. its market share nearly tripled from ~4.5% in the June 2022 quarter. According to IU data, Dr. Reddy’s launched Vasostrict AG on February 22 and achieved a market share of approximately 8% in the Vasostrict injection vial market. This product will be key to US revenue growth in the quarter.

The company’s revenue could increase by 7%, EBITDA by 8% and profit after tax (PAT) by 15% compared to the year-ago quarter.

Important management information to monitor:
Generic API business insights
New launch pipeline
Likely total contribution of new launches
Strategy to gain market share

million rupees	March 2022 estimates	Annual change	QoQ change
Revenue	50,746	7%	(5)%
EBITDA	10,915	8%	(9)%
Profit after taxes	6,253	15%	(12)%

Source: IIFL Research

ELIZABETHTON — Elizabethton City Council met again Tuesday in the Electrical Department Boardroom to hold its second of three budget workshops for the 2022-23 fiscal year budget.

The board discussed a wide range of topics, including an expansion of the employee health insurance plan to include more options for family and spousal coverage.

Elizabethton’s chief financial officer, Preston Cobb, also discussed several changes to fund balance totals since the last workshop, adding that budgets are a moving target as the board prepares to make its final decisions. The biggest change has already been announced. Cobb said it was a miscalculation on the electrical fund, which changes the electrical fund balance to $1,088,117.

The City’s total revenue for the General Fund is expected to increase by $1,212,055 next year. This is an increase from current total revenues of $18,023,563 to projected $19,235,618. Much of this revenue is raised as funds to bring a major country music group and a religious music group for two nights of musical entertainment at Citizens Bank Stadium in September during Covered Bridge Days.

City manager Daniel Estes said it was the lion’s share of the $484,000 increase in the city’s culture and recreation fund.

Another big increase in revenue comes from sales tax, which is expected to rise by $425,961 next year. Sales tax for this year is expected to be $5,406,639. This collection is expected to reach $5,832,600. Much of the increase would be the result of inflation.

Total expenses for this year are expected to be $19,147,064. This is expected to decrease next year to $18,782,950. This represents a drop of $364,114 for next year.

OPKO Health, Inc. (Quick quote OPKPKO – Free Report) posted a loss per share of 11 cents in the fourth quarter of 2021 compared to earnings per share (“EPS”) of 5 cents a year ago. The figure was wider than Zacks’ consensus estimate of a loss of 3 cents per share.

The adjusted loss per share for the full year was 5 cents, compared to EPS of 5 cents at the end of 2020. The Zacks consensus estimate for EPS for the full year was 4 cents.

Income in detail

OPKO Health reported revenue of $401.3 million in the fourth quarter, down 18.9% year-over-year. The figure exceeded Zacks’ consensus estimate of 19.9%.

Full-year revenue was $1.77 billion, reflecting a 23.6% improvement over 2020. The metric beat Zacks’ consensus estimate by 3.5%.

Segment revenues

OPKO Health manages its operations through two reportable segments: Diagnostics and Pharmaceuticals.

Within the Diagnostics business, Services revenue was $362.8 million in the current quarter, down 20.8% year-on-year, primarily due to lower the volume of COVID-19 tests.

BioReference Laboratories (“BRL”) processed approximately 2.7 million COVID-19 polymerase chain reaction (“PCR”) tests in Q4 2021, up 22.7% sequentially.

Within the Pharmaceuticals business, product revenue increased 14.6% to $35.3 million due to accelerating growth in OPKO’s international pharmaceutical business. RAYALDEE’s fourth quarter 2021 sales revenue was $7.7 million, down 23.8% from the prior year period, primarily due to challenges in onboarding new patients due to the pandemic.

Total RAYALDEE prescriptions decreased 24.2% year-over-year to approximately 11,450 in the fourth quarter.

Revenue from transfer of intellectual property and other totaled $3.2 million, down 45.8% year-on-year due to lower Somatrogon R&D-related revenue.

Margin analysis

In the quarter under review, OPKO Health’s gross profit fell 38.3% to $108.5 million. Gross margin contracted by 853 basis points (bps) to 27%.

Selling, general and administrative expenses increased 35.8% to $138.2 million. Research and development spending increased 20% year over year to $21 million. Adjusted operating expenses of $159.2 million increased 33.4% year over year.

The adjusted operating loss totaled $50.7 million compared to the prior year quarter adjusted operating profit of $56.6 million.

Financial situation

OPKO Health ended 2021 with cash and cash equivalents of $134.7 million, compared to $72.2 million at the end of 2020.

Orientation 2022

OPKO Health has launched its financial outlook for the year 2022.

The company expects overall revenue for 2022 to be between $1.1 billion and $1.2 billion. Zacks consensus estimate for the same currently stands at $1.23 billion.

Overall revenue for the full year includes services revenue of $940-1 billion, product revenue of $145-155 million, and other revenue of $18-22 million.

OPKO Health expects to perform between 2.2 and 2.6 million COVID-19 PCR, point-of-care and antibody tests in the year 2022.

Our opinion

OPKO Health ended the fourth quarter of 2021 with better than expected revenue. Pharmaceuticals’ year-over-year revenue growth is encouraging. The increase in volume in the urology sector is impressive. BRL’s strong COVID-19 testing volume in the reported quarter reinforces our optimism. Developments such as NGENLA (somatrogon) injection have obtained regulatory approvals in Europe, Japan, Australia and Canada for pediatric growth hormone deficiency and the FDA has approved the well’s premarket approval application of 4Kscore test auger for the company.

The launch of RAYALDEE in Germany by OPKO Health licensee Vifor Fresenius Medical Care Renal Pharma and the announcement of favorable initial results from a Phase 2 clinical trial evaluating RAYALDEE as a treatment for symptomatic outpatients with COVID- 19 in the quarter are other highlights.

However, the year-over-year decline in sales and overall income, as well as revenue from the Diagnostics branch, is concerning. The decline in income from the transfer of intellectual property and the like is also of concern. Another concern is the decline in prescriptions and total sales of RAYALDEE. The shrinking gross margin does not bode well for the company.

Zacks Ranking and Key Picks

OPKO Health currently carries a Zacks rank #3 (Hold).

Some top-ranked stocks in the broader medical field that have announced quarterly results are AMN Healthcare Services, Inc. (AMN quick quoteAMN – free report), Allscripts Healthcare Solutions, Inc. (MDRX Quick QuoteMDRX – free report) and Henry Schein, Inc. (HSIC Quick QuoteHSIC – free report).

AMN Healthcare, posting a Zacks No. 1 ranking (Strong Buy), reported Q4 2021 Adjusted EPS of $2.95, which beat the Zacks consensus estimate by 14.3%. Revenue of $1.36 billion exceeded the consensus mark by 0.5%. You can see the full list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings have exceeded estimates for the past four quarters, with the average surprise being 20%.

Allscripts, sporting a No. 1 Zacks ranking, reported fourth-quarter 2021 adjusted EPS of 79 cents, which topped the Zacks consensus estimate of 154.8%. Revenue of $391.7 million topped the consensus mark by 0.1%.

Allscripts has an estimated long-term growth rate of 12.4%. MDRX earnings have exceeded estimates for the past four quarters, with the average surprise being 64.8%.

Henry Schein reported Q4 2021 Adjusted EPS of $1.07, which beat Zacks’ consensus estimate by 18.9%. Fourth-quarter revenue of $3.33 billion beat Zacks’ consensus estimate by 4.7%. He currently has a No. 1 Zacks rank.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC earnings beat estimates in past four quarters, average surprise 25.5%