Dr Reddy’s–Alvotech deal: Why investors are bullish

CHENNAI: Shares of Dr Reddy’s Laboratories surged over 3% in early trade on Thursday after the Indian drug maker announced a global licensing agreement with Alvotech, an Iceland-based biopharmaceutical company. Under this agreement, the two firms will codevelop, manufacture, and commercialise a biosimilar candidate to Keytruda (called as pembrolizumab by the biological name) — a blockbuster cancer immunotherapy drug originally developed by the US pharma major Merck & Co., also known as MSD Pharmaceuticals outside US.

Keytruda, prescribed for the treatment of various cancers including melanoma, non-small cell lung cancer, and head and neck cancers, in adults and children, is one of the most sold drugs of Merck from its original research. According to Merck’s 2024 sales data, this drug alone contributed over $29.5 billion in revenue for the company, which also makes it one of the world’s top-selling drugs. This drug is in demand as it is used in advanced, metastatic, or recurrent cancers that are not responding to other treatments or cannot be removed by surgery. Keytruda can also be used to prevent cancer recurrence after surgery.

A biosimilar is a generic equivalent of a biological drug. In this case, the biosimilar — pembrolizumab– can enter the market once Merck’s patent is expired. There are several drug firms work on this bio-molecule currently worldwide, and Alvotech is one of the frontrunners.

The licensing deal signed between Dr Reddy’s and Alvotech marks a strategic expansion of the former’s biosimilars pipeline, aligning with the company’s ambition to build a strong presence in the global oncology space.