Copaxone nod a booster dose for Natco

Settlement of patents for higher dosage can add wings

Shares of Natco Pharma gained 20 per cent to hit the upper circuit of Rs 954.35 on Wednesday after its partner Mylan received the US regulator’s approval for the generic version of multiple-sclerosis treatment drug Copaxone.

The Street is enthused with the news, as the much-awaited generic approval for Teva’s blockbuster multi-billion brand has finally come.
 

In August, Mylan had indicated all major launches, including the generic Copaxone, would be deferred to 2018, looking at the ongoing challenges in the US and an uncertain regulatory environment. The news had led to a sharp correction in Natco’s share price from Rs 967 in early August to sub-Rs 700-levels.

Also, the latest approval has been received for both 20 mg and 40 mg strengths, which not many analysts were expecting, given the complexity of the injectible product. On the sales front, the 20 mg/mL dose strength generated about $700 million, while $3.64 billion came from the 40 mg/mL dose for the 12 months ending July 31, 2017, according to the company.

The approval is a big positive for Natco’s earnings. For the 20 mg strength, Sandoz has the approval and is selling its generics in the US. Mylan-Natco may launch the generics soon. Factoring in the competition, analysts are estimating the drug to add about $40 million in annual sales for Natco in the 20-mg category. For 40 mg strength, the launch is still sometime away, as the patents are under litigation. Of the five patents, four have been invalidated, analysts said, but a complete settlement has not been arrived at.

 

Ranvir Singh of Systematix Shares said the approval for the complex product was more critical and as far as the patent litigation was concerned it’s just a matter of time before it is settled.

Another positive is that in the 40-mg strength category, Mylan-Natco is the first to receive the approval, so they should get six months exclusivity post launch. However, the US FDA has not specified in this regard.

Sandoz, Dr Reddy’s Laboratories and Synthon are other filers. Considering a two-three-player market, analysts believe Mylan-Natco can garner $350 million in annual sales. But, if they get exclusivity, the gains will be more profound.

Assuming the launch of 40 mg dose strength in the September 2018 quarter and that of 20 mg in the June 2018 quarter, Jefferies said the approval was thus nine months ahead of their expectation. Given this, the launch (assuming no other player in FY18) could add 75 per cent to Natco’s FY18 earnings per share.