Divi's Labs shares jump 5% as US court stays FDA approval for Entresto drug

Shares of Divi’s Laboratories surged up to 5 per cent at Rs 4960 per share on the BSE in Wednesday’s intraday deals. This came after a US court stayed the United States Food and Drugs Administration's (USFDA) approval given to a generic drug version of Novartis AG’s heart failure drug, according to a Bloomberg report. 

The US Court of Appeals for the District of Columbia stayed the drug nod pending resolution of an appeal to the court filed by Novartis. The drug Entresto was manufactured by MSN Laboratories. 

This news came as a relief for the domestic drugmaker, Divis Labs, as earlier brokerages had estimated an earnings cut on the potential competition in the US market for the heart failure drug.  

The domestic brokerage firm, Kotak Institutional Equities had earlier highlighted concerns around Divi's Laboratories CDMO contract with Novartis for the blockbuster heart failure drug, Entresto. 

According to Kotak, this contract contributed approximately 8 per cent of Divi's total sales and 19 per cent of its CDMO sales for FY2024.

Due to the potential entry of generic versions of Entresto by MSN Laboratories, Kotak had anticipated a downside risk exceeding 10 per cent to Divi's EPS estimates for FY 2026-2027.

Divi's Laboratories reported a 21 per cent year-on-year increase in net profit for Q1 FY25, reaching Rs 430 crore compared to Rs 356 crore in the same quarter of the previous year. Revenue from operations also saw a significant rise of 19 per cent, climbing to Rs 2,118 crore from Rs 1,778 crore. 

Additionally, earnings before interest, tax, depreciation and amortisation (Ebitda) grew by 23 per cent to Rs 622 crore, with an Ebitda margin improving to 29.4 per cent, up from 28.3 per cent in the year-ago quarter.

At 12:00 PM; the stock of the company was trading 3.50 per cent higher at Rs 4,886.60 per share on the BSE. By comparison, the BSE Sensex was nearly flat, down 0.06 per cent at 80,757 levels.