ICICI Direct's research report on Natco Pharma
In a positive development for Natco, the USFDA has approved the generic version of Teva’s Copaxone (Glatiramer Acetate) for both 20 mg/ml (once a day dosage) and 40 mg/ml (three times a week dosage) strengths. The product will be marketed by Mylan in the US. The drug is used to treat relapsing form of multiple sclerosis (MS). While patent for 20 mg/ml has expired on May 5, 2014 the subsequent five patent filed by Teva for the 40 mg/ml strength are supposed to expire in 2030. As per IMS, the brand sales for the Copaxone in the US were at US$700 million and US$3.6 billion, for the 20 mg/ml and 40mg/ml, respectively. Due to the successful transition of the MS treatment from the 20 mg/ml strength to 40 mg/ml, Teva continues to dominate the MS market, earning 96% of the overall MS revenues. In September 2009, Mylan had filed a Copaxone 20 mg/ml ANDA with USFDA. Natco/Mylan are second filers for the gCopaxone 20 mg/ml after Sandoz/Momenta.
After a wait of almost eight years, the company has received approval for this complex product. We believe this will be a huge sentimental booster for the company after tanking almost ~30% from its high apparently due to suspense over approval. We expect 20 mg/ml product to be launched soon while the 40 mg/ml product may be launched in FY19. Natco will supply the drug under cost plus profit sharing agreement and Mylan will market it in the US. We arrive at an NPV per share of Rs 37 and Rs 253 for the 20 mg/ml and 40 mg/ml, respectively, leading to an overall price target of ~Rs 1065 on an SOTP basis. We upgrade our rating to BUY. Any unfavourable decision for Mylan by the US Court of Appeals and incremental USFDA approvals to other players are likely limiting factors to our revised target.
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