The Dr Reddy's Laboratories stock hit its highest level in nearly two months today after an appeals court in the United States vacated the preliminary injunction order that had prohibited the Indian pharma firm from selling its generic version of Suboxone film in the US. The stock opened with a gain of 6.32% in trade today. It touched an intra day high of Rs 2,651 or 8.21%. The stock closed 5.90% higher at 2594 level on BSE. On Nifty, the stock gained 6.44% to 2600.45 level.
The large cap stock has gained 8.75% during the last one year and risen 7.88% since the beginning of this year. The stock is trading above its 50-day and 200-day moving average of 2,472.01 and 2,311.30.
19 of 39 brokerages rate the stock "buy" or 'outperform', eleven "hold", six "underperform" and three "sell", according to analysts' recommendations tracked by Reuters.
Suboxone is British drugmaker Indivior's best-selling opioid addiction treatment drug in the US. Shares of Indivior tanked about 47 percent on Tuesday, in a record single-day fall.
A Dr Reddy's spokesperson stated, "We are pleased with the decision of the appellate court in Dr. Reddy's favour, vacating the preliminary injunction that had prevented Dr Reddy's from bringing this important drug to the public. We are committed to providing affordable and innovative medicines that address the unmet and under-met needs of patients around the world and in particular look forward to taking the lead in helping to fight Opioid use disorder."
In July this year, a US court granted preliminary injuction blocking the Hyderabad-based firm from selling cut-price versions (buprenorphine and naloxone) of the British drugmaker Indivior's best-selling opioid addiction treatment in the US. The ruling came days after Indivior scrapped its full-year guidance citing an "accelerated" loss in US market share to the cheaper version of Suboxone launched by Dr Reddy's.
On July 16, the Dr Reddy's stock fell up to 10.61% or 246 points to 2,071.50 level on the BSE.
The stock closed 9.85% or 228 points lower at 2089.15 on the BSE.
Dr Reddy's and US-based Mylan received approval from the Food and Drug Administration (FDA) in June to sell versions of Indivior's bestselling opioid addiction treatment, which followed an immediate generic launch by the Indian firm in June.
The order was related to further sales and commercialisation of its Buprenorphine and Naloxone sublingual film in the US. It is the generic version of Indivior UK's Suboxone sublingual film. The product is indicated for treatment of opioid dependence.
Here's a look at what brokerages said after the Indian firm's win in the US Appeals court.
Jefferies analysts said they consider the ruling to be near-term positive, and one that allows the company to immediately re-launch the product, but still at-risk.
Nomura analysts said they believe Dr Reddy's is likely to be compensated in due course for the preliminary injunction, but await clarity whether the compensation could be higher than $72 million.
Suboxone win, launch still 'at risk' given Para IV litigation is still ongoing. Assuming firm launches drug immediately, could generate US$40-50 mn revenues in FY19E & US$110-140 mn in FY20E. Translate into Rs10-12 impact on EPS in FY19E and Rs 25-30 in FY20E.
The win clears way for relaunch of the drug. The firm is likely to be compensated for missed sales over past 4 months and also is likely to benefit from limited competition in near term. Buy with a target price of Rs 2,704.
Big relief in Suboxone litigation, expect firm to relaunch generic of Suboxone immediately. Suboxone generic sales in FY19 can potentially increase to $50-60 mn from $20 m. Our stance is neutral on the stock with a target price of Rs 2,500.
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