Teva drug copy to boost Natco Pharma sales

Hyderabad: Natco Pharma Ltd, an Indian drugmaker backed by billionaire Dilip Shanghvi, says its sales will jump 62% in two years once it starts selling a generic version of Copaxone, a treatment for multiple sclerosis.

add_main_image“The company is likely to receive US Food and Drug Administration (FDA) approval to make the copy in May next year,” chief executive officer Rajeev Nannapaneni said in an interview. Teva Pharmaceutical Industries Ltd, which owns the rights for Copaxone, suffered a setback in July after a US court ruling gave the $4 billion drug less than a year of patent protection.

“The big growth next year is going to come from export of formulations, particularly Copaxone,” Nannapaneni said at his office in the southern city of Hyderabad. “The FDA approval is important. We strongly believe we have a fair chance. It will make us an immensely profitable company.”NextMAds

“Natco is focusing on higher margins by making finished medicines whose patents have either expired or it has challenged. Mylan Inc. will market the generic version of Copaxone in the US,” Nannapaneni said. “Sales of the drug in the North American country reached $806 million in the quarter through June,” Mumbai-based brokerage ICICIdirect said, citing Teva data.

‘Bull scenario’

“Revenue may reach ₹ 1,000 crore ($158 million) in the year ending 31 March 2015, from ₹ 620 crore in the 12 months through 31 March 2013,” according to Nannapaneni. “In the bull scenario, sales could touch about ₹ 1,300 crore in the year,” said Siddhant Khandekar, an analyst at ICICIdirect.

Any rejection by the FDA may deal a blow to Natco’s growth plans. The US regulator, which is cracking down on poor manufacturing standards in the South Asian country, this month restricted imports from one of the production facilities of Ranbaxy Laboratories Ltd and issued a warning letter to Strides Arcolab Ltd, a Bangalore-based company.

“An approval would lead to a re-rating of the stock,” said Praful Bohra, an analyst at Nirmal Bang Institutional Equities in Mumbai. “I have taken a 60% probability of a launch happening. That’s not very optimistic because it’s a difficult-to-make drug. There has been increased regulatory risk.”

Price targetsixthMAds

Shares of the company have risen 29% this year to ₹ 594.95 in Mumbai, compared with a 66% plunge in Wockhardt Ltd, India’s worst performing drug stock, and the 34% slide in Ranbaxy, which in May agreed to pay $500 million to settle fraud allegations.

Six of seven analysts recommend buying Natco shares, with one favoring holding them, according to data compiled by Bloomberg. The average one-year price target is ₹ 714.80.

Copaxone, the largest branded drug sold by the Petach Tikva, Israel-based company, accounted for almost 20% of its revenue in 2012 and 40% of the multiple sclerosis market.

Multiple sclerosis causes the immune system to attack the insulating tissue around nerve fibers. It stops nerve cells from sending signals, sapping patients’ energy, blurring their vision and slowly depriving them of mobility, balance and coordination. Copaxone is an injection designed to work with the body’s immune system to cut relapses of the disease.

Facing hurdles

The US Court of Appeals for the Federal Circuit in Washington on 26 July upheld four patents that expire in May 2014, while invalidating other patent claims, including one that expires in September 2015. Momenta Pharmaceuticals Inc., which is developing a generic version with Novartis AG’s Sandoz, and Mylan along with Natco were Teva’s challengers.

Generic-drug makers face hurdles in getting their products to the market next year. Teva can seek a review before the US Supreme Court. The FDA would need to approve copies of the drug and Teva says that the regulator should require lengthy clinical trials not typical for generic medicines because Copaxone is a complex molecule.

“A Teva appeal in a higher court is a hanging sword,” said ICICIdirect’s Khandekar. “If an approval comes through, this could be a game changer for Natco. The multiple sclerosis space isn’t too crowded.”

Weston, Massachusetts-based Biogen Idec Inc. won FDA approval in March for its MS drug Tecfidera, which analysts project may draw more than $3.5 billion in annual revenue by 2017.

Capex plans

“Natco plans to spend ₹ 150 crore in the next one year to expand its operations, including a plant in the eastern state of Assam to make formulations for the domestic market,” said Nannapaneni.

Shanghvi, whose net worth is about $12 billion, owns about 3.7% of Natco, according to data compiled by Bloomberg. He is the founder and largest shareholder of Sun Pharmaceutical Industries Ltd, India’s biggest drugmaker by market value.

“Generic cancer drugs account for about 60% to 70% of Natco’s future products,” the CEO said. The company makes generic versions of Novartis’ Gleevec and Bayer AG’s Nexavar as the nation has denied patent protection for the two in India.

“Should Natco fail to get FDA’s approval for the Copaxone copy, the company can fall back on its oncology products for revenue,” said Nirmal Bang’s Bohra.

“It won’t be the end of the world for them as they have a strong position in the domestic cancer segment,” he said.