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Informist, Friday, Sep 20, 2024

MUMBAI - Shares of Zydus Lifesciences and Lupin will be in focus next week after the US Court of Appeals for the Federal Circuit overturned a decision that favoured generic drugmakers of Mirabegron.

The US Court of Appeals said a district court made an error while invalidating a patent covering Mirabegron drug and directed the case back to the district court for reconsideration. In view of this order, brokerage Nomura said the innovator of the drug may seek to stop companies such as Lupin and Zydus Life from selling the generic drug.

This puts earnings growth of the two companies at risk as Nomura estimates the product in question will contribute 13% and 15% to Zydus Life and Lupin's earnings in 2024-25 (Apr-Mar). Raising concerns over sales of Mirabegron, BofA Securities has reduced its target price of Zydus Life to 1,145 rupees from 1,310 rupees and that of Lupin to 1,560 rupees from 1,660 rupees.

Today, however, shares of the companies did not react much to the news. Shares of Lupin ended at 2,151.70 rupees, down nearly 1%. Shares of Zydus Life closed unchanged at 1,054.60 rupees.

Analysts expect limited impact of the court order for now as the two companies will continue to sell the drug until a final decision is taken. "...a fresh decision by the District Court will take at least 9-12 months. Hence, we do not see the need to change our estimates for Zydus Life and Lupin at this stage," Elara Securities said in a note today, while iterating their "buy" rating on both companies.

Nomura argued the case may even have a positive effect on earnings. With the timeline for the case extended, competitors in this space would wait for a final decision before launching their products, the brokerage said. "For instance, Alkem, which is one of the generic filers stated that as per its settlement terms, the launch is not likely till all patent litigation issues are decided...Thus, in absence of competition, the contribution from the product may be higher than our current estimates," Nomura said.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anshul Choudhary
Edited by Ashish Shirke

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