The share price of Dr Reddy's Laboratories, which has been hit heavily by regulatory tangles over the past year or so, rose as much as 9 per cent on Friday, following an agreement on patent settlement with the US-based drug maker Vivus on its weight management capsules, Qsymia.
The settlement agreement permits Dr Reddy's to sell the generic version of Qsymia on June 1, 2025, or earlier under certain circumstances. In the event of a launch earlier than June 1, 2025, Dr. Reddy's will be liable to pay royalty to Vivus on sales of the generic version.
Qysmia is a combination of phentermine and topiramate extended-release sold in capsule form. The drug had gross sales of around $73.6 million in 2016.
Dr Reddy’s bought eight abbreviated new drug applications (ANDAs), including Qysmia ANDA worth $350 million from Teva Pharmaceuticals in August 2016. Both Teva and Actavis had filed ANDAs with a paragraph IV certification challenging the validity of patents held by Vivus for Qysima. Dr Reddy’s substituted Teva as a defendant in the lawsuit in September 2016.
Regulatory issues
Dr Reddy's Labs was one of the pharma companies hit badly by USFDA regulatory actions over the last couple of years. The company received USFDA warning letters regarding deviations from current good manufacturing practices (cGMP) at its active pharmaceutical ingredients (APIs) plants at Srikakulam and Miriyalaguda and for violations at its oncology formulation facility at Duvvada. These led to a disruption in supplies, delays in approvals and remedial costs. All this, in turn, impacted the revenue of the company badly.
During the first quarter in the 2017-18, Dr Reddy's Labs has registered disappointing earnings numbers. The company has reported a 56.6 per cent drop in consolidated net profit to Rs 66.6 crore in the June quarter, compared to the same period last year due to structural headwinds in its key markets such as US and India.
This has led to steep corrections in its share price by 29 per cent in the last one-month period, touching a multi-year low of Rs 1,931. With the rebound in the price at Rs 2,202, the stock now trades at about 32 times its trailing 12-month earnings — almost equal to its three-year average.