MOSL: DR REDDY’S LABS (Neutral)-Mylan/Natco receives Copaxone 40mg approval-20mg TAD in November 2017

​DR REDDY’S LABS: Mylan/Natco receives Copaxone 40mg approval; 20mg TAD in November 2017 for DDRD

(DRRD IN, Mkt Cap USD6.3b, CMP INR2384, TP INR2400, 1% Upside, Neutral)

• Mylan received an ANDA approval for gCopaxone 20mg/ml (branded market sales: USD600m) and 40mg/ml (branded market sales: USD2.2-2.3b). Mylan is the second generic filer to receive an approval for 20mg/ml (Sandoz/Momenta is already in the market). In 40mg/ml, Mylan is the first filer to receive an approval. Copaxone is indicated for the treatment of patients with relapsing forms of multiple sclerosis (MS).
  
• 40mg launch may happen 'at risk': Although the company will be launching 20mg/ml strength now, the 40mg/ml product is still under litigation. In January 2017, a District Court in the US had found all the asserted claims of four out of five patents related to Teva's Copaxone to be invalid for obviousness. However, the case related to the fifth patent is still ongoing in the District Court (ruling expected in early 2018). Mylan, in its press release, said that it will 'begin shipping imminently' for both 20mg and 40mg products. Although Mylan hopes to get 180-day exclusivity, the FDA has not mentioned that specifically.
  
• Expected to remain limited-competition product in near term: Currently, there are six filers for Copaxone 20mg/40mg (Sandoz/Momenta, Mylan/Natco, DRRD, Amneal, Synthon and Biocon/ Apotex). Sandoz/ Momenta has 25/30% market share in 20mg strength, with sales of ~USD150-160m. For Sandoz, 40mg approval is pending due to the warning letter at its partner site. Biocon/Apotex is expected to reply to CRL by end-FY18. Target Action Date (TAD) for DRRD for 20mg product is November 2017, while for 40mg, it is April 2018 (CRL for 40mg was responded in August 2017 by DRRD). We expect DRRD to launch 20mg by early FY19 and 40mg by late FY19. Assuming 60-65% price erosion and a 4-5 player market, DRRD should make ~USD100-120m from Copaxone 20mg/40mg in FY19E. DRRD launch will also be dependent on the resolution of warning letter at Srikakulam (API filed from this facility).