Shares of Divi's Laboratories soared nearly 5% after a U.S. court stayed the Food and Drug Administration's (FDA) approval of the generic version of a drug that is part of the pharma company’s contract manufacturing portfolio.
What Happened: The FDA's approval of a generic version of Novartis AG's heart failure drug Entresto has been put on hold. The generic drug, manufactured by MSN Laboratories, has been stayed pending a resolution of an appeal filed by Novartis.
As Entresto is one of the largest drugs for Divi’s in its contract manufacturing portfolio, the stay on the drug's generic version is a relief for the Indian pharmaceutical company.
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Earlier this month, Kotak Securities had sounded alarms over the company's margins due to the anticipated launch of Entresto generics.
Entresto contributed 8%-12% to the total sales of Divi's, so the launch of a generic version would potentially hurt the pharmaceutical firm's earnings per share (EPS) margin, Kotak said. The brokerage estimated more than 10% downside risk to the firm's earnings per share for FY27.
Kotak had a "sell" recommendation on the stock with a target price of ₹3,600.
Price Action: Shares of Divi's Laboratories jumped 3.57% to ₹4,891.65 on Wednesday morning.
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