Aurobindo Pharma was a silver lining in a sea of red on Dalal Street on Friday, after Israel-based Teva Pharmaceuticals announced a settlement of patent dispute with the Indian drug maker. The Aurobindo Pharma stock gained by as much as 1.3 percent to Rs 537 apiece on BSE.
Aurobindo Pharma is India's fifth largest drug maker by sales, after Sun Pharma, Dr Reddy's, Cipla and Lupin.
Two US-based affiliates of Teva — the world's largest generics drug maker — reached an agreement to resolve the dispute over Aurobindo’s abbreviated new drug application (ANDA) for a generic product, according to a statement by the Israel-based company.
Teva Pharmaceuticals and Aurobindo Pharma have been involved in a patent infringement litigation. Teva has asserted a number of patents against Aurobindo that cover the Israil-based company's product, Austedo (deutetrabenazine).
Austedo is approved by the US regulator for the treatment of chorea associated with Huntington’s disease and tardive dyskinesia.
As part of the settlement, the litigation between Teva and Aurobindo parties in the will end. Aurobindo will have a license to sell its generic product beginning April 2033 or earlier under certain circumstances.
Teva said the settlement with Aurobindo "is a further reflection of the strength of its intellectual property" covering Austedo.
Here's what analysts make of Aurobindo
Aurobindo is among the major generics players in India, and one of the largest suppliers of generic drugs to the US.
| Index/stock | Return (%) | PE (TTM) |
| One month | YTD |
| Aurobindo Pharma | -12.1 | -27.8 | 21.3 |
| Nifty50 | 1.5 | -5 | |
| Nifty Pharma | -1 | -12.4 | |
| Sun Pharma | -0.4 | 1.5 | 450.1 |
| Dr Reddy's | 10.6 | -11.9 | 44.4 |
BOB Capital Markets has a 'buy' rating on Aurobindo Pharma with a target price of Rs 680, which indicates a 28.3 percent upside as of Thursday.
The brokerage finds Aurobindo's valuation attractive and sees a limited downside. It is positive on traction in the company's specialty sales and increased launch momentum in the coming years.
ICICI Direct has a 'hold' rating on Aurobindo with a target price of Rs 610, citing the pharma company's:
High single digit to low double-digit price erosion in US business
Lack of triggers for growth in ex-US domainIt values Aurobindo Pharma at 12 times its price-to-earnings for the year ending March 2024.
Analysts say a rise in US regulatory inspections could delay a recovery in Indian pharma valuations, already battered by high
price erosion in the US space.
According to ICICI Securities, the frequency and number of inspections of manufacturing plants in India by the FDA — the US drug regulator — had increased significantly before the pandemic, with growing ANDA filings especially for complex products.
"We expect this trend to return with the environment normalising. However, it remains a double-edged sword since, pre-COVID the inspections were followed by a number of observations, official action indicated (OAI) and warning letters," the brokerage said in a report dated May 13.
"FDA inspection remains a double-edged sword for Indian companies," it said. ICICI Securities has Alkem, JB Chemicals and Dr Reddy’s as its top pharma picks.
First Published: Jun 10, 2022 2:43 PM IST
