Synopsis:
Divi’s Laboratories shares fell 4% after MSN won a U.S. patent case on Entresto, threatening up to 20% of Divi’s revenue. IIFL flagged a 12–13% EBITDA risk and maintained a “reduce” rating with a Rs 5,465 target, implying 20% downside.
The shares of one of India’s leading API manufacturers, engaged in the production and export of APIs, intermediates, and nutraceutical ingredients, were under pressure and declined 4% after a key product in its custom synthesis portfolio faced a potential earnings risk.
With a market capitalization of Rs 1,78,634 Crores, the share price of Divis Laboratories Ltd was trading over 4% down to hit an intraday low of Rs 6547.50 per share from its previous day closing price of Rs 6833.10 per share.
Reason For the Crash
Divi’s Laboratories is facing a potential earnings setback after Indian drugmaker MSN won a patent litigation case related to Entresto, a blockbuster heart failure drug marketed by Novartis. The ruling allows MSN to launch a generic version in the U.S. after July 15, 2025, which could impact Divi’s significantly as it manufactures the Entresto API.
Entresto is the largest product in Divi’s innovator Custom Synthesis (CS) portfolio, contributing an estimated 40% of CS revenue and nearly 20% of the company’s overall revenue. The introduction of a generic version poses a serious threat to this revenue stream.
Brokerage firm IIFL has flagged a material risk to Divi’s earnings following this development. It estimates that the company’s EBITDA could decline by 12%–13% over the next year due to the loss of exclusivity on Entresto.
IIFL noted that Divi’s is currently trading at 58x FY27 EPS and 40x FY27 EBITDA, pricing in high optimism around future opportunities in GLP-1 and CDMO businesses.
However, it cautioned that the Entresto patent cliff is a major near-term concern. The brokerage has retained its “reduce” rating on the stock with a target price of Rs 5,465, implying a potential downside of 20%.
About the Company
Divi’s Laboratories, founded in 1990 and based in Hyderabad, is one of India’s top pharmaceutical companies and a global leader in making APIs, intermediates, and nutraceutical ingredients. It exports to over 100 countries and is among the top three API makers worldwide.
The company runs three advanced manufacturing units in Hyderabad and Vizag, including the world’s largest API facility. These sites are approved by global health authorities like the USFDA and EU regulators.
With around 700 scientists across three R&D centers, Divi’s focuses on generic APIs, custom manufacturing for Big Pharma, and specialized nutraceutical products.
The company reported a revenue of Rs 9,360 crore in FY25, up by 19.3 percent from its FY24 revenue of Rs 7,845 crore. Coming to its profitability, the company reported a net profit rise of 36.94 percent to Rs 2,191 crore in FY25 from Rs 1,600 crore in FY24. The stock delivered an ROE and ROCE of 15.4 percent and 20.4 percent, respectively.
Written By Rohan Pandey
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