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Divi’s Labs is betting on a miracle drug

Divi’s Labs is betting on a miracle drug

 the stock hit a 52-week high on the back of its license to manufacture an experimental COVID-19 drug.
July 4, 2021
3 min read
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Divi’s Labs is betting on a miracle drug

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Divi’s Labs is betting on a miracle drug

pharmaceutical major Merck has an antiviral drug that could cut Covid hospitalisation and deaths by 50%. once the interim analysis of the phase 3 trial of Molnupiravir was published, Hyderabad-based Divi’s Labs stock rallied 10% and hit a new high. 

the reason? Divi’s Labs is the authorised manufacturer for Molnupiravir. on October 4, Divi’s Labs hit a 52-week high touching ₹5,313.80 per share on BSE. 

the stock also helped the Nifty Pharma Index gain over 2%, with Divi’s Labs leading the pack. 

ever since Merck got a nod for Molnupiravir in June 2021, Divi’s Labs has been seeing an uptick in its stock price. the latest data boosted its shares considering that this drug is being touted as a ‘miracle’ solution to reduce Covid deaths

the business

set up in 1990, Divi’s Laboratories makes active pharmaceutical ingredients (API) and offers its products to over 75 countries. the company manufactures generic drugs (like antivirals, hypertension pills, and anti-inflammatory medicines) and nutraceuticals (dietary supplements). 

the company has now shifted focus to ‘green chemistry’. this strategy aims to  reduce wastage through technology adoption. 

the Q1 numbers helped the stock as well. Its net profit grew 13% year-on-year to ₹557 crore while sales grew 14% to ₹1,961 crore. 

what works?

the company has set aside ₹400 crore for its custom synthesis business. custom synthesis is where a pharma manufacturer makes one particular ingredient/molecule for a drug exclusively for one company at a large scale. 

since there is little competition in India in this space, Divi’s Labs stands to benefit. Divi's is now focussing on six growth engines, including generics and hypertension drugs over the next 4-5 years. 

even though there is time for Molnupiravir to be launched in India, Divi’s Labs’ role in getting the drug ready for the global market cannot be overstated. if this medication indeed works, Divi’s Labs’ fortunes will only look brighter.