Zydus Life shares rose nearly 2% in intraday trade on Friday after Bernstein said Novartis' decision to discontinue its drug VHB937 for Amyotrophic Lateral Sclerosis has improved the commercial landscape for Zydus' Usnoflast.
Zydus Life shares rose as much as 2.8% to Rs 1,167.30 on the NSE and were trading at Rs 1,155.80, up 1.82%, as of 11:17 a.m. The stock opened at Rs 1,150.70 and touched an intraday low of Rs 1,147.70.
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Bernstein maintained its Outperform rating on the stock with a target price of Rs 1,457. The brokerage said Novartis' exit gives Usnoflast a clearer opportunity in the ALS market, while the ongoing clinical study remains the key determinant of the drug's value.
Usnoflast's ALS opportunity
Bernstein said Novartis discontinued VHB937 for ALS on Sept. 16. It expects the development to improve the commercial landscape for Usnoflast, Zydus Life's new chemical entity candidate for the disease.
The brokerage said the two drugs target different biological pathways and reiterated its positive view on the probability of success for Usnoflast.
"The key determinant of value remains whether Usnoflast can demonstrate a clinically meaningful slowing of disease progression," Bernstein said.
The drug is being evaluated in the ongoing UNITE-ALS study.
Orphan designation, FDA priority review
Zydus has received Orphan Drug designation in ALS for Usnoflast and a priority review tag from the US Food and Drug Administration, according to Bernstein.
The brokerage said these designations could translate into high returns on research investment if the clinical data is clean.
Bernstein expects Usnoflast to demonstrate meaningful efficacy in its Phase IIb trial. It estimates the drug could generate an annual run rate of $100 million, helped by its oral administration and potential use across a broad ALS population.
The brokerage expects Usnoflast to ramp up faster than Saroglitazar and said the drug could become Zydus' second high-return US new chemical entity.
Bernstein also said Zydus is steadily building its innovation pipeline to support growth in the US market.
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