Equity Analysis /

Pakistan pharmaceuticals: FEROZ enters negotiations for Remdesivir production

  • FEROZ is in negotiations with Gilead Sciences to manufacture a Covid-19 treatment drug named Remdesivir

  • This is a non-exclusive license agreement where SEARL and Getz Pharma may also be potential candidates

  • If FEROZ successfully avails the license agreement, it is likely to fetch the top-end of premium valuations

Yusra Beg
Yusra Beg

Senior Investment Analyst

Intermarket Securities
12 May 2020

In an exchange filing yesterday, Ferozsons Laboratories Limited (FEROZ) notified that it has entered negotiations, via its 80% owned subsidiary BF Biosciences Limited (BFBL), to potentially reach a non-exclusive license agreement with US-based Gilead Sciences for the manufacture and sale of Remdesivir in Pakistan and 126 other countries. Remdesivir is a US FDA approved wide-spectrum antiviral drug used to treat advanced stage Covid-19 patients. 

However, the non-exclusivity of the agreement opens the field for several other local players and unlike FEROZ’s previous blockbuster drug Sovaldi – an innovator drug, for which it maintained a monopoly until patent expiry. Data from a trial by the National Institutes of Health (NIH) in the United States showed Remdesivir reduced hospitalisation stays by 31% compared to a placebo treatment, but it did not significantly improve survival.

We think Searle Company (SEARL) and Getz Pharma may also be candidates to obtain this license because of their existing presence in biosciences (Hep-C, HIV). Sanofi Pakistan (SAPL) may also potentially emerge with Regeneron Pharmaceuticals with other drugs later in the year, in our view.

Lead time to production is likely to be shorter than Sovaldi

Gilead’s patent on Remdesivir means it has the exclusive rights to produce it. But, under international trade rules, nations defined by the UN as least-developed countries (including Pakistan and Bangladesh) can ignore such patents and make drugs more affordable in their markets. 

Remdesivir is one of several repurposed drugs drawing cautious optimism for efficacy in Covid-19 treatment. These drugs are normally indicated for other diseases, where a shortened development timeline and reduced costs for existing compounds is particularly advantageous in a pandemic situation. The lead time to production is expected to be extremely short where Bangladesh’s largest drug makers, Beximco Pharmaceuticals, announced that it will start production in mid-May 2020 (under a similar agreement with Gilead). However, the exact timeline for FEROZ is yet to be determined as (i) negotiations with Gilead are still underway, (ii) sourcing of API remains and (iii) regulatory approval from DRAP have yet to be obtained. We expect it should be shorter than Sovaldi (7 months) due to the urgency of the situation.