The recent transaction between Karuna and BMS has given clarity on two fronts:
Very High probability of commercialisation of KArxt drug.
The entire valuation of Karuna is mainly derived out of Karxt drug and hence the current valuation gives a reasonable clarity on the broad total addressable market of Karxt drug.
In view of above we now have more clarity on Commercialisation and TAM of the KArxt drug.
The same has also been immediately factored in share price of Karuna post BMS transaction wherein more than 50% appreciation was observed in a single trading session of 22/12/2023 to factor in the acquisition cost.
Now since we have clarity on above two variables we need to work our on the potential revenue for Neuland from the KArxt drug as an API supplier.
As per Annual Report of Karuna:
For clinical supply, we use CMOs who act in accordance with the FDA’s good laboratory practices, or GLP, and current good manufacturing practices, cGMP, for the manufacture of drug substance and product. Currently, we contract with Neuland Laboratories Limited and Esteve Quimica, S.A., for the manufacture of xanomeline and source trospium from Procos, S.p.A. and Midas Pharmaceuticals, Inc.
The KARXT drug is combination of 2 API (Xanomeline & Tropsium) and Karuna has 2 different sources for each of the API.
While searching for API manufactures for Tropsium, names of following Pharam Company was reflected.
However, I was not able to find any manufacturers for Xanomeline. (Experts can throw light on this).
The ratio of Xanomeline and Tropsium in the formulation is roughly in the ratio of 1:4 i.e for making 1 KG of KArxt you will require 200 Grams of Tropsium and 800 Gram of Xanomeline and hence more revenue potential for manufacturers of Xanomeline API (as a layman calculation).
Further, as per Annual report Karuna :
It is our intent to identify and qualify additional manufacturers to provide active pharmaceutical ingredient and fill-and-finish services prior to submission of a new drug application to the FDA for any product candidates that complete clinical development.
So Karuna will obviously look for other manufacturers also for sourcing the 2 APIs.
Now from the above table it is evident that for Tropsium, there are various other manufactures, however for Xanomeline I couldn’t find any one.
So is the API manufacturing process for Xanomeline complex ?? , if yes then there is a natural entry barrier and Neuland is in a safe position.
Further, we also need to analyse how sticky this business will be for Neuland or how sticky Neuland can make this business for itself. The following project highlight (for Xanomeline) published by Neuland reflects the capabilities of Neuland and also build a entry barrier for other manufactures even if the process is not complex. (similar to DIVIS Lab where they evolve their manufacturing process to become a lowest cost produce thereby creating a niche even in generic API)
So any new manufacturer which Karuna/ BMS will be looking for Xanomeline to replace Neuland will be required to have above capabilities along with proven track record. Further, the cost/compliance of shifting/ adding new API manufacturer(for Xanomeline) can also be a deterrent for Karuna/BMS.
https://www.chemanager-online.com/en/topics/pharma-biotech-processing/switching-api-sources
Karxt seems to be a blockbuster and a much awaited drug.
One can go through several reference article available on the internet to comprehend the requirement of this drug.
For reference one can also go through concal transcript of Karuna
KARUNA CONCAL.docx (70.0 KB)
Karuna Therapeutics, Inc. (NASDAQ:KRTX) Q3 2023 Earnings Call Transcript November 5, 2023
Neuland with the latest transaction seems to be elevated to a new orbit now.
Please help out for following questions:
Formulations/drug where Xanomeline is used as an API.
Manufactures of Xanomeline in India/World.
Is Manufacturing process of Xanomeline complex. ?
Disclosure : Invested and further added today and will further add in a SIP mode.
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