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ICICI Securities Ltd. | Retail Equity Research

June 13, 2018

Monthly Update

Sun gets Halol respite…

A much awaited regulatory resolution on Sun Pharma’s Halol plant finally

arrived. This plant has received Establishment Inspection Report (EIR) from

the USFDA for the inspection conducted in February 12-23, 2018. According

to the press release, the USFDA concluded that the inspection is now

closed while issues contained in the warning letter issued in December 2015

have been addressed. Clearance of this plant is likely to minimise Sun

Pharma’s biggest regulatory overhang. This will pave the way for a new

product approval from Halol. Resolution of the Halol plant is already priced-

in our valuation.

On the Q4FY18 results front, aided by a low base of Q4FY17, the I-direct

healthcare universe reported strong double digit profitability growth.

Revenues also grew in high single digits. Geography wise, the challenging

environment in the US generic space continued to impact the overall US

growth. However, excluding US and Brazil (country specific issues) most

other geographies have reported strong growth on the back of new

launches and favourable currency movement. Domestic formulations grew

in double digits, in line with I-direct estimates. Overall, the I-direct universe

revenues were at | 40196 crore, growth of 7.4% YoY.

On the approvals/launches front, Sun Pharma’s in-licensing 505(b)(2)

oncology product Yonsa received USFDA approval. Lupin has launched

innovative gynaecology product Solosec (gynaecology) 2 gm oral granules

in the US.

On the biosimilar front, USFDA has approved Biocon-Mylan first biosimilar

to Amgen's drug Neulasta (anti-cancer) to help reduce the risk of infection

during cancer treatment. This is the second biosimilar approval for Biocon-

Mylan in the US. Aurobindo Pharma has received VAI status from USFDA

for its Unit IV injectable facility.

Finally, the Indian pharmaceutical market (IPM) grew 10.8% YoY to | 10583

crore for May. The growth was attributable to growth in volumes – 9% and

new product launches – 2.8%. Conversely, it was pulled down by a price

decline of 1%.

US seems bottoming out but pricing pressure unlikely to abate soon…

The Q4 numbers reflect a substantial arrest in the US YoY de-growth.

However, the generics pain is unlikely to subside anytime soon mainly due

to acute pricing pressure. The ANDA approval momentum has gone up

from ~500 (average of FY12-17) to ~780 for FY18. This is likely to erode the

base business growth of existing players due to higher competition. In

addition, lack of meaningful approvals and a delay in key launches is likely

to weigh for a few more quarters. Positive developments on the regulatory

front (Sun, Aurobindo) notwithstanding, may rekindle investor sentiments.

However, those are unlikely to impact earnings substantially. We expect

better overall visibility post H2FY19 on the back of a changed product mix

(tilting towards non-US franchisee), a leaner US portfolio to be driven by

incremental product launches largely in the speciality, biosimilar and

injectables space. In this backdrop, we prefer Indian formulation players,

especially MNCs. On the exports front, we prefer CRAMs players as we

believe the B2B space is better equipped to fathom acute pricing pressure in

the US.

Health Check

Health Check

Stocks Performance

Mcap

Company 1M 3M YTD 1Y 12-Jun

Sun Pharma.Inds. 15 6 -5 2 130052

Cipla -1 -2 -6 3 45812

Cadila Health. -4 -3 -13 -31 38616

Lupin 12 9 -5 -28 38019

Biocon -3 2 14 77 36600

Dr Reddy's Labs 9 1 -10 -17 36044

Aurobindo Pharma -2 2 -13 -2 34985

Divi's Lab. -12 5 -4 64 28126

Torrent Pharma. 2 6 -2 16 23530

Glenmark Pharma. 14 10 -1 -7 16617

Natco Pharma -1 9 -17 -22 14695

Apollo Hospitals -5 -12 -18 -26 13820

Jubilant Life -10 -4 -2 7 12287

Sanofi 7 3 11 30 12091

Pfizer 9 20 27 58 12032

Syngene Int. -8 1 8 26 11710

Alembic Pharma 8 -3 -1 -4 9904

Ajanta Pharma -3 -24 -31 -34 9014

Ipca Labs. -3 2 17 40 8826

Abbott 1 13 16 50 8736

Fortis Health -5 -5 -12 -26 7334

Narayana Hrudayalaya -13 -21 -23 -32 4711

Indoco Remedies 6 -18 -29 3 1826

Hester Bio -21 -21 -31 43 1091

NGL Fine-Chem -13 5 -15 2 251

Mangalam Drugs -30 -34 -49 -35 177

Return (%)

Market cap in | crore

Global Indices Performance

Company 1M 3M YTD 1Y 3Y 5Y

S&P 500 Pharm Index (US) 1 -2 -3 1 2 10

NASDAQ Biotechnology (US) 3 -4 3 13 -3 14

S&P Pharmaceuticals (US) 6 0 1 7 -8 8

DJ Pharma and Biotech (US) 2 -4 0 8 2 12

DJ STOXX Healthcare (EU) 1 4 1 -5 -1 8

TOPIX Pharma Index (Japan) 2 1 4 17 6 15

MSCI World Pharm & Biotech 1 -3 -1 3 0 8

NSE Pharma 5 3 -8 -7 -7 6

Return (%)

Source: Bloomberg

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah

[email protected]


Q4FY18 Results Review

Aided by a low base of Q4FY17, the I-direct healthcare universe reported

strong double digit profitability growth. Revenues also grew in high single

digits. On the geographical front, the challenging environment in the US

generic space continued to impact overall US growth. However, excluding

US and Brazil (country specific issues) most other geographies reported

strong growth on the back of new launches and favourable currency

movement. Domestic formulations also grew in double digits, in line with I-

direct estimates. Overall, the I-direct universe revenues were at | 40196

crore, growth of 7.4% YoY.

Exhibit 1: Actuals vs. estimates

Q4FY18 Q4FY18E Q4FY18 Q4FY18E Q4FY18 Q4FY18E

Ajanta Pharma 530.3 488.0 139.5 161.0 94.5 115.7

Alembic Pharma 853.3 831.1 173.2 187.0 93.8 130.4

Aurobindo Pharma 4049.1 4189.6 788.1 941.7 528.5 596.0

Biocon 1169.5 1098.1 233.0 241.1 130.4 113.6

Cadila Healthcare 3250.2 3204.4 870.4 801.1 606.7 496.2

Cipla 3698.0 3877.6 556.9 717.4 238.2 298.1

Divi's Laboratories 1088.0 1121.8 386.5 377.5 261.6 263.5

Dr Reddy's Labs 3553.9 3748.0 563.6 661.6 272.1 328.2

Glenmark Pharma 2279.8 2346.8 326.8 433.3 151.6 215.0

Indoco Remedies 269.6 275.1 49.4 38.5 20.5 16.9

Ipca laboratories 782.8 781.3 109.9 117.2 51.3 64.5

Jubilant Life Sciences 2252.0 2126.4 457.9 450.7 154.9 249.5

Lupin 4033.8 4030.4 710.0 775.1 358.6 344.6

Natco Pharma 767.8 694.6 383.3 400.3 299.9 298.7

Sun Pharma 6977.1 6718.7 1683.5 1406.9 1309.0 908.3

Syngene 409.1 380.6 129.1 126.0 84.5 79.9

Torrent Pharma 1722.0 1763.4 364.0 432.0 228.0 218.4

Apollo Hospitals 1862.9 1908.0 213.6 213.1 59.6 73.9

Narayana Hrudalaya 646.8 595.0 52.3 71.5 8.1 32.6

Total 40195.9 40178.9 8191.0 8553.0 4951.6 4844.0

Company

Revenues EBITDA Net profit

Source: Company, ICICI Direct Research

Exhibit 2: Quarterly performance of I-direct healthcare coverage

Company Q4FY18 Q4FY17 Var.(%) Q4FY18 Q4FY17 Var.(%) Q4FY18 Q4FY17 Var.(%)

Ajanta Pharma 530.3 476.8 11.2 139.5 160.9 -13.3 94.5 114.0 -17.1

Alembic Pharma 853.3 741.4 15.1 173.2 134.6 28.7 93.8 93.0 0.9

Aurobindo Pharma 4049.1 3641.6 11.2 788.1 721.2 9.3 528.5 532.5 -0.7

Biocon 1169.5 931.1 25.6 233.0 187.5 24.3 130.4 127.5 2.3

Cadila Healthcare 3250.2 2524.9 28.7 870.4 463.6 87.7 606.7 385.5 57.4

Cipla 3698.0 3582.0 3.2 556.9 506.2 10.0 238.2 -61.8 -485.5

Divi's Laboratories 1088.0 1066.7 2.0 386.5 362.0 6.8 261.6 259.3 0.9

Dr Reddy's Labs 3553.9 3611.9 -1.6 563.6 590.5 -4.6 272.1 337.6 -19.4

Glenmark Pharma 2279.8 2457.2 -7.2 326.8 443.8 -26.4 151.6 264.7 -42.7

Indoco Remedies 269.6 276.9 -2.6 49.4 32.6 51.7 20.5 17.9 14.3

Ipca laboratories 782.8 665.8 17.6 109.9 67.7 62.4 51.3 44.4 15.6

Jubilant Life Sciences 2252.0 1641.4 37.2 457.9 305.0 50.1 154.9 150.1 3.2

Lupin 4033.8 4253.3 -5.2 710.0 781.4 -9.1 358.6 380.2 -5.7

Natco Pharma 767.8 564.7 36.0 383.3 241.1 59.0 299.9 176.7 69.7

Sun Pharma 6977.1 7137.0 -2.2 1683.5 1547.5 8.8 1309.0 1223.7 7.0

Syngene 409.1 291.0 40.6 129.1 100.0 29.1 84.5 78.0 8.3

Torrent Pharma 1722.0 1434.0 20.1 364.0 295.0 23.4 228.0 206.0 10.7

Apollo Hospitals 1862.9 1661.6 12.1 213.6 170.1 25.6 59.6 48.2 23.8

Narayana Hrudalaya 646.8 483.5 33.8 52.3 58.3 -10.3 8.1 22.3 -63.8

Total 40195.9 37442.8 7.4 8191.0 7169.0 14.3 4951.6 4399.7 12.5

Revenues EBITDA Profit


US sales (select pack) declined 1.5% YoY to | 10383 crore due to persisting

pricing pressure owing to client consolidation, increased competition and

lack of meaningful approvals. Domestic formulations grew 10% YoY to

Geographical/segmental performance in Q4FY18

(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)

Ajanta 141.0 133.0 6.0 155.0 -9.0

Alembic 273.6 261.7 4.6 314.1 -12.9

Biocon 149.0 131.0 13.7 156.1 -4.5

Cadila 883.8 840.2 5.2 916.8 -3.6

Glenmark 608.7 576.9 5.5 578.5 5.2

Indoco 151.1 130.1 16.1 155.9 -3.1

Ipca 322.8 276.7 16.7 382.9 -15.7

Lupin 964.7 878.8 9.8 1,068.8 -9.7

Cipla 1,353.0 1,197.0 13.0 1,601.0 -15.5

Dr Reddy's 613.8 571.1 7.5 612.6 0.2

Sun Pharma 1,962.6 1,916.4 2.4 2,085.0 -5.9

Torrent 693.0 467.0 48.4 586.0 18.3

Total 8,117.1 7,379.8 10.0 8,612.7 -5.8

India


Aurobindo 1,738.8 1,643.2 5.8 1,909.6 -8.9

Cadila 1,642.4 985.1 66.7 1,583.8 3.7

Cipla 676.2 646.0 4.7 650.0 4.0

Glenmark 699.6 1,000.4 -30.1 735.9 -4.9

Lupin 1,499.0 1,900.7 -21.1 1,432.1 4.7

Dr Reddy's 1,448.7 1,534.9 -5.6 1,607.3 -9.9

Sun Pharma 2,371.6 2,554.5 -7.2 2,124.2 11.6

Torrent 307.0 281.0 9.3 266.0 15.4

Total 10,383.2 10,545.8 -1.5 10,308.8 0.7

US


Aurobindo 1151.6 777.2 48.2 1171.6 -1.7

Cadila 60.2 62.0 -2.9 64.9 -7.2

Glenmark 319.0 229.8 38.8 224.8 41.9

Dr Reddy's 171.1 206.6 -17.2 200.6 -14.7

Lupin 184.5 135.5 36.2 151.3 21.9

Torrent 248.0 235.0 5.5 241.0 2.9

Total 2134.4 1646.0 29.7 2054.2 3.9

Europe


Cadila 66.3 60.3 10.0 75.8 -12.5

Glenmark 127.6 134.0 -4.8 89.8 42.1

Torrent 215.0 216.0 -0.5 194.0 10.8

Total 408.9 410.3 -0.3 359.6 13.7

Latin America


Aurobindo 799.6 762.8 4.8 765.7 4.4

Alembic 198.0 181.0 9.4 180.0 10.0

Cadila 90.0 93.4 -3.6 113.7 -20.8

Glenmark 204.9 199.7 2.6 231.6 -11.6

Divi's Lab 532.3 558.4 -4.7 508.6 4.7

Indoco 14.4 12.0 20.0 15.8 -8.3

Ipca Labs 191.9 153.8 24.8 191.5 0.2

Lupin 280.8 281.5 -0.2 268.0 4.8

Cipla 135.2 162.0 -16.5 148.0 -8.6

Dr Reddy's 625.1 540.1 15.7 543.6 15.0

API 59.7 56.0 6.6 81.1 -26.4

Sun Pharma 353.8 409.3 -13.6 391.3 -9.6

Unichem 25.0 24.5 2.0 21.9 14.1

Total 3510.8 3434.6 2.2 3460.7 1.4

API



| 8117 crore. Europe surprised positively and reported ~30% YoY growth

on the back of new launches and favourable currency movement.

Despite overall decent growth, seven out of 19 companies under coverage

registered negative or muted revenue growth during the quarter due to

continued pricing pressure in the US. Bucking the trend, Syngene reported

41% YoY growth (mainly on lower base of fire incident) and Natco reported

36% growth (windfall of gCopaxone and gTamiflu). Jubilant Life registered

37% YoY growth (growth across portfolio) while Cadila registered 29% YoY

growth (windfall of gLialda exclusivity and gTamiflu).

EBITDA for the universe increased 14.3% YoY to | 8191 crore mainly due to

a lower base, cost rationalisation and operational leverage. EBITDA margins

improved 123 bps to 20.4% YoY. Net profit increased 12.5% YoY to | 4952

crore mainly due to strong operational, which was marginally offset by

higher interest cost and tax rate (15.1% vs. 11.8% in Q4FY17).

Exhibit 3: I-direct healthcare universe revenues trend

37443

34860

38752

3978140196

32000

34000

36000

38000

40000

42000

Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18

Revenue


Exhibit 4: I-direct healthcare universe EBITDA trend

7169

6313

8229

8541

8191

6000

7000

8000

9000

10000


EBITDA


Exhibit 5: I-direct healthcare universe profit trend

4400

3283

4823

3900

4952

3000

3600

4200

4800

5400


PAT


Exhibit 6: Trends in EBITDA & PAT margin of I-direct healthcare universe

19.118.1

21.2 21.520.4

11.8

9.4

12.4

9.8

12.3

0.0

5.0

10.0

15.0

20.0

25.0


EBITDA Margins (%) PAT Margins (%)



Exhibit 7: Deviation from estimates/change in outlook post Q4FY18 numbers

[5

Company Initial Rating Current Rating Deviation from

estimates

Remarks

Ajanta Pharma HOLD HOLD Mixed While revenues were above I-direct estimates mainly due to 110% YoY growth in African

branded formulation, profitability was below I-direct estimates due to a below expected

operational performance

Alembic Pharma HOLD HOLD Below Below I-direct estimates on the profitability front due to higher depreciation and tax rate.

Revenue was in line with I-direct estimates

Aurobindo Pharma HOLD HOLD Below Below I-direct estimates on all fronts

Biocon BUY BUY Above Above I-direct estimates mainly due to strong growth in biological segment and Syngene

Cadila Healthcare HOLD HOLD Above Result largely driven by strong US sales led by gLialda (ulcerative colitis) exclusivity &

favourable seasonality impact on gTamiflu (anti-infective)

Cipla HOLD HOLD Below Revenues were lower mainly due to lower sales growth in RoW and EU. Margins were

impacted due to one-offs

Divi's labs HOLD HOLD In-line In line with I-direct estimates on all fronts

Dr Reddy's Labs HOLD HOLD Below Revenues declined mainly due to lower sales in the US led by price erosion. Net profit declined

mainly due to lower operational performance

Glenmark Pharma HOLD HOLD Below Revenues declined mainly due to 30% YoY decline in the US. Net profit declined mainly due to

lower operational performance and other income

Indoco Remedies HOLD HOLD Above Result were above I-direct estimates on profitability mainly due to significent improvement in

EBITDA margins

Ipca labs BUY BUY Mixed While revenues were in-line with I-direct estimates, profitability was lower than I-direct

estimates on the back of lower-than-expected margins and higher tax rate

Jubilant Life Sciences BUY BUY Mixed While revenues were above I-direct estimates, net profit was below I-direct estimates mainly

due to one-off depreciation and higher taxation.

Lupin HOLD HOLD Above Results were in-line with I-direct estimates on revenues front. Adjusted PAT was above I-

direct estimates mainly due to higher other income

Natco Pharma HOLD HOLD Above Strong result on the back of windfall from limited competition products (Glatiramer Acetate,

Liposomal Doxorubicin, Oseltamivir and Lanthanum Carbonate) in the US

Sun Pharma HOLD HOLD Above While beat on revenues front was mainly on account of higher-than expected Taro revenues,

beat in EBITDA was mainly on account of strong gross margins

Syngene BUY BUY Above Strong result due to lower base of Q4FY17 (fire incident impact) and strong growth in

chemical development and discovery services supported by biologics business

Torrent Pharma HOLD HOLD Mixed While revenues and net profit were in-line with I-direct estimates, EBITDA was lower than I-

direct estimates mainly due to higher other expenditure. Revenues were largly driven by

consolidation of Unichem India and Nepal businesses

Apollo Hospital HOLD HOLD Mixed While revenues and EBITDA were in-line with I-direct estimates, the profitability came lower

than I-direct estimates mainly due to higher depreciation and tax rate (28.9% vs I-direct

estimates of 21.0%)

Narayana Hrudalaya BUY BUY Mixed While revenues were higher than I-direct estimates, profitability was below I-direct estimates

mainly due to incremental overheads pertaining to new hospitals and consolidation. Revenues

growth were mainly driven by consolidation of Health City Cayman Islands Ltd (Cayman)

Source: Bloomberg, ICICI Direct Research


IPM grows 11% YoY in May

The Indian pharmaceutical market (IPM) grew 10.8% YoY to | 10583

crore for May. The growth was attributable to growth in volumes – 9%

and new product launches – 2.8%. Conversely it was pulled down by

price decrease of 1%

The fixed dosage combination (FDCs) related market grew 18.5%, while

the Non FDC market showed a growth of 10.8%

Drugs under NLEM list grew 7.2% YoY while non-NLEM drugs grew

11.3%

Among companies under I-direct coverage Glenmark, Lupin, Torrent

and Dr Reddy’s registered higher than industry growth rate

Therapy wise, ~10 therapies registered higher than industry growth.

Notable among them with growth rates- respiratory – 15.4%, derma –

14.4%, anti-diabetic – 14.2%, cardiac – 13.1% and CNS – 11.3%. On the

other hand, anti-malaria and vaccine have witnessed muted to negative

growth

Domestic companies have grown 10.5% YoY while MNC companies

have grown 11.8% in May 2018

Exhibit 8: Domestic formulations - growth trend

[

7.2

5.4

-2.6

2.1

2.5

6.3 7.8

7.9 9

.9

7.4 9

.7

7.9

10.8

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

May-17

Jun-17

Jul-17

Aug-17

Sep-1

7

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

May-18

(%

)

Indian Pharma Market

Source: AIOCD data base, ICICI Direct Research

Exhibit 9: Companies growth in domestic market in May, 2018

15.9

8.7 8.9

11.9

15.2

8.9

12.9

20.0

11.2

7.08.0

17.5

0.7

6.0 5.8

8.4

14.2

0.0

5.0

10.0

15.0

20.0

25.0

Abbott

Ajanta

Ale

mbic

Bio

con

Cadila

Cip

la

DR

L

Gle

nm

ark

GS

K P

harm

a

Indoco

Ipca Labs

Lupin

Natco

Pfiz

er

Sanofi

Sun P

harm

a

Torrent

(%

)


Therapy wise performance (| crore)

Therapy May' 18 May' 17 YoY (%) April' 18 MoM (%)

Anti-Infectives 1303 1227 6.2 1306 -0.2

Cardiac 1362 1204 13.1 1335 2.0

GI 1323 1186 11.6 1287 2.9

Vitamins 972 883 10.0 926 4.9

Anti Diabetic 1036 907 14.2 998 3.7

Respiratory 647 561 15.4 722 -10.3

Pain 715 651 9.8 693 3.1

Derma 690 603 14.4 669 3.0

Neuro 656 590 11.3 643 2.1

Gynaecological 559 514 8.8 547 2.1

Anti-Neoplastics 231 195 18.8 223 3.9

Ophthal 201 192 4.9 203 -1.3

Vaccines 181 183 -0.9 182 -0.6

Hormones 184 163 13.0 187 -1.2

Blood Related 134 128 4.3 124 8.3

Urology 135 116 16.4 131 3.1

Others 113 100 12.3 106 6.6

Anti Malarials 35 34 1.1 34 0.4

Sex Stimulants 55 54 1.7 58 -4.4

Stomatologicals 53 48 9.8 50 6.6

Source: AIOCD data base

Top brands in Indian pharma market (MAT; | crore)

Brand Company Therapy May' 18 YoY (%)

Mixtard Abbott Anti Diabetic 493.0 -4.9

Spasmo Proxyvon PlusWockhardt GI 447.0 10.2

Glycomet Gp USV Anti Diabetic 427.0 2.6

Galvus Met Novartis Anti Diabetic 415.0 20.2

Janumet MSD Anti Diabetic 392.0 30.7

Lantus SANOFI INDIAAnti Diabetic 385.0 16.2

Augmentin GSK Anti-Infectives 360.0 24.9

Liv 52 Himalaya GI 336.0 13.3

Clavam Alkem Anti-Infectives 308.0 9.3

Monocef ARISTO Anti-Infectives 282.0 1.9

Source: AIOCD data base

Industry Acute vs Chronic vs Sub Chronic

Acute

48%

Chronic

32%

Sub

Chronic

20%

Source: AIOCD data base; As per AIOCD MAT May 2018


Domestic Formulations – I-direct Coverage universe data summary

Exhibit 10: Domestic formulations – Market Share (MAT Value May-18)

[

8%

6%

5%4%

4%3% 3% 3%

2% 2% 2%

1% 1% 1%1% 1% 1%

0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Sun

Abbott

Cip

la

Cadila

Lupin

Torrent

Gla

xo

Intas

PFIZER

Sanofi

Dr. R

eddys

IPCA

Ale

mbic

Novartis

Natco

Indoco Rem

edie

s

Ajanta

Bio

con

Market Share


Exhibit 11: Acute vs Chronic vs Sub Chronic (MAT Value May-18)

39 39

57

23

4451

41

8166

29

84

4763

4739

25

53

4052

23

6944 28

36

627

55

0

47 16 48

46

54

31

2110

207 12

20 2212 7

16 157

21

515 21 16

0

20

40

60

80

100

120

Abbott

Ajanta

Ale

mbic

Bio

con

Cip

la

Dr. R

eddys

Gle

nm

ark

Indoco

IPCA

Lupin

Sun

Novartis

Pfiz

er

Sanofi

Sun

Torrent

Cadila

%

Acute Chronic Sub Chronic



Exhibit 12: Top five brands in Value terms (MAT Value May-18)

[5

Sun Brand Therapy Sales (|cr)

1 Volini Pain 239

2 Istamet Anti Diabetic 233

3 Levipil Neuro 226

4 Rosuvas Cardiac 224

5 Gemer Anti Diabetic 194

Cipla Brand Therapy Sales (|cr)

1 Foracort Respiratory 272

2 Duolin Respiratory 205

3 Budecort Respiratory 183

4 Seroflo Respiratory 160

5 Asthalin Respiratory 158

Cadila Brand Therapy Sales (|cr)

1 Skinlite Derma 195

2 Deriphyllin Respiratory 135

3 Pantodac GI 108

4 Mifegest Kit Gynaecological 107

5 Atorva Cardiac 106

Lupin Brand Therapy Sales (|cr)

1 Gluconorm-G Anti Diabetic 210

2 Huminsulin Anti Diabetic 179

3 Budamate Respiratory 112

4 Tonact Cardiac 89

5 Rablet-D GI 71

Torrent Brand Therapy Sales (|cr)

1 Shelcal Vitamins 204

2 Chymoral FortePain 126

3 Losar H Cardiac 102

4 Nikoran Cardiac 100

5 Azulix-Mf Anti Diabetic 89

Dr. Reddys Brand Therapy Sales (|cr)

1 Omez GI 118

2 Omez D GI 103

3 Econorm GI 92

4 Atarax Respiratory 86

5 Razo D GI 71

Glenmark Brand Therapy Sales (|cr)

1 Telma Cardiac 197

2 Telma H Cardiac 179

3 Ascoril Plus Respiratory 115

4 Candid Derma 112

5 Telma Am Cardiac 107

IPCA Brand Therapy Sales (|cr)

1 Zerodol Sp Pain 128

2 Zerodol P Pain 96

3 Hcqs Anti Malarials 84

4 Larinate Anti Malarials 49

5 Folitrax Anti-Neoplastics 47

Alembic Brand Therapy Sales (|cr)

1 Azithral Anti-Infectives 155

2 Althrocin Anti-Infectives 76

3 Wikoryl Respiratory 61

4 Gestofit Gynaecological 53

5 Roxid Anti-Infectives 52

Sanofi Brand Therapy Sales (|cr)

1 Lantus Anti Diabetic 385

2 Hexaxim Vaccines 179

3 Combiflam Pain 168

4 Allegra Respiratory 158

5 Amaryl M Anti Diabetic 132

Natco Brand Therapy Sales (|cr)

1 Hepcinat Anti-Infectives 163

2 Geftinat Anti-Neoplastics 118

3 Erlonat Anti-Neoplastics 101

4 Natdac Anti-Infectives 94

5 Veenat Anti-Neoplastics 89

Indoco Brand Therapy Sales (|cr)

1 Febrex Plus Respiratory 78

2 Cyclopam GI 49

3 Oxipod Anti-Infectives 43

4 Sensodent-K Stomatologicals 40

5 Atm Anti-Infectives 36

Ajanta Brand Therapy Sales (|cr)

1 Met Xl Cardiac 91

2 Melacare Derma 54

3 Atorfit Cv Cardiac 52

4 Feburic Pain 28

5 Met Xl Am Cardiac 23

Biocon Brand Therapy Sales (|cr)

1 Insugen Anti Diabetic 112

2 Basalog Anti Diabetic 83

3 Canmab Anti-Neoplastics 43

4 Insugen R Anti Diabetic 24

5 Blisto Mf Anti Diabetic 17

Abbott Brand Therapy Sales (|cr)

1 Mixtard Anti Diabetic 493

2 Phensedyl Cough LinctusRespiratory 281

3 Thyronorm Hormones 280

4 Duphaston Gynaecological 276

5 Novomix Anti Diabetic 273

Pfizer Brand Therapy Sales (|cr)

1 Becosules Vitamins 240

2 Magnex Anti-Infectives 161

3 Minipress Xl Cardiac 149

4 Dolonex Pain 141

5 Gelusil Mps GI 140



Exhibit 13: Top five therapies in value term (MAT Value May 2018)

[5

Sun Therapy Sales (|cr)

1 Cardiac 1894

2 Neuro 1828

3 GI 1228

4 Anti-Infectives 994

5 Anti Diabetic 945

Cipla Therapy Sales (|cr)

1 Respiratory 1886


3 Cardiac 685

4 GI 416

5 Urology 295

Cadila Therapy Sales (|cr)


2 Cardiac 689

3 GI 556

4 Respiratory 550

5 Pain 462

Lupin Therapy Sales (|cr)

1 Cardiac 1007

2 Anti Diabetic 934


4 Respiratory 555

5 GI 327

Torrent Therapy Sales (|cr)

1 Cardiac 1230

2 Neuro 624

3 GI 568

4 Vitamins 445

5 Anti Diabetic 281

Dr. Reddys Therapy Sales (|cr)

1 GI 587

2 Cardiac 366

3 Respiratory 283


5 Anti-Neoplastics 214

Glenmark Therapy Sales (|cr)

1 Derma 797

2 Cardiac 697

3 Respiratory 470


5 Anti Diabetic 209

IPCA Therapy Sales (|cr)

1 Pain 435

2 Cardiac 262

3 Anti Malarials 258

4 GI 117


Alembic Therapy Sales (|cr)


2 Cardiac 219

3 Respiratory 195

4 GI 183

5 Gynaecological 175

Sanofi Therapy Sales (|cr)

1 Anti Diabetic 725

2 Cardiac 401

3 Vaccines 385

4 Respiratory 307

5 Pain 243

Natco Therapy Sales (|cr)



3 Pain 46

4 Blood Related 4

5 Cardiac 3

Indoco Therapy Sales (|cr)

1 Respiratory 143


3 Stomatologicals 129

4 GI 112

5 Vitamins 58

Ajanta Therapy Sales (|cr)

1 Cardiac 302

2 Ophthal 187

3 Derma 132

4 Pain 39

5 Vitamins 29

Biocon Therapy Sales (|cr)

1 Anti Diabetic 262



4 Blood Related 14

5 Cardiac 12

Abbott Therapy Sales (|cr)

1 Anti Diabetic 1508

2 GI 1246

3 Vitamins 842

4 Neuro 674

5 Cardiac 612

Pfizer Therapy Sales (|cr)


2 GI 304

3 Vitamins 298

4 Hormones 269

5 Gynaecological 263



Exhibit 14: Summary of USFDA approvals for May, 2018

Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size

Cadila Succinylcholine Chloride Injection Anesthesia Sandoz Anectine NA

Natco Pharma Azacitidine Anti-Cancer Celgene Vidaza NA

Dr reddy's lab THIOTEPA Oncology NA NA NA

Ajanta Pharma Sildenafil Citrate Harmonal Pfizer Revatio NA

Cadila Carbidopa tablets Parkinson Aton LODOSYN NA

Glenmark Clobetasol Propionate Cream Dermatology Fougera Pharma Temovate US$ 118 million

Jubilant Life Niacin ER CVS AbbVie Niaspan table NA

Dr. Reddy's Labs Esomeprazole Magnesium OTC GI Astrazeneca Pharma Nexium 24HR NA

Glenmark Colesevelam Hydrochloride Tablets CVS Daiichi Sankyo Inc Welchol NA

Cadila Dutasteride and Tamsulosin Hydrochloride Capsules Prostatic hyperplasia GSK JALYN NA

Cadila Omeprazole; Sodium Bicarbonate GI Santarus Zegerid NA

Cadila Nystatin Anti-Fungal NA NA NA

Taro Benzoyl Peroxide; Clindamycin Phosphate inflammatory acne Dow Pharma Onexton NA

Cadila Doxycycline Hyclate Anti-Infective Pfizer Vibra NA

Lupin Nystatin; Triamcinolone Acetonide Derma G And W Labs Mykacet US$ 62.2 million

Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size

Cadila Plerixafor Injection Diabetes Alidac Pharmaceuticals Janumet NA

Aurobindo Pharma Tadalafil CVS Eli Lilly Adcirca NA

Aurobindo Pharma Tadalafil CVS Eli Lilly Adcirca NA

Ajanta Pharma Tadalafil CVS Eli Lilly Adcirca NA

Tentative Approvals

[5



Exhibit 15: US patent litigations [5

Month Innovator ANDA Filer Brand Name API Used for

Jun-17 Allergan Taro Pharma Aczone Dapsone Leprosy

Jun-17 Genentech Sun Pharma Tarceva Erlotinib Cancer

Jun-17 Bayer AG Alembic Pharma Xarelto Rivaroxaban Blood Thinner

Jun-17 Teva Dr Reddy's Lab Copaxone Glatiramer Multiple Sclerosis

Jun-17 Valeant Pharma Sun Pharma Uceris Budesonide Ulcerative Colitis

Jun-17 Omeros Corp Lupin Omidria Phenylephrine And Ketorolac Pupil Dilation

Jun-17 Amgen Lupin Sensipar Cinacalcet Calcium Reducer

Jun-17 Biogen Aurobindo Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Sun Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Cipla Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Glenmark Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Lupin Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Torrent Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Forest Laboratories Sun Pharma Linzess Linaclotide Irritable Bowel Syndrome

Jun-17 Biogen Torrent Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jun-17 Biogen Cadila healthcare Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jul-17 Janssen Pharma Aurobindo Pharma Invokana Canagliflozin Diabetes

Jul-17 Actelion Pharma Sun Pharma Veletri Epoprostenol Pulmonary Arterial Hypertension

Jul-17 Biogen Cadila healthcare Tecfidera Dimethyl Fumarate Multiple Sclerosis

Jul-17 Delcor Asset Corp Sun Pharma Evoclin Clindamycin Acne vulgaris

Jul-17 Celgene Corp Dr Reddy's Lab Revlimid Lenalidomide Oncology

Jul-17 PreCision Dermatology Lupin Locoid Hydrocortisone butyrate Dermatitis

Jul-17 BMS Cadila healthcare Reyataz Atazanavir HIV

Jul-17 Endo Pharma Lupin Nascobal Cyanocobalamin Vitamin B12 deficiency

Jul-17 Bayer Sun Pharma Aczone Clindamycin Acne vulgaris

Aug-17 Bayer AG Lupin Xarelto Rivaroxaban Blood Thinner

Aug-17 Horizon Therapeutics Lupin Ravicti Glycerol Phenylbutyrate Inborn Urea Cycle Disorder

Aug-17 Celgene Cipla Revlimid Lenalidomide Oncology

Aug-17 Kissei Pharmaceuticals Aurobindo Rapaflo Silodosin Enlarged Prostate

Aug-17 Bayer AG Torrent Pharma Xarelto Rivaroxaban Blood Thinner

Aug-17 Forest Laboratories Aurobindo Linzess Linaclotide Irritable Bowel Syndrome

Aug-17 Alcon Research Cipla Pazeo Olopatadine Ocular Itching

Aug-17 Sanofi-Aventis Aurobindo Multaq Dronedarone Atrial Fibrillation

Sep-17 Janssen Products LP Aurobindo Prezista Darunavir Hiv

Sep-17 Allergan Aurobindo Lastacaft Alcaftadine Allergic Conjunctivitis

Sep-17 Eli Lilly and Co Glenmark Cialis Tadalafil Erectile Dysfunction

Sep-17 Indivior Dr Reddy's Lab Suboxone Buprenorphine Opioid Dependence

Sep-17 Teijin Ltd Aurobindo Uloric Febuxostat Gout

Sep-17 Takeda Pharma Indoco Remedies Nesina Alogliptin Diabetes

Sep-17 Allergan, Inc Alembic Pharma Latisse Bimatoprost Hypotrichosis

Sep-17 Wyeth Pharma Sun Pharma Bosulif Bosutinib Leukemia

Oct-17 Boehringer Ingelheim Aurobindo Pharma Gilotrif Afatinib Lung Cancer

Oct-17 Boehringer Ingelheim Sun Pharma Gilotrif Afatinib Lung Cancer

Oct-17 Forest Laboratories Torrent Pharma Fetzima Levomilnacipran Depression

Oct-17 Forest Laboratories Cadila Healthcare Fetzima Levomilnacipran Depression

Nov-17 ViiV Healthcare Lupin Triumeq Abacavir, Dolutegravir and Lamivudine HIV

Nov-17 Pfizer Sun Pharma Xeljanz Tofacitinib citrate Rheumatoid arthritis

Mar-18 Bial - Portela & CA. Dr reddy's lab Aptiom eslicarbazepine partial-onset seizures

Mar-18 Bial - Portela & CA. Jubilant Pharma Aptiom eslicarbazepine partial-onset seizures

Mar-18 Sumitomo Dainippon Pharma InvaGen Pharma Latuda lurasidone hydrochloride schizophrenia; bipolar depression

Mar-18 Vifor Fresenius Lupin/Teva Velphoro sucroferric oxyhydroxide chronic kidney disease

Mar-18 Gilead Sciences Natco Sovaldi Sofosbuvir hepatitis C

Mar-18 Taro Lupin Topicort Desoximetasone skin irritation

Mar-18 Stiefel Laboratories, Inc. Glenmark Olux-E clobetasol propionate psoriasis

Mar-18 Takeda Cadila Colcrys colchicine gout

Apr-18 Indivior Inc Dr. Reddy's Lab Suboxone buprenorphine and naloxone opioid dependence

Apr-18 Celgene Corp. Dr. Reddy's Lab Revlimid lenalidomide multiple myeloma

Apr-18 GlaxoSmithKline Dr. Reddy's Lab Lamictal XR lamotrigine seizures, bipolar disorder

Apr-18 Onyx Therapeutics, Inc. CIPLA Ltd Kyprolis carfilzomib multiple myeloma

Apr-18 Jazz Pharma Lupin Xyrem sodium oxybate narcolepsy

Apr-18 Biogen International Zydus Pharma Tecfidera dimethyl fumarate multiple sclerosis

Apr-18 Celgene Corp. Cadila Revlimid lenalidomide multiple myeloma

May-18 AstraZeneca Cadila Farxiga dapagliflozin diabetes

May-18 Takeda Pharma Torrent Pharma Trintellix vortioxetine depression

May-18 AstraZeneca Cadila Farxiga dapagliflozin diabetes

May-18 Celgene Corp Cipla Revlimid lenalidomide multiple myeloma

May-18 Takeda Pharma Cipla Trintellix vortioxetine depression

May-18 Astellas Pharm Eugia Pharma/Aurobindo Xtandi enzalutamide prostate cancer

May-18 Gilead Aurobindo Truvada emtricitabine, tenofovir HIV

May-18 Takeda Pharma Lupin Trintellix vortioxetine depression

May-18 Promius Pharma Taro Pharma Sernivo betamethasone plaque psoriasis

May-18 Janssen Dr reddy's Prezista darunavir HIV



Monthly Sector News

Price hikes, new launches, recalls, approvals

Sun Pharma announces USFDA approval of Yonsa

Sun Pharma’s in-licensing Oncology product Yonsa (abiraterone acetate), a

novel formulation in combination with methylprednisolone has received

USFDA approval. Churchill is eligible to receive upfront and sales-linked

milestone payments, and royalties on sales from Sun Pharma. Yonsa, in

combination with methylprednisolone, was filed as a new drug application

(NDA) under the 505(b)(2) regulatory pathway and will be promoted as a

branded product in the US.

EMA accepts Lupin application for biosimilar Etanercept

European Medicines Agency (EMA) has accepted Lupin’s marketing

authorization application (MAA) for a biosimilar of Etanercept. The

indications targeted for approval are rheumatoid arthritis (RA), psoriatic

arthritis, ankylosing spondylitis, axial spondyloarthritis, non-radiographic

axial spondyloarthritis and Plaque Psoriasis.

Lupin launches innovative gynaecology product Solosec in US

Lupin has launched innovative gynaecology product Solosec (secnidazole)

2g oral granules in the US. Solosec is indicated for the treatment of bacterial

vaginosis (BV) in adult women. The drug received final approval from the

USFDA on September 2017.

USFDA approves Biocon-Mylan first biosimilar of Neulasta

USFDA has approved Biocon-Mylan’s first biosimilar to Amgen's drug

Neulasta to help reduce the risk of infection during cancer treatment. This is

the second biosimilar approval for Biocon-Mylan in the US. The company

has received this approval on first target action date (TAD) despite

observations from the USFDA at the Bangalore plant. The approval was in-

line with I-direct estimates.

Natco launches generic version of Posaconazole injection in India

Natco has launched a generic version of Posaconazole Injection (antifungal

agent), 300 mg/16.7 ml, under its brand Posanat. This is the first time an

injection version of this drug was available in India. Posaconazole Injection

is sold in the US market by Merck under its brand name Noxafil.

Posaconazole injection is an antifungal agent. It is used in patients who are

at high risk of developing infections for being severely

immunocompromised, such as associated with stem cell transplant or from

chemotherapy.

Lawsuits, court rulings, settlements, regulatory issues

Dr Reddy’s Srikakulam (SEZ) API plant completes USFDA audit

Dr Reddy’s Srikakulam (SEZ) API plant in Andhra Pradesh has completed

USFDA audit with no observations.

Biocon receives CRL from USFDA to change manufacturing site for glargine

Biocon has received complete response letter (CRL), from USFDA for

clarification of a change in the manufacturing site for glargine from

Bengaluru to a new facility in Malaysia.

Cadila Ahmedabad SEZ facility cleared USFDA inspection

The USFDA inspected Cadila’s manufacturing facility at Ahmedabad SEZ

from May 28 to June 5, 2018. At the end of the inspection, no observation

(483) was issued. The site manufactures oncology injectables for the

regulated markets.

Sun Pharma Halol plant receives EIR from USFDA

Sun Pharma’s Halol plant has received establishment inspection report (EIR)

from USFDA for the inspection conducted in February 12-23, 2018.

According to the press release, the USFDA concluded that the inspection is


now closed while the issues contained in the warning letter issued in

December 2015 have been addressed.

USFDA accords VAI status to Aurobindo Unit IV injectable facility

According to media, Aurobindo pharma’s Unit IV injectable facility has

received voluntary action initiated (VAI) status from USFDA.

Q4FY18 Result Highlights

Torrent Pharma- Acquisition related adjustments weigh

Revenues grew 20.1% YoY to | 1722 crore (I-direct estimate: | 1763 crore)

mainly due to 48.4% YoY growth in Indian formulations to | 693 crore (I-

direct estimate: | 733 crore) led by consolidation of the Unichem India and

Nepal businesses. EBITDA margins improved 57 bps YoY to 21.1% YoY (I-

direct estimate: 24.5%). Improvement in gross margins (73.1% vs 65.8% in

Q4FY18) was largely offset by higher other expenditure. EBITDA increased

23.4% YoY to | 364 crore (I-direct estimate: | 432 crore). Net profit

increased 10.7% YoY to | 228 crore (I-direct estimate: | 218 crore) mainly

due to a strong operational performance and higher deferred tax assets,

that were partly offset by higher depreciation and interest cost

Apollo Hospitals- Growth tempo maintained but margins muted

Standalone revenues grew 12.1% YoY to | 1863 crore (I-direct estimate:

| 1908 crore) on the back of 16.1% YoY increase in pharmacy business to

| 863 crore (I-direct estimate: | 879 crore) and 8.9% YoY increase in

healthcare business to | 1000 crore (I-direct estimate: | 1029 crore). EBITDA

margins improved 123 bps YoY to 11.5% (I-direct estimate: 11.2%) mainly

due to lower base of Q4FY17. EBITDA increased 26% YoY at | 214 crore (I-

direct estimate: | 213 crore). Adjusted net profit grew 23.8% to | 60 crore (I-

direct estimate: | 74 crore) as growth in EBITDA was offset by higher

depreciation and tax rate (28.9% vs. 17.8% in Q4FY17).

Indoco Remedies- Domestic formulations shine but exports tumble

Revenues declined 2.6% YoY to | 270 crore (I-direct estimate: | 275 crore).

Export formulations declined 17% YoY to | 88 crore (I-direct estimate: | 101

crore) while domestic formulations grew 16.1% to | 151 crore (I-direct

estimate: | 154 crore). EBITDA margins increased 718 bps YoY to 18.9% (I-

direct estimate of 14.0%) due to lower operational expenditure across line

items. EBITDA rose 56.8% YoY to | 51 crore (I-direct estimate: | 39 crore).

Net profit increased 23% YoY to | 22.1 crore (I-direct estimate: | 17 crore).

The delta vis-à-vis EBITDA was mainly due to higher interest cost and tax

rate (19.3% vs. 12.0% in Q4FY17).

Narayana Hrudayalaya - Revenues buoyant but dent in margins

Revenues grew 34% YoY to | 647 crore (I-direct estimate: | 595 crore)

mainly due to consolidation of Health City Cayman Islands (Cayman) and

incremental revenues from new hospitals. EBITDA margins declined 398

bps YoY to 8.1% (I-direct estimate: 12.0%) mainly due to an increase in

doctor payouts, expenses related to new facilities, GST implementation

besides losses related to stent and implants regulation. EBITDA de-grew

10.3% YoY to | 52 crore (I-direct estimate: | 72 crore). Adjusted net profit

declined 56% to | 10 crore (I-direct estimate: | 33 crore) due to lower

margins and higher interest cost

Ipca - Upbeat numbers with margin expansion


due to 16.7% growth in domestic formulations to | 323 crore (I-direct

estimate: | 318 crore) and 25% growth in API to | 192 crore (I-direct

estimate: | 175 crore). Export formulations grew 12.3% YoY to | 251 crore

(I-direct estimate: | 276 crore). EBITDA margins improved 388 bps to 14.0%

YoY (I-direct estimate: 15.0%) mainly due to an improvement in gross

margins (67.3% vs. 65.2% in Q4FY17) and lower employee cost. EBITDA

increased 62.4% YoY to | 110 crore (I-direct estimate: | 117 crore). Net

profit grew 15.6% YoY to | 51 crore (I-direct estimate: | 65 crore). Delta vis-


à-vis EBITDA was primarily due to higher tax rate (28.4% vs -72.7% in

Q4FY17).

Glenmark- Margin contraction intensifies on US pricing

Revenues declined 7.2% YoY to | 2280 crore (I-direct estimate: | 2347

crore) mainly due to 30% YoY decline in the US to | 700 crore (I-direct

estimate: | 733 crore) on the back of high base of gZetia exclusivity in

Q4FY17. Europe, on the other hand, grew 38.8% YoY to | 319 crore (I-direct

estimate: | 264 crore). EBITDA margins contracted 373 bps YoY to 14.3% (I-

direct estimate: 18.5%) due to lower gross margins (65.6% in Q4FY18 vs.

68.4% in Q4FY17) and higher employee cost. EBITDA declined 26.4% YoY

to | 327 crore (I-direct estimate: | 433 crore). Adjusted net profit declined

42.7% YoY to | 152 crore (I-direct estimate: | 251 crore) due to a weak

operational performance and lower other income.

Aurobindo Pharma- Weak numbers plagued by US injectables


mainly due to 48.2% growth in Europe to | 1152 crore (I-direct estimate:

| 1106 crore) led by acquisition of Generis in Portugal. EBITDA margins

contracted 34 bps YoY to 19.5%. Margins were lower than I-direct estimate

of 22.5% mainly on account of higher other expenditure and employee cost.

EBITDA increased 9.3% to | 788 crore vs. I-direct estimate of | 942 crore.

Net profit declined 0.7% YoY to | 529 crore (I-direct estimates: | 596 crore)

mainly due to a below expected operational performance and higher

depreciation).

Mangalam Drugs – Weak Q4 numbers

Revenue declined 19% YoY to | 67.2 crore. EBITDA margins declined 257

bps YoY to 14.2%. Net profit fell 53% YoY to | 3.1 crore. The weak numbers

were mainly due to squashing of anti-malarial tender business.

Divi’s Laboratories- Capacity constraints impact growth

Revenues grew 2% YoY to | 1088 crore against I-direct estimate of | 1121

crore. EBITDA margins improved 159 bps to 35.5% (I-direct estimate of

33.7%) mainly due to strong gross margins and lower other expenditure.

Gross margins improved 200 bps to 62.5% (I-direct estimate: 60.7%).

EBITDA grew 6.8% YoY to | 387 crore (I-direct estimate: | 378 crore). Net

profit grew 0.9% to | 262 crore (I-direct estimate: | 264 crore). Lower

growth vis-à-vis EBITDA was mainly due to higher depreciation and tax rate

(33.9% vs. 26% in Q4FY17).

Sun Pharma- Positive surprises in negative growth


crore) mainly due to 7% YoY decline in the US to | 2370 crore (I-direct

estimate: | 2073 crore). The decline in the US was due to high base of

gGleevec (oncology) and gBenicar (CVS). EBITDA margins improved 245

bps to 24.1% (I-direct estimates of 20.9%) mainly due to strong gross

margins. Gross margins improved 539 bps to 74.6% (I-direct estimates of

68.4%). EBITDA increased 8.8% YoY to | 1684 crore (I-direct estimate:

| 1407 crore). Adjusted net profit increased 8.9% to | 1332 crore (I-direct

estimate: | 957 crore). Increase in depreciation & interest cost was largely

offset by tax reversal.

Cadila- Windfall gains in US drive Q4


mainly due to 66.7% rise in US sales to | 1642 crore (I-direct estimate:

| 1464 crore) led by gLialda (ulcerative colitis) exclusivity & favourable

seasonality impact on gTamiflu (anti-infective). EBITDA margins improved

870 bps to 25.8% (I-direct estimate: 25.0%) due to limited competition

launches in the US. EBITDA increased 87.7% YoY to | 870 crore (I-direct

estimate: | 801 crore). PAT increased 58% YoY to | 607 crore (I-direct

estimate: | 496 crore) due to a strong operational performance.


Natco Pharma- Windfall from limited competition US launches

Revenues increased 36.0% YoY to | 768 crore (I-direct estimate: | 695

crore) on the back of windfall from limited competition products (Glatiramer

Acetate, Liposomal Doxorubicin and Lanthanum Carbonate) in the US.

EBITDA margins improved 723 bps YoY to 50% (I-direct estimate: 57.6%)

mainly due to better realisation from limited competition launches in the

US. However, it was below I-direct estimates mainly due to lower gross

margins (84% vs I-direct estimates of 90%). Adjusted net profit increased

69.7% YoY to | 300 crore (I-direct estimates: | 299 crore) mainly on account

of a strong operational performance.

Dr Reddy’s Lab- Weakness in numbers persists


crore) mainly due to 5.6% YoY decline in the US to | 1449 crore (I-direct

estimate: | 1631 crore) and 20% YoY decline in Russia and CIS to | 360

crore (I-direct estimate: | 450 crore). Domestic revenue grew 7.5% YoY to

| 614 crore, in line with I-direct estimates of | 617 crore. EBITDA margins

contracted 49 bps YoY to 15.9% (I-direct estimate: 17.7%) mainly due to

higher employee cost. EBITDA fell 4.6% to | 564 crore against I-direct

estimate of | 662 crore. Net profit declined 19.4% YoY to | 272 crore (I-

direct estimate: | 328 crore) mainly due to a below expected operational

performance and higher tax rate (15.6% vs. 2.9% in Q4FY17).

Cipla- Muted sales growth; one-offs hurt margins

Revenues grew a mere 3.2% YoY to | 3698 crore (I-direct estimate: | 3878

crore), as 13% YoY growth in India to | 1353 crore (I-direct estimate: | 1341

crore) was largely offset by 17% YoY decline in RoW sales to | 676 crore (I-

direct estimate: | 797 crore) and 24.9% YoY decline in EU sales to | 135

crore (I-direct estimate: | 176 crore). US sales increased 4.7% YoY to | 676

crore (I-direct estimate: | 656 crore). EBITDA margins improved 94 bps YoY

to 15.1%, however came lower than I-direct estimate of 18.5% mainly due

higher employee cost and other expenditure. EBITDA grew 10% YoY to

| 557 crore (I-direct estimate: | 717 crore). Adjusted net profit was at | 238

crore (I-direct estimate: | 482 crore) against | 62 crore of loss in Q4FY17.

Pfizer – Strong revenue growth with improvement in margins

Pfizer’s Q4FY18 revenue grew 15% YoY to | 520 crore. Sales growth of

continuing business (ex-Corex) grew 21% YoY in Q4FY18. EBITDA margins

improved 574 bps YoY to 26.6%. Net profit increased 54% YoY to | 104.5

crore.

Abbott India– Strong revenue growth with improvement in margins

Abbott’s Q4FY18 revenue grew 12% YoY to | 788 crore. EBITDA margins

improved 464 bps YoY to 13.5%. Net profit increased 138% YoY to | 100.1

crore.

NGL Fine Chem – Strong revenue growth with steady EBITDA margins

NGL Fine Chem’s Q4FY18 revenues increased 26% YoY to | 32 crore.

EBITDA margins remained at ~18%. Net profit declined 11% YoY to | 3.1

crore mainly due to higher depreciation and lower other income.

Sanofi India – Decent revenue growth with expansion in margins

Sanofi’s Q1CY18 revenues increased 12% YoY to | 618 crore. EBITDA

margins expanded 343 bps to 21.8% mainly due to 204 bps improvement in

gross margins to 60%. Net profit increased 38% YoY to | 82.5 crore.

Hester Bio – Slow growth in export impacted Q4

Hester Bio Q4FY18 revenues increased 7% YoY to | 37.5 crore. The 18%

YoY growth in the poultry segment to | 34.66 crore was partly offset by

55% decline in large animal business to | 2.82 crore. EBITDA margins

contracted 371 bps YoY to 29.3% mainly due to higher employee cost and

other expenditure. Net profit increased 27% YoY to | 9.0 crore mainly due

to lower tax rate (5% vs 24% in Q4FY17).


Alembic Pharma - US drives sales but future path challenging


mainly on account of 45% YoY growth in the US to | 290 crore (I-direct

estimate: ~| 233 crore). Domestic revenue grew 6% YoY to | 304 crore (I-

direct estimate: | 330 crore). EBITDA margins improved 215 bps YoY to

20.3% (I-direct estimate: 22.5%) mainly due to lower other expenditure.

Subsequently, EBITDA increased 29% YoY to | 173 crore vis-à-vis I-direct

estimate of | 187 crore. Net profit increased mere 1% YoY to | 94 crore (I-

direct estimate of | 130 crore). Growth in operational performance was

largely offset by higher depreciation and tax rate (27.3% vs 14.7% in

Q4FY17).

Lupin - High base, price erosion continues to weigh

Revenues declined 5% YoY to | 4034 crore (I-direct estimate: | 4030 crore)

mainly due to 21% YoY de-growth in US to | 1499 crore (I-direct estimate:

| 1412 crore). This was on account of high base of Metformin sales in

Q4FY17. India sales increased 10% to | 965 crore, in line with I-direct

estimates of | 967 crore. EBITDA margins declined 80 bps YoY to 17.6% (I-

direct estimate: 19.2%). Decline in gross margins was largely offset by

lower other expenditure. Gross margins declined 592 bps YoY to 66.2% (I-

direct estimate: 66.0%). EBITDA declined 9% YoY to | 709 crore below I-

direct estimate of | 775 crore. Adjusted net profit (excluding | 1142 crore of

impairment provision and deferred tax assets of Gavis acquisition) declined

4% YoY to | 365 crore (I-direct estimate: | 344 crore) mainly due to lower

operational performance. Other income was at | 145 crore against | 45

crore in Q4FY17.

Jubilant Life Sciences - Maintains growth tempo

Revenues grew 37% YoY to | 2252 crore (I-direct estimate: | 2126 crore).

Revenues in the pharma business grew 53% YoY to | 1238 crore (I-direct

estimate: | 1075 crore) mainly due to consolidation of Triad Pharmacy

business. Excluding Triad, Pharma business grew 11% YoY. life science

ingredients (LSI) revenues grew 24% YoY to | 968 crore, in line with I-direct

estimates. EBITDA margins improved 175 bps YoY to 20.3% (I-direct

estimate: 21.2%) mainly due to higher margins in speciality injectable

business. On the other hand, US generic margins were lower and there was

a loss in Triad. EBITDA increased 50% YoY to | 458 crore (I-direct

estimates: | 451 crore). Net profit increased a mere 3% to | 155 crore (I-

direct estimate of | 250 crore). Strong operational performance and higher

other income was largely offset by | 91 crore of one-off depreciation

pertaining to rationalisation of products and higher tax rate.

Ajanta Pharma – Expansion related costs hurt margins


mainly due to 110% YoY growth in African branded formulation to | 109

crore (I-direct estimate: | 83 crore). Domestic sales grew 6% YoY to | 148

crore, in line with I-direct estimate of | 151 crore. Also, African tender

business declined 21% YoY to | 63 crore, in line with I-direct estimate.

EBITDA margins contracted 743 bps YoY to 26.3% (I-direct estimate:

33.0%) lowest in past three years mainly due to higher employee cost and

other expenditure. EBITDA declined 13% YoY to | 140 crore (I-direct

estimate: | 161 crore). Adjusted net profit decreased 17% YoY to | 95 crore

(I-direct estimates: | 116 crore) mainly due to lower operational

performance.

Biocon - Biologics, Syngene maintain momentum

Revenues increased 26% YoY to | 1170 crore (I-direct estimate: | 1098

crore) mainly due to 48% YoY growth in biologics to | 241 crore (I-direct

estimate: | 179 crore) and 45% YoY growth in contract research to | 409

crore (I-direct estimate: | 359 crore). Small molecules (ex-licensing income)

increased 12% YoY to | 424 crore (I-direct estimate: | 379 crore) and

branded formulations increased 14% YoY to | 149 crore (I-direct estimate:


| 157 crore). EBITDA margins remained at 20%. However, lower than I-

direct estimates of 22.0% mainly due to lower gross margins led by change

in product mix. Gross margins declined 321 bps YoY to 59.4% against I-

direct estimates of | 60.9%. EBITDA increased 24% YoY to | 233 crore

against I-direct estimate of | 241 crore. Net profit increased 2% YoY to | 130

crore (I-direct estimate : | 114 crore). Delta vis-a-vis operational growth was

mainly due to higher interest cost, depreciation and Tax rate (21.6% vs

6.7% in Q4FY17).

Syngene - Revenues upbeat but margins under pressure

Revenues grew 41% YoY to | 409 crore (I-direct estimates: | 381 crore)

mainly due to lower base of Q4FY17 (fire incident impact) and strong

growth in chemical development and discovery services supported by

biologics business. EBITDA margins declined 281 bps to 31.6% YoY (I-direct

estimate: 33.1%) mainly due to higher other expenses. EBITDA increased

29% YoY to | 129 crore (I-direct estimate: | 126 crore). Net profit increased

8% YoY to | 85 crore (I-direct estimate of | 80 crore). Delta vis-a-vis

operational performance was mainly due to higher interest cost, lower other

income and higher tax rate (19.1% vs 13.3% in Q4FY17).

Taro Pharma Q4FY18 result

Sun Pharma’s subsidiary Taro Pharma’s Q4FY18 revenues declined 11%

YoY to US$ 175.2 million. EBITDA margins declined 844 bps YoY to 45.3%.

Net Profit increased 4% YoY to US$ 86.6 million.

Exhibit 16: One year forward PE

0.0

10.0

20.0

30.0

40.0

50.0

6/13/201

2

12/13/20

12

6/13/201

3

12/13/20

13

6/13/201

4

12/13/20

14

6/13/201

5

12/13/20

15

6/13/201

6

12/13/20

16

6/13/201

7

12/13/20

17

6/13/201

8

x

NSE Pharma Nifty

30% Premium

Source: ICICI Direct Research


ICICI Direct coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| Cr) FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E

Ajanta Pharma AJAPHA 1047 1,190 Hold 9210.8 57.4 53.0 46.4 59.6 18.2 19.7 22.5 17.6 42.3 31.0 23.3 24.8 33.7 23.8 18.0 19.7

Alembic Pharma ALEMPHA 507 460 Hold 9555.9 21.2 21.9 22.6 25.5 23.9 23.2 22.4 19.9 25.3 17.9 14.6 16.5 21.0 18.5 16.6 16.3

Apollo Hospitals APOHOS 984 1,230 Hold 13693.4 15.9 10.3 23.8 31.6 62.0 95.7 41.4 31.2 6.1 6.8 9.3 10.8 6.0 3.8 8.2 10.0

Aurobindo Pharma AURPHA 604 640 Hold 35388.8 38.8 41.8 36.7 40.7 15.6 14.4 16.5 14.8 24.4 20.5 16.7 16.9 24.2 21.0 15.7 15.0

Biocon BIOCON 622 740 Buy 37290.0 8.5 6.2 9.3 14.0 73.3 100.1 66.8 44.4 9.6 8.4 11.3 14.7 10.5 7.2 9.8 13.0

Cadila Healthcare CADHEA 397 380 Hold 40591.4 14.5 17.5 16.8 19.0 27.3 22.7 23.6 20.8 13.1 17.1 14.7 15.5 21.4 21.5 17.8 17.5

Cipla CIPLA 589 640 Hold 47386.5 12.5 18.3 21.3 26.4 47.1 32.1 27.7 22.3 7.7 9.9 12.0 14.5 8.0 10.8 11.4 12.7

Divi's Lab DIVLAB 1066 1,070 Hold 28288.3 39.9 32.8 41.0 48.6 26.7 32.4 26.0 21.9 25.3 19.8 21.1 21.9 19.8 14.8 16.3 16.9

Dr Reddy's Labs DRREDD 2292 2,170 Hold 38021.6 78.0 57.0 80.3 120.5 29.4 40.2 28.5 19.0 7.3 6.1 7.5 9.3 10.5 7.2 9.4 12.6

Glenmark Pharma GLEPHA 595 500 Hold 16780.5 42.2 28.5 30.4 33.3 14.1 20.8 19.6 17.8 19.5 14.2 13.8 14.0 26.5 15.4 14.2 13.6

Indoco Remedies INDREM 199 190 Hold 1836.6 8.4 4.5 8.2 13.5 23.8 44.6 24.3 14.7 8.7 5.7 8.8 13.9 11.8 6.0 10.2 15.0

Ipca Laboratories IPCLAB 626 760 Buy 8725.9 15.4 19.0 30.4 42.2 40.6 33.0 20.6 14.8 8.7 9.1 13.7 17.2 7.9 9.0 12.9 15.6

Jubilant Life JUBLIF 790 1,090 Buy 12583.2 36.9 41.3 61.2 77.0 21.4 19.1 12.9 10.3 13.8 14.9 18.9 21.1 16.8 16.0 19.4 19.8

Lupin LUPIN 878 760 Hold 39696.4 56.7 13.3 34.0 40.4 15.5 66.2 25.8 21.7 16.6 10.6 11.0 12.6 19.0 4.4 10.4 11.2

Narayana Hrudalaya NARHRU 230 310 Buy 4700.3 4.1 2.5 6.4 9.9 55.7 91.5 35.9 23.2 12.5 6.4 12.7 16.4 8.8 5.1 11.4 15.1

Natco Pharma NATPHA 799 860 Hold 14731.8 26.3 37.7 42.7 27.5 30.3 21.2 18.7 29.0 33.6 27.3 27.3 16.1 29.5 22.6 21.5 12.6

Sun Pharma SUNPHA 555 510 Hold 133147.1 29.0 13.0 18.1 21.6 19.1 42.8 30.6 25.8 20.3 9.8 11.5 12.7 19.0 8.1 10.4 11.2

Syngene Int. SYNINT 597 715 Buy 11940.0 14.4 15.3 18.6 20.4 43.2 43.2 33.4 30.4 16.8 16.6 18.5 18.7 20.3 18.0 18.1 16.7

Torrent Pharma TORPHA 1444 1,420 Hold 24432.2 55.2 40.1 46.5 64.6 26.2 36.0 31.0 22.4 18.9 11.6 13.7 17.4 21.5 13.8 14.3 17.2

RoE (%)EPS (|) PE(x) RoCE (%)



RATING RATIONALE

ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research

assigns ratings to its stocks according to their notional target price vs. current market price and then

categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and

the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


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