Health Check Ajanta Pharma 5 11 -12 -12 9126 -1 4 22 -6...

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September 19, 2019

Health Check

Warning letter for Lupin’s Mandideep; forensic audit

for Sun…

Lupin’s Mandideep (Unit-1) facility has received a warning letter from the

USFDA. As there are no pending applications from this plant, we do not

expect any material impact. However, with two plants (Goa and Pithampur)

already under warning letter, addition of this plant could further increase the

company’s remedial expenses.

In another major development, Sebi has ordered a forensic audit of Sun

Pharma’s FY16-18 financial statements. The audit will look into allegations

of financial irregularities and lapses in corporate governance standards.

Sanofi’s management has approved a plan for the slump sale & transfer of

the Ankaleshwar (Gujarat) manufacturing facility to Zentiva Pvt Ltd (parent

company’s EU generic arm) for a consideration of | 261.7 crore. The

transaction is expected to be completed by March 31, 2020. This deal is an

extension of an arrangement struck in 2018 as part of a global transaction

between the Sanofi and Advent wherein the latter acquired Zentiva.

On the regulatory front, USFDA has closed the audit of Dr Reddy’s Duvvada

facility, Vizag by issuing an establishment inspection report (EIR). It has

issued a Form 483 with three observations to Ipca for the Piparia

formulations facility in Silvassa.

On the products front, Biocon’s partner Mylan has received a complete

response letter (CRL) from USFDA for Insulin Glargine (NDA). In July, USFDA

had issued 12 observations after pre-approval inspection of three insulin

manufacturing units in Malaysia. Lupin has received Health Canada’s

approval for first generic version of Pfizer’s Inderal –LA (Propranolol

Hydrochloride) extended-release capsules. The drug is indicated for

treatment of hypertension & prophylaxis of angina pectoris.

Lupin has entered into a definitive agreement through its Japanese

subsidiary Kyowa for the sale of its Japanese injectables business and

related assets in Japan to neo ALA Co Ltd.

The Indian pharmaceutical market (IPM) grew 9.4% YoY to | 12236 crore in

August 2019. The growth was attributable to price hike: 5.5%, new product

launches: 2.8% and volumes growth: 1.1% (drop from previous month July

(4.5%). On a MAT basis, IPM growth was 9.3% YoY to | 135210 crore.

Financials normalising but stock specific approach stands…

The US generics narrative in the last few quarters is reflecting some sort of

normalcy on the back of a stability in base business performance and new

launches besides rationalisation of unviable products. Domestic

formulations are also showing a steady performance on an annual basis.

Profitability is also likely to improve as the management commentary

continues to suggest rationalisation of R&D and other related expenses, MR

optimisation and concentrated focus on marketing costs for Specialty and

Biosimilars. Waning concerns on Chinese raw material sourcing besides

improving operating leverage are also likely to contribute to margin

expansion. Similarly, the companies are moderating capex plans to focus

on better RoCE. Financially, things are looking much stable. We expect sales,

EBITDA and PAT to grow at a CAGR of 12%, 16% and 18%, respectively, in

FY19-21E. However, resurfacing of regulatory issues raised by the USFDA

(10-15 OAIs in 2019 vs. seven in 2018 besides a handful of warning letters

and CRLs) and looming Generic generics threat in the domestic formulations

would continue to weigh on sentiments. In this backdrop, we continue to

maintain stock specific approach. MNCs, CRAMs players and hospitals are

our preferred picks in the healthcare segment.

Stock Performance

Mcap

Company 1M 3M YTD 1Y 18-Sep

Sun Pharma.Inds. 1 10 -3 -35 100194

Dr Reddy's Labs 10 6 5 6 45554

Divi's Lab. 7 5 9 17 42855

Cipla -4 -16 -12 -31 36901

Aurobindo Pharma 2 -1 -16 -21 36135

Lupin 4 7 -10 -18 34319

Torrent Pharma. 2 11 -5 -3 28395

Biocon 0 -6 -28 -33 27342

Cadila Health. 11 3 -31 -41 24698

Abbott 9 17 33 18 21132

Apollo Hospitals -4 5 13 27 19728

Pfizer 10 4 15 -1 15044

Sanofi -8 7 -9 -9 13396

Syngene Int. 1 -3 11 -3 12400

Ipca Labs. 0 4 17 22 11875

Natco Pharma 5 10 -16 -28 10360

Glenmark Pharma. 1 -31 -48 -47 10262

Fortis Health 0 -5 -11 -12 9441

Alembic Pharma -3 3 -17 -21 9380

Ajanta Pharma 5 11 -12 -12 9126

Jubilant Life 19 10 -25 -31 8447

Narayana Hrudayalaya-1 4 22 -6 4859

Suven Life 20 5 24 -7 3586

FDC Ltd 8 -2 0 -29 3010

Hikal 5 -7 -1 -17 1911

Hester Bio 6 4 58 44 1523

Indoco Remedies 3 3 -28 -25 1443

NGL Fine-Chem 0 -6 14 -11 307

Return (%)

Source: Bloomberg

Global Indices Performance

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

S&P 500 Pharm Index (US)1 -4 2 -3 6 6

NASDAQ Biotechnology (US)0 -2 9 -10 3 3

S&P Pharmaceuticals (US)4 -1 3 -21 -6 -4

DJ Pharma and Biotech (US)1 -3 3 -6 5 5

DJ STOXX Healthcare (EU)1 3 20 14 7 6

MSCI World Pharm & Biotech1 -1 7 0 6 4

NSE Pharma 3 1 -10 -24 -12 -5

Return (%)

Source: Bloomberg

Research Analyst

Siddhant Khandekar

[email protected]

MItesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Monthly Sector Update | Health Check

IPM grows 9% YoY in August, acute segment drives growth

The Indian pharmaceutical market (IPM) grew 9.4% YoY to | 12236 crore in

August 2019. The growth was attributable to price hike: 5.5%, new product

launches: 2.8% and volumes growth: 1.1% (drop from previous month July

(4.5%) and a drop from rolling average 12-month volume growth of 1.8%).

Drugs under NLEM list grew 12.7% YoY while non-NLEM drugs grew 9.1%.

The fixed dosage combination (FDCs) related market showed a decline of

67.9% while the approved FDC market grew 10.0%.

Among companies under I-direct coverage, seven (Sun, Cadila, Abbott, Dr

Reddy’s Labs, Lupin, Sanofi, FDC) have outperformed industry growth rate.

Therapy wise, three major therapies have registered faster than industry

growth. Notable among them with growth rates- anti-malaria – 35.2%,

respiratory – 13.6%, anti-infective – 12.9%.

Domestic companies have grown at 9.1% YoY while MNC companies have

grown at 10.4%.

On a MAT basis, IPM growth was 9.3% YoY to | 135210 crore.

Exhibit 1: Domestic formulations - Growth trend

Source: ICICI Direct Research; AIOCD

Exhibit 2: Companies growth in domestic market in August 2019

Source: ICICI Direct Research, AIOCD

8.8

7.1

12.2

6.7

9.5

10.5

9.8

8.8

10.4

7.1

6.6

13.2

9.4

0.0

5.0

10.0

15.0

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

(%

)

Indian Pharma Market

9.9

2.3 2.1

6.87.8

4.6

14.7

18.6

5.8

15.1

6.1

13.0

0.6

3.1

14.4

9.7

7.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Abbott

Aja

nta

Ale

mbic

Bio

con

Cadila

Cip

la

DR

L

Gle

nm

ark

GS

K P

harm

a

Indoco

Ipca L

abs

Lupin

Natco

Pfiz

er

Sanofi

Sun P

harm

a

Torrent

(%

)

Therapy wise performance (| crore)

Therapy Aug'19 Aug'18 % Jul'19 %

Anti-Infectives 1802 1563 15.3 1595 12.9

Cardiac 1463 1356 7.9 1481 -1.2

GI 1420 1315 8.0 1417 0.2

Anti Diabetic 1163 1046 11.2 1177 -1.1

Vitamins 1070 999 7.1 1085 -1.4

Respiratory 870 770 13.0 766 13.6

Pain 865 778 11.1 821 5.3

Derma 801 769 4.1 799 0.2

Neuro 713 666 7.1 713 0.0

Gynaecological 584 567 3.1 600 -2.6

Anti-Neoplastics 244 235 3.5 247 -1.4

Ophthal 219 206 6.4 222 -1.4

Hormones 218 200 9.0 215 1.1

Vaccines 187 173 7.9 194 -3.5

Urology 162 144 12.5 164 -1.4

Blood Related 147 132 11.1 149 -1.7

Others 118 103 14.3 116 2.0

Stomatologicals 65 56 14.9 65 0.4

Anti Malarials 62 53 17.2 46 35.3

Sex Stimulants 62 56 12.2 63 -0.7

Top brands in Indian pharma market (MAT; |

crore)



Acute vs. chronic vs. sub chronic

Source: ICICI Direct Research; AIOCD; As per AIOCD MAT Apr 2019

Acute

47%

Chronic

33%

Sub

Chronic

20%

Brand Company Therapy Aug'19YoY %

Mixtard Abbott Anti Diabetic 534 8.0

Lantus Sanofi IndiaAnti Diabetic 502 21.4

Galvus Met Novartis Anti Diabetic 484 18.7

Glycomet GpUSV Anti Diabetic 479 10.0

Janumet MSD Anti Diabetic 466 16.7

Augmentin GSK Anti-Infectives418 15.0

Liv 52 Himalaya GI 392 2.6

Duphaston Abbott Hormones 383 28.2

Clavam Alkem Anti-Infectives368 15.2

Thyronorm Abbott Hormones 349 12.4




Exhibit 3: Domestic formulations – market share (MAT value August 2019)


Exhibit 4: Acute vs. chronic vs. sub chronic (MAT value August 2019)


8%

6%

5%

4%4%

3%

2% 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

Pfiz

er

Dr.

Reddys

Sanofi

Gle

nm

ark

Ipca

Ale

mbic

FD

C

Natco

Indoco

Aja

nta

Bio

con

38 39

57

3242

52

77

40

82

65

27

88

40

62

43 40

26

54

4052

2460 45 29

9

41

527

57

0

56 15 5245

53

31

2210

208 13

2013 19

13 716 11

4

23

415

21 16

0

20

40

60

80

100

120

Abbott

Aja

nta

Ale

mbic

Bio

con

Cip

la

Dr.

Reddys

FD

C

Gle

nm

ark

Indoco

IPC

A

Lupin

Sun

Novartis

Pfiz

er*

Sanofi

Sun

Torrent

Cadila

%

Acute Chronic Sub Chronic




Exhibit 5: Top five brands in value terms (MAT Value August 2019)

Sun Brand Therapy Sales

1 Rosuvas Cardiac 264

2 Levipil Neuro 262

3 Istamet Anti Diabetic 258

4 Volini Pain 248

5 Gemer Anti Diabetic 200

Cipla Brand Therapy Sales

1 Foracort Respiratory 324

2 Budecort Respiratory 226

3 Duolin Respiratory 217

4 Seroflo Respiratory 190

5 Asthalin Respiratory 167

Cadila Brand Therapy Sales

1 Skinlite Derma 168

2 Deriphyllin Respiratory 158

3 Atorva Cardiac 131

4 Pantodac GI 119

5 Mifegest Kit Gynaecological 117

Lupin Brand Therapy Sales

1 Gluconorm-G Anti Diabetic 250

2 Huminsulin Anti Diabetic 185

3 Budamate Respiratory 122

4 Gibtulio Anti Diabetic 119

5 Ondero Anti Diabetic 103

Torrent Brand Therapy Sales

1 Shelcal Vitamins 217

2 Chymoral FortePain 150

3 Nikoran Cardiac 106

4 Azulix-Mf Anti Diabetic 100

5 Losar H Cardiac 97

Dr. Reddys Brand Therapy Sales

1 Omez GI 139

2 Omez D GI 122

3 Econorm GI 121

4 Atarax Derma 100

5 Razo D GI 82

Glenmark Brand Therapy Sales

1 Telma Cardiac 253

2 Telma H Cardiac 211

3 Telma Am Cardiac 132

4 Candid Derma 115

5 Ascoril Plus Respiratory 108

IPCA Brand Therapy Sales

1 Zerodol Sp Pain 189

2 Zerodol P Pain 120

3 Hcqs Anti Malarials 111

4 Folitrax Anti-Neoplastics 63

5 Glycinorm M Anti Diabetic 50

Alembic Brand Therapy Sales

1 Azithral Anti-Infectives 161

2 Althrocin Anti-Infectives 80

3 Wikoryl Respiratory 70

4 Roxid Anti-Infectives 53

5 Gestofit Gynaecological 50

Natco Brand Therapy Sales

1 Velpanat Anti-Infectives 200

2 Hepcinat Anti-Infectives 157

3 Geftinat Anti-Neoplastics 120

4 Erlonat Anti-Neoplastics 102

5 Natdac Anti-Infectives 92

Indoco Brand Therapy Sales

1 Febrex Plus Respiratory 87

2 Cyclopam GI 55

3 Sensodent-K Stomatologicals 51

4 Oxipod Anti-Infectives 49

5 Atm Anti-Infectives 45

Ajanta Brand Therapy Sales

1 Met Xl Cardiac 106

2 Atorfit Cv Cardiac 55

3 Melacare Derma 50

4 Feburic Pain 34

5 Met Xl Am Cardiac 26

Biocon Brand Therapy Sales

1 Insugen Anti Diabetic 114

2 Basalog Anti Diabetic 87

3 Canmab Anti-Neoplastics 81

4 Insugen R Anti Diabetic 25

5 Erypro Blood Related 18

Sanofi Brand Therapy Sales

1 Lantus Anti Diabetic 502

2 Allegra Respiratory 186

3 Combiflam Pain 179

4 Amaryl M Anti Diabetic 159

5 Hexaxim Vaccines 153

Source: ICICI Direct Research; AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)

Pfizer Brand Therapy Sales

1 Becosules Vitamins 302

2 Magnex Anti-Infectives 195

3 Gelusil Mps GI 156

4 Dolonex Pain 153

5 Mucaine GI 140




Exhibit 6: Top five therapies in value term (MAT value August 2019)

Sun Therapy Sales (|cr)

1 Cardiac 1964

2 Neuro 1868

3 GI 1335

4 Anti-Infectives 1109

5 Anti Diabetic 1026

Cipla Therapy Sales (|cr)

1 Respiratory 2183


3 Cardiac 836

4 GI 462

5 Urology 364

Cadila Therapy Sales (|cr)


2 Cardiac 769

3 Respiratory 614

4 GI 602

5 Pain 531

Lupin Therapy Sales (|cr)

1 Cardiac 1221

2 Anti Diabetic 1199


4 Respiratory 630

5 GI 373

Torrent Therapy Sales (|cr)

1 Cardiac 1280

2 GI 659

3 Neuro 616

4 Vitamins 529

5 Anti Diabetic 335

Dr. Reddys Therapy Sales (|cr)

1 GI 709

2 Cardiac 421

3 Derma 336

4 Respiratory 252

5 Anti Diabetic 235

Glenmark Therapy Sales (|cr)

1 Derma 858

2 Cardiac 835

3 Respiratory 524


5 Anti Diabetic 261

IPCA Therapy Sales (|cr)

1 Pain 561

2 Cardiac 324

3 Anti Malarials 290

4 GI 135


Alembic Therapy Sales (|cr)


2 Cardiac 257

3 Respiratory 217

4 GI 200

5 Gynaecological 192

Natco Therapy Sales (|cr)


2 Anti-Neoplastics 508

3 Pain 32

4 Cardiac 3

5 Blood Related 2

Indoco Therapy Sales (|cr)

1 Stomatologicals 163

2 Respiratory 156


4 GI 125

5 Vitamins 70

Ajanta Therapy Sales (|cr)

1 Cardiac 344

2 Ophthal 194

3 Derma 132

4 Pain 46

5 Vitamins 29

Biocon Therapy Sales (|cr)

1 Anti Diabetic 261

2 Anti-Neoplastics 140


4 Blood Related 21

5 Derma 14

Sanofi Therapy Sales (|cr)

1 Anti Diabetic 940

2 Cardiac 483

3 Vaccines 388

4 Respiratory 320

5 Pain 264

Source: ICICI Direct Research, AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)

Pfizer Therapy Sales (|cr)


2 Vitamins 375

3 GI 348

4 Gynaecological 276

5 Hormones 243




Monthly Sector News

Price hikes, new launches, recalls, approvals

Glenmark recalls anti-fungal cream in US

Glenmark has recalled over 31,000 tubes of anti-fungal Clotrimazole and

Betamethasone Dipropionate cream from the US market on account of

"Temperature Abuse: complaints received of liquid texture. The recall was

classified under class III recall.

Cadila receives novel biologic approval for rabies in India

Cadila has received marketing authorisation from the Drug Controller

General of India to launch Twinrab (Rabimabs), a novel biologic for rabies.

The drug is indicated in combination with rabies vaccine for rabies post-

exposure prophylaxis.

Aurobindo US recalls lipid-lowering generic in US

Aurobindo Pharma, US has initiated a Class III recall of 2,352 bottles of lipid-

lowering Simvastatin (CVD therapy) tablets, 40 mg from the US market.

Lupin receives generic approval from Health Canada

Lupin has received Health Canada’s approval for the first generic version of

Pfizer’s Inderal –LA (Propranolol Hydrochloride) Extended-Release

Capsules, 60 mg, 80 mg, 120 mg and 160 mg. The drug is indicated for

treatment of hypertension & prophylaxis of angina pectoris. It had annual

sales of CAD 8.6 million in Canada (IQVIA MAT December 2018).

Lawsuits, court rulings, settlements, regulatory issues

USFDA clears Alembic’s Vadodara facility without observations

The USFDA inspection of Alembic Pharma's bioequivalence facility in

Vadodara for a) bioequivalence bio analytical; and b) bioequivalence clinical

was completed with no 483s issued. The inspection was conducted in

August 12-16, 2019 and August 12-20, 2019, respectively.

Biocon’s Malaysian facility receives EU GMP certificate

Biocon has received EU GMP Certification for its Insulin Glargine

manufacturing Facility, Malaysia. The site was inspected in May 2019.

USFDA has issues Form 483 to Ipca formulations facility

The USFDA inspected Ipca Lab’s Piparia (Silvassa) formulations

manufacturing unit and issued three observations. The inspection was

conducted in August 19–23, 2019.

Delhi High Court verdict provides relief for Natco’s cancer drug

Natco Pharma has retained manufacture and sale of the generic version of

Novartis’ cancer drug Ceritinib in India. The Delhi High Court has revoked

the patent of Novartis Ceritinib, marketed as Zykadia.

Lupin may face Class action lawsuit in US

As per media reports, Lupin along with US based Bausch subsidiaries, Salix

Pharma and Santarus, are likely to face class action suit for delaying generic

competition for the diabetes drug Glumetza.

Divi's Vizag Unit-II cleared by HPRA and JAZMP

Inspectors from HPRA (Ireland) and JAZMP (Slovenia) have inspected Divi's

Laboratories’ Unit-2 Vishakhapatnam between August 26, 2019 and August

30, 2019. This was concluded with no critical observations.

USFDA inspects Biocon's biologic unit in Bengaluru

After a cGMP inspection at Biocon's biologics drug product facilities in

Bengaluru in August 22-30, 2019, USFDA have issued four observations.




USFDA issues CRL to Biocon's partner Mylan

USFDA has issued a complete response letter (CRL) for Insulin Glargine

(NDA) filed by Biocon's partner Mylan. The company expects no impact on

US commercialisation plans. In July, USFDA had issued 12 observations

after pre-approval inspection of three insulin manufacturing units in

Malaysia.

Sebi orders forensic audit against Sun Pharma

Sebi has ordered a forensic audit of Sun Pharma’s FY16-18 financial

statements to confirm findings of its initial inquiry. The audit will look into

allegations of financial irregularities and lapses in corporate governance

standards.

Sanofi to sell Ankaleshwar facility to Zentiva

The Sanofi Board has approved the slump sale and transfer of its API &

formulations manufacturing facility at Ankaleshwar, Gujarat to Zentiva Pvt

Ltd (Advent International) for a consideration of |261.7 crore. The sale is

expected to be completed by end of FY20.

USFDA issues EIR for Dr Reddy's Duvvada Facilities in Vizag

Dr Reddy's has received EIR from USFDA for its formulations plants (Vizag

SEZ Plant 1 & 2) at Duvvada, Visakhapatnam. The EIR receipt indicates

closure of the audit completed on June 21, 2019.

Odisha High Court grants relief to Apollo Hospitals, stays NHRC order

As per media reports, National Human Rights Commission (NHRC) had

directed the Odisha government to suspend/cancel the registration of Apollo

Hospital, Bhubaneswar for breaching provisions of the Transplantation of

Human Organs and Tissues Act. The HC has asked AHEL to submit a reply

to NHRC within the four weeks given. The HC has also directed the

government to not take any action against the hospital till that time

M&As, demergers, tie-ups and JVs

Lupin divests Kyowa Criticare to Neopharma group

Lupin has entered into a definitive agreement through its Japanese

subsidiary Kyowa for the sale of its Japanese injectables business and

related assets in Japan to neo ALA Company Ltd.

Lupin signs agreement with Creso Pharma for hemp oil based drug

Lupin's subsidiary Pharma Dynamics, South Africa have announced a

commercial agreement with Creso Pharma for hemp oil based cannaQIX.

The drug is indicated to reduce stress and support mental & nervous

functions.

Aurobindo Pharma signs agreement for JV in China

Aurobindo Pharma’s subsidiary, Helix Healthcare BV, Netherlands, has

entered into an agreement with Shanghai LongJin Investment Company Ltd,

China and Sveva Capitals, Hong Kong to establish a JV in China, 'Longxiang

Pharma Taizhou Co Ltd', for development, manufacturing, marketing and

sale of pharmaceutical products for China excluding Taiwan, Hong Kong and

Macau.

Glenmark to reorganise business into three separate entities

Glenmark expects its process of reorganisation into three different entities

to be completed within this fiscal, according to its CMD Glenn Saldanha. The

three entities will focus on different verticals - 1. Generics, branded and

specialty products (Glenmark Pharmaceuticals) 2. APIs (Glenmark Life

Sciences) and 3. Break through innovative drugs (unnamed)

Lupin, Boehringer lngelheim ink US$700 million deal for Novel Drug

The partnership aims to develop Lupin's lead MEK inhibitor compound in

combination with one of Boehringer Ingelheim’s innovative KRAS inhibitors

for patients with GI and lung cancers harbouring a broad range of oncogenic




KRAS mutations. Lupin will receive US$20 million in upfront payment and

also be entitled to receive double digit royalties on product sales.

Biocon licenses three generics to CMS for China

Biocon has signed a license & supply agreement with China Medical System

Holdings for three generic formulations in Greater China. The total

addressable market for the products in China is ~US$800 million as per

IQVIA.

Natco raises stake in OMRV Hospitals

Natco Pharma plans to raise its stake in OMRV Hospitals to 12.81% from

9.29%. OMRV currently runs "Pace Hospital", in Hyderabad, Telangana. In

FY18, its revenue was |25.04 crore.

Sun Pharma increases stake in PJSC Biosintez

Sun Pharma has increased its stake in PJSC Biosintez, Russia to 100% from

96.96% (3.04% increase) through mandatory tender offer. PJSC is mainly

engaged in manufacturing and marketing of pharmaceutical products used

in hospitals

Others

Cadila initiates Phase 2 trials for Saroglitazar in US

Cadila has initiated Phase 2 clinical trial of Saroglitazar Mg for treatment of

non-alcoholic fatty liver disease (NAFLD) in women with polycystic ovary

syndrome (PCOS). The trial is recruiting patients in USA and Mexico.

Fortis's subsidiary SRL Middle East closed

Fortis Healthcare’s subsidiary SRL Diagnostics Middle East LLC, Dubai (SRL

Middle East) has been closed by requesting license cancellation from Dubai

authorities. There has been no business transaction for the last two fiscals.

Apollo Hospital promoters sell stake to paring debt

Apollo Hospitals' promoters have divested 3.6% stake (5 crore shares) to

raise ~725 crore through bulk deal to reduce overall debt. Promoter holding

in AHEL is now at 30.8%. The total debt of the company was at |3,450 crore

as of March 31, 2019.

ANDA Approvals

Dr Reddy’s Lab has launched generic version of Sabril (vigabatrin) powder

for oral solution in 500 mg per packet in the US market. Annual sales of this

drug are ~US$274 million.

Cadila has received USFDA approval for Ranolazine Extended-Release

tablets. The drug is used to treat chronic angina. The drug will be

manufactured at Baddi.

Lupin has launched Eli Lilly's Prozac (Fluoxetine) Tablets, 10 mg and 20 mg

in the US. The drug had annual sales of ~US$53 million in the US (IQVIA

MAT June 2019).

Glenmark has received USFDA approval for the generic version of Faslodex

(Fulvestrant) injection of AstraZeneca Pharma in the US. As per IQVIA, this

drug had an annual sales of ~US$450 million.

Sun Pharma’s subsidiary Taro Pharma has received USFDA approval for the

generic version of Azelaic Acid gel for treating acne.

Glenmark has received USFDA approval for the generic version of Elidel

(Pimecrolimus) Cream of Bausch Health in the US. As per IQVIA, this drug

had an annual sales of ~US$ 199 million.

Dr Reddy’s has launched GSK’s anti-depressant Zyban (Bupropion

Hydrochloride) Extended-Release Tablets, 150 mg in the US. The drug had

annual sales of ~US$5.4 million in the US (IQVIA MAT June 2019).

Lupin has received USFDA approval for the generic version of Emend

(Fosaprepitant, prevent nausea and vomiting) Injection, 150 mg single-dose




vial. This drug had annual sales of ~US$285 million in the US (IQVIA MAT

June 2019).

Lupin has received USFDA approval for the generic version of Bausch

Health’s Edecrin (Ethacrynic Acid, diuretic) tablets, 25 mg. This drug had

annual sales of ~US$24 million in the US (IQVIA MAT June 2019).

Glenmark has received USFDA approval for the generic version of Mylan’s

Olux 1-E (Clobetasol Propionate, Therapy: Derma) Foam, 0.05% (Emulsion

Formulation). This drug had an annual sales of ~US$11.1 million in the US

(IQVIA MAT July 2019).

Dr Reddy's has launched USFDA approved Fosaprepitant (generic version

of Emend) for injection, 150 mg single-dose vial in the US. It is indicated for

prevention of chemotherapy induced nausea & vomiting. The drug had

annual sales of ~US$279 million as per IQVIA MAT July 2019.

Dr Reddy’s has launched over the counter (OTC) store brand equivalent of

Prevacid 24 HR (Lansoprazole) Delayed-Release Capsules, 15 mg in the US.

It is a Proton Pump Inhibitor (PPI) used to treat frequent heartburn. The drug

had annual sales of ~US$57 million in US (MAT August 2019).

Exhibit 7: One year forward PE

Source: ICICI Direct Research, Bloomberg

0.0

10.0

20.0

30.0

40.0

Sep-16

Mar-17

Sep-17

Mar-18

Sep-18

Mar-19

Sep-19

x

NSE500 Index NSE Pharma

41% Premium




Exhibit 8: ICICI Direct coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| cr) FY18 FY19 FY20E FY21E FY18 FY19 FY20E FY21E FY18 FY19 FY20E FY21E FY18 FY19FY20EFY21E

Ajanta Pharma AJAPHA 1046 1,010 Hold 9125 53.0 43.5 47.5 60.2 19.7 24.0 22.0 17.4 30.0 21.8 20.8 22.4 23.0 17.1 16.4 18.0

Alembic PharmaALEMPHA 497 560 Hold 9370 21.9 31.4 29.9 24.7 22.7 15.8 16.6 20.1 18.0 19.6 17.5 15.8 18.6 21.7 17.1 14.2

Apollo HospitalsAPOHOS 1419 1,500 Buy 19739 8.5 17.7 25.7 39.1 167.8 80.2 55.2 36.3 6.3 8.8 11.1 14.0 3.6 7.4 9.9 13.4

Aurobindo PharmaAURPHA 617 735 Buy 36170 41.6 42.1 49.1 61.2 14.8 14.7 12.6 10.1 20.0 15.9 14.3 16.3 20.7 17.7 17.3 18.0

Biocon BIOCON 228 330 Buy 27360 3.1 6.2 8.2 9.1 73.5 36.7 27.9 25.1 8.1 10.9 13.4 16.1 7.2 12.2 13.4 15.2

Cadila HealthcareCADHEA 241 250 Hold 24672 17.5 18.1 13.7 17.9 13.7 13.3 17.5 13.4 16.7 13.0 10.6 12.7 20.5 17.8 12.2 14.2

Cipla CIPLA 458 520 Hold 36921 18.3 18.6 21.4 25.9 25.0 24.7 21.5 17.7 9.6 10.9 12.4 13.7 10.4 10.0 10.5 11.5

Divi's Lab DIVLAB 1615 1,640 Hold 42880 33.3 51.0 50.3 63.1 48.5 31.7 32.1 25.6 20.0 25.5 21.7 23.3 14.9 19.4 16.8 17.9

Dr Reddy's LabsDRREDD 2745 2,770 Hold 45583 57.0 114.8 163.4 157.7 48.1 23.9 16.8 17.4 6.1 11.1 16.1 15.6 7.2 13.6 16.6 14.2

Glenmark PharmaGLEPHA 363 410 Hold 10253 28.5 26.9 28.3 34.2 12.7 13.5 12.8 10.6 14.6 14.5 13.5 14.5 15.6 13.5 12.6 13.3

Hikal HIKCHE 155 205 Buy 2022 6.3 8.4 10.1 13.6 24.8 18.6 15.3 11.4 12.2 14.3 14.8 17.2 11.5 13.6 14.5 16.5

Ipca Laboratories IPCLAB 937 1,195 Buy 11840 19.0 35.1 47.5 59.7 49.4 26.7 19.7 15.7 9.1 15.0 18.7 20.7 8.9 14.2 16.6 17.8

Jubilant Life JUBLIF 532 710 Buy 8474 41.3 52.1 54.1 64.9 12.9 10.2 9.8 8.2 14.9 14.4 15.9 17.1 15.7 16.9 15.8 16.5

Lupin LUPIN 758 755 Hold 34301 20.8 16.5 25.4 37.7 36.5 45.8 29.9 20.1 10.4 9.4 10.3 13.2 6.9 5.4 7.8 10.6

Narayana HrudalayaNARHRU 239 260 Buy 4891 2.5 2.3 6.2 9.0 95.6 105.6 38.4 26.5 6.3 7.6 11.9 14.7 4.9 4.3 10.5 13.3

Natco Pharma NATPHA 570 595 Hold 10360 37.7 34.9 35.9 26.4 15.1 16.3 15.9 21.6 27.4 21.3 19.3 13.1 22.7 18.5 16.1 10.7

Sun Pharma SUNPHA 418 470 Hold 100194 13.0 15.9 21.0 23.9 32.2 26.3 19.9 17.5 9.7 10.3 12.4 12.6 8.2 9.2 11.0 11.2

Syngene Int. SYNINT 310 358 Hold 12398 7.6 8.3 9.9 10.3 40.6 37.4 31.3 30.0 15.1 14.8 14.5 13.8 17.7 16.8 16.8 15.0

Torrent Pharma TORPHA 1683 1,750 Buy 28473 40.1 48.9 51.3 72.9 42.0 34.4 32.8 23.1 11.2 14.2 15.4 19.2 14.7 17.5 16.1 19.6

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

Source: ICICI Direct Research, Bloomberg




RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as

the analysts' valuation for a stock

Buy: >15%;

Hold: -5% to 15%;

Reduce: -5% to -15%;

Sell: <-15%

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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