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CADILA HEALTHCARE
A superior formula
We expect US approval to boost earnings further. Maintain BUY.
We maintain our BUY call on pharmaceutical company Cadila Healthcare.
Its joint-venture partner, Hospira, received Canadian approval for the
cancer drug, Taxotere, and has been guiding for a green light from the US
authorities within this quarter, which should boost our FY12 EPS estimate
by 8-9%. In addition, as Hospira is the first player to produce a generic
version of this product, and with a superior formulation, we expect it to
sustain a larger market share and benefit Cadila through FY12.
Generic taxotere approved in Canada; US approval expected soon.
Hospira received approval for a generic version of Taxotere, an injectable drug
for cancer, from Canadian regulator. Meanwhile, the company has been
guiding for approval from the US Food and Drug Administration (FDA) within
this quarter. Cadila Healthcare (CDH IB - Rs746.90 - BUY) will be
manufacturing and supplying this formulation to Hospira from its joint-venture
facility in a special economic zone (SEZ) near Ahmedabad. The US FDA
approval will provide strong upsides to Cadila as a result of lofty offtake from
the joint venture. We expect high market share for Hospira as it will be the
first generic Taxotere and its formulation is superior to generics (such as Sun
Pharma) that will be entering later. We expect the US approval to bring about
an 8-9% EPS upgrade for FY12 and contribute to FY13 earnings. This joint
venture is set to bring in more such opportunities for Cadila.
Uptrend in Cadila’s US generics prescriptions intact. Cadila’s US
business has been growing strongly (from less than Rs1bn in FY06 to c.
Rs9bn+ in FY11) and has become profitable over the past two years. This
has contributed to margin expansion over the same period. We expect the
trend to sustain and further broaden margins. The company has been
gaining market share despite being a late entrant in a couple of
formulations. Incrementally, it has been successful in being an early
entrant in the USA in a couple of formulations. This trend is likely to
accelerate and contribute to higher profitability.
Valuations towards higher end, but earnings growth superior. While
Cadila Healthcare has been one of the best performers over the past year,
we expect the stock to continue to perform as it delivers strong earnings
growth over the coming years. We anticipate an 18% net profit Cagr over
FY11-13 with upgrades from opportunities such as taxotere to come in. At
the same time, with profits from the SEZ subject to the minimum alternate
tax (MAT), Cadila’s joint venture with Hospira will come under the tax net.
This will impact our current estimates by about 1%
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CADILA HEALTHCARE
A superior formula
We expect US approval to boost earnings further. Maintain BUY.
We maintain our BUY call on pharmaceutical company Cadila Healthcare.
Its joint-venture partner, Hospira, received Canadian approval for the
cancer drug, Taxotere, and has been guiding for a green light from the US
authorities within this quarter, which should boost our FY12 EPS estimate
by 8-9%. In addition, as Hospira is the first player to produce a generic
version of this product, and with a superior formulation, we expect it to
sustain a larger market share and benefit Cadila through FY12.
Generic taxotere approved in Canada; US approval expected soon.
Hospira received approval for a generic version of Taxotere, an injectable drug
for cancer, from Canadian regulator. Meanwhile, the company has been
guiding for approval from the US Food and Drug Administration (FDA) within
this quarter. Cadila Healthcare (CDH IB - Rs746.90 - BUY) will be
manufacturing and supplying this formulation to Hospira from its joint-venture
facility in a special economic zone (SEZ) near Ahmedabad. The US FDA
approval will provide strong upsides to Cadila as a result of lofty offtake from
the joint venture. We expect high market share for Hospira as it will be the
first generic Taxotere and its formulation is superior to generics (such as Sun
Pharma) that will be entering later. We expect the US approval to bring about
an 8-9% EPS upgrade for FY12 and contribute to FY13 earnings. This joint
venture is set to bring in more such opportunities for Cadila.
Uptrend in Cadila’s US generics prescriptions intact. Cadila’s US
business has been growing strongly (from less than Rs1bn in FY06 to c.
Rs9bn+ in FY11) and has become profitable over the past two years. This
has contributed to margin expansion over the same period. We expect the
trend to sustain and further broaden margins. The company has been
gaining market share despite being a late entrant in a couple of
formulations. Incrementally, it has been successful in being an early
entrant in the USA in a couple of formulations. This trend is likely to
accelerate and contribute to higher profitability.
Valuations towards higher end, but earnings growth superior. While
Cadila Healthcare has been one of the best performers over the past year,
we expect the stock to continue to perform as it delivers strong earnings
growth over the coming years. We anticipate an 18% net profit Cagr over
FY11-13 with upgrades from opportunities such as taxotere to come in. At
the same time, with profits from the SEZ subject to the minimum alternate
tax (MAT), Cadila’s joint venture with Hospira will come under the tax net.
This will impact our current estimates by about 1%
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