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Summary
In February, we saw two pharma bellwethers reporting disappointing
quarterly numbers. While Cipla’s performance in Q3FY11 was muted on
account of tepid domestic growth and cost pressure from the new
facilities, Ranbaxy’s performance for Q4CY10 was affected by lower than
expected sales from FTF opportunity Aricept (anti-Alzheimer’s) in the US
and write-offs. In other December quarter results, we saw mixed fortunes
for CRAMS players. While Divi’s reported better-than-expected numbers,
Piramal surprised with rejuvenated growth. However, the other two
CRAMS players such as Dishman and Jubilant continued to reel under
pressure at the client’s end and posted disappointing numbers.
Partnership driven models such as Aurobindo and Strides registered
strong like-to-like growth driven by a focused approach.
The major event that sent a few shivers among investors was the
embargo imposed by the USFDA on Aurobindo Pharma for deviation in
some CGMP issues at its unit VI facility in Andhra Pradesh, which
supplies anti-bacterial Cephalosporin in the US and other markets. The
stock corrected by almost 25-30% after the news tarnishing all gains it
made after the stellar Q3 numbers. On the regulatory front, Dr Reddy’s,
Cipla, Aurobindo Pharma and Ranbaxy Laboratories got one ANDA
approval each while Glenmark and Sun Pharma have received for two
ANDAs approvals each. Cadila Healthcare got approvals for 3 ANDAs
from USFDA. In case of Strides, the approval was first from its new stateof-
the-art plant near Bangalore, throwing open much bigger product
offerings in the near future. On the IP front, Natco continued to challenge
global players, this time by filing Para IV certification to challenge
blockbuster bird/swine flu drug Tamiflu that is marketed by Roche
globally.
Finally, the Union Budget for FY11-12 did not bring any cheers for the
pharma industry and all their major demands such as duty rationalisation
and incremental R&D benefits remained unattended. There was in fact
bad news in the form of SEZ units being brought under the MAT ambit.
Majority of the pharma players have at least one unit in the SEZ.
Sector view
In February, the BSE Health Care Index has underperformed the broader
markets with ~8% decline vis-à-vis the Sensex decline of ~3%. We
believe this was on account of weak numbers from Cipla and Ranbaxy,
embargo on Aurobindo and Budget disappointments. Despite these
issues, we believe the fundamentals are still intact and overall financial
performance for the December quarter remains standout. We expect the
Healthcare Index to outperform the broader markets on account of good
traction from the US, Japan and other developed markets supported by
product approvals, a growing presence in Pharmerging economies and
growing foot-hold in India.
Regulatory approvals
Sun receives USFDA approval for generic Razadyne capsules
Sun Pharmaceutical Industries has received an approval from the USFDA
to market Galantamine Hydrobromide extended-release capsules, a
generic version of Razadyne ER, used in treating mild to moderate
Alzheimer's disease. Razadyne ER is a registered trademark of Ortho-
McNeil Janssen Pharmaceuticals and has annual sales of around US$50
million in the US. The approvals are for multiple strengths of extendedrelease
capsules, 8 mg (base), 16 mg (base) and 24 mg (base).
Aurobindo gets USFDA tentative nod for generic Effexor XR capsules
Aurobindo Pharma has received tentative approval from the USFDA to
manufacture and market Venlafaxine Hydrochloride extended release
capsules of 37.5 mg, 75 mg and 150 mg. The drug is the generic version
of Wyeth Pharmaceuticals’ Effexor XR capsules. The capsules are
indicated for the treatment of major depressive disorder (MDD) and falls
under the neurological (CNS) therapeutic category. The product has a
market size of approximately US$2.4 billion for the 12 months ending
September 2010 according to IMS. Aurobindo filed the ANDA with
Paragraph IV certification and is currently engaged in patent litigation in
the United States District Court for the District of New Jersey. The
product will be launched after the litigation settlement.
Glenmark Pharma receives final approval for generic Xyzal tablets
Glenmark Generics, the wholly owned subsidiary of Glenmark
Pharmaceuticals has received final approval for its abbreviated new drug
application (ANDA) of Levocetirizine Dihydrochloride 5 mg tablets from
the USFDA. The drug is the generic version of UCB Inc’s Xyzal tablets.
The drug had annual sales of US$231 million in the 12 months ending
December 2010. The drug is an antihistamine indicated for the relief of
symptoms associated with allergic rhinitis. Glenmark has launched the
drug in the US market.
Manufacturing facility approval
Strides’ new sterile manufacturing facility gets USFDA nod
Strides Arcolab has received approval from the USFDA to commercialise
the Vancomycin injection from the company's new sterile injectable
complex in Bengaluru. A severe shortage of the antibiotic Vancomycin in
the US has pushed the FDA’s approval for supplies from the new
Bangalore plant of Strides. It would start US shipments of the
Vancomycin injection from the new sterile injectable complex this
month. It is the first sterile product to come out of the facility. Strides is
among the three global players supplying the generic drug in the US
market. Strides’ Vancomycin injection, cleared by the USFDA in January
2009 from the first plant, takes up 70% of the capacity of that plant.
Although 33 injectable products out of 113 applications were approved
for the US, sales have begun for only nine products coming out of the
existing facility. Other USFDA approved drugs would also be shifted to
the new plant to speed up their US launch.
Financial Performance
Jubilant reports muted growth in sales on like-to-like basis
In Q3FY11, Jubilant Life Sciences reported sales of | 867 crore,
compared to | 865 crore on a like-to-like basis. The international
business contributed 69% to the topline with revenues from regulated
markets at | 377 crore. Revenues from life science products of | 700
crore contributed 81% to the revenue of the company and grew 13% in
the quarter. Services revenues stood at | 167 crore compared to | 246
crore in the same quarter last year. Last year, services sales included
onetime sales from H1N1 of | 55 crore. EBITDA was | 134 crore with
margins at 15.4%, significantly lower than ~24% a year ago. The
margins were affected due to the strengthening rupee and pricing
pressures in the products business. Net profit stood at | 44 Crore. Poor
Q3 numbers and concerns regarding higher interest expenses next year
due to foreign currency convertible bonds (FCCBs) repayment of $202
million will continue to weigh on the scrip.
Natco net profit up 3%
Natco Pharma reported a marginal rise in standalone net profit for the
quarter ended December 2010. During the quarter, the profit of the
company rose 3% to | 12.4 crore. Net sales for the quarter rose 6.5% to
| 79.7 crore. The company has accounted for a loss of nearly | 3 crore
on account of the sale of one of the retail stores in the US.
Piramal profit at | 60.3 crore due to interest on investment income
Piramal Healthcare’s Q3FY11 results are not comparable on both YoY
and QoQ basis as it sold its domestic formulation and diagnostic
businesses. Total income from operations and net profit declined 55.6%
to | 402.69 crore and 55.7% to | 60.3 crore, respectively. On a
comparable basis, total income from operations rose 26% driven by a
41% increase in sales from the CRAMS business (assets in India).
However, at the EBITDA level, PHL continued to post a loss of | 18 crore
compared to a loss of | 9.5 crore in Q3FY10. Net profit stood at | 60.3
crore as against a loss of | 33.6 crore in the corresponding previous
period, which was mainly driven by investment income. The
management has maintained that the real picture on the future
performance will be clear only at the end of the current quarter, as the
company is gaining back the confidence from prospective CRAMS
customers. They are still evaluating various business options for
investing the cash received from Abbott and SRL and this process will
take some more time.
Aricept spoils the party for Ranbaxy
Ranbaxy Laboratories registered a net loss of | 97 crore for the fourth
quarter ended December 31, 2010. Revenue for the period was | 2066
crore, about 9.8% lower than the comparable quarter in the previous
year. The de-growth in revenue was on account of lower-than-expected
sales from Aricept FTF (Anti-Alzheimer’s) opportunity in the US. The
price erosion was much higher at 65-70% as against 30-35%
expectation. The domestic business after adjustment for one-time sale
last year, grew by 17% in Q4. The loss for the quarter was attributable to
higher write-offs and charge backs. For CY10, Ranbaxy’s revenues grew
16% to | 8551 crore. The net profit grew almost five-fold to | 1497 crore.
Growth during the year was attributable to the 80% growth in its US
earnings to | 2745 crore on account of limited period exclusive
marketing opportunities. The company has given a flat growth guidance
of | 8400 crore (excluding FTF opportunities) for 2011.
Strides net up 12% on higher base
Strides Arcolab reported a 33% growth in total income to | 1765.5 crore
for the year ended December 31, 2010. The growth was mainly driven by
~85% growth in the specialties division, which contributed 39% to the
total income. Other division i.e. pharma grew 13% YoY. The EBITDA
margin also improved by 600 bps to 22% on account of higher growth in
specialties, which fetch better margins. The consolidated net profit rose
by 12% to | 122.5 crore for the year ended December 31, 2010. The
muted growth in net profit was attributable to the higher base of last
year, which included gains on FCCB buyback to the tune of | 37 crore.
The management has given 25% growth guidance for total income in
CY11. It expects EBITDA margins to be in the range of 28-30% for CY11.
Aurobindo Pharma net profit up 10%
Aurobindo Pharma’s sales on a consolidated basis increased by 30%
YoY to | 1192 crore for the quarter ended December 2010 driven by a
53% rise in the formulation business to | 643.8 crore. EBITDA margins
expanded 30 bps to 26.8%. Lower forex gains of | 4.08 crore (compared
to | 24.81 crore) and higher effective tax rate (up by 410 bps) to 28.5%
restricted net profit growth to 10% at | 188.6 crore.
Higher costs, tepid growth dent Cipla results
Total income from operations increased only 8% to | 1553.7 crore for the
quarter ended December 2010. The marginal growth in topline was
primarily on the back of just 11% growth in the domestic
pharmaceuticals business. EBITDA margins sharply declined 590 bps to
20.5% due to an increase in employee cost and other expenditure at the
Indore SEZ. Cipla added new employees for the SEZ facility and is also
regrouping contractual staff at Goa facilities. There were no sales
reported from the recently commissioned Indore SEZ. Cipla expects the
Indore facility to take two more years to fully ramp up. The marginal
growth in sales coupled with the dip in the EBITDA margin resulted in net
profit declining by 19% to | 232.7 crore.
Dishman continues dismal show
Dishman’s net sales on a consolidated basis witnessed marginal growth
of 4.3% YoY to | 231.8 crore mainly on the back of a decline in the
CRAMS business by 2% to | 158.2 crore. The dip in the CRAMS business
was mainly due to a decline in the Indian CRAMS business and execution
of a large order, which will be delivered in Q4FY11. On the other hand,
the marketable molecules business registered healthy growth of 20%
YoY to | 73.6 crore. The EBITDA margin sharply declined ~1220 bps to
10.9% on the back of an increase in the raw materials cost, which went
up ~950 bps to 36.1% as percentage of sales. The increase in the
material cost was due to execution of orders by its Swiss subsidiary
Carbogen Amcis at very low margins and a rise in Vitamin D prices. The
overall net profit declined 95% to | 1.7 crore.
Recovery in CRAMS business boosts Divi’s net profit
The net sales of Divi’s Laboratories on a consolidated basis increased by
58% to | 309.7 crore for the quarter ended December 2010, thanks to an
improvement in the CRAMS business. Re-start of inventory re-stocking at
its customers resulted in such improvement. With improvement in the
high margin CRAMS business, overall margins improved sequentially.
However, on a YoY basis, the margins remained under pressure, down
by 540 bps to 38.5%. The increase in other income and decline in tax
rate led to net profit growth of 45% to | 98.4 crore.
Elder Pharma margins dip 235 bps on consolidation of NeutraHealth
Elder Pharmaceuticals’ results are not comparable as it increased it stake
in Bulgaria based Biomeda and completed the acquisition of UK based
NeutraHealth. The net sales increased by 39.8% YoY to | 251.5 crore.
The combined sales of Biomeda and NeutraHealth during the quarter
were | 41.9 crore. Excluding this, the base business grew by 16.5% to |
209.6 crore. The growth in the base business was due to healthy growth
in brands i.e. Shelcal, Chymoral, Formic and Eldervit. EBITDA margins
fell by 235 bps to 17.8% due to an increase in overheads. Both
NeutraHealth and Biomeda are distribution companies with low EBITDA
margins compared to Elder. Despite 23.4% growth in the EBITDA level,
the net profit grew by only 3% to | 15.83 crore on the back of an
increase in the depreciation and interest costs.
IP issues
Abbott, Ranbaxy settle patent litigation related to Tricor
Abbott Laboratories has settled a patent litigation case against Ranbaxy
Laboratories allowing Ranbaxy to launch a generic version of the US
drug maker’s cholesterol lowering medicine Tricor. Abbott, which sells
fenofibrate under the brands Tricor and Triplix, generates about $1 billion
in annual sales from the American market alone. Abbott had earlier
settled with another generic drug maker Teva for 145 mg dosage of the
same medicine that permits the Israeli firm to launch its low-priced
version as early as March 2011.
Natco files ANDA with USFDA for generic Tamiflu
Natco Pharma and Alvogen, the US-based pharmaceutical company,
have filed an abbreviated new drug application (ANDA) with the US Food
and Drug Administration (FDA) for the generic version of Tamiflu
(oseltamivir phosphate). Both Natco and Alvogen believe it is the first
substantially completed ANDA filing containing a Paragraph IV
certification and expects to qualify for 180 days of marketing exclusivity
upon final FDA approval. Oseltamivir phosphate capsules are used in the
treatment of bird and swine flu infections and sold by Hoffman – La
Roche under the brand name Tamiflu. According to IMS Health in 2009,
Tamiflu had US sales in excess of US$1 billion.
Product Launches
Opto Circuits to supply AEDs for all Tyco flow control facilities
Cardiac Science Corporation, the wholly owned subsidiary of Opto
Circuits India, has been awarded a contract to deploy powerheart
automated external defibrillators (AEDs) in all Tyco Flow Control facilities
globally. Tyco Flow Control is a US$3.4 billion division of Tyco
International. The first phase of the rollout, planned for the first quarter of
2011, will equip Tyco's Australian, Pacific and North and South American
facilities. Cardiac Science Corporation has also been awarded a contract
to deploy Powerheart AEDs at US Postal Inspection Service sites across
the US. The US Postal Inspection Service is the primary law enforcement
arm of the United States Postal Service.
Eurocor launches angioplasty device in India
Opto Circuit's German subsidiary - Eurocor GmbH, has launched
combination angioplasty device MAGICAL in India. The technology has
received registration from the Drug Controller General of India (DCGI).
M & As and demerger
Piramal acquires majority stake in Oxygen Bio Research
Piramal Healthcare has acquired a majority stake in Oxygen Bio Research
Private Ltd (Oxygen Healthcare), a discovery services specialist based on
the Cambridge Science Park in the UK and with a research centre in
Ahmedabad, India. Piramal is paying | 51.29 crore for 76% of Oxygen
Bio Research, which is a provider of integrated discovery services in
synthetic chemistry, medicinal chemistry, computational chemistry and
in vitro biology. The acquisition is being made through the wholly-owned
subsidiary Piramal Pharmaceutical Development Services Private
Limited, which is part of the Indian company’s pharma solutions division.
Sun Pharma to delist Caraco Pharmaceuticals
Sun Pharmaceutical Industries and its subsidiaries are acquiring the
remaining 24.2% stake in US-based Caraco Pharmaceutical Laboratories.
Sun Pharma will pay US$5.25 per share. This is $0.50 more than the
proposed price of US$4.75 a share, which Sun Pharma had offered its
shareholders in its proposal to delist Caraco Pharma from the stock
exchange.
R&D developments
Dr Reddy’s DRL17822 molecule enters Phase-II clinical trials
Dr Reddy’s Laboratories is planning to start the second phase of clinical
trials for its new anti-cholesterol molecule DRL17822 in May 2011. The
molecule, which is under development, could be used in cardiovascular
treatment. Apart from the company, Roche and Merck are trying to
develop a similar drug, which is currently in the Phase III stage.
Glenmark’s GRC17536 molecule enters human trials
Glenmark Pharmaceutical’s novel molecule GRC 17536 has entered
human clinical trials. GRC 17536 is targeting TRPA1 receptor, which
could be used for pain and respiratory therapies. It has filed Phase I
application for first-in-man trial in the Netherlands. The phase I clinical
trials are expected to be completed before December 2011. It is also
planning to initiate Phase II studies.
Glenmark’s Crofelemer shows positive results in multi-centre study
Glenmark Pharmaceuticals’ Crofelemer showed positive results in the
multi-centre study for acute watery diarrhoea in adult patients. In this
multi-centre, placebo controlled trial, resolution of diarrhoea was
significantly higher in the Crofelemer arm compared to the placebo.
Crofelemer was found to be safe with no apparent differences in adverse
event profile in the Crofelemer group compared to the placebo.
Tie-ups
Ranbaxy to develop healthcare system in Yaroslavl region
Ranbaxy Laboratories and the Government of Yaroslavl region, Russia
have signed a memorandum of understanding on cooperation in the field
of healthcare and medical science. The major areas of cooperation are
the development of the healthcare system, new medical technologies in
the Yaroslavl region, including the expansion of educational programmes
for the medical and pharmaceutical community, collaboration in the field
of clinical trials as well as improvement of drug safety monitoring in
medical practice. The Yaroslavl region in Russia is establishing a
pharmaceutical zone and encouraging pharmaceutical companies to set
up manufacturing facilities and conduct clinical research.
Warning letters & import alert
FDA imposes import alert on drugs made at Aurobindo’s Unit VI facility
USFDA has imposed an import alert on drugs manufactured at
Aurobindo Pharma’s (APL) Unit VI manufacturing facility. Unit VI
manufactures Cephalosporin in both oral and sterile forms. The facility
was inspected by USFDA in December 2010 and found some deviations
in cGMPs of sterile products in the facility. Currently, Aurobindo has
stopped shipments to the US market from this facility. The company is
still unsure whether it relates only to sterile products and/or oral
products manufactured at Unit VI. Currently, it is supplying four
injections cefazolin, cefotaxime, ceftazidime and ceftriaxone from this
facility to Pfizer and five oral products cefadroxil, cefidinir, cefprozil,
cefprozil oral suspension and cefuroxime axetil to Pfizer’s generics unit
Greenstone LLC. The annual sales to the US market from the Unit VI
manufacturing facility are around US$30 million. It has filed 30 ANDAs
from this facility and received approvals for 20 ANDAs so far.
Other developments
Dishman to restructure Swiss subsidiary Carbogen Amcis
Carbogen Amcis, the subsidiary of Dishman Pharmaceuticals, has started
restructuring its business operations as profitability sharply declined due
to the slowdown in the CRAMS business. The company is planning to
focus more on development projects at the Aarau site and pilot
production of early phase projects at the Neuland site. Large volume
production and the manufacture of highly active agents will continue at
the Bubendorf site. It is planning to reduce 60 employees, which would
save around US$8-10 million per annum.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Summary
In February, we saw two pharma bellwethers reporting disappointing
quarterly numbers. While Cipla’s performance in Q3FY11 was muted on
account of tepid domestic growth and cost pressure from the new
facilities, Ranbaxy’s performance for Q4CY10 was affected by lower than
expected sales from FTF opportunity Aricept (anti-Alzheimer’s) in the US
and write-offs. In other December quarter results, we saw mixed fortunes
for CRAMS players. While Divi’s reported better-than-expected numbers,
Piramal surprised with rejuvenated growth. However, the other two
CRAMS players such as Dishman and Jubilant continued to reel under
pressure at the client’s end and posted disappointing numbers.
Partnership driven models such as Aurobindo and Strides registered
strong like-to-like growth driven by a focused approach.
The major event that sent a few shivers among investors was the
embargo imposed by the USFDA on Aurobindo Pharma for deviation in
some CGMP issues at its unit VI facility in Andhra Pradesh, which
supplies anti-bacterial Cephalosporin in the US and other markets. The
stock corrected by almost 25-30% after the news tarnishing all gains it
made after the stellar Q3 numbers. On the regulatory front, Dr Reddy’s,
Cipla, Aurobindo Pharma and Ranbaxy Laboratories got one ANDA
approval each while Glenmark and Sun Pharma have received for two
ANDAs approvals each. Cadila Healthcare got approvals for 3 ANDAs
from USFDA. In case of Strides, the approval was first from its new stateof-
the-art plant near Bangalore, throwing open much bigger product
offerings in the near future. On the IP front, Natco continued to challenge
global players, this time by filing Para IV certification to challenge
blockbuster bird/swine flu drug Tamiflu that is marketed by Roche
globally.
Finally, the Union Budget for FY11-12 did not bring any cheers for the
pharma industry and all their major demands such as duty rationalisation
and incremental R&D benefits remained unattended. There was in fact
bad news in the form of SEZ units being brought under the MAT ambit.
Majority of the pharma players have at least one unit in the SEZ.
Sector view
In February, the BSE Health Care Index has underperformed the broader
markets with ~8% decline vis-à-vis the Sensex decline of ~3%. We
believe this was on account of weak numbers from Cipla and Ranbaxy,
embargo on Aurobindo and Budget disappointments. Despite these
issues, we believe the fundamentals are still intact and overall financial
performance for the December quarter remains standout. We expect the
Healthcare Index to outperform the broader markets on account of good
traction from the US, Japan and other developed markets supported by
product approvals, a growing presence in Pharmerging economies and
growing foot-hold in India.
Regulatory approvals
Sun receives USFDA approval for generic Razadyne capsules
Sun Pharmaceutical Industries has received an approval from the USFDA
to market Galantamine Hydrobromide extended-release capsules, a
generic version of Razadyne ER, used in treating mild to moderate
Alzheimer's disease. Razadyne ER is a registered trademark of Ortho-
McNeil Janssen Pharmaceuticals and has annual sales of around US$50
million in the US. The approvals are for multiple strengths of extendedrelease
capsules, 8 mg (base), 16 mg (base) and 24 mg (base).
Aurobindo gets USFDA tentative nod for generic Effexor XR capsules
Aurobindo Pharma has received tentative approval from the USFDA to
manufacture and market Venlafaxine Hydrochloride extended release
capsules of 37.5 mg, 75 mg and 150 mg. The drug is the generic version
of Wyeth Pharmaceuticals’ Effexor XR capsules. The capsules are
indicated for the treatment of major depressive disorder (MDD) and falls
under the neurological (CNS) therapeutic category. The product has a
market size of approximately US$2.4 billion for the 12 months ending
September 2010 according to IMS. Aurobindo filed the ANDA with
Paragraph IV certification and is currently engaged in patent litigation in
the United States District Court for the District of New Jersey. The
product will be launched after the litigation settlement.
Glenmark Pharma receives final approval for generic Xyzal tablets
Glenmark Generics, the wholly owned subsidiary of Glenmark
Pharmaceuticals has received final approval for its abbreviated new drug
application (ANDA) of Levocetirizine Dihydrochloride 5 mg tablets from
the USFDA. The drug is the generic version of UCB Inc’s Xyzal tablets.
The drug had annual sales of US$231 million in the 12 months ending
December 2010. The drug is an antihistamine indicated for the relief of
symptoms associated with allergic rhinitis. Glenmark has launched the
drug in the US market.
Manufacturing facility approval
Strides’ new sterile manufacturing facility gets USFDA nod
Strides Arcolab has received approval from the USFDA to commercialise
the Vancomycin injection from the company's new sterile injectable
complex in Bengaluru. A severe shortage of the antibiotic Vancomycin in
the US has pushed the FDA’s approval for supplies from the new
Bangalore plant of Strides. It would start US shipments of the
Vancomycin injection from the new sterile injectable complex this
month. It is the first sterile product to come out of the facility. Strides is
among the three global players supplying the generic drug in the US
market. Strides’ Vancomycin injection, cleared by the USFDA in January
2009 from the first plant, takes up 70% of the capacity of that plant.
Although 33 injectable products out of 113 applications were approved
for the US, sales have begun for only nine products coming out of the
existing facility. Other USFDA approved drugs would also be shifted to
the new plant to speed up their US launch.
Financial Performance
Jubilant reports muted growth in sales on like-to-like basis
In Q3FY11, Jubilant Life Sciences reported sales of | 867 crore,
compared to | 865 crore on a like-to-like basis. The international
business contributed 69% to the topline with revenues from regulated
markets at | 377 crore. Revenues from life science products of | 700
crore contributed 81% to the revenue of the company and grew 13% in
the quarter. Services revenues stood at | 167 crore compared to | 246
crore in the same quarter last year. Last year, services sales included
onetime sales from H1N1 of | 55 crore. EBITDA was | 134 crore with
margins at 15.4%, significantly lower than ~24% a year ago. The
margins were affected due to the strengthening rupee and pricing
pressures in the products business. Net profit stood at | 44 Crore. Poor
Q3 numbers and concerns regarding higher interest expenses next year
due to foreign currency convertible bonds (FCCBs) repayment of $202
million will continue to weigh on the scrip.
Natco net profit up 3%
Natco Pharma reported a marginal rise in standalone net profit for the
quarter ended December 2010. During the quarter, the profit of the
company rose 3% to | 12.4 crore. Net sales for the quarter rose 6.5% to
| 79.7 crore. The company has accounted for a loss of nearly | 3 crore
on account of the sale of one of the retail stores in the US.
Piramal profit at | 60.3 crore due to interest on investment income
Piramal Healthcare’s Q3FY11 results are not comparable on both YoY
and QoQ basis as it sold its domestic formulation and diagnostic
businesses. Total income from operations and net profit declined 55.6%
to | 402.69 crore and 55.7% to | 60.3 crore, respectively. On a
comparable basis, total income from operations rose 26% driven by a
41% increase in sales from the CRAMS business (assets in India).
However, at the EBITDA level, PHL continued to post a loss of | 18 crore
compared to a loss of | 9.5 crore in Q3FY10. Net profit stood at | 60.3
crore as against a loss of | 33.6 crore in the corresponding previous
period, which was mainly driven by investment income. The
management has maintained that the real picture on the future
performance will be clear only at the end of the current quarter, as the
company is gaining back the confidence from prospective CRAMS
customers. They are still evaluating various business options for
investing the cash received from Abbott and SRL and this process will
take some more time.
Aricept spoils the party for Ranbaxy
Ranbaxy Laboratories registered a net loss of | 97 crore for the fourth
quarter ended December 31, 2010. Revenue for the period was | 2066
crore, about 9.8% lower than the comparable quarter in the previous
year. The de-growth in revenue was on account of lower-than-expected
sales from Aricept FTF (Anti-Alzheimer’s) opportunity in the US. The
price erosion was much higher at 65-70% as against 30-35%
expectation. The domestic business after adjustment for one-time sale
last year, grew by 17% in Q4. The loss for the quarter was attributable to
higher write-offs and charge backs. For CY10, Ranbaxy’s revenues grew
16% to | 8551 crore. The net profit grew almost five-fold to | 1497 crore.
Growth during the year was attributable to the 80% growth in its US
earnings to | 2745 crore on account of limited period exclusive
marketing opportunities. The company has given a flat growth guidance
of | 8400 crore (excluding FTF opportunities) for 2011.
Strides net up 12% on higher base
Strides Arcolab reported a 33% growth in total income to | 1765.5 crore
for the year ended December 31, 2010. The growth was mainly driven by
~85% growth in the specialties division, which contributed 39% to the
total income. Other division i.e. pharma grew 13% YoY. The EBITDA
margin also improved by 600 bps to 22% on account of higher growth in
specialties, which fetch better margins. The consolidated net profit rose
by 12% to | 122.5 crore for the year ended December 31, 2010. The
muted growth in net profit was attributable to the higher base of last
year, which included gains on FCCB buyback to the tune of | 37 crore.
The management has given 25% growth guidance for total income in
CY11. It expects EBITDA margins to be in the range of 28-30% for CY11.
Aurobindo Pharma net profit up 10%
Aurobindo Pharma’s sales on a consolidated basis increased by 30%
YoY to | 1192 crore for the quarter ended December 2010 driven by a
53% rise in the formulation business to | 643.8 crore. EBITDA margins
expanded 30 bps to 26.8%. Lower forex gains of | 4.08 crore (compared
to | 24.81 crore) and higher effective tax rate (up by 410 bps) to 28.5%
restricted net profit growth to 10% at | 188.6 crore.
Higher costs, tepid growth dent Cipla results
Total income from operations increased only 8% to | 1553.7 crore for the
quarter ended December 2010. The marginal growth in topline was
primarily on the back of just 11% growth in the domestic
pharmaceuticals business. EBITDA margins sharply declined 590 bps to
20.5% due to an increase in employee cost and other expenditure at the
Indore SEZ. Cipla added new employees for the SEZ facility and is also
regrouping contractual staff at Goa facilities. There were no sales
reported from the recently commissioned Indore SEZ. Cipla expects the
Indore facility to take two more years to fully ramp up. The marginal
growth in sales coupled with the dip in the EBITDA margin resulted in net
profit declining by 19% to | 232.7 crore.
Dishman continues dismal show
Dishman’s net sales on a consolidated basis witnessed marginal growth
of 4.3% YoY to | 231.8 crore mainly on the back of a decline in the
CRAMS business by 2% to | 158.2 crore. The dip in the CRAMS business
was mainly due to a decline in the Indian CRAMS business and execution
of a large order, which will be delivered in Q4FY11. On the other hand,
the marketable molecules business registered healthy growth of 20%
YoY to | 73.6 crore. The EBITDA margin sharply declined ~1220 bps to
10.9% on the back of an increase in the raw materials cost, which went
up ~950 bps to 36.1% as percentage of sales. The increase in the
material cost was due to execution of orders by its Swiss subsidiary
Carbogen Amcis at very low margins and a rise in Vitamin D prices. The
overall net profit declined 95% to | 1.7 crore.
Recovery in CRAMS business boosts Divi’s net profit
The net sales of Divi’s Laboratories on a consolidated basis increased by
58% to | 309.7 crore for the quarter ended December 2010, thanks to an
improvement in the CRAMS business. Re-start of inventory re-stocking at
its customers resulted in such improvement. With improvement in the
high margin CRAMS business, overall margins improved sequentially.
However, on a YoY basis, the margins remained under pressure, down
by 540 bps to 38.5%. The increase in other income and decline in tax
rate led to net profit growth of 45% to | 98.4 crore.
Elder Pharma margins dip 235 bps on consolidation of NeutraHealth
Elder Pharmaceuticals’ results are not comparable as it increased it stake
in Bulgaria based Biomeda and completed the acquisition of UK based
NeutraHealth. The net sales increased by 39.8% YoY to | 251.5 crore.
The combined sales of Biomeda and NeutraHealth during the quarter
were | 41.9 crore. Excluding this, the base business grew by 16.5% to |
209.6 crore. The growth in the base business was due to healthy growth
in brands i.e. Shelcal, Chymoral, Formic and Eldervit. EBITDA margins
fell by 235 bps to 17.8% due to an increase in overheads. Both
NeutraHealth and Biomeda are distribution companies with low EBITDA
margins compared to Elder. Despite 23.4% growth in the EBITDA level,
the net profit grew by only 3% to | 15.83 crore on the back of an
increase in the depreciation and interest costs.
IP issues
Abbott, Ranbaxy settle patent litigation related to Tricor
Abbott Laboratories has settled a patent litigation case against Ranbaxy
Laboratories allowing Ranbaxy to launch a generic version of the US
drug maker’s cholesterol lowering medicine Tricor. Abbott, which sells
fenofibrate under the brands Tricor and Triplix, generates about $1 billion
in annual sales from the American market alone. Abbott had earlier
settled with another generic drug maker Teva for 145 mg dosage of the
same medicine that permits the Israeli firm to launch its low-priced
version as early as March 2011.
Natco files ANDA with USFDA for generic Tamiflu
Natco Pharma and Alvogen, the US-based pharmaceutical company,
have filed an abbreviated new drug application (ANDA) with the US Food
and Drug Administration (FDA) for the generic version of Tamiflu
(oseltamivir phosphate). Both Natco and Alvogen believe it is the first
substantially completed ANDA filing containing a Paragraph IV
certification and expects to qualify for 180 days of marketing exclusivity
upon final FDA approval. Oseltamivir phosphate capsules are used in the
treatment of bird and swine flu infections and sold by Hoffman – La
Roche under the brand name Tamiflu. According to IMS Health in 2009,
Tamiflu had US sales in excess of US$1 billion.
Product Launches
Opto Circuits to supply AEDs for all Tyco flow control facilities
Cardiac Science Corporation, the wholly owned subsidiary of Opto
Circuits India, has been awarded a contract to deploy powerheart
automated external defibrillators (AEDs) in all Tyco Flow Control facilities
globally. Tyco Flow Control is a US$3.4 billion division of Tyco
International. The first phase of the rollout, planned for the first quarter of
2011, will equip Tyco's Australian, Pacific and North and South American
facilities. Cardiac Science Corporation has also been awarded a contract
to deploy Powerheart AEDs at US Postal Inspection Service sites across
the US. The US Postal Inspection Service is the primary law enforcement
arm of the United States Postal Service.
Eurocor launches angioplasty device in India
Opto Circuit's German subsidiary - Eurocor GmbH, has launched
combination angioplasty device MAGICAL in India. The technology has
received registration from the Drug Controller General of India (DCGI).
M & As and demerger
Piramal acquires majority stake in Oxygen Bio Research
Piramal Healthcare has acquired a majority stake in Oxygen Bio Research
Private Ltd (Oxygen Healthcare), a discovery services specialist based on
the Cambridge Science Park in the UK and with a research centre in
Ahmedabad, India. Piramal is paying | 51.29 crore for 76% of Oxygen
Bio Research, which is a provider of integrated discovery services in
synthetic chemistry, medicinal chemistry, computational chemistry and
in vitro biology. The acquisition is being made through the wholly-owned
subsidiary Piramal Pharmaceutical Development Services Private
Limited, which is part of the Indian company’s pharma solutions division.
Sun Pharma to delist Caraco Pharmaceuticals
Sun Pharmaceutical Industries and its subsidiaries are acquiring the
remaining 24.2% stake in US-based Caraco Pharmaceutical Laboratories.
Sun Pharma will pay US$5.25 per share. This is $0.50 more than the
proposed price of US$4.75 a share, which Sun Pharma had offered its
shareholders in its proposal to delist Caraco Pharma from the stock
exchange.
R&D developments
Dr Reddy’s DRL17822 molecule enters Phase-II clinical trials
Dr Reddy’s Laboratories is planning to start the second phase of clinical
trials for its new anti-cholesterol molecule DRL17822 in May 2011. The
molecule, which is under development, could be used in cardiovascular
treatment. Apart from the company, Roche and Merck are trying to
develop a similar drug, which is currently in the Phase III stage.
Glenmark’s GRC17536 molecule enters human trials
Glenmark Pharmaceutical’s novel molecule GRC 17536 has entered
human clinical trials. GRC 17536 is targeting TRPA1 receptor, which
could be used for pain and respiratory therapies. It has filed Phase I
application for first-in-man trial in the Netherlands. The phase I clinical
trials are expected to be completed before December 2011. It is also
planning to initiate Phase II studies.
Glenmark’s Crofelemer shows positive results in multi-centre study
Glenmark Pharmaceuticals’ Crofelemer showed positive results in the
multi-centre study for acute watery diarrhoea in adult patients. In this
multi-centre, placebo controlled trial, resolution of diarrhoea was
significantly higher in the Crofelemer arm compared to the placebo.
Crofelemer was found to be safe with no apparent differences in adverse
event profile in the Crofelemer group compared to the placebo.
Tie-ups
Ranbaxy to develop healthcare system in Yaroslavl region
Ranbaxy Laboratories and the Government of Yaroslavl region, Russia
have signed a memorandum of understanding on cooperation in the field
of healthcare and medical science. The major areas of cooperation are
the development of the healthcare system, new medical technologies in
the Yaroslavl region, including the expansion of educational programmes
for the medical and pharmaceutical community, collaboration in the field
of clinical trials as well as improvement of drug safety monitoring in
medical practice. The Yaroslavl region in Russia is establishing a
pharmaceutical zone and encouraging pharmaceutical companies to set
up manufacturing facilities and conduct clinical research.
Warning letters & import alert
FDA imposes import alert on drugs made at Aurobindo’s Unit VI facility
USFDA has imposed an import alert on drugs manufactured at
Aurobindo Pharma’s (APL) Unit VI manufacturing facility. Unit VI
manufactures Cephalosporin in both oral and sterile forms. The facility
was inspected by USFDA in December 2010 and found some deviations
in cGMPs of sterile products in the facility. Currently, Aurobindo has
stopped shipments to the US market from this facility. The company is
still unsure whether it relates only to sterile products and/or oral
products manufactured at Unit VI. Currently, it is supplying four
injections cefazolin, cefotaxime, ceftazidime and ceftriaxone from this
facility to Pfizer and five oral products cefadroxil, cefidinir, cefprozil,
cefprozil oral suspension and cefuroxime axetil to Pfizer’s generics unit
Greenstone LLC. The annual sales to the US market from the Unit VI
manufacturing facility are around US$30 million. It has filed 30 ANDAs
from this facility and received approvals for 20 ANDAs so far.
Other developments
Dishman to restructure Swiss subsidiary Carbogen Amcis
Carbogen Amcis, the subsidiary of Dishman Pharmaceuticals, has started
restructuring its business operations as profitability sharply declined due
to the slowdown in the CRAMS business. The company is planning to
focus more on development projects at the Aarau site and pilot
production of early phase projects at the Neuland site. Large volume
production and the manufacture of highly active agents will continue at
the Bubendorf site. It is planning to reduce 60 employees, which would
save around US$8-10 million per annum.
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