Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare (CDH)
Pharmaceuticals
Cadila buys into loss-making generics unit of KV Pharma, faint signs of revival
visible. Cadila acquires Nesher Pharma (generics unit of KV) at near book value for
US$60 mn in cash. KV is yet to emerge from consent decree, as it received its first
ANDA approval post decree in Sep 2010. Further approvals are expected by late
FY2012E, according to KV. Nesher had revenues of US$9 mn in FY2011 (based on 5
months sales). According to Cadila (1) Nesher’s niche product pipeline of extended
release and controlled substances and (2) manufacturing facility in US, essential for
controlled substances, were the main reasons behind this acquisition. Cadila believes
the worst is behind in terms of the FDA issues for Nesher. While we expect revenue
addition of around US$20 mn from this deal based on current product approved, profit
turnaround is contingent on a quick ramp-up in ANDA approvals, timelines of which are
uncertain. Retain BUY with PT of Rs1,130 (22X FY2013E EPS).
Genesis of Nesher Pharmaceuticals – generics division of KV Pharma bought by Cadila
Plagued by 6 nationwide product recalls in FY2009 affecting most of its products, KV Pharma
entered into a consent decree with the FDA in March 2009. Erstwhile KV Pharma had 3
subsidiaries—(1) Ther-Rx for branded products, (2) Ethex for specialty generics, and (3) PDI for API
which was divested in June 2010. Ethex, subject to criminal charges by US DOJ related to the
product recalls ceased operations in March 2010. However, KV Pharma retained all rights to
manufacture, market (once the requirements under the consent decree have been met) all generic
products and is in possession of all intellectual property related to generic products. In May 2010,
KV Pharma formed a subsidiary, Nesher, to operate as its generic division. Due to its strategy of
focusing on its branded business in women’s healthcare, KV Pharma has now divested Nesher
Pharma.
Faint signs of revival visible – first generic product approved in September 2010
In August 2009, FDA approved KV Pharma’s work plan for bringing its facility back into
compliance. In April 2010, independent cGMP consultants, Lachman certified KV Pharma’s
compliance with cGMP systems and validation batches of first product were certified by Lachman
in July 2010. FDA conducted an inspection in August 2010 and in September 2010, KV Pharma
received approval to market first set of products under consent decree—Micro K and its generic
version Potassium Chloride Extended Release Capsule, marketing of the latter resumed in Dec
2010. However, further product approvals are not likely until late FY2012E, according to KV.
Controlled substances products and manufacturing facility –main reasons behind acquisition
We do not expect any near-term positive impact as the profit turnaround is contingent on
product-by-product ANDA approval by FDA, timelines of which are uncertain. Until, the conclusion
of the transaction (expected in 2QFY12E), we leave our estimates unchanged.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cadila Healthcare (CDH)
Pharmaceuticals
Cadila buys into loss-making generics unit of KV Pharma, faint signs of revival
visible. Cadila acquires Nesher Pharma (generics unit of KV) at near book value for
US$60 mn in cash. KV is yet to emerge from consent decree, as it received its first
ANDA approval post decree in Sep 2010. Further approvals are expected by late
FY2012E, according to KV. Nesher had revenues of US$9 mn in FY2011 (based on 5
months sales). According to Cadila (1) Nesher’s niche product pipeline of extended
release and controlled substances and (2) manufacturing facility in US, essential for
controlled substances, were the main reasons behind this acquisition. Cadila believes
the worst is behind in terms of the FDA issues for Nesher. While we expect revenue
addition of around US$20 mn from this deal based on current product approved, profit
turnaround is contingent on a quick ramp-up in ANDA approvals, timelines of which are
uncertain. Retain BUY with PT of Rs1,130 (22X FY2013E EPS).
Genesis of Nesher Pharmaceuticals – generics division of KV Pharma bought by Cadila
Plagued by 6 nationwide product recalls in FY2009 affecting most of its products, KV Pharma
entered into a consent decree with the FDA in March 2009. Erstwhile KV Pharma had 3
subsidiaries—(1) Ther-Rx for branded products, (2) Ethex for specialty generics, and (3) PDI for API
which was divested in June 2010. Ethex, subject to criminal charges by US DOJ related to the
product recalls ceased operations in March 2010. However, KV Pharma retained all rights to
manufacture, market (once the requirements under the consent decree have been met) all generic
products and is in possession of all intellectual property related to generic products. In May 2010,
KV Pharma formed a subsidiary, Nesher, to operate as its generic division. Due to its strategy of
focusing on its branded business in women’s healthcare, KV Pharma has now divested Nesher
Pharma.
Faint signs of revival visible – first generic product approved in September 2010
In August 2009, FDA approved KV Pharma’s work plan for bringing its facility back into
compliance. In April 2010, independent cGMP consultants, Lachman certified KV Pharma’s
compliance with cGMP systems and validation batches of first product were certified by Lachman
in July 2010. FDA conducted an inspection in August 2010 and in September 2010, KV Pharma
received approval to market first set of products under consent decree—Micro K and its generic
version Potassium Chloride Extended Release Capsule, marketing of the latter resumed in Dec
2010. However, further product approvals are not likely until late FY2012E, according to KV.
Controlled substances products and manufacturing facility –main reasons behind acquisition
We do not expect any near-term positive impact as the profit turnaround is contingent on
product-by-product ANDA approval by FDA, timelines of which are uncertain. Until, the conclusion
of the transaction (expected in 2QFY12E), we leave our estimates unchanged.
No comments:
Post a Comment