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India Pharmaceuticals
6th Field Trip Highlights –
Steady Fundamentals
Central theme for the companies is “doing our own
thing”, i.e., accelerating investments in preferred
geographies and differentiated products, therapies, and
technologies. At the same time, the companies continue
to broaden their commodity/branded portfolios and
deepen their global footprints. In effect, we believe that
the Indian Pharma models are gradually transitioning
from Model S.0 to Model SV.0 (see our note on the topic
dated October 8, 2009).
Changing trends – Most frequently heard terms
were: domestic market, medical rep, MNC threat, EMs,
US, Japan, niche, NDDS, bio-similars, exclusivity in
India, FDA’s India office, SEZ, forex, inflation, alliances.
Less heard were: cost advantage, US exclusivities,
capex, hiring, NCEs. Least heard were – CRAM, debt,
funding issues, Europe, China. Notable one liners
include – big getting bigger, cutting prices in US doesn’t
gain market share, and managing complexity and scale
of business is the biggest challenge.
Big picture appears healthy: Based on estimates
from consultants/companies, the Indian pharma industry
can grow at 13-17% p.a. to US$70-100bn by 2020 from
~US$20bn sales in 2010 (55% domestic, 45% exports).
To reach this target, we estimate the industry will require
new capex of US$15-20bn over the next 10 years
(versus US$1bn per annum in the last couple of years).
We retain our In-Line industry view on the interplay of
strong fundamentals (20% EPS CAGR – F2011-13E)
and full valuations (19.5x F2012E). We profess stock
selection to profit in the group. DRRD, Lupin, Sun and
Ranbaxy is our preferred order (all OW). We are EW
Cipla, GSK and Biocon. Company highlights are (details
inside) – Sun appeared pleased with “limited” launch of
its proprietary DPI in India; DRL is sticking to its F2013
guidance of US$2.7bn sales; RANB said that it is well
prepared to monetize Lipitor in the US; Lupin’s US
pipeline appears robust; GSK targets to beat market
growth rate; and GNP is optimistic about its NCEs.
Pharmaceutical Trip – Consultants’ View
Morgan Stanley 6
th
Pharma Field Trip –
We completed our annual franchise trip during which we met
12 pharmaceutical companies and three consultants/industry
experts. The key highlights from each meeting are included
below.
IMS Health, Industry Expert – Kumar Hinduja
IMS estimates domestic India pharmaceutical market will
double in the next five years to US$25.2bn by 2015 – with a
CAGR of 15.7% (+/- 3%). It expects other components of the
healthcare industry – hospitals, diagnostics, medical devices,
biotech etc – to show high growth (15-25% CAGR) as well
over next five years.
Key drivers for the Indian pharmaceutical market include:
• Penetration to lower-class towns and rural areas;
• New product launches – patented drugs as well as
branded generics;
• Shift from acute to chronic;
• Gradual increase in government healthcare
expenditure.
Other highlights -
• Top 10 companies account for 38% share of the
(July’11 MAT) and account for above-industry
average growth rate.
• Chronic therapies continue to grow ahead of the
industry growth rates. Consequently, their share of
the overall market has risen from 25% in 2008 to
27% in 2011.
• Multinational pharmaceutical companies have
gained market share over the last few years – 21% in
2007 to 30% in 2011 – largely on recent acquisitions.
• Market share of patented products could rise
from 1-2% in 2011 to 5-6% in 2015, according to
IMS.
Dr Ajit Danji, Industry Expert – Chairman Fulford
Overall, Dr Dangi was optimistic about the longer-term
prospects of Indian pharmaceutical sector. He sees three
drivers of growth in the domestic market
1) Geographic focus to Tier II cities;
2) Therapeutic focus where in absolute terms both acute and
chronic will drive growth in equal measure (chronic higher in
percentage terms); and
3) Patented and branded generic focus in terms of IPR.
Januvia has been launched in India with exclusivity (i.e.,
patent protection) by Merck at 20% of US pricing, implying
US$30 per month medication cost. Within a short period of 18
months, Januvia has grossed Rs1bn in sales (versus Rs2.5bn
Augmentin, the largest selling product in India).
Vaccines – In particular, Dr Dangi expects India to emerge as
a major global source of vaccines. Plus, he believes that
bio-similars could present as a huge opportunity for the sector.
Multinationals are likely to gain market share in the
coming years, either organically or through acquisitions. Dr
Dangi expects MNC pharma companies to gross 35% market
share by 2015 versus 25% now.
Doctor density in India is roughly 0.6 per 1,000 people. This
could be understating the reality a bit since doctors in India
treat 10x more patients than those in other countries.
PWC – Sujay Shetty/Krishnakumar
Sankaranarayanan, Industry Expert
Overall, PWC estimates Indian pharmaceutical industry
will show healthy growth in this decade driven by both
domestic and export markets. It estimates the current
US$20bn market (60% domestic, 40% exports) to grow to
US$70bn (70% domestic) on conservative estimates (13%
CAGR) and US$100bn (74% domestic) on aggressive
estimates (17% CAGR) by 2020. Importantly, PWC was more
optimistic about the domestic market than the export business.
It expects Indian medical technology industry to grow from
US$2.75bn in market size to US$14bn by 2020, implying 18%
CAGR.
Other highlights – 1) Although penetration in smaller towns
is an integral part of India’s pharmaceutical industry’s growth
story, PWC believes that the upside from rural heartland is a
distant dream. 2) It expects multinational pharmaceutical
companies to win market share in the current decade and
increase its share from the current 25% to 50% by 2020. 3)
PWC expects the implementation of GST to bring supply
chain efficiencies, resulting in lower distribution costs.
Pharmaceutical Trip – Key Takeaways from Company Meetings
Summary and Conclusion
Lupin Limited (LUPN.BO, OW)
Outlook: For F2012, management expects top-line growth of
20-25%. It targets to launch 40-45 products in the US over the
next two years.
Oral contraceptives (US market) update: Management
expects OC to be a 6+ player market over the next few years.
Lupin is fully integrated for the OC products. It has filed for 26
products so far and has received one approval. The entry
barriers include technical complexity, dedicated capex and
long gestation to commercialize. The overall market size is
US$4.5bn, of which roughly US$750mn is currently generic.
The company believes that it needs 12 approvals to make an
impact in the market.
Entering new therapies for US markets: LPC is currently
working on the following key therapy areas for the US market in
the medium term:
• Opthalmology: ANDA filings have commenced and
the approval cycle is expected to begin two years from
now.
• Dermatalogy: ANDA filings will soon begin.
• Asthma: Lupin is working on MDI as well as DPI.
Regulatory filings have not started.
Research Spending: Due to the addition of new therapies to
its international portfolio, LPC expects its research spending to
rise to 8.5% of sales in the near term, but to revert to 7% of
sales later.
US filing update: Lupin has filed 152 products, 52 of which
have been approved and 100 of which are pending approval. It
has 76 para IV filings, 21-22 of which are FTFs including 10-11
sole exclusivities. It has been litigated on 45 products. Some of
the niche launches planned in the next few quarters include
Fortamet, Femcon AG, Geodon, and Tricor.
Japan business: The company has filed for regulatory
approval for sourcing of API and formulations (Goa) from India,
which could take two years to commence. According to the
company, this will lift the operating margins by 7-8%, from 41%
currently. To generate trust in the local management, Lupin
had expanded the Japanese manufacturing capacity from 0.9bl
units to 1.4bn units. Drug cost is largely paid by the government
in Japan, hence the patient is not incentivized to switch to
generic form. Both the doctor and the pharmacist have to check
the Rx to generate generic sales. Generic penetration in Japan
has risen from 17% in 2008 to 23% in 2011. This is expected to
rise to 30% by 2013.
South Africa: The company has grown its sales at 35-37% p.a.
for three years and has an EBIDTA margin of 35%. Lupin has a
leadership position in the CVS segment.
Latin America market: Lupin’s strategy is to enter the Latam
market through an acquisition (five to seven years payback
period). According to the company, Latam is a very
competitive market with strong presence from domestic
players.
Russia: The company is grossing US$22mn in sales. Hitherto,
this has not been the focused market. Lupin’s business model
here will be similar to that in India.
Domestic business: Lupin’s India growth strategy includes
improving its market reach (4,000 MRs), promotion, stronger
pipeline, and in-licensing. The company currently has 21
products in its portfolio that have been in-licensed (from Italy,
Germany, Korea, etc.).
Europe filings: Lupin has filed for 91 products in Europe, 46
of which have been approved.
New drug delivery system (NDDS): LPC is working on a few
platforms including taste masking (cefuroxime), orally
disintegrating tabs, and oral-modified release, although they
are still in the early stages in terms of drug filing visibility. It has
out-licensed its technology to Salix and Medicis.
Glenmark Pharmaceuticals (GLEN.BO, Not
Covered)
F2012 Outlook: GLEN expects to gross roughly US$850mn in
revenue, of which US should contribute US$250mn, India
US$200mn (growing at 18-20%), and Latam US$60-70mn
(growing at 35-40%).
Specialty segment: GLEN is focusing on three key therapies
– dermatology, respiratory and oncology.
Russia/CIS: Russia business is grossing US$60mn in
revenue run rate with 30%-plus EBIDTA margin. Management
expects the Russia/CIS business to grow at 25-30% for F2012
and 25% plus for F2013.
Latin America: The company grossed roughly US$50mn in
revenue and is at EBITDA breakeven level in F2011. It expects
margins to gradually improve in the coming years – 5% in
F2013 and 15% in F2014 and peak EBITDA margin of 25%
thereafter.
Opportunities for the US market:
• Malarone: Glenmark has launched generic Malarone
with 180 days sole exclusivity. Management does not
expect additional competition until the end of 2012.
• Fluticasone propionate: GLEN will be the third
player to enter the market, post Perrigo’s exclusivity.
Oral contraceptives (for US): Glenmark is the third player
(after Teva and Watson) to enter the market. Management
expects this segment to be competitive next year. It has filed
for 22-24 products, five of which have been approved and it
expects another two to three approvals in the balance F2012. It
is not vertically integrated, given low volume of API required for
formulations.
Domestic business: Management expects 18-20% growth
for F2012 and 20% for F2013 in the domestic business.
Oncology for US market: Glenmark will start filings for
oncology products this year for the US market, post which it
expects USFDA to inspect its Argentina facility.
Claris Lifesciences (CLAI.BO, Not Covered)
Outlook: Management expects strong operational
performance from C2013-15, driven by US business (lifting of
import alert) and new product launches in US and Europe. Next
12 months could be the period of consolidation, according to
the company
Specialty injectibles – a high entry barrier segment:
According to management, specialty injectibles have a high
entry barrier due to high capex, longer gestation period and
higher manufacturing breakeven (usually at 40% capacity
utilization). B Braun, Fresenius, Baxter and Hospira are key
global players in injectable market.
USFDA import alert update: Claris recalled three products in
the US market in June 2010. After that, the USFDA imposed an
import alert. According to management, the recall was driven
by a mechanical error during the printing of the bags. The
company has met with the USFDA, it is in the process of
resolving the issues, and targets to invite USFDA for inspection
in the near term. According to the company, the issues could
be resolved by 1H12. It has spent about US$3mn so far toward
resolution of the import alert.
Strategic shift in EM: For emerging markets, over the last few
years Claris has moved from subsidiary model to a partnership
model, thereby re-directing its focus on product and relying on
the local partner for distribution and marketing.
Key product drivers in the near term include:
• Propofol: Claris is selling the product in 48 countries
with an addressable market of US$100mn and
revenue of US$20mn. It has filed for drug registration
in US (US$350mn addressable market) and Europe
(US$250mn addressable market) and received
approval in the European market. It filed the dossier in
the US in September 2010, and expects approval
sometime in C1Q13.
• Iron sucrose: Global market size for iron sucrose is
US$350mn with two competitors. Claris revenue run
rate is US$5mn p.a. vs. addressable market of
US$20mn. Management expects approval for Europe
market (US$100mn sales) by the end of C2012.
GlaxoSmithKline Pharma (GLAX.BO, EW)
Outlook: Management expects the Indian pharmaceutical
market to grow at 13-15% and targets its growth rate at in line
with to ahead of the market.
Pipeline: The company has five sources of products for new
launches – parent portfolio, vaccines, branded generics,
in-licensing, and inorganic route. Patented products account
for 2% of GSK’s overall sales, which should rise to 5% by
C2015.
Field force: GSK has a total field force strength of 3,500
medical representatives. It has deployed 50% of the recent
hires in smaller cities to increase market penetration.
Sun Pharmaceutical Industries (SUN.BO, OW)
Overall, Sun remains optimistic about its longer-term
growth prospects in view of: 1) its ability to manage complex
technologies (which can be extended to new markets); 2) its
relatively small market share in various geographies; and 3) the
inorganic route.
Market commentary–
• Emerging Markets (EM): Underlying growth remains
strong, although forex volatility is an area of concern.
Early progress in its alliance with Merck for specialty
products is good. It will take five years plus to build
and establish brands in EMs. China remains an
unlikely opportunity in view of market complexity and
strong local industry.
• US: Ongoing consolidation of buyers (Medco/Express
Scrips; CVS/Caremark) can potentially disrupt the
market dynamics. Consolidation in distribution could
lead to consolidation in manufacturing (to which Sun
can adapt nicely and profitably). Patent cliff post 2012
is a challenge. Approval of auto-injector form of
sumatriptan is a major development from the FDA’s
standpoint, Sun believes.
• Europe: Sun is currently focusing on injectables for
EU markets (and not pharmacy products).
• Japan: Sun plans to enter and grow in this market
both organically and through acquisitions. Sun
believes it will take three to five years to build
business here.
• Domestic market: According to management, the
current economic slowdown will have some impact on
the domestic market. However, management believes
that the longer-term growth outlook remains good.
SPARC portfolio: So far, Sun has launched four products from
SPARC’s portfolio in the Indian market. It has pilot launched
DPI (dry powder inhaler) in the Indian market and has received
no negative feedback. The innovative device offers several
patient conveniences, and also includes similar efficacy with
half the dosing of the branded product (Advair). The product in
its current form can be taken to US/EU markets and be
positioned on a non-inferiority basis (versus the brand).
Management remains excited about the prospects of SPARC
and is planning a rights issue to fund the research cost
(Rs750-800mn p.a.).
Taro in US: Taro has over 60 products that are approved but
not marketed in the US market, which could drive growth.
However, Taro’s lack of meaningful investment in R&D over the
last three to four years has left a gap in the product pipeline,
which may catch up in the mid term. On an overall basis, Taro
has raised prices in the last few months. Taro is planning to
alter its equity listing in US from OTC market to main track.
Controlled substance portfolio (in US): According to
management, controlled substance is a gradual build-up
business, since it is driven by manufacturing quota allotment
every year.
Opto Circuits (OPTO.BO, Not Covered)
Industry outlook: According to management, various
emerging markets including Africa and Middle East are
showing healthy growth, while the US and Europe are stable.
Acquisition is a preferred route: Management believes that
acquisition is preferred route for growth in the medical
equipment space, since it takes three to five years for in-house
products from development phase to commercialization stage.
Company outlook: The company is building its distribution
network in various geographies including the US, Europe, Asia,
and Middle East. Management expects revenue to grow
20-25% and EBIDTA margins to grow in the 25-30% range for
the next few years. Near term, the company targets to
consolidate its position and not looking for an acquisition.
US to be the focus: Management expects the US to
contribute over 40% of the overall revenues in the next few
years.
Cardiac Sciences: Opto acquired Cardiac Sciences in
October 2010. It has about 27% market share in the US. It
currently manufactures 50% of its requirements in India/
Malaysia, and management targets to shift its entire
manufacturing to India/Malaysia by June 2012.
Stent commercialization in the US: Opto has tied up with
Mycell for the US market. Opto is the manufacturing partner,
while Mycell will be coating the product. Currently, the partners
are conducting studies on the coating technology and target to
file protocol anytime soon. Average investment for studies per
device is about S$15-20mn.
Dr. Reddy's Lab (REDY.BO, OW)
F2013 guidance: Management maintained its F2013 revenue
target of US$2.7bn. It expects margins to improve by roughly
200bp for the base business by F2013.
Domestic business continues to be weak due to 60%
concentration in acute therapies, which have slower than
market growth rates and price compression risks. Chronic
segment is growing well. Overall domestic will get back to
market growth rate (12%) by F4Q12, according to the company.
DRRD has faced a high level of iteration in its field of 20-25%
vs. the industry average of 10-15%.
US Market:
• Strategy: Management highlighted its strategy to
focus on low competition and complex generic
products.
• Fondaparinux: It expects market share scale up in
fondaparinux in six to nine months from launch date
(July 2011). The company is aiming for 50% market
share with 50-60% price erosion.
• Lipitor opportunity: DRRD expects generic Lipitor to
be a four to five player market initially and eventually
to be a seven to eight player market in 1.5 years (from
181 days).
• Manufacturing de-risking: Currently about 75% of
DRRD’s US sales are supplied from the Bachupally
facility (located near Hyderabad, India), and the
balance from the Shreveport facility (in the US). It
expects the Vizag based SEZ facility to commission
next year. In three years, DRRD targets
manufacturing share of 40:30:30 between Bachupally,
Shreveport, and Vizag.
• OTC business: Currently OTC portfolio contributes
about US$100mn in revenue. Management expects
this to double to US$200mn in two years, driven by
new launches including lansoprazole. OTC basket
has 15% lower profitability than the Rx generics.
• Augmentin and Amoxil launch in October 2011 is
on track.
Mexico import alert: The company is in the last phase of
implementing the processes for resolution of USFDA issues. It
expects revenue impact of US$15-20mn annualized
(US$8-10mn profit impact).
Biosimilars:
• Domestic market: It targets to launch one MAb
every year for the next few years in the domestic
market.
• Rituximab opportunity: It targets to launch its
rituximab equivalent (Reditux) in Brazil in F2013 and
Russia in F2014 with US$40mn sales opportunity in
each market (implying 20% market share at current
market size/price).
• US: DRRD is in discussion with various players for
potential partnerships for the US market.
• Capex: It has a current capacity of 5 kilolitres
(US$15mn capex). It targets to incur additional capex
of US$40-50mn and expand the total capacity to 200
kilolitres.
Russia business: Management expects the OTC portfolio to
contribute about 40-45% to the total Russia business in F2013
vs. 30% currently. It is currently spending aggressively on
marketing and promotion (roughly US$40mn p.a.), which
should moderate in future.
NDDS portfolio:
• Terbinafine: DRL’s lead compound, terbinafine for
skin application, is currently in phase III trials (900
patients – US$15-20mn expense), and the company
expects to launch this in F2014 in the US market. Two
other dermatology candidates are in Phase II clinical
trials.
Forex hedge: The company has currently hedged 60% of its
net forex exposure.
Aurobindo Pharma (ARBN.BO, Not Covered)
F1014 guidance: Management maintained its F2-14 revenue
guidance of US$2bn (versus US$950mn in F2011), driven by
formulations – US$1.45bn (US$550mn in F2011) and API
US$550mn. It expects the US to contribute US$650mn and
ARV tenders to US$250mn in F2014. It expects EM branded
generic business to ramp up sharply by F2014 (US$550mn)
through marketing alliances such as PFE (US$350-400mn),
AZN, etc. The company targets 22-23% operating margin in
F2014.
USFDA issues:
• Unit VI: The company has met with USFDA and is
currently working on the resolution (two to three
quarters). FDA inspection is likely thereafter.
• Unit III: Management expects to resolve the issues
within the next few quarters.
ARV tender business: ARV tender business garnered
US$150mn in revenue in F2011, which included one-time
US$20mn tender. Management expects this segment to gross
US$170-180mn sales in F2012. According to management,
profitability in te ARV business is similar to the US business
and is not working capital intensive.
US Market:
• Over 77 products are pending approval from USFDA.
• Zoysn opportunity: Zoysn is US$650mn market
opportunity in the US. It is a four-player generic
market with Aurobindo entering the market in May
2011. It is currently grossing US$2mn per month in
revenues and expects to ramp up to US$4mn per
month in the quarters ahead. It has aspirational target
of 15% market share.
Partnership with Pfizer: The partnership covers over 110
products. It has filed for over 15-20 products each in various
geographies (ex US), a few of which have been
commercialized. The company expects Rs1bn dossier income
per annum in F2012 and F2013.
Manufacturing capacity utilization is roughly 45% for
dosage forms and 70% for APIs. According to ARBN, its
capacities are sufficient to meet its F2014 targets. It expects
Rs2.7bn capex over the next 12 months.
Debt Update: ARBN had roughly Rs26bn net debt as of June
2011. A significant part of this is denominated in foreign
currency (a good part is unhedged). Over the next 12 month,
US$125mn repayment is expected.
Morgan Stanley is acting as a financial advisor to Pfizer Inc.
("Pfizer") in relation to its review of strategic alternatives for its
Nutrition business. Pfizer will pay fees to Morgan Stanley for its
services, including transaction fees that will be subject to the
consummation of any resulting transaction. Please refer to the
notes at the end of the report.
Suven Life Sciences (SUVP.BO, Not Covered)
Update on SUVN 502: SUVN52 is Suven’s lead compound for
alzheimer's / schizophrenia.
• Suven plans to iniitate phase IIa global study with a
CRO partner.
• It plans to enroll over 400 patients for the study.
• Estimated cost of phase IIa study is approximately
US$20mn.
• Out-licensing: The company plans to out-license the
molecule before initiation of phase III studies. It is in
active discussion with various potential partners.
Research and development: So far, Suven has spent over
Rs2.3bn on 12 molecules R&D activity.
CRAMS business: CRAMS segment contributes over 75% of
total revenue, according to management. The company has
executed over 546 projects so far. Management expects
CRAMS business to grow at 10-15% over the comingyears.
Natco Pharma (NATP.BO, Not Covered)
Outlook: Management expects subdued performance in
F2012 with revenue growth of 5-10% and net profit growth of
7-10%. However, it expects strong performance thereafter
driven by various product opportunities
Strategy for product tie-ups: In general, the company
diversifies its partnership risk by tying up with various
companies for different products.
Update on various product drivers for the US market:
• Generic Copaxone: Natco has tied up with Mylan for
generic Copaxone for the US market. It has received
milestone of US$1mn from Mylan so far. It filed the
ANDA in June 2009. Natco is fully integrated for
manufacturing generic Copaxone. The company is
planning to set up a separate dedicated block for
manufacturing of the product, with a total capex of
Rs1.22bn, of which partner to has contributed
Rs400mn.
• Lansoprazole: Natco filed ANDA in March 2010 for
prescription form and recently filed for the OTC as
well. It targets to garner 20% market share. It has tied
up with Actavis for the OTC version and Breckridge
for the prescription version for marketing the product.
• Generic Fosrenol: Natco filed an ANDA with Para IV
(FTF status) in October 2008, and is currently under
litigation with the innovator for generic Fosrenol
(US$110mn market size). It has tied up with Lupin for
this product, which will bear the legal risk. Natco is
vertically integrated for this product.
• Generic Revlimid: Natco has filed an ANDA for
generic Revlimid (US$2.3bn global market size) about
a year back. It has FTF status and tied up with Watson
for marketing for the product.
• Oseltamivir Phosphate: Natco has filed an ANDA
with para IV (has FTF status) on oseltamivir
phosphate. It has tied up with Alvogen for marketing
of the product. Natco is vertically integrated for this
product.
• Generic Tykerb 250 mg tablets: Natco has filed an
ANDA with para IV (has FTF status) on generic
Tykerb 250 mg tablets (US$114mn market size). It
has tied up with Lupin for marketing of the product.
Natco is vertically integrated for this product.
Partnership with Dr Reddy’s: Natco has tied up with Dr
Reddy’s for five oncology products. These include paclitaxel in
nano-tech platform and pegalyted doxorubicin. It expects
marketing approval in three years timeframe.
Funding plans: The company is planning to do equity linked
capital raising through structured product.
Ranbaxy Laboratories (RANB.BO, OW)
Outlook: Overall, management expects base business growth
to be in the high teens and operating margins in the mid teens
in 2012 (versus single-digit margins in 2011).
USFDA / DoJ issues: The company did not share much on the
ongoing FDA/DoJ issues. However, it did make the following
ponts regarding Lipitor:
• RANB plans to win market leadership for Lipitor
in some geographies. It is the cost leader on this
product in the world.
• The company is well prepared to monetize this
opportunity in the US, and manufacturing capacity is
not a constraint. It did not clarify whether the
company has commenced manufacturing in its New
Jersey facility.
• RANB is doing what is required to comfort customers
in the US.
• Post 180 days exclusivity, Lipitor could be a five to
six player market, i.e., limited competition dynamics.
• It will utilize the Lipitor earnings to reinvest in the
business including vaccines, bio-similars etc.
Mohali SEZ: RANB has made regulatory filings across various
geographies. USFDA has inspected the facility in June 2011.
Management expects the facility to begin commercial
manufacturing in 2012.
Domestic market: RANB expects the market to grow at
roughly 14-15%. Acute therapies are slowing down, but even
chronic care has been hit. The company expects Viraat to help
it outperform market. Key updates include:
• Acute segment constitutes in excess of 40% of
Ranbaxy’s domestic business. In the next few years,
management expects a balanced portfolio of chronic
and acute therapies.
• MNC entry into branded generics: RANB does not
expect MNC pharma companies’ entry into branded
generic space to be a big threat. It expects to weather
the pricing pressure (for example – GSK has priced
atorvastatin at 50% discount to RANB, although it
hasn’t garnered significant market share) on the back
of its brand equity.
• Field force expansion: Ranbaxy has added over
1,500 medical representatives since 2009 under
Project Viraat
India Equity Research Reports, IPO and Stock News
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India Pharmaceuticals
6th Field Trip Highlights –
Steady Fundamentals
Central theme for the companies is “doing our own
thing”, i.e., accelerating investments in preferred
geographies and differentiated products, therapies, and
technologies. At the same time, the companies continue
to broaden their commodity/branded portfolios and
deepen their global footprints. In effect, we believe that
the Indian Pharma models are gradually transitioning
from Model S.0 to Model SV.0 (see our note on the topic
dated October 8, 2009).
Changing trends – Most frequently heard terms
were: domestic market, medical rep, MNC threat, EMs,
US, Japan, niche, NDDS, bio-similars, exclusivity in
India, FDA’s India office, SEZ, forex, inflation, alliances.
Less heard were: cost advantage, US exclusivities,
capex, hiring, NCEs. Least heard were – CRAM, debt,
funding issues, Europe, China. Notable one liners
include – big getting bigger, cutting prices in US doesn’t
gain market share, and managing complexity and scale
of business is the biggest challenge.
Big picture appears healthy: Based on estimates
from consultants/companies, the Indian pharma industry
can grow at 13-17% p.a. to US$70-100bn by 2020 from
~US$20bn sales in 2010 (55% domestic, 45% exports).
To reach this target, we estimate the industry will require
new capex of US$15-20bn over the next 10 years
(versus US$1bn per annum in the last couple of years).
We retain our In-Line industry view on the interplay of
strong fundamentals (20% EPS CAGR – F2011-13E)
and full valuations (19.5x F2012E). We profess stock
selection to profit in the group. DRRD, Lupin, Sun and
Ranbaxy is our preferred order (all OW). We are EW
Cipla, GSK and Biocon. Company highlights are (details
inside) – Sun appeared pleased with “limited” launch of
its proprietary DPI in India; DRL is sticking to its F2013
guidance of US$2.7bn sales; RANB said that it is well
prepared to monetize Lipitor in the US; Lupin’s US
pipeline appears robust; GSK targets to beat market
growth rate; and GNP is optimistic about its NCEs.
Pharmaceutical Trip – Consultants’ View
Morgan Stanley 6
th
Pharma Field Trip –
We completed our annual franchise trip during which we met
12 pharmaceutical companies and three consultants/industry
experts. The key highlights from each meeting are included
below.
IMS Health, Industry Expert – Kumar Hinduja
IMS estimates domestic India pharmaceutical market will
double in the next five years to US$25.2bn by 2015 – with a
CAGR of 15.7% (+/- 3%). It expects other components of the
healthcare industry – hospitals, diagnostics, medical devices,
biotech etc – to show high growth (15-25% CAGR) as well
over next five years.
Key drivers for the Indian pharmaceutical market include:
• Penetration to lower-class towns and rural areas;
• New product launches – patented drugs as well as
branded generics;
• Shift from acute to chronic;
• Gradual increase in government healthcare
expenditure.
Other highlights -
• Top 10 companies account for 38% share of the
(July’11 MAT) and account for above-industry
average growth rate.
• Chronic therapies continue to grow ahead of the
industry growth rates. Consequently, their share of
the overall market has risen from 25% in 2008 to
27% in 2011.
• Multinational pharmaceutical companies have
gained market share over the last few years – 21% in
2007 to 30% in 2011 – largely on recent acquisitions.
• Market share of patented products could rise
from 1-2% in 2011 to 5-6% in 2015, according to
IMS.
Dr Ajit Danji, Industry Expert – Chairman Fulford
Overall, Dr Dangi was optimistic about the longer-term
prospects of Indian pharmaceutical sector. He sees three
drivers of growth in the domestic market
1) Geographic focus to Tier II cities;
2) Therapeutic focus where in absolute terms both acute and
chronic will drive growth in equal measure (chronic higher in
percentage terms); and
3) Patented and branded generic focus in terms of IPR.
Januvia has been launched in India with exclusivity (i.e.,
patent protection) by Merck at 20% of US pricing, implying
US$30 per month medication cost. Within a short period of 18
months, Januvia has grossed Rs1bn in sales (versus Rs2.5bn
Augmentin, the largest selling product in India).
Vaccines – In particular, Dr Dangi expects India to emerge as
a major global source of vaccines. Plus, he believes that
bio-similars could present as a huge opportunity for the sector.
Multinationals are likely to gain market share in the
coming years, either organically or through acquisitions. Dr
Dangi expects MNC pharma companies to gross 35% market
share by 2015 versus 25% now.
Doctor density in India is roughly 0.6 per 1,000 people. This
could be understating the reality a bit since doctors in India
treat 10x more patients than those in other countries.
PWC – Sujay Shetty/Krishnakumar
Sankaranarayanan, Industry Expert
Overall, PWC estimates Indian pharmaceutical industry
will show healthy growth in this decade driven by both
domestic and export markets. It estimates the current
US$20bn market (60% domestic, 40% exports) to grow to
US$70bn (70% domestic) on conservative estimates (13%
CAGR) and US$100bn (74% domestic) on aggressive
estimates (17% CAGR) by 2020. Importantly, PWC was more
optimistic about the domestic market than the export business.
It expects Indian medical technology industry to grow from
US$2.75bn in market size to US$14bn by 2020, implying 18%
CAGR.
Other highlights – 1) Although penetration in smaller towns
is an integral part of India’s pharmaceutical industry’s growth
story, PWC believes that the upside from rural heartland is a
distant dream. 2) It expects multinational pharmaceutical
companies to win market share in the current decade and
increase its share from the current 25% to 50% by 2020. 3)
PWC expects the implementation of GST to bring supply
chain efficiencies, resulting in lower distribution costs.
Pharmaceutical Trip – Key Takeaways from Company Meetings
Summary and Conclusion
Lupin Limited (LUPN.BO, OW)
Outlook: For F2012, management expects top-line growth of
20-25%. It targets to launch 40-45 products in the US over the
next two years.
Oral contraceptives (US market) update: Management
expects OC to be a 6+ player market over the next few years.
Lupin is fully integrated for the OC products. It has filed for 26
products so far and has received one approval. The entry
barriers include technical complexity, dedicated capex and
long gestation to commercialize. The overall market size is
US$4.5bn, of which roughly US$750mn is currently generic.
The company believes that it needs 12 approvals to make an
impact in the market.
Entering new therapies for US markets: LPC is currently
working on the following key therapy areas for the US market in
the medium term:
• Opthalmology: ANDA filings have commenced and
the approval cycle is expected to begin two years from
now.
• Dermatalogy: ANDA filings will soon begin.
• Asthma: Lupin is working on MDI as well as DPI.
Regulatory filings have not started.
Research Spending: Due to the addition of new therapies to
its international portfolio, LPC expects its research spending to
rise to 8.5% of sales in the near term, but to revert to 7% of
sales later.
US filing update: Lupin has filed 152 products, 52 of which
have been approved and 100 of which are pending approval. It
has 76 para IV filings, 21-22 of which are FTFs including 10-11
sole exclusivities. It has been litigated on 45 products. Some of
the niche launches planned in the next few quarters include
Fortamet, Femcon AG, Geodon, and Tricor.
Japan business: The company has filed for regulatory
approval for sourcing of API and formulations (Goa) from India,
which could take two years to commence. According to the
company, this will lift the operating margins by 7-8%, from 41%
currently. To generate trust in the local management, Lupin
had expanded the Japanese manufacturing capacity from 0.9bl
units to 1.4bn units. Drug cost is largely paid by the government
in Japan, hence the patient is not incentivized to switch to
generic form. Both the doctor and the pharmacist have to check
the Rx to generate generic sales. Generic penetration in Japan
has risen from 17% in 2008 to 23% in 2011. This is expected to
rise to 30% by 2013.
South Africa: The company has grown its sales at 35-37% p.a.
for three years and has an EBIDTA margin of 35%. Lupin has a
leadership position in the CVS segment.
Latin America market: Lupin’s strategy is to enter the Latam
market through an acquisition (five to seven years payback
period). According to the company, Latam is a very
competitive market with strong presence from domestic
players.
Russia: The company is grossing US$22mn in sales. Hitherto,
this has not been the focused market. Lupin’s business model
here will be similar to that in India.
Domestic business: Lupin’s India growth strategy includes
improving its market reach (4,000 MRs), promotion, stronger
pipeline, and in-licensing. The company currently has 21
products in its portfolio that have been in-licensed (from Italy,
Germany, Korea, etc.).
Europe filings: Lupin has filed for 91 products in Europe, 46
of which have been approved.
New drug delivery system (NDDS): LPC is working on a few
platforms including taste masking (cefuroxime), orally
disintegrating tabs, and oral-modified release, although they
are still in the early stages in terms of drug filing visibility. It has
out-licensed its technology to Salix and Medicis.
Glenmark Pharmaceuticals (GLEN.BO, Not
Covered)
F2012 Outlook: GLEN expects to gross roughly US$850mn in
revenue, of which US should contribute US$250mn, India
US$200mn (growing at 18-20%), and Latam US$60-70mn
(growing at 35-40%).
Specialty segment: GLEN is focusing on three key therapies
– dermatology, respiratory and oncology.
Russia/CIS: Russia business is grossing US$60mn in
revenue run rate with 30%-plus EBIDTA margin. Management
expects the Russia/CIS business to grow at 25-30% for F2012
and 25% plus for F2013.
Latin America: The company grossed roughly US$50mn in
revenue and is at EBITDA breakeven level in F2011. It expects
margins to gradually improve in the coming years – 5% in
F2013 and 15% in F2014 and peak EBITDA margin of 25%
thereafter.
Opportunities for the US market:
• Malarone: Glenmark has launched generic Malarone
with 180 days sole exclusivity. Management does not
expect additional competition until the end of 2012.
• Fluticasone propionate: GLEN will be the third
player to enter the market, post Perrigo’s exclusivity.
Oral contraceptives (for US): Glenmark is the third player
(after Teva and Watson) to enter the market. Management
expects this segment to be competitive next year. It has filed
for 22-24 products, five of which have been approved and it
expects another two to three approvals in the balance F2012. It
is not vertically integrated, given low volume of API required for
formulations.
Domestic business: Management expects 18-20% growth
for F2012 and 20% for F2013 in the domestic business.
Oncology for US market: Glenmark will start filings for
oncology products this year for the US market, post which it
expects USFDA to inspect its Argentina facility.
Claris Lifesciences (CLAI.BO, Not Covered)
Outlook: Management expects strong operational
performance from C2013-15, driven by US business (lifting of
import alert) and new product launches in US and Europe. Next
12 months could be the period of consolidation, according to
the company
Specialty injectibles – a high entry barrier segment:
According to management, specialty injectibles have a high
entry barrier due to high capex, longer gestation period and
higher manufacturing breakeven (usually at 40% capacity
utilization). B Braun, Fresenius, Baxter and Hospira are key
global players in injectable market.
USFDA import alert update: Claris recalled three products in
the US market in June 2010. After that, the USFDA imposed an
import alert. According to management, the recall was driven
by a mechanical error during the printing of the bags. The
company has met with the USFDA, it is in the process of
resolving the issues, and targets to invite USFDA for inspection
in the near term. According to the company, the issues could
be resolved by 1H12. It has spent about US$3mn so far toward
resolution of the import alert.
Strategic shift in EM: For emerging markets, over the last few
years Claris has moved from subsidiary model to a partnership
model, thereby re-directing its focus on product and relying on
the local partner for distribution and marketing.
Key product drivers in the near term include:
• Propofol: Claris is selling the product in 48 countries
with an addressable market of US$100mn and
revenue of US$20mn. It has filed for drug registration
in US (US$350mn addressable market) and Europe
(US$250mn addressable market) and received
approval in the European market. It filed the dossier in
the US in September 2010, and expects approval
sometime in C1Q13.
• Iron sucrose: Global market size for iron sucrose is
US$350mn with two competitors. Claris revenue run
rate is US$5mn p.a. vs. addressable market of
US$20mn. Management expects approval for Europe
market (US$100mn sales) by the end of C2012.
GlaxoSmithKline Pharma (GLAX.BO, EW)
Outlook: Management expects the Indian pharmaceutical
market to grow at 13-15% and targets its growth rate at in line
with to ahead of the market.
Pipeline: The company has five sources of products for new
launches – parent portfolio, vaccines, branded generics,
in-licensing, and inorganic route. Patented products account
for 2% of GSK’s overall sales, which should rise to 5% by
C2015.
Field force: GSK has a total field force strength of 3,500
medical representatives. It has deployed 50% of the recent
hires in smaller cities to increase market penetration.
Sun Pharmaceutical Industries (SUN.BO, OW)
Overall, Sun remains optimistic about its longer-term
growth prospects in view of: 1) its ability to manage complex
technologies (which can be extended to new markets); 2) its
relatively small market share in various geographies; and 3) the
inorganic route.
Market commentary–
• Emerging Markets (EM): Underlying growth remains
strong, although forex volatility is an area of concern.
Early progress in its alliance with Merck for specialty
products is good. It will take five years plus to build
and establish brands in EMs. China remains an
unlikely opportunity in view of market complexity and
strong local industry.
• US: Ongoing consolidation of buyers (Medco/Express
Scrips; CVS/Caremark) can potentially disrupt the
market dynamics. Consolidation in distribution could
lead to consolidation in manufacturing (to which Sun
can adapt nicely and profitably). Patent cliff post 2012
is a challenge. Approval of auto-injector form of
sumatriptan is a major development from the FDA’s
standpoint, Sun believes.
• Europe: Sun is currently focusing on injectables for
EU markets (and not pharmacy products).
• Japan: Sun plans to enter and grow in this market
both organically and through acquisitions. Sun
believes it will take three to five years to build
business here.
• Domestic market: According to management, the
current economic slowdown will have some impact on
the domestic market. However, management believes
that the longer-term growth outlook remains good.
SPARC portfolio: So far, Sun has launched four products from
SPARC’s portfolio in the Indian market. It has pilot launched
DPI (dry powder inhaler) in the Indian market and has received
no negative feedback. The innovative device offers several
patient conveniences, and also includes similar efficacy with
half the dosing of the branded product (Advair). The product in
its current form can be taken to US/EU markets and be
positioned on a non-inferiority basis (versus the brand).
Management remains excited about the prospects of SPARC
and is planning a rights issue to fund the research cost
(Rs750-800mn p.a.).
Taro in US: Taro has over 60 products that are approved but
not marketed in the US market, which could drive growth.
However, Taro’s lack of meaningful investment in R&D over the
last three to four years has left a gap in the product pipeline,
which may catch up in the mid term. On an overall basis, Taro
has raised prices in the last few months. Taro is planning to
alter its equity listing in US from OTC market to main track.
Controlled substance portfolio (in US): According to
management, controlled substance is a gradual build-up
business, since it is driven by manufacturing quota allotment
every year.
Opto Circuits (OPTO.BO, Not Covered)
Industry outlook: According to management, various
emerging markets including Africa and Middle East are
showing healthy growth, while the US and Europe are stable.
Acquisition is a preferred route: Management believes that
acquisition is preferred route for growth in the medical
equipment space, since it takes three to five years for in-house
products from development phase to commercialization stage.
Company outlook: The company is building its distribution
network in various geographies including the US, Europe, Asia,
and Middle East. Management expects revenue to grow
20-25% and EBIDTA margins to grow in the 25-30% range for
the next few years. Near term, the company targets to
consolidate its position and not looking for an acquisition.
US to be the focus: Management expects the US to
contribute over 40% of the overall revenues in the next few
years.
Cardiac Sciences: Opto acquired Cardiac Sciences in
October 2010. It has about 27% market share in the US. It
currently manufactures 50% of its requirements in India/
Malaysia, and management targets to shift its entire
manufacturing to India/Malaysia by June 2012.
Stent commercialization in the US: Opto has tied up with
Mycell for the US market. Opto is the manufacturing partner,
while Mycell will be coating the product. Currently, the partners
are conducting studies on the coating technology and target to
file protocol anytime soon. Average investment for studies per
device is about S$15-20mn.
Dr. Reddy's Lab (REDY.BO, OW)
F2013 guidance: Management maintained its F2013 revenue
target of US$2.7bn. It expects margins to improve by roughly
200bp for the base business by F2013.
Domestic business continues to be weak due to 60%
concentration in acute therapies, which have slower than
market growth rates and price compression risks. Chronic
segment is growing well. Overall domestic will get back to
market growth rate (12%) by F4Q12, according to the company.
DRRD has faced a high level of iteration in its field of 20-25%
vs. the industry average of 10-15%.
US Market:
• Strategy: Management highlighted its strategy to
focus on low competition and complex generic
products.
• Fondaparinux: It expects market share scale up in
fondaparinux in six to nine months from launch date
(July 2011). The company is aiming for 50% market
share with 50-60% price erosion.
• Lipitor opportunity: DRRD expects generic Lipitor to
be a four to five player market initially and eventually
to be a seven to eight player market in 1.5 years (from
181 days).
• Manufacturing de-risking: Currently about 75% of
DRRD’s US sales are supplied from the Bachupally
facility (located near Hyderabad, India), and the
balance from the Shreveport facility (in the US). It
expects the Vizag based SEZ facility to commission
next year. In three years, DRRD targets
manufacturing share of 40:30:30 between Bachupally,
Shreveport, and Vizag.
• OTC business: Currently OTC portfolio contributes
about US$100mn in revenue. Management expects
this to double to US$200mn in two years, driven by
new launches including lansoprazole. OTC basket
has 15% lower profitability than the Rx generics.
• Augmentin and Amoxil launch in October 2011 is
on track.
Mexico import alert: The company is in the last phase of
implementing the processes for resolution of USFDA issues. It
expects revenue impact of US$15-20mn annualized
(US$8-10mn profit impact).
Biosimilars:
• Domestic market: It targets to launch one MAb
every year for the next few years in the domestic
market.
• Rituximab opportunity: It targets to launch its
rituximab equivalent (Reditux) in Brazil in F2013 and
Russia in F2014 with US$40mn sales opportunity in
each market (implying 20% market share at current
market size/price).
• US: DRRD is in discussion with various players for
potential partnerships for the US market.
• Capex: It has a current capacity of 5 kilolitres
(US$15mn capex). It targets to incur additional capex
of US$40-50mn and expand the total capacity to 200
kilolitres.
Russia business: Management expects the OTC portfolio to
contribute about 40-45% to the total Russia business in F2013
vs. 30% currently. It is currently spending aggressively on
marketing and promotion (roughly US$40mn p.a.), which
should moderate in future.
NDDS portfolio:
• Terbinafine: DRL’s lead compound, terbinafine for
skin application, is currently in phase III trials (900
patients – US$15-20mn expense), and the company
expects to launch this in F2014 in the US market. Two
other dermatology candidates are in Phase II clinical
trials.
Forex hedge: The company has currently hedged 60% of its
net forex exposure.
Aurobindo Pharma (ARBN.BO, Not Covered)
F1014 guidance: Management maintained its F2-14 revenue
guidance of US$2bn (versus US$950mn in F2011), driven by
formulations – US$1.45bn (US$550mn in F2011) and API
US$550mn. It expects the US to contribute US$650mn and
ARV tenders to US$250mn in F2014. It expects EM branded
generic business to ramp up sharply by F2014 (US$550mn)
through marketing alliances such as PFE (US$350-400mn),
AZN, etc. The company targets 22-23% operating margin in
F2014.
USFDA issues:
• Unit VI: The company has met with USFDA and is
currently working on the resolution (two to three
quarters). FDA inspection is likely thereafter.
• Unit III: Management expects to resolve the issues
within the next few quarters.
ARV tender business: ARV tender business garnered
US$150mn in revenue in F2011, which included one-time
US$20mn tender. Management expects this segment to gross
US$170-180mn sales in F2012. According to management,
profitability in te ARV business is similar to the US business
and is not working capital intensive.
US Market:
• Over 77 products are pending approval from USFDA.
• Zoysn opportunity: Zoysn is US$650mn market
opportunity in the US. It is a four-player generic
market with Aurobindo entering the market in May
2011. It is currently grossing US$2mn per month in
revenues and expects to ramp up to US$4mn per
month in the quarters ahead. It has aspirational target
of 15% market share.
Partnership with Pfizer: The partnership covers over 110
products. It has filed for over 15-20 products each in various
geographies (ex US), a few of which have been
commercialized. The company expects Rs1bn dossier income
per annum in F2012 and F2013.
Manufacturing capacity utilization is roughly 45% for
dosage forms and 70% for APIs. According to ARBN, its
capacities are sufficient to meet its F2014 targets. It expects
Rs2.7bn capex over the next 12 months.
Debt Update: ARBN had roughly Rs26bn net debt as of June
2011. A significant part of this is denominated in foreign
currency (a good part is unhedged). Over the next 12 month,
US$125mn repayment is expected.
Morgan Stanley is acting as a financial advisor to Pfizer Inc.
("Pfizer") in relation to its review of strategic alternatives for its
Nutrition business. Pfizer will pay fees to Morgan Stanley for its
services, including transaction fees that will be subject to the
consummation of any resulting transaction. Please refer to the
notes at the end of the report.
Suven Life Sciences (SUVP.BO, Not Covered)
Update on SUVN 502: SUVN52 is Suven’s lead compound for
alzheimer's / schizophrenia.
• Suven plans to iniitate phase IIa global study with a
CRO partner.
• It plans to enroll over 400 patients for the study.
• Estimated cost of phase IIa study is approximately
US$20mn.
• Out-licensing: The company plans to out-license the
molecule before initiation of phase III studies. It is in
active discussion with various potential partners.
Research and development: So far, Suven has spent over
Rs2.3bn on 12 molecules R&D activity.
CRAMS business: CRAMS segment contributes over 75% of
total revenue, according to management. The company has
executed over 546 projects so far. Management expects
CRAMS business to grow at 10-15% over the comingyears.
Natco Pharma (NATP.BO, Not Covered)
Outlook: Management expects subdued performance in
F2012 with revenue growth of 5-10% and net profit growth of
7-10%. However, it expects strong performance thereafter
driven by various product opportunities
Strategy for product tie-ups: In general, the company
diversifies its partnership risk by tying up with various
companies for different products.
Update on various product drivers for the US market:
• Generic Copaxone: Natco has tied up with Mylan for
generic Copaxone for the US market. It has received
milestone of US$1mn from Mylan so far. It filed the
ANDA in June 2009. Natco is fully integrated for
manufacturing generic Copaxone. The company is
planning to set up a separate dedicated block for
manufacturing of the product, with a total capex of
Rs1.22bn, of which partner to has contributed
Rs400mn.
• Lansoprazole: Natco filed ANDA in March 2010 for
prescription form and recently filed for the OTC as
well. It targets to garner 20% market share. It has tied
up with Actavis for the OTC version and Breckridge
for the prescription version for marketing the product.
• Generic Fosrenol: Natco filed an ANDA with Para IV
(FTF status) in October 2008, and is currently under
litigation with the innovator for generic Fosrenol
(US$110mn market size). It has tied up with Lupin for
this product, which will bear the legal risk. Natco is
vertically integrated for this product.
• Generic Revlimid: Natco has filed an ANDA for
generic Revlimid (US$2.3bn global market size) about
a year back. It has FTF status and tied up with Watson
for marketing for the product.
• Oseltamivir Phosphate: Natco has filed an ANDA
with para IV (has FTF status) on oseltamivir
phosphate. It has tied up with Alvogen for marketing
of the product. Natco is vertically integrated for this
product.
• Generic Tykerb 250 mg tablets: Natco has filed an
ANDA with para IV (has FTF status) on generic
Tykerb 250 mg tablets (US$114mn market size). It
has tied up with Lupin for marketing of the product.
Natco is vertically integrated for this product.
Partnership with Dr Reddy’s: Natco has tied up with Dr
Reddy’s for five oncology products. These include paclitaxel in
nano-tech platform and pegalyted doxorubicin. It expects
marketing approval in three years timeframe.
Funding plans: The company is planning to do equity linked
capital raising through structured product.
Ranbaxy Laboratories (RANB.BO, OW)
Outlook: Overall, management expects base business growth
to be in the high teens and operating margins in the mid teens
in 2012 (versus single-digit margins in 2011).
USFDA / DoJ issues: The company did not share much on the
ongoing FDA/DoJ issues. However, it did make the following
ponts regarding Lipitor:
• RANB plans to win market leadership for Lipitor
in some geographies. It is the cost leader on this
product in the world.
• The company is well prepared to monetize this
opportunity in the US, and manufacturing capacity is
not a constraint. It did not clarify whether the
company has commenced manufacturing in its New
Jersey facility.
• RANB is doing what is required to comfort customers
in the US.
• Post 180 days exclusivity, Lipitor could be a five to
six player market, i.e., limited competition dynamics.
• It will utilize the Lipitor earnings to reinvest in the
business including vaccines, bio-similars etc.
Mohali SEZ: RANB has made regulatory filings across various
geographies. USFDA has inspected the facility in June 2011.
Management expects the facility to begin commercial
manufacturing in 2012.
Domestic market: RANB expects the market to grow at
roughly 14-15%. Acute therapies are slowing down, but even
chronic care has been hit. The company expects Viraat to help
it outperform market. Key updates include:
• Acute segment constitutes in excess of 40% of
Ranbaxy’s domestic business. In the next few years,
management expects a balanced portfolio of chronic
and acute therapies.
• MNC entry into branded generics: RANB does not
expect MNC pharma companies’ entry into branded
generic space to be a big threat. It expects to weather
the pricing pressure (for example – GSK has priced
atorvastatin at 50% discount to RANB, although it
hasn’t garnered significant market share) on the back
of its brand equity.
• Field force expansion: Ranbaxy has added over
1,500 medical representatives since 2009 under
Project Viraat
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