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Strong Sales for Incivek to drive Shasun UK
profitability
Vertex Pharma reported September quarter result ahead of
expectation. Vertex reported Sales of US659 million out of
which $420 million in net product revenue from Incivek sales in
North America (first full quarter since launch).The market
consensus was US$ 450 mn sales in H2CY11 which it achieved
in one quarter. During the quarter, Vertex launched Incivek in
Canada whereas it has received approval in Europe and Japan.
The drug is marketed by Janssen in Europe and currently
available in UK, France, Germany and Sweden. More than
17,000 people have started treatment with INCIVEK since
launch (market consensus was 17000 patients for
H2CY11).Incivek commands more than 70% market share with
one of the strongest launches within Pharma industry. Shasun
Pharma stands to gain significantly as it has an assured contract
from Vertex (Marketing rights for North America) for 70% of its
global requirement of API. We think the strong set of revenue of
drug would reflect in subsequent quarter earnings for Shasun
UK. Shasun UK has spare capacity to produce for next 2-3 years
without any capacity expansion thus leading to huge free cash
flows.
Outlook & Valuation
Management has recently highlights strong growth prospects
with 40-50% revenue growth and profitability to triple in FY12.
The company plans to reduce its debt from 330 Cr to 220 Cr
with majority of it being repaid through internal accruals by the
end of this financial year. We believe going forward the company
is a candidate for re-rating due to high potential growth with
majority of earning accruing from UK subsidiary. Shasun UK
total launched product portfolio has increased to 27 with prelaunch
pipeline of 16 live projects spanning clinical phase II and
III. On 7th October 2011, the company has passed a resolution
to issue 15, 00,000 warrants to Promoter group thus reinforcing
the confidence in company prospects. At the CMP, The stock
trades at P/E of 4.06x and 3.08x FY12E and FY13E
respectively. The sustainability of API agreement coupled with
strong product pipelines provides a huge upside and re-rating for
the stock. We expect the company to post EPS of Rs. 15.45 and
Rs. 20.40 for FY12E and FY13E respectively. We maintain our
BUY rating on the stock with a target price of Rs. 150. The
stock has come under pressure due to steep rupee
depreciation which would lead to Market to market losses
on company’s forward contract.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong Sales for Incivek to drive Shasun UK
profitability
Vertex Pharma reported September quarter result ahead of
expectation. Vertex reported Sales of US659 million out of
which $420 million in net product revenue from Incivek sales in
North America (first full quarter since launch).The market
consensus was US$ 450 mn sales in H2CY11 which it achieved
in one quarter. During the quarter, Vertex launched Incivek in
Canada whereas it has received approval in Europe and Japan.
The drug is marketed by Janssen in Europe and currently
available in UK, France, Germany and Sweden. More than
17,000 people have started treatment with INCIVEK since
launch (market consensus was 17000 patients for
H2CY11).Incivek commands more than 70% market share with
one of the strongest launches within Pharma industry. Shasun
Pharma stands to gain significantly as it has an assured contract
from Vertex (Marketing rights for North America) for 70% of its
global requirement of API. We think the strong set of revenue of
drug would reflect in subsequent quarter earnings for Shasun
UK. Shasun UK has spare capacity to produce for next 2-3 years
without any capacity expansion thus leading to huge free cash
flows.
Outlook & Valuation
Management has recently highlights strong growth prospects
with 40-50% revenue growth and profitability to triple in FY12.
The company plans to reduce its debt from 330 Cr to 220 Cr
with majority of it being repaid through internal accruals by the
end of this financial year. We believe going forward the company
is a candidate for re-rating due to high potential growth with
majority of earning accruing from UK subsidiary. Shasun UK
total launched product portfolio has increased to 27 with prelaunch
pipeline of 16 live projects spanning clinical phase II and
III. On 7th October 2011, the company has passed a resolution
to issue 15, 00,000 warrants to Promoter group thus reinforcing
the confidence in company prospects. At the CMP, The stock
trades at P/E of 4.06x and 3.08x FY12E and FY13E
respectively. The sustainability of API agreement coupled with
strong product pipelines provides a huge upside and re-rating for
the stock. We expect the company to post EPS of Rs. 15.45 and
Rs. 20.40 for FY12E and FY13E respectively. We maintain our
BUY rating on the stock with a target price of Rs. 150. The
stock has come under pressure due to steep rupee
depreciation which would lead to Market to market losses
on company’s forward contract.
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