ENAM - >> Update | Ranbaxy

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Ranbaxy has finally put an end to the long drawn uncertainty around launch of generic Lipitor (Atorvastatin), as it launched the product in US on 30^th Nov’11. Owing to its ongoing issue with the US FDA at Poanta Sahib (originally Atorvastatin was filed from this facility), Ranbaxy has done a site transfer to Ohm Labs, USA. Further, Ranbaxy has entered into a profit sharing agreement with Teva during its 180-day exclusivity.

Our assumptions

q       Market share – We believe getting a high market share would be very difficult for Ranbaxy. Given Pfizer is targeting 40% market share and an aggressive AG, we assume Ranbaxy can get 30% market share (from earlier 40%).

q       Price erosion – We are assuming a significant price erosion of 50% (from earlier 30%) in the near term.

q       Agreement with Teva – We believe this is for marketing and distribution support (assuming a 50% profit sharing).

Reduce estimates and TP; Maintain HOLD (8% upside from CMP of Rs 435)

Given the profit sharing agreement with Teva, we reduce our CY11E and CY12E EPS by 29% and 20% to Rs 37 and Rs 43 resp. Accordingly, we reduce our value of Lipitor to Rs 16/ share (Rs 43 earlier) and our TP to Rs 468 (Rs 418 for base biz at 20xCY12E EPS of Rs 21 and Rs 50 for settlements) from Rs 495 earlier. At CMP of Rs 435, the stock is trading at 12x CY11E and 10x CY12E EPS.

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