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Patented Growth...!!!
GSK Pharma is our preferred pick in the MNC Pharma space on the back of parents’ strong commitment towards
introducing high value patented products through Glaxo India in the domestic market. Lower dependency on
price controlled products, new product launches with minimal generic competition and moderate pricing ensures
revenue visibility. Healthy cash per share and a reasonable dividend yield, serves as a classic addition to the
defensive portfolio. The impact of the proposed draft National Pharmaceutical Pricing Policy 2011 (widens scope
of price control) is an overhang on valuations.
Investment Rationale
GSK India beneficiary of its parent’s commitment
GSK Plc has firm commitments towards launching patented products in India
through the listed entity. Glaxo India emerges as a clear beneficiary on back of
access to parents enriching pipeline which is skewed towards India specific
diseases and is exposed to minimal generic competition.
New product launches - Enough headroom for growth
The Company’s recent launches of the parent’s shelf include Synflorix
(pneumococcal vaccine), Votrient (renal cell carcinoma) and Revolade (low
platelet counts). It’s tiered pricing approach and significant domestic potential
for these drugs facilitates gradual scalability. New product launches (CY09
onwards) has contributed 27% to topline growth and account for 9% of Rx sales.
A favourable product mix (focus on lifestyle therapeutic segment) and increased
penetration (tier II & III cities) are key growth drivers.
Focus on Priority products and brand building initiatives
Glaxo’s well structured product mix favouring branded generics, vaccines and
specialty products has consequently boosted topline growth. The company’s
strong sales and marketing capabilities has made it a preferred partner of choice
for global big Pharma companies towards product licensing arrangements.
New Pharma Pricing Policy implementation is an overhang
The proposed New Drug Policy 2011 (NPPP 2011) poses a major risk for GSK.
Of its top five products, Augmentin, Calpol, Ceftum and Eltroxin together
contribute approx. 20% of its domestic revenue. Our estimates do not take into
account this impact due to lack of certainty over implementation
Valuations
Sustained growth in priority products and vaccines, with gradual scale up in
revenues from new product launches, will result in 13% revenue growth over
CY11-13E. At CMP, the stock trades at 26.5x CY12E and 23.4x CY13E earnings.
The impact of the proposed draft National Pharmaceutical Pricing Policy 2011
(widens scope of price control) is an overhang on valuations. We recommend
Sell with a target price of ` 2,174 (23x CY13E earnings).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Patented Growth...!!!
GSK Pharma is our preferred pick in the MNC Pharma space on the back of parents’ strong commitment towards
introducing high value patented products through Glaxo India in the domestic market. Lower dependency on
price controlled products, new product launches with minimal generic competition and moderate pricing ensures
revenue visibility. Healthy cash per share and a reasonable dividend yield, serves as a classic addition to the
defensive portfolio. The impact of the proposed draft National Pharmaceutical Pricing Policy 2011 (widens scope
of price control) is an overhang on valuations.
Investment Rationale
GSK India beneficiary of its parent’s commitment
GSK Plc has firm commitments towards launching patented products in India
through the listed entity. Glaxo India emerges as a clear beneficiary on back of
access to parents enriching pipeline which is skewed towards India specific
diseases and is exposed to minimal generic competition.
New product launches - Enough headroom for growth
The Company’s recent launches of the parent’s shelf include Synflorix
(pneumococcal vaccine), Votrient (renal cell carcinoma) and Revolade (low
platelet counts). It’s tiered pricing approach and significant domestic potential
for these drugs facilitates gradual scalability. New product launches (CY09
onwards) has contributed 27% to topline growth and account for 9% of Rx sales.
A favourable product mix (focus on lifestyle therapeutic segment) and increased
penetration (tier II & III cities) are key growth drivers.
Focus on Priority products and brand building initiatives
Glaxo’s well structured product mix favouring branded generics, vaccines and
specialty products has consequently boosted topline growth. The company’s
strong sales and marketing capabilities has made it a preferred partner of choice
for global big Pharma companies towards product licensing arrangements.
New Pharma Pricing Policy implementation is an overhang
The proposed New Drug Policy 2011 (NPPP 2011) poses a major risk for GSK.
Of its top five products, Augmentin, Calpol, Ceftum and Eltroxin together
contribute approx. 20% of its domestic revenue. Our estimates do not take into
account this impact due to lack of certainty over implementation
Valuations
Sustained growth in priority products and vaccines, with gradual scale up in
revenues from new product launches, will result in 13% revenue growth over
CY11-13E. At CMP, the stock trades at 26.5x CY12E and 23.4x CY13E earnings.
The impact of the proposed draft National Pharmaceutical Pricing Policy 2011
(widens scope of price control) is an overhang on valuations. We recommend
Sell with a target price of ` 2,174 (23x CY13E earnings).
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