Sun Pharmaceutical
Industries
Hikma’s Raised Guidance =
Doxycycline Upside –
Staying OW
Quick Comment: Hikma Pharmaceuticals PLC (Hikma)
has again increased its guidance for 2013 for its
generics division, due to doxycycline upside (refer
Exhibit 1 for guidance trend). It has now guided for
revenues of US$200 mln and operating profits margin of
above 30% for the generics division. To refresh, this is
the second upward revision to its Mar’13 guidance ($104
mln sales; flat margins), which was raised in May’13
($150 mln sales, low teen margins). The new guidance
implies incremental sales of US$100 mln with 60%
operating margins for 2013, driven by doxycycline.
Background: Due to doxycycline drug shortage in the
US, there was a sharp rise in prices in Feb’13. The
US$20 mln per month category peaked to US$125 mln
in March 2013, has now marginally tapered off to about
US$106 mln in May 2013 (as some players have
restored part of their supplies). Refer Exhibit 4.
Sun’s angle: URL/Mutual (acquired by Sun in Dec’12)
is a beneficiary of doxycycline hyclate shortage since it
has 18% market share. Refer Exhibit 3. Based on URL’s
current market share and Hikma’s (22% market share)
guidance, Sun could gross about US$80 mln pa in
revenues with high margins (5% of F14 EPS). We have
assumed 6 months contribution from doxy in our model.
If the pricing continues to hold longer, there is upside
risk to our numbers. Note though that once supplies are
restored in the market, doxy prices could compress.
We reiterate our OW rating on Sun: The company has
solid fundamentals as underlined by multiple growth
levers – domestic business, US (non Taro pipeline),
value unlocking in URL/DUSA and SPARC pipeline.
Please see our latest report – Sun Pharmaceutical
Industries – Asia Insight: Best Getting Better, dated May
12, 2013 for details.
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Industries
Hikma’s Raised Guidance =
Doxycycline Upside –
Staying OW
Quick Comment: Hikma Pharmaceuticals PLC (Hikma)
has again increased its guidance for 2013 for its
generics division, due to doxycycline upside (refer
Exhibit 1 for guidance trend). It has now guided for
revenues of US$200 mln and operating profits margin of
above 30% for the generics division. To refresh, this is
the second upward revision to its Mar’13 guidance ($104
mln sales; flat margins), which was raised in May’13
($150 mln sales, low teen margins). The new guidance
implies incremental sales of US$100 mln with 60%
operating margins for 2013, driven by doxycycline.
Background: Due to doxycycline drug shortage in the
US, there was a sharp rise in prices in Feb’13. The
US$20 mln per month category peaked to US$125 mln
in March 2013, has now marginally tapered off to about
US$106 mln in May 2013 (as some players have
restored part of their supplies). Refer Exhibit 4.
Sun’s angle: URL/Mutual (acquired by Sun in Dec’12)
is a beneficiary of doxycycline hyclate shortage since it
has 18% market share. Refer Exhibit 3. Based on URL’s
current market share and Hikma’s (22% market share)
guidance, Sun could gross about US$80 mln pa in
revenues with high margins (5% of F14 EPS). We have
assumed 6 months contribution from doxy in our model.
If the pricing continues to hold longer, there is upside
risk to our numbers. Note though that once supplies are
restored in the market, doxy prices could compress.
We reiterate our OW rating on Sun: The company has
solid fundamentals as underlined by multiple growth
levers – domestic business, US (non Taro pipeline),
value unlocking in URL/DUSA and SPARC pipeline.
Please see our latest report – Sun Pharmaceutical
Industries – Asia Insight: Best Getting Better, dated May
12, 2013 for details.
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