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Alkem Laboratories (ALL) is a leading Indian pharmaceutical company with
a strong domestic presence and global operations. The company is
engaged in the development, manufacture and sale of pharmaceutical and
neutraceutical products, which it markets in India and 55 countries
internationally, primarily the US. In the domestic pharma market, ALL is the
seventh largest player. Among therapies, it is the leading player in the antiinfectives
segment and among the top three players in the gastrointestinal
and vitamins/minerals segments. The company owns 16 manufacturing
facilities: 14 at five locations in India and two in the US. Five of its facilities
are USFDA, TGA and UK-MHRA approved. For FY15, domestic and
international operations accounted for 74.7% and 25.3% of the turnover
(| 3789 crore), respectively.
Investment rationale
Established player in domestic market
ALL is the seventh largest player in the domestic market with market share
of 3.46% (AIOCD MAT October 2015). It is also a leading domestic player in
the anti-infective segment and among the top three in gastrointestinal (GI)
as well as vitamins/minerals segments. Domestic revenues grew at 17.6%
CAGR to | 2832 crore in FY11-15 on the back of strong growth in its key
segments and foray into new segments. It owns a portfolio of 736 brands in
India. Therapies like anti-infectives, gastro-intestinal, pain and analgesics
and vitamins/minerals accounted for ~80% of total sales in the domestic
market for FY15. The company’s top five brands generated more than | 100
crore of annual revenues while nine brands generated more than | 50 crore
of revenue (AIOCD MAT October 2015).
US franchisee looks promising
International revenues grew at 45.7% CAGR to | 957 crore in FY11-15
mainly due to strong growth in US sales (accounts for 65-70% of
international revenues). ALL has filed 69 ANDAs (including 30 Para IV/FTF
filings and one NDA) of which it has received 21 final approvals and three
tentative approvals. The company markets its products in the US through
its subsidiary Ascend. Ascend currently sells 18 products out of which 13
are own products and five are in-licensed. The company has successfully
litigated four Paragraph IV challenges in the past and is currently active in
four litigations. It has also filed 14 DMFs in the US. Apart from the US, the
company has also filed 22 dossiers in Australia, 16 in Europe and 1,166
dossiers in other export markets.
Key concern
Competition and pricing issues in domestic markets; litigation/compliance
issues in international markets.
Priced at 26-27x on FY15 EPS of | 38.7
At the IPO price band of | 1020-1050, the stock is available at 26-27x on
FY15 EPS of | 38.7. We recommend that investors SUBSCRIBE to the issue.


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Alkem Laboratories IPO Review ICICI Securities