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UBS Investment Research
Ranbaxy -Mgmt. continues to deliver
Aricept approval the third FTF approval since Import ban
Aricept approval is the third FTF approval for Rbxy after Imitrex and Valtrex since
the US import ban on Indian facilities. While US issues are still to be resolved,
mgmt. continues to ensure successful monetization of FTFs. Mgmt. also continues
to believe they remain on track to resolve US issues with the FDA and DoJ. We
believe the co. has sufficient time ahead of Lipitor launch in Nov’11 for the same.
Q3’10 results highlight improving business momentum
The co. filed 7 ANDAs in Q3’10 highlighting the R&D focus is back on the
business. The India business grew an extremely healthy 18%YoY. The Africa
business is likely to regain growth momentum with completion of the
manufacturing facility in S. Africa. The shipments of Nexium API to AZN have
commenced in Q4’10 and formulations are expected to start in a few months.
Attractive story as we believe turnaround in base business not priced in
Rbxy’s base business margins remain under pressure, due to significant spend on
consultants and legal relating to US FDA issues. We expect base business margins
to improve significantly with resolution of US FDA issues relating to Indian
facilities. We believe the strong FTF pipeline also gives Rbxy the opportunity to
rebuild its base business in the US once US FDA issues are resolved.
Valuation: Maintain Buy, PT Rs 720
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11%. We add Rs15/share as risk adjusted value of the Valcyte opportunity.
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