09 January 2015

Aurobindo Pharma and Lupin receives final approval for Valsartan (g-Diovan) tablets :: IndiaNivesh

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Aurobindo Pharma and Lupin receives final approval for Valsartan
(g-Diovan) tablets
Valsartan Tablets are the generic equivalent to the Diovan Tablets, of Novartis
Pharmaceuticals Corporation (Novartis) and indicated for the treatment of hypertension,
to lower blood pressure. The product has a market size of approximately US$ 2 Billion for
the twelve months ending October 2014 according to IMS. Lupin has launched Valsartan,
while Aurobindo Pharma is ready for launching the product soon.
Our view: In addition to Aurobindo Pharma and Lupin, Mylan and Teva has also received
approval. There are three other players who have received tentative approvals. We expect
approvals for those players soon. As a result, there would be steep competition for this
product in the US market. Historically, the increased competition has resulted in price
erosion to the tune of 90-95%, which may make the opportunity unattractive. We expect
similar thing to happen in case of g-Diovan. We expect Aurobindo Pharma and Lupin to
garner US$ 14-15 mn from this product on annualised basis.
Valuation for Aurobindo Pharma: At the CMP of Rs1,088, the stock is trading at 18x
FY15E EPS of Rs60 and 15x FY16E EPS of Rs72. We remain confident on execution pace of
ARBP in key US market and improvement in operating leverage in Europe market. We
maintain BUY rating on the stock with price target of Rs1,293, based on 18x FY16E earnings,
with implied potential upside of 19% from current levels.
Valuation for Lupin: At CMP price of Rs1,394, the stock is trading at 25.3x FY15E EPS of
Rs55.1 and 20.4x FY16E EPS of Rs68.4. We believe that LPC is on track in terms of building
blocks for future growth in sales as well as profitability. We maintain BUY with price target
of Rs1,710, based on 25x FY16E earnings, with implied potential upside of 23% from
current levels.


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