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We recently met the management of Alembic Pharmaceuticals (ALPM IN) to get
an update on long term business drivers. On the back of discussion with
management and execution momentum of ALPM, we remain optimistic on the
superior performance of ALPM going forward. At CMP of Rs455, the stock is trading
at 27.5x FY15E EPS of Rs16.6 and 22.4x FY16E EPS of Rs20.3. We maintain our
price target of Rs412, based on 20x FY16 earnings. Though we continue to like
ALPM’s business model, we maintain HOLD rating on the stock based on valuation.
Efforts on track for higher growth in US market: The pace of ANDA filing in US
market has sharply increased, with 26 ANDAs filed in FY10 to 65 ANDAs filed by the
end of 1HFY15. Subsequently, it has resulted in increase in ANDA approvals from 8
in FY10 to 35 by the end of 1HFY15. Till now, most of the ANDA filing has been for
oral solids. ALPM has started making concentrated efforts towards injectables and
derma generic products, which are relatively complex and hence have limited
competition. Accordingly, R&D cost as % of sales has increased considerably from
4.1% in FY11 to 6% in H1FY15. We expect this to inch up further to explore more
number of complex generics.
ALPM has guided for filing Warfarin under 505(b)(2) route by the end of FY15. The
launch and subsequent marketing of the product would depend on the approval
from USFDA.
ALPM has four tentative approvals, which are expected to be launched in FY16.
One of them is Memantine HCL, which is expected to be launched in September
2015. Currently, the market size of this product is US$1.7bn and 10-11 players are
expected to launch in September 2015. We expect 10% market share and 90% price
erosion resulting in US$17mn in FY16 from this product. Another product for which
ALPM has received tentative approval is Aripiprazole, which is expected to be
launched in May 2015. This product has market size of US$6.2bn and we expect
14-15 players post patent expiry in May 2015. We expect price erosion of 90% and
6-7% market share, resulting in sales of US$40mn in FY16 from this product.
In addition, ALPM is also underway to establish its front end in US market. The
registration in different states of US as well as hiring key people is under process.
ALPM has guided for starting the front end in FY16.
LINK
http://www.indianivesh.in/Admin/Upload/635563011692047500_NiveshDaily%20-%206%20January%202015.pdf
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