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ICICI Securities Ltd. | Retail Equity Research
June 13, 2018
Monthly Update
Sun gets Halol respite…
A much awaited regulatory resolution on Sun Pharma’s Halol plant finally
arrived. This plant has received Establishment Inspection Report (EIR) from
the USFDA for the inspection conducted in February 12-23, 2018. According
to the press release, the USFDA concluded that the inspection is now
closed while issues contained in the warning letter issued in December 2015
have been addressed. Clearance of this plant is likely to minimise Sun
Pharma’s biggest regulatory overhang. This will pave the way for a new
product approval from Halol. Resolution of the Halol plant is already priced-
in our valuation.
On the Q4FY18 results front, aided by a low base of Q4FY17, the I-direct
healthcare universe reported strong double digit profitability growth.
Revenues also grew in high single digits. Geography wise, the challenging
environment in the US generic space continued to impact the overall US
growth. However, excluding US and Brazil (country specific issues) most
other geographies have reported strong growth on the back of new
launches and favourable currency movement. Domestic formulations grew
in double digits, in line with I-direct estimates. Overall, the I-direct universe
revenues were at | 40196 crore, growth of 7.4% YoY.
On the approvals/launches front, Sun Pharma’s in-licensing 505(b)(2)
oncology product Yonsa received USFDA approval. Lupin has launched
innovative gynaecology product Solosec (gynaecology) 2 gm oral granules
in the US.
On the biosimilar front, USFDA has approved Biocon-Mylan first biosimilar
to Amgen's drug Neulasta (anti-cancer) to help reduce the risk of infection
during cancer treatment. This is the second biosimilar approval for Biocon-
Mylan in the US. Aurobindo Pharma has received VAI status from USFDA
for its Unit IV injectable facility.
Finally, the Indian pharmaceutical market (IPM) grew 10.8% YoY to | 10583
crore for May. The growth was attributable to growth in volumes – 9% and
new product launches – 2.8%. Conversely, it was pulled down by a price
decline of 1%.
US seems bottoming out but pricing pressure unlikely to abate soon…
The Q4 numbers reflect a substantial arrest in the US YoY de-growth.
However, the generics pain is unlikely to subside anytime soon mainly due
to acute pricing pressure. The ANDA approval momentum has gone up
from ~500 (average of FY12-17) to ~780 for FY18. This is likely to erode the
base business growth of existing players due to higher competition. In
addition, lack of meaningful approvals and a delay in key launches is likely
to weigh for a few more quarters. Positive developments on the regulatory
front (Sun, Aurobindo) notwithstanding, may rekindle investor sentiments.
However, those are unlikely to impact earnings substantially. We expect
better overall visibility post H2FY19 on the back of a changed product mix
(tilting towards non-US franchisee), a leaner US portfolio to be driven by
incremental product launches largely in the speciality, biosimilar and
injectables space. In this backdrop, we prefer Indian formulation players,
especially MNCs. On the exports front, we prefer CRAMs players as we
believe the B2B space is better equipped to fathom acute pricing pressure in
the US.
Health Check
Health Check
Stocks Performance
Mcap
Company 1M 3M YTD 1Y 12-Jun
Sun Pharma.Inds. 15 6 -5 2 130052
Cipla -1 -2 -6 3 45812
Cadila Health. -4 -3 -13 -31 38616
Lupin 12 9 -5 -28 38019
Biocon -3 2 14 77 36600
Dr Reddy's Labs 9 1 -10 -17 36044
Aurobindo Pharma -2 2 -13 -2 34985
Divi's Lab. -12 5 -4 64 28126
Torrent Pharma. 2 6 -2 16 23530
Glenmark Pharma. 14 10 -1 -7 16617
Natco Pharma -1 9 -17 -22 14695
Apollo Hospitals -5 -12 -18 -26 13820
Jubilant Life -10 -4 -2 7 12287
Sanofi 7 3 11 30 12091
Pfizer 9 20 27 58 12032
Syngene Int. -8 1 8 26 11710
Alembic Pharma 8 -3 -1 -4 9904
Ajanta Pharma -3 -24 -31 -34 9014
Ipca Labs. -3 2 17 40 8826
Abbott 1 13 16 50 8736
Fortis Health -5 -5 -12 -26 7334
Narayana Hrudayalaya -13 -21 -23 -32 4711
Indoco Remedies 6 -18 -29 3 1826
Hester Bio -21 -21 -31 43 1091
NGL Fine-Chem -13 5 -15 2 251
Mangalam Drugs -30 -34 -49 -35 177
Return (%)
Market cap in | crore
Global Indices Performance
Company 1M 3M YTD 1Y 3Y 5Y
S&P 500 Pharm Index (US) 1 -2 -3 1 2 10
NASDAQ Biotechnology (US) 3 -4 3 13 -3 14
S&P Pharmaceuticals (US) 6 0 1 7 -8 8
DJ Pharma and Biotech (US) 2 -4 0 8 2 12
DJ STOXX Healthcare (EU) 1 4 1 -5 -1 8
TOPIX Pharma Index (Japan) 2 1 4 17 6 15
MSCI World Pharm & Biotech 1 -3 -1 3 0 8
NSE Pharma 5 3 -8 -7 -7 6
Return (%)
Source: Bloomberg
Research Analyst
Siddhant Khandekar
Mitesh Shah
ICICI Securities Ltd. | Retail Equity Research
Page 2
Q4FY18 Results Review
Aided by a low base of Q4FY17, the I-direct healthcare universe reported
strong double digit profitability growth. Revenues also grew in high single
digits. On the geographical front, the challenging environment in the US
generic space continued to impact overall US growth. However, excluding
US and Brazil (country specific issues) most other geographies reported
strong growth on the back of new launches and favourable currency
movement. Domestic formulations also grew in double digits, in line with I-
direct estimates. Overall, the I-direct universe revenues were at | 40196
crore, growth of 7.4% YoY.
Exhibit 1: Actuals vs. estimates
Q4FY18 Q4FY18E Q4FY18 Q4FY18E Q4FY18 Q4FY18E
Ajanta Pharma 530.3 488.0 139.5 161.0 94.5 115.7
Alembic Pharma 853.3 831.1 173.2 187.0 93.8 130.4
Aurobindo Pharma 4049.1 4189.6 788.1 941.7 528.5 596.0
Biocon 1169.5 1098.1 233.0 241.1 130.4 113.6
Cadila Healthcare 3250.2 3204.4 870.4 801.1 606.7 496.2
Cipla 3698.0 3877.6 556.9 717.4 238.2 298.1
Divi's Laboratories 1088.0 1121.8 386.5 377.5 261.6 263.5
Dr Reddy's Labs 3553.9 3748.0 563.6 661.6 272.1 328.2
Glenmark Pharma 2279.8 2346.8 326.8 433.3 151.6 215.0
Indoco Remedies 269.6 275.1 49.4 38.5 20.5 16.9
Ipca laboratories 782.8 781.3 109.9 117.2 51.3 64.5
Jubilant Life Sciences 2252.0 2126.4 457.9 450.7 154.9 249.5
Lupin 4033.8 4030.4 710.0 775.1 358.6 344.6
Natco Pharma 767.8 694.6 383.3 400.3 299.9 298.7
Sun Pharma 6977.1 6718.7 1683.5 1406.9 1309.0 908.3
Syngene 409.1 380.6 129.1 126.0 84.5 79.9
Torrent Pharma 1722.0 1763.4 364.0 432.0 228.0 218.4
Apollo Hospitals 1862.9 1908.0 213.6 213.1 59.6 73.9
Narayana Hrudalaya 646.8 595.0 52.3 71.5 8.1 32.6
Total 40195.9 40178.9 8191.0 8553.0 4951.6 4844.0
Company
Revenues EBITDA Net profit
Source: Company, ICICI Direct Research
Exhibit 2: Quarterly performance of I-direct healthcare coverage
Company Q4FY18 Q4FY17 Var.(%) Q4FY18 Q4FY17 Var.(%) Q4FY18 Q4FY17 Var.(%)
Ajanta Pharma 530.3 476.8 11.2 139.5 160.9 -13.3 94.5 114.0 -17.1
Alembic Pharma 853.3 741.4 15.1 173.2 134.6 28.7 93.8 93.0 0.9
Aurobindo Pharma 4049.1 3641.6 11.2 788.1 721.2 9.3 528.5 532.5 -0.7
Biocon 1169.5 931.1 25.6 233.0 187.5 24.3 130.4 127.5 2.3
Cadila Healthcare 3250.2 2524.9 28.7 870.4 463.6 87.7 606.7 385.5 57.4
Cipla 3698.0 3582.0 3.2 556.9 506.2 10.0 238.2 -61.8 -485.5
Divi's Laboratories 1088.0 1066.7 2.0 386.5 362.0 6.8 261.6 259.3 0.9
Dr Reddy's Labs 3553.9 3611.9 -1.6 563.6 590.5 -4.6 272.1 337.6 -19.4
Glenmark Pharma 2279.8 2457.2 -7.2 326.8 443.8 -26.4 151.6 264.7 -42.7
Indoco Remedies 269.6 276.9 -2.6 49.4 32.6 51.7 20.5 17.9 14.3
Ipca laboratories 782.8 665.8 17.6 109.9 67.7 62.4 51.3 44.4 15.6
Jubilant Life Sciences 2252.0 1641.4 37.2 457.9 305.0 50.1 154.9 150.1 3.2
Lupin 4033.8 4253.3 -5.2 710.0 781.4 -9.1 358.6 380.2 -5.7
Natco Pharma 767.8 564.7 36.0 383.3 241.1 59.0 299.9 176.7 69.7
Sun Pharma 6977.1 7137.0 -2.2 1683.5 1547.5 8.8 1309.0 1223.7 7.0
Syngene 409.1 291.0 40.6 129.1 100.0 29.1 84.5 78.0 8.3
Torrent Pharma 1722.0 1434.0 20.1 364.0 295.0 23.4 228.0 206.0 10.7
Apollo Hospitals 1862.9 1661.6 12.1 213.6 170.1 25.6 59.6 48.2 23.8
Narayana Hrudalaya 646.8 483.5 33.8 52.3 58.3 -10.3 8.1 22.3 -63.8
Total 40195.9 37442.8 7.4 8191.0 7169.0 14.3 4951.6 4399.7 12.5
Revenues EBITDA Profit
Source: Company, ICICI Direct Research
US sales (select pack) declined 1.5% YoY to | 10383 crore due to persisting
pricing pressure owing to client consolidation, increased competition and
lack of meaningful approvals. Domestic formulations grew 10% YoY to
Geographical/segmental performance in Q4FY18
(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)
Ajanta 141.0 133.0 6.0 155.0 -9.0
Alembic 273.6 261.7 4.6 314.1 -12.9
Biocon 149.0 131.0 13.7 156.1 -4.5
Cadila 883.8 840.2 5.2 916.8 -3.6
Glenmark 608.7 576.9 5.5 578.5 5.2
Indoco 151.1 130.1 16.1 155.9 -3.1
Ipca 322.8 276.7 16.7 382.9 -15.7
Lupin 964.7 878.8 9.8 1,068.8 -9.7
Cipla 1,353.0 1,197.0 13.0 1,601.0 -15.5
Dr Reddy's 613.8 571.1 7.5 612.6 0.2
Sun Pharma 1,962.6 1,916.4 2.4 2,085.0 -5.9
Torrent 693.0 467.0 48.4 586.0 18.3
Total 8,117.1 7,379.8 10.0 8,612.7 -5.8
India
(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)
Aurobindo 1,738.8 1,643.2 5.8 1,909.6 -8.9
Cadila 1,642.4 985.1 66.7 1,583.8 3.7
Cipla 676.2 646.0 4.7 650.0 4.0
Glenmark 699.6 1,000.4 -30.1 735.9 -4.9
Lupin 1,499.0 1,900.7 -21.1 1,432.1 4.7
Dr Reddy's 1,448.7 1,534.9 -5.6 1,607.3 -9.9
Sun Pharma 2,371.6 2,554.5 -7.2 2,124.2 11.6
Torrent 307.0 281.0 9.3 266.0 15.4
Total 10,383.2 10,545.8 -1.5 10,308.8 0.7
US
(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)
Aurobindo 1151.6 777.2 48.2 1171.6 -1.7
Cadila 60.2 62.0 -2.9 64.9 -7.2
Glenmark 319.0 229.8 38.8 224.8 41.9
Dr Reddy's 171.1 206.6 -17.2 200.6 -14.7
Lupin 184.5 135.5 36.2 151.3 21.9
Torrent 248.0 235.0 5.5 241.0 2.9
Total 2134.4 1646.0 29.7 2054.2 3.9
Europe
(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)
Cadila 66.3 60.3 10.0 75.8 -12.5
Glenmark 127.6 134.0 -4.8 89.8 42.1
Torrent 215.0 216.0 -0.5 194.0 10.8
Total 408.9 410.3 -0.3 359.6 13.7
Latin America
(| crore) Q4FY18 Q4FY17 Var. (%) Q3FY18 Var. (%)
Aurobindo 799.6 762.8 4.8 765.7 4.4
Alembic 198.0 181.0 9.4 180.0 10.0
Cadila 90.0 93.4 -3.6 113.7 -20.8
Glenmark 204.9 199.7 2.6 231.6 -11.6
Divi's Lab 532.3 558.4 -4.7 508.6 4.7
Indoco 14.4 12.0 20.0 15.8 -8.3
Ipca Labs 191.9 153.8 24.8 191.5 0.2
Lupin 280.8 281.5 -0.2 268.0 4.8
Cipla 135.2 162.0 -16.5 148.0 -8.6
Dr Reddy's 625.1 540.1 15.7 543.6 15.0
API 59.7 56.0 6.6 81.1 -26.4
Sun Pharma 353.8 409.3 -13.6 391.3 -9.6
Unichem 25.0 24.5 2.0 21.9 14.1
Total 3510.8 3434.6 2.2 3460.7 1.4
API
Source: Company, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 3
| 8117 crore. Europe surprised positively and reported ~30% YoY growth
on the back of new launches and favourable currency movement.
Despite overall decent growth, seven out of 19 companies under coverage
registered negative or muted revenue growth during the quarter due to
continued pricing pressure in the US. Bucking the trend, Syngene reported
41% YoY growth (mainly on lower base of fire incident) and Natco reported
36% growth (windfall of gCopaxone and gTamiflu). Jubilant Life registered
37% YoY growth (growth across portfolio) while Cadila registered 29% YoY
growth (windfall of gLialda exclusivity and gTamiflu).
EBITDA for the universe increased 14.3% YoY to | 8191 crore mainly due to
a lower base, cost rationalisation and operational leverage. EBITDA margins
improved 123 bps to 20.4% YoY. Net profit increased 12.5% YoY to | 4952
crore mainly due to strong operational, which was marginally offset by
higher interest cost and tax rate (15.1% vs. 11.8% in Q4FY17).
Exhibit 3: I-direct healthcare universe revenues trend
37443
34860
38752
3978140196
32000
34000
36000
38000
40000
42000
Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18
Revenue
Source: Company, ICICI Direct Research
Exhibit 4: I-direct healthcare universe EBITDA trend
7169
6313
8229
8541
8191
6000
7000
8000
9000
10000
Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18
EBITDA
Source: Company, ICICI Direct Research
Exhibit 5: I-direct healthcare universe profit trend
4400
3283
4823
3900
4952
3000
3600
4200
4800
5400
Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18
PAT
Source: Company, ICICI Direct Research
Exhibit 6: Trends in EBITDA & PAT margin of I-direct healthcare universe
19.118.1
21.2 21.520.4
11.8
9.4
12.4
9.8
12.3
0.0
5.0
10.0
15.0
20.0
25.0
Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18
EBITDA Margins (%) PAT Margins (%)
Source: Company, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 4
Exhibit 7: Deviation from estimates/change in outlook post Q4FY18 numbers
[5
Company Initial Rating Current Rating Deviation from
estimates
Remarks
Ajanta Pharma HOLD HOLD Mixed While revenues were above I-direct estimates mainly due to 110% YoY growth in African
branded formulation, profitability was below I-direct estimates due to a below expected
operational performance
Alembic Pharma HOLD HOLD Below Below I-direct estimates on the profitability front due to higher depreciation and tax rate.
Revenue was in line with I-direct estimates
Aurobindo Pharma HOLD HOLD Below Below I-direct estimates on all fronts
Biocon BUY BUY Above Above I-direct estimates mainly due to strong growth in biological segment and Syngene
Cadila Healthcare HOLD HOLD Above Result largely driven by strong US sales led by gLialda (ulcerative colitis) exclusivity &
favourable seasonality impact on gTamiflu (anti-infective)
Cipla HOLD HOLD Below Revenues were lower mainly due to lower sales growth in RoW and EU. Margins were
impacted due to one-offs
Divi's labs HOLD HOLD In-line In line with I-direct estimates on all fronts
Dr Reddy's Labs HOLD HOLD Below Revenues declined mainly due to lower sales in the US led by price erosion. Net profit declined
mainly due to lower operational performance
Glenmark Pharma HOLD HOLD Below Revenues declined mainly due to 30% YoY decline in the US. Net profit declined mainly due to
lower operational performance and other income
Indoco Remedies HOLD HOLD Above Result were above I-direct estimates on profitability mainly due to significent improvement in
EBITDA margins
Ipca labs BUY BUY Mixed While revenues were in-line with I-direct estimates, profitability was lower than I-direct
estimates on the back of lower-than-expected margins and higher tax rate
Jubilant Life Sciences BUY BUY Mixed While revenues were above I-direct estimates, net profit was below I-direct estimates mainly
due to one-off depreciation and higher taxation.
Lupin HOLD HOLD Above Results were in-line with I-direct estimates on revenues front. Adjusted PAT was above I-
direct estimates mainly due to higher other income
Natco Pharma HOLD HOLD Above Strong result on the back of windfall from limited competition products (Glatiramer Acetate,
Liposomal Doxorubicin, Oseltamivir and Lanthanum Carbonate) in the US
Sun Pharma HOLD HOLD Above While beat on revenues front was mainly on account of higher-than expected Taro revenues,
beat in EBITDA was mainly on account of strong gross margins
Syngene BUY BUY Above Strong result due to lower base of Q4FY17 (fire incident impact) and strong growth in
chemical development and discovery services supported by biologics business
Torrent Pharma HOLD HOLD Mixed While revenues and net profit were in-line with I-direct estimates, EBITDA was lower than I-
direct estimates mainly due to higher other expenditure. Revenues were largly driven by
consolidation of Unichem India and Nepal businesses
Apollo Hospital HOLD HOLD Mixed While revenues and EBITDA were in-line with I-direct estimates, the profitability came lower
than I-direct estimates mainly due to higher depreciation and tax rate (28.9% vs I-direct
estimates of 21.0%)
Narayana Hrudalaya BUY BUY Mixed While revenues were higher than I-direct estimates, profitability was below I-direct estimates
mainly due to incremental overheads pertaining to new hospitals and consolidation. Revenues
growth were mainly driven by consolidation of Health City Cayman Islands Ltd (Cayman)
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 5
IPM grows 11% YoY in May
The Indian pharmaceutical market (IPM) grew 10.8% YoY to | 10583
crore for May. The growth was attributable to growth in volumes – 9%
and new product launches – 2.8%. Conversely it was pulled down by
price decrease of 1%
The fixed dosage combination (FDCs) related market grew 18.5%, while
the Non FDC market showed a growth of 10.8%
Drugs under NLEM list grew 7.2% YoY while non-NLEM drugs grew
11.3%
Among companies under I-direct coverage Glenmark, Lupin, Torrent
and Dr Reddy’s registered higher than industry growth rate
Therapy wise, ~10 therapies registered higher than industry growth.
Notable among them with growth rates- respiratory – 15.4%, derma –
14.4%, anti-diabetic – 14.2%, cardiac – 13.1% and CNS – 11.3%. On the
other hand, anti-malaria and vaccine have witnessed muted to negative
growth
Domestic companies have grown 10.5% YoY while MNC companies
have grown 11.8% in May 2018
Exhibit 8: Domestic formulations - growth trend
[
7.2
5.4
-2.6
2.1
2.5
6.3 7.8
7.9 9
.9
7.4 9
.7
7.9
10.8
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
May-17
Jun-17
Jul-17
Aug-17
Sep-1
7
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
(%
)
Indian Pharma Market
Source: AIOCD data base, ICICI Direct Research
Exhibit 9: Companies growth in domestic market in May, 2018
15.9
8.7 8.9
11.9
15.2
8.9
12.9
20.0
11.2
7.08.0
17.5
0.7
6.0 5.8
8.4
14.2
0.0
5.0
10.0
15.0
20.0
25.0
Abbott
Ajanta
Ale
mbic
Bio
con
Cadila
Cip
la
DR
L
Gle
nm
ark
GS
K P
harm
a
Indoco
Ipca Labs
Lupin
Natco
Pfiz
er
Sanofi
Sun P
harm
a
Torrent
(%
)
Source: AIOCD data base, ICICI Direct Research
Therapy wise performance (| crore)
Therapy May' 18 May' 17 YoY (%) April' 18 MoM (%)
Anti-Infectives 1303 1227 6.2 1306 -0.2
Cardiac 1362 1204 13.1 1335 2.0
GI 1323 1186 11.6 1287 2.9
Vitamins 972 883 10.0 926 4.9
Anti Diabetic 1036 907 14.2 998 3.7
Respiratory 647 561 15.4 722 -10.3
Pain 715 651 9.8 693 3.1
Derma 690 603 14.4 669 3.0
Neuro 656 590 11.3 643 2.1
Gynaecological 559 514 8.8 547 2.1
Anti-Neoplastics 231 195 18.8 223 3.9
Ophthal 201 192 4.9 203 -1.3
Vaccines 181 183 -0.9 182 -0.6
Hormones 184 163 13.0 187 -1.2
Blood Related 134 128 4.3 124 8.3
Urology 135 116 16.4 131 3.1
Others 113 100 12.3 106 6.6
Anti Malarials 35 34 1.1 34 0.4
Sex Stimulants 55 54 1.7 58 -4.4
Stomatologicals 53 48 9.8 50 6.6
Source: AIOCD data base
Top brands in Indian pharma market (MAT; | crore)
Brand Company Therapy May' 18 YoY (%)
Mixtard Abbott Anti Diabetic 493.0 -4.9
Spasmo Proxyvon PlusWockhardt GI 447.0 10.2
Glycomet Gp USV Anti Diabetic 427.0 2.6
Galvus Met Novartis Anti Diabetic 415.0 20.2
Janumet MSD Anti Diabetic 392.0 30.7
Lantus SANOFI INDIAAnti Diabetic 385.0 16.2
Augmentin GSK Anti-Infectives 360.0 24.9
Liv 52 Himalaya GI 336.0 13.3
Clavam Alkem Anti-Infectives 308.0 9.3
Monocef ARISTO Anti-Infectives 282.0 1.9
Source: AIOCD data base
Industry Acute vs Chronic vs Sub Chronic
Acute
48%
Chronic
32%
Sub
Chronic
20%
Source: AIOCD data base; As per AIOCD MAT May 2018
ICICI Securities Ltd. | Retail Equity Research
Page 6
Domestic Formulations – I-direct Coverage universe data summary
Exhibit 10: Domestic formulations – Market Share (MAT Value May-18)
[
8%
6%
5%4%
4%3% 3% 3%
2% 2% 2%
1% 1% 1%1% 1% 1%
0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Sun
Abbott
Cip
la
Cadila
Lupin
Torrent
Gla
xo
Intas
PFIZER
Sanofi
Dr. R
eddys
IPCA
Ale
mbic
Novartis
Natco
Indoco Rem
edie
s
Ajanta
Bio
con
Market Share
Source: AIOCD data base, ICICI Direct Research
Exhibit 11: Acute vs Chronic vs Sub Chronic (MAT Value May-18)
39 39
57
23
4451
41
8166
29
84
4763
4739
25
53
4052
23
6944 28
36
627
55
0
47 16 48
46
54
31
2110
207 12
20 2212 7
16 157
21
515 21 16
0
20
40
60
80
100
120
Abbott
Ajanta
Ale
mbic
Bio
con
Cip
la
Dr. R
eddys
Gle
nm
ark
Indoco
IPCA
Lupin
Sun
Novartis
Pfiz
er
Sanofi
Sun
Torrent
Cadila
%
Acute Chronic Sub Chronic
Source: AIOCD data base, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 7
Exhibit 12: Top five brands in Value terms (MAT Value May-18)
[5
Sun Brand Therapy Sales (|cr)
1 Volini Pain 239
2 Istamet Anti Diabetic 233
3 Levipil Neuro 226
4 Rosuvas Cardiac 224
5 Gemer Anti Diabetic 194
Cipla Brand Therapy Sales (|cr)
1 Foracort Respiratory 272
2 Duolin Respiratory 205
3 Budecort Respiratory 183
4 Seroflo Respiratory 160
5 Asthalin Respiratory 158
Cadila Brand Therapy Sales (|cr)
1 Skinlite Derma 195
2 Deriphyllin Respiratory 135
3 Pantodac GI 108
4 Mifegest Kit Gynaecological 107
5 Atorva Cardiac 106
Lupin Brand Therapy Sales (|cr)
1 Gluconorm-G Anti Diabetic 210
2 Huminsulin Anti Diabetic 179
3 Budamate Respiratory 112
4 Tonact Cardiac 89
5 Rablet-D GI 71
Torrent Brand Therapy Sales (|cr)
1 Shelcal Vitamins 204
2 Chymoral FortePain 126
3 Losar H Cardiac 102
4 Nikoran Cardiac 100
5 Azulix-Mf Anti Diabetic 89
Dr. Reddys Brand Therapy Sales (|cr)
1 Omez GI 118
2 Omez D GI 103
3 Econorm GI 92
4 Atarax Respiratory 86
5 Razo D GI 71
Glenmark Brand Therapy Sales (|cr)
1 Telma Cardiac 197
2 Telma H Cardiac 179
3 Ascoril Plus Respiratory 115
4 Candid Derma 112
5 Telma Am Cardiac 107
IPCA Brand Therapy Sales (|cr)
1 Zerodol Sp Pain 128
2 Zerodol P Pain 96
3 Hcqs Anti Malarials 84
4 Larinate Anti Malarials 49
5 Folitrax Anti-Neoplastics 47
Alembic Brand Therapy Sales (|cr)
1 Azithral Anti-Infectives 155
2 Althrocin Anti-Infectives 76
3 Wikoryl Respiratory 61
4 Gestofit Gynaecological 53
5 Roxid Anti-Infectives 52
Sanofi Brand Therapy Sales (|cr)
1 Lantus Anti Diabetic 385
2 Hexaxim Vaccines 179
3 Combiflam Pain 168
4 Allegra Respiratory 158
5 Amaryl M Anti Diabetic 132
Natco Brand Therapy Sales (|cr)
1 Hepcinat Anti-Infectives 163
2 Geftinat Anti-Neoplastics 118
3 Erlonat Anti-Neoplastics 101
4 Natdac Anti-Infectives 94
5 Veenat Anti-Neoplastics 89
Indoco Brand Therapy Sales (|cr)
1 Febrex Plus Respiratory 78
2 Cyclopam GI 49
3 Oxipod Anti-Infectives 43
4 Sensodent-K Stomatologicals 40
5 Atm Anti-Infectives 36
Ajanta Brand Therapy Sales (|cr)
1 Met Xl Cardiac 91
2 Melacare Derma 54
3 Atorfit Cv Cardiac 52
4 Feburic Pain 28
5 Met Xl Am Cardiac 23
Biocon Brand Therapy Sales (|cr)
1 Insugen Anti Diabetic 112
2 Basalog Anti Diabetic 83
3 Canmab Anti-Neoplastics 43
4 Insugen R Anti Diabetic 24
5 Blisto Mf Anti Diabetic 17
Abbott Brand Therapy Sales (|cr)
1 Mixtard Anti Diabetic 493
2 Phensedyl Cough LinctusRespiratory 281
3 Thyronorm Hormones 280
4 Duphaston Gynaecological 276
5 Novomix Anti Diabetic 273
Pfizer Brand Therapy Sales (|cr)
1 Becosules Vitamins 240
2 Magnex Anti-Infectives 161
3 Minipress Xl Cardiac 149
4 Dolonex Pain 141
5 Gelusil Mps GI 140
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 8
Exhibit 13: Top five therapies in value term (MAT Value May 2018)
[5
Sun Therapy Sales (|cr)
1 Cardiac 1894
2 Neuro 1828
3 GI 1228
4 Anti-Infectives 994
5 Anti Diabetic 945
Cipla Therapy Sales (|cr)
1 Respiratory 1886
2 Anti-Infectives 1238
3 Cardiac 685
4 GI 416
5 Urology 295
Cadila Therapy Sales (|cr)
1 Anti-Infectives 807
2 Cardiac 689
3 GI 556
4 Respiratory 550
5 Pain 462
Lupin Therapy Sales (|cr)
1 Cardiac 1007
2 Anti Diabetic 934
3 Anti-Infectives 699
4 Respiratory 555
5 GI 327
Torrent Therapy Sales (|cr)
1 Cardiac 1230
2 Neuro 624
3 GI 568
4 Vitamins 445
5 Anti Diabetic 281
Dr. Reddys Therapy Sales (|cr)
1 GI 587
2 Cardiac 366
3 Respiratory 283
4 Anti-Infectives 247
5 Anti-Neoplastics 214
Glenmark Therapy Sales (|cr)
1 Derma 797
2 Cardiac 697
3 Respiratory 470
4 Anti-Infectives 389
5 Anti Diabetic 209
IPCA Therapy Sales (|cr)
1 Pain 435
2 Cardiac 262
3 Anti Malarials 258
4 GI 117
5 Anti-Infectives 97
Alembic Therapy Sales (|cr)
1 Anti-Infectives 340
2 Cardiac 219
3 Respiratory 195
4 GI 183
5 Gynaecological 175
Sanofi Therapy Sales (|cr)
1 Anti Diabetic 725
2 Cardiac 401
3 Vaccines 385
4 Respiratory 307
5 Pain 243
Natco Therapy Sales (|cr)
1 Anti-Neoplastics 511
2 Anti-Infectives 423
3 Pain 46
4 Blood Related 4
5 Cardiac 3
Indoco Therapy Sales (|cr)
1 Respiratory 143
2 Anti-Infectives 136
3 Stomatologicals 129
4 GI 112
5 Vitamins 58
Ajanta Therapy Sales (|cr)
1 Cardiac 302
2 Ophthal 187
3 Derma 132
4 Pain 39
5 Vitamins 29
Biocon Therapy Sales (|cr)
1 Anti Diabetic 262
2 Anti-Neoplastics 83
3 Anti-Infectives 15
4 Blood Related 14
5 Cardiac 12
Abbott Therapy Sales (|cr)
1 Anti Diabetic 1508
2 GI 1246
3 Vitamins 842
4 Neuro 674
5 Cardiac 612
Pfizer Therapy Sales (|cr)
1 Anti-Infectives 484
2 GI 304
3 Vitamins 298
4 Hormones 269
5 Gynaecological 263
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 9
Exhibit 14: Summary of USFDA approvals for May, 2018
Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size
Cadila Succinylcholine Chloride Injection Anesthesia Sandoz Anectine NA
Natco Pharma Azacitidine Anti-Cancer Celgene Vidaza NA
Dr reddy's lab THIOTEPA Oncology NA NA NA
Ajanta Pharma Sildenafil Citrate Harmonal Pfizer Revatio NA
Cadila Carbidopa tablets Parkinson Aton LODOSYN NA
Glenmark Clobetasol Propionate Cream Dermatology Fougera Pharma Temovate US$ 118 million
Jubilant Life Niacin ER CVS AbbVie Niaspan table NA
Dr. Reddy's Labs Esomeprazole Magnesium OTC GI Astrazeneca Pharma Nexium 24HR NA
Glenmark Colesevelam Hydrochloride Tablets CVS Daiichi Sankyo Inc Welchol NA
Cadila Dutasteride and Tamsulosin Hydrochloride Capsules Prostatic hyperplasia GSK JALYN NA
Cadila Omeprazole; Sodium Bicarbonate GI Santarus Zegerid NA
Cadila Nystatin Anti-Fungal NA NA NA
Taro Benzoyl Peroxide; Clindamycin Phosphate inflammatory acne Dow Pharma Onexton NA
Cadila Doxycycline Hyclate Anti-Infective Pfizer Vibra NA
Lupin Nystatin; Triamcinolone Acetonide Derma G And W Labs Mykacet US$ 62.2 million
Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size
Cadila Plerixafor Injection Diabetes Alidac Pharmaceuticals Janumet NA
Aurobindo Pharma Tadalafil CVS Eli Lilly Adcirca NA
Aurobindo Pharma Tadalafil CVS Eli Lilly Adcirca NA
Ajanta Pharma Tadalafil CVS Eli Lilly Adcirca NA
Tentative Approvals
[5
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 10
Exhibit 15: US patent litigations [5
Month Innovator ANDA Filer Brand Name API Used for
Jun-17 Allergan Taro Pharma Aczone Dapsone Leprosy
Jun-17 Genentech Sun Pharma Tarceva Erlotinib Cancer
Jun-17 Bayer AG Alembic Pharma Xarelto Rivaroxaban Blood Thinner
Jun-17 Teva Dr Reddy's Lab Copaxone Glatiramer Multiple Sclerosis
Jun-17 Valeant Pharma Sun Pharma Uceris Budesonide Ulcerative Colitis
Jun-17 Omeros Corp Lupin Omidria Phenylephrine And Ketorolac Pupil Dilation
Jun-17 Amgen Lupin Sensipar Cinacalcet Calcium Reducer
Jun-17 Biogen Aurobindo Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Sun Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Cipla Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Glenmark Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Lupin Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Torrent Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Forest Laboratories Sun Pharma Linzess Linaclotide Irritable Bowel Syndrome
Jun-17 Biogen Torrent Pharma Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jun-17 Biogen Cadila healthcare Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jul-17 Janssen Pharma Aurobindo Pharma Invokana Canagliflozin Diabetes
Jul-17 Actelion Pharma Sun Pharma Veletri Epoprostenol Pulmonary Arterial Hypertension
Jul-17 Biogen Cadila healthcare Tecfidera Dimethyl Fumarate Multiple Sclerosis
Jul-17 Delcor Asset Corp Sun Pharma Evoclin Clindamycin Acne vulgaris
Jul-17 Celgene Corp Dr Reddy's Lab Revlimid Lenalidomide Oncology
Jul-17 PreCision Dermatology Lupin Locoid Hydrocortisone butyrate Dermatitis
Jul-17 BMS Cadila healthcare Reyataz Atazanavir HIV
Jul-17 Endo Pharma Lupin Nascobal Cyanocobalamin Vitamin B12 deficiency
Jul-17 Bayer Sun Pharma Aczone Clindamycin Acne vulgaris
Aug-17 Bayer AG Lupin Xarelto Rivaroxaban Blood Thinner
Aug-17 Horizon Therapeutics Lupin Ravicti Glycerol Phenylbutyrate Inborn Urea Cycle Disorder
Aug-17 Celgene Cipla Revlimid Lenalidomide Oncology
Aug-17 Kissei Pharmaceuticals Aurobindo Rapaflo Silodosin Enlarged Prostate
Aug-17 Bayer AG Torrent Pharma Xarelto Rivaroxaban Blood Thinner
Aug-17 Forest Laboratories Aurobindo Linzess Linaclotide Irritable Bowel Syndrome
Aug-17 Alcon Research Cipla Pazeo Olopatadine Ocular Itching
Aug-17 Sanofi-Aventis Aurobindo Multaq Dronedarone Atrial Fibrillation
Sep-17 Janssen Products LP Aurobindo Prezista Darunavir Hiv
Sep-17 Allergan Aurobindo Lastacaft Alcaftadine Allergic Conjunctivitis
Sep-17 Eli Lilly and Co Glenmark Cialis Tadalafil Erectile Dysfunction
Sep-17 Indivior Dr Reddy's Lab Suboxone Buprenorphine Opioid Dependence
Sep-17 Teijin Ltd Aurobindo Uloric Febuxostat Gout
Sep-17 Takeda Pharma Indoco Remedies Nesina Alogliptin Diabetes
Sep-17 Allergan, Inc Alembic Pharma Latisse Bimatoprost Hypotrichosis
Sep-17 Wyeth Pharma Sun Pharma Bosulif Bosutinib Leukemia
Oct-17 Boehringer Ingelheim Aurobindo Pharma Gilotrif Afatinib Lung Cancer
Oct-17 Boehringer Ingelheim Sun Pharma Gilotrif Afatinib Lung Cancer
Oct-17 Forest Laboratories Torrent Pharma Fetzima Levomilnacipran Depression
Oct-17 Forest Laboratories Cadila Healthcare Fetzima Levomilnacipran Depression
Nov-17 ViiV Healthcare Lupin Triumeq Abacavir, Dolutegravir and Lamivudine HIV
Nov-17 Pfizer Sun Pharma Xeljanz Tofacitinib citrate Rheumatoid arthritis
Mar-18 Bial - Portela & CA. Dr reddy's lab Aptiom eslicarbazepine partial-onset seizures
Mar-18 Bial - Portela & CA. Jubilant Pharma Aptiom eslicarbazepine partial-onset seizures
Mar-18 Sumitomo Dainippon Pharma InvaGen Pharma Latuda lurasidone hydrochloride schizophrenia; bipolar depression
Mar-18 Vifor Fresenius Lupin/Teva Velphoro sucroferric oxyhydroxide chronic kidney disease
Mar-18 Gilead Sciences Natco Sovaldi Sofosbuvir hepatitis C
Mar-18 Taro Lupin Topicort Desoximetasone skin irritation
Mar-18 Stiefel Laboratories, Inc. Glenmark Olux-E clobetasol propionate psoriasis
Mar-18 Takeda Cadila Colcrys colchicine gout
Apr-18 Indivior Inc Dr. Reddy's Lab Suboxone buprenorphine and naloxone opioid dependence
Apr-18 Celgene Corp. Dr. Reddy's Lab Revlimid lenalidomide multiple myeloma
Apr-18 GlaxoSmithKline Dr. Reddy's Lab Lamictal XR lamotrigine seizures, bipolar disorder
Apr-18 Onyx Therapeutics, Inc. CIPLA Ltd Kyprolis carfilzomib multiple myeloma
Apr-18 Jazz Pharma Lupin Xyrem sodium oxybate narcolepsy
Apr-18 Biogen International Zydus Pharma Tecfidera dimethyl fumarate multiple sclerosis
Apr-18 Celgene Corp. Cadila Revlimid lenalidomide multiple myeloma
May-18 AstraZeneca Cadila Farxiga dapagliflozin diabetes
May-18 Takeda Pharma Torrent Pharma Trintellix vortioxetine depression
May-18 AstraZeneca Cadila Farxiga dapagliflozin diabetes
May-18 Celgene Corp Cipla Revlimid lenalidomide multiple myeloma
May-18 Takeda Pharma Cipla Trintellix vortioxetine depression
May-18 Astellas Pharm Eugia Pharma/Aurobindo Xtandi enzalutamide prostate cancer
May-18 Gilead Aurobindo Truvada emtricitabine, tenofovir HIV
May-18 Takeda Pharma Lupin Trintellix vortioxetine depression
May-18 Promius Pharma Taro Pharma Sernivo betamethasone plaque psoriasis
May-18 Janssen Dr reddy's Prezista darunavir HIV
Source: Bloomberg, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 11
Monthly Sector News
Price hikes, new launches, recalls, approvals
Sun Pharma announces USFDA approval of Yonsa
Sun Pharma’s in-licensing Oncology product Yonsa (abiraterone acetate), a
novel formulation in combination with methylprednisolone has received
USFDA approval. Churchill is eligible to receive upfront and sales-linked
milestone payments, and royalties on sales from Sun Pharma. Yonsa, in
combination with methylprednisolone, was filed as a new drug application
(NDA) under the 505(b)(2) regulatory pathway and will be promoted as a
branded product in the US.
EMA accepts Lupin application for biosimilar Etanercept
European Medicines Agency (EMA) has accepted Lupin’s marketing
authorization application (MAA) for a biosimilar of Etanercept. The
indications targeted for approval are rheumatoid arthritis (RA), psoriatic
arthritis, ankylosing spondylitis, axial spondyloarthritis, non-radiographic
axial spondyloarthritis and Plaque Psoriasis.
Lupin launches innovative gynaecology product Solosec in US
Lupin has launched innovative gynaecology product Solosec (secnidazole)
2g oral granules in the US. Solosec is indicated for the treatment of bacterial
vaginosis (BV) in adult women. The drug received final approval from the
USFDA on September 2017.
USFDA approves Biocon-Mylan first biosimilar of Neulasta
USFDA has approved Biocon-Mylan’s first biosimilar to Amgen's drug
Neulasta to help reduce the risk of infection during cancer treatment. This is
the second biosimilar approval for Biocon-Mylan in the US. The company
has received this approval on first target action date (TAD) despite
observations from the USFDA at the Bangalore plant. The approval was in-
line with I-direct estimates.
Natco launches generic version of Posaconazole injection in India
Natco has launched a generic version of Posaconazole Injection (antifungal
agent), 300 mg/16.7 ml, under its brand Posanat. This is the first time an
injection version of this drug was available in India. Posaconazole Injection
is sold in the US market by Merck under its brand name Noxafil.
Posaconazole injection is an antifungal agent. It is used in patients who are
at high risk of developing infections for being severely
immunocompromised, such as associated with stem cell transplant or from
chemotherapy.
Lawsuits, court rulings, settlements, regulatory issues
Dr Reddy’s Srikakulam (SEZ) API plant completes USFDA audit
Dr Reddy’s Srikakulam (SEZ) API plant in Andhra Pradesh has completed
USFDA audit with no observations.
Biocon receives CRL from USFDA to change manufacturing site for glargine
Biocon has received complete response letter (CRL), from USFDA for
clarification of a change in the manufacturing site for glargine from
Bengaluru to a new facility in Malaysia.
Cadila Ahmedabad SEZ facility cleared USFDA inspection
The USFDA inspected Cadila’s manufacturing facility at Ahmedabad SEZ
from May 28 to June 5, 2018. At the end of the inspection, no observation
(483) was issued. The site manufactures oncology injectables for the
regulated markets.
Sun Pharma Halol plant receives EIR from USFDA
Sun Pharma’s Halol plant has received establishment inspection report (EIR)
from USFDA for the inspection conducted in February 12-23, 2018.
According to the press release, the USFDA concluded that the inspection is
ICICI Securities Ltd. | Retail Equity Research
Page 12
now closed while the issues contained in the warning letter issued in
December 2015 have been addressed.
USFDA accords VAI status to Aurobindo Unit IV injectable facility
According to media, Aurobindo pharma’s Unit IV injectable facility has
received voluntary action initiated (VAI) status from USFDA.
Q4FY18 Result Highlights
Torrent Pharma- Acquisition related adjustments weigh
Revenues grew 20.1% YoY to | 1722 crore (I-direct estimate: | 1763 crore)
mainly due to 48.4% YoY growth in Indian formulations to | 693 crore (I-
direct estimate: | 733 crore) led by consolidation of the Unichem India and
Nepal businesses. EBITDA margins improved 57 bps YoY to 21.1% YoY (I-
direct estimate: 24.5%). Improvement in gross margins (73.1% vs 65.8% in
Q4FY18) was largely offset by higher other expenditure. EBITDA increased
23.4% YoY to | 364 crore (I-direct estimate: | 432 crore). Net profit
increased 10.7% YoY to | 228 crore (I-direct estimate: | 218 crore) mainly
due to a strong operational performance and higher deferred tax assets,
that were partly offset by higher depreciation and interest cost
Apollo Hospitals- Growth tempo maintained but margins muted
Standalone revenues grew 12.1% YoY to | 1863 crore (I-direct estimate:
| 1908 crore) on the back of 16.1% YoY increase in pharmacy business to
| 863 crore (I-direct estimate: | 879 crore) and 8.9% YoY increase in
healthcare business to | 1000 crore (I-direct estimate: | 1029 crore). EBITDA
margins improved 123 bps YoY to 11.5% (I-direct estimate: 11.2%) mainly
due to lower base of Q4FY17. EBITDA increased 26% YoY at | 214 crore (I-
direct estimate: | 213 crore). Adjusted net profit grew 23.8% to | 60 crore (I-
direct estimate: | 74 crore) as growth in EBITDA was offset by higher
depreciation and tax rate (28.9% vs. 17.8% in Q4FY17).
Indoco Remedies- Domestic formulations shine but exports tumble
Revenues declined 2.6% YoY to | 270 crore (I-direct estimate: | 275 crore).
Export formulations declined 17% YoY to | 88 crore (I-direct estimate: | 101
crore) while domestic formulations grew 16.1% to | 151 crore (I-direct
estimate: | 154 crore). EBITDA margins increased 718 bps YoY to 18.9% (I-
direct estimate of 14.0%) due to lower operational expenditure across line
items. EBITDA rose 56.8% YoY to | 51 crore (I-direct estimate: | 39 crore).
Net profit increased 23% YoY to | 22.1 crore (I-direct estimate: | 17 crore).
The delta vis-à-vis EBITDA was mainly due to higher interest cost and tax
rate (19.3% vs. 12.0% in Q4FY17).
Narayana Hrudayalaya - Revenues buoyant but dent in margins
Revenues grew 34% YoY to | 647 crore (I-direct estimate: | 595 crore)
mainly due to consolidation of Health City Cayman Islands (Cayman) and
incremental revenues from new hospitals. EBITDA margins declined 398
bps YoY to 8.1% (I-direct estimate: 12.0%) mainly due to an increase in
doctor payouts, expenses related to new facilities, GST implementation
besides losses related to stent and implants regulation. EBITDA de-grew
10.3% YoY to | 52 crore (I-direct estimate: | 72 crore). Adjusted net profit
declined 56% to | 10 crore (I-direct estimate: | 33 crore) due to lower
margins and higher interest cost
Ipca - Upbeat numbers with margin expansion
Revenues grew 17.6% YoY to | 783 crore (I-direct estimate: | 781 crore)
due to 16.7% growth in domestic formulations to | 323 crore (I-direct
estimate: | 318 crore) and 25% growth in API to | 192 crore (I-direct
estimate: | 175 crore). Export formulations grew 12.3% YoY to | 251 crore
(I-direct estimate: | 276 crore). EBITDA margins improved 388 bps to 14.0%
YoY (I-direct estimate: 15.0%) mainly due to an improvement in gross
margins (67.3% vs. 65.2% in Q4FY17) and lower employee cost. EBITDA
increased 62.4% YoY to | 110 crore (I-direct estimate: | 117 crore). Net
profit grew 15.6% YoY to | 51 crore (I-direct estimate: | 65 crore). Delta vis-
ICICI Securities Ltd. | Retail Equity Research
Page 13
à-vis EBITDA was primarily due to higher tax rate (28.4% vs -72.7% in
Q4FY17).
Glenmark- Margin contraction intensifies on US pricing
Revenues declined 7.2% YoY to | 2280 crore (I-direct estimate: | 2347
crore) mainly due to 30% YoY decline in the US to | 700 crore (I-direct
estimate: | 733 crore) on the back of high base of gZetia exclusivity in
Q4FY17. Europe, on the other hand, grew 38.8% YoY to | 319 crore (I-direct
estimate: | 264 crore). EBITDA margins contracted 373 bps YoY to 14.3% (I-
direct estimate: 18.5%) due to lower gross margins (65.6% in Q4FY18 vs.
68.4% in Q4FY17) and higher employee cost. EBITDA declined 26.4% YoY
to | 327 crore (I-direct estimate: | 433 crore). Adjusted net profit declined
42.7% YoY to | 152 crore (I-direct estimate: | 251 crore) due to a weak
operational performance and lower other income.
Aurobindo Pharma- Weak numbers plagued by US injectables
Revenues grew 11.2% YoY to | 4049 crore (I-direct estimate: | 4190 crore)
mainly due to 48.2% growth in Europe to | 1152 crore (I-direct estimate:
| 1106 crore) led by acquisition of Generis in Portugal. EBITDA margins
contracted 34 bps YoY to 19.5%. Margins were lower than I-direct estimate
of 22.5% mainly on account of higher other expenditure and employee cost.
EBITDA increased 9.3% to | 788 crore vs. I-direct estimate of | 942 crore.
Net profit declined 0.7% YoY to | 529 crore (I-direct estimates: | 596 crore)
mainly due to a below expected operational performance and higher
depreciation).
Mangalam Drugs – Weak Q4 numbers
Revenue declined 19% YoY to | 67.2 crore. EBITDA margins declined 257
bps YoY to 14.2%. Net profit fell 53% YoY to | 3.1 crore. The weak numbers
were mainly due to squashing of anti-malarial tender business.
Divi’s Laboratories- Capacity constraints impact growth
Revenues grew 2% YoY to | 1088 crore against I-direct estimate of | 1121
crore. EBITDA margins improved 159 bps to 35.5% (I-direct estimate of
33.7%) mainly due to strong gross margins and lower other expenditure.
Gross margins improved 200 bps to 62.5% (I-direct estimate: 60.7%).
EBITDA grew 6.8% YoY to | 387 crore (I-direct estimate: | 378 crore). Net
profit grew 0.9% to | 262 crore (I-direct estimate: | 264 crore). Lower
growth vis-à-vis EBITDA was mainly due to higher depreciation and tax rate
(33.9% vs. 26% in Q4FY17).
Sun Pharma- Positive surprises in negative growth
Revenues declined 2.2% YoY to | 6977 crore (I-direct estimate: | 6719
crore) mainly due to 7% YoY decline in the US to | 2370 crore (I-direct
estimate: | 2073 crore). The decline in the US was due to high base of
gGleevec (oncology) and gBenicar (CVS). EBITDA margins improved 245
bps to 24.1% (I-direct estimates of 20.9%) mainly due to strong gross
margins. Gross margins improved 539 bps to 74.6% (I-direct estimates of
68.4%). EBITDA increased 8.8% YoY to | 1684 crore (I-direct estimate:
| 1407 crore). Adjusted net profit increased 8.9% to | 1332 crore (I-direct
estimate: | 957 crore). Increase in depreciation & interest cost was largely
offset by tax reversal.
Cadila- Windfall gains in US drive Q4
Revenues grew 28.7% YoY to | 3250 crore (I-direct estimate: | 3204 crore)
mainly due to 66.7% rise in US sales to | 1642 crore (I-direct estimate:
| 1464 crore) led by gLialda (ulcerative colitis) exclusivity & favourable
seasonality impact on gTamiflu (anti-infective). EBITDA margins improved
870 bps to 25.8% (I-direct estimate: 25.0%) due to limited competition
launches in the US. EBITDA increased 87.7% YoY to | 870 crore (I-direct
estimate: | 801 crore). PAT increased 58% YoY to | 607 crore (I-direct
estimate: | 496 crore) due to a strong operational performance.
ICICI Securities Ltd. | Retail Equity Research
Page 14
Natco Pharma- Windfall from limited competition US launches
Revenues increased 36.0% YoY to | 768 crore (I-direct estimate: | 695
crore) on the back of windfall from limited competition products (Glatiramer
Acetate, Liposomal Doxorubicin and Lanthanum Carbonate) in the US.
EBITDA margins improved 723 bps YoY to 50% (I-direct estimate: 57.6%)
mainly due to better realisation from limited competition launches in the
US. However, it was below I-direct estimates mainly due to lower gross
margins (84% vs I-direct estimates of 90%). Adjusted net profit increased
69.7% YoY to | 300 crore (I-direct estimates: | 299 crore) mainly on account
of a strong operational performance.
Dr Reddy’s Lab- Weakness in numbers persists
Revenues declined 1.6% YoY to | 3554 crore (I-direct estimate: | 3748
crore) mainly due to 5.6% YoY decline in the US to | 1449 crore (I-direct
estimate: | 1631 crore) and 20% YoY decline in Russia and CIS to | 360
crore (I-direct estimate: | 450 crore). Domestic revenue grew 7.5% YoY to
| 614 crore, in line with I-direct estimates of | 617 crore. EBITDA margins
contracted 49 bps YoY to 15.9% (I-direct estimate: 17.7%) mainly due to
higher employee cost. EBITDA fell 4.6% to | 564 crore against I-direct
estimate of | 662 crore. Net profit declined 19.4% YoY to | 272 crore (I-
direct estimate: | 328 crore) mainly due to a below expected operational
performance and higher tax rate (15.6% vs. 2.9% in Q4FY17).
Cipla- Muted sales growth; one-offs hurt margins
Revenues grew a mere 3.2% YoY to | 3698 crore (I-direct estimate: | 3878
crore), as 13% YoY growth in India to | 1353 crore (I-direct estimate: | 1341
crore) was largely offset by 17% YoY decline in RoW sales to | 676 crore (I-
direct estimate: | 797 crore) and 24.9% YoY decline in EU sales to | 135
crore (I-direct estimate: | 176 crore). US sales increased 4.7% YoY to | 676
crore (I-direct estimate: | 656 crore). EBITDA margins improved 94 bps YoY
to 15.1%, however came lower than I-direct estimate of 18.5% mainly due
higher employee cost and other expenditure. EBITDA grew 10% YoY to
| 557 crore (I-direct estimate: | 717 crore). Adjusted net profit was at | 238
crore (I-direct estimate: | 482 crore) against | 62 crore of loss in Q4FY17.
Pfizer – Strong revenue growth with improvement in margins
Pfizer’s Q4FY18 revenue grew 15% YoY to | 520 crore. Sales growth of
continuing business (ex-Corex) grew 21% YoY in Q4FY18. EBITDA margins
improved 574 bps YoY to 26.6%. Net profit increased 54% YoY to | 104.5
crore.
Abbott India– Strong revenue growth with improvement in margins
Abbott’s Q4FY18 revenue grew 12% YoY to | 788 crore. EBITDA margins
improved 464 bps YoY to 13.5%. Net profit increased 138% YoY to | 100.1
crore.
NGL Fine Chem – Strong revenue growth with steady EBITDA margins
NGL Fine Chem’s Q4FY18 revenues increased 26% YoY to | 32 crore.
EBITDA margins remained at ~18%. Net profit declined 11% YoY to | 3.1
crore mainly due to higher depreciation and lower other income.
Sanofi India – Decent revenue growth with expansion in margins
Sanofi’s Q1CY18 revenues increased 12% YoY to | 618 crore. EBITDA
margins expanded 343 bps to 21.8% mainly due to 204 bps improvement in
gross margins to 60%. Net profit increased 38% YoY to | 82.5 crore.
Hester Bio – Slow growth in export impacted Q4
Hester Bio Q4FY18 revenues increased 7% YoY to | 37.5 crore. The 18%
YoY growth in the poultry segment to | 34.66 crore was partly offset by
55% decline in large animal business to | 2.82 crore. EBITDA margins
contracted 371 bps YoY to 29.3% mainly due to higher employee cost and
other expenditure. Net profit increased 27% YoY to | 9.0 crore mainly due
to lower tax rate (5% vs 24% in Q4FY17).
ICICI Securities Ltd. | Retail Equity Research
Page 15
Alembic Pharma - US drives sales but future path challenging
Revenues grew 15% YoY to | 853 crore (I-direct estimate: | 830 crore)
mainly on account of 45% YoY growth in the US to | 290 crore (I-direct
estimate: ~| 233 crore). Domestic revenue grew 6% YoY to | 304 crore (I-
direct estimate: | 330 crore). EBITDA margins improved 215 bps YoY to
20.3% (I-direct estimate: 22.5%) mainly due to lower other expenditure.
Subsequently, EBITDA increased 29% YoY to | 173 crore vis-à-vis I-direct
estimate of | 187 crore. Net profit increased mere 1% YoY to | 94 crore (I-
direct estimate of | 130 crore). Growth in operational performance was
largely offset by higher depreciation and tax rate (27.3% vs 14.7% in
Q4FY17).
Lupin - High base, price erosion continues to weigh
Revenues declined 5% YoY to | 4034 crore (I-direct estimate: | 4030 crore)
mainly due to 21% YoY de-growth in US to | 1499 crore (I-direct estimate:
| 1412 crore). This was on account of high base of Metformin sales in
Q4FY17. India sales increased 10% to | 965 crore, in line with I-direct
estimates of | 967 crore. EBITDA margins declined 80 bps YoY to 17.6% (I-
direct estimate: 19.2%). Decline in gross margins was largely offset by
lower other expenditure. Gross margins declined 592 bps YoY to 66.2% (I-
direct estimate: 66.0%). EBITDA declined 9% YoY to | 709 crore below I-
direct estimate of | 775 crore. Adjusted net profit (excluding | 1142 crore of
impairment provision and deferred tax assets of Gavis acquisition) declined
4% YoY to | 365 crore (I-direct estimate: | 344 crore) mainly due to lower
operational performance. Other income was at | 145 crore against | 45
crore in Q4FY17.
Jubilant Life Sciences - Maintains growth tempo
Revenues grew 37% YoY to | 2252 crore (I-direct estimate: | 2126 crore).
Revenues in the pharma business grew 53% YoY to | 1238 crore (I-direct
estimate: | 1075 crore) mainly due to consolidation of Triad Pharmacy
business. Excluding Triad, Pharma business grew 11% YoY. life science
ingredients (LSI) revenues grew 24% YoY to | 968 crore, in line with I-direct
estimates. EBITDA margins improved 175 bps YoY to 20.3% (I-direct
estimate: 21.2%) mainly due to higher margins in speciality injectable
business. On the other hand, US generic margins were lower and there was
a loss in Triad. EBITDA increased 50% YoY to | 458 crore (I-direct
estimates: | 451 crore). Net profit increased a mere 3% to | 155 crore (I-
direct estimate of | 250 crore). Strong operational performance and higher
other income was largely offset by | 91 crore of one-off depreciation
pertaining to rationalisation of products and higher tax rate.
Ajanta Pharma – Expansion related costs hurt margins
Revenues grew 9% YoY to | 530 crore (I-direct estimate: | 488 crore)
mainly due to 110% YoY growth in African branded formulation to | 109
crore (I-direct estimate: | 83 crore). Domestic sales grew 6% YoY to | 148
crore, in line with I-direct estimate of | 151 crore. Also, African tender
business declined 21% YoY to | 63 crore, in line with I-direct estimate.
EBITDA margins contracted 743 bps YoY to 26.3% (I-direct estimate:
33.0%) lowest in past three years mainly due to higher employee cost and
other expenditure. EBITDA declined 13% YoY to | 140 crore (I-direct
estimate: | 161 crore). Adjusted net profit decreased 17% YoY to | 95 crore
(I-direct estimates: | 116 crore) mainly due to lower operational
performance.
Biocon - Biologics, Syngene maintain momentum
Revenues increased 26% YoY to | 1170 crore (I-direct estimate: | 1098
crore) mainly due to 48% YoY growth in biologics to | 241 crore (I-direct
estimate: | 179 crore) and 45% YoY growth in contract research to | 409
crore (I-direct estimate: | 359 crore). Small molecules (ex-licensing income)
increased 12% YoY to | 424 crore (I-direct estimate: | 379 crore) and
branded formulations increased 14% YoY to | 149 crore (I-direct estimate:
ICICI Securities Ltd. | Retail Equity Research
Page 16
| 157 crore). EBITDA margins remained at 20%. However, lower than I-
direct estimates of 22.0% mainly due to lower gross margins led by change
in product mix. Gross margins declined 321 bps YoY to 59.4% against I-
direct estimates of | 60.9%. EBITDA increased 24% YoY to | 233 crore
against I-direct estimate of | 241 crore. Net profit increased 2% YoY to | 130
crore (I-direct estimate : | 114 crore). Delta vis-a-vis operational growth was
mainly due to higher interest cost, depreciation and Tax rate (21.6% vs
6.7% in Q4FY17).
Syngene - Revenues upbeat but margins under pressure
Revenues grew 41% YoY to | 409 crore (I-direct estimates: | 381 crore)
mainly due to lower base of Q4FY17 (fire incident impact) and strong
growth in chemical development and discovery services supported by
biologics business. EBITDA margins declined 281 bps to 31.6% YoY (I-direct
estimate: 33.1%) mainly due to higher other expenses. EBITDA increased
29% YoY to | 129 crore (I-direct estimate: | 126 crore). Net profit increased
8% YoY to | 85 crore (I-direct estimate of | 80 crore). Delta vis-a-vis
operational performance was mainly due to higher interest cost, lower other
income and higher tax rate (19.1% vs 13.3% in Q4FY17).
Taro Pharma Q4FY18 result
Sun Pharma’s subsidiary Taro Pharma’s Q4FY18 revenues declined 11%
YoY to US$ 175.2 million. EBITDA margins declined 844 bps YoY to 45.3%.
Net Profit increased 4% YoY to US$ 86.6 million.
Exhibit 16: One year forward PE
0.0
10.0
20.0
30.0
40.0
50.0
6/13/201
2
12/13/20
12
6/13/201
3
12/13/20
13
6/13/201
4
12/13/20
14
6/13/201
5
12/13/20
15
6/13/201
6
12/13/20
16
6/13/201
7
12/13/20
17
6/13/201
8
x
NSE Pharma Nifty
30% Premium
Source: ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 17
ICICI Direct coverage universe (Healthcare)
Company I-Direct CMP TP Rating M Cap
Code (|) (|) (| Cr) FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E
Ajanta Pharma AJAPHA 1047 1,190 Hold 9210.8 57.4 53.0 46.4 59.6 18.2 19.7 22.5 17.6 42.3 31.0 23.3 24.8 33.7 23.8 18.0 19.7
Alembic Pharma ALEMPHA 507 460 Hold 9555.9 21.2 21.9 22.6 25.5 23.9 23.2 22.4 19.9 25.3 17.9 14.6 16.5 21.0 18.5 16.6 16.3
Apollo Hospitals APOHOS 984 1,230 Hold 13693.4 15.9 10.3 23.8 31.6 62.0 95.7 41.4 31.2 6.1 6.8 9.3 10.8 6.0 3.8 8.2 10.0
Aurobindo Pharma AURPHA 604 640 Hold 35388.8 38.8 41.8 36.7 40.7 15.6 14.4 16.5 14.8 24.4 20.5 16.7 16.9 24.2 21.0 15.7 15.0
Biocon BIOCON 622 740 Buy 37290.0 8.5 6.2 9.3 14.0 73.3 100.1 66.8 44.4 9.6 8.4 11.3 14.7 10.5 7.2 9.8 13.0
Cadila Healthcare CADHEA 397 380 Hold 40591.4 14.5 17.5 16.8 19.0 27.3 22.7 23.6 20.8 13.1 17.1 14.7 15.5 21.4 21.5 17.8 17.5
Cipla CIPLA 589 640 Hold 47386.5 12.5 18.3 21.3 26.4 47.1 32.1 27.7 22.3 7.7 9.9 12.0 14.5 8.0 10.8 11.4 12.7
Divi's Lab DIVLAB 1066 1,070 Hold 28288.3 39.9 32.8 41.0 48.6 26.7 32.4 26.0 21.9 25.3 19.8 21.1 21.9 19.8 14.8 16.3 16.9
Dr Reddy's Labs DRREDD 2292 2,170 Hold 38021.6 78.0 57.0 80.3 120.5 29.4 40.2 28.5 19.0 7.3 6.1 7.5 9.3 10.5 7.2 9.4 12.6
Glenmark Pharma GLEPHA 595 500 Hold 16780.5 42.2 28.5 30.4 33.3 14.1 20.8 19.6 17.8 19.5 14.2 13.8 14.0 26.5 15.4 14.2 13.6
Indoco Remedies INDREM 199 190 Hold 1836.6 8.4 4.5 8.2 13.5 23.8 44.6 24.3 14.7 8.7 5.7 8.8 13.9 11.8 6.0 10.2 15.0
Ipca Laboratories IPCLAB 626 760 Buy 8725.9 15.4 19.0 30.4 42.2 40.6 33.0 20.6 14.8 8.7 9.1 13.7 17.2 7.9 9.0 12.9 15.6
Jubilant Life JUBLIF 790 1,090 Buy 12583.2 36.9 41.3 61.2 77.0 21.4 19.1 12.9 10.3 13.8 14.9 18.9 21.1 16.8 16.0 19.4 19.8
Lupin LUPIN 878 760 Hold 39696.4 56.7 13.3 34.0 40.4 15.5 66.2 25.8 21.7 16.6 10.6 11.0 12.6 19.0 4.4 10.4 11.2
Narayana Hrudalaya NARHRU 230 310 Buy 4700.3 4.1 2.5 6.4 9.9 55.7 91.5 35.9 23.2 12.5 6.4 12.7 16.4 8.8 5.1 11.4 15.1
Natco Pharma NATPHA 799 860 Hold 14731.8 26.3 37.7 42.7 27.5 30.3 21.2 18.7 29.0 33.6 27.3 27.3 16.1 29.5 22.6 21.5 12.6
Sun Pharma SUNPHA 555 510 Hold 133147.1 29.0 13.0 18.1 21.6 19.1 42.8 30.6 25.8 20.3 9.8 11.5 12.7 19.0 8.1 10.4 11.2
Syngene Int. SYNINT 597 715 Buy 11940.0 14.4 15.3 18.6 20.4 43.2 43.2 33.4 30.4 16.8 16.6 18.5 18.7 20.3 18.0 18.1 16.7
Torrent Pharma TORPHA 1444 1,420 Hold 24432.2 55.2 40.1 46.5 64.6 26.2 36.0 31.0 22.4 18.9 11.6 13.7 17.4 21.5 13.8 14.3 17.2
RoE (%)EPS (|) PE(x) RoCE (%)
Source: Company, ICICI Direct Research
ICICI Securities Ltd. | Retail Equity Research
Page 18
RATING RATIONALE
ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and
the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
ICICI Securities Ltd. | Retail Equity Research
Page 19
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