health check glenmark pharma. -25 -35 -58 -52 8183 -5 5 21...
TRANSCRIPT
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ICIC
I S
ecurit
ies –
Retail E
quit
y R
esearch
Monthly
Sector U
pdate
October 11, 2019
Health Check
Scepticism encircles generic players with flurry of
cGMP issues
In 2019, Indian companies received seven warning letters, ~10 Official
Action Indicated (OAI) and a number of adverse observations from USFDA.
In a recent update, Aurobindo Pharma’s Unit-7 has received Form 483 from
USFDA with seven observations. The USFDA conducted cGMP related
inspection at this unit from September 19-27, 2019. As per media reports,
this plant is contributing 25-30% to US revenues. The company has ~33
pending USFDA approvals as of Q1FY20 from Unit VII. We believe the
observations are critical and the company is likely to face further remedial
action from the USFDA like warning letter or in worst case scenario an
import alert. We await further action from the USFDA. Although the
company owns one of the best US generic ecosystem (lower product
concentration- top 25 products account for just ~40% of US sales; growing
non-oral franchise; number of alternate plants at the disposal; ~70% own
API source), the overhang of a fourth plant coming under scrutiny within a
span of few months is taking huge toll on the stock.
In another cGMP related incident, Torrent's Indrad (Gujarat) facility received
a warning letter from the USFDA. We were expecting this warning letter after
it received OAI status from the USFDA in August 2019. The management
expects no impact on existing supply and revenue generated from the
facility. As per media reports, Indrad contributes ~80% of the company's US
revenues (US is ~20% of total revenues). This, along with the fact that the
Dahej unit (second most ANDAs filed after Indrad) is also under OAI is likely
to affect future approvals. We expect minimal financial impact.
In yet another incident, Glenmark's Baddi facility received a warning from
USFDA. The inspection was conducted from April 15-20 earlier this year and
was classified as official action indicated (OAI). As per the company, existing
manufacturing & sale of products will not be impacted. Also, Baddi does not
have any major pending approvals in the next 12 months. Expected sales
from Baddi for FY20 are ~US$30 million (7% of US sales). We expect
minimal financial impact on account of likely increase in remedial cost.
Finally, the Indian pharmaceutical market (IPM) grew 11.9% YoY to | 12492
crore in September 2019. The growth was attributable to price hike: 5.6%,
new product launches: 2.9% and volume growth: 3.5%. On a MAT basis,
IPM growth was 9.8% YoY to | 136802 crore.
Regulatory concern magnified; stock specific approach remains
In the past few quarters, financially, things are looking much stable. The US
generics narrative is reflecting some sort of normalcy on the back of a
stability in base business performance and new launches besides
rationalisation of unviable products. Domestic formulations are also
showing a steady performance on an annual basis. Profitability is also likely
to improve as the management commentary continues to suggest
rationalisation of R&D and other related expenses, MR optimisation and
concentrated focus on marketing costs for specialty and biosimilars. Waning
concerns on Chinese raw material sourcing besides improving operating
leverage are also likely to contribute to margin expansion. Similarly, the
companies are moderating capex plans to focus on better RoCE. However,
a sudden spurt in warning letters and OAIs even for players with hitherto
unblemished cGMP record (read Torrent and Glenmark) have once again
brought scepticism towards US focused generic players. In this backdrop,
we continue to maintain our stock specific approach. India focused MNCs,
CRAMs players and hospitals are our preferred picks in healthcare segment.
Stock Performance
Mcap
Company 1M 3M YTD 1Y 10-Oct
Sun Pharma.Inds. -10 -1 -10 -36 92876
Divi's Lab. 3 3 13 29 44360
Dr Reddy's Labs -4 2 1 6 43762
Cipla -11 -23 -19 -34 34035
Lupin -10 -9 -18 -19 31363
Biocon 3 -3 -24 -22 28848
Torrent Pharma. -2 9 -5 5 28535
Aurobindo Pharma -26 -22 -36 -40 27305
Cadila Health. -2 2 -33 -40 23751
Abbott 11 24 46 50 23358
Apollo Hospitals -6 7 12 26 19625
Pfizer -2 -3 9 15 14259
Sanofi -9 0 -10 -5 13155
Syngene Int. -4 -1 11 5 12398
Ipca Labs. -8 -10 7 38 10828
Fortis Health 11 9 0 7 10615
Alembic Pharma 8 3 -10 -10 10180
Natco Pharma -6 3 -19 -18 10001
Ajanta Pharma -4 7 -17 -7 8539
Glenmark Pharma. -25 -35 -58 -52 8183
Jubilant Life -4 -2 -34 -30 7491
Narayana Hrudayalaya-5 5 21 -1 4812
Suven Life -7 0 11 -1 3204
FDC Ltd -1 -3 -5 -17 2843
Hikal -4 -13 -9 -13 1759
Hester Bio 1 -3 51 56 1446
Indoco Remedies -11 -7 -35 -24 1294
NGL Fine-Chem 7 3 19 6 320
Return (%)
Source: Bloomberg
Global Indices Performance
Company 1M 3M YTD 1Y 3Y 5Y
S&P 500 Pharm Index (US)0 -6 1 -3 6 7
NASDAQ Biotechnology (US)-5 -10 1 -12 1 3
S&P Pharmaceuticals (US)-6 -11 -5 -22 -7 -5
DJ Pharma and Biotech (US)-2 -7 1 -6 5 5
DJ STOXX Healthcare (EU)0 2 19 15 8 7
MSCI World Pharm & Biotech0 -3 6 0 6 5
NSE Pharma -10 -9 -18 -25 -14 -6
Return (%)
Source: Bloomberg
Research Analyst
Siddhant Khandekar
MItesh Shah, CFA
Sudarshan Agarwal
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ICICI Securities | Retail Research 2
ICICI Direct Research
Monthly Sector Update | Health Check
Exhibit 1: Warning Letters/OAIs issued to Indian companies
in 2019
Date Company Plant Status
Mar-19 Lupin Somerset facility OAI
Mar-19 Jubilant Life Roorkee Plant Warning Letter
Apr-19 Lupin Unit 2, Pithampur OAI
May-19 Aurobindo Unit I OAI
May-19 Aurobindo Unit IX OAI
May-19 Aurobindo Unit XI OAI
May-19 Lupin Goa OAI
Jun-19 Aurobindo Unit XI Warning Letter
Jul-19 Torrent Dahej facility OAI
Jul-19 Indoco Remedies Unit 1, Goa Warning Letter
Jul-19 Strides Pharma Puducherry Plant Warning Letter
Aug-19 Cadila Moraiya Plant OAI
Aug-19 Torrent Indrad facility OAI
Sep-19 Lupin Mandideep Plant Warning Letter
Oct-19 Glenmark Baddi Plant Warning Letter
Oct-19 Torrent Indrad facility Warning Letter
Source: Company, ICICI Direct Research
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ICICI Securities | Retail Research 3
ICICI Direct Research
Monthly Sector Update | Health Check
Healthcare Q2FY20 Results Preview
One-offs, consolidations and base effect to drive Q2 numbers
The I-direct healthcare universe is expected to register 16% YoY growth to
| 34789 crore mainly due to one-offs (Lupin exclusivities in the US, Dr
Reddy’s- sale of branded products) consolidations (Sun– Pola pharma,
Aurobindo- Spectrum business, Cadila- Craft portfolio in wellness segment)
and lower base. Domestic formulations (selected pack) are expected to grow
14% YoY to | 5634 crore mainly due to inventory adjustment and lower base
in Sun Pharma. Excluding the Sun base effect, domestic formulations are
expected to grow at 8.4%. US (selected pack) is expected to grow 14% YoY
to |10278 crore led by 1) growth in base business due to waning price
erosion and lower base, 2) opportunities created by high profile exits and 3)
new launches (including limited competition launches) besides
consolidations. Europe is expected to grow 17% YoY. Growth in other
emerging markets is likely to be driven by new launches. On the other hand,
due to high base effect, the API segment is expected to decline 6% YoY. For
Q2FY20, average YoY rupee depreciation vis-à-vis US$ was mere 0.4%. In
case of Apollo Hospitals, growth is likely to be driven by newly
commissioned hospitals and pharmacy additions.
On the companies front, eight out of 10 companies are likely to report double
digit growth. Among key outliers, Dr Reddy’s Labs (income from sale of
branded portfolio), Biocon (biologics traction) and Cadila (consolidation of
craft portfolio in wellness) are likely to register above 20% growth in
revenues.
EBITDA to grow 22% YoY; margins likely to expand 121 bps
EBITDA of the I-direct healthcare universe is expected to grow 22.6% YoY
to | 7706 crore. EBITDA margins are likely to improve 121 bps to 22.2% on
the back of improved operational leverage, improvement in product mix and
efficient cost control measures, thus mitigating higher raw material cost due
to raw material supply constraints from China and higher promotional cost
of specialty products.
Net profit to grow 12% due to strong operational performance
Net profit growth is expected to grow 12% YoY to | 4232 crore. A strong
operational performance is likely to be offset partially by higher depreciation
and financial cost.
Exhibit 2: Estimates for Q2FY20 (| Crore)
Revenue EBITDA PAT
Q2FY20E YoY QoQ Q2FY20E YoY QoQ Q2FY20E YoY QoQ
Aurobindo Pharma 5,588.4 17.6 2.6 1,168.3 18.5 1.5 683.0 7.0 5.3
Biocon 1,618.3 22.5 10.4 446.1 31.4 2.0 208.0 25.4 0.8
Cadila Healthcare 3,579.8 20.9 2.4 784.0 14.0 24.0 420.7 0.8 38.5
Divi's Lab 1,351.4 5.2 16.2 487.9 -5.1 26.0 350.4 -11.9 28.6
Dr. Reddys 4,587.1 20.2 18.9 1,222.0 60.9 61.2 790.0 52.4 14.1
IPCA Labs 1,122.4 10.7 11.0 235.7 25.0 20.8 172.8 27.5 30.9
Lupin 4,410.9 11.6 -0.2 816.0 48.5 -5.2 314.0 18.0 3.6
Sunpharma 8,072.0 16 -3.6 1,655.8 8 -17.0 988.9 -1 -28.7
Torrent Pharma 2,035.1 7.5 0.6 527.1 11.4 -2.6 201.6 12.6 -6.7
Apollo Hospitals 2,423.4 15.9 8.7 362.9 40.7 11.4 102.9 30.3 29.7
Total 34,788.6 15.9 3.9 7,705.7 22.6 5.8 4,232.4 11.6 -0.2
Change (%) Change (%) Change (%)
Company
Source: Company, ICICI Direct Research
Expected growth in domestic formulations
(| cr) Q2FY20E Q2FY19 % Q1FY20 %
Biocon 139 164 -15.0 133 4.8
Cadila 956 893 7.0 948 0.9
Ipca 534 469 14.0 453 18.0
Lupin 1,348 1,203 12.0 1,308 3.0
Dr Reddy's 789 686 15.0 696 13.4
Sun Pharma2,351 1,860 26.4 2,314 1.6
Torrent 864 816 5.9 907 -4.7
Total 5634 4888 15.3 9381 -39.9
Expected growth in US formulations
(| cr) Q2FY20E Q2FY19 % Q1FY20 %
Aurobindo 2,721 2,227 22.2 2,688 1.2
Cadila 1,432 1,320 8.5 1,367 4.8
Lupin 1,464 1,249 17.2 1,541 -5.0
Dr Reddy's 1,673 1,427 17.3 1,632 2.5
Sun Pharma2,615 2,401 8.9 2,947 -11.3
Torrent 372 394 -5.6 376 -1.1
Total 10278 9017 14.0 10552 -2.6
Expected growth in Europe formulations
(| cr) Q2FY20E Q2FY19 % Q1FY20 %
Aurobindo 1,397 1,157 20.8 1,392 0.4
Cadila 49 52 -5.0 47 4.2
Dr Reddy's 239 192 25.0 240 -0.4
Lupin 146 154 -5.0 140 4.0
Torrent 276 251 10.0 262 5.4
Total 2108 1805 16.8 2082 1.2
Expected growth in API segment
(| cr) Q2FY20E Q2FY19 % Q1FY20 %
Aurobindo 735 817 -10.0 732 0.4
Cadila 76 89 -15.0 69 9.3
Divi's Lab 669 637 5.0 580 15.2
Ipca Labs 256 225 13.9 298 -14.1
Lupin 351 335 5.0 349 0.7
Dr Reddy's 470 603 -22.0 454 3.6
Sun Pharma 447 426 5.0 491 -8.8
Total 2336 2494 -6.4 2393 -2.39
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ICICI Securities | Retail Research 4
ICICI Direct Research
Monthly Sector Update | Health Check
IPM grows ~12% YoY in September, price led growth again…
The Indian pharmaceutical market (IPM) grew 11.9% YoY to | 12492 crore
in September 2019. The growth was attributable to price hike: 5.6%, new
product launches: 2.9% and volume growth: 3.5%.
Drugs under NLEM list grew 13.2% YoY & non-NLEM drugs grew 11.8 %.
The fixed dosage combination (FDCs) related market showed a decline of
66.5% while the approved FDC market grew 12.3%.
Among companies under I-direct coverage 8 companies (Dr Reddy’s, FDC,
Lupin, Torrent, Abbott, Glenmark, Indoco, and Sun Pharma) have
outperformed industry growth rate.
Therapy wise, nine major therapies have registered faster than industry
growth. Notable among them with growth rates- vaccines - 20.5%,
stomatologicals – 19.1%, urology – 18.6%, anti-diabetic -14.2%, cardiac –
13.7%, pain – 12.6% and GI – 12.1%.
Domestic companies have grown at 11.6% YoY while MNC companies have
grown at 13.5%.
On a MAT basis, IPM growth was 9.8% YoY to | 136802 crore.
Exhibit 3: Domestic formulations - growth trend
Source: ICICI Direct Research; AIOCD
Exhibit 4: Companies growth in domestic market in September 2019
Source: ICICI Direct Research, AIOCD
7.2
12.4
7.0
9.7
10.8
9.8
8.8
10.4
7.1
6.7
13.2
9.5
11.9
0.0
5.0
10.0
15.0
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
(%
)
Indian Pharma Market
13.9
5.7
0.2
7.6
11.8
5.9
24.022.9
9.3
13.9
9.2
19.3
5.2
9.4
11.4
12.9
17.5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Abbott
Aja
nta
Ale
mbic
Bio
con
Cadila
Cip
la
DR
L
Gle
nm
ark
GS
K P
harm
a
Indoco
Ipca L
abs
Lupin
Natco
Pfiz
er
Sanofi
Sun P
harm
a
Torrent
(%
)
Therapy wise performance (| crore)
Therapy Sep'19 Sep'18 %Aug'19 %
Anti-Infectives 1898 1712 10.9 1806 5.1
Cardiac 1473 1296 13.7 1463 0.7
GI 1408 1257 12.1 1423 -1.1
Anti Diabetic 1147 1004 14.2 1164 -1.5
Vitamins 1076 966 11.4 1079 -0.2
Respiratory 946 877 7.8 872 8.5
Pain 874 776 12.6 866 0.9
Derma 829 751 10.3 813 2.0
Neuro 721 645 11.9 715 0.8
Gynaecological 586 543 7.9 585 0.2
Anti-Neoplastics 255 230 11.2 245 4.1
Hormones 225 201 11.8 219 2.5
Ophthal 219 197 10.8 219 -0.1
Vaccines 192 159 20.5 187 2.5
Urology 167 140 18.6 163 2.4
Blood Related 158 135 17.1 148 7.4
Others 117 99 18.2 112 4.8
Anti Malarials 75 67 11.2 62 20.0
Stomatologicals 65 55 19.1 65 0.5
Sex Stimulants 61 50 21.8 62 -1.5
Top brands in Indian pharma market (MAT;
| crore)
Source: ICICI Direct Research; AIOCD
Source: ICICI Direct Research; AIOCD
Acute vs Chronic vs Sub Chronic
Source: ICICI Direct Research; AIOCD; As per AIOCD MAT Sep 2019
Acute
47%
Chronic
33%
Sub
Chronic
20%
Brand Company Therapy Sep'19YoY %
Mixtard Abbott Anti Diabetic 539 8.4
Lantus Sanofi IndiaAnti Diabetic 499 18.4
Galvus Met Novartis Anti Diabetic 483 10.3
Glycomet GpUSV Anti Diabetic 474 15.8
Janumet MSD Anti Diabetic 469 16.0
Augmentin GSK Anti-Infectives429 18.2
Liv 52 Himalaya GI 397 4.7
Duphaston Abbott Hormones 388 26.0
Clavam Alkem Anti-Infectives370 14.7
Thyronorm Abbott Hormones 352 11.9
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ICICI Securities | Retail Research 5
ICICI Direct Research
Monthly Sector Update | Health Check
Exhibit 3: Domestic formulations – Market Share (MAT Value September 2019)
Source: ICICI Direct Research; AIOCD
Exhibit 4: Acute vs. Chronic vs. sub chronic (MAT Value September 2019)
Source: ICICI Direct Research; AIOCD
8%
6%
5%
4%4%
3%
2% 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
Pfiz
er
Dr.
Reddys
Sanofi
Gle
nm
ark
Ipca
Ale
mbic
FD
C
Natco
Indoco
Aja
nta
Bio
con
38 39
57
3242
52
77
40
82
65
27
88
41
62
44 40
26
54
4051
2460
45 29
9
41
527
57
0
55 15 5245
52
31
2210
209 13
2013 19
13 7 16 114
23
415
21 16
0
20
40
60
80
100
120
Abbott
Aja
nta
Ale
mbic
Bio
con
Cip
la
Dr.
Reddys
FD
C
Gle
nm
ark
Indoco
IPC
A
Lupin
Sun
Novartis
Pfiz
er*
Sanofi
Sun
Torrent
Cadila
%
Acute Chronic Sub Chronic
-
ICICI Securities | Retail Research 6
ICICI Direct Research
Monthly Sector Update | Health Check
IPM grows ~12% YoY in Q2FY20, price led growth…
The Indian pharmaceutical market (IPM) grew 11.5% YoY to | 36725 crore
in Q2FY20. The growth was attributable to price hike: 5.5%, new product
launches: 2.8% and volumes growth: 3.2%
The fixed dosage combination (FDCs) related market showed a decline of
67.0% while the approved FDC market grew 12.2% and single product
market grew 11.9%.
Drugs under NLEM list grew 13.5% YoY while non-NLEM drugs grew 11.4%.
Growth was mainly driven by price hikes.
Among companies under I-direct coverage 8 companies (Dr Reddy’s, Lupin,
FDC, Indoco, Abbott, Cadila, Sanofi, Torrent) have outperformed industry
growth rate.
Therapy wise, 12 major therapies have registered faster than industry
growth. Notable among them with growth rates- anti-malarials -18%,
stomatologicals -17.1%, urology -17%, vaccines – 14.1%, anti-infectives –
14%, sex-stimulants – 13.7%, anti-diabetic – 13.5%, respiratory – 12.4%,
pain – 12.2%, hormones -11.6%.
Domestic companies have grown at 11.3% YoY while MNC companies have
grown at 12.6%
Exhibit 5: Domestic formulations - growth trend
Source: ICICI Direct Research; AIOCD
Exhibit 6: Companies growth in domestic market in Q2FY20
Source: ICICI Direct Research, AIOCD
0.1
7.0 7.1 7.3
1.9 2.3 2.5
0.1
3.2
-2.1 -1.6-1.1 -0.9
5.0 4.94.9
5.1
5.5
2.7
2.7
2.7 2.7 2.7 2.7 2.5
2.9
2.8
0.7
6.4
8.6 9.0 9.79.8 9.9
8.1
11.5
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20
Volumes Price Increases New Products
12.3
5.8
2.5
8.1 7.6
19.3
16.9
8.2
16.6
10.2
16.9
(3.2)
7.8
14.1
11.4 12.7
13.7
(5.0)
-
5.0
10.0
15.0
20.0
25.0
Abbott
Aja
nta
Ale
mbic
Bio
con
Cip
la
Dr.
Reddys L
ab
FD
C
Gle
nm
ark
Indoco
IPC
A
Lupin
Natco
Pfiz
er
Sanofi
Sun
Torrent
Cadila
(%
)
Therapy wise performance (| crore)
Therapy Q2FY20 Q2FY19 %Q1FY20 %
Anti-Infectives5303 4653 14.0 4128 28.4
Cardiac 4418 3960 11.5 4331 2.0
GI 4251 3833 10.9 3983 6.7
Anti Diabetic 3488 3074 13.5 3374 3.4
Vitamins 3249 2943 10.4 3046 6.6
Respiratory 2585 2299 12.5 2112 22.4
Pain 2562 2284 12.2 2279 12.4
Derma 2451 2266 8.2 2245 9.2
Neuro 2151 1953 10.2 2076 3.6
Gynaecological1772 1663 6.5 1756 0.9
Anti-Neoplastics749 713 5.1 757 -1.0
Hormones 661 592 11.6 613 7.7
Ophthal 659 599 10.0 650 1.4
Vaccines 573 502 14.1 527 8.7
Urology 494 422 17.0 474 4.2
Blood Related 456 392 16.2 414 10.1
Others 340 300 13.1 318 7.0
Anti Malarials 195 165 18.0 183 6.1
Stomatologicals187 159 17.1 193 -3.3
Sex Stimulants 183 161 13.7 105 75.1
Source: ICICI Direct Research; AIOCD
-
ICICI Securities | Retail Research 7
ICICI Direct Research
Monthly Sector Update | Health Check
Exhibit 7: Top five brands in value terms (MAT Value September 2019)
Sun Brand Therapy Sales
1 Rosuvas Cardiac 269
2 Levipil Neuro 266
3 Istamet Anti Diabetic 259
4 Volini Pain 251
5 Gemer Anti Diabetic 200
Cipla Brand Therapy Sales
1 Foracort Respiratory 324
2 Budecort Respiratory 226
3 Duolin Respiratory 214
4 Seroflo Respiratory 191
5 Asthalin Respiratory 167
Cadila Brand Therapy Sales
1 Skinlite Derma 170
2 Deriphyllin Respiratory 161
3 Atorva Cardiac 133
4 Pantodac GI 121
5 Mifegest Kit Gynaecological 120
Lupin Brand Therapy Sales
1 Gluconorm-G Anti Diabetic 253
2 Huminsulin Anti Diabetic 186
3 Budamate Respiratory 124
4 Gibtulio Anti Diabetic 122
5 Ondero Anti Diabetic 106
Torrent Brand Therapy Sales
1 Shelcal Vitamins 219
2 Chymoral FortePain 152
3 Nikoran Cardiac 107
4 Azulix-Mf Anti Diabetic 101
5 Losar H Cardiac 97
Dr. Reddys Brand Therapy Sales
1 Omez GI 142
2 Omez D GI 125
3 Econorm GI 124
4 Atarax Derma 102
5 Razo D GI 84
Glenmark Brand Therapy Sales
1 Telma Cardiac 258
2 Telma H Cardiac 205
3 Telma Am Cardiac 132
4 Candid Derma 117
5 Ascoril Plus Respiratory 109
IPCA Brand Therapy Sales
1 Zerodol Sp Pain 189
2 Zerodol P Pain 122
3 Hcqs Anti Malarials 113
4 Folitrax Anti-Neoplastics 63
5 Glycinorm M Anti Diabetic 51
Alembic Brand Therapy Sales
1 Azithral Anti-Infectives 162
2 Althrocin Anti-Infectives 80
3 Wikoryl Respiratory 70
4 Roxid Anti-Infectives 53
5 Gestofit Gynaecological 49
Natco Brand Therapy Sales
1 Velpanat Anti-Infectives 190
2 Hepcinat Anti-Infectives 160
3 Geftinat Anti-Neoplastics 122
4 Erlonat Anti-Neoplastics 104
5 Natdac Anti-Infectives 94
Indoco Brand Therapy Sales
1 Febrex Plus Respiratory 87
2 Cyclopam GI 55
3 Sensodent-K Stomatologicals 51
4 Oxipod Anti-Infectives 50
5 Atm Anti-Infectives 46
Ajanta Brand Therapy Sales
1 Met Xl Cardiac 106
2 Atorfit Cv Cardiac 55
3 Melacare Derma 50
4 Feburic Pain 34
5 Met Xl Am Cardiac 26
Biocon Brand Therapy Sales
1 Insugen Anti Diabetic 114
2 Basalog Anti Diabetic 87
3 Canmab Anti-Neoplastics 80
4 Insugen R Anti Diabetic 25
5 Erypro Blood Related 22
Abbott Brand Therapy Sales
1 Mixtard Anti Diabetic 539
2 Duphaston Gynaecological 388
3 Thyronorm Hormones 352
4 Novomix Anti Diabetic 308
5 Phensedyl Cough LinctusRespiratory 288
Sanofi Brand Therapy Sales
1 Lantus Anti Diabetic 499
2 Allegra Respiratory 187
3 Combiflam Pain 183
4 Amaryl M Anti Diabetic 160
5 Hexaxim Vaccines 155
Source: ICICI Direct Research; AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)
-
ICICI Securities | Retail Research 8
ICICI Direct Research
Monthly Sector Update | Health Check
Exhibit 8: Top five therapies in value term (MAT value September 2019)
Sun Therapy Sales (|cr)
1 Cardiac 1980
2 Neuro 1882
3 GI 1348
4 Anti-Infectives 1126
5 Anti Diabetic 1036
Cipla Therapy Sales (|cr)
1 Respiratory 2186
2 Anti-Infectives 1355
3 Cardiac 842
4 GI 464
5 Urology 369
Cadila Therapy Sales (|cr)
1 Anti-Infectives 866
2 Cardiac 777
3 GI 608
4 Respiratory 618
5 Pain 537
Lupin Therapy Sales (|cr)
1 Cardiac 1239
2 Anti Diabetic 1225
3 Anti-Infectives 744
4 Respiratory 637
5 GI 378
Torrent Therapy Sales (|cr)
1 Cardiac 1297
2 GI 672
3 Neuro 624
4 Vitamins 535
5 Anti Diabetic 341
Dr. Reddys Therapy Sales (|cr)
1 GI 725
2 Cardiac 428
3 Derma 343
4 Anti-Infectives 218
5 Respiratory 257
Glenmark Therapy Sales (|cr)
1 Derma 860
2 Cardiac 834
3 Respiratory 528
4 Anti-Infectives 379
5 Anti Diabetic 265
IPCA Therapy Sales (|cr)
1 Pain 564
2 Cardiac 324
3 Anti Malarials 296
4 GI 134
5 Anti-Infectives 135
Alembic Therapy Sales (|cr)
1 Anti-Infectives 360
2 Cardiac 258
3 Respiratory 216
4 GI 200
5 Gynaecological 192
Natco Therapy Sales (|cr)
1 Anti-Neoplastics 516
2 Anti-Infectives 535
3 Pain 33
4 Cardiac 4
5 Blood Related 2
Indoco Therapy Sales (|cr)
1 Respiratory 157
2 Anti-Infectives 155
3 Stomatologicals 164
4 GI 126
5 Vitamins 72
Ajanta Therapy Sales (|cr)
1 Cardiac 345
2 Ophthal 195
3 Derma 132
4 Pain 47
5 Vitamins 29
Biocon Therapy Sales (|cr)
1 Anti Diabetic 261
2 Anti-Neoplastics 138
3 Anti-Infectives 22
4 Cardiac 10
5 Blood Related 24
Abbott Therapy Sales (|cr)
1 Anti Diabetic 1709
2 GI 1452
3 Vitamins 893
4 Neuro 722
5 Cardiac 638
Sanofi Therapy Sales (|cr)
1 Anti Diabetic 942
2 Cardiac 486
3 Vaccines 398
4 Respiratory 321
5 Pain 268
Source: ICICI Direct Research, AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)
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Monthly Sector News
Price hikes, new launches, recalls, approvals
Glenmark receives Orphan Drug Designation for its antibody candidate
Glenmark receives Orphan Drug Designation from USFDA for GBR 1342, a
bispecific antibody candidate under evaluation for the treatment of Multiple
Myeloma
Torrent Pharma expands Losartan recall in US
As per USFDA, Torrent Pharma has expanded recall of its hypertension
drugs, Losartan potassium tablets & Losartan
potassium/hydrochlorothiazide tablets in US due to detection of trace of N-
Methylnitrosobutyric, a known animal & potential human carcinogen
Dr Reddy's wins bid under China's pilot programme
As per a Chinese media report, Dr Reddy’s has won a bid for supplying
Olanzapine, an antipsychotic used to treat schizophrenia & bipolar disorder.
The company had offered a 35 % price cut under China’s drug procurement
pilot program to secure the bid. The drug will be supplied to public hospitals
in several provinces of China including Zhejiang, Hunan and Guangxi
GSK Pharma recalls Ranitidine drug in India, halts global supply
GSK pharma has suspended supply and distribution of its ranitidine
hydrochloride (Zinetac) products worldwide due to regulatory concerns into
presence of genotoxic nitrosamine NDMA in the drug. The company has
also issued a voluntary recall of Zinetac Tablets in India.
Biocon plans 70% cut in insulin prices
As per media reports, Biocon plans to bring down the cost of insulin to US$
0.10 (~| 7) in low & middle income countries. Currently blended median
patient prices are US$ 9 per 10ml vial (~US$ 0.36 per day for 40 units)
Biocon launches insulin biosimilar in Australia
Biocon and Mylan N.V. have launched the first insulin Glargine biosimilar
(Semglee, 3mL pre-filled pen) for injection, 100 IU/mL available on the
Pharmaceuticals Benefit Scheme in Australia
Dr Reddy’s suspends its Ranitidine supply worldwide
As per media reports, Dr Reddy’s has suspended supply of its OTC drug
Ranitidine (GI therapy) worldwide, as a precautionary measure due to
USFDA probe into reported presence of impurity N-
nitrosodimethylamine(NDMA) at low levels.
Lawsuits, court rulings, settlements, regulatory issues
USFDA inspects Glenmark’s Indore Unit
As per media reports, Glenmark's Indore unit did not receive any
observations from the USFDA after the cGMP inspection conducted from
September 9-13, 2019
Cipla’s Pithampur facilities get GMP certificate from UK MHRA
As per media reports, Cipla's manufacturing facilities in Pithampur, Madhya
Pradesh(unit I/II/IV) has gotten UK MHRA’s GMP certification for the
inspection conducted on June 04, 2019
Lupin receives warning letter from USFDA
Lupin’s Mandideep (Unit-1) facility in Madhya Pradesh has received a
warning letter from the USFDA. This plant manufactures cephalosporin API
and formulations. The warning letter follows an inspection of the plant in
Dec’18 and its classification as OAI (official action indicated) in Mar’19.
Cipla’s Bengaluru API facility receives EIR from USFDA
Inspection of Cipla's API manufacturing facility at Virgonagar, Bengaluru has
been closed with receipt of establishment inspection report (EIR) from
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USFDA. The facility had received seven observations after the cGMP
inspection conducted from July 15-19, 2019
Biocon’s new Bengaluru facilities receives Form 483 from USFDA
USFDA conducted pre-approval Inspection at two of Biocon’s new Biologics
Manufacturing facilities in Bengaluru from Sep 10-19, 2019. The inspection
included a new Drug Substance (DS) and a Drug Product (DP) unit. At the
end of inspection, USFDA issued a Form 483 with four observations for the
new DS facility, three observations for the new DP facility and one general
observation
USFDA inspects Lupin’s Tarapur Unit
Lupin’s API facility at Tarapur receives three observations from USFDA after
the inspection carried out from September 16-20, 2019
Cadila’s API unit at Ankaleshwar receives NAI status from USFDA
Cadila’s API manufacturing facility at Ankaleshwar, Gujarat has received EIR
from USFDA classifying it as ‘No Action Indicated’ (NAI), indicating clearance
of plant. The inspection was conducted by USFDA from July 22-26, 2019
USFDA completes inspection of Alembic’s Gujarat formulation facility
Alembic Pharma’s (Aleor Derma JV) formulation manufacturing facility at
Karkhadi, Gujarat has received one observation at the end of USFDA
inspection carried out from September 16-20, 2019
Sebi imposes | 22.7 crore fine on Aurobindo Pharma for insider trading
As per media reports, SEBI has imposed a penalty of | 22.7 crore on
Aurobindo Pharma, it's promoters & related entities for violation of insider
trading norms in relation to a licensing deal it entered into with Pfizer in 2009.
The regulator had investigated trading in the company's scrip based on
unpublished price sensitive information (UPSI) from July 2008 to March
2009
Cipla gets Form 483 after USFDA inspection
Cipla's Goa manufacturing facility has received Form 483 with 12
observations from USFDA after the cGMP inspection conducted from
September 16-27
Lupin's Goa facility completes Japan's PMDA inspection
Lupin's Goa facility (Unit - I & II) has completed GMP inspection by
Pharmaceutical and Medical Devices Agency (PMDA), Japan. As per the
company, no critical or major observations were issued after the inspection
that was conducted from September 24-27, 2019
Glenmark receives Russian MoH approval to market rhinitis drug
Glenmark Pharma has received approval from the Russian Ministry of
Healthcare to market Montlezir (Levocetirizine Dihydrochloride 5mg +
Montelukast Sodium 10mg) film‐coated tablets as a prescription product. The drug is indicated for the treatment of seasonal and perennial allergic
rhinitis. It is expected to be available in the Russian market by Q3 FY19‐20
Natco’s API facility at Mekaguda receives EIR from USFDA
Natco Pharma has received an establishment inspection report (EIR) from
USFDA indicating closure of inspection for its API facility at Mekaguda
Village near Hyderabad. The inspection was conducted from 5-9 August,
2019 at the end of which the facility had received a Form 483 with six
observations
Dr Reddy’s API facility receives EIR from USFDA
Dr Reddy's API facility at Bollaram, Hyderabad (Plant 2) has received an
establishment inspection report (EIR) from USFDA indicating audit closure.
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The facility, now classified as voluntary action indicated (VAI), had earlier in
July received a Form 483 with five observations
USFDA issues warning letter to Glenmark's Baddi facility
USFDA issued a warning letter to Glenmark's Baddi facility in Himachal
Pradesh. The inspection was conducted from April 15-20 earlier this year
and was classified as official action indicated (OAI). As per the company,
existing manufacturing & sale of products will not be impacted and there are
no major pending approvals from Baddi in the next 12 months. The Baddi
facility's expected sales for FY20 are ~US$30 million (7% of US sales).
We do not expect any material impact on the company's financials, except
a likely increase in remedial cost. However, stock is likely to remain under
pressure in near term due to this amendment
Aurobindo's Unit VII receives seven USFDA observations
The company's Unit-7 has received Form 483 from USFDA with seven
observations. The USFDA conducted cGMP related inspection at this unit
from September 19-27, 2019. As per the management, none of the
observations are related to data integrity. It is confident of addressing these
issues within the stipulated timeline
Unit VII is one of the largest and oldest plants for the company. As per media
reports, this plant is contributing 25-30% to US revenues. The company has
~33 pending USFDA approvals (including 14 tentative approvals) by the end
of Q1FY20 from Unit VII. We believe the observations are critical and the
company is likely to face further remedial action from the USFDA like
warning letter or in worst case scenario an import alert. We await further
action from USFDA. Until then, we believe the stock is likely to remain under
pressure
Lupin's Mandideep facility receives GMP certificate from Japan's PMDA
Lupin's Mandideep API facility (Unit - II) has received GMP certificate from
Pharmaceutical and Medical Devices Agency (PMDA), Japan. As per the
company, no critical or major observations were issued after the inspection
that was conducted from May 14-17, 2019
Torrent's Gujarat Indrad facility receives warning letter from USFDA.
Torrent's Gujarat Indrad facility receives warning letter from USFDA. Earlier
in August 2019 the US regulator had classified the facility (API &
Formulations) as official action indicated (OAI) after the inspection in April.
M&As, demergers, tie-ups and JVs
Cipla, Stempeutics sign agreement for novel stem cell product
As per media reports, Stempeutics Research signs an out-licensing deal with
Cipla for novel stem cell product 'Stempeucel-DFU' for treatment of non-
healing diabetic foot ulcer. As per the agreement Cipla will get marketing
rights for 5 years in India while Stempeutics will supply and manufacture the
product
CCI approves restructuring of Apollo’s Pharmacy business
CCI has approved restructuring & sale of Apollo Hospitals’ (AHEL) Pharma
business. This will help AHEL bring down its net debt. After the exercise
AHEL will hold 25.5% stake in Apollo Pharmacy Ltd
Biocon expands its R&D footprint through acquisition
Biocon acquired a 60,000 sq ft biologics R&D facility at TICEL bio-park in
Chennai from Pfizer Healthcare.
Apollo Hospitals to set up JV with Wellysis
As per media reports, Apollo Hospitals (AHEL) has launched a cardiac
command centre with connected technologies like tele-ECG monitoring,
tele-ECHO monitoring and remote Cathlab. AHEL has also signed an MoU
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with Wellysis (Samsung SDS South Korea spin-off) to set up a JV in Chittoor,
Andhra Pradesh. The JV will develop, manufacture and commercialize
cardiac wellness, diagnostics, monitoring and therapeutic devices.
Lupin completes sale of its subsidiary in Japan, Kyowa CritiCare
Lupin has completed the sale of Kyowa CritiCare's injectables business and
related assets to the Neopharma Group.
Cadila to sell its cholesterol lowering drug rights in US & Canada
Cadila Healthcare has signed an agreement to sell rights of its cholesterol
lowering Zypitamag (pitavastatin) to Medicure Inc for US & Canada markets.
Under terms of the agreement, Cadila will receive an upfront payment of
US$ 5 million and US$2 million in deferred payments over the next four
years along with sales milestone contingent payments & royalties.
Biocon, Evotec enter strategic deal for an early stage biosimilar
Biocon biologics, Just-Evotec ink pact for an early stage, pre-clinical
biosimilar asset. Biocon through this strategic in-licensing agreement will
expand its therapy basket & assume all development, manufacture &
commercialization for the asset. Evotec will receive milestone payments in
addition to the license fee.
Others
Apollo Hospitals launches AI-enabled Health Risk Assessment program
As per media sources, Apollo Hospitals has launched an AI-enabled
personalised Health Risk Assessment program 'Apollo Prohealth'. It has
been introduced in Chennai & Hyderabad, and will be extended to other
cities.
Apollo Hospitals’ promoter releases pledge shares
Apollo Hospitals’ promoter has released pledge on 79.4 lakh shares (5.7%
share capital) on Sept 19-20 by repaying debt obligations
Cadila announces positive clinical trial results from investigational molecule
Cadila healthcare has announced positive results from clinical trials
(EVIDENCES IV) of Saroglitazar Magnesium, for treatment of non-alcoholic
fatty liver disease (NAFLD) and non-alcoholic Steatohepatitis (NASH)
Sun Pharma presents positive trial results from ILUMYA
Sun Pharma presents results of long-term Phase 3 trials for ILUMYA
(tildrakizumab-asmn) showing significant skin clearance, maintained over
four years in people with moderate to severe plaque psoriasis at the 28th
European Academy of Dermatology and Venereology Congress (EADV) in
Madrid, Spain
ANDA Approvals
Lupin has received sANDA approval for generic version of Unithroid
(Levothyroxine Sodium) Tablets, 25/50/75/88/100/112/125/137
/150/175/200/300 mcg. The drug is used in treatment of hypothyroidism &
for Pituitary Thyrotropin Suppression. The drug(Unithroid & Synthroid) had
annual sales of ~US$2581 million in the US(IQVIA MAT June 2019).
Cipla has launched the generic version of Cubicin (Daptomycin, antibiotic)
single-dose 500mg/vial for injection in US. This drug had an annual sales of
~US$606 million in the US (IQVIA MAT June 2019).
Cadila gets USFDA approval for the generic version of Clobex (Clobetasol
Propionate, Therapy - derma) Lotion, 0.05% in US.
Lupin has launched the generic version of Pfizer’s Viagra (Sildenafil) Tablets,
25/50/100 mg in US. The drug, used for treatment of erectile dysfunction,
had an annual sales of ~US$ 216 million in US as per IQVIA MAT July 2019.
Lupin gets USFDA approval for the generic version of Pfizer’s Dilantin
(Extended Phenytoin Sodium, CNS therapy) Capsules, 100 mg. The drug,
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indicated for treatment & prevention of seizures, had annual sales of ~US$
105 million in US as per IQVIA MAT June 2019.
Alembic Pharma (Aleor Derma, JV) gets USFDA approval for generic version
of Galderma's Clobex (Clobetasol Propionate, Therapy - derma) Spray,
0.05% in US. The drug, used in treatment of moderate to severe plaque
psoriasis, had an estimated market size of ~US$ 22 million in US as per
IQVIA MAT December 2018.
Lupin has launched the generic version of Roche's immunosuppressant
Cellcept (Mycophenolate Mofetil) capsules, 250mg in US. The drug, used for
prophylaxis of organ rejection during transplants, had annual sales of ~
US$53 million in the US (IQVIA MAT August 2019).
Glenmark has received tentative ANDA approval from USFDA for the
generic version of Biogen's Tecfidera (Dimethyl Fumarate, CNS therapy)
delay-released Capsules, 120/240 mg. The drug, used to treat relapsing
multiple sclerosis (MS), had annual sales of ~US$ 3.7 billion in US as per
IQVIA MAT August 2019.
Cadila Healthcare has received final USFDA approval to market cholesterol
lowering Colesevelam Hydrochloride (RLD – Welchol) Tablets, 625mg in US.
The drug will be manufactured at the formulations facility at SEZ,
Ahmedabad.
Exhibit 9: One Year forward PE
Source: ICICI Direct Research, Bloomberg
0.0
10.0
20.0
30.0
40.0
Sep-16
Mar-17
Sep-17
Mar-18
Sep-18
Mar-19
Sep-19
x
NSE500 Index NSE Pharma
42% Premium
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Exhibit 10: ICICI Direct coverage Universe (Healthcare)
Company I-Direct CMP TP Rating M Cap
Code (|) (|) (| cr) FY18 FY19 FY20E FY21E FY18 FY19 FY20E FY21E FY18 FY19 FY20E FY21E FY18 FY19FY20EFY21E
Ajanta Pharma AJAPHA 977 1,010 Hold 8522 53.0 43.5 47.5 60.2 18.4 22.4 20.6 16.2 30.0 21.8 20.8 22.4 23.0 17.1 16.4 18.0
Alembic PharmaALEMPHA 542 560 Hold 10226 21.9 31.4 29.9 24.7 24.8 17.3 18.1 22.0 18.0 19.6 17.5 15.8 18.6 21.7 17.1 14.2
Apollo HospitalsAPOHOS 1407 1,500 Buy 19576 8.5 17.7 25.7 39.1 166.4 79.6 54.7 36.0 6.3 8.8 11.1 14.0 3.6 7.4 9.9 13.4
Aurobindo PharmaAURPHA 464 735 Buy 27173 41.6 42.1 49.1 61.2 11.1 11.0 9.5 7.6 20.0 15.9 14.3 16.3 20.7 17.7 17.3 18.0
Biocon BIOCON 240 330 Buy 28746 3.1 6.2 8.2 9.1 77.2 38.6 29.3 26.3 8.1 10.9 13.4 16.1 7.2 12.2 13.4 15.2
Cadila HealthcareCADHEA 232 250 Hold 23751 17.5 18.1 13.7 17.9 13.2 12.8 16.9 12.9 16.7 13.0 10.6 12.7 20.5 17.8 12.2 14.2
Cipla CIPLA 422 520 Hold 33987 18.3 18.6 21.4 25.9 23.0 22.7 19.7 16.3 9.6 10.9 12.4 13.7 10.4 10.0 10.5 11.5
Divi's Lab DIVLAB 1665 1,640 Hold 44201 33.3 51.0 50.3 63.1 50.0 32.7 33.1 26.4 20.0 25.5 21.7 23.3 14.9 19.4 16.8 17.9
Dr Reddy's LabsDRREDD 2643 2,770 Hold 43890 57.0 114.8 163.4 157.7 46.3 23.0 16.2 16.8 6.1 11.1 16.1 15.6 7.2 13.6 16.6 14.2
Glenmark PharmaGLEPHA 291 410 Hold 8197 28.5 26.9 28.3 34.2 10.2 10.8 10.3 8.5 14.6 14.5 13.5 14.5 15.6 13.5 12.6 13.3
Hikal HIKCHE 143 205 Buy 2022 6.3 8.4 10.1 13.6 22.8 17.1 14.1 10.5 12.2 14.3 14.8 17.2 11.5 13.6 14.5 16.5
Ipca Laboratories IPCLAB 858 1,195 Buy 10840 19.0 35.1 47.5 59.7 45.2 24.5 18.1 14.4 9.1 15.0 18.7 20.7 8.9 14.2 16.6 17.8
Jubilant Life JUBLIF 470 710 Buy 7489 41.3 52.1 54.1 64.9 11.4 9.0 8.7 7.2 14.9 14.4 15.9 17.1 15.7 16.9 15.8 16.5
Lupin LUPIN 694 755 Hold 31390 20.8 16.5 25.4 37.7 33.4 41.9 27.3 18.4 10.4 9.4 10.3 13.2 6.9 5.4 7.8 10.6
Narayana HrudalayaNARHRU 235 260 Buy 4809 2.5 2.3 6.2 9.0 94.0 103.8 37.7 26.0 6.3 7.6 11.9 14.7 4.9 4.3 10.5 13.3
Natco Pharma NATPHA 552 595 Hold 10026 37.7 34.9 35.9 26.4 14.6 15.8 15.4 20.9 27.4 21.3 19.3 13.1 22.7 18.5 16.1 10.7
Sun Pharma SUNPHA 389 470 Hold 93236 13.0 15.9 21.0 23.9 30.0 24.5 18.5 16.2 9.7 10.3 12.4 12.6 8.2 9.2 11.0 11.2
Syngene Int. SYNINT 309 358 Hold 12372 7.6 8.3 9.9 10.3 40.6 37.4 31.3 30.0 15.1 14.8 14.5 13.8 17.7 16.8 16.8 15.0
Torrent Pharma TORPHA 1681 1,750 Buy 28440 40.1 48.9 51.3 72.9 41.9 34.3 32.8 23.1 11.2 14.2 15.4 19.2 14.7 17.5 16.1 19.6
RoE (%)EPS (|) PE(x) RoCE (%)
Source: ICICI Direct Research, Bloomberg
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RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as
the analysts' valuation for a stock
Buy: >15%;
Hold: -5% to 15%;
Reduce: -5% to -15%;
Sell:
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We /I, Siddhant Khandekar, Inter CA, Mitesh Shah, CFA, Sudarshan Agarwal, PGDM (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to
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