Tag - Generic pharma

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13 Dec

Expect 15+ USFDA approval in CY22- Alembic Pharma

Update on the Indian Equity Market:

On Monday, NIFTY ended at 17,368 (-0.8%) 143 points lower. Among the sectoral indices, only IT (+0.3%) ended higher, whereas MEDIA (-1.8%), OIL&GAS (-1.4%) and REALTY (-1.4%) led the losers. Among the stocks, AXISBANK (+2.4%), TECHM (+2.2%), and SBILIFE (+1.5%) led the gainers while BAJAJFINANCE (-3.0%), BAJAJFINSERV (-2.1%), and RELIANCE (-1.9%) led the losers.

Pharmaceuticals

Expect 15+ USFDA approval in CY22- Alembic Pharma

Excerpts of an interview with Mr. RK Baheti, CFO of Alembic Pharma with CNBC TV18 on 9th December 2021:

  • Alembic Pharma has received tentative approval from USFDA for Selexipag tablets, a drug used to treat for pulmonary arterial hypertension with a market size of $460 Mn. There are 4 existing players in the market.
  • The company can only bring the drug to the market post its patent expiry so there’s an expected delay before the drug can be formally launched post final approval which will happen in CY23.
  • The company has first mover advantage in terms of launching the product on Day 1 of Patent Expiry, however the situation remains dynamic and other companies may receive approval for the same.
  • The company has an annual run rate of 15+ approvals and the company expects to launch 15 new products in the US in CY22, with 3 Products being first to file by the company.
  • Indian companies are facing intense pricing pressure in the US Generics business, due to heightened competition. Company’s degrowth is drawn by high base effect of last year’s exceptional performance and also drawn by company benefitting from scarcity and aggressive pricing over the past 2-3 years.
  • The growth ahead is expected to be driven by new launches and first to file opportunities as the pricing degrowth will continue by 10% on an annualized basis, the company has plans to stock up inventories in anticipation of shortages to take advantage of aggressive pricing as and when the opportunities arise

 

Asset Multiplier Comments

  • The company along with its peers is facing stiff competitive pricing pressure in the US Generics business, which was a key growth driver for the company in the past few years.
  • The revenue opportunity of new launches, existing competition and cost controls are going to be key drivers of profitability for the company.

 

Consensus Estimate: (Source: market screener website)

  • The closing price of Alembic Pharma was ₹ 797/- as on 13-Dec-2021.  It trades at 23x/19x/17x the EPS estimates of ₹ 35/42/47 for FY22E/FY23E/FY24E respectively.
  • The consensus target price is ₹ 860 implying a P/E Multiple of 18x on FY24 EPS Estimate of ₹ 47

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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09 Mar

Investments in generics getting validated now – LUPIN

Update on the Indian Equity Market:

On Tuesday, the equity market reversed from the day’s lows and the Nifty50 index closed 1% higher led by the BFSI sector. The top gainers in the index were SBILIFE (+5.0%), KOTAKBANK (+3.1%), and HDFCBANK (+2.9%) while the losers were BPCL (-4.6%), TATASTEEL (-3.9%), and GAIL (-3.3%). The sectoral gainers were FINANCIAL SERVICES (+2.2%), FINANCIAL SERVICES 25/50 (+1.9%), and PRIVATE BANK (+1.8%). METALS (-2.5%), MEDIA (-1.4%), and REALTY (-1.1%) led the sectoral losers.

On Women’s Day, CNBC-TV18 conducted interviews with some women leaders from India Inc. Here are the excerpts of an interview with Ms. Vinita Gupta, CEO, Lupin with CNBC TV18 on 8th March 2021:

  • Ms. Gupta believes that all the investments made to drive the generics business, and affordable medicines business to the next level are getting validated now. They have been investing in therapies like inhalation, biosimilars, complex injectables, and women’s health products over the past 5 years, and have made tremendous progress in the last 12-18months.
  • In the inhalation therapy, they have received the first major approval for Albuterol in Sept-2020. The timely approval despite the pandemic will be beneficial for asthma and COPD patients who are at a high risk of complications due to Covid-19 infection. Lupin was able to launch the product and is ramping up the production.
  • With more inhalation products pending approval from the US FDA, she believes the inhalation therapy will drive growth in the generics business.
  • There is still a very large number of Corona cases in particular in the US. From a lockdown point, some states have more of a lockdown than others. The elective procedures are still below pre-Covid levels, suggesting things aren’t yet back to normal. They hope things would be in the second half of this year with vaccinations ramping up over the next couple of months.
  • Lupin supplies medicines for about 5% of prescriptions in the USA so maintaining the supply continuity was essential through the pandemic.
  • Despite the pandemic, Lupin was able to achieve QoQ growth in both revenues and profits. She expects the growth to continue on FY22E as well. The Albuterol approval will be a significant growth driver in FY22E.
  • There are 5 other inhaler products in the pipeline in the next 2 years for Lupin in the USA. The FY23 will be a significant year as they intend to launch products like Albuterol, Fostair in Europe, Spiriva in 2023.
  • Price Erosion in the generics will continue to be one of the biggest challenges in FY22E. The price erosion has reduced from earlier periods to low-mid single digits now. The complex generics launches and operating efficiency will help offset the price erosion impact.
  • They have acute and chronic care products within their India portfolio. The chronic care areas such as diabetes, CNS, Cardiovascular, Respiratory have done extremely well. Acute care products have been struggling, in line with the overall acute market in India.

Asset Multiplier Comments

  • Domestic pharma companies have been facing price erosion pressures in generic products in the US for quite some time now. Hence, they have shifted focus on complex generics, and biosimilars which require a higher degree of specialization and are margin accretive. Some of these companies have shifted to a direct-to-market (DTM) approach rather than being partnered companies of US pharma majors.
  • Some domestic Indian companies such as Lupin and Cipla have specialization in respiratory/inhalation therapies. These companies expect Albuterol Sulfate inhaler products to be one of the key growth drivers in the near term. Apart from Albuterol Sulfate, these companies expect an incremental USD 100-150mn opportunity from the respiratory pipeline in the USA.

Consensus Estimate: (Source: market screener website)

  • The closing price of LUPIN was ₹ 1,033/- as of 09-March-2021. It traded at 43x/ 28x/ 23x the consensus earnings estimate of ₹ 23.9/ 37.5/ 45.7 per share for FY21E/FY22E/FY23E respectively.
  • The consensus target price of ₹ 1,045 implies a PE multiple of 23x on FY23E EPS of ₹ 45.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information pro

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01 Jul

Replacing China as a global chemical supplier is a medium to long term story- Lupin

Update on the Indian Equity Market:

 

On Tuesday, Nifty closed marginally lower at 10,302. Within NIFTY50, SHREECEM (+3.1%), MARUTI (+2.7%), and ICICIBANK (+2.6%) were the top gainers, while BPCL(-2.5%), POWERGRID (-1.9%) and SUNPHARMA (-1.9%) were the top losers. Among the sectoral indices, AUTO (+1.1%), FMCG (+0.3%), and FIN SERVICE (+0.3%) gained the most.  PSU BANK (-1.8%), MEDIA (-1.7%) and PHARMA (-1.5%) were the losing sectors.

 

Replacing China as a global chemical supplier is a medium to long term story- Lupin

 

Excerpts of an interview with Mr. Ramesh Swaminathan, Global CFO –Lupinpublished in Economic Times dated26thJune 2020:

  • The US Generic market has seen different phases in terms of pricing in the last 2 decades. Pricing was good during 2001-2005. In the 2005-2009 period, there was a sharp decline in prices which picked up later. 2011-2015 saw some tailwinds for pricing. 2015 onward due to customer consolidation and increased competition in generic space, the Pharma companies lost bargaining power leading to pricing pressure. However today, the situation has stabilized and everything depends on the portfolio.
  • There have been a lot of Indian generic entrants in the US generic space and that is where the competition is higher. US companies such as Teva, Mylan, and Sandoz have lost market share to the new entrants. But the smaller companies are now realizing that earning ROCE is not as easy. Companies have to invest in FDA approved manufacturing facilities of different kinds, there is a waiting period for getting ANDA approvals, and there is a working capital blockage. As a result, some players are backing out which will bring some pricing stability going forward.
  • In the last several years, Lupin, along with the other bigger companies, is focusing on delivering more complex generics including complex injectables, inhalation, etc. Complex injectables as a segment are growing at over 6-7%. Inhalations segment is growing at over 15%. These segments have lower competition because of the complexity involved.
  • In the specialty segment, a lot of the products are coming into the market over the next few years, which will help with the realizations for Indian generic companies. Companies need to have deep pockets because Specialty calls for a very different kind of approach. Innovation quotient and clinical data play a critical part.
  • Biosimilars is the sunrise industry for Indian pharma companies. There are considerable entry barriers, but once a company has a clone, has done immunogenicity studies well and, then potentially development risk will be mitigated. The pricing will also be better due to lower competition. Europe has adapted more to biosimilars. Once the American market picks up, the realization for players in that market would be much higher.
  • Lupin has got into women’s health because that is one space which has been vacated by big pharma and to that extent, the competition there is much lower.
  • Replacing China as a chemical producer for the world will be a medium to long term story. India has about 25% of USFDA approved API capacities in the world but there is still some way to go when it comes to supply. The government is trying to encourage this shift but the investments have to materialize.
  • There are 3 specific growth drivers for Indian pharma companies. One is the large American market, specifically the complex products which Lupin is also getting into. Second, the Indian domestic market is still underpenetrated. Due to the COVID-19 situation, there is going to be thrust from the Indian government and more public awareness which will aid faster growth. Third, many emerging markets are underpenetrated and if the portfolio is right, there is potential for growth in those markets.
  • There might be some demand contraction in India as well as America due to COVID-19 disruption. However, it is a very temporary situation and the second half of FY21E will be much better.
  • The flavor of the day seems to be a nationalistic foot forward. We can see in India as well as in America and other parts of the world. Lupin has been conscious about this for a while and has local manufacturing in countries where it operates. For Indian pharma companies, the basic paradigm should be low-cost manufacturing from India but supplemented with local manufacturing capabilities in overseas markets.

Consensus Estimate: (Source: market screener website)

  • The closing price of lupin was ₹ 910/- as of 30-June-2020. It traded at 31.9x/ 23.4x the consensus EPS estimate of ₹ 28.5/ 38.9 for FY21E/ FY22E respectively.
  • Consensus target price of ₹ 852/- implies a PE multiple of 21.9x on FY22E EPS of ₹ 38.9.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

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