FDC Ltd 13 22 19 14 3491 Health Check Suven Life -5 -1 20 ...content.icicidirect.com/mailimages/IDirect_HealthCheck_Dec19.pdf2 Chymoral Forte Pain 154 3 Nikoran Cardiac 109 4 Azulix-Mf

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December 12, 2019

Health Check

Hospitals in focus; Biocon launches Trastuzumab…

In the last three to four years, with many frontline large cap pharma

companies being hampered by structural US related & other issues, we have

seen growing investors’ preference for healthcare services providers. Some

peculiar factors responsible for growing interest in the hospitals space are:

1) waning high capex episodes of private hospitals after the 2008-18 capex

cycle, 2) shifting focus towards assets light model for most hospital players,

3) improving financial matrix, 4) government’s endeavour to bring private

players on board in the wake of the holistic view of universal and affordable

healthcare (themes like NHP 2017 and Ayushman Bharat), 5) India’s

emergence as the destination for medical tourism and 6) the underserved

situation of Indian hospitals compared to the growing needs and

demographic changes well documented by new and existing players. To

capture the potential, we have come up with a thematic report on hospitals

initiating coverage on Aster DM (BUY), Healthcare Global (HOLD) and Shalby

(HOLD) besides reiterating BUY on both Apollo Hospitals and Narayana

Hrudayalaya (please click for detailed report).

On the US launches front, Biocon-Mylan have launched Ogivri, oncology

biosimilar of Roche's Herceptin (Trastuzumab) in the US. The drug had

annual sales of US$2.9 billion in FY18. This is the second biosimilar launched

by Biocon-Mylan in the US.

In another major development, Suven Life’s SUVN-502 (Masupirdine) phase

2a study for Alzheimer’s disease failed to meet its pre-specified primary

endpoint in proof of concept (POC) study. This is a major setback on this

flagship drug. Nonetheless, the future financial impact may be minimal

mainly because the company has already expensed R&D cost in P&L.

On the regulatory front, the USFDA has classified Ipca Labs' formulations

facility at Piparia, Silvassa as official action indicated (OAI). The facility had

received three observations after the cGMP inspection conducted from

August 19-23 by USFDA. We do not expect any material impact of the OAI

status on current operations.

The Indian pharmaceutical market (IPM) grew 14.5% YoY to | 12624 crore

in November 2019. The growth was attributable to volume: 5.9% (highest in

last 17 months), price hike: 5.7%, and new launches: 3% (highest in last 16

months). On a MAT basis, IPM growth was 9.8% YoY to | 139144 crore.

Financials normalising but stock specific approach remains…

The US generics narrative in the last few quarters is reflecting some sort of

normalcy on the back of a stability in the base business performance and

new launches besides rationalisation of unviable products. However, a

sudden increase in USFDA scrutiny has once again put US-heavy companies

under pressure. Domestic formulations are volatile on a monthly basis but

are showing a steady performance on an annual basis. Profitability is 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.

Chinese raw material sourcing, besides improving operating leverage, are

also likely to contribute to margin expansion. Similarly, the companies are

moderating their capex plans to focus on better RoCE. Financially, things are

looking much stable. However, resurfacing of regulatory issues raised by the

USFDA and looming generic generics threat in the domestic formulations

would continue to weigh on sentiments. In this backdrop, we continue to

maintain a stock specific approach. MNCs, CRAMs players and hospitals are

our preferred picks in the healthcare segment.

Stock Performance

Mcap

Company 1M 3M YTD 1Y 12-Dec

Sun Pharma.Inds. 3 2 1 1 104416

Divi's Lab. 7 11 24 20 48660

Dr Reddy's Labs 4 5 11 13 48453

Cipla 2 -1 -11 -13 37223

Biocon 11 26 -7 -8 35100

Lupin 2 -1 -11 -9 33973

Torrent Pharma. 4 9 6 6 31650

Cadila Health. 15 11 -24 -25 27165

Abbott 8 29 68 68 26819

Aurobindo Pharma 3 -28 -39 -39 26408

Pfizer 8 33 51 50 19698

Apollo Hospitals -2 -5 10 14 19311

Sanofi 5 17 9 11 15963

Ipca Labs. 5 22 44 46 14594

Syngene Int. -9 -6 8 13 12060

Natco Pharma 1 4 -14 -17 10659

Alembic Pharma -4 8 -8 -11 10416

Fortis Health -14 9 -3 -11 10305

Glenmark Pharma. 18 -10 -50 -48 9687

Ajanta Pharma 0 -6 -17 -10 8578

Jubilant Life -1 8 -25 -29 8442

Aster DM 3 23 -4 -1 7546

Narayana Hrudayalaya7 24 58 49 6293

FDC Ltd 13 22 19 14 3491

Suven Life -5 -1 20 14 3460

Indoco Remedies 2 -6 -31 -30 1384

Hester Bio -3 -6 40 34 1341

Hikal -10 -35 -35 -35 1250

Shalby Ltd -15 14 -34 -36 1048

Healthcare Global -17 -17 -52 -52 834

NGL Fine-Chem -21 -17 -7 -10 250

Return (%)

Source: Bloomberg

Global Indices Performance

Company 1M 3M YTD 1Y 3Y 5Y

S&P 500 Pharm Index (US)6 9 11 5 11 7

NASDAQ Biotechnology (US)8 15 24 14 11 4

S&P Pharmaceuticals (US)8 11 14 1 3 -3

DJ Pharma and Biotech (US)6 11 15 8 11 6

DJ STOXX Healthcare (EU)2 8 30 24 12 8

MSCI World Pharm & Biotech5 11 19 13 13 6

NSE Pharma 3 -1 -8 -8 -9 -6

Return (%)

Source: Bloomberg

Research Analyst

Siddhant Khandekar

[email protected]

MItesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

http://content.icicidirect.com/mailimages/IDirect_Hospitals_SectorReport.pdf

ICICI Securities | Retail Research 2

ICICI Direct Research Monthly Sector Update | Health Check

IPM grows 14% YoY in November, best growth in 32 months

albeit on lower base

The Indian pharmaceutical market (IPM) grew 14.5% YoY to | 12624 crore

in November 2019. The growth was attributable to volume growth: 5.9%

(highest in last 17 months), price hike: 5.7%, and new product launches: 3%

(highest in last 16 months). The leg up was also on account of low base of

November 2018 (7% YoY growth in that month).

Drugs under NLEM list grew 15.2% YoY while non-NLEM drugs grew 14.6%.

The fixed dosage combination (FDCs) related market showed a decline of

50.2%, approved FDC market grew 14.2%, & single molecules grew 14.7%.

Among companies under I-direct coverage, seven (Dr Reddy’s, Pfizer, FDC,

Glenmark, Torrent, Cadila, Lupin) have outperformed industry growth rate.

Therapy wise, seven major therapies have registered faster than industry

growth. Notable among them with growth rates- respiratory 19.7%, anti-

infective – 17%, urology – 15.8% and pain – 15.2%.

Domestic companies have grown at 15.1% YoY while MNC companies have

grown at 12.4%.

On a MAT basis, IPM growth was 9.8% YoY to | 139144 crore.

Exhibit 1: Domestic formulations - Growth trend

Source: ICICI Direct Research; AIOCD

Exhibit 2: Companies growth in domestic market in November 2019

Source: ICICI Direct Research, AIOCD

7.0

9.7 1

0.8

9.9

8.9

10.5

7.2

6.8

13.3

9.5

11.9

5.2

14.5

0.0

5.0

10.0

15.0

20.0

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

(%

)

Indian Pharma Market

12.010.1

8.9

0.0

10.712.6

28.0

9.4

20.0

12.811.4

15.3

-6.6

23.4

6.7

14.5

17.8

-10.0

-5.0

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 Nov'19 Nov'18 % Oct'19 %

Anti-Infectives 1789 1529 17.0 1806 -0.9

Cardiac 1542 1357 13.6 1491 3.4

GI 1342 1172 14.5 1322 1.6

Anti Diabetic 1190 1069 11.3 1161 2.4

Respiratory 1077 900 19.7 989 9.0

Vitamins 1058 931 13.7 1033 2.4

Derma 871 772 12.8 818 6.4

Pain 870 755 15.2 851 2.3

Neuro 749 660 13.5 724 3.6

Gynaecological 585 524 11.8 570 2.6

Anti-Neoplastics 263 234 12.5 253 4.0

Hormones 236 208 13.7 224 5.5

Ophthal 226 203 11.4 218 3.8

Vaccines 200 185 8.5 195 2.6

Urology 163 141 15.8 163 0.3

Blood Related 151 123 23.1 156 -3.0

Others 122 99 22.6 113 7.6

Stomatologicals 66 56 18.4 62 6.7

Sex Stimulants 66 55 19.5 60 8.9

Anti Malarials 58 51 13.7 68 -14.1


Top brands in IPM (MAT; | crore)


Acute vs. chronic vs. sub chronic

Source: ICICI Direct Research; AIOCD; As per AIOCD MAT Nov 2019

Acute

47%

Chronic

33%

Sub

Chronic

20%

Brand Company Therapy Nov'19YoY %

Mixtard Abbott Anti Diabetic 545 8.0

Lantus Sanofi IndiaAnti Diabetic 492 9.9

Glycomet GpUSV Anti Diabetic 487 8.1

Janumet MSD Anti Diabetic 477 15.0

Augmentin GSK Anti-Infectives440 19.3

Galvus Met Novartis Anti Diabetic 434 2.4

Liv 52 Himalaya GI 402 5.1

Duphaston Abbott Hormones 391 20.1

Clavam Alkem Anti-Infectives374 13.0

Thyronorm Abbott Hormones 355 9.3



Exhibit 3: Domestic formulations – market share (MAT value November 2019)


Exhibit 4: Acute vs. chronic vs. sub chronic (MAT value November 2019)


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 40

57

3142

52

77

40

82

65

27

88

42

60

44 4127

54

3951

24

6045 28

9

41

527

57

1

54 17 5245

52

30

2210

199 13

2013 19 13 7

16 115

23

415

2116

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



Exhibit 5: Top five brands in value terms (MAT value November 2019)

Sun Brand Therapy Sales

1 Rosuvas Cardiac 272

2 Levipil Neuro 271

3 Istamet Anti Diabetic 259

4 Volini Pain 257

5 Gemer Anti Diabetic 203

Cipla Brand Therapy Sales

1 Foracort Respiratory 325

2 Budecort Respiratory 234

3 Duolin Respiratory 217

4 Seroflo Respiratory 191

5 Asthalin Respiratory 171

Cadila Brand Therapy Sales

1 Deriphyllin Respiratory 166

2 Skinlite Derma 163

3 Atorva Cardiac 136

4 Mifegest Kit Gynaecological 126

5 Pantodac GI 124

Lupin Brand Therapy Sales

1 Gluconorm-G Anti Diabetic 254

2 Huminsulin Anti Diabetic 185

3 Budamate Respiratory 128

4 Gibtulio Anti Diabetic 124

5 Ondero Anti Diabetic 109

Torrent Brand Therapy Sales

1 Shelcal Vitamins 219

2 Chymoral FortePain 154

3 Nikoran Cardiac 109

4 Azulix-Mf Anti Diabetic 102

5 Nexpro Rd GI 95

Dr. Reddys Brand Therapy Sales

1 Omez GI 150

2 Omez D GI 129

3 Econorm GI 127

4 Atarax Derma 108

5 Razo D GI 88

Glenmark Brand Therapy Sales

1 Telma Cardiac 268

2 Telma H Cardiac 213

3 Telma Am Cardiac 134

4 Candid Derma 119

5 Ascoril Plus Respiratory 112

IPCA Brand Therapy Sales

1 Zerodol Sp Pain 192

2 Zerodol P Pain 124

3 Hcqs Anti Malarials 115

4 Folitrax Anti-Neoplastics 64

5 Larinate Anti Malarials 52

Alembic Brand Therapy Sales

1 Azithral Anti-Infectives 163

2 Althrocin Anti-Infectives 82

3 Wikoryl Respiratory 71

4 Roxid Anti-Infectives 53

5 Gestofit Gynaecological 48

Natco Brand Therapy Sales

1 Velpanat Anti-Infectives 172

2 Hepcinat Anti-Infectives 159

3 Geftinat Anti-Neoplastics 122

4 Erlonat Anti-Neoplastics 104

5 Natdac Anti-Infectives 94

Indoco Brand Therapy Sales

1 Febrex Plus Respiratory 89

2 Cyclopam GI 55

3 Sensodent-K Stomatologicals 52

4 Oxipod Anti-Infectives 51

5 Atm Anti-Infectives 47

Ajanta Brand Therapy Sales

1 Met Xl Cardiac 107

2 Atorfit Cv Cardiac 54

3 Melacare Derma 50

4 Feburic Pain 35

5 Met Xl Am Cardiac 26

Biocon Brand Therapy Sales

1 Insugen Anti Diabetic 113

2 Basalog Anti Diabetic 86

3 Canmab Anti-Neoplastics 75

4 Erypro Blood Related 27

5 Insugen R Anti Diabetic 25

Abbott Brand Therapy Sales

1 Mixtard Anti Diabetic 545

2 Duphaston Gynaecological 391

3 Thyronorm Hormones 355

4 Novomix Anti Diabetic 306

5 Phensedyl Cough LinctusRespiratory 290

Sanofi Brand Therapy Sales

1 Lantus Anti Diabetic 492

2 Allegra Respiratory 188

3 Combiflam Pain 188

4 Amaryl M Anti Diabetic 160

5 Hexaxim Vaccines 157

Source: ICICI Direct Research; AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)



Exhibit 6: Top five therapies in value term (MAT value November 2019)

Sun Therapy Sales (|cr)

1 Cardiac 2000

2 Neuro 1904

3 GI 1377

4 Anti-Infectives 1163

5 Anti Diabetic 1048

Cipla Therapy Sales (|cr)

1 Respiratory 2219


3 Cardiac 855

4 GI 413

5 Urology 374

Cadila Therapy Sales (|cr)


2 Cardiac 791

3 Respiratory 628

4 GI 619

5 Pain 549

Lupin Therapy Sales (|cr)

1 Cardiac 1259



4 Respiratory 653

5 GI 384

Torrent Therapy Sales (|cr)

1 Cardiac 1307

2 GI 687

3 Neuro 631

4 Vitamins 542

5 Anti Diabetic 347

Dr. Reddys Therapy Sales (|cr)

1 GI 752

2 Cardiac 438

3 Derma 358

4 Respiratory 266

5 Anti Diabetic 244

Glenmark Therapy Sales (|cr)

1 Derma 874

2 Cardiac 857

3 Respiratory 547


5 Anti Diabetic 274

IPCA Therapy Sales (|cr)

1 Pain 569

2 Cardiac 324

3 Anti Malarials 302


5 GI 134

Alembic Therapy Sales (|cr)


2 Cardiac 259

3 Respiratory 221

4 GI 199

5 Gynaecological 190

Natco Therapy Sales (|cr)


2 Anti-Neoplastics 513

3 Pain 33

4 Cardiac 4

5 Others 2

Indoco Therapy Sales (|cr)

1 Stomatologicals 166

2 Respiratory 160


4 GI 126

5 Vitamins 76

Ajanta Therapy Sales (|cr)

1 Cardiac 345

2 Ophthal 199

3 Derma 135

4 Pain 49

5 Vitamins 29

Biocon Therapy Sales (|cr)

1 Anti Diabetic 259

2 Anti-Neoplastics 135

3 Blood Related 30


5 Derma 16

Abbott Therapy Sales (|cr)


2 GI 1487

3 Vitamins 903

4 Neuro 732


Sanofi Therapy Sales (|cr)

1 Anti Diabetic 940

2 Cardiac 487

3 Vaccines 408

4 Respiratory 325

5 Pain 271

Source: ICICI Direct Research, AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)



Monthly Sector News

Price hikes, new launches, recalls, approvals

Dr Reddy's enters Indian nutrition segment with 'Celvida' drink

Dr Reddy's has entered the nutrition segment with the launch of its diabetes

nutrition drink 'Celvida' in India. As per the press release, the drink is clinically

proven (Indian patients) to help manage blood glucose levels.

Lupin launches hypokalaemia drug in US

Lupin has launched the generic equivalent of Pharma Research Software

Solutions, Potassium Chloride (KCl) for oral solution, 20 mEq in US. The

drug, indicated for the treatment & prophylaxis of hypokalemia, had annual

sales of ~US$90 million in the US (as per IQVIA MAT September 2019).

Lupin launches 'Adhero', smart device to support respiratory treatment in

India

Lupin has launched 'Adhero' in India, a connected smart device for patients

with chronic respiratory disease to help track their metered-dose inhaler

(MDI) usage and thereby improve therapy adherence.

Biocon, Mylan launch oncology biosimilar 'Ogivri' in US

Biocon, Mylan have launched Ogivri (Trastuzumab - dkst), oncology

biosimilar of La Roche's Herceptin (Trastuzumab) in 420 mg multiple-dose

vial & 150 mg single-dose vial in US. The drug, used in the treatment of

breast and metastatic stomach cancer, had annual sales of US$2.9 billion in

FY18 (as per Roche's annual report). This is the second biosimilar launched

by Biocon-Mylan in the US. We have already factored in this opportunity in

our valuation.

Dr Reddy’s launches cancer drug 'Bortezomib' in US

Dr Reddy's has launched Bortezomib for injection, 3.5 mg/vial for

intravenous use only in US. The drug, indicated for treatment of multiple

myeloma and mantle cell lymphoma in adult patients, was approved by

USFDA through a 505(b)(2) new drug application (NDA) pathway.

Aurobindo recalls three drugs from US

As per media reports, Aurobindo Pharma has issued a class-II recall of its

heartburn drug, 'ranitidine' in tablets/capsules (2,76,048 bottles) and syrup

form (19,320 bottles) from US due to detection of NDMA

(Nitrosodimethylamine) impurity. The company has recalled (Class - II)

11,200 vials of the local anaesthetic injection, Lidocaine HCl from US due to

presence of impurities. Aurobindo has also recalled (Class-III) 1,97,000 vials

of Amiodarone Hydrochloride injection, used in treating irregular heartbeat,

due to visible presence of particulate matter in the vials due to crystallisation.

Lawsuits, court rulings, settlements, regulatory issues

Cipla's Patalganga facility receives four Form 483 observations

Cipla's Patalganga manufacturing facility has received four observations

after the USFDA cGMP inspection (for both API & formulations) conducted

from November 4-13.

Divi's Unit-I facility in Telangana clears USFDA cGMP inspection

Divi's Unit-I facility at Lingojigudem, Telangana has cleared USFDA cGMP

inspection conducted from November 11-15 without observations (Form

483) issued.



Indoco's Goa plants get USFDA establishment inspection report

Indoco's sterile (Plant II) & solid dosages (Plant III) manufacturing facilities at

Verna, Goa have received establishment inspection report (EIR) from

USFDA. The site has maintained its voluntary action indicated (VAI) status.

The USFDA inspection (pre-approval inspection for a sterile injectable

product) conducted from October 7-15 had ended with two observations

which have now been closed.

USFDA warns Torrent pharma for cGMP violations

As per media reports, USFDA has warned Torrent Pharma for violating

cGMP practices for finished pharmaceuticals at its Levittown, Pennsylvania

based manufacturing facility. The USFDA inspection of the site was carried

out earlier this year from March 11-April 9.

Indoco's CRO at Hyderabad receives EIR from USFDA

Indoco Remedies' Clinical Research Organisation (Anacipher) at Hyderabad

has received establishment inspection report (EIR) from USFDA indicating

inspection closure. The inspection was conducted from Aug 5-9, 2019 with

no Form 483 observations being issued.

USFDA classifies Ipca's Silvassa formulations unit as OAI

USFDA has classified Ipca Labs' formulations facility at Piparia, Silvassa as

official action indicated (OAI). The facility had received three observations

after the cGMP inspection conducted from Aug 19-23 by USFDA.

In lieu of pre-existing import alert, the facility does not contribute to US

business. We do not expect any material impact of the OAI status on current

operations.

Biocon receives USFDA approval for Pegfilgrastim from new Bangalore unit

USFDA has approved Biocon-Mylan's supplemental biologics license

application (sBLA) for the manufacture of Pegfilgrastim drug substance

(Fulphilia) at the company's new biologics facility in Bengaluru. USFDA had

earlier conducted the pre-approval inspection of the new drug substance

unit from September 10-19, 2019.

Sun Pharma may face multi-district antitrust lawsuits in US

As per media reports, Sun Pharma will face multidistrict antitrust litigations

over three generics (Valacyclovir, Valsartan & Esomeprazole) in the US. The

proposed class actions alleges antitrust violations and racketeering by Sun

Pharma and its subsidiary Ranbaxy.

Lawsuit filed against Lupin, two others for delaying diabetic drug generics

As per media reports, three pharmacy chains, including Walgreens Boots

Alliance, have filed a suit against Bausch Health, Assertio Therapeutics and

Lupin, for overcharging of Bausch's diabetes drug Glumetza. The lawsuit

alleges that Assertio and Lupin struck a deal with Bausch to delay entry of

their generic versions of Glumetza thereby maintaining sales monopoly of

the branded drug and its generic equivalents.

Cadila files liver disease drug in India

Cadila Healthcare has filed a new drug application (NDA) for Saroglitazar

magnesium in non-alcoholic steatohepatitis (NASH) with the Drug Controller

General of India (DGCI). As per the company's press release, NASH (liver

disease) has no currently available treatment options.

Sun Pharma, Biocon, HEC Pharm receive USFDA approval for Novartis' MS

drug

USFDA has approved three generic equivalents of Novartis's Gilenya

(Fingolimod Hydrochloride) by Sun Pharma, Biocon and HEC Pharm in US.

The drug, used to treat relapsing forms of multiple sclerosis in adult patients,

had annual sales in US of ~US$1.8 billion in CY18.



Cadila's Dabhasa API facility receives USFDA EIR

Cadila Healthcare's API facility at Dabhasa, Gujarat has received

establishment inspection report (EIR) from USFDA classifying the facility as

no action indicated (NAI). The facility was inspected by USFDA from Oct 7-

11 with no observations (Form 483) being issued.

M&As, demergers, tie-ups and JVs

Cipla to acquire remaining 40% stake in its Sri Lankan subsidiary

Cipla has signed an agreement to acquire remaining 40% stake in its Sri

Lankan subsidiary, Cipla Pharma Lanka, from Citi Health Imports Pvt Ltd for

a cash consideration of ~| 1.6 lakh. The transaction is expected to be

completed by December 10, 2019.

Aurobindo to acquire R&D assets from Profectus Biosciences

Aurobindo Pharma (subsidiary Auro Vaccines) inks pact to acquire certain

R&D assets from Profectus Biosciences (US), a clinical-stage vaccine

developer, for ~US$11.3 million in cash (and potential milestone payments).

The acquisition is indicated to be completed by H1CY20.

Cadila's board approves merger with four of its subsidiaries

Cadila Healthcare's (CHL) board has approved the draft Scheme of

Amalgamation with four wholly owned subsidiaries; Zydus Technologies

(ZTL), Alidac Pharma (APL), Liva Pharma (LPL) and Dialforhealth India (DHIL).

The amalgamation is subject to approval from NCLT and shareholders &

creditors of CHL, ZTL, APL, LPL and DHIL.

Natco completes | 5 crore investment in OMRV

Natco Pharma has completed | 5 crore investment in OMRV Hospitals via 5

lakh, 0.05% compulsory convertible cumulative preference share (CCCPS)

under private placement. On a fully diluted basis Natco will hold 12.81%

stake in the company.

Others

Natco's formulations facility at Vizag commences operations

Natco Pharma's finished dosage formulations facility in Vishakhapatnam has

commenced commercial operations. The facility, part of the SEZ, will cater

primarily to the US and other international markets. As per the press release,

an application for site transfer for the first product to trigger a regulatory

audit has already been filed with the USFDA.

Cadila announces second Phase III trial for novel anaemia drug, Desidustat

Cadila has announced the second Phase III trial (DREAM - D) of Desidustat,

an investigational new drug, targeted at treating anaemia in dialysis

dependent CKD patients. The study will be a multicentre (50-60 sites in

India), randomized, active-controlled clinical trial to evaluate the efficacy &

safety of Desidustat tablet versus Epoetin alpha injection.

China's commerce ministry removes anti-dumping duty on pyridine

Jubilant Life has informed in an exchange filing that China's Ministry of

Commerce (MOFCOM) has decided to terminate the 17.6% anti‐dumping

duty on imported pyridine originating in India.

Jubilant Life's subsidiary partially redeems its Senior Notes

Jubilant Life's subsidiary, Jubilant Pharma(JPL) has partially redeemed its

4.875% Senior Notes due 2021 worth US$100 million (out of US$300 million)

at a redemption price of 102.43750% along with accrued interest till date.



Suven's SUVN-502 phase 2 study fails to meet primary endpoint in study

Suven Life Sciences announced the results of its SUVN-502 (Masupirdine)

phase 2A study targeted at Alzheimer’s disease (AD). The unique triple

(Masupiridine+Donepezil+Memantine) therapy failed to meet its pre-

specified primary endpoint in proof of concept (POC) study. Detailed

findings will be presented at clinical trials on Alzheimer’s disease (CTAD)

from December 4-7 at San Diego. Substantial future cash flow was expected

on the success of these POC results. Hence, adverse results are negative for

the stock. However, further financial impact is expected to be minimal

mainly because the company has already expense all the R&D cost of SUVN

-502 in the P&L.

Narayana discontinues Kenya hospital project

Narayana Hrudayalaya (NH) has discontinued its plan to establish a 130

bedded hospital in Nairobi, Kenya due to financial institutional partner's

inability to fund the project. As per the press release, the project's carrying

value for NH (FY19) is | 2.94 crore, having invested ~US$0.66 million in the

same. The realisable value from project discontinuation is dependent on the

amount received from land sale.

Apollo, Dubai Health Authority ink pact to collaborate in healthcare

Apollo Hospitals, Dubai Health Authority (DHA) have signed a memorandum

of understanding (MoU) to collaborate on opportunities in the healthcare &

healthcare related technology.

ANDA Approvals/Launches

Cadila has received tentative USFDA approval for the generic version of

Otelza (Apremilast) tablets, 10/20/30 mg. The drug, used to treat psoriatic

arthritis, plaque psoriasis & mouth sores (Behcet's disease patients), will be

manufactured at the company's Ahmedabad (SEZ) manufacturing facility.

Cadila Healthcare has received final USFDA approval for the generic,

lsosorbide Dinitrate (US RLD - Isordil) tablets in the US. The drug, used to

prevent chest pain attacks (angina), will be manufactured at the company's

Baddi formulations facility. The company has also received ANDA approval

for Desonide cream (Derma therapy), 0.05% from USFDA, which will be

manufactured at the group's topical facility at Ahmedabad.

Alembic Pharma has received USFDA approvals for the generic version of

Novartis' Jadenu (Deferasirox) tablets, (two final - 90/360 mg & one tentative

approval - 180 mg) in the US. The company also got final ANDA approval

for Novartis' Exjade (Deferasirox) tablets for oral suspension, 125/250/500

mg in the US. The cumulative estimated market size for the drugs, used in

treatment of chronic iron overload due to blood transfusions, is US$609

million as per IQVIA MAT December 2018.

Glenmark has got USFDA approval for the generic version of Salix Pharma's

Glumetza (Metformin Hydrochloride) extended-release tablets, 500/1000 mg

in the US. The drug, used in management of type 2 diabetes, had annual

sales of ~US$226.7 million in the US (as per IQVIA MAT September 2019).

Alembic Pharma has got USFDA approval for the generic version of Allergan

Sales' Rapaflo (Silodosin) capsules, 4/8 mg in US. The drug, used to treat

symptoms of benign prostatic hyperplasia (BPH, prostate enlargement) had

an estimated market size of ~US$114 million in the US as per IQVIA MAT

June 2019.

Alembic Pharma (Aleor Derma, JV) has got tentative USFDA approval for

generic version of HZNP Medicines' Pennsaid (Diclofenac Sodium) topical

solution, 2% w/w in US. The drug, used in treatment of knee osteoarthritis

pain, had an estimated market size of ~US$974 million as per IQVIA MAT

December 2018.

Cadila Healthcare has received tentative USFDA approval for the generic,

Lorcaserin Hydrochloride (US RLD - Belviq) tablets, 10 mg in US. The drug,



used to treat obesity, will be manufactured at the company's formulations

facility at Ahmedabad SEZ.

Dr Reddy's has launched the generic equivalent of Sanofi-Aventis', Hectorol

(Doxercalciferol) injection multiple dose vials, 4 mcg/2 ml in US. The drug,

indicated for the treatment of secondary hyperparathyroidism (SHPT) in

patients with chronic kidney disease on dialysis, had annual sales of

~US$138 million in US (IQVIA MAT September 2019).

Lupin has launched the generic equivalent of Sun Pharma's, Westcort

(Hydrocortisone Valerate, Derma therapy) cream, 0.2% in US. The drug had

annual sales of ~US$11.5 million in US (as per IQVIA MAT September 2019).

Dr Reddy's has launched USFDA approved generic version of Novartis'

Jadenu (Deferasirox) film coated tablets, 90/360 mg in US. The company has

also launched the generic for Novartis' Exjade (Deferasirox) tablets for oral

suspension, 125/250/500 mg in US. The drugs, used in treatment of chronic

iron overload due to blood transfusions, had US sales of ~US$113 million

(Exjade) and ~US$470 million (Jadenu) as per IQVIA MAT September 2019.

Exhibit 7: One-year forward PE

Source: ICICI Direct Research, Bloomberg

0.0

10.0

20.0

30.0

40.0

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

x

NSE500 Index NSE Pharma

29% Premium


ICICI Direct Research

Monthly Sector Update | Health Check

Exhibit 8: ICICI Direct coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| cr) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19FY20EFY21EFY22E

Ajanta Pharma AJAPHA 985 1,180 Buy 8578 43.5 43.5 53.4 65.5 22.6 22.6 18.4 15.0 21.8 21.8 20.8 21.8 17.1 17.1 16.3 17.4

Alembic PharmaALEMPHA 553 540 Hold 10416 31.4 31.4 27.8 32.6 17.6 17.6 19.9 17.0 19.6 19.6 15.5 17.1 21.8 21.8 13.7 14.2

Apollo HospitalsAPOHOS 1388 1,800 Buy 19311 17.0 17.0 43.7 68.1 81.8 81.8 31.7 20.4 8.8 8.8 14.8 17.5 7.1 7.1 14.9 19.6

Aurobindo PharmaAURPHA 450 475 Hold 26408 42.1 42.1 55.4 59.5 10.7 10.7 8.1 7.6 15.9 15.9 15.7 16.1 17.7 17.7 16.7 15.4

Biocon BIOCON 292 310 Buy 35100 6.2 6.2 10.6 15.6 47.1 47.1 27.6 18.7 10.9 10.9 16.7 20.9 12.2 12.2 15.7 19.1

Cadila HealthcareCADHEA 266 260 Hold 27165 18.1 18.1 16.6 18.7 14.7 14.7 16.1 14.3 13.0 13.0 11.7 12.4 17.8 17.8 13.5 13.6

Cipla CIPLA 462 520 Hold 37223 18.6 18.6 25.3 30.0 24.9 24.9 18.3 15.4 10.9 10.9 13.6 14.8 10.0 10.0 11.2 11.9

Divi's Lab DIVLAB 1832 1,850 Hold 48660 51.0 51.0 59.1 71.2 36.0 36.0 31.0 25.7 25.5 25.5 22.1 22.8 19.4 19.4 17.0 17.6

Dr Reddy's LabsDRREDD 2918 3,000 Hold 48453 114.8 114.8 140.0 166.7 25.4 25.4 20.8 17.5 11.1 11.1 13.9 16.9 13.6 13.6 12.7 13.5

Glenmark PharmaGLEPHA 343 410 Hold 9687 26.9 26.9 36.7 46.1 12.8 12.8 9.4 7.4 15.3 15.3 15.0 17.0 13.5 13.5 14.0 15.1

Hikal HIKCHE 102 140 Buy 1255 6.3 8.4 9.7 11.7 16.3 12.2 10.5 8.7 12.2 14.3 13.0 14.2 11.5 13.6 14.2 14.8

Ipca Laboratories IPCLAB 1154 1,355 Buy 14594 35.1 35.1 60.7 75.3 32.9 32.9 19.0 15.3 15.0 15.0 19.9 21.2 14.2 14.2 18.0 18.9

Lupin LUPIN 750 730 Hold 33973 16.5 16.5 34.6 36.8 45.3 45.3 21.6 20.4 9.4 9.4 10.6 13.0 5.4 5.4 9.2 9.0

Narayana HrudalayaNARHRU 307 360 Buy 6293 2.9 2.9 9.8 13.3 105.9 105.9 31.4 23.1 7.7 7.7 13.9 16.5 5.5 5.5 14.5 16.7

Natco Pharma NATPHA 586 595 Hold 10659 34.9 34.9 23.7 22.0 16.8 16.8 24.7 26.6 21.3 21.3 12.2 10.5 18.5 18.5 10.0 8.6

Sun Pharma SUNPHA 436 470 Hold 104416 15.9 15.9 20.2 24.7 27.5 27.5 21.6 17.6 10.3 10.3 11.3 12.5 9.2 9.2 9.9 11.3

Syngene Int. SYNINT 302 360 Buy 12060 8.3 8.3 10.0 12.8 36.5 36.5 30.2 23.7 14.8 14.8 13.5 15.8 16.8 16.8 14.4 15.7

Torrent Pharma TORPHA 1872 2,020 Buy 31650 48.9 48.9 74.0 91.8 38.3 38.3 25.3 20.4 14.2 14.2 18.7 21.2 17.5 17.5 19.6 20.6

RoE (%)EPS (|) PE(x) RoCE (%)

Source: ICICI Direct Research, Bloomberg



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: <-15%

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

[email protected]



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