February 18, 2020content.icicidirect.com/mailimages/IDirect_HealthCheck_Mar20.pdf · the USFDA has accepted Biocon & Mylan's biologics license application (BLA) for proposed oncology

ICIC

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Retail E

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Monthly

Sector U

pdate

March 16, 2020

Health Check

Aurobindo VAI rescinded; warning letter to Cipla…

In a surprisingly odd turn of events, USFDA has rescinded the voluntary

action indicated (VAI) status issued (on February 18, 2020) to Aurobindo

Pharma's Unit IV, injectable facility at Pashamylaram, Hyderabad. The VAI

was issued for the inspection conducted from November 4-13, 2019, which

had resulted in 14 observations. This does not bode well for the company

since it has 46 pending filings (~30% of total pending filings) including 50-

60% of pending injectables that have been filed from this plant. The

company has four other plants under USFDA scrutiny (Unit XI: warning letter

& Unit VII/I/IX have official action indicated (OAI) status.

In another adverse USFDA update, Cipla's Goa manufacturing facility

received a warning letter (WL) from USFDA for the inspection conducted in

September 16-27, 2019 post which the unit had received 12 observations.

However, this warning letter was already expected post the assignment of

official action indicated (OAI) status in January 2020.

On the Indian pharma market front, the DGFT has restricted export of 13

APIs and their formulations amid supply issues stemming from the

Coronavirus outbreak.

On the products front, the USFDA has accepted Biocon & Mylan's biologics

license application (BLA) for proposed oncology biosimilar to Avastin

(Bevacizumab) for review. Also, Cadila Healthcare has received Drug

Controller General of India’s (DGCI) approval for its liver disease drug,

Saroglitazar in India. The drug, a new drug application (NDA), is indicated

for treatment of non-cirrhotic non-alcoholic steatohepatitis (NASH).

Biocon’s partner, Mylan, has won a device patent litigation in the New Jersey

district court against Sanofi Aventis', ‘Lantus Solostar’ device for its insulin

glargine product, 'Semglee'.

The Indian pharmaceutical market (IPM) grew 12.1% YoY to | 12073 crore

in February 2020. The growth was attributable to a price hike: 5.4%, volume

expansion of 3.8% and new product launches: 2.9%. On a MAT basis, IPM

growth was 9.7% YoY to | 142658 crore.

Amid fall, panic, stock specific approach remains…

In the last few days, markets across the globe, including India, witnessed a

sharp fall due to hampered trade, travelling restrictions and possible impact

due to rapid spread of Covid-19 pandemic across the world. In the

healthcare space, barring a few cases, most stocks withstood the carnage.

That said, we still refrain from taking overall sector call and maintain our

stock-specific recommendation approach. On the business front, domestic

growth has stabilised on an annual basis and is likely to maintain the tempo

on the back of new launches and volume gain. The US generics narrative in

the last few quarters is reflecting some sort of normalcy on the back of

stability in the base business and new launches. However, regulatory

uncertainty is likely to remain as an overhang on US-heavy companies.

Profitability is likely to improve as the management commentary continues

to suggest cost rationalisation and MR productivity. Improving operating

leverage is also likely to contribute to margin expansion. The companies are

also moderating their capex plans to focus on better RoCE. As per the

assertion of most managements, Covid-19 issue is not a concern currently

as inventory levels are covered till March for most APIs and key starting

materials (KSM). That said, if supplies do not resume in March, the industry

is likely to start facing raw materials crunch from Q1FY21. India focused

players, including MNCs, global CRAMs players and hospitals are our

preferred sub-segments for bargain hunting.

Stock Performance

Mcap

Company 1M 3M YTD 1Y 16-Mar

Sun Pharma.Inds. -8 -11 -11 -17 92708

Divi's Lab. -9 5 6 15 52009

Dr Reddy's Labs -12 4 1 10 48473

Torrent Pharma. -5 7 9 8 33987

Biocon -9 -5 -4 -10 33780

Cipla -7 -9 -13 -22 33439

Abbott -1 10 11 100 30950

Lupin -14 -17 -19 -21 27934

Cadila Health. -5 -2 0 -25 26131

Aurobindo Pharma -17 -7 -7 -45 24867

Apollo Hospitals -11 10 5 34 20991

Pfizer 4 0 3 36 19946

Ipca Labs. -9 17 15 48 16553

Sanofi -5 1 0 22 16098

Ajanta Pharma -10 31 31 26 11131

Syngene Int. -12 -9 -16 -7 10754

Alembic Pharma -13 2 -3 2 10444

Fortis Health -12 2 4 -1 10343

Natco Pharma -17 -3 -5 -5 10215

Glenmark Pharma. -30 -32 -33 -64 6599

Narayana Hrudayalaya-15 -5 -5 31 5985

Aster DM -34 -26 -28 -26 5810

Jubilant Life -35 -38 -36 -61 5452

FDC Ltd -13 6 2 21 3680

Indoco Remedies -23 27 1 4 1775

Hikal -26 -16 -21 -46 1113

Hester Bio -23 -22 -19 -19 995

Healthcare Global -17 5 -6 -49 867

Shalby Ltd -35 -32 -30 -51 696

NGL Fine-Chem -34 -28 -29 -34 185

Return (%)

Source: Bloomberg

Global Indices Performance

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

S&P 500 Pharm Index (US)-10 -8 -10 -1 5 5

NASDAQ Biotechnology (US)-15 -14 -13 -8 2 -2

S&P Pharmaceuticals (US)-22 -15 -20 -12 -4 -9

DJ Pharma and Biotech (US)-12 -10 -11 -3 5 3

DJ STOXX Healthcare (EU)-22 -17 -17 -3 2 1

MSCI World Pharm & Biotech-14 -11 -12 -1 5 2

NSE Pharma -12 -9 -9 -20 -11 -10

Return (%)

Source: Bloomberg

Research Analyst

Siddhant Khandekar

[email protected]

MItesh Shah, CFA

[email protected]

Sudarshan Agarwal

[email protected]

Siddhant Khandekar

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Monthly Sector Update | Health Check

IPM grows 12% YoY in February, driven by price growth

The Indian pharmaceutical market (IPM) grew 12.1% YoY (7.6% in January

2020) to | 12073 crore in February 2020. The growth was attributable to price

hike: 5.4%, volume expansion of 3.8% (contracted 0.3% in January), and

new product launches: 2.9%.

Drugs under NLEM list grew 12.0% YoY while non-NLEM drugs grew 12.1%.

Among companies under I-direct coverage, 10 (Dr Reddy’s, FDC, Torrent,

Pfizer, Glenmark, Sun Pharma, Natco, Lupin, Ajanta, Ipca) have

outperformed the industry growth rate.

Therapy wise, eight major therapies registered faster than industry growth.

Notable among them with growth rates – blood related: 20.5%, respiratory:

17.9%, stomatologicals: 15.5%, urology: 14.8%, anti-infective: 14.1%,

cardiac: 13.3%, and vaccines: 12.3%.

Domestic companies have grown at 13.2% YoY while MNC companies have

grown at 7.6%.

On a MAT basis, IPM growth was 9.7% YoY to | 142658 crore.

Exhibit 1: Domestic formulations - Growth trend

Source: ICICI Direct Research; AIOCD

Exhibit 2: Companies growth in domestic market in February 2020

Source: ICICI Direct Research, AIOCD

10.0

8.8

10.4

7.1

6.9

13.4

9.6

12.1

5.2

14.6

8.7

7.7

12.1

0.0

5.0

10.0

15.0

20.0

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

(%

)

Indian Pharma Market

9.4

14.4

6.1

-6.1

14.6

10.4

21.4

15.6

7.9 8.3

12.213.4

24.7

14.0

10.0

14.4

17.4

-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 R

eddys

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 Feb'20 Feb'19 % Jan'20 %

Anti-Infectives 1641 1438 14.1 1574 4.2

Cardiac 1562 1378 13.3 1612 -3.1

GI 1301 1173 10.9 1278 1.8

Anti Diabetic 1162 1047 11.0 1204 -3.5

Respiratory 1053 893 17.9 1032 2.1

Vitamins 988 888 11.2 984 0.4

Pain 806 721 11.8 793 1.6

Derma 792 722 9.8 812 -2.5

Neuro 737 664 10.9 750 -1.8

Gynaecological 582 545 6.9 587 -0.8

Anti-Neoplastics 242 232 4.4 254 -4.7

Hormones 216 199 8.8 227 -4.7

Ophthal 208 192 8.0 206 0.8

Vaccines 197 176 12.3 197 0.3

Urology 158 138 14.8 160 -1.0

Blood Related 135 112 20.5 138 -1.7

Others 122 102 18.9 117 4.0

Sex Stimulants 70 61 14.5 72 -3.8

Stomatologicals 65 56 15.5 66 -1.5

Anti Malarials 35 32 8.8 35 -1.1


Top brands in Indian pharma market (MAT;

| crore)


Acute vs. chronic vs. sub chronic

Source: ICICI Direct Research; AIOCD; As per AIOCD MAT Feb 2020

Acute

47%

Chronic

33%

Sub

Chronic

20%

Brand Company Therapy Feb'20YoY %

Mixtard Abbott Anti Diabetic 553 6.5

Glycomet GpUSV Anti Diabetic 499 7.6

Lantus Sanofi IndiaAnti Diabetic 493 3.4

Janumet MSD Anti Diabetic 479 9.2

Augmentin GSK Anti-Infectives457 20.5

Liv 52 Himalaya GI 408 5.2

Duphaston Abbott Hormones 384 9.0

Clavam Alkem Anti-Infectives377 9.3

Monocef Aristo Anti-Infectives375 25.1

Galvus Met Novartis Anti Diabetic 372 -19.1




Exhibit 3: Domestic formulations – market share (MAT value February 2020)


Exhibit 4: Acute vs. chronic vs. sub chronic (MAT value February 2020)


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

39 40

57

2942

52

78

40

81

66

27

88

44

59

44 4127

54

3950

24

6245 28

9

43

527

57

1

51 18 5244

52

30

2210

199 13

2013 17 13

715 11

5

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




Exhibit 5: Top five brands in value terms (MAT Value February 2020)

Sun Brand Therapy Sales

1 Rosuvas Cardiac 283

2 Levipil Neuro 281

3 Volini Pain 261

4 Istamet Anti Diabetic 253

5 Gemer Anti Diabetic 208

Cipla Brand Therapy Sales

1 Foracort Respiratory 331

2 Budecort Respiratory 242

3 Duolin Respiratory 227

4 Seroflo Respiratory 193

5 Asthalin Respiratory 180

Cadila Brand Therapy Sales

1 Deriphyllin Respiratory 168

2 Skinlite Derma 158

3 Atorva Cardiac 140

4 Mifegest Kit Gynaecological 135

5 Pantodac GI 132

Lupin Brand Therapy Sales

1 Gluconorm-G Anti Diabetic 249

2 Huminsulin Anti Diabetic 178

3 Budamate Respiratory 133

4 Gibtulio Anti Diabetic 125

5 Ondero Anti Diabetic 111

Torrent Brand Therapy Sales

1 Shelcal Vitamins 224

2 Chymoral FortePain 162

3 Nikoran Cardiac 114

4 Azulix-Mf Anti Diabetic 104

5 Nexpro Rd GI 101

Dr. Reddys Brand Therapy Sales

1 Omez GI 158

2 Omez D GI 135

3 Econorm GI 128

4 Atarax Derma 115

5 Razo D GI 92

Glenmark Brand Therapy Sales

1 Telma Cardiac 283

2 Telma H Cardiac 222

3 Telma Am Cardiac 137

4 Candid Derma 122

5 Ascoril Ls Respiratory 117

IPCA Brand Therapy Sales

1 Zerodol Sp Pain 199

2 Zerodol P Pain 129

3 Hcqs Anti Malarials 121

4 Folitrax Anti-Neoplastics 66

5 Zerodol Th Pain 54

Alembic Brand Therapy Sales

1 Azithral Anti-Infectives 165

2 Althrocin Anti-Infectives 86

3 Wikoryl Respiratory 72

4 Roxid Anti-Infectives 53

5 Gestofit Gynaecological 45

Natco Brand Therapy Sales

1 Velpanat Anti-Infectives 175

2 Hepcinat Anti-Infectives 162

3 Geftinat Anti-Neoplastics 124

4 Erlonat Anti-Neoplastics 105

5 Natdac Anti-Infectives 95

Indoco Brand Therapy Sales

1 Febrex Plus Respiratory 90

2 Cyclopam GI 54

3 Oxipod Anti-Infectives 52

4 Sensodent-K Stomatologicals 51

5 Atm Anti-Infectives 49

Ajanta Brand Therapy Sales

1 Met Xl Cardiac 108

2 Atorfit Cv Cardiac 50

3 Melacare Derma 50

4 Feburic Pain 35

5 Rosutor Gold Cardiac 27

Biocon Brand Therapy Sales

1 Insugen Anti Diabetic 112

2 Basalog Anti Diabetic 84

3 Canmab Anti-Neoplastics 60

4 Erypro Blood Related 34

5 Insugen R Anti Diabetic 25

Abbott Brand Therapy Sales

1 Mixtard Anti Diabetic 553

2 Duphaston Gynaecological 384

3 Thyronorm Hormones 350

4 Novomix Anti Diabetic 302

5 Phensedyl Cough LinctusRespiratory 286

Sanofi Brand Therapy Sales

1 Lantus Anti Diabetic 493

2 Combiflam Pain 191

3 Allegra Respiratory 190

4 Amaryl M Anti Diabetic 160

5 Hexaxim Vaccines 152

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




Exhibit 6: Top five therapies in value term (MAT value February 2020)

Sun Therapy Sales (|cr)

1 Cardiac 2041

2 Neuro 1945

3 GI 1419

4 Anti-Infectives 1217

5 Anti Diabetic 1064

Cipla Therapy Sales (|cr)

1 Respiratory 2290


3 Cardiac 870

4 GI 410

5 Urology 378

Cadila Therapy Sales (|cr)


2 Cardiac 810

3 Respiratory 649

4 GI 637

5 Pain 572

Lupin Therapy Sales (|cr)

1 Cardiac 1274



4 Respiratory 668

5 GI 387

Torrent Therapy Sales (|cr)

1 Cardiac 1346

2 GI 718

3 Neuro 652

4 Vitamins 561

5 Anti Diabetic 363

Dr. Reddys Therapy Sales (|cr)

1 GI 783

2 Cardiac 456

3 Derma 379

4 Respiratory 284

5 Anti Diabetic 252

Glenmark Therapy Sales (|cr)

1 Cardiac 890

2 Derma 890

3 Respiratory 588


5 Anti Diabetic 291

IPCA Therapy Sales (|cr)

1 Pain 587

2 Cardiac 325

3 Anti Malarials 310


5 GI 134

Alembic Therapy Sales (|cr)


2 Cardiac 263

3 Respiratory 226

4 GI 198

5 Gynaecological 185

Natco Therapy Sales (|cr)


2 Anti-Neoplastics 520

3 Pain 33

4 Cardiac 4

5 Others 2

Indoco Therapy Sales (|cr)

1 Stomatologicals 167

2 Respiratory 162


4 GI 126

5 Vitamins 81

Ajanta Therapy Sales (|cr)

1 Cardiac 346

2 Ophthal 205

3 Derma 138

4 Pain 51

5 Vitamins 29

Biocon Therapy Sales (|cr)

1 Anti Diabetic 255

2 Anti-Neoplastics 123

3 Blood Related 37


5 Derma 18

Abbott Therapy Sales (|cr)


2 GI 1529

3 Vitamins 925


5 Neuro 734

Sanofi Therapy Sales (|cr)

1 Anti Diabetic 948

2 Cardiac 490

3 Vaccines 411

4 Respiratory 333

5 Pain 273

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




Monthly Sector News

Price hikes, new launches, recalls, approvals

DGFT restricts export of 13 APIs and their formulations

The Directorate General of Foreign Trade (DGFT) has restricted the export

of 13 active pharmaceutical ingredients (API) and their formulations amid

supply issues stemming from the Coronavirus outbreak. The restricted list

comprising some vitamins, antibiotics and paracetamol implies that

companies will have to get a no-objection certificate from the government

before exporting these products.

Taro recalls seizure drug in US

Sun Pharma's US subsidiary, Taro Pharma, has issued a voluntary recall of

two lots of Phenytoin oral suspension, 125 mg/5 mL down to the consumer

level in US. The drug, indicated for treatment of grand mal and temporal

lobe seizures, is being recalled as the product may not re-suspend when

shaken, which could result in under/overdosing.

Perrigo gets USFDA approval for gProair

In an adverse turn of events for Lupin, USFDA has granted Perrigo, partner

Catalent Pharma, approval for the first generic version of Teva's 'Proair'

(albuterol sulphate) inhalation aerosol. As per the press release, the drug,

indicated for treatment of bronchospasms (respiratory), had MAT annual

sales of ~US$1.4 billion as per IQVIA.

Due to ongoing complete response letter (CRL), Parrigo has launched this

drug ahead of Lupin. This may impact the expected market share gain for

Lupin post launch.

Abbott launches flu vaccine in India

As per media reports, Abbott India has launched an inactivated vaccine, 0.5

ml in India for treatment of four strains (quadrivalent) of influenza in children

above six months and adults.

Dr Reddys', Lupin launch Vimovo's generic version in US

Dr Reddys' and Lupin both have launched generic version of Horizon

Pharma's Vimovo (Naproxen and Esomeprazole Magnesium) delayed-

release tablets, 375/20 mg and 500/20 mg in the US. The drug, indicated for

treatment of arthritis, had US sales of ~US$400 million as per IQVIA MAT

January 2020.

Lawsuits, court rulings, settlements, regulatory issues

Aurobindo's Unit XII receives six observations

As per media reports, Aurobindo's formulations facility (Unit XII) has

received Form 483 with six observations from USFDA post cGMP inspection

conducted from February 10-21, 2020.

USFDA rescinds VAI status for Aurobindo's Unit IV

In a surprisingly odd turn of events, USFDA rescinded the voluntary action

indicated (VAI) status issued (on February 18, 2020) to Aurobindo Pharma's

Unit IV, general injectable formulation facility at Pashamylaram, Hyderabad.

The VAI was issued for the inspection conducted from November 4-13,

2019, which had resulted in 14 observations.

This does not bode well for the company since it has 46 pending filings

(~30% of total pending filings) including 50-60% of pending injectables that

have been filed from this plant. The stock is likely to give back all the gains

post the VAI classification. The company has four other plants under USFDA

scrutiny (Unit XI: warning letter & Unit VII/I/IX have official action indicated

(OAI) status).

Biocon's insulin facility in Malaysia gets three observations

Biocon's Malaysian insulin manufacturing facility has received three Form

483 observations after the pre-approval inspection (PAI) for Insulin Glargine




conducted by USFDA from February 10-21, 2020. As per the press release,

the company believes that the observations are procedural in nature and

should not impact commercialisation plans for the product in US.

Dr Reddys' Vizag facility receives EIR indicating audit closure

USFDA has issued an establishment inspection report (EIR) to Dr Reddys'

formulations manufacturing facility (Vizag SEZ Plant 1 - FTO 7) at Duvvada,

Visakhapatnam indicating audit closure in addition to the earlier voluntary

action indicated (VAI) classification. The facility had received eight Form 483

observations after the USFDA inspection conducted earlier in August, 2019.

Sun Pharma violates disclosure norms as per Sebi audit

As per media reports, Sebi has concluded that Sun Pharma has violated its

disclosure norms by failing to reveal related-party transaction with Aditya

Medisales (AML) that was owned by Sun's promoters and distributed its

products in India. However, the probe has not confirmed the alleged

misappropriation of | 42,000 crore worth of funds. Sources also say that

Sebi has recommended adjudication proceedings against the company

under Section 15 of the Sebi Act.

Aurobindo's Hyderabad API unit receive EIR with VAI status from USFDA

Aurobindo Pharma's API facility (Unit VIII: Gaddapotharam) at Hyderabad

receives establishment inspection report (EIR) with voluntary action

indicated (VAI) status from USFDA. The facility had earlier received four

Form 483 observations after inspection conducted in October 21-25, 2019.

Cipla's Goa facility receives warning letter from USFDA

Cipla's Goa manufacturing facility received a warning letter from the USFDA

for the inspection conducted from September 16-27, 2019 post which the

unit had received 12 observations. The facility had received official action

indicated (OAI) classification in January 2020

Biocon’s small molecules API facility at Bengaluru receives two observations

Biocon’s small molecules API facility in Bengaluru received two Form 483

observations from USFDA after the post-approval and GMP inspection

conducted from February 20-26, 2020.

Dr Reddys' integrated product development facility clears USFDA inspection

Dr Reddys' integrated product development organisation (IPDO) at Medchal-

Malkajgiri, Telangana has cleared USFDA audit with no Form 483

observations.

Dr Reddy's Hyderabad facility receives two observations from USFDA

Dr Reddys' formulations plant - 3 at Bachupally, Hyderabad has received one

Form 483 observations after the USFDA inspection.

Cadila receives DCGI approval for Phase-I trials for RA drug

Cadila Healthcare has received DCGI approval for Phase-I clinical trials of its

investigational new drug, 'ZYBK2', a new chemical entity (NCE) for treatment

of rheumatoid arthritis (RA).

Cadila gets DCGI approval for liver disease drug in India

Cadila Healthcare has received DGCI approval for liver disease drug,

Saroglitazar in India. The drug, a new drug application (NDA), is indicated

for treatment of non-cirrhotic non-alcoholic steatohepatitis (NASH).

Dr Reddy's Telangana API facility gets three USFDA observations

Dr Reddys' API manufacturing plant - 5 at Miryalaguda, Nalgonda district,

Telangana has received three Form 483 observations after completion of

USFDA inspection.




Natco's Kothur facility receives one USFDA observation

Natco Pharma's Kothur formulations facility has received one observation

related to equipment qualification of a company mill after the USFDA

inspection conducted from March 2-6, 2020.

Hikal's Mahad unit gets shutdown notice from MPCB

The Hikal Mahad unit has got Maharashtra Pollution Control Board's (MPCB)

notice for shutdown due to complaint from Taloja's local community alleging

presence of a tanker carrying company's by-product near Kasadi River. The

company has filed a petition to stay the closure in Bombay High court.

In continuance to the earlier intimation, Hikal later on informed that its

Mahad unit has continued normal operations. The unit contributed | 260

crore (16% group revenue) in FY19.

USFDA accepts Biocon's BLA for Bevacizumab

USFDA has accepted Biocon and Mylan's biologics license application (BLA)

for MYL-14020, a proposed oncology biosimilar to Avastin (Bevacizumab)

for review. The FDA goal date for the same is December 27, 2020.

Cadila's Baddi facility clears USFDA inspection

Cadila's Baddi formulation facility has received no Form 483 observations on

completion of the cGMP and post approval inspection conducted by USFDA

from March 2-9, 2020.

USFDA halts inspections amid Coronavirus outbreak

USFDA has halted inspections for food, drug and medical devices outside

US till April due to Coronavirus outbreak. However, the drug regulator will

consider critical inspections on a case by case basis.

Mylan wins patent claim against Sanofi

Biocon's partner Mylan has won device patent (9526844) litigation in New

Jersey district court against Sanofi Aventis' Lantus Solostar device for its

insulin Glargine product, 'Semglee'. The court found the patent claim 'not

infringed' and 'invalid' for lack of written description. The USFDA target date

for the product is set for June 2020 while the company is likely to

commercialise the product in CY20. As per the company's press release, the

estimated US market opportunity for the product is ~US$2.2 billion.

Alembic Pharma receives four observations for Panelav facility

Alembic Pharma’s general oral solid formulations facility at Panelav has

received Form 483 with four observations at the end of USFDA inspection

carried out in March 9-13, 2020.

M&As, demergers, tie-ups, JVs

Apollo Hospitals may buy out stake in Apollo Gleneagles

As per media reports, Apollo Hospitals may be looking to buy out its stake

from its Malaysian partner, IHH Healthcare Berhad in Apollo Gleneagles, its

50:50 JV hospital in Kolkata.

Glenmark, Hikma sign agreement for Ryaltris in US

Glenmark, Hikma have signed a pact for commercialising Ryaltris

(olopatadine hydrochloride, 665 mcg & mometasone furoate, 25 mcg) nasal

spray in the US. The drug, a new fixed‐dose combination nasal spray of an

antihistamine and a steroid, is indicated for treatment of symptoms

associated with seasonal allergic rhinitis. The company will be responsible

for the development and USFDA approval of the drug and Hikma will

commercialise the drug in the US. Glenmark will receive upfront payment,

milestone payments and royalties from Hikma.

Cadila signs pact with XOMA for immuno-onco drug

Cadila Healthcare and XOMA Corporation have signed a licensing

agreement to develop an IL-2 based immuno-oncology (IO) drug candidate.

Under the terms of the agreement, Cadila will develop and commercialise




the drug in India, Brazil, Mexico and other emerging markets and XOMA may

receive sales royalties for those territories while also retaining rights in all

other geographies.

Cadila transfers animal health business to wholly owned subsidiary

Cadila Healthcare's board has approved transfer of its' Animal healthcare

business on a going concern basis to its wholly owned subsidiary, 'Zydus

Animal Health and Investments' (ZAHL) through a definitive agreement.

ZAHL will issue ~227.3 crore preference shares at face value | 10 in

consideration for the transfer.

Others

Apollo Hospital launches Alexa based voice app for doctor appointments

As per media reports, Apollo Hospitals has launched an Amazon Alexa

based voice app, Skill ask Apollo, to book doctor appointments and find

nearby Apollo healthcare providers. The app will provide consumers’ access

to more than 3500 super/multi-specialty doctors (across 72 hospitals)

alongside access to the groups’ chain of pharmacies and clinics.

Sun Pharma facing shortage of hypertension drug in US

As per media reports, Sun Pharma is facing shortage of the generic version

of its hypertension oral drug, Pindolol in US due to a lack of APIs. However,

the company has informed that the API shortage is not stemming from the

China issue.

GSK appoints Sridhar Venkatesh as MD, VP

GSK India has appointed Sridhar Venkatesh as MD & VP effective April 1,

2020. He will be replacing Mr Annaswamy Vaidheesh who will retire from

the company effective March 31, 2020.

Divis commences production at Vizag unit

Divis Lab has commenced production at its DCV-SEZ unit in Chippada

Village, Vishakhapatnam from March 9, 2020.

Narayana to shutdown Chinmaya Heart centre in Bangalore

Narayana Hrudayalaya will shut down operations at its Chinmaya Narayana

Superspeciality Centre (Heart centre) in Chinmaya Mission Hospital,

Bangalore on March 31, 2020 as the contract partner (Karnataka Chinmaya

Seva Trust) wishes to operate the unit by itself from FY21. In FY19, the unit

had generated | 12.5 crore in sales (0.4% group sales) having an EBITDA of

| 2.3 crore (0.6% group).

ANDA approvals

Suven Life has received USFDA approval for calcium acetate oral capsules,

667 mg used to prevent high blood phosphate levels in patients who are on

dialysis.

Lupin has launched the generic version of Bausch Health's diuretic, Edecrin

(Ethacrynic Acid) tablets, 25 mg in the US. The drug, used to reduce swelling

(edema) due to various diseases, had annual sales of ~US$20 million in the

US (IQVIA MAT December 2019). The drug will be manufactured from the

company's Nagpur oral solids facility.

Cadila Healthcare has got ANDA approval for the generic version of Truvada

(Emtricitabine, Tenofovir Disoproxil Fumarate) tablets, 200/300 mg in US.

The company has also received tentative approval for three other strengths

of the drug from USFDA. The drug, used to control HIV infection, will be

manufactured at the company's formulations facility at Ahmedabad SEZ.

Alembic Pharma has received USFDA approval for the generic version of

Galderma's Periostat (Doxycycline Hyclate) tablets, 20 mg in the US. The

drug, indicated as part of periodontitis' treatment process, has an estimated

market size of US$7 million as per IQVIA MAT December 2019.




Exhibit 7: One year forward PE

Source: ICICI Direct Research, Bloomberg

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 PharmaAJAPHA 1277 1,525 Buy 11183 43.5 53.0 63.4 76.2 29.3 24.1 20.1 16.8 21.8 24.1 23.2 23.9 17.1 18.0 18.6 19.1

Alembic PharmaALEMPHA 561 620 Hold 10514 31.4 44.3 26.6 31.0 17.8 12.7 21.1 18.1 19.6 21.6 13.4 14.9 21.8 24.9 13.3 13.8

Apollo HospitalsAPOHOS 1514 2,060 Buy 21103 17.0 24.5 41.6 69.8 89.3 61.9 36.4 21.7 8.8 10.9 14.3 17.6 7.1 9.1 12.9 18.5

Aurobindo PharmaAURPHA 423 630 Hold 24782 42.1 45.5 56.9 62.9 10.0 9.3 7.4 6.7 15.9 16.3 15.8 16.7 17.7 16.2 17.1 16.1

Biocon BIOCON 282 310 Hold 33924 6.2 7.5 10.3 15.7 45.5 37.5 27.4 18.0 10.9 12.9 15.1 19.4 12.2 12.3 14.7 18.6

Cadila HealthcareCADHEA 257 285 Hold 26279 18.1 13.3 15.6 19.0 14.2 19.4 16.4 13.5 13.0 10.1 11.1 12.6 17.8 12.1 12.8 13.9

Cipla CIPLA 416 490 Hold 33620 18.6 20.6 22.3 27.3 22.4 20.2 18.6 15.2 10.9 12.7 13.1 14.6 10.0 10.1 10.0 11.1

Divi's Lab DIVLAB 1964 1,990 Hold 52166 51.0 50.1 58.4 71.0 38.5 39.2 33.6 27.6 25.5 21.8 21.8 22.8 19.4 16.7 16.8 17.5

Dr Reddy's LabsDRREDD 2924 3,520 Hold 48424 114.8 107.5 148.2 175.9 25.5 27.2 19.7 16.6 11.1 8.6 14.1 16.8 13.6 11.5 14.0 14.6

Glenmark PharmaGLEPHA 234 340 Hold 6582 26.9 26.8 33.9 42.5 8.7 8.7 6.9 5.5 15.3 13.1 14.3 15.9 13.5 12.0 13.3 14.4

Hikal HIKCHE 89 160 Buy 1594 8.4 9.6 11.1 13.3 10.6 9.3 8.0 6.7 14.3 13.3 13.6 14.5 13.6 14.1 14.2 14.9

Ipca LaboratoriesIPCLAB 1307 1,560 Buy 16462 35.1 57.2 64.5 78.0 37.3 22.8 20.2 16.8 15.0 21.1 20.7 21.4 14.2 19.6 18.7 19.0

Indoco remediesINDREM 192 240 Hold 1768 -0.3 3.0 8.4 15.1 -611.5 65.2 22.9 12.7 1.0 4.6 9.3 15.3 -0.4 4.0 10.1 15.4

Lupin LUPIN 613 675 Hold 27834 16.5 -35.6 18.0 30.7 37.1 -17.2 34.0 20.0 9.4 8.6 7.8 12.2 5.4 -12.2 5.9 9.3

Narayana HrudalayaNARHRU 293 430 Buy 5947 2.9 7.2 9.8 13.3 100.9 40.9 30.0 22.0 7.7 12.0 13.9 16.5 5.5 12.2 14.5 16.7

Natco PharmaNATPHA 559 650 Hold 10153 34.9 26.9 24.6 23.4 16.0 20.8 22.8 23.9 21.3 14.6 12.7 11.3 18.5 12.6 10.4 9.1

Sun Pharma SUNPHA 387 460 Hold 93032 15.9 17.7 18.4 23.0 24.4 21.9 21.0 16.9 10.3 10.8 10.6 11.9 9.2 9.4 9.0 10.1

Syngene Int. SYNINT 269 360 Buy 10780 8.3 10.5 9.6 12.0 32.6 25.7 31.7 25.6 14.8 13.7 13.1 15.1 16.8 14.7 14.1 14.9

Torrent PharmaTORPHA 2008 2,020 Hold 34077 48.9 56.1 71.5 91.8 41.0 35.8 28.1 21.9 14.2 15.7 18.4 21.2 17.5 17.4 19.1 20.7

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

Source: ICICI Direct Research, Bloomberg

0.0

10.0

20.0

30.0

40.0

Mar-17

Sep-17

Mar-18

Sep-18

Mar-19

Sep-19

Mar-20

x

NSE500 Index NSE Pharma

24% Premium




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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,

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Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




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Documents

February 18, 2020content.icicidirect.com/mailimages/IDirect_HealthCheck_Mar20.pdf · the USFDA has accepted Biocon & Mylan's biologics license application (BLA) for proposed oncology