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Indian Pharma to benefit from these US approvals - Part I - Views on News from Equitymaster

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  • Oct 4, 2013 - Indian Pharma to benefit from these US approvals - Part I

Indian Pharma to benefit from these US approvals - Part I
Oct 4, 2013

The past few months have seen adverse events impact Indian pharma players especially on the regulatory front. However, the last few days have been quite good for them. Various companies viz., Dr Reddy's, Glenmark, Sun Pharma and Lupin have received either low competition approvals from USFDA or are benefitting from the existing portfolio.

For instance, Dr Reddy's got approval for a niche injectable Vidaza and Vimovo. On the other hand, Sun Pharma will further benefit from the low competition drug Doxil due to lower supply from Johnson and Johnson (J&J).

Let's discuss these products and the respective upsides for both Dr Reddy's and Sun Pharma.

Dr Reddy's

  1. Approval to launch generic Vidaza injectable

    Dr Reddy's is the first generic company to get approval for this injectable. The company has launched the drug in the US market.


    • About the drug: Vidaza is generically known as Azacitadine. The branded sales of this drug are US$ 380 m per annum. The said drug is in injectable form, indicated for MSD (myelodysplastic syndromes ) and all the patents for this drug have expired.

    • Upside for Dr Reddy's: Interestingly, there are not many filers for this drug. Besides Dr Reddy's, the innovator Celgene has also launched authorized generics through Mylan. So other than the innovator, there are two generic players in the US market. Hence the competition for Dr Reddy's for this launch is low. We expect sales of US$ 65 m, and EPS of Rs 6-7 per share per annum from this drug. Once more generics will start entering the market, the said upside will come down depending upon the number of new players.

    • Our View: We believe this to be a very lucrative opportunity for Dr Reddy's. This is because the drug is an injectable and thus it will have higher margins. Plus, we believe that competition will not enter this market for atleast one year.

      Dr Reddy's has made several filings in the injectable market and this approval too underlines the company's commendable R&D capabilities. The company has in past also done several niche launches such as Tacrolimus, Fondaparinux and so on. Both these drugs were launched around two years back and there have been very few generic companies who have entered the market.


  2. Approval for generic Vimovo

    Dr Reddy's got approval for Vimovo last week. This seems to be a 180-days opportunity; however the upside will not be imminent.


    • About the drug: Vimovo is the combination of Esmoprazole Magnesium and Naproxen. The branded sales of this drug are US$ 60 m annually. Dr Reddy's had filed Para IV on this drug in April 2011, and was subsequently sued by AstraZenca and its partner Pozen. The patents in issue are set to expire in 2023 (patent number' 907). The drug is indicated for symptoms such as osteoarthritis, rheumatoid arthritis and ankylosing spondylitis. Recently, Dr Reddy's received approval on this drug.

    • Upside for Dr Reddy's: Once again, there are not many filers for this drug. And thus this looks to be a low competition opportunity. However, as the patent in issue is set to expire in 2023, there are chances of new developments taking place. It is still not very clear whether Dr Reddy's holds first-to-file (FTF) status for the drug or not. However based on the available information, it seems Dr Reddy's is the FTF and thus should be entitled for 180-days exclusivity.

      As per the company management, it is looking at various options to launch the drug. However, it does not expect to launch the same in the near term. One will have to wait for more developments before the upside for Dr Reddy's becomes clearer.


Sun Pharma
  1. Benefit due to shortage of Doxil from October 2013 onwards

    Sun pharma is already supplying Doxil, the current shortage to further increase the market share for the company


    • About the drug: The innovator of Doxil (generically known as Doxorubicin) is J&J and the latter has been witnessing manufacturing lapses at its partner's end, Ben Venue manufacturing plant. This had created shortage of the drug in the US market.

      Due to this shortage, the US FDA had given rights to Sun to supply this drug in the US for some time. Later in Feb 2013, Sun got the approval for this drug and launched the generic version of this brand. J&J had resolved the issues to some extent; and thus was permitted by USFDA to supply the drug in the US market on a lot basis. This means, J&J can market a specific lot of the drug only after the said lot is cleared by the USFDA.

      Doxil is used to treat ovarian cancer and tumors. The branded sales of the drug were US$ 250 m before Sun Pharma had entered the market.

      Recently, J&J has once again indicated that from Oct 2013 onwards, it will not be able to supply Doxil at all.

    • Upside for Sun Pharma: When both Sun Pharma and J&J were selling the Doxil, the former had some 50% market share. Since J&J will stop the supply of the drug starting from mid October this year, the market share of Sun will go up. As per available sources, J&J will face manufacturing constraints of Doxil for atleast one year. This indicates that Sun will be able to benefit from this launch for the said period. We expect sales of US$ 125 m per annum, higher from our earlier estimate of US$ 90 m. This converts to an EPS upside of Rs 3.25 -3.50 per share.

    • Our View: Doxil is a complex drug with high technical entry barriers. As J&J is again facing manufacturing issues, Sun is the only generic player in the market. Further, due to the complexity of the drug, the probability of new players entering the market is very low. Over and above, the said drug is quite lucrative for Sun, which strengthens its niche portfolio.

  2. More upside can be expected from Prandin launch

    Sun is already selling this drug under 180-days exclusivity. However AG is still not launched, this would result in higher upside for the company.


    • About the drug: Sun Pharma had launched the generics of Prandin (generically known as Repaglinide tablets), in July 2013, under 180-days exclusivity. The brand size of the drug is US$ 200 m and indicated for patients suffering from Type II diabetes.

    • Upside for Sun Pharma: We had estimated sales of US$ 35 m with an EPS of Rs 1.5 for the period of 180-days. However this assumption was based on the fact that one authorized player will enter the market. As per the available data from various sources, authorized generics (AG) has still not been launched. This means that the upside for the Sun will increase as it will be able to take higher market share. Though it is still not very clear, there is a probability that generic penetration will not be imminent. In that case Sun will be able to benefit for a longer time.

    • Our View: Prandin was an important launch by Sun Pharma as there were several litigations which were going on for this drug and the company managed to overcome these challenges and launch the drug. This has been part of Sun Pharma's strategy to target products which have high entry barriers with low competition.
In the next article, we will focus on some important approvals for Lupin and Glenmark.

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