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Jun 24, 2020

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  • ICICI Securities Ltd. | Retail Equity Research

    September 21, 2016

    Monthly Update

    Syngene opens new centre; Domestic growth recovers… In a significant tie-up, Syngene has opened a dedicated centre for US based leading biologics dedicated player Amgen Inc. in Bangalore. This centre, christened as Syngene Amgen Research and Development Centre (SARC), will be Syngene’s fourth such exclusive R&D centre and the first for a biologics company. Syngene already operates dedicated R&D centres for Bristol-Myers Squibb (BMS), Abbott Nutrition (Abbott) and Baxter Inc. SARC will be staffed by a team of more than 100 Syngene scientists, working with Amgen researchers around the world on the discovery and development of innovative medicines. The Indian pharmaceutical market (IPM) grew 15% YoY to | 9643 crore for the month of August, the highest growth in nine months mainly due to recovery in volume growth (albeit on lower base) and seasonality benefit. The growth was largely driven by volumes increase – 9.1% followed by price hikes- 2.9% and new product launches- 2.9%. On a MAT basis, IPM growth stood at 10.5% YoY to | 102537 crore. On an innovation front, Glenmark has announced the discovery and initiation of investigating new drug (IND) enabling studies for a novel clinical development candidate, GBR 1372. GBR 1372 adds to Glenmark’s expanding oncology portfolio of biologics including GBR 1302 (HER2xCD3 bispecific antibody) and GBR 1342 (CD38xCD3 bispecific antibody) based on its proprietary BEAT technology. Glenmark is likely to file an IND with the USFDA in 2HFY18. Glenmark presently has a pipeline of six Novel Biologics Entity (NBE) and tow Novel chemical Entity (NCE) in various stages of preclinical and clinical development. Glenmark has entered into a tie-up with US based Particle Sciences, Inc. to develop and market a generic version of Celgene’s oncology injection Abraxane (paclitaxel protein (albumin)-bound particles for injectable suspension). As per the agreement, Glenmark has obtained global exclusive marketing and distribution rights of the product upon commercialization. Particle Sciences will develop this product exclusively for Glenmark. On a regulation front, Indoco’s Goa plant II (sterile and solid dosages facility) received six 483 observations from USFDA. Inspection was conducted between 31st August 31, 2016 to 4th September, 2016. The injectable ANDA filings triggered this inspection. In Mar 2016, Goa plant received establishment inspection report (EIR) for inspection conducted in July 2015. No red flag on earnings front; regulatory worries waning… Despite pricing pressure and client consolidation in the US, which were thought to be the significant headwinds post Q4FY16 numbers, most of the players (barring few) managed to expand volumes in Q1 thereby neutralising these headwinds. Regarding USFDA issues the Indian players have moved on and seem better prepared than 12-18 months ago as reflected by growing number of EIRs by the USFDA for Indian facilities. The Indian formulations also did reasonably well despite NLEM / FDC issues. We expect earnings momentum to continue on the back of incremental product launches in the US and likely positive outcome from the USFDA re- inspections besides normalising of Indian formulations growth. We expect healthcare universe revenue, EBITDA and PAT to grow at a CAGR of 12%, 13% and 16%, respectively, in FY16-18E. The growth will be steered by US (~13% CAGR over FY16-18E) and Indian formulations (~14% CAGR over FY16-18E).

    Health CheckSector View Positive Index Performance as on September 21, 2016

    Return (%) 1M 3M YTD 1Y

    CNX 500 1.3 8.8 11.4 12.7

    Nifty 1.3 6.8 10.5 10.0

    NSE Pharma 1.2 10.4 -1.9 -7.7

    Return (%)

    Stocks Performance Mcap

    Company 1M 3M YTD 1Y 21-Sep

    Sun Pharma.Inds. -0.6 5.8 -5.0 -13.5 187445

    Lupin -1.9 6.6 -15.9 -17.8 69689

    Dr Reddy's Labs 4.7 3.4 1.4 -20.3 52244

    Cipla 8.0 24.4 -7.4 -7.4 48323

    Aurobindo Pharma 5.6 12.0 -7.8 13.5 47261

    Cadila Health. 4.9 24.1 19.5 -1.6 40069

    Divi's Lab. 2.3 19.0 15.1 19.0 35287

    Torrent Pharma. 4.2 21.6 12.7 13.8 27360

    Glenmark Pharma. 4.0 18.1 -2.4 -12.0 25394

    Glaxosmit Pharma -10.0 -20.0 -15.2 -16.1 23806

    Biocon 11.6 30.5 82.5 114.9 18911

    Apollo Hospitals -5.8 0.4 -10.5 -3.8 18251

    Ajanta Pharma -0.2 34.1 47.6 35.8 17298

    Alembic Pharma 1.1 20.3 -6.2 -5.8 12310

    Natco Pharma -0.8 26.9 10.0 41.2 11094

    Jubilant Life 24.1 84.3 52.7 81.3 10007

    Wockhardt 11.8 -1.0 -41.7 -35.4 9851

    Syngene Int. 13.8 17.9 15.7 49.7 9641

    Strides Arcolab 4.6 -5.2 -20.0 -14.1 9211

    Pfizer 4.7 5.9 -15.3 -22.4 9140

    Ipca Labs. 15.2 20.2 -20.3 -22.2 7457

    Indoco Remedies 8.1 25.7 1.2 1.1 3051

    Unichem Labs. -2.7 1.1 -1.6 -3.6 2389

    Return (%)

    M Market cap in | crore

    Price movement

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    Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

    CNX Pharma Nifty (RHS)

    Research Analyst

    Siddhant Khandekar [email protected] Mitesh Shah [email protected]

  • ICICI Securities Ltd. | Retail Equity Research

    Page 2

    Regulatory approvals

    Exhibit 1: Summary of USFDA approvals for Aug, 2016 [5

    Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size Sun Pharma Metformin Hydrochloride Anti-Diabetic Santarus Inc Glumetza US$ 1200 million Natco Pharma Oseltamivir Phosphate Anti-Infective Roche Tamiflu US$ 403 million Aurobindo Pharma Linezolid Anti-Bacterial Harmacia Zyvox US$ 87 million Sun Pharm Buprenorphine Hydrochloride; Naloxone Hydrochloride Anti-Addictive Indivior Inc Suboxone NA Aurobindo Pharma Galantamine Hydrobromide Anti-Alzheimer Janssen Pharma Razadyne NA Glenmark Pharma Triamcinolone Acetonide Dermatology NA NA US$ 4.4 million Aurobindo Pharma Esomeprazole Sodium GI Astrazeneca Nexium IV NA Dr Reddys Labs Paricalcitol Hormonal Abbvie Zemplar US$ 110 million Jubilant Felodipine Er Tablets CVS Astrazeneca Plendil NA Aurobindo Pharma Omeprazole; Sodium Bicarbonate Gi Santarus Zegerid NA Jubilant Telmisartan Tablets CVS Boehringer Ingelheim Pha Micardis US$ 250 million Cipla Trospium Chloride Cns Valeant Wellbutrin XL US$ 792 million Sun Pharm Morphine Sulfate Pain Management Purdue Pharma Ms Contin NA Dr Reddys Labs Nitroglycerin CVS Pfizer Nitrostat US$ 108 million Ajanta Pharma Olanzapine Cns Lilly Zyprexa NA

    Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size Torrent Pharms Rosuvastatin Calcium CVS Astrazeneca Crestor NA Lupin Paroxetine Anti-Depressant Apotex Paxil NA Ajanta Pharma Eletriptan Hydrobromide Pain Management Pfizer Relpax NA

    Final Approvals

    Tentative Approvals

    CNS: Central Nervous System; CVS: Cardiovascular,GI: Gastro Intestinal, NA: Not available; Source: USFDA, ICICIdirect.com Research

    M&As, Demergers, Tie-ups and JVs DRL to market three of Amgen’s Biological drugs in India DRL will be commercialising Amgen’s three biological drugs XGEVA (denosumab), Vectibix (panitumumab) and Prolia (denosumab) in India in the therapeutic areas of oncology and osteoporosis. Cadila partners Takeda for chikungunya vaccine Cadila health entered in to a strategic partnership with Japan's Takeda Pharma to develop vaccine for vector borne chikungunya. The agreement includes early stage development to the final commercialisation of the vaccine. As per management, there is currently no vaccine to prevent chikungunya virus infection. Glenmark Signs agreement with Particle Sciences For gAbraxane Glenmark Pharma entered into a strategic agreement with Particle Sciences, Inc. to develop and market a generic version of Celgene’s oncology injection Abraxane (paclitaxel protein (albumin)-bound particles for injectable suspension). As per the agreement, Glenmark has obtained global exclusive marketing and distribution rights of the product upon commercialization. Particle Sciences will develop this product exclusively for Glenmark, and shall receive certain milestone payments during various stages of the product’s development from Glenmark, including royalties on sales. Development of the product has been initiated for the US market and Glenmark intends to file the ANDA in FY19. The product will be subsequently filed in other key markets across the globe. Branded Abraxane marketed globally by Celgene has reported sales of US$ 967 million in CY15. Indoco acquires manufacturing plant at Baddi Indoco Remedies has acquired the manufacturing facility at Baddi from Micro Labs Ltd. The facility is spread over an area of 18000 sq mt, out of which 11,000 sq mt is the built-up area. It produces 4.3 billion tablets and 50

  • ICICI Securities Ltd. | Retail Equity Research

    Page 3

    million capsules p.a. With this acquisition, Indoco will now have six facilities for formulations and three for APIs. Price cuts / New Launches / Recalls/Approvals Glenmark announces Initiation of IND studies for GBR 1372 Glenmark has announced the discovery and initiation of investigating new drug (IND) enabling studies for a novel clinical development candidate, GBR 1372. GBR 1372 is the third Bispecific Antibody and also Glenmark’s third clinical candidate targeting an oncology indication. Law suits / Court rulings / Settlements / Regulatory Issues

    Indoco Goa Plant II received six observations from USFDA Indo