Nov 30, 2016 08:17 PM IST IST | Source: Moneycontrol.com

Torrent Pharma jumps 4% after USFDA nod, CLSA upgrades to buy

Torrent Pharmaceuticals shares surged 4.4 percent intraday Wednesday after approval from the US health regulator for antihypertensive drug and CLSA upgraded to buy.

Moneycontrol Bureau

Torrent Pharmaceuticals shares surged 4.4 percent intraday Wednesday after approval from the US health regulator for antihypertensive drug and CLSA upgraded to buy.

The Ahmedabad-based healthcare company has received approval from the United States Food & Drug Administration for Amlodipine & Olmesartan Medoxomil tablets that are used to treat hypertension.

Meanwhile, CLSA has upgraded the stock to buy from outperform with an unchanged target price of Rs 1,730, saying a solid domestic franchise coupled with strong presence in emerging markets makes Torrent an attractive buy in the midcap pharma space.

India formulation (35 percent of total revenue) witnessed a 21 percent revenue CAGR to Rs 1,820 crore over FY13-16 led by a strong presence in chronic products. A turnaround of Elder Pharma's portfolio and strong execution has led to a sharp improvement in Torrent’s field force productivity.

In addition, the company has discontinued certain promotional schemes and this will benefit it in the long run, says the brokerage house that expects India formulations to witness a 15 percent CAGR over FY16-19 with an improving profit mix.

Torrent's US sales declined 25 percent QoQ to USD 48 million in Q2FY17 largely due to intense pricing pressure in generic Abilify.

CLSA says recent approvals of generic Enablex and generic Sarafem should lift Q3 US sales and another 10-12 approvals in FY18 should lead to a strong recovery in the US. Given the low base, Torrent has the potential to witness a 20 percent revenue cAGR in the US over the next two years.

Torrent's R&D spend increased sharply to 7 percent of sales in 1HFY17 from 4 percent in FY16. The company expects its R&D spend to remain high as it ramps up filings in the US. Torrent is aiming to file eight ANDAs in 2HFY17 (six filed in 1HFY17).

Despite the high R&D spend, CLSA expects Torrent’s EBITDA (earnings before interest, tax, depreciation and amortisation) margin to remain strong due to improving profitability in India and Brazil.

Its balance sheet remains strong, allowing room for mid-sized merger & acquisition opportunities. The stock has corrected around 15 percent post its Q2 results while the Nifty has fallen 6 percent, CLSA says.
 
At 10:57 hours IST, the stock was quoting at Rs 1,423.85, up Rs 20.50, or 1.46 percent on the BSE.

Posted by Sunil Shankar Matkar

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