Sharekhan 's report on Torrent Pharmaceuticals
“Torrent Pharmaceuticals (Torrent Pharma) is set to gain from the acquisition of anti-bacterial drug, minocycline tablets and capsules in the US, currently being marketed by Ranbaxy Laboratories (Ranbaxy; market size $700 million). As per the order issued by FTC (US) in January this year, Sun Pharmaceutical Industries (Sun Pharma; which is in the process of acquiring Ranbaxy) was required to divest Ranbaxy's interests in generic minocycline tablets and capsules to Torrent Pharma. Ranbaxy holds close to 27% of market share in the drug, which will now be passed on to Torrent Pharma. We believe this product will give significant upside for Torrent Pharma.”
“The company is witnessing a stronger traction in some of the products launched during the last 12 months, thanks to surge in demand of generic products. Besides, the company is accelerating products filings in USA (currently 19 ANDAs pending approval from USFDA while 44 products are under development). It aims to launch 9 to 11 products in the US market during FY2016. We can expect a significant upside from Abilify (an antipsychotic medication having brand sales of $6.5 billion), which will lose basic patents next month (though not factored in our revenue model).”
“The Indian pharmaceutical market is likely to see a healthy growth in Q4FY2015, as evident from a 15% growth registered in secondary sales in January and February this year. Torrent Pharma is likely to gain from the better market condition on home turf. Due to a high base effect and volatile currency in key emerging markets, growth may moderate in Q4FY2015. However, we expect a healthy growth in two to three years’ time frame on the back of multiple growth drivers including capacity expansions. We expect a revenue and a profit CAGR of 21% and 26% over FY2014-17E, respectively.”
“We factor in the potential upside from the minocycline drug and a better traction in base business in the US market. Accordingly, we have revised our earnings estimates up by 5% and 11% for FY2016 and FY2017, respectively. We also assign a higher valuation multiple to set a price target of Rs1,500 (19x FY2017E EPS). We upgrade our rating to Buy on the stock”, says Sharekhan’s research report.
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