July 07, 2016 / 14:09 IST
Axis Direct's research report on Alembic Pharma
Alembic’s FY16 Annual Report highlights significant initiatives toward augmenting research capabilities and expanding product development pipeline. We note Alembic is fast tracking its R&D initiatives (expects~50% spike in R&D in FY17 to Rs 4.5bn, 14.5% of FY17 sales) across different dosage forms – Oncology, Injectables and Dermatology– and building capacities (plans Rs 10bncapex over FY17 - mid of FY19).
While impact of these R&D initiatives would be visible from FY19, Alembic is in a sweet spot given small US revenue base, lower USFDA risks (both API and formulation units recently cleared by USFDA), steady India business and strong return ratios. On back of improving business quality &~15% price correction in last 6M, we upgrade stock to HOLD.
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