IDirect Healthcare AnnualUpdate 2016

Annual Update
June 22, 2016

Sector View
Healthcare Annual Update
Neutral
Stocks Performance ( % Returns as on March 31, 2016)
Company
Jubilant Life
1Y
2Y
3Y
5Y FY17 (YTD)
173
162
143
153
-17
Alembic Pharma
32
113
488
NA
-22
Aurobindo Pharma
22
191
921
660
-18
Torrent Pharma.
16
156
285
362
-7
Ajanta Pharma
15
254
719
5176
10
Glaxosmit Pharma
11
48
73
85
Divi's Lab.
11
45
100
193
-4
Unichem Labs.
-4
27
16
-3
Biocon
14
77
40
40
Glenmark Pharma.
41
72
180
-17
Natco Pharma
-2
158
381
650
-13
Apollo Hospitals
-3
45
58
181
-11
CNX 500
-8
23
45
39
Strides Arcolab
-8
180
24
194
-16
Ipca Labs.
-8
-31
10
94
-34
Nifty
-9
15
36
33
Cadila Health.
-9
55
113
101
-4
Dr Reddy's Labs
-13
18
72
85
-2
CNX Pharma
-14
44
85
142
-10
Pfizer
-20
41
69
44
-20
Sun Pharma.Inds.
-20
43
100
271
-10
Indoco Remedies
-20
107
400
390
-19
Lupin
-26
59
135
255
-21
Cipla
-28
34
35
59
-26
Syngene Int
NA
NA
NA
NA
-2
YTD: till 20-June-2016
Currency Movement
140
130
120
110
100
90
80
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
70
USDINR
EUROINR
RUBINR
BRLINR
JPYINR
ZARINR
Price movement
140
130
120
110
100
90
80
70
CNX Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Research Analyst
Siddhant Khandekar
siddhant.khandekar@icicisecurities.com
Mitesh Shah
mitesh.sha@icicisecurities.com
Nandan Kamat
nandan.kamat@icicisecurities.com
ICICI Securities Ltd. | Retail Equity Research
Course correction drive after turbulent FY16...

FY16 turned out to be a demanding fiscal for pharma players after a near
hassle-free ride for five years. This was attributable to the triple whammy
impact of 1) USFDA issues (483s and warning letters), 2) NLEM/FDC
impact in the domestic market and 3) political turmoil and adverse
currency shock in EMs. Indian companies received nine USFDA warning
letters in FY16, by far the highest run rate over the years. What came as a
surprise even for industry players was the frequency of inspections and
the random nature of issues flagged in the scrutiny. Paradoxically,
however, the fiscal also witnessed highest ever ANDA approvals for
Indian companies (177 approvals vs. 92 in FY15). However, investors, by
and large, remained sceptical as almost all players received either
warning letters or critical Form 483 observations.
Despite the regulatory turmoil, US sales of a select pack of I-Direct
universe (~37% of universe revenues) grew ~14% YoY in FY16 thanks
to accelerated approvals and exclusivity launches by Lupin (gGlumetza;
anti-diabetic), Torrent (gAbilify; CNS) and Sun Pharma (gGleevec; anticancer)) besides consolidation of new acquisitions (Natrol by
Aurobindo). Note that US growth has not captured gNexium (GI) traction
for Cipla and gAbilify traction for Alembic for nondisclosure of specific
traction. Companies like Glenmark and Cadila have also registered strong
YoY growth.
Domestic formulations from the select pack (~24% of universe revenues)
grew ~11% YoY in FY16. The below-normal growth can be attributed to
NLEM/FDC impact and, to some extent, also to the higher base of FY15.
Among companies, Ajanta, Glenmark, Lupin, Cipla, Dr Reddys, Sun and
Torrent witnessed strong growth.
Most companies spent heavily on R&D and also guided for incremental
R&D spend in the next few years. Likewise, the capex spend also went up
significantly as companies invested in augmenting capacity to mitigate
the regulatory impact and debottlenecking besides out-bound
acquisitions (Gavis by Lupin and InvaGen by Cipla among others).
Overall, the R&D spend as a percentage of sales was at 7.7% for the IDirect universe with some large caps committing even excess of 12% for
the future. Similarly, capex spend for the fiscal was at | 15398 crore, by
far the highest in recent years.
Pharma in metamorphosis mode; valuations reflect near term headwinds
After enjoying a near seamless journey in the US, thanks to the patent
cliff ride, the companies are facing headwinds not only in the US but also
in India and some important emerging markets, as discussed earlier. By
virtue of this, most stocks are down between 20% and 40% from their
FY16 peaks. The companies are bracing for the new normal whereby
frequent and random USFDA audits will be common as will be the cost
on remediation and improvement besides capex for alternate
arrangements. Secondly, the R&D spend is likely to spike as companies
prepare for complex launches in the US such as oncology injectables,
respiratory, derma, ophthalmic and biosimilars to mitigate the pricing
impact and consolidation. However, this metamorphosis is fraught with
front-loaded costs and longer gestation periods. We prefer companies
that are best placed to tackle the new challenges. Our top picks are
Lupin, Dr Reddys, Torrent Pharma, Natco and Syngene. USFDA, NLEM
and FDCs related issues are likely to weigh in the near term.
US remains market to conquer but new challenges emerge

We divide the success story of Indian generic players in the US into two
phases - FY06-11 and FY11-16. While the first phase witnessed heavy
capex followed by growing US generic opportunities, the early part of
the FY11-16 phase witnessed robust incremental free cash flows on the
back of exclusivity launches and the extensive piggyback impact of the
impending patent cliff.
Passing of the Generic Drugs User Fee act (GUDUFA) and Affordable
Care Act also lifted the generics usage and, in turn, the fortunes of Indian
generic exporters. However, the latter was marred by frequent recalls,
increased USFDA scrutiny especially time taken between inspection and
issuance of warning letter, pricing pressure due to buyer consolidation
and waning impact of the generic patent cliff.
Exhibit 1: US sales grow 66.3% in FY06-11
Exhibit 2: US sales grow 28.8% in FY11-16

50000.0
40000.0
40000.0
30000.0
30000.0
20000.0
10000.0
970.3
3804.2
3972.3
FY07
FY08
7220.5
9692.7
12355.5
| crore
| crore
50000.0
20000.0
43739.1
32493.5
12355.5
18321.5
37316.9
23042.1
10000.0
0.0
0.0
FY06
FY09
FY10
FY11
FY11
FY12
FY13
FY14
FY15
FY16
US Sales
US Sales
Source: Company, ICICIdirect.com, Research
Source: Company, ICICIdirect.com Research
We believe Indian pharma players are at an inflection point as they plan

to mitigate the US based risks by 1) improving quality checks, 2) higher
investments in back-up arrangements, 3) augmented R&D to move away
from plain vanilla generics and exploiting complex and untapped areas
such as biosimilars and 4) outbound M&As including brands and select
portfolios. Large cap players such as Lupin and Cipla acquired US based
players to establish the manufacturing base in that country whereas Dr
Reddys was busy in brand acquisitions. We also noted a changed
strategy on part of Indian players, especially in the innovative space,
whereby MNCs are offering their pipeline to Indian companies to take it
forward for late stage R&D and marketing (Sun-MSD deal and Dr
Reddys-Xenoport deal).
Exhibit 3: I-Direct Universe capex FY06-11
Exhibit 4: I-Direct universe capex (FY11-18E)
20000
20000
18375
15233
15000
15000
10498
5000
2872
3760
5711
7447
4282
10000
| crore
| crore
8889
10000
7447
8023
FY11
FY12
10323
8383
7276
5000
0
0
FY06
FY07
FY08
FY09
FY10
FY11
FY13
FY14
FY16
FY17E FY18E
Capex
Capex
FY15
Page 2
Exhibit 5: I-Direct Universe R&D FY06-11
Exhibit 6: I-Direct Universe R&D FY11-18E
10.0
10.0
8.0
8.0
6.0
5.5
4.8
4.6
4.0
5.3
4.4
4.1
6.0
5.3
6.8
6.4
5.7
5.4
7.9
8.9
8.8
4.0
2.0
2.0
0.0
0.0
FY06
FY07
FY08
FY09
FY10
FY11
FY11
FY12
FY13
I-Direct R&D as % of Sales
FY14
FY15
FY16
FY17E
FY18E
I-Direct R&D as % of Sales
Exhibit 7: Top five companies R&D as percentage of sales
Exhibit 8: Others with significant spike in R&D as percentage of sales
12.0
11.5
13.0
11.3
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
7.6
10.5
9.9
9.0
7.1
6.1
5.1
Sun Pharma
6.9
Lupin
6.5
4.4
Dr. Reddy's
Labs
FY12
8.0
FY16
Cipla
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
12.0
9.8
5.5
7.0
7.4
8.0
4.0
7.7
6.9
4.3
4.3
2.2
4.5
1.9
Alembic
Pharma
Glenmark
6.1
Ajanta
Pharma
FY18E
Cadila
Healthcare
FY12
FY16
Torrent
Pharma
Indoco
Remedies
FY18E
The new investments are likely to take more time to mature because of
the changed rules of the game and also due to crowding in existing
opportunities. Despite receipt of nine warning letters (by far the highest
in any fiscal) there were as many as 177 approvals, also the highest. This
suggests that the approval machinery is on and running. Although there
will be some windfalls due to FTF launches, we expect a major change of
course in the strategy beyond FY18.
Exhibit 9: Warning letters (highest in FY16)
Exhibit 10: ANDA approvals (highest in FY16)
10
8
6
150
177
138
119
106
92
100
50
29
35
35
22
44
Warning Letters
Source: USFDA, ICICIdirect.com Research
FY16
FY15
FY12
FY11
FY10
FY07
FY06
FY09
FY08
FY14
FY13
4
2
200
FY12
FY13
Final Approvals
FY14
FY15
FY16
Tentative Approvals
Source: USFDA, ICICIdirect.com, Research
For FY16-18E, the I-direct universe of the select US pack is likely to grow
at a CAGR of 14.4% to | 55339 crore. Companies like Lupin, Glenmark,
Cadila and Aurobindo are likely to post good growth whereas Sun,
Alembic and Torrent are likely to be laggards.
Page 3
NLEM additions for domestic formulations likely to continue; FDC new

headache
In FY16, besides extension of the NLEM list (NLEM 2015) by NPPA, the
companies were also hit by negative adjustment for NLEM portfolio- in
synch with negative WPI for FY16. However, the major unforeseen event
was banning of 344 fixed dosages combination (FDCs) over safety
concerns. In 2014, the government formed a panel (Kokate panel) to
review over 6,000 FDCs that were able to penetrate the market after
approval from only individual state regulators and not from the central
government, which is a legal necessity. Although companies contested
the ban in the Delhi High Court, which subsequently stayed the order, the
abrupt government action had its impact on the banned drugs sales due
to channel disturbance. Also note that the panel has notified 963 FDCs as
irrational so the fate of the remaining 619 is still hanging in balance. This
suggests that smooth sailing in the Indian formulations space is likely to
be a thing of past as companies will have to introduce new products and
push for more volumes for growth. In this scenario, we expect the annual
growth trajectory for Indian formulations to come down from 13-15% to
10-12%, going ahead.
For FY16-18E, the I-direct universe select pack is likely to grow at a CAGR
of 15.4% to | 33606 crore. Companies like Ajanta, Alembic, Glenmark,
Sun and Dr Reddys are likely to post good growth whereas Biocon,
Cadila, Ipca and Torrent are likely to be laggards.
Exhibit 11: Impact NLEM 2015, FDC ban and negative WPI
(| crore)
COMPANY
Full Value
NLEM 15 - New
FDC's
WPI
MAT VAL
Total
% Impact
MAT VAL
% Impact
MAT VAL
% Impact
MAT VAL
% Impact
IPM
98042.2
4460.7
4.5
877.5
0.9
3049.3
3.1
534.0
0.5
Glenmark
2346.7
192.3
8.2
42.0
1.8
141.8
6.0
8.5
0.4
Lupin
3405.4
113.0
3.3
32.1
0.9
63.3
1.9
17.6
0.5
Cipla
4886.4
136.6
2.8
78.1
1.6
26.2
0.5
32.4
0.7
Zydus
3810.9
105.2
2.8
59.7
1.6
18.1
0.5
27.4
0.7
Sun
8643.8
230.5
2.7
97.8
1.1
87.3
1.0
45.4
0.5
Dr Reddy's
2420.7
64.1
2.6
36.0
1.5
13.1
0.5
14.9
0.6
Torrent
2271.7
39.7
1.7
12.5
0.6
12.1
0.5
15.0
0.7
Abbott Healthcare
3148.9
500.7
15.9
8.4
0.3
473.3
15.0
19.0
0.6
Pfizer
2871.9
441.8
15.4
52.2
1.8
365.7
12.7
24.0
0.8
Macleods
2828.9
364.1
12.9
12.3
0.4
338.3
12.0
13.4
0.5
Micro
1842.3
97.8
5.3
17.6
1.0
70.4
3.8
9.8
0.5
Mankind
3655.6
185.7
5.1
1.9
0.1
169.5
4.6
14.3
0.4
Alkem
3045.2
142.0
4.7
44.5
1.5
75.4
2.5
22.1
0.7
Aristo
2425.5
80.5
3.3
1.5
0.1
61.9
2.6
17.1
0.7
USV
1951.6
64.7
3.3
8.2
0.4
47.8
2.4
8.7
0.4
Intas
2770.9
88.7
3.2
27.6
1.0
48.5
1.7
12.7
0.5
Sanofi
2357.8
72.2
3.1
45.3
1.9
9.7
0.4
17.2
0.7
GSK
3197.8
94.9
3.0
12.0
0.4
54.1
1.7
28.9
0.9
Abbott India
1973.4
26.1
1.3
14.5
0.7
5.6
0.3
6.0
0.3
Source: AIOCD, ICICIdirect.com Research
Page 4
Exhibit 12: Growth trends in Indian formulations market in FY16 (secondary market)
25
22.9
20
18.8
15.8
15
Revenues
17.0
10.0
15.9
13.0
15.5
15.5
16.2
16.1
10.6
16.1
21.0
11.9
13.3
18.7
16.7
9.4
24.2
-0.8
16.8
EBITDA
16.6
-13.9
29.2
14.4
16.0
13.0
15.7
14.5
9.1
19.9
31.4
38.7
17.0
21.7
15.1
13.0
26.8
-21.1
29.1
6.6
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
IPM Growth (%)
Source: AIOCD Data base, ICICIdirect.com Research
Exhibit 13: Growth in key therapeutic segments in FY16

25
14.6
15
10
21.2
19.6
20
16.4
10.8
20.3
17.4
16.9
16.2
13.4
12.5 12.5
15.3
14.2
13.1
10.5
8.5
12.2
1.6
Sex Stimulants
Anti Malarials
Others
Urology
Blood Related
Vaccines
AntiNeoplastics
Ophthal
Hormones
Gynaecological
Derma
Respiratory
Pain /
Analgesics
Neuro / Cns
Source: AIOCD Data base, ICICIdirect.com Research
Expected CAGR in FY16-18E

Ajanta Pharma
Alembic Pharma
Apollo Hospitals
Aurobindo Pharma
Biocon
Cadila Healthcare
Cipla
Divi's Labs
Dr Reddy's Labs
Glenmark Pharma
Indoco Remedies
Ipca laboratories
Jubilant
Lupin
Natco Pharma
Sun Pharma
Syngene Int
Torrent Pharma
Unichem Laboratories
9.6
Anti-Infectives
Profit
52.6
62.5
6.2
85.6
20.5
32.3
-0.2
21.7
13.1
13.2
25.9
-29.8
40.9
19.8
28.9
18.0
29.1
65.6
-0.5
12.2
9.6
(%)
Ajanta Pharma
Alembic Pharma
Apollo Hospitals
Aurobindo Pharma
Biocon
Cadila Healthcare
Cipla
Divi's Labs
Dr Reddy's Labs
Glenmark Pharma
Indoco Remedies
Ipca laboratories
Jubilant
Lupin
Natco Pharma
Sun Pharma
Syngene Int
Torrent Pharma
EBITDA
37.6
57.9
8.7
51.7
14.6
26.3
4.4
19.6
13.2
16.8
23.1
-18.0
7.4
17.8
21.4
20.4
28.2
59.7
-2.0
12.5
10.4
10
Financial CAGR in FY13-16

Revenues
22.7
27.0
17.1
32.8
11.8
15.5
18.0
20.2
9.9
15.4
16.6
0.8
3.9
13.7
19.6
35.8
26.0
28.2
7.2
13.6
13.4
13.0
Jul-15
Profit
51.4
54.4
12.5
27.7
19.5
16.5
8.8
20.5
17.0
14.6
11.0
-11.2
13.4
21.4
23.7
22.3
52.1
49.1
3.2
Jun-15
EBITDA
43.3
44.4
13.3
26.8
6.9
18.4
13.2
22.4
18.9
22.1
19.3
-1.9
18.2
25.7
25.5
34.7
29.3
47.5
1.8
May-15
Revenues
27.9
21.2
18.5
25.8
4.7
16.3
16.7
23.1
15.7
21.3
15.6
8.7
11.0
19.5
20.2
37.9
28.0
25.1
10.1
Cardiac
Gastro
Intestinal
Vitamins /
Minerals /
Anti Diabetic
Ajanta Pharma
Alembic Pharma
Apollo Hospitals
Aurobindo Pharma
Biocon
Cadila Healthcare
Cipla
Divi's Labs
Dr Reddy's Labs
Glenmark Pharma
Indoco Remedies
Ipca laboratories
Jubilant
Lupin
Natco Pharma
Sun Pharma
Syngene Int
Torrent Pharma
Apr-15
Financial CAGR in FY11-16
Profit
18.0
-13.9
43.8
17.1
-17.5
17.3
18.1
12.0
10.6
24.7
47.9
74.3
43.9
21.2
20.9
23.3
29.5
-20.2
34.1
Exhibit 14: Leading brands in Indian formulation market (| crore)

Brand
Company
Therapy
FY16
FY15
Gr.(%)
Augmentin
Glaxosmithkline PharmaceAmoxycillin; Clavulanic Acid
API
Anti-Infectives
317.5
319.0
-0.5
Corex
Pfizer Ltd
Respiratory
310.9
228.6
36.0
Chlorpheniramine; Codeine
Spasmo ProxyvWockhardt Ltd
Dicyclomine; Paracetamol
GI
309.3
178.2
73.5
Lantus
Sanofi India Ltd.
Glargine
Anti Diabetic
273.0
220.8
23.6
Galvus Met
Novartis India Ltd
Vildagliptin; Metformin
Anti Diabetic
272.1
187.5
45.1
Clavam
Alkem Laboratories Ltd.
Amoxycillin; Clavulanic Acid
Anti-Infectives
239.9
225.4
6.4
Becosules
Pfizer Ltd
Vitamin B Complex
Vitamins
228.6
243.8
-6.2
Volini
Ranbaxy Laboratories Ltd Diclofenac
Pain
217.0
212.1
2.3
Foracort
Cipla Ltd.
Respiratory
196.1
169.1
16.0
Synflorix
Glaxosmithkline PharmaceAll Other Vaccines
Vaccines
195.1
151.9
28.5
Formoteral; Budesonide
Source: AIOCD data base, ICICIdirect.com Research
Source: Company, icicidirect.com
Page 5
Exhibit 15: Domestic performance (primary-reported by companies) ICICIdirect.com coverage companies quarter wise
45
38
40
34
35
27
30
(%)
25
21
20
17
15
15
10 10 11
10
16
13
14
17
16
13
11
23
19
19
10
6
2
11
15
11
19
15
17
13
12
0
Ajanta
Pharma
-5
Alembic
Pharma
Biocon
0
Cipla
Cadila
Dr Reddy's
Q1FY16
Glenmark
Q2FY16
Indoco
Q3FY16
Ipca Labs
Lupin
-1
Torrent
Pharma
Sun Pharma
Q4FY16
Unichem
Labs

Exhibit 16: Domestic performance (secondary market) ICICIdirect.com coverage companies
35
18
(%)
20
10
14
14
10
10
17 17
15
7
22
19
18
16
15
10
23 24
15
Ajanta
Pharma
Alembic
Pharma
13
2
Cadila
Cipla
19
14
17
Dr Reddy's
Q1FY16
Q2FY16
Glenmark
Q3FY16
4
0
Indoco
-2
19
18
15
12
12
9
Biocon
18
15
0
-5
28
27
25
25
15
32
30
30
Ipca Labs
Lupin
Sun Pharma
Torrent
Pharma
13
5
Unichem
Labs
Q4FY16
Source: AIOCD data base, ICICIdirect.com Research
Page 6
Stock performance
Apollo Hospitals
Capex cycle on; expansion of pharmacy business affects margins
240
220
200
180
160
140
CNX Pharma
Apollo Hospitals
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
120
100
80
60
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Adjusted PAT
Adj. EPS (|)
FY15
5178.5
734.7
326.5
23.7
FY16P
6085.6
782.3
301.9
22.2
FY17E
6956.2
1063.0
482.6
34.7
FY18E
7974.5
1299.1
679.2
48.8
FY15
0.6
55.0
27.4
28.6
5.9
10.4
9.9
FY16E
0.8
56.4
26.6
26.8
5.4
8.9
8.2
FY17E
0.7
38.7
19.3
19.7
4.9
12.5
10.8
FY18E
0.6
27.5
15.4
16.2
4.2
15.3
13.3
Key Ratios
Debt / Equity
PE (x)
EV to EBITDA (x)
Target EV/EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 Highlights
Revenues grew 17.5% YoY mainly due to consolidation of Hetero
Pharmacy, Nova Speciality Hospital and Guwahati Hospital. The
hospital segment grew 9.4% while the pharmacy business grew
31% YoY
Strong growth in the low margin pharmacy business led to
contraction in EBITDA margin by 133 bps YoY to 12.9% in FY16.
The pharmacy business margins were 3.6% while healthcare
services margins were 21.3%
Total 1,725 beds in 11 locations were commissioned in the last
36 months Vanagaram 260, Jayanagar 140, Trichy 200, Nashik
120, Women and Child OMR 60, Indore 120, Nellore 190,
Perungudi 150, women & child SMR 50, Vizag new 245,
Malleswaram 190. Chennai cluster revenues grew 11% YoY in
FY16 to | 1378 crore and Hyderabad cluster revenues grew 8%
in FY16 to | 535.4 crore
Revenues from new hospitals grew to | 318.7 crore in FY16 from
| 176.7 crore in FY15. FY13 Hospitals Vanagaram & Jayanagar
reported an EBITDA of | 19.5 crore in FY 16 compared to | 6.8
crore in FY15
Hospitals in Vizag and Malleswaram were commercialised in
Q4FY16 with ~50% occupancy rate
Currently, 15% of business can be attributed to international
patients
The company added 251 pharmacy stores and closed 51 stores
in FY16, taking the total number of pharmacy stores to 2326
The company entered into an agreement with Patanjali to market
its products through Apollos stores
What to Watch
Apollo plans to add 545 beds in Navi Mumbai (480 beds) and
Indore (65 beds). The Navi Mumbai hospital is expected to be
commissioned by Q2FY17 (150-200 beds initially)
The company plans to add another 500 beds in FY19 South
Chennai 200, South Mumbai 300
Total capex estimated for this expansion plan is | 1520.4 crore.
Of this, investment of | 584.1 crore has already been made.
Balance will be invested through a mix of internal accruals, debt
Apollo is planning expansion of its international business in
South East Asia along with Africa and the Middle East. The
company expects it to improve to 20-25%, going forward
Apollo expects overall EBITDA margins to reach 20% level in five
years from 13.7% in FY16
The company gave tax rate guidance of 20-21% for FY17, FY18
Our View
With more and more players getting listed in healthcare space, we
believe scrutiny for margin improvement and improvement in return
ratios may intensify. Newly commissioned hospitals have achieved the
BE level fairly ahead of our expectations. Focus now is likely to shift to
operational gauges for different cluster hospitals as the current phase of
the capex cycle nears the end. On the pharmacy front, margins showed a
substantial improvement in the last few quarters. We value the stock on
an SOTP basis by valuing the healthcare business at 15x FY18E
EV/EBITDA and pharmacy business at 1.5x FY18E EV/sales. Our SOTP
target price is | 1420. We continue to monitor progress on margins and
return ratios.
Page 7
Ajanta Pharma
Stock Performance
Visibility intact amid near term challenges
200
180
160
140
120
100
80
CNX Pharma
Ajanta Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(|crore)
Revenues
FY15
FY16P
FY17E
FY18E
1480.6
1729.4
2011.0
2368.9
EBITDA
505.2
582.3
682.2
791.8
Net Profit
309.9
403.3
462.5
561.5
36.0
45.7
52.4
63.6
FY15
FY16E
FY17E
FY18E
EPS (|)
Key Ratios
Debt / Equity
PE (x)
M.Cap/ Revenues (x)
0.1
0.1
0.0
0.0
42.7
32.8
28.6
23.6
8.9
7.7
6.6
5.6
EV to EBITDA (x)
26.0
22.7
19.3
16.3
Price to book (x)
15.7
11.3
8.6
6.7
RoNW (%)
37.8
34.4
30.0
28.2
RoCE (%)
50.3
43.7
37.9
35.6
FY16 highlights
Revenues for FY16 grew 16.8% YoY to | 1729 crore mainly due
to the strong growth in the African tender business and domestic
cardiology segment
The export business grew 19% YoY to | 1162 crore due to strong
growth in the African tender business. African tender business
grew 51.8% to | 413 crore. Total African & Asian business grew
29% and 7% to | 682 crore and | 469.5 crore, respectively
The domestic branded business grew 18.9% to | 497 crore
mainly due to strong growth in the cardiology segment, which
was partially offset by slow growth in the dermatology segment
on account of increased competition from the Melacare brand
The domestic institutional business declined to | 35 crore in FY16
from | 61 crore in FY15
Global field force strength has gone up from 572 to 650 in FY16
Total 26 ANDAs have been filed in the US market, out of which
five have been approved. Sales in FY16 accounted for ~US$2
million
What to watch
Guided for 33-35% EBITDA margins for FY17. In the domestic
market, it expects 18-20% YoY growth while in exports it expects
mid-teen growth
The company expects ~US$10 million revenues from US sales in
FY17 and US$20 million for FY18
It plans to file eight to 12 ANDAs every year
R&D guidance for FY17 - 7% of sales
Guided for 25-26% of tax for FY17 and 24-25% for FY18
Guided for capex of ~| 475 crore for FY17. This includes
allocation towards the development of the Guwahati plant (| 300
crore), new corporate office, capitalisation of R&D (| 100 crore for
next two years) and maintenance capex (| 50-60 crore annually)
Validation batches from the Dahej plant have been started. The
company expects to start US filing from H1FY17. It expects to
commercialise the Dahej facility and Phase I of the Guwahati
facility from Q1FY18. Guwahati phase II is expected to start from
Q1FY19
Our view
The company is entering the stretched phase of capex across two to
three years to bolster the domestic business and exports franchise,
especially the US. We believe this is a calculated move as Ajanta
prepares to scale up in the backdrop of 1) challenges in the domestic
derma space 2) currency translation issues in emerging markets and 3)
slower-than-expected off-take in the US. With a strong balance sheet and
high return ratios, we believe the time is ripe for the company to enter
the capex cycle, the benefit of which is likely to pan out beyond FY18.
We have ascribed a target price of | 1780 based on 28x FY18E EPS of
| 63.6.
Exhibit 17: Notable Para IV Filings
Brand Name
Indicator
Generic Name
NDA holder
Abilify
Depression
apriprazole
Otsuka Pharma
Filing Date
17-Mar-15
[
Source: Bloomberg, ICICIdirect.com Research
Page 8
Alembic Pharma
Stock Performance
gAbilify windfall boosts FY16 numbers; sharp R&D spike to impact near
term profitability
CNX Pharma
Alembic Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
240
220
200
180
160
140
120
100
80
60
Nifty
Key Financials
(|crore)
Revenues
EBITDA
Net Profit
EPS (|)
FY15
2056.2
404.6
284.3
15.1
FY16P
3140.4
1006.0
719.4
38.2
FY17E
3227.1
536.6
369.7
19.6
FY18E
3802.7
746.4
533.1
28.3
FY15
0.3
36.2
41.1
32.2
33.7
32.1
30.7
FY16P
0.1
14.3
16.2
12.6
78.5
51.5
58.0
FY17E
0.1
27.9
31.6
23.9
34.8
22.3
24.8
FY18E
0.1
19.3
21.9
17.3
40.1
26.2
29.7
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
ROIC (%)
RoNW (%)
RoCE (%)
FY16 highlights
Alembics revenues grew 52.7% YoY to | 3140 crore in FY16 on
account of gAbilify launch in the US by its partner under shared
exclusivity. gAbilify launch and a better product mix in the
domestic market caused an EBITDA margin expansion of 1230
bps to 32% in FY16
The company received four Form 483 observations from the
USFDA in March 2016 for its Panelav facility. The same facility
was also inspected by the agency last year without any
observations. Post the observations, the company received
ANDA approval from USFDA to be sold from the facility
APLs cumulative ANDAs were at 76. In FY16, it filed eight
ANDAs and received nine approvals in FY16. The company filed
nine DMFs in the US market in FY16 taking the count to 81
The company had launched 11 products under its own label in
FY16
APL has added ~1400 MRs in the past two years in the domestic
market to widen its focus on the specialty segment by
introducing more divisions within segments taking the total MR
strength to ~5000
What to watch
Guided for | 450 crore (14-15% of sales) of R&D spending in
FY17
Guided for higher than | 300 crore capex in FY17. Total | 80-100
crore capex for its JV with Orbicular for dermatology portfolio.
Under the JV, It shortlisted ~40 products for future development.
Total market size of these opportunities is ~US$5 billion
The company expects six to nine ANDA approvals in FY17
The Sikkim plant became fully operational during Q4FY16. It is
expected to reach full capacity utilisation in FY17
Reiterated tax rate guidance of ~20% for FY17
Our view
With the announcement of aggressive R&D and capex plans, the
management has signalled the strategy for the next five to six years,
especially on the US front. This includes a foray into niche areas like
oncology, injectables, derma, etc. This, we believe, is fraught with a new
set of challenges, the benefits of which are most likely to be back-loaded.
The company is now at a new inflection point as it prepares to do away
with one-off finite opportunities in the US. The immediate cash-burn is
likely to weigh on sentiments in the near term. Accordingly, we have
reduced our FY17E, FY18E EPS estimates by 31% and 21%, respectively.
Our target price is | 620 based on 22x FY18E EPS of | 28.3.
Page 9

Brand Name
Indicator
Generic Name
NDA holder
Abilify
Depression
apriprazole
Otsuka Pharma
Filing Date
9-May-14
Brilinta
Cardiovascular
Ticagrelor
AstraZeneca
30-Oct-15
Lyrica
diabetic peripheral neuroppregabalin
Pfizer
7-Dec-11
Multaq
prevention of cardiovascudronedarone hydrochloride
Sanofi
4-Apr-14
Staxyn
erectile dysfunction
vardenafil hydrochloride
Bayer
18-Sep-15
Uloric
febuxostat
hyperuricemia
Takeda
19-Nov-13
Viibryd
major depressive disorde Vilazodone Hydrochloride
Forest Laboratories
30-Mar-15
Benicar
hypertension
Daiichi Sankyo
olmesartan medoxomil
1-Apr-16
[
Aurobindo Pharma
Stock Performance
Highest ever approvals in FY16; robust product basket bodes well for future
150
140
130
120
110
100
90
80
CNX Pharma
Aurobindo Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
70
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Net Profit
Adjusted PAT
EPS (|)
Adjusted EPS (|)
FY15
FY16P
FY17E
FY18E
12120.5 13831.2 15543.9 17652.7
2563.6 3140.7 3524.3 4109.8
1575.8 1915.6 2200.6 2627.8
1635.4 1981.6 2200.6 2627.8
27.1
32.8
37.7
45.1
28.1
33.9
37.7
45.1
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY15
0.9
27.5
36.6
30.7
8.4
31.7
23.4
FY16E
0.5
22.7
30.2
24.8
6.2
28.1
25.0
FY17E
0.4
19.7
26.3
22.0
4.8
24.3
24.6
FY18E
0.2
16.5
21.9
18.5
3.8
22.9
26.4
FY16 Highlights
Revenue growth of 14% was largely driven by strong US sales
on the back of extensive product launches
Received highest ever USFDA annual approvals (49 final USFDA
approvals including 20 injectable approvals and nine tentative
approvals) among all Indian pharma companies
Filed 78 ANDAs with USFDA under injectables segment
(including ophthalmic) of which 29 have received approvals. The
company launched 28 products in the US during FY16
Cumulative ANDA filings were at 398 including 215 final
approvals, 36 tentative approvals and 147 pending approvals
Received EIR for Unit III (January 2016 inspection), Unit VII,
Auronext, Unit XI (API facility) and Unit VIII (API facility). Unit XII
(July 2015 inspection) is pending EIR. Unit IV (September 2014
inspection) is expected to be inspected within the next 12
months.
Auromedics garnered sales of US$36.3 million registering growth
of 98% YoY on account of new product launches
Natrol recorded revenue growth of ~15% in FY16 to US$110
million. Natrols margins are better than the companys
consolidated margins
Actavis portfolio has start generating net profit during the year
Net debt was US$584 million with cash of ~US$127 million
Capex was US$212 million (US$18 million intangible and US$194
million tangible)
What to watch
The company expects Nexium launch in H2FY17. It expects stiff
competition due to a crowded market
Aurobindo plans to start filing oncology and hormonal products
in the US in the next four quarters while injectable filings are
expected to be same as FY16
For the Natrol business, the company guided for 15% YoY
revenue growth with margin expansion
The company is planning an expansion of its injectable capacity
and de-bottlenecking of capacity at unit VII
Guided for high single digit EBITDA margins for Europe in a
couple of years
Guided for 4-4.5% of R&D spending in FY17E
Guided for | 1200 crore of capex in FY17E and | 500 crore in
FY18E
Page 10
Our view
The company continues to thrive in the US, backed by a robust product
pipeline and niche launches. Despite a sharp increase in approvals in
FY16 (49 final approvals, nine tentative approvals), the filing to final
approval gap (147 at present) still bodes well for future US growth. We
expect initial margin pressure on account of Actavis and now Natrol, to
ease further on the back of incremental high margin US launches. With
the USFDA expected to hasten the approval process (90% of approvals
by September 2017) companies like Aurobindo will stand to benefit the
most. We have ascribed a target price of | 990, based on 22x FY18E EPS
of | 45.1.
Brand Name
Indicator
Generic Name
NDA holder
Filing Date
Acular LS
Ocular Pain
Ketorolactromethamine
Allergan
6-Nov-15
Prevacid
Stomach ulcers
lansoprazole
Salix Pharmaceuticals,
13-Oct-15
Xarelto
Blood Thinner
Rivaroxaban
Takeda Pharma
21-Oct-15
Aloxi
nausea and vomiting
palonosetron hydrochloride
Roche
15-Apr-13
Angiomax
blood clots
bivalirudin
The Medicines Compan
11-Apr-13
Boniva
osteoporosis
biphosphonic acid
Roche
22-Jan-13
Allegra-D
seasonal allergies
fexofenadine hydrochloride
Sanofi-Aventis U.S. LLC
5-Nov-10
[
Stock Performance
Biocon
180
Event full FY16; biosimilars progress to trigger growth
160
FY16 Highlights
Biocons revenues grew 12.8% to | 3485.4 crore on account of
30% growth in Syngene to | 1068.5 crore
The company raised ~| 550 crore via unlocking of Syngene
(IPO).. Biocon offloaded ~11% stake in the process. Proceeds
from the IPO are expected be used by Biocon for its biosimilar
pipeline
Four of its biosimilar products (Trastuzumab, Pegfilgrastim,
Adalimumab and Insulin Glargine) reached the advanced stage
(Phase III or beyond) of global clinical trials
The company received first biosimilar approval in a developed
market with Japanese approval of Insulin Glargine. Its partner
Fujifilm Pharma expects to commercialise the product in H1FY17.
The company also launched its biosimilar Glargine in emerging
markets while five of its biosimilar products entered late stage
development
Biocon, with its partner Mylan, has announced positive phase III
data for biosimilar of a Roche biological Herceptin (Trastuzumab;
oncology). Global sales of the drug were ~US$6.5 billion in FY16
The company has completed Phase I study for Insulin Tregopil
(insulin) in the US with BMS as its partner
Biocon acquired API and oncology formulation manufacturing
unit of M/s. Acacia Lifesciences Pvt Ltd at Vishakhapatnam
Malaysian facility is in validation stage and is expected to receive
regulatory approvals in near term. The company plans to
commercialise sales of insulin in Malaysia and other emerging
markets in FY17. The Malaysian plant has received local approval
The company is in the process of setting up oral solid dosage
facility for generic formulations and sterile formulations facility
140
120
100
80
CNX Pharma
Biocon
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Adj. Net Profit
Adj. EPS (|)
FY15
3089.8
695.8
408.4
20.4
FY16P
3485.4
820.0
441.2
22.1
FY17E
4031.8
955.6
565.2
28.3
FY18E
4647.9
1103.4
609.5
30.5
FY15
0.3
32.2
26.6
12.5
10.4
9.6
4.0
FY16E
0.6
14.7
24.7
10.9
9.1
8.7
3.2
FY17E
0.5
23.3
19.2
12.7
10.9
7.3
3.0
FY18E
0.5
21.6
17.8
12.5
11.1
6.0
2.7
Key Ratios
Debt / Equity
PE(x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
Page 11
for biologics business. These plants are being built in Bangalore

SEZ area and are expected to be commissioned in CY17
The company has filed seven ANDAs with the USFDA till the end
of FY16. It has filed gCopaxone (Glatiramer acetate; multiple
sclerosis) 20 mg and 40 mg with the USFDA
What to watch
Biocon is planning US/EU biosimilar filings for Trastuzumab,
Pegfilgrastim, insulin Glargine and Adalimumab in FY17
The management has reiterated its FY19 revenue guidance of
US$1 billion
The company expects higher growth for biosimilars in emerging
markets and branded formulations and mid single digit growth
for small molecules
Progress of the Malaysian insulin plant, which has recently been
commissioned. It expects emerging market sales from this plant
to start from FY17 and expects developed market approval by
FY18
The company plans to spend 18-20% (gross) of biopharma sales
on R&D expenditure for FY17
Biocon is planning standalone capex of | 200-225 crore for FY17.
This includes maintenance capex along with additional capex
required for commissioning the two new facilities in Bangalore
Our view
Syngene continues to maintain growth momentum. However, the
positive surprise was biopharma growth on the back of biosimilar
launches in emerging markets. This, along with the Japanese Glargine
approval and proposed filing in other markets bodes well for the future
as the company expects higher contribution from biosimilars, going
forward. On the other hand, prolonged restructuring, pricing pressure
and capacity constraints continue to impact small molecules growth.
Given the different fortunes for different segments, we continue to adopt
SOTP methodology for valuation. Our SOTP target price is | 545.
Cadila Healthcare
Stock Performance
Moraiya resolution, site transfer momentum to be in focus
200
180
160
140
120
100
80
CNX Pharma
Cadila Healthcare
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(|crore)
Revenues
FY15
FY16P
FY17E
FY18E
8635.8
9844.0
10921.5
13140.0
EBITDA
1740.2
2389.3
2393.0
3048.6
Net Profit
1146.4
1530.8
1586.0
2105.5
11.2
15.0
15.5
20.6
EPS (|)
FY16 Highlights
Cadila revenues grew 14% in FY16 to | 9844 crore on account of
19% growth in US sales. EBITDA margins grew 412 bps YoY to
24.3%
The company received a warning letter from the USFDA for its
Moraiya formulation facility and Ahmedabad API facility (Zyfine).
~60% of its US revenues (25% of overall revenues) are from
Moraiya facility
On the other hand, four formulation facilities, viz. oral solid
dosage facility, oncological injectable facility (Alidac),
transdermal facility (all in Ahmedabad SEZ) and oral solid dosage
facility at Baddi received the establishment inspection (EIR) from
the USFDA
The company successfully completed site transfer of five
products from Moraiya to Baddi for the US market in FY16, taking
the cumulative number of such site transfer products to 12
FY16 capex was ~| 950 crore. This includes acquisition of select
animal healthcare brands, the manufacturing operations in India
from Zoetis and acquisition of Actibile (GI), the brand from Albert
David
Page 12
Key Ratios
Debt / Equity
PE (x)
FY15
FY16E
FY17E
0.6
0.4
0.2
FY18E
0.1
28.5
21.4
20.7
15.6
Target PE (x)
34.8
26.1
25.2
19.0
EV to EBITDA (x)
19.9
14.2
14.1
10.8
Price to book (x)
7.7
6.1
5.1
4.1
RoNW (%)
27.0
28.6
24.4
26.3
RoCE (%)
20.7
27.9
24.6
29.5
In FY16, the company filed 30 ANDAs with the USFDA taking

cumulative ANDA filings to 269 and received approval for 10
ANDAs (including one tentative approval)
The company launched 40 products in domestic formulations
including line extensions in India during FY16, of which 10 were
for the first time in India
In LatAm, the company launched two new products in Brazil and
two in Mexico in FY16
In Europe, it launched three new products in France and four
new products in Spain. The company filed 14 new product
dossiers in FY16, taking its cumulative filings to 205 and received
approval for 11 new products, taking its cumulative approvals to
164 for the European market
The company launched eight new products in the focused
markets of Asia-Pacific, Africa and Middle East during FY16. This
included the launch of first biosimilar in the emerging markets
On the biosimilars front, the company completed Phase III clinical
trials for one of the mAbs and received regulatory approval from
the DCGI to conduct Phase III clinical trials for one more product.
On the novel biologics front, it initiated the next phase of clinical
trials for Rabimabs (anti-rabies)
R&D spend for FY16 was 7.7% of sales, of which 75% was
earmarked for ANDA development
On the biosimilars front, the company completed Phase III clinical
trials for one of the mAbs and received regulatory approval from
the DCGI to conduct phase III clinical trials for second product.
On the novel biologics front, it initiated the next phase of clinical
trials for Rabimabs (anti-rabies)
What to watch
Cadila plans to complete remediation process of Moraiya facility
by May 2016 and request re-audit of the facility by USFDA
The company expects to receive 20 approvals during FY17
It expects a tax rate of 20% for FY17 and R&D at 7-8% of sales
Cadila expects its domestic growth in FY17 to be better than
FY16 growth (11% YoY) and JVs sales to remain flat in FY17
EBITDA margins are expected to be ~22% for FY17
Our view
Despite the warning letter at Moraiya, we believe the US would remain a
key driver on the back of expected launch of gAsacol in Q2FY17, more
than 50% pending approvals from other facilities and initiated site
transfers from Moraiya. However, the transfer arrangement is likely to
delay its future launches while some key competitive opportunities may
be lost in the process. Similarly, the non-generic space is yet to achieve
critical mass. We have ascribed a target price of | 390 based on
19xFY18E (earlier 20x) EPS of | 20.6.
Page 13

Brand Name
Indicator
Generic Name
NDA holder
Exelon
dementia
rivastigmine
Novartis
Filing Date
27-Aug-13
Daliresp
Chronic Obstructive PulmRoflumilast
AstraZeneca
15-May-15
Nexium
gastroesophegal reflux di esomeprazole magnesium
AZ
12-Aug-13
Abilify
Depression
aripiprazole
Otsuka Pharma
30-May-08
LIVALO
high cholesterol
Pitavastatin Calcium
Kowa Pharma
17-Apr-14
Optivar
seasonal allergic rhinitis azelastine hydrochloride
Meda Pharmaceuticals
22-Mar-10
Strattera
attention-deficit hyperact atomoxetine hydrochloride
Eli Lilly and Co.
27-Oct-10
[

[
Stock Performance
Cipla
gNexium supports FY16; margins enigma to weigh in near term
190
170
150
130
110
90
70
CNX Pharma
Cipla
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
50
Nifty
Key Financials
(|crore)
FY15
FY16P
FY17E
FY18E
11345.4
13678.3
16129.4
18477.9
EBITDA
2161.7
2501.1
2761.6
3349.2
Adjusted PAT
1180.8
1505.9
1600.7
2101.3
14.7
18.8
19.9
26.2
FY15
FY16E
FY17E
FY18E
0.2
0.4
0.3
0.2
PE (x)
31.8
24.9
23.5
17.9
Target PE (x)
32.0
25.1
23.6
18.0
EV to EBITDA (x)
17.7
16.6
14.8
11.8
Revenues
Adj. EPS (|)
Key Ratios
Debt / Equity
Price to book (x)
3.5
3.2
2.8
2.5
RoNW (%)
10.9
12.7
12.1
14.1
RoCE (%)
13.8
12.1
13.1
16.0
FY16 highlights
Revenues grew 20.6% to | 13678.3 crore mainly on account of
gNexium supply to Teva under exclusivity
Cipla acquired InvaGen and Exelan Pharma in the US for US$550
million. The combined revenue of these companies was
~US$230 million in CY15. Also, Ciplas management has
indicated that the issued USFDA 483 observations at InvaGens
plant had been resolved. Post acquisition, contribution of US
sales to overall revenues was ~20%
Ciplas Indore plant received nine 483 observations from USFDA
In FY16, the company filed for seven products in the US, 19 in
Europe and over 700 in international markets
The company has over 200 formulation development projects
under way, of which top 50 projects cover an addressable market
of US$30 billion, based on innovative sales. Of these, the US
accounts for 26 projects. Inhalation and injectable delivery forms
account for 25 of the 50 top projects
The impact of the DPCO and FDC ban in FY16 on the domestic
portfolio was 2-3% of sales
The companys tender business in South Africa grew 60% YoY in
FY16. Currently, it has ~5% market share in the South African
private market and is the third largest generics player in the
market
The company accelerated execution plan for in-house biologics
clinical trial for Bevacizumab (angiogenesis inhibitor) and proofof-concept (POC) for two or three other products
The company has filed 168 cumulative ANDAs with the USFDA,
of which 90 have been approved
What to watch
Guided for mid-teens revenue growth and EBITDA growth of 1520% on its base business. Base EBITDA margins are expected to
be 16-18%, going forward
The company plans to launch 15-17 products in the US (including
five to seven from InvaGen) and file 20-25 ANDAs in FY17,
including filings in respiratory and oncology segments
In FY16, the company executed six in-licensing deals in
oncology, respiratory and dermatology segments in the domestic
market. It has also, initiated five incremental innovation projects,
of which three would be commercialised in FY17
The company gave R&D guidance of 8% of sales for FY17. R&D
spends for FY16 was 6.5% of sales
Page 14
The company is planning clinical trials and filing for its metered
dose inhaler (MDI) device in the US in FY17
The companys capex for FY16 was ~8% of sales. It guided for
similar percentage of capex for FY17
Our view
The key takeaway from the management commentary post FY16
numbers was exceptionally conservative margin guidance (16-18% for
base business for the next three years). This is despite factoring in
respiratory and other interesting launches in the developed markets.
Frequent restructuring indicates that the management is still some
distance away from a sustainable business model. In this backdrop, the
Street is likely to focus only on the profitability aspect. Our target price is
| 470 based on 18x (earlier 21x) FY18E EPS of | 26.2.
Brand Name
Indicator
Generic Name
NDA holder
Reyataz
HIV
Atazanavir
Bristol Myers Squibb
Filing Date
19-Feb-16
Emtriva
HIV
emtricitabine
Gilead Sciences
20-Aug-12
Pataday
allergic or inflammatory eolopatadine hydrocholric solution Alcon Research
29-Jan-14
Prezista
HIV
darunavir
Tibotec Inc.
13-Aug-14
Sustiva
HIV
rivastigmine tartrate
Merck
27-Jun-13
[
Divis Laboratories
Stock Performance
Lower guidance due to delay in expansion
200
180
160
140
120
100
80
CNX Pharma
Divi's Labs
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(|crore)
FY15
FY16P
FY17E
FY18E
Revenues
3114.9
3721.3
4292.5
5015.5
EBITDA
1165.2
1396.1
1588.2
1830.6
851.5
1107.7
1215.0
1389.8
32.1
41.7
45.8
52.4
FY15
FY16E
FY17E
FY18E
0.0
0.0
0.0
0.0
Adj. Net Profit

Adjusted EPS (|)
Key Ratios
Debt / Equity
PE (x)
32.5
25.0
22.8
19.9
Target PE (x)
39.3
30.2
27.5
24.1
EV to EBITDA (x)
23.1
19.2
16.9
14.4
Price to book (x)
7.9
6.5
5.4
4.5
RoNW (%)
24.4
25.8
23.6
22.6
RoCE (%)
29.4
30.6
29.1
28.4
FY16 highlights
Revenues grew 19.5% to | 3721.3 crore while EBITDA margins
stayed muted at 37.5%.
Generic: CS sales ratio for FY16 was 55:45
Carotenoids sales for FY16 were | 193 crore
Total | 252 crore was capitalised in FY16 and CWIP as on March
2016 is | 264 crore. Current capacity utilisation is ~87% across
plants
The company had forex gains of | 24 crore in FY16
Vizag facility received EIR post USFDA inspections that happened
in February, 2016. Hyderabad facility was last inspected in 2015
What to watch
The company altered revenue guidance for FY17 to 14-15%
(from 15-20%)
Capex for Kakinada and Vizag (greenfield) facilities is likely to be
~| 900 crore to be spread between FY17 and FY18. The capex
for the facilities has been delayed by two months. The funding
for the capex will be mainly through internal accruals
Our view
The management has altered the revenue growth guidance from 15-20%
to 14-15% as the Kakinada expansion has been delayed. However, once
materialisation of | 750 crore capex happens, which the company
intends to undertake soon, sales growth for FY18 onwards can go back
to the higher trajectory. With the kind of FCF generation rate, the
proposed capex is not going to affect leverage. The company remains in
a sweet spot both in the generics and custom synthesis space. It remains
a preferred player for generic supplies for many generic opportunities
arising from the impending patent cliff. We have valued the stock at
| 1260 based on 24x FY18E EPS of | 52.4.
Page 15
Dr Reddys Laboratories
Stock Performance
Near term concerns persist but long term visibility intact
200
180
160
140
120
100
80
CNX Pharma
Dr Reddy's
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(|crore)
FY15
Revenues
FY16P
FY17E
FY18E
14818.9 15470.9 16608.5 18911.7
EBITDA
3482.7
3982.5
3945.9
4739.3
Adjusted PAT
2198.6
2422.2
2372.8
2964.6
EPS (Adjusted)
129.0
142.1
139.2
174.0
FY15
FY16E
FY17E
FY18E
0.4
0.3
0.2
0.1
23.7
26.3
22.0
17.6
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
27.0
24.5
25.0
20.0
EV to EBITDA (x)
15.0
13.1
12.8
10.2
Price to book (x)
5.3
4.1
3.6
3.0
RoNW (%)
22.3
18.9
16.1
16.8
RoCE (%)
16.7
15.1
15.1
18.3
FY16 Highlights
Revenues grew just 4.4% to | 15470.9 crore. The FY16
performance was largely impacted by one-offs on account of
remedial expanses, Venezuela adjustment and volatility in entire
RoW and European businesses
Dr Reddys received a warning letter from the USFDA for three of
its manufacturing facilities. These include two API facilities at
Srikakulam, Andhra Pradesh and Miryalaguda, Telangana and
one oncology formulation facility at Duvvada, Vishakhapatnam.
Out of these three facilities, the Srikakulam API facility is the
major API plant for DRL
The company has cumulative filings of 234 ANDAs (52 Para IV
filings and 18 FTFs) and three NDAs with the USFDA of which it
has received approval for 155 ANDAs
The company has successfully executed site transfer of four to
five products. One or two products have been approved for site
transfer while a few others have been submitted for approval
It launched Zembrace SymTouch (Sumatriptan Succinate)
injection for the acute treatment of migraines in adults in the US.
The company is planning to launch of Sernivo (betamethasone
dipropionate) spray for the treatment of mild to moderate plaque
psoriasis in adults. It has also received USFDA approval for Aloxi
505 b (2) injection (anti-nausea drug) in March 2016
Dr Reddys entered into a license agreement with XenoPort for
exclusive US rights for XP23829 on milestone and double digit
royalty basis. The company plans to develop XP23829 as a
potential treatment for moderate-to-severe chronic plaque
psoriasis and may potentially develop XP23829 for relapsing
forms of multiple sclerosis (MS). Dr Reddys will pay an upfront
fee of US$50 million to XenoPort and up to US$440 million based
on milestones. In September 2015, XenoPort announced results
of a Phase II clinical trial of XP23829 as a potential treatment for
moderate-to-severe chronic plaque-type psoriasis
The domestic business had negligible impact from the
government ban of certain FDC products
The company completed integration of UCB portfolio. The UCB
portfolio performance was in line with company expectations.
Normalising for contribution from the UCB portfolio, growth of
the base business during the year is healthy
R&D expenditure was | 1783 crore (11.5% of sales) for FY16
What to watch
The company expects its gross margins to remain muted in
H1FY17 on account of realisation pressure in the US owing to
customer consolidation
The company has submitted its first remedial update to USFDA
on January 28, followed by a second one on March 30 2016. It
expects most of its commitments to the USFDA to be over by the
end of Q1FY17. Post this it will request USFDA for reinspection.
The company expects USFDA approvals to peak up from H2FY17
Dr Reddys expects its share in gNexium (GI) market to improve,
going ahead. It expects to get gGleevec (oncology) approval in
FY17
The company gave a capex guidance of | 1200 crore for FY17
and FY18 each, to build new facilities for injectables, topicals and
biosimilars
Page 16
In FY17 and FY18, the company expects 40-45% of additional

revenues from Injectable business, ~40% from oral solids, 1520% from derma patches and creams for the US market
The company is in the process of price registration for Reditux
(Rituximab) in Russia
The company expects its R&D spending to increase to 12% (from
11.5% in FY16) on account of proprietary product launches.
Our view
The FY16 performance was largely impacted by one-offs on account of
remedial expanses, Venezuela adjustment and volatility in entire RoW
and European businesses. We expect US revenues to normalise from
H2FY17 either by successful resolution of warning letter or site transfers.
Some interesting launches are also expected from the proprietary
products space. India is showing promising growth as well. We expect
an improvement in business mix, going ahead, as the contribution from
margin accretive US + India business to improve to 68.6% in FY18E from
56% in FY15. Our target price is | 3480 based on 20x FY18E EPS of
| 174.0.
Brand Name
Indicator
Angiomax
anticoagulant for patients bivalirudin
Generic Name
Boniva
osteoporosis
NDA holder
Filing Date
Medicis Pharma
28-Apr-11
ibandronic acid; ibandronate sodi Hoffmann-La Roche Inc.
28-Oct-10
Toviaz
Urotherapy
Fesoterodine
Pfizer
Copaxone
multiple sclerosis
glatiramer acetate
Teva Pharma
Dexilant
erosive esophagitis, hear dexlansoprazole
Takeda Pharma
31-Mar-11
Diprivan
delirium, agitation
Fresenius Kabi
25-May-13
Effient
acute coronary syndromeprasugrel hydrochloride
Eli Lilly
12-Mar-14
19-Jun-14
prpofol
Folotyn
Lymphoma
Pralatrexate
Allos Therapeutics
Gleevec
leukemia
imatinib mesylate
Novartis
Intermezzo
insomnia
zolpidem tartrate
Purdue Pharma
Ixempra
breast cancer
epothilone
Bristol-Myers Squibb
Jevtana Kit
prostate cancer
Cabazitaxel
Sanofi-Aventis
Kuvan
Phenylketonuria
Sapropterin Dihydrochloride
Mozobil
non-Hodgkin's lymphoma plerixafor
8-Nov-15
11-Sep-14
6-Feb-14
2-Apr-13
21-Dec-12
6-Apr-15
Biomarin Pharma
17-Nov-14
Sanofi
29-Aug-13
Mucinex
bronchial congestion
Nexium
treatment of acid reflux] esomeprazole sodium
pseudoephedrine hydrochloride Reckitt Benckiser Inc.

AstraZeneca AB
Pristiq
depression
Pfizer
Reclast
osteoporosis and Paget's zolendronic acid
Novartis Pharma
20-Feb-13
Treanda
chronic lymphocytic leukebendamustine
Cephalon Inc.
20-Dec-13
desvenlafaxine
26-Jun-15
17-Jan-08
4-Jun-13
Uloric
febuxostat
hyperuricemia
Takeda
30-Oct-13
Velcade
cancer
bortezomib
Millennium
25-Jun-15
Copaxone
Multiple Sclerosis
Glatiramer
Teva Pharma
8-Apr-15
[
Page 17
Glenmark Pharma
Stock Performance
Product launches across geographies spur growth
200
180
160
140
120
100
80
CNX Pharma
Glenmark Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Adjusted PAT
EPS (|)
FY15
6644.8
1225.2
650.9
23.1
FY16P
7746.5
1620.4
906.6
32.2
FY17E
FY18E
8993.0 10442.5
1996.8 2328.9
1166.7 1409.5
41.4
50.1
FY15
1.3
52.5
43.3
22.4
8.1
21.7
13.3
FY16E
0.9
26.9
31.1
17.0
5.7
21.2
16.2
FY17E
0.7
20.9
24.1
13.9
4.5
21.7
18.8
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY18E
0.4
17.3
20.0
11.5
3.6
21.0
20.3
FY16 highlights
Revenues grew 16.6% to | 7746.5 crore on account of 18.7%
growth in US sales and 20.6% growth in domestic sales. EBITDA
margins grew 250 bps during FY16 to 20.9%
Domestic business (27% of total revenue) grew 20.6% to | 2109
crore on account of market share gain across therapies and new
product launches
Accumulated ANDAs filings were at 171, including 59 pending
approvals (26 Para IV filings). In FY16, it filed 12 ANDAs with the
USFDA. The company received 24 ANDA approvals (including
five tentative approvals) from USFDA during the year
It launched 24 products in global markets (ex-US) in FY16 of
which 16 were in-licensed
The company concluded the licensing deal with Celon for generic
Seretide Accuhaler in Europe. It obtained semi-exclusive
marketing and distribution rights for the product across 15
European countries, including UK and Germany upon
commercialisation
R&D spend was 9.6% of revenues in FY16 to | 724 crore. Total
| 321 crore of R&D was on innovative products while | 430 crore
was on generic products
The Venezuela business revenues were at | 320 crore for FY16
with net profit at | 75 crore.
What to watch
Guided for 25% revenue growth for FY17. US sales (ex-Zetia) are
expected to grow 15-20% in FY17
Glenmark plans to file more than 25 ANDAs in FY17 and expects
approvals for 10-12 ANDAs
The company gave a capex guidance of US$ 100 million for FY17
and FY18 each.
Guided for 22-25% tax rate for FY17.
Expects US$10-15 million of revenues from Venezuela in FY17
Guided for ~11% of R&D threshold (ex-Zetia) in future
Our View
Going ahead, the US franchisee looks promising with gZetia launch
under exclusivity and strong pipeline of 63 pending approvals (including
26 Para IVs). Domestic formulations continue to maintain higher
trajectory on the back of market share gain in key therapies. Europe and
LatAm continue to buck the trend on the back of new product launches
and strong respiratory traction. The management has guided for ~25%
growth in FY17, including 25% growth in the US business and more than
20% growth in Europe and LatAm. We have ascribed a target price of
| 1000 based on 20x FY18E EPS of | 50.1.
Page 18

Brand Name
Indicator
Generic Name
NDA holder
Alimta
Cancer
pemetrexed disodium
Eli Lilly
Filing Date
23-Jan-14
Bystolic
Hypertension
nebivolol
Forest Lab
13-Mar-12
Crestor
high cholesterol
rosuvastatin calcium
Effient
Epiduo
acne
benzoyl peroxide
Galderma Lab
Finacea
rosacea
azelaic acid
Bayer
14-Mar-13
Multaq
Sanofi
6-Mar-14
AstraZeneca Pharmace
26-Apr-10
Eli Lilly
12-Mar-14
6-May-15
Savella
fibromyalgia
milnacipran hydrochloride
Forest Lab
6-Feb-14
Zyvox
Anti-Infective
Linezolid
Symed Labs
4-Nov-15
Velcade
cancer
bortezomib
Millennium
10-Sep-14
Vimpat
epilepsy
lacosamide
UCB Pharma
10-Jul-13
Jevtana Kit
prostate cancer
Cabazitaxel
Sanofi-Aventis
6-Apr-15
Onglyza
type II diabetes
Saxagliptin
Astrazeneca
23-May-14
[
Indoco Remedies
Stock Performance
Watson offtake, domestic growth tempo key catalysts
200
150
100
CNX Pharma
Indoco Remedies
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
50
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Adjusted PAT
EPS (Adjusted)
FY15
857.0
167.2
82.8
9.0
FY16P
1003.9
174.8
85.8
9.3
FY17E
1197.9
239.7
139.1
15.1
FY18E
1469.9
301.7
187.8
20.4
FY15
0.2
32.6
40.6
16.6
5.2
16.0
16.4
FY16E
0.2
31.5
39.2
16.1
4.6
14.7
13.2
FY17E
0.2
19.4
24.2
11.6
4.1
20.9
19.7
FY18E
0.1
14.4
18.0
9.2
3.5
24.2
24.4
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 Highlights
Indoco Remedies revenue grew 17.1% to | 1003.9 crore in FY16
owing to 33% growth in export formulations to | 385.9 crore.
EBITDA margins contracted 210 bps to 17.4%
Domestic formulations (53% of total revenue) grew mere 4.8%
YoY to | 529 crore due to restructuring, inventory adjustment
and the seasonality impact
As per the management, the proposed ban on fixed dose
combinations (FDCs) has a minimal impact (2-3% of domestic
sales) on company sales. Total 9.5-10% of domestic portfolio is
currently under NLEM
The US cumulative ANDA filings were at 34 with 26 pending
approvals (including three tentative approvals). Total 54 products
are under the development pipeline for the US. The company has
launched eight products in the US market (ophthalmics - five,
solid dosage- one and Watson deal- two). Total 14 products have
been filed through Watson
Watson contributed ~US$3 million to the companys revenues in
FY16
Aspen has filed for 22 products with MCC, the regulatory
authority of South Africa. For FY16, Aspen generated sales of
| 20 crore
The company received the Establishment Inspection Report (EIR)
on May 25, 2016 from the USFDA for its sterile and solid dosage
facility (Goa Plant II). Indoco also received the EIR from USFDA
for its Goa Plant I (solid dosages facility) and Goa Plant III
The company has won the tender for Bimatoprost Ophthalmic
Solution in New Zealand. Supplies for the same will commence
soon
It has filed total 70 patents as on date. Out of these, 23 are for
finished dosages and 47 are for API manufacturing processes.
The company has MR strength of 2800 MRs for the domestic
formulations.
Page 19
What to watch
The company expects international sales to grow 30-35% in
FY17. Overall, Indoco expects high teen growth in revenues in
FY17
Guided for ~15% growth in the domestic market for FY17
The company expects US revenues to be ~| 150 crore for FY17
It expects four ANDA approvals per annum. Addressable market
size for these products is ~US$800 million
The company guided for 10 ANDA filings annually
The company expects to launch gVigamox (moxifloxacin; anti
biotic) and gPatanol 0.1% (olopatadine; ophthalmic) in Q2FY17
During FY16, ~| 12.5 crore of R&D was capitalised. The company
is planning an R&D spend of 4.5-5% of sales for FY17
Capex guidance of | 120-125 crore for FY17
Tax rate guidance - 19-20% for FY17
Our View
Going ahead, we expect accelerated USFDA approvals post the EIR for
Goa II. As per the management, domestic formulations are likely to
register decent growth in FY17 after languishing in FY16. Even on the
margins front (sub-par margins vis--vis the peers), the situation is likely
to improve with higher US and domestic traction. Overall, visibility has
improved substantially due to a robust US portfolio (23 pending
approvals). Other deals such as Aspen are likely to provide traction for
ex-US exports. We expect sales, EBITDA and PAT to grow at CAGR of
21%, 31% and 48%, respectively, in FY16P-18E. We have valued the
stock at | 365 i.e. 18x FY18E EPS of | 20.4. Our estimates factor in better
visibility and the track record of the management of timely execution.
Ipca Laboratories
Stock Performance
Multiple headwinds yet to be addressed
190
170
150
130
110
90
70
CNX Pharma
Ipca labs
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
Mar-15
May-15
50
Nifty
Key Financials
(| crore)
Revenues
EBITDA
Net Profit
EPS (|)
Adj. EPS (|)
FY15
3141.8
529.1
254.2
20.2
19.9
FY16P
2885.0
341.7
93.3
7.4
10.0
FY17E
3245.2
543.2
304.6
24.1
24.1
FY18E
3610.1
657.0
383.8
30.4
30.4
FY15
0.4
21.9
22.6
12.1
2.5
11.4
11.5
FY16E
0.3
59.7
61.5
17.9
2.4
5.5
5.8
FY17E
0.2
18.3
18.8
11.1
2.2
12.0
12.4
FY18E
0.1
14.5
15.0
8.9
1.9
13.3
14.5
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 highlights
The company received warning letters for manufacturing units at
Ratlam (Madhya Pradesh), SEZ Indore (Pithampur) and Piparia
(Silvassa). Import alerts were already issued to these plants by
USFDA based on inspections on July 24, 2014, January 23, 2015
and March 25, 2015, respectively
Pithampur facility got cleared by UKMHRA
During the fiscal, the Ratlam facility got clearance from all
regulatory authorities except USFDA. The remedial actions for
the facility are ongoing
Due to warning letters issued by USFDA, Switzerland based
Global Fund, a major contractor for Ipcas anti-malarial tender for
African markets has terminated the contract. According to the
management, the company may lose US$15-20 million (~4% of
revenues) business in FY17 on account of this development
HCQS shipment to the US witnessed a dip in prices during
Q4FY16, in turn, impacting its sales further in the US
Domestic formulation grew a mere 6.9% YoY to | 1207 crore due
to lower anti-malarial offtake
What to watch
Guided for 13-14% (without considering US sales) of revenue
growth with 16-17% of EBITDA margins in FY17. API sales
growth is expected to be 16-17% in FY17
The company expects US$1-2 million of remedial impact on a
quarterly basis till the Ratlam facility is cleared by USFDA
R&D expenses for FY17 are expected to be similar to FY16 in
absolute terms
The company has planned a capex of | 200 crore for FY17, FY18
Page 20
Our View
FY16 has been a wash-out fiscal due to the USFDA import alert,
termination of the global fund tender business, currency fluctuations in
emerging markets and slow growth in the domestic market due to
restructuring. The management expects 13-14% growth in FY17 on the
back of a recovery in the domestic market, strong growth in API, branded
export markets and partial USFDA allowances. Clearance from the Global
Fund tender business and from USFDA will be key events to watch in
FY17. These are, however, sticky issues. The resumption is likely to take
more time than expected. We have ascribed a target of | 455 (15x FY18E
EPS of | 30.4).
Jubilant Life Sciences
Stock Performance
Margin expansion demonstrated in FY16
310
260
210
160
110
CNX Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| crore)
Revenues
EBITDA
Net Profit
EPS (|)
Adjusted EPS (|)
FY15
5826.3
689.3
-57.8
-3.6
-0.6
FY16P
5802.3
1277.8
431.5
27.1
26.0
FY17E
6604.2
1489.0
663.3
41.6
41.6
FY18E
7442.1
1750.4
893.6
56.1
56.1
FY15
2.0
NA
14.4
14.8
2.2
-0.4
5.8
FY16E
1.6
12.8
7.6
7.8
1.9
14.2
12.0
FY17E
1.1
8.3
6.1
6.3
1.6
18.9
15.1
FY18E
0.7
6.2
4.8
5.0
1.3
20.6
17.8
Key Ratios
Debt / Equity
PE (x)
EV to EBITDA (x)
Tar. EV/EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 Highlights
The pharmaceutical business was driven by growth in US sales
and other sub-segments, largely offset by de-growth in the LSI
segment due to lower oil prices and regulatory changes
The company has filed 72 ANDAs in the US till date of which 28
are pending approval
Radiopharma grew 36% YoY while the CMO business grew 27%
In the LSI business, nutrition business growth was flat in FY16
whereas specialty and life science chemicals business de-grew
10% and 19%, respectively
The company has cumulative filings of 599 and received 409
product approvals in the RoW markets through partnership and
distribution agreements
The company has added two pyridine derivative products in
FY16 and plans to add another product by Q4FY17
The pharma business margin improved to 29.1% from 16.6% in
FY15 while the LSI business margin increased to 16.3% from
10.2% in FY15
All pharmaceutical facilities were inspected successfully by the
USFDA during FY16
CMO business capacity utilisation was 65-70% in FY16
Net debt as of FY16 was | 4028 crore
What to watch
The company has planned seven to eight launches and 10-12
ANDA filings in the US in FY17
The company filed 505(2)b application with USFDA for Ruby-fill
for diagnosis of coronary heart disease through PET procedures.
The company expects to launch the same by Q4FY17
The company expects a ramp up of operations in the CMO of
sterile injectables and oral solid facilities
The company has guided for | 300 crore capex and product
development of | 150 crore for FY17
Our view
FY16 has been marked by flattish growth but ~1000 bps EBITDA margin
expansion. These have been the best margins in the last 10 years. Both
the pharma segment and LSI registered substantial margin expansion.
Note that revenues have been flattish since FY14, mainly due to LSI
segment de-growth. In this scenario, the margin expansion achievement
is admirable. Going ahead, the pharma growth is likely to sustain on the
back of robust US sales and other sub-segments while the LSI segment
may witness some growth on the back of crude oil reversal and new
launches. This improvement is unlikely to change the leverage situation
Page 21
overnight but things are looking much better than earlier. Given the
different fortunes of different segments in the business, we have adopted
the SOTP methodology for valuation. Our SOTP target price is | 405,
which comprise pharma value of 6x FY18E EV/EBITDA and LSI value of
4x FY18E EV/EBITDA.
Lupin
Stock Performance
Cost overrun, Goa 483 to weigh in near term
150
140
130
120
110
100
90
80
70
CNX Pharma
Lupin
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| Crore)
Revenues
EBITDA
Net Profit
EPS (|)
FY15
12770.0
3619.6
2403.2
53.6
FY16P
14208.5
3733.4
2270.7
50.4
FY17E
17630.4
5073.9
2972.4
66.0
FY18E
20023.2
5529.8
3337.7
74.1
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
FY15
0.1
27.4
34.5
17.9
7.4
27.1
FY16E
0.6
29.2
36.7
19.4
6.0
20.7
FY17E
0.4
22.3
28.0
13.5
4.9
22.1
FY18E
0.2
19.8
25.0
11.8
3.9
19.9
RoCE (%)
35.1
18.6
22.5
23.1
Key Ratios
FY16 Highlights
Revenues grew 11.3% to | 14208.5 crore while EBITDA margins
witnessed a contraction of 200 bps to 26.3% in FY16
In FY16, 12 USFDA audits took place for its facilities. Nine of the
12 audits were without any observations. Aurangabad and
Mandideep plants EIRs had been closed while the Goa (nine
observations) plants EIR is expected to be closed soon. The Goa
facility was inspected within nine months
Total ~30% of pending ANDA approvals are from the Goa
facility. The company has started site transfer of key products
from the Goa facility to Aurangabad, Indore (SEZ) and Gavis
During the year the company acquired US generic company
Gavis for US$880 million. Gavis FY14 sales were US$96 million.
The management has guided US$300 million of revenue by
FY18. Gavis has launched 28 products in the US so far (nine
controlled substances) and 102 cumulative filings
Gavis has also added two branded products Methergine
(gynaecology) and Methylphenidate injectable (paediatric ADHD)
in Lupins US branded portfolio
Total ~| 6500 crore spike in debt in FY16 was mainly due to the
Gavis acquisition
It has also acquired companies in Brazil (Medquimica Industria
Farmaceutica SA), Russia (ZAO Biocom) and assets purchase in
Germany from Temmler Pharma
Cumulative ANDA filings were at 343 including 163 pending
approvals. The company has 45 FTF products, which includes 17
exclusive opportunities
Total 24% of the companys domestic sales are under NLEM list
In FY16, the company added 1000 MRs, established five new
divisions and launched 19 products in India of which 58% were
launched in the chronic segment
The company has a portfolio of 256 products under development
in the US
Currently 10 biosimilar products are under development in India,
one of which has entered phase III trials in Japan
R&D expenses for FY16 were 11.3%
What to watch
Lupin gave a guidance of US$3.5 billion of revenues for FY18.
Net profit margins guidance was ~20%
The company is planning 25-30 launches in the US in FY17, of
which 15 products are likely to be from Lupins Indian facilities
Lupin plans to license out three NCEs by FY18.
The company filed for first nasal spray in the US in FY16. In FY17,
it plans to file first MDI, which would be launched in FY18. Lupin
also plans to file DPI (gAdvair) in FY18, which it expects to launch
in FY19
The company expects 15% domestic growth in FY17
Lupin plans to improve its Japan business by launching new
products, seeking new partnerships and capacity expansion
Page 22
The company has guided for 12-15% of R&D expenses in FY17.

The increase in R&D would be on account of development of
biosimilars, new drug developments and complex generic
products. It plans to file more than 36 ANDAs in FY17
Tax guidance - 28-30% for FY17 and FY18
Guided for more than | 1000 crore capex for FY17
Our view
Revenue guidance of US$3.5 billion (earlier US$4 billion) for FY18
suggests the company has to deliver a CAGR of 28% in FY16-18E.
Despite the strong pending approval pipeline (and reiteration of Gavis
guidance of US$300 million revenues by FY18) the target does look
demanding. Similarly, incremental R&D spend, higher Gavis amortisation
and interest is likely to change the earning calculations. Accordingly, we
have scaled down our FY17E and FY18E EPS by 5% and 16%,
respectively. Goa observations are also likely to remain an overhang
despite site transfer arrangements to Indore, Aurangabad and Gavis. Our
target price is | 1850 based on 25x FY18E EPS of | 74.1. We believe the
steps taken by the management are in the right direction from a fairly
long term point of view.
Page 23

Brand Name
Indicator
Generic Name
NDA holder
Aloxi
Nausea
palonosetron hydrochloride
Roche
Filing Date
13-Feb-15
Axiron
testosterone
hypogonadism
Eli Lilly
6-Jul-15
Beyaz
Birth control
Drospirenone
Merck
10-Oct-15
Celebrex
pain and inflammation
benzenesulfonamide
Pfizer
5-Mar-13
Daliresp
Respiratory
Roflumilast
Shire Canada
12-Mar-16
Detrol LA
overactive bladder
tolterodine tartrate
Pfizer
21-Mar-13
Effient
CVS
Prasugrel
Eli Lilly
14-Apr-15
Fanapt
Schizophrenia
Iloperidone
Vanda Pharma
24-Nov-15
Lyrica
Pfizer Inc.
29-Apr-09
Livalo
High Cholestrol
Kowa
Lialda
Ulcerative Colitis
Mesalamine
Shire Pharma
13-Nov-15
Multaq
Sanofi
21-May-15
Namenda
Alzheimer's Disease
Memantine Hydrochoride
Allergan
Natazia
oral contraceptive
estradiol valerate and dienogest Bayer
28-Nov-12
Nexium
acid reflux
esomeprazole magnesium
21-Oct-09
Nuvigil
excessive sleepiness ass armodafinil
Cephalon Inc., Cephalon 16-Mar-10
Pennsaid
Osteoarthritis
Diclofenac
Horizon Pharma
Paxil CR
Anxiety
Paroxetine Hydrochloride
Prevacid
gastroesophageal reflux lansoprazole
Takeda Pharma
29-Nov-12
Prezista
HIV
Tibotec Inc.
15-Nov-10
Prolensa
postoperative eye inflammbromfenac
Bausch & Lomb Inc
31-Jan-14
Pennsaid
Osteoporosis
Diclofenac
Horizon Pharma
Renagel
renal disease
sevelamer hydrochloride
Genzyme Corp.
5-Mar-09
Renvela
chronic kidney disease
sevelamer carbonate
Genzyme Corp.
14-May-09
Roxane Calcium Acet Renal Disease
NA
Roxane Lab
10-Feb-15
Savella
fibromyalgia
milnacipran
Forest Lab
23-Sep-13
Safyral
Birth Control
Drospiranone; Ethinyl Estradiol; L Merck
15-May-15
darunavir
3-May-15
21-Aug-15
AstraZeneca AB
24-Sep-15
Apotex Inc.
1-May-15
3-Apr-15
Tamiflu
Influenza
Oseltamivir
Gilead Sciences Inc.
12-Sep-15
Toviaz
overactive bladder
fesoterodine fumarate
Pfizer
28-Jun-13
TravatanZ
elevated intraocular presstravoprost ophthalmic solution
Alcon Research
20-Jul-15
Truvada
HIV
tenofovir disoproxil fumarate/emtGilead Sciences
16-Aug-12
Uceris
GI
Budesonide
Cosmo Techs
18-Nov-15
Uloric
gout
febuxostat
Takeda
12-Feb-14
Vimovo
osteoarthritis, rheumatoidnaproxen / esomeprazole magnesAstrazeneca
Viread
HIV
Welchol
high cholesterol and type colesevelam hydrochloride
Daiichi Sankyo Inc.
30-Jul-10
Nuvigil
excessive sleepiness ass armodafinil
Cephalon Inc.
2-Nov-11
Revlimid
myelodysplastic syndromlenalidomide
Celgene Corp.
Tamiflu
influenza
Roche
15-Mar-11
27-May-14
tenofovir disoproxil fumarate
oseltamivir phosphate
25-Jul-11
Gilead Sciences
20-Aug-12
8-Oct-10
Treanda
Cephalon Inc.
Apriso
ulcerative colitis
mesalamine
Salix Pharmaceuticals I
Exelon
dementia
rivastigmine
Novartis
3-Apr-13
Lyrica
Suprep
laxative
sodium / potassium / magnesiumBraintree Laboratories,
Xyrem
Narcolepsy
Sodium Oxybate
Pfizer
Jazz Pharma
18-Feb-14
7-Jan-11
9-Mar-11
13-Sep-15
[
Source: Bloomberg, ICICIdirect.com Research; Included Subsidiaries filings
Page 24
Natco Pharmaceuticals
Stock Performance
Hepatitis C group sales drive FY16 growth
150
140
130
120
110
100
90
80
70
CNX Pharma
Natco Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| crore)
Revenues
EBITDA
Net Profit
EPS (|)
FY15
825.3
213.4
151.4
8.3
FY16P
1141.6
269.7
155.2
8.9
FY17E
1348.8
303.5
190.6
10.9
FY18E
1554.5
357.5
227.0
13.0
FY15
0.4
61.7
34.3
39.2
10.0
17.9
15.4
FY16E
0.1
52.0
32.0
30.0
6.2
12.0
16.1
FY17E
0.1
42.3
26.0
26.9
5.5
13.0
16.4
FY18E
0.1
35.5
21.9
22.8
4.9
13.7
17.3
Key Ratios
Debt / Equity
PE (x)
Target PE(x)*
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 Highlights
Revenues increased 38% YoY to | 1142 crore mainly due to
strong sales in Hepatitis C segments. Hepatitis C (ex third party)
sales were ~| 256 crore in FY16 compared to | 17 crore in FY15
The company has filed Hepatitis C products in 40 countries and
received approval in eight countries
EBITDA margins declined ~240 bps YoY to 23.6% mainly due to
higher other expenditure, which mainly comprised third-party
profit sharing for the procurement of Hepatitis C APIs
The cumulative ANDA filings were at 38 including 16 Para IV. The
company filed four ANDAs during FY16 of which three were Para
IV filings and one was an FTF
R&D spend for FY16 was ~| 70 crore
During the fiscal, it sold US based Save Mart pharmacy store
The company received USFDA observations on its API facility at
Manali, near Chennai, and formulations facility at Kothur, near
Hyderabad. Both these facilities were inspected by the USFDA
during February and March
What to Watch
The management gave a revenue guidance of ~| 1350 crore and
net profit guidance of ~| 175 crore of net profit
The management expects ~| 850 crore domestic sales in FY17
with Hepatitis C portfolio contributing ~| 500 crore, oncology
business | 280-300 crore and | 65-75 crore of third party sales
The management expects the Hepatitis C branded segment to
contribute | 125-140 crore every quarter with EBITDA margins of
30%
It expects gTamiflu (anti-infective), gCopaxone (oncology),
gFosrenol (kidney disease) and gEntocort (anti-inflammatory)
USFDA approvals in FY17
The company is planning launch of gDoxil (anti-cancer) by FY18
It is planning six to seven filings in FY17 with brand sales of
~US$3 billion. Total ~50% of filings will be oncology filings. As
per the company, most filings are expected to be Para IV
opportunities
The company expects to receive EIR for its Chennai API facility
and Kothur, Telangana formulations facility
R&D spend is expected to be 6-7% of sales in FY17
Guided for | 270-280 crore of capex for FY17 of which, | 100
crore earmarked for Vizag facility, | 130 crore for expansion of
Hyderabad and Chennai facilities, ~| 30 crore for Dehradun and
Guwahati formulation facilities and ~| 40 crore for Kothur
formulation facility
The company plans to commercialise the Vizag facility by the end
of FY17
Guided for 21% tax rate for FY17 and FY18
Our View
Sofosbuvir (and combination) sales in India have become the main
catalyst for growth besides legacy segments. This augurs well in the long
run as the domestic portfolio was mostly dependent on oncology offtake. Despite possible crowding in the Hepatitis C space we expect the
product to generate significant cash flows from India and other emerging
markets, going ahead. On the export front, the US would remain a key
Page 25
long term driver base on its strong complex FTF/Para IV filings. We

continue to value the stock on an SoTP basis to capture the emerging
FTF/limited competition opportunities in the US. We arrive at a target
price of | 600 including base business value of | 287 (22x FY18E EPS of
| 13.0) + | 313 for NPV of other FTF/Para IVs.
Sun Pharmaceuticals
Stock Performance
Conservative guidance; Halol resolution key near term catalyst
150
140
130
120
110
100
90
80
70
CNX Pharma
Sun Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| Crore)
Net Sales
EBITDA
Adj. Profit
Adj. EPS (|)
FY15
27433.4
7866.7
4777.1
19.8
FY16P
28563.0
8724.3
5652.6
23.4
FY17E
31525.9
9670.1
6324.5
26.2
FY18E
34205.3
11132.8
7557.7
31.3
FY15
0.4
41.4
23.4
7.3
18.6
18.8
FY16E
0.3
37.9
20.8
6.0
18.0
18.6
FY17E
0.1
29.7
18.1
5.1
17.3
19.5
FY18E
0.1
24.9
15.2
4.4
17.6
20.1
Key Ratios
Debt / Equity
PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 highlights
Revenues grew mere 4.1% to | 28563 crore on account of
USFDA issues at its Halol facility and Ranbaxy consolidation.
EBITDA margins grew ~180 bps to 30.5% during the year
The company launched gGleevec (oncology) under exclusivity in
Q4FY16. The annual sale of the drug is ~US$2 billion in the US
Announced positive results of phase-III clinical trials for
Tildrakizumab (plaque psoriasis) in the US
The company forayed into the Japanese branded market by
acquiring 14 prescription brands from Novartis for a cash
consideration of US$293 million. These brands have combined
annualised revenues of ~US$160 million
Taro has received NDA approval from USFDA for Keveyis
(dichlorphenamide) 50 mg Tablets for the treatment of primary
hyperkalemic and hypokalemic periodic paralysis. However, the
response was not up to the mark
Suns cumulative ANDAs were at 572 including 159 pending
approvals (includes 13 tentative approvals). In FY16, it filed 22
(including 10 filings from Taro pharma) ANDAs and received 14
approvals. During FY16, the company did not file for any
complex generic products
The company received USFDA approval for its NDA BromSite
(bromfenac ophthalmic solution; market size of ~US$400 million)
used for the treatment of postoperative inflammation and
prevention of ocular pain in patients undergoing cataract surgery
Suns capex for FY16 was less than | 1000 crore
The Board of Directors has proposed a buy-back of equity shares
of the company
R&D spend for FY16 was 8.3% of revenues
What to watch
The management gave a revenue guidance of 8-10% for FY17
The company is planning a re-inspection request to USFDA for
Halol facility in Q1FY17
In the US, the company plans to launch NDA BromSite
(bromfenac ophthalmic solution) in Q2FY17. It expects approval
for another NDA for ophthalmic product. The company currently
has MR strength of 100 for this portfolio
Expects a pricing impact of 5-10% for its US base business in
FY17 on account of increased competition
The company plans to offer one Ranbaxy facility to the USFDA
for re-certification
It is planning a capex of US$250 million for Tildrakizumab, the IL23 monoclonal anti-body in-licensed from MSD (US) over four to
five years to be utilised for its psoriasis trials
The company is in the process of receiving marketing
authorisation for an acquired portfolio of 14 brands from Novartis
in Japan. It expects the business to contribute to the total
turnover from H2FY17
In FY17, Sun guided for R&D spend of 9% of the turnover
The company gave a tax rate guidance of 14-15% for FY17
Page 26
Our View
The management guidance for revenue growth of 8-10% looks a bit
conservative given the residual traction from gGleevec (four months
exclusivity), Japanese traction from H2 and likely product launches in
H2FY17 from Halol (assuming USFDA resolution). This indicates that the
management is expecting some genuine pricing pressure in the US base
business. The proposed buy-back is also likely to be perceived negatively
given the companys knack of deploying cash for successful acquisitions
in the past. On the Tildrakizumab front, the progress is encouraging but
back-loaded. In the near term, Halol and the US base business
headwinds are likely to weigh. We have ascribed a target price of | 785
based on 25x FY18E EPS of | 31.3.
Brand Name
Indicator
Generic Name
NDA holder
Acanya
severe acne
benzoyl peroxide
Dow Pharma
13-Aug-14
Alimta
lung cancer; mesotheliompemetrexed disodium
Eli Lilly
13-Sep-13
Allegra
seasonal allergies
Aventis Pharmaceutical
9-Oct-09
23-Jan-09
fexofenadine hydrochloride
Filing Date
Allegra-D
seasonal allergies
fexofenadine hydrochloride / pseuAventis Pharmaceutical
Ampyra
Multiple Sclerosis
Dalframpridine
Acorda Therapeutics Inc 12-May-15
AMPYRA
multiple sclerosis
Dalfampridine
Alkermes Pharma
18-May-15
Angiomax
anticoagulant for coronar bivalirudin
Medicis Pharma
21-Nov-11
Crestor
high cholesterol
26-Apr-10
Effient
Eli Lilly
12-Mar-14
Epiduo
Acne
Adapalene & Benzoyl peroxide
Galderma Labs
12-Aug-15
GanirelixAcetate
IVF
ganirelix acetate
Merck
27-Aug-12
Lyrica
Pfizer Inc.
29-Apr-09
Moviprep
Gastro Intestinal
Polyethylene glycol electrolyte soSalix Pharmaceuticals,
2-Oct-15
Multaq
cardiovascular hospitalizadronedarone hydrochloride
Sanofi
Naftin
Fungal Infection
Naftifine Hydrochloride
Merz Pharma
14-May-15
Onexton
Acne
Cindamycin Phosphate and BenzoDow Pharma
12-Jan-16
Onglyza
type II diabetes
Ortho TRI-Cyclen LO oral contraceptive
Saxagliptin
6-Mar-14
Astrazeneca
3-Jun-14
ethinyl estradiol; norgestimate) Purdue Pharma
8-Apr-11
Reclast
Novartis Pharma
20-Feb-13
Reclast
Novartis Pharma
14-Jul-12
Savella
fibromyalgia
milnacipran
Forest Lab
Suprep
colon cleansing
sodium sulfate
Braintree Lab
Taclonex
psoriasis vulgaris
calcipotriene / betamethasone di Cancer Research Tech.
Treanda
Treximet
migraine
sumatriptan / naproxen sodium Pozen Inc.
26-Nov-11
Uloric
gout
febuxostat
Takeda
12-Feb-14
Cephalon Inc.
23-Sep-13
9-Oct-14
15-Sep-10
26-Dec-13
Vascepa
hypertriglyceridemia
icosapent ethyl
Amarin Pharma
20-Jun-14
Velcade
cancer
bortezomib
Millennium
25-Jun-15
Xyrem
narcolepsy
paracetamol
Jazz Pharma
Yaz
contraception; acne; premdrospirenone / ethinyl estradiol Bayer
12-Jan-11
Zemplar
secondary hyperthyroidis paricalcitol
24-Jan-13
AbbVie Inc
2-Oct-14
Source: Bloomberg, ICICIdirect.com Research; *Included Subsidiaries filings
Page 27
Syngene International
Stock Performance
Compelling non-generic option with thrust on capex
200
180
160
140
120
100
80
CNX Pharma
Feb-16
Dec-15
Aug-15
Oct-15
60
Syngene Int
Nifty
Key Financials
(|crore)
FY15
FY16P
FY17E
FY18E
Revenues
859.9
1107.0
1411.6
1707.0
EBITDA
281.1
357.8
458.2
575.2
Net Profit
175.0
221.2
311.7
371.0
8.8
11.1
15.6
18.5
EPS (|)
PE (x)
M.Cap/ Revenues (x)
EV to EBITDA (x)
What to watch
Key Ratios
Debt / Equity
FY16 Highlights
Revenues grew 28.7% to | 1107 crore while EBITDA margins
remained flattish at 32.3%
Realisation was muted in FY16 as the company passed on the
currency benefits to customers
In FY16, top 10 clients contributed 69% to revenues as compared
to 71% in FY15
Dedicated services, discovery services and development &
manufacturing services contributed ~33%, ~27% and ~40%,
respectively, to FY16 revenues
During FY16, the company cleared three USFDA inspections
without any major observations
The company increased its client base to 256 from 221 in FY15
Number of scientists has gone up from 2227 in FY15 to 2571 in
FY16 with total employees from 2656 in FY15 to 2967 in FY16
The company has raised US$100 million via ECB for the
construction of Mangalore facility and other capex
FY15
FY16P
FY17E
0.2
0.9
0.6
FY18E
0.5
42.5
33.6
23.9
20.1
8.6
6.7
5.3
4.4
26.1
20.5
16.7
13.1
P/B (x)
8.8
7.1
5.6
4.5
ROE (%)
20.7
21.2
23.5
22.4
RoCE (%)
19.5
13.3
16.7
18.2
Guided for US$250 million of revenue by FY18E with EBITDA

margins of ~33% (including other income) and PAT margins of
~20%
It has planned a capex of US$200 million from FY16-18E for 1)
setting up a commercial scale manufacturing centre in Mangaluru
(~US$100 million), 2) new research centre (~US$50 million), 3)
capacity expansion in its developmental services and cGMP drug
substance manufacturing and 4) biologics plant, viral testing
services and antibody-drug conjugate (ADCs). The company has
already spent ~US$50 million in FY16
Biological centre to start commercial operations from FY18
The company has guided ~3% annual increment in realisation
Late stage (phase IIb and phase III) molecules are currently at
high single digit in the development pipeline.
The company expects its Mangaluru facility to be operational
from FY19 and reach its peak occupancy (~70%) by FY21
The company gave tax rate guidance of ~14% for FY17
and~16% for FY18.
Our View
In the crowded Indian pharma space dominated by generic exporters,
SIL stands out as an atypical candidate with new molecular entity (NME)
focus. It is well poised to capture opportunities in the global CRO space
on account of strategic outsourcing by global innovators in the backdrop
of structural challenges such as an impending patent cliff, controlling
costs and keeping new products introduction flow intact. Its proven
capabilities have been backed by robust financials, which have been
fairly consistent, thanks to regular customer addition and stickiness of
existing customers. This is also on account of continuous broadening of
services offering by the company since inception. We expect sales,
EBITDA and PAT to grow at a CAGR of 24.2%, 26.8% and 29.5% to
| 1707.0 crore, | 575.2 crore and | 371.0 crore, respectively, between
FY16P and FY18E. We have ascribed a target price of | 445 based on 24x
FY18E EPS of | 18.5.
Page 28
Torrent Pharma
Stock Performance
US, India key catalysts for future
150
140
130
120
110
100
90
80
70
CNX Pharma
Torrent Pharma
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
Mar-15
May-15
60
Nifty
Key Financials
(|crore)
Revenues
EBITDA
Net Profit
EPS (|)
FY15
4653.0
1020.0
750.9
44.4
FY16P
6813.0
2857.0
1954.8
115.5
FY17E
6044.7
1654.5
1147.0
67.8
FY18E
6708.6
1777.8
1269.6
75.0
FY15
1.1
31.1
37.2
24.8
9.4
30.2
20.1
FY16E
0.6
11.7
14.3
8.3
6.9
57.7
51.1
FY17E
0.3
20.4
24.3
14.2
5.5
27.0
27.0
FY18E
0.2
18.4
22.0
12.8
4.5
24.4
26.8
Key Ratios
Debt / Equity
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY16 Highlights
Revenues grew 46.4% to | 6813 crore mainly on account of
gAbilify launch under exclusivity in the US. EBITDA margins
consequently grew ~2000 bps to 41.9% owing to traction from
gAbilify exclusivity.
Domestic formulations (27% of total revenue) grew 13% YoY to
| 1825 crore mainly due to consolidation of Elder's portfolio
The impact of NLEM 2015 accounts for 1-2% of domestic sales
In FY16, the company launched two biosimilars Rituximab (anticancer) and Adalimumab (anti-inflammatory) in India.
The company launched tenegliptin (anti-diabetic) in India in FY16
During FY16, the company launched five new products, namely,
gAbilify (aripiprazole- CNS), domperidone (GI), gNexium
(esomeprazole-GI), gExforge (CVS) and gExforge HCT (CVS) in
the US.
During FY16, the companys Dahej, Indrad and Indore
dermatology facility were inspected by the USFDA. The company
received EIR for Dahej facility, while Indrad facility received two
or three minor 483 observations
As per the company, its market share in gAbilify (aripiprazoleCNS) is more than 4% in the US and gNexium (esomeprazole-GI)
is ~4%, which is expected to increase to 5-7%, going forward
The company has 15% market share for gDetrol (tolterodine)
used to treat urinary ailments. The company expects its share to
increase going forward.
What to watch
Torrent expects eight to 10 launches (including couple of limited
competition launches) in the US in FY17
It plans to file three to four ANDAs through Zyg Pharma and 1015 filings from Dahej facility in FY17
Currently, the company is working on 121 R&D projects. It signed
nine collaboration agreements with external partners and are on
track to file about 15-20 ANDAs in FY17
Torrent expects to receive EIR for Indrad facility in FY17
The R&D spend in FY16 was ~4% of sales. The company expects
this to go up to 8% of sales in FY17. Torrent plans to increase its
R&D spend for Brazil and India along with the US
The company has planned a capex of | 1500 crore for the next
two to three years (| 400-500 crore annually).
Torrent is looking for an acquisition in the range of US$300-600
million, with major focus on the US institutional business
The company gave a tax rate guidance of 23% for FY17
Our View
The US remains on a strong growth path with the launch of gAbilify
under the shared exclusivity, which is the second such product after
gCymbalta. These kinds of windfall free cash flows are likely to bring
down the leverage position and will pave the way for further acquisitions.
Going ahead, the US and India will be pillars for future growth driven by
new product launches and improvement in market share. However, the
macroeconomic headwind in Brazil would dent overall growth. We have
ascribed a target price of | 1650 (22x FY18E EPS of 75.0).
Page 29

Brand Name
Indicator
Generic Name
NDA holder
Benicar
Anti-depressant
Olmesartan
Daiichi Sankyo
21-Mar-16
Bystolic
Hypertension
nebivolol
Forest Lab
13-Mar-12
Crestor
high cholesterol
Daliresp
Chronic Obstructive PulmRoflumilast
AstraZeneca
15-May-15
Viagra
erectile dysfunction
Pfizer
17-Mar-14
pyrazolopyrimidinones
Filing Date
8-Jul-10
Stock Performance
Revenue growth recovers but margins still under pressure
200
180
160
140
120
100
80
CNX Pharma
Unichem Labs
Mar-16
Jan-16
Nov-15
Sep-15
Jul-15
May-15
Mar-15
60
Nifty
Key Financials
(| crore)
Revenues
EBITDA
Adj. Net Profit
Adj. EPS (|)
FY15 FY16P
1201.8 1334.6
101.3 163.9
75.3 111.6
8.3
12.3
FY17E
1569.4
204.0
140.9
15.5
FY18E
1821.7
273.2
200.6
22.1
FY17E
0.0
16.8
19.9
11.6
2.2
13.4
16.2
FY18E
0.0
11.8
14.0
8.3
2.0
16.8
20.4
Key Ratios
Debt/Equity (x)
PE (x)
Target PE (x)
EV to EBITDA (x)
Price to book (x)
RoNW (%)
RoCE (%)
FY15
0.0
31.5
37.3
23.0
2.7
8.7
8.5
FY16E
0.0
21.8
25.2
14.5
2.5
11.7
13.8
FY16 Highlights
Revenues grew 11% to | 1334.6 crore mainly due to strong
growth in the US and recovery in domestic market (albeit on
lower base). Domestic revenue grew 14.1% to | 742.9 crore and
export formulation grew 17.7% to | 368.1 crore.
EBITDA margins improved ~390 bps to 12.3% due to a better
product mix, which was partially offset by increased employee
strength, additional bonus paid accordance with amendment in
Bonus Act and higher cost in the US
Total ANDAs filing was at 36 of which, the company has
launched 14 products and awaiting approvals for 16 ANDAs. The
company reported cumulative DMF filings to 46
The CRAMS business accounts for 10% of total standalone sales
of | 1222.4 crore. YoY growth for CRAMS was flat in FY16
The company received establishment inspection report (EIR) post
re-inspection of three plants in Goa, Ghaziabad and Roha
Total six to seven new products were added in the NLEM list in
FY16. Currently, 21-22% of the domestic portfolio is under NLEM
while 2-2.5% of the portfolio is under the FDCs banned by the
Government of India
As of FY16, the company has ~250 scientists, more than 2500
MRs and total employee strength of ~5500
The capacity utilisation at the company level is 60-70%
Total ~90% of the companys formulation business is backward
integrated
The company has so far launched more than 15 products from its
Niche Generics subsidiary, UK
Unichem has launched two products in the Brazilian markets
R&D expenses for FY16 were 4-5% of total sales
What to watch
Operating margins are expected to improve 100-150 bps in FY17
on account of a better product mix and sales growth
The company is planning | 150-200 crore of capex for FY17 and
FY18, mostly for the API facility in Kolhapur. Rest of the capex
would be utilised for maintenance and de-bottlenecking of its
existing facilities
The company is planning one or two ANDA filings every quarter
and six to eight filings annually. Unichem is planning two product
launches in Q1FY17 and one or two launches in Q2FY17
The company plans to launch two products in Brazil (approved
by ENVISA) by Q2FY17
Unichem has guided an R&D spend at ~5% of total sales, going
forward
Guided for tax rate of ~24% for FY17 and FY18
Page 30
Our View
Domestic formulations growth has shown signs of recovery in FY16. The
managements focus on restructuring the matured portfolio, which
accounts for 46% of the overall pie and that comprises legacy but slow
moving brands, seems to be working. Despite a better product mix, the
margin remained under pressure. Higher employee expenses and oneoff pertaining to provision of subsidiary investment have dented margins.
The next task for the management is to bring dwindling margins to the
industry level. Export formulations are likely to maintain the growth
tempo on the back of incremental US filings and subsequent launches.
We expect revenues, EBITDA, profit to grow at a CAGR of 16.8%, 29.1%
and 34.1%, respectively, in FY16P-18E. We have ascribed a target price
of | 310, based on 14x FY18E EPS of | 22.1.
Page 31
Exhibit 27: USFDA approvals for companies under I-Direct coverage in FY16
Date
Company
Drug Name
Therapeutic Area
Innovator company
Generic Version of
Market Size
15-Aug
Ajanta Pharma
Monteculast Sodium
CVS
Merck
Singulair
US$ 3.5 billion
15-Nov
Ajanta Pharma
Memantine Hydrochloride
CNS
Forest Labs
Namenda
US$ 1.1 billion
16-Mar
Ajanta Pharma
Almotriptan Malate
CNS
Janssen Pharma
Axert
NA
15-Dec
Ajanta Pharma
Irbesartan
CVS
Sanofi Aventis
Avapro
US$ 1.23 billion
15-Jun
Alembic Pharma
Lithium Carbonate
Anti-psycotic
Ani Pharms
Lithobid
US$ 21 million
15-Jun
Alembic Pharma
Desvenlafaxine Succinate
Anti-Depressant
Wyeth Pharms
Pristiq
US$ 600 million
15-Aug
Alembic Pharma
Celecoxib
Anti-Inflammatory
Go Searle
Celebrex
US$ 2.44 billion
15-Sep
Alembic Pharma
Zolmitriptan
CNS
IPR
Zomig
US$ 152.8 million
15-Oct
Alembic Pharma
CNS
Forest Labs
Namenda
US$ 1.1 billion
15-Dec
Alembic Pharms
Linezolid
Anti-bacterial
Pharmacia and Upjohn
Zynox
NA
15-Apr
Aurobindo Pharma
Sildenafil Citrate
Harmonal
Pfizer
Revatio
US$ 300 million
15-Apr
Aurobindo Pharma
Atracurium Besylate
CNS
Hospira
Tracrium
NA
15-Apr
Aurobindo Pharma
Cefixime
Antibiotic
Lederle
Suprax
US$ 123 million
15-Jun
Aurobindo Pharma
Phenytoin Sodium
Anti-Epileptic
Parke Davis
Dilantin
US$ 125 million
15-Jun
Aurobindo Pharma
Azithromycin
Anti-Infective
Pfizer
Zithromax
NA
15-Jun
Aurobindo Pharma
Entacapone
CNS
Orion Pharma
Comtan
US$ 82 million
15-Jul
Aurobindo Pharma
Flecainide Acetate
CVS
Cnty Line Pharms
Tambocor
US$ 61 million
15-Jul
Aurobindo Pharma
Esmolol Hydrochloride
CVS
Baxter Hlthcare
Brevibloc
US$ 49 million
15-Aug
Aurobindo Pharma
Alprazolam
CNS
Pharmacia & UpJohn
Xanax
US$ 26.5 million
15-Aug
Aurobindo Pharma
Cetrizine Hydrochloride Allergy
Anti-histamine
McNeil Consumer
Zyrtec Allergy
US$ 146.3 million
15-Aug
Aurobindo Pharma
Omeprazole
Gastro Intestinal
Astrazeneca
Prilosec
US$ 185 million
15-Aug
Aurobindo Pharma
Ibandronate Sodium
Osteoporosis
Roche
Bonva
US$ 450 million
15-Aug
Aurobindo Pharma
Entecavir
Anti-viral
Baraclude
US$ 328 million
15-Aug
Aurobindo Pharma
Raloxifene Hydrochloride
Osteoporosis
Lilly
Evista
US$ 209.3 million
15-Sep
Aurobindo Pharma
Gemfibrozil
CVS
Pfizer
Lopid
US$ 44 million
15-Sep
Aurobindo Pharma
Telmisartan
CVS
Boehringer Ingelheim
Micardis
US$ 250 million
15-Sep
Aurobindo Pharma
Caffeine Citrate
CNS
Eurohlth Intl Sarl
Cafcit
NA
15-Oct
Aurobindo Pharma
Tramadol Hydrochloride
Anti-inflammatory
Valeant Intl
Ultram ER
US$ 132 million
15-Oct
Aurobindo Pharma
CNS
Forest Labs
Namenda
US$ 1.1 billion
15-Oct
Aurobindo Pharma
Aripiprazole
CNS
Otsuka
Abilify
US$ 7.8 billion
15-Nov
Aurobindo Pharma
Sildenafil Citrate
Erectile Dysfunction
Pfizer
Revatio
US$ 300 million
15-Nov
Aurobindo Pharma
Risedronate Sodium
Osteoporosis
Warner Chilcott LLC
Actonel
US$ 180 million
15-Nov
Aurobindo Pharma
Methylprednisolone Sodium Succinate
Anti-Allergy
Pharmacia & Upjohn
Solu-Medrol
US$ 102 million
15-Nov
Aurobindo Pharma
Loperamide Hydrochloride
GI
Johnson & Johnson
Imodium
US$ 9.7 million
15-Dec
Aurobindo Pharma
Risedronate Sodium
Osteoporosis
Warner Chilcott
Actonel
US$113 million
15-Dec
Aurobindo Pharma
Loperamide Hydrochloride
GI
J and J Consumer Inc.
Imodium
US$ 9.7 million
15-Dec
Aurobindo Pharma
Methylprednisolone Sodium Succinate
Anti-Inflammatory
Solu-Medrol
US$ 102 million
16-Jan
Aurobindo Pharma
Norethindrone Acetate
Gynacology
Duramed Res
Aygestin
US$ 24 million
16-Jan
Aurobindo Pharma
Tranexamic Acid
Hemophiliac
Cyklokapron
US$ 50 million
16-Jan
Aurobindo Pharma
Paricalcitol
Hormonal
Abbvie
Zemplar
US$ 110 million
16-Jan
Aurobindo Pharma
Voriconazole
Anti-Infection
PF Prism CV
Vfend
US$ 103 million
16-Feb
Aurobindo Pharma
Levetiracetam
Anti-epileptic
UCB Inc
Keppra
US$ 1.2 billion
16-Feb
Aurobindo Pharma
Celecoxib
Anti-Inflammatory
GD Searle
Celebrex
US$ 2.44 billion
16-Feb
Aurobindo Pharma
Isosulfan Blue
Diagnostic Agent
Covidien
Lymphazurin
NA
16-Feb
Aurobindo Pharma
Levofloxacin
Anti-infective
Janssen Pharma
Levaquin
US$1.45 billion
Source: USFDA website, ICICIdirect.com Research; * Subsidiary of Sun Pharma
Page 32
Date
Company
Drug Name
Therapeutic Area
Innovator company
Generic Version of
Market Size
16-Feb
Aurobindo Pharma
Acetylcysteine
CVS
Cumberland Pharma
Acetadote
NA
16-Mar
Aurobindo Pharma
Ibandronate Sodium
Osteoporosis
Hoffmann La Roche
Boniva
US$ 55 million
16-Mar
Aurobindo Pharma
Dexmedetomidine Hydrochloride
Anesthesia
Hospira
Precedex
US$ 59.1 million
16-Mar
Aurobindo Pharma
Naproxen Sodium
Anti-inflammatory
Alvogen
Naprelan
US$ 96 million
16-Mar
Aurobindo Pharma
Rivastigmine Tartrate
CNS
Novartis
Exelon
US$ 26.7 million
16-Mar
Aurobindo Pharma
Vancomycin HCl
Antibiotic
Fresenius Kab
Vancomycin HCl
US$ 160 million
16-Mar
Aurobindo Pharma
Pantoprazole Sodium
Gastro Intestinal
Wyeth Pharma
Protonix
US$ 93.5 million
16-Mar
Aurobindo Pharma
Valganciclovir Hydrochloride
Antiviral
Hoffmann La Roche
Valcyte
US$ 94 million
15-Dec
Aurobindo Pharma
Eptifibatide
CVS
Schering
Integrilin
US$ 137 million
15-Dec
Aurobindo Pharma
Levonorgestrel
Oral-Contraceptive
Teva
Plan-B
US$ 64 million
15-Dec
Aurobindo Pharma
Dexamethasone Sodium Phosphate
Anti-Inflammmatory
Merck
Decadron
US$ 31 million
15-Dec
Aurobindo Pharma
Olopatadine Hydrochloride
Opthalmic
Alcon Pharms
Pataday
US$ 235 million
15-Dec
Aurobindo Pharma
Famotidine
GI
Valeant Pharms
Pepcid
US$ 29 million
15-Aug
Aurolife
Methadone Hydrochloride
Pain Management
Mallinckrodt
Methadone
NA
16-Mar
Cadila Healthacare
Dextroamphetamine IR Tablets
CNS
Amedra Pharma
Dexedrine
US$ 40.6 million
16-Mar
Cadila Healthacre
Acyclovir
Antiviral
Cipher Pharma
Sitavig
NA
15-Jun
Cadila Healthcare
Pyridostigmine Bromide
CNS
Valeant Pharms
Mestinon
US$ 27.9 million
15-Jun
Cadila Healthcare
Calcium Acetate
Blood phosphate
Cypress Pharm
Eliphos
NA
15-Aug
Cadila Healthcare
Amiloride Hydrochloride
CVS
Paddock LLC
Midamor
NA
16-Feb
Cadila Healthcare
Doxycycline
Anti-Infective
Aqua Pharma
Monodox
US$ 181 million
16-Feb
Cadila Healthcare
Glyburide; Metformin Hydrochloride
Anti-diabetic
Glucovance
NA
16-Mar
Cipla (Invagen Pharma) Olanzapine
CNS
Lilly
Zyprexa
US$ 3.2 billion
15-Aug
Dr. Reddy's Labs
Pramipazole Dihydrochloride
CNS
Boehinger Ingelhem
Mirapex ER
NA
15-Sep
Dr. Reddy's Labs
Esomeprazole Magnesium
GI
Astrazeneca Pharma
Nexium
US$ 7.3 billion
15-Dec
Dr. Reddy's Labs
Amoxicillin
Anti-bacterial
GSK
Amoxil
NA
15-Apr
Glenmark
Ethinyl Estradiol; Levonorgestrel
Contraceptive
Wyeth Pharms
Alesse
US$ 6.4 million
15-Apr
Glenmark
Ethinyl Estradiol; Norethindrone Acetate
Contraceptive
Warner Chilcott
Estrostep
US$ 38.6 million
15-May
Glenmark Pharma
Desmopressin Acetate
Respiratory
Ferring Pharma
Minirin
NA
15-Jun
Glenmark Pharma
Calcipotriene
Vitamins
Leo Pharma
Dovonex
US$ 92.8 million
15-Jun
Glenmark Pharma
Levonorgestrel and Ethinyl Estradiol
Oral Contraceptive
Teva
Seasonale
US$81 million
15-Aug
Glenmark Pharma
Drosperenone and Ethinyl Estradiol
Gynecolgy
Bayer Hlthcare
Yaz
US$ 347 million
15-Sep
Glenmark Pharma
Voriconazole
Anti-Infection
PF Prism CV
Vfend
US$ 800 million
15-Oct
Glenmark Pharma
Betamethasone Dipropionate; Clotrimazole
Dermatology
Merck Sharp Dohme
Lotrisone
NA
16-Jan
Glenmark Pharma
Potassium Chloride
Hypokalemia
Upsher Smith
Klor-Con
US$ 74.1 million
16-Jan
Glenmark Pharma
Norethindrone Acetate and Ethinyl Estradiol
CVS
Warner Chilcott
Loestrin
US$ 56.8 million
16-Feb
Glenmark Pharma
Norgestimate; Ethinyl Estradiol
Oral Contraceptives
Sandoz
Tri-lo-estarylla
US$ 420 million
16-Mar
Glenmark Pharma
Frovatriptan Succinate
CNS
Endo Pharma
Frova
US$ 87.8 million
16-Mar
Glenmark Pharma
Raloxifene Hydrochloride
Osteoporosis
Lilly
Evista
US$ 336.5 million
16-Mar
Glenmark Pharma
Bendamustine Hydrochloride
Anti-cancer
Cephalon
Treanda
US$ 92.6 million
16-Mar
Glenmark Pharma
Drospirenone; Ethinyl Estradiol
Oral Contraceptive
Bayer Healthcare
Yaz
US$ 347 million
16-Mar
Glenmark Pharma
Levonorgestrel
Oral-Contraceptive
Teva
Plan-B
US$ 64 million
15-Dec
Glenmark Pharms
Linezolid
Anti-bacterial
Zynox
US$ 447.6 million
16-Feb
InvaGen Pharma
Bupropion Hydrochloride
Anti-depressant
GSK
Wellbutrin
US$ 268 million
15-Jun
Levofloxacin
Anti-infective
Ortho McNeil Janseen PhaLevaquin
US$1.45 billion
Source: USFDA, ICICIdirect.com Research; * subsidiaries of Sun Pharma
Page 33
Date
Company
Drug Name
Therapeutic Area
Innovator company
Generic Version of
Market Size
15-Sep
Zolmitriptan
CNS
Astrazeneca
Zomig
US$ 152.8 million
15-Oct
Rizatriptin Benzoate
CNS
Merck
Maxalt - MLT
NA
15-Oct
CNS
Forest Labs
Namenda
US$ 1.1 billion
15-Oct
Indomethacin
Anti-Inflammatory
Iroko Pharma
Tivorbex
NA
15-Nov
Paroxitine Hydrochloride
Anti-depressant
Apotex Technologies
Paxil
NA
15-Dec
Citalopram Hydrobromide
Anti-depressant
Forest Labs
Celexa
NA
15-Dec
Paroxetine
Anti-Depressant
Apotex
Paxil
NA
15-Apr
Lupin
CNS
Forest Labs
Namenda
US$ 1.1 billion
15-Apr
Lupin
Quinine Sulfate
Anti-malaria
Mutual Pharm Co Inc
Qualaquin
US$ 31.9 million
15-May
Lupin
Azithromycin
Anti-infective
Pfizer
Zithromax
NA
15-May
Lupin
Moxifloxacin Hydrochloride
Anti-Bacterial
Bayer Healthcare
Avelox
US$ 400 million
15-Jun
Lupin
Amlodipine Besylate, Valsartan and Hydrochlorothiazide Anti-hypertensive
Novartis
Exforge HCT
US$ 320 million
15-Jun
Lupin
Celecoxib
Anti-Inflammatory
GD Searle
Celebrex
US$ 2.44 billion
15-Jun
Lupin
Desvenlafaxine Succinate
Anti-Depressant
Wyeth Pharms
Pristiq
US$ 600 million
15-Jul
Lupin
Calcium Acetate
Kidney Disease
Fresenius Medical
Phoslo
NA
15-Jul
Lupin
Repaglinide and Metformin Hydrochloride
Anti-Diabetic
Novo Nordisk
Prandimet
US$ 200 million
15-Aug
Lupin
Bekyree
Gynecolgy
Organon USA
Cyclessa
US$ 22.5 million
15-Aug
Lupin
Fenofibrate
CVS
Skyepharma
Triglide
US$ 156 million
15-Aug
Lupin
Diclofenac Sodium
Anti-Inflammatory
Nuvo Res Inc
Pennsaid
US$ 13.3 million
15-Aug
Lupin
Omeprazole
Gastro Intestinal
Astrazeneca
Prilosec
US$ 185 million
15-Sep
Lupin
Clarithromycin
Antibiotic
Abbvie
Biaxin
NA
15-Oct
Lupin
Donepezil Hydrochloride
CNS
Eisai Inc.
Aricept
US$ 52.3 million
15-Oct
Lupin
Blisovi 24 FE
Sex-stimulant
Warner Chilcott
Estrostep 21
NA
15-Nov
Lupin
Contraceptive
Warner Chilcott LLC
Estrostep
NA
15-Nov
Lupin
Levonorgestrel ; Ethinyl Estradiol
Oral Contraceptive
Teva
Seasonale
US$81 million
16-Mar
Lupin
Ethinyl Estradiol; Norethindrone
Contraceptive
Warner Chilcott
Estrostep
US$ 38.6 million
16-Mar
Lupin
Ethinyl Estradiol; Levonorgestrel
Contraceptive
Wyeth Pharms
Alesse
US$ 6.4 million
15-Dec
Lupin
Oral-Contraceptive
Warner Chilcott
Femhrt
US$ 39.9 million
15-Dec
Lupin
Potassium Chloride
CVS
Apothecon
Klotrix
US$ 85.6 million
15-Apr
Natco Pharma
Alprazolam
CNS
UCB Inc
Niravam
NA
16-Jan
Natco Pharma
Lansoprazole
Anti-ulcer
Takeda Pharms
Prevacid
NA
15-Apr
Strides Acrolab
Polyetylene Glycol 3350; Potassium Chloride; Sodium B Colonoscopy
Braintree
Nulytely
US$ 20 million
15-May
Strides Acrolab
Lamivudine and Zidovudine
Anti-retroviral
ViV Healthcare
Combivir
US$ 295 million
15-Jul
Strides Acrolab
Benzonatate
Non-narcotic Cough medPfizer
Tessalon
US$ 40 million
15-Nov
Strides Acrolab
Dutasteride
Nephrology
Glaxo Smith Kline
Avodart
US$ 467 million
15-Apr
Sun Pharma
Oxymorphone Hydrochloride
Pain
Endo Pharms
Opana
US$ 25 million
15-Jun
Sun Pharma
Donepezil Hydrochloride
CNS
Eisai Inc
Aricept
US$ 2.5 billion
15-Jun
Sun Pharma
Levocetirizine Dihydrochloride
Anti-histamine
UCB Inc
Xyzal
US$ 231 million
15-Aug
Sun Pharma
Tetrabanazine
Pain Management
Valeant Pharms
Xenazine
NA
15-Sep
Sun Pharma
Dexmethylphenidate Hydrochloride
CNS
Novartis
Focalin
US$ 683 million
15-Nov
Sun Pharma
Risedronate Sodium
Osteoporosis
Warner Chilcott LLC
Actonel
US$ 180 million
15-Dec
Sun Pharma
Imatinib Mesylate
Anti-Cancer
Novartis
Gleevec
US$ 2.5 billion
Page 34
Date
Company
Drug Name
Therapeutic Area
Innovator company
Generic Version of
Market Size
16-Jan
Sun Pharma
Minocycline Hydrochloride
Anti-biotic
Medicis
Solodyn
US$750 million
16-Jan
Sun Pharma
Buprenorphine Hydrochloride
Anti-pain
Endo Pharms
Belbuca
NA
16-Feb
Sun Pharma
Nitrofurantoin
Antibiotic
Alvogen
Macrodantin
NA
15-Jun
Taro Pharma
Desloratadine
Anti-Biotic
Schering Plough
Clarinex
US$ 212 million
15-Jul
Taro Pharma
Loratadine
Anti-histamine
Bayer Healthcare
Clartin
US$ 301 million
16-Jan
Taro Pharma
Anti-fungal
Merz Pharms
Naftin
NA
16-Mar
Taro Pharma
Oxiconazole Nitrate
Antiinfective
Fougera Pharma
Oxistat
NA
15-Apr
Torrent Pharma
Aripiprazole
CNS
15-Jun
Torrent Pharma
Amlodipine Besylate, Valsartan and Hydrochlorothiazide Anti-hypertensive
15-Aug
Torrent Pharma
Tolterodine Tartrate
15-Oct
Torrent Pharma
15-Oct
Torrent Pharma
CNS
15-Dec
Torrent Pharms
Celecoxib
Anti-Inflammatory
GD Searle
Celebrex
US$ 2.44 billion
15-Oct
Unichem Labs
CNS
Forest Labs
Namenda
US$ 1.1 billion
Otsuka
Abilify
US$ 7.8 billion
Novartis
Exforge HCT
US$ 320 million
Nephralogy
Pharmacia & UpJohn
Detrol LA
US$ 571.5 million
GI
Astrazeneca
Nexium
US$ 7.3 billion
Forest Labs
Namenda
US$ 1.1 billion
15-Oct
Unichem Labs
Montelukast Sodium
Anti-asthama
Merck
Singulair
US$ 3.5 billion
16-Jan
Unichem Labs
Alfuzosin Hydrochloride
Prostatic Hyperplasia
Covis Pharma Sarl
Uroxatral
NA
16-Mar
Unichem Labs
Quetiapine Fumarate
CNS
Astrazeneca
Seroquel
NA
15-Dec
Unichem Labs
Irbesartan
CVS
Sanofi Aventis
Avapro
US$ 1.23 billion
Page 35
Exhibit 31: Tentative approvals for companies under I-Direct coverage in FY16
Date
Company
Drug Name
Therapeutic Area
Innovator company
Generic Version of
Market Size
15-Oct
Ajanta Pharma
Irbesartan
Anti-Hypertensive
Sanofi Aventis
Avapro
US$ 50 million
15-Oct
Ajanta Pharma
Omeprazole; Sodium Bicarbonate
GI
Santarus
Zegerid
NA
16-Jan
Ajanta Pharma
Sildenafil Citrate
Harmonal
Pfizer
Revatio
US$ 300 million
15-Jun
Alembic Pharma
Celecoxib
Anti-Inflammatory
GD Searle
Celebrex
US$ 2.44 billion
16-Mar
Alembic Pharma
Olmesartan Medoxomil
CVS
Daiichi Sankyo
Benicar
NA
15-Jul
Aurobindo Pharma
Sildenafil Citrate
Harmonal
Pfizer
Revatio
US$ 300 million
15-Oct
Aurobindo Pharma
Tadalafil
CVS
Eli Lilly
Adcirca
NA
15-Nov
Aurobindo Pharma
Palonosetron Hydrochloride
Anti-Nausiatic
Helsinn Hlthcare
Aloxi
NA
15-Dec
Aurobindo Pharma
GI
Astrazeneca Pharma
Nexium
US$ 7.3 billion
15-Dec
Aurobindo Pharma
Bivalirudin
CVS
The Medicines Co.
Angiomax
NA
16-Jan
Aurobindo Pharma
Prasugrel
CVS
Eli Lilly
Effient
US$ 522 million
16-Jan
Aurobindo Pharma
Saxagliptin
Anti-diabetic
Astrazeneca
Onglyza
US$ 820 million
16-Feb
Aurobindo Pharma
Pitavastatin
CVS
Kowa
Livalo
NA
16-Feb
Aurobindo Pharma
Ritonavir
HIV
Abbvie
Norvir
US$ 400 million
16-Mar
Cadila Healthcare
Clofarabine
Anti-cancer
Genzyme
Clolar
NA
15-May
Cipla
Lopinavir and Ritonavir
Anti-Retroviral
Abbott Labs
Kaletra
NA
15-Jun
Cipla
Nevirapine
Anti-retroviral
Boehringer Ingelheim
Viramune
NA
15-Dec
Dr. Reddy's Labs
Fesoterodine Fumarate
Urology
Pfizer
Toviaz
US$ 159 million
16-Jan
Dr. Reddy's Labs
Doxycycline
Antibiotic
Dr. Reddy's Labs
Zenavod
NA
15-Apr
Glenmark
Calcipotriene
Vitamins
Leo Pharma
Dovonex
US$ 92.8 million
15-May
Glenmark Pharma
Rufinamide
Anti-Epilepsy
Eisai
Banzel
US$ 121.8 million
15-Oct
Glenmark Pharma
Lacosamide
Epilepsy
UCB Inc
Vimpat
US$ 365 million
15-Dec
Glenmark Pharma
Dronedarone Hydrochloride
CVS
Sanofi Aventis
Multaq
US$ 425.7 million
16-Feb
Glenmark Pharma
Azelaic Acid
Dermatology
Allergan
Azelex
NA
16-Mar
Glenmark Pharma
Lacosamide
Epilepsy
UCB Inc
Vimpat
US$ 365 million
15-Dec
Jubilant Life Sciences Olmesartan Medoxomil
CVS
Daiichi Sankyo
Benicar
NA
15-Apr
Lupin
Fesoterodine Fumarate
Urology
Pfizer
Toviaz
US$ 159 million
15-Oct
Lupin
Milnacipran Hydrochloride
CNS
Forest Labs
Fetzima
NA
16-Jan
Lupin
Lurasidone Hydrochloride
CNS
Sunovion Pharms
Latuda
US$ 202 million
15-Sep
Natco Pharma
Lapatinib
Anti-Cancer
Glaxo Smith Kline
Tykerb
US$ 362.5 million
15-Sep
Strides Acrolab
Rilpivirine
HIV
Janssen Prods
Edurant
NA
15-Dec
Sun Pharma
Isotretinion
Vitamin
Ranbaxy
Absorica
NA
16-Jan
Sun Pharma
Lacosamide
Epilepsy
UCB Inc
Vimpat
US$ 365 million
16-Jan
Sun Pharma
Lurasidone Hydrochloride
CNS
Sunovion Pharms
Latuda
US$ 202 million
16-Jan
Taro Pharma
Diclofenac Sodium
Anti-Inflammatory
Nuvo Res Inc
Pennsaid
US$ 13.3 million
15-Apr
Torrent Pharma
Rosuvastatin Calcium
Avascular necrosis
IPR
Crestor
US$ 5 billion
15-Jul
Torrent Pharma
Amlodipine and Omlesartan Medoxomil
Bloodpressure
Daiichi Sankyo
Azor
US$ 174 million
15-Oct
Torrent Pharma
Olmesartan Medoxomil
CVS
Daiichi Sankyo
Benicar
NA
16-Feb
Torrent Pharma
Amlodipine; Olmesartan Medoxomil
Bloodpressure
Daiichi Sankyo
Azor
US$ 174 million
15-Jun
Unichem Labs
Alfuzosin Hydrochloride
Prostatic Hyperplasia
Covis Pharma Sarl
Uroxatral
NA
Page 36
Exhibit 32: Patent Litigations - Indian companies vs. innovators

Month
Innovator
ANDA Filer
Brand Name
API
Used for
Apr-15
Sanofi Aventis
Dr. Reddy's Labs
Jevtana KIT
Cabazitaxel
Prostate Cancer
Apr-15
Sanofi Aventis
Glenmark
Jevtana KIT
Cabazitaxel
Prostate Cancer
Apr-15
Medicis Pharma
Taro Pharma
Zyclara
Imiquimod
Actinic Keratoses
Apr-15
Alcon Research
Wockhardt
Patanol
Olopatadine hydrochloride
Allergic Conjunctivitis
Apr-15
Janssen Products LP
Cipla
Prezista
Darunavir
Anti-Retroviral
Apr-15
Teva Pharma
Dr. Reddy's Labs
Copaxone
Glatiramer
Multiple Sclerosis
Apr-15
Eli Lilly
Lupin
Effient
Prasugrel
CVS
Apr-15
Horizon Pharma
Lupin
Pennsaid
Diclofenac
Osteoporosis
May-15
Apotex Inc.
Lupin
Paxil CR
Paroxitine Hydrochloride
Anti-Anxiety
Acne
May-15
Galderma Labs
Glenmark
Epiduo
Adapalene; Benzoyl Peroxide
May-15
Horizon Pharma
Dr. Reddy's Labs
Vimovo
Esmoprazole Magnesium; Naproxen Osteoporosis
May-15
Merz Pharma
Taro Pharma
Naftin
May-15
Takeda
Zydus Pharma
Daliresp
Roflumilast
CVS
May-15
Takeda
Strides
Daliresp
Roflumilast
CVS
May-15
Acorda Therapeutics Inc.
Sun Pharma
Ampyra
Dalframpridine
Multiple Sclerosis
May-15
Merck
Lupin
Safyral
Drospiranone; Ethinyl Estradiol; LevomBirth Control
May-15
Kowa
Lupin
Livalo
High Cholestrol
Jun-15
Millenium Pharmaceuticals
Dr. Reddy's Labs
Valcade
Bortezomib
Anti-Cancer
Jun-15
Millenium Pharmaceuticals
Sun Pharma
Valcade
Bortezomib
Anti-Cancer
Jun-15
Reckitt Benckiser LLC
Dr. Reddy's Labs
Mucinex
Guaifenesin; Pseudoephedrine HCl
Bronchial Conjestion
Jul-15
Eli Lilly
Lupin
Axiron
Hypogonadism
Testosterone
Jul-15
Fresenius Medical
Gavis Pharma
Phoslo
Calcium Acetate
Kidney Disease
Jul-15
Alcon Research
Lupin
TravatanZ
Travoprost Ophthalmic solution
Elevated Intraocular pressure
Aug-15
Allergan
Lupin
Namenda
Memantine Hydrochoride
Alzheimer's Disease
Aug-15
Galderma Labs
Taro Pharma
Epiduo
Adapalene & Benzoyl peroxide
Acne
Sep-15
Jazz Pharma
Lupin
Xyrem
Sodium Oxybate
Narcolepsy
Sep-15
Gilead Sciences Inc.
Lupin
Tamiflu
Oseltamivir
Influenza
Sep-15
Horizon Pharma
Lupin
Pennsaid
Diclofenac
Osteoarthritis
Sep-15
Bayer Pharma
Alembic Pharma
Staxyn
Vardenafil Hydrochloride
Sex Stimulant
Oct-15
Merck
Lupin
Beyaz
Drospirenone
Birth control
Oct-15
Salix Pharmaceuticals, Inc.
Taro Pharma
Moviprep
Polyethylene glycol electrolyte soln
Gastro Intestinal
Oct-15
Takeda Pharma
Aurobindo
Prevacid
lansoprazole
Stomach ulcers
Oct-15
Janssen Pharma
Aurobindo
Xarelto
Rivaroxaban
Blood Thinner
Oct-15
Novartis Pharma
Natco Pharma
Gleevec
Matinib Mesylate
Anti-cancer
Oct-15
Otsuka Pharma
Zydus Pharma
Abilify
Aripiprazole
Schizophrenia
Oct-15
AstraZeneca
Alembic Pharma
Brilinta
Ticagrelor
CVS
Nov-15
AstraZeneca
InvaGen Pharma
Brilinta
Ticagrelor
CVS
Nov-15
Novartis Pharma
Dr. Reddy's Labs
Exelon Patch
Rivastigmine
Dementia
Nov-15
Allergan
Aurobindo Pharma
Acular LS
Ketorolactromethamine
Ocular Pain
Nov-15
Shire Pharma
Lupin
Lialda
Mesalamine
Ulcerative Colitis
Nov-15
Dexcel Pharma
Sun Pharma
Omeprazole
Omeprazole
GI
Nov-15
Dexcel Pharma
Dr. Reddy's Labs
Omeprazole
Omeprazole
GI
Nov-15
Cephalon Inc.
Aurobindo Pharma
Nuvigili
Modafinil
CNS
Nov-15
Cosmo Techs
Lupin
Uceris
Budesonide
GI
Nov-15
Pfizer
Dr. Reddy's Labs
Toviaz
Fesoterodine
Urotherapy
Fungal Infection
ssss
Page 37
Exhibit 33: Patent litigations - Indian companies vs. innovators

Month
Innovator
ANDA Filer
Brand Name
API
Used for
Nov-15
Vanda Pharma
Lupin
Fanapt
Iloperidone
Schizophrenia
Nov-15
Forest Labs
InvaGen Pharma
Viibryd
Vilazodone
Anti-depressant
Nov-15
Jazz Pharma
Sun Pharma
Xyrem
Gamma-hydroxybutyric acid
CNS
Nov-15
Otsuka Pharma
Alkem Labs
Abilify
Aripiprazole
Schizophrenia
Nov-15
Symed Labs
Glenmark Pharma
Zyvox
Linezolid
Anti-Infective
Dec-15
UCB Inc.
InvaGen Pharma
Zyrtec-D
Cetirizine
Respiratory
Dec-15
Unimed Pharma
Dr. Reddy's Labs
Androgel
Testosterone
Low Testosterone
Dec-15
Helsinn Healthcare
Dr. Reddy's Labs
Aloxi
Palanosetron
Nausea
Dec-15
Sanofi-Aventis
Glenmark Pharma
Multaq
Dronedarone
Atrial Fibrillation
Dec-15
Otsuka Pharma
Ajanta Pharma
Abilify
Aripiprazole
Schizophrenia
Dec-15
Merz Pharma
Taro Pharma
Naftin
Fungal Infection
Jan-16
Dow Pharma
Taro Pharma
Onexton
Cindamycin Phosphate and Benzoyl P Acne
Jan-16
Cubist Pharma
Dr. Reddy's Labs
Cubicin
Daptomycin
Antibiotic
Feb-16
Bayer Pharma
InvaGen Pharma
Xarelto
Rivaroxaban
Blood Thinner
Feb-16
Cipla
Reyataz
Atazanavir
HIV
Feb-16
Janssen Products LP
Lupin
Prezista
Darunavir
HIV
Mar-16
Shire Canada
Lupin
Daliresp
Roflumilast
Respiratory
Mar-16
Daiichi Sankyo
Torrent Pharma
Benicar
Olmesartan
Anti-depressant
Page 38
ICICIdirect.com coverage universe (Pharma & Hospitals)

Company
I-Direct
Code
CMP
(|)
TP
(|)
Rating
M Cap
(| Cr)
EPS (|)
PE(x)
EV/EBITDA (x)
RoCE (%)
RoE (%)
FY16P FY17E FY18E FY16P FY17E FY18E FY16P FY17E FY18E FY16P FY17E FY18E FY16P FY17E FY18E
Ajanta Pharma
AJAPHA 1500 1,780
Buy
13198.6
45.7
52.4
63.6
32.9
28.6
23.6
22.7
19.3
16.3
43.7
37.9
35.6
34.4
30.0
Apollo Hospitals
APOHOS 1297 1,420 Hold
18049.4
22.2
35.0
49.2
58.4
37.1
26.4
26.6
19.2
15.3
8.2
10.9
13.3
8.9
12.6
15.4
Aurobindo Pharma
AURPHA 726.6 990
42518.4
33.9
37.7
45.1
21.4
19.3
16.1
24.8
22.0
18.5
25.0
24.6
26.4
28.1
24.3
22.9
Alembic Pharma
ALEMPHA 529
Buy
28.2
620
Hold
9970.7
38.2
19.6
28.3
13.9
27.0
18.7
12.6
23.9
17.3
58.0
24.8
29.7
51.5
22.3
26.2
Biocon
BIOCON
545
Hold
14340.0
22.1
28.3
30.5
32.5
25.4
23.5
8.7
7.3
6.0
9.1
10.9
11.1
10.9
12.7
12.5
Cadila Healthcare
Cipla
CADHEA 313 390

CIPLA 485.6 470
Buy
Hold
32079.0
39017.3
15.0
18.8
15.5
19.9
20.6
26.2
21.0
25.9
20.2
24.4
15.2
18.6
14.2
16.6
14.1
14.8
10.8
11.8
27.9
12.1
24.6
13.1
29.5
16.0
28.6
12.7
24.4
12.1
26.3
14.1
Divi's Laboratories
DIVLAB
1110 1,260
Buy
29469.7
41.7
45.8
52.4
26.6
24.3
21.2
19.2
16.9
14.4
30.6
29.1
28.4
25.8
23.6
22.6
Dr Reddy's Labs
DRREDD
2974 3,480
Buy
51274.4
142.1 139.2 174.0
20.9
21.4
17.1
13.1
12.8
10.2
15.1
15.1
18.3
18.9
16.1
16.8
Glenmark Pharma
GLEPHA
858 1,000
Buy
21371.3
32.2
41.4
50.1
26.7
20.7
17.1
17.0
13.9
11.5
16.2
18.8
20.3
21.2
21.7
21.0
Indoco Remedies
INDREM 280.3 365
Buy
2583.0
9.3
15.1
20.4
30.1
18.6
13.8
16.1
11.6
9.2
13.2
19.7
24.4
14.7
20.9
24.2
IPCLAB
455
Hold
6157.3
10.0
24.1
30.4
48.7
20.2
16.0
17.9
11.1
8.9
5.8
12.4
14.5
5.5
12.0
13.3
VAMORG 351.5 405
Buy
5599.4
26.0
41.6
56.1
13.5
8.4
6.3
7.6
6.1
4.8
12.0
15.1
17.8
14.2
18.9
20.6
Buy
66023.2
50.4
66.0
74.1
29.1
22.2
19.8
19.4
13.5
11.8
18.6
22.5
23.1
20.7
22.1
19.9
Ipca Laboratories
Lupin
LUPIN
717
488
1464 1,850
Natco Pharma
NATPHA 507.1 600
Sun Pharma
SUNPHA
Buy
8832.4
8.9
10.9
13.0
56.9
46.3
38.9
30.0
26.9
22.8
16.1
16.4
17.3
12.0
13.0
13.7
743
785
Hold
178773.7
23.4
26.2
31.3
31.7
28.3
23.7
20.8
18.1
15.2
18.6
19.5
20.1
18.0
17.3
17.6
445
23.5
Syngene International
SYNINT
396
Buy
7910.0
8.8
11.1
15.6
43.3
34.2
24.3
26.1
20.5
16.7
19.5
13.3
16.7
20.7
21.2
Torrent Pharma
TORPHA
1344 1,650
Buy
22746.6
115.5
67.8
75.0
11.6
19.8
17.9
8.3
14.2
12.8
51.1
27.0
26.8
57.7
27.0
24.4
UNILAB
260
Buy
2362.3
12.3
15.5
22.1
21.1
16.7
11.7
14.5
11.6
8.3
13.8
16.2
20.4
11.7
13.4
16.8
310
Source: ICICIdirect.com Research
Page 39
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a stock.
Sector view:
Over weight compared to index
Equal weight compared to index
Under weight compared to index
Index here refers to BSE 500
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com
Page 40
ANALYST CERTIFICATION
We /I, Siddhant Khandekar, CA INTER and Mitesh Shah, MS (finance), Nandan Kamat MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed
in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
Terms & conditions and other disclosures:

ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia,
engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and has its various
subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of which are
available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
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Page 41

IDirect Healthcare AnnualUpdate 2016

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IDirect Healthcare AnnualUpdate 2016

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Annual Update

June 22, 2016

Healthcare Annual Update

YTD: till 20-June-2016

ICICI Securities Ltd. | Retail Equity Research

Course correction drive after turbulent FY16...

US remains market to conquer but new challenges emerge

Exhibit 2: US sales grow 28.8% in FY11-16

Source: Company, ICICIdirect.com, Research

Source: Company, ICICIdirect.com Research

We believe Indian pharma players are at an inflection point as they plan

Exhibit 4: I-Direct universe capex (FY11-18E)

ICICI Securities Ltd. | Retail Equity Research

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com, Research

Exhibit 5: I-Direct Universe R&D FY06-11

Exhibit 6: I-Direct Universe R&D FY11-18E

I-Direct R&D as % of Sales

I-Direct R&D as % of Sales

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com, Research

Exhibit 7: Top five companies R&D as percentage of sales

Exhibit 8: Others with significant spike in R&D as percentage of sales

Source: Company, ICICIdirect.com, Research

Source: Company, ICICIdirect.com Research

Exhibit 10: ANDA approvals (highest in FY16)

Source: USFDA, ICICIdirect.com Research

Source: USFDA, ICICIdirect.com, Research

ICICI Securities Ltd. | Retail Equity Research

NLEM additions for domestic formulations likely to continue; FDC new

Source: AIOCD, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

IPM Growth (%)

Source: AIOCD Data base, ICICIdirect.com Research

Exhibit 13: Growth in key therapeutic segments in FY16

Source: AIOCD Data base, ICICIdirect.com Research

Expected CAGR in FY16-18E

Financial CAGR in FY13-16

Financial CAGR in FY11-16

Exhibit 14: Leading brands in Indian formulation market (| crore)

Glaxosmithkline PharmaceAmoxycillin; Clavulanic Acid

Spasmo ProxyvWockhardt Ltd

Sanofi India Ltd.

Novartis India Ltd

Alkem Laboratories Ltd.

Amoxycillin; Clavulanic Acid

Ranbaxy Laboratories Ltd Diclofenac

Glaxosmithkline PharmaceAll Other Vaccines

Source: AIOCD data base, ICICIdirect.com Research

Source: Company, icicidirect.com

ICICI Securities Ltd. | Retail Equity Research

Source: Company, ICICIdirect.com Research

Source: AIOCD data base, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

Capex cycle on; expansion of pharmacy business affects margins

ICICI Securities Ltd. | Retail Equity Research

Visibility intact amid near term challenges

Price to book (x)

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

ICICI Securities Ltd. | Retail Equity Research

Exhibit 18: Notable Para IV Filings

diabetic peripheral neuroppregabalin

prevention of cardiovascudronedarone hydrochloride