MOSL: AJANTA PHARMA (Buy)-Continues to perform well on regulatory front-US business story, anti-malaria base business intact

​Ajanta Pharma: Continues to perform well on regulatory front; US business story, anti-malaria base business intact

(AJP IN, Mkt Cap USD2.3b, CMP INR1741, TP INR2028, 16% Upside, Buy)

• AJP’s Dahej facility has successfully cleared its first USFDA inspection, implying minimal regulatory risk in the medium term.
  
• We expect institutional anti-malaria sales to be similar to FY16 based on stable funding to Global fund and low probability of re-entry of Ipca in CY17.
  
• In FY17, AJP grew at 14.2%, outperforming the 10.1% growth in the domestic formulations market. We remain positive on the stock. Buy.
  

Dahej facility successfully clears first USFDA inspection

USFDA inspected AJP’s Dahej facility over April 3-7, 2017. This was the first USFDA inspection of this facility. AJP has filed one ANDA from this facility, which triggered the inspection. USFDA issued 0 (zero) Form 483 observations at the end of the inspection. This implies minimal regulatory compliance risk for AJP over the medium term. Approval of the ANDA would depend on further USFDA review. We expect the time period for the review to be 12-15 months. AJP’s Paithan facility was also recently inspected and USFDA had issued one observation. We believe this observation to be minor in nature. With both formulations facilities successfully clearing USFDA inspection in the recent past, we believe AJP is well-placed on the regulatory front. Several of its peers are facing regulatory hurdles, which is impacting their business.