Report
Tushar Manudhane

MOSL: SHILPA MEDICARE (Buy)-EIR lowers regulatory risk over medium term; Focus to shift to product approvals

Shilpa Medicare: EIR lowers regulatory risk over medium term; Focus to shift to product approvals

(SLPA IN, Mkt Cap USD0.6b, CMP INR489, TP INR749, 53% Upside, Buy)

 

  • The receipt of establishment inspection report (EIR), with unchanged status – voluntary action initiated (VAI) – for the Jadcherla formulations facility from the USFDA is a positive. It minimizes regulatory risk over the medium term.
  • SLPA’s ANDA pipeline remains robust. We expect 16% CAGR in sales to INR12b and 35% CAGR in PAT to INR2.7b over FY17-20.
  • Our price target of INR749 implies 53% upside. We re-iterate Buy.

 

  •  Issuance of EIR by USFDA comforting: The USFDA had inspected SLPA’s formulations facility at Jadcherla over 20-30 November 2017. It had issued a form 483, with 10 observations. The observations were related to media fill, out of specification (OOS), and stability program. SLPA has only one formulation and resolution of the issues highlighted in the 483 was critical for continuation of its existing business and for future ANDA approvals. The issuance of EIR and status remaining unchanged at VAI implies that the inspection is closed successfully and will not be a show stopper for SLPA’s future approvals. This was the fourth USFDA inspection for SLPA in the last three years.
  •  Strong oncology ANDA pipeline pending for approval: Currently, SLPA has two ANDAs approved and 31 pending for approvals. It has a healthy portfolio of oncology drugs and approval followed by commercialization would result in strong growth in revenue over the next 2-3 years. We expect US sales to ramp up from INR250m in FY17 to INR3.6b by FY20. Multiple inspections and equipment-related issues had affected SLPA’s 3QFY18 US sales. We expect US sales to revive in the coming quarters on new approvals and increased traction from existing products.
Underlying
Shilpa Medicare

Shilpa Medicare Limited is engaged in the business of manufacturing of bulk drugs or active pharmaceutical ingredient (API) and intermediates, and wind power generation. The Company's segments include Bulk Drug/Intermediates and Energy. It offers 3a 7b Dihydroxy. The Company deals with APIs, Intermediates, Formulations, New Drug Delivery Systems, Peptides/Biotech products and Specialty Chemicals. The Company supplies oncology/non-oncology APIs and intermediates. Its oncology API products include Anastrozole, Axitinib, Azacitidine, Abiraterone Acetate, Bicalutamide, Bortezomib, Busulphan, Cabazitaxel Amorphous, Capecitabine, Carboplatin, Cladribine, Clofarabine, Zoledronic acid, Vismodegib, Pemetrexed DiPotassium Nonahydrate, Cyclophosphamide Monohydrate and Cytarabine. It also offers AntiRetroVirals. Its non-oncology API products include Acebrophylline, Echothiophate, Nifedipine, Perfenidone, PrucaloprideSuccinate, Sildenafil Citrate, Ursodeoxycholic acid and Dimethyl Fumarate.

Provider
Motilal Oswal
Motilal Oswal

​Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. 

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

Analysts
Tushar Manudhane

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