MOSL: SHILPA MEDICARE (Buy)-G-Gleevec to boost profitability- US generics the key growth driver
SHILPA MEDICARE: G-Gleevec to boost profitability; US generics the key growth driver for SLPA over medium term
(SLPA IN, Mkt Cap USD0.5b, CMP INR400, TP INR620, 55% Upside, Buy)
- Shilpa Medicare (SLPA) has received the USFDA’s final approval for Imatinib Mesylate (g-Gleevec) used in Leukemia in the form of tablets (100mg and 400mg). g-Gleevec (Imatinib Mesylate) is expected to open business opportunity of USD10-12m for SLPA in the US generics segment.
- With four ANDA approvals (3-final and 1-tentative) in place, SLPA’s ANDA pipeline is strong with 34 ANDAs pending for approval. This implies strong growth for SLPA over the next 2-3 years.
- We expect SLPA to deliver revenue CAGR of 16% and earnings CAGR of 28% for FY18-21.
- We remain positive on SLPA on the back of strong growth in earnings led by forward integration to formulations and increased business from the regulated markets. We continue to value SLPA at 23x 12M forward earnings and arrive at a price target of INR620. Re-iterate BUY.
- g-Gleevec to drive revenues; improve operating leverage: SLPA has received the USFDA’s final approval for Imatinib Mesylate (g-Gleevec) used in Leukemia in the form of tablets (100mg and 400mg). Besides having para-IV filing for g-Gleevec, SLPA had a settlement in place with the innovator, with respect to litigation on the generic version of Gleevec since FY17. Also, SLPA has regulatory compliance in place with respect to its formulation and API facility. Thus, final approval was the last key milestone for g-Gleevec. The drug has a market size of USD885m (IQVIA MAT Q2 2018) with six other generic approvals, of which two approvals came in the last six months. Based on the competitive scenario, we expect SLPA to garner sales of USD10-12m from this product on annualized basis. This would also enhance operating leverage thereby improving profitability of SLPA in the US generics business.
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.
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