MOSL: STRIDES SHASUN (Buy)-Niche approval kicks in-Thesis playing out

​Strides Shasun: Niche approval kicks in; Thesis playing out; reiterate Buy

(STR IN, Mkt Cap USD1.3b, CMP INR941, TP INR1300, 38% Upside, Buy)

• The approval for Potassium Citrate Extended Release (PCER) has triggered long-awaited approvals for niche molecules for STR, in our view.
• Though investors like STR for its (1) niche ANDA pipeline, (2) strong regulatory compliance, and (3) credible management, they have been concerned over delay in approvals. In its 1QFY18 results concall, the company had pointed out that the delays were only procedural and that it had no regulatory issues pending. Yet, there was skepticism among investors, as STR was not getting approvals despite compliant manufacturing facilities.
• The PCER approval vindicates the company’s stand and would reduce investor concerns. G-Lovaza is another likely opportunity over the medium term for STR.
• We recently initiated coverage on STR with a Buy rating. We remain positive, given STR’s healthy ANDA pipeline for the US market, significant value accretion potential in API business, and strong growth trajectory in Australia business. We reiterate Buy.

STR’s first extended release tablet approval: STR received final approval for Potassium Citrate Extended Release tablets (5mEq, 10mEq, and 15mEq). The market size for this product is ~USD110m.

Annualized sales of USD30m expected from this niche product: Only two companies have final approval for this product and only one sells this product in the US market. Since there are only two DMF filers for this product, competition would be limited for a considerable period. Based on 30% price discount and 55% market share, we expect STR to garner annual sales of USD30m from this product.