Sector Update | 14

Update

Healthcare | Sector

July 2014

Healthcare

More price controls in India - derogative step for industry

Sanofi most impacted; increases apprehension on regulatory environment







New directive expands span of price control on 39 new molecules in the anti-diabetic

and cardiovascular space; more therapies to be covered.

Among MNCs, Sanofi India is likely to be the most impacted, while Indian companies

are expected to see a PAT impact of 1-4%.

Although this development is likely to be challenged by industry participants, it

increases apprehensions on India’s regulatory environment.

Notification for price ceilings on 50 molecules, 39 of which are not in NLEM

The National Pharma Pricing Authority (NPPA) has notified price control for 50

molecules in the anti-diabetic and cardiovascular space, 39 of which are not a part

of the National List of Essential Medicines (NLEM) 2011. The ceiling price for these

drugs is capped at 25% above the simple average price of all brands.

Sanofi India to be hit the most; Indian companies see minimal impact

Sanofi India would be the most hit, with 32% estimated impact on its CY14E EPS.

Other MNCs impacted are AstraZeneca and Merck. Impact on GSK is likely to be

insignificant as less than 1% of its sales come under this directive. Indian companies

will have an impact of 0.4-3.6%, with a major impact on Cadila Healthcare and

Torrent Pharma (refer Exhibit 1 on page 2).

Order likely to be challenged; sales to be impacted till stay order is

obtained

The order has been passed under the provisions of paragraph 19 of the Drug Price

Control Order 2013. The provision states that in case of extraordinary

circumstances, NPPA may (a) fix the price of any drug [understood as including

those not included in NLEM] and (b) change the ceiling price on drugs already under

price control. Given the lack of clarity on what can be construed as “extraordinary

circumstance”, we expect leading industry bodies to challenge this notification.

However, revenues of impacted companies are expected to decline until a stay

order is obtained.

Aim is to reduce inter-brand price differences; increases apprehension over

regulatory environment

NPPA’s rationale for this move is to reduce the existing price difference between

two brands of the same molecule. The directive hints that similar notification can be

expected in six more therapies: anti-cancer, HIV/AIDS, anti-TB, anti-malaria, anti-

asthmatic and immunological. It is likely that products outside the purview of NLEM

may come under price control too. This has increased the uncertainty on the

regulatory environment in India. However, we note that most Indian companies do

not have their products priced at significant premium and thus may not be as

significantly impacted as MNCs by such notifications.

Alok Dalal

(Alok.Dalal@MotilalOswal.com); +91 22 3982 5584

Hardick

2014

(Hardick.Bora@MotilalOswal.com); +91 22 3982 5423

Bora

14 July

Investors are advised to refer through disclosures made at the end of the Research Report.

1

Healthcare | Sector Update

Exhibit 1: Impact from recent price notification (INR m)

Company

Sanofi India

Cadila Healthcare

Ranbaxy

Lupin

Torrent Pharma

Sun Pharma

Cipla

Glenmark

Dr. Reddy's

FY15/CY14 India Estimated sales India sales impact FY15/CY14 total

sales estimate

loss*

(%)

sales estimate

14,661

27,849

20,152

28,762

17,040

43,563

47,224

17,824

17,600

1390

400

380

320

270

250

190

180

140

9.50

1.40

1.90

1.10

1.60

0.60

0.40

1.00

0.80

20,598

82,436

128,607

125,350

52,790

176,192

116,489

68,391

Total sales

impact (%)

6.7

0.5

0.3

0.3

0.5

0.1

0.2

0.3

PAT

Impact (%)

32.3

3.6

2.0

1.1

3.6

0.4

1.0

1.9

145,226

0.1

0.5

Source: MOSL Estimates; *Initial estimates by AIOCD

Exhibit 2: Key brands impacted by recent NPPA notification

Brand

Sanofi India

Cardace

Amaryl

Clexane

Cetapin

Others

Total

GSK Pharma

Benitec

Rosutec

Carzec

Others

Total

Cadila Healthcare

Atorva

Aten

Zytanix

Others

Total

Sun Pharmaceutical

Rozavel

Aztor

Volibo

Cardivas

Istavel

Olmezest

Korandil

Others

Total

Ranbaxy Labs

Rosuvas

Storvas

Volix

Others

Total

Genric Name

Ramipril

Glimepiride

Enoxaparin

Metformin

-

-

Olmesartan

Rosuvastatin

Carvedilol

-

As a % of MAT June 2014 sales

6.2%

5.0%

3.9%

0.5%

0.2%

15.9%

0.2%

0.2%

0.1%

0.1%

0.5%

1.9%

0.9%

0.5%

1.5%

4.8%

1.3%

1.2%

1.0%

0.8%

0.7%

0.7%

0.5%

1.9%

8.2%

5.1%

2.7%

1.3%

2.5%

11.6%

Atorvastatin

Atenolol

Metolazone

-

Rosuvastatin

Atorvastatin

Voglibose

Carvedilol

Sitagliptin

Olmesartan

Nicorandil

-

Rosuvastatin

Atorvastatin

Voglibose

-

14 July 2014

2

Healthcare | Sector Update

Exhibit 2: Key brands impacted by recent NPPA notification

Brand

Glenmark Pharma

Telma

Razel

Zita(Glenmark)

Glimulin

Olmax

Glucar

Mignar

X-Met

Eptus

Aplet

Vocarb

Enamate

Nebinex

Pepar

Teradip

Vivalol

Others

Total

Torrent Pharma

Nikoran

Rozucor

Dilzem

Dilzem Cd

Nebicard

Thrombiflo

Voglitor

Listril

Prax

Carnisure

Azulix

Telday

Others

Total

Dr. Reddy'S

Glimy

Telsartan

Reclide

Atocor

Rozat

Enam

Vozuca

Others

Total

Ipca Laboratories

Ramcor

Glycinorm

Xtor

Tenolol

Glyree

Others

Total

Genric Name

Telmisartan

Rosuvastatin

Sitagliptin

Glimepiride

Olmesartan

Acarbose

Miglitol

Metformin

Eplerenone

Prasugrel

Voglibose

Enalapril

Nebivolol

Pioglitazone

Terazosin

Metoprolol

-

As a % of MAT June 2014 sales

8.0%

1.3%

1.1%

0.6%

0.4%

0.3%

0.2%

0.2%

0.1%

0.1%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

1.3%

13.6%

3.7%

1.5%

1.3%

0.9%

0.8%

0.7%

0.7%

0.6%

0.6%

0.6%

0.6%

0.6%

3.1%

15.5%

1.5%

1.3%

1.3%

1.2%

0.9%

0.6%

0.6%

0.7%

8.1%

1.4%

0.9%

0.6%

0.5%

0.5%

1.7%

5.6%

Nicorandil

Rosuvastatin

Diltiazem

Diltiazem

Nebivolol

Enoxaparin

Voglibose

Lisinopril

Prasugrel

Levocarnitine

Glimepiride

Telmisartan

-

Glimepiride

Telmisartan

Gliclazide

Atorvastatin

Rosuvastatin

Enalapril

Voglibose

-

Ramipril

Gliclazide

Atorvastatin

Atenolol

Glimepiride

-

14 July 2014

3

Healthcare | Sector Update

Exhibit 2: Key brands impacted by recent NPPA notification

Brand

Biocon

Metadoze-Ipr

Dynalix

Statix

Bestor

Telmisat

Blisto

Others

Total

Alembic Pharma

Tellzy

Rosave

Vogo

Tetan

Others

Total

Cipla

Dytor

Enclex

Atorlip

Others

Total

Lupin

Tonact

Ramistar

Lupenox

Novastat

Ivabrad

Telista

Gluconorm

Pinom

Glador

Others

Total

Genric Name

Metformin

Enoxaparin

Atorvastatin

Rosuvastatin

Telmisartan

Glimepiride

-

As a % of MAT June 2014 sales

2.2%

2.0%

1.7%

1.0%

0.9%

0.9%

0.8%

9.4%

1.0%

0.9%

0.8%

0.7%

0.4%

3.9%

1.1%

0.9%

0.6%

1.8%

4.4%

2.1%

1.8%

1.2%

0.9%

0.9%

0.9%

0.5%

0.5%

0.5%

2.5%

11.8%

Telmisartan

Rosuvastatin

Voglibose

Telmisartan

-

Torsemide

Enoxaparin

Atorvastatin

-

Atorvastatin

Ramipril

Enoxaparin

Rosuvastatin

Ivabradine

Telmisartan

Metformin

Olmesartan

Glimepiride

-

-

14 July 2014

4

Healthcare | Sector Update

NOTES

14 July 2014

5

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