Healthcare

28 January 2019

Healthcare

US generics — what lies ahead for Indian companies?

Focus on pace and quality of approvals



Company name

Alembic Pharmaceuticals

Aurobindo Pharma

Cadila Health

Cipla

Dr Reddy’ s Labs

Glenmark Pharma

Lupin

Strides Shasun

Sun Pharma

Torrent Pharmaceuticals

Healthcare performance (1-year)

Sensex

109.0

104.0

99.0

94.0

89.0

Healthcare

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





We analyzed the US portfolio of companies under coverage based on the incremental

business led by (a) new launches, (b) market size, and (c) competitive dynamics, and

on leakage in base business led by (a) price erosion, and/or (b) market share loss in

existing molecules due to launches by peers.

Cipla, Aurobindo Pharma (ARBP), Glenmark Pharma (GNP) and Alembic Pharma

(ALPM) are likely to have better incremental gain over FY18.

Though Cadila Healthcare (CDH) has the maximum approvals, incremental gain is

expected to be marginal due to considerable erosion in its base business.

Incremental gain in case of DRRD is expected to be small on high base of FY18, while

Torrent Pharma (TRP) may see marginal increase in the US on lack of approvals.

The loss in base business is expected to dominate in case of Lupin (LPC) and Sun

Pharma (SUNP), thereby resulting in US sales contracting for 9MFY18.

Multiple factors at play in the US generics market

Prospects for companies focusing on US generics have improved following faster

approvals by the USFDA and compliance consistency. However, size of the base

business, concentration of portfolio, competitive pressure in potential products, lack

of approvals due to ANDA specific issues and/or GMP issues at API/formulation site

are counter forces for growth in the US generics business. Against this backdrop, we

attempt to analyze additional business for these companies from new approvals

over the past one year and look for companies that are best placed after adjusting

for the probable business loss in the base portfolio.

Higher approvals; subsequent launches to aid growth for Cipla, GNP &

ARBP

We expect Cipla, GNP, ARBP and ALPM to show maximum net gains in the US

business on an absolute basis and on % increase over FY18. These companies had

strong pace of approvals (Cipla: 21; GNP: 16; and ARBP: 37). Cipla is expected to

have minimum loss in its base business; but we have not considered rationalization

of Cipla’s B2B portfolio; the company now has 50% market share for g-Albenza (got

approval in Sep’18) and 16% share for g-Reyataz (got approval in Aug’18).

ARBP has a diversified portfolio, thus, it is expected to have marginal erosion despite

sizeable base business. In addition, its superior execution in terms of gaining market

share from new launches is expected to aid better growth in the US generics

business. Notably, ARBP now has ~50% market share for g-Invanz and g-Reyataz for

which it got approval in Jun’18. GNP too received some interesting approvals, for

example, for g-Welchol and g-Vagifem in FY19YTD. In case of ALPM, product specific

opportunities in base portfolio is driving growth, while new launches are yet to

contribute meaningfully to the US generics business.

Source: MOSL, Bloomberg

Research Analyst

Tushar Manudhane

Tushar.Manudhane@motilaloswal.com

+91 22 6129 1536

Rajat Srivastava

Rajat.Srivastava@motilaloswal.com

+91 22 6129 1557

Ankeet Pandya

Ankeet.Pandya@motilaloswal.com

+91 22 6129 1552

Investors are advised to refer through important disclosures made at the last page of the Research Report.

1

28 January 2019

Motilal Oswal research is available on

www.motilaloswal.com/Institutional-Equities,

Bloomberg, Thomson Reuters, Factset and S&P Capital.

Healthcare

SUNP and LPC — base erosion dominating business from new launches

Loss of market share to peers in few potential products and gradual off-take of new

launches is expected to result in a nominal decline in the US generics business.

Significant price erosion in potential products is expected to result in a decline in US

sales for LPC. Recent approval of Levothyroxine Sodium provides some respite and

would aid growth over the medium term.

Rating companies based on net gain/net loss in the US business

We have analyzed 10 companies and assigned them star ratings depending on a net

gain/net loss in the US business over the last six months. We have assigned ratings

between

five blue stars

(the highest rating – companies that have zero loss in

existing base and considerable increase over the FY18 base business) and

five red

stars

(the lowest rating – to companies that have net loss in the US business over

the last six months and have suffered considerable impact on FY18 base business).

Exhibit 1: Maximum gain for Cipla while maximum loss for Lupin

Companies

Cipla

Glenmark Pharma

Alembic Pharma

Aurobindo Pharma

Strides Pharma

Dr Reddy’ s Labs

Cadila Healthcare

Torrent Pharma

Sun Pharma

Lupin

FY18

sales

(USDm)

386

493

143

1,154

120

920

898

169

1,357

879

Incremental gain

(USDm) from

new approvals

105

91

14

134

23

74

128

6

45

81

Incremental loss

(USD m) due to

rise in No. of

Producers

9

30

2

39

14

48

115

4

46

176

Incremental 12M

gain/loss till date

(USDm)

96

61

12

95

9

26

13

2

(1.3)

(95.5)

Incremental

gain/loss over

FY18 (%)

24.8

12.4

8.5

8.2

7.4

2.8

1.4

1.2

(0.1)

(10.9)

Source: Company, MOSL

Score

Exhibit 2: CDH has highest number of approvals YTD

ANDA approvas YTD

42

Exhibit 3: GNP expected to have highest avg. rev/ANDA

Avg Rev/ANDA (USDm)

5.7

5.3

5.0

4.2

3.6

3.0

37

21

19

18

16

14

11

2.5

2.1

2.0

1.0

7

6

Source: MOSL, Company

Note: Avg. Rev/ANDA calculated from new approvals over last 12

monthsSource: MOSL, Company

Valuation and view:

Despite headwinds in the form of supply dynamics and/or

increased compliance risk, we believe the structural growth story in US generics is

intact. Incremental value can be derived by focusing on developing niche products

and complex manufacturing capabilities/capacities. At the same time, continuous

facility upgrade and knowledge improvement to meet evolving regulatory standards

should ensure minimum compliance risk. Accordingly, we remain selectively positive

on the sector with ARBP as our top pick.

Our top pick:

Aurobindo Pharma (ARBP)

28 January 2019

2

Healthcare

Cipla: Strong approval rate to aid growth in the US

With 21 approvals and 17 launches over the past one year, Cipla has an annualized

business potential of USD105m from these opportunities, in our view.

Exhibit 4: To see highest incremental business amongst all the peers

Active Ingredient

Diclofenac Sodium

Albendazole

Atazanavir Sulfate

Isoproterenol Hydrochloride

Phenylephrine Hydrochloride

Docetaxel

Efavirenz

Testosterone Cypionate

Exemestane

Caspofungin Acetate

Cinacalcet Hydrochloride

Launched

Brand

(Y/N)

Y

Voltaren

Y

Albenza

Y

Reyataz

Y

Isuprel

Y

Vazcupel

Y

Taxotere

Y

Sustiva

Y

Depo-Testosterone

Y

Aromasin

Y

Cancidas

N

Sensipar

Dosage Form

Gel

Tablet

Capsule

Injectable

Solution

Injectable

Tablet

Injectable

Tablet

Powder

Tablet

Approval

Competitors

Date

Aug-18

2

Sep-18

2

Aug-18

3

Jun-18

2

Apr-18

2

Aug-18

5

Jun-18

4

Jun-18

7

Apr-18

6

Jul-18

5

Mar-18

7

Market Size

Potential

(USDm)

Sales (USDm)

353

22.5

99

21.0

402

17.1

148

15.1

56

8.6

200

8.2

105

6.2

191

3.0

77

1.8

24

1.0

1700

0.0

TOTAL (USDm)

105.1

Source: MOSL, Bloomberg

We see some amount of erosion in the base business of Cipla as it is losing market

share in its top drug – Topiramate. The drug has not seen any new approvals in the

last one year. All the top drugs of Cipla are already facing high competition; hence,

there is little scope for high erosion in the base business. However, we expect base

business to erode by USD9m as against incremental business of USD105m.

We have not considered business loss on account of a reduction in the B2B

business.

Exhibit 5: Base business erosion to remain low

Cipla Drugs

Topiramate

Amlodipine Besylate

Atorvastatin Calcium

Gabapentin

Number of

Approx.

Total

incremental

Approval prior to

Remarks

approvals till

contribution

approvals in last 12

12Ms

date

to US sales

months

0

13

13

14.3%

1

26

25

9.4%

~34% of portfolio saw increased

competition

4

13

9

5.6%

2

15

13

5.1%

Probable total loss (USDm) 9.2

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD96m

28 January 2019

3

Healthcare

GNP: Increase in market share for top drugs

GNP received 16 product approvals over the past one year and all the 16 products

have been already launched. These are expected to generate incremental sales of

USD91m (annualized).

Exhibit 6: Strong approval rate and new launches to aid growth

Launched

(Y/N)

Colesevelam Hydrochloride

Y

Estradiol

Y

Tacrolimus

Y

Teriflunomide

Y

Azelaic Acid

Y

Colesevelam Hydrochloride

Y

Atovaquone

Y

Hydrocortisone Valerate

Y

Ethinyl Estradiol; Norethindrone Acetate

Y

Active Ingredient

Brand

Welchol

Vagifem

Protopic

Aubagio

Finacea

Welchol

Mepron

Westcort

Loestrin

Approval

Market Size

Potential

Competitors

Date

(USDm)

Sales (USDm)

Tablet

May-18

4

520

22.1

Tablet-Vaginal Sep-18

2

286

14.6

Ointment

Apr-18

1

109

11.1

Tablet

Nov-18

7

1600

10.9

Gel

Nov-18

2

64

9.8

Suspension

Jul-18

2

73

9.3

Suspension

Nov-18

4

119

7.1

Cream

Oct-18

2

17

2.6

Tablet

Jun-18

4

41

2.5

TOTAL (USDm)

91.4

Source: MOSL, Bloomberg, Industry

Dosage Form

Glenmark continues to gain market share and saw an increase in sales in its flagship

drugs in the US – Omeprazole and Gabapentin. With already high competition in its

top drugs, we expect little erosion in the company’s base portfolio. We expect base

business to erode by USD29m as against incremental business of USD91m.

Exhibit 7: Less erosion in base business as key drugs performing well

Glenmark Drugs

Omeprazole

Gabapentin

Rosuvastatin Calcium

Ranitidine Hcl

Topiramate

Pramipexole Dihydrochloride

Number of

Total

incremental

approvals

approvals in last

till date

12 months

3

11

2

16

2

20

3

10

1

13

3

15

Approx.

Approval prior to 12Ms contribution

to US sales

8

14

18

7

12

12

Probable total Loss (USDm)

22%

10%

9%

5%

4%

2%

29.3

Remarks

~51% of portfolio saw increased

competition

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD61m

28 January 2019

4

Healthcare

ALPM: To see growth on a small base

ALPM received seven approvals and launched six of these over the past one year.

Notably, it did not receive any ANDA approval over the past three months. We

expect annualized business potential of USD14.2m from these opportunities.

Exhibit 8: Low incremental business but to witness growth on a low base

Active Ingredient

Vardenafil Hydrochloride

Bupropion Hydrochloride

Candesartan Cilexetil

Acyclovir

Temazepam

Doxycycline Hyclate

Launched

(Y/N)

Y

Y

Y

Y

Y

Y

Brand

Staxyn

Bupropion Hydrochloride

Atacand

Zovirax

Restoril

Vibramycin

Dosage Form

Tablet OD

Tablet

Tablet

Ointment

Capsule

Capsule

Approval

Competitors

Date

Nov-18

Jun-18

Dec-18

Apr-18

Nov-18

Jun-18

0

5

3

7

6

7

Potential

Sales

(USDm)

8

4.3

80

3.3

22

2.6

145

2.3

48

1.1

37

0.6

TOTAL (USDm)

14.2

Market Size

(USDm)

Source: MOSL, Bloomberg

With high competition in new approvals, incremental business is expected to remain

low. However, low base and little erosion in the base business will help ALPM to

outperform the industry growth rate. Overall, we expect ALPM to have incremental

revenues of USD14m as against base business erosion of USD5m.

Exhibit 9: Limited downside in the base business

Alembic Drugs

Celecoxib

Aripiprazole

Fluoxetine Hydrochloride

Fluoxetine Hydrochloride

Aripiprazole

Olmesartan Medoxomil

Number of

Total

Approval

incremental

approvals prior to

approvals in last

till date

12Ms

12 months

3

14

11

4

14

10

4

14

10

4

14

10

4

14

10

2

14

12

Approx. contribution to US

sales

Remarks

4%

4%

3%

~27% of portfolio saw increased

competition

3%

2%

2%

Probable total loss (USDm) 2.3

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD12m

28 January 2019

5

Healthcare

ARBP: Growth intact despite high base

ARBP received 37 product approvals and launched 22 of these over the past one

year. Annualized business potential from these launches is USD134m.

Exhibit 10: Strong pace of approvals and superior execution to provide growth even on a high base

Launched

Brand

(Y/N)

Ertapenem Sodium

Y

Invanz

Atazanavir Sulfate

Y

Reyataz

Armodafinil

Y

Nuvigil

Ritonavir

Y

Norvir

Naproxen Sodium; Sumatriptan Succinate

Y

Treximet

Sildenafil Citrate

Y

Viagra

Silodosin

Y

Rapaflo

Palonosetron Hydrochloride

Y

Aloxi

Azithromycin

Y

Zithromax

Active Ingredient

Niacin

Ibuprofen

Drosperinone; Ethinyl Estradiol

Y

Y

Y

Dosage Form

Approval DateCompetitors

Jun-18

Jun-18

Mar-18

Sep-18

Feb-18

Jun-18

Dec-18

Nov-18

Jul-18

Feb-18

Feb-18

Mar-18

2

3

3

3

2

6

6

8

6

6

4

10

Injectable

Capsule

Tablet

Tablet

Tablet

Tablet

Capsule

Injectable

Tablet

Tablet, Extended

Niaspan

Release

Ibuprofen

Suspension

Yaz

Tablet

Market Size

(USDm)

387

402

104

208

70

330

194

459

132

126

Potential Sales

(USDm)

40.3

25.6

12.2

11.1

10.7

7.9

4.6

3.9

3.1

3.0

43

2.6

481

2.0

TOTAL (USDm)

134.3

Source: MOSL, Bloomberg

ARBP continues to gain market share in its top products, despite these products

facing intense competition. For instance, in Clopidogrel, ARBP gained significant

market share and increase in sales. With high ANDA approval rate, diversified

portfolio and superior execution, we expect marginal base business erosion of

USD39m as against incremental business of USD134m.

Exhibit 11: Marginal increase in competition for top drugs

Aurobindo Drugs

Clopidogrel

Simvastatin

Valacyclovir

Fluoxetine Hcl

Pantoprazole Sodium

Gabapentin

Metformin Hcl

Losartan-Hydrochlorothiazide

Montelukast Sodium

Ezetimibe

Number of

Approx.

Total

incremental

Approval prior

contribution

approvals till

to 12Ms

approvals in last 12

to US sales

date

months

1

16

15

8%

1

11

10

5%

1

13

12

5%

2

11

9

4%

1

15

14

4%

2

16

14

4%

3

18

15

3%

1

14

13

2%

2

22

20

2%

2

11

9

2%

Probable total loss (USD m)

39.0

Remarks

~39% of portfolio saw increased

competition

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD95m

28 January 2019

6

Healthcare

STR: Base business intact; newer aprovals to pick up

STR had 11 approvals and launched nine of these in the last one year. We expect

annualized business potential of USD23m from these opportunities. Due to

seasonality, sales from g-Tamiflu would be higher in 2HFY19.

Exhibit 12: New approvals yet to see a pick-up

Active Ingredient

Oseltamivir Phosphate

Efavirenz

Tenofovir Disoproxil Fumarate

Ketoconazole

Nystatin; Triamcinolone Acetonide

Lamivudine

Cyproheptadine Hydrochloride

Piroxicam

Gabapentin

Launched

(Y/N)

Y

Y

Y

Y

Y

Y

Y

Y

Y

Brand

Tamiflu

Sustiva

Viread

Nizoral

Mykacet

Epivir

Feldene

Neurontin

Dosage Form

Capsule

Tablet

Tablet

Tablet

Ointment

Tablet

Tablet

Capsule

Capsule

Market Size

Approval

Competitors

(USDm)

Date

Jun-18

Mar-18

Jan-18

Jun-18

Jan-18

Apr-18

Apr-18

Jan-18

Oct-18

6

4

9

3

8

8

9

10

14

Potential

Sales

(USDm)

725

11.1

115

6.8

750

3.2

7

0.8

62

0.5

27

0.2

20

0

11

0

270

0

TOTAL (USDm)

22.7

Source: MOSL, Company

STR is expected to have incremental revenues of USD23m as against base business

erosion of USD14m. Strides’ continues to see increase in sales and gain of market

share in its flagship drug – Ranitidine Hydrochloride. Dutasteride, on the other

hand, saw a decline in sales recently with competition kicking in.

Exhibit 13: Competition to set in for top drugs..

Strides Shasun Drugs

Ranitidine Hydrochloride

Dutasteride

Calcitriol

Buspirone Hydrochloride

Mycophenolate Mofetil

Pottassium citrate

Number of

Approx.

Total

incremental

Approval prior

contribution

approvals till

Remarks

to 12Ms

approvals in last 12

to US sales

date

months

3

10

7

30%

2

18

16

10%

0

5

5

8%

~77% of portfolio saw increased

competition

1

11

10

7%

1

10

9

4%

1

4

3

18%

Probable business loss (USDm)

13.8

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD9m

28 January 2019

7

Healthcare

DRRD: Recent launches performing well

DRRD received 14 approvals and launched 12 products of these. We expect

annualized business potential of USD74m from these opportunities.

Exhibit 14: New product launches supporting growth

Active Ingredient

Launched (Y/N) Brand Dosage Form Approval Date Competitors Market Size (USDm) Potential Sales (USDm)

Imatinib Mesylate

Y

Gleevec

Tablet

Aug-18

5

1700

17.3

Colesevelam Hydrochloride

Y

Welchol

Tablet

Oct-18

4

520

15.5

Propofol

N

Diprivan Injectable

Nov-18

3

300

0.0

Sevelamer Carbonate

Y

Renvela Suspension

Oct-18

1

101

9.7

Atomoxetine Hydrochloride

Y

Strattera Capsule

Feb-18

4

284

7.2

Tetrabenazine

Y

Xenazine

Tablet

Jan-18

6

288

6.9

Colesevelam Hydrochloride

Y

Welchol

Tablet

Nov-18

4

520

6.6

Neostigmine Methylsulfate

Y

Bloxiverz Solution

Jul-18

6

185

4.4

Aspirin And Dipyridamole

Y

Aggrenox Capsule ER

Oct-18

7

230

3.7

Zoledronic Acid

Y

Reclast Injectable

Nov-18

3

22

2.6

TOTAL (USDm)

73.8

Source: MOSL, Bloomberg

Dr.Reddy has a well-diversified portfolio and its top drugs – Decitabine and

Metoprolol Succinate – continue to increase sales and gain market share, while sales

of other generic players are seeing a decline. Other top drugs are seeing decline in

sales due to increased competition, which will offset incremental business to some

extent. Overall, we expect incremental business of USD74m as against base business

erosion of USD48m.

Exhibit 15: Competitive intensity on rise for top drugs

Total

Approval prior

Number of incremental

Dr Reddy Drugs

approvals till

to 12Ms

approvals in last 12 months

date

Decitabine

2

8

6

Metoprolol Succinate

3

8

5

Azacitidine

2

7

5

Tizanidine Hydrochloride

1

11

10

Ranitidine Hydrochloride

3

10

7

Tacrolimus

0

7

7

Approx. contribution to US

sales

Remarks

7%

7%

3%

~26% of portfolio saw

increased competition

3%

3%

3%

Probable total loss (USDm) 47.8

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD26m

28 January 2019

8

Healthcare

CDH: Concentrated portfolio risk playing out

CDH received 42 approvals and launched 35 of these over the past one year. We

expect annualized business potential of USD127m from these opportunities.

Exhibit 16: Cadila had the highest number of product approvals in FY19YTD

Active Ingredient

Lansoprazole

Succinylcholine Chloride

Metoprolol Succinate

Albendazole

Omeprazole; Sodium Bicarbonate

Dutasteride; Tamsulosin Hydrochloride

Methylprednisolone

Bumetanide

Doxycycline Hyclate

Zolmitriptan

Glipizide

Cholestyramine

Launched

Brand

(Y/N)

Y

Prevacid

Y

Quelicin/Anectine

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

Approval

Market Size

Potential

Competitors

Date

(USDm)

Sales (USDm)

Tablet (OD,DR) Nov-18

2

168

25.7

Injectable

May-18

2

100

20.4

Tablet, Extended

Toprol

Mar-18

6

690

16.4

Release

Albenza

Tablet

Dec-18

2

100

15.3

Zegerid

Capsule

May-18

5

300

10.2

Jalyn

Capsule

May-18

2

55

8.4

Medrol

Tablet

Apr-18

6

299

7.1

Bumex

Tablet

Apr-18

4

85

5.0

Doxycycline Hyclate

Capsule

May-18

7

300

4.8

Zomig

Tablet

Jul-18

11

446

3.8

Tablet, Extended

Glipizide

Jul-18

5

70

2.9

Release

Prevalite

Powder

Jul-18

3

22

2.6

TOTAL (USDm)

127.9

Dosage Form

Source: MOSL, Bloomberg

Cadila’s flagship drug – Mesalamine (contributes ~34% to total US sales) is facing the

heat with two new approvals in the past one year. The company also received the

highest number of approvals in FY19 YTD. Incremental business from these new

approvals is expected to be marginally above the decline in its base portfolio.

Exhibit 17: Increased competition in key molecule a big risk to the business

Zydus Cadila Drugs

Mesalamine

Oseltamivir Phosphate

Potassium Citrate

Hydroxychloroquine Sulfate

Metformin Hydrochloride

Eletriptan Hydrobromide

Oxycodone Hydrochloride

Potassium Chloride

Number of

Total

incremental

approvals

approvals in last

till date

12 months

2

3

3

7

1

4

5

12

6

21

2

6

2

13

3

8

Approx.

Approval prior to 12Ms contribution

to US sales

1

4

3

7

15

4

11

5

Probable total loss (USDm)

34%

7%

4%

3%

2%

2%

2%

2%

114.6

Remarks

~56% of portfolio saw increased

competition

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD13m

28 January 2019

9

Healthcare

TRP: Drought in approvals

TRP received six approvals and launched four of these; we expect annualized

business of USD6m from these new launches.

Exhibit 18: Torrent has the lowest number of new approvals in FY19 YTD

Active Ingredient

Sildenafil Citrate

Fenofibrate

Montelukast Sodium

Launched

(Y/N)

Y

Y

Y

Brand

Viagra

Antara

Singulair

Dosage Form

Tablet

Capsule

Granules

Approval

Date

Jun-18

Jun-18

Jul-18

Competitors

10

7

4

Market Size Potential Sales

(USDm)

(USDm)

350

3.0

98

1.6

25

1.5

TOTAL (USDm)

6.0

Source: MOSL, Bloomberg

Incremental business from new approvals is expected to be slightly higher than the

loss in the base business. Loss in the base business is expected to be minimal

despite newer approvals for peers as competitive intensity is already very high in

those products. TRP has received the lowest number of approvals in FY19 YTD.

Exhibit 19: Competition in top drugs also increasing

Torrent Pharma Drugs

Aripiprazole

Pantoprazole Sodium

Rosuvastatin Calcium

Losartan-Hydrochlorothiazide

Sildenafil

Celecoxib

Number of

Total

Approval

incremental

approvals prior to

approvals in last

till date

12Ms

12 months

4

14

10

1

15

14

2

20

18

1

14

13

7

11

4

3

14

11

Approx. contribution to US

sales

Remarks

12%

8%

6%

~35% of portfolio saw increased

competition

4%

3%

3%

Probable total loss (USDm) 4.0

Source: MOSL, Bloomberg, Industry

NET POTENTIAL GAIN: USD2m

28 January 2019

10

Healthcare

SUNP: Low approval rate hurting growth prospects

Considering only the generic products of SUNP (excluding NDAs), it had 18 approvals

and launched 12 of these. We expect an annualized business potential of USD45m

from these opportunities.

Exhibit 20: Low business potential from new approvals

Active Ingredient

Dofetilide

Paliperidone

Naproxen Sodium; Sumatriptan Succinate

Methadone Hydrochloride

Aspirin And Dipyridamole

Clobetasol Propionate

Launched

(Y/N)

Y

Y

Y

Y

Y

Y

Brand

Tikosyn

Dosage Form

Caspsule

Tablet, Extended

Invega

Release

Treximet

Tablet

Methadose

Tablet

Aggrenox

Capsule ER

Olux

Aerosol, Foam

Approval

Competitors

Date

Oct-18

4

Apr-18

Jul-18

Mar-18

Aug-18

Oct-18

4

2

3

6

2

Market size

(USDm)

300

300

70

75

230

13.2

TOTAL (USDm)

Potential Sales

(USDm)

17.9

15.3

10.7

8.8

5.5

2.0

45

Source: MOSL, Bloomberg

The pace of new approvals for SUNP has been slower than its peers like – ARBP,

Cadila, Cipla and Lupin, while the base business continued to erode, even as top

drugs faced higher competition. For instance, Imatinib Mesylate has lost significant

market share and seen decline in sales with new players coming in. Overall we

expect erosion in the base business to be slightly higher than incremental business.

Exhibit 21: Probable loss to be higher than incremental business as key molecule faces intense competition

Sun Pharma Drugs

Imatinib Mesylate

Olmesartan Medoxomil

Ketoconazole

Tetrabenazine

Nystatin Triamcinolone Acetonide

Clomipramine Hydrochloride

Chlorthalidone

Clobetasol Propionate

Oxycodone Hydrochloride

Number of

Total

incremental

approvals

approvals in last

till date

12 months

2

6

2

14

1

4

3

5

2

11

2

7

2

5

6

7

0

15

Approx.

Approval prior to 12Ms contribution

to US sales

4

12

3

2

9

5

3

1

15

Probable total loss (USDm)

9%

3%

2%

2%

1%

1%

1%

1%

1%

46.4

Remarks

~21% of portfolio saw increased

competition

Source: MOSL, Bloomberg, Industry

NET POTENTIAL LOSS: USD1m

28 January 2019

11

Healthcare

LPC: Increased competion in key drug to knock growth

LPC received 19 approvals and launched 13 ANDAs. We expect an annualized sales

potential of USD80m from these opportunities. Due to seasonality, potential sales

from g-Tamiflu should be higher in 2HFY19.

Exhibit 22: LPC new approvals and launches expected to add USD80m in revenues

Active Ingredient

Oseltamivir Phosphate

Atovaquone

Oseltamivir Phosphate

Potassium Chloride

Tetrabenazine

Desoximetasone

Silodosin

Hydrocortisone Butyrate

Drospirenone; Ethinyl Estradiol;

Levomefolate Calcium

Launched

(Y/N)

Y

Y

Y

Y

Y

Y

Y

Y

Y

Brand

Approval

Market Size

Competitors

Dosage Form

Date

(USDm)

Feb-18

Sep-18

Jan-18

Aug-18

Apr-18

Mar-18

Dec-18

Aug-18

Jun-18

3

2

6

2

6

1

6

1

2

358

117

467

185

288

20

198

14

22

Potential

Sales

(USDm)

18.3

14.9

11.1

9.4

6.9

6.2

4.7

4.4

3.4

Tamiflu

Suspension

Mepron

Suspension

Tamiflu

Capsule

Potassium Chloride Solution

Xenazine

Tablet

Topicort

Spray

Rapaflo

Capsule

Locoid

Lotion

Safyral

Tablet

TOTAL (USDm)

80.5

Source: MOSL, Bloomberg

LPCs flagship drug – Metformin Hydrochloride is seeing significant decline in sales as

other generic players have entered the market. Other top drugs are also seeing

increased competition. The incremental revenues expected from new approvals are

not sufficient enough to offset this loss and hence we see decline in overall US sales

for LPC.

Exhibit 23: Base business to decline with competition kicking in for key drugs

Lupin Drugs

Metformin Hydrochloride

Ethinylestradiol Iron Ferrous

Fumarate; Norethindrone Acetate

Ethinylestradiol Iron Ferrous

Fumarate; Norethindrone Acetate

Fenofibrate

Methylergonovine Maleate

Ethinylestradiol Levonorgestrel

Number of

Total

incremental

approvals

approvals in last

till date

12 months

1

3

3

3

2

2

1

10

10

9

3

4

Approx.

Approval prior to 12Ms contribution

to US sales

2

7

7

7

1

3

Probable total loss (USDm)

14%

7%

5%

4%

3%

3%

176.0

~36% of portfolio saw increased

competition

Remarks

Source: MOSL, Bloomberg, Industry

NET POTENTIAL LOSS: USD96m

28 January 2019

12

Healthcare

Exhibit 24: Valuation at a glance

Company

Alembic Pharma

Alkem Lab

Ajanta Pharma

Aurobindo Pharma

Biocon

Cadila Health.

Cipla

Divi's Lab.

Dr Reddy's Labs

Glenmark Pharma.

Granules India

Glaxosmit Pharma

Ipca Labs.

Jubilant Life

Lupin

Sanofi India

Shilpa Medicare

Strides Pharma

Sun Pharma.Inds.

Torrent Pharma.

Reco

Neutral

Buy

Buy

Buy

Neutral

Buy

Neutral

Neutral

Neutral

Neutral

Buy

Neutral

Buy

Buy

Buy

Buy

Buy

Buy

Buy

Neutral

EPS (INR)

P/E (x)

P/BV (x)

EV/EBITDA (x)

ROE (%)

TP Mkt Cap

(INR) (USD B) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

615

1.6

21.9 29.3 29.6 27.1 20.3 20.1 5.0 4.2

3.7 18.2 13.2 12.8 19.6 22.4 19.3

2,500 3.2

58.9 74.3 97.0 32.0 25.3 19.4 4.6 4.1

3.5 21.2 17.5 13.4 15.1 17.1 19.3

1,415 1.4

53.0 45.4 56.2 21.4 25.0 20.2 4.9 4.2

3.6 14.7 16.2 13.4 26.0 18.1 19.1

940

6.5

42.7 42.8 60.5 17.8 17.7 12.5 3.8 3.2

2.6 12.9 12.0 9.0 23.8 19.6 22.7

685

5.6

6.2 11.9 21.8 104.6 54.6 29.8 7.5 6.7

5.8 48.0 28.1 17.9 7.4 13.0 20.9

430

4.9

17.5 17.2 18.0 19.0 19.4 18.5 3.9 3.4

3.0 13.6 13.2 12.4 22.1 18.8 17.3

620

5.7

20.3 19.3 26.5 24.2 25.4 18.6 2.8 2.5

2.3 15.5 14.5 11.0 11.5 10.0 12.2

1,390 5.6

33.0 50.3 57.5 44.6 29.3 25.6 6.6 5.6

4.8 29.9 21.4 18.0 15.5 20.7 20.2

2,300 6.2

64.7 103.2 124.6 40.6 25.4 21.1 3.5 3.1

2.8 20.2 15.0 11.9 8.6 13.0 14.0

600

2.6

28.5 29.8 36.3 22.2 21.2 17.4 3.5 2.9

2.5 14.5 13.8 11.5 15.6 13.5 14.4

140

0.3

5.7 7.7

9.4 15.7 11.6 9.5 1.7 1.6

1.4 10.3 7.8

6.4 12.2 14.2 15.9

1,374 3.4

19.7 27.0 30.1 70.9 51.6 46.2 11.5 11.0 10.2 45.6 36.4 31.7 16.2 21.2 22.0

910

1.4

19.0 30.8 41.1 41.0 25.2 18.9 3.7 3.3

2.9 22.3 15.3 12.1 9.3 13.7 16.2

1,033 1.5

45.6 59.2 69.2 15.7 12.1 10.3 2.7 2.3

1.9 9.3 7.4

6.2 18.9 20.5 19.9

1,020 5.5

32.0 26.3 44.8 27.1 32.9 19.3 2.9 2.7

2.5 14.2 17.3 10.9 10.7 8.5 13.4

6,850 2.0 141.7 169.5 194.9 44.5 37.2 32.4 7.2 6.5

5.8 25.6 20.6 17.5 16.1 17.5 18.0

620

0.4

12.8 18.7 25.4 29.7 20.4 15.0 2.9 2.5

2.2 19.8 15.4 12.2 10.3 12.8 15.1

533

0.7

11.3 9.6 22.8 44.8 52.7 22.1 1.8 1.8

1.7 16.3 14.1 11.4 3.9 3.4

7.9

560

14.2 13.5 17.5 24.5 30.6 23.5 16.8 2.6 2.5

2.2 18.9 13.9 10.1 8.7 10.8 13.8

1,500 4.4

53.7 47.6 65.1 34.4 38.9 28.4 6.8 5.7

5.1 26.9 17.2 14.5 20.3 16.0 19.0

Source: MOSL, Bloomberg, Industry

28 January 2019

13

Healthcare

NOTES

28 January 2019

14

Healthcare

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the

inconsistency, take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Securities Ltd. (MOSL)* is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com.

MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd.

(NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking

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Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should

be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant

banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Securities Limited are available on the website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from

MOSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state

laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together

with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment

services provided by MOSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to

"Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This

document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only

available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the

U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct

business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International

Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

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Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

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SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

****************************************************************

****************************************************************

28 January 2019

15

Healthcare

-

-

-

-

-

-

-

The associates of MOSL may have:

financial interest in the subject company

actual/beneficial ownership of 1% or more securities in the subject company

received compensation/other benefits from the subject company in the past 12 months

other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)

discussed herein or act as an advisor or lender/borrower to such company(ies)

received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

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The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

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in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

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the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all

jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither

the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue

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The person accessing this information specifically agrees to exempt MOSL or any of its affiliates

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this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980

4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080

1000. Compliance Officer: Neeraj Agarwal, Email Id:

na@motilaloswal.com,

Contact No.:022-38281085.

Registration details: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412.

AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual

Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd.

is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. *Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate

products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench. The existing registration no(s) of MOSL would be used until receipt of new MOFSL registration numbers.

28 January 2019

16