30 Jan 2014
Update |Sector: Healthcare
Ranbaxy Laboratories
CMP: INR325
TP: INR 300
Sell
Novartis gives CY14 guidance; Now expects Ranbaxy’s exclusive
Diovan copy in 2QCY14 beginning; Launch already a part of our
TP; No incremental positive
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Novartis has shared its CY14 guidance today vide its press release (excerpt
reproduced below). They have assumed generic entry of Diovan
monotherapy in beginning of 2QCY14.
In 2013, the innovator has increased its guidance twice during the year (first
in July and then in October) owing to the delay in Diovan launch by Ranbaxy.
In its October press release, Novartis had indicated of its assumption of a
launch in 1QCY14. Now assuming a 2QCY14 launch, the entry will be delayed
by more than 18 months.
Ranbaxy’s generic was supposed to be launched in Sep 2012, but has
witnessed continuous delays. This postponement could be attributed to the
company’s quality issues with the US FDA at its manufacturing sites, which
has led to multiple site transfers for the drug.
This development does not impact our core EPS estimates or DCF value of
FTFs as we have already assumed Diovan launch anytime (based on media
reports of alternate API source). Hence we do not view this development as
incrementally positive.
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Background
The street was hopeful after the dismissal of Mylan's plea in December 2012
for revoking Ranbaxy's exclusivity and allowing another generic player in the
market. However, Ranbaxy's exclusive copy is late by more than 15 months.
Novartis had twice already increased its CY13 guidance in July 2013 and
October 2013. It s current guidance now assumes the launch will happen in
start of 2QCY14.
Diovan generates ~USD1.9b in sales from US for Novartis. If successfully
launched, we expect this opportunity to generate one‐off sales of
~USD100m for Ranbaxy over the exclusivity period.
We also expect Novartis to introduce an authorized generic version through
its generic unit, Sandoz.
Extract from Novartis Press release: “Group net sales in 2014 are expected
to grow at a low to mid‐single digit rate (cc), after absorbing the impact of
generic competition, which is expected to be as much as USD 3.0 billion
compared to USD 2.2 billion in 2013. This assumes a Diovan monotherapy US
generic launch occurs at the beginning of the second quarter of 2014.”
A
further sub‐note adds “This is an assumption for forecasting purposes. We
do not know when generic competition will enter in the US for Diovan
Monotherapy”
(Link: http://hugin.info/134323/R/1757594/594143.pdf)
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