Monday, December 26, 2011

>GENERIC LAUNCH CALENDAR III : Updated chronology of upcoming generic launches in US market for key Indian players

Teva loses TriCor, Dr Reddy’s files Valcyte

  •  We provide updated chronology of upcoming generic launches in US market for key Indian players
  • 2012 will be peak period for generics launches; we remain positive on overall US generics opportunities

We highlight new filings across our coverage universe and key litigation updates on existing product pipeline. Please see below for detailed launch calendar.

New ANDA filings and litigations

Dr Reddy’s Labs (DRRD IN)
Valcyte (valganciclovir): DRRD got sued on Roche’s Valcyte, which is indicated for cytomegalovirus infections in organ transplant patients and has annual sales of 
cUSD400mn. DRRD’s 30-month stay will expire on Jun-14. Ranbaxy, Sandoz, Endo, 
Apotex were also sued on this product by innovator Roche; Ranbaxy which is the FTF (first-to-file) has settled for Mar-13 launch.

Lupin (LPC IN)
Generess (ethinyl estradiol + norethindrone): Lupin got sued on Warner’s Generess Fe (oral contraceptive) where Mylan is FTF. Given the small size this is not a meaningful opportunity. Lupin now has 9 active litigations in oral contraceptives space aside from 2 launches – gFemcon Fe and gNor QD. gLo Seasonique recently got final approval but launch is not yet visible.

Lumigan (bimatoprost): Lumigan (0.01% ophthalmic solution) is fourth filing in ophthalmic space for Lupin; Sandoz is FTF on this product. Teva and Sandoz earlier had also filed on 0.03% solution. Brand size is cUSD400mn and generic launch can be expected after ‘819 patent expiry in Aug-14.

Sun Pharma (SUNP IN)
Ortho Tricyclen Lo (ethinyl estradiol + norgestimate): Sun was sued for second oral contraceptive ANDA on OrthoTricyclen Lo after first filing on Bayer’s Yaz. Teva, Watson, Sandoz, Mylan and Lupin are other known filers for this product. Teva was FTF and had launched earlier but later settled for re-entry in Dec-15. With annual brand sales of cUSD450mn, this filing is big but may have atleast 5 players at time of launch post Teva’s exclusivity.

Angiomax (bivalirudin): Sun has also filed ANDA for anticoagulant Angiomax which has brand sales of cUSD400mn. Teva is FTF and has settled for a launch in June 2019 which makes this a very late opportunity. Other filers include Hospira, Fresenius, Mylan and Dr Reddy’s.

Cadila Healthcare (CDH IN)
Asacol HD (mesalamine): Asacol HD 800mg is Cadila’s second focused filing for ulcerative colitis after Lialda, and Cadila is FTF. Asacol HD 800mg was launched in the US in Jun-09 and has current annual sales of cUSD70mn. Innovator Warner Chilcot is actively moving patients from Asacol 400mg to Asacol HD 800mg as part of its life-cycle extension strategy. We believe, the market for Asacol will gradually shift from 400mg to 800mg strength as Warner is anticipating generic entry in 400mg strength (though recent grant of citizen petition delays generic in lower strength as well). We believe this a very strong filing in terms of expected limited competition and sustainable sales.

Zegerid/+OTC (omeprazole + sodium bicarbonate) Cadila filed ANDA for both prescription and OTC Zegerid. Innovator Santarus has stopped promoting brand post generic entry in 2010. Par is the FTF on the product and Prasco the authorized generic. Generic sales for the product are cUSD85mn with brand at cUSD30mn.

To read the full report: GENERIC LAUNCH CALENDAR

>INDIA ECONOMICS: It’s Time to Address The Fiscal Deficit Problem

■ Fiscal stimulus played a key role in post credit crisis recovery: The government’s national fiscal deficit (central plus states combined) increased from 4.8% of GDP in F2008 to 10% in F2009. This expansionary fiscal policy has been a bigger growth driver than monetary easing over the past three years, in our view.

■ A large part of the increase since F2008 has been due to higher revenue expenditure: The government’s expenditure increase was largely centered around the revenue items wages, subsidies and national rural wage scheme. Even the capital expenditure taken up by the government tends to generate low efficiency capital asset.

■ Low productive nature of government spending brought inflation pressures: This boost to consumption via public spending helped to offset the shortfall in growth from the decline in private investment to GDP. In other words, less productive public spending substituted the decline in productive private investment. Although this approach was justified for a short period immediately post credit crisis, the government pursued this approach for too long, which meant persistent inflation pressures and higher current account deficit.

 Maintaining high fiscal deficit and pursuing monetary tightening is a sub-optimal policy outcome: Ideally, the response from the policymakers should have been a quick reversal in less productive government spending, cut in fiscal deficit to boost overall savings and at the same time initiate policy measures to boost private investments. However, a persistent delay in reversing government spending and the resultant increase in inflation pressures is forcing the Central Bank to tighten monetary policy to control aggregate demand which is only adversely affecting the growth in private investment and taking non-accelerating inflationary growth potential lower.

To read the full report: INDIA ECONOMICS

>Real State of Real Estate in NCR, Pune, Mumbai & Chennai Bengaluru

■ High level of absorption witnessed in Bengaluru; unlike other cities where it is seeing downtrend

 Mumbai with the danger of sharp increase in inventory on the back of several new launches is poised for property price correction

 In NCR, Gurgaon and Noida are stronger markets compared to Greater Noida which has high level of inventory and slow pace of absorption

 Bengaluru continues to be the strongest property market in India; high level of absorption is the key to avoid price correction

 New Delhi has very low inventory; marginally above 2msf, no price correction expected

■  New launches have declined across the markets excluding Bengaluru

 Absorption in Pune is following Mumbai property market trend; price correction expected unless the pace of newlaunches remain slow

 Reasonable absorption level and the slower pace of new launches will help Chennai property prices to stabilise at the current levels

To read the full report: REAL ESTATE

>TATA STEEL: Jamshedpur expansion remains the key

Domestic demand visibility for upcoming expansion, concerns on Tata Steel Europe’s (TSE) margins, outlook on pension liabilities and incremental cashflow stress dominated investor concerns in our roadshow with Tata Steel’s (TSL) management. Though the stock at current level is drawing investor attention, the management’s cautious guidance on TSE’s H2FY12 margins, volumes and cashflow will lead to a wait and watch strategy. For us, it is the uncertainty over despatches of upcoming HRC capacity which is leading to maximum quantum of value loss. We have cut FY13 contribution from 2.9mtpa Jamshedpur expansion to 0.7mtpa from 1.3mtpa (the management still guides for 1- 1.2mtpa). Further, there are unnecessary concerns on domestic cashflow on the possibility of increased lending requirement, where one overlooks Rs30bn of working capital inflow in TSL in H1FY12. We are revising down our FY12/13 earnings estimates by 37%/19% respectively, we still maintain BUY with a revised target price of Rs482 (Rs590 earlier).

Expansion volumes guided at 1-1.2mnte in FY13: The management maintained the commissioning of Jamshedpur expansion in March 12, pegging the first year volume estimate at 1-1.2mnte. We have revised down our FY13 incremental volume contribution from the expansion to 0.7mtpa from 1.3mtpa, in line with our in-house assessment of HRC demand scenario in India (using a bottom-up approach).

Management’s cautious commentary on TSE’s margins reflects ongoing pricing weakness in Europe. Surprisingly though, the volume guidance is not tracking the margin commentary in Europe. Also, analysis of Ijmuiden’s margins suggests that sub US$20/te scenario in TSE for FY12 looks difficult.

Pension liability continues to reign supreme in investor mind: TSL has clarified that P&L impact for restatement of surplus/deficit is not related to % deficit that can come out of actuarial valuation. Further, the management maintained that cashflow requirements would not be immediate.

Still counting on release of working capital: Management clarified that impact of reducing raw materials as well as working capital release for TSE will be deferred to Q1FY13. We have taken almost flat working capital outflow in TSE in H2FY12 (HoH)

Reducing estimates for domestic operations: We have cut target price from Rs590 to Rs482, ~90% of which is led by revision in the numbers of domestic business. Further, domestic numbers have higher probability of surprising negatively from current levels than TSE’s numbers. Nevertheless, we still see value in the stock. Maintain BUY.