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February 4, 2011

ICICIdirect.com|Equity Research

Monthly Update

Summary

January saw majority of pharma companies declaring Q3FY11 results.While most companies registered sound sales growth YoY, EBITDAmargins for most of them remained under pressure. This was mainly onaccount of adverse currency fluctuation as well as a rise in staff and R&Dcosts. Cost pressure was somewhat severe for smaller players likeUnichem, Ipca and Torrent. In terms of sales, while companies like Sunand Opto saw robust growth on account of inorganic growth, majority ofbig players like Glenmark, Lupin, Cadila, Sun and smaller players likeTorrent and surprisingly Alembic registered good growth in domesticformulations, which normally are subdued in Q3. On the US genericfront, Lupin and Glenmark were negative surprises but these playersregistered robust growth in the ex-US markets. Thus, they made goodthe US slowdown. However, companies having a German presence like

Dr Reddys and Biocon continued to bleed in that market on account ofthe 16% rebate proposed by the government for three years.

On the regulatory front, there were eight final approvals and fourtentative approvals from the USFDA. Aurobindo and Dr ReddysLaboratories have received tentative approvals for two drugs each. Othercompanies like Alembic, Glenmark Pharma, Lupin, Natco, Torrent and DrReddys received final approval for one drug each while CadilaHealthcare got the nod for two drugs. In a first of its kind of compulsorylicensing challenge, Natco Pharma has sought licensing from Pfizer andBayer to launch their patented products for HIV and cancer, respectively,under the cover of compulsory licensing. On the R&D front, we saw

Biocon reporting discouraging results for its diabetic drug in phase IIItrials. During the month, Cadila formed a new JV with Bayer Healthcareto market its products from niche categories. Glenmark received anunfavourable verdict from a US jury regarding anti-hypertensive drugTarka, which asked the company to stop sales of Tarka and also slappeda | 70-crore penalty to be payable to Abbott. During the month, theIndian patent office denied patent protection to Abbotts HIV drug Kaletraand allowed the generic sale of this product by Cipla and Matrix.

Regulatory approvals

Aurobindo gets USFDA nod for two drugs

Aurobindo Pharma has received tentative approval from the USFDA tomanufacture and market Levofloxacin tablets of 250 mg, 500 mg, 750mg. Levofloxacin tablets are indicated for the treatment of adults withmild, moderate and severe infections caused by susceptible strains ofthe designated micro organisms such as pneumonia, bacterial sinusitis,etc. The product has a market size of nearly US$1.45 billion for the 12months ending September 2010 according to IMS.

It received tentative approval from the USFDA to manufacture andmarket Famciclovir tablets of 125 mg, 250 mg and 500 mg. FamciclovirTablets 125 mg, 250 mg and 500 mg are the generic versions of NovartisPharmaceuticals Corps Famvir Tablets of 125 mg, 250 mg and 500 mg. It

is indicated for the treatment of recurrent mucocutaneous herpessimplex infections in HIV-infected patients and suppression of recurrentgenital herpes in immuno-competent patients. The product has a market

Pharma Pilldex Performance as on 31 January 2011

1Months 3Months 6Months 1Year

fty -10.3 -10.0 1.2 12.4

ensex -10.6 -9.9 1.2 12.1

SE Healthcare -7.4 -4.9 10.9 27.6

Return (%)

ocks Performance

Mcap

ompany 1month 3month 6month 1year 31-Jan

un Pharma -9 5 24 50 45629

Reddy's Labs -4 -2 20 45 27489

pla -10 -6 2 5 26676

anbaxy Labs -7 -6 22 21 22976

axosmit Pharma -2 2 13 50 19304

pin -11 -3 13 49 18852

adila Health. 7 18 30 73 16862

ramal Health -6 -8 -9 20 9189

vi's Lab. -2 -8 -15 6 8433

enmark Pharma. -13 -10 14 27 8288

ocon -16 -15 13 30 6998

urobindo Pharma -9 1 22 48 6910

rrent Pharma. 1 5 3 31 4913

pto Circuits -5 -13 -9 17 4574

ca Labs. -10 -7 8 35 3789

bilant Life -19 -28 -37 -25 3580

rides Arcolab -7 -1 30 110 2393

chid Chemicals 1 3 58 85 2071

DC -9 -3 17 41 1882

nichem Labs. -17 -12 15 46 1796

shman Pharma. -13 -27 -39 -39 1077

B Chem & Pharm -17 -3 20 94 993

embic 2 -8 19 52 914

atco Pharma -10 4 43 149 789

der Pharma 1 -6 15 25 767

doco Remedies -10 -12 8 36 543

Return (%)

cap in | crore

ice movement

0

1000

2000

3000

40005000

6000

7000

8000

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

0

5000

10000

15000

20000

25000

BSE Healthcare Sensex

nalysts name

iddhant Khandekar

[email protected]

Krishna Kiran Konduri

[email protected]

CICI Securities Limited

ISIEmergingMarketsPDF in-nmimsmum from 122.170.126.130 on 2011-02-17 04:09:50 EST. DownloadPDF.

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size of approximately US$170 million for the 12 months endingSeptember 2010 according to IMS.

Cadila Healthcare receives approval for hypertension drug

Cadila Healthcare's US arm has got tentative approval from the USFDAfor hypertension drug Irbesartan tablets. The company has got approvalsfor tablets of 75 mg, 150 mg and 300 mg strengths. The patent for thedrug will expire in March 2012. Currently, the drug is marketed by Bristol-Myers Squibb and Sanofi-Aventis under different brand names withannual sales of $1.3 billion and $2.1 billion, respectively.

USFDA grants marketing approval for Glenmarks anti-malarial drug

Glenmark Generics, the US subsidiary of Glenmark Pharmaceuticalsreceived final approval from the USFDA for abbreviated new drugapplication (ANDA) for the generic version of Atovaquone & ProguanilHydrochloride tablets in the strengths of 250 mg and 100 mg.GlaxoSmithKline (GSK) originally developed it and markets this product

as Malarone in the US, which is indicated for the prevention andtreatment of malaria. The patent is set to expire in 2014. The total USsales as reported by IMS Health for the 12 month period endingDecember 2009 were approximately US$ 64 million. Glenmark Generic isthe first to file ANDA for the product. Interestingly, in April 2010 it madean out-of-court settlement with GSK over an earlier lawsuit filed in a UScourt. According to the terms of settlements agreement, which are stillsubject to review by the Federal Trade Commission and Department ofJustice, Glenmark will be able to sell its generic tablets under a royalty-bearing licence from GSK from the third quarter of 2011, or earlier undercertain circumstances.

Lupin receives USFDA nod for Nabumetone tablets

Lupin Pharmaceuticals, Inc (subsidiary of Lupin) has been granted finalapproval for its Nabumetone tablets, 500 mg and 750 mg strengths fromthe US Food and Drug Administration. Lupins Nabumetone is the AB-rated generic equivalent of GlaxoSmithKlines Relafen tablets indicatedfor acute and chronic treatment of the signs and symptom ofosteoarthritis and rheumatoid arthritis. Annual sales for the Nabumetonemarket in the US was $66.8 million for the 12 months ended September2010, based on I Health sales data.

Strides gets USFDA approval for anti-inflammatory injection

Strides Arcolab received an approval from the USFDA for an additionalpackage size of anti-inflammatory adenosine injection, USP, 3 mg/MIpackaged in 12 mg/4 ml single-dose vials. The product will be launchedupon expiry of applicable innovator patents. The US innovator market forAdenosine presentations is approximately US$94 million. Strides had in2010 received approval for Adenosine Injection 60 mg per 20 ml and 90mg per 30 ml vials. The product will be launched under the partnershipbetween Strides and Sagent Pharmaceuticals wherein Strides isdeveloping and supplying more than 25 injectable products for the USmarket, which is marketed by Sagent.

Glenmark plans to launch Malarone in Q2FY12




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Exhibit 1:Summary of USFDA approvalsCompany Drug Name Therapeutic Area Innovator company Generic Version of Market Size

Alembic Lamotrigine tablets Central Nervous System GlaxoSmithKline Pharma Lamicta; US$ 452 million

Dr Reddy's Labs Pantoprazole Sodium tablets Anti-Ulcerant Hospira Protonix US$ 1.8 billion

Glenmark Pharma Atovaquone and Proguanil Hydrochloride tablets Anti-Malarial GlaxoSmithKline Pharma Malarone US 64 million

Lupin Nabumetone Tablet Anti- inflammatory GlaxoSmithKl ine Pharma Relafen US$ 66.8 mil lion

Natco Pharma Chloroquine Phosphate tablet Anti-Malar ia l Sanofi Aventis Aralen NATorrent Pharma Pantoprazole Sodium tablets Anti-Ulcerant Hospira Protonix US$ 1.8 billion

Strides Arcolab Adenosine injection Anti-inflammatory Astellas Adenocard US$ 94 million

Cadi la Healthcare Gl ipizide; Metformin Hydrochloride tablet Anti-diabetic Bristol Myers Squibb Metaglip US$ 30 mil liom

Cadila Healthcare Tramadol Hydrochloride tablet Pain Management Ortho McNeil Janseen Pharma Ultram NA

Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size

Aurobindo Pharma Levofloxacin tablets Anti-infective Ortho McNeil Janseen Pharma Levaquin US$1.45 billion

Aurobindo Pharma Famciclovir tablets Anti-retroviral Novartis Pharmaceut icals Famvir US$ 170 million

Dr Reddy's Labs Sumatriptan; Naproxen Sodium tablet Anti-inflammatory GlaxoSmithKline Pharma Treximet NA

Dr Reddy's Labs Clopidogrel tablets Anti-clotting Sanofi Aventis Plavix US$ 200 million

Final Approvals

Tentative Approvals

Source: Company, ICICIdirect.com Research

Financial Performance

Alembics profit grows 127% YoY

Alembic reported a 23% increase in revenues to | 373.79 crore for thequarter ended December 31, 2010. The company posted 127% growth innet profit at | 30.84 crore. Domestic formulations grew ~20% YoY to |184.24 crore above industry growth rate of ~17%.

Biocon sales up 15% YoY

Biocon has registered a net profit of | 101 crore in the third quarter of thecurrent financial year, a rise of 24% YoY. Total income rose 15% to | 738crore and its operating profit saw a rise of 34% to | 178 crore during thesame period. The sales growth was driven by biopharmaceuticals andCRAMS nullifying de-growth from the German subsidiary Axicorp. Salesfrom Axicorp will go down from Q4 as the German governmentmandated a 16% rebate on all pharma drugs.

Cadila Healthcare net profit at | 162 crore

Cadila Healthcare registered a total income of | 1170 crore in Q3FY11, up18% YoY on a consolidated basis. EBITDA was up 22% YoY to | 256

crore. Net profit stood at | 162 crore, up 25% YoY. The income growthwas mainly driven by a growth of 20% in formulations exports and agrowth of 17% in domestic formulations. The companys consumerwellness business was up 21%.

Dr Reddys posts profit, but numbers disappoint

Dr Reddy's Laboratories swung to profit for the quarter ended December2010. Its third quarter net profit rose to | 273.2 crore against a net loss of| 521.7 crore in the same quarter previous year. The company recordeda 9.7% increase in revenues to | 1898.5 crore, on account of a growth insales of the generic segment, especially in the US. During the quarter,the company launched 42 generic products and filed 21 new productregistrations globally. It entered into two settlement agreements withAstraZeneca in the US related to abbreviated new drug application filedfor generic versions of Nexium (esomeprazole) and Accolate (zafirlukast).

Total 20% growth in the domestic formulation business

drives the growth in overall sales

Axicorp sales to hit going forward

Higher litigation cost drags overall margins




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The company's profit, however, was below expectations due to higherselling, general and administration (SG&A) expenses including litigationcosts in the US. The German market continued to be a drag on its sales.

Speciality business drives Glenmark sales

Glenmark's consolidated net sales moved up by 17% to | 751 crore forQ3FY11. There was, however, some pressure on the EBITDA margin onaccount of lower realisations and inventory adjustments. Marginsdeclined by ~330 bps. Consolidated net profit went up 16.5% to | 109.56crore. The company's speciality business registered a growth of 25% to |452.06 crore. Its speciality business in India saw a growth of 30% to |239 crore while that in the rest of the world grew 27%t to | 115 crore.The Latin American business increased by 88% to | 52.83 crore and inEurope it clocked a growth of 27% to | 44.77 crore. The generic sales,however, recorded tepid growth of 7% and touched | 298.8 crore mainlydue to subdued growth in the US, which grew just 8% to | 204.1 crore.This was attributable to the discontinuation of the cardiovascular drugnitroglycerine and a slower ramp-up of generic products for which it has

approval.

Indoco Remedies net profit up 14%

Indoco's Q3FY11 sales increased 19.4% to | 114.3 crore mainly driven bythe growth in formulation exports and domestic API business. However,at the EBITDA level, margins were subdued at 12.7% due to a change inthe product mix, increase in raw materials cost and fall in realisation dueto currency fluctuation. Increase in the taxation YoY restricted the netprofit growth to 14% to | 8.8 crore. The company expects the domesticformulation business to be normalised in due course. It also expects acouple of product launches in semi-regulated markets in Q4FY11.

Ipcas EBITDA margins plunge 330 bps

Ipca's Q3FY11 sales increased 18% YoY to | 466.4 crore backed by 33%rise in the export formulation business and almost 17% growth indomestic branded formulations. EBITDA margins declined ~330 bps YoYas sales & marketing expenses and expenses related to newly joinedemployees went up. Net profit increased 10% to | 63.9 crore. The exportformulations segment is likely to continue its growth momentum, goingforward. Incremental sales from newly added medical representativeswill also support growth in sales from H2FY12E onwards. However,EBITDA margins will continue to be under pressure for at least two orthree quarters.

Lupins sales increase by 16.9% YoY in-spite of US slow down

Lupins net sales grew 16.9% YoY to | 1467.2 crore for Q3FY11 backedby formulations sales growth in the US, Europe and Japan. EBITDAmargins declined 90 bps to 19.7%. This was on the back of an increase inR&D cost, forex loss of | 17 crore and rise in employee expenses due tonew recruitment at the Indore SEZ and also due to addition of ~160medical representatives. However, net profit was up 39.5% to | 224.1crore on the back of lower tax provision.

Absence of sales from Nitroglycerine leads to lower growth

in US business sales

Indoco will launch a couple of products in semi-regulated

markets in Q4FY11

Increase in employees cost and cost related to new

employees dragged overall margins

Forex loss and higher R&D cost dragged margins




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Optos like to like sales up by 37%

Opto Circuits has posted a net profit after minority interest of | 95.67crore for the quarter ended December 31, 2010 as compared to | 65.68crore for the quarter ended December 31, 2009, a rise of 45.67%. Totalincome has increased 70.59% to | 428.12 crore. The numbers are notcomparable as the company acquired majority stake in US based CardiacScience in December. On a like-to-like basis sales grew ~37% YoY.

Sun Pharma reported muted net profit growth of 3% YoY

Sun Pharma reported ~57% growth in net sales to | 1603 crore drivenby consolidation of Israel-based Taro Pharmas accounts. Taro clocked~| 459 crore sales during the quarter. Without Taro, on a like to likebasis the sales growth was just ~11%. This was mainly on account ofhigher base of Q3FY10 on account of sales from anti-ulcerant Protonix,which it stopped in the current fiscal due to litigation issues. Due to thisconsolidation, EBIDTA margins declined by ~660 bps and PAT also grewby just ~3% YoY to | 350 crore. Another US subsidiary Caraco reported

~20% de-growth in sales to | 180 crore on account of continuance ofproduction stoppage due to USFDA related issues. The company doesnot expect the restart of production in Q4FY11. Sales from Indianbranded formulations grew 20% to | 640 crore driven by nine productlaunches and further consolidation in at least six therapeutic categorieswhere Sun is the market leader.

Torrent Pharma profit dips 7.28% YoY

Torrent Pharmaceuticals consolidated net profit declined 7.28% YoY to |76.91 crore for the third quarter ended December 31, 2010. Profits wereaffected due to planned expansions in domestic and international

markets and adverse currency movements. The Q3 sales stood at | 565crore, up 20%, on the back of robust growth in the domestic formulationbusiness and continued buoyancy in the international business. DuringQ3, domestic formulation business recorded sales of | 214 crore,growing 17%. Sales outside India jumped 19% to | 292 crore.Operations in Brazil registered an impressive performance with salesgrowth of 15% to | 102 crore. Germany-based Heumanns operationsrecorded sales of | 76 crore with growth of 15%. Europe (other thanHeumann), Russia & CIS and rest of the world operations grew 22% withsales of | 78 crore.

Unichems net profit declines 24% YoY

Unichem Laboratories net profit decreased ~24% to | 25.60 crore forthe third quarter ended December 2010. The decrease in profits wasessentially on account of increased investments in existing and newmarketing divisions and consequent payroll costs, higher manufacturingcosts and depreciation due to commissioning of new plants. Totalincome grew 14% YoY to | 197 crore.

IP Issues

Takeda Pharma sues Cadila Healthcare on Actos

Takeda Pharmaceuticals has filed a suit against Cadila Healthcare at a US

district court alleging that the latter would be infringing the former'spatent coverage by attempting to manufacture and market diabetes drugActos (pioglitazone hydrochloride) in the US market. Actos, which isused to improve glycemic control in type-II diabetes patients, is a

Excluding sales from Taro, the base business was up just

~ 11%

Export sales witnessed a growth of 19% YoY

Commission of new facilities hits EBITDA margins

Takeda resolved patent litigation with various generic

customers over the same drug




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blockbuster drug that clocked revenues worth $3.4 billion only in the USmarket for the year ending December 31, 2009, according to data ofmarket research firm IMS. The product is among the largest sellingdiabetic drugs globally and the eighth largest selling prescription drug inany therapeutic segment in the US market. Takeda has already resolvedpatent litigation with eleven generic companies chasing the diabetesdrug opportunity in the US market early this year.

Indias patent office denies Abbotts Kaletra

Indias patent office has denied protection to Abbott Laboratories AIDSdrug Kaletra allowing generic drug makers to continue selling their ownversions of the drug. The patent office said that the steps involved inmaking Kaletra do not constitute an invention. The initiative formedicines, access & knowledge, as well as Cipla and Matrix hadchallenged Abbotts patent application. Abbott is reviewing the decisionand weighing its options. Kaletra is a combination of two anti-virals. Theproduct generated about $1.4 billion in sales in 2009, making it Abbottssecond-best seller after the arthritis drug Humira.

Pfizer sues Dr Reddys over generic Lipitor

Pfizer Inc. has taken Dr Reddy's Laboratoriesto court in an effort to delaythe launch of the Indian company's low-cost version of atorvastatin in theUS. In a filing before a local court in Delaware, Pfizer has said Dr Reddy'splans to launch atorvastatin, a generic version of its anti-cholesterolmedicine Lipitor, will infringe upon its patent. Lipitor gets about $12billion in annual sales for Pfizer globally.

Dr Reddys gets favourable decision for generic Allegra D24

Dr Reddys Laboratories has announced that a US District Court of NewJersey has filed a stipulation and order lifting an earlier motion forpreliminary injunction and clearing the sale of Dr Reddys genericproduct version of Allegra D24 (fexofenadinehydrochloride/pseudoephedrine hydrochloride 180 mg/240 mg extendedrelease tablet), which was approved by the FDA on March 16, 2010. Inaddition, plaintiffs Sanofi Aventis and Albany Molecular Research havebeen required to post a security with the court, an amount of US$40million towards the possibility that the injunction had been wrongfullygranted. Having been excluded from launching the generic product sincethe June 2010 hearing, Dr Reddys intends to pursue an award of thissecurity.

Federal jury suggests Glenmark to stop supplying of generic Tarka

Sanofi Aventis SA and Abbott Laboratories won a US jury trial in whichthe drug makers sought to halt Glenmarks sales of a generic version oftheir hypertension medicine Tarka. Abbott was awarded US$16 million indamages. A federal jury in Newark, New Jersey rejected Glenmarkschallenge to the validity of a Sanofi patent that expires in February 2015.Glenmark argued that the patent covered an invention that was protectedby an expired patent. Abbott, which paid US$290 million for an exclusivelicense to Tarka, was seeking US$25 million as compensation for profit itlost because of Glenmarks sale of the generic drug. Sanofi owns thepatent on Tarka, first approved by drug regulators in 1996. The company

is now awaiting a verdict from the judge at the US court in the comingdays. The judge's ruling, which can be different from that of the jury's,will, therefore, holds the key.

Abbotts second best seller drug patent was denied by the

Indian Patent Office




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Released tablets on January 19, 2011. Pantoprazole Sodium Delayed-Released tablets had total US sales of approximately $1.8 billion for the12 months ending September 30, 2010 according to IMS Health. Bothstrengths of Dr Reddys Pantoprazole Sodium Delayed-Released tabletsare available in 90 count bottles.

Eurocor GmbH launch Freeway in German market

Opto Circuits (India),asubsidiary of Eurocor GmbH presented its latestdevelopment in the second generation PTA balloon technology Freeway014 and Freeway 035 to the German market for the very first time at theLINC (Leipzig Interventional Course) on January 2011. The two newproducts have already been premiered in London in November 2010.

M&As and demerger

Aurobindo divests China Penicillin-G business

Aurobindo Pharma has entered into a definitive agreement with China

National Pharmaceutical Group Corporation (Sinopharm) to divest itssubsidiary Aurobindo (Datong) Bio Pharma Co Ltd, China (ADBPL),subject to regulatory approvals. Sinopharm will initially buy 51% inADBPL and its stake would eventually go above 80%. APL's investmentof 19.50% post divestment will be strategic in nature to ensureuninterrupted supply of raw materials at competitive price. ADBPL isengaged in manufacturing of 6APA, a derivative of Penicillin-G and mostof its production is consumed by Aurobindo Pharma Ltd (APL) India. Inthe past, the performance of ADBPCL has been affected due toeconomies of scale and it is incurring losses. APL's loan of US$23 millionto ADBPL will be entirely paid back.

Cadila joins hand with Bayer to market Bayer drugs in Indian market

Cadila Healthcare and Bayer HealthCare have signed an agreement to setup the joint venture company Bayer Zydus Pharma for the sales andmarketing of pharmaceutical products in India. Each party will hold 50%of the shares of Bayer Zydus Pharma, headquartered in Mumbai, and beequally represented on its management board. Bayer Zydus Pharma willstart operations with Bayer HealthCares Pharmaceutical Divisioncontributing its existing sales and marketing business in India to the newcompany and Cadila contributing its womens healthcare products,diagnostic imaging business and other products. Bayer Zydus Pharmawill operate in key segments of the Indian pharmaceuticals market with afocus on womens healthcare, metabolic disorders, diagnostic imaging,cardiovascular diseases, anti-diabetic treatments and oncology. Inaddition to Bayer HealthCares currently existing pharmaceutical productportfolio in India, the joint venture is also intended to focus on the salesand marketing of future patented pipeline pharmaceutical products. BothBayer HealthCare and Cadila will supply the joint venture with productssourced from its manufacturing operations at existing locations.

Natco sells its US pharma retail store Nick Drugs

Natcos US-based arm K&C Pharmacy has exited from a local drugs retailchain, Nick's Drugs based in New Jersey. Natco Pharma holds 75% stakein K&C Pharmacy. The company does not see any significant effect on

the revenues and profitability. Nick's Drugs revenues were predominantlyguided by Medicaid reimbursements from the State of New Jersey,however of-late there have been significant reductions in thereimbursements because of budgetary restrictions. After the sale, Natco

Opto has already launched Freeway in the UK market in

November 2010

The product manufactured by JV would be marketed by

both companies

Natco is currently left with only one pharma store




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now owns and operates only one pharma store 'SaveMart Pharmacy',through its wholly owned subsidiary Natco Pharma Inc in Lancaster.

Strides sets up a JV in Brazil- based BioChimico

Strides Arcolabs wholly owned subsidiary Agila Specialties signed anagreement with Brazil-based BioChimico to set up a joint venturecompany for the Brazilian hospital market. Agila will be 52% partner inthe JV. As per the terms, BioChimico and Agila will transfer selectedBrazilian IPs to the joint venture to market products jointly. Strides'Brazilian facility in Campos and BioChimico's two manufacturing plants inRio de Janeiro and Itatiaia will manufacture products on a pre-determined cost model and transfer the products to the JV for onwarddistribution in the Brazilian hospital market. BioChimico is a longstanding hospital player in Brazil with a leadership position inanaesthetics, a domain in which Strides does not operate until now.

R & D Developments

Biocon IN-105 fails to meet its primary goal

Biocon has said that initial data from late-stage clinical trials on itsexperimental oral insulin drug for diabetes did not meet the desiredresults but said it was committed to the global development of the drug.In the final-stage trials being conducted in India, IN-105 did not meet itsprimary target of lowering HbA1c levels, or a haemoglobin count, inpatients with type 2 diabetes. The firm was further assessing the datafrom the trial, Biocon said, adding that the drug had met secondarytargets on efficacy and safety. The company plans to start looking for aglobal pharmaceutical partner to continue the development of the drug.

Dr Reddys enters into research collaboration with UK based Argenta

Dr Reddys Laboratories has entered into a research partnership with UK-based contract research organization Argenta. Argenta will apply itsintegrated drug discovery platform and expertise to find potential newdrug targets for Dr Reddys in the area of pain and inflammation.According to Argenta, the aim of the collaboration is to deliver highquality development candidates to support Dr Reddys research effortsfor proprietary products. Argentas contract research includes expertisein medicinal chemistry, computer-aided drug discovery, in vitro biology,analytics, in vivo pharmacokinetics, pharmacology and world-leadingrespiratory models.

Tie Ups

Strides signs a deal to supply 22 generic products to Pfizer

Strides Arcolab has struck a deal with Pfizer to sell 16 of its approvedabbreviated new drug approval (ANDAs) and six filed ANDAs. These 22filings were under an equal joint venture between Strides and US-basedNasdaq listed pharmaceutical company Akorn, which was formed in2005. Strides will be entitled to $28.2 million in cash as its share of theconsideration in addition to entering into supply agreement with Pfizerfor manufacture and supply of these products. With this new pact Stridesnow has 66 various drugs, which will be marketed by Pfizer across the

globe. Strides, early this year, had struck a deal with Pfizer for 44injectables, mostly in cancer care.

BioChimico is a long standing hospital player in Brazil with

a leadership position in anaesthetics, a domain in which

Strides does not operate until now




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Plant approvals & commissioning

Japanese health regulator approves Elder manufacturing facility

Elder Pharmaceuticals has received accreditation from the Ministry ofHealth-Japan for its Active Pharmaceutical Ingredient (API) plant atPatalganga, Maharashtra. Elder has already filed a PCT patent for one ofthe advanced intermediates for the Japanese market.

Torrent to commission Sikkim facility in Q1FY12

Torrent Pharmaceuticals is all set to commission its | 125 crore Sikkimfacility within the first quarter of next fiscal. The formulations facilitywould produce 3 billion tablets and capsules per annum. Torrentsmanufacturing plant at Chhatral has a capacity to manufactureapproximately 3 billion tablets, capsules and vials and 15,000 kg of bulkdrugs or active pharmaceutical ingredients (API) while its Baddi facilitycan manufacture 3.6 billion tablets, 150 million capsules, 10 million oralliquid bottles and 12 million sachets per annum. With the Sikkim facility

coming on stream, the company's formulation capacity will touch closeto 10 billion tablets and capsules.

Other developments

Ranbaxy CFO Omesh Sethi quits

Ranbaxy President and CFO Omesh Sethi has resigned on January 25.The company did not give a reason for the departure. The financialchiefs resignation is the second exit by a senior Ranbaxy executive infive months, after former Chief Executive Officer Atul Sobti quit inAugust. Sethi, who joined the company in 1989, has made a significant

contribution to improve its financial performance and also was involvedin mergers and acquisitions.




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ICIdirect.com coverage universe (Pharma)

iocon Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code BIOCON CMP 367 FY10 2367.8 14.7 25.0 16.4 16.7 15.6

Target 432 FY11E 2800.1 19.4 18.9 11.5 18.8 19.9

Cap 7340.0 Upside (%) 18 FY12E 3183.0 20.5 17.9 10.4 17.2 19.1

FY13E 3648.0 24.0 15.3 9.0 17.3 19.5

ishman Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code DISHPHA CMP 176 FY09 1062.4 18.2 9.7 8.0 20.9 13.6

Target 168 FY10 915.4 14.6 12.1 10.5 15.0 9.1

Cap 1420.3 Upside (%) -5 FY11E 911.0 15.1 11.6 10.7 13.8 7.4

FY12E 1044.0 16.8 10.5 8.4 13.8 9.6

PCA Labs Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code IPCLAB CMP 310 FY10 1559.6 16.4 18.9 13.4 23.7 20.5

Target 325 FY11E 1832.7 19.9 15.6 11.6 23.2 20.3

Cap 3896.0 Upside (%) 5 FY12E 2171.8 21.4 14.5 9.6 20.6 22.1

FY13E 2595.8 29.5 10.5 7.2 22.6 24.8

ramal Health Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code NICPIR CMP 472

Target NA FY09 3281.1 15.1 31.2 19.4 24.0 17.7

Cap 10032.0 Upside (%) NA FY10 3671.1 23.1 20.5 15.2 28.3 18.8

un Pharma Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code SUNPHA CMP 436 FY09 4271.4 17.6 24.8 23.2 25.7 28.3

Target 416 FY10 4019.8 13.0 33.4 31.0 17.7 19.5

Cap 44758.6 Upside (%) -5 FY11E 5808.6 16.7 26.1 22.2 19.0 20.3

FY12E 6844.1 17.7 24.7 20.3 17.3 18.1

lenmark Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code GLEPHA CMP 290 FY10 2093.0 7.7 42.4 24.4 19.4 16.4

Target 396 FY11E 2484.9 12.2 26.7 17.4 13.9 14.6

Cap 7836.0 Upside (%) 37 FY12E 2986.7 18.2 17.8 12.9 20.7 18.8

FY13E 3454.4 21.7 14.9 10.9 20.6 20.1

upin Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code LUPIN CMP 420 FY10 2500.7 12.2 23.7 15.5 14.1 14.8

Target 530 FY11E 2986.0 18.2 15.9 12.0 17.7 16.5

Cap 18472.0 Upside (%) 26 FY12E 3485.7 19.9 14.6 10.4 16.8 17.1

FY13E 4118.4 23.3 12.4 9.1 17.0 18.3

nichem Labs Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code UNILAB CMP 196 FY10 765.5 14.7 13.3 9.5 23.3 25.7

Target 227 FY11E 843.4 12.7 15.4 9.0 16.9 20.4

Cap 1768 Upside (%) 16 FY12E 993.3 18.3 10.7 6.5 20.6 24.7

FY13E 1149.1 20.6 9.5 6.0 19.5 24.7

doco Remedies Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code INDREM CMP 460 FY10 398.3 34.4 13.4 11.2 13.6 11.5

Target 511 FY11E 486.9 42.0 11.0 8.4 14.6 12.9

Cap 565.0 Upside (%) 11 FY12E 581.1 48.7 9.4 6.4 14.9 15.6

FY13E 712.6 63.9 7.2 5.3 16.7 17.9

pto Circuits Sales (| cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)irect Code OPTCIR CMP 260 FY09 818.5 22.2 11.7 20.1 26.1 19.8

Target 329 FY10 1077.6 14.2 18.3 13.3 26.0 20.4

cap (| cr) 4765.0 % Upside 27% FY11E 1558.6 18.3 14.2 12.3 20.1 17.0FY12E 2267.7 21.9 11.9 9.9 21.3 18.0




12/12


RATING RATIONALE

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as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the

notional target price is defined as the analysts' valuation for a stock.

Strong Buy: 20% or more;

Buy: Between 10% and 20%;

Add: Up to 10%;

Reduce: Up to -10%

Sell: -10% or more;

Pankaj Pandey Head Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,

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