USFDA compliance intact; Approval to start US sales
* The two positive events for Laurus were Zero 483 at its recent USFDA inspection and first product approval (g-Viread) from Unit II.
* Based on competition and price erosion, we expect Laurus to make USD2-3m from this product on annualized basis. On overall basis, we expect Laurus to garner US sales of NR1.3b by FY20 from INR20m in FY17.
Successful Inspection at Unit II (formulation) implies consistency in compliance and minimal regulatory hurdle:
Laurus successfully cleared recent USFDA inspection at unit II (formulation) with Zero observations. Facility was inspected during 26 Feb-1 Mar 2018. USFDA inspection at this facility has been after period of ~one year three months. Till date, unit II has been inspected twice by USFDA and Laurus has been able to clear it successfully with Establishment Inspection Report (EIR) in place for previous inspection. Laurus has faced nine inspections successfully at its different facilities, which implies consistency in regulatory compliance and minimal regulatory hurdle over medium term. This is commendable given the scenario, wherein, peers are facing regulatory hurdle to the extent that either existing business is stopped and/or new approvals have been halted by USFDA.
Laurus to start US sales from maiden approval and subsequent commercialization:
Laurus also received its first USFDA approval for g-Viread (Tenofovir Disoproxil Fumarate, TDF) tablets. A TDF tablet is used for treatment of HIV-1 infection in adults and pediatric patients. The market size of g-Viread is about ~USD1b. Laurus is sixth company to receive final approval for this product in past two months. Laurus had tentative approval in place. Post patent expiry on 25 January 2018, the final approval was awaited as there was neither any ANDA specific query pending nor any regulatory issues related to manufacturing. Post launch by five companies, price erosion has led market size to shrink considerably. Based on number of competitors and price erosion, we expect Laurus to garner USD2-3m on annualized basis.
Laurus on track to build robust ANDA pipeline for US market:
LAURUS has filed eight ANDAs (4 own, 4 with partners). It has target action date (TAD) spread over CY18 on three products. Laurus intend to file 8-10 ANDAs annually over next 2-3 years, taking cumulative filing to 30. We expect share of US formulation to increase from INR20m in FY17 to INR1.3b by FY20.
Valuation and view:
We remain positive on Laurus due to additional business from tender awards in ARV space, new customer addition, increased traction in Synthesis/ ingredient business and product launches in US. We expect Laurus to deliver 17% CAGR in sales and 28% CAGR in PAT to INR30b and INR4b over FY17- 20. We value Laurus at 18x (20% premium to midcap average multiple of 15x) 12M forward earnings to arrive at price target of INR613. Re-iterate Buy on the stock.
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