IGI Logo

Well-placed to gain from the drug shortages in the US

Compliance/manufacturing scale-up offers heads-up to GLAND

GLAND has 11 injectable products in the USFDA shortage list, which have combined sales of ~USD400m over the past 12-months.

The overall number of drugs under shortage in the US has declined to a 15-year low at present. However, the number of injectables facing a shortage is at its 20- year average, but is at a record high as a percentage of total drug shortages.

Among the Indian players present in the US, GLAND appears to be the largest beneficiary from drugs under shortages due to consistent compliance and manufacturing capacity/capabilities.

We value GLAND at 35x 12-month forward P/E to arrive at our TP of INR4,040. We remain positive given: a) its niche product pipeline in injectables, b) volume gains in existing products, c) wider market operations for its portfolio, d) a strong cash cushion for inorganic growth, and e) consistent compliance.

Advantage GLAND

Eleven products of GLAND, with a combined market size of USD400m, are facing a shortage in the US. There are certain drugs where more than five of its peers have ANDA approvals. Despite that, the drugs are under shortage due to: a) increased demand/reduced supply, or b) manufacturing constraints/discontinuation by existing companies.

Few key products such as Dexamthasone, Ketorolac, Midzolam, and Metronidazole represent a decent opportunity given their market size and competitive scenario.

Injectables shortage continues at a steady state

While the number of drugs facing a shortage stood at a 15-year low of 114 in CY21, the same in injectables continues to remain steady, close to its 20- year average of ~75. Almost 72% of total drugs under shortage are injectables.

From the total injectables under shortage at the industry level, GLAND and ARBP are among the Indian companies that have the highest number of drugs as part of their respective portfolio

Even if drugs under shortage provide business opportunities for companies like SUNP/LPC/DRRD there is limited scope for supplies due to either restricted quantities of API availability or inadequate inventory.

Valuation and view

We expect 27% earnings CAGR over FY22-24, led by 16% sales CAGR in its core markets, 23% in India, and 43% in RoW – supported by a 200bp margin expansion over FY22-24. We estimate INR3b in Biologics sales in FY24

We value GLAND at 35x 12-month forward P/E to arrive at our TP of INR4,040. We remain positive given: a) its niche product pipeline in injectables, b) volume gains in existing products, c) wider market operations for its portfolio, d) a strong cash cushion for inorganic growth, and e) consistent compliance.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer