ARBP received approval for gRenvela suspension, $140 million. Auro was a late filer for the product but is the first to receive approval, even as peers like Lupin, Cipla have struggled over the years. This is a key positive as in addition to being a near term earnings boost 6-9m exclusivity on suspension and increased probability of Renvela tablet launch, it validates the R&D strength of the company, which has been a key concern of investors. Retain Buy.
Aurobindo today announced that it has received approval for gRenvela suspension, Sevelamer carbonate, IMS Sales: $140 million. Aurobindo is the first player to get approval for a generic Sevelamer product. Sevelamer are oral phosphate binders used by chronic kidney disease (CKD) patients on dialysis. Sevelamer franchise has two brands Renvela and Renagel which combined have annual sales of $750 million. Renvela also has a oral solid dosage with brand size of $500 million.
Aurobindo is the first generic to receive Sevelamer generic approval despite being one of the last filers. While multiple generics including Lupin, Cipla, Actavis have filed for the product they have struggled to get approval. In fact, Lupin the first filer has now guided for a late FY19 approval at best. The approval then addresses the key investor concern on quality of R&D and ANDA filings. We have highlighted that Aurobindo despite being a late filer in most product has had much better quality of filings, which will aid faster approval and better returns. This approval validates the same.
Aurobindo will likely remain the only generic for the near term in Renvela suspension. Most peers have indicated a 2HFY18 or FY19 timeframe for approval. A 3m exclusivity will add 1% to FY18 earnings. Additionally, the approval also raises the probability of an FY18 launch for the Renvela tablet, vs JEFe FY19).
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Aurobindo is trading at 12.5x FY19 PE, a 20%+ discount to peers. It though has much better visibility and growth in earnings. Its diversified portfolio, large product pipeline and better quality ANDA filings, as reflected in its quicker approval pace, lend support to the topline, while its cost leadership makes it best suited to mitigate US pricing pressures. Aurobindo remains our preferred pick and we remain most cautious on Lupin.