1. Morgan Stanley Puts ‘OW’ rating on Cadila Healthcare

Morgan Stanley Puts ‘OW’ rating on Cadila Healthcare

CADI’s base US business seems to have bottomed in 2QF17. We expect 2HFY17 to be better, driven by prospects of 7-8 new approvals including 3-4 controlled substances from Nesher.

By: | Published: October 29, 2016 6:33 AM
We expect strong growth momentum from FY18 onwards, largely driven by approvals of a few niche site transfers, etc..(Reuters) We expect strong growth momentum from FY18 onwards, largely driven by approvals of a few niche site transfers, etc..(Reuters)

CADI’s base US business seems to have bottomed in 2QF17. We expect 2HFY17 to be better, driven by prospects of 7-8 new approvals including 3-4 controlled substances from Nesher. We expect strong growth momentum from FY18 onwards, largely driven by approvals of a few niche site transfers, etc. Plus, IP build-up (bio-similars, Lipaglyn) and reasonable valuation drive our OW rating on the stock.

Cadila continues to expect 40 ANDA filings for FY17 (10 filings in 1HF17). ANDA filings (site transfer) for key products – Prevacid ODT and Toprol XL – are expected.

R&D is expected to be flat in absolute value terms in FY17 (R7.6 billion in FY16), but would rise in FY18 on account of Lipaglyn clinical trials (7-8% of sales in medium to long term).

Tax rate to be 22-25% in FY17/18 while capex to be around R10 billion. Moraiya — all the remediation measures have been completed, and FDA has been invited for re-inspection. Oral facility at Ahmedabad and Topical SEZ have both received EIRs; b) Biosimilar business is currently around R3 billion (mostly in India). It is in the process of registering several EMs (all 7 products) and expects signifiant traction in FY18 ($500 m sales target in next 5-7 years); c) lower export incentives in Q2 due to Asacol HD; d) It filed and launched 4 products during the quarter; e) India business expected to grow 15% in medium term.

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