Aurobindo has received approval for gRenvela — Sevelamer carbonate (tablet) from the US FDA. We believe this validates Aurobindo’s capabilities in receiving timely approval for a relatively complex product. Earlier in mid June, 2017, Aurobindo received approval for Sevelamer carbonate (suspension). As per IMS, the company has garnered c19% TRx share in third week of launch. We expect gRenvela to be a limited competition market and expect 2-3 more players to enter in 2HFY18 and 3 more players by end FY19. We increase our FY18 sales and earnings estimates by 4% and 5% to factor lower than expected competition in Sevelamer carbonate. Our TP of `888 remains unchanged. Reiterate Buy.
gRenvela: The market size of the Renvela tablet is $1.9 bn for the twelve months ending May 2017 (source: Quintiles IMS). As per Sanofi’s filing, gRenagel/Renvela size is 764 mn euros in CY16 (up c6% y-o-y) and 207 mn euros (Q1CY17) for the US market. Sevelamer Carbonate tablet is indicated for patients with chronic kidney disease (CKD) on dialysis. Aurobindo is the first generic player to receive approval for gRenvela. There are 4-5 additional ANDA filers on the product.
Strong approvals continue to drive growth in FY18 and FY19: Aurobindo expects 3-4 approvals in oncology in FY18. Of the c147 pending ANDAs, c37% of its filings are in the limited competition space of injectables, penems, opthal, respiratory and controlled substances. We expect the share of niche products to rise as it invests in complex products.DTG Combination – received TAD of Aug 2017. Aurobindo has 331 ANDA approvals from USFDA. Pending approvals as on end of March 2017 stood at 115.
Valuation and risk: Our TP of Rs 888 is based on a target PER of 18x on FY19 recurring EPS. Key downside risks: delays in USFDA approvals of ANDAs filed, heightened pricing erosion in the US base business, currency volatility, and slower-than-expected growth in Europe and RoW markets.