Pharma Pill

ICICI Securities Limited
Monthly Update
February 4, 2011
Index Performance as on 31 January 2011
Return (%) Pharma Pill
1Months 3Months 6Months 1Year
Nifty -10.3 -10.0 1.2 12.4 Summary
Sensex -10.6 -9.9 1.2 12.1
BSE Healthcare -7.4 -4.9 10.9 27.6 January saw majority of pharma companies declaring Q3FY11 results.
While most companies registered sound sales growth YoY, EBITDA
Stocks Performance margins for most of them remained under pressure. This was mainly on
Return (%) Mcap account of adverse currency fluctuation as well as a rise in staff and R&D
Company 1month 3month 6month 1year 31-Jan costs. Cost pressure was somewhat severe for smaller players like
Sun Pharma -9 5 24 50 45629 Unichem, Ipca and Torrent. In terms of sales, while companies like Sun
Dr Reddy's Labs -4 -2 20 45 27489 and Opto saw robust growth on account of inorganic growth, majority of
Cipla -10 -6 2 5 26676 big players like Glenmark, Lupin, Cadila, Sun and smaller players like
Ranbaxy Labs -7 -6 22 21 22976 Torrent and surprisingly Alembic registered good growth in domestic
Glaxosmit Pharma -2 2 13 50 19304 formulations, which normally are subdued in Q3. On the US generic
Lupin -11 -3 13 49 18852 front, Lupin and Glenmark were negative surprises but these players
Cadila Health. 7 18 30 73 16862 registered robust growth in the ex-US markets. Thus, they made good
Piramal Health -6 -8 -9 20 9189 the US slowdown. However, companies having a German presence like
Divi's Lab. -2 -8 -15 6 8433 Dr Reddy’s and Biocon continued to bleed in that market on account of
Glenmark Pharma. -13 -10 14 27 8288 the 16% rebate proposed by the government for three years.
Biocon -16 -15 13 30 6998
Aurobindo Pharma -9 1 22 48 6910 On the regulatory front, there were eight final approvals and four
Torrent Pharma. 1 5 3 31 4913 tentative approvals from the USFDA. Aurobindo and Dr Reddy’s
Opto Circuits -5 -13 -9 17 4574 Laboratories have received tentative approvals for two drugs each. Other
Ipca Labs. -10 -7 8 35 3789 companies like Alembic, Glenmark Pharma, Lupin, Natco, Torrent and Dr
Jubilant Life -19 -28 -37 -25 3580 Reddy’s received final approval for one drug each while Cadila
Strides Arcolab -7 -1 30 110 2393 Healthcare got the nod for two drugs. In a first of its kind of compulsory
Orchid Chemicals 1 3 58 85 2071
licensing challenge, Natco Pharma has sought licensing from Pfizer and
FDC -9 -3 17 41 1882
Bayer to launch their patented products for HIV and cancer, respectively,
under the cover of compulsory licensing. On the R&D front, we saw
Unichem Labs. -17 -12 in-nmimsmum
15 46 1796
ISIEmergingMarketsPDF from Biocon reportingondiscouraging
122.170.126.130 results for
2011-02-17 04:09:50 EST.itsDownloadPDF.
diabetic drug in phase III
Dishman Pharma. -13 -27 -39 -39 1077
trials. During the month, Cadila formed a new JV with Bayer Healthcare
J B Chem & Pharm -17 -3 20 94 993
to market its products from niche categories. Glenmark received an
Alembic 2 -8 19 52 914
unfavourable verdict from a US jury regarding anti-hypertensive drug
Natco Pharma -10 4 43 149 789
Tarka, which asked the company to stop sales of Tarka and also slapped
Elder Pharma 1 -6 15 25 767
a | 70-crore penalty to be payable to Abbott. During the month, the
Indoco Remedies -10 -12 8 36 543
Indian patent office denied patent protection to Abbott’s HIV drug Kaletra
Mcap in | crore
and allowed the generic sale of this product by Cipla and Matrix.
Price movement
Regulatory approvals
8000 25000
7000
20000 Aurobindo gets USFDA nod for two drugs
6000
5000 15000
4000 Aurobindo Pharma has received tentative approval from the USFDA to
3000 10000 manufacture and market Levofloxacin tablets of 250 mg, 500 mg, 750
2000 mg. Levofloxacin tablets are indicated for the treatment of adults with
5000
1000 mild, moderate and severe infections caused by susceptible strains of
0 0
the designated micro organisms such as pneumonia, bacterial sinusitis,
Aug-10
Oct-10
Feb-10
Apr-10
Jun-10
Dec-10
etc. The product has a market size of nearly US$1.45 billion for the 12
months ending September 2010 according to IMS.
BSE Healthcare Sensex
It received tentative approval from the USFDA to manufacture and
Analyst’s name market Famciclovir tablets of 125 mg, 250 mg and 500 mg. Famciclovir
Siddhant Khandekar Tablets 125 mg, 250 mg and 500 mg are the generic versions of Novartis
siddhant.khandekar@icicisecurities.com Pharmaceuticals Corp’s Famvir Tablets of 125 mg, 250 mg and 500 mg. It
Krishna Kiran Konduri is indicated for the treatment of recurrent mucocutaneous herpes
krishna.konduri@icicisecurities.com simplex infections in HIV-infected patients and suppression of recurrent
genital herpes in immuno-competent patients. The product has a market
ICICIdirect.com | Equity Research

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size of approximately US$170 million for the 12 months ending

September 2010 according to IMS.
Cadila Healthcare receives approval for hypertension drug
Cadila Healthcare's US arm has got tentative approval from the USFDA
for hypertension drug Irbesartan tablets. The company has got approvals
for tablets of 75 mg, 150 mg and 300 mg strengths. The patent for the
drug will expire in March 2012. Currently, the drug is marketed by Bristol-
Myers Squibb and Sanofi-Aventis under different brand names with
annual sales of $1.3 billion and $2.1 billion, respectively.
USFDA grants marketing approval for Glenmark’s anti-malarial drug
Glenmark Generics, the US subsidiary of Glenmark Pharmaceuticals

received final approval from the USFDA for abbreviated new drug
application (ANDA) for the generic version of Atovaquone & Proguanil
Hydrochloride tablets in the strengths of 250 mg and 100 mg.
GlaxoSmithKline (GSK) originally developed it and markets this product
as Malarone in the US, which is indicated for the prevention and
treatment of malaria. The patent is set to expire in 2014. The total US
Glenmark plans to launch Malarone in Q2FY12 sales as reported by IMS Health for the 12 month period ending
December 2009 were approximately US$ 64 million. Glenmark Generic is
the first to file ANDA for the product. Interestingly, in April 2010 it made
an out-of-court settlement with GSK over an earlier lawsuit filed in a US
court. According to the terms of settlements agreement, which are still
subject to review by the Federal Trade Commission and Department of
Justice, Glenmark will be able to sell its generic tablets under a royalty-
bearing licence from GSK from the third quarter of 2011, or earlier under
certain circumstances.
Lupin receives USFDA

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on 2011-02-17 Nabumetone
EST. tablets
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Lupin Pharmaceuticals, Inc (subsidiary of Lupin) has been granted final

approval for its Nabumetone tablets, 500 mg and 750 mg strengths from
the US Food and Drug Administration. Lupin’s Nabumetone is the AB-
rated generic equivalent of GlaxoSmithKline’s Relafen tablets indicated
for acute and chronic treatment of the signs and symptom of
osteoarthritis and rheumatoid arthritis. Annual sales for the Nabumetone
market in the US was $66.8 million for the 12 months ended September
2010, based on I Health sales data.
Strides gets USFDA approval for anti-inflammatory injection
Strides Arcolab received an approval from the USFDA for an additional

package size of anti-inflammatory adenosine injection, USP, 3 mg/MI
packaged in 12 mg/4 ml single-dose vials. The product will be launched
upon expiry of applicable innovator patents. The US innovator market for
Adenosine presentations is approximately US$94 million. Strides had in
2010 received approval for Adenosine Injection 60 mg per 20 ml and 90
mg per 30 ml vials. The product will be launched under the partnership
between Strides and Sagent Pharmaceuticals wherein Strides is
developing and supplying more than 25 injectable products for the US
market, which is marketed by Sagent.

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Exhibit 1: Summary of USFDA approvals

Final Approvals
Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size
Alembic Lamotrigine tablets Central Nervous System GlaxoSmithKline Pharma Lamicta; US$ 452 million
Dr Reddy's Labs Pantoprazole Sodium tablets Anti-Ulcerant Hospira Protonix US$ 1.8 billion
Glenmark Pharma Atovaquone and Proguanil Hydrochloride tablets Anti-Malarial GlaxoSmithKline Pharma Malarone US 64 million
Lupin Nabumetone Tablet Anti-inflammatory GlaxoSmithKline Pharma Relafen US$ 66.8 million
Natco Pharma Chloroquine Phosphate tablet Anti-Malarial Sanofi Aventis Aralen NA
Torrent Pharma Pantoprazole Sodium tablets Anti-Ulcerant Hospira Protonix US$ 1.8 billion
Strides Arcolab Adenosine injection Anti-inflammatory Astellas Adenocard US$ 94 million
Cadila Healthcare Glipizide; Metformin Hydrochloride tablet Anti-diabetic Bristol Myers Squibb Metaglip US$ 30 milliom
Cadila Healthcare Tramadol Hydrochloride tablet Pain Management Ortho McNeil Janseen Pharma Ultram NA
Tentative Approvals
Company Drug Name Therapeutic Area Innovator company Generic Version of Market Size
Aurobindo Pharma Levofloxacin tablets Anti-infective Ortho McNeil Janseen Pharma Levaquin US$1.45 billion
Aurobindo Pharma Famciclovir tablets Anti-retroviral Novartis Pharmaceuticals Famvir US$ 170 million
Dr Reddy's Labs Sumatriptan; Naproxen Sodium tablet Anti-inflammatory GlaxoSmithKline Pharma Treximet NA
Dr Reddy's Labs Clopidogrel tablets Anti-clotting Sanofi Aventis Plavix US$ 200 million
Source: Company, ICICIdirect.com Research
Financial Performance
Alembic’s profit grows 127% YoY
Alembic reported a 23% increase in revenues to | 373.79 crore for the

Total 20% growth in the domestic formulation business quarter ended December 31, 2010. The company posted 127% growth in
drives the growth in overall sales net profit at | 30.84 crore. Domestic formulations grew ~20% YoY to |
184.24 crore above industry growth rate of ~17%.
Biocon sales up 15% YoY

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ISIEmergingMarketsPDF
Biocon has registered a net profit of | 101 crore in the third quarter of the
current financial year, a rise of 24% YoY. Total income rose 15% to | 738
crore and its operating profit saw a rise of 34% to | 178 crore during the
same period. The sales growth was driven by biopharmaceuticals and
CRAMS nullifying de-growth from the German subsidiary Axicorp. Sales
from Axicorp will go down from Q4 as the German government
mandated a 16% rebate on all pharma drugs.
Cadila Healthcare net profit at | 162 crore
Cadila Healthcare registered a total income of | 1170 crore in Q3FY11, up

18% YoY on a consolidated basis. EBITDA was up 22% YoY to | 256
crore. Net profit stood at | 162 crore, up 25% YoY. The income growth
was mainly driven by a growth of 20% in formulations exports and a
growth of 17% in domestic formulations. The company’s consumer
wellness business was up 21%.
Dr Reddy’s posts profit, but numbers disappoint
Dr Reddy's Laboratories swung to profit for the quarter ended December

2010. Its third quarter net profit rose to | 273.2 crore against a net loss of
| 521.7 crore in the same quarter previous year. The company recorded
a 9.7% increase in revenues to | 1898.5 crore, on account of a growth in
sales of the generic segment, especially in the US. During the quarter,
Higher litigation cost drags overall margins
the company launched 42 generic products and filed 21 new product
registrations globally. It entered into two settlement agreements with
AstraZeneca in the US related to abbreviated new drug application filed
for generic versions of Nexium (esomeprazole) and Accolate (zafirlukast).

The company's profit, however, was below expectations due to higher

selling, general and administration (SG&A) expenses including litigation
costs in the US. The German market continued to be a drag on its sales.
Speciality business drives Glenmark sales
Glenmark's consolidated net sales moved up by 17% to | 751 crore for

Q3FY11. There was, however, some pressure on the EBITDA margin on
account of lower realisations and inventory adjustments. Margins
declined by ~330 bps. Consolidated net profit went up 16.5% to | 109.56
crore. The company's speciality business registered a growth of 25% to |
452.06 crore. Its speciality business in India saw a growth of 30% to |
Absence of sales from Nitroglycerine leads to lower growth
239 crore while that in the rest of the world grew 27%t to | 115 crore.
in US business sales
The Latin American business increased by 88% to | 52.83 crore and in
Europe it clocked a growth of 27% to | 44.77 crore. The generic sales,
however, recorded tepid growth of 7% and touched | 298.8 crore mainly
due to subdued growth in the US, which grew just 8% to | 204.1 crore.
This was attributable to the discontinuation of the cardiovascular drug
nitroglycerine and a slower ramp-up of generic products for which it has
approval.
Indoco Remedies net profit up 14%
Indoco's Q3FY11 sales increased 19.4% to | 114.3 crore mainly driven by

Indoco will launch a couple of products in semi-regulated the growth in formulation exports and domestic API business. However,
markets in Q4FY11 at the EBITDA level, margins were subdued at 12.7% due to a change in
the product mix, increase in raw materials cost and fall in realisation due
to currency fluctuation. Increase in the taxation YoY restricted the net
profit growth to 14% to | 8.8 crore. The company expects the domestic
formulation business to be normalised in due course. It also expects a
couple of product launches in semi-regulated markets in Q4FY11.
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Ipca’s EBITDA margins plunge 330 bps
Ipca's Q3FY11 sales increased 18% YoY to | 466.4 crore backed by 33%
rise in the export formulation business and almost 17% growth in
domestic branded formulations. EBITDA margins declined ~330 bps YoY
Increase in employees cost and cost related to new
as sales & marketing expenses and expenses related to newly joined
employee’s dragged overall margins
employees went up. Net profit increased 10% to | 63.9 crore. The export
formulations segment is likely to continue its growth momentum, going
forward. Incremental sales from newly added medical representatives
will also support growth in sales from H2FY12E onwards. However,
EBITDA margins will continue to be under pressure for at least two or
three quarters.
Lupin’s sales increase by 16.9% YoY in-spite of US slow down
Lupin’s net sales grew 16.9% YoY to | 1467.2 crore for Q3FY11 backed
by formulations sales growth in the US, Europe and Japan. EBITDA
margins declined 90 bps to 19.7%. This was on the back of an increase in
Forex loss and higher R&D cost dragged margins R&D cost, forex loss of | 17 crore and rise in employee expenses due to
new recruitment at the Indore SEZ and also due to addition of ~160
medical representatives. However, net profit was up 39.5% to | 224.1
crore on the back of lower tax provision.

Opto’s like to like sales up by 37%
Opto Circuits has posted a net profit after minority interest of | 95.67
crore for the quarter ended December 31, 2010 as compared to | 65.68
crore for the quarter ended December 31, 2009, a rise of 45.67%. Total
income has increased 70.59% to | 428.12 crore. The numbers are not
comparable as the company acquired majority stake in US based Cardiac
Science in December. On a like-to-like basis sales grew ~37% YoY.
Sun Pharma reported muted net profit growth of 3% YoY
Sun Pharma reported ~57% growth in net sales to | 1603 crore driven
by consolidation of Israel-based Taro Pharma’s accounts. Taro clocked
~| 459 crore sales during the quarter. Without Taro, on a like to like
basis the sales growth was just ~11%. This was mainly on account of
higher base of Q3FY10 on account of sales from anti-ulcerant Protonix,
which it stopped in the current fiscal due to litigation issues. Due to this
Excluding sales from Taro, the base business was up just consolidation, EBIDTA margins declined by ~660 bps and PAT also grew
~ 11% by just ~3% YoY to | 350 crore. Another US subsidiary Caraco reported
~20% de-growth in sales to | 180 crore on account of continuance of
production stoppage due to USFDA related issues. The company does
not expect the restart of production in Q4FY11. Sales from Indian
branded formulations grew 20% to | 640 crore driven by nine product
launches and further consolidation in at least six therapeutic categories
where Sun is the market leader.
Torrent Pharma profit dips 7.28% YoY
Torrent Pharmaceuticals’ consolidated net profit declined 7.28% YoY to |

76.91 crore for the third quarter ended December 31, 2010. Profits were
affected due to planned expansions in domestic and international
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on 2011-02-17 movements.
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Export sales witnessed a growth of 19% YoY crore, up 20%, on the back of robust growth in the domestic formulation
business and continued buoyancy in the international business. During
Q3, domestic formulation business recorded sales of | 214 crore,
growing 17%. Sales outside India jumped 19% to | 292 crore.
Operations in Brazil registered an impressive performance with sales
growth of 15% to | 102 crore. Germany-based Heumann’s operations
recorded sales of | 76 crore with growth of 15%. Europe (other than
Heumann), Russia & CIS and rest of the world operations grew 22% with
sales of | 78 crore.
Unichem’s net profit declines 24% YoY
Unichem Laboratories’ net profit decreased ~24% to | 25.60 crore for

the third quarter ended December 2010. The decrease in profits was
essentially on account of increased investments in existing and new
Commission of new facilities hits EBITDA margins marketing divisions and consequent payroll costs, higher manufacturing
costs and depreciation due to commissioning of new plants. Total
income grew 14% YoY to | 197 crore.
IP Issues
Takeda Pharma sues Cadila Healthcare on Actos
Takeda Pharmaceuticals has filed a suit against Cadila Healthcare at a US

district court alleging that the latter would be infringing the former's
Takeda resolved patent litigation with various generic patent coverage by attempting to manufacture and market diabetes drug
customers over the same drug Actos (pioglitazone hydrochloride) in the US market. Actos, which is
used to improve glycemic control in type-II diabetes patients, is a

blockbuster drug that clocked revenues worth $3.4 billion only in the US
market for the year ending December 31, 2009, according to data of
market research firm IMS. The product is among the largest selling
diabetic drugs globally and the eighth largest selling prescription drug in
any therapeutic segment in the US market. Takeda has already resolved
patent litigation with eleven generic companies chasing the diabetes
drug opportunity in the US market early this year.
India’s patent office denies Abbott’s Kaletra
India’s patent office has denied protection to Abbott Laboratories’ AIDS

drug Kaletra allowing generic drug makers to continue selling their own
versions of the drug. The patent office said that the steps involved in
Abbott’s second best seller drug patent was denied by the
making Kaletra do not constitute an invention. The initiative for
Indian Patent Office
medicines, access & knowledge, as well as Cipla and Matrix had
challenged Abbott’s patent application. Abbott is reviewing the decision
and weighing its options. Kaletra is a combination of two anti-virals. The
product generated about $1.4 billion in sales in 2009, making it Abbott’s
second-best seller after the arthritis drug Humira.
Pfizer sues Dr Reddy’s over generic Lipitor
Pfizer Inc. has taken Dr Reddy's Laboratories to court in an effort to delay

the launch of the Indian company's low-cost version of atorvastatin in the
US. In a filing before a local court in Delaware, Pfizer has said Dr Reddy's
plans to launch atorvastatin, a generic version of its anti-cholesterol
medicine Lipitor, will infringe upon its patent. Lipitor gets about $12
billion in annual sales for Pfizer globally.
Dr Reddy’s gets favourable decision for generic Allegra D24
Dr Reddy’s Laboratories
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04:09:50 EST. a US District Court of New
Jersey has filed a stipulation and order lifting an earlier motion for
preliminary injunction and clearing the sale of Dr Reddy’s generic
product version of Allegra D24 (fexofenadine
hydrochloride/pseudoephedrine hydrochloride 180 mg/240 mg extended
release tablet), which was approved by the FDA on March 16, 2010. In
addition, plaintiffs’ Sanofi Aventis and Albany Molecular Research have
been required to post a security with the court, an amount of US$40
million towards the possibility that the injunction had been wrongfully
granted. Having been excluded from launching the generic product since
the June 2010 hearing, Dr Reddy’s intends to pursue an award of this
security.
Federal jury suggests Glenmark to stop supplying of generic Tarka
Sanofi Aventis SA and Abbott Laboratories won a US jury trial in which

the drug makers sought to halt Glenmark’s sales of a generic version of
their hypertension medicine Tarka. Abbott was awarded US$16 million in
damages. A federal jury in Newark, New Jersey rejected Glenmark’s
challenge to the validity of a Sanofi patent that expires in February 2015.
Glenmark argued that the patent covered an invention that was protected
by an expired patent. Abbott, which paid US$290 million for an exclusive
license to Tarka, was seeking US$25 million as compensation for profit it
lost because of Glenmark’s sale of the generic drug. Sanofi owns the
patent on Tarka, first approved by drug regulators in 1996. The company
is now awaiting a verdict from the judge at the US court in the coming
days. The judge's ruling, which can be different from that of the jury's,
will, therefore, holds the key.

Lupin settles patent litigation with Dainippon Sumitobo Pharma
Lupin and its subsidiary Lupin Pharmaceuticals Inc have settled all
litigation with Dainippon Sumitobo Pharma Co arm Sunovion
Pharmaceuticals Inc over Lunesta Eszopiclone tablets. Lupin said the
Plans to launch Lunesta in November 2013
settlement entitled the company to sell its generic version of Lunesta
under a license from November 30, 2013. Sales of Lunesta, which is used
to treat insomnia (Sleeping disorder), in US in the 12 months ended
September 2010, were at $787 million.
Natco Pharma seeks voluntary licenses for Pfizer’s HIV drug and
Bayer’s Cancer drug
Natco Pharma has sought a voluntary licence from Pfizer to make and
sell copies of its HIV medicine in India, a first step to a provision that
permits firms to legally make patented drugs of other companies. Natco
sent a notice to Pfizer in November saying Pfizer's drug was too
expensive for HIV patients in India, and that Natco can sell its own
product at about one-fifth the price. This is the first step in what is known
in pharma industry as compulsory licensing (CL), a provision that allows
generic drug makers to make and sell low-cost version of a patented
drug under certain conditions. Pfizer has time till May to reply. Pfizer's
HIV drug maraviroc sold under the brand Celsentri, costs about | 65,000
for a month dosage, said Natco in its notice to the world's largest
drugmaker. The Indian company has said it can make a copy that will
cost | 15,000 a month to HIV patients.
Natco plans to seek a compulsory licence from the government to make

Bayer AG's Nexavar (a cancer drug) in India, invoking a provision in local
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2011-02-17 04:09:50toEST.
make and sell patented drugs
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cheaply if the medicine is unaffordable. Bayer last month rejected Natco's
plea to seek a voluntary licence to make the drug in the country.
Nexavar's dosage for a month costs | 2.8 lakh while Natco says it can sell
its brand at less than | 10,000. India has an estimated 5 lakh cancer
patients.
Bayer sues Sun Pharma for generic oral contraceptive YAZ drug
German pharma major Bayer AG has filed patent infringement lawsuits

against Sun Pharma in the US, following a Paragraph IV certification, as
part of the latter's Abbreviated New Dug Application (ANDA) to
manufacture a generic version of oral contraceptive YAZ (drospirenone 3
Yasmin/YAZ has annual sales of US$ 782 million mg + ethinyl estradiol 0.3 mg). Bayer has alleged that Sun Pharma's
product infringes three of its US Patents expiring on June 30, 2014. Bayer
is also seeking an injunction against Sun Pharma preventing it from
engaging in manufacture and marketing of its generic version in the
United States. The Yasmin/YAZ (drospirenone + ethinyl estradiol)
families of contraceptive pills were Bayer's best-selling products in 2009,
with US sales of approximately US$782 million.
Product Launches
Dr Reddy’s launches generic Protonix in US market
Dr Reddy’s Laboratories has launched Pantoprazole Sodium (Anti-

ulcerant) Delayed-Released tablets (20 mg and 40 mg strengths), a
Dr Reddy’s patent expire on January 19, 2011 bioequivalent generic version of Protonix Tablets in the US market. The
FDA approved Dr Reddy’s ANDA for Pantoprazole Sodium Delayed-

Released tablets on January 19, 2011. Pantoprazole Sodium Delayed-

Released tablets had total US sales of approximately $1.8 billion for the
12 months ending September 30, 2010 according to IMS Health. Both
strengths of Dr Reddy’s Pantoprazole Sodium Delayed-Released tablets
are available in 90 count bottles.
Eurocor GmbH launch Freeway in German market
Opto Circuits (India), a subsidiary of Eurocor GmbH presented its latest

development in the second generation PTA balloon technology Freeway
Opto has already launched Freeway in the UK market in
014 and Freeway 035 to the German market for the very first time at the
November 2010
LINC (Leipzig Interventional Course) on January 2011. The two new
products have already been premiered in London in November 2010.
M&As and demerger
Aurobindo divests China Penicillin-G business
Aurobindo Pharma has entered into a definitive agreement with China

National Pharmaceutical Group Corporation (Sinopharm) to divest its
subsidiary Aurobindo (Datong) Bio Pharma Co Ltd, China (ADBPL),
subject to regulatory approvals. Sinopharm will initially buy 51% in
ADBPL and its stake would eventually go above 80%. APL's investment
of 19.50% post divestment will be strategic in nature to ensure
uninterrupted supply of raw materials at competitive price. ADBPL is
engaged in manufacturing of 6APA, a derivative of Penicillin-G and most
of its production is consumed by Aurobindo Pharma Ltd (APL) India. In
the past, the performance of ADBPCL has been affected due to
economies of scale and it is incurring losses. APL's loan of US$23 million
to ADBPL will be entirely paid back.
Cadila joins hand with Bayer to market Bayer drugs in Indian market
Cadila Healthcare and Bayer HealthCare have signed an agreement to set

up the joint venture company Bayer Zydus Pharma for the sales and
marketing of pharmaceutical products in India. Each party will hold 50%
of the shares of Bayer Zydus Pharma, headquartered in Mumbai, and be
equally represented on its management board. Bayer Zydus Pharma will
The product manufactured by JV would be marketed by start operations with Bayer HealthCare’s Pharmaceutical Division
both companies contributing its existing sales and marketing business in India to the new
company and Cadila contributing its women’s healthcare products,
diagnostic imaging business and other products. Bayer Zydus Pharma
will operate in key segments of the Indian pharmaceuticals market with a
focus on women’s healthcare, metabolic disorders, diagnostic imaging,
cardiovascular diseases, anti-diabetic treatments and oncology. In
addition to Bayer HealthCare’s currently existing pharmaceutical product
portfolio in India, the joint venture is also intended to focus on the sales
and marketing of future patented pipeline pharmaceutical products. Both
Bayer HealthCare and Cadila will supply the joint venture with products
sourced from its manufacturing operations at existing locations.
Natco sells its US pharma retail store Nick Drugs
Natco’s US-based arm K&C Pharmacy has exited from a local drugs retail
chain, Nick's Drugs based in New Jersey. Natco Pharma holds 75% stake
in K&C Pharmacy. The company does not see any significant effect on
the revenues and profitability. Nick's Drugs revenues were predominantly
guided by Medicaid reimbursements from the State of New Jersey,
Natco is currently left with only one pharma store
however of-late there have been significant reductions in the
reimbursements because of budgetary restrictions. After the sale, Natco

now owns and operates only one pharma store 'SaveMart Pharmacy',
through its wholly owned subsidiary Natco Pharma Inc in Lancaster.
Strides sets up a JV in Brazil- based BioChimico
Strides Arcolab’s wholly owned subsidiary Agila Specialties signed an

agreement with Brazil-based BioChimico to set up a joint venture
company for the Brazilian hospital market. Agila will be 52% partner in
the JV. As per the terms, BioChimico and Agila will transfer selected
BioChimico is a long standing hospital player in Brazil with Brazilian IPs to the joint venture to market products jointly. Strides'
a leadership position in anaesthetics, a domain in which Brazilian facility in Campos and BioChimico's two manufacturing plants in
Strides does not operate until now Rio de Janeiro and Itatiaia will manufacture products on a pre-
determined cost model and transfer the products to the JV for onward
distribution in the Brazilian hospital market. BioChimico is a long
standing hospital player in Brazil with a leadership position in
anaesthetics, a domain in which Strides does not operate until now.
R & D Developments
Biocon IN-105 fails to meet its primary goal
Biocon has said that initial data from late-stage clinical trials on its
experimental oral insulin drug for diabetes did not meet the desired
results but said it was committed to the global development of the drug.
In the final-stage trials being conducted in India, IN-105 did not meet its
primary target of lowering HbA1c levels, or a haemoglobin count, in
patients with type 2 diabetes. The firm was further assessing the data
from the trial, Biocon said, adding that the drug had met secondary
targets on efficacy and safety. The company plans to start looking for a
global pharmaceutical partner to continue the development of the drug.
Dr Reddy’s enters into research collaboration with UK based Argenta
Dr Reddy’s Laboratories has entered into a research partnership with UK-

based contract research organization Argenta. Argenta will apply its
integrated drug discovery platform and expertise to find potential new
drug targets for Dr Reddy’s in the area of pain and inflammation.
According to Argenta, the aim of the collaboration is to deliver high
quality development candidates to support Dr Reddy’s research efforts
for proprietary products. Argenta’s contract research includes expertise
in medicinal chemistry, computer-aided drug discovery, in vitro biology,
analytics, in vivo pharmacokinetics, pharmacology and world-leading
respiratory models.
Tie Ups
Strides signs a deal to supply 22 generic products to Pfizer
Strides Arcolab has struck a deal with Pfizer to sell 16 of its approved
abbreviated new drug approval (ANDAs) and six filed ANDAs. These 22
filings were under an equal joint venture between Strides and US-based
Nasdaq listed pharmaceutical company Akorn, which was formed in
2005. Strides will be entitled to $28.2 million in cash as its share of the
consideration in addition to entering into supply agreement with Pfizer
for manufacture and supply of these products. With this new pact Strides
now has 66 various drugs, which will be marketed by Pfizer across the
globe. Strides, early this year, had struck a deal with Pfizer for 44
injectables, mostly in cancer care.

Plant approvals & commissioning
Japanese health regulator approves Elder manufacturing facility
Elder Pharmaceuticals has received accreditation from the Ministry of

Health-Japan for its Active Pharmaceutical Ingredient (API) plant at
Patalganga, Maharashtra. Elder has already filed a PCT patent for one of
the advanced intermediates for the Japanese market.
Torrent to commission Sikkim facility in Q1FY12
Torrent Pharmaceuticals is all set to commission its | 125 crore Sikkim

facility within the first quarter of next fiscal. The formulations facility
would produce 3 billion tablets and capsules per annum. Torrent’s
manufacturing plant at Chhatral has a capacity to manufacture
approximately 3 billion tablets, capsules and vials and 15,000 kg of bulk
drugs or active pharmaceutical ingredients (API) while its Baddi facility
can manufacture 3.6 billion tablets, 150 million capsules, 10 million oral
liquid bottles and 12 million sachets per annum. With the Sikkim facility
coming on stream, the company's formulation capacity will touch close
to 10 billion tablets and capsules.
Other developments
Ranbaxy CFO Omesh Sethi quits
Ranbaxy President and CFO Omesh Sethi has resigned on January 25.
The company did not give a reason for the departure. The financial
chief’s resignation is the second exit by a senior Ranbaxy executive in
five months, after former Chief Executive Officer Atul Sobti quit in
August. Sethi, who joined the company in 1989, has made a “significant
contribution” to improve its financial performance and also was involved
in mergers and acquisitions.

ICICIdirect.com coverage universe (Pharma)

Biocon Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code BIOCON CMP 367 FY10 2367.8 14.7 25.0 16.4 16.7 15.6
Target 432 FY11E 2800.1 19.4 18.9 11.5 18.8 19.9
MCap 7340.0 Upside (%) 18 FY12E 3183.0 20.5 17.9 10.4 17.2 19.1
FY13E 3648.0 24.0 15.3 9.0 17.3 19.5
Dishman Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code DISHPHA CMP 176 FY09 1062.4 18.2 9.7 8.0 20.9 13.6
Target 168 FY10 915.4 14.6 12.1 10.5 15.0 9.1
MCap 1420.3 Upside (%) -5 FY11E 911.0 15.1 11.6 10.7 13.8 7.4
FY12E 1044.0 16.8 10.5 8.4 13.8 9.6
IPCA Labs Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code IPCLAB CMP 310 FY10 1559.6 16.4 18.9 13.4 23.7 20.5
Target 325 FY11E 1832.7 19.9 15.6 11.6 23.2 20.3
MCap 3896.0 Upside (%) 5 FY12E 2171.8 21.4 14.5 9.6 20.6 22.1
FY13E 2595.8 29.5 10.5 7.2 22.6 24.8
Piramal Health Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code NICPIR CMP 472
Target NA FY09 3281.1 15.1 31.2 19.4 24.0 17.7
MCap 10032.0 Upside (%) NA FY10 3671.1 23.1 20.5 15.2 28.3 18.8
Sun Pharma Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code SUNPHA CMP 436 FY09 4271.4 17.6 24.8 23.2 25.7 28.3
Target 416 FY10 4019.8 13.0 33.4 31.0 17.7 19.5
MCap 44758.6 Upside (%) -5 FY11E 5808.6 16.7 26.1 22.2 19.0 20.3
FY12E 6844.1 17.7 24.7 20.3 17.3 18.1
Glenmark Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code GLEPHA CMP 290 FY10 2093.0 7.7 42.4 24.4 19.4 16.4
Target 396 FY11E 2484.9 12.2 26.7 17.4 13.9 14.6
MCap 7836.0 Upside (%) 37 FY12E 2986.7 18.2 17.8 12.9 20.7 18.8
FY13E 3454.4 21.7 14.9 10.9 20.6 20.1
Lupin Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code LUPIN CMP 420 FY10 2500.7 12.2 23.7 15.5 14.1 14.8
Target 530 FY11E 2986.0 18.2 15.9 12.0 17.7 16.5
MCap 18472.0 Upside (%) 26 FY12E 3485.7 19.9 14.6 10.4 16.8 17.1
FY13E 4118.4 23.3 12.4 9.1 17.0 18.3
Unichem Labs Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code UNILAB CMP 196 FY10 765.5 14.7 13.3 9.5 23.3 25.7
Target 227 FY11E 843.4 12.7 15.4 9.0 16.9 20.4
MCap 1768 Upside (%) 16 FY12E 993.3 18.3 10.7 6.5 20.6 24.7
FY13E 1149.1 20.6 9.5 6.0 19.5 24.7
Indoco Remedies Sales (| Cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code INDREM CMP 460 FY10 398.3 34.4 13.4 11.2 13.6 11.5
Target 511 FY11E 486.9 42.0 11.0 8.4 14.6 12.9
MCap 565.0 Upside (%) 11 FY12E 581.1 48.7 9.4 6.4 14.9 15.6
FY13E 712.6 63.9 7.2 5.3 16.7 17.9
Opto Circuits Sales (| cr) EPS (|) PE(x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code OPTCIR CMP 260 FY09 818.5 22.2 11.7 20.1 26.1 19.8
Target 329 FY10 1077.6 14.2 18.3 13.3 26.0 20.4
Mcap (| cr) 4765.0 % Upside 27% FY11E 1558.6 18.3 14.2 12.3 20.1 17.0
FY12E 2267.7 21.9 11.9 9.9 21.3 18.0

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Strong Buy: 20% or more;

Buy: Between 10% and 20%;
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Reduce: Up to -10%
Sell: -10% or more;
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ICICIdirect.com Research Desk,

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ICICI Securities Limited

ICICIdirect.com | Equity Research

size of approximately US$170 million for the 12 months ending

Cadila Healthcare receives approval for hypertension drug

USFDA grants marketing approval for Glenmark’s anti-malarial drug

Glenmark Generics, the US subsidiary of Glenmark Pharmaceuticals

Lupin receives USFDA

Lupin Pharmaceuticals, Inc (subsidiary of Lupin) has been granted final

Strides gets USFDA approval for anti-inflammatory injection

Strides Arcolab received an approval from the USFDA for an additional

ICICIdirect.com | Equity Research

Exhibit 1: Summary of USFDA approvals

Alembic’s profit grows 127% YoY

Alembic reported a 23% increase in revenues to | 373.79 crore for the

Biocon sales up 15% YoY

Cadila Healthcare net profit at | 162 crore

Cadila Healthcare registered a total income of | 1170 crore in Q3FY11, up

Dr Reddy’s posts profit, but numbers disappoint

Dr Reddy's Laboratories swung to profit for the quarter ended December

ICICIdirect.com | Equity Research

The company's profit, however, was below expectations due to higher

Speciality business drives Glenmark sales

Glenmark's consolidated net sales moved up by 17% to | 751 crore for

Indoco Remedies net profit up 14%

Indoco's Q3FY11 sales increased 19.4% to | 114.3 crore mainly driven by

Lupin’s sales increase by 16.9% YoY in-spite of US slow down

ICICIdirect.com | Equity Research

Opto’s like to like sales up by 37%

Sun Pharma reported muted net profit growth of 3% YoY

Torrent Pharma profit dips 7.28% YoY

Torrent Pharmaceuticals’ consolidated net profit declined 7.28% YoY to |

Unichem’s net profit declines 24% YoY

Unichem Laboratories’ net profit decreased ~24% to | 25.60 crore for

Takeda Pharma sues Cadila Healthcare on Actos

Takeda Pharmaceuticals has filed a suit against Cadila Healthcare at a US

ICICIdirect.com | Equity Research

India’s patent office denies Abbott’s Kaletra

India’s patent office has denied protection to Abbott Laboratories’ AIDS

Pfizer sues Dr Reddy’s over generic Lipitor

Pfizer Inc. has taken Dr Reddy's Laboratories to court in an effort to delay

Dr Reddy’s gets favourable decision for generic Allegra D24

Federal jury suggests Glenmark to stop supplying of generic Tarka

Sanofi Aventis SA and Abbott Laboratories won a US jury trial in which

ICICIdirect.com | Equity Research

Lupin settles patent litigation with Dainippon Sumitobo Pharma

Natco plans to seek a compulsory licence from the government to make

German pharma major Bayer AG has filed patent infringement lawsuits

Dr Reddy’s launches generic Protonix in US market

Dr Reddy’s Laboratories has launched Pantoprazole Sodium (Anti-

ICICIdirect.com | Equity Research

Released tablets on January 19, 2011. Pantoprazole Sodium Delayed-

Eurocor GmbH launch Freeway in German market

Opto Circuits (India), a subsidiary of Eurocor GmbH presented its latest

M&As and demerger

Aurobindo divests China Penicillin-G business

Aurobindo Pharma has entered into a definitive agreement with China

Cadila Healthcare and Bayer HealthCare have signed an agreement to set

Natco sells its US pharma retail store Nick Drugs

ICICIdirect.com | Equity Research

Strides sets up a JV in Brazil- based BioChimico

Strides Arcolab’s wholly owned subsidiary Agila Specialties signed an

Biocon IN-105 fails to meet its primary goal

Dr Reddy’s Laboratories has entered into a research partnership with UK-