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Alembic Pharma company update

Contributed by Nirmal Bang

News: Alembic Pharma has received USFDA approval for its NDA, Desvenlafaxine Base, a bioequivalent version of innovator drug, Pristiq® by Pfizer. Alembic is the sponsor and manufacturer of the NDA however marketing would be done by Ranbaxy. Desvenlafaxine Base is Alembic’s first 505 (b) (2) filing.

Our View: The IP of the product is on the name of Alembic showing the strong R&D capabilities of the company

Under the 505 (b) (2), Alembic along with its partner would try to convert prescriptions from succinate to base and expects to garner $10 - 30 mn revenues out of which APL’s share is 50%

Desvenlafaxine Succinate is a patented product with $538mn sales. Almost 11 players including Alembic Pharma have filed for ANDA for the product.
We have incorporated $5mn revenues from Desvenlafaxine Base in our FY14E projections.

APL has strong product pipeline of 55 ANDAs with 21 approvals and 15 launches including exclusive opportunities of five Para IV and one 505 B (2).

The company expects to file 10-12 more products every year including two 505 (b) (2) in FY14 with 7-8 approvals in FY14. It expects its international business to grow at CAGR of 30-35% over next 2-3 years

What is a 505 (b) (2)?

A 505(b) (2) application can be thought of as a hybrid that contains more data than an ANDA, but less data than an NDA. An NDA containing investigations of safety and effectiveness that are being relied upon for approval and were not conducted by or for the applicant, and for which the applicant has not obtained a right of reference.


Valuation & Recommendation

With domestic business growing at decent 12-14% CAGR and new businesses like US are growing at a much faster pace (~30-35%) with interesting opportunities like FTFs and 505 (b) (2), we remain positive on the future prospects of the company.

The stock has already re-rated since our initiation last year (22nd March 2012 at price of Rs 43), however we believe that there is still some room left for upside. We recommend investors to BUY the stock on declines with price target of Rs 119 (12x of FY14E EPS), an upside of 29% from current levels