INSUBCONTINENT EXCLUSIVE:
HDFC Securities has a buy call on Dishman Carbogen Amcis (DCAL) with a target price of Rs 355.
The current market price of Dishman Carbogen
Amcis is Rs 227.80.
Time period given by the brokerage is one year when Dishman Carbogen Amcis price can reach the defined target
The product was approved by the US FDA in Oct-18 for the indication of community-acquired bacterial pneumonia (CABP) and acute bacterial
We believe DCAL could generate annual revenue of US$ 4-5mn in the initial years
Ramp up of the antibiotic product could be much slower as compared to other therapies as there are various established products in the
However, the overall opportunity remains large and even a small pie (10 per cent Rx share) could generate about US$ 1.5bn revenue for the
With an increasing pressure on innovators to cut costs, the global CRAMS market is growing at a healthy double-digit rate
We believe DCAL is steadily carving out a reputation as a reliable partner for innovators
With 17-18 products in phase III, the flow of lucrative commercial launches is likely to continue
We expect this to not only drive further growth and profitability, but also reduce dependence on single blockbusters (like Niraparib),
leading to lower earnings risk
in Feb-19: The antibiotic is developed by a small company in the US
It is currently approved for two indications - CABP and ABSSSI
This is the first antibiotic approved by the US FDA for these two indications in about 20 years
Expect peak US revenues of US$ 1.5bn from the product, which will translate into US$ 22mn API sales and Rs 4 EPS for DCAL
The product has patent protection till 2030 and is also being tried for the indication of urinary tract infection (UTI) which is a US$ 4.2bn
market opportunity.
Tesaro update: GSK UK has decided to acquire Tesaro for a sum of US$ 5.1bn
A big positive for DCAL as it manufactures Niraparib API for Tesaro
This acquisition will make Niraparib a leading product in the cancer therapy, as Tesaro lacked marketing muscle
At peak revenues of US$ 2bn for GSK, DCAL can generate US$ 50-60mn top line and Rs 11 EPS
However, this scale up will require further indication expansion in ovarian cancer
The next major indication expansion will happen in FY20 with the success of the PRIMA trials.
Valuation: At CMP, DCAL is trading at 11.6x
FY20E and 9.1x FY21E EPS, a about 60 per cent discount to DIVI
Potential blockbusters like Niraparib, Crenolanib, recently approved antibiotic product, commercialization of the phase III pipeline, and
commissioning of the softgel facility should enable 13/26 per cent revenue/earnings CAGR over FY18-21E
This is why we expect the disparity in valuations as compared to peers to reduce.
