Recommendation: Buy
CMP = Rs 340
Price target: Rs 500
Key points:
- As part of its settlement with Glaxo SmithKline, Ranbaxy Laboratories (Ranbaxy) has been awarded the 180-day exclusivity for Sumatriptan Succinate, the generic version of Glaxo SmithKline's Imitrex. Ranbaxy will launch the product sometime in December 2008 in the
- The annual market sales for Sumatriptan Succinate (Imitrex®) were USD985 million (IMS- MAT: September 2007). Assuming a market share of 40% for Ranbaxy and a price erosion of 60%, the product can generate revenues and profits of $79 million and $47 million respectively for Ranbaxy during the 180-day exclusivity period. This will translate into incremental earnings of Rs 4.5 per share.
- Ranbaxy's strategy of monetising the Para IV first-to-file (FTF) pipeline has paid off and Ranbaxy has four opportunities, including the recently announced deal on Imitrex, addressing a collective market opportunity of $12 billion lined up until 2010. Based on our discount-cash-flow (DCF) calculations, we believe that the FTF opportunities announced so far are collectively valued at Rs 2,724 crore, translating into a per share value of Rs 68.
- At the current market price of Rs 340, Ranbaxy is discounting our CY2008 earnings estimate by 19.3x.
- I maintain Buy recommendation on the stock with a price target of Rs 500.
