Health Check

April 17, 2020 Normalised Q4FY20; contrasting developments for Stock Performance , Aurobindo... R e turn (%) Mca p As most companies from the I-direct healthcare universe maintained C om p a ny 1M 3M YTD 1Y 16-Ap r sufficient inventories till March 31, 2020, we may not witness a material .Inds. 24 2 6 -1 109767 impact on account of Covid-19 pandemic disturbances on their Divi's Lab. 27 26 30 40 63736 performance. Despite supply chain issues and restriction on movement of Dr Reddy's Labs 35 30 33 35 63553 staff during the lockdown period, domestic formulations are likely to C ipla 51 24 25 7 48019 maintain their growth tempo on the back of extension of acute season and B iocon 30 21 18 12 41754 price hikes. The US pack, on the other hand, is likely to drag numbers due Torrent Pharma. 16 19 23 24 38346 Abbott 21 38 33 118 37075 to a higher base. Hospitals may take some hit on revenues due to fewer Lupin 36 8 7 -2 37012 medical tourists, OPDs and postponement of elective surgeries.

Cadila Health. 36 26 33 0 34736 Update Sector Monthly In a surprising development, USFDA has granted first generic approval to Aurobindo Pharma29 10 14 -33 30557 Cipla's respiratory drug, 'Albuterol sulphate' (Proventil HFA) metered dose P fiz er 2 7 3 34 19824 inhaler amid rise in product demand due to ongoing Covid-19 pandemic. Ipca Labs. 18 23 35 62 19393 This earlier than expected (Q4FY21) approval augurs well for companies -6 -13 -4 9 19259 with similar respiratory pipeline for US (e.g. LupinProAir) since USFDA may S anofi 13 16 12 34 18010 Alembic Pharma 18 9 12 20 11978 expedite approvals for such products to meet demand. 8 20 39 31 11827 Amid Covid-19 pandemic, Hydroxychloroquine sulphate (HCQ), an anti- Syngene Int. 5 -10 -13 -5 11158 malarial drug, has emerged to become one of the frontline drugs in fighting 8 -2 2 8 11046 Fortis Health -9 -18 -10 -16 8965 the disease (not yet approved but may be used as prophylaxis for frontline healthcare workers), having shown positive results in certain clinical trials. Glenmark Pharma.45 -10 -9 -51 8894 In , Ipca Labs and are two main producers of HCQ, Narayana Hrudayalaya-5 -21 -11 28 5608 with backward integration, currently having combined capacities of ~50 MT Jubilant Life 4 -38 -36 -51 5431 (25 crore tablets of 200 mg). Cadila has scaled up HCQ production to ~30 Aster D M -11 -36 -36 -32 5145 F D C Ltd 16 5 15 47 4165 MT and can further scale it up to 40-50 MT in coming months if needed. On Indoco Remedies 23 18 23 15 2173 the other hand, Ipca’s manufacturing facilities under import alert have got a Hikal 18 -20 -10 -44 1268 reprieve from USFDA for supplying HCQ based formulations & API. Hester B io -16 -37 -31 -32 851 and Sandoz have terminated the agreement to buy S halby Ltd 6 -38 -33 -55 671 Healthcare Global-30 -37 -35 -67 599 Sandoz’ US generic oral solids and dermatology businesses due to delay in NGL Fine-Chem 4 -35 -27 -30 192 securing US Federal Trade Commission approval. Sun Pharma's largest Research Equity Retail Source: Bloomberg USFDA approved formulation plant in Halol, Gujarat has received official – Global Indices Performance action indicated (OAI) status from USFDA. Return (%) The Indian pharmaceutical market (IPM) grew 9.8% YoY to | 143738 crore C om pany 1M 3M YTD 1Y 3Y 5Y in FY20 from | 130939 crore in FY19. The growth was attributable to price S&P 500 Pharm Index17 (US)-5 -2 10 9 6

hike: 5.4%, new product launches: 2.7%, and volume expansion of 1.7%. NASDAQ Biotechnology23 (US)-5 -4 6 7 0 Securities S&P Pharmaceuticals20 (US)-20 -16 -4 -2 -8 Pharma stocks poised for re-rating amid panic… DJ Pharma and Biotech19 (US)-5 -3 9 8 4

ICICI Amid the Covid-19 pandemic panic, which has taken a heavy toll on most of DJ S TO XX Healthcare16 (E U)-7 -5 14 7 3 the sectors in the Indian market, most pharma companies withstood the MSCI World Pharm 17& Biotech-5 -3 13 9 4 NS E P harm a 31 12 14 -2 -4 -7 carnage while some, in fact, delivered positive returns during this period. In

pharma, barring a few supply related disturbances that may impact the Source: Bloomberg supply line for few weeks, we do not envisage material earnings impact in FY21. Also, note that in this unprecedented global lockdown, healthcare Research Analyst services, being at the top layer of essential services, remain exempt Siddhant Khandekar everywhere. Now that Chinese supply lines for raw materials (KSM, APIs) [email protected] are crawling back to normal, supply side issues are slowly waning. Similarly, MItesh Shah, CFA some windfall opportunities like HCQ or Proventil may continue to emerge [email protected] for Indian companies. Overall, the perceived resilience has helped multiple re-rating in some of the stocks especially for those with 1) stable earnings Sudarshan Agarwal visibility, 2) no balance sheet stress and strong return ratios, 3) having strong [email protected] presence in some critical segments, besides 4) decent ESG quotient. We prefer India focused players including MNCs, API/ CRAMs players and hospitals. We remain neutral on US focused generic players as issues such as regulatory overhangs and intense competition are yet to wane. Siddhant Khandekar [email protected]

Monthly Sector Update| Health Check ICICI Direct Research

Healthcare Q4FY20 Results Preview

As most companies from the I-direct healthcare universe maintained Expected growth in domestic formulations sufficient inventories till March 31, 2020, we may not witness material impact India on account of Covid-19 pandemic disturbances in their performances. The (| cr) Q 4F Y 20EQ 4F Y 19 % Q 3F Y 20 % universe is expected to register ~7% YoY growth to | 35033 crore. Despite B iocon 149 133 12.0 157 -5.1 C adila 974 902 8.0 910 7.1 supply chain issues and restriction on movement of staff during lockdown Ipca 420 356 18.0 486 -13.6 period, domestic formulations are likely to maintain growth tempo on the Lupin 1,137 1,053 8.0 1,297 -12.4 back of extension of acute season and price hikes. The US pack, on the other Dr R eddy's 729 651 12.0 764 -4.6 hand, is likely to drag numbers due to a higher base. Hospitals may take S un P harma2,470 1,101 124 2,517 -1.9 Torrent 779 754 3.4 871 -10.5 some hit on revenues due to fewer medical tourists, OPDs and Total 5521 3897 41.7 10146 -45.6 postponement of elective surgeries. Note: Sun Pharma’s distribution change impact on base Expected growth in US formulations Domestic formulations (base adjustment of Sun Pharma’s distribution US change) are expected to grow ~11% YoY to | 5521 crore mainly due to (| cr) Q 4F Y 20EQ 4F Y 19 % Q 3F Y 20 % extension of acute season and price hikes across portfolio to adjust for Aurobindo 2,964 2,481 19.5 2,969 -0.2 higher raw material prices. US (select pack) portfolio is expected to decline C adila 1,844 1,795 2.7 1,675 10.1 Lupin 1,483 1,741 -15 1,377 7.7 1.3% YoY to | 10862 crore mainly due to base effect mainly in Lupin, Cadila Dr R eddy's1,721 1,496 15.0 1,600 7.5 and Sun Pharma. The decline in US could have been sharper but for strong S un P harma2,460 3,123 -21 2,492 -1.3 ramp-up in products such as Oseltamivir, Hydroxychloroquine (HCQS) and Torrent 390 372 4.8 381 2.3 average rupee depreciation vis-à-vis US$ by 2.8% during the quarter. Total 10862 11008 -1.3 10495 3.5 Growth in other emerging markets is expected to be impacted by currency Expected growth in Europe formulations volatility and supply chain constraints. However, despite high base effect, (| cr) Q 4F Y 20EQ 4F Y 19 % Q 3F Y 20 % APIs segment is expected to grow 2.8% YoY. In case of Apollo Hospitals, Aurobindo 1,441 1,312 9.8 1,476 -2.4 growth is likely to be driven by strong growth in the pharmacy segment. C adila 48 54 -10 49 -2.5 Dr R eddy's 287 191 50.0 309 -7.3 On the companies front, five out of 10 companies are likely to report double Lupin 143 169 -15 144 -0.3 digit growth. Among key outliers, Ipca (strong growth across portfolio) and Torrent 220 239 -8.0 219 0.4 (biologics traction) are likely to see above 20% growth in revenues. Total 2139 1964 8.9 2198 -2.7 Expected growth in API segment EBITDA to grow 12% YoY; margins likely to improve 81 bps (| cr) Q 4F Y 20EQ 4F Y 19 % Q 3F Y 20 % Aurobindo 825 917 -10 790 4.5 Owing to improvement in product mix and efficient cost control measures, C adila 120 96 25.0 163 -26.2 EBITDA of the I-direct healthcare universe is expected to grow 11% YoY to Divi's Lab 680 647 5.0 724 -6.1 Ipca Labs 281 212 32.8 285 -1.5 | 35034 crore. EBITDA margins are likely to improve 81 bps to ~20%. Lupin 306 291 5.0 317 -3.6 Dr R eddy's 710 677 5.0 691 2.9 Adjusted net profit to grow 9% YoY S un P harma508 484 5.0 503 0.9 Total 2750 2676 2.8 2749 0.05 Adjusted net profit is expected to grow 9% YoY to | 3645 crore, mainly in- line with operational performance. Lower financial cost and deprecation are likely to get offset by higher tax rate (~24% vis-à-vis 22.2% in Q4FY19).

Exhibit 1: Estimates for Q4FY20E (| crore) Revenue Change (%) EBITDA Change (%) PAT Change (%) Com pany Q 4F Y20E YoY Q oQ Q 4F Y20E YoY Q oQ Q 4F Y20E YoY Q oQ Aurobindo Pharma 5,826.4 10.1 -1.2 1,136.9 7.6 -5.9 655.7 5.5 -8.7 B iocon 1,873.6 22.6 7.2 467.9 16.1 5.3 237.1 11.0 16.9 Cadila Healthcare 4,099.3 9.8 12.7 799.4 -0.1 15.3 467.2 1.6 24.5 Divi's Lab 1,342.8 6.9 -3.8 463.2 12.7 -6.2 335.3 15.9 -6.6 Dr. R eddys 4,349.4 7.9 -1.1 856.5 4.6 LP 522.0 14.6 LP IP C A Labs 1,151.5 30.9 -5.1 252.2 54.2 -7.8 133.3 21.7 -32.2 Lupin 3,714.8 -15.7 -1.4 488.6 -44.1 13.6 155.4 -46.1 LP S un P harma 7,925.3 11 -2.8 1,710.0 68 -7.1 868.2 41 -5.0 Torrent Pharma 1,924.0 3.7 -2.1 490.6 3.7 -9.1 209.4 -0.2 -16.6 Apollo Hospitals 2,826.6 13.1 -2.9 390.9 33.1 -9.1 60.8 -28.3 -34.0 Total 35,033.6 7.3 -0.2 7,056.3 11.8 16.3 3,644.6 8.9 92.7 Source: Company, ICICI Direct Research

ICICI Securities |Retail Research 2 Monthly Sector Update| Health Check ICICI Direct Research

IPM grows 10% YoY in FY20, driven by price growth Therapy wise performance (| crore) The ra p y F Y20 F Y19 YoY (%) The Indian pharmaceutical market (IPM) grew 9.8% YoY to | 143738 crore Anti-Infectives 19558 17709 10.4 in FY20 from | 130939 crore in FY19. The growth was attributable to price C ardiac 18278 16346 11.8 GI 15955 14760 8.1 hike: 5.4%, new product launches: 2.7%, and volume expansion of 1.7%. Anti Diabetic 14056 12620 11.4 Drugs under NLEM list grew 9.7% YoY while non-NLEM drugs grew 9.8%. V itamins 12272 11290 8.7 Respiratory 10964 9689 13.2 Among companies under I-direct coverage, 10 (Dr Reddys, Torrent Pharma, P ain 9797 8942 9.6 Derma 9580 8956 7.0 Cadila Healthcare, Lupin, FDC, Glenmark, Indoco, , Sun Pharma and Neuro 8659 7915 9.4 Ipca Labs) have outperformed industry growth rate. Gynaecological 7045 6641 6.1 Anti-Neoplastics 2996 2870 4.4 Therapy wise, nine major therapies have registered faster than industry Hormones 2642 2390 10.5 growth. Notable among them with growth rates – stomatologicals: 15.2%, O phthal 2572 2400 7.1 urology: 13.9%, respiratory: 13.2%, cardiac: 11.8%, anti-diabetic: 11.4% V accines 2270 2136 6.3 Urology 1930 1695 13.9 and anti-infectives: 10.4%. Blood Related 1680 1465 14.7 O thers 1365 1235 10.5 Sex Stimulants 774 688 12.5 Stomatologicals 769 668 15.2 Exhibit 2: Companies growth in domestic market in FY20 Anti Malarials 574 523 9.7

Top brands in Indian Pharma market (MAT;

| crore)

Pfizer Ajanta Alembic Biocon Cadila Cipla Reddys Dr Glenmark Pharma GSK Indoco Labs Ipca Lupin Natco Pharma Sun Torrent Abbott Brand C om pany Therapy Mar'20YoY % 25.0 Mixtard Abbott Anti Diabetic561 7.1 20.0 19.1 Glycomet GpUSV Anti Diabetic507 8.6 Lantus S anofi IndiaAnti Diabetic503 3.7 15.0 11.9 12.5 11.0 10.9 11.7 10.8 Janumet MSD Anti Diabetic487 9.1 9.0 9.6 10.1 10.2 10.0 7.9 7.6 7.8 Augmentin GSK Anti-Infectives465 21.0 (%) Liv 52 Himalaya GI 409 5.0 5.0 2.9 2.7 Duphaston Abbott Hormones 380 6.0 0.0 Monocef Aristo Anti-Infectives380 26.7 C lavam Alkem Anti-Infectives380 9.3 -5.0 -0.7 G alvus Met Novartis Anti Diabetic354 -24.5 Source: ICICI Direct Research; AIOCD Source: ICICI Direct Research; AIOCD

Acute vs. chronic vs. sub chronic Exhibit 3: Domestic formulations – market share (MAT value March 2020) 9% 8% Sub 8% Chronic 7% 6% 20% 6% 5% Acute 4% 5% 4% 47% 4% 3% 2% 3% 2% 2% 2% Chronic 1% 1% 33% 2% 1% 1% 1% 1% 1% 0% 0%

Sun Source: ICICI Direct Research; AIOCD; AS per AIOCD MAT Mar 2020

FDC

Ipca

Cipla

Lupin

Pfizer

Natco

Cadila

Sanofi

Ajanta

Indoco

Abbott

Biocon

Torrent

Alembic Glenmark Dr. Reddys Dr. Source: ICICI Direct Research, AIOCD

Exhibit 4: Acute vs. chronic vs. sub chronic (MAT value March 2020) 120 100 10 10 7 6 4 22 19 14 20 13 17 13 15 111 23 15 21 16 80 9 5 27 24 50 18 52 31 % 60 50 45 28 43 45 39 62 58 52 40 78 81 88 57 66 59 53 20 40 41 52 40 44 44 41 39 28 27 27

0

Sun Sun

FDC

IPCA

Cipla

Lupin

Cadila

Sanofi

Ajanta

Pfizer*

Indoco

Biocon

Torrent

Abbott

Alembic

Novartis

Glenmark Dr.Reddys Sub Chronic Chronic Acute

Source: ICICI Direct Research, AIOCD

ICICI Securities |Retail Research 3 Monthly Sector Update| Health Check ICICI Direct Research

IPM grows 9% YoY in March, driven by price growth Therapy wise performance (| crore) The ra p y Ma r'20Ma r'19 %F e b '20 % The Indian pharmaceutical market (IPM) grew 8.9% YoY (12.4% in February C ardiac 1669 1393 19.8 1572 6.1 2020) to | 11856 crore in March 2020. Growth was attributable to price hike: Anti-Infectives1573 1428 10.2 1644 -4.3 Anti Diabetic 1259 1065 18.2 1167 7.9 5.3%, new product launches: 2.5% and volume expansion of 1.1%. GI 1259 1183 6.4 1303 -3.4 Drugs under NLEM list grew 11.8% YoY while non-NLEM drugs grew 8.3%. Respiratory 1026 835 22.9 1054 -2.7 V itamins 949 915 3.7 987 -3.8 Among companies under I-direct coverage, eleven (Ipca, Torrent, Ajanta, Dr P ain 771 736 4.8 809 -4.7 Neuro 722 663 9.0 739 -2.2 Reddys’, Glenmark, FDC, Sun Pharma, Pfizer, Lupin, Abbott India, Cipla) Derma 713 726 -1.7 794 -10.2 have outperformed industry growth rate. Gynaecological546 568 -3.9 583 -6.4 Anti-Neoplastics229 267 -14.2 242 -5.4 Therapy wise, eight major therapies have registered faster than industry Hormones 215 200 7.3 225 -4.3 growth. Notable among them with growth rates – anti-malarials: 31.0%, O phthal 194 205 -5.6 208 -6.8 respiratory: 22.9%, cardiac: 19.8% and anti-diabetic: 18.2%. V accines 167 185 -9.7 198 -15.7 Urology 158 143 10.5 159 -0.5 On a MAT basis, IPM growth was 9.8% YoY to | 143738 crore. Blood Related 129 123 4.9 135 -4.5 O thers 111 103 7.7 119 -7.0 Exhibit 5: Domestic formulations - Growth trend Stomatologicals63 57 10.0 65 -3.4 Sex Stimulants 57 61 -6.2 70 -18.2 Anti Malarials 46 35 31.0 35 29.7

Source: ICICI Direct Research; AIOCD

Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

20.0 14.7

15.0 13.4

12.4

12.1

10.4

9.6

8.9

8.8 8.8

10.0 7.9

7.1

6.9

(%) 5.3 5.0

0.0 Indian Pharma Market

Source: ICICI Direct Research; AIOCD

Exhibit 6: Companies growth in domestic market in March 2020

Pfizer Abbott Ajanta Alembic Biocon Cadila Cipla Reddys Dr Glenmark Pharma GSK Indoco Labs Ipca Lupin Natco Sanofi Pharma Sun Torrent 25.0 20.9 20.0 16.2 15.2 15.2 14.7 13.5 13.7 15.0 11.4 10.0 9.8 8.8 10.0 6.7 7.6 3.7

5.0 1.2 (%) 0.0 -5.0 -1.2 -10.0 -9.0 -15.0

Source: ICICI Direct Research, AIOCD

ICICI Securities |Retail Research 4 Monthly Sector Update| Health Check ICICI Direct Research

Amid the lockdown initiated due to Covid-19 pandemic, drug availability becomes one of the key concerns. AIOCD has provided re-measured stock level (including in-transit inventory) across thousands of stockists’ up to April 7, 2020. As per AIOCD data, there is adequate stock at distributor level across therapies. As production/transport ramps up, the stock level will only go up and continue to stabilise. Additionally, apart from the overall seven weeks of inventory at distributor level, there is ~four to six weeks inventory at pharma company depot and average seven to 10 days inventory at retail level leading to a cumulative medicine stock of 13 weeks or almost three months. Exhibit 7: Closing stock days TruStock Closing Stock days Gain / Loss SUPER GROUP Mar'19 F eb'20 Mar'20 YoY Q oQ IP M 44 41 40 -4 -1 ANTI-INFECTIVES 49 45 47 -2 1 C AR DIAC 40 38 32 -8 -6 GASTRO INTESTINAL 43 41 41 -2 0 ANTI DIABE TIC 34 34 27 -7 -7 VITAMINS / MINERALS/ NUTRIENTS 44 45 44 0 -1 RESPIRATORY 43 34 33 -10 -1 PAIN / ANALGESICS 45 44 43 -2 -1 DERMA 50 48 58 8 10 NEURO / CNS 43 42 40 -3 -2 GYNAECOLOGICAL 51 48 54 3 6 ANTI-NEOPLASTICS 47 48 43 -4 -5 OPHTHAL / OTOLOGICALS 41 41 44 3 3 HORMONES 48 41 41 -7 0 V AC C INE S 37 51 51 14 0 UROLOGY 43 43 41 -2 -2 BLOOD RELATED 49 46 43 -6 -3 OTHERS 49 54 55 6 1 SEX STIMULANTS / REJUVENATORS 50 49 58 8 10 STOMATOLOGICALS 39 39 40 1 1 ANTI MALARIALS 75 72 52 -23 -21 Source: ICICI Direct Research, AIOCD

ICICI Securities |Retail Research 5 Monthly Sector Update| Health Check ICICI Direct Research

Exhibit 8: Top five brands in value terms (MAT value March 2020) S un Brand Therapy S ales C ipla Brand Therapy S ales C adila Brand Therapy S ales 1 R osuvas C ardiac 287 1 F oracort Respiratory 335 1 Deriphyllin Respiratory 169 2 Levipil Neuro 286 2 B udecort Respiratory 244 2 S kinlite Derma 155 3 V olini P ain 262 3 Duolin Respiratory 231 3 Atorva C ardiac 141 4 Istamet Anti Diabetic 255 4 S eroflo Respiratory 194 4 Mifegest K it Gynaecological139 5 G emer Anti Diabetic 212 5 Asthalin Respiratory 184 5 P antodac GI 133

L upin Brand Therapy S ales Torrent Brand Therapy S ales Dr. ReddysBrand Therapy S ales 1 Gluconorm-G Anti Diabetic 250 1 S helcal V itamins 224 1 O mez GI 161 2 Huminsulin Anti Diabetic 181 2 Chymoral ForteP ain 164 2 O mez D GI 137 3 B udamate Respiratory 135 3 Nikoran C ardiac 116 3 E conorm GI 126 4 G ibtulio Anti Diabetic 127 4 Az ulix-Mf Anti Diabetic 106 4 Atarax Derma 117 5 O ndero Anti Diabetic 112 5 Nexpro R d GI 103 5 S tamlo C ardiac 94

G lenm ark Brand Therapy S ales IPCA Brand Therapy S ales Alem bic Brand Therapy S ales 1 Telma C ardiac 291 1 Zerodol S p P ain 201 1 Az ithral Anti-Infectives 169 2 Telma H C ardiac 225 2 Zerodol P P ain 131 2 Althrocin Anti-Infectives 87 3 Telma Am C ardiac 139 3 Hcqs Anti Malarials 128 3 Wikoryl Respiratory 74 4 C andid Derma 123 4 F olitrax Anti-Neoplastics67 4 R oxid Anti-Infectives 54 5 Ascoril Ls Respiratory 121 5 Zerodol Th P ain 54 5 G estofit Gynaecological44

Natco Brand Therapy S ales Indoco Brand Therapy S ales Ajanta Brand Therapy S ales 1 V elpanat Anti-Infectives 175 1 Febrex Plus Respiratory 91 1 Met Xl C ardiac 110 2 Hepcinat Anti-Infectives 162 2 C yclopam GI 54 2 Atorfit C v C ardiac 53 3 G eftinat Anti-Neoplastics124 3 O xipod Anti-Infectives 52 3 Melacare Derma 51 4 E rlonat Anti-Neoplastics105 4 Sensodent-K Stomatologicals51 4 F eburic P ain 36 5 Natdac Anti-Infectives 95 5 Atm Anti-Infectives 51 5 Rosutor Gold C ardiac 27

Biocon Brand Therapy S ales Abbott Brand Therapy S ales S anofi Brand Therapy S ales 1 Insugen Anti Diabetic 112 1 Mixtard Anti Diabetic 561 1 Lantus Anti Diabetic 503 2 B asalog Anti Diabetic 84 2 Duphaston Gynaecological380 2 C ombiflam P ain 193 3 C anmab Anti-Neoplastics54 3 Thyronorm Hormones 353 3 Allegra Respiratory 192 4 E rypro Blood Related 36 4 Novomix Anti Diabetic 307 4 Amaryl M Anti Diabetic 161 5 Insugen R Anti Diabetic 25 5 Udiliv GI 286 5 Hexaxim V accines 150

Source: ICICI Direct Research; AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)

ICICI Securities |Retail Research 6 Monthly Sector Update| Health Check ICICI Direct Research

Exhibit 9: Top five therapies in value term (MAT value March 2020) S un Therapy Sales (|cr) C ipla Therapy Sales (|cr) C adila Therapy Sales (|cr) 1 C ardiac 2072 1 Respiratory 2325 1 Anti-Infectives 894 2 Neuro 1966 2 Anti-Infectives 1468 2 C ardiac 866 3 GI 1430 3 C ardiac 877 3 Respiratory 654 4 Anti-Infectives 1232 4 GI 411 4 GI 641 5 Anti Diabetic 1081 5 Urology 380 5 P ain 574

L upin Therapy Sales (|cr) Torrent Therapy Sales (|cr) Dr. Reddys Therapy Sales (|cr) 1 C ardiac 1293 1 C ardiac 1368 1 GI 788 2 Anti Diabetic 1282 2 GI 726 2 C ardiac 463 3 Anti-Infectives 743 3 Neuro 658 3 Derma 380 4 Respiratory 677 4 V itamins 564 4 Respiratory 304 5 GI 389 5 Anti Diabetic 370 5 Anti Diabetic 256

G lenm ark Therapy Sales (|cr) IPCA Therapy Sales (|cr) Alem bic Therapy Sales (|cr) 1 C ardiac 906 1 P ain 592 1 Anti-Infectives 376 2 Derma 888 2 C ardiac 331 2 C ardiac 265 3 Respiratory 604 3 Anti Malarials 322 3 Respiratory 231 4 Anti-Infectives 431 4 Anti-Infectives 152 4 GI 198 5 Anti Diabetic 297 5 GI 134 5 Gynaecological 182

Natco Therapy Sales (|cr) Indoco Therapy Sales (|cr) Ajanta Therapy Sales (|cr) 1 Anti-Infectives 526 1 Stomatologicals 167 1 C ardiac 356 2 Anti-Neoplastics 520 2 Respiratory 164 2 O phthal 207 3 P ain 33 3 Anti-Infectives 159 3 Derma 140 4 C ardiac 4 4 GI 126 4 P ain 52 5 O thers 3 5 V itamins 81 5 V itamins 29

Biocon Therapy Sales (|cr) Abbott Therapy Sales (|cr) S anofi Therapy Sales (|cr) 1 Anti Diabetic 254 1 Anti Diabetic 1768 1 Anti Diabetic 962 2 Anti-Neoplastics 117 2 GI 1541 2 C ardiac 492 3 Blood Related 40 3 V itamins 934 3 V accines 413 4 Anti-Infectives 26 4 Anti-Infectives 787 4 Respiratory 337 5 Derma 18 5 Neuro 740 5 P ain 274

Source: ICICI Direct Research, AIOCD; Sanofi includes Sanofi India and Sanofi Pasteur (Vaccine)

ICICI Securities |Retail Research 7 Monthly Sector Update| Health Check ICICI Direct Research

Monthly Sector News

Price hikes, new launches, recalls, approvals Cipla gets first generic approval for Albuterol sulphate MDI from USFDA Cipla has received USFDA approval for the first generic version of Proventil HFA (Albuterol sulphate) metered dose inhaler (MDI), 90 mcg/inhalation in US. As per USFDA, the drug, used in treatment of bronchospasms, has seen an increased demand amid the Coronavirus pandemic. This approval comes as a positive surprise for us and augurs well for the company's US business. Dr Reddys' launches leukaemia drug 'Invista' in India As per media reports, Dr Reddy's has launched 'Invista', the generic version of Bristol-Myers' cancer drug Sprycel (dasatinib) in India. The drug is indicated for treatment of chronic myeloid leukaemia (CML) and its patent in India has expired on 12 April 2020. Biocon, Mylan have launched Fulphila in Australia Biocon, Mylan have launched Fulphila, a biosimilar to Neulasta (Pegfilgrastim) in Australia. The drug, approved by the Therapeutic Goods Administration for the treatment of cancer patients following chemotherapy, is available on the Pharmaceutical Benefits Scheme (PBS). This is the third biosimilar product to be launched in Australia under this partnership. Ministry of Health places ~10 crore HCQ tablets order with Ipca, Cadila As per media reports, Ministry of Health and Family Welfare has placed an order with Ipca Laboratories and Cadila Healthcare to supply ~10 crore hydroxychloroquine (HCQ) tablets, after ICMR recommendation for use of the drug as a preventive medication in high-risk individuals for Covid-19. Lawsuits, court rulings, settlements, regulatory issues Alembic's Karkhadi plant receives EIR from USFDA Alembic Pharma's API manufacturing facility at Karkhadi has received an establishment inspection report (EIR) for the USFDA inspection conducted from January 13-17, 2020. USFDA grants special exemption to Ipca's facilitates for securing Chloroquine supply USFDA has granted special exemption to Ipca Labs Ratlam API facility (under import alert) in order to secure API supplies of Chloroquine phosphate and Hydroxychloroquine sulphate to potentially combat Coronavirus (Covid-19). The company's SEZ , Silvassa and Pithampur facility which produce Hydro chloroquine sulphate tablets have also been granted special exemption. However, the USFDA has also informed that it may rescind the exemption at a later stage when the shortage of said products normalises. While the drug has yet not approved by any drug regulatory authority for treatment of Covid-19, clinical trials for the same are under way. In case of a positive outcome, Ipca being one of the largest vertically integrated manufacturers for chloroquine (API & formulations) will be able to capitalise on this one-off opportunity. ICMR recommends use of HCQ for Covid-19 The national task force for Covid-19 established by Indian Council for Medical Research (ICMR) has recommended Hydroxychloroquine (HCQ) as a preventive medication for asymptomatic high-risk population. The same has been approved by the Drug Controller General of India (DGCI) for restricted use in emergency as well. Government bans export of HCQ The central government has prohibited export of HCQ and its formulations with immediate effect barring certain exceptions. The drug was recently approved as a precautionary medication by ICMR for asymptomatic high-

ICICI Securities |Retail Research 8 Monthly Sector Update| Health Check ICICI Direct Research

risk population amid positive outcomes in certain clinical/laboratory studies for Covid-19. CDSCO approves use of Lopinavir/Ritonavir in Covid-19 patients As per media reports, central drugs standard control organisation (CDSCO), has approved the fixed dose combination of Lopinavir/Ritonavir (Kaletra) for restricted public health use among the symptomatic Covid-19 patients. As per the approval, hospitalised and laboratory confirmed Covid-19 adult patients can give written informed consent to receive the treatment for 14 days EMA recommends approval of Lupin's 'Nepexto' to European commission European Medicines Agency (EMA) has adopted a positive opinion and has recommended the approval of Lupin's (and partner Mylan) auto-immune drug, 'Nepexto', a biosimilar to Enbrel (Etanercept). The opinion will further be considered by the European Commission (EC) for final approval, which is expected in May 2020. The drug (Enbrel) had global annual sales of ~US$9.6 billion as per IQVIA MAT December 2019. Sun Pharma's Halol facility receives OAI status from USFDA Sun Pharma's Halol facility in Gujarat has received official action indicated (OAI) status from USFDA for the good manufacturing practices (GMP) inspection conducted from December 3-13, 2020 post which it was issued 8 Form 483 observations. The company has 19 ANDAs and two NDAs filed that are pending USFDA approval from the plant. The facility contributes 3-4% of total revenues (~10% US revenues). The OAI status at Halol is yet another addition to the regulatory & legal issues that the company is currently facing (US Department of Justice, whistleblower issue). Taking all these into account, we believe the stock is likely to remain under pressure at least in near term. Lupin's Coral Springs facility receives EIR from USFDA Lupin has received Establishment Inspection Report (EIR) from the USFDA for its Inhalation Research Center located at Coral Springs, Florida. The facility was inspected by the USFDA, from February 19-26, 2020, on behalf of the UK MHRA for the company's generic Fostair application to the UK MHRA. USFDA allows donation of HCQ, chloroquine phosphate to its emergency stockpile As per media reports, USFDA has allowed donation of HCQ and chloroquine phosphate (CPH) to the US emergency stockpile. This is an emergency use authorisation (EUA) and not an approval, which will be dependent on the outcome of ongoing clinical trials in US. However, this authorisation does not signify chloroquine-based drugs as the only remedy for Covid-19. Additionally, in order to support US response to Covid-19, Sandoz and Bayer have donated 30 million HCQ and 1 million CPH doses, respectively. Jubilant Pharma's US Salisbury plant receives USFDA EIR with VAI status Jubilant Pharma's (a subsidiary of Jubilant Life Sciences) solid dosage facility at Salisbury, Maryland in the US has received an establishment inspection report (EIR) with voluntary action indicated (VAI) status from USFDA for the inspection conducted from February 24-28, 2020. Biocon's Malaysian facility receives USFDA EIR +VAI for Insulin Glargine Biocon has received establishment inspection report (EIR) from USFDA for the pre-approval inspection (PAI) of its insulin manufacturing facility in Malaysia, for Insulin Glargine. The inspection has been closed with a VAI (Voluntary Action Indicated) classification, for the three observations issued after the inspection conducted from 10-21 February, 2020.

ICICI Securities |Retail Research 9 Monthly Sector Update| Health Check ICICI Direct Research

USFDA requests withdrawal of all Ranitidine products in US USFDA has requested manufactures to withdraw all Ranitidine, prescription and OTC, products from the US market due to observation of increase in N- Nitrosodimethylamine (NDMA) impurity levels in some products over time and when stored at higher than room temperatures. Lupin's Aurangabad facility clears USFDA inspection Lupin's Aurangabad facility has received Establishment Inspection Report (EIR) with no action indicated (NAI) status from the USFDA for the inspection conducted between February 10-14, 2020 post which the facility had received no observations Class action suit filed against Aurobindo Pharma in US As per media reports, a class action suit has been filed against Aurobindo Pharma and others in Florida district court, US for allegedly concealing the presence of N-nitrosodimethylamine (NDMA) impurity, a probable human carcinogen, in its type-2 diabetes drug, Metformin. India removes restrictions on export of 24 drugs As per media reports, India has removed restrictions on the export of 24 APIs and their formulations. The only exception to the original list (26) is paracetamol and its formulations. USFDA has closed audit of Dr Reddy's Telangana API plant Dr Reddys' API manufacturing plant - 5 at Miryalaguda, Nalgonda district, Telangana has received establishment inspection report (EIR) from USFDA indicating audit closure with voluntary action indicated (VAI) status. The facility had received three Form 483 observations after the inspection completed on 5 March, 2020. Lupin's Nagpur OSD facility receives EIR from USFDA Lupin's oral solid dosage (OSD) facility at Nagpur has received establishment inspection report (EIR) from USFDA after closure of inspection. The facility had earlier received 2 Form 483 observations after the prior approval inspection (PAI) conducted by USFDA from January 6-10, 2020. Lupin's Mandideep Unit-II facility receives EIR with VAI status from USFDA Lupin’s Mandideep (Unit-II) facility in Madhya Pradesh has received establishment inspection report (EIR) with voluntary action indicated (VAI) status from USFDA after closure of inspection. The facility was inspected from 26 November to 4 December, 2018 by USFDA. The company’s Mandideep (unit-I) still remains under warning letter. As a whole, Mandideep's overall contribution to Lupin's US sales is ~5-6% and hence this is not a critical plant for the company like Goa, Pithampur, or Somerset (US). Biocon biologics receives EIR from USFDA for its 2 facilities in Bangalore Biocon has received establishment inspection report (EIR) from USFDA for two of its new biologics manufacturing facilities in Bengaluru indicating successful audit closure. The pre-approval inspection (PAI) inspection had been conducted from September 10-19, 2019 at the end of which USFDA had issued a Form 483 with four observations for the new drug substance (DS) facility, three observations for the new drug product (DP) facility and one general observation. India relaxes ban on paracetamol and HCQ export India has relaxed its earlier ban on export of paracetamol and hydroxychloroquine (HCQ). The drugs, being used in treatment of Covid-19, will be supplied in 'appropriate quantities' to affected and neighbouring countries on a licensing base. Ipca Labs and Cadila Healthcare are two major producers of HCQ with backward integration in India.

ICICI Securities |Retail Research 10 Monthly Sector Update| Health Check ICICI Direct Research

M&As, demergers, tie-ups and JVs Glenmark divests Vwash brand to HUL Glenmark has signed an agreement to divest its intimate female hygiene OTC brand, 'VWash' to HUL. Under the terms of the agreement, Glenmark will receive an upfront payment and sales royalties for three years for the transfer of the brand alongside other extensions (no employee transfer). The transaction is expected to be completed in the next few months. The company's consumer business comprised three brands (Candid, VWash and Scalp) contributing | 190 crore in FY19. As per our estimates, the brand had ~| 50-60 crore in annual sales (FY19) and is likely to fetch | 200-250 crore (pre-tax) for the company at 4-5x. We do not expect a significant debt reduction as the deal size is small. Dr Reddys' board approves transfer CDMO business to subsidiary The Dr Reddy’s board has approved the sale of its contract development and manufacturing organisation (CDMO) division of Custom Pharmaceutical Services (CPS) business to its wholly owned step-down subsidiary, Aurigene Pharma, on slump sale basis, for a consideration of US$72 million. Sanofi's Ankaleshwar plant sale likely to be delayed till June 30, 2020 Sanofi India has informed through an exchange filing that the slump sale & transfer of its Ankaleshwar, Gujarat facility to Zentiva Pvt Ltd is now likely to be completed by June 30, 2020 changed from the earlier expected closing date of March 31, 2020 due to a delay in getting regulatory approvals. Aster DM to exit Kuwait market through sale of pharmacy business Aster DM has announced that it is going to exit the Kuwait market through sale of its loss making pharmacies to Pharmazone and Palestine Pharmacy Company for a consideration of ~ | 11.6 crore. The company expects the deal to be completed by May 31, 2020. The Kuwait division contributed 0.42% (~| 33 crore) of consolidated revenues and had a networth of ~| (27) crore as of FY19. Aster DM fully acquires HR consultancy firm, 'EMED Human Resources India' Aster DM has increased its shareholding in HR consultancy firm, EMED Human Resources India (EMED) from 33.33% to 100% through its wholly owned subsidiary, DM Med City Hospitals (India) for a cash consideration of | 2.25 lakh. In FY19, EMED had a turnover of ~| 1.25 crore and a networth of ~| 21 lakh. Sandoz deal off the shelf due to FTC delay Aurobindo Pharma and the US based Sandoz Inc. (generics/biosimilars arm of Novartis AG) have mutually decided to terminate the agreement to buy Sandoz’ US generic oral solids and dermatology businesses due to a delay in approval from the US Federal Trade Commission (FTC) for the transaction within the anticipated timelines. There will be some solace on the balance sheet front as the debt level was expected to double post this deal, which will not happen now. However, besides foregoing a portfolio of ~300 products spanning various therapies, the company will be losing the manufacturing base in the US, which could have proven critical in the current scenario when some of its key facilities in India are facing cGMP issues. Accordingly, we cut our EPS estimates by ~11-12% for FY21E and FY22E. Shalby incorporates 'Mars Medical Devices' Shalby has incorporated, 'Mars Medical Devices Ltd', a wholly owned subsidiary with paid up capital of | 5 lakh (FV: | 10 per share). The business, which would comprise R&D, manufacture, trading, importer, collaborator of all types of implants, medical devices, appliances and apparatus, etc, has not yet started operations.

ICICI Securities |Retail Research 11 Monthly Sector Update| Health Check ICICI Direct Research

Others Sun Pharma approves | 1700 crore buyback Sun Pharma's board has approved a share buyback worth | 1700 crore (excluding transaction costs) at a maximum buyback price of | 425 per share (~4 crore shares). Narayana Hrudayalaya temporarily shuts down Cayman operations Narayana Hrudayalaya has temporarily shut down operations at its Cayman Islands hospital as a precautionary measure amid Coronavirus (Covid-19) outbreak. Syngene's Mangalore facility commences operations Syngene has commenced operations at its new Mangalore SEZ (Unit - I) manufacturing facility in Karnataka. Government announces | 14,000 crore package for APIs, medical devices As per media reports, in order to reduce India's dependence on China for drug raw materials (~70%), the government has announced a | 14000 crore package to support and incentivised domestic production of APIs and medical devices. Under the scheme, three bulk drug parks will also be developed with an investment of | 3000 crore (as part of package) over the next five years. P&G Health's operations disrupted amid Covid-19 lockdown As per an exchange filing, P&G Health's (erstwhile Merck) operations have been disrupted across different sites, facilities & distribution centres on the back of the lockdown to arrest the spread of Covid-19 pandemic. The company expects these disruptions to continue for the next three weeks minimum. Syngene temporarily suspends part operations at Bangalore, Hyderabad Syngene has temporarily suspended part of its research activities at Bangalore SEZ and Hyderabad facilities from March 25 - April 14, 2020 (21 days) on account of nationwide lockdown to contain the spread of Covid-19 pandemic. The company will continue operations for essential services, development and manufacturing activities at the above facilities. Lupin reappoints Ramesh Swaminathan as CFO Lupin has reappointed Ramesh Swaminathan as Chief Financial Officer (CFO) and Head Corporate Affairs. He will also be joining the board as an Executive Director. Jubilant's Nanjangud plant temporarily shut as workers test Covid-19 positive Jubilant Life Sciences has clarified through an exchange filing that its Nanjangud plant in Karnataka has been temporarily shut down till April 10, 2020 and all plant employees have been placed under self-quarantine due to some of its workers testing positive for Covid-19. Aster DM dedicates 750 beds for Covid-19 in Kerala As per media reports, Aster DM has dedicated 750 beds across its Kochi, Kozhikode, Kannur, Kottakkal and Wayanad hospitals for Covid-19 patients in Kerala. Cipla completes Phase-3 study for generic version of Advair Cipla has successfully completed Phase-3 clinical study for the generic version of GSK's Advair Diskus (fluticasone propionate + salmeterol inhalation) powder, 100/50 mcg in US. The drug and its generic equivalents, indicated for treatment of asthma and other respiratory diseases, had annual US sales of ~US$2.9 billion as per IQVIA MAT February 2020. Divis Lab facing supply chain issues due to Covid-19 lockdown Divi's Lab has informed through an exchange filing that it is experiencing some supply chain disruptions due to the restriction in movement of goods

ICICI Securities |Retail Research 12 Monthly Sector Update| Health Check ICICI Direct Research

and employees amid the national lockdown. The company also anticipates delays in certain product deliveries to customers. Narayana Hrudayalaya reopens Cayman hospital for emergency and critical cases Narayana Hrudayalaya has re-opened its Cayman hospital for emergency and critical care services only from March 27, 2020. All other services including out-patient and elective procedures still remain closed. The complete restoration of services will be done in a phased manner. Hikal resumes partial operations at its facilities Hikal has started limited operations at all its factories in Taloja (Maharashtra), Mahad (Maharashtra), Panoli (Gujarat), Bengaluru (Karnataka) and the R&D facility located in Pune after receiving requisite permissions from government authorities. Cadila Healthcare in animal testing phase for Covid-19 vaccine Cadila healthcare has clarified through an exchange filing that it is currently carrying out animal testing of its Coronavirus vaccine. If test results are successful, human clinical trials will follow. NGL Fine-Chem extends shutdown NGL Fine-Chem has extended the shutdown of its office till April 30, 2020 due to Coronavirus (Covid-19) pandemic in accordance with Maharashtra government notice. Additionally, the factories at Tarapur and Navi Mumbai are operating at very low capacities as per the company's press release. Cipla Health partners with online food delivery aggregators for delivering OTC wellness products As per media reports, Cipla's subsidiary, 'Cipla Health', has partnered with Swiggy, Zomato and Dunzo for home deliveries of over the counter (OTC) wellness products amid the national lockdown. This initiative will cater to 4 lakh people and cover 250 stores across 45 cities in India. Suven Life presents Masupirdine study data in AAT-AD/PD meeting Suven Life Sciences has informed through an exchange filing that it has presented data from its Masupirdine (SUVN-502) Phase 2A Study at the Advances in Alzheimer’s and Parkinson’s Therapies (AAT-AD/PD) focus meeting 2020. ANDA Approvals Dr Reddy's has launched the first generic version of Geodon (ziprasidonemesylate) Injection, 20 mg/mL single-dose vials in US. The drug, used in treatment of schizophrenia, had annual US sales of ~US$21.8 million as per IQVIA MAT January 2020. Dr Reddy's has launched the generic version of Adapt Pharma's Narcan (naloxone hydrochloride) 2 mg/2 mL single-dose pre-filled syringe for Injection in US. The company also has a 180-day marketing exclusivity under the competitive generic therapy (CGT) granted by USFDA. The drug, used to reverse opioid overdose, had annual US sales of ~US$31 million as per IQVIA MAT January 2020. Dr Reddys has launched the generic version of Vyera Pharma’s Daraprim (pyrimethamine) tablets, 25mg in US. The drug, used to treat toxoplasmosis, had annual US sales of ~US$10 million as per IQVIA MAT January 2020. Lupin has launched the generic version of Merck Sharp's Diprolene (Betamethasone Dipropionate) ointment, 0.05% in US. The drug, used to treat a variety of skin conditions, had annual US sales of ~US$21 million as per IQVIA MAT January 2020. The drug will be manufactured from the company's Pithampur (Unit - III) facility. Glenmark Pharma has received tentative USFDA approval for the generic version of AstraZeneca's Farxiga (Dapagliflozin) tablets, 5/10 mg in US. The

ICICI Securities |Retail Research 13 Monthly Sector Update| Health Check ICICI Direct Research

drug, a sodium-glucose cotransporter indicated for treatment of type 2 diabetes, had annual sales of ~US$1.8 billion as per IQVIA MAT January 2020. Aurobindo Pharma has received USFDA approval for the generic version of Covis Pharma's muscle relaxant, Zanaflex (Tizanidine Hydrochloride) capsules, 2/4/6 mg in US. Cipla has received USFDA approval for the generic version of Astrazeneca's Nexium (Esomeprazole) for oral suspension, 10/20/40 mg in US. The drug, a proton pump inhibitor used in treatment of a variety of gastrointestinal conditions, had annual US sales of ~US$70 million as per IQVIA MAT November 2019. Cadila Healthcare has received tentative approval from USFDA for the generic version of Rytary (Carbidopa and Levodopa) extended-release capsules in US. The drug, indicated for the treatment of Parkinson’s disease, will be manufactured at the company's formulations facility at Ahmedabad SEZ. Cadila Healthcare has received USFDA approval for the generic version of Lamictal XR (Lamotrigine) extended-release tablets in US. The drug, indicated for the treatment of certain types of seizures, will be manufactured at the company's formulations facility at Ahmedabad SEZ. Lupin has launched the generic version of Novartis' Myfortic (Mycophenolic Acid) delayed-release tablets, 180/360mg in US. The drug, an immunosuppressant used to prevent organ rejection after a transplant, had annual US sales of ~US$156 million as per IQVIA MAT February 2020. The USFDA approval for the drug was received by Lupin's alliance partner Concord Biotech earlier. Ajanta Pharma has received USFDA approval for Cholestyramine powder. The drug is used to reduce high cholesterol. Aurobindo Pharma has received USFDA approval for generic version of Eli Lilly’s CNS drug, 'Prozac' (Fluoxetine) tablets, 10/20mg in US. This is the first ANDA approval out of its APL Healthcare oral formulation facility in Hyderabad. The drug, to be launched in April 2020, had an estimated market size of ~US$ 42 million in US as per IQVIA MAT February 2020. Cadila Healthcare has received ANDA approval for the oncology drug, Imatinib Mesylate (US RLD: Gleevec) tablets, 100/400mg from USFDA. The drug will be manufactured at the company's formulations facility at Ahmedabad SEZ. Cadila Healthcare has received tentative approval from USFDA for the generic version of Jardiance (Empagliflozin) tablets, 10/25mg in US. The drug, indicated for the treatment of type-2 diabetes mellitus, will be manufactured at the company's formulations facility at Ahmedabad SEZ. Dr Reddy's has launched the authorized generic version of US pharma's NitroDur (nitroglycerin) transdermal infusion system in US. The combined market for all nitrogylcerin transdermal patches, used to prevent chest pain attacks (angina) in patients with certain heart conditions, had annual US sales of ~US$14.7 million as per IQVIA MAT January 2020. Dr Reddy's has launched the generic version of Arbor Pharma's 'Evekeo' (Amphetamine Sulphate) tablets 5/10mg in US. The Schedule-II drug, used to treat attention deficit hyperactivity disorder (ADHD) and other central nervous disorders, had annual US sales of ~US$38 million as per IQVIA MAT January 2020. Ajanta Pharma has received USFDA approval for Metformin Hydrochloride extended release tablets, 500/1000mg in US. Also, Sun Pharma has received tentative approval for Dapagliflozin/Saxagliptin drug from USFDA. Both the drugs are used to treat type-2 diabetes.

ICICI Securities |Retail Research 14 Monthly Sector Update| Health Check ICICI Direct Research

Cadila Healthcare's wholly owned subsidiary, 'Zydus Worldwide DMCC' has received tentative approval from USFDA to market Macitentan (US RLD: Opsumit) tablets, 10mg in US. The drug, indicated for the treatment of pulmonary arterial hypertension, will be manufactured at the company's CMO Umedica Labs facility in Vapi, Gujarat. Cadila Healthcare has received USFDA approval for the generic version of Trilafon (Perphenazine) tablets, 2/4/8/16mg in US. The drug, indicated for the treatment of schizophrenia and controlling severe nausea and vomiting, will be manufactured at the company's formulations facility at Baddi.

Exhibit 10: One year forward PE

40.0 25% Premium 30.0

x 20.0 10.0

0.0

Oct-17 Oct-18 Oct-19

Apr-17 Apr-18 Apr-19 Apr-20 NSE500 Index NSE Pharma

Source: ICICI Direct Research, Bloomberg

ICICI Securities |Retail Research 15 Monthly Sector Update| Health Check ICICI Direct Research

Exhibit 11: ICICI Direct coverage universe (Healthcare) Com pany I-Direct CMP TPRating M Cap EP S (|) P E(x) RoCE (%) RoE (%) C ode (|) (|) (| cr) F Y 19F Y 20E F Y 21E F Y 22E F Y 19F Y 20EF Y 21EF Y 22E F Y 19F Y 20EF Y 21EF Y 22E F Y 19F Y 20EF Y 21EF Y 22E Ajanta Pharma AJAP HA 1354 1,700 B uy 11813 43.5 53.1 64.1 77.2 31.1 25.5 21.1 17.5 21.8 24.2 23.4 24.2 17.1 18.1 18.7 19.3 Alembic Pharma ALEMPHA 635 685 Hold 11977 31.4 44.3 27.2 31.0 20.2 14.3 23.4 20.5 19.6 21.6 13.6 14.9 21.8 24.9 13.6 13.8 Apollo Hospitals APOHOS 1384 1,490 B uy 19260 17.0 21.5 35.2 65.7 81.6 64.3 39.3 21.1 8.8 10.4 12.6 16.8 7.1 8.1 11.2 17.9 Aurobindo Pharma AURPHA 521 500 Hold 30530 42.1 49.2 51.3 55.5 12.4 10.6 10.2 9.4 15.9 17.8 17.1 16.9 17.7 17.4 15.5 14.5 B iocon B IO C O N 348 310 Hold 41730 6.2 6.9 9.5 14.6 56.0 50.3 36.6 23.9 10.9 12.1 14.3 18.5 12.2 11.4 13.8 17.7 Cadila Healthcare CADHEA 339 375 Hold 34736 18.1 14.3 17.5 20.9 18.8 23.7 19.4 16.2 13.0 10.6 12.1 13.4 17.8 12.9 14.1 14.9 C ipla C IP LA 596 610 Hold 48027 18.6 20.7 22.7 27.7 32.1 28.8 26.3 21.5 10.9 12.7 13.3 14.8 10.0 10.2 10.2 11.2 Divi's Lab DIV LAB 2403 2,130 Hold 63780 51.0 49.9 58.4 71.0 47.1 48.2 41.2 33.8 25.5 21.7 21.8 22.8 19.4 16.6 16.9 17.5 Dr Reddy's Labs DRREDD 3824 3,980 Hold 63539 114.7 106.3 152.8 180.8 33.3 36.0 25.0 21.1 11.1 8.4 14.4 17.1 13.6 11.4 14.4 14.9 Glenmark Pharma GLEPHA 315 340 Hold 8894 26.9 26.8 34.6 43.2 11.7 11.7 9.1 7.3 15.3 12.8 14.5 16.1 13.5 12.0 13.5 14.5 Hikal HIK C HE 102 160 B uy 1594 8.4 9.6 11.1 13.3 12.2 10.6 9.2 7.7 14.3 13.3 13.6 14.5 13.6 14.1 14.2 14.9 Ipca Laboratories IP C LAB 1533 1,900 B uy 19370 35.1 55.7 65.6 79.3 43.7 27.5 23.4 19.3 15.0 20.5 21.0 21.6 14.2 19.1 18.9 19.2 Lupin LUP IN 816 745 Hold 36981 16.5 -29.2 18.3 31.1 49.3 -28.0 44.6 26.3 9.4 9.0 7.9 12.3 5.4 -10.0 6.0 9.3 Narayana HrudalayaNARHRU 275 330 B uy 5615 2.9 6.2 8.2 11.4 94.6 44.0 33.6 24.1 7.7 11.6 12.7 15.3 5.5 10.8 12.5 15.1 Natco Pharma NATPHA 606 650 Hold 11031 34.9 26.9 24.6 23.4 17.3 22.5 24.7 25.9 21.3 14.6 12.7 11.3 18.5 12.6 10.4 9.1 S un P harma SUNPHA 458 510 Hold 109779 15.9 17.6 18.6 23.2 28.9 25.9 24.5 19.7 10.3 10.8 10.7 12.1 9.2 9.4 9.1 10.2 Syngene Int. S Y NINT 279 360 B uy 11148 8.3 10.2 9.7 12.1 33.7 27.2 28.8 23.3 14.8 13.4 13.2 15.2 16.8 14.3 14.2 15.1 Torrent Pharma TORPHA 2264 2,395 Hold 38312 48.9 54.4 71.8 92.1 46.3 41.6 31.5 24.6 14.2 15.4 18.5 21.3 17.5 17.0 19.2 20.8 Source: ICICI Direct Research, Bloomberg

ICICI Securities |Retail Research 16 Monthly Sector Update| Health Check ICICI Direct Research

RATING RATIONALE ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock

Buy: >15%; Hold: -5% to 15%; Reduce: -5% to -15%; Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

ICICI Securities |Retail Research 17 Monthly Sector Update| Health Check ICICI Direct Research

ANALYST CERTIFICATION

We /I, Siddhant Khandekar, Inter CA, Mitesh Shah, CFA, Sudarshan Agarwal, PGDM (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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