ICICI Securities recommends these 2 pharma stocks to buy
1 min read 04 Apr 2022, 12:05 PM ISTThe brokerage and research firm has retained its Buy recommendation on pharma stocks Dr Reddys and JB Chemicals
PremiumNovartis AG has entered into agreements with Dr Reddy’s Laboratories (DRL) and JB Chemicals & Pharmaceuticals (JBCPL) for their cardiovascular combination of Valsartan and Sacubitril in India. The patented molecule has been growing at around 38% CAGR over FY19-21 and is one of the fastest growing molecules in the cardiology segment, highlighted domestic brokerage and research firm ICICI Securities.
“Both the transactions appear reasonably valued at ~3.2-3.5x MAT February 2022 sales, however, patent for the drugs expire within the next 12 months which could erode the product value substantially," the note stated. The brokerage has retained buy rating on pharma stocks Dr Reddy's with target price of ₹5,359 and JB Chemicals with price target of ₹1,963.
While DRL has acquired the Cidmus brand (currently marketed by Lupin) for a cash consideration of $61 mn, Azmarda (currently marketed by Cipla) has been acquired by JBCPL for a cash consideration of around $32.5 mn.
JBCPL will acquire the Azmarda brand (currently marketed by Cipla) for a cash consideration of $ 32.5mn. As per IQVIA MAT February 2022 data, Azmarda recorded sales of around ₹768 mn and has entered the top 300 brands in the month of February 2022. Though, key risks Delay in launching new products, slowdown in India growth, regulatory hurdles and currency volatility, as per ICICI Securities.
“The acquisition is valued at ~3.2x MAT Feb’22 sales and is expected to be funded through debt (primarily) and internal accruals. Azmarda is expected to further strengthen JBCPL’s presence in the cardiology segment in India. The deal is expected to complete within two weeks, subject to customary closing formalities," the brokerage note added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
