Cadila Healthcare - MCap: US$2,429million; CMP: Rs725; TP: Rs800 - Karvy

Actavis plc has announced that it its subsidiary, Warner Chilcott Company, LLC, has entered into an agreement in principle with Zydus Pharmaceuticals USA Inc. and Cadila Healthcare Limited to settle all outstanding patent litigation related to Zydus' generic version of Asacol® HD (mesalamine) delayed-release tablets. The patent expiry is November 15, 2021.

Warner Chilcott Company will grant Zydus a royalty-bearing license to market its generic Asacol® HD beginning on November 15, 2015 or earlier, following receipt by Zydus of fi nal approval from the US. FDA on its ANDA for generic Asacol® HD. Alternatively, if Zydus does not receive FDA approval of its generic Asacol® HD by July 1, 2016, Zydus will be permitted to launch an authorized generic version of Actavis' product beginning on July 1, 2016 on paying of royalty.

The market size of Ascol HD is around USD 350 million. The company has a FTF but is unsure about the status of the six month exclusivity. There are around 12 fi lers for the same. We believe settlements may come in later on after a certain period of time.

Due to better traction in US business we increase our multiple from 16x to 17x and value the stock at Rs 800 based on 17x FY 2015E (EPS Rs 46.9). We currently don't factor the option value of Rs 10 on account of Ascol HD exclusivity.

Source : Equity Bulls

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