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EmkayResearch
Piramal Life Sciences Ltd
Pure R&D Value Play
28th August, 2008
Paragon Center, H -13 -16, 1st Floor, Pandurang Budhkar Marg, Worli, Mumbai – 400 013. India
Init
iati
ng
Co
ve
rag
e
Manoj Garg
Research Analyst-Pharma
+91 22 6612 1257
Akshat Vyas
+91 22 6612 1491
BUY
Price TargetRs157 Rs270
Sensex - 14,048
Price Performance
(%) 1M 3M 6M 12M
Absolute (15) n.a. n.a. n.a.
Rel. to Sensex (17) n.a. n.a. n.a.
Source: Bloomberg
Stock Details
Sector Pharmaceuticals
Reuters PLSL.BO
Bloomberg PLSL@IN
Equity Capital (Rs mn) 255
Face Value (Rs) 10
No of shares o/s (mn) 25
52 Week H/L (Rs) 520/100
Market Cap (Rs bn/USD mn) 4/91
Daily Avg Vol (No of shares) 1110273
Daily Avg Turnover (US$ mn) 3.6
Shareholding Pattern (%)
30/6/2008
Promoters 58.8
FII/NRI 10.5
Institutions 13.2
Private Corp 7.0
Public 10.6
Source:Capitaline
Piramal Life Sciences Limited (PLSL), the demerged R&D entity of Piramal Healthcare
(PIHC) began operations a decade ago. PLSL today boasts of a world class drug discovery
facility, a strong pipeline of 15 molecules (half of them in Phase I and Phase II) and in-
licensing agreements with global innovator companies like Eli Lilly, Merck and Pierre
Fabre Laboratories. PLSL's innovation philosophy of finding a drug that is safe and
effective by focusing on well defined targets having strong commercial viability minimises
the risk associated with drug discovery research. Our risk adjusted DCF based NPV is
Rs270/share. From the infrastructure view, the company is a value play. The replacement
cost of its R&D facility is 50% of its current Enterprise Value (EV). PLSL trades at a
significant discount to its only comparable competitor, SPARC. Despite having a stronger
pipeline of 15 molecules as against 8 for SPARC, PLSL trades at a significant discount
(80%) to SPARC's market cap. We initiate coverage on the stock with a Buy rating and a
DCF based target price of Rs270.
Key Triggers
n Successful completion of Phase II trial for P276 by December ’08.
n Phase III trials on P276 are likely to be completed by mid to late 2009.
n Major milestone payment from Eli Lilly in 2010.
n Out-licensing deal for P1736 in 2011.
n Launch of P276 in US market by early 2011.
Impressive pipeline - significantly undervalued
PLSL has one of the most interesting innovation pipelines in the industry with 15 molecules in its kitty
out of which 7 molecules are in Phase I / II stages. By end FY09, the company expects one more
molecule to enter into human clinical trial. Our estimate for PLSL's NPV is Rs270/share. We believe
that the current price does not reflect the potential value of its R&D pipeline.
In-licensing revenues from FY09E, Out-licensing deal likely in FY11E
Besides the molecules invented in-house, PLSL is working on in-licensed molecules and targets. We
believe that In-licensed assets complement PLSL's own pipeline and enhance the probability of
success. PLSL already has in-licensing agreements with the three global innovator companies, a) Eli
Lilly b) Merck & c) Pierre Fabre Laboratories. We believe that from FY09E onwards, PLSL will start
generating revenues from its in-licensing deal (first installment of US$5mn from Eli Lilly). We also
believe that company will start monetising its impressive R&D pipeline over the next 18-24 months. We
believe that the out-licensing deal at an advanced stage will enhance the company’s credentials and
valuations as seen in Glenmark's case.
Robust business strategy of PLSL
PLSL works on known and unknown targets, but in order to minimise the high risk associated with
drug discovery, it ensures that it is one among the first five in that category. We believe that its
strategy of finding a drug that is safe and effective for unmet medical need by focusing on well
defined targets, where the chosen molecule is one among the first five in the category is an appropriate
strategy.
Valuations
Our risk adjusted DCF based NPV is Rs270/share. We believe that the current price does not reflect
the potential value of its R&D pipeline. On a replacement cost basis also, PLSL's valuations are
attractive. Despite having a stronger R&D pipeline of 15 molecules as against 8 molecules of SPARC,
it trades at a significant 80% discount to SPARC. Given its strong R&D pipeline (15 molecules, 7 in
Human clinical trials, NPV- Rs16473mn) and attractive valuations, we rate the stock a Buy with a
DCF based target price of Rs270. We expect significant value creation in the next 3-5 years.
Net Sales EBITDA PAT EPS ROE P/E EV/ P/BV
YE-Mar (Rs.mn) (Core) (Rs.mn) (Rs) (%) (x) EBITDA (x)
FY2008 0 -826 -917 -30.0 NA -5.2 0.0 4.3
FY2009 210 -864 -1,100 -36.0 NA -4.4 -1.5 -22.1
FY2010 1,050 -240 -439 -14.4 NA -10.9 -3.8 33.1
Financials
28 August, 2008 2Emkay Research
Piramal Life Sciences Initiating CoverageInnovative Pipeline
Innovative Pipeline
Well balanced innovative pipeline
PLSL has one of the most interesting innovation pipelines in the industry with 15 molecules
in its kitty, out of which 7 molecules are in Phase I / Phase II stages. By end FY09, the
company expects one more molecule, which has successfully completed toxicology studies
to enter into human clinical trials. The source of leads is not limited to the library of
synthetically developed chemical compounds. PLSL has a library of natural products,
comprising of 40,000 microbial strains and 5600 plants derived from the diverse habitat
of India. Out of 15 development programs, three are based on Phyto-pharmaceuticals
(which are derived from medicinal plants and herbs), as well as natural products generated
by microbial strains.
PLSL has one of the most interesting
innovation pipelines in the industry
with 15 molecules in its kitty, out of
which 7 molecules are in Phase I /
Phase II stages
PLSL's R&D snapshot
Source: Emkay Research
28 August, 2008 3Emkay Research
Piramal Life Sciences Initiating Coverage
Immediate Revenue stream - when and how?
In-licensing revenues from FY09E onwards, Out-licensing deal in FY11E
We believe that from FY09E onwards, PLSL will start generating revenues from its
in-licensing deals. We expect the first installment of US$5mn in FY09E (after successful
completion of Phase I of first target) and US$20mn in FY10E (after successful completion
of Phase II of first target and Phase I of first target) from Eli Lilly. We also believe that
company will start monetising its impressive R&D pipeline over the next 18-24 months,
leading to a re-rating of the company. Management has indicated that P-1736 (currently in
Phase-I, market potential ~US$4.5bn) and P276 in other indications (currently in Phase I/
II, market potential ~US$2.7bn) are the potential candidates for out-licensing. We believe
that the out-licensing deal, which is at an advanced stage (end of Phase II stage), will
enhance the credentials of the company and thus the value of the company. We have
witnessed a similar re-rating in Glenmark's case, where the intrinsic value of its R&D
pipeline increased multifold post out-licensing deals. Further, we believe that the value
creation will be higher in case of PLSL, as the out-licensing deal may be struck at a more
advanced stage of development. In order to enhance the intrinsic value of the company
significantly, the management plans to take few of its molecules in the oncology segment,
on their own in the US market. We also subscribe to a similar views as the pay-off is
potentially higher as seen in the case of Millenium Pharmaceuticals. Millenium
Pharmaceuticals, a US based oncology company, which has recently launched
Velcade for Multiple Myeloma (within two years, the drug has achieved US$800mn
sales) and has 4 other compounds in human clinical trial stages (oncology and
inflammation space) has recently been acquired by Takeda Pharmaceutical (Japan's
largest pharmaceutical company) for a total consideration of US$8.5bn.
Partnering with global leaders: pipeline expansion
Besides the molecules invented in-house, PLSL is working on in-licensed molecules
and targets. We believe that In-licensed assets complement PLSL's own pipeline and
enhance the probability of success. Moreover, it also provides a great learning opportunity
while working with world class innovator companies. Unlike most of the licensing deals,
where the in-licensor has to pay upfront milestone payment to acquire the development
and marketing rights of the drugs, PLSL works with innovators as a development partner.
Where PLSL does not pay any up-front fee in the in-licensing agreements, it bears the
pre-clinical and early stage (Phase I & II) development costs, while the partner is
responsible for late stage development (Phase III & IV), registration and launch in
developed markets. In-lieu of this, PLSL gets milestones on successful completion of
each stage and percentage royalty of global sales along with exclusive marketing rights
for India and / or additional South Asian Markets. We believe such deals provide higher
returns as the company (PLSL) is also sharing the development risks.
PLSL has already entered into in-licensing agreements with three partners, a) Eli Lilly b)
Merck & c) Pierre Fabre Laboratories
n Agreement with Eli Lilly - PLSL signed a drug development agreement to develop
and commercialize a select group of Lilly's pre-clinical drug candidates (two targets)
spanning multiple therapeutic areas. As per agreement, PLSL is responsible for
design and execution of the global clinical development program upto end of Phase
II and Eli Lilly will be responsible for Phase III, registration and launch worldwide
(excluding India and certain South Asian countries);
Revenue stream
PLSL believes that its strategy of
taking its oncology molecule on its
own to the market will enhance the
company’s intrinsic value significantly.
PLSL's In-licensing strategy
complements its own pipeline and
enhances the probability of success
28 August, 2008 4Emkay Research
Piramal Life Sciences Initiating Coverage
PLSL will receive the following:
n Milestone payments on successful completion of Phase I, II and III, aggregating
US$ 100 mn / each target
n Percentage royalty on global sales upon successful launch
n Exclusive marketing rights for India and certain neighboring countries
n R&D Agreement with Merck & Co - Merck & PLSL entered into a research and
development collaboration agreement to discover and develop new drugs for two
new oncology targets provided by Merck. PLSL will be responsible for carrying out an
integrated drug discovery program from hits to leads through pre-clinical candidate
selection, followed by investigational new drug (IND- involving non-clinical studies
and human clinical trials) demonstrating proof-of-concept, primarily for Oncology.
Merck will have an option to advance the most promising drug candidates into late
stage clinical trials and to commercialize these drug candidates. PLSL will receive
milestone payments on successful completion of Phase I, Phase II and III, aggregat-
ing US$175mn for each candidate plus percentage royalty on global sales upon
successful launch.
n R&D Agreement with Pierre Fabre Laboratories - In January 2008, PLSL entered
into a collaboration agreement with Pierre Fabre for research in oncology. The Pierre
Fabre Group will provide expertise in screening and research in oncology, while
PLSL will make available its natural products base, which will lead to the pharmaco-
logical characterisation of new molecules.
Key Triggers
n Successful completion of Phase II trial for P276 by December ’08.
n Phase III trials on P276 are likely to be completed by mid to late 2009.
n Major milestone payment from Eli Lilly in 2010.
n Out-licensing deal for P1736 in 2011.
n Launch of P276 in US market by early 2011.
Stake sale - benchmark for valuing the portfolio
We believe PLSL is likely to look for financing from strategic or financial investors, as its
cash balance is not enough to sustain the increasing R&D expenses because of its
growing pipeline. Its annual expenditure on R&D is likely to be in the range of Rs1200-
1400mn in the next 2-3 years.
The stake sale to these investors (strategic or financial) can form a benchmark for valuing
the portfolio. PLSL's management has indicated that it will not go for a large dilution in one
shot. The dilution is expected to be gradual and need based. Mr. Ajay Piramal has hinted
at a dilution of 10-15% of total equity. This ensures that the promoters retain control of the
research entity. With progress in clinical development, the portfolio value can increase
substantially over time. Management has indicated that because of current market
conditions, they may not go for immediate stake sale and till that time they can fund their
requirement through debts from the parent company.
Revenue stream
With progress in clinical development,
the portfolio value can increase
substantially over time
28 August, 2008 5Emkay Research
Piramal Life Sciences Initiating Coverage
Robust Business Strategy
From humble beginnings to best in class
PLSL commenced its drug discovery research journey 10 years ago, with the acquisition
of Hoechst R&D centre. Over the past five years, we have witnessed a substantial ramp-
up in its R&D efforts. We believe that these efforts have started yielding good results for
the company, as today, it boasts of one of the best innovation infrastructures in India. It has
built a world class drug discovery centre with its facility spread over 200,000 square
feet at Goregaon, Mumbai at an investment of over Rs1bn.The management has
indicated that a similar facility in Europe or US could cost anywhere between US$80-
90mn. Even in India, to build a similar facility at present, is likely to cost approximately
Rs2bn. At the CMP of Rs157, the enterprise value of the whole company is Rs4.0bn.
Currently, it has a competent team of over 309 scientists. So far, it has invested Rs4.2bn
on innovative R&D research.
Innovation Philosophy
PLSL works on known and unknown targets, but in order to reduce the high risk associated
with drug discovery, it ensures that it is one among the first five in that category. Working on
known targets not only reduces the overall drug development cost (as targets are already
defined) but also reduces the chances of failure and therefore, ensures "low risk and high
returns". Lipitor (Atorvastatin) is one of the best examples of known target, which was
developed by Pfizer and today, it is the world’s best selling drug with annual revenues of
over US$12.5bn. Besides expertise and understanding of target mechanism of action,
commercial viability is an important criterion for continuing development program at PLSL.
The company has made it a point that it should be among the first five in its class.
PLSL's key focus areas are based on the following criteria:
n Well defined and large unmet medical need
n An understanding of target mechanism of action and clinical pathway
n Leverage on strong In-house capabilities; and
n Commercial viability
PLSL's Innovation Philosophy
PLSL has built state of the art R&D
facility with an investment of
US$20mn. Similar facilty in US or
Europe will cost any where US$80-
100mn.
PLSL's innovation philosophy of
working on known targets is relatively
'low risk high returns' strategy
Source: Emkay Research
Robust Business Strategy
28 August, 2008 6Emkay Research
Piramal Life Sciences Initiating Coverage
PLSL is mainly focusing on four therapeutic areas- Oncology, Inflammation, Infectious
diseases and Diabetes.
Therapeutic focus area
Discovery and development strategy
We believe that its strategy of finding a drug that is safe and effective for unmet medical
needs is an appropriate strategy. PLSL focuses on relatively fast and well defined path,
having strong commercial viability. Its chosen molecule is generally one among the first
five in its category.
PLSL has stated that it will take new chemical entities (NCEs) from early discovery through
Phase II clinical trials in India and overseas and after that, pursue one of the following
pathways:
Develop to Proof-of-Concept: Then, Out-license
If a drug involves larger clinical trials like Anti-diabetic, Anti-inflammations, etc, PLSL will
out-license to global pharmaceutical companies after establishment of proof-of-concept
(up to Phase II). Management has indicated that by FY2011, they will out-license at least
one molecule (Depending upon the successful completion of upto proof of concept).
Carry-to-Market
If a product involves orphan drug status, niche indications or accelerated clinical trials
such as oncology drugs, PLSL will develop the compound to launch. PLSL has decided
to launch P276 and NPS 31807 on its own. The Phase 1 trials of P276 are quite encouraging
which has not only established the safety of the compound but also found effective in two
terminally ill patients.
Drug discovery strategy
Source: Company, Emkay Research
Robust Business Strategy
Source: Company, Emkay Research
PLSL focuses on relatively fast and
well defined path, having strong
commercial viability
28 August, 2008 7Emkay Research
Piramal Life Sciences Initiating Coverage
Valuation
Valuation of R&D assets
We have used risk adjusted DCF based methodology for valuing PLSL's pipeline, where
we have captured the high failure risk by assigning the probability of success (from 5% to
20%), depending upon the stage in which the molecule is. We have valued the R&D
portfolio in three steps
n NPV of R&D assets ex-R&D cost
n R&D cost required to develop these assets
n Adjusting for external fund requirement, either through equity dilution or debt
NPV of R&D pipeline
We have valued 8 own R&D assets that are in various stages of development, adopting
risk adjusted DCF method. The key assumptions we have taken are peak sales, probability
of launch, year of launch and discount rate. We have also done a scenario analysis
assuming discount rate at 13%, 15% and 20%.
NPV of R&D assets
Valuation
We have captured the high failure risk
by assigning the probability of
success
Molecule Current Mkt. Launch Peak sales Prob NPV
Size (US $mn) est est (US$ mn) (%) (Rs mn)
P 276 2700 2011 800 20 8453
P1446 2700 2015 800 10 1179
NPB-001-056 1600 2011 500 20 2341
Pxxx 1000 2017 300 5 135
Onco Natural 1100 2013 200 5
P979 7500 2016 1000 5 615
NPS31807 300 2011 100 20 781
P1539 pro drug 1000 2016 300 5
P1736 4500 2015 1000 10 1345
PM 1811104 4500 2016 200 5 69
NPV of Eli Lilly deal 50 725
NPV of Merck deal 50 831
Total 16473
Source: Emkay Research
Key assumptions in our risk adjusted DCF model to arrive at fair value.
a) We have assumed peak sales, probability and year of launch for each of the mol-
ecules separately.
b) We have assumed that after launch of the product in the market, peak sales will be
attained in the seventh year.
c) After achieving peak sales, we expect sales to remain flat for another five years and
gradually to come down till the patent expiry. We have not taken any sales post patent
expiry.
d) Average PBT margin of 50% (for own launches) and mid-teen royalties for out-licens-
ing candidates.
e) We have done a scenario analysis at different discount rates (13%, 15% and 20%).
We have valued 8 R&D assets that
are in various stages of development,
adopting risk adjusted DCF method
28 August, 2008 8Emkay Research
Piramal Life Sciences Initiating Coverage
R&D expenses to develop portfolio
In order to arrive at a fair value we have deducted the R&D cost which PLSL is going to
incur to develop the R&D portfolio. We believe that the R&D cost is going to increase at a
CAGR of 20% over FY08-15E because of large numbers of molecules entering into
advanced clinical stages. Our development cost per molecule after adjusting for the
probability of success is Rs8209mn or US$198mn (our average R&D success rate is
11.5% and we have calculated the NPV of 8 molecules). We believe this a reasonable
assumption.
Impact of external funding in valuations
We believe that company will dilute a stake of 20% over the next 2 years, either in single or
multiple tranches. While valuing the R&D portfolio, we have considered the extended
equity of 30.5mn shares.
Valuation of R&D Assets (Rs mn)
NPV of R&D pipeline 16473
R&D spend (NPV) 8209
Net R&D value 8264
No. of shares (mn) 25.5
No. of shares - Post Dilution (mn)* 30.5
R&D value/per share if it dilute equity (Rs) 270
CMP (Rs) 157
Upside (%) 72%
*Assuming company will dilute 20% equity
Source: Emkay Research
We value PLSL at Rs270/share (at 15% Discount Rate). We believe that an out-licensing
deal for its R&D products will act as a catalyst, which would lead to higher valuations of the
company. Besides, the positive outcome of Phase II trials for P276 would lend credence
to the company's pipeline.
Scenario Analysis
Discount Rate 13% 15% 20%
NPV of R&D 19536 16473 11141
R&D expenses 8771 8209 7036
Net R&D Value 10764 8264 4106
NPV at current Equity 422 325 161
NPV per share post dilution 352 270 134
Source: Emkay Research
R&D pipeline - an attractive value proposition
We strongly believe that the current price does not reflect the potential value of PLSL's
R&D infrastructure. The company has invested almost Rs1bn to build a world class drug
discovery centre, spread over 200,000 square feet. Management has indicated that if one
build a similar facility in Europe or US, it will cost anywhere US$80-90mn. Even in India,
if today one want to build similar facility, it will cost approx. Rs2bn. At the CMP of Rs157, the
enterprise value of the whole company is Rs4.0bn. So practically the investors are getting
one of the best R&D infrastructures (15 molecules, 7 in Human clinical trial, NPV-
Rs16473mn) at Rs2.0bn, where company itself has pumped in Rs4.2bn in last 5 years for
the development of these assets. At CMP of Rs157, the stock is available at a significant
discount to its NPV and can provide an upside of 72% from the current price.
Valuation
Our development cost per molecule
after adjusting for the probability of
success is Rs8209mn or US$198mn
R&D pipeline- With its R&D
infrastructure replacement cost of
Rs2bn, PLSL available with a Mcap
of Rs4.0bn
28 August, 2008 9Emkay Research
Piramal Life Sciences Initiating CoverageValuation
PLSL trades at huge discount (80%) to its only comparable; SPARC
Standalone R&D in India is at a nascent stage and many companies have indicated that
going forward, they will be de-merging their R&D units into a separate entity. However,
SPARC (Sun Pharma Advance Research) is the only listed entity in the R&D space. From
the table below, it is quite clear that SPARC’s M Cap (Rs18453mn) is almost 5x PLSL’s M
Cap of Rs3999mn. Despite PLSL having better R&D pipeline of 15 molecules as against
SPARC’s pipeline of 8 molecules, it trades at a significant discount (80%) to SPARC’s M
Cap. Moreover, PLSL has 7 molecules in human clinical trials as compared to 3 molecules
of SPARC. PLSL has also partnered with three global innovative companies which not
only enhance the probability of success and de-risk its business model but also make
available the huge technical expertise of the global R&D players.
Peer comparisonCompany Mkt cap NPV Revenue R&D exp No of No of No of Gross Staff Per Mcap/R&D Mcap / Mcap /
(Rs mn) (Rs mn) (Rs mn) (Rs mn) Scientist molecules molecules Block Cost Employee spend Scientist No of
as on in Pipeline in Human Cost in ,000 molecules
28 Aug 08 Clinical in Human
Trials Clincial
Trials
PLSL 3999 16473 - 826.1 309 15 7 1189.4 215.8 698 5 13 571
SPARC* 18453 29316 374.6 408.2 174 8 3 379.4 124.1 713 45 106 6151
* SPARC presentation
Source: Company, Emkay Research
Despite its strong pipeline, PLSL
trades at a significant discount (80%)
28 August, 2008 10Emkay Research
Piramal Life Sciences Initiating Coverage
Key Risks
Drug discovery is a high risk high return business
Drug-discovery research involves substantial risk due to high failure rates and
uncertainties surrounding discovery and development of newer and better medicines.
Thereby, it becomes difficult to predict the outcome of each compound and plot future
projections. Besides, drug discovery is a long process, which usually takes 8-10 (or
more) years for introducing a compound in the market, provided things proceed within
plan, which is rare. A company would need to maintain a healthy balance between risk
and return for long-term success. We believe that PLSL's innovation strategy of focusing
on relatively fast and well defined targets is likely to ensure success.
Investing in drug discovery - Needs huge risk appetite
Investing in a drug discovery company needs huge risk appetite, given its unique, high-
risk high-return nature. Besides, the complex nature of the business proves difficult for
investors to understand the dynamics of science and commerce involved. We consider
quality of pipeline and evaluation of underlying risks coupled with experienced scientific
team to be most critical for a profitable investment.
Retention of scientists
Human assets play a very critical part towards the success or failure of any company and
it holds true for PLSL also. PLSL today has 309 scientists in its team out of which 10% of
them have worked with global innovator companies. The average experience of senior
scientists team is around 10 years. The retention of highly skilled scientists is a big
challenge for the company. However, in the last three years, PLSL has been able to retain
most of its senior scientists. The overall attrition rate in PLSL is 18% because few of the
people have left to pursue higher studies. Adjusting this the attrition rate is just 8% (people
left to join other companies)
Key Risks
28 August, 2008 11Emkay Research
Piramal Life Sciences Initiating CoverageFinancials tables
Income Statement
Y/E,Mar (Rs. mn) FY08 FY09E FY10E
Net Sales 0 210 1050
Growth (%) 400
Expenses (826) (1074) (1290)
Growth (%) 30 20
Other Operating Expense 826 1074 1290
EBIDTA (826) (864) (240)
Growth (%) 5 (72)
Other income 1 0 0
Interest (2) 127 87
Depreciation 91 107 111
PBT (915) (1098) (437)
Total Tax 2 2 2
Effective tax rate (%) 0 0 0
PAT (917) (1100) (439)
Source: Emkay research Source: Emkay research
Cash Flow Statement
Y/E, Mar (Rs. mn) FY08 FY09E FY10E
Pre-tax profit (915) (1098) (437)
Depreciation 91 107 111
Chg in working cap 1020 0 0
Tax paid (2) (2) (2)
Operating cash Inflow 193 (993) (329)
Capital expenditure (198) (86) (43)
Free Cash Flow (4) (1079) (372)
Investments 0 0 0
Equity Capital Raised 0 0 765
Loans Taken / (Repaid) 0 1270 (400)
Dividend (incl tax) (1) 0 0
Others 7 0 0
Increase in Msc Exp 0 0 0
Net chg in cash 2 191 (7)
Opening cash position 0 2 193
Closing cash position 2 193 186
Ratios
Y/E, Mar FY08 FY09E FY10E
Profitability (%)
EBIDTA margin NA NA NA
PAT margin NA NA NA
ROCE NA NA NA
ROE NA NA NA
Per share data (Rs.)
FDEPS (30) (36) (14)
CEPS (32) (26) (7)
BVPS 36.1 (7) 6
DPS (Rs) 0.0 0.0 0.0
Valuations
P/E (5) (4) (11)
Cash PE (4) (6) (22)
P/BV 4.3 (22) 33
EV / Net Sales 6.2 0.9
EV / EBITDA 0.0 (2) (4)
Dividend Yield (%) 0.0 0.0 0.0
Turnover (x) Days
Debtors T/O 0.0 0.0 0.0
Inventory T/O 0.0 0.0 0.0
Gearing Ratio
Total Debt/Equity (x) 0.0 (7) 6
Source: Emkay research
Balance Sheet
Y/E, Mar (Rs. mn) FY08 FY09E FY10E
Equity share capital 255 255 305
Reserves & Surplus 1582 1582 2296
Networth 1837 1837 2601
Deferred tax liability 67 67 67
Diventure/pref. Share 0 0 0
Loan Funds 0 1270 870
Total Liabilities 1904 3174 3538
Gross Block 1189 1479 1522
Less: Depreciation 288 395 506
Net block 902 1084 1016
Capital work in progress 204 0 0
Current Assets 23 214 207
Inventories 8 8 8
Sundry debtors 0 0 0
Cash & bank balance 2 193 186
Loans & advances 14 14 14
Other assets 0 0 0
Current liabilities 142 142 142
Current liabilities 127 127 127
Provisions 15 15 15
Net current assets (119) 72 65
Profit loss (Debit balance ) 917 2017 2456
Total Assets 1904 3174 3538
Source: Emkay research
28 August, 2008 12Emkay Research
Piramal Life Sciences Initiating Coverage
Annexure-I
Industry snapshot
The Indian pharmaceutical industry has evolved substantially and transformed itself from
a reverse engineering led industry, focused on the domestic markets- to a research
driven, export oriented industry with a global presence.
After transforming the global generic industry, the Indian pharma industry is poised to play
a decisive role in redefining the global drug discovery paradigms. We believe that with its
high quality and low cost scientific skills, India has the potential to become a key R&D
player in the global pharma value chain. Availability of high quality research scientists at 1/
5th of the comparable cost in the US makes India an attractive destination for R&D.
Product patent implementation from 2005 coupled with government incentives for R&D,
has also provided impetus to discovery R&D.
Research is steadily becoming an integral part of the strategy of Indian pharma companies,
who want to build a sustainable long term advantage. Over the last couple of years, the
discovery R&D segment has gained significant momentum and discovery R&D pipelines
of several players have expanded substantially. At present, as many as 11-12 companies
have molecules under various stages of development. R&D spending by Indian companies
as a percentage of sales has increased significantly in the past five years, from 2% to 8%.
R&D spends of major companies have grown at a CAGR of 38% over 2001-2006. With
robust activities on the R&D front, the Associated Chambers of Commerce and Industry of
India (ASSOCHAM) has indicated that the R&D spending of the Indian pharmaceutical
industry will reach about 9-10% of revenues by the year 2010.
Three main changes have taken place over the years for the Indian pharmaceutical industry:
a) Change in IP (intellectual property) regime- from process to product based
b) Co-options- Focus on alliances (be it licensing, contract research and manufactur-
ing, co-development, co-marketing, etc.) as a means to grow and sustain business
c) Indian companies going global- Adoption of inorganic avenue of growth
India's competitive advantage in offering strong chemistry innovation skills at significantly
lower costs has lured many multinational innovator pharma companies to make India a
major component of their global drug delivery value chain.
Declining R&D productivity, drying R&D pipeline, patent expirations of block buster drugs
coupled with pressure on margins has forced global pharmaceutical companies to revisit
their business strategies.
Global discovery and clinical research outsourcing is expected to increase from US$18bn
in 2006 to $33bn by 2010 (CAGR 16%). As per Kolorama information, the outsourcing
proportion for US pharmaceuticals had increased substantially from 10% in 1997 to 33%
in 2005. This proportion is expected to further rise to 41% by 2009, implying a CAGR of
16.5% in R&D outsourcing.
Annexures
28 August, 2008 13Emkay Research
Piramal Life Sciences Initiating Coverage
Annexure-II
R&D snapshot
Sourc
e: E
mkay R
esearc
h
Annexures
28 August, 2008 14Emkay Research
Piramal Life Sciences Initiating Coverage
Annexure-III
PLSL product pipeline
CDK Inhibitors
Cyclin dependent kinase (CDK) inhibitors are a new class of drugs that are being developed
for the treatment of cancers. Cancer continues to be a killer disease throughout the world
and is the second leading cause of death after cardiovascular diseases. All multiplying
cells have to go through a process called as 'cell cycle'. The CDK complexes play an
important role in regulation of cell cycle progression. Slowing down the Cyclins/CDKs
therefore offers a potential mechanism for treatment of cancer.
Market size: The potential market for the CDK4 inhibitor is around US$2700mn. At present,
Piramal Lifescience is developing 2 CDK inhibitors, belonging to the Oncology segment
(P276 & P1446).
P276
The P276 inhibitor is in Phase II clinical trials. The P276 is an injectable. P276 is a flavone
that inhibits CDK’s and has been identified as a novel antineoplastic agent. P276 is a
novel potent small molecule flavone derived selective CDK 4-D1, CDK1-B and CDK9-T
inhibitor, with potent cytotoxic effects against tumor cell lines.
PLSL has also initiated a phase I/II study in Multiple Myeloma (cancer of a specific type of
white blood cells) across 5 centres in India, in addition to a phase I study in multiple
myeloma to be conducted across three centers in USA. The Phase 1 trials of P276 are
quite encouraging which has not only established the safety of the compound but also
found effective in two terminally ill patients.
Multiple Myeloma (MM), a cancer of bone marrow, is generally considered incurable and
complete remission is possible only in 5% of the patients. The drugs present blockbuster
potential. For instance, Lenalidomide, a derivative of Thalidomid, the latest MM drug
approved in the US, is expected to reach peak sales of US$2,500 mn in the US in 2013.
Given the criticality of the drugs, fast track approval can be obtained for these drugs from
the USFDA. For instance, Velcade (Bortezomib) was approved in less than four months by
the US FDA.
PLSL management expects Phase II results for P276 by late 2008 and Phase III by mid-
2009 in Multiple Myeloma. Management expects to obtain an orphan drug status (orphan
drug is one which meets significant unmet medical needs and is useful to treat rare
disease) and a fast track approval for the same. The Phase III trials shall be limited to
250-300 patients. The overall cost shall be limited to less than US$15mn. We expect
Piramal to launch this molecule by 2011. Company is planning to launch this molecule on
its own in Multiple Myoloma and has indicated that launch cost in US would be around
US$20-30mn.
Management has indicated that they will be shortly conducting Phase II trials for other
indications such as Head & Neck cancer, Mantle cell Lymphoma and Malignant Melanoma.
They (management) has also indicated that they may go for out-licensing of P276 in other
indications once it will be through to Phase II stage.
The company also plans initiating studies of P276 in combination with gemcitabine
(which is already approved for the treatment of pancreatic cancer) and in combination with
radiation.
Annexures
28 August, 2008 15Emkay Research
Piramal Life Sciences Initiating Coverage
P1446
P1446 has just entered into Phase I clinical trials. P1446, the oral drug, is estimated to
enter the market 18-24 months after the launch of P276. P1446 is a novel, selective and
potent inhibitor of CDK4 D1, CDK1 B and CDK9 T. This molecule would serve as a back-
up molecule for P276. P1446 effectively slows down the proliferation of and induces
cytotoxicity on both sensitive and resistant cells without any significant cytotoxicity to normal
human cells. Additional phase I study to explore a continuous dosing schedule is also
being planned to be initiated in North America. Management has indicated that they may
launch this molecule on there own as a natural follow-up of the follow-up of P276.
Competing products are as follows
CDK Inhibitor Sales Expected Peak Exp Peak
Drug 2007 ($ mn) sales ($ mn) Sales year
Thalomid (Thalidomid) 447 433 2006
Revlimid (Lenalidomide) 774 2500 2013
Velcade (Bortezomib) 800 2000 2014
Gleevec resistant drug (NPB-001-05)
CML (chronic myelogenous leukemia) is a malignant cancer of bone marrow resulting in
abnormal growth in white blood cells. CML is a slowly progressing disease, in which too
many white blood cells (not lymphocytes) are made in the bone marrow. CML accounts for
almost 15% of all leukemias with 4000-5000 new cases being diagnosed every year in
the US alone.
The current medical therapy of CML includes tyrosine kinase inhibitors such as Gleevec
(Imatinib mesylate), Sprycel (Dasatinib), Tasigna (Nilotinib), Interferon-alpha and
cytoreductive agents such as Hydroxyurea, Busulfan, Cytarabine and their combinations.
Gleevec has emerged as a standard therapy of CML with significant improvement in
remission and survival rate. The survival rate has gone up from 35% in 2001 (prior to
Gleevec approval) to about 90% in 2006 (after the Gleevec approval). Although effective
and durable, the emergence of resistance and intolerability to tyrosine kinase inhibitors is
the biggest drawback of continued therapy with them.
Though Gleevec has been a successful drug, cases of Gleevec resistance are reported
in patients with advanced stage disease. Mutation of the target is the major cause of
resistance, which impacts drug binding. The most troublesome mutant is believed to be
T315I, which is found in almost 20% of the cases. The other therapies which were recently
approved against Gleevec resistant cases for CML are Sprycel (Dasatinib) and Tasigna
(Nilotinib). Though these drugs inhibit the Bcr-Abl mutants that Gleevec fails to bind to
because of mutation, however, even these molecules fail to inhibit the mutant T3151.
PLSL's drug NPB-001-05 has shown effectiveness in T3151 xenograft. The drug is being
developed as an oral formulation.
Market size: The potential market for the Bcr-Abl is around US$1600mn.
NPB001-05, a Phytopharmaceutical Gleevec resistant drug, is an oral liquid and has
demonstrated tyrosine inhibitor properties. The Phase II data shall throw more light on
efficacy of the drug. PLSL's management expects more information on NPB-001-05 to be
available in September 2008.
Annexures
28 August, 2008 16Emkay Research
Piramal Life Sciences Initiating Coverage
PLSL's product (NPB-001-05) is a phytopharmaceutical (plant-based product). The
regulatory hurdle shall be to establish consistency and repeatability of the manufacturing
process. PLSL remains confident that it can overcome the hurdle to obtain the USFDA
approval. PLSL plans to launch this molecule first in India by 2010 and a year later in US
(2011).
Competing products are as follows
Bcr-Abl
Sales Expected Peak Exp Peak
Drug 2007 ($ mn) sales ($ mn) Sales year
Sprycel (Dasatinib) 158 700 2015
Tasigna (Nilotinib)* 29 750 2016
Gleevec 3100
Source: Company, Emkay Research *Sale of H1CY08
Inflammation (NPS31807)
TNF Alpha is a protein manufactured by white blood cells to stimulate and activate the
immune system in response to infection or cancer. Overproduction of this compound can
lead to disease, where the immune systems act against healthy tissues, such as arthritis
or psoriasis. Some treatments for these diseases utilize drugs that bind and inactivate
TNF alpha, thereby reducing unhealthy inflammation. Rheumatoid arthritis (RA) is a chronic,
systemic, inflammatory disease affecting 1% of general population and leads to significant
disability and a consequent reduction in the quality of life. TNF-alpha is one of the major
mediators and has a potential role in the establishment of inflammation in the joints and
its eventual destruction. The novel drugs useful in Rheumatoid Arthritis are targeted
against TNF-alpha.
Successful biologic drugs have been developed to treat rheumatoid arthritis (RA) that
inhibit TNF alpha. These include Enbrel (2007 sales: US$3200 mn), Remicade (2007
sales: US$3327 mn) and Humira (2007 sales: US$3000 mn), which have all reached
blockbuster status. These drugs are reckoned as significant achievement in the treatment
of RA. These three drugs account for 98% of the RA treatment market in the US in value
terms. Biologics are difficult to manufacture and administer, and there are issues with
accessibility and compliance. Moreover biologics drugs are not only very costly but also
lead to reactivation of Tuberculosis.
A small molecule TNF alpha inhibitor can address many of these issues. However, the
advantages with biologics are its quick action and longer stay in the body. The small
molecules may have toxicity issues.
Small molecules are being developed by various companies in an attempt to overcome
the drawback of biologics. Please note that the small molecules are not necessarily TNF
alpha inhibitor only.
P979
PLSL is developing a small TNF alpha molecule P979 for various inflammatory
conditions - RA, psoriasis, and ankylosing spondylitis. The molecule is known to inhibit
TNF alpha and IL 6. The molecule has successfully completed toxicology study and is
likely to enter Phase I by year end (2008). It has been found effective in animal models of
RA. PLSL also has a number of back-up molecules in this category. Management has
Annexures
28 August, 2008 17Emkay Research
Piramal Life Sciences Initiating Coverage
indicated that this could be a potential target for outlicensing in FY2012. The potential
market for P979 is US$7.5bn.
NPS31807
PLSL is developing a phytopharmaceutical drug (NPS31807), which is an oral monoherbal
extract formulated in capsules. NPS31807 has shown better efficacy than Enbrel, a high-
priced bio-therapeutic. PLSL has completed one pilot Phase II study in Rheumatoid
Arthritis and other study in Rheumatoid Arthritis is nearing completion. Also the Phase II
study in Psoriasis is ongoing. Following are the competing products in the same category
Competing products are as follows
Drugs for RA- Biologics Sales
2007 ($ mn)
Enbrel (Etanercept) 3200
Remicade (Infliximab) 3327
Humira (Adalimumab) 3000
Source: Company, Emkay Research
Metabolic Disorder
Metabolic Disorder means disorders caused by problems with chemical processes in
the body. Similarly, Obesity is a condition with chronic nutritional imbalance. It is emerging
as a global outbreak of concern due to its high association with metabolic co-morbidities.
In the US alone, the prevalence of obesity has increased from 15% (1976-1980 NHANES
survey) to more than 32% (2003-2004 NHANES survey) in the adult population.
The current treatment recommendations for obesity include lifestyle changes in terms of
diet and physical activity for the mildly obese. The only two drugs approved for long-term
use in obesity are Sibutramine and Orlistat. These drugs are known to affect a weight loss
of only 5-10% on chronic administration.
P1201-07
P1201-07 is an orally active compound with selective actions against specific receptors
in the brain. It has been found to reduce food intake in the rodent model on short term as
well as long term administration. A drug being developed against this target has shown
efficacy in large phase II studies and is currently undergoing phase III trials in the US. After
completing the necessary studies to evaluate the toxicity in animals, Piramal Lifescience
has completed the first phase I study with P1201-07 in healthy overweight or obese
subjects in Europe to determine the safety, tolerability, pharmacokinetics and
pharmacodynamics of this drug. A phase II clinical study involving 3 months administration
of P1201-07 would later be conducted after ascertaining the safety and tolerability in
multiple dose study.
Type 2 Diabetes Mellitus
Diabetes is a life-long disease, marked by high levels of sugar in the blood. There are 3
types of diabetes i.e. Type1 Diabetes, Type 2 Diabetes and Gestational Diabetes. Type1
diabetes is usually diagnosed in childhood.
Annexures
28 August, 2008 18Emkay Research
Piramal Life Sciences Initiating Coverage
Type 2 diabetes is far more common than Type1 and makes up most of all cases of
diabetes. It usually occurs in adulthood. The pancreas does not make enough insulin to
keep blood glucose levels normal, often because the body does not respond well to the
insulin. Many people with Type 2 diabetes do not know they have it, although it is a serious
condition. Type 2 diabetes is becoming more common due to the growing number of
older Americans, increasing obesity and failure to exercise. About 20 mn Americans have
Type 2 diabetes and an additional 54 million have pre-diabetes. According to a 2007 study
by the U.S. Centers for Disease Control, the prevalence of Type 2 diabetes has been
increasing by 5% each year since 1990.
India is the world capital of Type 2 diabetes and this can be justified with the number of
diabetics estimated at 40 million in India in 2007 and this number is predicted to rise to
almost 70 million people by 2025. It is estimated that every fifth person with diabetes will
be an Indian and one of the factor could be the rising rates of obesity. WHO estimates that
mortality from diabetes, heart disease and stroke cost about $210 billion in India in the
year 2005. Current drugs such as Thiazolidinediones (TZDs) are associated with adverse
events such as weight gain, fluid retention, hepatotoxicity and possibly myocardial
infarction. Some of the adverse effects of TZD drugs are attributed to the peroxisome
proliferator activated receptor (PPAR gamma) activation by these agents. Therefore, a
safer agent that reverses insulin resistance by other (non-PPAR gamma activity)
mechanisms may be preferred as anti-diabetic therapeutics.
P1736-05
P1736, developed by PLSL, is an oral non-PPAR gamma insulin sensitizer. Currently, the
molecule is in Phase I. Management expects to finish Phase II studies by April 2009.The
potential market size is around $4.5bn and following are the competing products.
Competing products are as follows
Type 2 Diabetes Mellitus
Sales
Drug 2007 ($ mn)
Avandia (Rosiglitazone) 377
Actos (Pioglitazone) 2786
Source: Company, Emkay Research
Dermatophytes
Dermatophytes are a group of fungi that under most conditions, have the ability to infect
and survive only on dead keratin, found on the top layer of the skin, the hair, and the nails.
It cannot survive on moist skin found inside the mouth or the vagina. It is also responsible
for the majority of skin, hair, and nail fungal infections. Dermatophytes of the genera
Trichophyton and Microsporum are the most common causative agents.
NPH30907
PLSL is developing a molecule (NPH30907), a good anti-dermatophyte activity against a
panel of microorganisms. The company has completed clinical study to prove the efficacy
of 5% NPH30907 cream, as an anti-dermatophyte formulation in patients with localized
tinea lesions and is exploring options to commercialize the same. Tinea, also known as
Ringworm, is a common contagious fungal infection of the skin. The potential market is
around US$100mn and the competing product is Ketaconazole class compounds (Nizoral).
Annexures
28 August, 2008 19Emkay Research
Piramal Life Sciences Initiating Coverage
Anti-infective portfolio (PM-181104)
Antibiotic resistance is a common phenomenon and the pharmaceutical industry has
overcome this challenge by developing a new class of compounds. Stephalococus Aureus
is one of the more resistant pathogens. It was the first bacteria in which penicillin resistance
was found. Methicillin and later oxacillin were then introduced but they also developed
resistance in certain cases. Now methicillin-resistant Stephalococus Aureus (MRSA) is
quite common. It is now believed that almost half the Stephalococus Aureus infections are
resistant to penicillin, methicillin, tetracycline and erythromycin. This led to the development
of vancomycin. But soon, vancomycin-resistant strains of Stephalococus Aureus (VRE)
were found. Thereafter, new class of antibiotics called oxazolidones was developed in
1990. Linezolid was the first commercialized oxazolidones and resistance to the same
was reported in 2003.
PM181104
PM-181104 is a first-in-class compound and has a totally new structure, according to the
management. It has completed the toxicology studies and is expected to enter clinical
trials by Q3 2008 This would be followed by a 14 day phase II study in patients with MRSA
infections. The potential market is around US$500 mn. It is highly potent and effective
against all tested strains of S. aureus, including MRSA and MSSA strains.
Annexures
28 August, 2008 20Emkay Research
Piramal Life Sciences Initiating Coverage
Annexure-IV
Out-licensing Deals in early drug development phase
Company Molecule Therapeutic Stage at Potential Partner Upfront Additonal
Segment which it was deal size Payment payment
outlicensed
Glenmark GRC 6211 Pain Management Phase II $350mn Eli Lilly $45mn $305mn
Glenmark GRC 8200 Diabetes Phase II $280mn Merck $28mn $252mn
Isis Pharma ISIS 325568 Diabetes Drug Pre-Clincial $275mn Ortho-McNeil, $45mn $230mn
and ISIS studies J&J co.
377131
Glenmark GRC 3886 Asthmna / COPD Phase I $190mn Forest labs $10mn $190mn
$53mn Tejin $6mn $47mn
KAI Pharma KAI-9803 Cardiovascular Phase I/II $217mn BMS $25mn $192mn
Disease
Roche KOS-862 Oncology Phase I $210 Kosan $30mn $180mn
(R1492)
Vertex Pharma VX-680 Oncology Phase II $350mn Merck $101mn $249mn
VX-689 Oncology Preclincial
Astex Oral cell cycle Oncology Pre-Clincial $520mn Novartis $25mn $495mn
Therapeutics inhibitor studies
Vertex Pharma Telaprevir Investigational Clinical studies $380mn Janseen $210 mn $170mn
oral inhibitor of Pharmaceuticals
hepatitis C virus
protease
Source: Emkay Research
Annexures
28 August, 2008 21Emkay Research
Piramal Life Sciences Initiating Coverage
Annexure-V
Profiles and valuations of international R&D Companies
We have highlighted some of the small and mid-sized companies, who have scored big
with a single or couple of new molecules
Vertex Pharmaceuticals is a company with drug development programmes, focusing on
hepatitis C, HIV infection, oncology and cystic fibrosis. Vertex has 10 molecules in various
clinical stages, out of which Fosamprenavir calcium, an HIV protease inhibitor, is being
marketed through collaboration with GlaxoSmithKline, under the trade name Lexiva in the
United States and under the trade name Telzir in the European Union. It has eight molecules
in human clinical trial stages (1 in Phase III III ~ HCV infection, 3 in Phase II ~ 1 in cancer,
1 in cystic fibrosis, 1 in RA & 2 in Phase I) and 4 are in Phase I. Vertex has granted the
marketing rights of its lead candidate Telaprevir to Jansen Pharmaceuticals for ROW
markets, excluding North America & Far East, for a total consideration of $380mn, including
an upfront payment of $165mn plus $45mn research fund. Similarly, for the Far East
market, Vertex has tied up with Mitsubishi Tanabe Pharma Corporation for a total
consideration of $33mn milestone payment, while for the NA market, it has kept the
marketing rights with itself. For cancer molecules (VX-680 ~ currently in Phase II & VX-689
~ Preclinical candidate)), Vertex has granted the marketing rights to Merck for a total
consideration of US$350mn, including an upfront payment of $85mn plus $15.8mn
research fund. For another oncology molecule ~ VX-944 ~ Phase II candidate ~ Vertex has
tied up with Avalon Pharmaceuticals and has received $5mn upfront payment so far.
Vertex Pharmaceuticals was founded in 1989 and is headquartered in Cambridge,
Massachusetts.
Vertex
(US $M) 2005 2006 2007
Revenue 160.9 216.4 199
R&D spend 248.0 371.7 513.1
Net profit (loss) (203.4) (206.9) (391.3)
EPS (US$) (2.3) (1.8) (3.0)
M Capitalisation 2742 4699 3073
No. of drug candidates in pipeline 12
Cash & cash equivalent 361 704 460.7
M cap / R&D expense 11.1 12.6 6.0
M cap / Cash 7.6 6.7 6.7
M cap/ Sales 17.0 21.7 15.4
Source: Company, Emkay Research
Rigel Pharmaceuticals engages in the discovery and development of novel, small-
molecule drugs for the treatment of inflammatory/autoimmune diseases, cancer, viral
and metabolic diseases. Rigel has 4 molecules in clinical stages, out of which R788 is in
Phase 2 clinical trial for the treatment of rheumatoid arthritis (RA) and immune
thrombocytopenia purpura (ITP). Another molecule, R348 is in Phase 1 clinical trial for the
treatment of immune indications, such as psoriasis, RA, transplant rejection, and graft vs.
host disease. Its products also include R763, which is in Phase 1 clinical trial in the area
of oncology; and R343, a Phase 1 clinical trial product for asthma. Rigel Pharmaceuticals
has collaboration agreement with Merck Serono for R763, for which it has received $18.5mn
as upfront and milestone payment. Similarly it has collaboration agreement with Pfizer for
R343 and has already received $10mn as upfront and milestone payment so far. It has
Annexures
28 August, 2008 22Emkay Research
Piramal Life Sciences Initiating CoverageAnnexures
also tied up with other pharmaceutical companies like Johnson & Johnson, Novartis
Pharma and Daiichi Pharmaceuticals. The company was founded in 1996 and is based
in South San Francisco, California
Rigel
(US $M) 2005 2006 2007
Revenue 16.5 33.5 12.6
R&D spend 52.0 57.0 70.4
Net profit (loss) (45.3) (37.6) (74.3)
EPS (US$) (2.1) (1.5) (2.6)
M Capitalisation 202 298 788
No. of drug candidates in pipeline 4
Cash & cash equivalent 138.2 104.5 108.3
M cap / R&D expense 3.9 5.2 11.2
M cap / Cash 1.5 2.9 7.3
M cap/ Sales 12.2 8.9 62.6
Source: Company, Emkay Research
Cardiome is a company with drug development programmes focusing on the
cardiovascular segment. It has one antiarrhythmic drug, Vernakalant (iv) ~RSD 1235, with
an intravenous formulation in Phase III, and the oral version in Phase II. In October 2003,
the company granted the North American right for the intravenous formulations to Astellas
for a total consideration of US$68mn, including an upfront payment of $10mn. In Q406,
Astellas has submitted a NDA application for Vernakalant (iv) to US FDA. Cardiome also
has a Phase 1 program for GED-aPC, an engineered analog of recombinant human
activated Protein C (aPC) and a pre-clinical program directed at improving cardiovascular
function.
Cardiome
(US $M) 2005 2006 2007
Revenue 13.3 18.2 4.5
R&D spend 34.2 38.3 52.9
Net profit (loss) (44.1) (31.9) (79.6)
EPS (US$) (0.9) (0.6) (1.3)
M Capitalisation 513.7 597.7 568.4
No. of drug candidates in pipeline
Cash & cash equivalent 63.6 47.7 68.7
M cap / R&D expense 15.0 15.6 10.8
M cap / Cash 8.1 12.5 8.3
M cap/ sales 38.6 32.8 125.2
Source: Company, Emkay Research
28 August, 2008 23Emkay Research
Piramal Life Sciences Initiating CoverageThe team
www.emkayshare.com
BUY Expected total return (%) of stock price appreciation and dividend yield) of over 25% within the next 12-18 months.
ACCUMULATE Expected total return (%) of stock price appreciation and dividend yield) of over 10% within the next 12-18 months.
REDUCE Expected total return (%) of stock price appreciation and dividend yield) of below 10% within the next 12-18 months.
SELL The stock is believed to under perform the broad market indices or its related universe within the next 12-18 months.
NEUTRAL Analyst has no investment opinion on the stock under review.
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Technicals Research Team
Manas Jaiswal Technical Analyst [email protected] 91-22-66121274Suruchi Kapoor Jr.Technical Analyst [email protected] 91-22-66121275
Derivatives Research Team
Sameer Shetye Associate Analyst [email protected] 91-22-66121276
Emkay Rating Distribution