Download FUND AME NTAL S / TECH NICA LS

October 02, 2014
FEROZSONS LAB OUTPERFORM THE MARKET: Positives Priced In!
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SKY Rocketing Performance of Ferozsons:
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Ferozsons Ltd has outperformed the KSE-100 Index. Since the
announcement of agreement of Ferozsons Ltd with Gilead Ltd, the stock
priced has rallied by 89%.
The script is currently trading at P/E (trailing) multiple of 30X and DY(
trailing) of 2.8%.
The script is trading at premium to our TP of PKR 393/share. We assume
that the positive impact of this milestone has largely been priced in as
depicted from the price performance of share. We recommend SELL on the
script.
Aprroval of Import of Sovaldi acted as Fuel to Fire:
The Drug Registration Board on Tuesday approved the import of a recently introduced drug for the treatment of
Hepatitis C infection on highly subsidized rates. As per the news the 245th meeting of Drug Registration Board
was held on 29-30 September, 2014 in committee room of Ministry of National Health Regulation and
Coordination under Chairmanship of Ghulam Rasool Dutani, Director (Pharmaceutical Evaluation &
Registration). The Board approved new drug application of Sofosbuvir Tablet (Sovaldi), which is the recently
introduced therapy for the treatment of Hepatitis C infection.
Previously the hepatitis C was being treated via injection. The new drug Sofosbuvir (Sovaldi), which is in tablet
form can cure Hepatitis-C patient in six months. SOVALDI is a hepatitis C virus (HCV) nucleotide analog NS5B
polymerase inhibitor indicated for the treatment of chronic hepatitis C (CHC) infection as a component of a
combination antiviral treatment regimen.
Registration of Sovaldi: A Breakthrough for Ferozsons Lab:
Ferozsons Laboratories Limited has entered into an agreement with Gilead Sciences to be its exclusive branded
medicines business partner for Pakistan. Under the agreement, Ferozsons will market and distribute certain
Gilead medications for the treatment of chronic Hepatitis-C; HIV and chronic Hepatitis-B virus (HBV) infection in
Pakistan. As per our discussion with the management the cost of each Sovaldi tablet would be PKR2000 and
each pack of Sovaldi contain 28 tablets. It would be a three months therapy. The duration of the therapy would
vary based on the genotype 1,2,3,4 of Hepatitis. On average there are 10 million Hepatitis C patients in Pakistan
every year. Taking a conservative view that out of 10 mn people, 1million people go to the severe stage where
they will use this product. Each treatment will cost PKR 360,000 based on 6 months duration therapy).
We have run sensitivity taking a conservative assumption for distribution margins and volume. Change in actual
number of patients, volume and margins will be a risk to our sensitivity analysis. Moreover, how far will this
product be successful and post treatment side affects will impact the actual materialization of this milestone in
Pakistan.
WE
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EPS Impact on FY-15 of Sovaldi Agreement based on 3M Therapy:
Patient under treatment
EPS Impact @Margin of 10%
EPS Impact @Margin of 5%
10,000
3.9
1.9
20,000
7.8
3.9
Expected Increase in Sales of Medicines Owing to After Floods Impacts:
As per our discussion with management of different pharma companies affirmed that sales of medicines
usually increase after floods. The risk of diseases is high as affected people, especially children and women are
living in adverse weather conditions. Acute Respiratory Infections and water borne disease are on the rise due
to cold weather and stagnant water. However the size and impact on earnings of specific pharma companies
can not be determine. Hence, the companies in close proximity to flood affected areas are likely to benefit the
most.
Investment Perspective:
After rolling forward our earnings the script is currently trading at premium to our TP of PKR 393/share. Since
the announcement of this milestone project the price of the share has been increased massively by 89% .We
anticipate that the positive impacts of this Gilead Agreement with Ferozsons has largely been priced in. The
script is currently trading at sector average P/E multiple. We recommend to start booking profits on script.
DISCU
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YOUR
PORTF
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WITH
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