Wockhardt gets a shot in the arm

Wockgraph





The USFDA approval for Wockhardt's allergy drug opens up a significant earnings opportunity for the company. The company has received approval to market generic nasal spray of Fluticasone, which is used in the treatment of allergic rhinitis. With the company launching the product immediately in the US market, the company may receive a boost to its earnings.

Revenue opportunity

For one, the total market for the product in the US is about $580 million (according to IMS Health). Second, it is a limited competition segment, with only three other generic versions of the product in the market.

That US-based Hi-Tech Pharmacal, one of the existing generic players in this space, made about $23 million as revenue during the second quarter alone may help put the revenue opportunity for Wockhardt in perspective. Share price of Hi-Tech Pharmacal fell by about 15 per cent in the US market, following Wockhardt's product approval. Since Wockhardt will be manufacturing the nasal spray, developed in-house, at its facility in Morton Grove, Illinois, US, margins on the product can be expected to be high.

The product launch therefore could translate into earnings per share of about Rs 20-22 in FY13, assuming a 15 per cent market share.

Light at the end

This provides a good leg up to the company, which managed to turn around in the quarter-ended September 2011. Resolution of the litigation with its FCCB holders, which in turn clears the way for the sale of its nutrition business and brands to French diary giant Danone SA would provide the next key trigger. The stock ended the day at Rs 337, gaining about 11 per cent during the day.

Published on January 11, 2012
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