Panacea announced WHO pre-qualification for their pediatric combination vaccines Easy Four (DTP+Hib) and Ecovac (DTP+Hep B) which implies global acceptability of these vaccines by various UN procuring agencies. Expect approval for the crucial pentavalent vaccine (EasyFive) as well to be in place shortly. The combined demand of all combination pediatric vaccines worldwide was US$600mn in 2005 and is estimated to grow up to US$1.6bn by 2012.
Driven by combination and IPV vaccines as well as robust 14%+ domestic formulations growth, we expect Panacea to deliver EPS growth of 44% in FY09E and 26% in FY10E. Overall, we estimate 35% EPS CAGR (FY08E-10E) on the back of 23% revenue CAGR (FY08-10E).
Likely EPS triggers are as follows,
- Likely progress on Anthrax vaccine tender award of 25 mn doses for the US Govt. stock piling program (US$250mn market size; Not in MLe)
- Supply of combination vaccines to other markets like CIS and Latam
- Possible US/EU acquisition/collaboration for pharma/vaccines
- Launch of IPV vaccine in early 2008
Panacea’s valuations are attractive at 12x FY09E and 9.5x FY10E EPS which is a significant 25-30% discount to sector average. panacea is expected to report an EPS of Rs 32.36 and Rs 40.68 for FY09 and FY10 respectively. Merill Lynch recommends a BUY with a target price of Rs 513.