Hovid to take advantage of RM49b market for off-patent drugs: RHB

by **Cals** Sat 11 Jan 2014, 01:26

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Friday, 10 January 2014 16:27

KUALA LUMPUR (Jan 10): Hovid Bhd plans to raise its production capacity by 30% in order to take advantage of an estimated RM49 billion worth of generic drugs that have gone off patent in 2013.

According to a note by RHB Research Institute Sdn Bhd, the new off-patent drugs will add to Hovid’s current line of products, which include the recently launched generic versions of two drugs with recently expired patents.

Generic drugs are drugs which are identical to a brand name drug in terms of dosage form, safety, strength, route of administration, quality, performance characteristics and intended use, according to the US Food and Drug Administration (FDA).

“Given the current trend of patent protection expiry for major “innovator drugs”, the management was upbeat on Hovid’s prospects as a generic drug manufacturer.

“We concur with this view,” said RHB.

Going forward, the group plans to launch 10 to 12 new products annually. This will be done through the expansion of its production capacity at its tablet and capsule plant this year, setting up a bioequivalence test centre for new generic drugs and building a central new warehouse to manage the increased inventory.

“We like the company for its 21.9% 3-year earnings CAGR, strong exposure to the export market therefore well-positioned to benefit from further USD/MYR appreciation, net cash position and decent 15% return on equity,” said the research house.

RHB gives a fair value of 42 sen on the stock which trades at 36 sen currently. The stock is unrated.