Large price increases on Taro products (Credit Suisse)
Reuters Market Eye - Shares in Sun Pharmaceutical Industries(SUN.NS) gain 1.8 percent after Credit Suisse said the drug maker's subsidiary Taro Pharmaceutical Industries (TARO.N) has pushed through price increases in three products last week, citing industry checks.
Credit Suisse estimates those three drugs account for 35 percent of Taro U.S. sales.
The price increases raise sustainable sales estimates for Taro to $680 million versus $640 million earlier for FY 2015, the investment bank adds.
Credit Suisse maintains its "outperform" rating on the stock and raises its target price to 900 rupees from 840 rupees, in part by factoring higher sales estimates for Taro.
Most generic pill are made by 5-10 manufacturers including competition from india. There is zero pricing power. With that kind of competition , Pricing increase in the generic pill business is just not there .
good news yet again. PRICING POWER OF THIS "GENERIC" BUSINESS is indeed great.
Any valuation that does not consider this pricing power and values TARO using multiples of generic pharma companies selling generic pills, is #$%$.
Generic dermatology is niche. This pricing power, low competition for decades on many of its products, indicates the strength of the business. Plus, unlike a specialty pharma, TARO is hugely well diversified.
Taro deserves a valuation multiple of at least 15.