From Morgans.... ceasing coverage, but some useful insight all...

From Morgans.... ceasing coverage, but some useful insight all the same
Steady ship and generic expansion ■ ACR has updated the market on its move into the generic drug space with the first three targets chosen. ■ A number of generic companies have challenged ACR’s patent and the court will rule on these claims in due course. ACR and Eli Lilly are committed to asserting their intellectual property rights for Axiron. ■ No changes to forecasts or valuation. ■ Following a review of our coverage list we are ceasing formal coverage of ACR and our forecasts and valuation should no longer be relied upon. We will continue to monitor the company through our Daily Healthcare email. Generic strategy unfolding In mid-2015 ACR embarked on new strategy leveraging its existing capabilities and had been developing a pipeline of topical and transdermal generic products. The new generic program aims to recreate formulations of proven activities that have an existing market position. ACR has completed formulation development activities for the first three generic projects and is moving to scale up plans. Identification and selection of contract manufacturing organisations for these products is proceeding in parallel and manufacture of its first exhibit batches is expected to occur in FY17. The addressable annual market in the US for the first three topical generic projects in its program is collectively over US$500m, according to IMS June 2015 data. Patent litigation update ACR’s key product Axiron has attracted the interest of generic companies in the US, and its marketing partner Eli Lilly has filed lawsuits against a number of companies that have filed an application for a generic Axiron for infringement of specified issued US patents. Formal litigation proceedings began this month in the United States District Court for the Southern District of Indiana against these generic companies, with a decision expected sometime after the case has been completed. The court will rule on the validity and infringement of those claims. Lilly and ACR are committed to asserting their intellectual property rights for Axiron. No changes to forecasts or valuation We have made no changes to our forecasts for FY16, FY17 and FY18. As a result our valuation and price target remains unchanged at A$0.79. Our FY16 NPAT forecast of A$12.6m is lower than consensus of A$14.7m (FactSet). ACR will report its FY16 result on 10 August 2016. Cessation of coverage Following a review of our coverage list we are ceasing formal coverage effective immediately of ACR and our forecasts, valuation and price target should no longer be relied upon. We will continue to monitor the company through our Daily Healthcare email.