I think 22 eps is a reasonable estimate for FY17 by analysts, given the margins pressure coming in from higher R&D cost. But pre R&D expenses, the EBIDTA margins is on the rise for Alembic on FY15 base. See, recent concall transcript for more info.
I think we should not really focus too much on price erosion of a single molecule ie gAbilify.
There has been a lot of erosion already done. Let’s take a different point of view.
How much did it cost to alembic to develop and file ANDA for gAbilify?
Possibly some higher single digit crores.
How much did the molecule give returns back to Alembic (till now)?
Several hundreds of crores. Thus, the payoff from this molecule in such a short span has been 50-100x. (I might be wrong with the numbers but you get the gist of it right?)
Now one may think that Alembic got lucky because several other companies did not get approval for it. This is absolutely true. This windfall was an extreme low probability event.
However, if Alembic had not even filed an ANDA for gAbilify, there would have been Zero probability of this happening. There is huge huge difference between low probability and Zero probability events.
Because, its not low probability which matters. Its probability multiplied by payoffs which matters. (Read Antifragile by Taleb for more intutition)
0.05*100x = 5x
0*100x = 0x
So what crucial lesson did Alembic learn from this?
You have to expose yourself much much more to these extremely rare but still possible events.
How do you do so?
Its obvious. By filing many more ANDAs with potentially huge payoffs, the company gets more exposed to such rare events happening. Thus, alembic is investing heavily into R&D projects. Each project cost might be peanuts compared to the potential payoffs which you can possibly get from it.
Normally, we expect that there would be competition from day 1 of launch as several companies get approval for a molecule at the same time. But as Nityanand has mentioned previously, some companies might end up getting exclusivity for 6 months where there is not much price erosion. Rare events, but still possible.
Now there are many more facets apart from just filing ANDAs and getting approval. Some of them has been mentioned by Nityanand about supply chain execution. Also, one needs to have Manufacturing capacities to produce in huge amounts, should the opportunity arise.
I personally think of filing ANDAs as Making Dices which the pharma company gets to roll once. If you roll and you get “6”, you get a windfall. If you roll the dice and get “4” or “5”, you get a reasonable amount. If you roll the dice and get “1” or “2” or “3”, you get nothing. The more dices you manufacture, the more number of times which you can possibly roll. There is a role of luck, but for that to happen you have to have a dice in your hand. And possibly as many dices as you can.
Abilify was one of the dices which alembic rolled and luckily got a “6”. With the money from this, Alembic is now manufacturing many more dices . We don’t know which dice in future would be a jackpot, but what we know is that Alembic is surely producing many more dices to roll in future.