Pharmaceuticals

06 Mar

See a gap of 2-3 days without inventory; material shipments arriving by sea- Krishna Chigurupati, Granules India

Update on the Indian Equity Market:

On Thursday, NIFTY closed marginally higher (+0.2%) at 11,269 after a continuous losing streak in the previous days. The top gainers in NIFTY50 were Yes Bank (+26.9%), Eicher Motor (+2.9%) and Kotak Bank (+2.6%), whereas Zeel (-5.6%), Hindalco (-2.9%) and Infratel (-2.6%) were the top losers. Among sectoral indices, PSU Bank (+1.4%), FMCG (+1.1%) and Pharma (+0.7%) were the gainers while Realty (-1.1%), Metal (-0.8%) and Media (-0.7%) closed in red.


Excerpts from an interview of Mr. Krishna Prasad Chigurupati, Chairman and MD- Granules India with CNBC-TV18 dated – 3rd March 2020:

  • He said, “We just have to apply to the Directorate General of Foreign Trade (DGFT) for permissions and then they would give us permission to export based on past exports”.
  • In the worst case, maybe some of the shipments from this month may spill over to next month. Otherwise, two quarters put together he doesn’t see any big impact.
  • Most of the intermediates or the raw materials come from China. For example with regards to Paracetamol – the key intermediate comes from China and there has been a disruption or delay for about a week.
  • They have inventory for another 10 days but materials are arriving. So, there could be a gap of about 2-3 days without inventory but the shipments are already on the way and they should be getting them by next week. So, there is no issue on the inventories side.
  • It depends on how quickly the government acts on awarding permission to exports so there could possibly be little spill over into the next quarter. There could be a little fall in 4QFY20 which will be made up in the next quarter.
  • Airlifting of some products is happening. Air freights have gone up, the prices have gone up and there could be an increase in the cost of raw materials.
  • As far as their products are concerned there is absolutely no issue, everything is coming by sea. So, he doesn’t see any impact on margins.
  • They supply APIs to Indian companies, Paracetamol especially, but formulations are all for exports. They never sell any formulations within India. 

Consensus Estimate: (Source: market screener website)

  • The closing price of Granules India was ₹ 178/- as of 05-March-2020.  It traded at 13x/ 11x/ 9x the consensus earnings estimate of ₹ 13.6/ 15.5/ 19.2 for FY20E/FY21E/FY22E respectively.
  • The consensus target price for Granules is ₹ 172/- which implies a PE multiple of 9x on FY22E EPS of ₹ 19.2/-.
By Granules, Pharmaceuticals 0 Comments Read more...
27 Feb

Expect to address FDA observations in time to launch Glargine: Christiane Hamacher, Biocon Biologics

Update on the Indian Equity Market:

On Wednesday, NIFTY closed lower at 11,678 (-1.0%). The worst sectoral performers were Auto (-2.1%), Realty (-1.7%) and IT (-1.4%). There were no sectoral gainers. The top gaining stocks for NIFTY50 were YESBANK (+4.9%), SBIN (+0.4%) and HCLT (+0.2%) while the losers were GAIL (-5.1%), SUNPHARMA (-3.8%) and TATAMOTORS (-3.6%).

Excerpts from an interview with Dr. Christiane Hamacher, MD and CEO of Biocon Biologics aired on CNBC18 TV on 24nd February 2020:

  • They have received three observations from US FDA under form 483 and they are procedural in nature. They largely aim at process improvements.
  • They don’t have any repeat observations and they will be submitting an action plan very soon to address these observations.
  • They are expecting to address all the observations well in time to meet the target action date for their biosimilar Glargine in June 2020 and they expect to be in a position to launch in 2nd half of this calendar year in the US by their partner Mylan.
  • So, there is no delay when it comes to launching in the second half of 2020.
  • As a transition from New Drug Application (NDA) to Biologics License Application (BLA) for certain biologics will not actually affect their submission for biosimilar Glargine.
  • That was submitted another pathway and they are very clear that they expect their biosimilar will continue to be reviewed under the same pathway. So, they don’t foresee any delay when it comes to this review process.
  • Biosimilar Glargine together with their biosimilar Trastuzumab, and their biosimilar Pegfilgratim in the US, in the near future will be a very important component to achieve the revenue guidance of USD 1 billion that they have given for FY22.
  • They see much less competition compared to other areas like oncology and they have a huge portfolio. Along with their partner Mylan, they are very well positioned to be a leading player in the insulin biosimilar space.

Consensus Estimate: (Source: market screener website)

  • The closing price of Biocon was ₹ 298/- as of 26-February-2020.  It traded at 40x/ 30x/ 23x the consensus earnings estimate of ₹ 7.5/ 10.1/ 13.1 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 313/- which implies a PE multiple of 24x on FY22E EPS of ₹ 13.1/-
By Biocon , , , 0 Comments Read more...
10 Jan

‘Biocon optimistic about hitting $1 billion in revenue by FY22 on back of new launches’ – Kiran Mazumdar Shaw, Chairperson and Managing Director, Biocon

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 12,025 (-0.2%). Among the stocks, Bharti Airtel (+3.1%), Yes Bank (+2.2%) and TCS (+2.15%) were the gainers. Eicher Motors (-4.3%), Coal India (-2.5%), and LT (-2.2%) were the top losing stocks. IT (+0.4%) and FMCG (+0.1%) were the sectoral gainers. All the sectors ended in the red.

‘Biocon optimistic about hitting $1 billion in revenue by FY22 on back of new launches’ – Kiran Mazumdar Shaw, Chairperson and Managing Director, Biocon

Excerpts from an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director- Biocon published in Livemint on 08th January 2020:

  • They would get a benchmark valuation through some private equity investment before they take it to the market for an initial public offering (IPO) and according to her this is the first step where True North has invested in Biocon’s Biologics and they set a base level benchmark valuation.
  • They might raise little more private equity prior to the IPO. This gives them an idea of where they believe they can unlock the value in terms of Biocon Biologics in the next few years.
  • They have been in discussion with several private equity forums and of course True North has been first of the block and they will be socializing and entertaining other investment opportunities from other private equity firms.
  • In 2020, hopefully they will see private equity funding complete before they go for an IPO. The plan is obviously to invite private equity and use it for many of their current funding needs.
  • They have set up a very expensive biologics facility. So private equity funding will actually come in very handy instead of raising extra loans, debt finance.
  • They plan to extend the private equity funding to $200-300 million or more levels and True North is expected to take up additional stake along with others.
  • The opportunities are very well marked out, and she feels optimistic about hitting the target of $1 billion of revenue in biologics by FY22.
  • They are now in the US market with both Trastuzumab and Pegfilgrastim. Both have had pretty strong entries.
  • They have also got Glargine and Bevacizumab that will make an entry into the market by FY22 and we also expect insulin Aspart to be in the US market by that time.
  • There are many launches that are planned by FY22 and she believes that they have worked out a fairly conservative kind of metrics to get them to that FY22 billion dollar target. So that is why they remain quite confident that they will be able to hit that target.
  • She believes that they have a very robust pipeline; they have 28 molecules, either in the market or under development. They have just commissioned first expansion of their very large biologics facility in Bengaluru.
  • Biocon has to be viewed as a balanced portfolio with small molecules, biologics and research services and those who want a pure play investment opportunity in either biologics or research services can opt for either Syngene or Biocon Biologics. She thinks they have made it into an interesting investment opportunity by structuring it this way.
  • Biocon will continue to be a very strong performer considering the fact that it intends to have majority stake in both Syngene and Biologics.
  • As capex needs of biologics business are very high both in terms of manufacturing capacity as well as R&D investment, they will use the funding across the board.

Consensus Estimate: (Source: market screener website)

  • The closing price of Biocon Ltd was ₹ 282/- as on 08th January-20. It traded at 37x/ 28x/ 21x the consensus earnings estimate of ₹ 7.5/ 10.1/ 13.2 for FY20E/ FY21E/ FY22E respectively.
  • Consensus target price is ₹ 294/- which implies a PE multiple of 22x on FY22E EPS of ₹ 13.2/-
By Biocon, Pharmaceuticals , , , 0 Comments Read more...
05 Aug

ERIS LIFESCIENCES LTD (ERIS IN): 1QFY20 – Increase in YPM* drives the margin expansion

Dated: 30th July 2019

1QFY20 Results

  • ERIS Lifesciences (ERIS) reported revenues 9% YoY at Rs 2,743 mn. In 1QFY20, the Base business revenues (includes UTH products) grew by 10% YoY, the Strides revenues reported a 16% YoY growth. Kinetix now part of the standalone entity, reported a decline of 9% YoY in the revenues.  In the subsidiary, Aprica revenues increased by 15% YoY.
  • The EBITDA increased by 18% YoY to Rs 1,045 mn v/s Rs 886 mn in 1QFY19. The margins improved by ~280 bps to 37.1% due to lower employee costs and other expenses. The employee costs were lower in the quarter due to a one-off adjustment of the leave encashment liability on the assimilation of the Kinedex books.
  • The PAT grew by 18% YoY to Rs 840 mn v/s Rs 713 mn in 1QFY19. The effective tax rate was higher at ~11.5% during 1QFY20 (Effective tax rate was ~8% YoY)

Management Commentary

  • Chronic and subchronic therapies constituted ~84% of the total consolidated sales of ERIS and acute therapies constituted ~16% in 1QFY20. The Indian Pharmaceutical Market (IPM) sales composition stood at 55% from chronic and subchronic therapies and 45% from acute therapies during the quarter.
  • The increase in the YPM* to Rs 0.44 mn per month in 1QFY20 led to the EBITDA margin expansion.  The YPM was Rs 0.41 mn per month in 4QFY29. The number of Medical Representatives (MR) increased to 2075 by June 2019.
  • Management indicated that prescription sales are intact. The working capital pressure and increased competition from the online pharmacy; led to a decrease in inventory at the pharmacies. The lower inventory levels are now becoming a new norm for the sector.
  • Management guided for the tax rate to remain in the 8-10% range. In FY19, 61% of the total manufacturing was done at the Guwahati Plant in Assam which is eligible to avail certain tax incentives including income tax exemption and GST subsidies. ERIS intends to increase the manufacturing of this plant.

Consensus Estimate (Source: market screener website)

  • The close price of ERIS is Rs 395/- on 29-Jul-19. It traded at 16x / 13x the consensus EPS for FY 20E / 21E EPS of Rs 24.5 / Rs 30.2 respectively.
  • Consensus target price is Rs 670/- implies a PE multiple of 22x on FY21E EPS of Rs 30.2

By Eris Lifsciences, Pharmaceuticals 0 Comments Read more...