Notes from JB Chemicals AR for FY 21-22 -
- JBC was the fastest growing Pharma company among top 30 companies in the Indian Pharma market in FY 21-22. Company has 07 manufacturing facilities in India. 05 of its power brands feature in India’s top 300 brands. These are -
Rantac ( to treat heartburn, indigestion ), Rank- 45
Cilacar ( to treat high BP ), Rank- 52
Cilacar-T ( to treat high BP ), Rank - 203
Metrogyl ( to treat bacterial infections ), Rank- 194
Nicardia ( to treat high BP ), Rank - 240
- Key growth initiatives during the year -
(a) New go to market model focusing on increasing MR productivity and renewed focus on domestic business
(b) Increased focus on chronic segments. Acquired Azmarda ( Scaubitril + Valsartan ) from Novartis - used to treat heart failure, a fast growing category.
(c) Launched 15 products in domestic market. Contribution from new launches stands at 4pc, up from 1.4 pc last yr.
(d) Acquired 06 brands from Sanzyme. These are -
Sporlac ( probiotic used to treat gas and diarrhoea )
Lobun ( prebiotic used to treat chronic kidney disease)
Oxalo ( probiotic to treat constipation, diarrhoea )
Nano-Leo ( capsules to improve male sexual health )
Pubergen ( Injectable hormone to support pregnancy )
Gynogen ( Injection to treat infertility )
(e) Beyond India, SA and Russia are company’s strong markets. JBC was the fastest growing company in SA last yr. Company is ranked 15 in SA. Russian demand remains stable despite geo-political headwinds.
(f) In US, company to focus on low volume, high value products with own APIs as backward integration.
(g) Company’s CMO business, specially Lozenges represents an area of excellence with company being among top 5 companies globally. Aims to maintain the same. Also aims to focus on immunity based products here, beyond cold and cough products to improve growth rates.
- Last 5 yr data -
Sales - 1413, 1643, 1775, 2043, 2424 cr
EBITDA - 217, 305,378, 560,543 cr
EBITDA margins - 15pc, 19pc, 21pc, 27pc, 22pc
Disc: invested, biased
Q1results. Robust growth across all segments.
Disc: invested, biased.
PAT is down 12% YoY what is robust about the results? 
PAT is down because of ESOP cost and higher amortisation costs due to the acquisitions made by the company last year.
On the operating front, the business is showing very good momentum with robust sales and EBITDA ( adjusted for ESOP) growth.
If you remove whatever costs that go up you will obviously create an imaginary EBITDA which will always grow.
ESOP cost is part of employee cost. If the high profile employees did not get ESOP they would not have joined the company and they would not have put the effort to grow sales in the first place.
If you did not acquire companies the growth would have been lower. If you remove the amortization then you should remove the acquired companies sales contribution also.
Most experienced investors will see through this, but this is highly misleading to newbies!
Amortisation is not like Depreciation. Hard assets are depreciated over their useful life time. Post that the value of asset becomes zero. And rightly so.
In case of Amortisation, the value of acquired asset… instead of depreciating, actually appreciates over its life time.
So when amortisation is charged from P&L account, the company gets a tax break and the value of acquired asset or brands keeps growing. So, its a win win for the company.
On ESOP, I believe it would be charged only for Q1. So from Q2 onwards, the company should get the full benefit of operating leverage on the increased sales.
Regards,
Ranvir Dehal
This sounds like a catastrophic news for domestic branded generic players. Requesting views from senior Valuepickrs…
Regards,
Ranvir Dehal
This is proposed many times in the past, but not implemented. This time also it may be the same case. I pesonally dont think such a thing will be possible in near future. I may be wrong.
Drs have first hand information on how effective the medicine was on the patient. So they have a choice and knowledge of knowing which brand works better. Secondly, if generic name is prescribed the patient will be at the mercy of chemist on what is to be given to patient. Which may not be right. So in my view, it may not happen in near future.
Pharma companies promote their product through Drs using various means like gifting, education, training, event sponsorship, etc. They will resort to same policy with chemist, so if the intent is to eradicate this practice, the objective will not be met.
A sector level question. With such strict scrutiny of incentives to physicians how do these MR dependent companies drive sales. Will events and conferences suffice for incentivizing the doctor to write our brand?
Further how do they track productivity of a MR, where do they get data that a particular MR drove sales. Earlier it used to be area wise where shops of an area would report higher sales, indicating MR efforts. But now with online ordering, how do they track.
“JB Pharma delivered a good quarter driven by focused execution.
Our domestic business continued its growth trajectory through strong momentum in
our chronic portfolio and acquired assets. Our big brands, especially in chronic segment,
continue to outpace the market and have reached new milestones. CDMO business
scaled further during the quarter and the healthy momentum continues for this
segment too.
EBITDA margins improved during the quarter on account of better business mix,
increased efficiencies in sourcing, and higher volumes. The first quarter has been a
robust performance both in terms of topline and operating profit, and we remain
positive about delivering on our business objectives. We will maintain our distinctive
focus on India and the CDMO business, while maintaining our efforts to control costs &
increase efficiencies across the organisation.”
To track the productivity of MRs, companies often use a combination of methods. Traditional methods like area-wise sales reports still apply to some extent, especially in physical stores. However, with the rise of online ordering, companies are utilizing digital tools and data analytics to track sales trends and identify the impact of specific MR efforts. They may analyze data from online orders, prescription patterns, and customer feedback to gauge the effectiveness of MR interactions.
In this digital age, technology allows companies to gain insights into which MR interactions are driving sales, even in the online landscape. This could involve tracking customer conversions, monitoring changes in prescription rates, and analyzing correlations between MR engagement and product purchases. Overall, the landscape is evolving, requiring companies to combine traditional and digital methods to measure the success of MR strategies in driving sales.
This is how MR system works in USA. However they hv backend data availability /collection very much streamlined largely due to structure of business and dominant health insurance industry.
My daughter being in India, used to decide entire routine/schedule of comany MRs on daily basis based on certain KPIs and Algos.
