Neuland Laboratories Limited - Transformation towards niche APIs?


#22

Neuland reported bad Q3 results due to deferred shipments. Now ithas hit 20% ckt on news that Teva going to get priority review for a breakthrough drug. Seems Neuland supplies API for the molecule and could partner Teva after launch for which expedited decision could come by Aug 2017. Their blog on this matter suggests total opportunity could be more than $1bn (I think formulations). Neuland is working on quite a few exiting opportunities but failed to reflect in P&L

Disc: Invested.


(Saravanan B) #23

Can someone explain how this business can be scaled up? How competitive are the players in China? Moreover, how do you ensure that this company is shielded from regulatory shocks?


(Faiz Memon) #24

Scaling up is certainly in the works already. Refer to recent acq of Arch pharma facilities. Management has indicated a supply/demand mismatch which has caused most of their issues on revenues last few q’s. Mgt comment has indicated that they expect this to even out over the next 2-3 q’s but the variability in revenues will continue until they have a mature CMS pipeline. WRT China not aware of this type of contract research and API formulation markets though management indicates that their buyers typically have only one-two suppliers for their formulations and Neuland has 80% of their order share(needs to be verified). Regulatory overhang is an ever present force for the best pharma companies, Neuland cannot be immune either. A large number of the opportunities for Neuland seem to be under the development stage looking at the CMS pipeline. They have only about 9 molecules that are commercially viable and generating revenues but aiming to increase that materially within the next few years subject to approvals.
Disc. Invested


(Saravanan B) #25

Any updates why Neuland is going down day by day?


(Saravanan B) #26

Can anybody throw some light on who are the other API players in the market? Neuland’s competitors?


(Faiz Memon) #27

Results were lacklustre they continue to see product and demand mismatch. General sentiment towards pharma is negative. Can continue to throw darts, but predicting short term price movement is futile as you are well aware. Competitors on the API space are too many to list out, google search throws up number of competitors. Granules, Dishman, Marksons etc… Though the unique proposition of Neuland should be the focus they have on growing niche and CMS business. Though it may take some time to mature and stabilise in light of their troubles with capacity and optimisation of acquisitions. The ability to partner with best in class research teams of global pharma giants and learn the research and manufacturing methods for speciality molecules will tend to create a moat around Neuland business. Execution is always the questions and remains to be seen…
Disc- Invested


(Faiz Memon) #28

Thoughts after earnings, con call and recent qip.

Seems orders and flows have stabilized and production vs. demand mismatch seems to be alleviated (took 2q as indicated by mgt).

New plant acquisition has begun production on day 100 and will help integrate backward, lowering rm cost and adding to margins. Should help margins as raw materials costs have been trending up along with lower orders. They expect RM prices to stay elevated and complete mitigation of RM cost increases in one full year.

Prime products performed better than expected. Could this be trend reversal in demand?

Crams portfolio growing… Long gestation continues.

Approval for generic saltmetrol from Mylan expected by July… Positive trigger?

Tie up with Japanese firm Jitsubo could be interesting. Expands ability to manufacture pepetides on a mass scale in liquid & solid combination forms. Lots of research needed to see if it works, but if it does for even some of their molecules, then what’s the impact? https://www.businesswire.com/news/home/20141211006618/en/Sosei-Acquires-Jitsubo-Leading-Japanese-Peptide-Technology

Dilution though painful has likely allowed weak hands to be shaken. Largest acquirer in qip steadview cap.

Disc. Invested… Looking to add.