Shilpa Medicare -Racing away on the Oncology API highway!


(Donald Francis) #1

Ayush made a fantastic call on Shilpa, and still remains very very bullish.

In this Shilpa Medicare stock story he has tried to bring out exactly why. I never got around to taking his suggestion seriously to dig into Shilpa seriously:). Its never too late to make amends.

I want to understand first the competitive space around onclology APIs. Whats so special about Shilpa? Arent there others in the Oncology API space like Dabur Pharma/ Why are pharma majors not in this game? Why are Chinese API suppliers not able to match up??


(Ayush Mittal) #2

Yes, Shilpa Medicare has been a big multi-bagger for me. I have been tracking this company from 2005 when it was Rs 10 paid up and used to trade at Rs 30-40. Today the stock trades @ 350 (2 paid up) and a couple of days back Barring Equity fund has taken almost 9% stake @ 350/share!!

The future is equally bright caus Oncology segment is the fastest growing segment across the world and now Shilpa Medicare is the largest Oncology API player from India. The co has fantastic operating margins of 30-35% and the co has been growing at a CAGR of almost 55% for last 5 years.

Oncology space is not easy to be penetrated by every other co caus it involves understanding of complex chemistry and takes years to make a place for a new company. Also getting approvals from foreign countries is not easy.

Shilpa is one of the few co to get individual approvals for its Oncology API’s from country’s such as Germany, South Korea, France etc. The co is expecting to get USFDA approval soon.

Yes, Dabur Pharma is a strong competitor but look at the valuations. Fresenius Kabi had taken over Dabur Pharma when it was loss making. Today it has about 400 Cr turnover, has good margins but reports loss at consolidated NET levels, yet the stock is valued close 2400 Cr Market Cap!! i.e… 6 times turnover. While Shilpa Medicare is still available at just 2-2.5 times turnover :wink:

Shilpa Medicare Link: …/…/…/…/company/shilpa-medicare/stock-story seriously:)).


(Siddharth Shukla) #3

Ayush,

I haven’t looked into the numbers in detail but if i assume the moneycontrol numbers are correct(stand alone… do they have subsidiaries too??). The company has ROCE averaging at about 20% & NPM of around 10% unlike what you say in the stock story. So at PE of 17x & P/bv of 6.7 doesn’t it look overpriced to fairly valued at this time?? Just my initial impressions, i have no clue about the bigger macro picture of the space.

Yes, Shilpa Medicare has been a big multi-bagger for me. I have been tracking this company from 2005 when it was Rs 10 paid up and used to trade at Rs 30-40. Today the stock trades @ 350 (2 paid up) and a couple of days back Barring Equity fund has taken almost 9% stake @ 350/share!!

The future is equally bright caus Oncology segment is the fastest growing segment across the world and now Shilpa Medicare is the largest Oncology API player from India. The co has fantastic operating margins of 30-35% and the co has been growing at a CAGR of almost 55% for last 5 years.

Oncology space is not easy to be penetrated by every other co caus it involves understanding of complex chemistry and takes years to make a place for a new company. Also getting approvals from foreign countries is not easy.

Shilpa is one of the few co to get individual approvals for its Oncology API’s from country’s such as Germany, South Korea, France etc. The co is expecting to get USFDA approval soon.

Yes, Dabur Pharma is a strong competitor but look at the valuations. Fresenius Kabi had taken over Dabur Pharma when it was loss making. Today it has about 400 Cr turnover, has good margins but reports loss at consolidated NET levels, yet the stock is valued close 2400 Cr Market Cap!! i.e… 6 times turnover. While Shilpa Medicare is still available at just 2-2.5 times turnover ;))

In this Shilpa Medicare Link: …/…/…/…/company/shilpa-medicare/stock-story seriously:)).


(Ayush Mittal) #4

Hi Siddharth,

May be the FY 2010 numbers haven’t been updated.

In FY2010, the co had done a turnover of about 235 Cr, with an Operating Profit of 78 Cr and a NP of 47.50 Cr. The co had made tax provision of about 20 Cr during the year.

The company has been getting approvals from various countries and is one of the few cos worldwide to get such approvals.

The company has been again and again getting backing of large reputed fund managers:

Earlier 2-3 yrs back some foreign PE fund had taken stake @ 70-80. Few months back ICICI mutual fund entered and took a 4-5% stake @ 200-210. Then Reliance Mutual Fund took stake around 280 and now a PE Fund - Barring Equity has taken about 9% stake @ 350/share.


(Excel Monkey) #5
[quote="Donald, post:1, topic:62331050"] > Ayush made a fantastic call on Shilpa, and still remains very very bullish. > > In this stock story he has tried to bring out exactly why. I never got around to taking his suggestion seriously to dig into Shilpa Its never too late to make amends. > > I want to understand first the competitive space around onclology APIs. Whats so special about Shilpa? Arent there others in the Oncology API space like Dabur Pharma/ Why are pharma majors not in this game? Why are Chinese API suppliers not able to match up?? [/quote]

Hello everybody

this is Sat, I go by the name excel_monkey on theequitydesk.com

Thanks Hitesh bhai for introducing me with this wonderful forum (I came across this site via your blog)

Shipla's growth has been really fantastic but Ibelievethat API companies carry a greater amount of risk ascomparedto formulations companies and therefore I would prefer the likes of Venus Remedies in this space

The company has greater number of products ascomparedto Shilpa

Geographicallythe company is more diversified

formulations generally require greater investment and have longer gestation period but are more stable (R&D and registration spend is greater, for Venus it is 50 cr per annum)

Valuation:

the stock is quoting at a P/E of 5, itstop lineand bottom line has grown by more than 3 times in last 5 years.

Sonata investments is a major corporate invested in Venus. The company has won several awards.

Negatives:

The company had willfully defaulted on its FCCB though the issue has been settled between the company and FCCB holders the issue remains an overhang on the stock

the growth has slowed down as well as the margins have come down slightly but considering the nature of formulations business they should keep adding to the top line albeit at a slower pace.

some excerpts from a broker research report:

http://www.moneycontrol.com/news_html_files/news_attachment/2010/VenusRemedies.pdf Link: http://www.moneycontrol.com/news_html_files/news_attachment/2010/VenusRemedies.pdf

Business Details

Venus Remedies Ltd. is a research and development driven pharmaceuticalmanufacturing company incorporated on 15th Sept, 1989 as a privatelimited company by the name of Venus Glucose Pvt Ltd, and subsequently converted into a public limited company on 19th Sept. 1994 and thename was converted as Venus Remedies Ltd. Venus Remedies is a majorproducer of oncological and cephalosporine injectable products. Thecompany has three manufacturing locations, two in India and one in Germany.

Venus is top class manufacturer of Oncological and CefelosporineInjectable products following EU-GMP norms for all is activities.The company has de-risked its business model by having presence in thehigh growth therapeutic segments such as anti-infective, oncology, cardiologyand neurology. Its research team has proved itself to be a powerhouse of innovation by filing many international patents for sophisticatedformulations and are constantly working to broaden the pipeline of productsand to make an impact in the international markets.

The Company is having a strong marketing team. Its field marketing personnel,Unit III, has a strong people-oriented approach, round the clockopen communication channels, strong customer relations, prompt supplychain, use of custom-made IT software, automation tools to facilitate informeddecision making to strengthen its marketing. The internationaldepartment comprised three segments that oversaw business in Asia,Africa, CIS, Europe, the Middle East, and the US. The department's qualifiedand experienced team ensured an active presence across 20 countrieswith a total global presence in 60 countries, exporting 50 products for thedemanding anti-cancer, anti-infective and cardiovascular segments.

Investment Rationale

Venus Remedies has marked its presence in the region of Australasiaby receiving a patent from Commissioner of Patents, Trademarks& Design, Intellectual Property office of New Zealand for itsantibiotic Potentox, a fixed dose combination of cefepime and amikacin.New Zealand is the fourth country after South Korea, Indiaand South Africa from where Venus Remedies has got patent forPotentox, This patent will give Venus Remedies exclusive marketingrights in New Zealand. Post registration in New Zealand market,it expects to generate handsome revenues from this productwhich will add to growth in top line and bottom line of the company.

Venus Remedies has tied-up with IMTECH a renowned ResearchCenter of the Council of Scientific and Industrial Research (CSIR)and Department of Microbiology Panjab University to jointlydevelop a diagnostic kit for typhoid. The kit is expected to bringdown the detection time of the disease from 48 hours (fromconventional Vidal test) to just few minutes. The kit is expected tobe out in the market by 2013. The project has got a lot of social importanceattached to it as world over typhoid affects roughly 17 millionpeople annually. For the project, Venus Medicine ResearchCenter (VMRC), the research arm of Venus Remedies, has signedmemorandum of understanding with Institute of Microbial Technology.

Venus Remedies is planning to foray into the European drug marketwith its innovative generic injectables and cancer drugs. The companyhas lined up close to 25 products for launch in about 15 Europeancountries, including the launch of four drugs in few months.These drugs have a market potential worth over 400 million Euros.Venus plans to manufacture the basic products in India and convertthose to finished products at its acquired facility in Germany, forlaunch of different European markets.

Venus Remedies spend close to Rs.50 crores on Research & Developmentand planning to invest similar amount of money in everyyear for next five year time which leads it to become a power houseof innovation by filing many international patents and are constantlyworking to broaden the pipeline of products. Venus Remedies isall set to launch the world's first once-a-day painkiller injectable inthe country. The product Aceclofenac OD has just bagged a patentfrom the Indian Patent office, aims a 10 per cent market share in thesegment with this product. The company had recently launchedMebatic, a unique antibiotic combination in infusion form to curesevere gastro intestinal (GI) infections.

Valuation

valuations have come down since the report was written

The company has posted significant growth in its sales duringQ4FY10. Venus is continuously focusing its research and developmentactivity which brings strength to strong manufacturing base forspecialised products. Revenue Generation and increased profit hascontinued apace due to launch of innovative products in India andother international geographies. Venus is also looking for contractmanufacturing services for that it has filed many international patents.

Further the stock is trading at a very low PE multiple.Presently, the stock is trading at Rs 276.10 which is at 5.11 times toits earnings and 1.63 times to its book value of Rs 169.07. Since thestock offers good opportunity, we initiate a âBUYâ signal on the stockwith a target price of Rs 360.00 in medium to long term investmenthorizon expecting an appreciation of about 30% from the current levelof Rs 276.10.

Numbers from moneycontrol:

Profit & Loss account
in Rs. Cr.
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
null
12 mths 12 mths 12 mths 12 mths 12 mths
null
Income
Sales Turnover 92.07 141.22 213.60 264.51 311.93
Excise Duty 7.13 0.98 0.90 0.42 0.42
Net Sales 84.94 140.24 212.70 264.09 311.51
Other Income 0.07 3.53 1.83 -0.67 -0.43
Stock Adjustments 4.23 1.99 4.81 8.22 6.19
Total Income 89.24 145.76 219.34 271.64 317.27
Expenditure
Raw Materials 59.36 89.29 134.15 167.39 189.13
Power & Fuel Cost 0.62 0.77 1.53 1.57 1.64
Employee Cost 2.83 6.17 9.19 11.60 15.56
Other Manufacturing Expenses 0.30 0.35 0.63 1.03 1.35
Selling and Admin Expenses 3.63 8.00 14.83 22.34 30.61
Miscellaneous Expenses 0.49 0.73 2.45 4.20 3.65
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 67.23 105.31 162.78 208.13 241.94
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
null
12 mths 12 mths 12 mths 12 mths 12 mths
null
Operating Profit 21.94 36.92 54.73 64.18 75.76
PBDIT 22.01 40.45 56.56 63.51 75.33
Interest 1.93 2.79 4.76 8.42 13.41
PBDT 20.08 37.66 51.80 55.09 61.92
Depreciation 0.92 2.15 4.28 4.43 11.69
Other Written Off 0.75 2.01 1.47 1.41 1.27
Profit Before Tax 18.41 33.50 46.05 49.25 48.96
Extra-ordinary items -0.01 -0.11 0.00 0.00 0.00
PBT (Post Extra-ord Items) 18.40 33.39 46.05 49.25 48.96
Tax 2.18 4.67 7.52 3.73 7.90
Reported Net Profit 16.23 28.74 38.52 45.53 41.05
Total Value Addition 7.87 16.02 28.63 40.74 52.81
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 1.68 2.52 3.38 2.54 2.54
Corporate Dividend Tax 0.23 0.43 0.57 0.43 0.43
Per share data (annualised)
Shares in issue (lakhs) 84.07 84.07 84.53 84.53 84.73
Earning Per Share (Rs) 19.30 34.19 45.56 53.86 48.45
Equity Dividend (%) 20.00 30.00 40.00 30.00 30.00
Book Value (Rs) 38.00 69.61 110.65 169.38 212.37
null

Quarterly Results
in Rs. Cr.

null
null
Sep '09 Dec '09 Mar '10 Jun '10 Sep '10
null
Sales Turnover 74.86 76.48 80.78 82.17 85.75
Other Income 0.76 1.19 0.38 0.02 0.06
Total Income 75.62 77.67 81.16 82.18 85.81
Total Expenses 58.29 60.10 62.22 63.20 63.91
Operating Profit 16.57 16.38 18.56 18.97 21.84
Profit On Sale Of Assets -- -- -- -- --
Profit On Sale Of Investments -- -- -- -- --
Gain/Loss On Foreign Exchange -- -- -- -- --
VRS Adjustment -- -- -- -- --
Other Extraordinary Income/Expenses -- -- -- -- --
Total Extraordinary Income/Expenses -- -- -- -- --
Tax On Extraordinary Items -- -- -- -- --
Net Extra Ordinary Income/Expenses -- -- -- -- --
Gross Profit 17.33 17.57 18.94 18.99 21.90
Interest 2.11 2.42 3.00 3.36 5.11
PBDT 15.22 15.15 15.95 15.62 16.79
Depreciation 1.97 1.97 0.59 1.97 2.34
Depreciation On Revaluation Of Assets -- -- -- -- --
PBT 13.25 13.18 15.36 13.65 14.45
Tax 2.25 2.24 2.61 2.72 2.88
Net Profit 11.00 10.94 12.75 10.93 11.57
Prior Years Income/Expenses -- -- -- -- --
Depreciation for Previous Years Written Back/ Provided -- -- -- -- --
Dividend -- -- -- -- --
Dividend Tax -- -- -- -- --
Dividend (%) -- -- -- -- --
Earnings Per Share 12.99 12.91 15.05 12.87 13.62
Book Value -- -- -- -- --
Equity 8.47 8.47 8.47 8.49 8.49
Reserves -- -- -- -- --
Face Value 10.00 10.00 10.00 10.00 10.00

Key Financial Ratios
in Rs. Cr.

null
null
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
null
Investment Valuation Ratios
Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share 2.00 3.00 4.00 3.00 3.00
Operating Profit Per Share (Rs) 26.10 43.91 64.73 75.94 89.40
Net Operating Profit Per Share (Rs) 101.04 166.81 251.61 312.41 367.63
Free Reserves Per Share (Rs) 22.14 51.79 94.13 154.33 198.62
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) 25.83 26.32 25.72 24.30 24.31
Profit Before Interest And Tax Margin(%) 24.73 24.18 23.51 22.60 20.55
Gross Profit Margin(%) 23.95 26.56 23.71 22.62 20.56
Cash Profit Margin(%) 20.16 21.48 20.63 19.78 17.50
Adjusted Cash Margin(%) 21.06 22.94 20.63 19.78 17.50
Net Profit Margin(%) 19.08 19.99 17.95 17.22 13.17
Adjusted Net Profit Margin(%) 19.09 20.05 17.95 17.22 13.17
Return On Capital Employed(%) 38.01 25.28 26.84 21.32 19.10
Return On Net Worth(%) 50.78 49.09 42.89 32.32 22.94
Adjusted Return on Net Worth(%) 58.89 54.08 42.90 32.97 23.25
Return on Assets Excluding Revaluations 26.05 63.40 106.21 166.61 211.11
Return on Assets Including Revaluations 26.05 63.40 106.21 166.61 211.11
Return on Long Term Funds(%) 48.97 27.71 31.09 25.15 23.10
Liquidity And Solvency Ratios
Current Ratio 0.79 0.94 0.85 0.93 0.84
Quick Ratio 1.34 1.30 1.56 2.34 1.99
Debt Equity Ratio 0.68 1.45 1.02 0.92 0.83
Long Term Debt Equity Ratio 0.30 1.24 0.75 0.63 0.51
Debt Coverage Ratios
Interest Cover 12.28 16.08 12.25 7.68 5.01
Total Debt to Owners Fund 0.68 1.45 1.02 0.92 0.83
Financial Charges Coverage Ratio 11.40 14.49 11.88 7.65 5.66
Financial Charges Coverage Ratio Post Tax 10.26 12.78 10.30 7.10 5.03
Management Efficiency Ratios
Inventory Turnover Ratio 5.96 7.95 7.78 5.98 5.06
Debtors Turnover Ratio 14.55 16.55 16.44 11.14 9.91
Investments Turnover Ratio 6.60 7.94 7.78 5.98 5.06
Fixed Assets Turnover Ratio 4.29 2.43 1.74 1.84 1.30
Total Assets Turnover Ratio 1.59 1.02 1.18 1.14 0.95
Asset Turnover Ratio 2.94 2.70 1.74 1.84 1.30
Average Raw Material Holding 40.40 35.00 40.46 55.59 77.39
Average Finished Goods Held 24.08 19.50 16.46 22.37 24.68
Number of Days In Working Capital 73.16 58.34 68.30 104.47 106.09
Profit & Loss Account Ratios
Material Cost Composition 69.87 63.67 63.07 63.38 60.71
Imported Composition of Raw Materials Consumed -- -- -- -- --
Selling Distribution Cost Composition 1.43 1.96 2.85 3.57 4.26
Expenses as Composition of Total Sales -- -- -- -- --
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 11.79 10.26 10.27 6.51 7.24
Dividend Payout Ratio Cash Profit 10.69 8.96 8.93 5.77 5.50
Earning Retention Ratio 88.22 89.77 89.74 93.62 92.86
Cash Earning Retention Ratio 89.32 91.06 91.07 94.33 94.55
AdjustedCash Flow Times 1.21 2.58 2.16 2.52 2.74
null
null
Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
null
Earnings Per Share 19.30 34.19 45.56 53.86 48.45
Book Value 38.00 69.61 110.65 169.38 212.37

on the

Shilpa Medicare Link: ../../../../company/shilpa-medicare/stock-story seriously:).

(Hitesh Patel) #6

Ayush,

Few questions on shilpa medicare:

1). Consolidated sales are higher but profits are slightly lower on consolidated basis as compared to standalone profits.

2). Any chances of equity dilution? I think currently there are around 2.4 crore shares outstanding. Does this include the most recent QIP shares?

3). What kind of capacity utilisation is the company operating at? Any expansions done in the recent past?

regards

hitesh.


(Ayush Mittal) #7

Hi Hitesh,

1). Yes, the consolidates sales are higher as they had acquired a company in Austria to have a base in Europe as their major revenues are from Europe. When they acquired the company, it had loss of about 7 Cr which was reduced to 3 Cr in 2010 and now the loss is NIL from that company.

2). I think the co has already raised the money it needed by allotting shares to Baring Eq PE fund. The allotment was done @ 350 while the CMP is just 275. So there is a lot of comfort. Yes, outstanding shares should be 2.4 Cr

3). Don’t know the exact detail but going by the recent qtrs, it seems the co is operating at full capacity and now the growth should come from new products. The co is in process of several expansions - 1. JV with Italian co (details on bse announcement) 2. New products being developed 3. Co has planned foray into formulations, with investment of 90 Cr.

Regards,

Ayush


(Hitesh Patel) #8

Thanks Ayush.

regards

hitesh.


(Hitesh Patel) #9

I was looking at the news of Barings PE taking a stake in Shilpa Medicare. Shareholding pattern of december 2010 reveals around 8.2% stake of Barings – 20 lac shares allotted at 350 per share. Plus promoters have been allotted warrants --5 lacs warrants convertible into equity shares at a price of 350 per share.

About the Barings deal, the arranger has been named as Money Matters Financial Services. Maybe it has some rub on effect on the scrip price as also the general correction in mid/small cap stocks.

Results for the company are due to be announced on 28 jan 2011.

Technically the stock has already corrected 38% of its entire rise from 30 to 379 at 245 and currently has come down to 231. The 50% retracement levels come to around 205 whereas 61.8% levels come to around 165. These are mere levels of retracement but one can look for signs of stabilisation at any of the levels for a good entry point.


(Hitesh Patel) #10

shilpa medicare q3 fy 11 results

standalone sales down to 58 crores from 65 cr (q3 fy 10)

net profits down to 10.38 cr vs 13.3 cr

standalone 9m sales at 186 cr vs 173 cr(9M fy 10)

9M net profits at 37.07 cr vs 36.78 cr

fully diluted 9m eps 16.18 (not annualised)

**
**

consolidated results

q3 fy 11 sales 64 cr vs 71 cr

net profits down to 8.52 vs 12 cr

cons 9m sales 209 cr vs 195 cr

cons 9m net profits at 34.87 cr vs 33.06 cr

**
**

it seems subsidiaries are still in loss.

**markets must have sensed poor results looking at the correction in the stock prior to results. **

I guess company will end the full year with net profits at last year’s levels and one needs to look few quarters down the line while investing in this company.

**
**

**
**


(Hitesh Patel) #11

q4 results out

standalone sales for quarter up to 71 cr from 61 cr in q4 fy 10

Op profit 15 cr vs 16.73 cr for q4 fy 10

Net profit up to 13.44 cr from 10.7 cr mainly due to reduced tax provision

Cons sales for q4 fy 11 80 cr vs 70 cr for q4 fy 10

Op profit 15.77 cr vs 16.7 cr for q4 fy 10

Net profit 14.27 cr vs 10.6 cr again due to lower tax

Cons fy 11 sales at 290 cr (fy 10 263 cr)

Cons net profit at 49.15 cr vs 44.31 cr

FY 11 EPS at 20.5

For the quarter as well as the whole year the results seem lacklustre. Plus operating margins seem to be taking some hit.

**
**


(Ayush Mittal) #12

Hi Hitesh,

I’m happy with the nos…reasons:

1). The last qtr nos (Dec) were weak…the turnover had fallen off and so had margins. This qtr they are back to normalcy. This qtr turnover is the highest till now :slight_smile:

2). The margins are bound to soften. It will be tough to keep clocking 32-33% OPM.

3). The good part is - the subsidiary has become profitable now…it was loss making a couple of qtrs back.

4). Look at the Cash & Cash Equivalent on the Balance Sheet - 100 Cr!! (approx)

The way I look at this company is - its tough to come across cos which are doing innovative work…developing new APIs…have strong business model with entry barriers + OPM of 27-30%!! The stock is now trading at about 12-13 times earning and 2.5 times BV. For fast growing cos…these are attractive valuation points.

Regards,

Ayush


(Hitesh Patel) #13

thanks ayush.

regarding the cash on balance sheet could it be due to the funds raised by qip and yet to be deployed?

any new molecules for which the company gets regulatory approval will lead to good re rating for the stock. Results are not sufficiently good to provide the necessary tailwinds.


(Donald Francis) #14

Hi Ayush,

I am starting on the promise of Shilpa Medicare, for the second time:). This time I want to spend atleast a week trying to understand the Oncology space in India/worldwide.

Just wanted to get a heads up on the absence of growth. if i remember correctly they were supposed to be setting up the biggest oncology API facility in india?

a) Is it capacity constraints or market related, competition or what

b) JV with ICE progress?

In an interview in 2008 the MD had said “We are one of the few dedicated oncology product manufacturers in the country along with Intas, Venus Remedies and Biocon.” Any others have stepped up in this space in the last few years?

-Donald


(Ayush Mittal) #15

Hi Donald,

Usually one of the best stock ideas (read multi-baggers) are usually the ones which are the leaders/niche players in an emerging & fast growing field.

The Oncology (Cancer) segment is the fastest and most lucrative segment in the Pharma industry worldwide. Shilpa Medicare has done some remarkable work in the last 4-5 years. The co’s topline has grown over 50% CAGR over last 5 years and Operating profits have grown over 75% CAGR over last 5 years!

Reasons for the same: Co has moved up the value chain from a regular bulk drug company.

They are now one of the largest standalone Oncology players in India. They hadsuccessfullydeveloped Oncology APIs which were going off-patent.

The future is equally promising:

1). The co is expanding its APIs portfolio from just 6 a year back to 26 by next year. Most of the new APIs are for few blockbuster drugs which will be going off-patent over next 2-3 years.

2). Look at the Approvals of the co - they claim to be one of the few Indian cos to have so many multiple approvals. For eg: they have approvals from - France, Portugal, Germany, Australia, Canada, Japan, Korea, Europe etc.

3). They had entered into a JV with an Italian co wherein some speciality drugs in which the Italian co specializes will be manufactured. This will be a growth driver.

4). Co has major plans for the formulation business. They are putting up a 100 Cr plant for the same.

Co had got investment from Baring Equity Fund to the tune of approx 100 Cr. They took a 10% stake @ 350/share.

Any business having OPM of 25-30% and NPM of 18-20% can be a huge wealth creator for the shareholders if the continue to grow with similar ratios. Shilpa has really good ratios.

Overall, I think one should focus on their track record to get a feel about the company. Few points which I like are:

1). Mgmt seems conservative. They were mostly debt free. Took debt once for Oncology expansion and after success brought down the debt aggressively. They are debt free now.

2). Earlier a FII had participated during 2007-08 and had taken a stake. They got 4 fold return post the Oncology success.

3). Now Baring Fund has taken a stake @ 350.

CMP is 250 and stock is available at about 12 times earnings. This year might be a year of consolidation with moderate growth. Benefits of above expansions should start coming after 1 year.

Views Invited

Regards,

Ayush


(Donald Francis) #16

Thanks Ayush for the heads-up.

Guys, our next target of meeting management is Shilpa Medicare. We have got tremendous secondary feedback on Shilpa Medicare from other chemical companies. Someone even commented Shilpa is dedicated to oncology and is so good in its space that even the biggies like DRL, when they want a pilot conducted get Shilpa to do it.

I am getting started on trying to understand this Oncology space. It will be difficult but we can do it. Please dig for more information on Oncology space in India/worldwide. get us reports, investor presentations, interviews, annual reports of global competitors, anything that you can lay your hands on.

Thx

Donald


(Rajat Chadha) #17

Hi All,

A good resource could be:

http://www.oncbiz.com/index.php

I have started to look into Oncology market.

Regards.

Rajat


(Donald Francis) #18

Shilpa Medicare's complete product Profile, at the company's website.

Shilpa Medicare Oncology API Pipeline and estimated market, as per a report from Sunidhi. Let's try and establish the market for these products independently.

Product

Market Size branded in Us $ Mn

Post Patent API scope in $ Mn

Patent Expiry

Application

Anastrozole

600

18

Off-patented

breast cancer

Bicalutamide

900

27

Off-patented

prostrate cancer

Carboplatin

600

18

Off-patented

lung, head and neck cancer

Cisplatin

600

18

Off-patented

Small cell lung cancer & ovarian cancer

Docetaxel

1300

39

Off-patented

breast, ovarian and non-small cell lung cancer

Irinotecan HCI

1100

33

Off-patented

Colon cancer

Gemcitabine HCI

1350

41

0ff-patented

non-small cell pancreatic and breast cancer

Oxaliplatin

1100

33

2011 (USA)

colorectal cancer

Temozolamide

400

12

2013 (USA)

brain tumor

Capecitabine

1200

36

2013

metastatic breast cancer

Thanks Rajat for the link in your post above. Please try and look specifically for info on these products.

-Donald


(OMPRAKASH) #19

Hi,

In the latest financial statement share warrants application money is shown as 4.37 cr.I think the warrants issued to barring equity were converted.Only the warrants issued to promoters were pending.Clarify me the resultant equity afterconversion


(Arindam) #20

Oxaliplatin was discovered in 1976 atNagoya City Universityby Professor Yoshinori Kidani, who was granted U.S. Patent 4,169,846 in 1979. Oxaliplatin was subsequently in-licensed byDebiopharmand developed as an advanced colorectal cancer treatment. Debio licensed the drug toSanofi-Aventisin 1994. Eloxatin gained European approval in 1996 (firstly in France) and approval by theU.S. Food and Drug Administration(United_States)))(FDA) in 2002.

Patent information

Eloxatin is covered by patent numbers 5338874 (Expiry Apr 07,2013), 5420319 (Expiry Aug 08,2016), 5716988 (Expiry Aug 07,2015) and 5290961 (Expiry Jan 12, 2013) (see Electronic Orange Book patent info for Eloxatin).[9]Exclusivity code I-441, which expired on Nov 04, 2007, is for use combination with infusional 5-FU/LV for adjuvant treatment stage III colon cancer patients who have undergone complete resection primary tumor-based on improvement in disease free survival with no demonstrated benefit overall survival after 4 years. Exclusivity code NCE, New Chemical Entity, expired on Aug 09, 2007.[9]Source Wikipedia

So Oxaliplatin looks its off-patent not before 2013. Next I will try to authenticate the market size for Oxaliplatin as possible