Good digging about the individual product potentials and the cos having access to the same.
I think being investors, our focus shouldn’t be on estimating the margins or profitability etc of the future products. I think its impossible to get an estimate. The important thing from thesedataare:
1). For each of the above products, there are only a handful cos globally. Shilpa is one of them Look at the M Cap of the competitors and M Cap of Shilpa…if Shilpa has such capabilities then it can surely enter the big league down 3-5 years.
2). Shilpa is not staying happy with the success of initial products. They are going to scale their product portfolio from about 6 to 26 in couple of years. Like in stocks, some might be big hits…some aveg…and few below expectations.
3). Going forward the business model of Shilpa might become more stable due to the JV, Contract Manufacturing and formulations foray. Hence the volatility in the prices of API and margins might go away.
4). Most importantly, the co seems to be playing safely and not taking too much of debt.
Thanks Ayush for the views. I believe the digging of this data, even for individual products has been very useful, for the insights it can bring. Its not about estimating profits…its about estimating what kind of playing field is Shilpa operating in/likely to.
The data also tells us other things. And I am deliberately taking the other point of view, to spur some debate:) Pharma is a good space to work on, and Shilpa is certainly a promising company and currently not too expensive either. It deserves much more attention from all of us:
1). For every Sun Pharma, Teva or a Sanofi Aventis, there is a Shilpa, or a Hetero Drugs, or a Emcure Pharma, an Aarti drugs, and Arch Pharmalabs, or an SMS Pharmaceuticals or an Intas Pharma.
2). So it isn’t like only Shilpa is able to do this with any success. If there are 6 small pharma coys in India already with active oncology DMFs for blockbuster drugs going off-patent in the next 2 years, be sure there will be a dozen more doing concrete stuff in this space.
3). Its important therefore to zero in on key success factors. Why will a Shilpa Medicare succeed in scaling up…to big pharma levels. Is it doing some things differently from the other 7? what are they? Why will the biggies lift more of these APIs from Shilpa than these other 6 for example.
Hetero Drugs does not look small. Its unlisted but its big!Hetero was born in the year 1993 as a small API unit. Today, 17 years later, the name is synonymous with leadership in pharmaceuticals with more than 18 manufacturing units and 8000 employees.
Its a generic API player as well as an Oncology API player.
Donald, it will be interesting to get a sense of the kind of competition in non-oncology APIs. Can you give us some data on a general drug going off-patent, how many DMFs are active?? vs the 15-20 that we see for Oncology APIs.
To focus on Oncology therapeutic segment, both in Products and CRAMS
We intend to differentiate ourselves from other Indian API manufacturers by offering technologically advanced andnon-commoditized products having better margins. With this strategy in mind, going ahead, we are targeting growth inOncology and Controlled Substances segment. There exists a rising global need for Oncology drugs. At the same time,the drug pipeline of most of the innovator companies is concentrated in this therapeutic segment with the objective ofdeveloping more effective drugs.
This growing demand for Oncology drugs brings in growth opportunities for APIsupplies. However, the capital investment required in setting up a cGMP compliant Oncology API manufacturingfacility is high and thus acts as an entry barrier. This has restricted the number of players having Oncology APImanufacturing capabilities. Moreover, most companies which have Oncology API manufacturing capabilities areforward integrated into finished dosage forms. We have, therefore, targeted this segment and positioned ourselves as anon-competing standalone manufacturer of Oncology APIs whereby our customers are those who manufacture onlyfinished dosage forms.
We, today, offer 8 Oncology APIs on a commercial scale from our cGMP compliant facility, Tarapur Unit 2. We arealso developing another 6 APIs to be launched during the next 12 months. Our revenues from Oncology have grownfrom 6.6% of our consolidated Income from Operations in Fiscal 2009 to 8.2% in Fiscal 2010 to 18.7% (contributinghighest to our total revenues) in H1 2011.
It appears Arch Pharma has grown only by inorganic aquisitions. Interestingly the Oncology API portfolio comes from its acquisition of Benzochem for around 100 Cr in 2008.
Does anyone know what Other Income of 2.79 crore is? It is substantially higher for this quarter relative to last year. If not for this profit would be even lower.
Yes, the results are not good and the much awaited growth hasn’t happened for now. The other income has started coming since last 2-3 qtrs and is increasingcontinuously. One needs to find the reason for the same.
Despite weak results, my interest remains in the co for its fantastic past track record and strong upcoming expansions.But yes, stock may correct due to weak nos.
Shilpa medicare has broken out of an inverse head and shoulders bullish pattern on the daily charts. Neckline of the pattern is around 280.
It seems likely to see some action in the next few weeks. pattern targets may take stock price to 400 plus levels. Looks like the pharma bull will be taking everything by storm.
disc: taken a trading position today around 287.
pl do your own diligence before taking a position.
how does venus look in this space. It recently got patent for vancoplus from canada.
With patent for Vancoplus from Canada, the contribution of vancoplus to total revenue should increase from existing 3.3%.Same(increase in % share to revenue) is expected for Achlin, the instant pain reliever.
Venus is one of the most undervalued Pharma share trading at 5 times TTM PE … Fundamentally also company has been delivering strong results but with no growth for the past two-three years… Recently they have been able to get few approvals from CANADA,USA for their arthitis drugs and Vancoplus etc… Seems some growth visibility has come now and the market is rewarding all the Pharma stocks now. They should be able to generate around 55-60 eps for this FY13 on conservative basis and the outlook for FY14 is much better due toe expected launches … So i dont rule out this script to move to 8-9 times PE conservatively which should translate into a price of 450-500 in the very shortterm.Technically also the script once it moves beyond 325-330 … it will see much higher levels as it would become multi year breakout… and targets its 2008 hights around 600 …
Hi Hitesh,
Please share your esteemed views on this script fundamentals…
Yes, You are absolutely right. The financials of company don’t look very attractive.
However this is where the element of gap(Gap between expectations and delivery) comes in to play. Venus seems to be doing things right as far as growth is concerned. With increasing spend on R&D and increasing no. of patents, venus looks promising, provided it can convert its discoveries to sizeable markets.
Look at the M Cap of the competitors and M Cap of Shilpa…if Shilpa has such capabilities then it can surely enter the big league down 3-5 years.