TAKE SOLUTIONS LTD- will you take it?

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http://www.bcg.com/documents/file80247.pdf
Below chart is from 2011 paper.

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R&D Assessment by IDC over the last few years which is the key focus for Mgmt.

2011

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2013
> Either not part of assessment or lost ground to competitors.

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2015 report yet to be published.

Sales and Marketing
Does not pertain to the Pharmacovigilance segment which deals with Adverse events

Sales and Marketing - ITO
https://www.imshealth.com/files/web/Global/Tech%20&%20Apps/Nexxus%20Commercial%20Application%20Suite/IMSH_IDC_ITO_excerpt_2015.pdf

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Sales and Marketing - Strategic Consultant
http://idcdocserv.com/HI258970e_Accenture

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Below segments are being de-focussed by management.
Manufacturing and SCM assessments

2013
ITO Vendor Assessment
https://www.wipro.com/documents/IDC-MarketScape-worldwide-life-science-manufacturing-and-supply-chain-ITO-2013-vendor-assessment.pdf

Strategic Consultant Vendor Assessment

2015
ITO Vendor Assessment

BPO Vendor Assessment
http://idcdocserv.com/HI259302e_Accenture

Strategic Consultant Vendor Assessment
http://idcdocserv.com/HI259357e__Accenture

Top Preferred Life Science Technology Vendors for 2015
http://idcdocserv.com/HI255788-_2

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Was about to post the IDC results :smile:

I think this explains the reason why we don’t find mention of take in some IDC results like 2013

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The section “Delivering More Effective Clinical Trials” is very good and particularly related to the kind of work Take does. Take’s management had explained the same thing in an interview (probably the youtube link that I shared above). Now after hearing the rationale from a second source I could relate to it better.

In the last conference call management gave this overview of their business. Ambit research has put that matrix nicely here.

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Out of the above 3,

  • Consulting : 20% contribution to revenue and has highest margins. Competitors in this space is Deloitte…

  • Technology - 30% contribution and medium margins. I think this is implementation activity for products from Oracle like Argus Competitors in this space are TCS/Infyetc ? Business is not that sticky.

  • Functional Services - 50% revenue contribution. Medium margins. Competitors are Octagon research , ISI, Medidata

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If my understanding is correct, these reports show TAKE at bottom rung of the ladder and they have a small pie of the whole market ( Contender) and where a minus sign for TAKE indicates it is not growing. Two things we need to track 1) How they increase their market share in LS and 2) How do they reduce business in SCM ( finally get out) or improve margins there.

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Have just started spending some time on this company. Few questions that I am looking out for answers are below:

  • The management talks about huge growth in the Life Sciences segment given the increase in outsourcing share. In-spite of that, if we look at the sales of Life Sciences segment for Take in USD & INR Terms, the growth has been pretty average. What is the reason for the same?

  • Management has talked about increasing their consolidated margins to about 24% by FY17, what will drive that increase. The low margin business have been divested already. Further, they have acquired a low margin business in EA. Wouldn’t it be a barrier in achieveing the 24% margins
  • Their past acquisitions haven’t been that successful. What’s their thought process behind acquisitions and why did some of the previous acquisitions didn’t work (e.g- WCI)
  • In terms of capability, why can’t a TCS/Infosys/Capgemini/Accenture provide a similar suite of services to the clients? What is it that only Take can do?
  • For an Technology/knowledge based company, their asset turns is extremely low (~1) What’s the reason for this?
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Few more questions :

  • How are we similar/different from a Medidata for example.
  • What has changed in the last 2/3 years in the life-sciences division market - both externally and internally which has made us in the fray for larger deal sizes - USD 20-25 MN
  • Competition in this space should be heating up given the market growth and application of technology. What will enable Take to sustain and rather grow its position in the market.

I think the metrics to track in Take, like in MPS are

  • Revenue share from Top 5/10 customers. That should consistently grow. I understand that this is going to be a increase wallet share with customer story rather than new customer addition story
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What’s the data point for saying the WCI acquisition hasn’t worked well ?
I was thinking it’s probably one of their better acquisitions. They got the consulting and industry networks from this acquisition. Both of those have high value for what TAKE is doing currently. Consulting is high margin and sticky business. Industry networks is what gives them a standing in the market and among the thought leaders. Jim Tizzard from WCI is now heading NAVITAS and considered to be the brain behind increased focus on sales and marketing and lot of leadership activities.

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Raj, if you hear the con-call at the time of WCI Consulting acquisition a large part of the thesis was cross-selling TakeSol’s offering in Europe and increasing the share of Europe’s revenue. This hasn’t been successful yet. WCI at the time of acquisition was 70-75 Crores in revenues, This has grown to ~ 140-145 Crores so abotu 18-20% growth which is not bad. But their primary premise was to increase revenue share from Europe which hasn’t happened.

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@rohitbalakrish_

Here are few questions from my side.

Questions to Management:

  1. Market Size : Total Market Size: ~16 B, out of which ~8B is in data collection stage (That is the work of CRO, TAKE doesn’t participate in that area), out of the other 8B, 80% (6.4B) is addressed in house by Pharma companies (FIPCO - Fully Integrated Pharma Companies). From the rest 1.6B : Take’s FY15 revenue - 77.3 mn dollar (64% of 120.8mn), Medidata FY15 revenue - 300 mn. Which means TAKE has a 5% of current market share and 1% of potential market share where as medidata, as one of the largest company has ~20% market share. Q: Is this understanding correct ? Can we infer that, there are lot of small niche companies out there doing lot of cutting edge work for a section of pharma companies? Try to get a sense of developments in technology space which can disrupt this space. In which area are the innovations happening, and how TAKE is planning for times ahead.
  2. Ecron Acunova Acquisition: Our understanding is, Ecron is a Clinical Research Organization (CRO) player in the field of Biosimilars, stem cell therapy and developing medical devices in the area of diagnostics imaging. Also Ecron has been doing some work in Risk Based Monitoring which seems to be a very logical thing to do and USFDA too has been pushing for it and recently Medidata also launched a complete offering in this space and it’s been said to be one of the highest potential growth area. After acquisition of Ecron, TAKE mentioned that the addressable market size has now increased from 16B to 30B. Q: Please take us through the kind of work ecron does. If Ecron is a player in CRO field, is TAKE aiming to become a more end to end player in clinical trials space with this acquisition. What kind of opportunities/risks does CRO business bring along. What was thought process behind the announcement of increased addressable market size ? Because TAKE had earlier said data collection (CRO ?) market size is 8B (refer Q:1). How does Ecron help TAKE in what it was already doing.
  3. Regulatory Filings: TAKE has done over 2,00,000 regulatory filings so far. Our understanding is, TAKE does most of the regulatory filing work for innovator companies and does filing of clinical research data. Generic companies do chemical equivalence tests instead of clinical data trials but they too do regulatory filings for ANDA & DMF’s. Q: What is TAKE’s role in these kind of ANDA/DMF kind of regulatory filings. What is the level of engagement for TAKE with generic companies like Sun, Auro,Alembic,Cadila which TAKE lists as it’s customers.
  4. Consulting & Industry Network: We understand industry networks (along with consulting) practice came with the acquisition of WCI in 2011. Looking back, this seems to be like one of the best acquisition done by TAKE. Top Margins, sticky business (?) , getting the attention of top thought leaders & decision maker’s in the filed. Jim Tizzard (ex WCI CEO is leading Navitas) Q: Take us through, what keeps the industry professionals hooked on to TAKe’s industry networks (it’s a paid service). Are there competing networks existing as of today. How do we complete with them ? We understand Delloitte had tried to build such networks in the past and it didn’t work. How does these network contribute to the building of overall business for TAKE.
  5. Audited/Audit Ready Data Infrastructure : TAKE has now 3 audited/audit ready data centers. Q: Take us through what role they play in the business. How easy/difficult it is to build these audit ready facilities. Do players like CTS/TCS/Infy and other clinical data mgmt. players also have them. How often are they audited by regulators (FDA etc…) . Do the audit’s have same rigor as audit of pharma mfg. facility. Did TAKE acquire the first 2 facilities as part of some acquisition ?
  6. Recent USFDA 483’s/Import Alerts and TAKE’s role: If one goes through the details of USFDA observations on Indian generic Pharma manufacturing facilities on cGMP violations/483 observation/import alerts etc…a good proportion of violations are regarding the data integrity, data audit violations, unauthorized access to data etc…etc… Q: Does TAKE provides any solution in this space ? If yes, please help to provide us more details. If not, is this a lucrative area ? who are current players ?
  7. Competitors: We learn the Medidata has been spending heavily (R&D spend at 21% of sales) to build cutting edge technologies in mobile (mHealth ), big data , analytics and cloud. Q: What are take’s thought on the same. How do we see TAKE’s technology (R&D) spend evolving going forward. Players like Quintiles have their own CRO and Clinical Data management teams - Q: Is this correct ? In what kind of project do they seek TAKE’s services.
  8. Impact of GDUFA : Does the accelerated approval program of USFDA have any impact on the rate of technology adoption for Pharma companies.
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Will look up and get back on this.

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I always wondered how come the company is paying taxes at so low rates.

In q2 fy 16 it paid taxes at 10% whereas for first half of fy 16, its less than 10%.

And I dont think it has carry forward losses of earlier years?

One logic is acquired companies could have carry forward losses and might help in lower taxes but couldnt find any answer on the above tax query.

disc: no position.

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Taxation
Tax expense for the current year FY 2015 stands at 54 Mn from 10 Mn last year, resulting in an increase in the effective rate of
taxation from 2% to over 6%. This is due to increase in the deferred
tax expense for the year offset by drop in current tax component as
well downward revisions to tax pertaining to prior years. Deferred
tax expense is a function of the difference in carrying amount of
assets considered for tax reporting purposes and for GAAP reporting
according to laid out Accounting Standards.

This is from Take solutions 2014-15AR. Can somebody explain in simple terms what the highlighted line means?

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Indirect Competition for Take Solutions

http://www.outsourcing-pharma.com/Commercial-Services/Paragon-launches-manufacturing-compliance-service-for-drug-firms

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Navitas has Qlik listed among its Analytics partners.

http://www.pharmatechoutlook.com/magazines/December/January2016/

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Found below additional links from Qlik site:
http://www.qlik.com/search?q=life%20sciences&p=2 (Search link listing multiple PPT’s)
http://www.qlik.com/~/media/files/resource-library/global-us/direct/datasheets/ds-life-sciences-top-ten-solutions-en.pdf

Qlik being mainly a BI Platform with focus on visualization through dashboards and reports, with respect to Navitas has focused solutions for Pharmacovigilance and Clinical Trials Management.

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Europe was the second largest market in 2014. This is attributed to the tax benefits offered to the large and small-scale companies to promote more CRO activities. The large companies can claim 30% deducible from the income of their R&D expenditure. In case of small and medium sized enterprises, it is 225% for the R&D expenditure.

Asia Pacific is the fastest growing industry due to the reduced cost it offers in comparison to the U.S and other developed economies. Increasing incidence rate of chronic and lifestyle diseases such as heart disease and diabetes coupled with ease in patient recruitment and available expertise for the clinical trials are few drivers propelling growth of the Asian healthcare CRO market.

China and India are projected to witness tremendous growth in the CRO market owing to their treatment naĂŻve patient pool coupled with disease prevalence rate. Furthermore, genetically diverse population, highly qualified English-speaking investigators, well equipped hospitals are other opportunities offered by India for global clinical trials.

CROs are in a process of continuously improving their portfolio by integrating services with technology. This enables them to save more on time and deliver efficient and desired results to the clients. In October 2015, PPD joined hand with Oracle to use its cloud technology named Oracle Siebel CTMS.

In addition to offering improved services, CROs are in the process of collaborating to promote their services at a global level. For instance, in May 2014, ClinDatrix, Inc. collaborated with six other CRO’s to offer services to multinational clinical trials. The collaboration will strengthen its presence globally apart from the U.S. and Canada.

Major contributors are Quintiles, Covance, Pharmaceutical Product Development, LLC (PPD), Parexel, Charles River Laboratories (CRL), ICON plc, inVentiv Health, Medidata Solutions, and Theorem Clinical Research. According to the US database of trials, Parexel, Quintiles and PPD are involved in large number of collaboration with the sponsors pertaining to clinical trials.

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This post is an attempt to understand the implications of the acquisition of Ecron Acunova.
Views are invited.

Prior to the acquisition of Ecron Acunova, Navitas had the tech capabilities to handle clinical trial management through the following services:

  1. Trial Master File Management
  2. Clinical Data Management
  3. Clinical Data Standardization
  4. Biostatistics (To help with Clinical Trial Design, Selection of patients/sites, etc.)
    Basically, they were acting as a Tech-Vendor to a CRO who provide the actual data from clinical trials.

Highlights of the acquisition which has been commented on by mgmt. is:

  1. Access to Europe clientele
  2. Access to Biosimilars and other emerging pharma markets.
    What i felt missing was that the core competency of EA was not highlighted which was handling Phase I-IV clinical trials.

Most of Navitas competitors other than Medidata are mostly CRO’s who later diversified into CTMS, CDM tech solution space (eg: Quintiles, Covance). This investment in IT was more out of compulsion due to the amount of data generated from clinical trials (and nature of complexity) which had reached a point that their in-house data management systems could not handle.

Couple of links which attest to the above point.
Increasing data volume, trial complexity and changes in sponsor and regulator demands are driving investments in IT systems among contract research organisations (CROs).

During a panel discussion Christian Tucat, Senior Vice President Business Development at INC Research, said CROs “are awash with data” adding that “there are more and more data points, biometrics and capturing tools, but the biggest challenge we have is how to read and interpret it all.”
“Our sense is that CROs are viewing IT capabilities as increasingly important competitive differentiators, more so than in the past.

CRO: Explaining the term
http://www.financialexpress.com/article/pharma/cphi-india/at-crossroads/172755/
The abbreviation CRO is used for both ‘Clinical Research Organisation’ and ‘Contract Research Organisation.’ The former includes only the clinical research companies which can be subdivided into two categories:
• Clinical research organisations offering phase I to phase IV clinical trials
• Bioequivalence centres offering BA/ BE studies

And Ecron Acunova having both of the above 2 capabilities makes the combined entity a fully integrated CRO tech company.

Now, unlike Syngene which is clearly into drug-discovery, Ecron Acunova core competency is Phase I-IV clinical trials with dedicated sites available across Eastern Europe, India, Germany and US as well.

Oppurtunity size for CRO Market
From Quintiles JPM16 slides - http://s1.q4cdn.com/151453148/files/doc_presentations/2016/JP-Morgan-2016-Healthcare-Conference-vFINAL.pdf

Below is a comparison matrix between EA and Quintiles which is a decent match up.

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Below snapshots highlight the pedigree of EA’s capabilities and its potential in future.

Coming to the negative aspects:

  1. Regulatory: There had been a negative decline in Clinical Trials in India on account of unpredictable and uncertain regulatory environment. Approvals for change in dosage and other sort of hurdles which are not present in developed countries have contributed to the above trend.
  2. India is generally held to be a cost-competitive centre for clinical trials due to higher recruitment rates and diversity of population. This could be possibly disrupted with data analytics (and wearables) making it easier and faster to recruit in developed countries.

http://www.iconplc.com/news-events/news/icon-and-ibm-to-revolutio/index.xml
Initially, ICON is applying Watson Clinical Trial Matching to its breast, lung, colon and rectal cancer trials. The solution enables ICON to advise sponsors how many patients match their trial criteria, where they are located and how they will recruit them

3.EA had a partnership agreement with Biotrial for handling clinical trials in Europe. Biotrial has been in news recently for the failed trial which led to death of 1 patient and hospitalization of 5 others.
http://www.fiercecro.com/story/french-cro-biotrial-tries-move-forward-after-disastrous-clinical-study/2016-01-21

4.Low taxation numbers as was highlighted by @hitesh2710 bhai in earlier posts.

Disc:

All the above information is from public domain.
Ecron Acunova site is a treasure trove of information from which above slides have been taken.
I had bought shares of Take Solutions last week during the correction. I have bought it with a 3yr horizon. There is a degree of high uncertainty and hence please do your own due diligence.

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Result out…Great numbers…

Consolidated Q3 FY16
Sales up 34% from 184.7cr to 247.8
Profit up 46% from 164cr to 240cr
EPS Rs. 2 vs Rs. 1.37

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Yes…this is even after chennai floods…super results…:ok_hand::+1: & its now on UC…:slightly_smiling:

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Some rough notes from today’s concall -

  1. He talked about segmental break-up. Missed that part. EBITDA % was down mainly due to Chennai floods. Covered the segmental break-up below.

  2. Chennai Floods impact:
    In terms of revenue - $1.1 mn impact - got postponed. $160k will never be realised. $960k of revenues got transferred to current quarter. Revenue in rupee terms about 7 crores. —> "This will result in much stronger Q4.

One time cost of 2.5 crs. - Related to Employee benefit + Damage to assets + Temporary relocation cost (to bangalore) --> This wont recur

  1. 8 new customers added this quarter. Nefs(didnt get this word) membership grew to 110.

  2. Our flagship Pharmaready has reached 100 customers now. This is a milestone for us.

  3. I had talked about 2 major deals in pipeline as of last quarter - We did not win 1. On the other order, the order itself is broken down to three parts and we will get a substantial part. This announcement to be out this month/next. There are 3 other major deals in pipeline which we are pursuing. --> Likely to have a strong order book by 31st March 2016.

  4. To sum up - We had a decent quarter. Augurs very well for 4th quarter due to spill over + very strong order book. 3 big orders coming in. We are very bullish on Q4 and thereafter. And add to that Ecron Acunova will get consolidated in q4.

  5. Current orderbook at $80mn. Expected order book by March '16 - $92mn(due to amalgamation of Ecron Acunova). -> This does not factor in the possible wins.

  6. Ecron Acunova - 120 cr, EBITDA margins at 11-12%.

  7. Big data - We have a tie-up with a European major and we are going ahead with that. Intellent is the big data unit.

  8. USFDA stringent regulations impact - This is going to impact us positively. We are looking at this as a significant opportunity to help our customers (pharma majors). We have a lot of process expertise to help our customers. Dont look at us as a technology company.

  9. Tell us your EPS guidance - EPS guidance is complicated. Aiming at 25% cagr growth + 24% EBITDA level

  10. Main competitors - Missed the names. line was bad :frowning: No one with 360 degree solutions like us. We dont compare ourselves with IT company as only 30% of our revenues are from technology. 70% of revenues are from Consulting & Functional expertise

  11. Are you able to cross-sell products to Ecron Acunova’s customers - It needs some more time. Cross selling will definitely happen. Margins improvement can happen quickly, but cross selling will take time.

  12. Revenues from new deals(if we win) may start from May. We may not win all 3 deals. We should atleast 1 of them.

  13. Revenues by verticals - Q3 Life Sciences - 71.5% SCM - 24.5%, Others - 4.5%. Next qtr Life sciences may contribute more due to EA acquisition.

  14. What are the Margin levers in our hand - 1. How we apply technology is the critical margin lever. 2. How are we able to scale? alluding more towards mining the customer.

  15. How are you looking at SCM going forward? - Life sciences is continously growing and thats why SCM looks small. We have some strategic ideas for SCM

  16. Shriram has sold all its stake in Take Solutions - is it correct? They continue to remain a stakeholder. They have transferred to a different promoter entity.

  17. Orderbook growth looks optically slow in Q4- It doesnt follow a sequential pattern. Dont go by that.

  18. Good amount of cash available in your books. Plans for debt reduction - Cash is important for a company like us as there could be opportunities for expansion. Dollar denominated debt. so we are having this at fairly lower borrowing costs. We are comfortable with that.

  19. Currently 7% of our revenues from Europe. We are looking at 20% going forward from Europe.

  20. New acquisition(Ecron Acunova) effect will come only from Jan quarter.

  21. Ecron Acunova sold off because the promoter wanted to call it a day. We looked at it as an opportunity.

Thanks,
Ravi S
Disc -Take forms more than 10% of my PF.

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