Torrent Pharma Ltd

(ranvir dehal) #187

The management can do three things with the windfalls (sort of) they made this year-

  1. Distribute-via dividends
  2. Repay Debt
  3. Build up cash for organic and inorganic growth

Management has already stated its inclination towards 3rd option and has categorically rejected the second one.
Let us see how much do they allocate towards the First option.
Hoping for the Best.

(Srinivasan Sundaram) #188

Torrent, Dr Reddy’s, Aurobindo, Cipla, Lupin in race to buy Sagent

By Vikas Dandekar, ET Bureau | 25 Jan, 2016, 03.32AM ISTPost a Comment

MUMBAI: At least five Indian drug companies — Torrent Pharmaceuticals, Dr Reddy’s Laboratories, Aurobindo Pharma, Cipla and Lupin — are in initial discussions to bid for Sagent Pharmaceuticals, a Nasdaq-listed specialty injectables maker, sources familiar with the talks said.

The discussions started about a month ago, they told ET. Sun Pharmaceutical Industries was also interested and had even initiated the due diligence process, but then backed out, mainly over valuation, the sources said.

Sagent has mandated New Yorkbased investment banker Perella Weinberg Partners to scout for potential opportunities as part of its strategic alternatives.

Valuation is expected to be upwards of $500 million (Rs 3,400 crore), for which large generic drug makers and financial investors like global private equity funds may also be interested.

Torrent, Dr Reddy’s, Aurobindo, Cipla, Lupin in race to buy Sagent Sagent didn’t respond to an email ET sent last week seeking comment. Cipla said it is constantly in discussions with multiple parties on potential collaboration opportunities in line with its aspiration to drive access and ensure availability of high quality, affordable medicines, but refused to comment on any specific talks. The other Indian firms that the sources said were in talks didn’t respond to request for comment.

Sagent presents an ideal opportunity for companies that have an injectables manufacturing platform with focus on hospital-based medicines, industry watchers said. “Sagent has a tailor-made injectable sales and distribution outfit that could suit Indian companies. But the injectable business is getting highly competitive so the margins are getting squeezed. This is the right time to exit (for current investors), as money is available and valuations will be better,” a senior executive said.

Besides, with an increasing number of Indian drug makers faced with tough regulatory actions from the US Food and Drug Administration, the executive believed, the appetite for complementary manufacturing sites and products is high among Indian companies.

Sagent’s marketed products include calcium leucovorin, gemcitabine, octreotide, zoledronic acid and oxaliplatin in the anti-cancer drugs segment. Sagent has a set of anti-infective and drugs for critical care like propofol, adenosine and heparin, where it claims leadership positions.

Sagent recently forecast sales of $325-365 million for 2016, representing a compounded annual growth rate of 14% since 2013. It expects adjusted Ebitda of $35-50 million for the year.

The company operates through a network of 46 global partners. This offers the benefits of efficient manufacturing, diversified supplies, specialised facilities, capital efficiency and a broad development platform.

Founded a decade ago, Sagent’s portfolio of 55 products addresses a $2-billion opportunity and it plans a major future scale-up. The company has a pipeline of 98 future products that to gain access in a $13 billion market for injectables, which can further expand to a $37 billion opportunity by 2020.

Last year, top Indian companies saw hectic M&A activity. In the biggest ever overseas acquisition by a pharmaceutical company, Lupin acquired US-based Gavis Pharma in an $880 million deal to shore up its products pipeline. Cipla bought Invagen for $550 million as part of its US market strategy.

For Indian drug makers, the most sought-after market is the US, where as much as 86% of the total dispensed prescriptions are for generic drugs. However, in terms of value, branded prescriptions account for roughly 70% of the total US spending on medicines, which totaled $329 billion in 2013, according IMS Health data.

(Dhiraj Dave) #189


Even last year, Torrent pharma did announce interim dividend. So unless, extraordinarily large, it is normal for Torrent to declare interim

Last Jan 2015, the company declared interim of Rs 5 per share. Even in Jan 2014, it declared Rs 5 per share as interim. So I expect around 5-6 per share as interim.

(Rohit Ojha) #190

Injectibles company does seem interesting for Torrent. MCap as per google finance now is $263Mn which fits the bill for Torrent. But as per news below it is 500mn+

Sagent Pharmaceuticals, Inc. (NASDAQ:SGNT), formerly Sagent Holding Co., is an injectable pharmaceutical company that develops and sources products that the Company sells primarily in the United States. Sagent focuses primarily on generic injectable pharmaceuticals. Sagent offers its customers a range of products across anti-infective, oncolytic and critical care indications in a variety of presentations, including single- and multi-dose vials, pre-filled, ready-to-use syringes, medical devices and premix bags. As of October 31, 2010, Sagent marketed 21 products. The Company has a 50/50 joint venture known as Sagent Strides LLC (Sagent Strides) with a subsidiary of Strides Arcolab Limited (Strides), which is an Indian manufacturer of finished pharmaceutical products.

Found this on nasdaq website

Sagent Pharmaceuticals had a rough 2015, falling 38% because it failed to meet its own expectations. The company started the year with 2015 guidance of net revenue in the range of $325 million to $375 million. In March, founder and CEO Jeffrey Yordon retired and the company’s president, James Hussey, left the company. By the third-quarter conference call in November, the revenue guidance was down to a range of $305 million to $330 million.

Now what: Buying a company solely because you hope it’ll get sold is akin to gambling since it’s hard to know whether other companies might be interested in buying at the current price.

That being said, there’s a lot of consolidation in the generic-drug business where small margins make it advantageous to be larger. Because the acquirer can reduce redundancy, it’s possible that Sagent Pharmaceuticals could be taken out at a higher price than investors are willing to pay for the stand-alone company.

Shares of Sagent Pharmaceuticals (NASDAQ:SGNT) traded up 2.49% on Monday, hitting $16.48. 159,729 shares of the stock traded hands. Sagent Pharmaceuticals has a 52-week low of $12.78 and a 52-week high of $30.75. The firm has a market cap of $540.33 million and a PE ratio of 20.63.

(Srinivasan Sundaram) #191

Otsuka Sues Orchid Pharma to Halt Generic Abilify

By Cristina Violante

Law360, New York (January 26, 2016, 7:41 PM ET) – Otsuka Pharmaceutical Co. Ltd. has hit Indian drug maker Orchid Pharma Ltd. and its subsidiaries with two patent suits in New Jersey federal court over generic versions of the high-selling antipsychotic Abilify.

Otsuka claims in the suits filed Friday and Monday that Orchid has infringed several patents relating to aripiprazole, a prescription treatment marketed as Abilify, which is used to treat schizophrenia, bipolar disorder and Tourette syndrome. Orchid allegedly filed Abbreviated New Drug Applications with the FDA to sell a generic version of the product in…

(Chintan) #192

Results announced:
Consolidated (in crores):
Qtr. : Q3 FY16 v/s Q2 FY16 v/s Q3 FY15
Sales : 1515 v/s 1655 v/s 1156
PAT : 483 v/s 568 v/s 167

Tax : 78 v/s 164 v/s 34 This was alluded to by management in Q2 concall. Q1 tax was 410

Interim dividend of Rs. 20 declared

Thanks @pikrohit @ankitgupta @hitesh2710 and all boarders for the wonderful analysis on visibility.

Which one seems a better bet now: Torrent or Alembic?
Alembic Q4 results will reflect sales of Abilify they did in Q3. Apparently the margins have not taken a big hit. I feel both are undervalued on a 2-3 year forward basis, but Torrent more so, especially on a 2 year forward basis (if and when gAbilify margins take a large hit); though I am not an expert. Would love to hear views of others on this.

Excerpt from press release page 10 (italics are my addition):
Revenues from US operations for YTD FY2015-16 registered growth of 255%.
Current quarter and YTD has continued benefit of high sales of our largest product (read as gAbilify). However, base sales also recorded exceptional growth with support of new launches Esomeprazole and generic Detrol.

(Hitesh Patel) #193

thanks chintan for putting up the details.

Good results as expected from torrent pharma. Abilify continues to be on a roll. The note about base business doing exceptionally well is heartening.

I think it would be prudent to wait for concall and then have any views. Till now the investment thesis based on Abilify opportunity has kept playing well.

(Srinivasan Sundaram) #194

Does anybody has concall details?

(Lakshmi Narayana) #195

Con call complete detailsQ3 2016 Earnings Call.docx (39.7 KB)

(vivek naik) #196

could not open that file ,could somebody who can please highlight the imp issues in the concall.invested.

(Vaibhav1512) #197

Please find some conf call notes:

  1. US: TRP reported US sales of INR5.8bn in 3QFY16 with large part of this sales driven by gAbilify . Torrent expects that increased competition may play out in gAbilify in near-medium term with entry of 5-6 more players. Currently there are six players in gAbilify market.
    Beyond gAbilify, recent launches of gDetrol and gNexium are performing well in the US. It has currently c4% market share in gNexium which involves intensive manufacturing process and expects to grow further. gDetrol pricing remains attractive with market limited to three players. To sustain US momentum, it plans to launch 8-10 products in FY17.
  2. Torrent has currently 16 pending ANDAs in the US and it is planning to ramp-up its ANDA filings to 15-18 per year including filings from acquired Zyg facility from next year. Through Zyg Pharma, Torrent targets to file substantial number of ANDAs for derma products like creams and ointments.
    3, India formulations sales at INR4.7bn grew marginally at c7% yoy due to discontinuation of certain promotional scheme and other restructuring measures initiated in 2Q. Top Elder brands, Shelcal and Chymoral continued sales momentum and Torrent expects benefits from recent price hike taken in both brands in next quarter.
    4, Torrent reported revenues of INR1.2b (-24% yoy) in 3Q in Brazil though underlying business in Brazil remains strong with 15% yoy (20% yoy excluding tender sales) constant currency growth in ytdFY16. Despite weak macro outlook in Brazil in near-term, TRP remains positive about long-term prospects in Brazil.
  3. Torrent stated that it had successful FDA inspection of its SEZ Dahej facility in May’15 and it expects to receive EIR by the US FDA in near-term. It plans to start shipping from this facility in April 2016 to US markets. Through this facility, Torrent expects to ease capacity constraints for key markets.

discl: invested

(Vishnu Ch) #199

It is for last year’s - Jan 29 2015.

(Ankit Gupta) #200

Hi Chintan,

Both Alembic and Torrent seem to be doing well. I think market has its reservations about how things would look like in FY17 and beyond for both the companies especially Torrent since it has a relatively thin pipeline compared to Alembic.

However, there were quite a few things I liked about yesterday’s concall:

  • US: Base business in US seem to be doing well with ramp up in market shares of gNexium and gDetrol. Although, the size of these molecules cannot be compared to gAbilify, they still are pretty good products. gAbilify continues to be a good product despite severe price erosion. Since currently, there are just 7 players in the market till date, it might continue to have a good impact on the results of Q4 and hopefully Q1 of next year. The company is confident of launching 8 - 10 products in the US next year and 1 - 2 out of it might be blockbuster molecules. This might help in restricting significant tapering off of the profits which are expected in FY17. In addition, although the company has just filed one ANDA in this fiscal till date and plans to file one more by end of the quarter, the management seems pretty confident of filing 15 - 20 ANDAs from next fiscal onwards (Q1 commentary and results will give us indication of that). This might include filings for dosage forms including derma and oncology. From the time of filings, they expect approvals in 12 - 18 months time. So, some of this filings will have impact on FY18 results. The capacity constraints the company is facing for its regulated markets is expected to be addressed from Dahej facility. Surprisingly, Dahej is yet to receive Establishment Inspection Report (EIR) from USFDA but has received approval from USFDA for one molecule. The company expects to manufacture 8 - 10 molecules for US facility from Dahej in FY17. The company has also started building its oncology block and work on the filings has also started. Although, the plant is expected to be ready only after two years, the company will go ahead with its oncology filings through custom manufacturing.

  • Domestic Business: The company’s efforts for reducing bulk discounts and channel margins which had impact on the sales during Q2 and Q3 have been completed by end of Q3. The company expects to have a growth in domestic business in line with the industry growth in Q4 and hopefully surpass that from Q1FY17 onwards. These measures are expected to have a long term positive impact on the margins of the company. The company had launched biosimilar for Adalimumab, a therapy for the treatment of auto immune disorders like rheumatoid arthritis etc during Q3 in addition to one biosimilar launched in Q2. The pricing of the biosimilar will be one fifth of the innovator’s price. The company has tie up for three biosimalars with Reliance Life Sciene and the third molecule is expected to be launched in next year.

  • Brazil and Germany Business: The company has taken various measures to minimize the impact of currency of the Brazilian business like retrenchment of employees, cutting dealer and trade margins etc. The per man per month productivity (PCPM) has improved from 50,000 real to 80,000 real currently. Also, the cut throat competition on pricing has reduced amongst the companies due to currency depreciation which has impacted most of them. The Germany business had supply issues due to capacity constraints which is expected to be addressed through Dahej plant.

  • Cash and liquid investments:: Despite Rs.407 crore of outflow through interim dividend payment, company should hold substantial cash on its balance sheet by end of March, 2016 (even after factoring in final dividend payment; company has stated dividend payout of 30% of profits). The company continues to scout for opportunities in domestic and US markets and looks at a payback period of 7 - 8 years while assessing them.

(Vishnu Ch) #201

Hello Ankit,

Thanks for the diligent updates as usual.

As i could not participate in the concall, and with reference to our offline discussion (with @pikrohit) about GVK Biosciences black-listing of drugs off which Torrent had some molecules among them.

Would it be correct to infer that Torrent has not been materially impacted by this issue?


(Ankit Gupta) #202

Hi Vishnu,

Wasnt able to ask question to them during the concall and not much clarity about the impact of GVK Biosciences black-listing. May be we can drop them an email to get clarity on the issue.


(Vishnu Ch) #203

Sure. Will do. Thanks again.

(Rohit Ojha) #204

Here are my notes. Some of this is repetition

  • Net debt is only 800cr. long term debt of 2000cr and cash of 1200cr. Great cash generation
  • For acquisition the first priority is India and the second is USA.
  • 2016 (CY?) will see high single digit ANDA filings. Next year at least 15-20.8-10 launches in FY17, out of which at least a couple will have somewhat limited competition.
  • Derma and onco (through CMOs) will be commercialized from 2018.
  • Dahej is a vertically integrated plant with an API block
  • Tax rate will continue to be lower in Q4.

  • Aripiprazole is a very large product and Detrol, Nexium are just taking the initial steps in the launch cycle. So I wouldn’t like to compare them among themselves. As Esomeprazole (nexium) is really right now totally dominated by the brand with 60% market share. So, you would see a gradual ramp up for all generics on Esomeprazole Most of the customers are keeping both brand and generics, so it’s very early days and tolterodine (detrol) is a much smaller market. So I wouldn’t say that there is a comparable between the three products as of today.

  • During the quarter, esomeprazole monthly market share is 4% and we expect that share to grow up as the existing customer shift from brands to generics.

  • Nexium is a very competitive product, so we haven’t seen any incremental pricing pressure after Dr. Reddys has come back and I actually - I don’t know if they come back fully or only with limited quantities, but essentially the impact has not been felt. On tolterodine, it’s essentially pre-player market, so hence the prices prevailing in the market are more, I would say in line with that kind of market. IMS showed Detrol market share of 10%

Domestic market

  • Growth of 7% in Q3 does not reflect the complete underlying picture as growth was higher towards second half of the quarter. Moreover, benefit in margin is much higher than the temporary top line loss. Domestic market will show market beating growth after Q1FY17. Rationalized field force. PCPM has grown to INR 5 lakhs plus based on internal sales versus last year INR 3.8 lakhs.

  • Shelcal and Chymoral continue to outperform the market consistently and the growth drivers for Shelcal will remain higher penetration in two key segments like Gynaec, Ortho, CPs and in case of Chymoral it would be ?? where there is a huge untapped potential. Shelcal-CT also has entered the list of top 500 brands for the industry in December 2015, which is one of the recent extension launches of Shelcal.

  • Brazil impact- They are 100% hedged for the credit period of 270 days. The high currency depreciation has not walked into P&L. Management is long term bullish on Brazil. Its a huge market and they are positioning themselves right to reap the benefits in coming years. “We as a pharma company are in the right spot in a tough market”. "so my PCPM in Brazil right now is R$80,000. About two years ago, it used to be R$50,000. So those R$30,000 put up additional sales per month per head. It really contributes to the company’s bottom line. We’ve also kind of reduced the distributor margins, the trade margins and asking them to share the effort in these times and what we’ve also done is streamline the logistics and brought some activities in-house. So we essentially tried to cut costs to the bone during the three or four years, which will be tough for Brazil, because there it will be a much better position when the economy comes back. And the forecast I am seeing is that 2017 might be a zero year, but 2018 onwards the company should start growing again. so I don’t think that dark clouds will last"

  • US, Brazil and Germany are prioritized for allocation manufacturing capacity. Other markets were not doing well because of lack of capacity. Going fwd, UK, romania will gain momentum.

  • Third biosimilar of Reliance Life Sciences will be launched in FY17. Looking at larger strategic partnership with Reliance Life Sciences as they dont have sales organization.

@crazymama @ankitgupta I could only attend half of the concall so didnt ask questions either.

My reflections

  • Torrent continues to execute beautifully. I was expecting that markets will reward the result and dividend but the price didnt move. Now my feeling is that we may have to wait a bit longer and the maybe the markets want to look at Q1FY17 results on high base of Abilify…unless an institutional buyer comes in and takes prices higher.

  • Consensus looks like FY 17 will be a bad year but domestic market growth will kick in. Brazil will also improve IMO.

  • Torrent remains a good bet at these prices.

(Hitesh Patel) #205

thanks for concall notes. most of the things are covered by the guys who put up the notes.

I like the candidness of management in answering questions. No evasions while answering.

Surprising to hear that they got a product approval from dahej before getting EIR report.

About price not moving inspite of good results, I feel part of it is to do with the overall jittery markets plus a slew of negative or negatively projected news for the sector. The most recent one being the scare about API being sourced only from US. Basically its only for US govt supplied medicines which have little impact on companies we look at but markets run on emotions in the shorter run. Thankfully, as Lynch says, over longer run, the earnings is all that matters.

Torrent also seems to be overowned by institutions and even retail investors. So for institutional guys who have redemption pressures, its an easy exit decision bcos they wont be booking too much by way of loss. In fact its about booking profits and hence easy to explain to their superiors or to whoever they are answerable to.

Broad picture of the company to me looks to be encouraging. The single most important part for me is their execution part. Making best use of an unexpected opportunity says volumes about management.

(Rajesh_R) #206

One of the major conf. call take away for me was 12 to 18 months product approval time line. One of question I had was, what is management planning to do till next round of ANDA approvals arrive which are filed in FY17. Currently, With 16 pending and 1 more to be filed in Q4, I think it will keep the ball rolling for FY17 and FY18.

For FY17 and FY18, I think US business has enough fuel to maintain momentum esp. with few big molecules up for approval. As management indicated they couldn’t focus on all the products and had to go for high margin ones due to capacity constraint. Dahej will help them grab some market share for all the introduced products in US and also improve Europe business. With India business also showing some improvement, my comfort level has gone up.

For FY19, with 15 to 20 ANDAs filed in FY17, there should be enough approvals to kick start next round of US growth.

I hope management continues the same level and execution.

Disc: Invested.

(Ankit Gupta) #207

Torrent gets tentative approval for gAzor (AMLODIPINE;OLMESARTAN MEDOXOMIL; USD 166 million in CY2014; innovator - Daicha Sankyo; Patent Expiry - October 25, 2016). Link for the approval - It is the second tentative approval for the generic after Macleods Pharma for the molecule. It seems to be a relatively small molecule. Lot of molecules of Amoldipine family have patent expiry in FY17 like gExforge, gExforge HCT etc.