Interesting article @saumya2010 but Abbott investors can still take solace from :-
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When we compare with Q3 2020, the taxes too are lower in Q4.Therefore it would make sense to compare EBITA of Q4 with Q3 , which is down by 40%approx.
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Abbott India’s 70% raw material comes from china (APIs) . On the other hand china is increasing API price but Abbott’s lion share revenue comes from those products which have price control .
Is it not a risk for Abbott ?
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Why single out Abbott?
Indian pharma industry as a whole imports 70% of the Raw material / API from China…
You name an indian pharma company … It depends on china for it’s raw material…
Though in Feb, 2020 during Covid19, It was realised that we need to reduce China Dependency and action was initiated by our Govt in form of incentives to reduce dependency …
A lot of PE investments are pouring in…
Action initiated … India is capable of making all API’s…the cost may be little higher …but once we attain the economy of scale…the cost may be taken care of …
Now we are really serious …but overnight may not be possible…
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NSE to add Abbott India into NIFTY NEXT 50 from June 26.
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Abbott’s unlisted subsidy is bigger in size than the listed one and has brands such as Pediasure and Ensure. Reported loss are due to high interest costs paid to the parent . What is your view on this?
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Thanks for your query! 
Agree with you. It continues to be a pain point for Abbott India investors…
In spite of the latest performance, was wondering why the stock has not fallen as expected??? But the market is very intelligent than you and me…perhaps they tend to overlook one or two quarter of sub-standard performance.
Abbott has a full range of pharmaceuticals products for india out of which 3 are block bluster drugs occupying among top selling 10 drugs in India which is growing at an accelerated rates…
(1) Human mixtard insulin : It is top selling injectable , occupying number 1 position in India among all other drugs…there are 77 millions of Diabetes , 2nd highest in the world (China is no.1 with 116 million diabetes).
Unfortunately, our people tend to get diabetes very fast due to worsening life style , eating junk food , work pressure, lack of physical exercise … and then in most cases their off- spring also tend to become diabetes with similar lifestyle …and it is quite an alarming trend that 77 millions would likely to double within next 20 years… So now Abbott is coming out with a complete integrated digital solutiin such as CGM (continous glucose monitoring system) for diabetes…first in india.
(2) Thyronorm- We have 44 million people with either hypo or hyper thyroidism… and the numbers keep growing…this drug is also among the top 10 top selling drugs in India…
(3) Duphaston: it is very popular among females Every female has to take this at some point of time to normalise her menstruation cycle…this drug is also among top 10 drugs sold in India …
Disclosure: invested… wanted to add more if it comes down… I may be biased…I may be totally wrong in my analysis…The data provided above is collected from digital media which is available in public domain …
This is not a buy or sell recommendation. Please do apply due diligence before putting your hard earned money in any stock…I am not a SEBI registered stock advisor !
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No option but to live with this. THis is one of the biggest problems of MNCs today. Atleast Abbott is better than other few companies where sales of unlisted company is more than twice that of listed one.
First of all thanks for explaining in simple words and highlighting these important drugs from Abbott. Few points would be great to get your/or other’s views -
- I am aware each of these, specially insulin injectables and Throxine have decent competetors from MNC as well as domestic counterparts…I am trying to understand why do patients/doctors still go for say a Thyronorm only and not its equally top quality competetor? Is the moat here relationship with doctors or druggist/chemist or distribution/availability? I want to understand whats the real moat to decide if it is sustainable and what are the threats.
- The diagnostics/monitoring equipments - That has been a part of the unlisted entity if I am not wrong and any such launches will be via its subsidiary
- Phendysl range of cough sysrups are again part of its unlisted entity - I am trying to understand what is the logic here (if any) of what they keep as part of their listed or unlisted entity
- is Abbott India Ltd (Listed entity) into any vaccine in India? or any OTC product?
- Lastly, a general question for pharma OTC and prescription drugs - For every blockbuster drug/therepy area you will always find plenty of options from equally top quality MNC pharma/domestic pharma and unknown small pharma companies also - be it Vitamin D, B, Insulin, Thyroid (Chronic), Infectives (Antibiotics), GI, Cardio etc etc. Many people compare domestic oriented pharma companies with FMCG and currently they command similar valuations also. But dont you think that competetion is much greater in pharma OTC/prescriptions as compared to FMCG? Also, in FMCG you advertise and promote directly to consumers while here - Where is the real moat? and how sustainable it is? Do these MNC pharma and other domestic focussed with strong OTC products fall in same league as top notch FMCG and should command same or in some cases even higher valuations? Thanks
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Will try to answer your questions to the best of my abilities.
My understanding is that almost all prescription drugs/injectables, they keep it in their portfolio- Abbott India. Most of the OTC products perhaps are diverted towards their Unlisted entity…
Most of the block bluster drugs of Abbott such as Human mixtard insulin , thyronorm belong to their chronic segments…There are basically a couple of reasons why the block bluster drugs continue to be block bluster for year after year…
(a) once the doctor prescribes for the first time, the patient buys and consumes it… he finds its effectiveness… he is aware that he has to take lifelong…he does not want to change the brand because it works for him…he does not and need not go back to the doctor … as long as the drug works and he feels ok… Even if he goes for a check up after 6 months or 1 year or so, even if the doctor wants to change the brand , he is reluctant to switch over…for fear of ineffectiveness of new brand.
(b) So it is the brand recall that he would like to stick to. For example if people would like to stick to brands like Tata salt, Maruti car, Bata shoes, Maggi noddles which are considered non-essential …why not Mixtard insulin which he has used for years and it has saved his life…
(C) It is a general feeling among many indian patients that MNC - foreign brand like Abbott is more reliable than the Desi brand, though in reality it may not be so…
So , though every pharma company puts it’s best efforts to promote it’s own product , may be some of them may be aggressive , still it is the patient with a chronic illness who decides the brand depending upon its effectiveness and comfort level…
Regarding vaccination, yes Abbott has a complete range of vaccines …Tetanus toxoid, influenza, Rotavirus, H1N1, DPT…
Recently , they have rolled out in India globally approved vaccination 4-in-1 which can protect again 4 kinds of flu virus ( except Covid19) .
A few links which could be interest to you…
Please note that Mixtard insulin which is no.1 brand though made by another MNC called Novo Nordisk is marketed in India by Abbott through exclusive rights.
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Just found that Abbott India has a licensing arrangement with Bharat Biotech to market vaccines in immunology segment. If Bharat Biotech’s COVID-19 vaccine becomes successful, Abbott may get to market it using its well entrenched distribution network, although margins may not be high in that as the vaccine may come under price control. Bharat Biotech usually relies on government for its supplies and gets almost half of its sales from Indian government. So, Abbott may also not get a chance initially.
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We need not have to worry about Abbott.
While unlisted entity remains an issue for some OTC products , they can not afford to keep the shareholders unhappy…
There may be a couple of quarters of underperformance…but the kind of brand it has created among its patients and Doctors, the company performance and in turn the stock’ s performance would bounce back…
Apart from the power brands it owns , Look at its vaccination portfolio, as of today perhaps Abbott India has a good vaccine portfolio which includes vaccination against 5 kind of virus… Influenza, H1N1, Flu…
Yes, this vertical also is seeing good growth but these are licensed products of Bharat Biotech sold under Abbott’s label.
Not only OTC, they also sells their medical devices via that subsidiary, for example, the COVID-19 detection kit.
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Abbott USA Q1 beats Street estimates…
I wish Abbott India delivers better result !
Great set of Q1 numbers by Abbott India. More details can be seen from BSE site.
I am surprised for the higher performance even during sever lock down period.
Positive results posted by ABBOTT India in these tough conditions. the overall EPS has increased by 62% over Q4 and mainly seems to have been aided by considerable reduction in other expenses from Rs 150 cr to Rs 92 crores. Revenues have once again touched higher of Rs 1000 crores which is a good sign. surely if the overall situation improves and it is happening, can see EPS touch 95 in the next quarter.
Disc: Invested Abbott India Q1 no’s.pdf (1.7 MB)
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This is a one off and one should understand that this profitability isn’t sustainable. Companies took out all the promotional schemes they provide to retailers and stockists during lockdown and now they are all back along with field force.
Topline growth shows the resilience of Abbott’s products however the stock is richly priced.
Disc- Valuations kept me at bay. I love its business.
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It is the power brands which drives its business whether Covid19 or No Covid19…
The patients trust its power brands!
It’s Human mixtard insulin is no.1 preferred by Diabetes…it is ( Human mixtard insulin) also no 1 among all medicines sold in India in terms of sales… Thyronorm is another trusted brands in its chronic portfolio…then it’s existing vaccination portfolio against all viral infections, influenza, flu, H1N1…You may please read the previous posts…
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Agreed that this level of profitability is likely not sustainable. If you see the AR, the three biggest components in Other Expenses are ‘Advertising, publicity and sales promotion’ , ‘Travelling and business meetings’ and ‘Professional fees and other services’, together which account for roughly 57% of the total Other Expenses. As you said, these will likely increase now that the lock downs are largely over and we get back to biz as usual. However, a couple of points : 1) In my view (and also looking at past examples), at least some part of these cost cuts will continue structurally as Cos realize that biz can be done without needing some of that excessive A&P or travelling expenses for example. So some of these cost cuts could very well stick and improve the Co’s margin sustainably. 2) It reflects very well on the Co/Mgmt that they could cut down costs this sharply in such a short span of time and still manage to grow the top line y/y. The current Q has highlighted many otherwise well run cos which have been unable to cut costs enough while the top-line still sees material weakness y/y.
All in all, a very good set of nos from Abbott.
Disc : Invested
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