I am pretty sure that A&P would be back. During Lockdown, people bought medicines in panic. I remember we were stocked out of Thryonorm on day 1 of lockdown itself and the prices for retailers had risen up 10% in a few items. All these things will come back because it is a competitive market and I hope Abbott doesn’t reduce A&P because it can affect its business.
Disc. - Probably I will never be able to own its business due to steep valuations
Yes the valuation of this pharma company is high, but definitely ls cheaper than other MNC peers and many FMCG companies which hardly have consistency in growth over last 10 years…
If you look at the screener data :
Abbott India has given
There is a consistency in performance year after year for last 10 years without disappointing its share holders irrespective of Black swan events, wars, earthquakes, Geo-political situation, Govt policy in pharma pricing !
Do we have another such company in pharma space in india?
Anyway, Past performance gives no guarantees for future performance…
Discl: Invested…I may be biased… I may be wrong in my assessment… It is not a buy or sell recommendation… Please do your due diligence before putting your hard earned money in any stock.
Abbotts investment decision for me came from very strange qualitative factors, and it has been a good ride to put money despite high valuations.
It makes me wonder the importance of qualitiative rather than quantitative analysis in markets. If we be submissive to the fact that the market knows alot more than us, it might be sensible to stay invested in longetivity of growth plays despite heady valuations. After all the market knows best?
Though no longer a hidden Gem, even during pandemic Q1 2021, Abbott India which is a pure domestic play seems to have shown substantial bottom line growth of more than 50%…top line has also grown at a time when most others pharma companies have shown a De-Growth barring a few.
Abbott has signed an agreement with Novo-Nordisk World leader on Human Mixtard Insulin to market insulin products in the domestic market. Revenue from Insulin alone accounts for 38% of total revenue and the balance 62% from all its other power brands.
Incidentally, Human Mixtard Insulin is the no.1 Drug among all drugs of all companies sold in India.
According to Axis securities, “Abbott’s strategy of Going Digital and Services beyond the pill is the key differentiator and game-changer for the company” I did not understand what is that digital strategy ? 
If someone can throw some light ?
Disc: Invested @ 1200 level for long term…may be biased …not a buy sell recommendation. Please do your own assessment before investing
Hi
The 2020 AR is out. Some key business numbers I was looking for.
Business Segment wise
Women’s health segment grew by 21.9% (last yr 28.5%). Duphaston was the main product. 5 new products were in this business segment
Gastroenterology grew by 9.9% (12.4% last yr) led by Udiliv, Cremaffin and Duphalac. 12 new products in this segment
Metabolics saw exceptional growth of 27.9% (vs 9.1% last yr). 2 products were market leaders (like before)
Central Nervous System segment grew by 12.6% (vs 1.4% last yr). Market leading products (like before). A new product was launched in this category
Multi-Specialty contracted significantly to 4.4% from 14.4% growth rates.
Vaccines segment grew by 20.4% which is same as last year but its contribution to sales increased by 300bps. Influvac tetra was launched in this segment
Consumer Health segment grew by 19.5% vs 17.2% last year. 2 new products were added
Rgds
Disc: invested
So Abbott has something called CGM - The Freestyle Libre (which will be a big, big beneficiary once it gets more acceptance amongst diabetic patients).
Abbott intends to integrate the data from Novo Nordisk insulin pens with the CGM and make this a ‘full stack’ offering to speak.
I think that is what they mean by ‘digital’.
Abbott-India-icici.pdf (427.4 KB)
Research report by ICICI Securities.
Last Quarter Highlights:
Paying out 90% of profits as dividends last year seems to be a deviation from the usual 20 to 30% range. I hope this was one time.
Regards
K
Wat are the chances the same move; away from branded to Generics cannot happen here in India… sometime back in 2017, there was news that India would make it mandatory or atleast encourage Doctors to prescribe only Generics in place of Brands.
If that happens, this industry will just compete on Price and become a commodity business. PE de-rating could happen…
Any Sr members with more information on this pls educate. @hitesh2710 @ranvir
The article on generics is pretty old. It is interesting to note that despite the move in the US as above, the share price of Abbott USA has continued a stellar rise.
Did the widely stated move actually happen in the US or was it primarily political talk? And would the Abbott product portfolio be affected in that case, are questions I am not too certain of.
Secondly in that case, shouldn’t all mnc Pharma be affected? Interestingly Gsk Pharma and the likes are still trading at much higher PEs than Abbott.
Agree, this should be across the board for all MNC Pharma companies listed in US.
As for Abbott USA share price rise, maybe they have managed to control costs. Sales rose in 2017 seemingly on the back of price cuts since the margins took a deep dive that year to low single digits; has recovered to 11.56% in 2019. On the other hand what puzzles me is that US stock trades at almost 20% higher PE than Indian stock. Maybe there would be blockbuster years that might take the NP margins higher, than whats reflected for last 4 years
None unfortunately. Just reading a report from Axis whereby they’re citing a ~26% degrowth in Duphaston sales owing to a new drug from Mankind, and believe the topline will remain flat in the coming quarters in the absence of any new launches -
A market leader brand with 27 percent degrowth in a quarter due to a single competitor launch sounds pretty drastic in my opinion.
I would also add in that gynaecology visits and areas where duphaston is prescribed such as IVF treatment, the clinic footfalls would have gone down, as for the patients this is a treatment area that can be addressed once the situation becomes better after COVID, especially IVF, unlike other medical conditions which could require immediate medication. I suspect that or a substantially higher base could be more of a reason for a large decline versus a competitor launch. Also competition products always existed I assume.
A bit of scuttlebutt. Conversations with the local chemist revealed that there has been a price increase on Duphaston recently. Will be interesting to understand the impact on the profitability mix.
Abbott India: Stable
— JST Investments (@JstInvestments) May 18, 2021
🧫 Rev up 12% YoY
🧫 19% EBITDA margin
🧫 Pat up 37% YoY
🧫 Stable Cashflows: Final dividend of INR 120+ Special dividend of INR 155= total INR 275 for FY21#Q4withJST #Pharma pic.twitter.com/QsfFTEUcaT
https://www.bseindia.com/xml-data/corpfiling/AttachLive/ea8389ea-bd82-4f94-a6c9-2866e13ba71a.pdf
https://www.bseindia.com/xml-data/corpfiling/AttachLive/ba7cf29f-57f5-43c8-acbc-0c4f657e1369.pdf
Management meet Key Takeaways
Abbott India grew 5% in FY21 and 14% in Q4FY21. The company continues to outperform the IPM by 1.5x.
AIL management is confident on returning to historical double digit growth rate as IPM is showing signs of recovery at the start of FY22.
Enhancing access and awareness of focused and legacy brands to Tier II plus towns, exploring innovative channels to engage with the Doctors in these areas.
Digital platform to enable Doctors and patients one-stop solution patients support and counselling programs.
Duphaston occupying market leadership of 75% in dydrogesterone market.
The therapy was impacted amid pandemic due to postponement of appointments. AIL has invested in initiatives to address generic competition in Duphaston and have seen good traction with increasing acceptance by physicians. AIL expects some market share risk as few more competitors are expected to enter the segment.
Gastro Intestinal (GI) largest therapy in the AIL basket leading with three key brands like Creamaffin plus, Udiliv and Dufflac which continue to drive strong growth along with geographic expansion. Udiliv has grown 1.5x ahead of market and gained 3%ms despite generic competition and new players. Launch of Gutfit2.0 is expected to bring more growth to the segment.
Thyronorm continues to lead the segment and significant steps have been taken to enhance digital footprint of the brand which would aid the growth beyond pandemic.
Expansion to Tier II to Tier IV markets AIL confident of continuing the market beating growth.
OTC remains key strategic focus area for AIL meanwhile the segment largely comprises of antacid and laxative these would be further expanded by analgesics and preventive health. AIL expects to attain a sizable market share by FY25E.
E-pharmacy business has doubled in last one year do not forces any generic competition to hider this segment.
The Insulin share in sales mix has been similar to FY20. Top 3 and top 10 brand contribute 20% and 40% respectively and have grown ahead of participated markets. The field force stands at 2600 personnels with leading MRs productivity.
In FY21 the management has launched nearly 15+ products including brand extensions and expected to sustain the similar launch rate in FY22 as well. The key focus therapies for new launches would continue to be WH, Gastro, CNS, Vaccine and CH.
Hi
Was looking at the 2021 AR and a little disappointed on how they have skipped certain data points they used to present in earlier years perhaps since they have lost market share.
Thyronorm continues to be the leader as per the AR. And I am assuming the Influvac shot also is the leader since vaccine segment grew tremendously well.
Rgds
Deepak
Disc: Negligible position. No txns in last 30 days. Not registered as an analyst/adviser
Abbott India - Notes from AR 2020-21 -
Colospa - irritable bowel syndrome
Gonaton - Gastro medicine
Librax - irritable bowel syndrome
Zolfresh - insomnia
Thyronorm - hypothyroidism
Duphaston - IVF, miscarriage
Duphalac- constipation
Digene- antacid
Prothiaden - depression
Influvac- influenza vaccine
Creon - pancreatic insufficiency
Duvadilan - preterm labour
Brufen - analgesic
Enteroshield - prevention of typhoid
Cremaffin - constipation
Vertin - Vertigo
Udiliv - cholestatic liver disease
Most of these brands are category leaders. They command either No 1 or 2 spot in their respective category
In order to gain leverage in untapped markets, launched a team to specifically focus on Tier-2 markets
Women’s health - adversely affected as procedures like IVF were postponed due COVID-19. Overall de-growth of 19 pc during the yr. Biggest brand - Duphaston. Key risk - generic competition in this space
Gastroenterology - grew 7.9 pc led by Cremaffin, Duphalac and Udiliv. Four new launches in this space in the last one year.
Metabolics - grew by 7 pc mainly driven by Thyronorm
CNS - Grew by 10 pc, led by Vertin.Other key brands are - Prothiaden for depression and Inderal for Migraine and Hypertension. Also launched Vertin mouth dissolving strips ( first globally )
Multi- Specialty - Grew by 6.6 pc. Key contributors - Zolfresh, Duvadilan, Brufen and Arachitol ( Vit - D )
Vaccines - grew by 42 pc, led by Influvac.
Consumer health - grew by 15 pc led by Digene
Disc - invested, biased
FY21 AR Observations (adding delta, focusing on qualitative aspects):
MD’s Message: Nine of our top 10 brands lead their individual markets; Launched a team to specifically focus on coverage in the Tier 2 markets; Increase our efforts towards vertically integrating our portfolio; Making constant improvements in formulations and packaging to enhance patient adherence
Operating strategy (paraphrased):
OPERATIONAL EFFICIENCIES AT THE PLANT:
TABLETS MANUFACTURING
• 50% increase in coating installed capacity in 2 shifts from 675 mio tabs to 1,012 mio tabs. Increase in installed capacity will help site to produce all Brufen SKU’s in-house as well as scope for internalization of new coated product
• 75% reduction (from 16 hours to 4 hours) in coating solution preparation time with user friendly method
• 20% reduction in machine hours (from 12 hours to 8 hours) and 11% reduction in labor hours (from 36 hours to 32 hours)
• Standard Yield improved from 98% in 2020 to 98.3% in 2021 resulting in cost saving
LIQUID MANUFACTURING
• Enhancement in liquid installed capacity from 9,745 KL to 12,700 KL (30%) without any capex
• Reduction in conversion cost in liquid by 10% (Actual 2019 v/s 2020) resulting in reduction of cost per unit
• Over 54% volume growth in liquid which is the highest ever since inception of plant (44.4 million bottles)
Opportunity Size: India’s domestic Pharmaceuticals Market (IPM) is estimated at INR 153,534 Crore in 2021 with growth of 4.4% v/s 2020. Acute therapies dominate IPM with 64% of total sales, however the chronic segment shows faster growth. There are estimated to be over 8,000 pharmaceutical companies, however the market is dominated by a core of around 300 manufacturers whose products generate the majority of sales in most therapy areas. Domestic manufacturers claim around three-quarters of the market in value terms
Risk: Increase in the list of drugs covered by the National List of Essential Medicines (NLEM), restrictions on trade margin mark-ups and amendments in pricing regulations will create price pressure on the industry.
I could not think anymore that can impact this business severely. You are welcome to add more.
My opinion:
P&L statement shows ~16% growth in PAT w.r.t FY20, but it’s practically ‘same as FY20’, reversing the impact of increase in inventory under ‘Changes in inventories of finished goods, stock-in-trade and work-in-progress’ and decrease in Other Expenses (decent COVID time savings under the heads - Advertising, publicity and sales promotion and Travelling and business meetings. However, ‘Professional fees and other services’ flared up for reasons unknown to me…?). However, I consider this as one off considering the challenges COVID posed for the economy.
Business Characteristics: Sells branded products, which command trust among the health care professional, across multiple chronic therapies with almost NIL R&D. Well financed – No Debt, 68% B/S as Cash and equivalent, Asset Light (single digit % of Total Assets in PPE), Negligible Capex on YoY basis which makes it a Free Cash Flow Machine.
Overall: It’s a structural and domestic oriented multi-year growth story considering India’s demographics and portfolio of the products, which are necessary and need repeat buy. Due to the same and a limited supply of free float, valuations are rich even though shareholder’s communication is minimal.
Disclosure: Invested and expecting to beat FD returns at least. Please do not use the above as an investment advice due to below reasons: * I might be wrong in my understanding of the business, if history really rhymes.*** You may not know if I change my mind.**** Resources around you will help to build the conviction, which is a must have for anyone investing in equity directly.
Your thoughts are welcome. Also, do suggest any other domestic and listed competitor that I must study for better understanding.
Some thing to be optimistic about!
