Gufic BioSciences Ltd

Stock Opportunities
106

If the efficiency is similar, is the price difference between the product a reason to go for stunnox and not the other?

107

Yes, I think stunnox having the same efficiacy as a Botox / or other highly used botulinum toxin, and if stunnox is priced at a discount, that will be one of the reasons to go for that.

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108

Gufic Bio -

Q3 results and concall highlights -

Revenues - 202 vs 177 cr, up 13 pc
EBITDA - 37 vs 34 cr ( margins @ 18 vs 19 pc )
PAT - 22 vs 20 cr

New launches -

Cavim ( Ceftazidine Avibactum - used against bacterial infections ) - receiving encouraging response

First company to launch dual chamber bags of Merofic ( used in severe bacterial infections )

First company to launch Dalbavancin Injection
( used against acute skin infections ) in India

Company maintained market leadership in 2 of its products - Polyfic ( Polymyxin - used against Urinary track bacterial infections ) and Micafung ( anti fungal injections )

Company’s Botuulinum Toxin brand - Zarbot
( used in chronic Migraine’s treatment ) is gaining good acceptance among neurologists in India

Have launched Guficin - to address recurrent implantation failures in the treatment of infertility. Early feedback indicates encouraging results

Sparsh division ( basically selling 90 + injectable molecules directly to 1000 + hospitals ) - has added 70 new hospitals each month in Q3

Indore Capex - progressing well. Capacity to have capacity to make 52 million lyophilised injections and 60 million liquid ampoule injections and 30 million liquid vial injections. This will be the world’s largest single site injectable facility

Segment wise sales -

Domestic formulations( 56 pc of total sales ) - Mainly led by critical care ( 38 pc of domestic sales ), 27 pc of domestic sales come from infertility division, rest comes from mass marketed products, cosmetic brands, Sparsh division

Critical care grew by 16 pc in Q3

Fertility division grew by 18 pc in Q3

Mass marketed products grew by 14 pc in Q3

International formulations( 18 pc of total sales )

Contract manufacturing( 23 pc of sales )

APIs ( 3 pc of sales )

R&D spends for next two years expected to be at around 9-10 pc of sales as the company commercialises new products from its Indore facility

Expect to commercialise the Indore facility by Q1 FY 25. Early plan is to shift a part of domestic business from Navsari facilities to Indore to de-bottleneck the Navsari facilities wrt International orders. By end of FY 25, expect capacity utilisation from Indore at around 25 odd pc as the facility will only be catering to domestic mkts. As they get global approvals in FY 26,27 - capacity utilisation is likely to improve rapidly

Have raised Rs 100 cr from Motilal Oswal MF via preferential allotment ( in Q3 FY 24 )

Already have backlog of orders from Brazil, Germany, Canada. The shifting of domestic production from Navsari to Indore should help company to meet these orders

Disc: holding, biased, not SEBI registered

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109

https://medium.com/@nitya_shah/kamayakyas-stock-picking-philosophy-case-study-gufic-bioscience-ltd-f9c9fc5831c8

Wrote a blog on Gufic

Disc - holding and SEBI registered

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110

Hi All,

In the Q3 Concal FY24, the Arisia center was discussed extensively where they would offer anti aging treatments (368 products/services) for all parts of the body including vaginal rejuvenation and also vaginal tightening and mentioned that the costing is from INR 5,000 to INR 15,00,000. They have mentioned that they are close to break even + 10% and would mimic this model at a national level. Would large number of people pay such a price for this segment to be significant for the company? The company mentions the number of footfalls are increasing atleast 10% month on month but what would be scale they can hit.

VPers, please share your thoughts.

Disclosure : only tracking, not invested

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111

So Arisia can be a very interesting segment. It was started to create awareness of their botox segment. I was the one who had asked about it on last concall. He had earlier guided to open more centres with a franchise model, but only once his first centre unit economics stabilise.

Skin clinics are a super tough business to run, look at Kaya for eg. He is smart to have not opened more centres until profitability is achieved. But if they do things right, manage to open multiple centres, this could reach upto maybe 5-10% of revenues in the long run, consider it to be optionality for now

Disclosure- invested, recommended, one of my largest positions

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113

So according to your assessment, what are the main growth drivers?

Stunnox
Immuno-therapy
increased capacity of lyophilization
domestic formulations
114

Gufic has been coming with quite muted numbers in past quarters along with huge pressure in working capital. Management is always very bullish, its good that the 100 cr. capital raise derisks their balance sheet significantly. Concall notes from last couple of calls below

FY24Q3

  • 9M revenue breakup

    • Domestic: 56%

      • 38% critical care (16% growth)

      • 27% ferticare (19% growth)

      • 24% mass market (14% growth)

      • 5.5% Sparsh

      • Remaining aesthaderm (42% growth)

    • Exports: 18%

    • CMO: 23%

    • API: 3%

  • Critical care

    • Reached 1,500+ hospitals (50 government hospital)

    • Polyfic became #1 in Polymyxin-B injection market

    • Micafung was market leader in Micafungin market

    • Launched dual chamber bag with Merofic DCB

  • Ferticare

    • Launched Supergraf (ultra-purified HMG)

    • Recurrent implantation failure: launched Guficin alpha

  • Sparsh

    • Have reached 1,017 hospitals

    • Have increased frontline strength from 42 to 44 people

  • Healthcare, Stellar and Spark

    • Good growth witnessed in DD1 group products including DD1 extended release

  • Exports

    • Approvals: UK (2), Australia (1), South Africa (1), Mexico (1), Nepal (4), Tanzania (3), Myanmar (2)

    • 190+ registered products across regulated and semi-regulated markets, 150+ in pipeline

  • Capex

    • Commercialization & capitalization will happen in March end

    • Delay has been because they increase number of lyophilizers from 3 to 6

    • Indore capacity utilization will be 20-30% in FY25, 30-40% in FY26. In FY25/26, will sell in domestic markets. From FY27, once they get site approval for export markets, utilization will improve

  • Working capital cycle

    • Inventory for dual chamber bag has started coming down. Will maintain 18-22 cr. inventory on a steady state scenario

  • R&D can reach 9-11% for Indore validation batches

  • Target to commercialize 2 products in USA via CMO in FY25, will start in USA as a CMO with a marketing partner

  • Prime bio collaboration: 60-40% profit sharing with 60% going to Gufic

  • 175 cr. term loans + 150 cr. working capital limit (70-80% utilization)

FY24Q4

  • FY24 revenue breakup

    • Domestic: 58%

    • Exports: 20%

    • CMO: 21-22%. Should reduce to 15-17% in FY25

    • API: 4-5%

  • Critical care

    • Reached 2,000+ hospitals

    • 25%+ market share in Caspofungin, Micafungin, and Polymaxin-B

    • Gained 15% market share in ceftazidime + avibactam market (2nd rank)

    • In-licensed a novel pain management solution from a Taiwanese company (patented until 2031) for India market (synthetic analgesic with mechanism like an opioid without associated side effects; doing phase 3 trials in India)

    • Launched Dalbavan, a second-generation lipoglycopeptide antibiotic used for serious bacterial infections

    • Have witnessed pricing pressure which has resulted in slower revenue growth (API pricing has also come down)

  • Sparsh

    • Have reached 1,400+ hospitals (30 SKUs)

    • Have increased strength from 44 to 66 people (expanded in Gujarat)

  • Aesthaderm

    • Zarbot is prescribed by 100+ neurologists

    • Botulinum toxin contributes 25 cr. (aesthetics + neuro). Another 5-6 cr. comes from other products

  • Exports

    • 200+ registered products across regulated and semi-regulated markets, 150+ in pipeline

  • Capex

    • 4 lines in Indore, will start filing in global markets in November 2024 and expect inspections in 2025

    • Spent 8-12 cr. on validation batches

  • Working capital cycle

    • Have extended longer working capital cycles to hospitals, nursing homes and infertility centers. This should reduce by 40-50 cr. by September 2024 and back to normal by March 2025

    • Seeing improved gross margins due to direct business with hospitals

  • Should do 950-1000 cr. sales in FY25 and 15-20% growth in next 3-4 years

Disclosure: Invested (reduced position size to <1%, sold shares in last-30 days)

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