Very bad results, margin are down. Company was releasing their presentations for last two quarters but unable to find it. Is there a concall planned.
If not, To me, this is a very bad indicator, management is running away from concall when results are bad.
Same thing happened last year as well
No answers from management on what happened during bad timesā¦
They nicely come and project in good time
Though a bad quarter here and there is ok but communication gets missing
Primarily the reason i got out of this
Thereās concall scheduled for 6th. Letās see what the management says
https://www.bseindia.com/corporates/anndet_new.aspx?newsid=5f020247-163e-4141-862c-711cb6dd4c94
Are you guys worried about the QoQ performance ?
Because YoY , in 9 months, both sales & profits are already higher than full last year.
Not worried, but curious. Sales are down. Gross margins and EBITDA margins are also down.
āChanges in Inventoriesā is indicative of what you might be looking for. Two products, limited customers, batch deliveries (lumpy business). Volatility is bound to be there. Q-o-q is a terrible way to judge their business.
Real scale in Intermediates comes only when there is product diversification. Thereās a limit to where you can scale intermediates individually. Intermediates at an individual level arenāt fast churn because these are critical in manufacturing the API and are therefore stocked for a decent period of time. Because they donāt overload the inventories (value wise) for an API manufacturer (fractional cost). So, criticality + low value warrants stocking.
Gross margins also arenāt all that different. And Ebitda also has to take a hit when you have operated fully but havenāt sold the batches. Your overheads would eat up the margins.
Discl: no reco
Thanks Keshav, that was helpful
Seems that there is a decisive shift (after deliberation, diligence for 10+ years) in treatment approach towards fight against Tuberculosis/LatentTB. All the key global policy/decision makers are pushing for the new regime of treatmentā preference of using Rifapentine (12/30 doses) as against current preferred treatment based on Rifampicin (90/120 Doses) formulation.
Worth exploring what are the implications of same on GTPL (manufactures Rifampicin API and its intermediate Rifa-S/O.)
Some facts to understand why the change in approach in the first place.
Two way constrain/challenge leading to sub-optimal performance on End-TB initiative:
Funding/Resource constrain (at implementation agencies level):
Treatment unaffordability/Discontinuation (at individual/household level):
Considering the sheer scale, magnitude and context of Tuberclouses spread, fight has always been a calibrated global effort across different funding partners, implementation agencies, NGOs of global reach. Even in this case, global humanitarian agencies, implementation and monitoring agencies and eco-system members are working in tandem towards adoption and accelerated shift towards new medicine:
Prevailing treatment options:
P.S ā On the above image, prices for 3HP and 1HP has come down significantly (in the range of $12-13) post Sanofi/Macleaod/Cipla deal with funding agencies.
Potential Impact to Gujarat Themis:
1: GTBL currently has approval for Rifampicin (API) and Rifa-S/ Rifa-O (intermediate). They are not manufacturing Rifapentine. Any decisive changes in treatment approach may impact Rifampicin volume offtake quickly.
2. Logically thinking, even GTBL can add capacity to manufacture Rifapentine since backward production value-chain is mostly identical. However there are few aspects to be thought through:
In general, both the big players Lupin (20 MT/year) and Mcleods has capacity of Rifapentine and have mostly been ahead of curve to the regulatory changes. Will be interesting to see how GTBL respond to evolving situation.
Disc: Invested
Tarun
Thanks Tarun. This is indeed an important question that needs to be asked to the management in the next Concall.
Thanks Tarun for your insights. Couple of quick questions:
Is the Rifampicin market functioning as a cyclical commodity? In the sense, has there been a dramatic rise in the price of these API intermediaries in open marketā¦any chances of mean reversion when chinese suppliers come back etc.?
Is fermentation the only way to produce these APIs or is custom synthesis chemically an option as well?
Any reason for clients to prefer GTBL? ( Cost, FDA approval etc.) over the longer period ?
Thanks for the time.
Welcome to the forum Avinash (@Avinash_Baskar ).
To best of my understanding, there is no easy/direct tracking of Rifampicin domestic price trend. Even have not noticed this being tracked and reported by some of the sell side institutional desks who generally cover bulk chemical trend. However, purely by trade data section of Screener, import price has been in a narrow range for most part of the duration except some one-off spike for a short duration of time (mostly external factors) which gets normalized within months.
[ i have desisted from providing direct screener.com trade data screenshot respecting the paywall requirement. You can look up for this info directly using following HS codes, if have access to Premium features of Screener]
| API Name | CAS No | HS Code |
|---|---|---|
| RIFAMPICIN | 13292-46-1 | 29419011 |
| Vancomycin HCl | 1404-90-6 | 3004209090 / 30042096 |
| Daptomycin | 103060-53-3 | 29419090 |
My personal honest assessment is that more than cost advantage or tech edge, itās more a function of they persisting and surviving in a challenging industry while enduring brutal competition. Two pointers to this:
Silver lining is that Government/s has recognized the importance of independent industry eco-system and strategic importance of self-reliance. Here is a good read from Gov. thinktank on how honestly they have reflected on policy/action shortcomings and trying to course correct ( Pharmaceuticals.gov.in.pdf (944.8 KB) )
Regards,
Tarun
Thank you so much @T11 for taking the time out to respond. I have put GTBL on hold primarily because of the Chinese dumping point you mentionedā¦I am not able to make an independent opinion on whether this is done or likely to happen again.
study on TB treatment in Europe .
Rifampicin is frontline and most widely available.
while Rifapentine is scarce .
@T11 Do you see any impact because of this on G Themis ?.
though itās second line of treatment after front line Refam becomes ineffective
Just my thoughts on this business.
I was holding from 500 levels to 800. But sold at 750.
My reasons were - Too concentrated product portfolio. Only 2 products and that is also in TB where there can be bigger regulation/price control.
Management is good but has to wait to see how they can actually put the new plant and diversify in other products. And that is nearly 2 years away as per the management.
And valuations are not cheap for sure. Though PE is less. Check price to sales. Itās 8 and Diviās is at 10.
For just 2 product portfolios, a P/S of 8 is just too costly.
Personal opinion.
dr.vikas
@ankit_tripathi - Cannt think of any direct implication for Gujarat Themis. One, they are not into the value chain of Bedaquiline. Two, Bedaquiline is second line/fall back treatment once Refapentine or Isoniazid efficacy stops.
Though should be positive for GTL customers like Lupin, Unichem or Mecleods who will get access to adjacent market (second line treatment) - at least in domestic market.
Thanks,
Tarun
Pretty average results, no growth YoY. Token dividend declared.
Last time management said they are running at 95% capacity. Hence any growth will come only after new capex comes online. Will take 2 quarters, post that there will be customer qualifications.
Is 12 months a fair estimate before we can see any real growth?
Some notes from Q4ā23 concall dated May 15th:
Financials:
For Q4ā23: EBITDA margin is 52.98%, which is up by 751 bps. Better realization and lower R&D investment of about INR3 crores helped improve the profit margins.
For Full year FYā23: 29.71% year-on-year rise over the previous fiscal year. Growth was mainly driven by rise in volume coupled with better realizations. EBITDA margin is 49.82%.
Overall Business Outlook:
Capex:
Breakdown of capex cost:
The new warehouse, R&D and API block is expected to be ready by September ā23. these new facilities will be compliant with global regulatory norms since we shall be targeting export markets in addition to the domestic market.
The last leg of our capex will be the new fermentation facility, which are expected to be ready by the end of the next calendar year.
Asset-turn/Top line projection from capex: Hard to give numbers at least at this particular stage - may be practical post few few quarters. We are more looking at in terms of how quickly we can get the ROI, rather than asset turnover.
Challenges in commercial scale-up of identified new products - it is possible that scale-up from pilot to fermentation is tricky, weāve dealt with multiple products in the past, our team has dealt with multiple products in the past and we are confident enough to invest in the whole project.
Impact due to TB medication regimen change/market disruption (from Rifampicin to Rifapentine):
WHO recommendation for moving from rifampicin to rifapentine is a very recent development, It happened sometime during the course of last year. WHO will also go cautiously because they need to figure out, on the larger population side, how rifapentine is actually effective.
We consider a scenario where rifapentine is going to be the mainstay instead of rifampicin tomorrow, it really affects us very positively. First of all, Rifa-S that we currently supply to manufacture rifampicin is the same intermediate that is required to manufacture rifapentine. The second part, amount of rifapentine which needs to be given as per the new WHO treatment is quite significant. Also, ratio of conversion of Rifa-S to rifapentine is lower than that of rifampicin, which means we need more Rifa-S, to make that amount of rifapentine, vis-a-vis, rifampicin.
And, of course, not to lose sight of the fact that we are coming out with a API block, so we also have very much plans to manufacture rifapentine. Realistically speaking, we can expect rifapentine business to start in the next financial year or the API business to start in the next financial year or end of this financial year
Thereās a market locally for Rifapentine, because as in line with WHO, even the Indian government is moving from rifampicin to rifapentine. We believe that there is going to be a reasonably good requirement for rifapentine in years to come.
May not have much changes to customer mix even if market shifts from rifampicin to rifapentine. There will be things that we will do, but only in consultation and cooperation with customers.
Overall think this was very good call to clarify apprehensions on medication regimen changes and impact thereof on GTBL. Broadly, with reasonable certainty, its established now that Rifapentine is going to be the preferred treatment approach- both globally and domestically. Another re-assuring part is that management finally divulged the intent of venturing into manufacturing Rifapentine once new API block is ready. In that sense, not much of existential threat (which otherwise could be significant situation for 2 product, 2 client company) rather could significantly increase intermediate Rifa-S demand (as per management guidance)
Thanks,
Tarun
Disc: Invested
Thanks @T11 - As always super interesting. Just wanted to quickly check on a couple of things:
What happens if the GTBLās customers do not win the tender? How is GTBL sure they will ultimately be beneficiaries of the tender?
Any idea on what is the market share of GTBL in Lupin/Optrix for the articular intermediaries?
Does LUpin & Optrix buy both the intermediaries or Rifa -s is with Lupin & Rifa-O is with Optrix?
By any chance would you also know from whom does Lupin/Optrix competitors procure the intermediaries for the same APIs? Is that costlier/similar price as as what is being provided by GTBL
Thanks for your time.
Regards,
Avinash Baskar
Hi Avinash (@Avinash_Baskar) -
Sorry for the delayed response. Some inputs based on my understanding:
Rest all things being equal, global tenders are reach (overall and geo specific number of product approvals), scale (volume, backward integration) and depth (width of product portfolio) game.
Lupin has been largest supplier of anti-TB drugs for years. Globally Lupin has second largest product approvals (20+) from WHO while rest of the players have low single digit product approvals (except Macleod Pharma, who has 32 approvals and is emerging really well). Due to backward integration into API and intermediates (in some cases) and scale of operations, they have been able to offer competitive pricing. Another aspect, i think could be agility to adopt to newer medication developments (case in point could be MDR TB, pre-adult TB medication, Rifapentine adoption) etc. where Lupin has been able to garner a significant place for itself by being in sync.
Keeping above points in mind, hard to fathom a situation where Lupin does not get a share in Tuberculosis tenders pie - unless, they lose focus or get caught in compliance issues.
Not sure on GTBLs exact valet share in Lupin and Optrix demand, however, my understanding is that only Olons (Sandoz entity) and GTBL has domestic capacity of Rifa-S and Rifa-O.
To best of my understanding, Lupin is customer for Rifa-S and Optrix for Rifa-O. (just my understanding).
Other India based competitors for Tuberculosis business are Micro labs, Cadila, Sandoz and Maclods. As I mentioned above, as of now, Olon (Sandoz) is the only other domestic fermenter of Rifa-S. Macoleds has recently got PLI approval for Rifa-S, however, that may cater in parts to captive uses. GTBL has indicated that they have started catering to 2 other domestic manufacturers, though in small quantity. Rest of the demand, if any, I presume is met from China supply. On price competitiveness, I am not too sure, however, looking at margins of GTBL, least likely that there is too much of Chinese competition at the moment (however, one never knows enough about China).
Regards,
Tarun
