Pharma || Hospitals || Diagnostics : Industry perspective

Q&A: Questions & Answers
379

Windlas Biotech -

Company overview, Q4 and FY 24 results and concall highlights -

Its a contract maker of generic formulations for Domestic branded companies, GoI ( Jan Aushadhi Kendras ) and also export generic formulations

Vertical wise revenue split -

Generic Formulations CMO Domestic - 77 pc of sales. Last 5 yrs sales CAGR @ 14 pc
Trade generics + Govt Supplies - 19 pc of sales. Last 5 yrs sales CAGR @ 42 pc
Exports - 4 pc of sales. Last 5 yrs sales CAGR @ 45 pc

Therapy wise revenue split -

Acute therapies - 34 pc of sales
Chronic therapies - 66 pc of sales

Product wise revenue split -

Complex generics - 64 pc
Conventional generics - 36 pc

Focus therapy areas - Respiratory, Anti-Diabetic, GI

No of manufacturing facilities @ 4. All 4 located in and around Dehradun. Dosage forms manufactured - oral solids, chewable, liquid bottles, sachet / powdered products, Injectables. Injectables facility commenced operations in Mar 24

Q4 outcomes -

Sales - 171 vs 141 cr, up 22 pc
EBITDA - 22 vs 16 cr, up 34 pc ( margins @ 13 vs 12 pc )
PAT - 17 vs 11 cr, up 48 pc

FY 24 outcomes -

Sales - 631 vs 513 cr, up 23 pc
EBITDA - 78 vs 60 cr, up 30 pc ( margins @ 12 vs 12 pc )
PAT - 58 vs 43 cr, up 37 pc
CFO > 100 cr for FY 24
Cash on books @ 206 cr as on 31 Mar 24

GoI planning to triple the number of Jan Aushadhi stores to 25k inside next 2 yrs. should act as major catalyst to the Trade generics segment

Company’s CMO - domestic vertical grew by 20 pc in FY 24 - that’s 3X of IPM

As company’s capacity utilisation grows (and specially for injectables segment which is a high margin segment) - company’s EBITDA margins should expand going forward

Guiding for 1000 cr topline in FY 26
Capex guidance for FY 25 @ 20 cr for expansion of Dehradun plant - 2. For FY 26, it should be around 30-35 cr

The Capex spend for the Injectable facility was @ 75 cr

Company’s trade generics segment generates greater EBITDA margins vs CMO for branded companies as the company gets to retain the distribution margins in addition to the manufacturing Margins

Govt’s focus on better quality of generic medicines and crackdown on non-compliant players is a structural tail wind for the company

At peak capacity utilisation, the Injectables facility can do an asset turns of 1.2 times ( so that amounts to 90 odd cr of annual revenues. However, the EBTDA margins here are > 15-16 pc )

Company’s expansion plans for medium - long term will be a mix of organic + inorganic - given the healthy cash flow generation by them

Company’s employee costs are in the 13-14 pc band vs Innova Captab’s 7-8 pc band. Company believes that employee cost is an investment

Company believes that complying with all GMP / Schedule M regulations is not easy for smaller non-compliant players. It does cost significant money and a complete change in operating mindset

Disc: holding, biased, not SEBI registered

4 Likes
380

Any suggestion on how to play the theme of the trending obesity/weight loss drug?

381

@Siddharth_Goliya Play the proxies?
I searched for “weight loss” on screener. Only one concal had information about it. You could study this company.

“I’m happy to announce that we have onboarded our current
customer for one of our auto injectors and have also started development of a new auto injector
with automatic needle insertion. This is being developed particularly for the molecule
tirzepatide. Tirzepatide is Eli Lilly’s new weight loss drug and has an NCE-1 filing deadline of
May 2025”

2 Likes
382

Search “GLP 1” instead

6 Likes
383

Shaily Engineering Plastics. They manufacture injections through which such drugs are administered. I am not sure whether they have started supplying injections for weight loss drugs.

1 Like
384

FMCG is passe- Indian economy has a new definition of defensive stocks !

I found this Blog very intersting !

Once upon a time FMCG stock used to be counted as defensive stock. Defensive stocks not only should defend our portfolio from down sides during a bear market but also should give a reasonable return over a period of time.

If we analyse the stock performance of last few years, FMCG stocks has taken us no where.
Pharma stocks once thought to be defensive. But Our pharma industry is China dependent for API and KSM. Also Pharma Industry as a whole is bogged down frequently by USFDA issues- Hopefully the PLI schemes of the Govt would create the eco-system gradually in days to come to really challenge China and become the pharmacy of the world.

IT industry once thought to be Defensive, but it is now seen that the IT industry is undergoing technological challenges/ transformation due to AI.

So , what is defensive now ? This article explains well… it lists 8 stocks which we should keep under our watch list.

PS: I am able to access the full article from my android phone though I have not subscribed to its prime membership.But when I was trying to access the link in valuepickr forum , it is asking for subscription.:slightly_smiling_face:

Please confirm if you are able to open the link and access to the article

1 Like
385

Not able to access the article. ET prime membership only

1 Like
386

it is surprising !
i have not subscribed , but I am able to access.
You may please try from another device or from laptop /desk top if possible.

Or copy the link on your mobile browser and try to access.

387

Could you please share the sector names?

1 Like
388

The article speaks about Health care hospital sector. How in India with 1400 million people we have low penetration in health insurance and a lot of health insurance companies aggressively selling health insurance coverage.

While it is unethical to levy heavy charges for hospitalisation, sooner or later rates need to be standardized.
In spite of the fact that there is a move to standardise hospitalisation charges and the issue has been taken up with Supreme court, there is hardly any fall in stock price.

Health care is something basic necessity in life and there would be perennial demand for medical care. As economy grows , standard of living improves, people will seek health insurance cover and would utilise services from hospitals when they fall ill.
It also talks about IT, it says IT adopts to transformation and large IT companies will be able to adopt to changes very fast…

4 Likes
389

18% GST on health insurance is another deterrent. Also unlike Term insurance one can’t lock in the premium by availing early on. Moreover reviews of all health insurance companies are generally not so good with claims denied for silly reasons.

1 Like
390

Eris Lifesciences -

Q4 and FY 24 results and concall highlights -

Acquisitions made by the company in last 24 months -

Oaknet Pharma - entry into Derma business - paid Rs 650 cr

Select brands of Glenmark Pharma - paid Rs 340 cr

Derma brands of Dr Reddy’s - paid Rs 275 cr

Biocon’s domestic Nephro and Onco business - paid Rs 366 cr

Swiss Parenterals - sterile Injectables business - paid Rs 640 cr for 51 pc stake

Biocon’s India Injectables business - paid Rs 1242 cr

**Total cost of all acquisitions put together - 3510 cr **

Total revenues of the acquired assets at the time of acquisition - 1240 cr

Q4 outcomes -

Revenues - 547 vs 396 cr, up 38 pc ( domestic revenues @ 480 vs 389 cr )
Gross Profit - 432 vs 402 cr, up 31 pc
EBITDA - 148 vs 118 cr, up 25 pc
PAT - 79 vs 61 cr

FY 24 outcomes -

Revenues - 2009 vs 1685 cr, up 19 pc ( Domestic revenues @ 1902 vs 1606 cr )
Gross Profit - 1629 vs 1332 cr, up 22 pc
EBITDA - 674 vs 536 cr, up 25 pc ( margins @ 34 vs 33 pc )
PAT - 397 vs 374 cr, up 6 pc ( due much higher depreciation, amortisation, finance costs )

There were non-recurring one time expenses of aprox 38 cr in Q4. Adjusted to that, PAT for FY 24 would have been 430 cr

Consolidated Debt on balance sheet @ 3000 cr. Company intends to reduce it to 2600 cr by end of FY 25 out of internal accruals. By the end of FY 26, aim to bring it down to 2000 cr !!!

Aiming for organic revenue growth of 12-14 pc in the domestic formulations business. Aim to maintain EBITDA margins > 35 pc for FY25. Will share complete company level guidance post completion of integration of Swiss Parenterals and Biocon’s domestic business by end of Q1 FY25. Biocon’s domestic business is currently clocking annual sales of 360 cr. Swiss parenterals clocked FY24 revenues of 280 cr with 37 pc EBITDA margins

Eris - Biocon combined will create 5th largest Anti Diabetic franchise in India with Anti Diabetes only revenue base of close to 1000 cr / yr. It will have significant presence across oral and injectable Anti-Diabetic products

Company can work on expanding margins by using Swiss Parenterals manufacturing facilities to manufacture a lot of Biocon’s injectable products

Eris - MJ Biopharm JV ( 70:30 JV formed in 2022 to sell Insulins and GLP-1 products ) is now clocking a monthly sales of 5 cr. It reported an EBITDA loss of 20 cr in FY 23. In Q4 FY 24, EBITDA loss has narrowed down to 1 cr. Should turn EBITDA positive from Q1 FY 25

The Insulin penetration in the domestic mkt is very low. Company sees fairly large growth runway for their Insulin products - both from Biocon’s and MJ Biopharm’s portfolios

Aim to launch 4-5 new brands in India in Q1 in the Critical care space to be manufactured out of Swiss Parenteral’s facilities

Disc: holding, biased, not SEBI registered

3 Likes
391

Dr Reddy -

Q1 FY 25 results and concall updates -

Revenues - 7627 vs 6738 cr, up 14 pc

Gross Margins @ 60.4 vs 58.7 pc - due favourable product mix and operating leverage

EBITDA - 2130 vs 2068 cr, (margins @ 28 vs 31 pc) Margins contracted due increased investments in new business initiatives, higher freight costs, business integration costs

PAT - 1392 vs 1405 cr

Net surplus Cash on books @ 6730 cr

R&D expenses @ 620 cr @ 8.2 pc of sales - reflecting increased investments in Biosimilars pipeline and Novel Oncology assets

Geography wise sales -

North America - 3850 cr, up 20 pc YoY - mainly due increased volume in the base business, contribution from new launches, partially offset by price erosions

Europe - 530 cr, up 4 pc YoY ( Germany sales @ 280 cr, UK sales @ 160 cr )

India - 1330 cr, up 15 pc YoY - mainly on account of new product launches and newly in-licensed vaccine portfolio

Emerging Markets - 1190 cr, up 3 pc YoY ( Russia sales @ 550 cr, Sales from CIS region @ 190 cr, RoW sales @ 440 cr )

API + Pharma services - 770 cr, up 14 pc YoY. During the Qtr, company filed 11 DMFs globally

Company acquired World’s no 2 Nicotine Replacement therapy brand portfolio of - Nicotinell, Nicabate, Thrive & Habitual from Haleon PLC ( for sales across the world except US ) for a total consideration of Rs 5200 cr. It generated global sales of Rs 2300 cr for FY 24 ( across formats - gums, patches, lozenges ). Dr Reddy expects the brand to clock an EBITDA margin of 25 pc by FY 26. Deal is expected to be completed by Q3 FY 25

Earlier in Jan 24, company had acquired MenoLabs in US which owns a portfolio of 07 brands for treatment / management of menopause and pre-menopause

Company aims to have a worldwide OTC business with sales of $ 1 billion / yr in next 3-4 yrs. For that they intend to keep acquiring more brands

Inaugurated 70k Sq Ft state of the art Biologics facility in Genome Valley Hyderabad. Aim to commission manufacturing capacity by end of FY 25. This new facility will be targeting CDMO opportunities in the Biologics space

Company is confident of sustaining good growth momentum in their US business ( despite the price erosions ) on the back of continued new launches and reliable customer support and service that the company provides

Expect India growth to further pickup wef Q2

Disc: holding, biased, not SEBI registered, not a buy / sell recommendation

1 Like
392

Aarti Pharmalabs -

Q1 FY 25 results and Concall highlights -

Revenues - 555 vs 458 cr
EBITDA - 96 vs 85 cr, up 14 pc ( margins @ 17 vs 19 pc )
PAT - 55 vs 47 cr, up 18 pc

Revenue breakup in Q1 -

Xanthene derivatives - 54 pc ( seeing strong demand and sales in this segment despite the Chinese competition )

API + Intermediates - 44 pc ( 55 pc of this came from regulated mkts and the rest from RoW / unregulated mkts )

CDMO / CMO - 2 pc ( in Q4, it was 19 pc. This business generally picks up in Q3,Q4 ). Currently the company has 27 commercial projects and 26 projects are in various stages of development. Confident of growing this business by 25-30 pc in FY 25

Expect to complete the Xanthene brownfield capex by Q1 FY 26

Atali expansion ( for manufacturing of APIs + Intermediates + CDMO ) is expected to be completed by end of Q4 FY 25

Expansion of intermediates manufacturing facility at Vapi is expected to be completed by Q2 FY 25

Solar power plant that the company is in the process of setting up is likely to be commissioned by Q3. This will cater to 1/3rd of company’s needs and help reduce manufacturing costs

Company is seeing greater traction / enquiries for their CMO / CDMO work and are also seeing a shift away from China

Company’s Gross Margin profile generally fluctuates between 50-52 pc

Company’s CMO/CDMO projects are currently small. Expect project sizes to become bigger as the business scales up over medium term. All of company CMO / CDMO projects relate to patented molecules ( early stage and late stage intermediates )

LY the company did 175 cr of CMO/CDMO business. Expect to take it to > 220 cr this FY

Company agreed that the bio-secure act passed in US will act as an added tailwind for the company’s business

Lower GMs in Q1 is due to lower CMO/CDMO sales in Q1. As CMO/CDMO business picks up, gross margins should improve

Company is seeing greater traction / enquiries for their CMO / CDMO work and are also seeing a shift away from China

Company’s Gross Margin profile generally fluctuates between 50-52 pc

Company’s CMO/CDMO projects are currently small. Expect project sizes to become bigger as the business scales up over medium term. All of company CMO / CDMO projects relate to patented molecules ( early stage and late stage intermediates )

LY the company did 175 cr of CMO/CDMO business. Expect to take it to > 220 cr this FY

Company agreed that the bio-secure act passed in US will act as an added tailwind for the company’s business

Lower GMs in Q1 is due to lower CMO/CDMO sales in Q1. As CMO/CDMO business picks up, gross margins should improve

My Hunch - company may outperform its guidance on CMO/CDMO business and hence on overall company level margins. CMO/CDMO business is seeing a lot of tail winds for the Indian players

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation

5 Likes
393

GSK Pharma -

Q2 FY 25 results and concall highlights -

Revenues - 1011 vs 957 cr, up 5 pc
EBITDA - 322 vs 289 cr, up 11 pc ( margins @ 32 vs 30 pc )
PAT - 252 vs 218 cr, up 15 pc

Company’s operates under 3 broad segments in the IPM -

General Medicine ( with brands like - Calpol, T-Bact, Neosporin, Augumentin, Betnovate etc )

Vaccines

Speciality Products like - Nucala ( an injectable for severe Asthma ), Trelegy ( Inhaler for Asthma )

Seeing good traction in the Paediatric Vaccines portfolio - growing in Double digits

Company continues to build momentum in the Adult Vaccines space through its - Shingrix Herpes Zoster Vaccine. Have launched an awareness campaign featuring Mr Amitabh Bacchan around Shingrix prevention ( its a dreadfully painful disease )

In H1, company has grown by 7 pc. Of this 7 pc, 5.5 pc growth has come from volumes and 1.5 pc has come from prices

Q2 growth was weak for the company because of delayed monsoons which led to a weaker season for acute therapies

Company launched its Shingrix vaccine 18 months ago. It has been able to sell 1.1 lakh doses in this period. Company is making aggressive efforts to educate patients by enrolling a lot of private clinics and Hospitals to promote their innovative Vaccine

The new assets - Trelegy, Nucala and Shingrix Vaccine ( all three launched within last 3 yrs ) - now contribute to roughly 6 pc of company’s sales in India ( that’s about an annual run rate of Rs 210 cr for these three assets ). Company aims to take this revenue contribution from innovative and new products to 10 pc in near future

Company intends to keep growing volumes in the range of 5-7 pc for H2 + they have taken some price hikes that ll get reflected in the H2 results

Company has a 23 pc mkt share in the Private ( ie Self Pay ) paediatric vaccine mkt in India

Company has lined up 2 product launches for Q2, both in Oncology space - for treatment of Ovarian and Endometrial cancer

Disc : not holding, studying, not SEBI registered, not a buy/sell recommendation

3 Likes
394

Healthcare sector related updates from Budget 2025:

  • Government will facilitate setting up of Day Care Cancer Centres
    in all district hospitals in the next 3 years. 200 Centres will be established in
    2025-26
  • 10,000 additional seats will be added in medical colleges and hospitals, towards
    the goal of adding 75,000 seats in the next 5 year
  • Medical Tourism and Heal in India will be promoted in partnership with
    the private sector along with capacity building and easier visa norms
  • Broadband connectivity will be provided to all Government secondary
    schools and primary health centres in rural areas under the Bharatnet project
4 Likes
395
1 Like
396

Zydus Lifesciences -

Q3 FY 25 Results and Concall highlights -

Q3 financial outcomes -

Revenues - 5269 cr, up 17 pc YoY
Gross Margins @ 69.9 vs 67.4 pc
EBITDA - 1387 cr, up 26 pc YoY ( margins @ 26.3 vs 24.5 pc YoY )
PAT - 1023 cr, up 30 pc YoY

R&D expenses @ 503 vs 314 cr ( @ 9.5 pc of sales - very healthy levels )

Capex in last 3 Qtrs @ 290, 301, 302 cr

Cash on books @ 3091 cr
WC @ 6058 cr

Geography wise performance -

India Formulations - 1498 cr, up 5 pc YoY ( @ 29 pc of company sales ). YTD, India sales grew by 9 pc. Company gained mkt share in key therapies of Cardio, Respiratory, Anti-Infectives, Oncology and Nephrology

Contribution from Chronic portfolio now stands @ 43 pc vs 40 pc, 3 yrs back

No of Brands in India with sales > 100 cr @ 10
No of Brands in India with sales > 50 cr @ 20
No of Brands in India with sales > 25 cr @ 37

India FMCG - 448 vs 397 cr, up 13 pc ( @ 9 pc of company sales ). India FMCG business recorded volume growth of 13 pc ( rest of the growth came from price hikes taken by the company ). Acquired Naturell India ( a healthy Snacking company ) for a cash consideration of 390 cr in Q3

US formulations - 2409 vs 1842 cr, up 31 pc YoY ( @ 47 pc of company sales ). Filed 10 new ANDAs and received approvals for 3 new products. Launched 5 new products in Q3, including 3 brands of Sitagliptin { a 505(b)(2) } product. The 3 brands include - Zituvio, Zituvimet, Zituvimet XR. Sitagliptin will go generic in FY 27

RoW formulations - 570 vs 493 cr, up 16 pc YoY ( @ 11 pc of company sales )

Some Updates from Q2 concall -

Company has acquired 50 pc stake in Sterling Biotech for 550 cr. Currently setting up state of the art manufacturing facility to produce fermented animal free proteins Also acquired sterling Bio’s API business that manufactures fermentation based APIs like - Lovastatin, Daunorubicin, Doxorubicin and Epirubicin

Entered into an exclusive licensing and supply agreement with Viwit Pharma for 02 - Gadolinium based MRI - contrast agents - to be supplied in the US mkts. These are injectables - used to increase the visibility of organs during MRI procedures. This is a niche but valuable drug. There r no generics for this drug currently in the mkt

Opportunities like - Palbociclib ( breast cancer drug ) and Riociguat ( for treatment of pulmonary arterial hypertension ) and Cabizantinib ( used to treat thyroid cancer ) should help them offset the loss of exclusivity on Revlimid ( to a large extent ) wef Jan 26. Company is also looking to file and launch a few more 505(b)(2) opportunities immediately. On both - Palbociclib and Riociguat - company is expected to get exclusivity for meaningful time period

Hopeful of getting a WHO approval for their MR ( measles and rubella ) Vaccine as well. Both these vaccines ( MR + TCV ) should bring in sizeable business for the company as UNICEF buys them in bulk every year ( to the tune of 8-10 cr doses each ). Scale up should begin sometime in FY 26. Even if they get a fraction of this business - it can be very significant business for the company

Company has a healthy pipeline of Transdermal and complex Injectable products to be launched in US - these should help them sustain the business momentum in the US mkt

Key things to watch out for in the Indian innovative portfolio of the company for the near future should be their mkt share in products like - Saroglitazar, Desidustat and the Biologics that the company is launching. Company’s mkt share - both in volumes and value for Ujvira ( Trastuzunab - for treatment of breast cancer ) is now higher than the innovator. Company aspires to take Saroglitazar and Desidustat to among top 50 products in IPM

Updates from Q3 concall -

Growth in US business led by expansion in base business + slew of launches carried out over the last 1 yr

Sitagliptin 505(b)(2) opportunity is a serious success story for the company - likely to bring in good revenues for the company. With Sitagliptin, company now has 07 X 505(b)(2) commercial products in US. Clearly, company now has a substantial 505(b)(2) portfolio in US

Sentynl Therapeutics, Inc. (Sentynl), a U.S. based biopharmaceutical company wholly-owned by Zydus Lifesciences, Ltd. (Zydus Group),
announced the execution of an Assignment and Assumption Agreement with Cyprium Therapeutics, Inc in Dec 23. Under the agreement,
Cyprium completed the transfer of its worldwide proprietary rights and U.S. FDA documents pertaining to CUTX-101, the copper histidinate product candidate for the treatment of Menkes disease, to Sentynl. Sentynl now assumes full responsibility for the development and commercialization of CUTX-101. In 2021, Sentynl and Cyprium reported positive results from a safety and efficacy analysis of data integrated from two completed pivotal studies in patients with Menkes disease treated with CUTX-101. A rolling submission of the CUTX-101 New Drug Application (NDA) to the FDA is ongoing, with expected completion in 2024. This launch is now imminent in next 6 months and the company is making all preparations for the same

Company has not hedged its receivables - hence has incurred forex gains in Q3. Not hedging receivables has been a normal practice by the company for quite some time now ( IMHO - its a risk that needs monitoring )

Asacol HD has seen entry of new players in Q3. Company expects entry of at least one more player in near future

Most of Revlimid revenues from Q4 + Q1. FY 26 should the last year of exclusivity wrt Revlimid sales { it seems ( from management’s commentary ) , FY 26 Revlimid sales may be below FY 25 sales - although I m not sure about the same }

Overall, expecting high single digit growth in revenues from US business in FY 26 - on the back of new launches. Company believes, FY 27 should be another good year for the company on the back of exclusive launches ( despite loss of Revlimid sales )

EM business momentum is looking good. Same is likely to continue in near future. EM business is likely to start achieving 23 pc + kind of EBITDA margins in not so distant future

Should be launching Semaglutide in India in the first wave. Company shall be making its own API and formulation for Semaglutide. Additionally, company has tied up for a second source supply of APIs as well. Also plan to launch in various EMs

CUTX - 101 is going to be chronic drug ( lifelong treatment )

Will be launching 02 products from the LiqMeds portfolio ( acquired in Oct 23 ) in the US mkt in current CY

Should see Sentynl Therapeutics ( company’s subsidiary ) becoming profitable in FY 26 post the launch of CUTX 101

Company spends about 35 pc of its R&D dollars towards speciality portfolio comprising - Biologics, NCEs, Vaccines, Speciality generics

For FY 26, 27 , Capex intensity should be higher than FY 25 ( say 20-30 pc higher than FY 25 ) as company launches and scales up a number of speciality opportunities. Additionally, will continue to focus on acquiring commercially viable speciality products in US in order to utilise the cash on books

Confident of building a pipeline of another 2-3 NCEs to be launched in India in next 3-4 yrs ( after the successful launch of Desidustat and Saroglitazar )

Company’s animal health business in US has already turned profitable

Company’s Biologics business is currently focussed on India + EMs only. Not likely to venture into regulated mkt with Biologics ( in near future )

Disc: holding, biased, not a buy / sell recommendation, not SEBI registered

3 Likes
397

Hospital stocks to be the big beneficiary of this

1 Like
398

Basic learning of Pharma sector.

1 Like