Good Result
Q2 FY2024.pdf (1.5 MB)
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PIRAMAL PHARMA Q2 results highlights -
Revenues - 1911 vs 1720 cr, up 11 pc
Revenues breakup -
CDMO - 1068 vs 940 cr, up 14 pc
Complex Hospital Generics (CHG) - 589 vs 562 cr, up 5 pc
India Consumer health (ICH) - 256 vs 227 cr, up 13 pc
Gross Margins @ 66 pc
EBITDA - 315 vs 219 cr, up 44 pc !!!
EBITDA margins @ 16 vs 13 pc ( significant improvement ). Margins in Q1 were a paltry 10 pc
PAT - 5 vs (-) 37 cr
Completed rights issue in Q2 for 1050 cr. Debt reduced by 958 cr to 3823 cr - thank GOD !!! . Need to do a lot more here in future
H2 is always better than H1 for the company. Q4 is the best
CDMO Highlights -
Have recieved 40 pc higher orders in H1 this yr vs LY. Newer orders have a good proportion of contract manufacturing of on-patent molecules
Contract manufacturing of Generic APIs - also doing well
Five of company’s CDMO facilities have successfully closed USFDA inspections since Nov 22 - Digiwal, Pithampur, Sellersville, Riverview, Lexington ( these contribute to half of CDMO revenues )
Current proportion of CDMO business involved in on-patent / NCE manufacturing / development at 44 pc vs 35 pc 2 yrs ago
CHG highlights -
Expanding capacities to meet the increasing demand for Inhalation Anesthesia products
Maintained leadership positions in Sevoflurane ( 44 pc Mkt share ) and Baclofen ( 76 pc mkt share ) in US Mkt
Have a product pipeline of 28 injectable products in various stages of development
Concluded USFDA inspection at Bethlehem facility which makes CHGs ( received 02 minor observations )
ICG -
Spent 14 pc of ICH revenues on promotions / Ads
Power brands include -
Littles - grew 19 pc in Q2
Lacto Calamine - grew 24 pc in Q2
Polycrol
Tetmosol
I-Range ( I-Pill, I- Can etc )
Power brands grew 15 pc in H1 and contributed to 42 pc of ICH sales
E- Comm grew 34 pc in Q2 and formed 14 pc of ICH sales. Have presence across 20 E-commerce platforms including own channel ( http://Wellify.in )
Have launched over 100 new products in last 3 yrs. New products launched in last 2 yrs form 20 pc of ICH business
Management comments -
Expect high teens YoY revenue growth in H2 with material EBITDA margin expansion. LY H2 EBITDA margins were around 16 odd pc !!! ( Extrapolation - suppose the revenue grows by 15 pc, EBITDA expands by 200 BPS - H2 EBITDA can be around - 810 cr. Full FY EBITDA to be around 1200 cr vs 840 cr LY - that would be a big Jump )
As innovation component increases in CDMO business going fwd, margins in CDMO business likely to expand over next 1,2,3 yrs
As ICH business crosses 1000 cr / yr revenues, margins here should grow incrementally every year. Currently, margins in single digits
Currently, road to deleveraging mapped via internal accruals. No asset monetisation lined up
Asst turns to improve substantially as revenues keep growing
Capex retirements to be also met from internal accruals
Company operates a total of 17 sites across the three businesses - helps de-risk the business. Also helps serve customer preferences
Mid 20s EBITDA margins are feasible in the medium term - Nandini Piramal
Current interest outgo @ aprox $ 44- 48 million/yr
Macro trends on biotech funding still not back to pre-COVID levels. Big Pharma spending is back
Currently, employee cost @ 27 pc of revenues. Likely to come down only when operating leverage kicks in
Medium term ROCE potential is about high teens - should be achieved as EBITDA crosses 23-24 odd pc
Innovator CDMO to outgrow generic CMO - in all probability
Disc - holding, biased, not SEBI registered
3 Likes
Piramal Pharma - Annual Report - 2022-23 summary -
Has 17 manufacturing locations
Distribution network spread over 100 countries
Works under 3 segments -
CDMO business
Complex Hospital Generics ( CHG )
India Consumer Healthcare ( ICH )
Has a JV with AbbVie in India ( holds 49 pc stake )- one of the Mkt leaders in Ophthalmology in India
Has a 33 pc stake in Yapan Bio - operates in biologics/ bio therapeutics and vaccines space
Revenue break up -
North America - 45 pc
Europe - 20 pc
Japan - 4 pc
India - 20 pc
Others - 11 pc
69 pc sales from regulated markets
Segment wise revenue break up -
CDMO - 56 pc
CHG - 32 pc
ICH - 12 pc
CDMO -
Offer CDMO services in High potent APIs, Antibody Drug conjugates, Peptides, sterile injectables and hormonal products
Manufacturing facilities located across India, UK, North America. Have a deep customer base across - Big Pharma, Bio-Techs and Generic Pharma majors
Have successfully cleared 36 regulatory inspections since 2022
Company also offers CRO services from its facility at Ahmedabad
Also makes 30 off patent APIs for global clients. Also makes Vitamin / Minerals ingredients and premixes for human and animal nutrition
Top 5 customers contribute 25 pc of CDMO revenues. Breakdown of revenues from Discovery:Development:Manufacturing currently at - 5:30:65 ( includes generic and on-patent manufacturing ). Currently, company is manufacturing 18 on Patent commercial molecules. Company also has 35+ molecules in Phase - 3 development phase right now
Within CDMO segment, revenue breakup is as follows -
US- 47 pc
Europe - 27 pc
Japan - 3 pc
India - 14 pc
Others - 9 pc
Among the 30 pc CDMO revenues that come from Development services, the breakdown is as follows -
Pre Clinical - 20 pc
Phase -1 - 25 pc
Phase -2 - 12 pc
Phase - 3 - 43 pc
CHG -
Has a portfolio of 35 hospital focussed products in areas of Inhalation anaesthesia, Injectable anaesthesia, pain management, Intrathecal therapy (delivering pain killers directly at spinal cord) and other injectables - sold across 6000 hospitals
PPL is 4th largest company in global Mkts for inhalation anaesthesia - Sevoflurane, Desflurane, Isoflurane and Halothane
Biggest player in Sevoflurane (inhalation product - 40 pc Mkt share ) and Baclofen ( pre-filled syringes - 78 pc mkt share ) in US mkt
Both - inhalation and intrathecal therapies are complex and capital Intensive
Vertically integrated - in inhalation products. Company to continuously intensify efforts to increase the degree of vertical integration so as to sharpen its competitive edge
Has a direct sales for in US
Product pipeline of > 25 SKUs in the CHG segment
In process of expanding capacities at Dahej and Digwal facilities. Dahej makes KSMs for inhalation anaesthesia products while Digwal facility makes the APIs
Company’s Fentanyl brand ranks No-1 in Japan, RSA and Indonesia
Sales break up of CHG sales -
US- 56 pc
Europe - 17 pc
Japan - 4 pc
India - 6 pc
Others - 17 pc
ICH -
Has over 30 different OTC products with multiple SKUs. Mainly present in categories like - analgesics, skincare, Vit/Minerals, women’s health, Digestives, Hygiene and protection. Also has manufacturing and distribution rights for Supradyn, Saridon, Becozym and Bensdon from Bayer Pharma
Own power brands include - I-Pill, I-Range, Lactocalamine, Littles, Tetmosol, Polycrol. Company has introduced Littles baby diapers. If they find traction in the Mkt, the company may end up having a huge winner at hand
Other brands include - NIXIT, Joint Flex etc
Now strengthening presence in E-Comm, Modern trade channels
Company spending / investing aggressively behind brands. Not averse to acquisitions in this space provided the financial conditions of the company allow for the same
Company Infra -
Manufacturing facilities -
US - 04
UK - 02
Canada - 01
India - 10 ( including R&D site )
Total employee count - 6200
Industry trends -
CDMO - industry snapshot - grew at 7 pc CAGR from 2016 - 21 from $100 billion to $135 billion. Did outgrow global Pharma Industry growth of 4 odd pc during this period. Likely to be a $ 180 billion + industry by 2026
The trend of outsourcing the development and manufacturing is gaining traction by the day. Its a win win for Innovators and their CDMO partners
Compex Generics ( difficult to make APIs, routes of administration, complex - drug + device combo ) Mkt snap shot -
Mkt currently valued at $ 70 billion, grew by 12 pc CAGR from 2017-22. Likely to be a & 120 billion plus industry by 2026. Complexity in manufacturing and capital intensity are key entry barriers here
Among complex generics, complex hospital generics form the bulk of the Mkt with share of 70-80 pc
Cumulative size of - Sevoflurane, Isoflurane, Desflurane and halothane is aprox $ 1.09 billion with sevoflurane constituting 84 pc of the Mkt
Due high capital intensity, requirements of backward integration, difficulty in making devices like vaporisers etc - competition is limited. AbbVie, Baxter, PPL and Lunan are the only players in the Mkt at present
Intrathecal therapy - gaining traction in recent years. Two popular products are - Morphine Sulphate, Baclofen. Baclofen’s Mkt size in US in 2022 was aprox $ 33 million
Indian OTC Industry -
Valued at $ 4 billion in FY 22, grew by 8 pc CAGR from 2017-22. Expected to be a $ 7 billion industry by 2026 due increased awareness and affordability
Company’s compliance track record -
04 USFDA inspections in FY 23. 02 inspections with zero observations. Other regulatory bodies also inspected PPL facilities ( like - MHRA, EMEA, Health Canada etc )with no major observations. Company successfully cleared 36 regulatory inspections in last FY
Disc - holding, biased, not SEBI registered
11 Likes
Revisiting my earlier hypothesis with subsequent developments
I subscribed to the rights issue just for kicks and also applied for more than my allocation. (20 percent more)
I got the full allocations including the extra.
Stock price has gone up 80 percent from issue price (81) to 140 presently.
Rights issue was fully subscribed and I read that the promoters applied for more than their current holding so they were able to increase their shareholding at a lower cost.
When the companies demerged into PEL and PPL i think there was a lot of bad loans on the balance sheet of the financial arm so more than proportionate debt was passed on to PPL and therefore PPL had to deleverage while PEL rebuilt it’s balance sheet with lower NPAs.
From a company strategy and promoter interest point of view this is demerger was very well executed but minority shareholders not so much.
Nandini piramal has started appearing in media interviews and the company PR will build her up to a well known well regarded business leader in the coming days.
For those who may not know the she is married to the current CEO and she handles the non core activities of the business ( QA, HR etc)
With Ajay piramals guiding hand over time this company will do well , whether that works for minority shareholders or not is a separate question
5 Likes
If we keep aside the 1-off misallocation of NPAs in between the 2 entities during demerger, I would like to get inputs from you all on Piramal management along the lines of 1)capital allocation, 2)business decisions(product growth, new opportunities, scaling up) & 3)ethics. Would be great to hear from anyone who might have met the management
There was no misallocation of NPAs. I am an investor from pre demerger and I did not find it unethical. Only people who played smart in picking up shorting or selling PEL and buying PPL were worried that they did not know about Loans. Promoters are ethical in my view they always inject money when business needs them.
They may make not so wise decisions but have no issues with management. They are building business slowly . The point to watch was the competition in the hospital injectible business. Gv goods prices have again hiked in Europe. The positive side they have nearshore ADCs, building consumer brands and have a emphasized textgood quality track record.
I added PPL at 80s and subscribed right issue. My understanding of business is not great but ADCs is the next good opportunity. At the low price, you don’t have to get into so much science. The more price you pay you need to be very sure of business and the performance of the future.
Disc: I am biased as Invested in PEL and PPL you can find my portfolio here
2 Likes
Can anyone share the latest Jefferies Report on Piramal Pharma Limited?
HDFC mutual fund has bought 8 lakh shares of piramal pharma on 15th March.
Sharing an in-depth article on the CDMO opportunity in India.
I hope you find it useful.
dr.vikas
5 Likes
Strong results for the quarter.
Results -
https://www.bseindia.com/xml-data/corpfiling/AttachLive/3564c28a-e817-49ca-b6ce-4f3868f0fc76.pdf
Investor presentation
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Good results from PP. The innovation share of CDMO increased to 50 %, Integrated projects are now 40%, and Innovator business $116 M doubled. Piramal Pharma is back to 23% EBIDTA. Remember a year back some influencers were calling management incompetent, that was the best time to buy. In my opinion, they have the best assets to execute large orders of big pharma. Multicountry manufacturing is not easy but once you have mastered it then it benefits with big projects. Contract manufacturing esp of Pharma will go to large players and it will consolidate with few very large contract manufacturers of patent products.
7 Likes
Con Call Notes from Q4-FY24. CMP 154
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EBITA Margin 17%
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Interest cost not coming down in Q4 despite 1000 cr debt reduction in Q3-
- Overall rate has not come down
- Some interest on tax due to better outperformance (I did not get what it means, but it seems to be some sort of one-off part)
- Reduction in interest rate will contribute to lower interest rates in the future.
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Capex of $87 million
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Dahej capex is likely to come onstream by Q1-25
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Investment in key starting material, debottlenecking for CHG
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Capex will be similar to last year in FY25.
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Innovative business 50%. Grown by 20 CAGR over last 3/4 years
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40% of the order book is for integrated services (orders for more than one site)
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Once biotech funding improves, growth will come back from emerging companies. This is not reflected in the current guidance
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Visibility is higher than last year as compared to last yearly
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Due to nature, PPL high inventory during Q1-Q3 but it goes off as proudct is shiiped to clients.
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Peptide- Generic business is doing well and working towards getting into the on-patent business.
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18 months back, PPL saw funding issues with Bio-tech and hence pivoted to big pharma. This pivot has helped in Fy24 with more business from big pharma.
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PPL has been doing conjunction for over ten years
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Biosecure has increased interest from clients in innovative patent work.
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ADC- Number of large pharma visited in last six months. So expect to get business from them in the coming yearly
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Most of CDMO’s capabilities are in place. So, future capabilities will be more brownfield.
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Generic product capabilities are fungible for patent-related work if needed.
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High fixed-cost business. Increased sales drive professionalism. CDMO and ICH will be drivers of the increase in profitability in the future.
India Consumer Business
- New products launches in e-commerce. Once they are successful then PPL will launch in general trade. They kill them if they do not meet target.
CHG (Hospital Generic)
- Incurring non-recurring expenses related to CHG, so cost - Cost of 8-9$ million
Outlook for Fy25
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Early teen growth-
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CDMO will be better than CHG
This is the best slide to track the company performance
My Take
As per Jan 2023 ppt
As per Jan 2023 presentation, revenue from commercial products
- FY20- $19 million
- Fy22- $56 million
- FY24- $116 million
Four-year CAGR- 55% CAGR
This shows that business can show a sharp uptick once the product becomes commercial. They have 33 manufacturers in phase 3. Even if 5-10 become commercial in the next 2-4 years, they could add 50-100 million in revenue. Due to the nature of the business, even one successful manufacturer could add that much business.
I get the impression the company is keen on expanding on patient businesses. Last year, two companies announced the commercialisation of two products. I think their business would have been a major driver of the increase in revenue for the patent business. As they launch their product in the market, and as the product gets better accepted, it is likely that these two recently launched products will give more business. I think the CDMO on-patent business shall be higher significantly again in FY25, even if there is no more product commercialisation in FY25.
Note- Invested
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