Marico-Q2 udpade.
Demand scenario looks OK.
Revival in value added hair oils, surging sales of foods portfolio are heartning developments.
Disc: invested
1 Like
Notes from Shilpa Medicare AR 2019-20-
1.Company - over the years shifted its focus towards creating a niche in Oncology generics. In the process, developed strong mfg capabilities in oncology APIs and formulations. Company has started investing in novel drug delivery systems ( NDDS ) and bio technology with two R&D centers for the same.
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Company also present in Non Oncology APIs and formulations. Recent forays into - biologics, oral dissolving films and transdermal patches.
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SML - supplies more than 30 oncology APIs including key products like- Gemcitabine HCL, Capecitabine, Axitinib, Erlotinib HCL, Irinotecan HCL for various regulated mkts like- US, Europe, Japan, SK, Russia, Mexico, Brazil and other EMs. Key non-oncology products - Ambroxol ( facilitates clearence of Mucus ), Tranexmic acid ( used to treat heavy bleading during menstural periods and nose bleeds…basically by helping blood clot ), Ursodeoxycholic acid ( naturally occuring bile acid). In all, company makes 44 different APIs. Formulations range- 16 injectables, 19 oral solids and 13 formulations under its fully owned subsidary- Shilpa Therapeutics Private Ltd.
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Total consolidated revenues up 24pc to 925 cr, PAT up 39 pc to 156 cr. API / formulations revenue growth at - 13pc/40pc. PAT margins at 23.7 pc vs 18.3 pc last yr.
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Company aims to commercialise 3-4 molecules every year in their API facilities. Company also debottlenecking oncology production blocks and enhancing capacities by 40-70 pc. During the yr, company launched Indian branded generic of Ibruninib by the brand name - IBRUSHIL. Company increased capacity for Tranexamic Acid by nearly 100 pc. Company also acquired FTF pharma- an integrated drug development company. Last yr company filed 4 ANDAs and 01 NDA - 505(b)(2) opportunity.
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Going fwd - company agressively pursuing growth in Biologics, oral dissolving films, transdermal products and dermatological formulations. In biologics, company has 04 out of 15 products in the pipeline.
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Global oncology spending in 2017 stood at $131 billion, expected to rise to $200 billion by 2022- aprox 14pc of total medical spends. Current pharma pipe lines are also disproportionately focussed on Cancer tratment - at 34 pc of total spends.
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Impending pricing reforms may help divert more outsourcing. Large companies in the West may only retain sales and R&D in house.
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Stepping into 2020-21, company established fully owned subsidaries in Canada and Spain. Company developing marketting team across Russia, Europe, Brazil and other geographies.
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Manufacturing capabilities -
02 mfg lines for Oncology and Adjuvant therapy - oral solids.
02 mfg lines for Oncology and Adjuvant therapy -
Injectables - liquids and lyophillized.
09 blocks for oncology
04 blocks for non oncology
Total of 05 mfg sites, 04 in India, 01 in Austria.
R&D centers -
Raichur - for APIs
Bangalore - for formulations - oral solids, transdermal, injectables, orally disintegrating films, Nano and Micro technologies
Biologics Unit - at Hubli, Karnataka.
04 of the top 15 biologics under development.
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Avg spending on development of new pharma products in 2013-18 period - $43 billion. This figure is expected to be $45 billion for 2019-23. Most new development happening in Speciality, Biologics, Orphan, Oncology, Immunology, autoimmune, multiple sclerosis, HIV areas. Upto 70 new product launches expected in next 5 yrs in the Oncology space.
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Pharma products going off patent in next 5 yrs - $121 billion.Biologicals going off patent - worth $ 17 billion till 2023.
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Current size of API mkt- $ 182 billion, expected to reach $245 billion by 2023 growing at 6 pc CAGR. Growth in India likely to be much higher due outsourcing opportunities. **India has 18 pc of World’s API mfg facilities vs China’s 13 pc ( they are much bigger though )**Therefore, the opportunity for India’s API industry to grow is huge.
Disc: not holding any shares of SML. May buy in future.
5 Likes
Just a portfolio disclosure :
Reduced - Aarti Drugs, Alkem Labs.
Added - Shilpa Medicare.
Increased - Nestle, ICICI Lombard.
All this - Today, 09 Oct.
3 Likes
Death Ranvir,
Would you mind sharing your thought process of reducing stakes in Alkem and Aarti?
Thanks,
Deb
Hi…
Aarti Drugs had run up by more than 4 times of my buy price. So, just trimmed it ( by 15 pc of my Aarti’s holdings ).
Alkem - is a pure generics player with no backward integration. Plus they hardly have any speciality pipeline.
Although, their genric mfg capabilities, compliance track record, marketting capabilities are next to none. Therefore only sold small portion to raise some cash.
Basically…trimmed them to have a slice of Shilpa Medicare, which has a dominant position in Onco - API space ( a fast growing area ). And then, Shilpa got a warning letter from USFDA ( yesterday )… 
Just too bad.
At present…trying to judge its impact.
2 Likes
Hi sir …
As per credit rating agency 53% of its api revenue is derived from the top 2 customers in 9m fy20 and 64% of revenue of its formulation is contributed by its top molecule azacitidine.what is your view in this.
Hi…
Can you share the report. Thanks.
Hi…thanks for sharing the report.
Yes…those are imp levers.
On top of that, a company of the Size of Shilpa getting into Biologics, OTC - Speciality green Tea, 505(b)(2) opportunities are other signifigant risks as all these things require signifigant capital and Manangement’s time and focus. One may have to live with these uncertainities - I guess.
The only proctection against these risks, in my opinion are -
To keep the position size small for the moment- say 2-3 pc of portfolio ( that’s what I am doing ).
Or
To let some of these play out and not enter now.
Basically, its a subjective call.
Notes from Shilpa Medicare’s Q1 investor ppt ( over and above the points not covered in AR 19-20 ) -
- 06 biologics in pipeline. Strengths in development of continious bio processing has the potential to disrupt the current Mkt Pricing.
A few lines about this process ( an extract from an article ) -
Continuous bioprocessing has been proposed as one future biomanufacturing state because it operates at similar scales for both clinical and commercial production using flexible facilities that can react readily to changing market pressures. Application of flexible infrastructure such as singleuse flow paths and small surge vessels and similar bioreactor sizes will reduce footprint and capital investment while simplifying technology transfer activities and maintaining quality-attribute profiles. Continuous equipment trains can operate over long periods, so this manufacturing approach will need closed processing to manage the risk of microbial contamination. In addition, integration of downstream processes into a single flow path requires synchronization of each unit operation through automated process control.
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Biologics capacities -
Two independent lines -Single use ( 1000 KL bioreactors each ) and one 200 KL single use line for production of MABS ( monoclonal anti bodies ) and other recombinant protiens from mammalian cells. ( Do google the benifits of single use Bio Lines vs Stainless Steel reactors )
MABS are man made protiens that mimic human anti bodies.
Recombinant protiens - Protients made artificially using recombinant technologies ( joining of DNA from two different species for medicinal / agri etc uses ). -
Novel Biologics - Molecular pipeline, patent protected.
Targeting - low regulator barrier cell therapy, high regulatory barrier markets with the potential to disrupt the best in class. Also has the potential to develop targeted chemotherapy drugs.
Capacities in Novel Biologics - 2 lines each of 1000KL fermentation capacity for production of the NBE to cater to clinical trial material and formulation grade material.
- Manufacturing footprint -
Dharwad - Bioglogics manufacturing
Raichur Unit 1 - API - Both Onco and Non Onco
Raichur Unit 2- API - Both Onco and Non Onco
Jhadcherla - Formulations ( Onco and adjuvant therapies - oral and injectables ) - This is the facility that has got the FDA warning letter on 09 Oct. This plant was inspected in Feb 2020, was flagged with 15 observations.
Hyderabad - Oral dissolving films - formulations
Austria - API
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Consolidated sales - 228 cr, up 40 pc YoY
Consolidated EBITDA - 70 cr, up 127 pc YoY,
Consol - EBITDA margins at 31 pc vs 19 pc YoY
API sales - 147 cr vs 110 cr, Formulation sales -
56 cr vs 31 cr, Others - 7 cr vs 5.5 cr, Service and
Licence fees - 6.2cr vs 7 cr. -
Last three yrs key data -
Formulation sales - 89cr>165cr>191cr
API sales - 365cr>348cr>388cr
Service and License income- 36cr>30cr>89cr
- Company has launched 3 key Onco products in India mkts in last 1 yr at affordable rates -
Ibrushil - Ibruninib
Dasashil- Dasatinib
Axishil- Axitinib
Disc - invested, small portion of portfolio.
Abbott India AR- 2019-20 Notes -
- Abbott India delivering value across healthcare ecosystem for over 75 Yrs. Key therapy areas for the company are -
Women Health
Gastroenterology - focus on upper and lower gastrointerstinal tracts ( GI ) and Hepatic care. Differentiated offerings beyond oral solids - key to success
Metabolism - Cater to hyper and hyo - thyroidism and some new sub therapies
CNS- catering to ailments like vertigo, epilepsy, migraine and depression
Vaccines - Targetting influenza, typhoid and diorrhoea
Multispeciality - differentiated products for pain management, nutritional supplements, vitamins and insomnia
Consumer Health - Consumer focused products including all variants of antacids - tablets, liquids and powders
- Top 20 Key Brands -
Colospa - irritable bowel syndrome
Creon - exocrine pancreatic insufficiency
Cremaffin - constipation
Duphaston - miscarriage and infertility
Duphalac - constipation
Thyronorm- hypothyroidism
Vertin - vertigo
Prothiaden - depression and anxiety
Ganaton - gastroesopheageal reflux disease
Zolpresh - insomnia
Digene - antacid
Dwadilan - preterm labour
Enteroshield - prevention of typhoid
Librax- GI disorders
Udiliv- Chronic liver disease
Heptral - liver disease
Combinorm - bacterial vaginosis
Estrabet - menopause
Arachitol Nano - vit D deficiency
Influvac - prevention of influenza
Sixteen of top 20 of company’s brands are No - 1 or 2 in their participated mkt.
Fourteen of them are growing faster than the mkt.
- Key strengths of the company -
Abbott India’s 75 yr plus reputation for quality, relaible supply chain and expertise
Performance driven culture and powerful teams
Mkt leadership in multiple nice therapies
Consistent brand focus, changing product mix and robust business capabilities
- Company launched 21 new products in the last yr. Company also focusing on improvements across product lifecycles by introducting new packaging solutions, new flavours, simplified dosing and more.
Keeping in mind company’s 75th yr in India, company distributed a dividend of Rs 250 per share vs Rs 65 for the previous FY.
FY 19-20 revenues at Rs 4208 cr, up 11 pc, EBITDA at 871 cr, up 21 pc, NP at 592 cr, up 31 pc, ROCE - 26pc, EBITDA margins at 20.7 pc vs 18.9 pc, PAT margins at 14.1 pc vs 11.9 pc.
One of the company’s oldest brand - Cremaffin entered the OTC category. Also launnched India’s only quadrivalent ( protects against 4 types of flu ) flu vaccine . Company is expanding its activation team so that they can increase their adult vaccination segment. New launches included Dhphalac chew and Duphalac bears from the company’s global portfolio.
- Future Outlook -
Robust pipeline of products for next few yrs.
To futher raise innovation bar in key therapies - women’s health, thyroid and Gut health.
Medicine spends in India likely to grow by 9-12 pc CAGR for next 5 yrs which will bring India into the top 10 countries by medicine spending.
Consumerization in health care industry - a growing trend. Imp metrices - cost of care, ease of care, quality of care.
Company constantly reahing out to consumers and healthcare providers to spread awareness about various targeted segemts like - vertigo, vit - D deficiency, epilepsy, pancrea and gut care, thyroid, bacterial vaginosis.
- A closer look at financials -
Other income - 114 cr - interest income from bank FDs. Total FDs at Rs 2168 cr.
Material cost - up in absolute but lower in percentage terms ( 57.1 vs 57.4 pc ) due better sales realizations.
Employee cost - 11.7 pc vs 12 pc, inspite of increase in headcount - now at 3551.
Depreciation and Fincosts - up 7.8 pc vs last yr but lower in percentage terms at 15.1 pc vs 15.6 pc.
Debt to Equity- 0.5 vs 0.5
Inventory turnover days - 7.2 vs 6.2
Debtor turnover days - 13.8 vs 13.6
- Segment wise performance -
Women’s health - up 22 pc led by Duphaston - owing to strong brand equity, coverage of gynaecologists, sensitive indications and high premium on safety. New products introduced, setting up separate sales and marketing teams to increase focus on IVF. New product launches include - Femoston ( hormone replacement therapy ), Femilon ( contraception ), Novelon ( contraception ), Cetropo ( prevention of premature ovulation ) and Parihep ( thromboembolic conditions )
Gastroenterology - grew by 9.9 pc mainly driven by Cremaffin,Udiliv and Duphalac. New product launch focus on - GI space. 12 new products launched in the last one year.
Metabolics - grew by 28 pc led by leadership postn of Thyronorm and NeoMercazole ( used in hyprthyroid conditions )
CNS - grew by 12.6 pc. Vertin and Prothiaden continue as mkt leaders. New launch - Epishield ( for treatment of epilepsy )
Multi Specialty - includes pain management, nutritional supplements, insomnia and vitamins. Grew by 4.4 pc.
Vaccines - Key brands include - influvac, `enteroshield ( against typhoid ), rotasure ( against rotavirus ). Grew by 20.5 pc. A separate task force set up to tap adult vaccination. Company has licensing agreement with Bharat Biotech for marketing of vaccines. Launches - Influvac tetra, showing very good response within 3 months of launch.
Consumer health - includes variants of Digene - tablets, liquids, powders. Grew by 19.5 pc. Cremaffin being consumerised. New launches - Digene ultra fizz, Brufen Rapid.
- Key risks -
Regulatory - Proposed expansion of drugs covered under NLEM and restrictions on trade margin mark ups.
Cheaper alternatives - their growing awareness and access through various channels.
Disc : invested.
6 Likes
Notes from Divis Labratories 2019-20 AR -
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2020 marks the 30th yr of Operations for the company. Divis acknowledged as one of the most ethical and future ready supplier of high quality generic APIs, custom manufacturing solutions and specialized nutraceutical ingridients.
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Continious process innovation - company’s DNA. Process innovation and patent protections have helped the company attain global leadership position in majority of the products it makes. Divis today is among the largest API manufacturers in the World.
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Divis today -
Six mfg facilities
Presence in 95 countries
14000 employees
Portfolio of 122 products across diverse therapeutic areas - generic APIs, custom synthesis of APIs , Intermediates, Nutraceuticals
Gross Fixed assets in last 3 yrs - 3009 cr> 3254cr> 4109
Debtors outstanding in no of days in last 5 yrs - 90>90>103>93>102
Share of revenues ( at 5500 cr ) -
America - 23 pc
Europe - 47 pc
India - 15 pc
Asia - 11 pc
RoW - 4pc
- Manufacturing facilities -
Two manufacturing locations -
No 1 - in Distt - Nalgonda near Hyderabad, set up in 1995. Has 13 multi purpose production blocks to make APIs and Intermediates, spread across 500 acres. Spl DC SEZ set up here and commenced ops in Feb 2020.
No-2 - near Vishakhapatnam- 490 acres. Houses export oriented unit- 8 production blocks, SEZ unit - 9 production blocks, DSN SEZ set up in 2011 having 6 production blocks. A new DCV SEZ unit set up - started production in Mar 2020.
Research center - near Hyderabad
Process development and support centers - at manufacturing sites
Two Subsidaries - at US and EU ( Switzerland ) - for marketing of nutraceutical products
- Business -
Largest product - 18 pc of revenues
Top 5 products - 47 pc of revenues
Major brownfield expansion undertaken this yr comprising two projects, de bottlenecking, backward integration. Total cost - over 600 cr.
Some of the capex has started commercial ops in Feb and Mar 2020 ( as covered earlier also ). **Rest of the projects will be completed and utilization will start by second half of FY 2020-21.*Capital works in progress at the end of the yr stand at - 919 cr!!!
Revenues for 2019-20 - at 5500 cr, up 9 pc, PBT - 1813 cr - largely flat.
Material cost - 39.3 pc
Employees cost - 11.06 pc
Investments - 971 cr - short term fixed deposits with SBI- after liquidating SBI debt and equity MFs. Income from these stand at 99 cr for the FY.
Some large volume products - Naproxen ( pain killer ) , Dextromethorpan ( cough supressant ), Gabapentin (anti-convualsant )
Disc : invested.
6 Likes
Portfolio Disclosure -
Exited - Colgate Palmolive.
Added - Abbott India, Nestle India.
Entered - Tata Consumer.
Date - 16/10/ 2020
Reason - had bought Colgate during the Mar - Apr fall in the Mkts.
At present, looking for better growth prospects.
2 Likes
Hi,
Any reasons for Tata consumer addition?
Hi…
There is a dedicated thread on Valuepickr on Tata Consumer. One can get the details there.
Quick highlights -
India’s No 1 Branded Tea player. No 2 is HUL.
India’s No 1 Branded salt player.
One of the biggest Branded tea player in UK - Tetley brand.
Owns US’s oldest coffee brand - Eight o Clock coffee.
Growth drivers -
Himalayan packaged dringing water. ( launched some time ago with Pepsi in a 50:50 JV ). Acquired 100 pc stake this yr.
Merger with Tata Chemicals consumer business to unlock cost benifits and synergies that are yet to accrue - as per management’s latest interviews. ( avlb on the thread )
Rapidly growing staples business under the Tata Sampann brand - Dals, Ready to cook Mixes, Spices. Management believes they have a winner on their hands…and I agree with their perception.
Agressive push by the management to increase direct distribution.
Health cash balance on the balance sheet…around 2000 cr ( if I am not wrong, quoting it from memory ). Management is not averse to acquisitions for the said fund utilization.
Key things to monitor -
Improvement in RoE
Sustainence of growth momentum…that would be the key.
3 Likes
Hello Ranvir,
Don’t you think Tata consumer will be most vulnerable to private labels of organised retailers for many of their products (besan, dal).
Thanks
Yes. Private labels and Local Brands will come into this space.
But is an open field as far as organised players are concerned.
I would argue, the combined Mkt share of all private, local and national players wont be much beyond the teens at max as the loose mkt rules the roost, specially in Pulses.
For Pre Mixes like Poha, Chila, Idli etc, branding and taste is gonna be far more critical. But here as well, the growth runway thats avlb is huge.
These are some points to be kept in mind.
1 Like
Notes from Aarti Drugs 2019-20 AR -
- Introduction - Estd in 1984. Company makes APIs, Intermediates, spl chems and formulations. Formulations are made and sold under their fully owned subsidary - Pinnacle life Sciences. Major APIs include -
Ciprofloaxin HCL - Antibiotic, used to counter bacterial infections
Metformin HCL - Antidiabetic - one of the largest producer in the world
Ketoconazole - Antifungal
Ofloxacin - Antibiotic, used to counter bacterial infections
Tinidazole - Antibiotic, used to counter bacterial infections - largest producer in the world
Metronidazole benzoate - Antibiotic, used to counter bacterial infections - largest producer in the world
Nimesulide - NSAID - largest producer in the world
Spl Chems made by the company -
Benzene Sulphonyl Chloride - used in mfg of suphonamides and sulfonate esters
Methyl Nicotinate - used in vetenirary medicines
- Key facts -
Manufacturing locations - 12
Export revenues - aprox 34 pc
Monthly API mfg capacity - 3588 MT
API molecules manufactured - 50
Finished products - 80
R&D center - at Tarapur
Recent capacity expansion - in NSAIDs
Recent - company streamlining key product processes with alternate KSMs
Financials -
96 pc of standalone sales from APIs
4 pc from - spl chems
Breakdown within APIs - antibiotics - 44pc, anti-protozoals- 16 pc, NSAIDs - 10 pc, rest - antidiabetic, anti-fungals, cardioprotectants
Topline - 1806 cr , up 16 pc
Bottomline - 141 cr , up 57 pc
Debt / Equity - 0.58 vs 0.93 last yr
Company trying to reduce dependence on China for KSM by backward integration, change in processes
Capex - 2020-21- for expanding anti diabetic, KSM and spl chem facilities
Disc : invested.
Ranvir has responded very aptly to you already, just adding my two cents here as I have seen this question earlier as well and my thought is that actually - its the other way round. Loose and unbranded private labels came first, Tata Sampann later. Tata is a threat to those poor quality stuff with dye and chemicals. It is a blessing for people of India at affordable rates!!
3 Likes
Tata Consumers is a very interesting case… Tata sampann range consists of spices, pulses and besan, convenience food (pakoda mix, khichdi mix), poha. Except the spices, I think its difficult for them to penetrate the rural/semi urban market since people still tend to buy loose pulses from local kirana shop.
However, I see a huge growth potential in metro and big cities where people prefer to have a comfort of quality and they want to avoid spurious products. I have seen neighbourhood Tata Star market aggressively marketing in house range with discounts on it.
It will be interesting to see the their numbers in the future.
1 Like