Addendum -
Forgot to mention - Suven Pharma in the entire conversation
Thats another CDMO name that I like
Current / Target portfolio wt - 2 pc / 3 pc
Notes from Jubilant Pharmova Q2 results ( In Q2, it was Jubilant lifesciences which was separated into Jubilant Pharmova and Ingrevia in Q4. I ll cover only the Pharmova Part ) -
Business verticals with revenue contibution -
Speciality Phamaceuticals - Radiopharma + Allergy therapy products ( 52 pc of sales - 45 pc radio pharma , 07 pc allergy therapy )
CDMO - Injectables + APIs ( 16 pc of sales )
Generics - oral solids + India Branded business ( 28 pc of sales - 19 pc formulations, 11 pc APIs )
Manufacturing footprint - 6 USFDA approved plants- 04 in North America, 02 in India
Details -
Montreal ( 02 plants ) - radio pharma, CDMO - injectables
Spokane - CDMO - injectables + APIs
Salisbury - Oral Solids - formulations
Rourkee - Generics
Nanjangud - APIs
Radiopharma - Company specializes in cardiology, pulmonology, oncology and endocrinology as well as bone, brain and renal imaging . Supplies diagnostic and therapeutic radiopharma products to 13 countries. Company also has its own network of radiopharmacies in US ( total 49 pharmacies )
Allergy Therapy business - Jubilant HollisterStier ( brand name ) is the sole supplier for venom immunotherapy in US. Offers wide range of products and allergy vaccines for treatment of insect stings. Products include - 200+ different allergenic extracts, six insect venom products and exclusive skin diagnostic testing devices.
CDMO - Sterile Injectables ( 80 pc contribution ) and Non Sterile products ( 20 pc contribution ) - like ointments, dermatological creams and liquids
CDMO - APIs
Products include -
Pimaverium ( GI medicine )
Oxcarbazepine ( anti-convulsant )
Risperidone ( anti-psychotic )
Medizine ( zinc deficiency treatment )
Carbamazepine ( anti-convulsant )
Donepezil ( treatment of dementia )
Valsartan ( high BP treatment )
Generics -
56 commercialized products in regulated mkts and RoW. Benifit of vertical integration due API manufacturing. No 1 player in 4 products in US. Among top 3 in 5 other products
Combined Qtly revenues - 1452 cr up 4pc yoy
Combined Qtly EBITDA - 386 cr, down 11 pc yoy
Disc : invested from Rs 800 levels
3 Likes
Hi @ranvir,
You pharma portfolio is fantastic. Even I am very bullish in pharma sector.
I am reading a lot of concall of many companies to understand their business.
Recently I came through Aditya Khemka conviction about health care and even he says US business is like a commodity. He is more bullish branded generic companies in India.
His PMS portfolio is heavily invested in Indoco remedies, IPCA labs, JB chemicals, Unichem laboratories and FDC. Could you shed some light on these companies if you have gone through.
Highly appreciated and thanks in advance.
1 Like
Hi…
I have also seen his Interview.
His approach is different. He is betting big on generic pharma companies having an outsized exposure ( wrt their total business ) to the domestic market. His logic looks good - domestic market being the branded market and margins, return ratios here being far better than mkts like US, EU, Japan etc.
He is well within his rights to bet big here. However, I have a few observations in this space -
With this space seeing the entry of organized retail like 1 mg, pharmeasy, netmeds etc…wont the future margins be under some sort of pressure???
With retail moving towards being organized as we move ahead…Will it not not lead to some sort of genericisation of the entire Mkt as the chief USP of these mkt places is the facility for the customer to see the prices of all avlb brands for a particular molecule.
Plus there is another problem - there arent many pure India only branded generics companies. A few of them are - FDC ( does no concalls, publishes no investor PPTs etc ), MNCs like - Abbott India, Sanofi India etc. Here again - the investor communication is not ideal.
Among these, I have a small tracking position in Abbott India.
These fears ( genuine or overblown ) keep me away from betting heavily here.
Another segment where there are more than descent industry tail winds and a long runway ahead in the API / CDMO space. I find this to be more attractive than the Indian branded generics makers.
I may be wrong wrt my observations. However, its a personal choice …I guess.
Regards,
Ranvir Dehal
4 Likes
Hey curious you are not including Animal API player like Sequent? It has decent PE promoters as well now and recently big PEs/RJ etc interested in this space as well (buyout of Cadilla’s Animal API division). Interestingly why would Cadilla sell it if its a lucrative business…is it because it needs special focus compared to other API/Pharma business?
Also, I have seen investors by Pharma + Chemicals as the China + 1 strategy and you have not included any speciality chemical like Deepak Nitrite or even Fine Organics (Marcellus bet) in your basket of China + 1…would be good to know your thoughts…
It seems I have been ignoring this China + 1 since long time considering it as a momentum play but now I am beginning to feel its more long term structural…only shows how small/ignorant I am as an investor and how much I have to learn to develop better understanding of such structural changes…
1 Like
That’s a nice perspective. Yeah, maybe a bit. But I don’t think these retail channel will bring price competition between the companies. Brand will protect them I believe. In case of FMCGs, if there is dark fantasy and some new brand selling in the same category at 25% discount. People might buy it, atleast for the first time to taste. In case of medicines, do you think it will happen? I don’t think people will shift so easily, when a doctor prescribed a branded generic, Nonetheless, these retail channels 1mg and net meds, will improve the supply chain and improve the brand reach I guess. Just a doubt, I never bought medicines from these sites. Do we need a prescription to buy medicines from these websites ? Just my understanding, trying to think in different perspectives. I might be wrong.
Yes, completely agree with you. I haven’t read about FDC till now. There are no pure generics players who provide timely concalls and Ppts. But these two seems good i.e. Indoco remedies, IPCA labs and they branded generic revenue is more than 60-75%.
IPCA labs commissioning two API apex I believe and they expect 25-35% increase from revenue from Q4 2022 from Q42021 Concal. Many companies are entering into APIs and does this competition bring price erosion in APIs. Does APIs works as a commodity?
Indoco remedies also seems good with quality management. Currently, reading these both.
Unichem Labortories is spending 19% of total sales on R&D. Source: Tijori Finance.
That’s so huge isn’t ? How can we see that.
Your portfolio looks very interesting and I really loved it. API/CDMO are definitely have huge opportunities for India.
Correct me if I am wrong anywhere. I like healthy discussions. 
Regards
Pavan Kumar Naidu.
Hi…
I have indeed spent a fair amount of time trying to figure out the Pharma Sector / Pharma companies…and its a journey.
However, I have not made a similar effort in the Specialty Chemicals Space. I have bought two companies there - Jubilant Ingrevia ( due cheap valuations and good promoter ) and Aarti Industries ( was familiar with Aarti Group for over last 5 yrs. Bought it when the valuations were cheaper ie @ 1200 or so )
It would be a good idea to take a lead from Mr Saurabh Mukherjee and dig up the companies that he has shortlisted. He has the knack for quality and competitive advantages. Taking his lead…saves a lot of time.
Similarly, I havent studied the Animal API / Animal pharma space in any great detail.
4 Likes
Hi…
When it comes to branded generics - there are two categories of medicines - acute and chronic therapy. In chronic therapy like diabetes, BP, hypertension, depression etc…once the patients are stable on a particular molecule, like say - Metformin, Valsarta, Telmisartan, Venlafaxine etc, they end up doing a brand-price comparison.
Eg- Venlafaxine ( an anti depressant ) is made by most prominent companies like -Sun, Cipla, Torrent , Intas etc. Now the patient is almost sure of the quality here. Plus he has to take the medicine - life long, every single day. A brand - price comparison here is quite natural. I have also done some scuttlebutt here and found that people really do it.
Wrt APIs…there are aprox 4000 molecules in the mkt. So…there is ample opportunity for everyone. Thats one . Two - Indian API sales are aprox - $ 4 billion vs $ 40 billion for China. A 10-20 pc shift in long term + a normal growth rate of 6-7 pc is doable. Clearly the tail winds are there. Third - in API mfg, things that matter are - quality, compliance and cost leadership. So there are descent barriers. Not everyone can ensure all these for a large no of molecules.
Regards
Ranvir Dehal
1 Like
Hi Ranvir,
If available, can you please share the presentation slides for Sajal Sir’s webinar. Since its been days since the webinar was conducted, it will be a good learning material.
Regards
Hi…
U ll have to make an account on IIC ( Indian Investors conclave )
Its a Jun or Jul 2020 webinar - Sajal Kapoor on CDMO
1 Like
6722f05d-072b-4888-a3e1-ac3351756bfe.pdf (bseindia.com)
Q4 results from Amrutanjan Healthcare
Revenues at 94 vs 59 cr
Advert costs at 18.5 vs 9.1 cr
PBT at 13.7 vs 10.3 cr
PAT at 10.2 vs 7.8 cr
Qtly EPS at rs3.5 vs rs2.7
For the full FY -
Sales at 332 vs 261 cr
PAT at 61 vs 25 cr
EPS at rs 20.9 vs rs 8.6 !!!
What remains to be seen is the contribution of Sanitary Pads in the topline and bottomline for the Qtr and full FY. It there is significant growth there, this can end up being a serious FMCG story.
Disc : invested
2 Likes
Disc:
Mild trimming in HUL, Dabur - today
Addition - Strides Pharma ( tracking position )
3 Likes
Portfolio Disc : further trimming in Asian Paints, Pidilite, HUL.
Portfolio wt in the above mentioned stocks now stand reduced to 2 pc, 2pc and 1 pc
Additions - Biocon, Ipca Labs, Galaxy Surfactants
2 Likes
Notes from Neuland Labs AR for FY ending Mar 21 -
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A total of three manufacturing Sites - Unit - I, II and III. Units I and II have sucessfully cleared 15 USFDA audits. Unit III is awaiting FDA inspection and approval for commercial manufacturing of APIs.
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Two business verticals -
(a) Generic Drug Substances - making generic APIs. Sub-divided into two divisions - Prime APIs High volume and Mature APIs , Specialty APIs - Low volume and complex APIs
(b) Custom Manufacturing services ( CMS ) - catering to innovator pharma and biotech companies through exclusive contract development and manufacturing of NCE APIs
- Current revenue breakdown -
Prime APIs - 47 pc
Specialty APIs - 22 pc
CMS - 28 pc
Others - 3 pc
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FY 21 - Revenues at 953 cr, up 24 pc. Ebitda at 162 cr, up 54 pc. EBITDA margins up 340 Bps. Current Debt / Equity at 0.22 pc. Greater contribution from CMS and certain specialty business led to margin expansion. Company continues to focus on CMS without compromising on GDS business.
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Company working to improve processes, yeilds and productivity. Concrete steps taken during the year for products like - Ezetimibe ( to treat high cholesterol ), Levetiracetam ( anti - epileptic ), Deferasirox ( prevents iron overload ), Donepezil ( to treat dementia ), Dorzolamide ( opthalmic medicine ) and Rivaroxaban ( anti-coagulant ) - to make them more competitive in terms of cost and availability.
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Growth drivers for FY 22 - Strong CMS pipeline of 78 active projects with 24 in late stage development. Commercial production commencement at Unit - III. Already shipping 02 APIs from the same. Also gives them the headroom to accommodate higher volumes for molecules already being made at Unit - I and II.
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In FY 21, GDS business growth was led by - Levetiracetam ( anti epileptic ), Mirtazapine ( anti depressant ) , Labelalol ( to reduce BP ) in the Prime segment and by Deferasirox ( to treat iron overload during blood transfusion ), Dorzolamide ( opthalmic drug ), Entacapone ( to treat Parkinson’s ) and Ezetimibe ( to treat high cholesterol ) in the Specialty segment. Company having 6-7 molecules in late stage development stage ( talking about Generic APIs ) - to be launched this year.
Prime APIs - total 15 in number. Imp ones - Ciprofloxain, Levetiracetam, Mirtazapine, Enalapril, Sotalol, Labetalol. Company aims to keep leadership position going in key molecules by investing in lifecycle management initiatives ie improving yeilds and productivity.
Specialty APIs - higer value, higher margin, complex molecules. Key company strengths - Chiral chemistry, Hydrogenation and inhalation products. Company makes 20 molecules in this segment.
Company aims to launch 18 more molecules under its GDS business over the next decade. Will file 05 DMFs over next 01 yr.
Three generic peptides - Linaclotide ( to treat irritable bowel syndrome ), Liraglutide ( anti diabetic ) and Semaglutide ( anti diabetic ) are in various stages of development.
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New molecule addition in GDS business - Sugammadex ( to reverse neuromuscular blockade ), Elagolix ( to reduce endometriosis induced pain )
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Update on CMS business - 78 active CMS molecules in portfolio, 17 of them in commercial stage, 20 of them in development stage and remaining extending from early clinical trials to phase - III trials. In recent years, company witnessing increased number of late stage molecules entering their pipeline - this being a good trend as failure rates are lower here. Significant progress made in 4-5 late stage products which are expected to be commercialized in next 12-24 months.
CMS business revenues for FY 21 at 269 cr, up 42 pc. Company also has a few peptides under development in the CMS division.
- Dependence on Chinese imported RMs - down to 20 pc from 40 pc FY 18. Company aims to bring it down to 10 pc by FY 24.
Disc : invested, biased
10 Likes
Syngene International Notes from Q4 results -
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Sales at 659 cr, up 13 pc yoy. EBITDA at 234 cr, up 4 pc. PBT at 138 cr, up 15 pc yoy.
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Biggest highlight for the Qtr was - Extension of long standing partnership with Bristol Mayer Squibb till 2030. Syngene is their largest R&D hub outside US. New scientists to be added to work for BMS ( company guiding addition of 160 scientists over the current 400 working for BMS ), new areas of science to be added like - new domains of chemistry, biology, drug metabolism, pharmacokinetics, translational medicine etc.
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New Mangalore API facility completed its qualification process and is now a cGMP certified facility. Inspection by USFDA, EMA - is a key event for this new facility. Company also commissioned new HPAPI ( highly potent API ) laboratory that will support the up scaling of manufacturing in the chemical API space. No of projects from this facility to build up over next 2-3 yrs. Company continues to make Remdesivir under license from Gilead ltd.
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Company guiding for mid teen revenues growth in FY 22. Expect EBITDA margins around 30 pc. Company shall keep adding fresh CAPEX ( both manpower and equipment ). Hence the PAT growth to be lower - in single digits. Capex guidance for FY - 22 in the range of 750 to 900 cr !!!
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In the integrated drug discovery segment, company working with drugs in onco, cardio, liver , Parkinson’s, inflammatory disorders, orphan disease and animal health sector. IDD team working on a potential cure for inflammatory disorder in Dogs. Also developed a first of its kind formulation for dogs which has a global potential. In the last qtr, 10 of Syngene’s scientists were cited globally in renowned publications.
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Company working hard to ensure that Mangalore facility starts to deliver as soon as possible. At present, company making small size molecules from Mangalore facility to absorb some costs. Company to add overseas sales force as well in the current FY - an imp step to move physically and culturally closer to clients. Company striving to be a strategic partner and not just a service provider.
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Company has added 40 clients this yr, taking the total no of clients to over 400 now. Additional capacity added at Hyderabad lab facility which went live recently. Further waves of CAPEX at Hyderabad to happen almost every Qtr now. Current cash holding at 650 cr.
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Biologics manufacturing - Mammalian capabilities addition - new 2000 L reactor. Microbial tech capability addition - new 500 L microbial facility. Company can make wide variety of Biologic drugs for - oncology, hormonal disorders, many other areas. To commence viral vector development and manufacturing this year to be used in cell and gene therapies.
9. Company was involved in pre clinical to regulatory filing stages of development of Odevixibat drug ( pediatric drug to treat PFIC -.a liver disorder ). PDUFA date for drug - in Jul 21. If commercial manufacturing order contract offered to Syngene, it can be a near term trigger. Company believes that the Odevixibat is a great example of company’s capabilities.
- India - a great place to hire the Phds / scientific talent. This helps Syngene hire. Outsourcing R&D in Pharma industry to lower cost countries with huge talent is a norm these days. That ways, Syngene is positioned really well. Company was comparing this to what has happened over the years in the IT industry.
Disc : invested , biased
9 Likes
Hi Ranvir
I m a silent reader of the wisdom provided by all valuepickr seniors.
After going through the thread, I m getting an impression that you are practically following and implementing momemtum investing to some or great extent, same what Hitesh sir also follow at times.
Your confirmation/input about this query will be a great guidance as I am also working on the same line up and intend to apply it going further.
If yes, will be a great help if you can provide some inputs on ur exit criteria.
Thanks
Kamlesh
Hi …
Actually, my aim is to buy good / great businesses at descent prices. Sometimes u have to overpay for them. But I tell myself to be careful while doing so ( In cases of great businesses in India, one almost always ends up over paying to an extent ). Key is to know the extent of over payment initially paid. That’s of paramount importance.
On momentum investing - I dont do it intentionally. It may appear that I am doing it because of the high portfolio churn in recent times and the pivot towards Pharma space.
But…in my mind, its a medium term bet ( say 3-5 yrs ).
There are broadly 3 sectors that I am currently investing in -
Pharma / Specialty Chemicals
Financials - Banks / Insurance / asset managers etc
Consumer facing stocks - FMCG, FMEG, Consumer Durables, paints, tiles etc
However 18 months back, the first group was non existent in my portfolio ie pharma and specialty chemicals. So that has led to a lot of churn which may appear / give an impression that I am chasing momentum.
There are sectors where the momentum is strong that I have deliberately not invested in, like - sugar, cement, steel etc.
7 Likes
Thanks a lot for great inputs.
It almost matching with my line of thinking and action 
- In fact , I too explored pharma in last one year like u did and zeroed on Cadilla (currently holding).
- Avoided cyclicals of sugar, cement, graphite and steel despite caught them early.
- I think that pharma is exhibiting a structural strength although covid was a huge trigger/tail wind.
- Stocks gave spectecular returns in last one year owing to this tail wind with companies posting one of the great set of numbers (sorry i m not so well versed with numbers ).
- Going forward, i feel that this covid tailwind will weaken a little after few months (with corresponding correction/consolidation in stock prices).
- And then from a medium term perspective of 3~5 years, structural aspects will come in action gradually with
: China +1 theme driving the growth of the sector in downstream side of valuechain and
: Innovation on upstream side with Complex generics/Biologics/NCE at the heart of it on the back of Patent Expiration theme. - Pharma as a sector is coming out of down cycle after a long period of almost 5 years and I do feel that although the speed of upcycle is too fast due to covid trigger but it still has a leg of upside left for at least next 2 years on a structural and gradual speed basis although we will not be able to see the run up that we saw in last one year.
Your inputs about the same will be highly beneficial.
(Note : M just a beginner trying to learn from all seniors of valuepickr)
Thanks in advance
1 Like
Some Notes on Galaxy surfactants -
Largest manufacturer of oleochemicals based surfactants and specialty care products for home and personal care ( HPC ) companies
Two broad category of products ( both in home and personal care categories ) -
Performance surfactants ( 61 pc of sales ) - products where end user requires foaming and cleansing, large volume consumption. Makes 45+ products in this category.
Specialty care chemicals ( 39 pc of sales ) - Niche and premium products, low volumes, high value, low household penetration at present. ( company in oligopolistic position for most of these ). Makes 165 + products in this category
Ex - conditioning agents, UV protection agents, mild surfactants, protiens, preservative blends etc
Industries served -
Hair care, Oral care, Skin care, Cosmetics, Home care, Toiletries, Laundry
Manufacturing units -
05 in India
01 each in US and Egypt
Sales break up -
India - 35 pc
America / Middle East - 36 pc
RoW - 29 pc
In House R&D plant at Tarapur
Total approved patents - 78
Applied patents - 13
Major RM -
Fatty Alcohol
Over the last decade -
Volume CAGR - 10.9
Revenue CAGR - 14.9
EBITDA CAGR - 16.3
PAT CAGR - 19.8
ROCE > 22 pc ( company’s threshold ROCE ) for 7 out of last 10 yrs ( pre tax )
2010 - EBITDA / MT at Rs 10400
2020 - EBITDA / MT at Rs 16700
Specialty care chemicals include - Mild surfactants ( sulphate free ), Green preservation ( paraben free ), SunScreen ingredients ( for protection against UV rays ), Protiens ( naturally derived products for premium applications )
Capex in last 3 yrs ( 2018-21 ) at 500 cr…all via internal accruals
New growth categories -
Baby care products
Mens grooming products
Migration from lower end surfactants in laundry and dishwashing to performance surfactants
Q4 performance highlights -
Specialty portfolio makes a strong comeback, reporting a 11 pc volume growth in H2
Growth sustains in performance surfactants
EBITDA / Ton at Rs 19500 vs Rs 16700 in PY, up 16 pc !!!
Q4 volume growth -
Performance surfactants - 7.4 pc
Specialty surfactants - 10.5 pc
Total revenues up 19 pc at 785 cr
EBITDA up 17 pc at 120 cr
For FY 21 -
Revenues up 7 pc at 2795 cr
EBITDA up 23 pc at 460 cr
Disc - recently invested, tracking position, biased, not a buy/sell recommendation
7 Likes
HDFC AMC - Notes from AR 2020-21 -
-
Largest equity oriented MF manager in India
AUM - 3.95 lakh cr, up 24 pc YoY
PMS AUM - 9,700 cr, up 14 pc YoY
PAT - 1325 cr, up 5 pc YoY
Unique Investors - 53 lakh, Live accounts - 90 lakh
For context - India has 2.2 cr unique investor accounts
Investor Service centers - 227, out of which - 149 are in B-30 cities ( T-30 - is top 30 cities, B-30 is beyond top 30 cities ) -
Equity schemes as a percentage of total AUMs - 43 pc ( Industry avg is 41 pc ), Debt Schemes - 16 pc, Liquid Schemes - 39 pc , Rest - others
Total Equity schemes - 24
Total Debt schemes - 68
Liquid schemes - 02
Contribution to AUM from top 5 cities - 69 pc. next 10 cities - 14 pc, next 20 cities - 6 pc, Rest of India - 11 pc
Others - 07 pc
Share of Individuals in the total AUM - 57 pc
- Total MF industry at 31 lakh cr. MF AUM to GDP ratio at 15 pc vs Global AVG of 35 pc.
HDFC AMC’s mkt share in Individual segment - 13.7 pc ( highest in the Industry )
Monthly avg AUM for individual segment is at aprox 17 lakh cr. It has grown @ 22pc per yr since Mar 16
Monthly SIP flows the Industry for Mar 21 were at 9182 cr - up 3X vs Apr 16 !!!
Industry-Mar 21 vs Mar 17 AUM ( in lakh cr ) -
Equity AUM - 13 vs 6.3
Debt AUM - 10.6 vs 7.6
Liquid AUM - 4.1 vs 3.1
Others - 3.8 vs 0.5
Total - 31.5 vs 17.55
- HDFC AMC -
Annual SIP book at 11,100 cr
Of the total SIP book, 84 pc SIPs are over 5 yr old, 73 pc are over 10 yrs old !!!
FY 21 revenues at 1853 cr vs 2003 cr. Avg AUM went up. Still the overall revenues declined due lower proportion of AUMs under the Equity schemes which yeild higher management fees
Financial assets ( invetments ) held - 4753 cr vs 3944 cr last yr, out of which …amounts held in MFs - 4158 cr, amounts held in Debt securities - 522 cr
My take - the Industry structure looks poised for growth given the level of under penetration
Key risk for Industry - tech and regulatory disruptions where in lower cost models like ETFs become more popular or MF licenses are given out more easily so as to increase competition manifold
Key monitorable for HDFC AMC - recovery in the performance of their Equity schemes which can help them regain their market share losses
Disc : invested in HDFC AMC and Nippon India AMC
6 Likes