Solara Active Pharma Sciences - Pure Play API

Rafi_Syed · May 6, 2021, 3:09pm

Solara Active Pharma Sciences Earnings Call for Q4FY21

Business

Dip in gross margins is mainly due to fluctuations in sales mix between regulated and non regulated markets, since business is expanding into non regulated markets this has impacted the gross margins, this is going to improve in future
High Receivables - This is again due to non regulated markets contribution (sales increase on QoQ is due to this 30% sales from North America + Canada, rest is from non regulated markets) , in these markets the credit terms are slightly stretched compared to regulated ones
Dip in Ibuprofen prices are protected by long term contracts
Raw material fluctuations are not going to affect much due to the processes and cost efficiencies in place in the form of better procurement processes in place
Favipiravir and one more COVID drugs are going come on to the market soon (Aurore has more of these kind of drugs )
New Product Launches in Q2 Q3 - (Market opportunity size could be 10s of crores, too early to give exact number, multiple discussions with customers, capacity is fully booked for the entire year, good margin products )
Current capacity utilization is about Mid to late 80% (Excluding Vizag)
35-36% raw material is imported out of which 29% is from China (it used to be 32% )

Management

Hired a consulting firm to help to identify synergies after the merger
Focus on backward integration
Finding ways to get the approvals by using remote audits (this is already happening in the industry )
Management didn’t give any guidance on the growth, this is mainly due to the ongoing merger with Aurore, soon after the merger they are going to give detailed update
Order is full and Vizag plant is running its 2/3 of capacity, this is mostly going to cater to non regulated market and it is a multi purpose plant (Total IBU capacity 3,600 tons in Vizag all of this is going to less regulated markets at the moment, currently there is no approval from FDA at the moment , soon this approval comes then the product can be sold to regulated market)
CRAMS is picking up (Added 4 customers , Revenue + cost synergies + R & D - Aurore merger synergies ), made breakthrough in Japan, Korea, Singapore
Also thinking of additional capex , will give more clarity after the integration with Aurore
Financial ratios are going to improve once the Aurore merger is completed
Europe is slowed down mainly due to more focus on covid related products by the clients, expecting things to come back to normal soon
Remain Invested in Technology Platforms - for example Bio Catalysis, Flow Chemistry , Fermentations , Complex Generics (Help us to offer higher margin products , we are working on these lines )

CAPEX - 250 cr - Growth capex, we will give more details post synergy (Land available in mysore and vizag so we have to decide where the demand etc… )

aspireinvestor · May 12, 2021, 6:03am

Seems TPG of Singapore has sold 1.33 mill shares of Solara in open market. Any update on reason or other details?

Rishu1202 · May 12, 2021, 9:57am

Prof. Mankekar has bought 2.42% along with few other Mutual Funds.

Siddhantnautiyal · May 15, 2021, 11:19am

Solara Active Pharma Con Call Q4FY21

Business:
• The diversity of our geographical presence & the strength of our product portfolio enabled us to navigate Q4 quite well.
• Q4FY21 Revenue: ₹ 454 crores (Growth of 47% YOY) & EBIDTA: ₹ 105 crores (Growth of 74%) EBITDA Margin: 23.1% PAT: ₹ 56 crores ( Growth of 218% YOY)
• FY 21 Performance- Revenue: ₹ 1,645 crores (Growth of 22%, if you exclude ranitidine then it would be 30%), EBITDA: ₹ 400 crores (Growth of 43%) , EBITDA Margin: 24%, PAT: ₹ 221 crores (Growth of 93%)
• There has been a strong performance in other markets & continued increased presence in the regulated markets.
• Successfully been able to add multiple new customers in the markets including for the production that we have ramped up in Vizag
• We have also been successful in maintaining the wallet with key customers for our base business
• R&D velocity has increased significantly
• This year we filed 8 US DMFs (Double of last year’s total) & 3 EU DMFs.
• Our market extensions stood at 23 across multiple global markets & regions
• There was a one off delay in off take of volumes by a couple of our customers which we are confident will normalise over the coming months
• The commercialisation of the Vizag facility is going on in a calibrated manner & we have doubled our utilisation weights from Q3 to Q4.
• We have accelerated & are progressing really well towards validating & commercialising a multi-purpose facility at Vizag in Q1FY22. This facility will have the capability to produce a covid related molecule- Favipiravir.
• Between Aurore & Solara, we would have the largest capacuties for Favipiravir API.
• Also working together with Aurore on other interesting molecules that are related to covid therapy. These initiatives will nicely marry Solara’s assets with rapid product development & capabilities that both companies possess
• A key milestone for Solara was the recently announced merger with Aurore. This merger has added significant momentum to the execution of our strategy.
• Already initiated the strategy with a leading consulting firm for the process of identifying synergies at a more granular level & once we get the approval from shareholders, we will get into more details & will be shared at the appropriate time.
• We also make steady headway in developing technology platforms & we are on track for executing a proof of concept for at least two of them by the end of this financial year.
• A couple of new products that we have launched in FY21 & are all set for scale up in Q2 & Q3 of FY22. We have confirmed orders for the entire year already for these products. We also have additional products in our pipeline which will be into validation phase in FY22 and will support our growth not just in FY22 but for many years beyond
• The board has recommended a final dividend of ₹ 3 per share. The total dividend for FY21 including interim dividend will be ₹ 7 per share i.e 70
• Capex for this year stood at ₹ 174 crores, Asset turns stood at 1.8x ( If you take out Vizag then 2.1x)
• Qualitatively there are 3 cylinders of growth that Solara has and all three are in good shape. The Base business where we have in the right share of wallet & we are with the right customers and new products that are scaling up this year and we are fully booked in terms of capacity for those products with customer commitments. Our CRAMS business where we see strong visibility & stickiness with our customers particularly big pharma companies.
• Possibilities to backward integrate from both companies products & we have the land to be able to do it in Mysore.
• Vizag is roughly around 60-65 % capacity utilisation.
• 3,6000 tonnes Boiler plate is the capacity at Vizag and we will be able to ramp up the capability within 6-9 months time
• Added 4 big pharma players to our customer list & very deeply engaged with all of the. In terms of the geographical spread which is also equally important for us, we have made breakthroughs in CRAMS in Japan, Korea and we are strong in Europe. We continue to do the same in US. This is what gives us the confidence that the CRAMS business will grow faster than the overall company.
• Scaling up the API production
• Total raw material import is roughly around 35%-36% out of which 29% comes from China

Management:
• CEO: Bharat Sesha, CFO: Subhash Anand
• Anchored the regulated presence quite well and we are excited about further opportunities that we are currently in the final stages of concluding with new customers for multiple new products
• Our cost improvement actions both in supply chain & in operations continues to be a pillar of strength
• Seen repeat opportunities come in from big pharma companies & we continue to deepen our engagement with them
• Continue to have very good revenue visibility over the CRAMS business for the next 3 quarters and we expect the CRAMS business to grow at a faster growth than the overall company
• The merger with Solara is EPS accretive
• We will continue to see the growth going forward
• Going forward we should be looking at 23%-25% range for EBITDA
• We will aim to have at least 10-12 filings this year
• Continue looking for Inorganic opportunities to grow our CRAMS business. Looking for assets/lab in the west mainly.
• The leading indicators of geographical spread, big pharma customers along with the fact that we are doing the right things from a scientific differentiation perspective is what we believe is the propeller of growth for our CRAMS business.
• We’re bringing complex generics. What we are doing over the last few months and what we will continue to do is Invest in developing capabilities which means we will have a competence to develop a product that needs this particular technology. We anticipate to have at least two of these in terms of proof of concept by the end of this financial year. This gives us an opportunity in the medium to long-term is to participate in a market space with very limited competition, higher margin profile & strong customer stickiness and alters kind of the way that we work with our customers- partner with them on the launch, partner with them on any other strategic market entires that we may have

Risk:
•Import of Raw Materials from China

Rishu1202 · June 1, 2021, 1:58am

Solara received PLI approval on CDA yesterday. There are many more candidates in waitlist. Not sure how much was the contribution of CDA in the topline. If someone can shed some light on the net impact due to this.

Rafi_Syed · June 6, 2021, 9:12pm

Government approves four firms under PLI scheme for bulk drugs

The companies which have been given approval are – Solara Active Pharma Science Ltd, Rajasthan Antibiotics Ltd, Dhatri Lab Pvt Ltd and Vital Laboratories Pvt Ltd.

mahesh.kalkar · July 3, 2021, 11:26am

Solara is the first company to have its CEP restored by EDQM on Ranitidine.
How much could be the impact on revenue in FY 22 Q2?

Rafi_Syed · July 30, 2021, 4:02pm

SOLARA AR FY2021

Rishu1202 · August 4, 2021, 8:56am

Q1 Results

Okay set of numbers given the API companies are not outperforming this Qrtr, although excellent planning for Solara 2.0, if they can execute, will do wonders. Strengthens my conviction.

Aditya Puri, Vineeta Rai etc joins Joins, strengthening the Board.
Ambitious plan to get into global top 10 API
Don’t like the focus of management’s focus on Market Cap
Increase in Debt & working capital - Receivables impacted due to higher sales from the less regulated markets
Guidance of 2800 Cr topline & >20%ROCE
Aiming for >30% CAGR in CRAMS business.
Expect a strong management commentary in today’s call.
Aurore Numbers are still to be added in Q1, so basis last FY of 550 Cr of Aurore, we can expect 130-150 Cr per qr for Solara from reinstated Q1 numbers after board’s approval of merger.

153e336e-fb60-4be5-b4c4-270a36349be0.pdf (7.9 MB)

Disc:- Invested

Jotpreet · August 5, 2021, 1:04pm

SOLARA Q1 CONCALL NOTES -

Q1 performance - ibuprofen weak demand in regulated mkt, due to pandemic, normalise over 3-6 months. ebitda of 951 million INR, 23.1% EBITDA margin, PAT of 501 million INR, Y-o-Y 17% reve, 10%EBITDa, 19% PAT.
Drivers - reduction in sales to regulated. Mitigate this through strong growth in new products. 800 millionINR new products revenue. Good in APAC region (200% growth YoY). Maintained share of wallet with customers in all segments. Cost reduction is stellar. Despite pricing pressure, able to hold line.
Concluded dev of 7 products in quarter, well on track for 10-12 DMFs in FY22
25+ Filings in FY22
CRAMS - added 4 customers (highest in 1quarter). Value of pipeline - 40% growth YoY. Continue to have revenue visibility for CRAMS. No structural challenges. Broader mkt picture has not changed.
Pillar 1: Commercialising backward integration for ibuprofen by Q3FY22 at vizag. For entire need of raw material across solara and anchor as cost leader in market. Increase reliability. Only among 2 players with scale and backward integration in ibuprofen. Helps when demand recovers
All base products -increased wallet share. When demand recovers, benefit accrues
Pillar 2 - new products - strong demand and momentum. Entire capcity underwritten for 3-5 quarters for some products. 7 new products this quarter and on course to file DMF.
3rd pillar - CRAMS - good headway. Record quarter. Good visibility for years
4th - Inorganic move - for CRAMS
Bullish about new products. Reve growth 30%, EBITDA 25% growth
Demand and price pressure. Increase working cap by 133 cr. (522 - 655 cr) mainly due to higher receivable and inventory. Things got shifted to Q2.
Net debt to 528 cr. over last quarter. Expect to normalise in coming quarters.
asset turns - 1.6x
Aurore - filed application. Post NOC will move ahead with NCLT. Expect completion by end of FY22. Start sharing results after shareholder approval.
Phase 1 to phase 2 - Aditya puri has joined the board and is leading the board. 10x mcap increase in 4 years. Pure play API co with strong pf and high customer centricity.
SOLARA VERSION 2.0 - Ambition - top 10 player by default. $750 million revenue, 26% CAGR revenue growth. Aurore to help in CRAMS. Strong balance sheet and have inorganic ambition.
Playbook based on - increase base business, increase R&D pipeline to 30-40. Look to increase CRAMS. Focusing on newer technology and products. Working with cos for Pre clinical phase 1 and forward. Aurore is 1st positive step (well recd by markets and customers). Synergy numbers posted in investor presentation.
API and China +1 tailwind continues. Blips in terms of base commodities demand mainly due to COVID and reduction of prescriptions in specific programs.
Q&A
$300 mn is generic business to double to meet the ambition in next 4 years. No big stake acquisitions are part of business.
Margins are lower than before in projections - mgt thinks organic expansion will take place. For CRAMS have to build capacity before customer joins in.
Arun joined board now why? - Doesn;t normally do this, had to do this to get Aditya Puri on board. Non executive role in company.
Seasonal products had dip in demand from regulated market. No structural change. Customers have built up inventory and had lower offtake in regulated markets.
Contractual customers - no significant dip in prices. Some reduction in pricing.
Solving tough chemistry challenges where science is tough - they are dealing with this. Starting to see green shoots of this in the business.
Aurore is key component for the new target. Inorganic acq for CRAMS is tough given the valuations. Would need to invest heavily into new capabilities to attract customers. 400 cr of generics by aurore as of FY21. Vizag to churn out good capacity and utilisation rates. 6 months will bring clarity for CRAMS business.
Goodwill on books after aurore - no goodwill as it is a merger (yet to get conclusion but expecting this as final position). After NLCT approval can comment on this.
No excess tax payout. MAT paying co for a couple of years.
When choosing molecules, do look at competitive intensity and ability to differentiate. Need they can win and grow and scale when selecting product.
100+ products, good mix of high volume or high margin products. Mix will continue.
200-250 cr capex would continue for 2-3 years across capacities for both generic business and CRAMS.
Potential products being engineered for COVID for a few years. Uptake for such products in both aurore and solara.
Update on cuddalore plant - all actions done on time. Sent communication to USFDA and await their approval. Approval from Europe authorities recently. Confident that addressed ranitidine issues. Capcity at late 80s, early 90s. Multiple products in all facilities. Similar rates for FY 22 as in FY21.
Receivables at 115 days.
CRAMS 30% of revenue by FY25.
Companies in the industry can do 30%+ margins after capex phase is over.
Special DMF filings going on. Secure cost leadership in late filings. On more niche products, focused on higher gross margins and profit share.
CRAMS was late single digits percentage for the quarter. Mix of late stage and early clinical trial or looking for 2nd manufacturer.
Confident of growing EBITDA of aurore CRAMS faster than solara.
Took decision to backward integrate 18 months ago but not public info. Getting into validation of fully integrated ibuprofen player. Sell intermediates to others as well. Have marque customers. Now will ensure can improve margins and sustain the supply chain for customers.

Rafi_Syed · August 8, 2021, 9:13pm

Vizag is slowly turning into Pharma Hub

Good Institutes like Andhra University , GITAM etc

Rafi_Syed · August 13, 2021, 9:12am

Promoters buying from the open market

some more

Rafi_Syed · August 26, 2021, 8:46am

Once the merger happens 31% addition to the top line

After merger promoter share holding is going up

If we add Sequent shares to promoter group total promoter holding is 51.51%

Link

Total shares acquired by promoters in the past month 54,951

Rishu1202 · October 7, 2021, 5:06am

One of the key products of Solara, the API for Antimalarial drug - Artemether will be impacted due to this.

Dr.Midhun · October 7, 2021, 6:33am

Anti-malarial medications are used in combinations. Artemether-Lumefantrine is the most preferred one.

Solara produces Lumefantrine and Artesunate also. (Artesunate is also a 1st line drug in the treatment of Malaria)

vnktshb · October 7, 2021, 7:08am

Does anyone know how much % of revenues come from anti malaria APIs?

sethufan · October 8, 2021, 4:01am

Hi
This is the problem we retail face . This is what I raised to you in the Bajaj thread. We retail have certain limitations. Before we could even talk about impact, price would have done by a significant percentage

Dr.Midhun · October 8, 2021, 1:33pm

Rishu1202 · October 11, 2021, 2:38pm

I do not have the weightage of the products from Solara to calculate the exact impact. The fall may also be attributed to assumed increase in raw material Prices which it may be facing along with other players in this category. These are short term affects & provide good opportunity to accumulate for long term. I will look to add more around 1200 levels if it reaches there.

Disc :- Holding & Biased

Hemant_Desai · October 11, 2021, 2:56pm

Thanks…I inquired and I get to know the impact of the API product part of malaria is negligible…

Seems like raw material price impact n anticipated soft performance for Sep qtr.

Agree with you to buy on dips and keep it long.