Suven Pharma ~ Demerged CRAMS Arm of Suven Life Sciences

Thanks for the post, had a clash with another meeting, could not attend earnings call. In Q3 call, I remember Mr. Jasti mentioning the same margin profile as CDMO business, was there any deviation to this statement for the stock to correct so much.

He seems to have given conflicting & confusing replies. One can listen to the call at approx. 10 mins / 30 mins / 65 mins and draw one’s own conclusions.

Decent set of numbers by Suven Pharma. Some headline numbers:

  • Operating revenue of Rs. 1320 Crs. for FY’22 against 1009 Crs. for FY’21. Solid 30%+ topline Growth.
  • EBIDT of Rs. 768 Crs. against 455 Crs for last year. - 68% jump.
  • EBIDTA margin of 51% against 44% for FY’21 and 47% for FY’20. May moderate going ahead (guidance range of 40% - 45%), still industry leading numbers.
  • Personally, one of the most important take away from the concall is the commentary around 50%+ growth for Specialty Chem CDMO business. Interestingly, this growth is not majorly attributed to the 3rd molecule which was launched recently. Based on management commentary, my conclusion is that the growth is driven by molecule #2 which went off-patent and they had major setback in FY18. Now innovator has come-up with combination formulations thereby increasing volume offtake this financial. Repeat order possible with a buffer of 12-18 months.

Some Notes from concall dated May 9th’2022:

Casper Pharma Acquisition:

  • Acquisition completed in last week of April’22 for a consideration of $20.5M.
  • 2 ANDAs already filed under and waiting USFDA visit to commercialize. Other 15 products to be filed within fiscal year. This pipeline is for Rising Pharma.
  • Conflict of interest with innovators due to this: Full transparency and support from CDMO innovator clients. In some cases, seeing they extending hand for support, where needed.
  • Market front ending - Suven dont have capability. Will depend of various marketing partners (Rising can play a critical role here).

Guidance:

  • Revenue growth guidance in range of 10% - 15% with possibility of upside. Will depend on project mix and pipeline moving from L2 to L3 or commercialization. (this is on higher growth base this FY)
  • EBIDTA Margin in range of 40% - 45% for FY’23. Current FY was more of any outlier due to favorable mix, may or may not repeat. Realistic to stabilize around ~45%.
  • Formulation margins - Both Casper and own in the range of ~25%.

Pipeline:

  • CDMO: Phase 1 - 77 | Phase 2 - 37 | Phase 3 - 5 | Commercialized - 5
    (good build up in phase 3 compared to historical range of 2-3 molecules)
  • CDMO SpeChem - 3rd one got commercialized in this FY. 4th molecule commercialization expected sometime if CY23. Will be a 40 Crs. - 50 Crs opportunity.
  • Rising Formulation - 2 Para 4 submitted. 15 in pipeline for FY’23.
  • Suvens own legacy Formulation - 17 Fillings out of which 9 approved and 8 commercialized. Few are not turning out to be very remunerative. Another 7 - 8 filling expected in FY from Suven’s FDF facility in Pashamylaram
  • Focus is not to chase blockbuster or crowded drugs. Small/niche molecules with limited competition. (sub $10M types)

Forward Integration:

  • In few cases, innovator were interested in Suven moving up value chain however COVID has delayed the things.
  • May take couple of more years before any material progress in this direction.

Disc: Invested

Thanks,
Tarun

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