Tuesday, November 16, 2010

Stock Idea: Panacea Biotec

Panacea Biotec (PBL) is India’s highly progressive research based health management company involved in research, manufacturing and marketing of branded pharmaceutical formulations, vaccines and natural products. The product portfolio includes highly innovative prescription products in important therapeutic areas like pain management, diabetes & cardiovascular management, renal disease management, osteoporosis management, anti-tubercular, gastro-intestinal care products and vaccines. The flagship brands of the company- Willgo for pain management; Glizid & Glizid-M for diabetes; Panimun Bioral & Mycept for kidney transplant occupy leadership positions in their therapeutic segments. This is in persuit of marketing strategies to build brands and drive the growth of the company. The vaccines portfolio consists of oral polio vaccines (type I and type III), Enivac-HB (Hepatitis B vaccine), Enivac-HB Safsy, Ecovac-4 (DTwP+Hep B), Easyfour (DTwP+Hib), Easyfive (DTwP+Hep B+Hib). Vaccines in the offing are- Anthrax, Dengue, Japanese encephalitis and several others. Panacea Biotec has earned the distinction of being a WHO pre-qualified supplier of oral polio and Hepatitis-B vaccines and are in the process of obtaining similar pre-qualifications for other vaccines.
PBL is the second largest vaccine producer in India and has been ranked as the third largest biotechnology company in India (as per ABLE Survey June 2009). While vaccines account for three-fourths of the company’s overall revenues, the balance comes from domestic formulations (the major therapeutic areas being pain management, diabetes and organ transplantation). The company has also established collaborations and tie-ups with international research organisations. Bulk of the vaccines is sold to the UNICEF, which largely caters to the Indian market and to some countries such as Ethiopia, Maldives, Nepal, Somalia and Yemen. The company has ultra modern, state-of-art production facilities at Baddi (Himachal Pradesh), Lalru (Punjab) & Delhi for manufacturing tablets, capsules (including soft gelatin), ointments (transgel formulation) liquids, herbal formulations and vaccines. The facilities are WHO cGMP compliant.
Net profit of Panacea Biotec rose 692.02% to Rs 16.87 cr. in the Q2 ended September 2010. Sales rose 52.32% to Rs 252.57 cr. in the quarter. Net profit of PBL had risen 226% to Rs 49.4 cr. in the first half ended Sept. 2010. Net sales were up 48% to Rs 506.5 cr. in the first half. The EPS for the half year on a equity of 6.13 cr. (Promoter stake-74.41%, FII/MF stake- 11.44%) stands at Rs 8. For the year ended March 2010, PBL had posted 14% rise in net sales to Rs 900 cr. on consolidated basis, whereas net profit stood at Rs 72.41 cr. (against net loss of 67 cr. in FY09). For FY10 PBL’s vaccine segment grew 24% to Rs 680 cr.(75% of revenues). Going forward, PBL has identified brand building in exports as its thrust area and it has significant presence in the global markets including the CIS, Africa, the Middle East and Asia. The company is actively exploring opportunities for launching as well as licensing out some of our patented products for manufacture/marketing in developed countries in Europe, North America and Latin America. Eyeing the lucrative pie of off-patent drugs, PBL is looking to manufacture generics to expand its domestic formulation business and has plans to venture into the US market. Over $150 billion drugs would be off-patent in the next several years as their exclusivity time matures. PBL which gets most of its sales from domestic operations, is looking to start operations in the US from this fiscal to expand its exports, the area and region which they ignored till now.
PBL would announce deals in the next few weeks and is currently working on the Japanese encephalitis and Dengue vaccine which may be launched this fiscal The company has about Rs 120 cr. of cash reserves and it is not looking for acquisitions but expects in licensing and out licensing opportunities deals in the vaccines and medicines for infectious diseases and organ rejection. At the current market price of Rs 204, the stock trades at 12.4x and 10x of FY11E (Rs 16- Rs 17) and FY12E earnings(Rs 20- Rs 21), respectively.
Investors can start accumulating the PBL stock at current levels and add more on declines for decent returns of 50%-60% over the next 6-9 months.
Source: Internet (Valuenotes by Sanjay Chhabria)

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