Concord Biotech is an
India-based R&D-driven biopharma company. The company is ranked among the
leading global developers and manufacturers of select fermentation-based APIs
across immunosuppressants and oncology in terms of market share, based on
volume in 2022.
Company manufacture (a)
bio-pharmaceutical APIs through fermentation and semi-synthetic processes,
across the therapeutic areas of immunosuppressants, oncology and
anti-infectives; and (b) formulations, which are used in the therapeutic areas
of immunosuppressants, nephrology drugs and anti-infective drugs for critical
care.
In FY23, APIs
contributed 89.23% to total revenue and Formulations 10.77%.
Company supply its
products to over 200 customers in over 70 countries including regulated
markets, such as the United States, Europe and Japan, and India. In FY23, India
contributed 50.65% to total sales, USA 17.26% and Rest of the world 32.09%.
Company also offers
contract research and manufacturing services, where it collaborate with
third-party pharmaceutical companies to develop APIs and formulations. Going
forward, company plans to grow its CDMO business.
As of March 31, 2023,
company had three manufacturing facilities in the state of Gujarat, India,
comprising API manufacturing facilities in Dholka and Limbasi and a formulation
manufacturing facility in Valthera, which were commercialized in 2000, 2021 and
2016, respectively. As of March 31, 2023, company had a total installed fermentation
capacity of 1,250 m3.
Company had a market
share of over 20% by volume in 2022 across identified fermentation-based API
products, including mupirocin, sirolimus, tacrolimus, mycophenolate sodium and
cyclosporine.
As of March 31, 2023,
company had 23 API products including six fermentation-based immunosuppressant
APIs, including tacrolimus, mycophenolate mofetil, mycophenolate sodium,
cyclosporine, sirolimus and pimecrolimus. Company intends to continue to grow
its immunosuppressant API portfolio, which will remain one of the key
contributors to its API business.
To capitalize on the
benefits of backward integration that its presence in APIs provides, Company
entered into the formulations segment in 2016. In India, company market a
portfolio of 27 brands across immunosuppressants, nephrology drugs and
anti-infective drugs for critical care. Company has presence across 20 states
and five union territories in India.
Company aims to capture
opportunities within the fermentation segment across APIs, formulations and other
adjacencies, by combining its R&D and production capabilities. To continue
its growth momentum, company is also expanding in oncology and anti-infectives
(in addition to the existing immunology drug portfolio).
Going forward, company
intends to Increase its wallet share from existing API customers, serve
additional customers and expand its API portfolio and geographic reach.
Company has 77 approved
products for formulations. Company filed 128 Drug Master Files (DMFs) across
several countries for its APIs, including 20, 65 and four, respectively, in the
United States, Europe and Japan, as of June 30, 2023. In addition, it obtained
four ANDA approvals for six products from the USFDA for formulations, as on 27
July 2023.
For the Financial Years
2021, 2022 and 2023, its ten largest customers generated revenues of Rs 272.52
crore, Rs 310.19 crore and Rs 377.81 crore, respectively, representing 44.17%,
43.51% and 44.28%, respectively, of total revenue.
Offer and its objects
The IPO will be complete
offer for sale of 2,09,25,652 equity shares by existing shareholder Helix
Investment Holdings.
Price band for the IPO
is Rs 705 to Rs 741 per equity share of face value Re 1 each.
Company will not
directly receive any proceeds from the Offer, and all the Offer Proceeds will
be received by the Selling Shareholder Helix Investment Holdings.
Promoters of the
Company are Sudhir Vaid and Ankur Vaid. Promoters and promoter group holds an
aggregate of 22,558,375 equity Shares, aggregating to 44.08% of the pre-Offer
issued and paid-up Equity Share capital. The post IPO shareholding is expected
to remain same.
The issue, through the book-building process,
will open on 4 August 2023 and will close on 8 August 2023.
Strengths
Company is one of the leading
global developers and manufacturers of select fermentation-based APIs across
immunosuppressants and oncology in terms of market share, based on volume in
2022. As an established fermentation-based immunosuppressant API manufacturer,
company is well positioned to benefit from the growth potential in the
immunosuppressant drug market.
Company has high profit
margin because of its niche and complex product portfolio. Its OPM was 53.09%,
38.33% and 40.24%, respectively, for the Financial Years 2021, 2022 and 2023.
Company has invested
significantly in capacity expansion in recent years. Company
is among the few companies globally that have successfully scaled up
fermentation-based API manufacturing capabilities. With increased capacities, company is well poised to scale up its API
production to serve more customers.
Company has total of 41
manufacturing blocks and 387 reactors in the Dholka and Limbasi facilities,
which allows it the flexibility in plant configuration to cater to customer
demands.
Company has ability to
expand its installed capacity at the existing manufacturing facilities, which
may help reduce the need for significant capital expenditure on capacity
expansion.
Company has strong R&D
capabilities, which help improve its fermentation technology. It has dedicated
R&D units for both APIs and formulations. For the Financial Years 2021,
2022 and 2023, its expenditure on R&D activities amounted to Rs 19.29 crore,
Rs 25.84 crore and Rs 29.58 crore, respectively.
Company has a Diversified
global customer base with long-standing relationships with key customers. As of
March 31, 2023, company had over 200 customers in over 70 countries for both
API and formulation products. For the Financial Years 2021, 2022 and 2023,
long-term supply agreements with customers, constituted 14.06%, 12.45% and
12.56% of its total revenue, respectively.
Company is managed by, experienced
Promoters and management team. Mr. Sudhir Vaid, one of the Promoters has played
a crucial role in building technology capabilities, scaling up manufacturing
facilities and developing R&D division. Mr. Ankur Vaid, the other promoter
has contributed to its market strategy.
Weaknesses
Company is highly
dependent on imports of raw materials from China. Any disruptions to or restrictions
on supply of raw materials from China may adversely affect business. In FY23,
Cost of materials imported from china represented 32.01% of Total cost of
materials imported.
Company operate in a highly
regulated industry. Any inability to comply with laws and regulations may lead
to penalties and sanctions, which could impact business operations.
Company is subject to
risks arising from exchange rate fluctuations. Significant portion of its
business is in several other currencies, primarily in US dollars. For the
Financial Years 2021, 2022 and 2023, exports represented 59.05%, 52.67% and
49.35%, of its total revenue respectively.
Company face pricing
pressure from customers, which may affect its ability to maintain or increase
product prices, thus affecting profit margins.
Company’s business
requires significant working capital, for financing the purchase of raw
materials and the development and manufacturing of products before payment is
received from customers. Insufficient cash flows could affect business.
Company generate significant
proportion of its revenue from sales of immunosuppressant APIs. Decline in
sales of immunosuppressant APIs and formulations may affect business.
Pharmaceutical industry
in which company operate is highly competitive. Any failure to compete in
therapeutic areas in which it is focused, can impact business.
Valuation
For FY23, consolidated
sales were up by 19.67% to Rs 853.17 crore compared to FY22. OPM increased by
191 bps to 40.24%, which led to 25.62% increase in operating profit to Rs
343.29 crore. Other income increased 50.79% to Rs 35.31 crore, while interest
cost fell 17.74% to Rs 4.51 crore and depreciation increased 7.96% to Rs 54.03
crore. PBT increased 35.57% to Rs 322.01 crore. Tax expenses for FY23 was of Rs
81.93 crore compared to tax expense of Rs 62.59 crore in FY22. Net profit rose
37.25% to Rs 240.08 crore.
FY23 EPS on post-issue equity works out to Rs
22.95. At the upper price band of Rs 741, P/E works out to 32.28.
As of 2 August
2023, its listed peers such as Biocon trades at TTM P/E of 47.82, Lupin trades
at TTM P/E of 105.25 and Aurobindo Pharma trades at TTM P/E of 24.81. For FY23,
Concord Biotech OPM and ROE stood at 40.24% and 18.61% respectively, compared
to 22.48% and 2.58% for Biocon, 10.80% and 3.45% for Lupin, and 14.96% and 7.18%
for Aurobindo Pharma respectively.
Concord Biotech: Issue highlights
|
For Offer for Sale Offer size (in Rs crore)
|
|
- On lower price band
|
1475.25
|
- On upper price band
|
1550.59
|
Offer size (in no of shares )
|
2,09,25,652
|
Price band (Rs)
|
705-741
|
Minimum Bid Lot (in no. of shares )
|
20
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
10.46
|
- On upper price band
|
10.46
|
Post-issue promoter & Group shareholding (%)
|
44.08
|
Issue open date
|
04-08-2023
|
Issue closed date
|
08-08-2023
|
Listing
|
BSE, NSE
|
Rating
|
44/100
|
Concord Biotech: Restated Consolidated Financials
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
Sales
|
616.94
|
712.93
|
853.17
|
OPM (%)
|
53.09%
|
38.33%
|
40.24%
|
OP
|
327.55
|
273.27
|
343.29
|
Other inc.
|
13.81
|
23.42
|
35.31
|
PBIDT
|
341.36
|
296.69
|
378.60
|
Interest
|
0.67
|
5.48
|
4.51
|
PBDT
|
340.69
|
291.21
|
374.09
|
Dep.
|
27.52
|
50.05
|
54.03
|
PBT
|
313.17
|
241.16
|
320.05
|
Share of Profit/(Loss) from Associates/JV
|
(0.45)
|
(3.64)
|
1.96
|
PBT before EO
|
312.72
|
237.52
|
322.01
|
Exceptional items
|
-
|
-
|
-
|
PBT after EO
|
312.72
|
237.52
|
322.01
|
Taxation
|
77.83
|
62.59
|
81.93
|
PAT
|
234.89
|
174.93
|
240.08
|
Minority Interest
|
-
|
-
|
-
|
Net Profit
|
234.89
|
174.93
|
240.08
|
EPS (Rs)*
|
22.46
|
16.72
|
22.95
|
* EPS is annualized on post issue equity capital of Rs 10.46 crore of
face value of Re 1 each
|
# EPS is not annualised due to seasonality of business
|
|
|
EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
Figures in Rs crore
|
|
|
|
Source: Capitaline Corporate Database
|
|
|
|
|