I want to present work I’ve done on Caplin Steriles over the last quarter.
Why am I interested in Caplin Steriles?
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Work on the US facing injectables division started nearly a decade ago, in 2014. It took them four years to start commercial production, and in 2023, they are on track to turning profitable this year.
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They have scaled revenues tremendously well since 2018, and growth has come mainly through volumes. Newer molecules have the potential to raise realisations.
| Year | Revenue (Cr.) |
|---|---|
| FY20 | 65 |
| FY21 | 85 |
| FY22 | 127 |
| 9MFY23 | 155 |
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Caplin Steriles has losses of 25 Cr. as of FY22. This should have a direct impact on the consolidated PAT once they break even. In addition, they have 28 Cr. of deferred tax assets, which should give them a tax break initially when profits start to come in.
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This is currently a 60-70% gross margin business, depending on whether R&D/ANDA filing expenses should be thought of as COGS. One wonders what the EBITDA profile could look like when it turns profitable, as Sakar, Gland and others are in the 45-55% gross margin bracket.
Key Data Points
Note: market share is of Indian exports, volume CAGR is for the corresponding period.
| Molecule | 9MFY23 Market Share | Market Leader | Market Leader’s Share | Caplin’s Avg Price USD/KG | Market Leader Price USD/KG | Caplin Volume CAGR | Period |
|---|---|---|---|---|---|---|---|
| Ketorolac | 6.50% | Gland | 65% | 0.6 | 0.63 | 19.50% | FY20 – 9MFY23 |
| Glycopyrrolate | 18% | Gland | 21% | 1.2 | 1.2 | 3% | FY20 – 9MFY23 |
| Tranexamic Acid | 4.60% | Eugia Pharma | 21% | 1.5 | 1.45 | 95% | FY22 – 9MFY23 |
| Verapamil | 6.50% | Mylan | 60% | 1.8 | -15% | FY21 – 9MFY23 | |
| Ropivacaine | 24% | Eugia Pharma | 50% | 1.9 | 3.9 | 39% | FY21 – 9MFY23 |
| Phenylephrine | 65% | Caplin Steriles | 65% | 1.6 | 1.6 | 39% | FY22 – 9MFY23 |
| Argatroban | 15% | Gland | 40% | 13 | 30 | 15% | FY22 – 9MFY23 |
| Neostigmine | 27% | Caplin Steriles | 27% | 2.4 | 2.4 | 150% | FY22 – 9MFY23 |
| Milrinone | 8.50% | Gland | 60% | 2.8 | 4.8 | NA | FY23 |
| Etomidate | 13% | Gland | 35% | 2 | 2.2 | NA | FY23 |
| Labetalol | 8% | Rubicon | 70% | 1 | NA | FY23 |
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Ketorolac and Glycopyrrolate are the key molecules right now. Caplin has scaled other molecules well after approval.
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In general, price/kg is meaningless above as each vial has different volumes, and price of each volume class of is different. This is meant to show you roughly how things stand, and the differences between each molecule.
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Newer molecules have far higher realisations than older molecules. If product mix changes towards new molecules gradually, revenue can see improvement from both realisations and volumes.
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Some clients in the US are listed. Caplin sells to Baxter Healthcare, Somerset Therapeutics and Eversana. Disclosures tell us that scale happens through milestones and revenue sharing. One can go through their concalls to understand outlook.
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A number of molecules were only launched late in FY22 and are yet to come to scale.
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Most of these molecules have a market size of $50-60 million.
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Caplin Steriles’ volume CAGR from FY20-9MFY23 is around 34%.
Caplin Steriles is on track to reach 200 Cr. of revenues in FY23, and management explained their vision was to reach around the 700-800 Cr. mark in 3-4 years. This looks possible with scaling new ANDAs, having the two lines of capex come on stream in FY24. Things should also look better on profitability when the backward integration capex comes online through FY24 and FY25.
Disclosure: invested, no transactions in the last 30 days.
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