Nothing much happened in the AGM, but I am giving some information below.
Du Pont analysis is the past but market discounts the future. Sakar has setup a Rs.250-crore plant which includes an API, formulations and R&D facility dedicated to Oncology. The unit has received WHO GMP and EU GMP certifications. Revenues from Oncology have just begun and are not captured in current financials.
Last year, a contract with PharOS of Greece was signed in May for product development (mentioned as among the Top 10 products in Oncology). The product has been developed successfully by the company’s R&D and bioequivalence studies by the customer will get initiated soon. I believe some milestone payments have already been received for the same. Similarly, contracts with Ferring Pharma and Bazell Pharma of Switzerland for development and supply of two Oncology products have also been signed last year, and the Annual Report mentions validation work is going on. Currently, company has 6 products are under development in oral solid and 7 in oral liquid category in Oncology alone. Most of these products are either in validation or in accelerated stability study phase. Meanwhile, for the export markets, regulatory filing has been done for 17 product registrations till now in the EU and 10 in Latin America, Southeast Asia, Africa. Work is in progress on another 28 product dossiers. Nine agreements have been signed internationally on Oncology products of which 6 are in Europe / UK. In the domestic markets, 10 agreements have been signed in India. Commercials have started with 9 customers, and this will go up to around 12 by FY25 end. Approvals from EU are expected to start coming in from Q4 of this year. In addition, company is also in discussion with several potential customers for strategic tie-ups.
Meanwhile, rest of the business (non-oncology) is expected to grow at 7 to 8 % in line with the market growth. Here, Sakar in mainly doing CDMO / outsourced manufacturing for customers such as Zydus Lifesciences, Intas, Emcure, Glenmark, Torrent etc. I believe Zydus is the main customer. The Annual Report mentions technology transfer from Zydus Life Sciences for 23 SKUs of Oral Solids and 19 SKUs of injections, besides some others such as API supply to Jodas and Meta Life Sciences. Sakar does not market its own brands in the domestic market.
Overall, till date in FY25, filing has been done for 33 product registrations in all (including 17 mentioned above) & 4 registrations have been received. By the end of this financial year, dossier submission is expected reach 50. Company now has 290 product registrations in its own name and 321 registrations in all. Pharma is a long gestation business, it takes years to set a facility, file for product registrations, get approvals, sign customer contracts and revenues to start flowing in.
In FY24, Oncology revenues were just Rs.30 crore of the total of Rs.150-odd crore revenues. Going ahead, Oncology revenues are expected to double in FY25 and touch around Rs.100 crores by FY26. Once the product approvals start coming in, company expects to generate Rs.500 crores from Oncology alone over three years. Moreover, these will be at a higher margin of around 28 to 30 % compared to the existing business.
So, a lot of work has been happening which is not reflected in the current financials. The management has raised equity funding along the way which has kept debt levels under control. I have been invested in the stock for nearly four years now, and so far, I find the management has executed well. Last year, Tata Capital took a stake in the company, providing a stamp of approval for the business. All these expectations are factored in the current valuations.
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