Hi Donald,

Sorry for the delayed reply. Here is my pointwise reply to your points:

ICE Segment: The shift to the JV for the contract manufacturing of ursodeoxycholic acid will fully happen only in FY18. Also, till there is steady ramp up in JV operations, the standalone operations will continue to supply the product. There is a shortage of this molecule and Shilpa has orders for two years. Also, the JV has 2 – 2.50 times capacity than Shilpa’s current capacities for the molecule and since ICE is also a partner in it, the margins can be better in it. Also, both the management depending on the demand of the molecule, can further increase the capacities in the JV.
Capacetabine API: For me the main growth driver in the medium term (especially FY17) remain supply of APIs to the US markets post USFDA approval for the API plant. Coming specifically to Capacetabine even we were surprised when we heard about the capacity expansion for these molecule because of price erosion. Mr Bhutada sounded confident of doing well in the molecule despite price erosion since they have full backward integration for the molecule (up to N – 4/ N – 5 levels with N being the API). He also said that despite competition and entry of many generic players, the price erosion has just been around 30 – 40% in the API. Although, no timelines were mentioned for the utilisation of the expanded capacities, I think most of it should come in FY17 only. Ya they are targetting 25% of world’s total market of capacetabine in the future.
Imatinib Mysalate API: There are two factors which will determine success of the molecule: first is USFDA approval for the API plant and second being the approval of ANDA for the formulation player with which Shilpa has tied up for supply of API. I think they seem to have tied up with some formulator player for supply of API (doesnt look like Sun Pharma which has already tied up for the API supply) most probably post 2014 AGM. Again, it seems that they are fully backward integrated for APIs.
Japanese CRAMS: Although, it might not contribute much to revenues, margins can be pretty high. As written in the notes, few other Japanese formulators have inspected company’s facilities which might result in relationship with other players in medium to long term. One key aspect here is it takes long long time to forge a relationship with Japanese companies. I still remember him saying Japanese players start from few kgs and gradually increase it to tonnes.
Formulations: Formulations might see some revenues in FY17 only from EU or ROW markets like Mexico and Brazil or Argentina (if they clear inspections). However, major revenues will start only from FY18 onwards post USFDA approval. I think the FTF molecules that the partners have filled will only start getting approval in FY18 onwards. For other non-FTF molecules, company has tie up with three – four formulators. We did ask about customer switches but very few have switched till date.
Overall, I feel FY17 might see growth from supply of APIs to US markets (hopefully post approval) and Japanese CRAMS while major growth will only come in FY18 from formulations.

Hi Satya,

Let me share my views with you on this. Investing needs to be business like. So before investing we need to know why we are investing in any given company. We usually think that since markets are not efficient every situation in front of us appears to be a bargain in some sense(availability bias). However as Howard Marks says,” The market is efficient most of the time”, so whatever we are looking at most ration people out there are looking at that too. To beat that market we need to know what others don’t know and in this process we need to dig deep and deep.

Knowing a situation in detail can be expressed in a small story. This story is our understanding of the company and needs to be attacked for all possible criticism.

Now once we develop a story, we need to know what is the trigger to unlock the value and what are the triggers for destroying the value.
If we feel the that the stock price is going below its value due to irrational reasons, something like Greece than we should not trigger stop loss. However if the original story is disturbed or exposed to a -ve black swan, we should cut out losses. In lynch terminology “stop watering the weeds”

Regards,

Sunny

Q2 & H1 FY2016 -Conference Call Invite.
Event date: At 3:30 pm IST on 21 October 2015

http://www.syngeneintl.com/Media/Default/pdf/investor_relations/H1FY2016_Syngene_Concall_Invite.pdf

September 2015 Shareholding Pattern

http://www.syngeneintl.com/Media/Default/pdf/investor_relations/Syngene_Clause_35_Sept_2015.pdf

With 77.92 % promoter holding (including trusts) and 16.91 % fund holding, free float is reduced to only 5.17 % equity and if we count 1.56 % held by corporate bodies which will be most of PMS holding, free float gets further reduced to 3.61 % which seems excellent pitch for rerating if positive triggers materialise……IPO selling seems to be absorbed well by FIIs.

Taken a small position. Need to study more to increase conviction. Thank you @rohibalakrish_ for ur answer to my question.

Now “Aurobindo Pharma receives USFDA Approval for Aripiprazole Tablets”.Impact of Increasing competition will be interesting to see in next Q results.