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    Jubilant Pharmo

    JUBLPHARMANeutral
    Healthcare·21 Oct 2022
    Management Summary

    Jubilant Pharmova reported a mixed Q2 FY23, characterized by a strong recovery in Specialty Pharmaceuticals and CRDMO, offset by a severe downturn in the Generics segment. The company successfully refinanced $350 million in debt at a significantly lower interest rate (<2%), incurring one-time foreclosure charges that suppressed quarterly PAT. Management is pivoting toward a 'large-scale business transformation' in Generics to combat US pricing pressures and regulatory hurdles at the Roorkee plant.

    Highlights

    7

    • Revenue stood at ₹1,600 crore, down 3.4% YoY but up 10.2% QoQ.

    • Reported EBITDA was ₹232 crore with a margin of 14.5%, compared to 20.8% in Q2 FY22.

    • PAT fell sharply to ₹5 crore from ₹143 crore YoY, primarily due to ₹57 crore in exceptional refinancing costs.

    • Specialty Pharmaceuticals revenue grew to ₹814 crore, up from ₹651 crore in Q2 FY22.

    • Generics segment faced significant headwinds, with revenue dropping to ₹161 crore from ₹333 crore YoY due to pricing pressure and the Roorkee Import Alert.

    • Radiopharma business saw volumes recover to 95%+ of pre-COVID levels for most molecules.

    • Management identified ₹100 crore in annualized cost-saving opportunities in the Generics business to be implemented by Q4 FY23.

    Concerns

    2

    • US FDA Regulatory Actions

    • US Generic Pricing Pressure

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹1,600 Cr-3.4%YoY
    2. 02EBITDA₹232 Cr-32.6%YoY
    3. 03EBITDA Margin14.5%
    4. 04PAT₹5 Cr-96.5%YoY
    5. 05Normalized PAT₹62 Cr-56.6%YoY

    Segment breakdown

    • Specialty Pharmaceuticals₹814 Cr51.1%
    • CDMO Sterile Injectables₹299 Cr18.8%
    • Generics₹161 Cr10.1%
    • CRDMO₹320 Cr20.1%
    Donut· Share of Revenue

    Guidance & targets

    5
    CategoryTargetPriority
    Capex
    Capital Expenditure
    ₹700-750 crore
    		High
    Other
    Product Development Expenditure
    ₹250-300 crore
    		High
    Other
    Generics Cost Savings
    ₹100 crore
    		High
    Profitability
    Radiopharmacies Breakeven
    Breakeven
    		Medium
    Volume
    MIBG Market Potential
    >$200 million
    		Medium

    Risks & concerns

    6
    RiskSeverity

    US FDA Regulatory Actions

    Roorkee plant has 6 observations; Nanjangud plant remains under Import Alert, preventing new product launches in the US. — Both acknowledged

    high

    US Generic Pricing Pressure

    Pricing headwinds in the US generic market are significantly impacting revenues and profitability. — Management acknowledged

    high

    Tapering of COVID-related Revenue

    CDMO Sterile Injectables saw COVID deals drop from ₹162 crore to ₹22 crore YoY. — Management acknowledged

    medium

    Input Cost Inflation

    Higher employee and component costs in the US are impacting margins, though management claims some ability to pass these on. — Analyst acknowledged

    medium

    Areas of Evasion(2)

    • Specific timeline for Nanjangud re-inspection
    • Detailed breakdown of the ₹100 crore cost savings

    Q&A highlights

    3

    “We are touching more than 95% in all the molecules, except DTPA. DTPA has not yet come up and we are waiting, but rest of the products have come up to the pre-COVID level.”

    Confirms that the core Radiopharma business has largely recovered from pandemic-induced volume declines.

    asked by Rahul Veera

    2 min read5 chapters

    Detailed Narrative

    01

    Specialty Pharma Leads Recovery

    The Specialty Pharmaceuticals segment was the primary growth driver, with revenue reaching ₹814 crore, up from ₹651 crore YoY. Radiopharma volumes have normalized to over 95% of pre-COVID levels for most molecules, excluding DTPA. The Radiopharmacies business is showing operational improvement, with EBITDA losses narrowing to 5%, and management maintains its target for breakeven by the end of FY24.

    02

    Generics Business Under Siege

    The Generics segment faced a perfect storm of pricing headwinds in the US and regulatory restrictions. Revenue plummeted to ₹161 crore from ₹333 crore in the previous year. In response, management has appointed a new head for the business, Jaidev Rajpal, and initiated a transformation plan targeting ₹100 crore in annualized cost savings by Q4 FY23, alongside a rebalancing of the R&D portfolio.

    03

    Strategic Debt Refinancing

    Jubilant successfully refinanced $350 million of debt, replacing 6% coupon bonds and term loans with a new 5-year facility at a coupon rate of less than 2%. While this resulted in a one-time📎 exceptional charge📎 of ₹57 crore (foreclosure and write-offs), it is expected to yield 'phenomenal cost savings' over the next two years by significantly reducing interest outgo.

    04

    CDMO Normalization Post-COVID

    CDMO Sterile Injectable revenues normalized to ₹299 crore as high-margin COVID-related deals tapered off to ₹22 crore from ₹162 crore in Q2 FY22. Sequential revenue growth was seen due to higher volumes, though margins were impacted by scheduled plant shutdowns in Spokane and Montreal. Management expects margins to return to healthy pre-COVID levels on an annualized basis.

    05

    Regulatory and Pipeline Outlook

    The company is awaiting FDA feedback on its Roorkee plant CAPA plan following 6 observations in July. For Nanjangud, which is under an Import Alert, the company has hired external consultants and claims readiness for inspection, though no timeline is set. On the pipeline front, the MIBG theragnostic molecule is progressing through Phase II/III trials with a targeted US launch in FY25 and a potential market size exceeding $200 million.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.