Jubilant Life Sciences is a fundamentally strong company with a great future. The stock is now at Rs. 385 and has target price of Rs. 440. The stock is up 23% in last one month.
Buy Jubilant Life Sciences Initiating Coverage Research Report
Company Overview and Stock Price
Pharma Sector Outlook
Govt Initiatives in Pharma
Jubilant Biosys Enters Exclusive licensing
(Karvy Fundamental Initiation Report : Jubilant Life Sciences Ltd)
Investment Rationale of Jubilant Life Sciences:
• Jubilant Life Sciences Ltd, an integrated global Pharmaceuticals and Life Sciences Company, has received Abbreviated New Drug Application (ANDA) final approval for Levetiracetam Injection USP, 500 mg/5 mL (100 mg/mL), the generic version of Keppra® Injection 500mg/5mL (100mg/mL) of UCB, which is used for the treatment of epilepsy. As on March 31, 2016, Jubilant Life Sciences had a total of 739 filings for formulations of which 517 have been approved in various regions globally. This includes 72 ANDAs filed in the US, of which 44 have been approved and 46 Dossier filings in Europe.
• Revenues from North America were at Rs. 2,191 Crore, contributing 38% to the revenue mix. Revenues from Europe and Japan stood at Rs. 1,175 Crore, contributing 20% to the revenue mix. Revenues from ROW including China stood at Rs. 791 Crore, contributing 14% to the revenue mix. Domestic revenues stood at Rs. 1,669 crore, up 13% YoY and contributing 29% to the revenue mix. In monetary terms, 40.79 % of the material was sourced locally whereas 59.21 % was sourced from other countries for Indian operations.
• Pharmaceuticals business segment is getting back on track as margin scenario is improving due to generic launches in the US, launches in the specialty pharma space and successful resolution of two CMO facilities.
• Jubilant is one of the few Indian CRAMS players with a vertically integrated business model.
• The four key pillars of Jubilant success are: Integrated operations, Global outreach, Innovation and Sustainability.
• Strong margins growth expected: Revenues was down YoY from 5826 Cr to 5802 Cr YoY whereas. EBITDA margins increased 523 bps YoY to 21.3%.
• Revenues was flat YoY at 5802 Cr in FY16 compared to 5826 Cr in FY15 crore Revenues in the pharmaceutical business grew 10.1% YoY to 839 crore while life science ingredients (LSI) revenues declined 14.4% YoY to 662 crore
• Operating profit increased by 132% from 104 Cr in FY15 to 931.8 Cr in FY16
• PAT was positive by 431 cr in FY16 against loss of 40 Cr in FY15 due to exceptional item of -48 Cr in FY15.
• Company decreased its promoter holding pledge from 12.94% to 6.92% in FY16
• Per share earnings increased from negative 3.63 Cr in FY15 to 27.09 Cr in FY16
• Jubilant has filed 2 products in Japan and expects ramp up of operations in CMO of sterile injectables and oral solid facilities
• Jubilant has added 2 pyridine derivative products in FY16 and plans to add another product by Q4FY17. All pharmaceutical facilities were inspected successfully by the USFDA during the year.
• Jubilant has planned 7-8 launches and 10-12 ANDA filings in the US in FY17 We recommend BUY in JUBILANT @ 340-350 with the Target of 440 as Jubilant is aiming to improve its Debt situation in FY17 and revenues is expected to grow by 28% in FY18 to 7442.1 crore from 5802 Cr in FY16, driven by formulations, specialty pharma, CMO and nutrition products.
Company’s Overview and Stock Price
Jubilant Life Sciences Limited, is an integrated global pharmaceutical and life sciences company engaged in manufacturing and supply of APIs, Solid Dosage Formulations, Radiopharmaceuticals, Allergy Therapy Products, Advance Intermediates, Fine Ingredients, Crop Science Ingredients, Life Science Chemicals and Nutritional Products. It also provides services in Contract Manufacturing of Sterile Injectables and Drug Discovery Solutions. The Company’s strength lies in its unique offerings of Pharmaceutical and Life Sciences products and services.
Over the years, Jubilant Life Sciences has extended its footprint beyond India in the USA, Canada, Europe, and other countries across the globe. It has also expanded the business by building capabilities internally, through strategic expansions and acquisitions This resulted in a network of 7 world class manufacturing facilities in India and 5 in North America and a team of around 6100 multicultural people across the globe with 1200 in North America and 900 in R&D.
(Buy Jubilant Life Sciences for target of Rs 496: Daljeet Kohli)
Business Segments of Jubilant Life Sciences:
Over the last three decades, Jubilant Life Sciences has emerged as an integrated Pharmaceutical and Life Sciences Solution Provider offering products & services to its customers across the globe.
Life Science Ingredients:
The Life Science Ingredients business of Jubilant Life Sciences Limited is engaged in manufacture and supply of ingredients that find application in wide range of industries viz. pharmaceuticals, crop protection, animal & human nutrition, flavour & fragrances, personal care, paints & coatings and also doing custom research and manufacturing for pharmaceutical and agrochemical customers on exclusive basis. Jubilant aims to add value to millions of lives through innovations and cutting-edge technology. With continuous expansions over last three decades and the drive for excellence Jubilant has attained leadership positions in the key products it manufactures. Jubilant serves customers in over 85 countries with ground presence in India, North America, Europe and China. Products are approved by more than 275 global pharmaceutical, agrochemical and other industrial customers, Jubilant has global leadership position in several products:
• No. 1 in Pyridine and 11 Pyridine derivatives
• No. 2 in Niacinamide (Vitamin B3)
• No. 4 in Acetic Anhydride
• No. 7 in Ethyl Acetate
• Jubilant is India’s largest producer of Choline Chloride. Crop Science Ingredients: With emphasis on integrated offerings of products to the customers, it has expanded its expertise in the area of Pyridines & it’s derivatives in order to enhance best in class products for the Crop Science & Agrochemicals industry. It is a global leader in Pyridine & its derivatives; hence it plans to proceed at the same pace by introducing new products and being able to achieve global scales of operations for most of the related Crop Science products for the Agrochemicals industry.
The Crop Science Chemicals business offers the following:
• Advanced Intermediates for Agroactives
Nutritional products: Nutrition Ingredients business is a fully integrated operation and primarily manufactures and markets Vitamin B3, which is formulated for human, pharmacological, cosmetics and animal feed consumption, as well as Choline Chloride (also referred to as Vitamin B4), an important feed additive for poultry. Vitamin B3 is also used extensively in human nutrition such as flour fortification, food enrichment, sports drinks, energy drinks, baby food and multi-vitamins and in animal nutrition as feed additives for the poultry, dairy and pork industry, and in pharmaceuticals such as diabetes and cholesterol-related drugs in cosmetics for skin color and texture improvement and the manufacture of other life sciences intermediates.
The biggest advantage it has is integrated nature of operations. Beta Picoline manufactured under the Proprietary Products is the precursor to Niacin and Niacinamide (Vitamin B3) produced. This provides JUBL with the cost-advantage that is difficult for any player in the industry to match.
Life Science Chemicals: Life Science Chemicals are organic intermediates, also known as Acetyls, which are precursors to Advance Intermediates and Fine Chemicals used in a range of applications such as pharmaceuticals, aromatics, adhesives, food, packaging, beverages, crop protection chemicals, textiles and other solvents. It produces various organic intermediates including Acetic Acid, Monochloro Acetic Acid (MCA), Acetic Anhydride, Ethyl Acetate and Sodium Mono Chlor Acetate (SMCA), which are typically used in the manufacture of downstream products such as pharmaceuticals, crop protection chemicals and solvents.
Life Science Chemicals is a capital intensive business in which scale of operations is imperative. It has leadership position in Acetyls in India and sizeable presence globally. We enjoy economies of scale. The business produces ‘Green Solvent’ Ethyl Acetate, which is being preferred by customers in global markets.
Pharmaceuticals: Jubilant provides solutions to global pharmaceutical customers, offering a wide range of products & services. The Company is engaged in development, manufacture and supply of APIs, Solid Dosage Formulations, Radiopharmaceuticals, and Allergy Therapy Products. Services comprise Contract Manufacturing of Sterile Injectable, Ointments, Creams and Liquids. It has amplified the business by building capabilities internally, through strategic expansions and acquisitions, thereby, developing network of world class manufacturing facilities in India and in North America and a team of dedicated people across the globe. It has extended its reach globally with ground presence in India, North America and Europe.
The Company had 48 subsidiaries. Some of the major subsidiaries of Jubilant Life Sciences are:
Jubilant Pharma Limited
Jubilant Pharma Limited, Singapore is the wholly-owned subsidiary of the Company. Jubilant Pharma holds the global pharmaceutical business of the Company through its subsidiaries in USA, Canada, Europe and India. These subsidiaries of Jubilant Pharma are engaged in manufacturing and marketing of various pharmaceutical products and services like active pharmaceutical ingredients, oral dosage forms (tablets and capsules), contract manufacturing of sterile injectables, ointment, creams and liquids, allergy therapy products and radiopharmaceutical business.
Jubilant Generics Limited
Jubilant Generics Limited is a wholly-owned subsidiary of the Company through Jubilant Pharma. During the year, JGL has, by way of slump sale, acquired (i) API business and (ii) Dosage Forms business of the Company through Business Transfer Agreement, on a going concern basis. JGL has also acquired investments of the Company in Jubilant Pharma Holdings Inc., USA and Jubilant Pharma NV, Belgium. JGL owns two manufacturing locations; one at Nanjangud, Karnataka and another at Roorkee, Uttarakhand which are engaged in API and Dosage Forms business, respectively.
Cadista Holdings Inc. and Jubilant Cadista Pharma Inc.
Cadista Holdings Inc a corporation incorporated in Delaware, USA, is a wholly-owned subsidiary of Jubilant Pharma Holdings Inc. Effective December 22, 2014, Jubilant Generics Inc. which held 82.38% shares in Cadista, acquired 17.62% shares held by the minority shareholders in Cadista through Tender Offer. Pursuant to this acquisition, Jubilant Generics Inc. merged into Cadista. ii) Jubilant Cadista pharmaceuticals Inc., a corporation incorporated in Delaware, USA is a wholly-owned subsidiary of Cadista Holdings Inc. This company is in the business of manufacturing solid dosage forms of generic pharmaceuticals at its USFDA approved manufacturing facility in Salisbury, Maryland, USA. Its customer base includes all the large wholesalers, retail and grocery chains. Besides manufacturing its own label products, it also provides Product Development and Contract Manufacturing Services.
Jubilant Pharmaceuticals NV
This is a wholly-owned subsidiary of JLS through Jubilant pharma NV, Belgium, which holds 99.8% of its shares and Jubilant Pharma holds the balance shares. This company is engaged in the business of licensing generic dosage forms providing regulatory services to generic pharmaceutical companies.
Pharmaceutical Sector Outlook
The Indian pharmaceuticals market is the 3rd largest in terms of volume and 13th largest in terms of value. Branded generics dominate the pharmaceuticals market, constituting nearly 70 to 80 % of the market. India is the largest provider of generic drugs globally with the Indian generics accounting for 20 % of global exports in terms of volume. The Indian pharmacy industry, which is expected to grow over 15 % p.a. between 2015 and 2020, will outperform the global pharmacy industry, which is set to grow 5 % p.a. between the same periods. Presently the market size of the pharmaceutical industry in India stands at US$ 20 billion. India has the largest number US FDA compliant plants. The industry is expected to reach US$ 55 million by 2020, out of which US$ 30 million will be for exports.
Increasing investments in the sector
• The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent in 2015 from US$ 6 billion in 2005 and is expected to expand at a CAGR of 15.92 per cent to US$ 55 billion by 2020.
• By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size.
• India’s cost of production is significantly lower than that of the US and almost half of that of Europe. It gives a competitive edge to India over others.
Generic drugs form the largest segment
• With 70 per cent of market share (in terms of revenues), generic drugs form the largest segment of the Indian pharmaceutical sector.
• India supplies 20 % of global generic medicines market exports in terms of volume, making India the largest provider of generic medicines globally and expected to expand even further in coming years
• Over the Counter (OTC) medicines and patented drugs constitute 21 % and 9 %, respectively, of total market revenues of US$ 20 billion.
Government Initiatives in Pharma
The Government of India’s ‘Pharma Vision 2020’ aims at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments. Further, the government introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines.
Some of the major initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
• Indian Pharmaceutical Association, the professional association of pharmaceutical companies in India, plans to prepare data integrity guidelines which will help to measure and benchmark the quality of Indian companies with global peers.
• The GOI plans to give incentive to bulk drug manufacturers, including both state-run and private companies, to encourage ‘Make in India’ programme and reduce dependence on imports of active pharmaceutical ingredients (API), nearly 85 % of which come from China.
• The Department of Pharma has set up an inter-ministerial coordination committee, which would periodically review, coordinate and facilitate the resolution of the issues and constraints faced by the Indian pharmaceutical companies.
• The Department of Pharma has planned to launch a venture capital fund of Rs 1,000 crore to support start-ups in the R&D in the pharmaceutical and biotech industry.
• Indian and global companies have expressed 175 investment intentions worth Rs 1,000 crore in the pharmaceutical sector of Gujarat.
• Telangana has proposed to set up India’s largest integrated pharmaceutical city spread over 11,000 acres near Hyderabad, complete with effluent treatment plants and a township for employees, in a bid to attract investment of Rs 30,000 crore in phases. Hyderabad, which is known as the bulk drug capital of India, accounts for nearly a fifth of India’s exports of drugs, which stood at Rs 95,000 crore in 2014-15.
Company Name 1 Week 1 Month 3 Months 6 Months 1 Year
JUBILANT 1.88 -4.74 -3.63 -18.47 104.37
AUROBINDO PHARMA 3.5 -1.88 12.63 -2.12 20.4
BIOCON 0.54 13.56 44.53 51.63 58.2
CIPLA -1.74 -14.14 -13.48 -27.97 -25.29
INDOCO REMEDIES -1.33 7.7 3.52 -8.26 -21.26
SUN PHARMA -10.62 -9.02 -13.94 -2.39 -13.04pany Name:
Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Promoter and Promoter Group (%) 54.02 54.02 54.02 54.02 54.02
Indian 49.65 49.65 49.65 49.65 49.65
Foreign 4.38 4.38 4.38 4.38 4.38
Institutions (%) 27.56 26.43 18.12 17.73 22.47
FII 16.60 11.19 17.56 16.94 21.75
DII 10.96 15.23 0.57 0.79 0.72
NonInstitutions (%) 18.41 19.55 27.85 28.24 23.50
Bodies Corporate NIL NIL 5.71 6.38 6.59
Others 15.96 17.05 22.14 21.86 16.91
Custodians 2.45 2.50 NIL NIL NIL
Total no. of shares (cr.) 15.93 15.93 15.93 15.93 15.93
JUBILANT’S shareholding shows that FII investment has increased in March Quarter.
Persons holding securities more than 1% of total number of shares under category Public Shareholding.
Mar-16 Dec-15 Sep-15 Jun-15 Mar-15
Cumin Investments Limited 1.51 1.51 1.51 1.51 1.51
Hsb Corporate Consultants Pvt Ltd 11.74 11.74 11.74 11.74 11.74
Jubilant Stock Holding Private Limited 18.63 18.63 18.63 18.63 18.63
Nikita Resources Pvt Ltd 2.2 2.2 2.2 2.2 2.2
Rance Investment Holdings Ltd 1.51 1.51 1.51 1.51 1.51
Ssb Consultants And Management Services Pvt Ltd 13.19 13.19 13.19 13.19 13.19
Vam Holdings Ltd 3.57 3.57 3.57 3.57 3.57
Atyant Capital India Fund 1 NIL 1 1.26 NIL NIL
Bodies Corporate 3.79 NIL NIL NIL NIL
Danske Invest Management Company S.A A/C NIL NIL 1.4 1.4 1.38
Deutsche Securities Mauritius Limited 1.95 2.42 2.42 2.42 2.42
East Bridge Capital Master Fund Ltd 3.92 3.78 3.78 NIL NIL
Foreign Institutional Investors 10.82 NIL NIL NIL NIL
Ga Global Investments Ltd NIL NIL NIL 7.14 7.14
Goldman Sachs (Singapore) Pte 1.36 1.29 1.7 1.7 1.7
Government Pension Fund Global 2.13 2.5 2.57 2.57 2.21
JLL Unclaimed Suspense Account (Transferred in
Terms of Clause 5A of the Lising Agreement)
1.57 1.58 1.59 1.59 1.6
Jubilant Employees Welfare Trust NIL 2.69 3.03 3.03 3.03
MORGAN STANLEY ASIA (SINGAPORE) PTE 2.45 2.56 2.23 NIL NIL
Samena Special Situations Mauritius 3 4.42 4.79 4.79 4.79
Promoters of JUBILANT have kept their investment constant throughout the year
Jubilant Biosys Enters into Exclusive out – Licensing Agreement with Checkpoint Therapeutics
Jubilant Biosys Ltd a subsidiary of Jubilant Life Sciences Ltd, and Checkpoint Therapeutics, Inc. a subsidiary of Fortress Biotech, Inc. announced the signing of an exclusive, worldwide license agreement under which Jubilant Biosys will out-license to Checkpoint a family of patents covering compounds that inhibit BRD4, a member of the BET (Bromodomain and Extra Terminal) domain for cancer treatment. The deal includes an upfront payment of US $2 million and contingent preclinical, clinical and regulatory payments including commercial milestones totalling up to US $180 million. Jubilant Biosys will also receive research funding and royalty payments on successful commercialization of the compounds. Checkpoint will assume all further preclinical, clinical development and commercialization responsibilities. The field of epigenetics as a treatment for cancer is a rapidly evolving area of focus for the pharmaceutical and biotech industry. Both parties believe that by working together to further develop these compounds, they will better be able to move towards bringing a product to market that will greatly improve the lives of patients.
Mr. Shyam S. Bhartia, Chairman and Mr. Hari S. Bhartia, Co- Chairman and MD of Jubilant Life Sciences, commented, “The Drug Discovery business vertical under Jubilant Biosys and Jubilant Chemsys has acquired many years of extensive expertise and knowledge working with large pharma and biotech companies. Jubilant had decided to make strategic investments in proprietary drug discovery of small molecules with an intent to out-licence the same for upfront payments and phased milestone payments/royalties.”
James F. Oliviero, III, President and CEO of Checkpoint stated, “We are very pleased to be partnering with Jubilant Biosys to license a family of patents covering compounds that inhibit BRD4 for cancer treatment. This agreement enhances our current product portfolio of immuno-oncology and targeted anti-cancer agents. BET inhibitors have generated significant excitement within the oncology community and Jubilant’s asset provides us with additional opportunities to explore proprietary combinations and treatment options for patients. We appreciate Jubilant entrusting our organization to continue development of their exciting technology.”