Hikal
– Company Overview
Shuchi.P.Nahar
Link to my previous blog for detail explanation on
What are CDMO and their wide scope:
1. Company Overview
Established
in 1988, Hikal is predominantly a B2B player that provides intermediates and
active ingredients to global pharmaceutical, animal health, crop protection and
specialty chemical companies. Hikal today is one of the leading global
suppliers to the Life Sciences industry. Company is having six sites providing
a multitude of services across the value chain.
Figure:1 Business Snapshot
The
pharma business is currently divided almost equally between generic active
pharma ingredients (APIs) and contract development and manufacturing
organisation (CDMO) businesses. Leading Sustainable Technology driven company
serving the Crop Protection & Pharmaceutical Industries.
Figure:2 Company Overview
2. Revenue Growth Trend over the Years
Figure:3 Hikal's Revenue Trend
Source: Company's Investor Presentation
Hikal recorded a total turnover of ₹
15,073 million as compared to ₹ 15,896 million in FY 2019-20, a decrease of 5.2%. The
crop protection division witnessed a sales de-growth from ₹ 6,505 million in FY
2018-19 to₹ 6,204 million in FY 2019-20, a decline of 4.63%. The pharmaceutical
division witnessed a sales de-growth from ₹ 9,391 million in FY 2018-19 to₹
8,869 million in FY 2019-20, a decline of 5.56%. The reason for this
performance is largely attributable to de-stocking at the customers end which
resulted in lower volumes during the year.
3. Research & Development –Principal Growth
Driver
Figure:3 Increase in R&D Expense Year on Year
Source: Company's Investor Presentation
I Innovation
across processes and strong research capabilities have been made possible
through our dedicated team of ~250 scientists. Annually, we invest about 3-4%
of our total sales in R&T.
·
Commercialize
3-4 DMF’s in 2019-20 for our generic API portfolio.
·
Continue
to generate our own IP through Process Patents
·
Filed
2 DMFs (Dapagliflozin and Empagliflozin) as part of our proprietary portfolio
in the pharmaceutical division, one veterinary master file (VMF) and one
certificate of suitability (CEP) for Europe
·
The
VMF is for an antiparasitic active ingredient for veterinary use. The CEP is
for Flunarizine which is a migraine prevention medication
·
R&T
facility in Pune and Development and Launch plant (DLP) in Bangalore delivered
several contract development and manufacturing projects successfully
·
In
efforts to develop DLP further, we have filed a DMF from this site
Developed a new API
using an enzymatic process which is both cost-effective and environmentally
friendly.
4. Pharmaceuticals – Important Business
Segment
Figure:4 Pharmaceuticals Business Overview
Invested
significantly in the generic API business both in terms of personnel and
manufacturing capabilities. Company has strengthened their R&D
infrastructure by starting a solid-state chemistry lab that will help them
serve customers better in terms of getting the right polymorphs and particle
sizes of API’s. Contract manufacture two large volume molecules,
a neuropathic pain reliever and an anticholesterol molecule
exclusively for a leading US based innovator Company. Expecting the volumes of
both these molecules to continue to grow in the coming year.
Gabapentin
(CNS) is the largest product that contributes ~40% to total pharma sales.
The pharma business is mainly export-oriented with ~55% of sales derived from
the US, 30% from Europe and the balance from the rest of the world (RoW).
5. Animal Health Business – A Natural
Progression
Hikal continues its focus on growing the animal health business. Our exclusive
manufacturing contract with a leading US-based veterinary drug innovator
for a non-antibiotic veterinary drug API was stable in terms of volume
this past year. Hikal completed the scale up validation of a niche pain
management veterinary drug.
Company
plans to commercialise several advanced intermediates for a new generation
ectoparasitic API that belongs to the isoxazoline group. Successfully filed a
VMF for an antiparasitic active ingredient used in veterinary medicine in
livestock and pets against internal parasites. Company has developed a process
for the preparation of a leading flea and tick medicine.
Figure: 5 Animal Healthcare Overview
6. Crop Protection - Bodes Well for the Company Figure:6 Crop Protection Overview
Company’s Crop
Protection CDMO segment has 2-3 products in the pipeline currently.
These are all early stage products. Overall, product pipeline is healthy. Over
the years, it has increased its product offerings with a foray into niche
products and specialty chemicals.
During the
financial year, a project on organophosphorus chemistry was developed and
delivered. Company also scaled up and successfully commercialised
a biocide product. This was done while company continued developing
processes for 2 new products, expected to be commercialised in the next few
years. Additionally, a new process for a novel fungicide was also developed for
an innovator company and is due for commercialisation next year.
7. Capex – Long Term Horizon
At Hikal,
they have a capex programme running across both their segments, aggregating to
around ₹ 3,000 million, which is targeted towards capacity addition and
upgradation of infrastructure across facilities. As of 31
March 2020, company has already invested ₹ 1,580 million and the
balance capex cycle is expected to get completed in 2020-21. The capex is
targeted towards multi-product plants providing us with flexibility to
manufacture various products.
About 40-55% of this new capacity will be
absorbed by existing products and balance capacity will be utilised for
new products. The current capex programme would have a blended asset turnover of
approximately 1.5 times, once completed.
References: 2019-20 Hikal's Annual Report & Q1FY21, Q4FY20 Investor Presentation
Disclaimer: The information provided on Shuchi Nahar’s Weekend Blog is for educational purposes only. The articles may contain external links , references and compilation of various publicly available articles. Hence all the authors are given due credit for the same. All copyrights and trademarks of images belong to their respective owners and are used for Fair Educational Purpose only.
I Like to add one more important thing here, The Active Pharmaceutical Ingredients Market is expected to be around US$ 238.5 Billion by 2025 at a CAGR of 6% in the given forecast period.
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