Investment Ideas: Panacea Biotech

CMP: Rs 140.00 
Market Cap : 860 crores

Panacea Biotech is the largest vaccine manufacturer in India. The company has recently gone aggressive and it has tied up with many other organizations to provide the vaccines in various countries. Tie ups are mostly done with international institutions which will expand its presence in international market. All the tie ups mostly have Profit Sharing business model which will be main driver of the growth for the company. Drawback is that the company has reported Loss previous quarter but that was due to the investments made by it various R&D.

Website: www.panaceabiotec.com

Background and Product Portfolio:

Panacea Biotec Ltd. (Panacea) is India's 2nd largest Vaccine manufacturer. The company's product portfolio includes Pharmaceutical Formulations for Nephrology, Diabetes & Cardiovascular Management, Pain & Arthritis Management, Gastrointestinal Disorders, Paediatrics, Orthopaedics, Respiratory Therapy & Oncology segments. The company sells a number of products in the above referred segments. Besides, the company has a number of products in the vaccine segment too. For more details, readers can visit the links below :-
 
Products : http://www.panaceabiotec.com/Product_List.html
Vaccines : http://www.panaceabiotec.com/Product_List_vaccine.html
 
The company has been credited with supply of over 9.7 billion doses of Oral Polio Vaccine to Government of India through UN Agencies in India & abroad.

The company has strong Research capabilities with four dedicated Research & Development Centres. The company has six manufacturing facilities for vaccines & pharmaceutical formulations which comply with several International regulatory bodies like USFDA, BfArM, Germany, ANVISA, Brazil and WHO-cGMP standards. The company has an employee base of over 2800 with around 150 Scientists working on new vaccine development, bio-pharmaceuticals, monoclonal antibodies, novel drug delivery systems, etc. The Company's vaccine bulk manufacturing facility at Lalru and formulation facility at Baddi is pre-qualified by World Health Organisation (WHO) for supply of pentavalent vaccine to UN Agencies. In the vaccine segment, the Company was mainly supplying its Oral Polio Vaccine (OPV) and pentavalent vaccine, Easyfive-TT to WHO until 2011.

 

What Went Wrong & What has Changed Now:

Panacea Biotec was doing well till FY 10-11 wherein it clocked revenues of over Rs.1165 crores, made Operating Profit of Rs.285 crores and a PAT of Rs.155 crores.
However, the pentavalent vaccine, EasyFive-TT was de-listed from the WHO pre-qualification criteria in August, 2011 on account of deficiencies observed by WHO in the Company's Quality Management System at the Company's Lalru plant. Further, the company voluntarily withdrew its OPV vaccine from WHO's list of pre-qualified vaccines in Feb-12, in the light of series of changes made at Vaccines facility at New Delhi and WHO assessment.
These developments were a major setback to the company since Easyfive was one of the bestsellers for the company & contributed significantly to its profitability. The result was a sharp decline in sales for the company & start of the bad times. Sales dropped to Rs. 708 crores in FY 12 and fell further to Rs.600 crores in FY 13. The company made losses of roughly Rs.208 crores in FY 12 and Rs.230 crores in FY13.
 
The company has thereafter totally revamped its quality management system at both its plants at Lalru & Baddi. WHO conducted audit of the company's plants in Feb-March 2013, has cleared the plants & relisted the products for supply in October 2013. The company has received UNICEF Award for the supply of the vaccines to UNICEF during the period 2014-2016. The company has started supplying vaccines to International markets against UNICEF Purchase order.
 

Intellectual Property:

Company has 5 research and development centers and best thing about this stock is the number of patents it has. Panacea Biotec has an in-house Intellectual Property Management Department which supports its development of patent applications, files patents, identifies potential new products and markets for its vaccines and pharmaceutical formulations and provides support to its research activities.
More than 490 patent applications have been filed in various parts of the world including 82 patent applications and 20 Patent Co-operation Treaty applications with the Indian patent office.

Besides this, the Company has filed more than 123 applications for registration of Copyrights out of which atleast 77 have been granted and others are pending. Around 400 applications for registration of Trade Marks field out of which 223 were registered.  12 International Trade Mark Applications were filed and all have been granted.

Also they started into Hospital Business, one of the most profitable one. All these major changes and investments will start yoelding the money soon.
 
Cyrus Poonawala which is probably the only billionaire who has not listed its big firm on any trading Index, (Serum Institute) holds some stake in this company. This stake was mostly given to Serum Institute in transfer of the intellectual property, showing its links to one of the biggest group. 

Company has number of subsidiaries and indirect subsidiaries increasing its presence in many countries. The business of patents is really wonderful as if one patent is a useful and approved, the company can shoot to the skies overnight. It is one of the foremost company who started working vaccines to cure Ebola. Company has shown loss due to the investments being done on RnD space. This will now start yielding money soon. This stock is for the ones who are willing to hold for long term. Once it picks up, there will be nothing stopping this counter.

Now is the age of Intellectual property, which literally has amazing values in overseas. I, being in IT industry know what intellectual property is worth but in India, it is still undervalued. Growth and awareness is being made lately and so the trend is changing.

It has also nice amount of assets.More details can be found out in following link.

Check the following link: http://poweryourtrade.moneycontrol.com/plus/multibagger/multibagger_promo.php?autono=4121

 

CONCLUSION:

The company has a great future and is available at nice valuation. Its the time to enter into the stock. Though Poonawala has refused to takeover Panacea but, it still holds commandable stake and should surely help in growing business. If Debt restructuring is proposed, there shouldnt be any problem in making a way out as the company has nice assets and land in rajasthan and hospital they have in Gurgaon. So, I recommend to definitely invest in this GEM... 

CAUTION: The stock will benefit to the ones who are willing for investment to be done for long time horizon so that they can get maximum benefits.