Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wockhardt: On an expansion mode - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 9, 2002

    Wockhardt: On an expansion mode

    Wockhardt, the Rs 6.5 bn biotech pioneer in India seems to be on a major expansion drive with a clear growth strategy. While the company seems to have missed out on the generics boom, the export strategy, going forward, seems quite clear. The company is aiming to create global class capacities in some niche product categories.

    Biotech- The key growth driver for the company...
    Pharma biotech has been one of the key focus areas for Wockhardt. The company's biotech research has yielded impressive results so far with two product launches. Biovac-B, the largest selling Hepatitis B vaccine in the country, is from the company's biotech research stable. EPOX, an erythropoietin is another biotech product after Biovac-B. Both these products now contribute around 8% to the company's revenues with more than 100% growth recorded last year. Wockhardt is planning to expand its pilot Hepatitis B manufacturing capacity by 10 times from current 5 m doses to 50 m doses as part of the mega biotech farm investment. The manufacturing plant of the company would be the only WHO (World Health Organisation) approved facility for vaccines outside developed countries. Post expansion, the company is targeting to participate in WHO export tenders. Wockhardt could also benefit immensely if Hepatitis B is included in the mass immunization program of the Indian government.

    A major forthcoming highlight from the company's biotech division is the commencement of human recombinant insulin manufacturing capacity. Currently, there are only three other companies in the world to have the required expertise in this field. The domestic requirement of human insulin is currently met through imports. Wockhardt is planning to launch this product by end 2003 with an aggressive pricing of 30-40% discount to the imported alternatives. We expect the company to launch the same in developed markets within 18-24 months of domestic launch, keeping in mind regulatory approvals. Considering strong competitive advantage, we expect the company to capture a considerable share of the domestic Rs 3 bn (global demand US$ 3.5 bn), insulin market.

    Wockhardt is expecting one product introduction every year from its biotech division. Besides these, the product lineup of the company seems to be strong with various combinational vaccines, typhoid vaccine and other drugs in lifestyle therapeutics (chronic segment). The company is consciously shifting its revenue mix towards chronic segment where growth and margins are higher compared to acute segment.

    A different export strategy....
    Coming to exports, the strategy adopted by Wockhardt seems to be quite different from other domestic players. While most of its peers have chosen the ANDA (Abbreviated new drug application) route, the company is targeting to create giant manufacturing capacities in difficult to manufacture bulk drugs. The idea is to focus on super generics, especially products on NDDS platform (Novel Drug Delivery system) derived from its proprietary sustained release products.

    Almost two thirds of export revenues, currently, comes from bulk drugs with a concentration on three main products viz; analgesic bulk -DMP, anti-cold bulk active-DPP, and Vitamin B12. During the year, Wockhardt significantly expanded the manufacturing capacities of its bulk-actives DPP and Vitamin B12. Post expansion, the company is the largest global producer of US$ 30 m DPP bulk drug with 35% market share. In DMP and Vitamin B12, the company is expected to achieve 25% and 20% global market share. Though these being older generation molecules the chances of substitute molecules capturing the market are less considering the fact that not much global research is happening in these segments.

    As far exploring generic formulations market, the company intends to go through the partnership route with companies filing ANDA in the US and Europe. The company is clear on not investing in any marketing infrastructure abroad. The strategy is similar to that of Cipla. Wockhardt has till date also forged partnerships with 3 companies in the US market for a total of 9 products. Considering that the management has indicated that the total market size of all these products is in excess of US$ 9 bn, which indicates that the company is targeting big molecules. The US generic approval for the first product on the block could come early next year. Considering the uncertainties, it is prudent not to build up any revenue stream at this point of time.

    Wallis Laboratories specalises in the manufacturing of generic and over-the-counter pharmaceuticals and has almost all the major retail pharmacy chains as its customers in Europe. This subsidiary of the company generated a net profit of 1m last year.

    R&D- Too early to comment
    On the R&D front, though it is very early to comment, the company has a pipeline, which could hold promise going forward. One of its anti-infective molecule (WCK 771) has finished its pre-clinical trials and the company is in talks for outlicensing this molecule. Read more. However, it would be pre-mature to build expectations from the same at this point of time.

    The conclusion one draws from the above is that the company does have a clear growth strategy. The biotech division of the company is capable of giving positive surprises, especially the human insulin production that has the potential to put the company on the global pharma map. However, the export basket of the company is too concentrated and skewed towards older generation bulk drugs. Though the generic business of the company is likely to help the company reduce the concentration, this business would take time before it takes off as the company (or its current partners) lacks mature ANDA filings.



    Equitymaster requests your view! Post a comment on "Wockhardt: On an expansion mode". Click here!


    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 23, 2017 09:48 AM


    • Track your investment in WOCKHARDT LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts