Knoll Pharmaceuticals, formerly Indian subsidiary of Knoll AG, has declared excellent performance for first half of FY02 in line with our expectation (Better days ahead). Apparently, net profit has dropped by 27% due to inclusion of an extraordinary income to the tune of Rs 161 m in the last year from sale of mutual fund units. The performance in second quarter is remarkable considering that there was a drop in operating profit in the first quarter on the back of cut in Ibuprofen prices by NPPA in January this year. Ibuprofen is a bulk drug which is used in pain management segment. As Knoll Pharma is a market leader in the Ibuprofen market, the price cut had a severe impact on the company's financials in the first quarter.
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The jump in operating margins in the second quarter was on the back of upward revision of four formulations of Insulin injection in March. Insulin Vial prices have increased by 22% - 25% since then. Insulin is the biggest revenue churner for Knoll where the company has a market share of close to 60%.
Abbot Labs had recently made an open offer at Rs 328 per share to the shareholders of Knoll Pharma covering 20% of the company's equity. This follows Abbot's acquisition of Lupharma UK Holding One Ltd. which in turn holds a 51% stake in Knoll Pharmaceuticals.The free float of the company post acquisition is very limited. At the current market price of Rs 299, the stock is trading at a P/e of 7x its FY02 expected earnings. There company's financials in the coming year may receive substaintial boost if insulin prices remain stable at current levels.
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