Wockhardt Returns to Profit in Q3

Wockhardt returns to profit in Q3

Wockhardt, the drug maker, for the first time in three years reported to profit during the October-December quarter mainly on account of improvement in operational performance and cost rationalisation.

The company posted a consolidated net profit of Rs 19.21 crore for the December 2019 quarter as compared to a net loss of Rs 76.86 crore for the corresponding period of 2018-19.

However the quality of profits earned still look weak as a large of the profit in Q3FY20 has come from other income of Rs 17.20 crs and forex income adjustments to the tune of Rs 50.55 crs in this period which were largely responsible for the positive PAT this time.

Consolidated revenue from operations stood at Rs 869.15 crs for the quarter under consideration. It was Rs 1,045.86 crs for the same period year ago.

While the company has been reporting steady EBITDA quarter by quarter, for the first time in the past 3 years.

In January 2020, Drug Controller General of India (DCGI) approved the company’s two new antibiotics, EMROK (IV) and EMROK 0 (Oral), for acute bacterial skin and skin structure infections including diabetic foot infections and concurrent bacteremia.

It continued pursuit in creating strong intellectual property (IP) base resulted in the filing of 5 patents during the quarter ended on December 31, 2019, taking the cumulative filings to 3,162/

Wockhardt was granted 9 patents during the quarter and now holds 717 patents.

Wockhardt employs more than 7,000 people and has a presence in the US, Britain, Ireland, Switzerland, France, Mexico, Russia, and other countries. It has manufacturing and research facilities in India, the US and Britain, and a plant in Ireland.
Meanwhile, Cipla and Asian buyout fund PAG are vying with each other to acquire a big chunk of Wockhardt’s domestic formulations business for Rs 2,100-2,800 crs ($300-400 million) as the indebted pharmaceutical company is looking to deleverage its balance sheet,

Wockhardt is expected to finalize one bidder and begin final negotiations to conclude the transaction.
Meanwhile, Wockhardt is working on alternate options to raise funds and reduce debt. The company plans to sell a minority stake in its domestic formulations business, and this is a precautionary move in case the private equity funds do not fructify

The Mumbai-headquartered firm is now reaching out to strategic suitors and is exploring the sale of select brand portfolios.

The business has value and therefore there will definitely be buyers for divisions like respiratory and gastro-intestinal, which have good brands and can easily fetch 2x or 2.5x revenues in terms of valuations.

The sale of both these divisions could raise around Rs 1,000 crs which could provide some temporary relief to the company.

Wockhardt has a total debt burden of Rs 2452 crs as of March 31, 2019, with four of its factories are still under FDA scanner

A big positive for Wockhart is that it has several New Chemical Entities (NCEs) being developed as antibiotic drugs that are at various stages of clinical trials

Also, its another drug molecule namely NCE, WCK 4282, has been acknowledged by Chinese regulator NMPA which would address unmet needs in China.
Accordingly, China would be a part of the global Phase III cUTI study. Another NCE, WCK 4873, has obtained India Phase 3 CABP study approval from DCGI, which will commence in the third quarter of 2019.

Also, NCE, WCK 771/WCK 2349, has completed India Phase 3 Acute Bacterial Skin and Skin Structure Infection (ABSSSI) study and its New Drug Application (NDA) is under review by the Investigational New Drug (IND) committee.

Wockhart also runs a chain of 8 super-specialty hospitals located across Maharashtra and Gujarat with a reputation for world-class healthcare services.

Net net we believe that Wockhardt has several IPs in its portfolios and is an ideal take over the candidate. This is the main reason markets are positive on its long term prospects despite high debt and being in a loss as on date.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.