Emcure Pharmaceuticals IPO: Growth Plans, Existing Profit & More | All You Need To Know

Summary

In this NTV Profit interview, MQ Pharmaceuticals discusses their upcoming IPO on July 3rd, with a price band of 960-980, aiming for a market value of over 19,000 CR. The company intends to use the fresh equity of 800 CR to reduce debt and has shown strong growth in the domestic market, especially in gynecology and cardiology. Despite a recent dip in profits due to investments in new facilities and increased field force, the company projects a return to normalized growth within 18-24 months and emphasizes its commitment to R&D, with a focus on innovation and technology-driven products.

Takeaways

• 🌟 MQ Pharmaceuticals is launching an IPO on July 3rd with a price band of 960 to 1088, aiming to raise funds primarily for debt reduction.
• 💰 The company is looking to raise 800 crores in fresh equity as part of the IPO, with a total issue size of 1952 crores.
• 📉 Despite the IPO, the company's R&D expenses as a percentage of sales have decreased to 4.6%, though they plan to maintain spending between 4.5% to 5% going forward.
• 📈 MQ Pharmaceuticals operates in 19 therapeutic areas with a strong market share in gynecology, and is focused on women's health, with a 13.12% market share.
• 🏢 The company has seen a decline in profits due to investments in new facilities and an increase in the field force for better market reach and penetration.
• 📊 The EBITDA margins have decreased from 19.7% to 18.5%, but the company expects to guide back to over 20% in the current year and further improve in the next two years.
• 🔬 MQ Pharmaceuticals has a strong R&D focus with a history of launching differentiated products, including chirality, biotech products, and iron preparations.
• 🤝 The company has entered into a licensing arrangement with Sanofi, which has bolstered its position in the cardiac segment and added to its product pipeline.
• 🌐 48% of MQ's revenue comes from third-party manufacturing, but the company has a mix of in-house and outsourced manufacturing, especially for R&D-driven brands.
• 🛠️ The company has invested significantly in the last three years to expand capacities and does not plan aggressive further investments, focusing instead on optimizing existing capacity.
• 🚫 MQ Pharmaceuticals has no legal baggage from the demerger of its US business Heritage, which was completed in 2022, and is ready to go public with a clean slate.

Q & A

What is the purpose of the 800 crores fresh equity raised by MQ Pharmaceuticals in their IPO?

The 800 crores is being raised to reduce the company's debt, which stood at around 1500 crores as of March 31st.

What is the current market share of MQ Pharmaceuticals in the Indian pharmaceutical market and in which therapeutic areas does the company operate?

MQ Pharmaceuticals operates in 19 therapeutic areas and has a pole position in gynecology with a 13.12% market share, which is a 5.1% lead over the next player. They also have a strong presence in cardiovascular, HIV, vitamins, gastro, and other segments with a focus on women's health.

How has MQ Pharmaceuticals' R&D expenditure changed as a percentage of sales, and what is the company's stance on R&D investment going forward?

The R&D expenditure has come down to 4.6% for FY24, but the company plans to continue investing in R&D, aiming to spend between 4.5% and 5% of sales, as it is a key differentiator for the company.

Why has the profit of MQ Pharmaceuticals fallen by 600% over the last few years?

The fall in profits is attributed to investments in new facilities and an increase in the field force to improve reach and penetration in tier 2 and tier 3 cities, which is expected to normalize profitability over the next 18 to 24 months.

What is the expected timeline for MQ Pharmaceuticals to return to normalized growth after their recent investments?

The company expects it to take between 18 to 24 months for the investments in market penetration and reach to fully take effect and return to normalized growth.

What is the current EBITDA margin for MQ Pharmaceuticals and what is the guidance for the next 24 months?

The EBITDA margin for FY24 was around 18.5%, down from 19.7%. The company is guiding for a margin of over 20% in the current year and 22.5% in the next 24 months as they start to see better utilization of their facilities.

What is the significance of the licensing arrangement with Sanofi for MQ Pharmaceuticals, and how does it impact their cardiac segment?

The licensing arrangement with Sanofi has placed MQ Pharmaceuticals in the top three in the cardiac segment, with access to strong brands like Cardis ceron and kleon, which is expected to significantly impact their revenue potential.

How does MQ Pharmaceuticals plan to diversify their revenue and reduce reliance on a few big brands?

The company plans to continue making big brands bigger, leveraging their strong R&D pipeline for new launches, and focusing on areas with white space where they have strength, to ensure revenue diversification.

What is the contribution of biotech products to MQ Pharmaceuticals' revenue and what is the potential for future growth in this area?

The company has a strong platform in biotech with five products already launched and a pipeline in CHO and mRNA platforms, which could potentially lead to the development of vaccines and unlock hidden technological competence in the next 3 to 5 years.

How is MQ Pharmaceuticals addressing their high working capital requirement and receivables period, which are impacting their cash flow?

The company acknowledges the need for improvement in working capital management, particularly in the global market where the working cycle can extend beyond 125 to 180 days. Efforts are being made to bring down the working capital requirement and receivables period.

What is the risk associated with the demerger of the US business Heritage and the pending class-action lawsuit to MQ Pharmaceuticals?

As of the interview, all issues related to the demerger of Heritage, including civil suits and DOJ matters, have been cleared, and there is no baggage from the lawsuit affecting MQ Pharmaceuticals as they go public.