JB Pharma, one of India’s fastest-growing pharma firms, plans to double its lozenges business in the next 3-4 years, according to CEO Nikhil Chopra. The CDMO business contributed to Rs 115 crore of revenue in the second quarter of FY 24.
In a conversation with Moneycontrol, Chopra spoke of the company's journey thus far and offered insights into its prospects.
Lozenges, which are medicated candy that dissolves slowly in the mouth, is the primary CDMO (contract development and manufacturing organisation) business of the company. JB partners with top international players like Reckitt, P&G, J&J, and Inova to manufacture cough and cold lozenges. JB Pharma's ambitions extend beyond cough and cold remedies, and it aims to diversify into lozenges for sleep disorders, anti-inflammatory lozenges, and immunity-boosting lozenges, says Chopra. The lozenges for sleep disorders will be made with melatonin, valerian, and ashwagandha extracts, while anti-inflammatory lozenges will be made using flurbiprofen. Immunity-boosting lozenges will include zinc, curcumin, piperine, and vitamin C. “You will see us launching them next year,” Chopra said.
JB also plans to take its lozenges international, with partnerships in Brazil, Mexico, South Africa, and Europe, Chopra adds. The company has a production capacity of 2 billion units in the lozenges segment.
JB Pharma reported a 36 percent increase in consolidated net profit, which hit Rs 151 crore in the second quarter of FY 23-24.
The company has invested close to Rs 93 crore in capex in the first half of the year, mainly in expanding its lozenges facility in Daman. The capex for the current financial year is expected to be Rs 145 crore, Chopra had said in the company’s earnings call after its second-quarter results.
Also read: JB Pharma Q2 results: Net Profit up 35% to Rs 150.5 crore
Focus on the chronic business
The cardiovascular segment has become a stronghold of JB Pharma, according to the management. Currently at 8th position, JB Pharma aspires to break into the top 5 in the cardiology segment, marking a significant leap from its 13th position just three years ago.
September 2023 pharma database IQVIA MAT (Moving Annual Total) data reveals a 63 percent volume growth for its heart failure drug Azamrda. According to Chopra, cardiology is the fastest-growing market in India, making heart-related ailments a focal point for JB Pharma. “The chronic part of the business will see high single-digit growth, the acute bit will grow depending on seasonal variability,” he adds.
The firm acquired Razel, a drug to reduce cholesterol / risk of heart attack from Glenmark in December 2022, with the aim of reinvigorating the product and growing it by 12-14 percent in the first year itself, highlighted Chopra.
The company’s domestic business grew 11 percent, to Rs 481 crore, in Q2 FY 23-24, against Rs 434 crore in Q2 FY22-23.
Chopra emphasises that JB Pharma’s plan is “making big brands bigger — not by going wide, but by digging deep.’’ This entails a three-pronged approach involving lifecycle management, incremental innovation, and launching new products within existing flagship brands like Cilacar, Nicardia, Rantac, and Sporlac.
JB has invested close to $200 million in India to acquire four assets. Key drugs in the cardio segment, like Azmarda, Razel, etc., became important growth drivers in the local market. “Our chronic therapies and acquired portfolio drove our domestic business up by 11 percent year-on-year (YoY), to Rs 481 crore,” Chopra said in the Q2 earnings call.
Sporlac, the probiotics business it acquired in January 2022, is another of JB’s key brands. Brands acquired from Sanzyme (which includes Sporlac) was India’s third-largest probiotic brand, with a market share of 7 percent and monthly revenues of about Rs 12 -13 crore at the time of acquisition. Post acquisition, they now generate Rs 17-18 crore per month and its market share has grown to 10 percent. Chopra feels there is further room to grow even though there is huge competition in the probiotics market.
JB Pharma's focus on India has elevated the contribution of its domestic business from 45 to 52 percent in 2023, with a plan to further enhance the combined contribution of its Indian business and CDMO operations to 80 percent. “We generate close to around 5,00,000 prescriptions per quarter. We are the 15th ranked company in prescriptions, and we have two of the top 10 prescribed brands in the country — Rantac (acid reflux medication) and Metrogyl (antibiotic for a variety of conditions including dysentery),” Chopra said.
Despite incurring debt for strategic acquisitions, JB Pharma remains optimistic about being debt-free by the end of the third quarter of FY23-24. As of 30th September 2023, the company’s gross debt reduced from Rs 548 crores as on 31st Mar’23 to Rs 427 crore. In H1 FY24, net debt reduced by Rs 248 crores to Rs 18 crore as on 30th Sep’2023.
Also read: JB Chemicals Consolidated September 2023 Net Sales at Rs 881.74 crore, up 8.93% Y-o-Y
Trends in Indian pharma
Chopra says that accessibility and affordability will play a key role in Indian pharma. With many patents set to expire in the coming years, Chopra says Indian pharma has an opportunity and needs to focus on India operations.
“If quality products come from quality companies, then growing in double digits is not going to be a big task,” Chopra said. He emphasised that if Indian companies focus on value leadership instead of volume leadership, then opportunities are aplenty. He added that this approach will directly help in reducing the burden of diseases, which is the primary focus in western markets, over volume of sales. He adds that as the incidence and detection of chronic diseases increases, the potential of the India-focussed operations of pharma companies will improve.
Chopra also predicts that a few more acquisitions might happen among the top 20 Indian pharma companies. He said that promoters are happy with maybe around Rs 100 crore which can be generated from a product. “They do not see that the market cap can double,” Chopra adds.
“It all depends on the interest of the people running the organisation. There are a good number of assets, which, if not run by the promoters but by the right management, can do wonders,” Chopra explained. He said that eventually, when the promoters start feeling the pressure, deals will happen.
Also read: JB Chemicals scales 52-week high on 35% surge in Q1 net profit
Brokerage views
Brokerages remain optimistic about the company, with 10 buy calls, three hold calls, and two sell calls, according to Bloomberg analyst coverage data. Analysts at Dolat Capital say the company has been successful with “inorganic pursuits, ploughing back cash for growth.’’
Analysts at Yes Securities, however, say that the company’s CDMO business may have a softer Q3, which could result in a 12 percent YoY growth in FY23-24. (CDMO business grew 5 percent YoY in Q2 FY 24.) The company reported EBITDA margins of 27 percent in the first and second quarters of FY 23-24. Analysts at Elara Capital say that margins are at an all-time high, and with limited room for margin improvement, they have a “reduce” rating.
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