The share price of Abbott India has been falling at quite a fast pace as evident from the below chart capturing the stock over the past 6 months:
Against this stock’s performance, the benchmark i.e. Sensex has given a very good return over the same period:
Another thing to notice is falling institutional holding in the stock:
The Reason for the fall in price may lie in the financials. So let us first analyze last quarter numbers quickly
Revenue & Profit (in Rs cr)
So the problem is deep and may lie in its core operations that are its therapy portfolio. Let understand How Abbott India made money over the past 5 years (till March 31, 2020). The key contributor of the revenue was 5 Power brands:
The most important brand for this company was Duphaston with ~11% contribution in topline. So let us dig deeper to find out what has happened past 6 months.
First, let us see the performance of these power brands during Q2 & Q3 FY21
Just notice the sharp fall in Duphaston sales numbers in both charts.
The conclusion of this analysis is that Duphaston has lost 1/3rd of its revenue from Rs 380 cr to Rs 287 cr in Q3 FY21. Now Golden question is why Duphaston sales have gone sharp down dragging the company’s performance?
What Duphaston is?
Duphaston is used to treat female infertility, various menstrual problems including painful, or irregular periods, Premenstrual syndrome (PMS), and endometriosis.
It helps to restart periods that have stopped before menopause and to prevent unusually heavy periods. It basically helps the body generate a natural hormone called Progesterone.
Progesterone is a natural hormone involved in the menstrual cycle, implantation, and the successful maintenance of pregnancy.
Any deficiency of progesterone during different stages of the reproductive process can cause infertility, menstrual disorders, and miscarriage.
What has changed?
The manufacturing process of Dydrogesterone is very complex as it involves the conversion of natural progesterone.
Till last year only Abbott was the only manufacturer of this compound.
But in Dec 2019, Mankind Pharma launched the generic version of this drug named Dydrogesterone. Business Today captured Mankind Pharma as below:
The Rs 6,000-crore turnover Mankind is the highest valued privately-held domestic drug company.
Private equity companies Capital International and Chrys Capital have minority stakes in Mankind and in the latest deal a couple of years ago, the firm was reportedly valued at over Rs 23,000 crore.
It is not looking at an initial public offer in the next 3-4 years, considering the market situation.
In the current financial year, the company is expected to grow by 9-10 percent. Mankind has set up a 500-scientist team of R&D infrastructure eyeing potential therapies in chronic segments.
Now exports contribute about Rs 250 crore from 10-15 products and plans are to grow this business.
The launch of a strong competitive drug of Abbott’s key power brand has hit the stock and that is precisely the reason for the fall in the stock price.
The company has a track record of new drug launches and there are many more drugs are in the pipeline, so it may come out of the performance slump.
However, the current position of the company in the market with head to head with another biggie i.e. Mankind Pharma is not a peaceful sight for investors and shall be observed closely.
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