Wanbury Ltd - 135.00 Rs

Wanbury Ltd (Wanbury) actually came into existence with the merger of the two diverse companies, Wander and Pearl Organics. These two entities are now functioning as the independent business units of Wanbury. While Wander Ltd became the formulations division catering the domestic market, Pearl Organics manufactures bulk drugs for international market under API division. Ironically, Wanbury is the world’s largest producer of Metformin Hydrochloride - a diabetes management product and Salsalate, an anti-inflammatory drug. Presently, more than 50% of revenue comes from export to over 50 countries serving 200 customers including three of the top five generic players in US. And notably, 65% of the total export is done to regulated markets like USA, UK, Europe etc. The key bulk drugs manufactured by the company are ibuprofen, glucosamine, promethazine, tramadol, atenolol, sertraline etc. Under the formulations business, company’s product profile comprises of anti diabetic, neutraceuticals, antibiotics, cough & cold solutions, anti- inflammatory & analgesic with specialization in gynecology, orthopedic pediatrics, nutrition etc. Wanbury also offers telemedicine and video conferencing services which are new revolution in healthcare industry.

Post its recent amalgamation with Pharmaceutical Products India and Doctors Organic Chemicals (DOCL), Wanbury now boasts of having three world class large scale plants spread across Patalganga & Tarapur in Maharashtra and Tanuku in Andhra Pradesh. Of these, it’s Patalganga and Tanuku facilities are USFDA approved for multi-products and also of EDQM standards. Apart from having corporate office in Vashi-Navi Mumbai, it has set up two hi-tech R&D centers: one in Turbhe-Navi Mumbai, for API and another at Chembur-Mumbai, for formulations. Currently, Wanbury has 23 DMFs with USFDA and is looking to file another 4~5 DMFS in near future. Off late it introduced 2 new brands ‘C-Pink’ and ‘Rabiplus’ in domestic market and both are doing exceedingly well. As a part of its growth strategy, company has launched a super specialty research division `Osteolife' catering to orthopedic health issues such as osteoporosis, osteoarthritis and pain management. Besides, with acquisition of DOCL, Wanbury has got into CRAMS business also and does contract manufacturing for leading MNCs like Pfizer etc.

Now most importantly, Wanbury recently acquired the generic ethical formulation business division of Industrial Farmaceutica Cantabria, Spain for approx 250 cr thru its wholly owned subsidiaries. Interestingly, only 40% payment is to be made upfront with balance 60% to be paid in two year and the assets of the Spanish firm will be used as collateral to raise loans to fund the acquisition. Cantabria, which owns 17 brands in various therapeutic segments like traumatology, pain management, asthma, anti depressants, anti eplileptics, anti ulcerants, cephalosporin’s, beta blokers etc is targeting a revenue of Euro 33 million (i.e. Rs 200 cr) with an EBITDA of Euro 8-10 million (i.e. Rs 50~60 cr). Moreover, it has product development worth Euros 6 million in the pipeline for the next year and is expected to grow at CAGR of 15~20% over a five year period. In short this first overseas acquisition has significantly propelled Wanbury into new dimension.

In April’07, company issued FCCB aggregating Euro 15 million in order to fund the Cantabria acquisition, organic expansion, related diversifications and new R&D activities. Out of this, Euro 8 million is fully paid up whereas only 10% is paid-up for balance 7 million and these FCCB’s can be converted into equity shares @ approx 140 Rs. Apart from modernizing and expanding its manufacturing capacity, company is also in the process of acquiring domestic ethical brands. Moreover the rise in outsourcing of pharma activities to low-cost offshore destinations like India bodes well for Wanbury as company is now in a unique position to offer a single point of contract for R&D, process development and commercial production. For FY08, on a consolidated basis including the Cantabria business, it is expected to clock a turnover of 375 cr and PAT of 35 cr. This leads to an EPS of 26 Rs on current equity of 13.60 cr. However on fully diluted equity of 21 cr (post conversion of all warrants & FCCB’s) the EPS works out to 17 Rs. This can move up to 20 Rs for FY09. Hence at a reasonable discounting by 12x times against its FY09 earning, scrip has the potential to cross 240 Rs in 12~15 months. At the same time if rupee appreciation continues, the bottom-line may get affected to some extent.