Steady growth for Indies Pharma despite pandemic disruptions

The fundamentals of the company are strong and growth is sustained, notwithstanding pandemic disruptions and a dip in profits in 2021, the head of pharmaceutical developer and distributor Indies Pharma Jamaica has said.

CEO Dr Guna Muppuri points to growth in revenues and assets for the junior stock market company as evidence of a positive trajectory for the business that is part of Muppuri’s Bioprist Group, which is busy building out a bigger footprint in the health and wellness market.

Indies Pharma’s revenues of $846.8 million for year ending October 2021 were up 11 per cent over the previous year, its preliminary earnings report shows. Some of the gains were passed through to operating profit, which rose by a modest five per cent, but a sevenfold increase in finance costs led to a 22 per cent decline in earnings. Annual profit amounted to $160.4 million, compared to $206.6 million in October 2020.

The pharma company ended the year with positive indicators for the fourth quarter, including improved three-month revenue, up nearly seven per cent to $213.5 million, and net profit up 12 per cent to $54 million.

The results came without any new products being added to the list of prescription and over-the-counter medications and other products that the company sells to government and private-sector pharmacies. The absence of new products, the Indies Pharma CEO notes, is a direct result of disruptions caused by the ongoing COVID-19 pandemic, but which led the company to focus its research and development agenda for much of 2020 and 2021 on its application to the US Food and Drug Administration for approval of three new drug formulations for the United States market that should further strengthen the company’s bottom line post-pandemic.

“This year we have kept ahead of the game and sustained our profitability a little bit better than last year. The pandemic has impacted a number of products that we were planning to infuse into the market, in a timely manner and according to our schedule,” Muppuri told the Financial Gleaner, while emphasising that production disruptions over the past two years have been a feature of businesses globally.

Indies Pharma has said it develops its own drug formulas and contracts manufacturing mainly to drug manufacturers in India, with rigid and close quality monitoring by the Jamaican company.

Bond raise

The company has pumped more than half of the $805 million it raised in a bond float last year into new products bound for the US market, with expectations of returns on the investment by 2023. The bond, which matures in 2025, requires servicing quarterly at seven per cent per annum, which has served to drive up Indies Pharma’s annual finance charges from $9.2 million last year to $67.4 million.

The remainder of the financing was used to boost assets with the acquisition of land in the upscale Ironshore area of the western city for the construction of a headquarters building for the company. Indies posted improved assets for the quarter and the year at $2 billion, up from $1.8 billion. It’s a significant improvement over the pre-pandemic asset levels of $770.9 million in 2019.

With these gains in tangible assets through more valuable real estate holdings as well as intangible assets in the form of drug inventory and intellectual property on new drug formulations, Muppuri is not perturbed by the company’s rising liabilities, which are headed towards $1 billion.

“The amount of money we have been paying in finance cost is nothing compared to the capital gain we have had on this prime real estate. The money we have borrowed has been one of the wisest and best investment decisions we have made,” he said of the asset appreciation from the real estate investment.

“We were able to secure prime real estate in an area where growth is going to be exponential. The gains from this are already being seen, with total comprehensive income of close to half a billion dollars, which would not have been expected by some persons. However, it is no surprise to me. That is why we made the decision to go for the bond, and we did that in less than a year,” Muppuri added.

The businessman is also pointing to efficiencies in the business that have resulted in cost of sales being held fairly steadily over several years, including remaining just above $239 million for 2020 and 2021, up from $217 million five years ago. Muppuri says the efficiency of the business has been further boosted with the inclusion of investment bankers Lissant Mitchell, the former CEO of Scotia Investments Jamaica, and Kevin Donaldson, former CEO of Sagicor Investments Jamaica, on the company’s board. They replaced retired directors Senator Aubyn Hill and Dr Norman Dunn, who both joined the government.

Indies Pharma’s stock price performance has not mirrored its fundamentals, Muppuri has conceded, but rationalised that its performance has been affected by low trading volumes, with investors holding the stock instead of selling.

Indies Pharma has a market value of over $4 billion. The stock traded at $3.02 on December 29, up 14 per cent year to date, but down 13.5 per cent over the quarter.

business@gleanerjm.com