Nicholas Piramal India Ltd | Scrip Code: NICHPI | Call: Buy | Price: 146.00
Company details
- Price target: Rs326
- Market cap: Rs5,291 cr
- 52 week high/low: Rs321/195
- NSE volume: 65,842
(No of shares) - BSE code: 500302
- NSE code: NICHOLASPIR
- Sharekhan code: NICHPI
- Free float: 10.5 cr
Key points
- Nicholas Piramal India Ltd (NPIL) is planning to restructure its research and development (R&D) division by spinning off its new chemical entity (NCE) research unit into a separate entity. The company is holding a board meeting on August 31, 2007 to consider the proposal.
- NPIL currently spends around 5-6% of its turnover on discovery R&D. With a focus on the therapeutic segments of oncology, diabetes, inflammation and infectious diseases, NPIL has a pipeline of one new NCE and two phytopharmaceutical products in the clinics. Additionally, five of its NCEs and one phytopharmaceutical product is scheduled to enter the clinics in 2007, which would make it one of the largest clinical development pipelines among the Indian players.
- We have attempted to value the demerged discovery R&D entity of NPIL in line with Sun Pharma Advanced Research Company (SPARC-which is the demerged innovative R&D unit of Sun Pharmaceuticals). We estimate the value of the demerged R&D company at Rs2,369.1 crore, which translates into a value of Rs113.4 per share.
- Assuming that the demerger is effective from April 1, 2007, the same would provide some relief to the base business in terms of the reduction in R&D expenses and the associated loss of the tax shield. We estimate that the demerger would result in Rs55.3 crore and Rs67.9 crore of incremental net profit for the base business, which adds an additional Rs2.6 and Rs3.2 to the earnings per share (EPS) of FY2008E and FY2009E respectively.
NPIL is planning to restructure its research and development (R&D) division by spinning off its new chemical entity (NCE) research unit into a separate entity. The company is holding a board meeting on August 31, 2007 to consider the proposal. NPIL currently spends around 5-6% of its turnover on discovery R&D. With a focus on the therapeutic segments of oncology, diabetes, inflammation and infectious diseases, NPIL has a pipeline of one new NCE and two phytopharmaceutical products in the clinics. Additionally, five of its NCEs and one phytopharmaceutical product is scheduled to enter the clinics in 2007, which would make it one of the largest clinical development pipelines among the Indian players. The company’’s total pipeline has an aggregate revenue potential of $30.9 billion, which is estimated to grow to $48.5 billion by 2008. NPIL also has in place a modern, state-of-the-art R&D facility with around 350 scientists.
NPIL’’s lead compound P276, an oncology molecule is currently in Phase IIB clinical trials, which are due to finish by the end of FY2008. The product is currently undergoing clinical trials in Canada. NPIL is working with Harvard Medical School for undertaking the Phase I/II studies for multiple myeloma, which increases the confidence on the potential of the molecule. NPIL is targeting an orphan drug status for this molecule, which can significantly cut short the approval time as well as enable clinical trials on a much limited scale. This will make the entire clinical development programme extremely cost effective and enhance NPIL’’s flexibility in seeking outsourcing options.
A key feature of NPIL’’s R&D programme is its strategy of focusing on incremental innovations in addition to discovering novel drugs. As part of this strategy, NPIL is working on developing safer versions (with lower side-effects) of popular drugs like Aspirin, Dioflenec and central nervous system (CNS) drugs using a proprietary technology. Another aspect of Nicholas” R&D program is its focus on developing phytopharmaceutical compounds by actively tapping its enormous library of natural products comprising 35,000 microbial strains and 5,600 plants from natural habitats.
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