Trial and success

PENNY WISE

Bilcare's clinical trials business is set to prop up its momentum.

Over the past decade, the global pharmaceutical industry has been going through a consolidation phase, which has spread out an array of opportunities for a number of Indian pharmaceutical companies. Generics, active pharmaceutical ingredients (APIs), formulations and bulk drugs have all become a known story.

Indian companies have been providing solutions to global pharmaceutical majors in areas such as contract research and manufacturing services (CRAMS), bulk drugs, marketing and so on. Bilcare has added itself to this list by carving out a niche for itself in the area of pharmaceutical packaging.

From being a generic packaging manufacturer, it has developed its own patented technology for providing optimum packaging solutions for new drugs within merely four weeks, as compared to one or two years taken by other drug makers.

Bilcare has now ventured into providing custom clinical trial services to global pharma majors, which aids in speeding up the human trials phase of drug research. Thus, it functions as a catalyst for drug-makers to help them bring new drugs to the market quickly.

Innovation engine
Bilcare's research focuses mainly in the area of methods of drug dispensing, and maintaining the potency of medicines for longer periods, which help in coming up with optimum standardised packaging for drugs distributed globally.

For each new drug brand, it provides custom research based packaging solutions, and ultimately helps companies decide the quality and nature of packaging.

Bilcare's new division, Global Clinical Services (GCS) provides clinical trial services to drug-makers assisting them during all the four phases of human trials.

"We provide services like batch manufacturing for clinical trials, trial packs, randomisation, storage services, returns management and distribution to drug-makers in order to ensure transparency in the process of trials," says Vineet Mehrotra, chief financial officer, Bilcare.

Recently, the company has set up its first Bilcare Academy in Pune to train professionals in clinical trials, an industry which is skill-intensive and still at a nascent stage in India. To strengthen its presence across the globe, Bilcare has made acquisitions in the US and the UK, and set up facilities for both packaging research and clinical trials in Singapore.

Bilcare is now looking at expanding its capabilities in the pharma value chain. "We are looking at technology and research and development (R&D) focused outfits for potential acquisitions," says Mehrotra. "We are willing to pay the necessary premium for any value addition to our existing skill-set," he adds.

Number talk
Bilcare has registered robust financials as its revenues have grown at over 50 per cent y-o-y over the past three years. It has been earning decent operating margins at over 24 per cent consistently. With the high-margin GCS business gaining scale, profitability is expected to be even better. 
 

FINANCIALS
Rs crore	FY07	FY08E
Revenue	407.90	530.30
Operating profit	117.00	156.40
OPM(%)	28.70	29.50
Net profit	59.90	78.00
EPS (Rs)	42.20	51.70
P/E (x)	25.70	21.00

The clinical services vertical, which contributes nearly 20 per cent to the topline currently, is expected to contribute half of the revenues by FY11. Packaging research chips in the other half. Again, the Bilcare Academy too is a cash rich business, and the company is looking at establishing 5-6 centres over FY08.

Over the past three months, the stock has offered a whopping return of 118 per cent. The present valuations are nearly on a par with similar pharmaceutical counterparts which are into outsourcing and contract research.

However, considering that the company is growing at a faster pace, the price-earnings multiple of 21 on its estimated FY08 earnings appears justifiable. Bilcare compares well with peers on other parameters such as EV/Sales and EV/EBITDA too. 
 

VALUE PLAY
FY07	EV/Sales	EV/EBITDA
Bilcare	4.20	14.50
Dishman	4.00	16.40
Divi's Labs	8.80	25.80

While risk-takers may want to enter at these levels, conservative investors may want to accumulate the stock on dips.