Remember the TV advertisements of Pinkoo gripe water? Launched in 1979, Pinkoo was Ajanta Pharma's first OTC (over-the-counter) product. For the next two decades, Ajanta sold OTC products and forayed into institutional sales (government contracts). Then in 2004, it shifted to branded formulations, homing in on CVS, ophthalmic and derma therapies. As of FY14, Ajanta has launched 48 products in dermatology, 54 in ophthalmic and 27 in cardiovascular system. Here is what will drive Ajanta's fortunes ahead.
No US dependency. Unlike many other domestic pharma companies, Ajanta's exports (two-thirds of total sales) are not US dependant. Half of Ajanta's exports are to Africa while 42.5 per cent make it to Asia. In all, Ajanta exports to 35 emerging countries with a portfolio of anti-infectives, ophthalmic, dermatology and anti-malarials. Malaria is big business especially in Africa where the company participates in tender sales. Exports have grown at 33 per cent CAGR in the last three years.
Robust domestic sales. Domestic sales (one-third of total sales) are branded prescriptions (83 per cent of domestic sales) and institutional sales (17 per cent). Only 12 per cent of Ajanta sales fall under the NLEM (National List of Essential medicines) category.
Cardiovascular focus paying off. Cardiovascular is Ajanta's biggest domestic money driver (27 per cent of local sales). Ajanta ranks 26th in the domestic cardiovascular segment with a share of one per cent. It has a couple of winners in its hands: like Resufit CV, the largest in its category or Atrofit CV, the second largest or Met XL, the third largest. Cardiovascular sales have grown 45 per cent annually in the last three years driven by new launches.
First launches. Ajanta has often been the first to launch a product in India. Of the 160 brands it markets, 119 are first launches. This helps the company stay ahead of competition.
The risks. The biggest risk Ajanta faces is the addition of more drugs to the NLEM list. The National Pharma Pricing Authority has been incrementally adding more drugs to this list in recent months.
Valuations and outlook. Ajanta's strategy of new products and first launches have kept it in good stead and likely to continue. Exports should keep up with high demand especially in Africa and Asia. The stock trades at 0.36 times its three-year PEG ratio. Buy.