Hyphen Pharma International - SAC Capital 2022-08-18: Growth From Organic And Acquisition

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HYPHENS PHARMA INTL LIMITED (SGX:1J5)

Hyphen Pharma International - Growth From Organic And Acquisition

• Hyphens Pharma (SGX:1J5)'s 1H22 revenue (+24.5% to S$80.7m) and net profit (+42.5% to S$6.2m) benefitted from
  1. inclusion of Novem from end 2021 which contributed to 11.4% of revenue and 22.6% of NPAT; and
  2. lifting of border and movement restrictions, driving resumption of elective medical treatments that were postponed, leading to higher demand for pharmaceutical drug.
• Conversely, the demand for some COVID-19 related drugs have dropped off as the new virus variant has more muted symptoms. Excluding Novem, 1H22 revenue grew 9.3% and NPAT up 11.6%.
• EBITDA margin of 10.7% (1H21: 9.2%) was lifted by
  1. ASP increase (we estimate about 3-5%) and
  2. Novem, which specializes in specialty drugs to the public sector.
• Hyphens Pharma generated operating cash flow of S$8.2m, or S$0.027 per share. Hyphens Pharma's net cash as at end June was S$23.1m, after S$6m raised from the sale of 10% stake in DocMed. The proceeds is earmarked for software development, strategic acquisition and operating expenses.
• We expect healthcare spending to normalize in 2H22 as pent-up demand wanes. The sale of Biosensors’ products in Vietnam will dwindle when the distribution agreement expires at end 2022. This accounted for a mere 3% of sales in FY21. And the ramp up in DocMed’s development milestone will incur ~S$1m opex in FY22E and ~S$2m in FY23E, we estimate. This is half of our earlier estimates. 2H is also seasonally lower than 1H.
• Hyphens Pharma entered into a 10-year exclusive licence and supply agreement (with auto-renewal) with Esteve Group for Lederlon, an intra-articular corticosteroid for the treatment of osteo-arthritis. Hyphens Pharma will seek registration for this product in Singapore, Malaysia and Philippines, which might take about 2 years. This is the first intra-articular product at Hyphens Pharma which is distinct from the oral drugs that it distributes, and we believe this pushes it higher in the value chain.

Hyphens Pharma - Earnings forecast and recommendation

• We are raising our earnings estimates for Hyphens Pharma by 7.4% for BUY recommendation on Hyphens Pharma.
• See
  • Hyphens Pharma's Share Price,
  • Hyphens Pharma's Target Price,
  • Hyphens Pharma's Analyst Reports,
  • Hyphens Pharma's Dividend History,
  • Hyphens Pharma's Announcements,
  • Hyphens Pharma's Latest News.

Peggy Mak SAC Capital Research | https://www.saccapital.com.sg/ 2022-08-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.460 SAME 0.460