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Jagsonpal Pharma: Period Pills and Private Equity 🩺

You know that ‘time of the month’ for women, which has all sorts of verbal and non-verbal codenames? Yes, menstrual cycles. These ‘periods’ cause some complications, and irregularity can be a rather regular one.

There is a female hormone called progesterone, which plays a major role in regulating the menstrual cycle - it initiates regular growth and shedding of the womb lining. A deficiency of this hormone can result not just in menstrual disorders, but also infertility and miscarriages, depending on the stage of the reproductive process.

Of course, this hormone is an important one, and the lack of it in women is a rising problem. But there is a solution to it - a drug called Dydrogesterone. In fact, this drug is such a saviour that it’s taking the pharma market by a storm. It is perhaps the first ever gynaecology drug to hit Rs. 100 crore in monthly sales in India. The common ones with that kind of clout are treatments for blood pressure, diabetes, and antibiotics.

And there is a small company with a market cap of just above Rs. 1,000 crore, which is making the most of the rise in the Dydrogesterone market. From humble beginnings of a small chemist shop in Delhi in the 1960s, this company has become a promising name, especially in women’s health.

And while the journey from a shop to a pharma company in itself must be an inspiring one, Jagsonpal Pharma seems to have embarked on its next phase of a mega scale-up, and the start to that journey has its roots in the booming - Dydrogesterone!

The Dydrogesterone Story

Menstrual disorders aren’t new, and there have been solutions in the market. The most popular replacement for a progesterone deficiency was, umm, progesterone. This was traditionally put into the body either through a vaginal cream or intramuscular injections.

But then, there was a revolution. Global pharma leader Abbott developed Dydrogesterone - a molecule developed by converting natural progesterone through a very complex manufacturing process. Dydrogesterone rapidly became successful because, compared to progesterone:

  1. It is more easily absorbed by the body

  2. It is more effective at a dose that is 10-20x lower

  3. Taken orally, it is more convenient a solution

For years, Abbott took advantage of its supremacy here, and its brand Duphaston was the only drug available in India. Abbott had been manufacturing the drug in the Netherlands and shipping it to India.

However, things changed in 2020. Mankind Pharma (the makers of Manforce condoms) launched the first generic of Dydrogesterone, and that opened the gates for several players to introduce more affordable versions of the drug.

Over the last two years, the market for Dydrogesterone has grown at a 35% CAGR, taking share from the traditional progesterone. It was April 2022, when Dydrogesterone sales (Rs. crore) overtook progesterone for the first time - a trend that has continued, and is expected to in the future.

Jagsonpal Pharma sells Dydrogesterone under the brand names Divatrone and Pro Retro. Its brand is #6 in the crowded market of more than 30 players. But thanks to its affordable pricing and reach, it has been gaining market share, which is already at 4%, and growing.

The product has been so successful for Jagsonpal Pharma, that sales of Dydrogesterone grew by 3x in FY23 only, and in just two years from launch, it is already amongst the top 3 selling drugs of Jagsonpal Pharma.

Strong Positioning in Women’s Health

While we’ve been raving about Jagsonpal Pharma’s recent success from Dydrogesterone, the company has a stronghold in multiple other drugs, which are primarily in the therapies of gynaecology and orthopaedics, with a majority of them focusing on women’s health.

In fact, Jagsonpal Pharma’s brands are the top 3 selling in several molecules.

The company has exhibited success in all these formulations, which is evident not just from its rank in the market, but also from its market share growth, and contribution to financial prowess.

The Private Equity Takeover

Over the years, Jagsonpal Pharma has proven its credibility and got itself associated strongly in the women’s health space, which is a fast-growing market with huge potential. And that’s exactly what prompted a private equity takeover.

In June 2021, a majority stake (43.7%) in Jagsonpal Pharma was acquired for Rs. 269 crore by private equity firm Convergent Funds. The stake was acquired from the Kochhar family, which still owns 26% of the company, and is now a joint-promoter of the company.

To get the ball rolling, Convergent made 2 major changes, which have already started showing results, in a direction that leads Jagsonpal Pharma on to its next orbit of growth.

New Leadership Manish Gupta, the newly appointed CEO and MD of Jagsonpal Pharma is not a new face to the pharma space, with 8 years to his portfolio with Sequent Scientific. From being a loss making, small animal pharma company, Manish Gupta pulled off a turnaround by:

  • Changing Revenue Mix - Identified opportunity in securing R&D for Veterinary Formulations business, a higher margin and more specialised business, the composition of which went from 8% of revenues in FY14 to 69% in FY22

  • International Game - Scaled the business from being just an India-focussed one to expanding worldwide, where the market for specialised formulations was booming, with revenues coming in from exports going from 45% in FY14 to 90% in FY22

  • Acquisition Strategy - In the course of the tenure, engaged in various acquisitions like Lyka Labs, Strides Pharma, Provet, Brazilian-based Nourrie and Evance Group to name a few, not just to laterally add onto their business prospects but gain exposure to newer markets - both foreign and domestic

The result has been revenues going up by 4x compared to a flat-ish growth before FY14, actual profits on the income statement and the title of being the largest animal health company in India.

Cutting Excess Flab Jagsonpal Pharma’s business model had been simple, yet archaic:

While this does look pretty straightforward, the company took on the burden of transporting these products from the plants to these depots that they owned, adding unnecessary costs into this chain of events, making it less profitable for the company.

Post Convergent, old ways have been incrementally phased out, with the attempts to shut down these depots (13 across the country) and outsource this entire exercise to what is known as a ‘Carry and Forwarding Agency’.

These agents essentially take over Step 2 and 3 entirely, handling the transport of products from plants to storage facilities, engage in inventory management, market products and even engage in the direct sale to pharmacies - all in exchange for a margin or cut on the turnover at the end!

This new model (that other pharma companies have already implemented) will reduce overheads and let Jagsonpal Pharma focus on what they are good at - making medication, and even increase margins and return ratios.

The Money Is Flowing in Already

While Dydrogesterone and the other gynaecology and orthopaedic meds are likely to keep revenue growth strong over the next couple of years, Jagsonpal Pharma has also made pain management a key focus. This along with a renewed sales engine have the potential of accelerating growth.

Additionally, Convergent has engaged in a quick clean-up which has already resulted in operating margins improving by 200 bps and ROCE going from 38% to 64% in just one year. These include (i) discarding subpar assets like its Faridabad factory and Delhi office, (ii) remodelling distribution and unlocking operating efficiencies, (iii) reducing working capital days from 35 to 23 in just one year, and (iv) focusing on cash generating taking the cash balance from Rs. 69 crore in FY22 to Rs. 126 crore in the last quarter.

Realigning focus areas, immediate value unlocking, and revamping old ways might just turn out to be the right pills for Jagsonpal Pharma’s profitable scale up over the next few years.


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