PJSC Pharmsintez is one of the few biotechnology companies, whose shares are on the Moscow Exchange. Despite highly inconsistent financials and negative share performance, the company is included in the lists of leading Russian drug manufacturers.
About company
The company is considering an innovative business model and increasing its market share. Pharmsintez placed shares (ticker LIFE) on MICEX in 2004 — it is the first pharmaceutical company in Russia, issued securities. The company's shares have the third level of listing - they are illiquid.
History of the group of companies. The predecessor of Pharmsintez is the holding Farmavit, established in 1996. The holding entered as manufacturers of pharmaceutical products, and trading companies, while he occupied about 27% Russian pharmaceutical market.
Pharmsintez was founded on the basis of Farmavit, the company appeared in 2001 in the form of CJSC, registered in the Leningrad region, initially as part of the Baltic Pharmaceutical Society CJSC group of companies, the largest shareholder of Farmavit.
In the same year, a high-tech research and production complex of the company was built and put into operation.. In 2004, in parallel with the issue of shares, the company is establishing relations with research and production organizations as in Russia, as well as abroad.
In 2007, the Estonian company EPhag AS bought out most of the company's shares from the Baltic Pharmaceutical Company.. The company in the same year receives the exclusive right to distribute the drug "Prostenongel".
Since 2008, the company has been using biocatalysis technology and producing Fludarabine preparations., "Cladribine" and "Ribavirin". In 2009, a nanovaccine for the treatment of multiple sclerosis was added to the range of drugs. In 2010, Pharmsintez shares began to be traded publicly on the stock market, and the company was transformed from CJSC into OJSC. In this way, it became the second Russian biotechnological company after HSCI PJSC, whose shares have become available for public trading.
As a result of the issue of ordinary shares, the share of EPhag AS in the capital of Pharmsintez decreased from almost 100 to 69,24%. Since 2011, the company has been acquiring stakes in other companies and has attracted companies to buy its shares..
Since 2011, Pharmsintez has been actively cooperating on this basis with foreign companies: subsidiaries with 100% capital of Pharmsintez are organized, additional issues of shares are carried out for offsetting counter obligations.
Since 2013, the enterprises of the group of companies have begun to specialize in drugs for the treatment of oncological diseases and multiple sclerosis, together with Rosnano and the American company OPKO. A product range has been formed, which is produced by a group of companies and is currently.
Composition of the group of companies. Already at the first glance at the structure of Pharmsintez PJSC, the international nature of the holding is striking. Out of ten companies, included in it, six are outside Russia: in USA, Belarus, Finland and Estonia.
Pharmsintez is the first Russian pharmaceutical company, which in the early 1910s began to finance production abroad, starting an investment program with Estonia and the USA.
The structure of the PJSC Pharmsintez group of companies
| Company | Status | Country of registration | Share of participation |
|---|---|---|---|
| AS Kevelt | Daughter | Estonia | 100% |
| Kevalt Pharmaceuticals OY | Daughter | Finland | 100% |
| LIFEBio Laboratories LLC | Daughter | USA | 100% |
| Guardum Pharmaceuticals LLC | Daughter | USA | 100% |
| OOO "Sinbio" | Daughter | RF | 100% |
| LLC "Center for the Development of Personalized Pharmaceutical Technologies" | Daughter | RF | 100% |
| LLC "Trading house" Pharmsintez " | Daughter | RF | 100% |
| JSC "VACCINES" | Daughter | RF | 100% |
| LLC "PrimeSintez" | Daughter | Belarus | 50% |
| Genetic Biosciences, Inc | Associate | USA | 5,1% |
Sales geography. The main sales market of the group is Russian, it has to 66% sales revenue. Next come the countries of the near abroad - Ukraine and Kazakhstan.
Remarkably, that Belarus, which is also located in the near abroad, occupies the last place - and at the same time, that the population is more than 9 million people, that more, than in Latvia, Estonia and Azerbaijan, which account for a much larger percentage.
This can hardly be explained by the, that the population of Belarus is less sick, than the inhabitants of the mentioned countries. Quicker, this is due to fierce competition: Belarus develops enough own drugs for cancer, an anticancer drug was developed in 2020. Nevertheless, Pharmsintez's revenue from sales in Belarus increased in 2020 by more than 53%: the group of companies is crowding out local producers due to the, that she has her own enterprise in the country.
Unfortunately, no US and Canadian sales data for 2020, but it can be seen from the statistics, that sales in most countries have increased, except for Ukraine and Israel.
The decrease in sales in Ukraine can be attributed to the deterioration of relations between Russia and Ukraine, including in the field of foreign trade. The decline in sales in Israel reflects the overall picture of Russian exports to this country. Apparently, this can be attributed to an increase in the orientation of Israel's imports to Western countries against the backdrop of a strong Westernization of the country.
Geographic structure of exports of PJSC Pharmsintez products
| Country | Sales revenue in 2020, thousand. rubles | Sales revenue in 2019, thousand. rubles | Share of 2020 year | Increase for 2020 year |
|---|---|---|---|---|
| Canada | — | 4538 | — | — |
| USA | — | 472 | — | — |
| Latvia | 24 883 | 10 692 | 6,69% | 132,73% |
| Belarus | 1873 | 1221 | 0,50% | 53,40% |
| Russia | 245 574 | 164 922 | 66,07% | 48,90% |
| Estonia | 20 534 | 14 065 | 5,52% | 45,99% |
| Azerbaijan | 2545 | 2168 | 0,68% | 17,39% |
| Kazakhstan | 25 330 | 23 288 | 6,82% | 8,77% |
| Ukraine | 26 513 | 50 183 | 7,13% | −47,17% |
| Israel | 2682 | 5380 | 0,72% | −50,15% |
| Other | 21 723 | 14 145 | 5,84% | 53,57% |
| Total | 371 667 | 291 074 | 100,00% | 27,69% |
Shareholders and key figures. The largest share of the company's shares belongs to the corporation "Rusnano", which invests in high-tech projects, including in the field of biotechnology.
Other holders are foreign companies, including offshore Relative Core Cyprus Limited, as well as a subsidiary of IceGen 1, which acquired shares in the order of offset of counter obligations. Vikram Punia, a native of Indian Jaipur, is a key figure in the company., son of a major Indian developer. Punia studied in Irkutsk as a doctor on an exchange program and received Russian citizenship.
Shareholders of PAO "Farmsintez"
| Shareholder | Country and city of registration/residence | Stake in authorized capital and share of ordinary shares owned |
|---|---|---|
| JSC "Rosnano" | RF, G. Moscow | 36,5800% |
| Free float | RF, G. Moscow, Mosbirzha | 27,5285% |
| JSC "EFAG" (EPhag AS) | Estonia, G. Tallinn | 14,1200% |
| OPKO Pharmaceuticals (OPKO Pharmaseuticals, LLC) | USA, Florida, G. Miami | 8,5000% |
| IceGen 1 LLC | RF, Leningrad region., Vsevolozhsky district, GP Kuzmolovsky | 6,6644% |
| Relative Core Cyprus Limited Liability Company (Relative Core Cyprus Limited) | Cyprus, G. Nicosia | 6,6071% |
What he earns
The company produces the following innovative drugs:
- "Vasostenon". Drug for the treatment of obliterating atherosclerosis of arteries of the lower extremities based on prostaglandins.
- "Glaumaks". The drug for lowering intraocular pressure in patients with open-angle glaucoma and with increased ophthalmotonus - intraocular pressure.
- "Neovir". Immunomodulatory drug for immunodeficiency states, for example with HIV. Latest generation endogenous interferon inducer.
- Sehydrin. Antineoplastic agent, the first preparation of hydrazine sulfate in Russia.
- "Neostim". Preparation, growth-enabling, maturation and functional activity of many blood cells. It is used for pathologies of hematopoiesis.
- Fludarabel. Antineoplastic chemotherapeutic agent.
- Fenazide. The first complex preparation of isonicotinic acid hydrazide and ferrous iron for the treatment of tuberculosis.
- Mifepriston. Antigestagenic drug. It is used to terminate unwanted pregnancies and for postcoital contraception..
The company also produces generics, however, the management has plans to abandon their release in favor of innovative drugs by 2030.
Revenue structure from sales of various products. Sales of own pharmaceutical products account for the largest share of revenue. Share of resale of pharmaceutical products, made by other manufacturers, dropped to zero in 2020. At the same time, revenue grew the most due to the service segment.. It is worth noting, that in 2020 Pharmsintez resumed supplies of Phenazid and Fludarabel, who had been absent for two years before.
The group of companies did not receive government orders for research in any 2019, not in 2020. Nevertheless, she spends them at her own expense and at the expense of investors., including those with state capital - corporations "Rosnano", IBCh RAS, as well as some foreign companies.
Basically, developments are carried out in the direction of creating drugs against coronavirus. However, sales of vaccines and other drugs in this direction have not yet begun., they are all under development.
Revenue structure of Pharmsintez PJSC in 2020 and 2019
| Income item | Revenue in 2020, thousand. rubles | Revenue in 2019, thousand. rubles | Share as of 2020 year | Increase for 2020 year |
|---|---|---|---|---|
| Provision of services | 39 382 | 19 920 | 10,60% | 97,70% |
| Sales of our own pharmaceutical products | 332 275 | 268 525 | 89,40% | 23,74% |
| Resale of pharmaceutical products | 0 | 2629 | 0,00% | −100,00% |
| Total | 371 657 | 291 074 | 100,00% | 27,69% |
Financial indicators. Financial ratios, reflecting the company's activities in 2020 and the first half of 2021, — extremely contradictory and generally correspond to the high volatility of Pharmsintez PJSC shares on the stock market.
In 2021, such coefficients, as a net profit margin, return on assets and return on equity fell to negative values. Quick ratio, vice versa, rose to three digits. At the same time, the total revenue of the group of companies for 2020 increased, however, the net loss was even larger, than in 2019, what can be associated with the excess of short-term liabilities over current assets. This caused the auditor to doubt the ability of PJSC to continue as a going concern..
Financial ratios of Pharmsintez PJSC for 2020 and 2019
| Indicator name | 2019 | 2020 | Change compared to the same period of the previous year |
|---|---|---|---|
| Quick ratio | 0,13 | 0,34 | 161,54% |
| Current liquidity ratio | 0,31 | 0,41 | 32,26% |
| Asset turnover ratio, once | 0,04 | 0,05 | 25,00% |
| Net profit margin | 17,96% | −555,12% | −3190,87% |
| Return on assets | 0,77% | −26,23% | −3506,49% |
| Return on equity | 1,03% | −36,14% | −3608,74% |
Financial indicators for the first half of 2021 compared to the same period of the previous year have a less exaggerated change. But the variation in the magnitude of the change in indicators is quite large, besides, they are heterogeneous.
Some improvement can be attributed to the liquidation of credit debt, as well as with a decrease in the amount of uncovered loss. But a further decrease in the net profit margin in the report is associated with financial premiums to buyers from shipment of past periods and the recognition of income from the write-off of profitability with an expired statute of limitations in 1 quarter of 2020.
Such data can only be assessed negatively.. The instability of multipliers is striking, which can be regarded as one of the reasons for the high volatility of PJSC share prices.
Financial ratios of PJSC Pharmsintez for 1H2021 and 1H2020
| Indicator name | 6м2020 | 6м2021 | Change compared to the same period of the previous year |
|---|---|---|---|
| Quick ratio | 0,06 | 0,35 | 483,33% |
| Asset turnover ratio, once | 0,01 | 0,03 | 200,00% |
| Current liquidity ratio | 0,2 | 0,35 | 75,00% |
| Net profit margin | 293,23% | −33,23% | −111,33% |
| Return on assets | 1,75% | −0,97% | −155,43% |
| Return on equity | 2,38% | −1,36% | −157,14% |
Plans
The company's strategy assumes an increase in revenue by 2025 in 45 once. Such an ambitious plan should be fulfilled by attracting investments for the modernization of production.
The global investment fund LDA Capital must, by the specified date, allocate funds for the projects of PJSC Pharmsintez and for this it will receive the right to redemption up to 19,9% company shares. Due to this, it is also planned to bring several more new drugs to the market.. On the whole, there is no reason to doubt that, that these plans will come true, since in June 2021 the agreement between the company and the investment fund was already signed.
Further work is planned on the production of a vaccine against coronavirus. JSC Vaccines, one of Pharmsintez's subsidiaries, can receive a total of 2 billion rubles from the Industrial Development Fund for the production of a nutrient medium for the Sputnik vaccine and for the production of a monoclonal body from HiFiBio Therapeutics.
The company itself will invest only 500 million rubles in the project. Attachments, according to the forecasts of Pharmsintez analysts, will pay off in 5 years. Design capacity will be reached by 2023 and in 2024: 6 tons of dry medium for vaccine cultivation and 40,000 doses of HiFiBio Therapeutics, respectively.
By 2030, it is planned to reorient the company's production only to the production of innovative drugs. In particular, it will be hormonal drugs, cardiovascular preparations and infusion preparations for artificial parenteral nutrition of the patient (feeding through a dropper).
The decision was made after the scandal in 2019, when the oncology center them. Blokhin sharply criticized generics, used for the treatment of cancer. Although it was originally planned to bring high-margin generics to the market.
The most ambitious and grandiose plan is the creation on the basis of an unfinished construction, owned by a group of companies, research and production biotechnical center. The enterprise will, including, focused on the production of drugs against coronavirus.
The group of companies will make efforts in the near future to improve the financial efficiency of its activities, which has not been in the best shape in recent years.
Risks
Despite, that the COVID-19 pandemic gave impetus to the group of companies to produce new drugs, it is its economic consequences that constitute a significant part of the risks. Here's what applies to them.
Falling demand on most of our own innovative drugs due to the redistribution of the budget for the fight against coronavirus with the corresponding consequences for the pharmacological industry.
Disruptions in the supply of raw materials for production drugs due to lockdown, primarily in China, as well as suspension due to the pandemic of research at the Serum Institute of India.
Investment delays from the main shareholder of the group - the corporation "Rosnano".
Financial risk. In many respects, the negative results of recent years could be associated with the consolidation of company assets, included in the group. The same risks include the risk of bankruptcy - in 2019, Pharmsintez received a bankruptcy lawsuit from the National Medical Research Center for Cardiology of the Ministry of Health and from the law firm Leonax, and the amount was small.
Rosnano Corporation has already threatened Pharmsintez with withdrawal from the shareholders and the termination of project financing due to the company's unprofitability. So there is no guarantee, that the plans of the group of companies to raise capital for new promising projects will come true.
conclusions
With all the risks and negative financial indicators of the Pharmsintez group of companies and the negative dynamics of shares, it has a chance to become profitable, what will entail the growth of stocks actually from the bottom.
Operational results are improving, work is underway to create and market drugs against coronavirus. This is a promising direction, Considering that, that the incidence of coronavirus in Russia is not decreasing, but only increases. The fourth wave is expected, at the same time, the new strain multiplies more intensively, than previous. In such a situation, one can clearly predict, that work in this direction at Pharmsintez will continue for a long time.
More difficult with anti-cancer drugs. Competition in this market has intensified. The main competitor of Pharmsintez is a large company Pharmstandard. At the same time, public procurement of anticancer drugs and immunomodulators decreased in 2021.
Little of, as a result of the compulsory medical insurance reform, cancer patients now have to pay for their treatment themselves, which could lead to lower sales in the future..
Attachment of cancer patients to local dispensaries and a ban on free treatment outside the place of attachment may lead to a decrease in public procurement of anticancer drugs, in addition to this, a decrease in the purchasing power of the population is added. In this way, the prospects for sales of oncological drugs by the company in Russia are not the most rosy. We can only count on an increase in sales abroad or on the effect of increased government spending on the fight against cancer..
In this way, shares of the company can only be bought if, if there is news, which can be at least some guarantee of the implementation of its plans and strategies. Such news can come, first of all, from the state.
