JM Financial Sees 67% Upside in Piramal Pharma Due to Major US Deal and Strong Financial Outlook

Strategic Insights -

JM Financial, a leading brokerage firm, has predicted a 67% upside in Piramal Pharma due to a major US deal and a strong financial outlook. The domestic brokerage house has given a 'Buy' rating on the CDMO player and set a target price of Rs 313 per share. The key reasons behind the brokerage's bullish stance include a multi-million dollar deal with NewAmsterdam Pharma, the potential of the Obicetrapib and Ezetimibe therapy, a partnership that goes deeper, and a financial impact ahead.

Key Takeaways:

  • Piramal Pharma Solutions has struck a multi-million dollar deal with NewAmsterdam Pharma to support commercial production of Obicetrapib and Ezetimibe.
  • Obicetrapib is a novel CETP inhibitor under development to lower LDL cholesterol, which has shown significant reductions in LDL cholesterol with a placebo-like safety profile in Phase 2 and 3 trials.
  • The fixed dose combination of Obicetrapib and Ezetimibe has a market potential of USD 1--2 billion once commercialized.
  • Piramal Pharma's integrated global network has already supported Obicetrapib's development, with its Ahmedabad site playing a critical role in formulation work and the Pithampur site providing dual sourcing to ensure supply chain resilience.
  • The deal is expected to start reflecting in numbers by FY27, with Piramal likely to be the exclusive supplier, enhancing the US business profitability and margins upwards of 30%.
  • JM Financial has revised its estimates upwards, penciling in an additional Rs 2.6 billion and Rs 5.1 billion in revenue for FY27 and FY28, along with incremental EBITDA of Rs 0.9 billion and Rs 1.8 billion in the same period, and net profit estimates raised by 8% for FY27 and 12% for FY28.
  • The brokerage has set a target price of Rs 313 per share, implying an upside potential of nearly 67% from the current market price.

Statistics:

  • The market potential of the fixed dose combination of Obicetrapib and Ezetimibe is USD 1--2 billion once commercialized.
  • The deal is expected to start reflecting in numbers by FY27.
  • The US business profitability margins are expected to be upwards of 30%.
  • The contributions from the tie-up are expected to materialize from FY27 onwards, with USD 50--100 million annual top-line potential for the first three years.
  • Revenue estimates have been revised upwards by Rs 2.6 billion and Rs 5.1 billion for FY27 and FY28, respectively.
  • Incremental EBITDA estimates have been revised upwards by Rs 0.9 billion and Rs 1.8 billion for FY27 and FY28, respectively.
  • Net profit estimates have been raised by 8% for FY27 and 12% for FY28.

Sources:

  • JM Financial report on Piramal Pharma
  • Piramal Pharma Solutions filing
  • NewAmsterdam Pharma website
  • Contify.com
  • IE Online Media Services Pvt. Ltd.