Venus Remedies (Venus), a high-growth mid-sized pharma company in the injectables space, has two key differentiators: presence in high value therapeutic segments and a strong research focus. This has allowed the company to maintain robust revenue CAGR of around 18% over last 4 years, at healthy operating margins. The company’s growth rates and margins could get a boost as its growing repository of research products and patents comes into play.

1. C O M P A N Y
India
Venus Remedies
4 Jun 2012
Sector: Pharma
BSE Code
CMP (Jun 1)
Nifty
Equity Cap (m)
Shares (m)
Market Cap (m)
526953
166.1
4,842
2,369
9.74
1,618
NSE Code
52W H/L
Sensex
Face Value
Free Float
Avg Vol
(weekly)
VENUSREM
276/141
15965
10
65.29%
9,514
Shareholding Pattern (March 31,
2012)
Venus is among top 10 players globally in combination
drugs space. This is a high margin space within injectables.
Venus has further focussed on highly specialised products
within this space, helping it maintain high profitability and
robust top-line growth.
DII
0%
Others
32%
Bodies
Corporate
19%
Concentrated focus on IP development
The Company has maintained high focus on IP
development. Its R&D spends reached a high of 19% of its
revenue for FY11, growing from a level of 5% in FY07. The
company expects to maintain spends in double digits. This
puts Venus Remedies among top 5 pharma companies in
R&D investment as ‘% of sales’ and top 15 by total amount.
Price Performance (Last 6 months)
Venus Remedies
The Company has developed many path breaking products
such as Sulbactomax, a novel combination product with
market potential of US$400mn in India, and patents in
more than 42 countries including EU and Australia. Venus is
currently exploring out licensing deals for Sulbactomax for
global markets and has hired a leading global consulting
firm for the same.
Nifty
200.00
190.00
180.00
170.00
160.00
150.00
Antimicrobial Resistance: A winning strategy
140.00
30-Jan
29-Feb
31-Mar
30-Apr
31-May
Consolidated Financials
FY'11
FY'12E
FY'13E
FY'14E
3,631
4,196
4,788
5,546
EBITDA
892
1,022
1,186
1,395
PAT
462
493
610
755
Sales
EBITDA margin(%)
24.57
24.35
24.78
25.14
Net margin(%)
12.73
11.74
12.75
13.62
ROE(%)
22.65
18.07
18.01
18.56
ROCE(%)
19.11
16.28
16.37
17.39
3.99
3.28
2.65
2.14
EV/EBITDA(x)
EPS (Rs)
Venus Remedies (Venus), a high-growth mid-sized
pharma company in the injectables space, has two key
differentiators: presence in high value therapeutic
segments and a strong research focus. This has allowed
the company to maintain robust revenue CAGR of
around 18% over last 4 years, at healthy operating
margins. The company’s growth rates and margins
could get a boost as its growing repository of research
products and patents comes into play.
In highly attractive injectables segment
FII
14%
Promoter
35%
P/E Ratio(x)
Rs 166.1
Building a unique formulation
Rs
30-Dec
R E P O R T
4.12
3.60
3.10
50.63
50.56
62.65
2.64
77.55
Rs mn
Venus correctly identified anti-microbial resistance (AMR)
as its core area for R&D efforts around 10 years ago. AMR
has emerged as the biggest threat to global health in
recent years, so much that even WHO has proposed a
global strategy to fight AMR. Venus Remedies’ entire
antibiotic research product chain caters to the AMR
segment including Sulbactomax, Vancoplus, Potentox and
Tobracef.
Low Valuations
At current price, Venus Remedies quotes at around 3.3x
FY12 and around 2.6x FY13e earnings, below peer
averages. These are values below its historical trading
range. We expect Venus’s price to cross Rs 200 over a 12
month period. Any big out licensing deal will give further
upside. This is an upside of 23% from current levels.
Four-s reports are available on BLOOMBERG, Reuters, Thomson Publishers and Market Publishers

2. Company Report: Venus Remedies
4 Jun 2012
Investment Rationale
A top player in the attractive injectables space
Venus is among top 10 players globally in combination drugs space
with the biggest capacity in Asia in manufacturing for injectables.
The US$200bn injectable market is higher on margins and faces
lower pricing pressure compared to oral pharmaceuticals.
A consistent focus on injectables, the highest end of the formulation
value chain marked by stringent manufacturing standards,
demanding quality parameters and low competition (only 1% of
India’s over 10,000 pharmaceutical companies produce injectables)
gives Venus a better ability to deliver higher margins.
High growth segments
Focussed on
high growth,
high margin
segments within
injectables
Venus Remedies has focused on high growth segments like antiinfective (33% of revenue) and oncology (30.7%) which are
considered to be the fastest growing segments and expected to
contribute 50 to 60% of product launches globally by 2015.
With changing demography and overall changes in lifestyle, antiinfective, oncology, cardiovascular and neurology segments are
expected to benefit the most in the coming years, not only in India
but globally.
Venus has been investing strongly in R&D for all of these segments
which will sooner than later start benefiting the company. Venus has
already launched products in segments like anti-biotic, oncology, and
neurology in last few years.
Maintains high margin with highly specialised products
Venus Remedies’ reported operating margins are better than the
peer set, reflecting its focus on high margin segments within
injectables. The company has margins better than all peers except
Claris. The reason behind this is Venus Remedies’ conscious strategy
to move away from its me-too products to enter high margin
specialised segment with the backing of strong R&D process.
Better profitability supporting the growth
FY11 Margin (%)
Company
EBIDTA
PAT
TTM Margin (%)
EBIDTA
PAT
Mid-Cap Peers
Ajanta Pharma
Four-S Research
19%
10%
21%
12%
Indoco
13%
11%
14%
9%
2

3. Company Report: Venus Remedies
4 Jun 2012
Natco Pharma
19%
12%
23%
12%
Nectar
20%
9%
18%
6%
Parabolic Drugs
15%
8%
18%
6%
17%
10%
19%
9%
Strides Arcolab
21%
7%
21%
32%
Ahlcon
16%
6%
16%
7%
Parenteral Drugs
10%
1%
-2%
-20%
Claris
31%
19%
32%
17%
Kilitch
15%
7%
17%
9%
Average
19%
8%
17%
9%
Industry
Average
18%
9%
18%
9%
Venus
25%
13%
22%
13%
Average
Injectable Peers
(Source: Ace Equity, company reports)
Profitability set to improve
The company is confident that it can improve margins going forward.
The key reason behind this is the high revenue flow expected from
out-licensing of the already developed technology. This revenue will
add to the top-line without putting much strain on cost side of the
company’s profit and loss sheet.
Creating significant opportunities through R&D
Focus on formulation R&D products to beat me-too generic
products competition
Research
pipeline based
on novel
formulations
Venus has evolved an innovative approach to its R&D investments to
overcome competition in generic drugs. Its R&D is focussed on
creating new drug candidates through formulation focused research,
where it aims to combine two or more already patented APIs into a
new formulation or a dosage form. Venus aims to make formulations
that are more effective than alternatives available in the market. It
aims to offer a therapeutic advantage and differ from me-too generic
products.
This strategy offers a low-risk, low-cost alternative to the traditional
pharmaceutical development of new medicines, due to their shorter
development timeline. New Chemical Entities (NCEs) take a long time
to develop, often at a cost of over US$1bn. Conversely, the
development of new therapies through Venus’ method is cheaper and
less time consuming, as it has a known mechanism of action and an
established safety and efficacy profile. This offers products a less
complex clinical development process.
It also has a simpler pathway to patent approval that can potentially
save pharmaceutical sponsors both time and money.
Four-S Research
3

4. Company Report: Venus Remedies
4 Jun 2012
Some of its key products like Sulbactomax and Vancoplus are novel
formulations of previously approved APIs.
Concentrating on future epidemic : Anti-Microbial Resistance
Venus has maintained strong focus on Antimicrobial resistance (AMR)
while developing research products. Antimicrobial resistance (AMR) is
the resistance of a microorganism to an antimicrobial medicine to
which it was previously sensitive. These resistant organisms are able
to withstand attack by antimicrobial medicines, such as antibiotics,
antivirals, and antimalarials, so that standard treatments become
ineffective and infections persist and may spread to others.
Infections caused by resistant microorganisms often fail to respond to
the standard treatment, resulting in prolonged illness and greater risk
of death. Once resistance evolves, it can spread very rapidly across
borders and around the world. This drug resistance threatens to
erase gains made in disease treatment and control in developing
countries.
Venus Remedies is one of the few R&D led companies which has
innovated and developed a comprehensive range of novel antibiotic
combinations which not just provide relief from the aggravated
problem of antibiotic resistance but also are cost-effective and have
reduced side effects.
The Company could foresee the potential of antibiotics fading 10
years back and it is the result of its focused approach that today it
has some SUPER BUG tackling solutions under patent protection. The
entire antibiotic research products of Venus like Vancoplus,
Sulbactomax, Potentox, Tobracef and many more cater to the
Antimicrobial Resistance segment.
Sulbactomax – a key growth driver
Sulbactomax, a
likely winner
The biggest product from Venus’s R&D initiative is Sulbactomax, an
anti-infective product, used to combat beta-lactamase generated
drug resistance, the only product in its category to prevent growth
and spread of bacterial resistance.
Sulbactomax is a combination of Ceftriaxone and Sulbactam with
VRP1034. Venus’s tests show that Sulbactomax is much more
effective than all the existing third generation cephalosporins and
their combinations.
Research pipeline robust, several launches ahead
Research
launches
beginning to hit
the market
Four-S Research
Besides Sulbactomax, Venus’s R&D has come up with several new
unique formulations like Vancoplus, Potentox, and Tobracef.
Achnil, launched in FY11, is a revolutionary once-a-day pain killer,
given Product of the Year award by Biospectrum Asia for its
uniqueness in addressing critical health conditions.
4

5. Company Report: Venus Remedies
4 Jun 2012
Many new products like Tumatrek, Trois and Stermex were lauched in
FY12 and many more to be launched in coming years. These new
products are estimated to generate revenue of 5-10% for the
company in the next 2-3 years. Venus Remedies is coming up with
constant flow of research products mainly due to its well thought out
R&D process which looks for novel solutions that fill the vast gap
between challenging ailments and available molecules.
Aims to create Sizeable IP wealth by 2015
Venus now has 80+ global patents out of more than 360+ filed for its
13 research products. There is a clear indication that the company
has created strong traction in R&D as well as Global presence.
Rightly positioned to capitalise IP wealth
Licensing
discussions on
for Sulbactomax
Sulbactomax itself is patented in 42 countries including the EU
countries; patents are awaited from 8 more countries including US
and Japan. Sulbactomax has US$400mn market in India itself,
according to Venus. Global potential is indicated by third generation
cephalosporins and carbapenems, a close substitute, which have
market of around US$2bn globally. Venus Remedies has already outlicensed Sulbactomax successfully to a South Korean pharma
company to monetise the South Korean US$585mn market.
In a similar way, Venus Remedies is looking to capitalise its IP wealth
from its range of research products by striking deals with global
pharma companies for specific geographies.
Venus Remedies has already shortlisted a number of companies and
is very close to finalising the deal with these companies. The
company has hired renowned external agencies to make sure these
deals are executed in the best interest of Venus Remedies’
stakeholders.
Market authorisation in regulated markets
Venus Remedies has marketing authorisations for EU markets for
multiple products like Meropenem. It is the first Indian company to
get GCC market authorisation for its oncology and Carbepenem
products. This authorisation will further increase market reach of its
products, pushing revenue growth.
Vast pool of patented R&D products to capitalise on
Since Venus Remedies has reorganized its priorities and started
investing in R&D, it has developed respectable IP wealth within a
very short period. Venus currently has more than 13 research
products in development, with 11 products already under patent
protection. 7 of these products are already commercialised not only
in India but are also launched in emerging export markets through
various alliances, and are selling in 12 countries.
Overall, Venus Remedies boasts of 80+ patents out of more than
Four-S Research
5

6. Company Report: Venus Remedies
4 Jun 2012
360+ filed in over 51 countries. It has 44 product registered in
developed countries and has filed 108 CTDs for 7 products. Venus
Remedies also has more than 375 market authorizations in semiregulated market. Strong IP wealth with patented technology and
ready to launch products along with EU GMP certified plant will enable
Venus Remedies to monetise this wealth in the near future.
Traction from research products to grow
Revenue from
R&D products
could grow 2025% annually
With ever growing investment in R&D by Venus Remedies (from
14.5% of revenue in 2009 to 19% in 2011) and a strong R&D team
of 60 scientists, in-licensing and R&D alliances with many
international universities, Venus Remedies is on right path to grow its
IP wealth. This is also evident from range of their products in phase
II & III of research.
Research products contributed around 25% of Venus’ total revenue in
FY12. Revenue from research products is expected to grow at a rate
of 20-25%, higher than the generics in its portfolio. This strong
traction is expected in near future because of new research products
and established products.
Superior operational efficiencies
Better working capital management
The chart below shows debtor turnover for the latest financial year.
Venus Remedies performance here is above peer averages.
Debtors Turnover
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Running business with higher capital efficiency
Venus remedies is utilizing its capital efficiently, resulting in better
profitability ratio and better returns to its stakeholders. It can be
seen from Venus remedies having highest ROE and ROCE ratios
compared to most of its peers and much higher than industry
average.
Four-S Research
6

7. 4 Jun 2012
Company Report: Venus Remedies
ROE
ROCE
30%
25%
25%
20%
20%
15%
15%
10%
10%
Venus
Industry Average
Kilitch
Claris
Ahlcon
Parenteral Drugs
Strides Arcolab
Parabolic
Nectar
Indoco
Natco Pharma
Ajanta Pharma
Venus
Industry Average
Kilitch
Claris
Parenteral Drugs
Ahlcon
Strides Arcolab
Nectar
Parabolic
Natco Pharma
0%
Indoco
5%
0%
Ajanta Pharma
5%
Valuations – have trended down in FY12
High discount compared to its peers
Valuations
ignoring steady
growth, and
R&D results
Venus is currently traded at discounted valuations as compared to its
pharma peers. When we divide peers among injectable segment and
mid-cap segment, within injectable segment, Venus Remedies is at
lowest multiple compare to its all injectable peers.
Venus is also at lower range of valuations amongst Pharma
companies of similar scale. Currently, Venus is traded at a PE ratio of
3.3 whereas mid-cap Pharma companies are traded at an average of
9.5 and injectables are traded at an average PE of 13.4.
Given Venus’ steady growth performance, and reasonable return on
capital, this gap will get bridged, at least partially, if not wholly. If it
gets revenue from out-licensing, the process of narrowing of the
valuation gap could get accelerated, giving a major upside for the
stock.
Four-S Research
7

8. 4 Jun 2012
Company Report: Venus Remedies
Peer Benchmarking
The peer set: mid-cap pharma companies & injectable players
Venus Remedies is among the leading injectable manufacturers in
India. We have compared it to its injectable peers, as well as midcap
pharma peers. We find its performance is within peer averages, and
better on some parameters. The strategy of Venus Remedies to focus
on niche injectables segment has benefitted company, which is
evident from its growth in last few years and margins it has managed
through out.
Company
Market
Cap
EV
TTM
Sales
TTM
Sales 4yr CAGR
TTM
EBITDA
TTM
EBITDA
4-yr
CAGR
TTM
PAT
TTM PAT
4-yr
CAGR
Ajanta Pharma
7456
8633
6714
21%
1407
29%
773
37%
Indoco
4981
5980
5389
19%
735
15%
460
11%
11517
13717
4831
10%
1095
20%
602
10%
Nectar
4339
12299
13412
15%
2453
18%
804
2%
Parabolic
1253
5997
9288
33%
1666
37%
574
18%
Average
5909
9325
7927
19%
1471
24%
642
16%
39986
64181
25645
26%
5399
67%
1,689
15%
3089
3341
848
9%
139
1%
43
-2%
Mid-Cap Peers
Natco Pharma
Injectable Peers
Strides Arcolab
Ahlcon
Parenteral Drugs
1441
7329
3083
10%
-52
NA
50
NA
Claris
10674
14376
7625
0%
2446
5%
1,414
4%
Kilitch
570
1100
1414
5%
235
1%
105
2%
11152
18065
7723
10%
1633
19%
660
5%
8531
13,695
7825
15%
1552
21%
651
10%
1617
3486
4049
18%
896
15%
493
9%
Average
Industry
Average
Venus
Better P&L
growth numbers
than injectables
peer average
Venus Remedies has performed better than its injectable peers in the
last 4 years as peers’ overall profit declined. Venus managed to
improve PAT at a CAGR of 9%.
Peer revenues have grown at an average of 15%, while Venus has
delivered growth rates of 18% over last four years.
Among the best organic growths
Among the companies performing better than Venus on growth,
Strides Arcolab revenue was boosted by its acquisitions of Ascent
Pharmahealth. Ascent Pharmahealth, one of the biggest branded
generic drug manufacturer in Australia, had sales of US$140mn in
FY10. Strides recently sold out 94% of its stake in Ascent to refocus
Four-S Research
8

9. 4 Jun 2012
Company Report: Venus Remedies
on speciality injectables.
As can be seen in the table below, Venus Remedies is among the
outperformers in its peer group on standalone basis as well, signifying
success of Venus Remedies to grow organically at very comfortable
rate. Venus Remedies has managed to propel its growth organically
using its strong product portfolio and strong presence in highly
growing injectable space.
Company
Revenue CAGR (FY08-FY11)
Ahlcon Parenterals
11%
Ajanta Pharma
17%
Claris Lifesciences
Indoco Remedies
Kilitch Drugs
4%
22%
8%
Natco Pharma
16%
Nectar Lifesciences
13%
Parabolic Drugs
31%
Parenteral Drugs
22%
Strides Arcolab
9%
Industry Avg
15%
Venus Remedies
19%
Standalone revenues, Rs mn
Comparing key P&L items
Better profitability parameters
Focus on high
margin products
has boosted
margins
Venus Remedies has outperformed most of its peers in profitability in
midcap as well as injectable peers while generating strong growth
numbers in last few years.
While injectable peers have EBITDA margins of 17% on average and
9% PAT margins, Venus Remedies has managed to clock 22% EBITDA
margin for TTM and 12% PAT TTM margins.
Venus Remedies has better margins among its mid-cap peer
companies which are averaging 19% EBITDA and 9% PAT margins
compared to 22% EBITDA and 12% PAT TTM margins of Venus
Remedies.
Four-S Research
9

10. 4 Jun 2012
Company Report: Venus Remedies
FY11 Margin (%)
Company
EBIDTA
TTM Margin (%)
PAT
EBIDTA
PAT
Mid-Cap Peers
Ajanta Pharma
19%
10%
21%
12%
Indoco
13%
11%
14%
9%
Natco Pharma
19%
12%
23%
12%
Nectar
20%
9%
18%
6%
Parabolic Drugs
15%
8%
18%
6%
17%
10%
19%
9%
Strides Arcolab
21%
7%
21%
32%
Ahlcon
16%
6%
16%
7%
Parenteral Drugs
10%
1%
-2%
-20%
Claris
31%
19%
32%
17%
Kilitch
15%
7%
17%
9%
Average
19%
8%
17%
9%
Industry Average
18%
9%
18%
9%
Venus
25%
13%
24%
12%
Average
Injectable Peers
Balance sheet ratios
Reasonable leverage
Company
Debt Equity (x)
Interest Coverage (x)
FY10
FY11 FY10
FY11
Mid-Cap Peers
Ajanta Pharma
0.83
0.8
2.87
4.02
Parabolic
2.65
1.25
2.03
2.27
Indoco
0.21
0.29
14.3
21.22
Nectar
0.97
1.1
2.59
2.35
Natco Pharma
0.39
0.62
4.88
4.99
Average
1.01
0.81
5.33
6.97
Injectable Peers
Ahlcon
0.29
0.66
7.35
3.17
KIlitch Drugs
0.57
0.63
4.27
4.94
Parenteral Drugs
0.62
0.75
3.17
1.3
Claris
0.39
0.38
4.07
4.07
Strides Arcolab
1.57
1.74
1.79
0.97
Average
Industry Average
Venus
0.69
0.85
0.87
0.83
0.82
0.79
4.13
4.73
4.28
2.89
4.93
3.77
Although Venus Remedies has investing heavily in its R&D and
capacity ramp up in last 3-4 years, its debt condition is in line with
industry scenario. Its financial position is pretty much on par
Four-S Research
10

11. Company Report: Venus Remedies
4 Jun 2012
compared to most of its peers as can be seen table above.
Liquidity ratios on par
Current Ratio (x)
Cash Ratio (x)
Company
Mid-Cap Peers
FY9
FY10
FY11
FY10
FY11
Ajanta Pharma
1.62
1.85
1.55
0.16
0.12
2.7
2.79
2.63
0.48
0.31
0.13
Indoco
Nectar
1.26
2.11
1.72
0.17
Natco Pharma
1.27
1.31
1.53
0.08
0.31
Average
1.71
2.02
1.86
0.21
0.2
Injectable Peers
Ahlcon
1.11
1.58
1.37
0.36
0.1
1.68
1.54
1.42
2.53
1.08
3.43
0.17
0.38
Claris
1.08
1.04
Strides Arcolab
1.39
2.12
1.86
0.37
0.19
Average
Industry
Average
1.43
1.91
1.94
0.43
0.36
1.57
1.96
1.90
0.32
0.28
Venus
1.65
1.50
1.67
0.11
0.11
KIlitch Drugs
Venus Remedies is maintaining liquidity status similar to peers in the
industry even though it has under taken high capex in last few years
in R&D and capacity up-gradation.
In March 2012, ICRA has assigned a BBB- rating to Venus Remedies
on its debt facilities, citing comfortable financial risk profile marked
by healthy size of net worth.
Four-S Research
11

12. 4 Jun 2012
Company Report: Venus Remedies
Comparing Peer Valuation
Dividing peer set into two parts
In the table below, as earlier, we have presented two sets of peers:
mid-cap pharma companies and companies in injectable space.
Valuation*
Company
P/E
EV/
EBIDTA
(TTM)
CAGRs 4 year
P/E
(TTM)
EV/
EBIDTA
EV/
TTM
Sales
TTM
Sales
4.62
9.72
8.96
6.13
1.69
17%
Indoco
10.70
10.84
9.28
8.13
1.24
Natco Pharma
TTM
NP
Ratios
D/E
ROCE
(FY11)
ROE
(FY11)
32%
0.80
22%
27%
21%
19%
0.29
14%
15%
Mid-Cap Peers
Ajanta Pharma
14.48
19.13
15.80
12.52
2.97
11%
10%
0.62
16%
16%
Nectar
5.35
5.41
5.58
5.58
1.10
13%
11%
1.10
14%
15%
Parabolic
5.00
2.18
5.95
3.60
0.89
31%
21%
1.25
15%
20%
Average
8.03
9.45
9.11
7.19
1.58
19%
19%
0.81
16%
19%
Injectable Peers
Strides Arcolab
9.59
4.85
13.80
11.89
2.53
35%
31%
1.74
12%
17%
Ahlcon
10.83
53.63
31.17
24.11
4.98
4%
-11%
0.66
17%
12%
Parenteral Drugs
88.27
-2.29
14.78
-139.91
1.51
32%
-36%
0.75
4%
2%
Claris
7.24
7.24
6.07
6.07
1.90
7%
19%
0.38
16%
15%
Kilitch
7.48
4.58
4.97
4.69
0.75
8%
-3%
0.63
13%
13%
24.68
13.60
14.16
11.69
2.33
17%
0%
0.83
12%
12%
16.4
11.53
11.6
9.44
1.96
18%
9%
0.82
14%
15%
Venus
3.98
3.28
3.91
4.06
*based on latest financial year, +excluding Parenteral Drugs
0.96
19%
9%
0.79
19%
23%
Average
Industry Average
Venus Remedies is discounted lower compared to all its peers
Sharp valuation
discount to both
injectables and
pharma peers
Venus Remedies is valued at a sharp discount by the market
compared to all of its peers. While Venus Remedies’ PE is ~3x FY12,
industry average is hovering at 8-9x. Amongst the peer set listed
above, parenteral peers get similar valuation compared to pharma
companies, but within the parenteral set as well, Venus is getting a
low valuation.
On a ttm basis Venus Remedies trades at discount of 70%, with a PE
ratio of 3 compared to industry average of 10.63x. Venus Remedies’
EV/EBITDA is at discount of 43% and EV/Sales shows a discount of
38% with respect to industry average.
Four-S Research
12

13. 4 Jun 2012
Company Report: Venus Remedies
Valuation and Price Target
Scope for higher valuations
Business
performance
supports better
valuation
In terms of business ratios, like growth rates, operating margins,
balance sheet ratios, Venus is doing as well as its peers.
It is likely Venus’ valuations are still suffering from the resettlement
of FCCB redemptions in FY10. This FCCB was issued in 2006, and
given the bear phase the Indian markets were going through in
FY10, the prevailing share price was much lower than the market
price. Accordingly, investors wanted redemption. However,
ultimately both parties agreed for a settlement at a lower price.
Liquidity situation continues to remain reasonable. The company’s
current rating is BBB-, as awarded by ICRA in March 2012.
Another reason for the low valuation is the high R&D spends, some
of which is passed through the balance sheet. Investors may be
wanting to see more tangible results from the investment on R&D.
We believe this scenario may change going forward as the market
begins to see more results from Venus’s R&D pipeline. We also
expect bottom-line growth to robust over FY12-14, as the company
derives greater share of sales from high margin products. Any
significant deal on Sulbactomax can be a further driver of rerating.
Price Target
3 year P/E band chart
400
PE
350
7x
300
250
5x
200
3x
150
100
50
Even if Venus
maintains
current ttm
Four-S Research
1-Feb-12
1-Dec-11
PE
1-Oct-11
1-Aug-11
1-Jun-11
1-Apr-11
PE
1-Feb-11
1-Dec-10
1-Oct-10
1-Aug-10
PE
1-Jun-10
1-Apr-10
1-Feb-10
1-Dec-09
1-Oct-09
1-Aug-09
1-Jun-09
1-Apr-09
0
Venus is currently trading at around 3.3x FY12 eps and 2.6x
expected FY13 eps. This is below its historic trading range of the last
3 years, and around the valuation at the depth of the 2009 bear
13

14. Company Report: Venus Remedies
valuations,
Mar’13 price
could touch
around Rs 225
Four-S Research
4 Jun 2012
market. These values are also much below peer levels. Similarly, its
EV/EBITDA for FY13 works out to 3.1x, which is much less than peer
levels.
We expect Venus to rerate upwards as market realises the strides it
has made it its R&D portfolio. We expect Venus’s price to cross Rs
200 over a 12 month period, implying a rating of 3.3x expected FY13
earnings. This is an upside of 23% from current levels.
14

15. Company Report: Venus Remedies
4 Jun 2012
Venus Remedies’ Business
As we noted in the valuation section, the low valuation given to
Venus could partly derive from a lack of understanding of its
business model. Its research model is quite unique compared to
most Indian pharma companies.
Second, inventors might not be giving much weight to its research
capability, and assigning much value to its research pipeline.
All of the above could arise because while Venus Remedies’ focus on
R&D has resulted in significant investments, strong returns are yet to
flow in. As a result, the company has not come close to generating
free cash flows in recent years.
These issues are discussed in detail below.
A vision to break-out from me-too companies
R&D push from
2006
Till year 2000, Venus Remedies was part of the cluttered generic
injectables products segment. At the time, Venus Remedies was
involved in generics injectables only. Realising generic products
would have a limited scope in the future with patent regime coming
into place in India from 2005; Venus Remedies changed its strategy
and decided to focus on innovation to drive its growth.
Venus Remedies started investing in R&D from year 2001. In a short
time of 4 years, they filed for their first patent for Sulbactomax. The
R&D effort is beginning to show steady results since then.
Understanding Venus’ R&D
R&D spends
above peer
levels
Venus Remedies is ranked 3rd among all Indian listed
pharmaceutical companies in terms of R&D spends as a share of
revenues. It is ranked among the top 15 R&D spenders in absolute
terms.
Rank
Companies
R&D Spend (FY11)
1
Dr Reddy’s Laboratories
8464
2
Sun Pharmaceutical Inds.
2860
3
Matrix Laboratories
2820
4
Cadila Healthcare
2686
5
Cipla
2598
6
Biocon
1725
7
Ranbaxy Laboratories
1670
8
Torrent Pharmaceuticals
1527
9
Lupin
1268
10
983
11
Four-S Research
Glenmark Pharmaceuticals
Aurobindo Pharma
815
15

16. 4 Jun 2012
Company Report: Venus Remedies
12
Panacea Biotec
772
13
Piramal Healthcare
716
14
Venus Remedies
696
15
Jupiter Bioscience
567
(Rs mn)
Rank
Companies
1
Vivo Bio Tech
% of revenue
49
2
Suven Life Sciences
22
3
Venus Remedies
19
4
Jupiter Bioscience
17
5
16
6
KDL Biotech
Sun Pharma Advanced Research
Company
7
Zenotech Laboratories
12
8
Dr Reddys Laboratories
11
9
Auromed
11
14
Venus Remedies has invested more than Rs 1.5bn in the last 3
years, which is around 16.5% of its revenue in this period. For last
three years, all the capex is done is also mainly in R&D, up-gradation
and modernisation.
R&D capability of Venus Remedies
A multi-pronged
approach
The Company has proven its R&D capability with the gradual
increase of revenue from the research products and 80+ patents in
hand from over 51 countries. Venus has, in all, 11 testing labs
working together to develop first-of-its kind product through highly
sophisticated technology. It has developed 13 research products in
short span of 9-10 years. At any time, R&D has a pipeline of 20+
products. On average, the Company comes out with 1-2 new
developed products every year.
In FY10, Venus Remedies launched Mebatic, an infusion therapy and
Ampucare, a wound healing therapy, a first of its kind product in
India. In FY12 Venus Remedies launched Achnil, a once-a-day
painkiller.
Venus has a well developed R&D centre with high tech capabilities at
par with stringent cGLP standards. Its R&D centre has a strong 60
member scientist team; 70% of them are PhDs and post graduates.
In licensed
tumour
detection
technology from
University of
Illinois
Four-S Research
The Company also benefits from in-licensing alliances with various
innovative companies and university. It has in-licensed solid tumour
detection technology for early detection from University of Illinois.
Such alliances have enhanced company’s R&D capabilities and have
helped to improvise its R&D process.
As of now, Venus is preparing to file more than 100 CTDs and ACTDs
16

17. Company Report: Venus Remedies
4 Jun 2012
each in the coming 3 years to take its present count of 600 ACTDs to
700 and 108 CTDs to 200 by 2015.
Key Research areas
Nano-tech
based sustained
release
formulations
Novel Drug Delivery System (NDDS): Venus has achieved success in
development of nanotechnology-based, sustained release and
targeted delivery formulations with NDDS. This has resulted in
developing formulations with reduced adverse drug reaction and side
effects in therapeutics
areas of oncology, NSAID, neuroscience,
arthritic disorders, stress and lifestyle-related diseases, immune
chemistry, infectious diseases and wound healing. NDDS is advance
drug delivery system which improves drug potency, control
drug release to give a sustained therapeutic effect and provide
greater safety. It is used to target a drug specifically to a desired
tissue.
Non-infringing
formulations
Formulation Development: Venus is building its IP through
developing non-infringing formulations. Company is developing
various formulations to revitalise established brands, fill product
pipeline gaps and enhance patient compliance. With the help of
strong regulatory team, Venus has managed to gain early mover
advantage in many leading generic markets.
Research Capabilities:
Process
developme
nt and
technology
transfer
Analytical
research
division
(ARD)
Clinical
research
services
Research
Capabilities
Office of
research
support
(ORS)
Natural
product
research
Chemical
and
stability
testing
Preclinical
division
(PCD)
Process development and technology transfer: Ability to
transfer technology from laboratory to pilot and to manufacturing
scale. This is vital in technology transfer required to scale a
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17

18. Company Report: Venus Remedies
4 Jun 2012
successful molecule and technology transfer in out-licensing deals.
Analytical research division: Capable in developing novel
formulations, analytical development and drug design support.
Chemical and stability testing division: Capability to perform
stability tests as per ICH guidelines provides analytical services to
research dept and meets international quality and regulatory
standards.
Pre-clinical division: Performs pre-clinical trials and oxicological
studies under GLP environment.
Natural product research: screens natural products and drug
development as per pharmacopial and medicine standards.
Office of research support: Bridges the gap between research
and marketing through interactions with the field force, training
marketing teams, addressing queries raised by the PMT team and
designing experiments for research value-addition.
Clinical research services: Division involved in Phase-I, II, III, IV
and BA/ BE clinical studies monitoring, as per GCP, for its research
products to accelerated the delivery of safe and effective
therapeutics.
Key Initiatives in R&D
Cell Culture Molecular Biology (CCMB) laboratory
Working on a
novel cancer
treatment
Venus has setup CCMB laboratory in affiliation with some other
pharma companies to fasten the cancer drugs testing. The company
has 4-5 such products which are expected launched in next 4-5
years. Company is also working on novel cancer drug for targetspecific treatment (90% of the drug will go to the affected area
against the present 10%). This will reduce the side effects of these
drugs and also brings down the costs.
Tie-ups with renowned research institutes
A typhoid
testing kit
through a
research tie-up
Company has tie-ups with IMTECH, a renowned research center of
CSIR and Punjab University. Through this alliance, company is
developing a typhoid diagnostic kit. This kit will reduce detection
time from 48 hrs to few minutes. Company has the authorisation to
market this kit worldwide.
Products conforming to ASEAN CTD
Venus has upgraded its entire product pipeline of 75 products to
ASEAN CTD preparing the entire portfolio for international.
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18

19. Company Report: Venus Remedies
4 Jun 2012
Capitalising the IP
Seeking out
licensing deals
to monetise IP
Venus Remedies understands that it is not easy to capitalise the IP
wealth they are creating in the huge global market. So to maximise
the potential of this IP development, it has a clear strategy in place.
Venus Remedies has appointed a leading consulting firm to seek tieups with international pharma companies for Sulbactomax.
Venus Remedies plans to out-license the patented products to multinational and regional companies with specific geographical interest
considered. This will help Venus Remedies to garner the benefits
from market across the globe without having to invest in market
development.
Venus Remedies has already closed an out-licensing alliance with a
major South-Korean Pharma company for Sulbactomax. For FY12,
Venus Remedies expects to get 25% of its revenue from its own
research products.
Venus Remedies’ Manufacturing excellence
Among
global
manufacturing
leaders
in
fixed
dosage
injectable
Venus Remedies is among world’s top 10 injectable manufacturers
and has the largest super specialty injectable manufacturing capacity
in Asia. Venus has strong presence in relatively uncluttered,
specialised, higher margin fixed dosage injectable space. Global
injectable market is pegged at US$200bn in 2010 with generic
market contributing US$20bn of it.
There are limited numbers of players in the injectable space and high
investment is required in setting up the complex plants. This will
keep margins in this segment high with lesser competition to face in
the market.
Prominent Products
15% of FY11
revenue
Sulbactomax: It is the top product in Venus Remedies kitty with
15% revenue contribution in FY12. The company holds patents for
Sulbactomax in South Africa, India, 37 countries of the European
Union, Russia, Ukraine, Mexico, Australia and New Zealand while
patent is still awaited in six countries including US and Brazil.
Sulbactomax is the only product in its category to prevent bacterial
resistance. Sulbactomax is a formulation of ceftriaxone and
sulbactam with VRP1034. The global injectable antibiotic market is
US$200bn of which Ceftriaxone alone accounts around US$1.2bn.
Sulbactomax aims to target a significant share of this market
because of the growing bacterial resistance. Venus is currently
marketing this product in India and seven other countries.
Potentox: It is ranked second in Venus Remedies with respect to
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19

20. Company Report: Venus Remedies
4.2% of FY11
revenue
3% of FY11
revenue
4 Jun 2012
revenue contribution (4.6% in FY12). Company has patents in South
Africa, New Zealand, South Korea, Australia, Ukraine and India.
Patents awaited from 44 other countries including EU and US.
Potentox, a research-based super-specialty product is used for
treating hospital and community acquired pneumonia and febrile
neutropenia. It reduces pneumonia treatment time from 21-30 days
to 7-10 days and reduces drug and disease-induced toxicities. This is
the only solution to growing flouroquinolene and aminoglycoside
resistance.
Vancoplus: It is third biggest product of Venus with 3% of revenue
in FY11. The company holds patent in US, Japan, Australia, South
Africa, New Zealand and Ukraine. Patents awaited from 44 other
countries including EU and Brazil.
It is the only remedy after vaccination to treat superbug like MSRA,
VRSA, VRE and multi-drug-resistant microbes causing meningitis.
The product effectively stops the spread of resistance by preventing
bacterial conjugation.
2% of FY11
revenue
Tobracef: Tobracef contributed 2% of revenue in FY11. It’s a
research-based anti-infective product catering to Pseudomonal
infections caused in Cystic Fibrosis and HAP with patents in South
Africa and patents awaited from other countries. Once company get
patents and authorisation in major regulated market, this could also
turn out to be major blockbuster project for Venus Remedies.
Neurotol: Neurotol is an innovative product which contains mannitol
and glycerine. Neurotol is used in the management of raised
intracranial pressure and brain oedema associated with cerebral
infraction, intracerebral hemorrhage, head injury, subdural
hematoma, brain tumour, encephalitis and toxemia. Neurotol is
widely accepted by medical fraternity like neurosurgeons and
neurophysicians. The synergy of mannitol and glycerin in Neurotol
prevents the chances of rebound oedema. Mannitol is known to
provide immediate effect while glycerin is helpful for sustained
effect. Venus is the first company to introduce this product. Neurotol
offers improved patient compliance with no side-effects when
compared with plain generic mannitol.
Launched in
FY11
Achnil: Achnil is an NDDS based controlled and sustained release
NSAID
(non steroidal anti-inflammatory drug) injection. It is the
world’s first once-a-day pain killer injection which replaces the three
injections per day therapy. It has already got patent application in
EU and India while patent in US in under process. Achnil was
launched in FY11 in the domestic market. The product prevents post
surgical adhesion and has high levels of safety.
Venus Research Product portfolio
Four-S Research
20

21. Company Report: Venus Remedies
4 Jun 2012
Products
Therapy
Nature
Sulbactomax
Caters to ESBL, NMD-1, Penem Resistance
Injection
Vancoplus
Caters to MRSA, VRSA & VRE
Injection
Potentox
Caters to HAP, Febrile Neutropenia
Injection
Tobracef
Developed for Cystic fibrosis
Injection
Zydotum
For Pseudomonas Infections In Burns
Injection
Supime
Intra-abdominal infections caused by various pathogens and postoperative infections
Injection
Pirotum
Treatment of peritonitis and complicated intra-abdominal infections,
pirotum is indicated. continuous ambulatory pulmonary dialysis,
management of lower respiratory tract infections and febrile
neutropenia
Injection
Neurotol
For raised intracranial pressure and brain oedema associated with
cerebral infraction, intracerebral hemorrhage, head injury, subdural
hematoma, brain tumour, encephalitis and toxemia.
Infusion
Mebatic
For pre and post surgical procedures, pelvic infections, urinary tract
infections, urogenital tract infections, typhoid and prevention of ICU
infections due to anaerobes.
Infusion
AMR compatible research products
AMR has rapidly
emerged as a
big global
health threat
Antibiotic Resistance is spreading faster than expected throughout
world and the poor R&D pipeline for new antibiotics is further adding
up this menace. Recently, World Health Organisation (WHO) has also
taken this issue with vigour by making this as main theme for World
Health Day. According to WHO, AMR results in prolonged illness and
greater risk of death. AMR not only increase overall health cost bur
WHO feels world may end up in pre anti-biotic era.
AMR has become serious problem for treatment for many major
diseases like HIV, tuberculosis, malaria, gonorrhoea and many more.
Risk factor involved in the infectious diseases has grown much more
than it even existed and if it would keep on growing at the same
pace, the world will soon reach the pre-antibiotic era again.
The situation has deteriorated to an extent that even a mild infection
can be deadly in today's world. The rising misuse and under usage
has made the life saving antibiotics ineffective against the microbes.
Reports say that US households lost approximately US$35bn in 2000
to antibiotic resistant infections including lost wages, extended
hospital stays and premature deaths. The annual cost to the US
health care system of antibiotic resistant infections is US$21bn to
US$34bn and more than 8mn additional hospital days.
In 29 countries of European union, an estimated 25,000 people die
every year because of the infections related to antibiotics resistance.
The medical cost per patient suffering from an antibiotic resistance
(ABR) infections ranges from US$18,588 to US$ 29,069. According
to the BCC Research report, the global market for infectious disease
treatments was valued at $90.4 billion in 2009. This market is
expected to increase at a compound annual growth rate (CAGR) of
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21

22. Company Report: Venus Remedies
4 Jun 2012
8.8% to reach US$138bn in 2014. The antibiotics market generated
sales of US$42bn in 2009 globally, representing 46 percent of sales
of anti-infective agents (which also include antiviral drugs and
vaccines) and five percent of the global pharma market.
Inception of new antibiotics is getting difficult because of the present
drug development scenario which is fraught with financial,
regulatory, ethical and scientific bottlenecks. Due to huge investment
in R&D and less output (financially) out of the product dejects the
pharmaceutical companies to invest in it.
Today, Venus Remedies is one of the few R&D led companies to have
innovated and developed a comprehensive range of novel antibiotic
combinations which not just provide relief from the aggravated
problem of antibiotic resistance but also are cost-effective and have
reduced side effects. All products which came out of Venus research
efforts do cater to antimicrobial resistance.
Products
Sulbactomax
Category
Antibiotic
Dose
Indications
Once daily IM/ IV injection in
mild to moderate infections and
twice daily in severe infections
Infections caused by ESBL resistant
pathogens:







Lower respiratory tract infection
Urinary tract infection
Skin infections
Surgical prophylaxis
Bone and Joint infections
Acute bacterial septicemia
Acute Otitis media
Potentox
Antibiotic
Twice Daily
Multi-drug resistance of:
 Nosocomial Pneumonia
 Febrile Neutropenia
 Other severe hospital acquired
infections
Vancoplus
Antibiotic
Twice Daily IV injection in mild to
moderate infections and thrice
daily in severe infections.
Infections caused by resistant pathogens
such as MRSA:
 Meningitis
 Septicemia
 Skin and skin structure infections
 Bone and joint infections
 Post operative infections
Tobracef
Antibiotic
Twice Daily injection
Acute pulmonary exacerbations due to:
 Cystis fibrosis
 Pneumonia
 COPD
Presence in highly specialised generics
Within generics, which were around 75% of revenue in FY11, Venus
has shifted focus to high margin products. Currently, Venus sells
around 75+ products, with around 20+ products under development
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22

23. Company Report: Venus Remedies
4 Jun 2012
phase at any point of time.
Carbapenams, a
key part of
generics folio
Meropenem is one such generic product (carbapenem injection).
Venus Remedies has received market authorisation for Meropenem
in EU. This represents a €150mn market opportunity, putting Venus
among the top 3 EU-GMP manufacturers globally of carbapenem
antibiotics.
The Company has also received market authorisation for
Imipenem+Cilastatin, Docitaxel and Irinotecan in the European
Union. Similarly Venus also has market authorisation in for
Gemcitabine for U.K., Germany, Poland Slovania, Portugal and
Macedonia.
Oncology
generics are
about 29% of
revenue
Venus also has strong presence in oncology segment with 21
injectables in its portfolio. Oncology segment contributed more than
30% to FY11 revenues, with extremely good margins. These are
much specialised products and high technology is required in
manufacturing these products.
A key oncology product for Venus Remedies is Gemcitabine, for
which it has marketing authorisation for in EU and UK. Gemcitabine
is established as a gold standard therapy in treating pancreatic
cancer.
Venus understands the importance of this highly specialised, high
technology, high margin oncology business. Hence, the Company has
setup a dedicated sub-business unit for oncology business covering
almost all cancer types just to further strengthen the focus on it.
Oncology segment is likely to remain high growth has patents of
oncology injectables, currently worth US$8.3bn, are set to expire by
FY2015.
Products kitty
As can be seen, Venus has a strong kitty of 8 R&D products
marketed in 12 nations. In the high margin oncology segment, it has
19 products with presence in 23 nations. Carbapenem and
Cephalosporin has 20 products, with Carbapenem products sold in 23
nations.
Category
No. of products
Presence
R&D products
8 products
12 nations
Oncology liquid
19 nations
Oncology lyphilised
10 products (in various dosage
forms)
9 products
Carbapenem
3 products
23 nations
Cephalosporin and other
17 products
18 nations
5 products
11 nations
23 nations
injectables
PFS and infusions
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24. Company Report: Venus Remedies
4 Jun 2012
Bigger the pipeline, greater the in-flow in future
Venus Remedies has strong R&D product pipeline as of now with
more than 10 products at various stages of research. This comprises
of products from therapeutic segments such as oncology, antiinfection and neuro.
Typhoid and
tumour
detection kits
part of IP
pipeline
Some of the products close to commercialisation include a Typhoid
detection kit. With 17mn patients every year for typhoid, this
detection kit has the potential to be a key revenue generator for
Venus Remedies in future. The kit reduces the time taken for a
typhoid test sharply, from 48 hours to few minutes.
Similarly Venus has Tumatrek, an early tumour detection test in
phase III and DPPC, a novel triple conjugate for targeted delivery of
anticancer drug in preclinical phase. Venus also has products on
oral, breast and ovarian cancer under pre-clinical tests.
This strong pipeline creates strong prospects for Venus Remedies to
drive the growth with its research products.
Accolades & Awards showcasing research efforts
Venus has received number of awards and accolades in last few
years affirming the efforts and path chosen by the company. Venus
has won awards for its research products and patents filed by
company and as emerging company & manufacturing excellence.
List of awards won by Venus Remedies:
 BioSpectrum Product of the Year 2012 award for its novel research
product 'ACHNIL', a once-a-day painkiller.
 Gold Patent award 2011 for the novel research drugs presented by
Pharmexcil.
 The Bizz- Business Excellence Award 2011 received in US.
 'Silver Certificate of Merit' in the Economic Times' India
Manufacturing Excellence Awards (IMEA), 2011 held in Mumbai.
 'Emerging Company of the Year 2011' award in the 4th annual
Pharmaceutical Leadership Summit & Award 2011.
 Best SMB Award 2008
 Emerging India Award 2007 presented by Dr. Manmohan Singh
Prime Minister of India.
 Ampucare Gold Medal 2010
'India Innovation Program- 2010'
organized by Lockheed Martin (USA), FICCI and DST (India)‫‏‬
.
 Trois: Gold Medal 2011
'India Innovation Programme - 2011'
organized by Lockheed Martin (USA), FICCI.
 Quality Award 2011 in Gold category from BID International
convention at Geneva.
 2011 Spotlight award for the Annual Report in the LACP's (League
of American Communications Professionals) Global Communication
Competition In Bronze category in San Diego, USA.
Marketing & Distribution
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25. Company Report: Venus Remedies
Pan India
distribution
reach
4 Jun 2012
Venus has established a pan-India marketing presence covering 24
States and two Union Territories, supported by over 700 marketing
professionals.
Venus Remedies has reach of 2,000 stockists and 40 distributors
across India for the domestic market. These help target over 40,000
Pharmacies and 120,000 medical practitioners. The company has
strong emphasis is on developing network of medical practitioners in
critical care segment to address their specialised product market.
Marketing Alliances to expand the reach
Enhanced by
tie-ups with
other pharma
companies
To improve the reach within the domestic market, Venus Remedies
has entered into tie-ups with many renowned Indian Pharma
companies like Abbot, IPCA, Glenmark, Lupin, Elder, etc. To target
the international markets in a better way, Venus Remedies has 11
overseas offices to cover 60 countries. Venus Remedies sells 44
products internationally with 3 research products launched till now.
Similar to its domestic market strategy, Venus Remedies has made
20+ international alliances for its international market.
Global Presence
Direct overseas
presence in 11
countries
To capitalise on its IP pipeline, Venus Remedies has developed multiregional presence across the globe. Venus has setup 11 overseas
marketing offices covering 60 countries up from 19 countries in
FY08. The 22 member team promotes 52 products across the globe.
It has export presence in 25 countries with the help of these offices.
World Class manufacturing capacities
3 manufacturing
plants, 2 in
India, one in
Germany
Venus Remedies has state of the art manufacturing facilities with the
latest technology. The company has invested more than Rs 2bn for a
100mn units injectable manufacturing facility at its unit in Baddi,
Himachal Pradesh. This has resulted in more than 20 international
GMP certifications from more than 50 countries. This facility
manufactures in all 75+ super specialty products.
In all, Venus Remedies has 3 manufacturing locations: Baddi,
Panchkula (India) and one in Germany. All are with EU-GMP and
WHO-GMP certification along with other certifications.
Its Panchkula site has 7.5mn units capacity for large volume
parenterals accredited with WHO-GMP. Products manufactured at
this facility include Mebatic, Calridol, Moximicin, Neurotol, Glutapep,
among others.
The Baddi campus has eight small volume parenteral facilities. It
manufactures oncology injections, oncology lyophilised, lyophilised
injections, pre-filled syringes and cephalosphorins. It has been
accredited with more than 20GMPs. Recently; its Baddi plant has
received GCC certification for oncology and carbepenem products,
the first in India.
Four-S Research
25

26. Company Report: Venus Remedies
4 Jun 2012
Venus Pharma GmbH (Germany)
With the goal in mind to be a true global Pharma company, Venus
acquired the German Pharma company in 2006. It’s strategically
located in the second largest Pharma market and largest in Europe,
Germany. This acts as an entry vehicle for Venus Remedies products
in European market.
Venus Pharma GmbH helps Venus Remedies to generate export
orders for its products, executes site transfer projects and supports
in CTDs filing.
Revenue distribution
Dry powder and
oncology are
the two key
segments
Venus Remedies has a strong existence in dry powder segment
constituting 33% of revenue in FY11. Cehpalosporin and penem
products constitute this dry powder segment. Venus Remedies has
strong presence in this segment in both generic products and also in
research products. With multiple countries GMP certification for its
manufacturing plant, the export market may grow at very good rate
for this segment.
Revenue Distribution
Anti-cancer
24%
31%
Cephalosporin (Inc
Carbapenem)
Infusions
12%
SVP & Others
33%
With many products still new in the market and in the process of
developing its market, high growth in all the segments especially in
oncology, dry powder is very much visible in the coming few years
Four-S Research
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27. 4 Jun 2012
Company Report: Venus Remedies
Focus on higher margin products
Dry Powder Revenues
1,350
60%
1,300
50%
1,250
40%
INR mn
1,200
30%
1,150
20%
1,100
10%
1,050
1,000
0%
FY08
FY09
FY10
Dry Powder
Dry power share
coming down
FY11
FY12E
% of Total Revenues
In line with focus on high margin products, share of revenue of dry
powder products is coming down.
Increasing higher margin oncology segment
Oncology biz growth
1,400
35%
Oncology Segment
1,200
% of Revenue
30%
1,000
25%
800
20%
600
15%
400
10%
200
5%
0
0%
FY08
Oncology is a
focus segment
for Venus
FY09
FY10
FY11
FY12E
Oncology segment contributes almost 31% of overall revenue of
Venus Remedies. Due to complex products, critical nature and
sophisticated technology involved in this segment, margins are
better here.
Venus Remedies has successfully managed to improve oncology
contribution. Oncology segment has grown CAGR of 30% in last 4
years. With more than 300 market authorisations from 25 countries,
Four-S Research
27

28. Company Report: Venus Remedies
4 Jun 2012
the company should be able to maintain this thrust.
Risk Factors
Venus Remedies has the policy of capitalising major portion of its
R&D expenditure. In FY11, Venus Remedies capitalised Rs 557mn of
R&D expenditure out of its Rs 686mn R&D expenditure. R&D
expenditure capitalisation is not new for pharma companies as most
of Indian pharma companies do capitalise part of their R&D
expenditure. Yet amount of R&D expenditure capitalised is much
higher compared to many other major pharma companies.
The Company attributes this to expenditure on research which is yet
to be commercialised; around 360 patent applications are still
pending. The Company is capitalising expenditure on R&D, IPR, CTD
/ACTD and other product registration expenses, R&D activities like
clinical trials, process development & technology transfer, in
licensing and formulation development from in-licensed technology,
expenses on analytical & chemical research on products under
commercialization, etc.
This R&D expenditure capitalisation is also reflected in cash flow.
Though Venus has good positive operation cash flow, company is
suffering from negative free cash flow.
Four-S Research
28

29. Company Report: Venus Remedies
4 Jun 2012
Financial Analysis and Growth Outlook
15% CAGR for revenue expected during FY’12-14
The Company’s net revenues have grown at a CAGR of 18% over
FY’08-’12E (for FY12 only stand alone results declared so far,
consolidated are our estimates) to Rs 4.78bn from Rs 2.15bn in FY08.
Revenue Growth
4,500
4,000
4 year revenue
CAGR is 18%, 3
year growth is
12%
3,500
3,000
2,500
2,000
1,500
1,000
500
FY'08
FY'09
FY'10
FY'11
FY'12E
(Rs mn)
The top line of Venus is expected to grow at CAGR of 15% over FY1114.
Revenue Growth Expected
6,000
Growth to be
driven by newly
launched
products and
expansion in
regional
presence
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
FY'11
Four-S Research
FY'12E
FY'13E
FY'14E
29

30. Company Report: Venus Remedies
4 Jun 2012
Segment Performance
Oncology and Dry powder are major revenue contributors, making up
30.7% and 33% of revenues in FY12 respectively. One can see the
growing contribution of oncology segment to Venus Remedies.
Revenue Mix
4,500
4,000
Anti- Cancer
3,500
Dry Powders
3,000
2,500
IV fluids
2,000
1,500
S.V.P(Injectio
ns/Amp/PFS)
1,000
Others
500
0
FY05
FY06
FY07
FY08
FY09
FY10
FY11 FY12E
Oncology segment
Strong growth
seen in
Oncology
segment
Oncology segment is growing at handsome rate of 42% in last 4 years
growing from Rs 269mn in FY07 to Rs 1,047mn in FY11. This growth
was driven by increasing demand from the segment, more than 375
market authorisations across the globe and more than 21 injectable
products.
Growth in oncology segment
1,400
1,200
1,000
800
600
400
200
0
FY08
FY09
FY10
FY11
FY12E
Cephalosporin (Dry powder)
Cephalosporic segment has grown at stable rate of 10% CAGR in last 5
years. This is mainly driven by new research products which are
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30

31. Company Report: Venus Remedies
4 Jun 2012
increasing their revenue contribution as the time passes and are
expected to add high value in the years to come.
Margins expected to move up
Venus Remedies has maintained good margins historically. It has
managed to maintain EBITDA margins of 20-25% through out last few
years. With the range of products launched recently and increasing
contribution from oncology, this segment is further expected to
improve.
Venus Remedies EBITDA is expected to grow from Rs 303mn in FY07
to Rs 1022 in FY12 at CAGR of 28%.
Impressive EBITDA performance
1,200
25%
EBITDA
EBITDA Margin
25%
1,000
24%
24%
800
23%
600
23%
22%
400
22%
21%
200
21%
-
20%
FY'07
FY'08
FY'09
FY'10
FY'11
FY'12E
Net profit is expected to grow from Rs 238mn in FY07 to Rs 493mn at
the CAGR of more than 16%.
Net Profit Growth
550
Net profit has
grown at 16%
CAGR over
FY07-12
500
450
400
350
300
250
FY'07
Four-S Research
FY'08
FY'09
FY'10
FY'11
FY'12E
31

32. 4 Jun 2012
Company Report: Venus Remedies
Financial Annexure
Profit & Loss Statement
Income Statement
FY'08
FY'09
FY'10
FY'11
FY'12E
FY'13E
FY'14E
Gross Sales
2,165
2,692
3,144
3,637
4,196
4,795
5,554
9
4
4
6
0
7
8
4,788
5,546
Less : Excise Duty
Revenue from Operations
Decrease/(Increase) in Stock
Raw Materials Consumed
Manufacturing/Other expenses
Payments to and provision for
employees
2,156
2,688
3,140
3,631
4,196
-48
-82
-62
-39
-90
-66
-77
1336
1668
1885
2054
2398
2666
3055
73
107
147
171
199
228
264
119
141
167
200
253
301
362
38
44
Power & Fuel Cost
19
20
17
27
34
Selling and Distribution Expenses
62
98
153
198
231
264
305
Administrative & Other expenses
57
87
91
119
150
171
198
Miscellaneous Expenses
25
23
14
9
0
0
0
3,602
4,152
Total Expenses
EBITDA
Depreciation
EBIT
1,643
2,063
2,413
2,739
3,174
512
625
728
892
1,022
1,186
1,395
50
68
125
181
249
275
307
462
558
603
711
773
912
1,087
13
15
Other Income
19
3
2
4
11
Financial Expenses
Profit before tax and
Exceptional Items
48
84
141
189
256
256
256
433
477
464
526
528
668
846
Exceptional Items
-
-
-
-
-
-
-
Profit before tax
433
477
464
526
528
668
846
58
90
Tax
Profit after tax before minority
interest
75
37
68
64
36
358
440
396
462
493
610
755
Reported net profit
358
440
396
462
493
610
755
(Rs mn), consolidated financials
Four-S Research
32

33. 4 Jun 2012
Company Report: Venus Remedies
Balance Sheet
Balance Sheet
FY'08
FY'09
FY'10
FY'11
FY'12E
FY'13E
FY'14E
Shareholder's Equity
Share Capital
Reserves and Surplus
ESOPs
Total equity capital
85
85
85
133
188
188
188
784
1,259
1,627
2,236
2,896
3,506
4,261
-
-
-
-
-
-
-
890
1,386
1,712
2,369
3,083
3,693
4,449
475
698
917
1,648
1,966
1,966
1,966
482
618
577
221
215
215
215
42
60
76
92
94
96
96
1,889
2,762
3,281
4,330
5,358
5,971
6,726
-
-
-
-
-
-
-
1,526
2,096
2,609
3,429
4,332
4,930
5,653
138
192
314
496
745
1019
1326
1388
1905
2295
2933
3588
3911
4327
14
8
7
145
200
225
325
-
-
-
-
-
-
-
278
446
619
754
960
1066
1200
169
330
283
357
430
535
619
11
16
24
31
42
67
95
0
0
0
0
0
0
0
183
239
260
378
464
583
700
1,518
1,519
1,520
1,521
1,522
1,523
1,524
Liabilities
Secured Loans
Unsecured Loans
Deferred Tax Liability
Total Liabilities and Owner's
Equity
Assets
Goodwill on consolidation
Gross Block
Less: Depreciation
Net Fixed Assets
Work-in-progress
Investments
Inventory
Debtors
Cash and Bank Balance
Other Current Assets
Loans and Advances
Total Current Assets
Current Liabilities
Provision
Total Current Liabilities
Net Current Assets
Total Assets
86
113
98
116
190
250
330
106
92
121
162
145
175
220
192
205
220
278
335
425
550
2064
449
825
967
1242
1561
1825
1889
2762
3281
4330
5358
5971
6726
(Rs mn)
Four-S Research
33

34. 4 Jun 2012
Company Report: Venus Remedies
Cash Flow Statement
Cash Flow Statement
FY'08
FY'09
FY'10
FY'11
FY'12E
FY'13E
FY'14E
433
477
464
526
528
668
846
50
52
125
182
249
275
307
4
2
2
0
0
0
0
Expenses Amortised
Adjustment of excess mat Transferred to gen
reserve
15
14
13
9
0
0
0
0
0
-15
53
52
53
50
Adjustment for FBT
-2
-3
25
4
0
0
0
500
541
613
774
830
996
1203
-275
-275
-148
-327
-365
-329
-336
-33
-72
-123
-73
57
90
125
-2
-4
0
0
0
0
0
190
189
342
373
522
756
992
0
0
0
0
-86
-109
-140
Operating Cash flow- A
190
189
342
373
436
647
852
Purchase/Sale of Fixed Assets (net)
-743
-570
-512
-820
-904
-598
-724
403
6
0
-144
-55
-25
-100
1
0
0
0
0
0
0
Cash from Investing activities- B
-338
-564
-512
-964
-959
-623
-824
Proceeds from Issue of Share Capital
0
0
0
48
54
0
0
proceed from share capital(share premium)
-26
198
0
175
166
0
0
Proceeds from Long Term Borrowing( Net)
133
160
25
731
318
0
0
Proceeds from Short term Borrowing( Net)
22
20
153
-357
-6
0
0
Cash from Financing activities- C
129
379
178
598
533
0
0
Change in Cash= A+B+C
-19
5
8
7
11
25
28
Opening Balance
30
11
13
24
31
42
67
Closing Balance
11
16
21
31
42
67
95
Net Profit/(Loss) before Tax
Depreciation
Deferred Employee Compensations
Operating Cash flow before Wcap
Adjustments for increase /decrease in Current
Assets
Decrease / Increase in Current Liabilities/
Provisions
Extraordinary Items
Cash Generated from Operations
Direct Taxes Paid
Decrease in Capital Work-in-Progress (including
capital advances)
Interest received
(Rs mn)
Four-S Research
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35. Company Report: Venus Remedies
4 Jun 2012
Ratios
Ratios
FY'08
FY'09
FY'10
FY'11
FY'12E
FY'13E
FY'14E
EPS
42.4
52.0
46.7
50.6
50.6
62.6
77.5
CEPS
22.5
22.4
40.4
40.9
44.8
66.5
87.4
2.0
2.5
1.0
1.3
1.4
1.7
2.1
P/E Ratio
9.1
2.9
5.5
4.0
3.3
2.6
2.1
EV/EBITDA
8.2
4.1
5.0
4.1
3.7
3.1
2.7
EV/Sales
2.0
1.0
1.2
1.0
0.9
0.8
0.7
EBITDA margin
23.8%
23.3%
23.2%
24.6%
24.4%
24.8%
25.1%
Pretax margin
20.1%
17.7%
14.8%
14.5%
12.6%
14.0%
15.3%
Net margin
16.6%
16.4%
12.6%
12.7%
11.7%
12.7%
13.6%
Return on avg. Equity
21.7%
38.6%
25.5%
22.7%
18.1%
18.0%
18.6%
Return on avg. Capital employed
18.1%
24.5%
20.4%
19.1%
16.3%
16.4%
17.4%
Revenue growth
53.7%
24.7%
16.8%
15.6%
15.6%
14.1%
15.8%
EBITDA growth
69.3%
22.0%
16.3%
22.6%
14.5%
16.1%
17.6%
Net profit growth
52.5%
10.0%
-2.7%
16.8%
6.6%
23.9%
23.8%
Asset turnover
0.9
1.3
1.1
1.0
0.9
0.9
0.9
Working Cap turnover
6.2
4.2
3.5
3.3
3.0
2.8
2.9
Debtors turnover
16.3
10.8
10.3
11.3
11.3
9.9
9.6
Debtor Days
22.4
33.8
35.6
32.2
32.2
36.8
38.0
9.4
7.4
5.9
5.3
4.9
4.7
4.9
Inventory Days
38.8
49.2
61.9
69.0
74.6
77.2
74.6
Payables turnover
32.2
27.0
29.7
33.8
27.4
21.8
19.1
Payables Days
11.3
13.5
12.3
10.8
13.3
16.8
19.1
Current Ratio
1.4
1.7
1.5
1.7
1.6
1.8
1.8
Cash Ratio
0.2
0.1
0.1
0.1
0.1
0.1
0.2
Debt Equity
1.1
0.9
0.9
0.8
0.7
0.6
0.5
Leverage Ratio
2.1
2.0
1.9
1.8
1.7
1.6
1.5
Net Debt / EBITDA
1.8
2.1
2.0
2.1
2.1
1.8
1.5
Interest Coverage
9.7
6.6
4.3
3.8
3.0
3.6
4.2
DPS
Valuation Ratios
Profitability
Growth Ratios
Activity/Turnover Ratios
Inventory turnover
Liquidity Ratios
Solvency
Four-S Research
35

36. Company Report: Venus Remedies
4 Jun 2012
About Four-S Services
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Four-S Research
36