Dechra Pharmaceuticals Share Discussion Threads

[simon gordon] 23/1/2006 10:02

After another look at NVS I think it could easily be susceptible to increased competition or a growth slowdown which would hurt margins - a drop on sales or margins will hit the bottom line swiftly. The profits in this division are not super secure and should be valued at around 11x earnings with the pharma at 18x. As the profits are not broken down it makes it hard to properly value DPH but from what I read the NVS division is the main profit centre of the business.

The pharma division is pretty small and I am suprised they are listed in the Pharma sector as this is such a small part of the business with a lead time of 5 years to bring a drug to market and hardcore competition from the large animal drug companies. A p/e of 14.5 for '07 looks high and 13 would be fairer value as they are not a very dynamic growth stock. As a comparision VOD offers a forward P/E of 10.5, yield of 4.2%, and a new dynamic Chairman about to join.

[simon gordon] 21/1/2006 10:24

I thank you for explaining that.

Looking five years out what market cap. size are you hoping for?

One factor I like is that the balance sheet has plenty of room to grow.

[shuisky] 21/1/2006 09:01

Hi Simon, FWIW I don't think that distribution of animal pharmaceuticals is as tied to the economic cycle as you seem to be suggesting. If your pet/stock is ill than it's ill! I'm willing to be proved wrong on this point but i don't think their profitability is tied to the economic cycles.

NVS' margins are relatively protected because it has a technical monoploy (which has already been investigated a few years ago) so I don't really think that is the issue. IMHO, the issue that's caused problems in the past is that the monopoly situation has led to customers being overstocked and therefore leading to a slowdown in the next period. This is why some analysts talk of 'cyclicality'.

SP keeeps falling and I'm tempted to top-up at some point.perhaps your 200p prediction is right?

[simon gordon] 20/1/2006 15:22

Hi Shuisky

How protected are the profit margins at NVS?

I am nervous they could be hurt in a UK economic slowdown!

Simon

[shuisky] 20/1/2006 15:05

I'd agree that the negative sentiment is probably due to the delay in getting Vetoryl approved, however IMHO the market is over-reacting. We're talking about a delay in revenues rather than a foregoing, and on a free cash flow basis the stock is cheap.

It seems clear from the trades, that there is a large seller out there who has been reducing position steadily. Once he's over, I suspect we may make a small move upwards.

No matter, I'm LTBH, and frankly you need to be patient with ths sort of company. There are plenty of long term growth prospects here.

[simon gordon] 17/1/2006 10:31

I think I may become a buyer if the price moves towards £2.00 as sentiment has cooled because the FDA trial means Vetoryl for Cushings Disease will, at the earliest, be on the market 2008.

[piedro] 09/1/2006 10:39

Reasonable Trading Update - imo



"...revenue growth of approximately 11%.."

BUT

"...product development expenditure.....significantly higher..."

[gbh2] 16/10/2005 19:40

seems to have price movement every week will it ever stop climbing!

[piedro] 16/10/2005 13:03

Next AGM - 21 Oct.
Ex-Dividend - 26 Oct - @3.5p
May have some price movement this week.

[the old codger] 06/9/2005 09:06

Nice figures - steady as she goes - hold on just hold on imho dyor TOC

[the old codger] 05/9/2005 11:56

That's tomorrow -

I must say I am impressed with the slow but inexorable progress of the share price in front of the figures - hopefully the figs will satisfy everyone and further progress will be seen. Great also to see so few posters here! IMHO DYOR TOC

[piedro] 04/9/2005 12:32

Preliminary Results ...... Tuesday 6th September.

[the old codger] 17/8/2005 14:44

You are not wrong there Piedro!

[piedro] 10/8/2005 13:25

The more boring the better!

Nothing to shout about, just keeps on going.

[the old codger] 14/7/2005 12:07

Judging by lack of posts on this Board - not much interest in this cracking business imho dyor TOC

[the old codger] 21/6/2005 12:12

This is a good business - hang on for the long term - imho dyor TOC

[davpat] 19/5/2005 17:03

I see some very decent buying today, but news hunting hasn't yielded anything to explain. Anyone out there interested?
DAVPAT

[lbo] 11/3/2005 16:57

Good post shuisky. I agree they have risks and I also would like to hear some eps upgrades coming from the brokers.

IMHO Looks a liitle pricey near term with a prospective p/e for 2005 of 16. Especially when you think Pfizer is on a 2005 P/e of only 12 and has a yield of approx 2.5%.

[shuisky] 11/3/2005 10:32

DPH had the preliminary meeting on Mar 2, but as such, I can't find any feedback/statements on how the meeting went. I suspect the recent buying is based on speculation/knowledge on how the meeting went.

Maddox- It's hard to quantify the future growth of DPH, because doing so requires many assumptions based upon imponderables. For example, they are trying to establish distribution with the States, Janssen are marketing for them in Europe, they still need FDA approval for F & V etc etc

My argument for holding DPH is that you have plenty of upside potential, and are reasonable priced. Very much a GARP idea. They generate a lot of cash, and should be able to continue to exploit their UK distribution network in order to expand sales of their own pharma products. The cash generation of NVS will fund pharma expansion and their international aspirations.

It's easy to do things like assume that, say, Vetoryl sale will be 10m in the US in a few years time because the US dog market is ten times bigger than the UK's, but that would imply plenty of rosy assumptions. I'd rather not do that because once these things get built into the price, any disappointments will savage the price.

IMHO, the best policy here is to keep an eye out fot analyst upgrades after the newsflow, and adjust your view on current evaluation accordingly. It's not that I think the analysts are any better than, you or I, but it's a lot easier when the company are telling you what they think the likely impact is going to be.

The downside risk with DPH is that they do carry debt, and are undergoing expansionary CapEx at the same time. Any issue with NVS, like say overstocking of customers (they had a similar issue a couple of years back) and DPH will be exposed. However, you can't buy shares without risk and I like the risk/reward profile here.

[lbo] 10/3/2005 13:43

results ok, goes xd and still buyers around!

[lbo] 10/3/2005 13:43

Dechra shrugs off hunt-ban setback Mar 2 2005

By Staff Reporter, Birmingham Post


The hunting ban should have should have an "absolutely negligible" impact on the fortunes of the veterinary pharma company Dechrya Pharmaceuticals, even though its biggest selling product ' Equipalazone' is nonsteroidal treatment for bumps and bruises on horses and has some 90 per cent of its market.

So said the Stoke-on-Trent company's chief executive Ian Page yesterday, presenting healthy results for the six months to December.

Dechra's half-time profits were 24 per cent ahead on sales up 22 per cent to £103.3 million. Riders, he insisted will go on riding even if they cannot chase foxes. Anyway, while there are one million horses in Britain, there are 6.8 million dogs and 7.5 million cats.

Dechra has its own licensed drug for each - 'Vetoryl' for endocrinol cancer in older dogs, ' massively underdiagnosed in the past said Dechra's chief executive Ian Page, and a hyper-thyroid treatment for cats called 'Felimazole'.

Its campaign is to develop markets for these and other veterinary drugs overseas.

On continental Europe it has struck a marketing deal with Jannsen, the Belgian offshoot of Johnson & Johnson.

In America it is talking with US authorities about permission to market 'Vetoryl'.

"The US market is out biggest opportunity," said Mr Page. "There are ten times as many dogs and US vets are at the cutting edge with more animal medicines.

" The question is not whether 'Vetroyl' is licensed, but when?"

Meantime, two-thirds of Dechra's profits, and a higher percentage of its sales, come from wholesaling the products of other companies and providing specialist IT support to vets. Most of the proceeds are invested in efforts to invest in continental markets and the USA.

A 1.7p interim dividend is ten per cent up on last year's. The shares edged 41/2p higher to 1931/2. within striking distance of their all-time high. Since coming to the stock market at 120p in September, 2000 they have fallen to 58p during a Competition Commission investigation, then recovered strongly to their present price.

[lbo] 10/3/2005 13:43

Interesting