New equity research report: Sopharma’s recovery is speeding up



Sopharma, the leading generic pharmaceutical company in Bulgaria, is recovering faster than expected from the Russia/Ukraine conflict on strong exports – this was concluded in the latest equity research report by ELANA Trading analysts covering Q1 2017 earnings of Sopharma.

Sopharma’s top line recovery speeding up

Sopharma’s top line is recovering faster than ELANA Trading’s analysts expected with Russia advancing quickly after inflecting in late 2016. Q1’17 standalone top line results positively surprised with 12.2% y/y rise to BGN 46.6m while preliminary H1’17 data signal recovery is speeding up to 18% y/y rise in sales. If the pace is sustained, by year end Sopharma will be closing in on its pre 2014 Russia/Ukraine crisis results.

Surge in exports

Exports drive the recovery with 24% y/y surge in Q1’17 to BGN 29.7m accelerating to 30% y/y in H1’17. Sales in Russia alone advanced 32% y/y in Q1’17 overtaking the Bulgarian market as a top seller. Sopharma’s management expects the Russian uptrend to be sustained by year end which together with a positive development in the Caucasus and Central Asia region to deliver strong 2017 results.

Profitability in check

Despite a surge in manufacturing costs, standalone operating and net profitability remain in check. EBITDA was flat at BGN 16.5m in Q1’17 while EBIT declined 1.2% y/y to BGN 12.8m on slightly higher depreciation. Net income improved 2.6% y/y to BGN 12m on lower interest expense and reversal of impaired trade loans.

Insiders continue to add stock

Due to new regulatory regime with respect to insider trading, the latter continued to be active in adding Sopharma stock. In mid-June 2017, key shareholder and CEO Ognyan Donev acquired 0.37% stake and increased his investment to 25.15% of the registered capital via Donev Investments Holding.

Going forward with Tabex in the US

In mid-June, US SEC approved the merger between Sopharma’s smoking cessation drug Tabex US rights holder – Achieve Life Science, and OngoGenex Pharmaceuticals (OGXI US). The latter paves the way for a final OncoGenex shareholders’ approval to be put on vote in August 1st, 2017. Achieve and OngoGenex plan to get Tabex registered in the US with first significant development expected as early as 2018. If approved, Sopharma to be eligible to royalty and manufacturing benefits.


Read in detail in ELANA Trading equity research report