LAURUSLABSNSEQ1 FY 2023June 28, 2022

Laurus Labs Limited

8,758words
100turns
15analyst exchanges
4executives
Management on call
Satyanarayana Chava
FOUNDER AND CHIEF EXECUTIVE OFFICER, LAURUS LABS LIMITED
V. V. Ravi Kumar
EXECUTIVE DIRECTOR AND CHIEF FINANCIAL OFFICER, LAURUS LABS LIMITED
Vivek Kumar
INVESTOR RELATION TEAM
Monish Shah
ANTIQUE STOCK BROKING LIMITED
Key numbers — 40 extracted
rs,
nges with increased infections with new subvariants. We hope everyone of you and your family members, colleagues and friends are keeping safe and healthy during the times. We are pleased to have thi
30%
althy start to our FY 2023. As we continue to improve on product mix and EBITDA was maintained at 30%. This was achieved despite ongoing disruption in the business environment due to COVID-19 and geo
Rs.1539 crore
pprovals anticipated. Moving on to our financial results for the quarter: We achieved Rs.1539 crores in revenues, showcasing a very healthy growth of 20% year-on- year. Sequentially, we have substan
20%
he quarter: We achieved Rs.1539 crores in revenues, showcasing a very healthy growth of 20% year-on- year. Sequentially, we have substantially improved on our non-ARV revenue numbers. Form
Rs.349 crore
we have substantially improved on our non-ARV revenue numbers. Formulation reported a revenue of Rs.349 crores for the quarter, a decline of 33% year-on-year. Coming to LMIC business: While broader demand en
33%
RV revenue numbers. Formulation reported a revenue of Rs.349 crores for the quarter, a decline of 33% year-on-year. Coming to LMIC business: While broader demand environment on ARV was softer the pri
10 billion
We have commissioned our brownfield expansion at unit 2, taking the total FDF capacity to handle 10 billion units now. We expect a more gradual ramp up of capacity utilization in the new block. On the R&
3%
started working on a few priority projects. Overall, R&D spending to sales for the quarter was at 3%. We have a total 55 products in R&D pipeline either under review or under development having an a
40 billion
R&D pipeline either under review or under development having an addressable market size of over $40 billion. When it comes to generic APIs, our anti-viral business during the quarter continued to
Rs.383 crore
i-viral business during the quarter continued to witness sequential improvement and sales grew to Rs.383 crores, while overall demand environment stays softer, we expect volumes and prices are going to stabil
Rs. 63
also expect to increase, marginally in the developed market supplies of APIs. Onco APIs reported Rs. 63 cores sales during this quarter reflecting a marginal growth of 5% year-on-year. As we are mention
5%
f APIs. Onco APIs reported Rs. 63 cores sales during this quarter reflecting a marginal growth of 5% year-on-year. As we are mentioned, we have the largest high potent capabilities in the country an
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Guidance — 20 items
Moni Shah
opening
“Imported RM prices have largely remained elevated in the light of supply chain conditions but we do anticipate some of these challenges to abate with gradual China lifting sanctions during COVID and also easing off, geopolitical situation across the globe.”
Moni Shah
opening
“As a result, we retain our aspirational target of a billion sales and which will be partially supported by several approvals anticipated.”
Moving on to our financial results for the quarter
opening
“We expect US filing pace to pick up during this financial year.”
Moving on to our financial results for the quarter
opening
“We expect a significant upside in this financial year from these products and we have a basket of 9 approved products, of which we have launched three on our own label and we will be launching two more products shortly.”
Moving on to our financial results for the quarter
opening
“We expect a more gradual ramp up of capacity utilization in the new block.”
Moving on to our financial results for the quarter
opening
“When it comes to generic APIs, our anti-viral business during the quarter continued to witness sequential improvement and sales grew to Rs.383 crores, while overall demand environment stays softer, we expect volumes and prices are going to stabilize around these levels.”
Moving on to our financial results for the quarter
opening
“We continue to maintain a leading market share is current product line and also expect to increase, marginally in the developed market supplies of APIs.”
Moving on to our financial results for the quarter
opening
“Our aim to strengthen global leadership in offering onco APIs not for generic customers but also for the innovator clinical based molecule.”
Moving on to our financial results for the quarter
opening
“We have also completed the validations of few APIs and we expect to file additional DMFs in the current financial year.”
Moving on to our financial results for the quarter
opening
“Laurus Bio revenues were largely stable at Rs.30 crores on quarter-on-quarter but we do anticipate pickup with the ramp up of new capacities, debottlenecking of R2 for our large scale CDMO partner.”
Risks & concerns — 14 flagged
Our CDMO division delivered exceptionally good performance offsetting pressure on our ARV business and growth in API division was modest but future business prospects appeared very encouraging.
— Moni Shah
We are progressively expanding our portfolio and new initiatives this along with our significant investment program should enable us to capture exciting and new business opportunities and reduce any concentration risk from a single product or a single therapy and deliver a broad-based sustainable growth in the long run.
— Moni Shah
Formulation reported a revenue of Rs.349 crores for the quarter, a decline of 33% year-on-year.
— Moving on to our financial results for the quarter
Coming to the developed market our performances was stable as increase in the generic volumes more than offset by pricing pressure.
— Moving on to our financial results for the quarter
Satyanarayana Chava: There was price pressure on ARVs both APIs and formulations, that reduction in the margins in ARVs was offset by higher margin CDMO business.
— Ameya Chalke
Just to understand is there any one risk that you do not need to say what it is but if there that one risk in your mind which could impact achieving this may be some product developing some problem, or one client moving away from you.
— Binu Pathiparambil
Is there one or two such key risk which can impact us or is it a well distributed business target?
— Binu Pathiparambil
Can you quantify in terms of ARV pricing pressure which you mentioned significantly, how much it would be down on a year-on-year basis?
— Rithesh Rathod
You see any sort of risk over there after a year or so?
— Rithesh Rathod
Ok and any kind of pricing pressure comes in this product on an annual basis or productivity benefits which needs to be passed on.
— Rithest Rathod
Satyanarayana Chava: We have not seen significant price pressure in this division unless we agree.
— Rithest Rathod
Satyanarayana Chava: There are opportunities, see the challenge right now is we do not have capacity to offer.
— Manoj
Satyanarayana Chava: It is a difficult one to answer no new player came under the market yet and it is not a growing for 10 people to jump in.
— Pratik Kothari
If the incumbents are weak then there is a scope for a new player but incumbents are very strong and market is stabilized, it is not growing.
— Pratik Kothari
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Q&A — 15 exchanges
Q
Thank you for taking my question and congratulations for good set of numbers the only question I have on the total break up of ARV versus non-ARV sales for this quarter? Dr. Satyanarayana Chava: The ARV APIs is at 25% of our sales. If you recollect ARV APIs once upon a time in 4-5 years that used to constitute 80% of our sales. Now it is 25% of our sales and 17% sales came from ARV formulations. If you sum it up about 42% of sale came from ARV either APIs or formulations, put together.
Management
Q
Thank you for taking my question and congratulation for the management for the good set of numbers. Sir I have one question on the margin side. So, despite sizable increase into synthesis business our margin improvement sequentially has been minimal. So, is it fair to assume that the synthesis margins are not very far from the company level margins and if it is so, do not you think it is on the lower side, if you can clarify on that along with that also if you can explain the higher other expenses for this quarter compared to the Q4 of last year? Dr. Satyanarayana Chava: There was price pressu
V.V. Ravi Kumar
The expenses side there is a power shortage in our manufacturing area in Andhra Pradesh. In the last quarter, we have sourced lot of power from the private sources and also, we used the diesel. We spent about Rs.33 crores additional expenditure towards power and some part of a foreign exchange loss also there. You are aware, the foreign exchange loss on account of not incurred loss, it is a restated loss. So, that is also reflected in the other expenses. Sure. So, going ahead, you expect these other expenses to normalize at least in the near term? We expect so, the power and fuel getting norma
Q
I hope I am audible perfectly. Sir 2 or 3 questions I have, the first question is the CAPEX for the FY 2023 and FY 2024. You have guided towards the pros and cons of CAPEX can you help me with CAPEX which will be dedicated for the custom synthesis business mix Rs.2000 crores. Dr. Satyanarayana Chava: The CAPEX number what guided by Ravi little while ago is Rs.2000 crores for FY 2023 and FY 2024. I would say 40-50% of the CAPEX is the CDMO space. If R&D or manufacturing put together it is about that number and nothing is going into ARV APIs or formulations. So, most of the remaining CAPEX say w
Nikhil Mathur
So, basically, what is gross today for the custom synthesis and if we add another Rs.1000 crores. So, what is the gross profit we are looking at for custom synthesis two years down the line. Dr. Satyanarayana Chava: Currently except for one small facility we do not have a dedicated manufacturing facilities for custom synthesis. So, today our facilities are common for both generic and custom synthesis to remove that complexity and fight for capacity. We are creating dedicated capacities for a CDMO space. So, we cannot segregate right now. How much is used for CDMO or how much is used for generi
Q
Congrats for a great set of numbers. Dr. Chava your guidance of billion-dollar for the year implies 50%-60% plus kind of growth for the year and in the first quarter, you have done 20% so which means for the next three quarters, you are looking at may be 70% odd kind of growth in revenues year-on-year, still that in full confidence or it is more aspirational, how confident are you about meeting yourself that? Dr. Satyanarayana Chava: When we announced our goal, aspiration to become a billion dollar. The dollar was at Rs.70- Rs.73. So, we are very confident to achieve that number now. So, at th
Binu Pathiparambil
Sounds great. Just to understand is there any one risk that you do not need to say what it is but if there that one risk in your mind which could impact achieving this may be some product developing some problem, or one client moving away from you. Is there one or two such key risk which can impact us or is it a well distributed business target? Dr. Satyanarayana Chava: We have capacities, we have customers, we have visibility of orders and except one product approval in formulation all are in place, if we are scouting for customer, we are scouting for a capacity or a facility approval and all
Q
Thanks for the opportunity. Based on this brownfield capacity which has now come up in July so what could be the incremental operation cost associated with this which will come in the subsequent quarter. Dr. Satyanarayana Chava: Our formulations expansion capacity is fully manned. So, those expenditures are already built- in in Q1 itself. So, we are going to recruit marginally more people in new block but those costs are already built-in in Q1 if there is a slight increase. It will be built in Q2. You are aware all these preoperative expenditures are expensed not capitalized in the company. So
Tushar Manudhane
Interesting and just on other API segment where we have seen good traction over past few quarters. So, how do you see this in terms of the new products and the market share gaining the existing product the prospective here is that there has been good amount of inventory made disruption in API in industry per se may be on account COVID and or may be the China related lockdown. So, how do you see the prospects of non-ARV APIs? Dr. Satyanarayana Chava: Non-ARV APIs will continue to grow and increase in our inventory is a conscious decision we took to weather the supplies and challenges. So, in on
Q
Can you quantify in terms of ARV pricing pressure which you mentioned significantly, how much it would be down on a year-on-year basis? Dr. Satyanarayana Chava: It is both ARV APIs and formulation if you take together as I mentioned it is about Rs.550 crores. The margin impact was almost 15%. Average 15% both put together.
Rithesh Rathod
And in case of custom synthesis, you spoke about two contracts and the second one where you are ramping up. So, I presume, you would have ramped up in Q1 as well as in Q4 let to some extent. How sustainable that business would be after a year or so once it reached to steady state. You see any sort of risk over there after a year or so? Dr. Satyanarayana Chava: These products are on the late stage or just launched. So, they have a very long patent life. So, these are not like generic molecules today company A will get market share, tomorrow company B get market share. Then we are not with A and
Q
Thanks for taking my question. Sir on the CDMO business how many commercial products are we supplying right now? Dr. Satyanarayana Chava: We have 7 commercial products, 4 intermediates and 3 APIs.
Nitin Agarwal
And sir, how many late-stage products would we have that can be commercialized over the next 2-3 years. Dr. Satyanarayana Chava: We do not want to give you a number but there are very good number candidates in the late stage because of those only we are expanding our capacities and capabilities in that division. I was just curious rest of the seven that we have, do we see this number going 2x, 3x over the 3- 5 years, 3 years rather. Dr. Satyanarayana Chava: We do not want to comment on that. Fair enough sir. Can you help us also with the split which is there between contract research and contr
Q
Sir, had couple of questions. one on the ARV tender side. Sir, three years ago, we received a large multi-year contract for the LMIC market. Just wanted to understand when will this would due for renewal. Is this done at a new round of tender for this. Dr. Satyanarayana Chava: The South African tender was announced, we do not have any formulation sale there. So, API sales will go to South African contract and the Global Fund and other tenders will be announced soon for 2023 onwards. So, for 2023 allocations were already made and supplies will start from next quarter.
Siddhartha Bhothika
Okay and sir my second question is on the large CDMO product. Is it fair to say that if you exclude from this quarter then the synthesis business have led to single digit growth on a year- on-year basis? Dr. Satyanarayana Chava: Large multi-year, multi-product contract has not given any significant revenues in Q1. No, I am talking about commercialized large contract that we have been supplying since March. Dr. Satyanarayana Chava: No still there is growth. This is not a one-month contract. So, if there is a quantum still, we need to execute fully. So, meaning the follow up to this is that, is
Q
Sir, my question is on the CDMO space, this quarter you have done about Rs. 577 crores of revenue. Is it fair to say that for full the year, this is a peak, capacity utilization you are running at, so on a full year, you could probably do Rs.2000 plus crores revenue from the segment? Dr. Satyanarayana Chava: We want to reserve answering this question, right now.
Dhruv Bhatia
But you have the capacity to do further than this with current capacity available. Dr. Satyanarayana Chava: Well capacity available yes. And the Rs. 1000 crores incremental CAPEX that you are planned for CDMO, what type of asset turns can we build in going forward? Dr. Satyanarayana Chava: You could take our current average is asset 1.4-1.5, between 1 and 1.5 depending on how effectively utilize that CAPEX. And the capacity that you have put up is obviously for as you mentioned, the muti-year, multi- product contracts but over and
Manoj· Carnelian
Q
Hi, this is Manoj from Carnelian. First of all, congratulations for good set of numbers. I have couple of questions, first one is on CDMO side, so just wanted to understand little bit more on CDMO. Since you mentioned that you have built some new capabilities to build this business so just wanted to understand two things, sir. A. what is our right to win here and secondly how do you pan down the opportunity size in the segments where you are working. Dr. Satyanarayana Chava: Right to win, these opportunities is based on reputation regulatory track record, flexibility in offering volumes that i
Management
Q
My question is to Dr. Chava. Sir, you said that you want to see CDMO to be 25% of the sales in FY 2025 and if you see our numbers now, already in last quarter CDMO is 25% of the revenue and this quarter is already 37% of the revenue. So, I would like to know where do you see CDMO in percentage of sale in FY 2025? Dr. Satyanarayana Chava: A very good observation, may have to revise our target to one-third by FY 2025. Yes, from 25 to one-third by FY 2025 may be.
Bharath
Yes, currently I can see in the PPT that is 25% by FY 2025 but already you are 37% so I think 33% is good number you gave. Dr. Satyanarayana Chava: Yes. Yes, and my next question is that total capacity of Unit 2 is 15 billion. Dr. Satyanarayana Chava: 10 billion right now. Yes, right now 10 billion is commissioned but the total capacity can be estimated to 15 billion, we can also do a brownfield extension of 5 billion more, right? Dr. Satyanarayana Chava: Yes, you are right. The physical infrastructure was created to expand capacity by 10 billion but 5 billion capacity was installed and qualif
Q
Good morning and thank you for the opportunity. There are a couple of questions regarding ARV. Sir in the last con call, we did mention that our API and formulation prices were down 10% and you said this quarter it is down about 15% from price so there has been further deterioration of 5% odd. Dr. Satyanarayana Chava: Yes, and we do believe that is the new base we do not expect further significant price drops.
Pratik Kothari
Fair enough and we also did say that going forward in the coming few quarters. We used to Rs.550-600 crores ARV APIs a quarter. We are at about 350 odd now or rather 400 odd now. This should go back but at the same margins that we used to see may be two years. Dr. Satyanarayana Chava: ARVs both APIs and formulation put together. I think topline will grow but at a lesser gross margin what we enjoyed in the previous years. Ok fair enough. Sir two years back when we used do Rs.550-600 crores of ARV APIs did started a second line. Dr. Satyanarayana Chava: No, we never did 600 crores. So, the peak,
Q
Congratulations sir, just few questions, first is last year, when we talked, we were having world leadership in 8 molecules and we aspiring to go for 15 molecules. So, where do we stand now. Dr. Satyanarayana Chava: Couple of oncology, we increased our market share so that target is on Jeevan, on that. So, we are continuing to add portfolio where we have leadership position or ability to get to leadership position that goal is on track and in next two years may that number what you said will definitely more than 10.
Jeevan Patwa
Okay, perfect and on the CDMO side basically we were into human health, now we are getting into animal health, I think we are also getting into plant. I think looking at your CDMO it looks like more of a chemical company than a pharma company. And we have capacities, we have capabilities, we have credibility and we have clients. So, we have all four ‘Cs’. So, how do we see the traction coming into CDMO. The kind of enquiry you are getting from the clients. So, are we looking to sign something similar multi-year, multi-product contract deal even in the future? Dr. Satyanarayana Chava: We are no
Q
Thanks for the opportunity, few clarifications. Firstly, on the CAPEX pipeline of Rs. 2000-2500 crores you mentioned 50% would go to CDMO business and you have shared an asset turnover of 1.5x. can you give us the asset turnover of the CDMO business, what one should expect? Dr. Satyanarayana Chava: I think when I mentioned around 1.5, our CFO also corrected that. So, you can take between 1 and 1.5 asset turnover ratio when it is fully utilized. The gestation between our first two investment starts to getting to the peak commercial sale. We will take between 3-4 years. We invest and we go to th
Nushad Chaudharu
That I understand, so in both the businesses, we should expect on a full utilization it should give 1.5x. Dr. Satyanarayana Chava: Between 1 and 1.5, you are free to choose either 1 or 1.5. Okay and how are we planning to fund this CAPEX sir, would it largely through internal accrual or any portion on debt we are planning. Dr. Satyanarayana Chava: I will ask our CFO to answer that. Most internal accruals. Okay by any chance do you share your CDMO margins if do not quantify it qualitatively and you indicate would it be significantly higher than our API and formulation business or a marginally h
Q
Thank you everyone.
Management
Speaking time
Moderator
18
Bharath
10
Nitin Agarwal
9
V.V. Ravi Kumar
8
Nushad Chaudharu
7
Manoj
6
Jeevan Patwa
6
Nikhil Mathur
5
Siddhartha Bhothika
5
Ameya Chalke
4
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Opening remarks
Moni Shah
Thank you, Neerav, good morning and welcome to Laurus’ Q1 FY 2023 results conference call. We thank the management for giving us the opportunity to host this call. Today, we have with us Dr. Satyanarayana Chava – Founder and CEO, Mr. V. V Ravi Kumar – Executive Director and CFO and Mr. Vivek Kumar from the Investor Relation team. I would like to hand the call over to Dr. Satya for his opening challenging comments. Thank you and over to you sir. Dr. Satyanarayana Chava: Thank you Monish for this introduction. Thank you for joining us for our Q1 FY 2023 Results Conference Call. Since COVID-19 continued to cause challenges with increased infections with new subvariants. We hope everyone of you and your family members, colleagues and friends are keeping safe and healthy during the times. We are pleased to have this opportunity to update you on the progress and answer your questions. Our Q1 results reflects, a very healthy start to our FY 2023. As we continue to improve on product mix and E
Moving on to our financial results for the quarter
We achieved Rs.1539 crores in revenues, showcasing a very healthy growth of 20% year-on- year. Sequentially, we have substantially improved on our non-ARV revenue numbers. Formulation reported a revenue of Rs.349 crores for the quarter, a decline of 33% year-on-year. Coming to LMIC business: While broader demand environment on ARV was softer the pricing as largely remained depressed in Q1 which is at already record low level. We are taking a calibrated biding approach to ensure better outcomes in the tenders for this business. Having said that we are very confident of sustaining our leadership position in ARV first-line treatment both APIs and formulation. During Q1, we launched lopi-rito combination in US. Additionally, we are awaiting few more approvals in the US which will drive our growth in the coming quarters and years. As you are aware Laurus is a fully integrated player in ARV formulations and we believe we have the fair ability to whether pricing challenges and we are able to
V.V. Ravi Kumar
Thank you doctor and a very warm welcome to everyone on our first quarter FY 2023 Earnings Call. Total income from operation for the quarter is Rs.1539 crores against Rs.1279 crores with a healthy growth of 20%. Gross margin for the quarter is at 57.6% almost improved like 90 bps on a better product mix. Our EBITDA for the quarter 1 is at Rs.454 crores with a margin of 29.5% which is close to the full year guidance what we have provided. Our diluted EPS for the quarter is 4.6 not an annualize which grew over 4% over the corresponding quarter. Our ROCE improved to 29.4% on annualized basis based on the better product mix. On the CAPEX front, we invested close to Rs.209 crores for the quarter and as we guided, we are expected to invest around Rs.2000 crores in the two years’ time between FY 2023 and FY 2024. For any further details you may refer to IR presentation in this regard. We remained on course to strengthen our position as a cost effective integrated pharma player. We are investi
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