Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Neuland Laboratories Ltd (BOM:524558, Financial) reported a strong EBITA margin of 20.8% for Q2 FY25, indicating efficient cost management.
- The company has generated a free cash flow of INR 45.84 crores in H1 FY25, showcasing effective cash management.
- Neuland Laboratories Ltd is seeing increasing interest from biotech companies, which could lead to more early-stage projects and potential growth.
- The company has completed additional manufacturing facilities, which positions it for high growth in FY26 and beyond.
- Neuland Laboratories Ltd is strategically positioned to seize future opportunities by focusing on high-value molecules and enhancing customer experience.
Negative Points
- Total income for Q2 FY25 was INR 315.2 crores, a decrease from INR 422.84 crores in the same period last year, indicating a decline in revenue.
- The company's gross margin for the quarter decreased to 56.3% from 59.8% in the previous year, reflecting increased manufacturing costs.
- Profit after tax was significantly lower at INR 32 crores compared to INR 89.1 crores in Q2 FY24, highlighting reduced profitability.
- Neuland Laboratories Ltd expects FY25 to be flat compared to FY24, indicating limited growth prospects for the current fiscal year.
- The business is inherently variable, making it challenging to provide consistent guidance and potentially leading to investor uncertainty.
Q & A Highlights
Q: Can you elaborate on the increasing interest from companies with larger pipelines and biotech firms?
A: Saharsh Davuluri, Vice Chairman & Managing Director, explained that Neuland is seeing more interest from larger companies due to M&A activities where biotech firms they work with are acquired by larger companies. This has opened up opportunities with companies that have larger pipelines. Additionally, the improved funding environment in the US and a favorable China-India narrative are contributing to increased interest from biotech firms.
Q: Are there any large molecules in the pipeline that could significantly impact revenue?
A: Saharsh Davuluri noted that while there are exciting programs in the pipeline, the probability of success is low at this stage. However, there are a couple of molecules that are one step away from commercialization, which could potentially contribute significantly to revenue starting from 2027.
Q: How do you see the CMS business evolving, and will its revenue share increase beyond 55%?
A: Saharsh Davuluri indicated that the CMS business is expected to grow and could surpass the 55% revenue share mark. However, the exact mix will depend on the performance of both the CMS and GDS businesses, which are independent of each other.
Q: How is Neuland addressing the challenge of retaining and hiring top talent in the competitive CDMO space?
A: Sucheth Davuluri, Vice Chairman and CEO, emphasized a multi-faceted approach, including recruiting individuals aligned with the company's purpose, leveraging advisory boards for recruitment, and using tools like exit interviews and retention bonuses to keep teams engaged. The focus is on quality over quantity, given the company's specific needs in API development.
Q: What is Neuland's strategy to attract Big Pharma as a CDMO partner?
A: Saharsh Davuluri explained that Neuland aims to build trust with Big Pharma through existing CMS customers acquired by larger companies and by developing unique technical capabilities, such as in peptides, which are not available with Big Pharma's existing network.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
