Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alkem Laboratories Ltd (BOM:539523, Financial) reported a significant improvement in EBITDA margin, increasing to 21.1% in H1 FY25 from 17.7% in H1 FY24.
- The company achieved a net profit growth of 36% year-over-year, reaching 12,338 million.
- Alkem Laboratories Ltd (BOM:539523) outperformed in six therapy areas during H1, including GIVMN, antiae, neuro, gynec, and derma.
- The company reached the second rank in the Indian Pharmaceutical Market (IPM) for the first time.
- There is a positive outlook for the US business in H2, with expectations of improved performance and profitability due to better inventory management and strategic focus on high-margin products.
Negative Points
- The US business experienced a significant volume decline of 18.7% and price erosion of 6% in Q2, leading to a 15% de-growth in H1.
- Alkem Laboratories Ltd (BOM:539523) lagged behind market growth in key therapies like anti-infectives, gastro, pain, and cardiac in Q2.
- The acute market, which constitutes a significant portion of the company's business, has shown sluggish growth, impacting overall performance.
- The company faced supply chain challenges in the US, resulting in lost contracts and penalties due to inability to supply products.
- There is ongoing litigation related to the launch of certain products in the US, which could delay market entry and impact revenue.
Q & A Highlights
Q: Can you provide an update on the US business, particularly regarding product launches and overall performance expectations for FY 25?
A: We launched one product in Q2, which was small and differentiated. For Q3, we expect to launch another product with CGT and 180 days exclusivity. We faced supply chain challenges in the US, leading to significant volume de-growth and price erosion in H1. We anticipate improvement in H2, expecting a flattish to mid-single-digit erosion annually. Profitability has improved due to efficiency measures and a focus on profitable sales.
Q: Why has Alkem lagged market growth in key therapies like anti-infectives and gastro in India for Q2? Will you revise your growth guidance for FY 25?
A: The lag is primarily in anti-infectives due to a higher acute business weightage and challenges in the injectable segment. Despite this, we maintain our guidance of 8% to 9% growth for the domestic market, expecting H2 to be stronger. The acute market's slower growth impacts us more due to our portfolio mix, but we are optimistic about recovery.
Q: What is the status of the new plant in the US, and when do you expect it to start operations?
A: The plant is progressing as planned, with expected production to begin between Q4 and Q1 of next year. We have started receiving orders and queries, indicating positive momentum. There are no significant delays reported at this time.
Q: Can you elaborate on the guidance for full-year growth and margin expectations?
A: Due to challenges in the US business, we expect mid-single-digit growth in the top line. However, we anticipate a 100 basis point improvement in EBITDA margins, targeting between 18.5% to 19%. The focus remains on improving profitability despite volume and price pressures.
Q: How is the chronic segment performing in India, and what are your strategies for growth in this area?
A: Chronic is a high-focus area, and we are outperforming in key segments like diabetes. Chronic growth is expected to outpace acute due to a faster-growing market and our smaller base. We aim to increase the chronic segment's contribution to our overall business, which should enhance margins over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
