Alembic Pharma – Management Meet Update (Source Nirmal Bang 25 Nov 22)
In Indian and RoW markets, the company continues to expect double-digit growth on a normalized base. However, in the US, it continues to face acute pricing pressure due to the only OSD portfolio. Alembic has reiterated US$45-50mn quarterly US sales guidance in the near term. However, this run-rate may increase once injectable approvals start contributing meaningfully next year onwards. Despite aggressive spends on capex and R&D for the US market, we do not see any meaningful visible large launches. Also, margins are expected to remain under pressure due to
~Rs2bn of addition cost incurred on new plants, which are likely to start reflecting in P&L 4QFY23 onwards.
- Alembic has reiterated US$45-50mn quarterly US sales guidance in the near term.
- The company is only into Oral Solid Dosages (OSD) and continues to face high double-digit price erosion in the base business.
- As per the management, the US is sitting on decadal high inventory levels and given the limited shelf life, there is a frenzy to sell products before expiry. Many players are recovering only partial costs. Distributors too are skeptical about filling lines today, which stand at 80-85% as against 90-92% earlier. The situation has improved over the last quarter though.
- The company is expecting 25-30 approvals, including 10-15 injectable approvals for the next year.
- It has filed ~50 injectable products, for which approvals are expected over a 3-year timeframe.
- The share of OSD formulations would remain higher in future ANDA filings. However, current pending approvals are equally divided betweenOSD and injectables.
- The company cumulatively has ~250 ANDA filings, with 100+ global authorization and 126 DMF filings
- The management expects small and meaningful market share in gApriso. There are already 10 players in the market for this product.
- The company has aspiration to clock ~US$350-400mn in annual US sales over the long-term horizon.
- CWIP of ~Rs24bn pertains to F2, F3 and F4 facilities. F2 is an oncology facility while F3 is an injectables facility and F4 is an extension of F1 facility, which manufactures OSD.
- The new F2 and F3 facilities will start taking batches from Dec’22/Jan’23 and post that will start commercialising products.
- The company has received product approvals from the new facility, but plant approval is still pending.
- For the new plants to achieve breakeven levels at the current gross margins, ~Rs5-5.5bn of sales are required
India
- The company expects the domestic business to continue to grow at 10-12% annually.
- Domestic business growth is expected to be driven by continuous strong growth in high focus brands, expansion of customer base and optimization of business operations.
- Current MR strength stands at ~4,700, which may inch up to ~5,000 by the end of FY23. The company is not looking for any large MR addition in the near term.
- 500 MRs have been assigned to the Animal Health business, with the rest equally split between Acute and Chronic therapies.
- MR productivity stood at Rs0.35mn. MR productivity for Speciality and Acute business varies by (+/-) Rs25,000.
- The Acute business would be driven by growth in Macrolide Antibiotics such as Azithromycin and Clarithromycin among others.
- The Animal Health business is reporting robust growth of 30%. It is largely a B2C business for the treatment of diseases in both Poultry and Large animals.
Others
- The RoW markets are expected to report strong growth of 10-15%. Most of these markets have better realizations and higher gross margins than the US business. The company is increasingly focusing on GCC and South East Asian markets.
- It has guided for Rs6bn of R&D spending in FY23 and Rs5.5bn in FY24
- The company has guided for Rs2.5bn of annual capex for the future.
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