Divi’s Laboratories

Some business updates after Q2 2024 concall: Information is best of my knowledge, excuse for any inaccuracies

• Management Anticipate’s numerous growth opportunities – in contrast media, sartans & products with soon to expire patents
• Unit 3 200-acre Phase I construction project is progressing well and this greenfield project shall free up facilities in Unit 1 and 2 for new opportunities in Custom Synthesis and Generic Products. The plan is to start commencing production activities towards end of Q1 ’24-’25
• Did inventory write off close to 20 Crore, as there were some materials left over from COVID drug
• On Pricing Pressure | Margin profile | Business traction,
  • Pricing pressure in generics is weighing on the margin, no issues with custom synthesis. Expect to be doing better going forward
  • Seeing very good volume trend for generic API’s, due to pricing pressure revenue growth isn’t that great yoy. So overall it is double digit volume growth in generic with mid single digit price erosion.
  • In generic, pricing pressure is seen in large volume products that we were doing for long time and not on the recently launched products.
  • Think the pricing pressure will settle down in next quarter, will need to wait & watch, as everybody looks to get rid of their stocks
• CDMO Business:
  • No impact to CDMO business of Divi’s due to funding issues for small biotech companies, as they are working with big pharma’s
  • Custom Synthesis growth is not just one company or one product, it is distributed over several therapeutic segments
  • Growth engine in custom synthesis are projects from big pharma, 2 of them are geared up & they’re fully on production line, which will see additions in next quarters.

• On Peptides:
  • Seems like they have excellent opportunity, done lot of progress and will become one of the major suppliers very soon. This opportunity is like another growth engine and not a small one
  • There are not many players outside to supply these building blocks
  • Divi’s is not talking about amino acids that goes for 3 or 4 % per kilo, but specialized protected amino acids with lot of chemistry involved and where there are not many companies that can supply hundreds of tons, where Divi’s seems to be Number 1.
  • Should start to have value added contribution from FY25 End, after approvals & qualifications are complete. And in large volumes after that.
  • There is capacity already available for that and no new additional facilities required.

• Contrast Media:
  • Divi’s is the most backward integrated company – from Iodine (basic starting material)
• Excluding covid drug, overall business & CDMO had double digit growth for Q2 & H1 2024.