Alembic Pharmaceuticals Limited — Q3 FY26

Alembic Pharmaceuticals Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=sk3QEx-iq7o Published: 3 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to Q3 FI26 awnings conference call of Olympic 0:08 8 seconds Pharmaceuticals Limited. We have with us today Mr. Pranav Amen, managing director, Mr. Shaak Amen, managing 0:15 15 seconds director, Mr. AKI, executive director, Mr. G Krishnan, CFO, Mr. Ajakumar Desai, 0:22 22 seconds senior VP finance. As a reminder, this conference call is only for analysts, institutional investors. All participant 0:31 31 seconds lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance 0:38 38 seconds during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being 0:46 46 seconds recorded. I now hand the conference over to Mr. G. Krishna. Thank you and over to you sir. 0:53 53 seconds Thank you. Good evening everyone. Thank you for joining the conference call to discuss the financial results for third quarter and 9 months ended uh December 1:01 1 minute, 1 second 2025. Uh let me briefly take you through the numbers for the period before handing it over to Shaak. Um so moving 1:09 1 minute, 9 seconds on, we continued the momentum that we had in the first half of the financial year into the third quarter. Revenue for 1:17 1 minute, 17 seconds the quarter grew by 11% yearover year-over-year 2,876 crores. Uh the 1:24 1 minute, 24 seconds quarter saw broad-based growth driven by volume expansion, new product launches and increased traction in ex US markets 1:32 1 minute, 32 seconds offset in part by pricing uh pressure in US generics and API. Gross margin was at 72% for the quarter compared to 74% uh 1:41 1 minute, 41 seconds in the previous year. The moderation was primarily driven by change in product mix and uh pricing challenges partially 1:49 1 minute, 49 seconds offset by cost improvement programs that we have in our international business. 1:54 1 minute, 54 seconds Uh pricing pressure in international generics particularly in the US and API businesses persisted during the quarter. 2:00 2 minutes These head bins were mitigated by sustained cost efficiency programs helping us remain competitive in the market. As communicated earlier, our 2:09 2 minutes, 9 seconds gross margin remained in in the operating range of 70 to 75%. So hence the gross margin of 72% for the quarter 2:17 2 minutes, 17 seconds uh is uh is something that we are comfortable with. Aida before R&D expenses and exceptional items stood at 2:25 2 minutes, 25 seconds 464 crores for the quarter representing 25% of revenue compared to 23% in the previous year. uh again reflecting an 2:33 2 minutes, 33 seconds improved operating leverage and uh prudent management of discretionary spending during the quarter and hence the year on year growth was at about 2:42 2 minutes, 42 seconds 20%. R&D expenses increased by 33% yearover year to 165 crores for the quarter and this is in line with the 2:51 2 minutes, 51 seconds fullear guidance of 600 to 650 crores that we had provided earlier. profit before tax for the quarter but before 2:58 2 minutes, 58 seconds exception items grew by 15% yearonear to 205 crores again reflecting underlying revenue growth and margin improvement 3:06 3 minutes, 6 seconds that we have seen during the quarter. Uh profit after tax for the quarter before exceptional items grew by 21% yearon 3:13 3 minutes, 13 seconds year to 168 crant to the changes under the new labor code the company has recognized a one-time provision of 42 crores towards employee benefits. 3:22 3 minutes, 22 seconds However, this does not impact operating performance or any immediate cash flow. 3:27 3 minutes, 27 seconds Adjusted for this exceptional item pertaining to the labor code related impact. Reported profit after tax uh was slower by 4% compared to previous year. 3:37 3 minutes, 37 seconds Net working capital stood at 2944 crores broadly near the September levels. 3:43 3 minutes, 43 seconds Net debt marginally declined uh um to to about,213 crores compared to the previous quarter. 3:52 3 minutes, 52 seconds Moving on to the 9-month results, revenue grew at 12% yearonear to 5,000 uh close to about 5,500 crores. Again, 3:59 3 minutes, 59 seconds growth was broad-based across all the businesses. Reida before R&D spent in exceptional items for the previous for 4:06 4 minutes, 6 seconds the period was about,391 crores, which is 25% of the revenue and uh resulting in a 25% year-over-year growth. 4:15 4 minutes, 15 seconds This reflects strong revenue growth and better utilization uh of facilities uh of capacity utilization across 4:22 4 minutes, 22 seconds facilities. IITA post R&D expenses was 921 crores which is 17% of revenue and pad before exceptional items for uh 9 months grew by about 22% to 505 crores. 4:35 4 minutes, 35 seconds Um while I have given a broad overview of the financials for the quarter, I now request Shaop to take you through the India branded business. Over to you. 4:43 4 minutes, 43 seconds Yeah, thank you Krishna. Um, the India branded delivered a 6% year-on-year growth reaching a revenue of 625 kores 4:53 4 minutes, 53 seconds for the quarter. Gynecology of thermalology animal healthcare segments have demonstrated accelerating performance. Our anti-infective segment 5:02 5 minutes, 2 seconds grew in line with performance and we have launched successfully four new products in this quarter. I will now 5:10 5 minutes, 10 seconds hand over the discussion to Prana for Thank you, Shauna. [clears throat] I'm pleased to present the performance for 5:16 5 minutes, 16 seconds the third quarter of FI26. The Q3 performance reflects continued momentum as we strengthen the presence across key 5:24 5 minutes, 24 seconds markets and achieved growth in both formulations and API. The performance was driven by a 36% growth in RO 5:31 5 minutes, 31 seconds markets, reflecting our strategic geographic expansion and focused execution. The US business grew 6% 5:39 5 minutes, 39 seconds supported by higher volumes and new launches in the last few quarters despite continuing pricing challenges. 5:45 5 minutes, 45 seconds We have executed few outlicensing and manufacturing agreements as well that support injectable and encore uh capabilities. These 5:54 5 minutes, 54 seconds strategic contracts uh along with the in-house products would help us scale utilization in these new facilities over the next 12 to 18 months. We continue to 6:02 6 minutes, 2 seconds maintain sharp focus on profitability and operational ex excellence. We file one and during the quarter and 6:08 6 minutes, 8 seconds cumulative and filings were at 270. Our R&D investment is approximately 9% of revenue and it demonstrates a sustained 6:17 6 minutes, 17 seconds commitment to pipeline development and long-term value creation. The focus remains on complex and differentiated areas such as injectables, peptides, 6:25 6 minutes, 25 seconds oral solids and drug discovery with an emphasis on early entry opportunities including first to file day one and NC1 minus launches. We received seven 6:34 6 minutes, 34 seconds approvals in the US. We launched two approved products in the US during the quarter and sumittedly have 23 and approvals and 20 appro and 20 tenative 6:44 6 minutes, 44 seconds approvals. We hope to launch another four to five products in the fourth quarter of the year. We also on track to launch our first branded product in the 6:51 6 minutes, 51 seconds US in February 2026. Sometime in Q4 we'll do it. Uh Pivia is a firstline 6:58 6 minutes, 58 seconds oral antibiotic targeting uncomplicated urinary tract infections in women with a track record of low treatment and 7:05 7 minutes, 5 seconds emergent adverse events. This will help us uh target uh the this particular market in the US. While the launch will 7:13 7 minutes, 13 seconds have an impact on near-term profitability, we expect the product prescription share to scale up during the course of the next 12 to 18 months. 7:20 7 minutes, 20 seconds We are confident of the medium to long-term market opportunity that the product will help us capture. Moreover, this helps us with a strategic shift 7:28 7 minutes, 28 seconds towards part branded we can ramp up hopefully in the years to come. Uh with this, I would like to open the floor open for Q&A. 7:38 7 minutes, 38 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 7:47 7 minutes, 47 seconds telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands while asking a 7:55 7 minutes, 55 seconds question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. 8:05 8 minutes, 5 seconds The first question is from the line of Damayanti from HSBC. Please proceed. Hi uh good evening and thank you for the 8:13 8 minutes, 13 seconds opportunity. My first question is in India business. So Shaun we have seen some improvement but uh the m uh the 8:20 8 minutes, 20 seconds growth seen so far is still below the market growth rate. So uh when we when we are anticipating uh Olympic India 8:29 8 minutes, 29 seconds growth to catch up with the market growth and what kind of progress you have seen uh versus last quarter when we spoke. 8:38 8 minutes, 38 seconds Yeah. So you know the India business is quite complicated and it's some of lot of moving parts and to grow it on a 8:45 8 minutes, 45 seconds sustained basis requires lot of interventions to make it happen. Um I think as this point in time I think Q1 8:54 8 minutes, 54 seconds of the coming financial year is where we feel we should be back in line with the market growth rate. 9:04 9 minutes, 4 seconds Okay. Uh so whether that will be driven more by improvement in processes or you are looking forward for some u u some 9:14 9 minutes, 14 seconds meaningful launches etc which can really help you to catch up with the market growth. Right. So I mean obviously launches continue to happen but I think 9:21 9 minutes, 21 seconds we're basing this to be more back of operational uh execution um to drive this growth in Q1. 9:33 9 minutes, 33 seconds Okay. So um say u next fiscal is uh the timeline where you think your India growth will converse with the market growth rate. 9:42 9 minutes, 42 seconds Yes. 9:44 9 minutes, 44 seconds Okay. Uh my second question is uh to pranab regarding your upcoming launch of media in the US. 9:52 9 minutes, 52 seconds So uh this is a branded product right and in this phase I think what we had seen in the market there were earlier 9:59 9 minutes, 59 seconds launches which were good in terms of efficacy but somehow uh there were problem on the reimbursement part etc. 10:07 10 minutes, 7 seconds That's why many com I'll say many brands uh went out of the market. So uh what are your expectation in terms of 10:14 10 minutes, 14 seconds reimbursement for this product and uh what preparation are currently underway and what makes you think like this will 10:22 10 minutes, 22 seconds be a success compared to other AMR products which where there in the US market? 10:28 10 minutes, 28 seconds Yeah. Yeah. So I think success is relative, right? I think what we're trying to build is just some kind of incremental business. As you know, we've said given the details about the licensing, it wasn't very expensive. 10:38 10 minutes, 38 seconds It's a higher royalty outgo for us. We believe there's quite a few uh uh there's a couple of products already in the market and we [clears throat] can position oursel well. There's some new 10:46 10 minutes, 46 seconds ones which are very expensive. There's some older ones which are genericized. 10:49 10 minutes, 49 seconds In terms of efficacy, I think we sit on a sweet spot. So I think let's see how it goes. It's still early days. I think uh let's take a couple of quarters to see where we stand. I think in terms of 10:58 10 minutes, 58 seconds the reimbursement and the co-pays and everything the team is US team is working on that with the respected uh customers and the bodies. 11:09 11 minutes, 9 seconds Okay. Uh but it it's it's on track for launch uh this quarter right on in quarter. 11:15 11 minutes, 15 seconds Yes. Yeah. It's uh it's on track for launch in this quarter. I think the MR training the MRS are being onboarded right now. The material is being shipped 11:23 11 minutes, 23 seconds to the US. So when the material is all ready so I think we're on track for a clue for launch. 11:29 11 minutes, 29 seconds Okay. And my last question is on US business again uh where we uh continue to see challenges on the pricing part 11:36 11 minutes, 36 seconds and then you mentioned uh some contracts on the injectable and on sales which might help you in coming quarters etc. 11:44 11 minutes, 44 seconds So uh besides uh first let when these contracts will start appearing in your uh numbers and when you think US will be back on uh growth track. 11:56 11 minutes, 56 seconds So I think US is already on the growth track as we speak we are growing in terms of volumes we're growing quite a bit uh with the pricing pressure you 12:03 12 minutes, 3 seconds take it. So with that it's 6% last year Q3 we had a higher base because we had few more launches uh in Q3 of last year 12:11 12 minutes, 11 seconds few big launches that's bumped up Q3 last year but I expect the US business to grow between 10 to 12% uh for the full on a full year basis and I think 12:20 12 minutes, 20 seconds we're well on track for that we have a few interesting launches happening in uh Q4 as well. Okay uh that's helpful. Thank you. 12:29 12 minutes, 29 seconds Thanks. Thank you. 12:31 12 minutes, 31 seconds Thank you. Before we take the next question, we would like to remind participants who wishes to ask a question, you may press star and one 12:38 12 minutes, 38 seconds now. The next question is from the line of Candace Pera from Dollar Capital, please proceed. 12:45 12 minutes, 45 seconds Yeah. Hi. Uh so uh just to clarify the R&D is all 65 cr. 12:55 12 minutes, 55 seconds Yes. 12:57 12 minutes, 57 seconds Okay. And uh will it remain in this range for the next year as well for coming 9% of revenue? 13:06 13 minutes, 6 seconds Sorry, your voice is a bit buffled. 13:08 13 minutes, 8 seconds Muffled if I understand the question it's uh uh is it going to be at the same level for next year? 13:14 13 minutes, 14 seconds Yes. So you know next year we will guide u uh sometime when we start the next year but for the current year we have we 13:22 13 minutes, 22 seconds seeing it about u uh 8 to 9% of total revenue as the R&D spend and uh it's been at the similar levels for Olympic 13:31 13 minutes, 31 seconds in the last few years. So for next year specifically we will discuss at the time when we do the quarter four results. 13:39 13 minutes, 39 seconds Okay. 13:39 13 minutes, 39 seconds Yeah. But by and large I think we will be along the same numbers between we'll be between that 8 9% kind of range generally. 13:49 13 minutes, 49 seconds Okay. Got it. And uh if the other income is slightly higher this quarter so is there any forex gain and how much is it? 13:58 13 minutes, 58 seconds Uh yes and uh forex gain should not be uh big. I think you should say that. So yeah so the other income is about 15.5 14:06 14 minutes, 6 seconds crores and most of that will be forex gain. Okay. All right. 14:15 14 minutes, 15 seconds Yeah, I think yeah, that's a bit from my side. Thank you. 14:20 14 minutes, 20 seconds Thank you. Participants who wishes to ask a question may press star and one now. 14:29 14 minutes, 29 seconds Participants who wishes to ask a question may press star and one. The next question is from the line of Rahul from IF. Please proceed. 14:39 14 minutes, 39 seconds Yeah. Uh thanks sir for taking my question. Uh sir on the domestic business can you talk about the 14:46 14 minutes, 46 seconds challenges which we are facing because our domestic business growth has been uh quite tid over the past 3 to four years. 14:54 14 minutes, 54 seconds So we have been underperforming market growth and in the past as well we have talked about growth improving but we 15:02 15 minutes, 2 seconds haven't seen that playing out. So uh just in terms of how our domestic business is shaping up to be and do you 15:10 15 minutes, 10 seconds think that with the kind of scale up in investments which we were doing for the US business over that period maybe the 15:18 15 minutes, 18 seconds investments on the domestic business have been on the lower side due to which now we are struggling to grow even in line with market. 15:29 15 minutes, 29 seconds No, I I think Rahul I mean I don't think there's a issue of underfunding the business. I mean if you want to talk 15:36 15 minutes, 36 seconds about something that maybe we were too conservative on I think the whole um doctor spend scenario in the context of 15:44 15 minutes, 44 seconds UCMP possibly we were too uh conservative and extremely uh sensitive to it relative to the market. That's 15:52 15 minutes, 52 seconds what I understand. So maybe that was one of the factors which has led to this. I think ex of this I think historically Olympic has not been a high growth 16:02 16 minutes, 2 seconds company period but I think we wanted to fix the fundamental issues that have been plaguing us. I think that 16:09 16 minutes, 9 seconds compounded with you know the postcoid drop that we saw rather the po the co bump that we saw for a large part of our 16:17 16 minutes, 17 seconds large brands in the business. I think dealing with those uh when those markets prepped I think it compounded the whole 16:24 16 minutes, 24 seconds view but I agree with you. I think the growth has been tid but I think we're quite confident of this going forward at this point in time. 16:32 16 minutes, 32 seconds Sure sir. So so some of your peers have also been actively expanding their rep teams in India uh in order to let's say 16:40 16 minutes, 40 seconds drive penetration in some of the smaller tier 2 tier three markets. So while uh we adhering to the the ethical norms 16:48 16 minutes, 48 seconds might have c might have slightly impacted our growth but do you think that there is a need for us to expand a field force in order to drive better 16:57 16 minutes, 57 seconds penetration at a market level uh which could help us to drive better growth going forward. 17:03 17 minutes, 3 seconds I personally don't think at this point we are looking at uh any further large expansions. Um but that being said yes 17:13 17 minutes, 13 seconds there is a large opportunity India in the India market assuming if things start going as per our expectations operationally I mean we would consider 17:21 17 minutes, 21 seconds and look at those plans to take it forward on that point of the UCMP I don't think it's a small bit I think it's a very large bit relative to there 17:30 17 minutes, 30 seconds are extremes of this so I think that's a large part of um many companies where there is extremely high growth 17:39 17 minutes, 39 seconds okay Sure. But but that that uh uh then if that is your stated strategy that's not going to change going forward. So 17:47 17 minutes, 47 seconds then our domestic business in the best case scenario would let's say grow only in line with market or continue to slightly underperform market. 17:57 17 minutes, 57 seconds I think Rahul we can take this offline. 17:58 17 minutes, 58 seconds I think it's a lengthier discussion because it's a we're talking of multitudes of company but yes uh I think the alignment to UCMP possibly more 18:07 18 minutes, 7 seconds companies are sensitive to to it today than they were in the last two years. So okay sure uh and uh uh question with 18:16 18 minutes, 16 seconds respect to the US business. So while we have been aggressively investing in terms of R&D so if I 25 we saw a 18:24 18 minutes, 24 seconds slowdown in our R&D spend but again this year there has been an acceleration. So when do we actually see our US growth 18:33 18 minutes, 33 seconds picking up from whatever complex opportunities we which we are pursuing. 18:38 18 minutes, 38 seconds So kind of talked about injectables, peptides, even drug device combinations. 18:43 18 minutes, 43 seconds So just some outlook in terms of how do you see the US trajectory over the next uh 2 to three year period because as I 18:51 18 minutes, 51 seconds said we have been aggressively investing behind this business. 18:55 18 minutes, 55 seconds No s business has been growing. I think u what's happening is due to increased uh competition and competitive intensity 19:03 19 minutes, 3 seconds we are finding that uh the opportunities are becoming a little less. Having said that, in terms of volume, we continue growing and I think with some of the 19:11 19 minutes, 11 seconds injectables that we're doing, we've got few injectable opportunities, we're getting few more and I think over the next two years is when we should see a lot more of that coming up. I think 19:20 19 minutes, 20 seconds we've done a pretty good job and we've got a lot of market share. Most of the athanics that we've gotten a lot of leadership positions over there and injectables, the general injectables and 19:28 19 minutes, 28 seconds complexes also we'll do that over the next couple of years once we get the additional approvals. 19:35 19 minutes, 35 seconds Okay. Sure. So, so do you think that the US business can grow at a mid- teens kind of a constant currency rate going into 27 and 28? 19:44 19 minutes, 44 seconds Yeah, it could. I think uh I would say you know it's it's tough for me to say ideally yes I would like to go in the mid- teens but yeah like between 10 to 19:51 19 minutes, 51 seconds 15 at least I would expect the US business to continue growing every year. 19:56 19 minutes, 56 seconds Sure. And one last question from my side with your permission. So with respect to this branded product launcher, what kind 20:03 20 minutes, 3 seconds of a margin drag should we factor in let's say for an initial period till the product starts uh scaling up? 20:12 20 minutes, 12 seconds Um so I think till the product starts scaling up there would not we wouldn't have any margin because you know you have until it gets to a certain point 20:19 20 minutes, 19 seconds you have your MR cost you have the royalty payments you have everything else. So I think let's see I think let's wait for a couple of quarters and you guys will all get a much better idea. we 20:28 20 minutes, 28 seconds will also get a much better idea how quick the ramp up is happening. 20:32 20 minutes, 32 seconds But let's say if we had to budget in the the the the opex for this business, what kind of a opex do you envisage for this business for let's say 527? 20:43 20 minutes, 43 seconds So, so uh Rahul I think the way you should look at it is that a uh overall company level the margins is something 20:50 20 minutes, 50 seconds that you should factor and uh we are what we are seeing is that the core business margins have shown improvement in the current financial year and with 20:59 20 minutes, 59 seconds with uh better capacity utilization in the existing facilities that we have put the margin expansion is something that we should uh see you know coming out in 21:08 21 minutes, 8 seconds the next few quarters now we are like prana said you know we don't know exly ly where we will land on the top line. 21:14 21 minutes, 14 seconds So hence the margin pressure on PVR launch is something it's not possible for us to predict at this point. But 21:21 21 minutes, 21 seconds from a modeling perspective you could you could assume that you know uh the the margin expansion will be sort of a 21:29 21 minutes, 29 seconds cushion for the uh expenses that will come from PV. 21:34 21 minutes, 34 seconds Okay. Sure. So thank you. I will join back the queue. 21:39 21 minutes, 39 seconds Thank you. Participants who wishes to ask a question may press star and one now. 21:49 21 minutes, 49 seconds Participants who wishes to ask a question may please press star and one now. 21:57 21 minutes, 57 seconds As there are no further questions from the participants, I would now like to hand the conference over to Mr. G. Krishna for his closing comments. 22:05 22 minutes, 5 seconds Uh thank you for joining on the call for third quarter. Please feel free to reach out to the team for any clarifications 22:12 22 minutes, 12 seconds or questions you might have. And uh thank you once again. Have a very good evening. 22:18 22 minutes, 18 seconds Thank you ladies and gentlemen. On behalf of Olympic Pharmaceuticals Limited, we concludes this conference. 22:25 22 minutes, 25 seconds Thank you for joining us.