Alkem Laboratories Limited — Q2 FY25
Alkem's Q2 FY25 PAT grew 11% YoY to INR 6,886 million, driven by cost controls and a favorable product mix.
neutral
medium
✓ Verified against BSE filing
Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
64%Questions answered2Evaded / deflected11Questions auditedContradictedNumbers vs filing
Partial answer
High priority
Why only one US product launch this quarter? Expected run rate for FY25?
Asked by Kunal Dhamesha, Macquarie
CEO gave qualitative outlook but did not quantify expected run rate for FY25.
no specific run rate givenqualitative outlook only
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Question
The first one on the US business, I believe that we are supposed to launch more than one product in this quarter, and there were a few relaunches also planned in this quarter, but I see we launched only one product. So are we expecting more products to be launched in the coming quarter, and how should we think about the US overall run rate for FY 2025 since H1 looks quite weak?
Vikas Gupta, CEO
Yes, we launched one product in Q2, which was also a very small product, differentiated product. But if you look at Q3, we are expecting to launch another product, which we have received the CGT with the 180 days exclusivity. And we are also planning. We have also received approval for Sacubitril/Valsartan in the US market...
Declined
High priority
What is the profitability range for US business pre-R&D?
Asked by Kunal Dhamesha, Macquarie
CEO explicitly stated they never share country-level profitability.
refused to share segmental profitability
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Question
So on a pre-R&D basis, our U.S. business would be at what kind of profitability, any particular range that you can direct us to?
Vikas Gupta, CEO
We have never shared the segmental country-level profitability. But yeah, overall EBITDA-wise, we all know that U.S. is a lesser EBITDA business as compared to our overall EBITDA. But we are improving over there, and our intent would be to get it closer to our at least overall EBITDA margin and not be dilutive, which will happen over a period of time.
Partial answer
High priority
Why did Alkem lag market growth in key therapies? Will FY25 guidance be revised?
Asked by Damayanti Kerai, HSBC
CEO explained reasons but did not provide specific therapy-level growth breakdown or revise guidance.
attributed to acute mix and NLEM pricingmaintained guidance without specific therapy-level detail
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Question
So can you explain the key reason for why Alkem has lagged market growth in key therapies like anti-infectives, gastro, and cardiac for second quarter? And since in H1, Alkem is below IPM, so in that context, will you be revising your guidance of on par growth with the market for FY 2025?
Vikas Gupta, CEO
Actually, if you see, it's only anti-infectives where we have had. See, cardio is we do not have a big cardio portfolio. So I would say, and in GI, if you look at the overall H1, we have outperformed the market. So in GI, we do not foresee too much of a challenge. In anti-infectives, at first, I will take the question on the overall growth being maybe 1% lesser than the overall market growth...
Answered
High priority
What is the new full-year guidance for top line and EBITDA margin?
Asked by Saion Mukherjee, Nomura
CEO provided specific revised guidance for top line (mid-single-digit) and EBITDA margin (18.5%-19%).
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Question
My first question is regarding the full year guidance. I think you talked about 10% growth on top line, I think 18% EBITDA margin. What's your new guidance overall for the company now?
Vikas Gupta, CEO
So overall, looking at the struggle that we have had in H1 from the US business, I would say on the top line, we would be mid-single-digit kind of growth as far as the overall top line is concerned. But when it comes to the overall margin, we are bullish about at least a 100 basis point kind of improvement, somewhere between 18.5% to 19%, I mean, kind of EBITDA. That's the outlook that I would maintain.
Answered
High priority
What caused the large volume decline in US business? Longer-term outlook?
Asked by Saion Mukherjee, Nomura
CEO explained supply chain issues, improved back orders, and strategy to prioritize margins over volume.
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Question
On the US business, we have seen fairly large volume decline, and also you mentioned about price erosion. If you can take us through, is there something you have seen in the recent past, things have deteriorated for the portfolio? And how are you thinking from a slightly longer-term perspective for your US business?
Vikas Gupta, CEO
So like I mentioned, we had some internal challenges. ... we had certain supply chain-related issues. ... The volume degrowth has largely been on account of our supply issues, which were there in the past. ... our back orders are now down to 2% in U.S. ... we expect US to be better. But we would not go aggressive on pricing and erode margins to win back the top line.
Answered
Medium priority
Are the INR 100-110 crore additional costs for new businesses yet to flow?
Asked by Neha Manpuria, Bank of America
CFO provided updated cost estimate (INR 60-70 crores) and confirmed timing.
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Question
Based on your guidance, is it fair to assume that the INR 100 crore to INR 110 crore additional cost that we were talking about for the new businesses hasn't really started flowing through our P&L, and a large part of that will come in the second half?
Nitin Agrawal, CFO
So you're right that in quarter one, we said that around at max around INR 100 crores, we will incur at pre-operating expenses for our MedTech and gen business. So as of now, we don't think we will cross at max INR 60-70 crores for both the MedTech and the gen US plant.
Evasive
Medium priority
Why have key anti-infective brands lost market share?
Asked by Yash Tanna, iThought PMS
CEO attributed to normal fluctuations and declined to provide specific reasons for market share loss.
dismissed as short-termrefused to discuss specific brands
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Question
So if I look at our MAT numbers, I think our brands like Clavam, Xone, and Taxim, they have regrown on a MAT basis, MAT October 2024. ... Clavam has lost market share from 15.6% to 15%. And even Xone has lost market share from around 18% to 16.5%. So if you can share anything on this, that would be very helpful.
Vikas Gupta, CEO
See, slight fluctuation in market shares keeps happening. ... a lot of smaller players also coming back to the market. ... I wouldn't go into those kind of nitty-gritties into specific brands, why they have lost market share and these things. I think these are all short-term trends.
Answered
Medium priority
Will Exactech's bankruptcy affect MedTech partnership and launch timeline?
Asked by Rahul Jeewani, IIFL Securities
CFO confirmed partnership remains and launch timeline unchanged.
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Question
Sir, on the MedTech business, if I'm correct, our partner, Exactech, is going through bankruptcy proceedings in the U.S. So would that lead to any change in terms of our partnership with them? And would we be looking for other partners then for this business?
Nitin Agrawal, CFO
So you're right that they are going to a bankruptcy proceeding. ... in terms of our, say, contract with Exactech, that still remains. And we are going to get those brands assigned the technical know-how transfer. ... operationally, we don't see any challenge or we don't see any change at Exactech, which will actually make us deviate from the original plan.
Partial answer
Medium priority
Is underperformance in anti-infectives due to rationalizing low-margin injectables?
Asked by Rahul Jeewani, IIFL Securities
CEO admitted rationalization but did not provide specific details or quantify the impact.
acknowledged but did not quantify impactvague on corrective measures
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Question
So are we rationalizing some of these injectable anti-infective products which are low-margin products and hence we have been underperforming market growth?
Vikas Gupta, CEO
I think there are two parts to it. ... the injectable piece, anyway, if you see the injectable anti-infective market is a low margin ... there are certain growth opportunities that you have to walk away with, right? But I wouldn't overplay onto that. I think there is some delta of performance that needs to come up on the anti-infective side as well.
Partial answer
Medium priority
What is the strategy to increase chronic business contribution? Can EBITDA reach 25%?
Asked by Forum Parekh, BOB Capital
CEO gave qualitative strategy but no quantified target for chronic share or timeline for 25% EBITDA.
no specific target for chronic sharedeferred to long-term
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Question
So the chronic side is around 20%-21% currently. So any strategy or any thought process to increase the chronic side of the business and to what extent can we see the contribution increasing in the near term is my first question.
Vikas Gupta, CEO
So I've always maintained chronic is our highest focus within the domestic segment. ... chronic will grow much faster than our growth in acute ... for the next three years, our growth in chronic is going to be much, much higher than what the market growth is. That should result in an improvement in the overall percentage of chronic business as compared to our overall pie.
Answered
Low priority
What is the split between trade and branded generic in India business?
Asked by Kunal Dhamesha, Macquarie
CEO provided the split (80/20) and margin improvement comment.
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Question
So for our India business, what would be the split for trade and branded generic business?
Vikas Gupta, CEO
So it's around 80/20. So around 20% of our business is trade generic. Yeah. But even on the trade generic business, we are seeing good improvement in the overall margins.
Answered
Medium priority
Why did inventory levels increase despite lower growth and raw material prices?
Asked by Saion Mukherjee, Nomura
CEO explained the strategic reason for inventory increase and expected benefits.
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Question
So Nitin, can you explain? There is an increase in inventory level. I mean, though we haven't grown much in the first half, and raw material prices in general have come down. So I see from March period, the inventory levels have gone up. Even from a year-ago period, it is quite high.
Vikas Gupta, CEO
So on the inventory part, we have purposely increased our inventory levels in the U.S. because in FY 2024, our inventory levels went down quite substantially in the U.S. market. ... purposely, we have increased our inventory in the U.S., which will actually give us positive results in quarter four onwards.
Quantitative claims vs filed numbers
| Claim | Management said | Filing | Verdict |
|---|---|---|---|
| EBITDA margin improvement of 100 bps to 18.5%-19% | 18.5% | 22% | Understated vs filing |
Filed figures sourced from Screener.in. Claims within a small tolerance of the filing are marked “matches filing”.