Alembic Pharma: New Product Launches On The Horizon? | NDTV Profit
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00:00We're joined by Shauna Kameen, who's the Managing Director at Ellimic Pharma,
00:03who joins us now. Welcome to the show. Sir, my first question to you is, that overall good set
00:10of numbers, I want to understand that on the US part of things, that now you're launching a lot
00:17of products there as well. So I just want to understand that what is the kind of run rate
00:21that you're seeing in the US business overall, and overall in FY25?
00:26Yeah, so I think in terms of new product launches in the US, we launched two in the current quarter,
00:33and I think we're expecting a few more to happen in the next one or two quarters.
00:37You do understand some of these things are hard to kind of time exactly quarter to quarter basis,
00:43but I think over the next two quarters, we should see a few more launches happening.
00:47We've also got 12 approvals this year. So I think it kind of ties in with our historic
00:53ability to get product approvals as well as have successful new launches.
00:59So I think we continue on that trend. Mr. Shauna, continuing on the US, so we do have,
01:06I mean, we had this US pricing issues, and your comment on the US pricing environment,
01:12have you seen any changes there? You know, so the US pricing pressure does continue.
01:17I think the market is still seeing a pricing pressure. I think it's just maybe a little more
01:27internally adapt to dealing with some of these internal pressures. So I think that change in
01:33the environment, I think we've been a little better to deal with it. But the pricing pressure
01:37does continue as we go forward. Sure. Harsh here as well. You know,
01:43before we move to Q1 earnings, and try and break those down, I want to try and understand the
01:49outlook with regard to the Indian business, because you've spoken about global. How's the
01:54Indian business doing in terms of growth? What can we expect going forward as well as new product
01:59launches? What should that add overall to global as well as Indian consolidated top line?
02:04Okay. You always ask very tough questions. So yeah, so on the Indian business, you know,
02:11you know, so we've done a lot of internal restructuring from the Indian business point
02:14of view over the last three years. You know, the what we maintain is we want to
02:20outperform the Indian pharmaceutical market. And I think we're quite confident of delivering on
02:24those numbers. Q1, I would say, was a bit of an aberration because there was, you know,
02:30climate change and these extreme heat waves, which really did disrupt those local markets.
02:36And we do have a large amount of our portfolio sitting in the acute space. So that was a
02:42disturbance. But all things being normal, we want to, we're quite confident that we'll perform over
02:47a long enough period, the Indian market consistently by a few basis points. And that's what we're
02:52working towards. Coming to new product launches, I think new product launches have been integral
02:57part of L&B both from the US markets as well as global as well as the India piece.
03:02From the US piece, like I said, you know, we continue the pipeline to kind of keep delivering
03:09and keep launching products. From the India bit, I would just tweak it a little bit. I think it's
03:13not just going to be pure new launches. We've seen a lot of traction in those products which are,
03:17you know, which have been launched over the last 24 and 36 months. And I think a lot of the effort
03:23also is to scale some of these products up in India from, you know, just being a new launch to
03:28can we build significant momentum in the market. So that should take a larger share of the top
03:32line. Pure new launches that have been launched in the current financial year. Yes, that continues.
03:38But I don't think it's going to be a meaningful number just from looking at it from that point
03:42of view. Got it. Now, let me switch focus to Q1. Your gross margins have gotten better,
03:50or rather they've come in also at a very healthy number. But your EBITDA not so good. Talk to us
03:56about what's happening here in terms of numbers. And should this trend likely reverse? And should
04:02this gross margin improvement also start to aid EBITDA going forward? Yeah, so I think our historic
04:08gross margins and EBITDA have been very robust over the last decade. Obviously, with a lot of
04:14new plants and stuff coming on steam, I think we do see a bit of traction in that. So on the
04:18gross margin side, I think we see this momentum continuing going forward for the next two
04:24quarters, couple of quarters. On the EBITDA bit, I think there'll be some time for the lag to catch
04:29up. But I think over time, we do expect both to kind of come back to historic numbers.
04:36Mr. Amin, in the past few quarters, your API was performing pretty well. But in this quarter,
04:41API has seen a degrowth of around 15%. So I want to understand firstly, why has that happened? And
04:47secondly, where do you see this going and shaping up in FY25 overall? Yeah, so I think on the API
04:53business, there are two parts to it. One is, I think the API business, not just for us, but the
04:59whole market did see a lot of robust growth in 2022, 2023, 2024. We did see that. And we also
05:09got a large chunk of that. I think coming to this point, I think the market has seen a bit of,
05:15it's getting a bit tired. There is also some amount of price sensitivity that's happening,
05:21and price erosion on the API side. We expect these conditions to continue. But I think over
05:27time, product mix will kind of keep offsetting that. But that's it. Coming to the specific
05:33quarter numbers, I think it's just a bunching up issue of certain quarters, where you build
05:40something and some orders come in one quarter and the other quarter. So I think it's better to look
05:44at these API numbers over six months, rather than just the quarter number. Also, in terms of your
05:49animal health business, which is in India, so far, the last couple of quarters, we have seen
05:54good traction there. So in the next three to four years, where are you seeing this business going?
06:00Yeah, so you know, we're quite bullish on the animal health side of things. We've seen
06:04significant ramp up on this business. Last financial year, we added a new division with
06:09about 250 booths on ground, and expanded the product portfolio, largely in the livestock space.
06:16You know, we're very bullish, you know, process point of view, and I think from a product pipeline
06:21point of view, we're quite confident on the India wet business. So you know, we expect this momentum
06:26to keep continuing. And, you know, we expect this to kind of keep going forward. I don't think we
06:32see any slowdown on this front at this point in time. When it comes to R&D expenses, you have
06:38always guided around expense of around 550 to 600 crores. Where are you looking in this fiscal?
06:46Yeah, so you know, we've optimized our spend as a percentage from a high 10s from a mid 10s to
06:52more like a 7% this quarter. I think what we're trying to work on at this point in time is just
06:57optimize, you know, how we spend where we spend, we do understand that price sensitivity, price
07:02erosion in the US does play a lot of put a lot of pressure on our ability to work. So I think we
07:08continue with this kind of percentage in terms of, you know, absolute R&D spends, I think going
07:15forward as a percentage, we might see some inching up of this, as we see more recovering
07:19happening on the US side of things. So will it go towards 10? I mean, will it go back?
07:25It's not going to go towards 10, but it won't stay at 7. It would see some
07:29marginal movement upwards of this year. So understood. And with regard to CAPEX plans,
07:35any plans on the capacity expansion side of things? What are you focused on? And when do
07:41you expect this US recovery to start to play out? Yeah, so I think on the CAPEX side of things,
07:49we had the Indore plant we've talked about last year, but that continues beyond that,
07:52there are no new CAPEXs at this point in time. So this financial year, we won't see any new
07:58CAPEXs. There's always these routine CAPEXs, which keep happening in terms of balancing
08:02equipments. Yeah, so on the US recovery side, I think we've seen, you know, some gradual pickup
08:08on the US side. I mean, we expect this to move on back by some good launches, back by better product
08:13portfolio mix. So I think we're just better suited at dealing with the US market at this point in
08:18time. So I think we're quite comfortable and confident that going from this point of view,
08:22we don't see any shocks in the system as such. Got it. Mr. Amin, you know, I want to shift towards
08:29balance sheet side of things, you know, your gross borrowings in fourth quarter onwards has gone up.
08:35So I want to understand that overall, how is the debt trajectory going to be like in FY25?
08:42Yeah, so again, it's hard for me to comment on the debt trajectory, but I think
08:47our levels are very comfortable at this point. I think there's no stress on the balance sheet
08:50at all. I think it's, you know, it's going to be hovering around this point, you know,
08:58these percentages. So it's not, I think we're far from any kind of stress or any kind of,
09:04and we're quite cognizant of this. So yeah, so that's where we are in the balance sheet side.
09:09Also, Mr. Amin, yesterday there was this announcement wherein central government
09:13decided to waive requirement of some, you know, clinical trials in India,
09:17if the drugs are already approved in US, UK and Japan, Australia and Canada. So
09:24how are you seeing this opportunity? So I think it's not a new opportunity. It's just
09:30an easing up of ease of doing business, which is very much in line with the government's policy.
09:35So I think I'm very happy to hear that statement like this. So, but I don't know enough to comment
09:39on it. I have to get into the office and really we get into the depths of it at this point in time.
09:45Right, Mr. Amin, I just want to round this up. So you spoke about how margins will go back to
09:51where they were earlier, which is likely closer to 20. How quickly do they get there?
09:57No, so I can't give a forward guidance on that. I think as a process, we're working towards that.
10:01Okay. So look, it's something's out of our hand, but I think as a process, I mean,
10:06that's something that's, you know, we're quite sensitive towards. And if you see things like
10:11trimming our R&D expenses and, you know, optimizing plants, working on product mix,
10:16I think we're working towards that. It's hard for me to really give you a hard statement that,
10:20look, it's going to happen in 10 weeks or 20 weeks or 40 weeks. So, but as a process,
10:25we're totally on it. Right. And you had guided for launching roughly 10 products in Q2 FY25.
10:32Is that on track? Or does that change at all? No, I said not exactly in Q2. I said over the
10:40next two quarters, we should see some new launches and we should see, but I think as a whole in the
10:45financial year, we should look at around 10 to 12 new launches. Got it. Got it. Also, Mr. Amin,
10:51this rest of world sales were affected this quarter and I guess a constraint to supply
10:57was one of the reasons. So how are you planning to resolve this? Yeah. So I think it's just working
11:04in terms of, you know, optimization of plants to supply it. I think also rest of the world had a
11:09strong momentum in the last few years. So I think we, some of it is the base effect, but, you know,
11:16we're working to resolve these issues. Right. And Mr. Amin, just with regard to the US,
11:23it's going to be likely critical for you in terms of margins as well is what I seem to believe.
11:31Now, just in terms of when the US pickup happens, seems to be uncertain. But what would be the
11:39levers therefore, outside of this, which would aid margins? I think plant capacity optimization
11:47is one area we are looking at. I think product mix is a big lever for us. New launches, of course,
11:54is a big one for us. If you see historically our performance, if you go into the past, a lot of our
11:59performance have been linked to our new product launch pipelines. So I think a couple of these
12:03things put together should help the margins move forward. Okay. Mr. Amin, thank you so much for
12:10giving us those comprehensive answers and all the best for FY25. Thank you so much, guys. Thank you.
12:15Thanks a lot. Have a good day. Thank you so much.