Alembic Pharmaceuticals, which has been seeing broad-based growth across verticals in the last several quarters, will be able to sustain its growth momentum going forward, Managing Director Shaunak Amin said.
A complex generic pipeline in the US market, traction in the domestic formulation led by specialty brands, and higher offtake of active pharmaceutical ingredients (API) would help the company achieve this goal, he told Moneycontrol in an interview.
The Vadodara-based drug maker, which has been around for over a century, saw revenues grow 21 percent year-on-year (YoY) to Rs 4,113 crore in the nine months ended December 31 of FY21, while net profit in the same period rose 53 percent over the previous year to 927 crore. EBITDA margins have risen to 31 percent in the first nine months of FY21. The stock gave a 57 percent return in the last one year.
US growth momentum
A late entrant in the US market, Alembic is trying to play catch-up with the competition. The US now contributes over 40 percent of the company’s revenues. Alembic is eyeing sales of $400 million-$500 million by FY24, which will be more than double the current figure.
The US business, which was primarily driven by Sartans, a class of drugs used in the treatment of blood pressure and heart failure, is seeing more competition, Amin said.
Alembic Pharmaceuticals took full benefit of supply shortages of Sartans in the US market, as most other competitors had to recall products due to impurity and compliance issues. But with competitors such as Torrent Pharma, Jubilant Life Sciences among others addressing the impurity issue and re-entering the market, Alembic is seeing competition and price erosion.
Amin says he nevertheless believes that the US growth story will continue on the back of new launches and better traction from existing products.
Focus on R&D
Amin said the company invests 10-12 percent of revenues on R&D, which is higher than industry, to develop a pipeline of complex products related to dermatology, ophthalmology, injectables, oncology injectables and oncology oral solids. While investing in R&D, the company simultaneously built factories to make those products, he added.
"We have done an extensive capex in the last 3 years, and almost Rs 1,800 crore has been spent on new facilities. We have four new facilities. At this point in time, we are at the end of the capex cycle for these products, we expect plant approvals and audits to happen in the next few quarters," Amin said.
Alembic Pharmaceuticals has filed 199 abbreviated new drug applications (ANDA) filings, of which 137 were approved.
Amin said the company has over the years built up a strong track record in terms of USFDA regulatory compliance and an efficient supply chain to become a reliable supplier to US distributors.
India formulations business
A decade ago Alembic decided to realign its focus from cough and cold, antibiotics, pain to specialties like cardio-diabetology, gastroenterology, gynaecology, and couple of smaller segments like neurology, nephrology, dermatology and ophthalmology, Amin said.
"India business, which is a second focus area for us, we have spent a lot of time in the last few years in reorganising our business, we have taken a call to operate without trade discounts. Last two quarters India business has picked up, led by specialty (non-acute) brands."
"Legacy wise we have a large cough and cold, antibiotic and pain business. Since the start of 2007, we have diversified into non-acute segments. Now the non-acute contributes 55-60 percent of sales," he added.
Despite competition, Amin sees huge scope to build up the speciality business and outperform market growth.
Growth in the API business, he said, was not dependent on any single product. This would call for multiple products, especially for new age drugs.
Analysts tracking the company say Alembic’s growth in the US will depend on new product launches and commercialisation of its injectable portfolio.
"Sartans’ contribution saw first significant erosion after multiple quarters, though US sales still hovered around $70 million in Q3. We reckon focus would be on the ex-sartans portfolio which should pick up on back of incremental approvals," Yes Securities said in its latest report.
"Expect US sales to consolidate over the next 12-18 months till new facilities see ANDA approvals post-inspection," the report added.
"We lowered our EPS estimate by 3 percent/4 percent for FY22/FY23, factoring in price erosion in Sartans on account of peers’ re-entry and the delayed commercialization at the injectables facility," a report by Motilal Oswal said.
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