Laurus Labs Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Laurus Labs Limited (LAURUSLABS) Q3 FY24 Earnings Concall

• Business Performance
  • Gross margins remained resilient at over 52% for several quarters despite slower Q3 performance.
  • EBITDA margins negatively impacted in Q3 due to higher expenses on growth projects and new initiatives.
  • Q3 revenues increased 6% excluding large prior year CDMO order; overall declined 23% year-on-year to INR 1,195 crores.
  • Underlying volume trends across businesses remain upbeat.
• Growth Drivers
  • Building promising pipeline leveraging technology platform offerings.
  • Gaining customer confidence through enabling capabilities.
  • Investment in growth projects expected to accelerate future potential.
  • Healthy order book and commercial execution to drive rebound from Q4FY24.
  • Strategic priorities focused on long-term success.
• Outlook
  • Formulations: Recovery in ARV business, growth in developed markets with new launches.
  • Onco APIs: Strong 38% YTD growth; capacity expansion underway.
  • Biosimilars & Novel Biologics: Progress on NexCAR19 commercialization, gene therapy collaboration.
• CDMO Business Momentum
  • Baseline CDMO business healthy; project pipeline scaling up with new customers.
  • Good RFP flow from big pharma and biotechs; advanced platform gaining confidence.
  • Working on 60+ active projects, 10 products in commercial supply.
  • Key CDMO capex projects on track across R&D, manufacturing, crop sciences etc.
  • Animal health unit started validation & scaling up, fully contracted to big pharma.
  • R&D center to open by FY24 end to support new CDMO opportunities.
• Biosimilars Business
  • Bio division sales up significantly to INR 131 crores in 9M FY24.
  • Growth led by diversifying CDMO services across expanding customer base.
  • Scaling enzyme engineering & production capabilities into API projects.
  • Downstream processing capacity up 20%; to peak revenues in FY25.
  • Large R3 facility construction starting, adds 2 million liters fermentation.
  • Phase 1 with 0.7-0.8 million liters to be completed in 24 months.
  • Further phases to add capacity every 12 months.
• Pipeline and Capacity Expansion Investments
  • R&D spending at 4.8% of sales in 9M FY24; expected ~4.5% for full year.
  • 39 ANDA filings in US, 18 in EU, 21 in Canada etc.; 16 Para IV filings.
  • Additional FDF capacity added, utilization expected from Q4FY24.
  • Onco API capacity addition underway to strengthen leadership.
• Financial Rebound and Growth
  • Putting weak quarters behind; confidence from order book and deliveries.
  • In growth phase like 3 years ago before strong growth.
  • Committing to better H2 than H1 as previously guided.
  • Most gross margin uptick will flow to EBITDA based on leverage.
  • Seeing revenue growth, not cost reductions driving profitability.
• Capex Investments
  • Current capex focused on Synthesis and Bio divisions.
  • Asset turns expected to improve from capex.
  • Temporary deleveraging and margin impact.
  • Investments will support growth in coming years.
  • Not undertaking any major new capex currently.
  • Looking to optimize spending without compromising growth.
• Animal Health Business
  • Long-term contract for site capacity remains in place.
  • Delayed qualification of facility and validations due to complexity.
  • 20 APIs need validation; doing 1+ per quarter to complete by FY26.
  • Peak revenues expected in FY26, not FY25 as previously thought.
• CAR-T Therapy Progress
  • Started patient enrollment last month.
  • Looking to accelerate access and adoption in India.
  • Key milestone for novel pipeline and capabilities.
• Non-capex Investments
  • Over INR 450 cr in Laurus Bio, ImmunoACT, IIT-Kanpur etc.
  • Enabling expansion into new therapies like cell/gene therapy.
  • Will start contributing along with operational leverage.
  • 35-40 stores have achieved ROI showing profitable model.
• Leveraging Core Capabilities
  • Utilizing existing infrastructure and scientific talent.
  • Repurposing assets from legacy businesses.
  • Focus on operational excellence and cost optimization.
  • Prudent investments to support long-term growth.