Aurobindo Pharma Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Aurobindo Pharma Limited (AUROPHARMA) Q2 FY24 Earnings Concall

• Revenue Growth
  • Revenue grew 25.8% year-on-year to INR7,219 crores, driven by growth across formulations, APIs, and geographies.
  • Formulations revenue, excluding Puerto Rico, grew 29% YoY to INR5,968 crores.
  • US formulations revenue, without Puerto Rico, grew 35.7% year-on-year to INR3,385 crores, driven by volume gains, stable demand and new launches.
  • Europe formulations revenue grew 16.7% year-on-year to INR1,769 crores.
  • Growth markets revenue grew 24.7% year-on-year to INR564 crores.
• Margin Expansion
  • EBITDA grew 67.7% year-on-year and 21.9% quarter-on-quarter to INR1,403 crores.
  • EBITDA margin expanded to 19.4% against 16.8% last quarter.
  • Margin expansion driven by higher capacity utilization, operating leverage, lower material costs, and favorable product mix.
• US Business Performance
  • Received 15 ANDA approvals and launched 19 products in Q2 FY24.
  • Filed 10 ANDAs during the quarter.
  • US revenue growth driven by injectables and oral solids.
  • Improved pricing environment in US with price erosion remaining neutral.
  • US formulations revenue excluding Puerto Rico grew 35.7% year-on-year.
  • Injectables revenue stabilized around $80-90 million per quarter currently.
  • Oral solids growing at double digit rate driven by new product launches and volume gains.
  • Launching 40 new products in 12 months, on track.
  • Leveraging manufacturing capabilities and broad portfolio
• Capacity Expansion
  • Multiple manufacturing plants under installation and commissioning.
  • New plants in China, Pen G, and API expected to be operational starting Q4 FY24.
  • Clinical trials underway for biosimilars plant which will be commissioned in FY25/26.
  • Existing plants undergoing debottlenecking to increase capacity.
• Outlook
  • Confident of sustaining growth momentum in revenue and earnings.
  • Expect to achieve over 20% EBITDA margin target for FY24.
  • Focus on new product launches, cost efficiencies and expanding product pipeline.
  • Exploring bolt-on acquisitions aligned with company’s growth strategy.
  • Targeting over 20% EBITDA margin for FY24.
  • R&D spend expected to increase back to INR350-400 crores per quarter.
  • With plants getting commissioned, capex may moderate from FY25.
  • Strategy capex of $100-150 million will continue for biosimilars, CMO etc.
  • Existing generics business may not require major capex.
• MSD Partnership
  • Signed letter of intent to partner with MSD for biologics contract manufacturing.
  • Will invest in infrastructure for innovator biologics manufacturing with capacity of over 15 KL bioreactors.
  • Aims to compete with major CMOs globally in both drug substance and finished product.
  • Final investment amount still under negotiation, expected clarity in 4-5 months.
• Debt Position
  • Gross debt increased by $160 million in Q2 FY24.
  • Spent on Indonesia acquisition, PLA plant capex, working capital.
  • Expect to end FY24 with net debt between $0-50 million.
  • Cash flows from PLA plant will help reduce net debt next fiscal year.
• Revlimid Launch
  • Launched in October 2023.
  • Pricing similar to competitors.
  • Planning for stable quarterly revenue contribution throughout settlement period.
• Europe Business Outlook
  • Focus on improving profitability and margins rather than chasing top line growth.
  • Aiming to achieve company average EBITDA margins of 20% with scale.
  • New injectable and biosimilar launches to aid growth along with China facility.
• Indonesia Acquisition
  • Acquired Pfizer’s branded portfolio in Indonesia.
  • 16 well-known brands with INR31 million revenue.
  • Gives direct presence in large and growing pharma market.
  • Closed in Q3 FY24, will aid growth from FY25.
• Europe Biosimilar Filings
  • Faced delay earlier, have resubmitted Pegfilgrastim file.
  • Will submit Filgrastim and Trastuzumab files by end of January 2024.
  • Pegfilgrastim and Filgrastim approvals expected in FY26.
  • Trastuzumab approval likely in FY27.
  • Audit for Filgrastim expected in Q1 2024.
• ARV Business Revenue
  • Quarterly revenue around $25 million ± $5 million.
  • No huge growth expected unless unable to supply in a quarter.
• Organic Capex
  • Existing plants capex around $125-150 million annually.
  • Not embarking on major new greenfield plants currently.
  • Adding lines and debottlenecking existing plants to reduce gestation period.
• Inorganic Investments
  • Spent $95 million this year on acquisitions for new markets and business.
  • Do not foresee similar scale of investments every year.
  • Will evaluate bolt-on acquisitions if value-accretive opportunities arise.