Categories Concall Highlights, Earnings, Health Care

Divi’s Laboratories Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Divi’s Laboratories Ltd (DIVISLAB) Q2 FY24 Earnings Concall

  • Business Overview
    • Anticipating growth opportunities in contrast media, sartans, soon-to-expire patented products.
    • Demand for established generics remains stable despite pricing pressure.
    • Pursuing comprehensive business strategy, new DMF filings to drive growth.
    • Custom synthesis garnering customer interest with expanded capacity and reduced lead times.
    • Sartans family now in top 10 products by revenue and scaled up as expected to become a major product segment.
  • Manufacturing and Capacity
    • Construction underway on 200-acre greenfield project, to start production in Q1 FY25.
    • New facilities to free up existing plants for custom synthesis and new generic opportunities.
  • Financial Performance
    • Q2 total income at INR1,995 crores, up 3% year-over-year.
    • Q2 profit before tax at INR469 crores.
    • Exports were 87% of revenues in Q2, with Europe and US exports being 68% of Q2 revenues.
    • Generics were 60% of Q2 revenues, custom synthesis 40%.
  • Unit III Capacity
    • Will increase operational expenses as new facilities come online.
    • Expenses will be proportional to volume loaded into facilities.
  • Custom Synthesis Growth
    • Growth distributed across several therapeutic segments.
    • Driven by two large custom synthesis projects now at full production.
    • Resumption of delayed custom synthesis opportunities post-COVID.
    • Growth to accelerate in Q3 based on sales visibility.
    • Working with large pharma companies, not small startups for late-stage pipeline projects or those acquired from smaller firms.
    • Not seeing slowdown in opportunities that some CDMOs are facing.
  • Pricing Pressures
    • Seeing pricing pressure in some large volume established generics.
    • Impacting gross margins despite growth in custom synthesis.
    • Expect pricing and margins to improve going forward once inventories are depleted.
    • Not seeing major pricing pressure in newer generic launches.
  • Generic API Business
    • Seeing good volume growth in generic APIs, pricing pressure is impacting revenues.
    • Estimating double-digit volume growth and mid-single digit price erosion.
  • Contrast Media Update
    • Supplying two iodine-based contrast media currently.
    • Entering two more iodine-based contrast media.
    • Gadolinium-based contrast media in final process stage.
    • Targeting gadolinium-based supplies in FY25 after approvals.
  • Peptide Opportunity and Regulatory Needs
    • Significant opportunity in peptide building blocks for diabetes and weight loss drugs like GLP-1 agonists.
    • DIVISLAB can supply at scale versus competitors.
    • Huge potential to expand into di/tri-peptides.
    • May not need USFDA approval for early stage peptides, but later stage peptides likely to need regulatory approvals.
    • Qualifications very stringent and tough.
  • Peptide Product Timeline
    • Company sees initial sales starting in fiscal year 2025, with bigger sales numbers coming after that.
    • Currently working on approvals and qualifications that will be completed prior to 2025.
    • Existing facilities have capacity to produce needed building blocks like di- and tripeptides.
    • Do not require additional capacity for the peptide opportunity.
  • Nutraceutical Growth Drivers
    • Limited competitors in Divi’s niche products.
    • Strong in animal nutrition complex products.
    • Seeing steady 10-15% growth.

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