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.