Key highlights from Divi’s Laboratories Ltd (DIVISLAB) Q3 FY24 Earnings Concall
- Growth and Performance
- Witnessed a steady 3Q driven by expanding market opportunities and slight decline in raw material prices.
- Generic business remains stable with sustained demand for established products.
- New opportunities from patent expiry products continue to create positive prospects.
- Custom synthesis segment is rising with two major Big Pharma projects entering full scale production, expected to further increase contribution in coming quarters.
- Business Expansion
- Actively involved in peptide building blocks used in new antidiabetic and anti-obesity drugs.
- Production activity to commence in Q2 2024-2025 for 200 acre Phase 1 greenfield project as part of Unit III infrastructure.
- Global Crisis Impact
- The Red Sea crisis has introduced global supply chain disruptions, leading to increased freight costs and shipment delays.
- With vessel diversion and longer voyages, international freight rates and insurance premiums are rising.
- China Opportunity
- Big Pharma looking to curb exposure to China manufacturing, translating into business for Indian CDMOs.
- Seeing huge growth opportunities as Big Pharma works more with Indian and European companies.
- Peptide/Protein Progress
- Supplying protected 3-4 amino acid chains; working with innovators using these in GLP-1 drugs made at their sites.
- Commercial opportunities expected around 2025 after 1+ year qualification process.
- Experience with amino acid protecting groups like tBoc, Fmoc, Dboc used in solid phase peptide synthesis.
- Currently supplying protected amino acids, dipeptides, tripeptides; under qualification for supply of longer 30-40 amino acid peptides.
- Focus on building blocks for now rather than final API.
- Custom Synthesis Growth Drivers
- Two major projects commercialized and ramping up volumes, benefiting custom synthesis share.
- Several molecules in late regulatory stages with customers, ready with capacity for opportunities.
- Custom synthesis share varies quarter-to-quarter, more relevant to see full year share.
- Generic Business Outlook
- Pricing pressures currently driven by competitors destocking inventory, expect stability in 2-3 quarters.
- Maintained market share despite pricing pressures; increased capacity in major APIs.
- Future patented molecules coming off patent from 2025 onwards a growth driver.
- Kakinada Production to start end of Q2 next fiscal year.
- Target is equal growth in generics and custom synthesis.
- Multiple growth levers in generics and custom synthesis, so no skew expected.
- Kakinada Update
- Production to start end of Q2 next fiscal year.
- Commercialization by Q3 2024-25 following regulatory approvals given export focus.
- Will have a mix of both generics and custom synthesis products.
- Most manufacturing blocks are multi-purpose rather than dedicated.
- Current investments of INR 458 crores for seven production blocks.
- Additional 300 acres available for future expansion as opportunities increase.
- Nutraceuticals Outlook
- Running at full capacity currently in niche products like astaxanthin.
- Worldwide soft demand and prices, cautious on growth.
- Steady 10% YoY growth, may add capacity if opportunities increase.
- GLP-1 Update
- Have enough capacity currently to meet initial customer demand.
- If volumes grow beyond expected, may need to invest in additional dedicated capacity.
- Have dedicated capacity of few hundred tonnes ready for GLP-1 commercialization.
- Waiting on innovator customer approvals to start supply.
- GLP-1 products expected to be accretive to overall gross margins.
- Capacity Utilization
- Current quarter capacity utilization around 80%.
- Added capacity in last 2 years now being utilized for higher volumes.