X

Divi’s Laboratories Ltd Q3 FY24 Earnings Conference Call Insights

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.
Related Post