Key highlights from Gland Pharma Limited (GLAND) Q3 FY23 Earnings Concall
Management Update:
- [00:06:08] GLAND said the insulin line is in the process of ramping up post line improvements. The company expects to close Cenexi acquisition by March-April 2023 and focus on leveraging synergies between businesses.
- [00:06:24] GLAND also stated that China remains a key geographic focus and the company filed two more complex injectable products during 3Q23.
Q&A Highlights:
- [00:13:05] Sudarshan Padmanabhan of JM Financial asked about supply chain issues still persisting. Srinivas Sadu MD answered that most of the issues GLAND has resolved, but few still persist. GLAND has applied for a second source but haven’t received approval yet.
- [00:13:50] Sudarshan Padmanabhan from JM Financial enquired if the inventory adjustment has settled to a reasonable level, and if improvement is expected in the US and RoW markets. Ravi Shekhar CFO said there is a lot of competition in the market, and some companies are exiting certain products and businesses. GLAND’s current products are still selling well, but success is bleak with new product launches due to competition.
- [00:17:11] Saion Mukherjee with Nomura enquired about the profit share for 3Q23 and what’s the sustainable number. Ravi Shekhar CFO answered that profit share for 3Q was at 9% and in 2Q23 it was 7%, while in 3Q22 it was 10%. GLAND expects it’s sustainable at the current levels.
- [00:19:14] Saion Mukherjee with Nomura asked about growth from FY24, considering the changed environment like pricing pressure and lack of opportunities. Srinivas Sadu MD said GLAND can’t comment on the growth percentage, but it’s seeing companies getting input alerts and utilizing strengths in terms of quality and manufacturing. GLAND has taken on more capacities to replace losses, and there is pressure from competition and exits in the market.
- [00:21:00] Shyam Srinivasan at Goldman Sachs asked about GM showing QoQ improvement due to product mix and geography and if it’s sustainable. Srinivas Sadu MD replied the focus is to improve margins both internally and from material perspective. Also GLAND is trying to stay away from low margin business.
- [00:22:21] Shyam Srinivasan at Goldman Sachs enquired about Enoxaparin being a $50 million product but GLAND is doing just $5 million in 3Q23. Srinivas Sadu MD clarified that the run rate for the year is about $50 million. It’s just a timing issue when it can be achieved. And also depends on which SKU gets dispatches in which quarter.
- [00:24:30] Shubham Goyal of Motilal Oswal asked about Europe strategy, considering the supply chain issues and peers launching their products. Srinivas Sadu MD answered that in Europe, GLAND is purely a CDMO player. So peer comparison cannot be done.
- [00:28:15] Kartik Mehta from Klay Securities enquired if GLAND can provide information on the capacity and opportunity to move large volumes within 2 or 3 quarters’ time. Srinivas Sadu MD replied that in response to an increase in demand, the company has converted one of its biologics lines to cater to the increased need and is replacing transfers with their own products. This will help meet the capacity needs.
- [00:33:12] Prakash Agarwal with Axis Capital asked about the status if the two products expected from China in FY23. Srinivas Sadu MD replied that it was expected in Dec. Since it’s holiday now, it could be expected in Jan. Feb. or next quarter.
- [00:35:40] Sameer Baisiwala at Morgan Stanley asked about Enoxaparin run rate, considering GLAND did $44 million in the nine months. Srinivas Sadu MD replied that it depends on which quarter how much offtake it will have. On an annual basis, $50 million is the estimate the company has.
- [00:36:15] Sameer Baisiwala at Morgan Stanley enquired about the Pashamylaram expansion. Srinivas Sadu MD said GLAND currently has eight lines, with three lines under validation. These three will be commercialized in the next quarter. By the time everything is qualified, GLAND will have 11 lines.
- [00:38:33] Tushar Manudhane from Motilal Oswal asked about new capex required for biosimilar CDMO facility. Ravi Shekhar CFO replied that GLAND has spent about INR300 crores. Addition capex is being evaluated, but it won’t be very significant. Overall it will be about INR200-250 crore for FY23 and around INR300 crore for FY24.
- [00:42:33] Neha Manpuria of BofA asked about what areas do the complex filings cover, and when can GLAND expect them to contribute to new launches. Srinivas Sadu MD replied that the 4 products are valued at an estimated INR2 billion. They are a combination of hormonal peptides and suspensions, with the expectation that one or two will be approved in FY24, and the rest after that.
- [00:50:55] Kunal Dhamesha from Macquarie asked about reason for client inventory days reducing and GLAND’s days increasing. Srinivas Sadu MD answered GLAND doesn’t want to repeat the long lead times it experienced in the last 9 months. GLAND is trying to keep inventories low, but ready for when opportunities arise, such as audits that might come up.