Categories Concall Highlights, Earnings, Health Care

Laurus Labs Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Laurus Labs Limited (LAURUSLABS) Q3 FY24 Earnings Concall

  • Business Performance
    • Gross margins remained resilient at over 52% for several quarters despite slower Q3 performance.
    • EBITDA margins negatively impacted in Q3 due to higher expenses on growth projects and new initiatives.
    • Q3 revenues increased 6% excluding large prior year CDMO order; overall declined 23% year-on-year to INR 1,195 crores.
    • Underlying volume trends across businesses remain upbeat.
  • Growth Drivers
    • Building promising pipeline leveraging technology platform offerings.
    • Gaining customer confidence through enabling capabilities.
    • Investment in growth projects expected to accelerate future potential.
    • Healthy order book and commercial execution to drive rebound from Q4FY24.
    • Strategic priorities focused on long-term success.
  • Outlook
    • Formulations: Recovery in ARV business, growth in developed markets with new launches.
    • Onco APIs: Strong 38% YTD growth; capacity expansion underway.
    • Biosimilars & Novel Biologics: Progress on NexCAR19 commercialization, gene therapy collaboration.
  • CDMO Business Momentum
    • Baseline CDMO business healthy; project pipeline scaling up with new customers.
    • Good RFP flow from big pharma and biotechs; advanced platform gaining confidence.
    • Working on 60+ active projects, 10 products in commercial supply.
    • Key CDMO capex projects on track across R&D, manufacturing, crop sciences etc.
    • Animal health unit started validation & scaling up, fully contracted to big pharma.
    • R&D center to open by FY24 end to support new CDMO opportunities.
  • Biosimilars Business
    • Bio division sales up significantly to INR 131 crores in 9M FY24.
    • Growth led by diversifying CDMO services across expanding customer base.
    • Scaling enzyme engineering & production capabilities into API projects.
    • Downstream processing capacity up 20%; to peak revenues in FY25.
    • Large R3 facility construction starting, adds 2 million liters fermentation.
    • Phase 1 with 0.7-0.8 million liters to be completed in 24 months.
    • Further phases to add capacity every 12 months.
  • Pipeline and Capacity Expansion Investments
    • R&D spending at 4.8% of sales in 9M FY24; expected ~4.5% for full year.
    • 39 ANDA filings in US, 18 in EU, 21 in Canada etc.; 16 Para IV filings.
    • Additional FDF capacity added, utilization expected from Q4FY24.
    • Onco API capacity addition underway to strengthen leadership.
  • Financial Rebound and Growth
    • Putting weak quarters behind; confidence from order book and deliveries.
    • In growth phase like 3 years ago before strong growth.
    • Committing to better H2 than H1 as previously guided.
    • Most gross margin uptick will flow to EBITDA based on leverage.
    • Seeing revenue growth, not cost reductions driving profitability.
  • Capex Investments
    • Current capex focused on Synthesis and Bio divisions.
    • Asset turns expected to improve from capex.
    • Temporary deleveraging and margin impact.
    • Investments will support growth in coming years.
    • Not undertaking any major new capex currently.
    • Looking to optimize spending without compromising growth.
  • Animal Health Business
    • Long-term contract for site capacity remains in place.
    • Delayed qualification of facility and validations due to complexity.
    • 20 APIs need validation; doing 1+ per quarter to complete by FY26.
    • Peak revenues expected in FY26, not FY25 as previously thought.
  • CAR-T Therapy Progress
    • Started patient enrollment last month.
    • Looking to accelerate access and adoption in India.
    • Key milestone for novel pipeline and capabilities.
  • Non-capex Investments
    • Over INR 450 cr in Laurus Bio, ImmunoACT, IIT-Kanpur etc.
    • Enabling expansion into new therapies like cell/gene therapy.
    • Will start contributing along with operational leverage.
    • 35-40 stores have achieved ROI showing profitable model.
  • Leveraging Core Capabilities
    • Utilizing existing infrastructure and scientific talent.
    • Repurposing assets from legacy businesses.
    • Focus on operational excellence and cost optimization.
    • Prudent investments to support long-term growth.

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