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.