Laurus Labs Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Laurus Labs Limited (LAURUSLABS) Q4 FY22 Earnings Concall

Management Update:

• LAURUSLABS said that based on its healthy product pipeline, it continues to invest in FDF infrastructure. And brownfield expansion at Unit 2 is progressing as per expectation and is expected to add significant capacity to FDF operations, taking the capacity to 10 billion units.

• The company said it’s in the process of acquiring additional land  to further expand manufacturing capabilities to offer CMO services for recombinant food proteins.

Q&A Highlights:

• Tushar Manudhane of Motilal Oswal asked about the selling prices of ARV, how much it has fallen over last six months and the drivers of it. Satyanarayana Chava CEO said that ARV sales in FY22 for most companies were significantly lower. A specific number cannot be given but API and ARV prices both were down around 10%.

• Tushar Manudhane of Motilal Oswal asked about the $1billion target for FY23, if it will be spread out across four quarters. Satyanarayana Chava CEO replied that it has to be spread out, but a specific number cannot be given.

• Tushar Manudhane with Motilal Oswal also asked that with $1 billion in FY23, how much of it could buildup in FY24. Satyanarayana Chava CEO replied the company is seeing lot of opportunities not just in FY23 but FY24 also. As the company is building capacities, it is adding lot of customers and approvals are expected. ALURUSLABS doesn’t see any one-off in FY23 to reach the target.

• Harith Ahamed of Spark Capital Advisors enquired about Laurus Bio, the utilization of the new capacity added as of 4Q. Satyanarayana Chava CEO answered that its 180,000 liter capacity is fully operational in 4Q. The company is taking up some debottlenecking exercise to add more downstream capacity to utilize fermentation much better. The new fermentation capacity will only come by end of FY24. Therefore, significant growth in revenues at bio can come only in 2025.

• Harith Ahamed of Spark Capital Advisors asked about the 3 new facilities in CDMO starting supply from FY25, how much of an increase the company is seeing in the CDMO capacity. Satyanarayana Chava CEO replied that currently the capacity is shared between CDMO and generic API space. The reactor volume for CDMO will be close to 600 cubic meter. And then there is ability to add more capacity brownfield because the land parcel is big.

• Harith Ahamed of Spark Capital Advisors queried about the drivers for sharp increase in other current liabilities. V V Ravi Kumar CFO replied the other current liability is higher due to the higher purchase in 4Q. And therefore, the company needs to gear up for higher revenue in FY23.

• Tarang Agrawal with Old Bridge Capital asked about the ARV, formulations plus API as a percentage of FY22 revenues. Satyanarayana Chava CEO said that close to 55% of revenues came from ARV.

• Ratik Gupta from Guardian Holdings asked about the forecasting proportion mix on API in FY23. Satyanarayana Chava CEO said the onco APIs, when revenue base was small, it used to be 8%. LAURUSLABS is seeing opportunities for doing more non-ARV, non-onco revenues from FY24 onwards. Therefore expects growth predominantly to come from non-ARV, both in APIs and the formulation space.

• Ratik Gupta from Guardian Holdings asked about maintaining a leadership pipeline in the API segment and the US, Europe market share as a whole. Satyanarayana Chava CEO said that the company can’t give specific product share, but LAURUSLABS haven’t lost any market share and haven’t seen any pricing pressure on products in Europe and US.