Key highlights from Laurus Labs Limited (LAURUSLABS) Q4 FY23 Earnings Concall
- [00:09:24]LAURUSLABS said it invested in expanding non-ARV formulation infrastructure with a capacity of 10 billion units. The company expects brownfield capacities added in FY23 to be better utilized in FY24 due to better demand visibility in ARV business, CMO portfolio and key product approvals.
- [00:20:45] Ravi Agarwal from Agarwal Investment asked if the energy crisis in Europe due to war will create opportunities for Laurus in India as a key supplier of API or intermediates, as many plants are set up for API. Satyanarayana Chava CEO said the energy crisis in Europe will increase manufacturing costs. LAURUSLABS has opportunities in intermediates and APIs, not large volume products. Laurus invested INR1,000 crores to capture such opportunities and is well-positioned to take advantage of contract manufacturing.
- [00:22:01] Ravi Agarwal from Agarwal Investment enquired about the company’s competency in CDMO compared to Lonza, Samsung Biologics, WuXi or Syngene. Satyanarayana Chava CEO said LAURUSLABS is not currently involved in recombinant or bio-CMO. The company focuses on enzyme and food protein manufacturing, not therapeutic protein manufacturing and do not offer recombinant mAbs for therapeutic use.
- [00:24:04] Madhav Marda of Fidelity International queried if the company’s plants can potentially run at 100%. Satyanarayana Chava CEO clarified that the utilization is at about 85%.
- [00:24:24] Madhav Marda at Fidelity International asked about the potential contract wins in the next year, following the animal health contract win in Europe. Satyanarayana Chava CEO replied that the company has several programs in Phase 2 and Phase 3, but it is uncertain how many will advance to commercial. Contracts for future supplies are not received until the molecule moves to commercial phase. The company has capacities to capture opportunities if it moves to commercial phase.
- [00:26:17] Nishant Shah with Emkay Global queried about the near-term and long-term outlook and if LAURUSLABS can maintain a 25% CAGR growth with cost and technology improvements, ongoing projects etc. Satyanarayana Chava CEO said the company’s growth will come from capturing more opportunities with the existing partners. LAURUSLABS is not anticipating growth coming from new geographies.
- [00:28:14] Harith Ahamed from Avendus Spark asked about the breakdown of the 60% QonQ growth in the FDF business. Satyanarayana Chava CEO answered that in 4Q23, the company did INR393 crores sales in formulations. Out of that, 60% is ARVs and rest is non-ARVs.
- [00:30:20] Harith Ahamed of Avendus Spark asked about the timeline for commissioning of LSPL Unit 3 and Unit 4. Satyanarayana Chava CEO replied that LSPL 2 will go into commercial production in 2H24. LSPL 4 already has a pilot plant for registration batches and commercial production is expected in 2H25.
- [00:34:21] Jeevan Patwa from Sahasrar Capital queried about formulation and API performing well in 4Q23, while CDMO at below expectations and if there was some deferment. Satyanarayana Chava CEO clarified that there was no deferment of shipment. LAURUSLABS delivered the orders it was supposed to deliver in 4Q.
- [00:35:21] Jeevan Patwa from Sahasrar Capital enquired why has GM been decreasing over the last few quarters, and what is a sustainable GM percentage that can be assumed going forward. Satyanarayana Chava CEO said GM impact was mainly due to depressed pricing in ARV, APIs and formulations. Margins are expected to improve through process improvements, manufacturing cost improvements, and purchase pricing improvements.
- [00:37:13] Tushar Manudhane of Motilal Oswal asked where do the business prospects for the new non-ARV formulation come from. Satyanarayana Chava CEO said significant growth in formulations in non-ARV will come from contract manufacturing and also increased sales in US and Canada.
- [00:38:59] Gaurav Singhal from Aspex Management asked about the number of projects the company has in Phase 3 for the CDMO segment. Satyanarayana Chava CEO said total number of active projects are over 60, while LAURUSLABS doesn’t give a detailed breakdown of how many are in Phase 1, Phase 2, or Phase 3.
- [00:41:17] Bharat from Quest for Value asked about the BM tablet capacity of the new greenfield capex for BF in Hyderabad. Satyanarayana Chava CEO clarified that that capacity LAURUSLABS purchased land, but haven’t started construction of a formulation facility in Hyderabad. The first two facilities at the site will be for sterile commercial manufacturing and oral solid manufacturing.
- [00:42:32] Bharat from Quest for Value queried what is company’s vision for the product mix 5 years down the line, and what could be the combined share of CDMO and Bio. Satyanarayana Chava CEO said in FY23 CDMO revenue was 36% and in 5 years, CDMO and Bio will be around 50%.
- [00:46:30] Neha Agarwal of SageOne asked in how many years is full utilization of the capex from FY22-’23 and the planned capex for FY24 expected to be achieved. Satyanarayana Chava CEO said current capacities are expected to be fully utilized by FY25, and more capex will be put in to increase capacities. In the last 24 months, 30% API capacity and 50% formulation capacity have been added, representing a significant improvement in capacity.
- [00:55:53] Yasser Lakdawala with M3 Investment asked about the right to win on non-oncology APIs, are they large volume products, and is there a cost advantage. Satyanarayana Chava CEO said of the INR2,600 crore API revenue, INR1,530 crores comes from ARV APIs, INR318 crores from oncology, and INR780 crores from non-ARV and non-onco. Half of the INR770 crore revenue comes from contract manufacturing of generic APIs to generic customers.
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