Key highlights from Laurus Labs Ltd (LAURUSLABS) Q4 FY24 Earnings Concall
- R&D Progress
- Advanced several pipeline projects across offerings and augmented technology/manufacturing platforms.
- Deepened cooperation with major CDMO clients on green/sustainable tech like continuous flow chemistry, biocatalysis.
- Significant investments in development & manufacturing capabilities for next growth wave.
- Innovative cell & gene therapy (CGT) investments; successful NexCAR19 commercial launch in India.
- Second large GMP integrated R&D facility under construction for CGT to service more patients affordably.
- Collaboration with IIT Kanpur on gene therapy; GLP/GMP plant construction for viral vectors & gene therapy products
- Financials
- 9% revenue growth to INR 5041 cr driven by formulations, CDMO, Onco APIs & Bio division.
- EBITDA margins at 16% impacted by higher opex on growth projects & higher R&D spend.
- Q4 results improved sequentially led by positive contribution from all businesses.
- Gross margins at 52% for FY24; EBITDA at 16% impacted by opex on growth projects.
- Q4 gross margins down 450 bps QoQ despite favorable product mix shift due to lower share of high-margin Bio/Synthesis, reduction in inventory overheads absorbed.
- Capex of ~INR 700 cr invested, mostly in CDMO and Bio divisions.
- Net debt at INR 2003 cr, targeted to reduce going ahead.
- ARV Franchise
- ARV business stabilizing; market volumes largely stable aided by pricing trend over last few quarters.
- Impact on ARV franchise broadly stabilized and expected to stay in current range.
- Optimization programs to counter pricing impact; portfolio breadth & new markets to solidify leadership.
- Generics Business
- 8 ANDA filings; 99 approvals including tentative; 2 US launches in Q4 & 2 more launches in preparation.
- Diverse pipeline across ARVs, CVS, diabetes, CNS & GI.
- R&D spend 4.8% of sales; first modified release generic product launch.
- Maintaining market share leadership in first-line HIV treatment APIs.
- Oncology and Other APIs
- Onco APIs reported highest ever Q4 sales; strong 27%+ growth in FY24.
- Capacity expansion & new product validations at Vizag for Onco APIs.
- Other APIs (CVS, diabetes, asthma) recovered sequentially led by CMO deliveries.
- 4 new DMF filings in FY24 taking total to 83.
- CDMO Business
- Substantial increase in RFPs from big pharma/biotechs; focus on early & late stage projects.
- Over 70 active projects; commercial supplies for 10 products.
- Crop Science CDMO contract; capacities being added at new animal health facility.
- Leveraging scientific capabilities to diversify revenue streams.
- No need for equity capital raise for growth or protection.
- Meaningful revenue contribution from animal health and crop protection contracts expected.
- Bio Division
- 28% growth led by CDMO services expansion & growing customer base.
- Downstream capacity operationalized; 20% increase in R&D capacity.
- Plans for larger fermentation capacities at Vizag & Mysore for opportunities in GMP pharma manufacturing.
- FY25 Outlook
- Entering year with solid foundation, focused on sustainable profitable growth.
- Prioritizing operating margin improvement, higher asset utilization, delivering on late-phase NCE opportunities.
- Expecting pricing pressure in some APIs offset by volume growth and cost improvement measures.
- Continuing investments to create long-term value for stakeholders.
- Tax rate expected around 25% going forward under new regime.
- Capex plan similar to current year focused on Bio and CDMO divisions.
- High receivables due to higher Q4 revenues, expected to normalize.
- Integrated CDMO capabilities
- Able to offer integrated services spanning biocatalysis, enzymes, chemistries across animal, crop & human life sciences.
- Integrated approach with in-house enzyme manufacturing capability provides significant advantage over non-integrated players.
- Deeper engagement with innovators who can access multiple capabilities from single vendor.
- Complex projects involving continuous flow chemistry, biocatalysis becoming integral due to big pharma’s ESG commitments.
- China Diversification Opportunity
- China-based CDMOs have significant US exposure; US pushing to reduce dependence on China under Biosecure Act.
- India CDMOs like Laurus well-positioned to capture shift with existing capabilities and capacities.
- More late-phase project RFPs indicate big pharma’s vendor diversification efforts have started.
- Formulations Business
- New product launches in US align with strategy to be global leader in 15 high-volume growing products.
- Aim for gradual market share gain post-approval without disrupting pricing.
- Adding packaging lines to cater to new multi-year, multi-product tertiary packaging contract.
- Bio Division Strategy
- Shifting strategy to produce pharma intermediates/APIs at Vizag and non-pharma at Mysuru.
- Long-term plans for 10 food proteins with 1350 ton total capacity for contract manufacturing.
- Food protein capacities not very large for B2B model.
- Gene Therapy Investments
- Investing in R&D and manufacturing for gene therapy at IIT Kanpur.
- Near-term impact on P&L due to Capex and Opex, but strategic for long-term growth.
- API Capacity Utilization
- API capacity increased by 50% recently, but other APIs segment saw 25% revenue decline YoY.
- New capacity meant for clinical trial supplies, not generic APIs.
- Other APIs a smaller portion of overall API sales, so growth not critical for entire segment.
- Long-term Strategic Vision
- Transition from pure-play API to integrated offerings across human, animal, crop sciences.
- Early investments in new areas to capitalize on innovator de-risking.
- Though growth not visible yet, exploring opportunities with partners for conviction areas.
- Expect CDMO contribution to grow from 20% currently to 1/3 in next few years.