Marksans Pharma Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Marksans Pharma Limited (MARKSANS) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:08:54] Riddhesh Gandhi from Discovery Capital asked why there is revenue growth despite high single-digit price decreases. Mark Saldanha MD said pricing pressure and price erosion continues in all functional countries, mainly in the US. This is being offset by focus on service, new product launches, positioning, and product range, which has allowed MARKSANS to become a preferred choice.

• [00:09:53] Riddhesh Gandhi with Discovery Capital also asked about backward integration timelines. Mark Saldanha MD replied that MARKSANS is currently focusing on the CDMO strategy and the acquisition and integration of Teva, but the company plans to file a DMS in 2023.

• [00:11:25] Riddhesh Gandhi at Discovery Capital enquired if the company will continue to be able to see the good growth trajectory in future. Mark Saldanha MD said the company is on track to reach INR2,000 crores in the next fiscal year and there shouldn’t be any major hurdles or pricing pressures that could disrupt this growth trajectory.

• [00:13:00] Agastya Dave of CAO Capital enquired how long do MARKSANS expect inflationary pressures to continue to affect P&L and when can cost stability be expected. Mark Saldanha MD said the company was sitting on some inventory due to China lockdowns and increased inventory to service contracts.

• [00:19:07] Agastya Dave of CAO Capital asked about the fully diluted share count after the warrant conversion and end of buyback. Jitendra Sharma CFO replied that the current issued share capital is around 45 crore shares.

• [00:19:43] Utsav Jaipuria from DAM Capital asked about a 12% growth QonQ and if it’s due to the flu season. Mark Saldanha MD replied that the company does not anticipate any hiccups in showing growth in the US in the upcoming financial year, and believes it will be able to maintain that growth due to new product launches and contracts that have been commercialized.

• [00:22:51] Viraj asked about the switch from the Rx to OTC, mainly in UK that is leading to an increase in OTC due to this switch.  Mark Saldanha MD said the company does not engage in Para-IV challenges, however MARKSANS do look for opportunities when an Rx product is switched to OTC. This allows the product to become more accessible to consumers, resulting in higher volumes than if it was a prescription item.

• [00:25:00] Viraj also asked about freight cost and if the company had benefit of reduction in 3Q23. Mark Saldanha MD replied that there is a lag effect and the benefit will kick in, in 4Q23. The margins are expected to go up plus 1% due to freight cost reductions going forward.

• [00:28:21] Prerit Choudhary with Green Portfolio queried if the company is recording any revenue from the Teva plant. Jitendra Sharma CFO answered that revenue from the Teva plant will be starting from FY24 onwards.

• [00:29:01] Prerit Choudhary with Green Portfolio asked about the revenue from the Access Healthcare business. Jitendra Sharma CFO replied that it was INR19 crores.

• [00:37:14] Vishal Manchanda at Systematix asked that on the Rx to OTC switch, if the company is targeting any product categories in the US. Mark Saldanha MD replied that MARKSANS is working on few categories both in Europe as well as in the US, but it’s too early to discuss.

• [00:40:02] Dipesh Sancheti asked if the company is carrying any accumulated losses that will be useful for tax advantage from Teva. Jitendra Sharma CFO clarified that there won’t be any accumulated losses taken.

• [00:41:38] Dipesh Sancheti enquired where MARKSANS will see the growth coming in future and if it will be maximum from Teva. Mark Saldanha MD replied that the growth will come from all geographies. And the acquisition of a plant from Teva will help fuel growth in all geographies and serve global demand.

• [00:43:02] Anupam Agarwal at Lucky Investments asked about the number of filings and the overall market size and potential number of competition in those products. Mark Saldanha MD said the company has planned to file 34 new products in the UK and 32 in the US over the next two years, with seven to be filed this year and 16 already in the pipeline. These products are spread across solid oral, ointments, creams, and soft gels. The company only undertakes expensive ANDA filings when it believes there is enough return.

• [00:53:27] Vishal Manchanda from Systematix asked about the percentage of MARKSANS OTC business is own label and if they have better realizations. Jitendra Sharma CFO replied that the own label is around 15-20%. On realization, own label does more to some extent than the other businesses.