Key highlights from Torrent Pharmaceuticals Ltd (TORNTPHARM) Q2 FY24 Earnings Concall
- Revenue Growth Across Key Markets
- India business revenue grew 18% year-on-year; 12% growth excluding Curatio acquisition.
- Strong constant currency revenue growth of 8% in Germany and 23% in Brazil.
- US revenues declined due to loss of low-margin business and supply issues.
- Margin Expansion
- Operating EBITDA margin increased to 31% from 22%.
- EBITDA margins for India business 14% higher than pre-Curatio acquisition levels.
- Focus on improving cost efficiency and streamlining processes in US business.
- New Product Launches
- Commercialized first oncology product in US from new oral onco facility.
- Launched niche derma product in US.
- 5 product launches in Germany in H1.
- 2 more CNS products and 2 cardio-diabetes products to be launched in Brazil
- Brazil Business Growth And Outlook
- Brazil business grew 17.8% in Q2 with the market at 10%, an outperformance of almost 8%.
- Added 26 reps in CNS division, expanding reach and balancing portfolio.
- Branded generic growth of 13% versus market growth of 8%.
- Launching 4 more products in Brazil by end of financial year.
- Torrent expects to maintain 5% plus outperformance driven by new launches and penetration
- India Business Growth And Outlook
- Torrent’s India business growth was 12% in Q2, with 7% from price increases and the rest from volume and new product launches.
- Volume growth was muted at just 1-1.5%.
- Torrent believes the market is growing 7-8%, higher than external reports, and expects market data to normalize in a few quarters.
- The company believes the muted volume trends are temporary, not structural.
- M&A Strategy And Priorities
- Torrent open to acquisitions but remains focused on India where it has a track record of successful integration.
- For acquisitions, comfortable with starting net debt/EBITDA of 3x, falling to 1.5-2x over 2 years.
- Focused on cash flow generation to service debt and fund growth.
- Capital Allocation
- Majority of capital allocation focused on India, estimated at about 70-80%.
- Much lower allocation to Brazil and other international markets due to lower familiarity.
- Leverage comfort depends on cash flow generation of acquisition target.
- US Business Performance
- US business declined to $30 million quarterly run rate in Q2 vs previous quarters.
- Decline was due to single digit price erosion and loss of some contracts and supply issues.
- Going forward, US sales expected to be $30-35 million range per quarter.
- Manufacturing costs were capitalized in July, and there won’t be incremental costs in the future.
- Traction In Digital Marketing Initiatives
- Seeing positive results so far in digital marketing pilots for brands like Tedibar and Unienzyme.
- Significant increase in Shelcal sales in markets with media presence and distribution push.
- Marketing and field force expansion stabilized, so no further cost increases expected.
- India Pharma Industry Growth
- Industry growth to have a slight slowdown from the historical rate of around 10%.
- Attributes this slowdown to structural changes such as trade generics and Jan Aushadhi, but believes it won’t be a significant threat.
- Expects 0.5% reduction in IPM growth due to increased generic penetration, but not a major concern.
- Prescription Practices in India
- Torrent expects branded generics will continue to exist even in a hybrid system.
- Emphasized on developed markets also having a branded generic market alongside generics.