Alkem Laboratories Ltd. Q4FY23 Result Update

Headquartered in Mumbai, India, Alkem Laboratories Limited is a leading Indian pharmaceutical company with global operations. The company is engaged in the development, manufacture and sale of pharmaceutical and nutraceutical products. The company produces branded generics, generic drugs, active pharmaceutical ingredients (APIs) and nutraceuticals, which it markets in India and international markets. With a portfolio of more than 800 brands in India, Alkem is ranked the fifth largest pharmaceutical company in India in terms of domestic sales. The company also has presence in more than 40 international markets, with the United States being its key focus market.

Results Highlights

Alkem reported revenue growth of 16.9% compared to the previous year and a decrease of 4.5% compared to the previous quarter. The revenue was in line with market expectations. In India, the business saw strong double-digit growth in major acute therapy segments. The US business grew by 9.2% due to currency depreciation. Alkem outperformed the market growth in both acute and chronic therapies.

The EBITDA increased by 4.8% compared to the previous year but decreased by 41.0% compared to the previous quarter. Gross margins contracted due to increased raw material costs. Profit after tax decreased by 37.5% compared to the previous year and 85.3% compared to the previous quarter, falling below market expectations. R&D investments decreased compared to the previous year.

Valuation and Outlook

In Q4FY23, Alkem experienced strong revenue growth, driven by its India business, which performed exceptionally well and surpassed industry benchmarks. The company also outperformed the market in both acute and chronic therapies. However, the US business faced pricing pressure, impacting its performance. Alkem has filed numerous applications with the USFDA and received approvals for several of them. The domestic sales are showing positive trends due to increased demand and market share gains from new launches. However, the US business remains uncertain due to ongoing price erosion in its portfolio.
Key Concall Highlights

1. Alkem’s domestic business achieved strong growth, driven by the success of anti-infectives, gastrointestinal, and pain management therapies.
2. The chronic segment also performed well, with double-digit growth in CNS, Anti-Diabetes, and Derma therapies.
3. In the US market, revenues declined sequentially but the company plans to reduce price erosion and launch 15 new products in the coming year to support recovery.
4. Trade generics accounted for a significant portion of sales, growing 5% in FY23.
5. Enzene Biosciences, the biosimilars venture, had sales of Rs. 1,600 mn but incurred losses. The company expects it to break even in FY24. Alkem has a strong marketing representative force and plans to expand it further.
6. The company has a Capex plan focused on biosimilars for FY24.
7. Management aims for double-digit volume growth in the next fiscal year and plans to grow the US business despite price erosion.
8. The tax rate for FY24 is expected to be between 14-15%.
9. The shutdown of the St. Louis plant will lead to cost savings of approximately Rs. 2000 mn.

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