Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Torrent Pharmaceuticals Ltd (BOM:500420, Financial) reported a 10% increase in revenue, reaching INR2,859 crores.
- Operating EBITDA grew by 14% year-over-year, with EBITDA margins at 32.3%.
- India revenues grew by 15%, driven by strong performance in chronic therapies and new product launches.
- The company has entered into a nonexclusive licensing agreement with Takeda and successfully launched Vonoprazan, which is ranked number one as of June 2024.
- Germany's constant currency revenue increased by 9%, with Torrent winning new tenders and increasing its market share to 6.1%.
Negative Points
- Primary sales in Brazil were impacted by floods and currency depreciation, affecting overall performance.
- US revenues declined by 13% in constant currency terms, with a 9% de-growth after adjusting for one-off income from the previous year.
- The US FDA inspection of the Indrad manufacturing facility resulted in a Form 483 with five observations, creating uncertainty about future approvals.
- The company's US business is currently at breakeven pre-R&D expenses, indicating challenges in achieving profitability post-R&D.
- There was a one-off expense of INR20 crores related to an international opportunity that did not materialize, impacting overall expenses.
Q & A Highlights
Highlights of Torrent Pharmaceuticals Ltd (BOM:500420) Q1 FY25 Earnings Call
Q: Aman, my first question is on the India business. We saw 15% growth in this quarter, which seems pretty strong, given we already have Curatio in the base. Could you give us some color on how we should assume growth for the India business? Is this growth rate stable? And also, any color that you can give us on the Curatio asset that now it has been fully integrated, what's the traction that we are seeing there?
A: Yes. So the breakup of the 15% growth roughly based on the AIOCD data for the quarter is 2.5% volume, 8.5% price and 4% new products. This is all fully organic driven because Curatio is in the base. The Curatio business grew at 19% during the quarter. So it's seeing continued high-growth traction in almost all the top brands. In terms of margins of the Curatio business, also, we see consistent improvement now quarter-on-quarter. So in terms of acquisition integration, I believe we are on track or even slightly ahead of where we anticipate it to be as the growth momentum should continue. Going ahead, depending on how the market growth plays out, 15% was a Q1 growth, but I think somewhere between 13% or low-teens growth for the rest of the year should be doable.
Q: Sudhir, on the margins, gross margin expansion, again this quarter, was pretty significant, if I look at it from a quarter-to-quarter, year-on-year perspective. How much of this is sustainable? Is that -- is this the level we should be able to maintain? I understand there's some mix benefit because of higher India growth this quarter. And also, if you could give us some color on what the INR20 crore one-off was related to?
A: Yes. So I think from a gross margin perspective, Neha, last year, if you look quarter-on-quarter, it was between 74.5 to 75, which I believe is something which should be sustainable. So 75 should definitely be sustainable, right? The additional 0.7 which we got in this quarter, probably because India has done much better and the branded segments have done better than the generic segment, possibly attributable to that. But I think definitely, 75 is something that should be possible for the full year, is what I believe. The INR20 crores one-off expenses pertains to one of the potential international opportunities, which we were evaluating and finally didn't materialize, actually. So that's the expenses which we have incurred in Q1.
Q: My first question is on the US business. So quarter-on-quarter, it's broadly stable. So just wanted to understand how supplies from Dahej plant is picking up? Because Indrad is yet to clear. So I assume when we got clearance for Dahej, there was expectation of better pickup to happen here. So some color on the US business, please.
A: Correct. So -- and I see the supplies from both Indrad and Dahej have been stable, right, because our current business was not impacted by any of the FDA actions. So what we are seeing now is a lot of site transfers are getting approved from Dahej. So gradually, the products which we were made at Indrad are now being made at Dahej. So the volumes have remained about 4 billion pills a year. And the mix is changing with Indrad coming down and Dahej ramping up appropriately.
Q: And you mentioned one of the objectives for this year is to grow profitability of US business. So right now, it's profitable or like it's a loss-making segment?
A: So pre-R&D expenses, we have breakeven -- kind of a breakeven for the US business. And that's what Sanjay was implying that we want to move towards a profitable path, as far as US is concerned, post-R&D.
Q: Just one question on the acquisition. So if you're looking at international markets, are this -- are you interested in new markets? Are you looking at branded piece like what you have in Brazil? Or you would be interested in generics and some sort of technology acquisition? What are the areas that would interest you at this point?
A: In branded, definitely, yes, right? I mean -- but we're not restricting looking at assets with only branded focus. If there are some good assets, which are even in the generic segment, it's something which we would look at and then decide whether we want to go that way or not. But branded, definitely, is the priority.
Q: And would that be in the markets you already have presence, like Brazil, Mexico? Or you could look at completely new markets, where you would sort of set your base?
A: Yes, I mean a combination of both, right? I mean, new market, definitely, yes. And even within the existing market, if there are entry possibilities in terms of the other therapies where I'm not present, that's something which is also open to pursue.
Q: Sanjay, I mean, I think a few quarters back, you mentioned US business, once the facilities are cleared, ramping up to 250 million or 200 million kind of an annualized revenue in two years or so. How do you assess that at this point? Do you think that's still achievable?
A: So honestly, it depends upon the ANDA approvals that we get, right? So far, we've seen the first wave of approvals from Dahej come in, but they have been more on the site transfer approval rather than new ANDA approvals. So I think I was expecting about seven to eight approvals this year, most of them in the next three quarters. So depending upon how it goes, we have a couple of expectation as for a couple of oncology approvals, some approvals, which could have an upside in terms of lesser competition. So that will drive the sales growth. So I would still expect between 5 to 10 approvals this year that would propel us forward. And next year onwards, it should be a higher rate.
Q: And the limited competition opportunities you expect in this fiscal or next fiscal?
A: I would expect in this fiscal. But again, you don't have it until you have it, right? So there are other people also trying for the similar opportunities. So we'll see who comes out ahead.
Q: Can you share your R&D number? And also, what's the expectation? Or what is it that you are factoring in as a full year spend?
A: Yeah. So currently -- so it's around 5%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
