Release Date: February 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Neuland Laboratories Ltd (BOM:524558, Financial) reported a 46% increase in total income for Q3 FY24, reaching INR394.9 crores.
- EBITDA for the quarter stood at INR122.7 crores with a margin of 31.1%, reflecting a 10.8% increase over Q3 FY23.
- The company achieved a gross margin of 59.8% in Q3 FY24, up from 55.2% in Q3 FY23.
- Profit after tax for the quarter was INR80.7 crores, significantly higher than INR30.4 crores in Q3 FY23.
- Neuland Laboratories Ltd (BOM:524558) generated a free cash flow of INR129 crores for the nine months, using part of this to reduce debt by INR38.8 crores.
Negative Points
- The operating environment remains unpredictable, with potential fluctuations in revenues and EBITDA margins due to business mix and order inflow.
- The company experienced a slight lowering of vasopressin during the quarter due to receivables arising from Christmas and year-end holidays in developed markets.
- Neuland Laboratories Ltd (BOM:524558) anticipates modest growth in FY25 with some normalization of margins due to rising operating expenses and ongoing investments.
- The biotech funding crunch is still prevalent, potentially impacting early-stage pipeline projects.
- The company faces challenges in maintaining consistent growth and profitability due to factors like individual product performance, forex, raw material costs, geopolitical changes, and regulatory shifts.
Q & A Highlights
Highlights from Neuland Laboratories Ltd (BOM:524558) Q3 FY24 Earnings Call
Q: Can you clarify the growth expectations for FY25 and beyond?
A: FY25 is expected to see moderate growth, with higher growth anticipated beyond that. However, this is not a quantified guidance but a qualitative outlook based on current visibility. (Saharsh Davulur, Vice Chairman & MD)
Q: What is the status of the KarXT molecule and its commercialization?
A: We cannot comment on specific CMS molecules due to confidentiality. Generally, acquisitions by larger companies can open new opportunities for us as a CDMO. (Saharsh Davulur, Vice Chairman & MD)
Q: How does Neuland ensure the protection of intellectual property (IP) for its clients?
A: We have ISO 27001 certification for Information Management & Protection, and we do not manufacture finished dosage forms, which aligns our priorities with those of our clients. (Sucheth Davuluri, Vice Chairman & CEO)
Q: What impact does the biotech funding crunch have on Neuland's business?
A: While there are challenges in the early-stage pipeline, our current growth is driven by cash-rich companies. We do not foresee a significant impact on our business performance in the short term. (Saharsh Davulur, Vice Chairman & MD)
Q: What is the current utilization of Unit 3, and what are the future expansion plans?
A: Unit 3 is currently at 57% utilization. We have acquired additional land for future expansion, which will be used as business opportunities arise. (Abhijit Majumdar, CFO)
Q: How does Neuland handle the transition of ownership when a small biotech is acquired by big pharma?
A: The risk of losing a contract depends on the stage of clinical development and the complexity of the process. If the process is complex and the site is registered in the NDA, the relationship is more likely to be retained. (Saharsh Davulur, Vice Chairman & MD)
Q: What are the steps and timelines for changing or adding a supplier for a commercialized drug API under patent?
A: It can take a minimum of two years and up to five years, depending on the complexity of the process and the regulatory strategy. (Saharsh Davulur, Vice Chairman & MD)
Q: What are the capex plans for the next couple of years?
A: Normal capex is around INR100 crores annually. We have started building a new block with an estimated cost of INR128 crores and acquired additional land for future expansion. (Abhijit Majumdar, CFO)
Q: What is the status of the peptides business and its potential revenue contribution?
A: We have two CMS molecules close to commercialization and three GDS molecules in development. However, we have not factored in significant revenue from peptides in our current outlook. (Saharsh Davulur, Vice Chairman & MD)
Q: Can you explain the terms DMF, CMS, and GDS?
A: DMF stands for Drug Master File. CMS refers to Custom Manufacturing Solutions, which is our CDMO business. GDS stands for Generic Drug Substances, which is our generics business. (Sucheth Davuluri, Vice Chairman & CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
