Release Date: January 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strides Pharma Science Ltd (BOM:532531, Financial) reported strong revenue growth, exceeding their outlook with a 17% increase for the first nine months of FY24.
- The company achieved a significant improvement in free cash generation and debt reduction, with debt-to-EBITDA now at 2.8 times, down from 5.7 times in FY22.
- Gross margins have been consistently close to 60% for three consecutive quarters.
- Strides Pharma Science Ltd (BOM:532531) secured two significant product approvals during the quarter, including Suprep and Icosapent, which are expected to contribute positively to future revenues.
- The company has maintained sustainable profitable growth, with 34 out of 65 commercialized products ranking among the top three in terms of market share in the US market.
Negative Points
- The access market business remains lumpy and is not a primary focus for Strides Pharma Science Ltd (BOM:532531).
- There is a challenge in maintaining the current gross margin levels of 59-60%, which the company acknowledges will be more difficult than growing them.
- The company faces competition in the Icosapent market, with seven to eight players already present.
- The other regulated markets segment showed flat growth quarter-on-quarter, despite a 21% year-on-year increase.
- The process of national approvals for new products in other regulated markets is expected to take another three to four months, delaying significant revenue contributions from these markets until H2 FY25.
Q & A Highlights
Q: The commercial service agreement for GLP1 product with one customer is for which market?
A: It is for regulated markets. (Arun Kumar, Executive Chairperson and Managing Director)
Q: On Icosapent approval, with seven to eight players now, how do you think the business potential is for Strides? And could you share the API source for the product?
A: We do not share API sources, but we do not have a constraining situation with API. We expect our market share to be a leading one, similar to our other soft gelatin capsules. (Arun Kumar, Executive Chairperson and Managing Director)
Q: What kind of price erosion is witnessed in the base portfolio in the US?
A: Negligible or hardly anything. (Arun Kumar, Executive Chairperson and Managing Director)
Q: Could you explain the reason for lower depreciation, which is down QoQ and YoY basis?
A: The Singapore divestment completed last quarter had significant line items below EBITDA, including lease rentals. With the divestment completed, the depreciation and related line items are now gone. (Arun Kumar, Executive Chairperson and Managing Director)
Q: How much is the scope for further improvement in gross margins from the current level of 59%?
A: At 59%-60%, we are already amongst the best-in-class. Maintaining this would be more challenging than growing it. (Arun Kumar, Executive Chairperson and Managing Director)
Q: Why are corporate guarantees much in excess of the gross loan Stelis has on its balance sheet?
A: Corporate guarantees are a function of total loans outstanding. We are in the process of getting our banks to reduce it to the level of outstanding. (Arun Kumar, Executive Chairperson and Managing Director)
Q: What is the outlook for the US business, given the recent product launches?
A: We are confident of launching 15 products per year. We have the approved products and are timing the launches based on market opportunities and pricing. (Arun Kumar, Executive Chairperson and Managing Director)
Q: Are we on track to boost our EBITDA to approximately 21%-22% through cost optimization?
A: Yes, we are very focused on cost control and believe that achieving a 21% EBITDA is realistic. (Arun Kumar, Executive Chairperson and Managing Director)
Q: Has the full impact of the Icosapent launch been visible in this quarter?
A: No, the full impact will flow through in the coming quarters. The current revenue uplift is from transfer pricing. (Arun Kumar, Executive Chairperson and Managing Director)
Q: What is the growth trajectory for the other regulated markets in FY25?
A: From H2 FY25, you can see a meaningful bump up in numbers due to major product approvals and licensing deals. (Arun Kumar, Executive Chairperson and Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
