Alembic Pharma (Oral Solids ==> Injectables, Onco, Derma, Opthalmic)

Although they dont have an EIR yet, FDA is accepting some of their ANDAs. This generally means that EIR will come soon.


When we compare Alembic with it’s peer Aurobindo / Unichem they are burning too much under Employee expenses and SGNA, could you please share your thoughts ?




Image courtesy @kkarimyusuf

Employee expenses:
As per FY22 Annual report, Alembic Pharma spent 838cr which is 15.8% of revenue 5306 cr. Has 1300+ employee in R&D out of 12,216 employee. R&D employee salary will be far higher than non-R&D employee.

Aurobindo has only 1500+ in R&D out of 23000+ employees as per FY22 Annual report.

so you need to consider these factors as well when looking at employee expenses.


Any way to check the classification assigned to the below - OAI (Official Action Indicated), VAI (Voluntary Action Indicated), NAI (No Action Indicated)?

Alembic Pharma – Management Meet Update (Source Nirmal Bang 25 Nov 22)

In Indian and RoW markets, the company continues to expect double-digit growth on a normalized base. However, in the US, it continues to face acute pricing pressure due to the only OSD portfolio. Alembic has reiterated US$45-50mn quarterly US sales guidance in the near term. However, this run-rate may increase once injectable approvals start contributing meaningfully next year onwards. Despite aggressive spends on capex and R&D for the US market, we do not see any meaningful visible large launches. Also, margins are expected to remain under pressure due to
~Rs2bn of addition cost incurred on new plants, which are likely to start reflecting in P&L 4QFY23 onwards.

  • Alembic has reiterated US$45-50mn quarterly US sales guidance in the near term.
  • The company is only into Oral Solid Dosages (OSD) and continues to face high double-digit price erosion in the base business.
  • As per the management, the US is sitting on decadal high inventory levels and given the limited shelf life, there is a frenzy to sell products before expiry. Many players are recovering only partial costs. Distributors too are skeptical about filling lines today, which stand at 80-85% as against 90-92% earlier. The situation has improved over the last quarter though.
  • The company is expecting 25-30 approvals, including 10-15 injectable approvals for the next year.
  • It has filed ~50 injectable products, for which approvals are expected over a 3-year timeframe.
  • The share of OSD formulations would remain higher in future ANDA filings. However, current pending approvals are equally divided betweenOSD and injectables.
  • The company cumulatively has ~250 ANDA filings, with 100+ global authorization and 126 DMF filings
  • The management expects small and meaningful market share in gApriso. There are already 10 players in the market for this product.
  • The company has aspiration to clock ~US$350-400mn in annual US sales over the long-term horizon.
  • CWIP of ~Rs24bn pertains to F2, F3 and F4 facilities. F2 is an oncology facility while F3 is an injectables facility and F4 is an extension of F1 facility, which manufactures OSD.
  • The new F2 and F3 facilities will start taking batches from Dec’22/Jan’23 and post that will start commercialising products.
  • The company has received product approvals from the new facility, but plant approval is still pending.
  • For the new plants to achieve breakeven levels at the current gross margins, ~Rs5-5.5bn of sales are required


  • The company expects the domestic business to continue to grow at 10-12% annually.
  • Domestic business growth is expected to be driven by continuous strong growth in high focus brands, expansion of customer base and optimization of business operations.
  • Current MR strength stands at ~4,700, which may inch up to ~5,000 by the end of FY23. The company is not looking for any large MR addition in the near term.
  • 500 MRs have been assigned to the Animal Health business, with the rest equally split between Acute and Chronic therapies.
  • MR productivity stood at Rs0.35mn. MR productivity for Speciality and Acute business varies by (+/-) Rs25,000.
  • The Acute business would be driven by growth in Macrolide Antibiotics such as Azithromycin and Clarithromycin among others.
  • The Animal Health business is reporting robust growth of 30%. It is largely a B2C business for the treatment of diseases in both Poultry and Large animals.


  • The RoW markets are expected to report strong growth of 10-15%. Most of these markets have better realizations and higher gross margins than the US business. The company is increasingly focusing on GCC and South East Asian markets.
  • It has guided for Rs6bn of R&D spending in FY23 and Rs5.5bn in FY24
  • The company has guided for Rs2.5bn of annual capex for the future.

Recent Developments



Sales growth was strong at 19% this quarter, margins have started reviving but pricing pressure is still high in US. Concall notes below.

FY23Q3 concall

  • US quarterly revenues was $52mn, benefitted from the strong flu season
  • Aleor R&D amortization was 13 cr. this quarter, amount left is 11 cr.
  • All facilities put together will have annual depreciation charges of 200 cr. (gross block is ~1200 cr. and remainder is pre operating expense)
  • API growth was due to jump in CMO order from an MNC customer. Normalized growth should be around 10%
  • There will be 15-20% reduction in R&D expenses in FY24, especially towards US market

Disclosure: Invested (position size here, bought shares in last-30 days)


from the concall i gather that this $500M was anyways an aspirational target and not their current run rate… and the management may have decided to scale that down given the low margin environment in the US.

Market has definitely read it negative, price down another 10% from the already battered levels…
what do you make of this @harsh.beria93.

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Most of the Indian Parma serving US are having pricing pressure for the past 5+ years. A few years back, the reason given was buyer consolidation and bargaining power of them. Is it the only reason for current pricing pressure or any other reasons?

Many Indian Parma companies are adding capacity at break-neck speed. Is the industry overspending on capacity?

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Can somebody explain this scheme of arrangement in simpler terms and is it alright?

Impairment is like valuating the assets i.e. machinery and other things to market value to current period. As a result company can show it up as loss incurred. One question here in this case is, the recent capex has been written as impairment- which shows company lack of understanding the macro situation and capex done at wrong time. Company is writing of half value of assets now and half value of assets once new sites start making money.

As a result reserves are going to decrease for now.


This is like management telling the shareholders:
a) that they took big decisions like investing in new P&M in India to cater to US market, without doing detailed homework.
b) Now that there is substantial price erosion faced by the Co, in US market, the new capacity will never be fully utilized and if not written off partly/substantially, the depreciation hit would be a major drag on the Co.'s P&L, going forward.
c) hence, the management prefers to bite the bullet in the FY 2022-23, by writing off Rs. 1150 cr worth of CWIP.
d) for maintaining an optical illusion, this write-off would be done by reducing the balance in the General Reserve rather than the FY 2022-23 PBT.

Big question here is how detailed was the management’s homework before taking the investment decision? Had they sought the opinion of US based pharma consultants or not?

Disc.: Was invested for over 4 years, but sold off after reading the doom & gloom in management commentary post Q1 FY 2022-23 results.


Ok, so eps will not look ugly because of this right? And also I wanted to know, since they are tapping general reserve for this, is their a possibility that this amount is being siphoned off from company in this way for their own use…? Just guessing, not good in all this…

  1. No changes will be there in EBIDTA. However EPS for the year will be negative. As the company has corrected a lot and the management is foreseeing significally less cash generation from the facilities, it makes prudent to do one time write of this year only.

  2. Writing off the identified CWIP will reduce the capital employed in the company, which can result in a higher ROCE in forthcoming years. This is because the capital employed will be lower due to the reduced CWIP whereas production and revenues will be generated from the said facilities.

  3. Asset turn over will be more in forth coming years.

  4. Now experienced investors like @harsh.beria93 and @Rafi_Syed will be able to answer how the management took such a big decision by investing in new P&M without doing a home work and where they went wrong.


“However EPS for the year will be negative.”

Can you pl explain how you determined that the EPS for the year would be negative?

My reading of the proposal, particularly the highlighted text below, led me to understand that because the managemnt does not want to show a reduced EPS for the FY 2022-23, the CWIP write-off will be against accumulated balance in General Reserve.

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(i) In respect of the Manufacturing Facilities or part thereof, for which the
commercial operation commences during the financial year 2022-23 and
capable of being used in the manner as intended by the management of the
Company, the amount of Identified CWIP shall be written-off to the Statement
of Profit and Loss of the financial year 2022-23;
In my understanding if they write off to the the Statement of Profit and Loss of the financial year 2022-23, the company has to show losses and ultimately -ve EPS.

In whatever manner the management presents in the books, the fact doesn’t change that 1150 cr of shareholders money has gone down the drain!!!

The networth and fixed assets would stand reduced to the extent of write off

Business calls do go wrong, but the relative magnitude of assets written off and time (doesn’t reflect in balance sheet) show some serious weakness on part of management.

Was invested earlier. Fortunately exited around 700 when asset turnover was not improving

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Q4 results are out (Link).

Key Takeaway for me: Provides a good example that why I must read the accounting notes!!!
An accounting decision by the management to write-off and provision the impaired assets under CWIP (snapshot shown below).

Net result: Net Loss of ~670 Cr. switched to Net Profit of 342 Cr. None of these figures showed up in the PnL as all is managed in the accounting notes. This led to Qualified Opinion from the auditor since it does not follow Ind AS accounting standards,


Alembic continues to do its thing, adjusting the CWIP directly through reserves and not passing it via P&L statement. It lowers their book value, improves ROE and P&L looks clean. On the business front, large number of launches will happen in the next few quarters. Concall notes below


  • Wrote off 1150 cr. of CWIP (largely capitalized pre-operating expenses) without passing through P&L statement. Won’t be capitalizing any pre-operating expenses from now (65 cr. additional costs in Q4 P&L)
  • Received PLI benefits of 21 cr.
  • Price erosion is still in double digits
  • Launched 5 products in Q4FY23, will launch 10 products in Q1FY24 and 20-25 in FY24
  • R&D will be maintained at 500-525 cr.
  • 15-20 ANDA filings in FY24
  • Expect margins of 15% in FY24
  • Will have 17.5% tax rate in FY25
  • FY24 capex will be less than 250 cr.

Disclosure: Invested (position size here, no transactions in last-30 days)


Alembic Pharma gets EIR from USFDA for its solid oral formulation facility at Jarod


What is implication for the business? @harsh.beria93

Unnecessary & too much capex is called gold plating. This is done by promoters to take money out of the company for personal use. It is usually written off in the future.

I had mentioned this in October 2020 Alembic Pharma (Oral Solids ==> Injectables, Onco, Derma, Opthalmic) - #654 by vnktshb

But in the euphoria no one noticed I guess