Q4FY25:
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• US Market FY25 EBIDTA crosses ₹102 Crores (Growth of 71% over FY24).
• Free Cash Reserves at ₹1,180 Crores
Gross Margin for Q4 FY 25 is 60% vs 56.6% in Q4 FY24 and 12M FY25 is 60.2% vs 57.3% in 12M FY24, aided by new product launches across existing and new markets
Business Highlights for Q4 FY25:
Emerging Markets:
• Mexico Update – Company has filed 30+ products (28 PQ), with 13 (10 PQ) approvals received. Working on a pipeline of 60+ (45+ PQ) products, to be filed within the next 12 months, through Internal and Outsourced manufacturers.
• Company establishes Private Market sales through own Warehouse in Chile, with sales already commencing in Q1 FY26
• Company receives first Insulin product approval in Central America. Plans to file further Insulin Analogues in Latin American markets, through strategic partners from China.
• Company plans to file first GLP-1 product in all current Emerging Markets within the next few Quarters. Also, in discussions with Chinese players to import Biosimilars Key Starting Materials for fill/finish in India
• Trials ongoing at Company’s API unit at Vizag, with first scale ups targeted in June ‘25. First few DMFs to be filed from the site before Q4 FY26, for key US ANDA products, as part of backward integration.
• Construction ongoing at full swing at Oncology API site in Thervoy, near Chennai. Facility expected to be completed within 15 months, and will cater to Company’s budding Oncology business for Regulated and Emerging Markets.
• CP-1 site gears up to launch unique Dual-Chamber Pre-Filled Syringes in all existing markets within the next few Quarters, a segment with very limited competition.
US & Regulated Markets:
• CSL receives 8 new ANDA approvals in FY-25 with another 2 ANDAs acquired from outside. Total ANDAs under CSL at 38 (28 PQ) till date (along with partners), with a further 13 products (13 PQ) under review with FDA. Approvals include Injectables, Opthalmics and Complex Emulsion products.
• Company expects 10-12 ((10 PQ) ANDA approvals in FY26, setting the stage for robust Top and Bottom-line growth once again.
• Company launches its first RTU Bag, first Opthalmic Emulsion and first Injectable emulsion product in the last few months, both under own label and with Partners.
• Scale Up activities ongoing for high value Pre-Filled Syringe products (Line-6). Company targets filing 7 (7 PQ) Pre-Filled Syringe products within FY26. Plans also to file GLP-1 products (Cartridges) from this line, in Emerging Markets.
• Company has approvals and launched products in multiple non-US markets: Canada (8), Mexico (4), Australia (3) amongst others. Meaningful revenue expected from these markets including Brazil in FY26/27.
Caplin Steriles USA Inc - company’s own label in the US:
• Company’s front end achieves revenue of $2.5 million (0.5 PQ) from inception till date (around 6 months), with excellent profitability.
• CSU has launched 22 (14 PQ) products till date, with a further 15+ (10 PQ) products to be launched in FY26.
• Company has entered into contracts with the 7 largest Wholesalers (3 PQ) in the US, with weekly ordering cycles established with the Big 3.
• Company enters into supply agreements with 24 (15 PQ) direct buyers (IDNs and Hospital Systems) in the US, with ongoing discussions with 25+ (30+ PQ) more health systems. CSU targets maximum revenue through these direct buyers in the next 24 months.
• Total number of end users (Hospitals, Pharmacies, Clinics etc) currently buying CSU label products – 5610.
• Company targets highly profitable CSU revenues to offset potential dip in milestone revenues from B2B partners going forward.
• Mr. C.C. Paarthipan, Chairman said: “We’re once again focusing on getting back to Asset Light outsourcing using our Second Innings at China, with import of Peptides and Key starting materials for Biosimilars, which we plan to file and launch in our Emerging Markets where we have a significant presence already.”
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(CP I and ONCO Injectable facilities delayed by 1 Qtr)
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(Africa sales contribution increased to 6% from 2% YOY)
(Retail channel revenue contribution increased to 35% vs 25% yoy and Wholesale channel contribution decreased to 45% vs 55% yoy)
(Inhouse manufacturing increased to 60% vs 55% YOY and exports from India declined to 73% vs 75% YOY)
CONCALL NOTES:
• Let me start with a footnote actually of a French philosopher who once said, “One’s life has value so long as one contributes value to the lives of others.” However, evolutionary biology tells that this is easier said than done. Humans are hardwired, try to survive and in the race to the fittest, compassion becomes a casualty. That we at Caplin strongly believe that empathy is leadership essential in the world of technology. We practiced it and we always followed the concept of catering to the bottom of the pyramid with quality generics at affordable prices to our customers. That’s how that made all the differences actually to our business.
• Our value proposition in CSL, the USFDA facility, our deviations and job orders in the shop floor has reduced drastically in addition to the OOS and OOP from QC. This is possible only because of the woman empowerment in the shop floor and also in the grassroots of quality control. When most of the big companies fully automate and digitalize the whole system and the shop floor and other areas, we have achieved this productivity with compliance only with partial automation and digitalization. This will be replicated in all our new and old facilities.
• COST REDUCTION AND COST CONTROL INITIATIVES: Now Pondicherry factory where we export our products to RoW market, we are planning to reduce the cost by utilizing our own QC/QA professional in our Pondicherry factory to do the outsourcing of quality products at a better price compared to our present cost in the facility. The products which we outsource is going to be in the Pondicherry state. We are sure that now we can create a cost reduction of 25% to 30% from compared to our earlier overheads.
After completing the market tracker for our own sales and marketing, we now plan to create a cost control tracker through a dashboard with the help of our finance and IT teams. The benefits are as follows:
a) The tracker will enforce physical discipline at every department level in the Company.
b) The MIS on the tracker will come through the finance team, which will arrest any cash leakage.
c) It will also help us to go for projected versus actuals and cost versus benefit to monitor and review the financial activities.
And definitely, I think as Chairman mentioned, our improvement in productivity in Caplin Steriles has been due to very, very close monitoring. In fact, from the highest level as you all might have heard in previous con call, the Chairman has already moved his base to very close to Caplin Steriles over the last three years and also due in part to this Women’s Empowerment Movement that we have been taking on in the last couple of quarters. We hope for that to really gather strength in the coming few quarters and really make a marked difference to both productivity, compliance, integrity and safety that we maintain at our facilities all over.
• We have developed 2 popular peptide injections for the RoW market where the patent expires by the early next year. Further, we also plan to launch in the regulated markets too.
• We are also in discussion with some Chinese medium sized companies to import biosimilar key starting materials for full finish in India.
• API: We have completed API R&D for 51 general injectables and 34 Onco injectables and Onco OSD, which in total is 85. We now plan to manufacture these APIs in a Chinese facility where it is easier to chase the economies of scale. These products will also be manufactured at a later date in India for captive consumption. Once the facilities are ready, this general injection facility, which of course you know is nearing completion, after that we will use it actually for our captive consumption in India. We will also manufacture some of the APIs using this Chinese facility for the supply of our RoW markets, which again will be an asset light model.
• We are also working on an NC-1, which is in the nascent state.
• CAPLIN STERILES: We have also seen that some of these newer approvals that we have had especially in ophthalmics have started to begin contributing quite significantly to the bottom line in terms of profit share that we received from our partners.
WHY GROWTH WAS SLOWER THIS YEAR: See, there are two, three things here. Number one is, what we are looking forward is a high-quality growth. If we need to go for growth just for the sake of it, we can go up to even 40%- 50% just by stopping all of the R&D, stopping all of the product filings, etc., and going only for commercial revenue. I know another certain listed company as well that have dropped prices by almost 30%-40% on a product that is selling for less than $1. So, we do not want to go after this kind of growth. What we want to go after is highly profitable growth that we can sustain for a longer period of time. We are not in this race for the next three years and then running away. We are building up our company for the next 25 to 30 years. Right? So, if there are periods during our progression where we see that the growth is a little bit moderated but comes at a high-quality growth, we are happy with that rather than chasing just top line numbers. And this is nothing to do with Caplin Steriles alone. This is to do with Caplin Point, oncology everything.
See, the U.S. also, as you might have seen in the last couple of years, that’s a very, very volatile space as well. So, we need to make sure our compliance record is taking precedence over everything else. We can’t go from x productivity to 3x productivity within a 12-month period. We need measure and slow and sustainable growth. That I think is more important compared to just top line chasing.
And one more thing I would like to add, see, the business that most of the companies of our size, most of them, they are simply CMOs. But in our case, as you are aware that we started our front end. So, starting a front end, it takes little time, does not involve actually instant gratification. But what happens is when you keep your goods next to the customer, like any other big company, which is there in the U.S., maybe 2 to 3 years from now, we will also produce what exactly you are expecting. But again, as you know well, it all needs a timeline actually because overnight you can’t do anything. If you try and actually sell products for the sake of selling in credit, that also will lead to lot of complications.
• US FRONT END:
o WHY THE PIVOT TO B2C FROM B2B: Many people had some questions over why we are doing this considering how well we are growing in Caplin Steriles. See, we took this conscious decision based on multiple factors.
- The primary one of it being that there is always going to be other companies, maybe mostly smaller companies like CMOs that are able to offer lower prices than us. They might not be able to match us in terms of the compliance record or the productivity that we have. But when it comes to costs, there are companies that will be able to offer a more aggressive and potentially less sustainable pricing than us.
- Number 2, with the amount of competition our B2B partners being the size that they are, they are always going to ensure that their margins are not affected. So, they are going to be squeezing the manufacturers into providing lesser and lesser prices.
- And three, the most important one of all is that our pattern of success has always been in control of the front end. So, that continues on with us launching a label of our own.
o The break up in sales is anywhere between 70% to 75% wholesale sales and the other 25% to 30% is direct. Eventually our idea will be to pivot that into a 70-30 favouring the direct sales.
• Having inventory in our warehouses has been our most lethal commercial weapon during the disturbed times like COVID, Red Sea issues and so on and so forth.
• So, despite the kind of volatility that you see in the market, our growth has been extremely consistent. It’s been measurable. It’s been manageable. You would have seen that there is a high level of predictability in our growth. So, I think because of the fact that we cater so much to the bottom of the pyramid, and also the fact that we are in the private market, helps us sustain this kind of consistency. So, I think this is what we will be aiming towards, not so much on one specific number that we need to hit.
• Today, we are not a debt driven company. We don’t do anything in the form of leveraging the debt too. We don’t want to do that also. We want to actually grow very healthy, more liquid cash and liquid assets. Maybe at one point of time, maybe after 3-4 years when we have Rs. 2,000 crores, Rs. 3,000 crores in the form of cash, we can straightaway acquire a company. Then everything will be doubled also. There is a possibility. But it should be a meaningful acquisition. Then only we will be in a position to do that also.
• NEXT 2 YEARS GROWTH TO BE SIMILAR TO CURRENT GROWTH: I think we have spoken about this in the past as well, where we feel that the next 18 to 24 months is going to be a bit of a transitionary period for us, specifically because of the fact that two or three of our initiatives are all in slightly nascent stages. I would say number one is our entry into the larger markets of Latin America such as Mexico and Brazil, our Oncology Division that where we need multiple products to start getting approved and come through, and our U.S. front end starting to gather steam. So, I would say that while we are happy with the growth and the quality of growth that we have, for us to expect something even better might probably take another 18 to 24 months, within which period you will probably start seeing similar kind of numbers like the ones that we have reported right now.
• US PRODUCT PORTFOLIO: So, it is very diversified portfolio. It is a mixed bag when it comes to market share. We are not specifically targeting any specific product to occupy a larger market share compared to others. We need to make sure that we have very good cost control, we have very good consistency in supply and above all, our compliance record takes precedence over everything else
• GLP-I PRODUCT DETAILS;
Since it is a highly competitive space and with Mounjaro coming in and Semaglutide will come in March ‘26, like post patent expiry, there will be a huge inflow of players at that point. So, what is our thought behind entering such a competitive space and that to a new one? And what will be our ideal strategy for success?
Vivek Partheeban: So, obviously in Latin America, if you see, we have had a presence there for more than 20, 21 years, right? So, the platform is very well set. Caplin as a brand, is one of the most trusted brands when it comes to pharmaceuticals and whatever new products that we have launched, we have launched in the name of brand generics basically where there is a high level of brand recall, there is a high level of trust that’s imposed on our name. So, we feel that GLP-1 product that we launched in the smaller markets where we are present, which are very largely underserved by the product, because I think obviously the innovators themselves have capacity constraints and whenever that happens, they are going to be supplying and serving the markets which bringing the maximum revenue for them, you know. So, I would say amongst equals Caplin has a very, very good name and trust and brand recall in the markets where we are present, and we feel quietly confident that we can make it a successful launch.
C.C. Paarthipan: Add to it actually, I am sure that it’s not a questionable opportunity. If it is the questionable opportunity, you will avoid pursuing everything, but these are products which are definitely better than actually a vanilla generic. And we have been selling products, generics for a long time and it has created skin in the game. That’s why we are sure that anything that we launch, as long as actually the quality and the price matches to actually our customers and they will definitely buy our product because Caplin has become a private label in Central American markets.
One final point also on that is remember that we also have a fairly wide portfolio of anti-diabetic products that we have been supplying to these markets for a long time. So, this sort of falls within that basket anyway.
• We don’t have one or two specific products that we consider are going to be blockbusters or anything like that. Our model is to cater to the bottom of the pyramid with a wide array of offerings with a wide portfolio. So, we will continue going in this direction, I would say
• CHILE: Here the private market is only 30%. So, we will still focus on private marketing. In fact, we started the warehouse with the private market products. We are slowly inching forward in terms of actually business growth. And tender business also is a good business, and I don’t foresee any issues because of tariff and other things
• Before that the next level of our transformation starts showing in the numbers, what is it that you would want us to look out for in the business?
C.C. Paarthipan: Okay, I will put it this way. I have not been travelling for the last five years. And I have fixed my travel on Sunday. After five years, I am traveling actually outside the country. So, I am basically the person who actually used to be in the market. Whatever little creation I was able to do it, I did. Afterwards, my sons have taken over along with the professionals. Now, I sincerely feel South America and China in addition to U.S. are going to be the destination for our prospect. See, initially, we did more of outsourcing from China and directly exporting the formulation. Now, we will go there and find out some startup companies or medium-sized companies, especially into the most important areas of biosimilar and then peptide area and the products, which are always in scarcity in the area of actually blood products, see how exactly to go for a joint venture. I will look at it there. So, till the time which I feel is going to open the floodgate for us to open up a second revenue stream, it may take 1-2 years. But again, we are 100% sure we will make it. So, this is how one has to take it rather than looking at it actually on a quarter-on-quarter basis or one year or two years. This one we can guarantee you that we will do extremely well in three years from now.
When I go outside the country, I know actually I will be in a position to identify because in 2019, I made 8 to 9 trips actually to a country where we were almost complete. We came to a final stage of doing something together with one of the biggest companies in the country, $20 billion company. And now, in five years, we have not done anything. Of course, six months ago when the COO went to that country and he met the person, and he is very keen to meet with us and then do something together. Like that, there are so many companies. Today, if you look at actually the biosimilar companies in China, at least 10x, or 12x of actually Indian company, if we have or say 15-20 companies, they will have at least 300 companies 400 companies. So, here, we have to actually change our strategy. We will have to actually look at earlier for generics, we went for the big companies like CSPC, and others considered as #1 or #2 in the country. Now for a specialized product, what is important actually is not the size but the quality. And also, he has to grow, and we would also help him in terms of actually front-end marketing, but also if there is something in the form of other areas, if he is interested, we would also explore them. So, we will see things which is not noticed by the big clients. We will see with the startups and the medium-sized company. That’s how I will actually fit.
• MEXICO MARKET STRATEGY: If you look at companies, especially from India, most of the companies, they don’t go to the smaller geographies. That was the time we went there and we replaced the importer. It was more of a physical risk, which, of course, not many companies do it. And then now we are getting into the bigger geographies where we see big companies already present. But if you look at that business, there are two things one will notice. A, mostly they will go to the institution business. B, they will only replace the importer the way we replaced the importers in smaller geography. Now once we go there, we will replace the distributor or a whole seller which means one level below we have to go and find out who is our target audience and then cater to them. Maybe if you work 2-3 years, then, of course, as I told you before, it creates the skin in the game. That’s the only way we made it actually in smaller geography. We will make it the same in the bigger geographies. Mexico is just one hour actually by flight from Guatemala. The population of Guatemala is 17 million. That’s where we do the maximum business of $48 million to $50 million per year. Then imagine what kind of opportunity will be there actually in Mexico. It takes time. I do agree, but definitely there is a huge opportunity because culture is same, purchasing power is better and the population is huge. And then this is one place where maybe 7 to 8 Indian companies are present. They are all focusing on the tender business where we will get everything in volume. If you look at our business, we don’t actually bother about the top line. We have always focused on the bottom line and cash flow. The same thing will happen when we approach actually in this market, when I approach to the customer in this market also.
THINGS TO TRACK
• **CAPLIN STERILES B2C DIVISION PROGRESS: NEW PRODUCT LAUNCHES; LICENSING DEALS; MARGINS GOING AHEAD. **
• MEXICO, BRAZIL AND CHILE MARKET PROGRESS
• NEWER GROWTH INITIATIVES PROGRESS (BIOLOGICS/INSULIN, CHINA PARTNERSHIP, SPECIALITY CHEMICAL)
• ONCOLOGY DIVISION PROGRESS
• CAPLIN STERILES B2B DIVISION PROGRESS: B2C DIVISON EFFECT ON B2B GROWTH RATES?
• EXISTING LATAM MARKET GROWTH PROGRESS
• GLP-I PRODUCT PROGRESS
