To understand the pharma sector a good vedio must watch which explains the dynamics of industry and opportunity available for indian players
“PHARMA SECTOR BASICS” with Abhishek Singhal
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Richcore LifeSciences acquisition is completed today.
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Quarterly results are out. Result came at 14.59 hours in BSE site and since then, stock is pretty much flat or slightly negative.
At first glance, results look fine but will await the trained eyes to tell more
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Commenting on the results announcement, Dr. Satyanarayana Chava – Founder & CEO said;
“Our Consolidated revenue for the quarter increased by 76% driven by growth in all the divisions. we have been able to sustain our EBITDA margins, and our profitability has also improved to Rs. 273 crs for the quarter.The generic API division recorded a healthy growth of over 100% for the quarter, the growth was led by
higher growth in ARV API business in turn led by higher volume of 1st line products. The Formulations business showcased a growth of over 120% for the 9M period, led by higher LMIC business. Custom Synthesis continues to maintain its growth trajectory with a healthy pipeline and with good visibility. I am also very happy to announce that we have concluded our acquisition of Richcore Lifescienceson 20th Jan 2021. Richcore will be renamed to Laurus Bio shortly. With our vision of creating long term sustainable growth we continue to undertake major Capex program across all divisions. I am very optimistic about growth for the coming years.”
Commenting on the results announcement, V V Ravi Kumar, ED & Chief Financial Officer said;
“Our Total Revenue from Operations came in at ₹ 1,288 crs, showcasing strong growth of 76% for the quarter and ₹ 3,402 crs for 9M FY21 growing by 71%. Our EBITDA Margins remained steady at 34% owing to better operating leverage and product mix. Our PAT stood at ₹ 273 crs for the quarter, showcasinga robust growth of 274%.Our ROCE on an annualised basis has improved to 40%. We continue to have healthy cash position with ~ 600 crs of headroom available in the form of unutilized bank limits. We continue to undertake larger CAPEX for all the divisions and initiate new manufacturing units on greenfield basis…” The board
of directors please to announce second interim dividend of Rs. 0.40/- per share.
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Laurus Labs Q3 concall highlights
Key notes
Management Update:
• Our contributor for this year was the robust product basket.
• Formulation biz contributed 39%
• Continue capex in infrastructure
• De-bottlenecking the plant is key remain online
• Expanding capacities in key API
• Dedicated a special plant location for CRAMS Facility
Laurus Bio
- Acquired 100% in Richcore & named as Laurus Bio, it will be growth driver after 3-5 years
- Not much of CAPEX is allocated
- Don’t see any challenges to invest over there
- It is high margin business and expected to deliver good cash flow for the business. Hence management expect most of the investment to be internally funded
HIV
• Doubling the segment is impossible as the patients in the disease are not that higher
• Growth in HIV will come from demand moving from weak players to strong players
Diabetic and Cardiovascular
• Strong product basket in Diabetic, while Cardiovascular will be another growth driver
• There are not much development left in ARV segment for Laurus, hence in future major growth driver non ARV
Nutraceuticals and Cosmeceuticals
• It was added in CDMO product. As it also commodity business company is not much in the business but there are tie ups with big customer.
Long Active Injectables
• Actively watching ARV business since past many years, hence any new disruption will be in close eyes of Laurus.
• Injectables is currently not signed by WHO and and company don’t expect it till 2025
• We have molecules in the pipeline for injectables.
TLE to TLE transaction
• Majority of the sales coming from TLD.
• However company has more molecules filed in TLE which make more growth available in TLE segment
• ARV margins- Gross margins was less in Q3 due to delay of export incentives. However this quarter margins remain on line
Capacity
• Currently company is at optimum utilization and de-bottlenecking of the plant will be finished in Q4
• There are 8 formulation player active who have filed for Doltagrovate molecule while there are no player who is WHO certified for the API division
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Dr satyanarayana Chava of Laurus Lab on Q3 results 29.01.2021.
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Came across these two insightful reads on Richcore Lifesciences.
The first one is a profile on Subramani Ramachandrappa, Founder, Chairman and MD of Richcore. (Dated Sep 2017)
The second article is on the early relationship between Richcore and its early investor VenturEast and how they started it. (Dated Jan 2021)
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Dr Chava in his interview after Q3 result
- Growth primarily driven by customer demand in API & custom synthesis
- Q2 ebitda was 33% & Q3 is 34%
- Revenue growth is not due to stocking / price hike
- Ebitda can be maintained at least 30% or above in future quarters
- Capacity -1200 cr capex in 18-24 months spread in each quarter (6-8 quarters)
- Currently running at optimum capacity
- Inaugurated one backward integration block last month
- Expect additional API production commercialization beginning March/ another API block by June this year / by July-Aug we will have very large FD plant inauguration
- API shift due to china : we haven’t seen any growth due to china+1 strategy / covid & don’t see any negative impact as well
- We have seen more traction in CDMO than API
- ARV API is growing and expect single digit growth in next year
- API divisions are growing beyond our expectations
- Revenue in Q3 from US : custom synthesis revenue 100% from Europe / FD 25% from Europe & US / API - 30% from Europe & US … overall 40% from Europe & US
- Synthesis biz update: created 100% subsidiary for CDMO div & building dedicated R&D division near R&D campus at shamirpet, Hyderabad - early next year ready for 400 scientists
- Acquired land for CDMO (manufacturing) - construction to start in next few weeks : it will have 6-7 manufacturing lines ready from FY23 onwards
- Gross margin constant despite significant revenue growth Q1-55% Q2-56% Q3-54%, expect to maintain ebitda / margin both
- Launch of new products in Europe & North America will help in next year
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Can any member explain the difference between CDMO and CUSTOM SYNTHESIS?? Are both are same or different?? Thanks in advance.
for CDMO refer the link above
Custom Synthesis - This a small part of the entire CDMO life cycle.
" Custom synthesis means the exclusive synthesis of compounds on behalf of the customer, i.e., you can order a specific molecule that is only synthesized on your request on the scale, with the purity and with the specification or methods you require. "
You can read more from here
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“Laurus Labs Limited Q3 FY’21 Earnings Conference Call Transcript"
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Laurus Labs’ Management Shares Outlook For Q4 & Beyond:
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Thanks for sharing @Krishna1
China Impact :
To setup any new green plant takes 12-15 Months, and then Regulatory approvals etc… , it is easy said than done
People just don’t come buy becuase they wanted to have china + 1, we should be price competetive with regulatory compliance which can’t happen overnight
Diversification : Can’t happen overnight 
, it needs time, it took 15 years to come to this stage from one product to multi basket today
ARVs are cash cows, we are using this cash to grow other businesses
Custom Synthesis - Q4 will be good and it will be a bumpy number , margins are very high due to small volume orders but high margin
We have all levers to grow in API, Forumulations (capcity exansion), Custom Syntheis , Larus Bio , created base, invested in infra. continously investing, never invested if there is no visibility
Laurus Bio / Laurus Labs - New Facilities coming online from Jan, March/April May and August
Investments : We don’t do investments just for the sake capacity expansion, but we focus on Disruptive Capex , investment that is going to bring disruptive advantages
The more you listen to Mr Chava the stronger the conviction you form, always straight to the point. Long journey ahead.
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thanks…you have captured all points nicely…one point at the end of conversation which I liked is that, in response to debt reduction query, Mr Chava said that why would he try to reduce as long as cost of capital is considerably less than the ROCE.Very pertinent point as long as the management knows where to put that money judiciously.
This should put to rest the questions about debt or pledge…as long as growth is amazing and company is able to generate cash flow and profits.
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Thanks Krishna1, One of the best interviews I have ever seen by Dr.Chava,
My thesis on investing on Laurus is their Scale,cost, capacity, and compliance,capability, process chemistry expertise, Good corporate governence with no guidance 
In my opinion only weak players will participate in PLI and other subsidy schemes.Rather than investing in many pharma companies I thought why not bet big on Laurus itself as it is very well diversified and growing in all areas. I would be surprised if they they dont have a injectable division few years down the line with the way they are venturing.Present valuation seems not reflecting it’s fundamentals, as market participants are distracted by noise in other sectors, ready to wait for few years till price narrows with funda’s.
My antithesis: Keyman risk and Management sucession plan
Disc: Presently 50% of my networth avg@120.
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Q3FY21 concall notes
In our FDF infrastructure,our debottlenecking exercise of existing capacities is on course and this capacity will be available for commercial manufacturing by end of the Q4, although with a delay of a few months. Our Brownfield expansion project in FDF on the same site with similar capacities will be operational in a phased manner from August 2021 and will be fully operational by end of FY’22.
API blocks opened in January, another planned in march and then another one in the month of May.
The revenue split from LMIC versus North America and EU,one-fourth of revenue came from advanced markets and three-fourth came from LMIC
In our ARV, we have done more API sale to third parties in ARVs rather than our formulations division. So we would like to maintain that strategy & not be aggressive in formulations
There are about eight Formulation approvals right now for Dolutegravir-based combinations. Laurus is has top 3rd market share.In API ,Laurus is market leader.In the last five years, there is no new API player came into ARV.We have regulatory approvals in place by WHO, by FDA. So we believe we will maintain our leadership position
ARV business growth doubling is not possible, patients added in the programme is growing at the rate of 5-6%, growth that we are witnessing is from market share gain from weaker players.
Next leg of growth will come from Diabetes & cardiovascular division.
Our growth in formulations division is not dependent on launching our first-to-file products.
Laurus Bio will be a CDMO for recombinant proteins, it could be food, or for therapeutics. Currently, the expansion is for food based.We are also identifying a lot of areas where the synergies could be built between our chemistry and fermentation capabilities of bio.
With respect to API ARV volume. Currently, we have 4.5 million liters of reactor volume and we are adding close to a million liters in the next expansion phase. So that will take us to 5.5 million liters reactor volume. That is a significant addition, almost 20% what we have, we’re adding in next 12-months.
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