Laurus Labs - Can Business Transform to Next Level?

[inthingakhlak]

Companies will compete but Feel the market here is massive infact the whole world… Don’t know about others but Laurus has advantage due to its close proximity with MPP, very good experience in ARV , low costs, can scale up massively very quickly due to its huge ongoing expansion, if required can be diverted to this, so hoping for the best😊
Just in June there was a this news…
Laurus Labs Ltd is developing a third-line HIV treatment, darunavir boosted with RITONAVIR (DRV/r), for children.
The development is under way based on an agreement inked in June 2021 by the Hyderabad-based company, Unitaid and the Clinton Health Access Initiative, so world knows Capabilities of Laurus in this field.

Jeevan patwa a expert had tweeted & i agree …Majority of 1700 crs capex will commercialize by Mar-22 which is into non-ARV and generate roughly 2500 crs. This capex is already tied up for clients, so capacity utilization will happen from Q1fy 23 itself

The sales from COVID pills will be the huge icing on the cake when order received , i think , COVID or No COVID Laurus will march ahead, again in my view this is a decadal theme the only concern which i forgot to mention last time I feel is …execution, as their plate is full , strategy is in place, hope if required they will keep hiring the right managers…, To manage all this skillfully But was somewhat relieved after reading this news Vivek Digumarti IT head from @LaurusLabs was named a winner at the #IDCIIA2021 in the #Innovation in #Operations category for the initiative to conduct #virtual facility tours by using #realwear Smart glass.
Event: http://bit.ly/3s4CAhF I Winners: http://bit.ly/3GKNOvE! News by IDC India
thusThey are taking some steps towards very efficient execution thankfully, also for succession his son Mr. Krishna Chaitanya spearheads the Synthesis and Ingredients divisions of the Company and has rich work experience in strategy, & is highly educated thus is being groomed by his father
Corporate governence i don’t think is the issue here Cause if you read the reason given in the article why they were chosen in top 5 finalist out of so many companies for corporate governance award by moneylife foundation its very overwhelming… These are just my thoughts thinking aloud with you friends not good in accounts so number crunching is not my forte… Just do back of the envelope calculation, can be wrong please guide take care stay safe.

[Worldlywiseinvestors]

Threat of substitute products being turned into reality:-

UNAIDS welcomes the approval of long-acting injectable cabotegravir as a...

[Galaxy]

The Medicines Patent Pool and the University of Washington sign a licence agreement for an investigational long-acting injectable drug combination candidate for HIV

9 December 2021

Geneva and Washington – Thanks to a licence agreement announced today between the Medicines Patent Pool (MPP) and the University of Washington (UW) through CoMotion, people living with HIV in low- and middle-income countries (LMICs) might, one day, be able to get a monthly injection that will offer an alternative method of delivery to existing oral therapies.

The licence covers the patents and expertise relating to a long-acting injectable (LAI) drug combination candidate that is being developed for use in HIV treatment, with support from Unitaid. The LAI formulation is enabled by UW’s drug combination nanotechnology.

[Galaxy]

Dr. Chava mentioned about their intension and preparations to venture in to injectable forms and also about Molnupiravir. Now with MPP acquiring license for long acting HIV injectables for use in LMIC it’s just an other opportunity and stepping up as per requirement for Laurus lab.
Here is the part of conference call transcript of Q2 October 29 -2021 (page 11)……

As of now, most of our commercial products are immediate release. Only one is modified release. We are going into the modified release dosage form-V and we are also developing more complex generics which we will file one by end of FY’23 and other one in FY’24. Apart from the oral solids, we also clear on going into sterile manufacturing and our R&D will be ready by end of Q4. For that, we started recruiting talent and we are building a portfolio and some partnerships too. We decided to go into other delivery forms into injectables.

Question: On Molnupiravir, we mentioned we will look at getting a license from MPP like you’ve done in the past for other products. So, what are the next steps and what’s the kind of timelines that we should think of in terms of licensing?
It’s only expectations. FDA has to approve in their 30th November meeting and then the local regulatory DCGI has to approve. Our files are pending with DGCI. We do hope they will take a decision after FDA approvals by end of November. If approval comes, we are ready to take the opportunity.
Will be supplied in India as well along with the MPP designated regions?
Many people will approach MPP for licenses. As I mentioned we have a very long successful partnership with MPP. Probably very challenging to say whether launch will happen in this quarter but definitely we do hope the products will be launched across the low, middle income countries by January for sure.

[prashantrane2000]

Paxlovid Dosage: Twice a day: Two 150 mg tablets of Paxlovid, and One 100 mg of Ritonavir.

Supply:
That brings us to the supply issue since it is expected that only 200,000 treatment course will be available right away, even though the United States has purchased 10 million and Pfizer expects to make 80 million during 2022. That clearly will not be enough given the toll of double dose coronavirus with Delta and Omicron right now, and for what is likely in store next year.

Probable psychological outcome:
The availability of Paxlovid should not in any way diminish the vital need to get all individuals vaccinated and boosted. But people refusing to get vaccinated may consider a 5-day pill treatment as a further excuse to remain unvaccinated.

Why Paxlovid is a Just-in-Time Breakthrough

[inthingakhlak]

I feel there are a few challenges with injectibles initially… first is the cost, as stated previously by a boarder , even funds for orals are in question Rates of which are presently very very less compared to injectibles, Rilpivirine needs to be stored in a refrigerator,cabotegravir+rilpivirine is not suitable for people with HIV and hepatitis B co-infection (which is common in many African and Asian countries) plus COVID being such a deadly desease still there are so many people around the world who are averse to taking injections, so there will be challenges, a few people who will take time to convert, and even few who just don’t like injections regularly (we all know such people), all in all to convince and change and reach the dept of Africa’s and Lmic, will take time roughly minimum 3 years i think, doctors here can guide better, these are just my guestimates, cause for a deadly disease like COVID with all the world machinery and money after it , even the pills to go mainstream after USD approval will take some time forget the cost, as per Bloomberg report…Just like Covid-19 testing sites and vaccines, Covid-19 treatment pills will be in short supply for months until production can increase.

As i think even after getting licence for HIV injectibles think the companies will be asked to conduct the late phase 3 trials in the countries where they need to supply not very sure about this,

All in all due to COVID, can be pushed back as most funds will be diverted to COVID pills, and vaccines again And now Boosters, n by the time thing will fall in place Laurus will be in a very different orbit , as said earlier even for manufacturing hiv injectibles laurus can play a huge part… as have my own business can affirm what Warren says…Businesses seldom operate in a tranquil, no-surprise environment, and earnings simply don’t advance smoothly (except, of course, in the offering books of investment bankers).
Heavily biased and bit lazy in investing for me finding very few idea is enough for me Laurus is one of them for the coming year, love the way Dr Chava accepts challenges and before we all could sense it he was preparing for it… And even new challenges will come which today we are not aware, but how he faces and overpoweres it is important Even worst case if that happens can affect one or Max two quarters (which is nothing if you are talking of a decade) but i don’t think so cause he was very clear from q4 onwards we will start upward journey n there are reasons for this already stated before… So hope for the best.

I Find very very few companies with ebidta Hovering around 30, very good roe,roce, cash flow

for internet companies people are ready to give PE multiples in few hundreds saying just look in the wind shield for huge growth, not rear view mirror, forget the meager profit or loss now.

i feel with Laurus let’s look what what more it can do.we do have discussed what it can’t do.
Just a few days back there was an ad of Laurus Bio
“We are aggressively building our Biocatalysis portfolio and if you are one of those with the relevant experience and want to see your work get commercialised, come join us”. Need Scientists ,
Just read 4 days before… In open PR…Covid-19 Impact on Biocatalysis & Biocatalysts Market to Show Incredible Growth by 2027.
People who have knowledge in this field can kindly comment on the growth here for Laurus Bio as i feel The direction in which Laurus is going is much bigger than Only ARV… As feared by most.

And as far as COVID pills are concerned the dose of paxlovid/molnupiravir is roughly 40 nos per patient , if successfull The pie will be so huge even the crumbs that fall off the table will make a few companies happy. Just my thoughts overall can be wrong please guide No reco DYOR take care stay safe.

Also please if time go through this link… Thanks

What do we know about injectable HIV medication?

[ram1984]

You seem to be really in love with the company and Dr Chava . When you are in love with the company all you find is confirming evidences, which is one of the biggest enemies of investing.

Aspirational targets are always set for employees and to please the markets and needs to be taken with a pinch of salt. At the same time if it’s not achieved, then you hear investors saying management not walking the talk. So it’s better to understate and over achieve. If one hears Dr Chava speaking at any of the concall, he has always maintained good growth projections, including ARV APIs where he claimed there will be subdued growth and never hinted at any degrowth. And that’s what any management do. They never say anything that’s disappointing.

Laurus is no doubt a long term story. It took them 15 years to reach where they are and are scaling. But the growth will never be linear. Infact even the API growth may be due to stocking on account of covid, we never know.

Coming to the 1 billion sales target, it was originally set for 2020 and they could achieve only 50% of that. Listen
https://youtu.be/ppqTkDtN5lM

[Ashusharma]

I believe for promoters stocks are like their kids. I have never heard any promoter saying his company or business strategy is bad.

Dr Chava said there will be marginal impact on margins but margins dropped by 4 points. Dr Chava is knowledgeable and good, but this company is like his kid. Here this stock jumps 8 times or 10 times and you say everything is good and fine and then your margins slide.

Disc: Not holding but watching on sideline to invest if there is further dip.

[inthingakhlak]

Yes I agree what you are saying is right, I liked the business model and the more i started reading about it the more i liked it, cause atleast for me if i didn’t have the conviction would sell at any fall , & i didn’t have any long term stock or story where i could with understanding keep it for long without the stock market vagaries disturbing me.
But will surely heed your advice and force myself to think in contra and try to look for disconfirming evidences also , thanks for taking out time and guiding take care

[sahil_vi]

@rupeshtatiya

So the question that really needs to be answered is - can business grow in terms of bottom-line at healthy pace while ARV business structurally moves to lower margin and capital efficiency.

Maybe I am missing something but this is not what the aurobindo concall says. What it talks about are short term headwinds.

1. Short term headwinds: Inventory pileup across the channel & subsequent pricing pressure.
   
   
2. At the same time, there is absolutely nothing in the concall to suggest structurally lower prices. Which makes sense. Prices are primarily a function of supply & demand. Supply has not gone up. Demand has not gone down.
   
   
   
   All that he has indicated is that prices might take time to recover. This is not a 1-2 month phenomenon. For investors who want to focus on next 2-3 Q profits, it makes sense to sell. But for investors who see Laurus’s lead in ARV APIs, could it be an opportunity to get a good biz at lower valuations?

By the way, in Q2 Aurobindo ARV sales were down 70%.

In Q1 Aurobindo ARV sales were down 30%.

In contrast, Laurus saw ARV grow 23% in Q1, started supplying more ARV to US & EU markets.

Laurus Formulation revenue (which is 75% ARV) grew 10% in Q2, they continue to see large growth for ARV in regulated markets (Europe, USA).

If anything this entire thing indicates to me that Laurus’s claim of being lowest cost producer of ARV is being demonstrated live. While big competitor like auro is degrowing 30% 70%, laurus is continuing to maintain its revenue (Growth in FDF & small degrowth in ARV API due to channel destocking).

The way I see it, Stock market is an instrument to transfer money from the impatient to the patient. If investors dont want to put up with 2-3 Q of pain & find better opportunities then of course it makes sense to look for alternate investments, but to the investors who can see the long term trend & focus not just on the short term but also the medium term, not much has changed, at least on the current ARV treatment side.

Laurus is expecting ARV growth to be back on track in H2 & specially Q4. It is up to the investor to see whether they trust the management commentary or not.

Their gross margins on ARV side have actually remained same or expanded. The operating margins are lower due to the destocking across the channel due to which their sales were lower, which is also leading to inventory build up.

If anything, Laurus is talking about passing on price increases for new ARV contracts.

Regarding injectable prophylactics, Here is what Dr Chava said in the Concall:

As of now, most of our commercial products are immediate release. Only one is modified
release. We are going into the modified release dosage form-V and we are also developing more
complex generics which we will file one by end of FY’23 and other one in FY’24. Apart from
the oral solids, we also clear on going into sterile manufacturing and our R&D will be ready by
end of Q4. For that, we started recruiting talent and we are building a portfolio and some
partnerships too. We decided to go into other delivery forms into injectables.

I am quite happy to go through disconfirming evidence. But as far as I can see it there seems to be very little in this case. Channel level destocking is a short term headwind at best, but even in being that it is actually demonstrating the absolute lead that Laurus has over its competitors.

Where the puck is vs where the puck is moving:

I went through the SMS pharma concalls and could not find any commentary on ARV sales.
smsq2.pdf (278.4 KB)
Investor presentation for SMS:
https://smspharma.com/wp-content/uploads/2021/11/Investor-presentation.pdf

Disc: Invested, eagerly actively looking for disconfirming evidence, but not finding much.

[greengoblin]

Interview with Dr Satyanarayana Chava, Founder & CEO at Laurus Labs

[Rafi_Syed]

@Chandragupta

Please listen to this for the reason behind promoter co investing in personal capacity Time Stamp : 20:33

[Souresh_Pal]

In Q2FY22 the fall in ARV API revenue is because of de-stocking. How ever when someone asked during Q2FY21 earnings concall whether the ARV API revenue growth is due to stocking up or not Dr. Chava denied it.

Dr. Satyanarayana Chava: During this pandemic, there is a slight shift in dispensing pattern. More countries move to multi-month dispensing rather than every month dispensing. Either they are giving three packs of 30 or they are giving a pack of 90 for the patient. So patients did not come and see the dispensary or a doctor frequently. So that shift happened.
Nimish Mehta: In a way there is more stocking per patient which is happening because of COVID and that is one of the reasons driving the growth in the ARV market, is that a fair understanding? *
Dr. Satyanarayana Chava: There is no stocking up. So, whenever the patient comes, instead of he get one pack of 30, he is getting two or three packs of 30, so that you may not come to the dispensary quite often during this crisis. There is no stocking of the inventory. So they started buying more of multi month dispensing right now. So there is no stocking up.

Conclusion:

1. So this means when it comes to ARV API, either he is being dishonest or he has no idea himself which is highly unlikely. So don’t believe what he says blindly which I did while investing before FY22Q2 results
2. Now we are hoping that FDF business in FY23 will have 3200 cr revenue (double of FY21 FDF revenue) since the FDF capacity will be 10 Billion by FY22 end which is twice of FY21 capacity. Now a significant part of the FDF capacity belongs to ARV (Source: Past concalls)
   

So there is a risk of whether the growth comes in FY23 from FDF or not since it has a significant dependency on ARV. If the risk play out then FY23 will be fllat assuming FY22 will also be flat. So in that case growth will come from FY24. So it will be a test of conviction. All these assumptions are pessimistic case.

Disclosure: Invested from a price of 622 and not trying to find any confirming bias.

[Dev_S]

Here is what one of the key sponsors of HIV worldwide has to say ( via Bill and Melinda foundation ) - Bill Gates shared his views on future of HIV therapy -

It’s being co developed by Gilead and Merck.

Clinical trials are on hold for now

Trials of long-acting islatravir for HIV treatment and prevention placed on hold

Note that Bill Gates article publish date( 7th Dec) is around same time when Clinical trials went in a temp pause.

Irrespective of outcome here, what is clear is that current daily pill regime will be replaced with newer solutions as above and there is backing of sponsors. It is a matter of time.

Can Laurus continue to play a meaningful role in any new solution and build on its relationship with MPP? That would be the true testimony to the planning & execution capabilities of management.

[rpm]

It is good for the HIV patients that better treatment is coming out along with preventive medicines. Current inputs indicate that the HIV drug market growth should start slowing down, reaching the peak in a few years. After that it should start degrowing as the preventives gain traction. However Laurus has at least 15 years or more to plan and execute their trajectory including their participation in the new drugs and also preventives. This is a long time.

[Rafi_Syed]

[ram1984]

Buy Laurus Labs: Target Of Rs 735: Sharekhan

“ImmunoACT stake acquisition to be a long-term growth driver: Laurus had recently entered into an agreement to acquire a 26.6% stake in ImmunoACT, which is an advanced cell and gene therapy company and has a portfolio of CAR-T cell therapy assets under various development stages for treatment of multiple auto immune diseases and oncology indications. The CAR-T therapy is an advanced therapy and offers material advantages over the existing therapy areas of chemotherapy/stem cell transplant. In India, CAR-T therapy is unavailable and this collaboration will help Laurus bring this novel technology for Indian markets at a very affordable
pricing, which bodes well from a growth perspective”

Dont understand how something that just incubated be a profit driver for a price target

[Dev_S]

A quick research in quest of following the funding money for ARV - led to this presentation from Oct 20 from global fund.

One slide(slide#107) that did forecasted ARV demand pattern and was in public domain from Q3 20 - could have saved us all a ton of time and energy - it was writing on wall that Q4 20, Q 1 21, Q2 21 will have much higher demand for ARV, Q3 21 and Q4 21 and Q1 22 will see reduction but stabilize as well with QoQ minor improvement.

Read all quarters keeping Q 4 20 reference as Oct 20. Now we know what to expect in next two quarters( current and next)

Here is full deck link - it’s treasure trove for ARV story - many of us are guilty of superficial research in this digital era( including self) hence lack of data/conviction

psm_2020-10-arv-large-buyer-and-sellers-forum_presentation_en.pdf

Quick points in skimming through global fund deck( folks from industry can enlighten us more)

• It is a complex program, multi agency - multi country - complex supply chain - nothing alike commercial mainstream pharma

• Ground realities are very important to implement effective therapy regime ( cost, shelf life , country specific context and so on) - what stands out is that even if new regime were to come it will be multi year process to get executed - not as simple as equivalent to a commercial drug launch post approval, here is a glimpse of TLD regime approval in 17, launch in 19 and ongoing implementation of 2+ years
  

  

• Clear references to good work by supplier from India - presumably Laurus( transparency, communication, supply security etc during tough times in Corona first wave) - There is a reason that Laurus was awarded pediatric ARV contract few month back

Supply chain issues attributed to supply movement challenges in India in wave 1 - Laurus is only major supplier

• There is a proper forecast, PO release and supply mechanism in place - it didn’t seem fair on Laurus part to not fully know demand spike etc/not being fully transparent with investors community - either ways investors are equally to blame for extrapolation

For e.g Kenya actually forecasted by prescription ( slide #137)

Ethiopia has given visibility till June 22

• South Africa plans
  

  

• Per South Africa HIV patients are growing and medications are lagging - further delayed by covid - this is condition of a relatively better off South African country
  

  

• UNDP projections - Q1 22 numbers are robust - major jump above Q1 21 - is worst over for demand?
  

  

Here is UNDP coverage

• FDA filings trend suggest reducing interest in space - current leaders likely to hold fort longer? Advantage laurus?
  

  

• FDA approval influence on overall supplier ecosystem - need it one way or another - advantage for players with proven track record
  

  

Summary

• ARV via global fund( and other agencies) tenders is a complex process, cost/quality/supply security will continue to benefit established players per qualifying criteria
• Current ARV regime is built over last 3-4 years and push is to get it implemented deeply - regime change is multi year process and LMIC context is very imp - do not see any breakthrough risk in near future
• Demand forecast hints at growth from Q1 22(CY) per limited understanding
• ARV coverage is still lagging patient coverage - demand to grow( price vs volume is different issue)
• FDA filings for ARV show a declining trend, cost leadership will continue to help currently established players ( not attractive enough for new entrants)

Encourage fellow VPers /domain expert to go through deck and share their thoughts

[Aniesh7]

Once-a-day HIV pill effective at suppressing HIV in children

[nirvana_laha]

Molnupiravir launched in India

Covid Antiviral Pill India: Covid antiviral pill launched at 1,399 for full...