Another disappointing set of numbers, apart from bad margins even the US topline has de-grown from $200mn quarterly runrate. Company is having HR problems, compliance issues, supply chain management issues, etc. Here are my notes from their concall.
- US revenues came below $200mn because of (1) recall of losartan (due to NDMA impurities), (2) price erosion on oral solids (8-12%, increased from 7% in January to 16% in February) on products including gBrovana where competitors have come in, (3) no sales of Cephalosporin products. There is a lot of competition in oral solids, have exited a number of products
- Albuterol market share is 22.6
- gSuprep: Should be launched in Q3FY23 (already have approval)
- gSpiriva: Should be launched in Q4FY23
- Domestic prescription business growth was 13.9% in FY22
- Diagnostics: Will grow in importance over time, if over 5-years India business becomes 10’000 cr. then diagnostics will be around 500 cr. Currently its loss making
- Expect NCE spinoff to happen in FY23
- Expect current margins to recur in Q1 and Q2 FY23, should start to inch up starting Q3FY23 and by Q4 it should go up to 18%. Expect 20% EBITDA margins in FY24
- Has one of the highest number of ANDA pipeline for USA, stuck due to regulatory compliance
- Have had issues on supply chain disruptions because of which company had to air freight some consignments, will go back to ocean freighting model
- Less than 5% of revenues come from FDA impacted site. Mandideep: no product pending (mainly a Cephalosporin facility), Tarapur: 1 to 2 products stuck (undergoing site transfer), Pithampur II (30 ANDAs stuck) and Goa were big sites for stuck ANDAs, as Goa got FDA clearance products are being launched. Have 7 products coming out of Goa in FY23. The material products now come from inhalers, injectables and biosimilars
- Have $110mn goodwill/intangible (of $900mn) in Gavis
- Had lots of supply chain problems in generic procurement, these were set 10-15 years ago
Biosimilars
- Pegfilgrastim: Expect approval to come and plan a launch in Q4FY23
- Etanercept (Enbrel): Long way away from US launch (sometime in 2029)
- Annual R&D spends are $15-20mn + funding for key programs
Disclosure: Invested (position size here, no transactions in last-30 days)