Alkem Laboratories Ltd
NSE:ALKEM
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
4 521.15
6 366.25
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Alkem Laboratories Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of Alkem Laboratories Limited, hosted by Motilal Oswal Financial Services.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services. Thank you, and over to you.
Thanks, [ Yashasvi ] Good evening and a warm welcome for 4Q FY '24 Earnings Call for Alkem Laboratories. From the management side, we have Dr. Vikas Gupta, CEO; and Mr. Nitin Agrawal, CFO. Over to you, sir, for the opening remarks.
Thanks, Tushar. So good evening, everyone. Thank you for joining us for today's Alkem Laboratories Q4 and FY '24 earning call. So to discuss the business performance and outlook going forward, we have with us on the call the senior management that's represented by Dr. Vikas Gupta, CEO; and Mr. Nitin Agrawal, CFO.
So earlier during the day, we have released our financial results, press release and the investor presentation, and the same have been posted on our website as well. I hope you all had the chance to have a look at it. So before we proceed to the call, we'd like to remind everyone that this call is being recorded and that the call transcript will be made available on our website as well.
We'd also like to add that today's discussion may include certain forward-looking statements and the same must be viewed in conjunction with the risks that our business faces. After the end of this call, if any of your queries remain unanswered, please feel free to get in touch with us.
So with this, I would now like to hand over the call to Dr. Vikas Gupta to present the key highlights for the full year and the quarter and the strategy going forward. Thank you, and over to you, sir.
Thank you, Purvi. Good evening, everyone, and I welcome you all to this earnings call for FY '24 and quarter four. I'll start by presenting an overview of the operational and financial achievements for FY '24 as well as for the fourth quarter. And post this we shall be happy to answer any questions that you may have for us.
Our focus has been to improve the EBITDA margin during the year on the back of benefits through implementing various cost control initiative as well as the favorable API prices that we had during the year. Continuing our trend of improved operational performance, Q4 builds on the momentum gained from previous quarters with significant gross margin enhancements backed by lower raw material costs as well as the lower intensity of price erosion in U.S.
We are happy to highlight that Alkem has registered a net profit before tax of more than INR 2,000 crore for the first time. And also one of the first is that, our international business has crossed the revenue of INR 4,000 crore in FY '24.
Coming to the highlights of FY '24. During the year, we have generated approximately INR 1,400 crores in cash, which reinforces our balance sheet to establish a substantial net cash position of around INR 3,550 crores. We outperformed the IPM in antidiabetic therapy, which everybody has been looking forward to us to grow the chronic business and that is really on track. Not only antidiabetic in other markets like Derma, GI and even the VMN therapies, we have really grown, outperformed the IPM. And our ranking has improved in therapies like antidiabetic, cardiac as well as the respiratory.
The company maintained its leading position in the anti-infective segment. However, we all know that anti-infective market saw a very sluggish growth in the financial year '24 and that did impact us as well. The company continues to rank among the top 5 companies in the Indian pharmaceutical market. Our international business has delivered a very strong growth with U.S. business reporting double-digit growth of more than 10% for the year. In the non-U.S. business, across geographies, we continue to achieve a very healthy growth.
Coming to the quarter 4 FY '24. In quarter 4, it has been a good quarter in terms of profitability improvement for the company. Our EBITDA margin improved by 150 basis points as compared to Y-o-Y Q4 of '23. So from 12.2%, we moved up to 13.7%. The net profit after tax for the quarter stood at INR 294 crores. And PAT for Q4, it was impacted on the account of derecognition of the deferred tax of INR 120 crores. Adjusted for the above items, PAT growth for Q4 FY '24 would be roughly 54%.
During the quarter, we have received 2 ANDA approvals. Our biosimilar business is performing impressively and witnessing significant traction in the domestic biosimilar market with a portfolio of 7 products now. We aim to sustain and carry forward this performance momentum in the current financial year. Thank you for your patient listening, and the house is open for any questions that you may have for us.
[Operator Instructions]
We'll take our first question from the line of Kunal Dhamesha from Macquarie.
Sir, would you like to provide any broad outlook for FY '25 in terms of revenue, growth and profitability?
So I've always maintained that our revenue growth will be in line with the market growth. We will be, say, we'll be at par with around 10% is what our revenue growth looks like for the coming financial year and largely driven from even the domestic market.
In International business, our U.S. business is going fine. The price erosion that we used to see over there, that has now stabilized at a low single digit. So and that is what gives us hope that even our U.S. business will grow pretty fine. So that's on the revenue business, on the revenue.
In terms of gross margins, we maintain, we will be within the range of both the gross margin as well as EBITDA as to what we are currently. So I think that is what we will, as a guidance, I would like to give you.
And just a follow-up on the cost efficiency measures that we have taken? But when I see the, let's say, the improvement on a year-on-year basis from around 14% EBITDA margin to 17.7% in FY '24, majority of that is driven by the gross margin improvement. And I think another 60 basis coming from the lower R&D expense. So the cost efficiency measures will it kind of be positively impacting us going forward or is it already baked into the improved gross margins?
So it's an ongoing process. Some part of it we have already baked in, in our gross margins. But as we continuously keep our focus on improving costs, I'm sure this will add further. But on the overall API prices, currently, the prices are pretty stable. So sometimes if we are more cost efficient on one side, there may be a scenario that we see an increase on the -- on some of the cost side of certain raw materials, which we can't predict. But anyhow, we are not seeing any such trend currently.
So I'm assuming that at a business unit level, our EBITDA might even improve as we move along. But there are certain investments that we are going to make for the future growth. And that is why I'm saying that our overall EBITDA at the corporate level because of those investments might still, I would maintain it where we are currently.
Is it more R&D expense that we are expecting?
See, there are certain initiatives that we are taking, which are future growth potential initiatives. Say for example, we are putting up this plant in the U.S. for Enzene CDMO business. So that will take up some part of our investments that will become operational by the end of this financial year, most likely. So we -- and that's a business that we are very bullish about in times to come. So I think some of those kind of opportunities, we will -- we have our investments to make, which is a mix of R&D as well as some of the CapEx that we may have to do for future growth opportunities.
Sure, sir, and one more with your permission on the what would the CapEx for FY '25?
So it will be to the tune of INR 600 crores to INR 700 crores.
We'll take our next question from the line of Neha Manpuria from Bank of America.
Sir, on the guidance that you just mentioned, when you say GM at current level, the gross margin at current levels, I'm assuming you're talking about the full year number?
Yes. We're talking about mostly about the full year number.
And while I understand the investment in future growth, the U.S. plant that you talked about, but that will only start hitting our P&L post commissioning, right? So is there any other investments specifically that you're doing in R&D or MR expansion because of which we are keeping our EBITDA margin guidance as similar to what we have done in FY '24?
So not on MR expansion side, any major investment. But on R&D, if you see this year, we have been at around 4.1%. But we would like to keep it at 4.5% to 5%. That's something that has been our trend on the R&D side. So and some of the -- and that includes some of the clinical trials that we do for some of our biosimilar portfolio as well. So I'm foreseeing the R&D spend somewhere within the range of 4.5% to 5%. And I think put together as some total of that, that's why I'm keeping the guidance at...
Understood. Understood. And if I were to specifically look at the India performance. While I understand that seasonality didn't really benefit -- was not really a tailwind this year. Fourth quarter usually does not have any seasonality benefits. So it was surprising to see a decline year-on-year in the India business. Anything specific that you want to call out as to what's happening in India and anti-infective other than the seasonality? Is there anything specifically that is impacting any other segments or any other therapies in India for Alkem?
Neha, my belief is that it's a one-off. If you will see even the IPM. IPM and the anti-infective market for Q4 has degrown. Degrown at around 2%, 2.2%, which is a very unusual trend. And I guess the reason for that is the high base in Q4 of FY '23 which saw very good outbreak of flu and I think it's a seasonality and a base correction that has happened in the market. And equally, we are impacted. And this is not new in the acute market. We see some of these peaks and troughs depending on certain events in the external environment.
So I wouldn't -- I think fundamentally, we are going very strong as far as our domestic market is concerned. We are very bullish. This is one of our key core markets. And if you will look at the other therapies that I mentioned, we have significantly outperformed in these markets as far as India business is concerned. So I'm sure and even in the coming year, we are very bullish on our growth in India. So I don't foresee any major challenge. See, there was also an improved, I would say, focus on the profitability -- overall profitability from the organization's standpoint. And that's why Q4 is looking a little sluggish. But otherwise, we are very bullish as far as our India story is concerned.
And last time, you had mentioned some concerns on the Pain segment, competitive pressures there. Has that improved? Have we been able to sort of allay those concerns related to competition?
So we are continuously at it, if you will see on the pain portfolio. We are registering internally quite significant growth. And strategically, whatever initiatives we had to take to counter those, we have already put in those strategic initiatives. Over a period of time, we will see the market also registering better performance in times to come.
We'll take our next question from the line of Rashmi Shetty from Dolat Capital.
So again on GMs, because generally, when I see the trend of the company, quarter 4 has always done higher gross margins.
I'm sorry, give me a moment, please. We'll check her connection. Meanwhile, we'll take the question from the line of Saion Mukherjee.
Sir, firstly, on your comment on the domestic market. I'm wondering the growth, of course, seasonality is one factor. So when you think about growth next year at around 10% given that you have a large NLEM portfolio, where there is no price increase, are you banking on normalization of seasonal demand to get to this growth?
To some extent that, and I would say, a strong volume growth because we have large feet on street. We have initiatives that we done quarter-on-quarter. So this year, we have had pressure on volumes, right? In a year where we do not have price as a lever for growth, which is around 30% of our portfolio is NLEM portfolio, but I think balance, 70% portfolio, we have levers of price as well as volume. On this 30% portfolio, it will be largely driven by volumes. So that is why I'm overall quite bullish on our India story.
Of course, as the year progresses, we'll get to see even the market should show a better movement. But of course, if there is a sharp decline in the market, we may also get impacted, but which is a very unlikely scenario at this point in time, and I'm banking on a strong volume growth that we will be driving as far as our business is concerned.
And sir, the -- how has been the performance of trade generics for you in this fiscal year? And an associated question is, when you talk about volume growth, you see many companies launching their trade generics division and getting aggressive there. And you have additional competition from generics private label, et cetera. So aren't you worried about these headwinds, which can impact volume growth over the medium term?
Saion, I have a different take on this. I think we have a unique proposition as a company where we are the largest trade generic player in the country. And our trade generic business continues to grow along with our Rx business. So we have the know-how of managing these 2 businesses, the way they need to be managed.
Any headwind on the trade -- because of new entrants, of course, the market is competitive. But I think that's the nature of our market, and we have dealt with it in the past as well. We are not seeing any, I would say, issues in terms of growth in our trade generic business, so to say. In fact, we are even improving on our margins as far as the trade generic business is concerned with every passing year.
So with the kind of scale that we have in this business, in fact, we are very bullish about both the trade generic as well as the branded generic business. In the trade generic business, we are even going ahead with a lot of products that we are going to launch new on the trade generic side, which should further propel the growth of our trade generic business with improved margins in the medium term.
Right, sir. And sir you talked about margin and cost measures in the -- earlier. I'm wondering -- and I understand that international and U.S. business, the margins can go up with volumes. What about the domestic business, whatever margin levels you have, do you see -- how do you see India business margins in general over the medium term?
So India business margins will be increase in volume and with the reduction in the API prices of certain key products. We see a positive trend on the India side as well. So during the previous years, especially during COVID times, we had seen on very significant upsurge in the pricing of some of the commodity APIs, which has stabilized now. So -- and with I think unless there is a Black Swan Event, which drives these kind of prices further up, I think these raw material prices I expect them to be stable. I expect them to be at this level.
Of course, there are certain elements which will play out in the market over a period of time, and that will decide on some of our key products like PenG, where everybody is expecting the price to come down. So far, we haven't seen it getting played. If that plays out the way everybody is anticipating then I'm sure our margin profile would even get better.
So it's more around raw material and not -- and the impact is limited from other expenses like SG&A, et cetera?
Yes, not so much to do. Those are -- we have a scale business. So those are pretty much standard SG&A expenses that we have. But I think it's the raw material, which will impact if any gross margin improvement further has to happen. I mean, that is how it will be.
Yes. And one more point that can impact the margin is the mix as our chronic business is improving, as the portfolio, which is a higher-margin portfolio as its contribution increases over a period of time and that also will contribute positively to our overall improvement in the margin.
We'll take our next question from the line of Rashmi Shetty from Dolat Capital.
Am I audible now?
Yes.
Okay. Sorry, if I'm asking this question, and you might have answered this because I lost the connection in between. So just on the gross margin side, just need a clarity that every fourth quarter we are normally seeing higher gross margins compared to your first 3 quarters. While I understand that you have given the explanation that stable price erosion and lower input cost has benefited to that extent.
So just to understand that for your cost control initiatives, any restructuring or anything which you have seen to improve on the supply side, on the inventory side, [ closing ] materials that are cost effective, anything that is also leading to this improvement?
Yes. Rashmi, I wouldn't attribute this improvement to any one single step. All of this that you mentioned is what we do on a day-to-day basis. So it's a continuous improvement process. It's not a onetime improvement initiative that we take and leave it at that. So I guess, all of this what you have referred to, including the supply chain efficiency, including the raw material procurement, et cetera, we do it on a day-to-day basis, and wherever there are opportunities to improve the margins further, we do that.
So I think it's a mix and some total of all of these initiatives that has led to this kind of improvement, which is -- which, to my mind, should be sustainable. Of course, because of mix issues, it might be a slight variation here or there. But I guess, on an annualized basis, more or less, it should pretty much stabilize at it.
Okay. And on your U.S. business, the sales have come down significantly on a quarter-on-quarter basis. Like in the first 3 quarters, we managed to do $80 million plus but this quarter, we were below that, around $70 million to $75 million. So just want to know this was purely seasonality or there are any other issues with this?
So I would say it's on 2 accounts. One is some of seasonality. And second, given some of the supply issues that we had in the U.S. business, so -- which was, I would say, one-off that impacted us for 1 or 2 months, which has largely led to quarter-on-quarter if you compare it like that. But if you will see even the previous years, the trend more or less because of seasonality has been like that even in U.S. business. But yes, I mean, we are seeing -- the way I will put it, U.S. business, the kind of price erosions that we were seeing in the previous years, that has come down.
We, every day read reports and newspapers that U.S. is going through a drug shortage for many products. For that to happen, the products need to be available over there. And I think it's translating even in our numbers where we are seeing the prices getting more or less bottomed out for many products. So I think that is a general, larger trend and we are very bullish now that because of our volume growth that we are getting in U.S. business, our U.S. business should also continue to grow significantly.
And how many launches we have done this year? And how many are we planning for next year?
So this year has been just 2 to 3 launches and similar is our expectation in the coming year. So in Q2, we will see that we get done. So that is what we will look at. But we are looking at -- in FY '25, overall, we are looking at around 6 to 7 launches, I would say, sorry, I said 2, 3. 6 to 7 launches. And one of those launches are relaunched. So looking at around 7% to 8% growth contributed by the new product launches in the U.S. market. That is something as well.
Okay. And one last question on Enzene Bioscience. We had given earlier sales guidance of achieving INR 2 billion and achieving the breakeven level. Have we achieved that? Or any outlook if you can give for next year?
So we are pretty optimistic about that business. Today, I think whatever guidance we have given, we are more or less running in line with that. But I guess it is FY '25 for and beyond, actually, because we are making some more investments in that business to make sure that we grow this top line. So at the individual business level, I guess, we don't look at profitability like that. But I think we can give you more this thing on, Nitin, would you like to add the numbers?
So the investment we have made in Enzene in the last 10 years was mostly for India in the plant and in the R&D, which we did for the India market and for Europe market. So that business has achieved breakeven in last year. Now in the current year, we will invest for U.S. market. We are building a plant in the U.S. We'll also invest in R&D and for other related stuff like CDMO for the U.S. market. So there will be some expense which we will incur and the revenue will start generating maybe from quarter 1 of next year for the U.S. market.
In this year, we may incur some expenses related to R&D and training of employees for the U.S. market, once the plant is ready in the U.S. in the second half of the current year. So for the U.S. market, definitely, we'll report a loss on the Enzene, but the India market and the Europe market under the Indian operations we'll do well, where we have already almost break even in FY '24 itself.
We'll take our next question from the line of Damayanti Kerai from HSBC Securities and Capital Markets.
My first question is again on India business. Dr. Gupta, you mentioned you're very positive on outlook for volumes in FY '25 after a muted show in this last fiscal. So theoretically, just like if you assume like volumes still remain muted, then what are your expectation on contribution coming from the price hike and new launches. So very broadly on other 2 drivers, what are your expectations?
See, I will maintain my guidance of an overall growth. Now of course, there are levers of price, volume and new launches. So I think largely, our growth is mainly volume-led growth, which is going to be there. So we have 3% growth that comes out of price that we take. There are 1% or 2% growth that we attribute to the new launches that we do during the year. And balance, we should have the volume-led growth. So I think that's the -- that has been a general breakup. And that is what I expect in the current year to go ahead.
Sure. And my next question is again on India segment. So improving contribution from chronic segment will be a key driver for your profitability ahead. So can you update us on like what is the contribution coming from chronic portfolio? And then what is the productivity in terms of sales team on chronic and acute team?
So I think every quarter I get this question, and I will once again reiterate. See, like I mentioned in my earlier commentary, antidiabetic market, we have grown substantially well. If you're asking the productivity, then for FY '24, we have an overall group level productivity at around 4.5 lakhs. From chronic, it's around 3.5 lakhs already that we have bought. So that's on the productivity side. But if you look at the percentage contribution. Today, we have around 17% to 18% business that comes out of chronic, and I expect it to cross 20% in the near term to midterm.
Okay. And lastly, you mentioned you are broadly done in terms of hiring MRs, medical representative et cetera. So any addition planned for this year or it will be [nominal]?
I mean India is our core market, home market, right? Not the kind of expansion that we have done in previous years, we do not have any such plan for this year. Of course, if there are minor additions here there that we continue to do, but nothing like we have done in the recent past in the previous years.
Sorry, can you mention like what is the head count on MR side?
So today, put together, we have around 12,000, which will be -- around 12,000 is the number that we have overall on our field force overall.
We'll take our next question from the line of Kunal Dhamesha from Macquarie.
So on this U.S. capacity that we are putting, can you share what is the capacity size and approximate CapEx that we are doing. And this is on biologics side, right?
Yes, yes. This is a CDMO facility for the biosimilar that we are putting. I would refrain from right now giving the capacity size, et cetera. But on an overall CapEx side, I think we have given a guidance that we will be within -- for the overall CapEx for the company will be to the tune of INR 600 crores to INR 700 crores, and that covers the CapEx that we will have to put in for this facility as well.
Okay. And what would be our maintenance CapEx?
So this includes around INR 80 crores to INR 100 crores of maintenance CapEx, which we incur every year, Kunal.
Only if you are looking at the -- for the facility. It should be to the tune of around INR 400 to...
No. No. This is maintenance CapEx is for the existing...
No, no, I'm saying the -- his question was on U.S. facility breakup? And what is it that we're looking for?
For the U.S. facility, the U.S. facility, we will have a CapEx of around INR 400 crores. For the maintenance CapEx of the existing plant, it will be in the range of INR 80 crores to INR 100.
Sure. Sure. And second question on the trade generic business, what was the contribution of trade generic business this thing around?
So we are, I think, between the range of around 20%.
20% is the total contribution of the generic business to our domestic business.
So has it come down substantially? Because I think last year, we were somewhere around 23%, 22%, 23%?
No, no. In fact, it has remained stable, and it is also growing. It is growing at a similar pace of what our general, overall Rx business was.
Because I think last time around just like we were at 23%, and it has been growing slightly faster, and hence, the contribution is increasing.
In terms of percentage, maybe in a year where our branded business has not grown that well. It ranges within that range. So 1% or 2% here or there, it remains. This year, we are giving you this year numbers that we are within the range of 20% to 25%.
So going forward also, it will remain in...
Yes. It remain in 22%...
22% only.
Okay. And in terms of margin, you earlier alluded that the margin in this business is improving. So maybe qualitatively, if you can say how -- what is the gap between the branded versus the trade generic business in India and how that gap has moved over the last 3, 4 years?
Generally, we have not given any specific margins. What I can say is we are improving with every passing year. And of course, everybody knows that these 2 businesses operate at different margins. But I would say at an overall EBITDA level, we are improving in that business every year. And with the increase in scale, we generally get that leverage. I think we are leveraging that operating leverage has started coming in that.
Is it fair to say the trade generic business would be higher than our corporate average margin?
It will be within that range of 1% or 2% here there. So it's within that range.
Okay. And sir, last question from me on anti-infective side, right, which is our stronghold. But when I see even there, we have underperformed the market. So what could be the reason here? Was it like more inventory channel -- channel inventory was there. And hence, this year, we had seen lower than market growth? Or would we have lost market share on that strong hold? How should we think about it?
So it's a mix. Some part of it is also on account of some of the inventory and channel normalization, which will generally happens whenever the market sees a sluggish growth. And also, it's about the regional dependence. There are certain geographies where we are more dominant than the others. And if the market is impacted more in those geographies as compared to the others, then they we get impacted a little more. So that is perhaps one of the reasons as to why our growth is looking sluggish as compared to the overall market. It's more of a weighted average issue on that front.
And would you say that now channel inventory for us would be normalized...
That is there. So it's the nature of this business. When you will see the demand going up, the channels are actually keep getting to normalized levels.
And one more if -- in terms of, let's say, this penicillin G consumption since we are really being an anti-infective. Would you be able to provide like what is our tonnage consumption of penicillin G or [indiscernible] And do we buy penicillin G or [indiscernible] and convert it to the APIs? Or we just buy directly the APIs that we kind of sell in India like amoxicillin?
So we buy directly. That is what we do. I think on the other details, we will have to connect offline as to what is the tonnage, et cetera, where you can post your query, and we will really respond to that. What I can tell you is that we are one of the largest consumers of PenG and if PenG prices ease out, we will be more happy than anyone else. That is something that I can just let you know.
We have our next question from the line of Bharat S, an individual investor.
Since there is no response. We'll move on to the next question from the line of Rahil Dasani from Mittal Analytics.
Am I audible?
Yes.
Yes, Rahil.
Just a few quick questions on adalimumab. Are we selling it under Enzene's own brand or have we licensed it to someone? And secondly, where are we selling this product exactly?
Sorry. Adalimumab?
Yes.
No. We are selling it as through Enzene.
We have our own brand.
Sorry. Yes, yes, we have our own brand.
And when are we selling this product exactly?
Right. It's India one. Your question is with regards to adalimumab Enzene India sales, right? We are selling it in India.
Okay. So we can see another Indian MNC Sun Pharma has become a licensee of adalimumab which is the same concentration of our product. So how do we plan on competing in terms of pricing?
Our pricing is very stable as far as this market is concerned. This is not a new market, right? This market, we have been there for -- since long. And there are -- that's a day-to-day thing that we do. So I think we are very competitive in terms of -- those are generics. So it's a generic market, and we are very competitive in terms of pricing. So that's not an issue. You have anything specific in mind rather than a product level price issue or please not -- or do you get it?
So I just wanted to understand adalimumab is a big product. It's supposed to be a big product for Sun Pharma. So concerning that, I wanted to understand more on the pricing and are we seeing increased competition from them?
No. So there is competition, but we have other products also which are much bigger than adalimumab. But as far as this market is concerned, we are pretty competitive in terms of pricing. So I don't think it's a price war anymore or it's because of price that we are losing on out to competition. So we are competitive like we are in most of the segments as far as our price is concerned.
And secondly, if I'm not wrong, we launch this product in 2022?
I do not have the exact date handy. But yes, somewhere around that time. You want exact date, we can check.
No, I just wanted to understand what sort of volume growth have you seen from that period of time for this product?
No. I refrain from giving product level details on -- we sell a large number of SKUs. Sorry, you'll have to post this specific query, separately.
We'll take our next question from the line of Madhav Marda from Fidelity.
Yes. Just one question from side.
We cannot hear you, Mr. Marda.
Can you hear me now?
Yes. Your voice is quite feeble. Can you please be a bit louder.
Yes. Yes. I just had one question which was, if you could just remind us on the tax rate reset when that kicks in and what could be the effective tax rate maybe for FY '27?
So see, for next 2 years, we see our tax rate in the range of 13% to 15%. For FY '27, the Sikkim tax benefit will be over. So our tax rate will definitely increase, and it will be in the range of, say, 25% from there onwards.
We'll take a next question from the line of Saion Mukherjee from Nomura.
On the Enzene or biosimilar program, can you share how many programs you've identified for development? And how should we think about clinical development spend on these over the next, say, 3 to 5 years?
So currently, we have around 7 products that we have already launched. We are already working on another 5, is what I would say. And this is for the domestic market. And for the global market, we have close to around 4 assets that we are working on for the global market.
And any time line you can share from now like when can we expect the full development and filing in the regulated markets?
It's an ongoing process and product level, the details are -- they are different time lines for different products. So Saion, what I would say is you can get back to us and we can respond to it separately because it needs product level detail. All the products are at different stages. So the timelines would differ for each one of them.
In this year Saion, there will not be any logs in biosimilar, maybe next year, there will be...
Right. And the whole idea about setting up a plant in the U.S., so how -- is it primarily -- so I'm wondering like why you have decided to put a plant in the U.S. and not in India. Are there -- what is the specific rationale here?
Yes so it's to meet up on the CDMO business that we have from -- in the U.S. market. So there were companies like WuXi Biologicals, who have really -- catering to this market and they had multibillion dollar business as far as this business was concerned.
Now with U.S. facing pressures on -- because of geopolitical reasons. So some of these companies are not doing the kind of business that they were doing and which threw up an opportunity for players like us to consider entry into the CDMO business as far as U.S. market is concerned.
So clearly, we see an opportunity over there, and there have been players in the market who have been doing that in the past. So that is why we are putting up that facility over there. And we have this unique proposition where part of it of the process we can do in India, and we can really offer a cost arbitrage in terms of grabbing business as far as that market is concerned so that's why we have decided to put up that facility over there.
Okay, sir. And just one last on the U.S. launches. Would you have any comment on generic Suprep launch? And then the Baddi site, which recently got 10 observations, how are you thinking and how critical from new launch perspective is that site?
So in Baddi, I already gave the -- I think Saion, we had a few observations to which we have responded to the USFDA. And we are pretty sure that none of these observations were very significant or were such that there were no data integrity issues, et cetera, that we got as an observation. So as part of our USFDA audits, you all know is the part of, is the part of pharma ecosystem. So as part of regular exercise, we -- that audit was done and we have responded to all the queries that were raised by USFDA. They're pretty hopeful that we should be able to address all the issues that were raised over there. A generic Suprep, we have just launched. So it's picking up now. So at this stage, I do not have any this thing because it's a recent launch that we have just done in U.S. market. .
And to add, Saion, for our FY '25 new launches in U.S., none of it was planned from Baddi. All the new launches are planned from Daman for FY '25.
We'll take our next question from the line of Aanchal Maheshwari from Equirus Securities.
Since there is no response, we'll move on to the next question from the line of Kunal Dhamesha from Macquarie.
Since we are sitting on a decent pile of cash. What is your capital deployment priorities? Would you be looking for inorganic activity to boost our growth? Or would it be returning to shareholders?
So we are -- I said it on the earlier calls as well. We are building war chest for acquisitions, I would say we are very hungry, we are looking for right opportunity in the market, but of course, at the right price. So we are very open to acquiring any asset which will be synergistic to us, of strategic value to us and comes at the right price. So that's how we plan to deploy cash. But of course, dividend payout, we have always been within the range of particular range, and we are continuing to be within that range as far as our dividend payout is concerned.
In terms of acquisition, any preference for size, large size, small size, more like brand acquisition versus the organization acquisition? And when you say right price, what is the valuation metrics that you look at?
No, I would say anything that can add value to our overall business and can be value accretive I wouldn't put a size and scale and a valuation to it. That will be well dependent on asset to asset. But we value and we evaluate various opportunities that come our way. And I think we cannot be way off from the market if we have to acquire something. So I think whatever are the market valuations, we have to be in line with that. But of course, the way we look at it as, will it be value accretive for us? Will it add value to us overall business. And if the answer is yes, then definitely, we'll be very keen to acquire something.
Anything like chronic, acute or we're open to...
Yes, of course, chronic will be our first priority because that's a business that we are building at scale. But since we have presence across therapies, we will not be averse to any therapy, so to say, to consider as far as acquisition is concerned.
And let's say, today, like what would be a biggest obstacle for you to do an M&A? Would it be the availability of asset or the availability of asset at right price, what would be the bigger concern for you?
It's a mix of both, but more #2.
We have our next question from the line of Shrikant from Nuvama.
Just 2 questions. How do you see the anti-infective season in FY '25 considering the monsoon prospects?
I'll be bullish, but this is a forecaster's job. I can't forecast how rains or season will play out. But what I know is trends in the previous year. And balance, let's see, it's not very far. You'll get to see in a few months.
But within your 10% guidance for the domestic growth, what sort of growth would you have baked in for the anti-infective considering it is very large therapy and we had a very poor season last year?
So I would take it at somewhere within the range of 7% to 8%.
Understood. And on the biosimilar, domestic biosimilars, what will be the current contribution of this business, and how is it growing? If you can talk about last 2, 3-year performance and how the margins have been performing there?
So the business has really grown well. Today it stands at around 5% of our overall domestic business. And the margins are decent enough as far as this business is concerned. So the competition is also less as compared to certain other segments as far as the biosimilar businesses there. And we continue to get strong and strong with every passing quarter as far as this business is concerned.
And about the -- again, biosimilars only, how big do you think that the biosimilar market is in India in terms of value?
There is no organized report over there. So whatever estimates I would give would be my view versus anyone else's view. So I would refrain from giving a number over here. But yes, there is -- I mean, IQVIA, gave this one number. But in these kind of markets, you can't rely only on IQVIA numbers. What we are seeing is that whatever second products that we are getting into, there is enough headroom for us to grow and build brands as far as on the biosimilar market is concerned. So that's how I'll put it.
And on the biosimilars, do you need to put different MR folks or you can market this to existing sales force?
So it depends on the product to product. For some products, we need a specific task force to cover those specialties, but there are many products where our regular field force helps us take that to the market.
We have a next question from the line of Harsh Bhatia from Bandhan AMC.
Am I audible?
Yes, please.
Yes. Just 2 quick questions. I joined the call a little bit late, so may be repetitive, but the Enzene plant once it gets commercialized in the fourth quarter, Doctor, would you say that on an annualized basis, the Enzene segment as a whole would still continue to be breakeven once the fourth quarter cost come into picture? Or would you say that, that would not be the case?
So I think Nitin already had answered this question. So it will still take a while because when it was only India, they had break even. So we saw the breakeven happen only ex India, but now we'll need investments that need to be made for this plant. And once we start clocking in revenue, which may be Q4-ish to Q1-ish of somewhere around that time. That is the time we will be able to give you some outlook on when do we breakeven for the U.S. investment that we have made on, the overall Enzene business.
Sure. And the margin on...
On a strong top line growth as far as this business is concerned, which is what we are pretty bullish about.
Sure. And the margin guidance. So I understand the Enzene a part of the chronic share and the trade generic margin potential as such. What is your internal assumption very qualitatively, directionally, again, for your most important, let's say, raw materials as far as [ 7-ACA ] PenG What is your internal assumption to that extent? And so yes, the internal part of it.
PenG, I've already answered. It's very hypothetical because everybody is expecting it to play out the way it has to play out because one large Indian player has already started producing. We should see our assumption is that we should see the costs using out over a period of time. Right now, we haven't seen any significant change on that front. I think once that happens, then obviously, our numbers will start showing it up.
Sure. And lastly, just bookkeeping. In this quarter, is there anything incremental on the OpEx side? I understand that you haven't called out anything in particular as such. So there is no one-off in the other OpEx line item?
So only one-off was service given penalties, which we have incurred. So in our U.S. business, we faced some supply chain issues. And because of that, we have incurred some amount of service level penalties. So that was the only one-off.
Okay. That would be in the range of $1 million to $2 million at max or maybe more?
So for the entire year, it was around INR 120 crores.
We have a next question from the line of Aanchal Maheshwari from Equirus Securities.
So sir, just wanted to understand on the -- again, on the supply chain penalties, which we have faced. So what was those during fourth quarter, if you can call out that number?
That was INR 30 crores for fourth quarter.
Okay. And how do you see the supply chain issues going forward? And especially on the U.S. business, how do you see U.S. business on a normal basis? Whether it will be again back to $80 million? Or how should we look at it?
So you mean in terms of supply?
Yes, you mentioned that there were some supply issues for the first 2 months.
We had certain back orders and because of which we are facing this service level penalties. But as we have ramped up our supply chain to bring down the back orders, we see that situation getting eased with every passing quarter. So on an overall basis, I guess we should be pretty much in control of this and we should be able to bring this number down in the current financial year.
Right. And sir, on -- again, on Enzene business. So what sort of operational expenses we are seeing for the new plant?
What kind of, sorry?
Operational expenses.
So this year is largely CapEx that we will be doing and some operational expense that will happen. Yes.
This year, it will be around, say, INR 30 crores to INR 40 crores of operational expenses, which we will incur on both for, say, R&D and hiring of MRs and for also for their training and all. But most probably, from quarter 4 onwards, we will also start seeing the revenue.
Sir, so on an annualized basis, we are expecting almost like INR 100 crores to INR 120 crores sort of expenses from this plant?
Going forward from next year?
Yes. For FY '26, we will be building almost like INR 100 crores sort of growth ?
Yes , it will be, say, INR 120 crores, INR 130 crores.
Right. And what sort of response we are getting from the clients. So whether we have got any commitments, some initial interest from the clients from the orders perspective from the CDMO perspective?
So we have already started building our order book in U.S. I can't share the numbers, specifically of the orders we have already booked, But we already have customers who are ready to work with us. So once ready I think we'll start serving that.
And sir, just trying to understand whether it will require incremental R&D spend from our side as well for to conduct this business? Or will we...
No, we will not be investing much in R&D. I think the clients will invest.
Right. So it will be more of a manufacturing, contract manufacturing services which you will be providing there.
[ Yes ].
Right. And sir, just last one from my end. So we were early adapting that we'll be seeing almost a 100 to 120 bps margin improvement every year. So has that changed? Because for this year, as far as you have mentioned that there will be only INR 30 crores spend which will be coming through from the Enzene plant. So -- but you are saying that the overall EBITDA margin is expected to remain flattish?
So really overperformed about over the guidance which we have given, we have given a guidance of 17% and we achieved 17.7% in the current year itself. So definitely, there will be a few points of improvement, but broadly very significant improvement over what we have achieved in FY '24. Maybe say 20, 30 basis points, we can expect. But broadly very significant because as Vikas spoke about that because of, say, an AVM also, there is no price growth in a significant part of our portfolio. So we'll try to push our say, [16%] through volume. So definitely, the margin will be more or less in line with what we have achieved. .
And last one, sir. In fourth quarter, was that trade generic business very different from what we would have done for the full fiscal?
No, it was -- the contribution of trade generic was stay on the similar lines like our total domestic.
In the fourth quarter, right? And when we are expect -- we are guiding for [indiscernible] growth in the domestic business, what sort of growth we are expecting for IPMs?
IPM. IPM....
IPM, should be in the range of 8 to 10-ish, I think, somewhere around that.
So are we expecting any -- any outperformance as compared to IPM or we are expecting to be largely in line with?
We're looking at in line or a plus 1% compared to IPM somewhere within that range, on a full year basis.
On a full year basis. Sure, sir. And we would have already seen some sort of ramp up already happening for this quarter, right, first quarter?
I can't give any numbers at this time.
We'll take a last question from the line of Yash Tanna from ithoughtpms.
Sir, I was just wondering about the medical devices business. I mean there were a couple of news article relating to Alkem launching a couple of medical devices. And I think you also mentioned probably in one of the media interviews. So is this line of business, we would probably look to make an acquisition in, is that a possibility? Or if you can just elaborate about this line of business?
Sorry, this line of business, can you make up?
The medical devices, there have been a couple of media articles relating Alkem launching couple of medical devices?
Yes. So see, it's a line of business that we are setting up now. So it will be a mix of both organic as well as we are very open to even if there is any inorganic opportunity that comes in that -- on that front. So it's an important line. It's going to be an important line of business for us. We've just started and we've just floated that company. So we'll give you further details on it as and when we've got significant details on the same.
Sure, sir. And this is mainly based on the domestic market or are we launching...
Domestic market.
Okay. Got it. And if you could also throw some light, I think Alkem launched [ophthalmic ] division, so how is that progressing? And what's the vision of that?
On sorry, on chronic?
Ophthalmic?
Ophthalmic. Like I said, even in the last quarter, Ophthalmic is a very recent launch that we have had. So it's a business which is growing with every passing month. But it's right now in a very small stage. It's a very potential market. Market size is very big. The number of players are lesser as compared to certain other therapies. So we are bullish about this market, but we have just -- we've just entered into that market. It's early days, and we have some of the new launches that we have planned in this therapy as well. So I think that is where we will see how the business progresses over the coming quarters.
Sure, sir. And if you could provide like a vision if Alkem wants to come in the top 5, or 10, probably top 10...
Excuse me, sir, your not clearly audible.
Your voice is not very clear.
Am I audible now?
Can you use your handset? It is sounding muffled.
Sorry. I'm using my handset only. Am I audible now?
Yes.
Yes.
Yes. No, sir, is this relating to the vision of Alkem's vision, 5-year vision, if we could reach a top 5 category or something?
We said top 10, I guess. So -- but yes, we are pretty bullish. Any business that we launch, we are -- that's with the vision to enter the top players in that segment. We are not a company where we have operated in that market, and we are at a -- we do not have a meaningful presence. So we have that credential that whatever segment we have entered, we have made it really meaningful, and we are in the top players in that segment. Same will be the case with this business as well.
We'll take that as the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.
Yes. Thank you, everyone, for taking your time out today and making this a meaningful discussion. If you have any queries, which remain unanswered, please feel free to connect with us. And thank you once again.
Thank you. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.