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Concord Biotech Ltd
NSE:CONCORDBIO

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Concord Biotech Ltd
NSE:CONCORDBIO
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Earnings Call Transcript

Earnings Call Transcript
2024-Q3

from 0
Operator

Ladies and Gentlemen, good day, and welcome to Concord Biotech Limited Q3 and 9 Months FY '24 Earnings Conference Call.

Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Sagar Shroff from Strategic Growth Advisors. Thank you, and over to you, Mr. Shroff.

S
Sagar Shroff

Thank you, Neerav. Good afternoon, everyone, and thank you for joining us on the Q3 and 9 months FY '24 Earnings Conference Call for Concord Biotech Limited. Today, we are joined by Mr. Sudhir Vaid, Chairman and Managing Director; Mr. Ankur Vaid, Joint Managing Director and CEO; Mr. Lalit Sethi, Chief Financial Officer; and Mr. Prakash Sajnani, Compliance Officer and EVP accounts.

Company has uploaded its financial results and investor presentation on the company's website and stock exchanges. I hope everybody had an opportunity to go through the same. We will begin the call with opening commentary by the management followed by a Q&A session.

I would like -- now like to invite Mr. Sudhir Vaid, Chairman and Managing Director for Concord Biotech Limited, to give his opening remarks. Over to you, sir.

S
Sudhir Vaid
executive

Good afternoon. Thank you for joining us on our Q3 and 9 months FY '24 Earnings Conference Call. We are happy to report a healthy financial and operational performance for 9 months ended December 23.

While our revenue for Q3 FY '24 was flat, our revenues during 9 months grew by 20% over the same period last year. Reported EBITDA and PAT grew by 39% and 43%, respectively, on a year-on-year basis. Over the years, Concord has developed substantial expertise in the area of fermentation enabling us to innovate and introduce a varied spectrum of fermentation-based pharmaceutical APIs for the pharmaceutical industry in the field of immunosuppressants, oncology, anti-infective and antifungal.

Fermentation process is very intricate, requires specialized manufacturing capabilities, expertise in working with microorganisms, precise control of diverse process parameters and implementation of multiple downstream purification process. Concord has established itself as a market leader in fermentation-based biopharmaceutical APIs for immunosuppressants, alongside diversifying into the field of oncology, anti-infectives, antifungal segments, a strategic move that can indeed mitigate risk and open up new opportunities for growth.

Having a comprehensive product portfolio and continuous new product additions will serve as a significant advantage. This not only shows -- showcases Concord's expertise and presence across the spectrum, but also positions us as a one-stop solution provider of fermentation-based APIs. We are also exploring opportunities for CDMO projects to accelerate our growth journey. Beyond our technical expertise, we manage very expensive and sophisticated manufacturing facilities with a proven history of securing regulatory approvals and adhering to compliance standards.

In this context, I would like to highlight that recently, ANVISA, that is, Brazilian Health Regulatory Agency, conducted a successful inspection of our Unit 1 API facility with no adverse remarks. These regulatory approvals across geographies positions us to cater to both regulated and unregulated markets. Our strong research and development capabilities, supported by an in-house R&D team, have been instrumental in commercializing high-quality, cost-effective products efficiently.

Being backwardly integrated with the manufacturing of key starting materials also provides a distinct competitive advantage. This vertical integration can contribute to cost efficiencies, quality control and a more streamlined production process. It also enhances our ability to manage supply chain effectively, ensuring a steady and reliable source of key essential materials.

Overall, having state-of-the-art manufacturing facilities, global regulatory approvals, R&D and manufacturing expertise, along with backward integration, positions Concord as a well-rounded and resilient player in the manufacturing of fermentation-based pharmaceutical APIs and finished formulations. By leveraging on these strengths, Concord expects to launch new products across different therapeutic segments and therefore, well-poised to expand its presence in global market, therefore contributing to sustainable growth and success.

From ESG's standpoint, I would like to highlight that Concord was also awarded with Bronze Rating by EcoVadis in 2023. Thus, by maintaining a focus on sustainability, ethical practices and staying abreast of evolving industry trends, Concord will further enhance its standing in the market. In the end, I would like to convey my thanks to all our partners, associates and investors for their continued support.

With this, I hand over the call to Mr. Ankur Vaid, Joint Managing Director and CEO of Concord Biotech Limited.

A
Ankur Vaid
executive

Thank you, sir. Let me begin with performance for the quarter, followed by strategies going forward. We are pleased to announce our performance for quarter 3 and 9 months FY '24. And our outlook remains optimistic, aligning with our long-term guidance of CAGR growth of 25% over the period of 5 years. During quarter 3 FY '24, our revenues stood at INR 241 crores which is similar to the same quarter last year. However, our 9-month FY '24 revenues grew by 20% year-on-year basis, driven by a 7% increase in API revenues and a 156% surge in formulation revenues compared to the corresponding period last year.

I would emphasize to assess our financial results on an annualized basis rather than quarterly. This is because there could be fluctuations on quarter-on-quarter basis, resulting in some quarters experiencing higher procurement than others. Some of the reasons for the fluctuations are changes in customer procurement patterns, sales spillover to subsequent months due to approvals and Red Sea disruptions. Therefore, a more accurate assessment of our performance is best achieved by analyzing the medium to long-term trends rather than short-term quarterly variations.

Speaking of the specific highlights, we are delighted to announce that the Brazilian health regulatory agency, which is ANVISA conducted a successful inspection of our Unit 1 API facility in Dholka in January with no adverse remarks. This achievement is expected to open up new opportunities in different regions and attract more customers in Brazil for our API products. Simultaneously, we are actively pursuing applications and registrations in various emerging and regulated markets to introduce our extensive product range.

Presently, we have secured 4 ANDAs for 6 products from the U.S. FDA and have also filed new ANDAs. We are also in the process of submitting additional dossiers across different territories. Furthermore, the approvals obtained from regulated markets serve as a solid foundation for securing approvals in emerging markets, facilitating quicker approval process and enabling us to establish a stronger presence in those markets. This perspective focuses on our geographical expansion efforts.

On the product front, we currently offer a portfolio of 24 products spanning across immunosuppressants, oncology, anti-infectives and antifungal fermentation-based APIs. Our strategic plan involves introducing approximately 8 to 10 additional products over the next 3 years, especially in the field of oncology and anti-infectives. Contributing to our sustained long-term revenue growth. In the coming few months, we expect to commercialize a couple of these APIs.

In tandem with product expansion, we are actively acquiring new customers across different regions. Simultaneously, we aim to enhance our market share among existing customers by offering a comprehensive range of fermentation-based products, thereby diversifying our product offerings and strengthening our position in the market.

Speaking of our formulation business, it has experienced notable success gaining increased acceptance of our products among customers across regions. Our formulation business has demonstrated strong performance with an increase of 190% for quarter 3 FY '24 on a Y-on-Y basis. We have an on-ground team of over 150 members in sales and marketing across India for our formulation business. And with addition in our product portfolio, we are optimistic of expanding our customer base in the years ahead.

Our strategic focus involves targeting the domestic and emerging markets for our formulation business with limited presence in the regulated markets. The formulation business is in a continuous state of development and we anticipate significant growth in terms of both products and customers, contributing to our overall success from a medium to long-term perspective.

We are progressing as planned for commercial production of our injectable facility in the first quarter of the fiscal year 2025. Once operational, this facility will enable us to offer a comprehensive range of formulation products, including oral solid dosage and injectables, positioning us as the preferred vendor for our customers. This strategic initiative is poised to enhance our market presence across various geographies significantly.

We have also articulated our intentions to venture into the CDMO business. We are currently actively engaging with innovators and large generic players submitting RFQs and positioning ourselves as a viable partner by leveraging our expertise and manufacturing capacities and capabilities. The successful implementation of any CDMO project has the potential to contribute substantial volumes and revenues to our growth trajectory, allowing us to accelerate our growth. However, it is currently premature to provide any specific time line for these endeavors. We will keep you informed on any developments in this regard. It's important to note that our outlined growth targets do not currently account for this opportunity. Successfully tapping into the CDMO business could significantly expedite our growth journey.

Finally, we remain mindful of our ESG initiatives. We are delighted to inform that Concord has achieved bronze rating in 2023 by EvoVadis, one of the world's most trusted business sustainability ratings agency. This recognition reaffirms our commitment to environmental responsibility and sustainable business practices contributing to positive global impacts.

Going forward, we maintain confidence in our growth strategies, including the emphasis on deeper market penetration, acquiring new customers and introducing innovative molecules in niche categories.

With this, I hand over the call to Lalit Sethi, our Chief Financial Officer for finance and operational performance. Thank you.

L
Lalit Sethi
executive

Thank you, sir. Let me take you through the financials and operational performance for the quarter and 9 months ended December 2023. On the revenue front, our revenue for the quarter financial year '24 stood at INR 240.8 crores as compared to INR 240.7 crores in the quarter 3 of the last financial year. As highlighted earlier, it will be prudent for one of -- one to look at the company on an annualized basis rather than comparing on a quarter-to-quarter basis on account of lumpiness in the revenues.

Revenues for the 9 months financial year '24 stood at INR 698 crores as compared to INR 581 crores in the same period last year, which represents a growth of 20% on a Y-o-Y basis. Revenue from the API business stood at INR 562.6 crores for 9 months financial year '24 as compared to INR 527.7 crores in the 9-month financial year 2023.

Revenue from formulation business stood at INR 68.5 crores as compared to INR 23.5 crores in quarter 3 financial year '23, with stellar growth of 191%. Formulation revenue for the 9 months financial year '24, stood at INR 135.4 crores, a growth of 156% on Y-o-Y basis. The split between the API and formulation sales for the 9 months stood at 81% and 19% in line with our guidance.

Domestic revenues for the quarter stood flat with exports growing by 1% Y-o-Y. Domestic revenues for the 9 months financial year '24 increased by 25% Y-o-Y and exports grew by 15% for the same period.

Speaking on EBITDA. Reported EBITDA for quarter 3 financial year '24 stood at INR 106 crores as compared to INR 112 crores in the same period last year. EBITDA for the 9 months financial year '24, stood at INR 297 crores, which represents a growth of 39% on a Y-o-Y basis from INR 214 crores in the 9 months last year.

Reported EBITDA margin for 9 months financial year '24 stood at 42.6% as compared to 36.9% for the same period last year, which represents an increase of 570 bps. Margin for the quarter stood at 44% as compared to 46.4% in Q3 financial year '23. EBITDA, including share of profit from the joint venture stood at INR 303 crores with a margin of 43.4% in the 9 months financial year 2024.

On the profit after tax. Our profit after tax for the quarter 3 financial year '24 stood at INR 77.6 crores as compared to INR 77.4 crores in the quarter 3 financial year 2023. Our profit after tax for the 9 months financial year '24 stood at INR 213.1 crores as compared to INR 148 crores in 9 months, financial year '23, which represents a growth of 43% on a Y-o-Y basis.

PAT margins for quarter 3 FY '24 stood at INR -- stood at 32.2% as compared to 32.1% in quarter 3 financial year 2023. PAT margins for 9 months financial year '24 stood at 30.5%, a growth of 490 bps on Y-o-Y basis. As of 31st December 2023, we are a net debt-free company.

With this, I shall now leave the floor open for Q&A.

Operator

[Operator Instructions]. First question is from the line of [ Hussain ] from Ambit Asset Management.

U
Unknown Analyst

So my question was on API revenue. So if you look at our company revenue on a 9-month basis, we are growing at 20%. However, API revenue is up like around 6% to 7%. So could you highlight what is the reason for this? And also, if you could help us understand that what is or how the growth trend is excluding the key molecules, the top 7 molecules?

A
Ankur Vaid
executive

Sure. So we are seeing good growth overall in the API business. There were certain -- as I mentioned, that there were certain spillovers of certain key molecules into the subsequent months because of certain reasons. And these were relatively high volume sales numbers for different reasons because of which it got spilled over into the subsequent quarter. But if I look at it from an overall perspective, we see good growth within the API segment.

And talking about how the split is between the different therapeutic segments. On a 9-month basis, we have seen the dependency on the immunosuppressants portfolio going down by close to 3%, lower than what it was last year. And much of that has been gained through our increase in sales in the oncology followed by the antibiotic segments and then the antifungal segments. So we are seeing good growth in all the therapeutic segments, but as more molecules are coming in the newer therapeutic segments, which ex immunosuppressants, there is more growth happening in that segment.

U
Unknown Analyst

Understood. And my last question is basically on the formulation revenue. So would it be possible for you to give a breakup as to how much of it would be from India currently? And also, can you help understand the formulation business in India? Because if my understanding is correct. I believe that's largely all hospital sales or tender sales, right? So if you could just provide an overview on the India formulation business.

A
Ankur Vaid
executive

So we don't give a geographical segmentation for the formulations. But yes, India and emerging markets are the key markets for us. We have limited presence in the regulated markets. And the India business for us has grown very well, particularly the transplant or the immunosuppressing division because we have been there in that segment for now close to 5, 6 years. And I would say that we are the only company right now, which is having the full integration, right from API to formulation, supplying from U.S. FDA-approved facility with full BA/BE studies. So our quality is of very high standards when -- and that's something that the doctors and the medical fraternity and the patients appreciate because of which we've been growing so aggressively in the India market.

Of course, being own manufacturers, we are catering not only to the corporate hospitals but also to the tenders. The critical care division of ours is also doing very well, and we are very optimistic that with own manufacturing coming in, over a medium-term perspective, we are going to see similar high-level growth in the injectable once we become own manufacturing on some of the specialized injectable products.

Operator

[Operator Instructions]. Next question is from the line of Alka from Baroda BNP Paribas.

A
Alka Katiyar
analyst

My part question has already been answered. Just if you can share your views on the -- your oncology everolimus traction going forward? How do you see and how it has been on the 9 months? And how do you see full year? And over the next one to two years?

A
Ankur Vaid
executive

So I would not be able to comment on our product on product sales, how we are seeing that. But of course, we have approvals in place, now both from U.S. as well as Europe. We have been granted CEP also for everolimus in Europe. So there is a lot of growth prospects. And with ANVISA, everolimus was also one of the products that was covered. So with us getting global regulatory approvals. And with our filings in global markets, we are in discussion with global customers in terms of how we can collaborate and cooperate with them on this molecule.

So in terms of capacity, we have enough capacity to cater to the global requirements. And with the regulatory approvals in place and few coming in, we are well poised to capture a large market share on this product as well, like the others.

A
Alka Katiyar
analyst

Fair enough. And also, if you can just, broadly if you can share how has the new customer revenue share been for the 9 months?

A
Ankur Vaid
executive

So we have added new customers. Close to 54 customers have been added in the 9 months period. But we do not categorize it between what's the sales coming from new customers vis-a-vis from the existing customers.

A
Alka Katiyar
analyst

Okay. No problem. So can we assume that it's a blend of both the new customer plus your existing ones?

A
Ankur Vaid
executive

That's correct.

Operator

[Operator Instructions]. Next question is from the line of Vivek Agrawal from Citigroup.

V
Vivek Agrawal
analyst

So in the last 9 months, we have grown -- our top line has grown by around close to 20%, right? So any updated guidance for, let's say, how to look at FY '24 and '25 numbers in terms of growth? Though we continue to maintain around 25% kind of long-term guidance. But it will be super helpful if you can share some near-term trends as well.

A
Ankur Vaid
executive

So we have mentioned that we will grow at a CAGR of 25% over the next 5 years. And during our previous calls as well, we discussed that this is not something -- this is a journey from where our historical CAGR of 18% to our target of 25% because during these 5 years, there are going to be different, different milestones that will be achieved, whether it is the utilization or the commercialization of the injectable plant, us getting new products commercialized, getting more penetration. So more penetration into the -- into different geographies with our existing products.

So this is a journey that is going to go from 18% to the 25%. And all the growth levers are well in place to take us through that journey. Talking about how do we see this year? I would say that we have a good order position and we have orders flowing in, but I would not be able to give you a guidance in terms of what that number would be by the end of the year. But definitely, it will be higher than the historical growth and towards that journey of 25%.

V
Vivek Agrawal
analyst

Thanks, Ankur. And would you like to share how the pricing has behaved for the top 4, 5 products, especially in the API segment? And what is your contribution of the top 5 product as a percentage of revenue has moved over the last 9 months?

A
Ankur Vaid
executive

So pricing for us on a customer basis, have has been relatively stable, and we have not seen any significant price erosions. However, if one would see at a blended level, because of new customer acquisitions, there could be possibilities of getting newer customers who have a much, much larger opportunity to kind of give a relatively better pricing than what historically is to others. So it's basically just more about price versus the volume.

But to most of our existing customers, it's been relatively stable for us.

V
Vivek Agrawal
analyst

So just to clarify that the new customers that you are adding that are coming at relatively higher price even for the same products?

A
Ankur Vaid
executive

So -- again, it's a blend because if there are newer customers, but having relatively smaller volumes, then the price points are different versus a new player who has a substantial big market share. They have -- they are able to command a better pricing than the others.

V
Vivek Agrawal
analyst

Understood. And your share of API to formulation mix. So what is the current share in Q3? And how we should expect this to move, let's say, over the next couple of years?

A
Ankur Vaid
executive

In Q3, it's 81% from the API and 19% is from the formulation. And going forward also, we are expecting to have the 80-20 kind of a contribution from API and formulation.

Operator

Next question is from the line of Vineeth Lambu from HSBC.

V
Vineeth lambu
analyst

So the API revenue has had like some orders has been spilled over to subsequent months. So you expect quarter 4 to be more than average growth, right, in API segments. Do you expect the...

A
Ankur Vaid
executive

See, I would put it in a way that if we are going to grow with a historical CAGR -- more than the historical CAGR and the split is going to remain 80-20. Definitely, there is -- if there is any variance on the API percentage growth, that would get quite well taken care of. So as rightly said that we expect good sales in the API in this quarter as well.

V
Vineeth lambu
analyst

Okay. And the next question is on the -- like what would be the sustainable growth rate in the formulation business because it has grown like 150% over 9 months, right? Like what would you expect it to be measured because the base has also increased. So what expected growth rate you are expecting? So, then maybe one or -- not quarter view, but maybe one year view or two years view.

A
Ankur Vaid
executive

Yes. So formulation for us started in 2016. And we got our ANDAs approvals around 2019, 2020 based on which we started taking this dossier into the global markets. And that's when COVID hit. So '21, '22 was -- or '22, '23 was more of a dry period where we got less approvals. But now since the approvals have started flowing in, that's getting translated into business for us. And that is a result of why we are seeing such high growth in the formulation business.

But as we have mentioned earlier that going forward, we have growth levers in place that while the percentage growth within the formulation segment could be relatively slightly higher because the base is smaller compared to the API. But the split between the two is going to remain more or less 80-20. So if we grow with our 5-year CAGR, what we look at, the split will remain more or less 80-20, and that's how you could then take it -- you could break it down at the formulation level as well.

V
Vineeth lambu
analyst

One last question. And as you said, the commercialization in the injectables would be starting in quarter 1 FY '25, right?

A
Ankur Vaid
executive

Yes.

V
Vineeth lambu
analyst

So what would be the, like, average revenue run rate like for the FY '25 or FY '26? What is expected revenue generation from this?

A
Ankur Vaid
executive

So FY '25 is going to see the commercialization of the injectable plant, we're going to take validation batches and then go ahead after stability, go with the filing in the emerging markets. So from an emerging market perspective, this is more of a medium-term business opportunity because it will take some time before we get market access in the emerging markets.

However, our sales to the India market with integration would start by the middle of the next financial year once we have enough stability data with us, to start supplying in the Indian market. And again, from an India perspective, once we have 2 years of manufacturing certification, we would also be able to get access to the government tenders.

So the injectable piece is more of a medium-term to long-term opportunity. And that's where it kind of also answers the question that Vivek had asked earlier that growing from 18% to 25% on a CAGR basis, this is going to be one of the piece that would also play out its roll when we are at a medium-term phase.

V
Vineeth lambu
analyst

Last one. So you think like from FY '26, the injectables would be adding meaningfully, revenue wise to the...

A
Ankur Vaid
executive

Yes. It would start adding -- it would start contributing to the overall number. It would start slowly because we would start getting access to the emerging markets. But as time will progress, then our sales would keep increasing over the years. But we should see some good sales coming in FY '26.

V
Vineeth lambu
analyst

And you expect the margins to be the overall like 40% -- around 40% for the injectables? Or if you can give me some range on it?

A
Ankur Vaid
executive

It's -- I mean, a little too early to say because, again, things changed in a span of 1.5, 2 years. But I would say that being an integrated player on the API, having our own manufacturing, definitely, we'll be able to get a much better share of the market. And the margins in the injectables is relatively better compared to the oral solid dosage. So I expect that the -- compared to oral solid dosage margins, our margins should be relatively better off.

Operator

[Operator Instructions]. Next question is from the line of Harsh Bhatia from Bandhan Asset Management.

H
Harsh Bhatia
analyst

Just to pick up on the previous question from the injectable perspective. If you could help us understand -- so I understand the trajectory in terms of first targeting the domestic business as well as the emerging markets. So at least, if you could help us understand the number of products that we would be sort of targeting for the next 1-, 2-year period, plus the therapies that we are looking at. I understand that the addressable market might be a little bit difficult to give out. But if you could help us understand the range of -- on a broader basis for the domestic market as well as the emerging market. Like could it be like an overall size of which is $500 million on a global scale basis? Or is it -- it could be close to, let's say, $1 billion? Anything from that front?

A
Ankur Vaid
executive

So a little early for us to kind of give the addressable market. But talking about the products, we would have close to around 8 to 10 products that we initially intend to go with. And most of those are backwardly integrated products. So where we are the API manufacturers, again, at the API front, as I say, that there are not many API manufacturers for these fermentation APIs, which are in the anti-infective, antifungal space. So having this full integration approach definitely would play to our advantage. And with that, we should be in a position to get a larger market share over a period of time. All these products are going to be the dry powder, liquid injection, bulk lyophilisation products, which are typically going to be within the anti-infectives antifungal space.

Mind you that so far, we have been only manufacturing non-sterile APIs, but we have also put in a provision here for manufacturing sterile, bulk APIs. So this was something that we used to lose as an opportunity because at times, sterile fermentation API products, we were not able to do which maybe some other suppliers were able to do from other parts of the world. But now that we would have -- we'll have the provision of supplying sterile bulk APIs from this new facility as well, this would also open gateways not only at the formulation level, but also at the sterile API supply levels.

So very optimistic. And that is something that could happen relatively faster than getting approvals in the formulation level. So just wanted to share that. That's also a good opportunity that we see in this space.

H
Harsh Bhatia
analyst

So from an FY '26 perspective, we should be building in the sales of both the injectable formulations as well as the sterile bulk API as well? Obviously, the ratio would be dramatically different, but...

A
Ankur Vaid
executive

Yes.

Operator

Next question is from the line of Bhavesh Gandhi from Yes Securities.

B
Bhavesh Gandhi
analyst

One question from my side. Recently, if I look at the approvals, then one Chinese company got an approval for Tacrolimus extended release capsules, whereas the product which we have is [ API ] an oral capsule. So does this create any impact on our Tacrolimus franchisee? This kind of approval purchase for the extended release version of the product? That's it from my side.

A
Ankur Vaid
executive

Yes. So no, it does not because from an API perspective, it does not create any concerns to us. As a matter of fact, they could potentially become a customer to us because we are also registering our Tacrolimus in China as it is already there in other parts of the world. So maybe in the future, they could be a potential customer to us. But that being said, from a formulation perspective, there is no concern. And from our own formulations, we are since not there in that particular formulation product, again, do not see any concern. So not from API or formulation that I see any concern there.

Operator

Next question is from the line of Alankar Garude from Kotak Institutional Equities.

A
Alankar Garude
analyst

Sir, first question, how has been the ramp-up in utilization of the Limbasi facility?

A
Ankur Vaid
executive

Limbasi facility is now been operating at 36.78% for the 9-month period as compared to 26.77% in the same period last year.

A
Alankar Garude
analyst

Sir, then if I look at the 7% year-on-year growth in the API segment in 9 months. Would it be fair that our blended pricing is down in high single digits compared to 9 months FY '23?

A
Ankur Vaid
executive

No. First, as I said that -- maybe what I'll do is maybe give you an example that there was a good amount of inventory that we had sitting in our WIP this year that while capacity utilization happened, we were not able to sell to that customer because the customer wanted material from the entire batch instead of smaller batches that we were giving. And they needed regulatory approvals -- internal approvals from their quality teams.

So, that, at the end of the year, we were sitting actually on a significant larger inventory. Although the capacity utilization number shows that but that did not get translated into sales for us. So there have been some examples because of this. I spoke about the Red Sea disruption. So when we sell our finished formulations to certain markets, they are on CIF basis. So while the product was shipped from our facility, it did not get translated into sales for us because instead of 30-day period now, it is taking closer to 45, 50 days period -- time period.

So while the utilization numbers shows a very different picture. Somehow, it has not got translated into the sales number. But from a pricing perspective, as I said, that the new customers, the pricing for some of the customers have been relatively on the lower side because of the volumes that they are looking at. And in certain cases, the prices have been more or less in line with what our historic prices has been. So again, it's very case-to-case basis, if I put it.

A
Alankar Garude
analyst

Understood, Ankur. So I mean, basically, then the assumption is while we have seen some growth in volumes despite all the issues you pointed out, possibly on a blended basis, pricing could be down slightly on a year-on-year basis.

A
Ankur Vaid
executive

That's correct. In some of the molecules, we could see some bit of pricing, which could be slightly lower, not as significant. But it could be slightly lower compared to what historical it was. But since these new customers do not account for a very significant portion of the total volume, that number is going to be very less. But if we would talk maybe in a percentage term, it would be -- it is going to be marginally lower. But yes, I would have to come back to you, but it could be slightly lower on a blended number.

A
Alankar Garude
analyst

Fair enough. The second question, Ankur, is now with Limbasi coming in, it's been more than 2 years now. Are you starting to see some kind of traction in your interaction with clients, which will enable you to get higher market share, particularly for your key products, say, for example, Tacrolimus or Cyclosporine. And I'm not talking specifically about 9 months FY '24. But in general, have those discussions started? Where are we in that process? If you could just highlight that?

A
Ankur Vaid
executive

So I think in these 1.5, 2 years, Alankar, we've moved quite aggressively in terms of getting our -- this new facility into our existing DMF. So with the -- getting the approvals from the U.S. FDA, Japanese AFM and other regulatory authorities, customers have started accepting this site into their ANDAs or into their dossiers. And that is the reason why we are seeing that kind of a ramp-up in the capacity utilization growing from 26% to 36%.

Now of course, we are also working on a lot of new molecules as well. So the kind of discussions that we are having with customers is not only with respect to our existing APIs, but also with respect to the new APIs that we are developing, how aggressively we can start working with them. So those are the kind of discussions that are now happening not only with the existing but also on the new molecules that we are looking at.

A
Alankar Garude
analyst

Sure. And maybe one quick one. Similar to Limbasi, can you also share the utilization levels for Dholka and Valthera?

A
Ankur Vaid
executive

From Dholka, it is from 75% to 79%. And Valthera, it's around from 18% to 17.71%.

Operator

Next question is from the line of [ Vatsal Sheth ] from [ Upswing Investments ].

U
Unknown Analyst

So my first question is that how do you see the issue of Red Sea currently? So do you foresee any kind of major challenges going ahead because Concord Biotech's revenues are -- a lot of revenues depending on exports. So how do you address the situation of Red Sea going forward?

And number two, we have seen a quarter-on-quarter dip on the API segment, no doubt because of the spillovers. So how do you see that spillover getting back into the business?

A
Ankur Vaid
executive

So on the Red Sea, I would say that majority of our exports happen by air only. It is only with respect to our formulation sales that we end up using the sea as a route. So -- and that's where I said that because of the nature of our terms with the customer, FOB or CIF, we are seeing some impact in the revenue recognition because it takes slightly longer time than the usual to kind of get it realized in our sales. So that's one.

Maybe from an import perspective, what we are doing is we are just trying to closely monitor the situation and also see that how we can do relatively better planning on maybe some of the few imports that we do. Of course, we are not dependent much on the imports, most of our raw material procurement happens from within India. But if there are a few items that are imported, we have to kind of closely monitor the situation and kind of do a better planning so that it does not impact us.

So those are the only two areas where we see some impact happening and this is basically kind of delaying the recognition for us. Particularly with respect to the formulations. It's how we look at things.

Operator

[Operator Instructions]. Next question is from the line of [ Ashish ] from JM Financial.

U
Unknown Analyst

So Ankur, when you say that next -- over the next 5 years, we see a revenue -- CAGR of around 25%, does this number also include the CDMO opportunity?

A
Ankur Vaid
executive

No.

U
Unknown Analyst

Okay. Fair enough. And secondly, on the injectables, so we have spent almost around INR 200 crores on building this facility. So what kind of asset terms are you guys envisaging? And over what time frame you feel this facility can achieve a 70% to 80% utilization?

A
Ankur Vaid
executive

Normally, population in injectable kind of business, the asset turn is to the extent of around 2.5 to 3x. And it takes around 3 to 4 years' time to take the capacity to that level.

And -- just to add, these 2 to 3 years' time frame is after you getting the necessary regulatory approvals in place. So once we have the approvals, one can take maybe that kind of a time frame to kind of start seeing that ramp up.

U
Unknown Analyst

So when you say emerging markets, what markets does that include?

A
Ankur Vaid
executive

So this primarily we would be targeting is Southeast Asia, Middle East and LATAM.

U
Unknown Analyst

Okay. And in India, you said mid FY '25, but emerging markets could be earlier? Is that what you are saying?

A
Ankur Vaid
executive

No. The emerging markets would be later. But mid next year, we should start seeing sales in the India market.

U
Unknown Analyst

Okay. And lastly of all these facilities like Valthera, Limbasi, obviously, there is -- so basically, what is the operational cost on an annualized basis, if you could put that number, just to figure out how much it is eating off the total cost?

A
Ankur Vaid
executive

So we do not provide segmental or divisional profitability, but consolidated numbers are there, which we have shared.

U
Unknown Analyst

Okay. Fair enough. And whatever expansions you guys are doing and possibly in the future, you guys might also venture into adjacencies. But in terms of seasonality, the seasonality will remain in favor of second half, right? So that business -- in terms of business construct, these economics will continue to remain even over the next 2 to 3 years, right?

A
Ankur Vaid
executive

Yes. I mean, as I said, that there is lumpiness and as you will see that our quarter 2 saw a very, very significant jump in the sales, which, again, is very different from what we've seen historically. So this, again, as I said that there would continue to be lumpiness. But historically, what we have seen is that our second half has always been higher compared to what our first half has been.

U
Unknown Analyst

Sir, lastly, just one more question on this Limbasi facility. Where are we in terms of customer inquiries? How is that thing moving on?

A
Ankur Vaid
executive

So we know who our target customers are. We are already engaging with them. And most of these customers are basically working towards adding the site into their dossier. And wherever we are getting new customers, we are trying to request them to start procuring quantities from the new site only rather than -- so that's how we are working with them. But I think since we have significant global market share. We are working with all the major customers. So the process is mostly towards getting access to their dossier from this new site is where much of the work is happening.

U
Unknown Analyst

And just one more question, sorry. Out of 25% revenue guidance over the next 5 years,. And since Limbasi and Valthera are just starting in the initial stages now. So would it be fair to assume that the guidance of 25% would be back-ended in nature? I'm just trying to figure out, would it be that 25% revenues would be coming like from FY '26 or '27? Or you feel it's an evenly spread out kind of revenue growth that you are anticipating?

A
Ankur Vaid
executive

See, definitely not evenly spread out, but -- and surely not all back ended, but it is a journey that one would have to go from. And at different, different time points, there are different, different growth levers which would start playing out. So when we talk about the injectables, we speak about FY -- from FY '25, '26 onwards. We have the Limbasi facility, which is already playing out because last year was 26%. Now it is 36%. And with the introduction of new APIs at Limbasi, that ramp-up would also start contributing not only to top line but also to the bottom line.

So I would say it's a journey difficult to quantify for us in terms of how that number is going to be and is all I would say.

U
Unknown Analyst

Okay. And versus 42% EBITDA margins in the first 9 months, would you say that 40% is the minimum that you guys can do at any point in time? Is that a fair assumption?

A
Ankur Vaid
executive

So again, we won't be able to comment on what is the minimum that we could do or the maximum. But I would say that since second half is always the heavier side and we would see increased capacity utilizations. Definitely, our performance should be better than what has been for the 9 months on the profitability side.

Operator

Next question is from the line of Harshal Patil from Mirae Asset.

H
Harshal Patil
analyst

So just need one clarification. This is for the API segment. Sales for Q3, we've seen a decline. So sir, just to understand it correctly, this decline could be attributable to a delayed offtake by one of the customers, is it right?

A
Ankur Vaid
executive

No, it's a blend of many things. As I said that -- we spoke about the lumpiness. So the consumption pattern of the customers is one thing that has played out because at times, depending upon their production planning, they may require the product in a particular month versus in a subsequent month. Those patterns could be the reason. And this is, again, we are considering that as an option or as a possibility.

And second is, of course, that we spoke about that we did see some spillover, some of the examples that we spoke earlier and also the Red Sea disruption that we spoke about. So those are some of the reasons that I feel are the probable reasons why it has been this way.

H
Harshal Patil
analyst

Right. Sir, just a continuation to that. When we say the Red Sea disruptions, so that was more so with respect to the exports right? And on the formulations, I guess, if I'm not wrong, most of the formulation exports are through the sea route that we do and APIs are mostly done through the air. Is that right? Or am I wrong on that?

A
Ankur Vaid
executive

That's correct. And some bit of import, as I mentioned earlier, for some things that we do procure as imports, they are mostly by sea. So some delays are accountable to that as well.

H
Harshal Patil
analyst

So in that case, considering that there was a Red Sea disruption, we could have seen some better formulation sales as well as compared to what's reported in Q3?

A
Ankur Vaid
executive

Sorry, I didn't get you.

H
Harshal Patil
analyst

The Q3 formulation segment sales that is showing a very strong growth on a Y-o-Y basis, we would have had some disruptions from the Red Sea issues in this quarter for formulation sales or no?

A
Ankur Vaid
executive

So as I said, it's not a disruption. It's basically delayed recognition of sales. So something that could have happened, say, by 31st December, probably it reached the destination, say, in third week of January because of which we were able to recognize the sales in January.

H
Harshal Patil
analyst

Right. So in that case, that's what I'm saying that there would be some spillover effect of the formulation sales in Q4 as well. So the traction actually would have been better.

A
Ankur Vaid
executive

Yes, that's correct.

H
Harshal Patil
analyst

Sir, just lastly, when we say that we are starting with the injectables mid next year and gradually increasing it in '26, '27. So just from an understanding perspective, this would definitely [ inch up ] the contribution or probably the growth of the formulation segment overall. So just wanted to understand that, what can be the rub-off effect on margins with the share or probably with the growth of formulations getting stronger. Any qualitative comments around that?

A
Ankur Vaid
executive

Yes. So as I said, that we have growth levers in place for both the API and the formulation. So while the base will continue to grow for both the 2 divisions, the split is something that we are looking to be somewhere between the 80-20, plus/minus 2%, 3% here and there. So if you would have seen last year, we were again somewhere around the 80-20 mark. And even now on a 9-month basis with 20% of growth happening, we are again at an 80-20.

So at least this is playing out to what we had considered and looked at that while base will grow, the split would remain the same, and this is something that we are seeing as we speak now. And going forward also is something that we anticipate given that there are growth levers in both the divisions.

Operator

Thank you very much. Ladies and gentlemen, due to time constraint, we'll take that as a last question. I now hand the conference over to Mr. Ankur Vaid for closing comments.

A
Ankur Vaid
executive

So thank you, everyone, for joining on our quarter 3 FY '24 earnings call. And we hope we have been able to address all your queries. For any further information, please get in touch with us or SGA, our investor relations advisers. Thank you, and have a good evening.

Operator

Thank you very much. On behalf of Concord Biotech Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

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