APLLTD - ALEMBIC PHARMACEUTICALS LIMITED Share Price

In the management's outlook for Q1 FY'26, Alembic Pharmaceuticals reported a strong start to the financial year, with total revenue increasing by 10% year-on-year to Rs. 1,711 crores. The gross margin improved from 74.8% to 76.2%, driven by a better product mix and cost improvement initiatives. EBITDA margins before R&D expenses stood at 25%, amounting to Rs. 424 crores, a 23% increase compared to the previous year.

For the company's R&D expenses, there was an increase of 26% year-on-year to Rs. 145 crores, aligning with the earlier guidance of Rs. 600 to Rs. 650 crores for the full year. EBITDA after R&D expenses was reported at Rs. 288 crores, representing 17% of revenue, marking a 20% growth. Net profit rose by 15% to Rs. 154 crores, translating to an EPS of Rs. 7.85.

Key forward-looking points addressed by management include:

1. Anticipation of continued growth in the US market, expecting a 10% increase across all quarters due to several product launches, including the recent launch of Entresto.
2. A commitment to focusing on execution to regain double-digit growth in the domestic market and expectations of moving towards this goal within months rather than years.
3. The roiling API sector, impacted by pricing pressures and strong competition, though the company remains optimistic about improvements in the medium term.
4. Ongoing ramp-up of new manufacturing facilities to optimize operations and boost margins, with projections of launching 4 to 5 more products in Q2 FY'26.

Management conveyed confidence in sustained operational efficiency and strategic growth initiatives across international and domestic segments while being mindful of challenges such as evolving pricing dynamics in generics and the API market.

Major Questions and Answers from the Conference Call Transcript

1. Question by Tushar Manudhane: "Sir, just on domestic formulation while there was an underperformance, but if you could throw some light on specialty segment in particular, while after many quarters we have seen muted performance for this quarter. That was first. And secondly, in terms of you highlighted rebuilding the team, if you could just elaborate in terms of what exactly are you trying to do here?"

Answer (Shaunak Amin): We are tightening our sales processes compared to industry norms. We've implemented mechanisms to monitor market inventory better, which impacted Q1 sales. The issues span all therapies, but we're confident in identifying gaps and addressing them. Performance should improve as we enhance execution and gain visibility on prescription trends.

2. Question by Nirali Shah: "On the peptide front... I just wanted to know if you could update us on the timeline for the first peptide filing? And any update on filing for Semaglutide and RoW markets?"

Answer (Pranav Amin): We are pursuing peptides but haven't allocated 35% of R&D to them. Semaglutide for the US is late, with no first-wave launch. We will target RoW markets post-filing. However, I cannot disclose specific RoW markets until we finalize our regulatory strategy.

3. Question by Damayanti Kerai: "How long it will take before you can catch up with the market growth rate first and then may outpace the IPM growth?"

Answer (Shaunak Amin): We're looking at months, not years, to address our execution issues and aim for double-digit growth again. While it's challenging to ensure 100% execution across districts, our ongoing efforts should start yielding results in a matter of months.

4. Question by Saion Mukherjee: "What if you have a 10% or higher tariff? How do you think the industry would react?"

Answer (Pranav Amin): Tariffs add significant complexity. If they rise, our strategies will pivot accordingly. We're focused on maintaining profitability without over-committing capital to US manufacturing solely for tariff mitigation. We may have to reassess our business strategies based on competitive responses.

5. Question by Gagan Thareja: "In terms of your US business, can you perhaps give some idea as to how do you see the full year panning out?"

Answer (Pranav Amin): I foresee a 10% to 15% growth in the US business this year, fueled by launching about 10 to 15 additional products through the remainder of the year. Our position remains strong with ongoing product approvals and increased market share.

These questions and answers reflect key discussions during the call regarding performance insights, growth strategies, market challenges, and financial outlooks for Alembic Pharmaceuticals.