Drug firm Alembic Pharmaceuticals sees margins increasing after two years. The company reported EBITDA margins of 19.7 percent versus 19 percent year-on-year and will continue to maintain that for another year or two, says Director and President - International Business Pranav Amin.
Speaking to CNBC-TV18 post earnings, Amin says the growth for the international generics remain muted at about 9 percent because last year the company had a little higher base. Also, the company let go off some contract manufacturing opportunities and its new launches are taking a little while to get some traction in the market, he adds.
The company expects its active pharmaceutical ingredient (API) business growth to be around 10 percent in FY15 on an yearly basis.
Below is verbatim transcript of the interview: Q: Your revenue growth has been mainly led by the India branded formulations business this time. Can you take us through the growth within that segment and what happened to the India generics business?
A: Let’s take two parts of the business. One is the branded formulation business India which has grown by 18 percent, so it’s a good growth. In India both the acute and specialty sector have done very well for us. In specialty we have seen good growth in the cardio, diabetology areas.
On the acute side cough, cold and anti-infective have also made good for us. In terms of international generics the growth was muted at about 9 percent because last year we had a little higher base and let go off some contract manufacturing opportunities and third, our new launches that are taking a little while to get some traction in the market.
Q: You have managed to improve your margins this quarter on a year-on-year basis; it currently stands at 19.7 percent. How much higher can it go from hereon?
A: In another year or two we should be closer to 20 percent. We are at 19.7 percent for the quarter. On a half year basis we should be at 19.6 versus 17.9 last year. So we should be at these levels for the next year or two and then we should gradually see them increasing again.
Q: How have you done in your US business? Can you give us a sense because you have filed one abbreviated new drug application (ANDA) in Q2 and four in the second half? What was your US performance like?
A: Our US performance was good. Last year we had higher base because we had some more contract manufacturing and some lower margin business. This year strategically we have let go off some and some was little lower but the products that we have launched are doing well through our partners.
We had two launches in the last quarter, two more in the first quarter as well, some have lesser competition and are therefore doing well. It depends on partners to get some market share moving forward and we are confident that they will do a good job.
Q: The maximum growth in your segments has come in surprisingly from your API business which is up 20 percent year-on-year. What led to the API business growing so strongly and is it a sustainable growth rate for the coming quarters as well?
A: I would like to look at API on yearly basis. On yearly basis we will grow by 10 percent. This was a good quarter. We had more orders; we had some capacities that we could allocate to API sales, so we did well on that.
Q: What about India generics. It de-grew by 12 percent this quarter although it’s a small part of the entire portfolio; it is still down 9 percent in the first half. Will it be a year of de-growth for India generics and if yes, by how much?
A: Strategically for us the branded business is the most important in India. We have good brand equity where we have good practices in the field, so we would like to focus on those areas.
The India generic is relatively low margin business and so, we are not too worried about that.
Q: How much would be your market share in the India branded formulation business and would you manage to grow above the industry that you have this quarter?
A: As we have said in some of our guidance that we believe that we should grow faster than the industry, hence, we would be picking up some market share but it takes a while specially segments where we are growing, they are much smaller base compared to the other areas, so gradually we should see a ramp up above the market share.
Q: Any change in your FY15 sales guidance?
A: We haven’t given a formal guidance per se but we should grow faster than the market in India and international generics will continue growing as well.
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