Don't see over 40% margins; open to partnerships: Suven

The company's net profit stood at Rs 36.4 crore versus Rs 7.7 crore (YoY) and its EBITDA margins at 45.9 percent versus 23.8 percent (YoY).

Below is the verbatim transcript of the interview.

Ekta: Can you just give us what resulted in the margin improvement as well as a revenue improvement this time around?

A: The revenue improvement is because of the supply of the pre launch quantities which we have been doing since the last two quarters also. Pre launch quantities new chemical entity (NCEs) usually is the high margins that why the margins are also high that is why you can see the profitability going up by that much.

Ekta: How much do you expect your margins to improve or do you expect it to sustain at these levels of around over 40 percent?

A: It will be difficult to achieve 40 percent year-on-year because this is a special year because three of the molecules which are in for long time in the phase 3 has gone into launch mode by the innovators. Regularly it will be around 20 percent, not more than 20 percent.

Ekta: Did you receive milestone payment this quarter?

A: This has nothing to do with the milestone. This is a supply of the intermediate new chemical entity (NCEs), which are under clinical development which are going into the launch mode.

Ekta: Till when do you expect the supplies to continue for these three molecules which have been launched and where have these molecules been launched?

A: Most of these supplies have been done and Q4 also we will have some residual supplies going through. However, after the launch again we will receive the repeat orders and that will become the base loading of the activity rather than the gyrating effect of the quarter-on-quarter (QoQ) basis. Next year onwards, it will be much more stronger on the bottomline with the base loading of the activities.

Ekta: How many more molecules do you have in the pipeline which you will be supplying the intermediaries for or is it just these three molecules?

A: These three molecules are in volume basis on a pre-launch mode but we have total of 98 active projects with three molecules in phase 3 by innovators; 44 in phase 2 and 51 in phase 1. For those, we are supplying small quantities but for these three molecules this is the volume based pre launch that is why you see this growth in the revenue and also growth in the bottomline.

Ekta: What about the launch of your own NCEs?

A: Now it is going through the phase 1(b) in USA and Q3 we expect that to go to the phase 2(a), proof of concept. It takes another 4 years before you can see this goes into market if everything goes well with that molecule.

Ekta: What would your R&D expenditures be as a percentage to your sales and would we see an incremental rise in R&D expenditures as you finish your phase 1 for NCEs?

A: For phase 2(a) that will come under the development. So, that has to come out of somewhere else, not the revenues which we generate because that will cost you USD 20 million. For that we need to go out and raise money.

Ekta: Would you be looking to maybe partner with somebody or would you be looking to raise money via the capital markets?

A: We are always ready to partner with somebody, especially in the development which is a big boy’s game. Unfortunately, globally the risk averseness is there. Everybody is looking for an additional investment from outside to do the proof of concept in patients. So, we need to necessarily go there because our molecules look very robust. We are going ahead on our own but we are always looking for partners.