EBITDA margin came off unusually high base: Alembic Pharma

A: It’s been a decent performance this quarter. On year to date (YTD) basis sales are up 11.2 percent to Rs 1,559 crore, the profit after tax (PAT) is up 22 percent on a year to date basis to Rs 212 crore.

Talking about the quarter specifically, net sales are up 6 percent to Rs 515 crore versus PAT is up 7.2 percent to Rs 70.7 crore. EBITDA is at 19.7 percent which is fairly in the range. We have been in the range of 19-20 percent. Last year it was 21 percent but that was an abnormal quarter and we had a higher base effect due to that.

Reema: Can you walk us through how your various segments did. What was the growth in the international business in this quarter? How did India branded formulation sales do, what was the growth?

A: India branded business grew at 11 percent for the quarter on YTD basis at 15 percent. As we have been working on the India branded business more on the specialty side of the business, which has been good. Our specialty segment has grown by about 19 percent versus the acute segment was 3 percent. As far as international generics go, we had muted growth at 3 percent, which was as expected as we had forecasted. We had a much higher base effect of last year. As we go we are building up our foundation to ensure that in future we keep our new launches perform better.

Ekta: What happened in terms of the slowdown this time and when do you expect India to possibly pickup again?

A: It is a matter of another quarter or two. I do not think it’s something to worry about. We are expanding in lot of divisions, we have pre pone some expense, we are investing a lot more for the future, so both should be back on track soon. Acute does have some effect of the season and what happens, but we are confident that India business will get back to growth in a quarter or two.

Reema: International generics has only grown by 3 percent in the quarter. What was the reason for this slower growth?

A: Couple of reasons, First, last year this Q3 as well as Q2 last year had a very high base effect because that time we had just started our new plant, so we had a lot more of the backlogs that we did.

And second, what has happened this time is we have not done some of the contract manufacturing business which was a little lower margin, at the same time our new launches; we had about four new launches in the US this year. They have yet to gain significant traction, our marketing partners are doing as much of an effort to get more market share.

Third, price competition in some of our existing abbreviated new drug applications (ANDAs)

Ekta: Your active pharmaceutical ingredients (API) business too has slowed down this quarter, it was 20 percent last quarter, it is up 7 percent this time. It just seems as though there was a total overall slowdown in sales this time?

A: Across the board all three had their own issues. API is generally where we have given a guidance of only about 10 percent. So API is as per what is happening. There are some of our customers who have had Food and Drug Administration (FDA) issues, so that has slowed down part of the API sale.

Ekta: Which ones would they be? Would you be at liberty to talk about that?

A: No, I can’t disclose any. There are two of them who have had these FDA issues. So that has slowed down sales to a particular aspect. Second thing on API is 10 percent is what we are forecasting. So, it should come back up as capacity come along and we have more sales.

Ekta: When do you expect your growth to possibly pick up from what you reported this quarter, because if you look at it in the previous quarter as well it was up 12 percent? So there has been a single digit growth this time, when do you expect it to pick up even in double digits?

A: API will be around the 10 percent range. I would like to look at it more on a year-to-date basis or on a moving regular basis. As far as international generics are concerned on YTD basis it is 22 percent. If you see on a compound annual growth rate (CAGR) basis we had said with the last eight quarters or so we are higher by about 25-30 percent and that should continue.

Reema: In the coming quarter what we can expect. We can expect a pick up in the API, should we expect a pick up in the international generics. Just walk us through how this quarter is likely to be compared to the previous?

A: In terms of the India business you should definitely see some pick up in the India business. As far as international generics is concerned this quarter as well as the next quarter is really a function of the market. As far as we are concerned in terms of execution we are doing whatever we can. So it really depends on the market opportunities. However I still feel it will be a muted quarter, you won’t see the abnormal growth that we saw in the last eight quarters or so where we grown a phenomenal amount and API will be around these levels as well.

Ekta: What about your ANDA filings in the US. As of the second half it was four, where does it stand at now and what sort of approvals can we expect?

A: Yes, we had filed four up to H1. We filed one more ANDA in Q3. We had given a forecast of anywhere between six-seven filings for the year and we should be in that range for this year.

As far as approvals are concerned, we have got about five approvals this year and that’s as per what we thought, so that moving fairly steady. Hopefully, we will see more ANDA filings next year onwards.

Ekat: Regarding your ANDA filings, have approvals slowed down from what you might have anticipated or has there been any sort of delay in approvals from the US FDA and consequently which of your manufacturing plant would possibly have any routine inspections which have been undertaken?

A: As far as plans are concerned, they are all in compliance right now. The next inspection should be anytime has been over two years for the API as well as formulation plant in the next six months we should see an inspection coming up. As far as delay in approvals, I do not think so. By and large all our approvals are coming within the timeframe stipulated by FDA, so that’s not something that is in our control or affecting us per se, so we are okay on that.