Prabhat Agrawal, CEO of Alkem Laboratories, says the company’s H1FY16 revenue growth will be in line with its historical growth rate. However, he pointed out that second half of the year is traditionally a lean period for companies in the sector.
The company’s stock listed on the exchanges today with a 30 percent gain at Rs 1,380 per share compared to its issue price Rs 1,050 per share.
“Alkem has seen a topline growth of 22.3 percent over the last 5 years with strong growth in domestic market of about 17.5 percent and international market at around 45.5 percent. The first six months performance is also in line with historical trends”, Agrawal says.
On concerns over the fluctuations in its margins pointed out by analysts, Agrawal stated that it was largely due to investments in the international market where two-third of the 69 Abbreviated New Drug Applications (ANDA) filed by the company could not get commercialised pending US FDA approval.
Also, investments in certain therapy areas in the domestic market have not been fully operational.
However, Agrawal expects that once these issues are sorted, the company’s performance should fall back on track. Below is the verbatim transcript of Prabhat Agrawal\\'s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: What are the growth prospects for the company now? What kind of sales and margins can we expect in FY17?A: In the last five years the company has delivered topline growth of 22.3 percent with a strong growth coming from both domestic market of 17.5 percent and from international markets around 45.5 percent. In the first six months the results of the company for this year is also in line with historical trends and we are confident about the future growth of the company given the investments that we have made in the past in both domestic and international markets, a strong competitive positioning that we enjoy in domestic markets. So all these investments and our brands and competitive position give us strong advantage to deliver good growth rates for future.Sonia: The one thing that analysts have been a bit concerned about is the volatility in your margins. In the first half of FY16 you managed to reach 17 percent margins. What is the expectation for the second half of the year and also for FY17?A: The margins in the last few years were depressed because of certain reasons and one of the most important reason for that was our investments in international markets where we file around 69 abbreviated new drug applications (ANDAs) but 2/3rd of our portfolio could not get commercialised and is waiting for an approval from The US Food and Drug Administration (USFDA). We have also made investments in certain therapy areas in domestic market. So as these investments turnaround, we expect our margins to expand going forward. The first six months of the results gave a view of that. The first six months of the results didn\\'t have any one-off but I would say that traditionally in the domestic pharmaceutical market, the first six months of the year are traditionally stronger than the next six months. Sonia: Have these investments in the US chronic therapy business that you just spoke about, have they reached breakeven?A: Those businesses are profitable and after allocation of research and development (R&D) costs and others, they are about breakeven levels.
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