Laurus’ revenues declined 20.2% YoY to Rs 1028.8 crore in Q3FY22 amid lower demand of ARV APIs and formulations due to transient inventory correction. Formulations revenues declined 13.3% YoY to Rs 373 crore, impacted by lower demand in ARV segment due to stocking at channel partners while API sales de-grew 42% YoY to Rs 424 crore. In API, ARV sales declined 64.2% YoY to Rs 203.5 crore while oncology API posted growth of 32.5% YoY to Rs 84.8 crore and other API grew 37.1% to Rs 135.7 crore. CRAMS maintained its momentum with strong YoY growth of 63% to Rs 207 crore due to sustained new client addition and increased business from existing customers. EBITDA margins declined 535 bps YoY to 27.7%, mainly due to higher employee and other expenditure. EBITDA de-grew 33.1% YoY to Rs 285.3 crore while adjusted PAT was down 43.7% YoY at Rs 153.7 crore for the quarter. Delta vis-à-vis EBITDA on back of higher depreciation and interest cost along with lower other income being partially offset by lower tax expense

Results were a miss on all fronts for this quarter as a drag in ARV business is sharper than expected and appears to have bottomed. In API, ARV specific impact should ease from Q4 with visible signs of demand stabilisation while good traction for other and oncology API should help in gradual recovery. Steady market share gain in existing portfolio along with portfolio expansion remains key for recovery in formulations. CRAMS business is on track to leverage new opportunities and extend services. Overall outlook remains positive with gradual improvement in demand and planned capacity expansions in portfolio based on complexity and scale

Q3FY22 Earnings Conference Call highlights 

The company faced challenges on logistics, raw material availability and inflation in solvent prices. Logistics still remain challenging while there has been some improvement in raw material availability and solvent prices

EBITDA margins were better in Q3 due to change in product mix towards margin accretive non-ARV business and better operating leverage.

Generic FDF: Brownfield capacity expansion at Unit 2 (to add 4 billion units) is on track and expected to get commercialised by Q1FY23

Total three ANDAs were filed during 9MFY22. It is expecting to file six to seven ANDAs during the year ahead. Cumulatively 30 ANDAs are filed out of which 10 final approvals have been received with eight tentative approvals so far

In Canada, Laurus will have 11 approvals in line with the guidance provided during Q2FY22 call, out of which they have launched five and are in the process to launch few more

Laurus secured two customer validations for contract manufacturing in Europe

Generic API: Other APIs and oncology revenues continued to normalise faster and saw good traction overall

Total 25% additional capacity to be added by FY22 end with increasing allocation for API in CV and anti-diabetic space.

ARV & non ARV split across API and formulation is ~ 50:50

Synthesis: Outlook for synthesis business to represent 25% of total revenue of by FY25

The management guided for ARV API & formulation demand to be normalised from Q4FY22 and reiterated the aspiration of US $ 1 billion in sales by FY23