ALKEM - Alkem Laboratories Limited Share Price

Management's outlook for Alkem Laboratories emphasizes sustained margin improvement through cost optimization, portfolio prioritization, and growth in high-margin segments. Key highlights include:

1. Financial Guidance:

• Maintained ~19% EBITDA margin guidance for FY25 despite Q4's expected higher expenses (R&D filings, Enzene U.S./MedTech investments).
• Domestic revenue growth is projected to align with market growth (~7% for FY25), driven by flagship brands (Pan, Clavam) and volume gains (1.1% vs. market's 0.3% in Q3).

2. Strategic Initiatives:

• Acquisitions: Adroit (dermato-cosmetology) and Bombay Ortho (orthopedic implants) aim to diversify into high-growth MedTech (INR2,400 Cr Indian market).
• U.S. Market Recovery: Supply-chain normalization (back orders reduced from 38% to 2%) to stabilize sales; price erosion (~5%) offset by volume recovery.
• GLP-1 (semaglutide) Launch: Plans to be among first entrants in India's emerging GLP-1 market (current oral antidiabetic market: INR500+ Cr), leveraging in-house R&D.

3. Domestic Focus:

• Branded Generics: 32 of top 50 brands gained market share; outperformance in antidiabetic, GI, and CNS therapies.
• Trade Generics: Margins improved despite flat growth (strategic pricing focus).

4. International Markets:

• Non-U.S. Markets: Chile's currency/tender issues impacted Q3; stabilization expected in Q4.
• Enzene (CDMO): Targeting INR300 Cr sales in FY25 (~15-20% growth in FY26).

5. Capital Allocation:

• Prioritizes branded Rx and MedTech acquisitions (current net cash: INR4,700 Cr).

Challenges: Q4 margin pressure from R&D spends (5 filings planned) and inflationary API costs. Overall, management remains confident in long-term growth via portfolio optimization and strategic investments.

Question 1: "My first question is, I think in the last call, you mentioned that there would be some overhead expenses of around INR70-odd crores. Have those expenses started to come through? Secondly, you guided us toward a 19% EBITDA margin for the full year. In 9 months, it's 21.6%, so it seems like you are on course to sort of beat that number if you can give a revised guidance for fiscal '25?"
Answer: Management reiterated the 19% EBITDA margin guidance for FY25, citing higher Q4 R&D spending and sluggish seasonality. Overhead expenses for Enzene (U.S.) and MedTech totaled INR35"“40 crore YTD, with an additional INR20"“30 crore expected in Q4.

Question 2: "In the U.S., can you indicate if you can name products or otherwise? Are you looking at any low-competition, high-value launches over the next 12 months? And also, do you have any plans with respect to GLP-1 in India?"
Answer: Alkem plans to launch semaglutide (GLP-1) in India among the first wave of players, pending regulatory approval. In the U.S., key launches include sacubitril-valsartan (post-litigation resolution in July 2025) and topiramate oral solution, though no major near-term catalysts are expected.

Question 3: "Sir, one question on other expenses. Is there any forex-related charge or anything that is baked in?"
Answer: Forex impacts were limited to INR20 crore loss in Q3 (Chilean peso depreciation), booked under "other income." Year-to-date forex gains remain INR10"“20 crore.

Question 4: "The GLP-1, where we are expecting it to be in wave 1. In terms of manufacturing, et cetera, how are we positioned?"
Answer: Alkem's R&D has developed semaglutide independently, with in-house manufacturing capabilities. The company expects to capitalize on India's growing GLP-1 market, targeting both oral and injectable segments.

Question 5: "India's growth has remained subdued. How should we think about growth in the next 1-2 years, given acute therapy challenges?"
Answer: India's 6% YoY growth in Q3 aligned with the market (7.2% IQVIA). Volume growth (1.1%) outpaced the industry (0.3%). Focus on chronic therapies (e.g., antidiabetic, CNS) and flagship brands (e.g., Pan, Clavam) will drive future growth.

Question 6: "In the U.S., any quarter-on-quarter improvement in growth is due to any launch? Comment on price erosion."
Answer: U.S. revenue decline improved to -7% YoY (vs. -22% in Q2) due to normalized supply (back orders reduced from 38% to 2%). Price erosion (~5%) persists, offset by volume recovery.

Question 7: "How should we interpret the Bombay Ortho acquisition (INR147 crore) given its small turnover?"
Answer: The acquisition strengthens Alkem's orthopedic implants segment (India market: ~INR2,400 crore), providing manufacturing capacity and entry into the value segment. It complements the premium Exactech partnership.

Question 8: "What is the margin outlook for Q4, given 9M EBITDA of 21.6% vs. 19% guidance?"
Answer: Q4 margins may dip due to higher R&D spend (~5% of sales) for 5 planned filings, but full-year EBITDA is expected to align with 19% guidance.

Question 9: "How is the trade generics business performing?"
Answer: Trade generics grew 7% YTD (~INR1,378 crore) but slowed due to acute therapy headwinds and pricing discipline. Margins now align with corporate averages.

Question 10: "What is the capital allocation strategy for acquisitions?"
Answer: Prioritizing branded formulations and MedTech (budget: INR2,000"“2,500 crore over 3"“4 years). Current net cash: INR4,700 crore, with flexibility for leverage.