Release Date: January 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indoco Remedies Ltd (BOM:532612, Financial) has a strong order book for international formulations business to Europe and US, standing at about INR180 crores.
- The company's largest brand, Cyclopam, has shown significant growth, reaching INR175 crores with a growth rate exceeding 20%.
- New product introductions now form 4.8% of the top line, surpassing the industry benchmark of 2.8%.
- Indoco Remedies Ltd received final ANDA approval from the US FDA for Cetirizine Hydrochloride tablets and Varenicline tablets, expanding their product offerings.
- The company entered into a strategic distribution partnership with Clarity Pharma UK, which is expected to enhance their market reach.
Negative Points
- The supply side for international formulations business has been severely impacted, particularly due to a warning letter from the FDA regarding the sterile plant in Goa.
- Sales to regulated markets of the US and EU have decreased by INR90 crores YoY for the quarter, significantly affecting revenues.
- The EBITDA to net sales ratio has dropped to 5.5% from 14.6% in the same quarter last year, indicating reduced profitability.
- The company is incurring additional fixed costs due to the acquisition of a front end in the US, impacting the P&L without corresponding revenue output.
- Remediation costs related to compliance issues are expected to continue for at least two more quarters, affecting financial performance.
Q & A Highlights
Q: What is the status of the refurbishment of the plants for Europe and USA? Can you update on which lines are operational now?
A: From Plant II, Line 1 is fully operational, exporting one product to the US. Line 2 is operational for exhibit batches but not FDA inspected. Line 3 will be ready by early February, and Line 4 by early March. For solid orals, Plant I in Goa is ready, and Baddi plants are rolling out, with some delays expected in the fourth quarter.
Q: What kind of digital initiatives do you plan to undertake or currently exploring for the India business?
A: We have digitized with 2,000 field employees using iPads for product promotion. We use software for real-time reporting and achievement tracking. We are exploring AI/ML applications in quality, stability, and R&D departments to improve efficiency.
Q: Can you elaborate on the US FDA remediation status and when we might see approvals and ramp-up?
A: We have submitted our initial response to the warning letter and are in communication with the FDA. We are working with remediation partners and expect costs to impact the fourth quarter and the first quarter of next year.
Q: How do you plan to regain market share once the compliance challenges are resolved?
A: We have strong relationships and reputation with our partners, which should help us regain market share. We are managing supplies to minimize impact and maintain customer confidence.
Q: What is the impact of the warning letter on US supplies, and what products are still being supplied?
A: We are in discussions with the FDA and customers to determine safe supply options. Terminally sterilized products are being supplied, but they form a small part of our portfolio. We await further guidance from the FDA.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
