Pricing pressure in US business is maxed out; veterinary & animal healthcare business will continue to do well: Shaunak Amin, MD, Alembic Pharmaceuticals

Shaunak Amin, Managing Director, Alembic Pharmaceuticals, talks about the Q3FY22 numbers, the US and Indian business, animal health business, product pipeline, USFDA observation on injectables facility and CapEx among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: How will you summarise the performance of Q3FY22 and what were the main highlights and growth drivers in the quarter?

A: If you have a look at the main highlights then on sequential quarters especially our US business has stabilized. Last year performance is not comparable because the base was quite high last year and if we have a look at the last three to four years then our US business is running at a high 30% CAGR and last year there were a lot of one-time benefits, so, it is not comparable. But the drop we witnessed in sales in the first quarter in the US improved in Q2 and has stabilised in Q3. We are quite comfortable that this is a new base for the US business and if we move forward on this base then there is a good chance to keep growing the US business on this. Also, going forward in Q4, we have some interesting launches coming up in the US and our first product will be launched in Q4 or Q1. We are quite confident that we will be able to build up as long as the market becomes more supportive, we should be able to make the US business start performing like we were over the last five, six years. Besides, when it comes to the Indian business than the India business has consistently been delivering high double-digit growth numbers. If we have a look at the Indian pharmaceutical market's overall growth then consistently from the last three quarters, we have been giving 5-6 points higher growth compared to the Indian pharmaceutical markets growth. We are quite confident that the India business will continue to do well.

Q: You have talked about the US business and expect it will get better from here but pricing pressure is there. By when do you expect that the pricing pressure will normalise? What's the outlook on the US business prices and Volumes? 

A: In the US market, we cannot predict that by when the prices will ease up but as I said that we feel that the pressure that we saw in Q1, we see some stabilising from that base of pressure. We have been able to build some volumes on this. Honestly, I am just making a guess about that some ease can be seen in the next two to three quarters but as you are aware that the US business is a cyclable business, so there are ups and downs in the business and we are hopeful that the bottom cycle of pricing pressure is maxed out at the bottom at this point in time. But when the recovery happens then we are not sure exactly. But that's the only view I can give at this point in time.

Q: Indian business has shown strong growth of about 17%. Is this growth rate sustainable and which portfolio has contributed to this growth the most?

A: For India growth, we are quite confident about these numbers. We are dependent on how the market performs and we have been consistently giving guidance that at this point, we are confident that we will do at least 4-5 bps (basis points) higher growth than whatever the overall market will do. So, we are extremely comfortable with that situation at this point in time. As far as which segment is growing is concerned, then every segment is growing well, antibiotics, cough and cold, women's health care, hormones, cardiovascular, diabetes, gastroenterology, all of our major segments across the board and on the sub-segments, the growth has been more or less in line or higher than the market.

Q: How has the animal health business performed this time and what is your outlook on the front?

A: If we have a look at the animal health business then it has been performing quite good for the last two years and there has been a high double-digit growth opportunity. We expect this animal health business to continue delivering with that speed going forward. Even the market is quite conducive and in the last two years, there have been good monsoons so it helped the livestock and poultry market. Also, the commodity prices have been quite favourable for the last two years, so, that has helped. We expect this veterinary and animal healthcare business to continue to deliver this kind of numbers.

Q: Tell us about the product pipeline going ahead? How many fillings are done and how many launches will be done in Q4? Are there any high margin products going ahead?

A: We are expecting, as I have mentioned, there will be two to three launches coming up in the next quarter out of which two are interesting launches and the first is an inhalation product, which I mentioned formoterol. It should either be either in Q4 or Q1. Talking about the margins, it is too early for me to give any suggestion on margins, when the products are launched then only we get a sense of the margins. For, the US business and that is just how the market is. But we have quite a few products lined up and we have filed a few products also. We are filing around 15 to 16 products, every year and the launch profile also should be good. So, I think, we have done a lot of work on that and I think they should be a good number both in terms of filing as well as in terms of new launches coming up in the next 12 months.

Q: Update us on injectables facility and what kind of observations were made by USFDA and by when do you expect a resolution will be received on it?

A: At this point, I can just say that we are working with the USFDA to resolve some of these issues and it will happen, we do not have any definite timelines on this.

Q: What are your outlook for the next year in terms of the top line, bottom line and the challenges you have seen all through and what kind of recovery have you seen and what kind of recovery do you foresee for the next year realistically with challenges on ground?

A: Honestly, we do not give guidance for the top line for the coming year as you know the market is unpredictable. I think there is consistency both for India and the US and our endeavour is to outperform the market. And that is what we work towards. I think in the past we have a track record of being able to outperform the market consistently and as I said that is the idea where we are as an organisation at this point in time.

Q: You have talked about the contribution of the animal business but what is the growth prospects for the same and what is the market share that you can make in it? How big is the opportunity? Also, do you have any M&A opportunities in your hand at present and do you feel that this can be an area where you can enter?

A: On the M&A side, there is nothing on the radar and we do not have any plans for M&A also at this point. We feel that enough investments have been done for organic growth within the organisation from India point of view as well as the US business. As far as animal health is concerned, we have done a lot on animal health business in the last two to three years to reorganise ourselves to increase distribution and we see plenty of opportunity on this site. In terms of the market share, unfortunately, there are no published numbers for the veterinary market, so, I cannot answer it. But, I think, we've been doing fairly well and we have broadly in the line with the other companies maybe a little better than the market, if I have to take an average of the performance of all companies in veterinary care from the quarterly numbers.

Q: What kind of CapEx will be lined up for the next year and what kind of expansion would you focus on?

A: Going forward, at this point, there is no large new CapEx planned. We have done quite a bit of CapEx in the last three to four years. Any CapEx in the future will be just maintenance CapEx and running CapEx for the normal upgradation in the maintenance of the plants. So beyond that, there is no CapEx at this point.