Our India branded business is doing well; this growth is sustainable, says Raj Kumar Baheti, CFO, Alembic Pharma

Raj Kumar Baheti, CFO, Alembic Pharma, talks about Q2FY22 numbers, USFDA observation for Karkhadi Injectable Facility, API business and margins, among others, in an exclusive chat with Zee Business Executive Editor Swati Khandelwal. Edited Excerpts:

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Q: Slight pressure has been seen in the Q2FY22 numbers across all parameters from revenue, profit to margins. What was the reason and how would you like to summarize this quarter?

A: Your observation is absolutely correct. This year our revenue and profits have declined a lot as compared to last year. The main reason for it is that the last year's base was exceptionally high. You would know that there was a shortage of Sartans in the US market last year and its prices went up. There were shortages for other products as well and we took advantage of that and posted exceptional growth at that time. Now, in a way, we can say that competition led to price erosion, it was expected but we have benefitted from it for a long time and we earned huge profits out of it. Actually, it was expected that due to competition the prices will come down, which has come down. The good thing is that there has been no loss in our business volume or market share and the loss is just due to the price erosion that occurred in the market. Generally, you will see that the generic companies operating in the US have been under pressure this year, it is small for a few and large for others depending upon the last year's base. Our large year base was high, so, the impact is more.

Q: The company has received 10 observations post-re-inspection of the Karkhadi Injectable Facility. Can you give us details on this and what kind of observations were there and how will this impact the new launches and financials?

A: I would like to add something to the previous answer, it is said that there is a silver lining or the good thing is that trend of decline that started in the first quarter or the start of the year, a steep fall, at least we have been able to arrest that. The operations and numbers are now seemingly stabilizing and we cannot be sure that it will remain the same in the future as well but we expect that a bottom has been created and the curve will move up from here. As far as Karkhadi is concerned, it is a new injectable plant for us and none of the products has been launched from this facility. We are waiting for the approval of the facility. It was inspected in February, there were some observations and we have responded to it and have also received Establishment Inspection Report (EIR). But they re-inspected the plant and, in this re-inspection, they just didn't look at the old compliances but also inspected two other lines. There are three lines, they inspected just one-line last time but this time, they also inspected two other lines as well as two other products and provided their observations on those. It is a setback for us but I take it in a positive manner because during the COVID, when travel restrictions were in place, two physical inspections were carried out at our facility in a small period and we also received an EIR, so, we are confident that we will be able to address these observations and they all are addressable. We will be able to reply to it in some time with the hope that we will get approval for it.

Q: What is your outlook on the API business and margins going ahead?

A: Our API business is doing well for us, again, the last year's base was very high because of one product Azithromycin, which was a big part of exports last year because of COVID-scare. So, if we remove it this time, then we have grown by 15%, while there is slight de-growth with it. But, the most important thing I would like to inform your audience through you is that our India branded business is going quite well, the whole industry is doing well but we are outperforming the market in most segments and products where we are operating. We are outperforming the market in almost all the segments like Gynac, Gastroenterology, Anti-diabetic, cardio and in small segments Acute and Antibiotics and Cough & Cold. We have also worked a lot on it in the domestic market in the last two years and I believe that it is sustainable growth.