Laurus Labs Company Analysis

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Written By: Shuchi.P.Nahar | Shuchi’s Blog

 1. Company Profile & Background


Laurus Labs is a leading R&D driven pharmaceuticals company established in 2005 with its headquarters in Hyderabad.

It is among the leaders in the manufacturing of Active Pharmaceutical Ingredients (APIs) for Antiretroviral (ARV) and Hepatitis C (Hep-C) formulations.

Other major API segments include therapeutic areas such as Oncology, Cardiovascular, and Anti-Diabetes.

Laurus Lab Business Review

From a one-product company in 2010 to an Active Pharmaceutical Ingredients (APIs) company thereafter, company has now emerged as one of India’s leading manufacturers of generics APIs for various complex therapies.

Company is thriving on growth opportunities in formulation manufacturing, addressing the critical needs of the world’s key pharmaceutical markets.

Over the years, the most important enablers of this transformation has been their People, Plants, Products, and their Processes, encapsulated as ‘4Ps’. 

2. Revenue Comparison 2019 v/s 2020

• Total Revenue showed a robust growth of 32% for the quarter (Y-o-Y) & 24% for FY20 (Y-o-Y).

• Generic FDF business recorded significant growth for the quarter and FY20.

• The robust growth was led by higher sales from tender business in LMIC having strong order book for coming quarters.

 Synthesis Business recorded strong growth. The business showed a healthy growth of 34% for the quarter (Y-o-Y) and 31% for FY20 (Y-o-Y). Growth was led by higher contribution from CDMO business.

3. Strategy for various Business Segment

a. Formulation – 29% Revenue Contribution in (FY 20)

• Strategic Partnerships with multilateral agencies providing access to major tenders

• Actively Participating in In-Country Tenders

• Focused on executing large sized opportunities from tenders in coming quarters

• Cumulatively filed 11 products in various LMIC markets 

• Filed 4 Triple Combination products – DLT, TLE600, TLE400 & TEE Approvals

• Filed 26 ANDAs with USFDA – 6 final approvals and 5 tentative approvals. In addition, completed 2 products validation

• 10 in Canada, 6 in Europe, 8 with WHO, 2 in South Africa, 2 in India & 11 products filed in various ROW markets. 

• The company has added several new customers with programs in various clinical stages and also completed several projects in various stages from preclinical to commercial scale. 

• It is working with large Global Innovator pharmaceutical companies and mid/small Biotech companies.

• Merged Ingredients business division with Custom Synthesis business in order to have clear demarcation on Products and Strategy.

• Sizeable revenue generating from Unit 5 for Aspen. Commercial supplies started for 2 products  

c.Generics – APIs– 57% Revenue Contribution in (FY 20)

• The company is working with 9 of the top 10 large global Generic pharma companies for contract manufacturing of generic APIs. This is a growing business and growth in the segment will be led by both new launches and increase in market share of existing products.

• Huge growth opportunity on offer with global supply disruptions in the market. Focusing on key therapeutic segments like Anti Diabetic, PPIs, & CNS.

• Products commercialized for Contract Manufacturing opportunities with an EU Customer. Contract Manufacturing is a growing business with global generic partners. Additional revenue from commodity ingredients are merged into Generic API business

4. Strong Research and Development – Backbone of the Company

 A team of well-qualified and skilled professionals in R&D centers spread across multiple locations are specialized across the value chain of research, and process development of advanced intermediates, ingredients and contract research.

•  The R&D team mainly emphasizes on process development, absorption of technologies and establishment of technologies at a commercial scale. Have a healthy order book for FY 21 & Beyond in FDF Contract business with a strategic partner in EU.

• Filed 26 ANDAs with USFDA and 6 final and 5 tentative approvals. Expected to file 8-10 ANDAs annually with a focus on ARV, CVS, CNS and PPI with few para IV opportunities.

• Filed 257 patent applications and 116 patent granted as on March 31, 2020

• 2 product validation completed for formulation apart from filling of 26 ANDAs and NDAs

5. Infrastructure Facility – Company’s Strength

• Company currently operate six manufacturing facilities in Visakhapatnam, Andhra Pradesh and one facility in
Hyderabad. At five of these facilities, we manufacture drug substances.

• The sixth facility is well-equipped to manufacture both drug products and drug substances. Company operate a Kilo Lab facility at their R&D centre in Hyderabad.

• Investment in R&D and manufacturing facilities enables company to expand their product portfolio, technical capabilities, geographic reach and manufacturing capacity.

6.Management Guidance

  • The formulations segment is going to be the new growth engine while the synthesis and ingredients businesses are expected to continue to grow.
  • Continue to undertake Brown Field Capex programme for Capacity addition in line with strong Order Book visibility and business outlook.
  • Doubling FDF capacity by FY22.
    The company incurred a capex of INR 230 crores in FY20, and has guided for a capex in excess of INR 300 crores for FY21. It has upped the initial guidance from INR 250 crores for FY21 based on the robust order book for its products.
  • All the capex opportunities are brownfield in nature and have a 1.5-2x revenue potential. These capex programs will have a shorter payback period and are expected to be a ROCE accretive.

References:

     Laurus Lab Annual Report 2019-20 , 2018-19, 2017-Investor Presentation Q1FY21, Q4FY20, Q4FY19, Conference Call Transcript Q1FY21, Q4FY20, Q4FY19, Q4FY18

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Shuchi Nahar
Shuchi is NISM Certified Equity Research Analyst, CFA - Level 1, a student of Law and Finance, and an aspiring CS.
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