Laurus Labs Limited : In A Healthy Space

Laurus Labs Limited : In A Healthy Space

India is considered to be one of the largest providers of quality, affordable generic drugs globally and Laurus Labs occupies a position of prime significance in this segment

Laurus Labs Limited is an India-based manufacturer of active pharmaceutical ingredients (APIs) for anti-etrovirals (ARVs), oncology, cardiovascular, anti-diabetics, anti-asthma and gastroenterology. The company develops and manufactures oral solid formulations, provides contract research and manufacturing services (CRAMS) and contract development and manufacturing organisation (CDMO) to the global pharmaceutical companies. It also produces specialty ingredients for nutraceuticals, dietary supplements and cosmeceuticals. 

The company’s business units include generics APIs, generics finished dosage forms (FDFs), and synthesis and ingredients. Its generics APIs business comprises the development, manufacture and sale of APIs and advanced intermediates in the ARV, Hepatitis C, oncology, cardiovascular, anti-diabetic, anti-asthmatic, gastroenterology and ophthalmic therapeutic areas. The generics FDFs is engaged in developing and manufacturing oral solid formulations. 

Industry Overview 

The pharmaceutical industry is considered to be one of the fastest growing industries in the world and is also the biggest contributor to world economy. Due to increased overall use of treatments and costlier specialty therapies, global spending on prescription medicines is expected to increase between 2-5 per cent annually over a period of next five years from USD 955 billion reported for the previous year and may exceed USD 1.1 trillion overall by 2024. Despite this, the industry may experience sluggish growth for the next five years compared to the previous five years because of the corona virus pandemic’s impact.

India is considered to be one of the largest providers of quality, affordable generic drugs globally and Indian pharmaceutical companies have been playing a vital role in improving access to affordable healthcare around the world. India exports medicines to 205 countries and vaccines to over 150 countries. Owing to panic buying of medicines for chronic ailments such as cardiac and diabetes amid a nationwide lockdown to combat the pandemic, March 2020 pharmaceutical sales grew by 8.9 YoY to Rs 11,856 crore. For the quarter ended March 2020, pharmaceutical sales registered a growth of 9.7 per cent YoY.

Impact of Pandemic

The sudden spread of the virus led to a global healthcare crisis leading to an unprecedented response from people, communities and systems. The pharmaceutical and life science industry has been put into a spotlight during this ongoing crisis period and has joined the fight against the virus not only by providing support through the development of treatments and vaccines for the virus but also in various other ways. Most pharmaceutical manufacturing companies have been monitoring their supply chains and have reiterated their commitment to uninterrupted supply with minimum disruptions. However, the pandemic has led to a sharp economic downturn which could negatively impact pharmaceutical spending in some countries. 

As a result of the pandemic, a sudden surge in cough and cold medicines has been seen boosting volumes but on the other hand, travel and tourism restrictions has caused decline in medical tourism.

During this period, Laurus Labs has been operating at good capacity and following all necessary protocols related to hygiene and health check of workers as well as facilities. The company also extended its support to the governments of Telangana and Andhra Pradesh by donating 1 lakh tablets of Hydroxychloroquine (HCQ) IP 200 mg and through other initiatives as well. 

Financials

From the financial point of view, net sales of the company for Q4FY20 were Rs 839.14 crore as compared to net sales of Q4FY19 at Rs 635.16 crore. Thus, there is a 32.11 per cent increase in net sales of Q4FY20 as compared to Q4FY19. For Q4FY20 the PBDT stood at Rs 172.79 crore, which is an increase of 79.91 per cent as compared to Rs 96.04 crore for Q4FY19. For Q4FY20 the company recorded a profit of Rs 110.15 crore, a significant increase compared to the profit of Rs 43.18 crore in the same quarter of the previous fiscal year.

On the annual front, for FY20 the company recorded net sales of Rs 2,831.72 crore which is a 23.55 per cent increase when compared to net sales of Rs 2,291.92 crore for FY19. The PBDT for FY20 stood at Rs 480.88 crore as against Rs 283.94 crore FY18. For FY20 there can be seen an increase of 69.36 per cent in PBDT as against that of FY19. Also, the net profit is recorded at Rs 255.27 crore, which is a positive increase of 172.25 per cent compared to the net profit of Rs 93.76 crore for FY19. 

Outlook

The Indian pharmaceutical industry is assumed to grow by 10–13 per cent by 2021 on the basis of healthy demand from the domestic market provided there is an increase in spending on healthcare along with improved access. Laurus Labs currently supplies APIs to nine major pharmaceutical companies and going forward increased adoption of healthcare services will benefit the API market, further benefitting the company’s growth. To support its growth in the generics segment, the company intends to file 8-10 ANDAs every year with an increased focus on various therapeutic areas of antiretroviral (ARV), CVS, CNS and PPIs. Currently it has filed 26 ANDAs with USFDA and six final approvals and five tentative approvals and has also completed two product validations.

Contract research and manufacturing services (CRAMS) segment is one of the fastest growing sectors in the pharmaceutical and biotechnology industry as the pharmaceutical industry uses outsourcing services from providers in the form of contract research organisations (CROs) and contract manufacturing organisations (CMOs). Other than offering assistance at any stage of the product lifecycle, Laurus Labs also offers support for three broad service segments, namely, drug substance, analytical development and product development. It also has a presence in the US through Laurus Synthesis Inc. CRAMS remains a valuable segment for the company with growing global demand for outsourcing to India. 

The company believes that its forward integration capabilities to supply finished dosages will allow it to expand margins. Going forward, apart from being well-positioned in the markets, Laurus Labs has a strong product portfolio and solid support from its API division. Further, the formulations business led by low middle income countries (LMIC) tenders has been able to deliver growth in a short time. Backed by strong order visibility in formulations, Laurus Labs is expected to sustain a positive growth momentum for FY21 as well. Hence, we recommend investor-readers to HOLD this scrip.

Rate this article:
No rating
Comments are only visible to subscribers.

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR