Despite a mixed performance in the financial year (FY) 2019, on the back of rising raw material prices and subdued business segment performance, analysts remain positive on the growth prospects of Alkem Laboratories. This leading pharmaceutical company has been ranked, the number one anti-infective company for over 10 years. It was the sixth largest pharmaceutical company in India in terms of domestic sales for the fiscal year 2018. The company markets its high-quality branded generics, generic drugs, active pharmaceutical ingredients (APIs) in India and over 50 countries. Today, it holds a comprehensive portfolio of over 750 brands, covering all major therapeutic segments coupled with a robust pan India sales and distribution network.
Alkem’s management indicated that beginning of FY19, it streamlined the company’s distribution process, which led to the shifting of some of its domestic sales between quarters, which was normalised by year end. In FY19, its domestic formulations standing at Rs4,874.2 crore saw a single digit growth of nine per cent Y-o-Y, due to FDC ban, a relatively weak anti-infective season and muted trade generics. However, the company’s US business sales increased to 39 per cent Y-o-Y in FY19 standing at Rs1,896.7 crore, driven by new product launches and market share growth in existing products.
The US business being the key focus and second-largest market, contributed 26 per cent towards revenue share. “We expect a 13 per cent revenue CAGR over FY19-21 in its domestic formulations, backed by better productivity, volume growth, the rising chronic share, its strong marketing network and product launches,” said an analyst at Anandrathi share and stock brokers. The management cited that the company grew 14.3 per cent Y-o-Y, as compared to Indian pharmaceutical market’s growth of 10.5 per cent. In the chronic business, Alkem Laboratories continues to spear ahead of the market growth rate, thereby improving market share and rankings in therapy segments of neuro, CNS, anti diabetic, cardiac and derma.
This was led due to effective sales and marketing strategies. For FY19, the company filed 23 abbreviated new drug application with the US FDA and received 21 approvals (including six tentative approval). With that, a lot will depend on the company’s ability to get traction both in India as well as abroad for its new launches. Despite subdued performance in FY19, many brokerages remain positive on the company prospective as they believe that the domestic business is expected to recover on a softer base of FY19. “We expect Alkem to return to normal business margins of 16-16.5 per cent in FY20E. Although it is unlikely to repeat its US performance due to incremental competition, we do believe a 10 per cent + Y-o-Y growth is achievable owing to 8-10 yearly launches,” said an analyst at HDFC securities.
