Jubilant Pharmova Limited — Q1 FY23 earnings call

Call held 2 Aug 2022

Management summary

Jubilant Pharmova faced a challenging Q1 FY23, primarily driven by a sharp decline in the Generics business and the normalization of COVID-related revenues in the CDMO Sterile Injectables segment. While Specialty Pharmaceuticals and CRDMO showed robust growth, the overall profitability was weighed down by US pricing pressure, Sartan price erosion, and regulatory challenges at the Roorkee plant. Management is focused on a turnaround strategy involving new product launches in Radiopharma and a breakeven target for the Generics business by the end of FY23.

Highlights

  • Revenue stood at ₹1,452 Crore, a 11.2% decline YoY from ₹1,635 Crore.

  • EBITDA fell 46.2% YoY to ₹204 Crore, with margins contracting to 14.0% from 23.2%.

  • PAT dropped significantly to ₹47 Crore compared to ₹160 Crore in Q1 FY22.

  • Generics segment reported a negative EBITDA of ₹70 Crore on revenue of ₹178 Crore.

  • Specialty Pharmaceuticals revenue grew 14.2% YoY to ₹722 Crore with EBITDA margins improving to 16.2%.

  • CRDMO segment witnessed strong growth with revenue at ₹280 Crore, up 45% YoY.

  • CDMO Sterile Injectables revenue fell to ₹263 Crore due to lower COVID-related deals (₹70 Cr vs ₹220 Cr YoY).

  • Management announced a significant FY23 Capex guidance of ₹700-750 Crore.

Concerns

  • USFDA Regulatory Action (Roorkee Plant)

  • US Generics Pricing Pressure

Key financials

  1. Revenue ₹1,452 Cr -11.2%YoY
  2. EBITDA Margin 14% -39.7%YoY
  3. PAT ₹47 Cr -70.6%YoY
  4. EPS ₹2.96 -70.7%YoY
  5. Net Debt ₹1,951 Cr -0.15%YoY

What they filed

Q1 FY27: revenue up 12.8%, net profit up 25.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue61 56 61 60 66 +8%67 +20%70 +16%67 +13%
EBITDA10 10 11 10 12 +18%12 +22%15 +33%12 +17%
Net profit11 5 14 6 -6 −161%7 +25%57 +321%7 +26%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,443 Cr Total
  • Specialty Pharmaceuticals ₹722 Cr 50.0%
  • CRDMO ₹280 Cr 19.4%
  • CDMO Sterile Injectables ₹263 Cr 18.2%
  • Generics ₹178 Cr 12.3%

Guidance & targets

Capex

  • Capital Expenditure Capex · FY23 · High confidence ₹700-750 crores
    We expect to incur capex of around Rs 700-750 Crore in FY23 primarily towards expansion in CMO business and enhancement of Drug Discovery Services capabilities and capacities.

    — Arun Sharma, CFO

Other

  • Product Development Expenditure Other · FY23 · High confidence ₹250-300 crores
    In addition, we expect product development expenditure of Rs 250-300 Crore.

    — Arun Sharma, CFO

Profitability

  • Radiopharmacy Breakeven Profitability · FY24 · High confidence Breakeven
    we have been indicating that we expect breakeven in FY24 and if you look at the numbers and the trend, we are on track. We are confident that in FY24, the business will be break even.

    — Pramod Yadav, CEO Jubilant Pharma

  • Generics Breakeven Profitability · by end of FY23 · Medium confidence Breakeven
    I will say that there is a very high probability or quite a good chance that by end of this year, it should be breaking even because we are hopeful for the USFDA outcome

    — Pramod Yadav, CEO Jubilant Pharma

Volume

  • Radiopharma Product Launches Volume · FY23-FY24 · High confidence 4 products
    So as of now, we have planned to launch at least 4 products. Probably we are trying, one in FY23 and 3 in FY24

    — Pramod Yadav, CEO Jubilant Pharma

Capacity

  • CRDMO Capacity Addition Capacity · FY24 · Medium confidence 20-25%
    Overall, I would say that in the range of 20% to 25%, it would be the kind of capacity we want to add.

    — Giuliano Perfetti, CEO Jubilant Biosys

Risks & concerns

  • USFDA Regulatory Action (Roorkee Plant)

    high

    The Roorkee facility is under an Import Alert; a recent inspection resulted in 6 observations, with a 3-month wait for the final outcome.

    Both acknowledged

  • US Generics Pricing Pressure

    high

    Intense pricing pressure in the US market and a sharp fall in Sartan prices significantly impacted Generics profitability.

    Management acknowledged

  • COVID Revenue Cliff

    medium

    Significant drop in COVID-related contracts in CDMO Sterile Injectables and nil Remdesivir sales compared to the previous year.

    Management acknowledged

Areas of evasion (2)

  • Specific pharmacy-level profitability metrics
  • Quantifying the exact price reduction in Sartans

Q&A highlights

2 direct
Radiopharmacy Breakeven and Sequential Decline Direct
We are confident that in FY24, the business will be break even... sequentially lower volume in radiopharmaceuticals... was more of a scheduling and really nothing much to read into that.

Investors are closely watching the turnaround of the loss-making radiopharmacy network, which is critical for specialty margin expansion.

Asked by Amit Goela

Generics Turnaround and Revenue Requirements Partial
Since due to the remediation of our volumes were low, now the remediation work is completed, USFDA inspection is over, now, we need to increase the production and get back into the market.

The analyst questioned the feasibility of a quick turnaround given the massive revenue gap (₹700 Cr) needed to reach EBITDA neutrality.

Asked by Nikhil Mathur

FY23 EBITDA Guidance vs Q1 Performance Direct
FY23 will be slightly muted than FY22, but in terms of the quarterly trend... the second half is better than the first half.

Management effectively lowered expectations for FY23 compared to previous guidance of ₹1100-1150 Cr EBITDA, citing a muted first half.

Asked by Tushar Manudhane

2 min read 5 chapters

Detailed narrative

Segment Reorganization and Enhanced Disclosure

Starting Q1 FY23, Jubilant Pharmova reorganized its reporting into four segments: Specialty Pharmaceuticals, CDMO Sterile Injectables, Generics, and CRDMO. This move provides investors with granular EBITDA data for each business line, revealing the stark contrast between the profitable Specialty and CDMO segments and the loss-making Generics business. Management emphasized that this transparency will help track the turnaround progress of individual units.

Generics Segment Faces Perfect Storm

The Generics business reported a revenue of ₹178 Crore, down 59% YoY, and a negative EBITDA of ₹70 Crore. This was driven by a combination of US pricing pressure, a sharp fall in Sartan prices as more players entered the market, and the ongoing Import Alert at the Roorkee plant. Management expects a turnaround by the end of FY23, contingent on a favorable USFDA outcome and shifting production to other CMO sites.

Radiopharmaceuticals Recovery and Specialty Growth

Specialty Pharmaceuticals revenue grew to ₹722 Crore, led by a recovery in Radiopharmaceuticals as pandemic impacts eased. Ruby-Fill installations reached record quarterly highs, and the Radiopharmacy turnaround plan is reportedly on track for FY24 breakeven. The Allergy business also continued to perform strongly, operating at volumes higher than pre-COVID levels.

CDMO Sterile Injectables Normalization

Revenue in the CDMO Sterile Injectables segment fell to ₹263 Crore from ₹373 Crore YoY, primarily due to the reduction in COVID-related deals from ₹220 Crore to ₹70 Crore. Despite the drop, the segment maintains healthy margins (approx. 50% EBITDA margin). Management is investing heavily in this segment, with a significant portion of the ₹700-750 Crore FY23 Capex dedicated to expanding capacity in Spokane and Montreal.

CRDMO Segment Emerges as Growth Driver

The newly formed CRDMO segment, combining Drug Discovery Services and CDMO-API, reported 45% YoY revenue growth to ₹280 Crore. Drug Discovery Services alone grew 34% YoY, driven by robust demand from biotech companies. Management plans to add 20-25% capacity in this segment by FY24 to sustain a 25% annual growth rate, supported by the expansion of the Greater Noida facility.

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