Morepen Labs.

Morepen Labs reported Q2 FY25 revenue of INR 444.71 crores, contributing to a half-year (H1 FY25) revenue of INR 901 crores, a 9% increase YoY. Despite a modest revenue growth, the company achieved significant profitability improvements, with Q2 FY25 EBITDA rising 33% YoY to INR 49 crores and PAT increasing 64% YoY to INR 35 crores. The H1 FY25 EBITDA margin expanded to 11.55%, reflecting a strategic shift towards higher-margin products and markets, moving away from low-yielding business segments.

The company emphasized its 'Morepen 2.0' strategy, marked by a successful QIP raising INR 200 crores. Of this, INR 123 crores are earmarked for capex and INR 46 crores for working capital, with INR 137 crores remaining as of September 30, 2024. The overall project is targeted for completion by end of FY26 (18-24 months). This strategic pivot aims to transform Morepen from a predominantly B2B API player to a B2C consumer-facing and branded business, focusing on higher gross and EBITDA margins.

The medical devices segment contributed INR 271 crores to H1 FY25 revenue, representing 30% of the total, with a target to increase this to 40% in the next five years. The installed base of glucometers grew to 13 million customers, and strip consumption increased by 10% in H1 FY25 to 22.1 crores strips. New initiatives include launching a Bluetooth meter with a dedicated app and starting production of nebulizers, expected to add INR 25-30 crores in revenue. The company has also secured USFDA and Health Canada registrations, enabling exports to regulated markets like the US and Canada, and is actively exploring international opportunities at events like MEDICA in Germany.

In the API segment, Morepen is strategically reducing exposure to low-yielding domestic and South American markets, leading to a 9% decline in India and 22% in South America, while focusing on high-value drugs and exports. Pharma exports grew 21% in H1 FY25 to INR 337 crores, with Europe showing a 60% increase and the US a 5% increase. The company has achieved market leadership in key anti-allergy drugs like Fexofinadine (market share up from 22% to 31%), Loratadine (64% to 69%), Desloratadine (42% to 49%), and Montelukast (44% to 70%).

Morepen is expanding its API capacity from 400 KL to 600 KL, with 50 KL already implemented. New formulation facilities are installed with a capacity of 1.2 billion dosages (720 million tablets, 300 million capsules), with validation batches underway. The company has added three new products to its API basket in Q2: Resmetirom (for non-alcoholic fatty liver), Bempedoic acid (cholesterol reducer), and Bilastine (anti-allergy). These new molecules, along with existing diabetic portfolio products, are expected to drive significant future growth, with their contribution increasing to 13.6% in H1 FY25 from 10% earlier.

The management articulated an ambitious long-term vision to achieve INR 5,000 crores in top-line revenue by 2030, supported by a 20% CAGR and a 10% PAT margin. They also target a 15% EBITDA margin in the next three years, increasing to 17-18% in five years. A key strategic move is the planned demerger of the medical devices business into a separate subsidiary, with regulatory processes expected to conclude by Q1 next fiscal, aiming to unlock significant shareholder value and provide a clearer growth path for the consumer-facing segment.