Torrent Pharma Q3 2022 Concall Highlights

  • Revenues were ₹2108 Cr (6% growth YoY), EBITDA was ₹585 Cr (5% decline YoY), PAT was ₹249 Cr (16% decline YoY). Profitability was affected due to higher than anticipated price erosion in the US market and under absorption of certain amounts of plant overheads. 
  • They have rolled out cost optimization initiatives and are confident of reviving the margins in a short period of time. 
  • The Board has recommended an interim dividend of ₹25 per share.
  • India business revenues were at ₹1072 Cr (15% growth). Growth was driven by top brands in all their focus therapies. Of the 15% growth, volume accounts for 4%, price for 8% and new products account for 3%.
  • PCPM for the quarter was ₹9.9 lakhs with an MR strength of 3600. They continue to focus on brand building and specialty approach and have 16 brands in the top 500 of the Indian Pharma market. They have 11 brands with more than ₹100 Cr sales.
  • Sales in Brazil were ₹182 Cr (5% growth YoY). During the quarter, they launched a new division in the CNS segment. They have also launched Rivaroxaban which has a market size of BRL 800 million which is one of the largest markets they would be participating in.
  • Germany sales were ₹237 Cr (10% decline YoY). The market in Germany continues to be muted in calendar year 2021 and witnessed 0% growth. The tender segment is also witnessing an increased amount of competition.
  • US sales were ₹235 Cr (20% decline YoY). Sales are lower due to price erosion in base business and lack of new approvals due to pending reinspection of facilities.
  • The manufacturing facility at Levittown was inspected by the USFDA in December 2021. They did not give any observations.
  • For the US business – There is an increase in logistics cost by 1%. Another 1% impact is because there were certain failures to supply provisions made for the US business, where they had contracts on one of the products which they decided to discontinue. The manufactucturing volumes were also lower this quarter which led to under absorption of overheads and caused another 1% impact. So overall there was a 3% one-off impact on margins this quarter.
  • The share of the US business in revenues will continue to decline until they get new approvals. They are expecting a few approvals in Q4. The biggest among them is Dapsone which is a dermatology product with a market size of roughly $135 million with 2 players.
  • They will need the plant approval to see any significant growth in US business because they have more than 50 ANDAs waiting for approval, of which 27 have no pending issues and are just waiting for facility clearance.
  • They had 10 new launches in the India business in Q3 and they have planned another 10 launches in Q4. Of that, 2 have already been launched – Digestron and Molnupiravir.
  • US price erosion is expected to persist in the next quarter. For the next year, they would be taking price increases in branded generics. The portfolio consists of about 65% branded generics, so that should offset the price erosion and increase margins. They will also be launching new products which will have better margins.
  • There isn’t much change in RM prices compared to Q2, but on a full year basis there has been a significant increase in RM prices – both API and inactive ingredients. Some inactives have gone up almost 50%
  • They are more focused on the chronic segment and the dependency on China is low for those segments. Most of the price increases have been on the acute side, not the chronic side. Overall, RM prices have impacted gross margin by around 0.8-1%.
  • They are looking to increase their field strength in the coming quarter. Overall, they will be looking to add 400 to 500 reps to the field force. They will be promoting existing product segments like cardiovascular, CNS, gastrointestinal, etc.
  • The reason for price erosion in the US was because of the entry of new players into 2 main products – Nebivolol and Olmesartan
  • They have backup manufacturing sites for certain key products. Revlimid will not be manufactured at Torrent.
  • In India business, the organized pharmacy players both online and offline do not account for more than 5%. It could be higher in chronic therapies because chronic purchases on e-pharmacies tend to be higher.
  • They will be launching 3 oncology products in the next year.

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