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Domestic markets, new product launches to drive FY22 earnings for Alkem

International business had reported a decline, with most of it coming from the US markets which account for a fourth of overall revenues for Alkem. (Photo: Bloomberg)Premium
International business had reported a decline, with most of it coming from the US markets which account for a fourth of overall revenues for Alkem. (Photo: Bloomberg)

  • The mainstay India business continues to do well, with boost coming from covid-led sales. Analysts say that the company has seen a good pick-up in 1QFY22 sales of vitamins/minerals, antacids, antibiotics, pain relief medicines, among others

MUMBAI: Shares of Alkem Laboratories Ltd have gained about 23% since their March lows and traded near highs seen on Thursday. Gains were largely led by investor confidence in domestic growth. The company had already impressed the Street with the performance of its India business during the March quarter, with sales rising 17.1% year-on-year to Rs1473.2 crore. The domestic market contributes more than two-third to the total business.

International business had reported a decline, with most of it coming from the US markets which account for a fourth of overall revenues for Alkem. Revenue in that market fell 10.4% year-on-year, pulled down by lower sales Ibuprofen--a key product--and inventory write-off. Winter products also clocked tepid sales and new product launches came at the end of the quarter. Market share erosion in some products did not help either.

But things are looking up with a slew of products in the pipeline.

Analysts at Jefferies India Pvt Ltd have said, “US business takes a hit, to recover from hereon led by new product launches".

The company has filed for four abbreviated new drug applications (ANDAs) with the US Food and Drug Administration (FDA). It has received 10 approvals, including three tentative. Overall, it has more than 42 products pending approval from the US FDA.

“Alkem received 19 ANDA approvals but launched only 12 products, which makes us believe that product launch momentum will be healthy next year and that could support growth," said analysts at Jefferies India Pvt Ltd.

The mainstay India business continues to do well, with boost coming from covid-led sales. Analysts say that the company has seen a good pick-up in 1QFY22 sales of vitamins/minerals, antacids, antibiotics, pain relief medicines, among others. While elective surgeries remain subdued but are being compensated by rising patient visits to OPDs. This has been driving prescription flows.

Antibiotics sales have been strong, largely a factor of pneumonia caused by covid-19. The company expects a mid-teens growth for its domestic business in FY22.

Analysts at Motilal Oswal Financial Services Ltd said, “On a high base of FY21, we expect 8% earnings CAGR over FY21-23, led by 11%/14% sales CAGR in the US/domestic formulation segments respectively." They expect this to be led by new launches and better traction in existing products in the US and strong growth in antibiotics, vitamins and minerals, and pain relief drugs in the domestic market.

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