Key takeaways:
Gland Pharma
Gland’s export shipments worth USD31 million in July 2022 have doubled from January-April 2022 run-rate of USD15-16 million, implying that the sequential recovery in Gland remains on track. IIFL Capital Services’ current Q2FY23 estimates factor-in ~18% QoQ growth in Gland’s overall revenue from Rs8.6 billion to Rs10.1 billion. Ramp-up in July 2022 exports was driven by products such as Enoxaparin, Daptomycin, Ketorolac, Levothyroxine and Paclitaxel which accounted for ~60% of the increase in shipments versus January-April 2022 levels.
Gland has had nil shipments of Micafungin from April 2022 to July 2022, which will continue to present tough comparables as this product likely contributed revenue of USD55 million in FY22 (USD15/19/16/7 million over Q1-Q4FY22). Micafungin will likely normalize to USD10 million quarterly revenue run-rate only from Q3FY23 onwards, given the inventory rationalization being done in the market.
JB Pharma
JB Pharma’s exports business has shown strong traction over the past two quarters, growing 9/28% YoY in Q4FY22/Q1FY23, on the back of robust growth in its CMO business (up 38/108% YoY in Q4/Q1). JB’s robust traction in the exports business has sustained in July 2022 as well, with export shipments of USD12 million in July 2022 being similar to average monthly run-rate from January to June 2022. On a YoY basis, JB’s export shipments in July 2022 have grown >60%. JB’s CMO export shipments (to customers such as J&J, P&G, Innova, Adcock, Reckitt) have ramped-up from a quarterly run-rate of ~USD5-6 million from Q1-Q3FY22 to ~USD10-11 million in Q4FY22/Q1FY23 and the strong CMO export run-rate has sustained in July 2022 as well. The CMO shipments now account for ~28% of JB’s overall export shipments in CY22 YTD versus ~19% in FY20. Based on July 2022 run-rate and ~29% being the contribution of JB’s first month’s shipments during a quarter, analysts at IIFL Capital Services estimate that JB’s overall export shipments could grow 14% QoQ in Q2FY23 versus their current estimates which have factored-in 3% QoQ decline for JB’s exports business.
Divi’s
Divi’s exported USD27 million worth of Molnupiravir API to Merck in July 2022 vs. ~USD130/110/65 million which it shipped in Q3FY22/Q4FY22/Q1FY23, respectively. While Divi’s management stated during Q1 earnings call that the company has completed all pending orders for Molnupiravir, the exports data still continues to show shipments from Divi’s. In-fact, Molnupiravir accounted for ~39% of Divi’s overall export shipments in July 2022 versus ~27-48% during Q3FY22-Q1FY23.
The key concern of analysts at IIFL Capital Services has been that the company’s base business revenue, ex-Molnupiravir, has been flat for the past five quarters and there was no visible pick-up in the base business for July 2022 as well. Divi’s base business export shipments, exMolnupiravir, was only USD42 million in July 2022 versus USD180-190 million (or monthly run-rate of ~USD60 million) in Q4FY22/Q1FY23.
On the base business products, July 2022 export shipments run-rate was significantly below Jan/Apr-22 run-rate for products such as Valsartan, Gabapentin, Losartan, Raltegravir and Sitagliptin which was partly offset by better traction in some products such as Levetiracetam and Dextromethorphan. While Divi’s base business continues to show weak trends, IIFL Capital Services’ current estimates factor-in ~14% revenue CAGR (ex-Molnupiravir) over FY22-25 on which they see downside risks.
Ipca
Ipca’s export shipments were USD27 million in July 2022, down ~13% from USD30-33 million monthly run-rate in Q1FY23. On a YoY basis, Ipca’s exports were flat in July 2022. Moderation in Ipca’s July 2022 shipments versus Q1FY23 levels was driven by lower shipments for Losartan, Artemether, Allopurinol and Amlodipine which was partly offset by better traction in products such as Paracetamol, Nemozole and Artesunate.
Based on July 2022 run-rate and 31-32% being the contribution of Ipca’s first month’s shipments during a quarter, analysts at IIFL Capital Services estimate that Ipca’s overall export shipments could decline 8% QoQ (flat YoY) in Q2FY23 versus their current estimates which have factored-in flat QoQ (8% YoY) growth for Ipca’s exports business.
Laurus
Laurus exported Paxlovid intermediates worth USD22 million in July 2022 versus USD58 million in Q1FY23 and Paxlovid accounted for ~60% of Laurus’ overall export shipments in July 2022 versus ~45% in Q1FY23.
While Paxlovid has aided Laurus’ exports sales recently, company’s base business (ex-Paxlovid) has been muted for the past four months. Laurus’ base business export shipments, ex-Paxlovid, have averaged only USD20-25 million monthly run-rate from April 2022 to July 2022 versus USD30-35 million monthly run-rate from October 2021 to March 2022. Weakness in Laurus’ base exports business has been driven by limited shipments for all its key ARV products, including DTG/Lamivudine/Efavirenz combinations.
Paxlovid is currently masking the weakness in Laurus’ base business, similar to the way Molnupiravir offset the base business pressures for Divi’s in FY22. This benefit might not be available to Laurus 2-3 quarters down the line as Paxlovid shipments will start moderating at some point in time, particularly as the US government stops buying COVID products and transitions distribution of these drugs to private commercial market, post which end-market demand of the product will become the critical factor for further supplies.
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