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#LaurusLabs Q1 FY23 concall highlights 💊💊

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1. Revenue for the quarter was ₹1539 Cr (20% growth YoY). The EBITDA margin was 29.5% for the quarter despite inflationary pressures.

2. They saw significant growth in their CDMO business

(196% growth YoY, 60% growth QoQ) which helped offset the muted performance of the ARV business.

3. RM prices remain elevated due to the geopolitical situation and the Covid lockdown in China. But they are expecting gradual decrease in RM prices during the year

4. They are confident of achieving the aspirational target of $1 billion in revenue which will be supported by several approvals during the year.

5. With respect to their ARV business in LMIC markets - the demand was soft but the major issue is that the pricing has been largely

depressed and has been at record low levels for a while. However, they are confident of maintaining their leadership position in both APIs and formulations.

6. Their performance in the developed markets was stable. They saw an increase in the volumes

but it was more than offset by the pricing pressure.

7. The ARV APIs contributed to 25% of sales and ARV FDFs contributed to 17% of sales. So put together, the ARV business contributed to 42% of sales during the quarter.

8. They continue to invest in their non-ARV FDF infrastructure. They have commissioned the brownfield expansion at Unit 2 taking their total capacity to 10 billion units. The facility has been qualified and will be fully utilized by the end of the calendar year.

9. They have also commissioned their sterile R&D lab and have started working on a few priority projects.

10. They have the largest high potency API capacity in the country and they continue to add capacities. They are seeing good uptake in oncology APIs. Their aim is to

strengthen their global leadership in onco APIs for not only generics but also innovative molecules.

11. In the non-ARV non-onco API space, they have filed 1 DMF during the year and plan to file more in the current financial year. They have very good order book visibility for

these products and are increasing manufacturing capacity accordingly.

12. Their capex for the Synthesis business is progressing as per expectations. This includes the greenfield investment for a dedicated R&D centre for the synthesis business and 3 manufacturing units at Vizag.

The facilities will have capabilities to manufacture steriles, hormones, high potent molecules and other large volume products in animal health.

13. They have zeroed in another land parcel for a greenfield site for a large scale fermentation facility.

They plan to add about 600,000 to 1,000,000 liters capacity at the new site.

14. They plan to invest about ₹2000 crores for capex in FY23 and FY24. Of this, they have invested about ₹209 crores in Q1 FY23. About 40-50% of the total capex will be in the synthesis business and

the remaining will be non-ARV APIs and formulations or backward integration.

15. In the Synthesis business, they had signed a multi-year multi-product contract with a global life sciences company and are building a dedicated facility to cater to that. They are currently

developing the products which will go to that manufacturing site. They also have 1 NCE molecule undergoing validation at an existing site. The revenues from this contract are not significant now, but they will be when the plant has been qualified -

which is expected to happen in the second half of FY24.

16. They have not just added significant capacities but also significant capabilities with their capex. They can now do hydrogenation at scale, cryogenic reactions at scale, biocatalysis at scale and

continuous flow reactions at scale. That is why they can attract new customers and insource several products at the late clinical stage or commercial stage

17. In the CDMO business, they currently have 7 commercial molecules - 4 intermediates and 3 APIs. They also have a very

good number of products in the late stage clinical trials.

18. Their fermentation capacities will be for synthetic biology, alternate foods and recombinant proteins. So they are not necessarily competing with China in fermentation of steroids, vitamins or large molecules.

19. They are currently supplying interim capacities to the animal health company from Unit 4. The commercial supply will begin toward the end of FY24 when the dedicated facility comes online.

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