Analyst Concall
Divi's Labs says "sky is the limit" for GLP-1 opportunity
This story was originally published at 17:43 IST on 3 February 2025
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--Divi's Labs: Engaged with global clients on GLP-1 opportunity
--Divi's Labs: Investing actively on GLP-1 molecules
--Divi's Labs: Have enough opportunities to drive custom synthesis business
--Divi's Labs: Upcoming patent expiries to provide growth in generics
--Divi's Labs: Capacity expansion yielding results
--Divi's Labs: Customer enquiries increasing as capacity has risen
--Divi's Labs:Total amount spent on Kakinada unit INR 13.40 bln as of Dec 31
--Divi's Labs: Kakinada unit to help co in backward integration of inputs
--Divi's Labs: Kakinada unit phase 1 started making key starting materials
--Divi's Labs: Logistics issues in Red Sea were a challenge in Oct-Dec
--Divi's Labs: US Biosecure Act generating new opportunities
--Divi's Labs: No need to worry about US tariffs as of now
--CONTEXT: Comments by Divi's Labs' management in post-earnings analyst call
By Narayana Krishna and Akshita Kumar
HYDERABAD/MUMBAI - Divi's Laboratories Ltd. Monday said "sky is the limit" for the company in terms of grabbing the upcoming opportunities in GLP-1, or glucagon like peptide, products. In a post-earnings conference call for the December quarter, the company's management said it was engaged with its global clients to understand and prepare to meet their requirements in this space. "We make our own resins. We make our own building blocks. We make our own protected amino acids and that's why we have a much more edge over working with others. So I would say in this GLP-1 right now the way things are looking, sky is the limit," Divi's Labs management said.
GLP-1 has several products in its category and helps to regulate the blood glucose and insulin in the human body and is used to treat diabetic and obesity conditions. As several patents in this category are set to expire in 2026, pharmaceutical companies across the globe are getting ready with their respective versions of the products.
The company's management said the company is working with global clients to supply bulk drugs, fragments, and peptide blocks as per their product requirements. The company is making required investments to meet the needs of GLP-1 customers.
Divi's Labs has a global customer base in the US and Europe, including the top-20 customers of the pharmaceutical industry in the world. It supplies custom synthesis, nutraceuticals, and generic bulk drugs to the customers and GLP-1 will be the big opportunity in the generics space.
The company said growth in the custom synthesis business helped growth in Oct-Dec despite challenges like logistic issues in Red Sea. Divi's Labs Monday reported a net profit of INR 5.94 billion for Oct-Dec, up 66% on year, beating the analysts' estimates. The net profit growth is higher than the last two quarters and much higher than the analysts of INR 4.98 billion. The company's revenue for the quarter rose 27% on year to INR 22.97 billion led by robust growth across all business segments.
Divi's Labs management said the custom synthesis business remains highly dynamic and the company is excited about the new opportunities it presents. "Our longstanding relationship with customers combined with our technological expertise positions us uniquely in this space. We are witnessing a rise in customer engagement reflected in an increased number of RFPs (request for proposals) and on-site visits," the management said.
The management said the benefits of the investments and capacity expansions are becoming more evident, reinforcing its position as a trusted partner for complex, high-value and sustainable chemistry solutions. "We are also actively involved in multiple new projects at different stages of the product lifecycle and will continue collaborating closely with customers to develop innovative solutions tailored to their evolving needs," the management said.
Divi's Labs said upcoming patent expiry in generics space are expected to provide enough growth opportunities going forward, and the company wants to get 50% of its revenue from generics space. The company supplies generic bulk drugs to large generic pharmaceutical manufacturers across Europe and the US. The company said capacity expansion in its units yielding good results as the customer visits and enquiries have increased in recent quarters.
KAKINADA UPDATE
Divi's Laboratories has started operations at its greenfield manufacturing facility at Kakinada, which the company named as Unit-III from Jan 6. While part of the phase-I just began production, the company expects full scale production of the unit in the next six months.
The company is planning to make key starting materials at the Kakinada plant and has already shifted some of such products for initial trial runs of the facility. Divi's Labs has spent INR 13.40 billion on Kakinada unit as of Dec. 31. The company plans to develop the facility as key facility for backward integration of its raw materials.
Divi's Labs said there was a structural change in margins as the new issues such as logistics challenges in the Red Sea area, increased regulatory costs and operational costs have put pressure on margins.
The company said the developments such as Biosecure Act would provide new opportunities and that it was not worried about the possible imposition of new tariffs under the new US President Donald Trump's regime as of now. On Monday, shares of the company ended at INR 5,884.10 on the National Stock Exchange, up 4.7% from its previous close. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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