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Informist, Tuesday, Aug. 12, 2025

By Gopika Balasubramanium and Narayana Krishna

MUMBAI/HYDERABAD – Alkem Laboratories Ltd. is planning to focus more on non-US markets to de-risk the overall business and increase its penetration into new geographies, the company's management said in a post-earnings analyst call. Apart from business expansion, the threats, such as new tariffs in the US and intense competition leading to pricing erosion, are among the reasons the company is seeking business opportunities in other markets, according to management.

While India accounted for nearly 70% of the company's consolidated sales for the June quarter, the US and non-US markets contributed nearly 20% and 10%, respectively. Alkem Laboratories said the company has increased its new product filings for approval in several non-US markets as part of the strategy to enter new geographies. 

The pharmaceutical company reported a consolidated net profit of INR 6.64 billion on revenues of INR 33.71 billion. Both net profit and revenue were above the analysts' estimates. The company's shares rose after the results and closed 6.3% higher at INR 5,149 on the National Stock Exchange.

"We are strategically accelerating our focus on the non-US business segment by strengthening our presence in high-potential non-US markets as well and capturing new opportunities that align with our long-term growth ambitions," the company management said. The company said its focus on strengthening its presence in non-US markets to push up its spending on research and development. 

Alkem guided that the capital investment for research and development will be 4.5-5.5% of sales for 2025-26 (Apr-Mar). The company said its research and development spending will be more towards the December and March quarters due to a higher number of filings.  

"And that is why I am saying some of the coming quarters, we may have a higher expense in R&D because if you see our filing strength as well, I think it is loaded more towards, you know, in Q4 (Jan-Mar) we do the maximum filings," Alkem said. The company said this has been the cycle it has followed in terms of research and development-related expenditure.

This is after being mindful of its plans to scale up operations in geographies other than the US, where it deems to increase the number of filings for drug applications, taking the research spending higher. "We are also focusing on growing our non-US business, so there are a lot of filings that we are doing in the non-US markets as well... products that we are working on in our R&D (research and development)," the company said. 

Consequently, the company sees its margins to be impacted due to higher expenses, especially towards the last two quarters. "So, in the light of those expenses that we foresee in Q3 or Q4 (Oct-Dec or Jan-Mar), because of that, our margins may look, and that's why we are staying put with the guidance for the overall year," the company said. For FY26, the company has guided for a gross margin of 64% and its earnings before interest, tax, depreciation, and appreciation margin at 19-20%.  

For the quarter ended June, the company said its margins benefited from lower prices of active pharmaceutical ingredients in the US. "... there was a positive impact on the amount of lower API prices," Alkem said. The company also said that robust growth in its India business boosted margins. For the quarter under review, the company's EBITDA margin expanded to 21.9% from 20.1% a year ago. The company said its margins will likely improve in the coming years, given the scale-up of its business it has planned.  

Alkem MedTech Pvt. Ltd. contributed just INR 25 million to the company's overall revenues. "This quarter marks the commencement of revenue generation from our Alchem MedTech initiative that we had started and we are really confident of scaling up this business," Alkem said.  It said the company may get a revenue of INR 400 million-INR 500 million in FY26 on an annual run rate basis. The company sees Alkem MedTech to break even on EBITDA basis in FY28. The company will take steps to scale up this business "quarter by quarter".  

Alkem said its contract development and manufacturing unit will be operational from Oct-Dec and sees revenue flowing from the unit from the same quarter. "We do get some marginal revenue even now, but that's a very small-scale lab work that happens on that side," the company said. 

The company said it sees a big growth potential for the chronic therapies market. "As and when we see, we are pretty open to looking at any acquisition target, more so in chronic space. If it comes to the table, we would definitely look at getting it at the right price," the company said. The company currently has chronic therapy products which involve diabetes, neurology, dermatology, and urology.

The company said it has enough cash reserves and will not limit itself on the size of a business it would acquire. "No, I don't think we are limiting ourselves to, you know, ticket size more to say we have a good amount of cash on the balance sheet," company executives said. As of Jun. 30, the company's cash reserves stood at INR 48.7 billion.

As far as tariffs are concerned, the company said it will pass on any impact due to tariffs to the end user. The company also said that tariff-related nitti-gritties are unlikely to deter it from ramping up operations in the US. "So I think our focus on non-US markets, you know, would continue strong irrespective of whether tariffs come or they don't come," the company said.  End

Edited by Saji George Titus

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