Informist, Saturday, Nov. 9, 2024

By Narayana Krishna and Gopika Balasubramanium

HYDERABAD/MUMBAI – Even as other pharmaceutical companies gear up to grab their share of the pie of Glucagon-like peptide, or GLP-1, products, Divi's Laboratories Ltd. on Saturday said it is already working on several products in this category and that demand for this segment is very high. In a post-earnings conference call, Divi's Labs management said the company is currently supplying fragments of the GLP-1 category products and it is ready to provide end-to-end solutions to customers.

However, the management said it will work only as per customer requirements as a custom synthesis maker for the GLP-1 category products and is not interested to get into generic manufacturing. GLP-1 products help control blood sugar and insulin levels and are mainly used in diabetic and weight loss treatments. A large chunk of product patents is set to expire 2030 onwards and generic drug players are getting ready with their products to grab the opportunity.

Divi's Labs is one of the key suppliers of bulk drugs and intermediates to the top-20 Big Pharma companies across the globe. The company is also known for its chemistry skills and quality peptide offerings.

The management said several products from its customers are in phase-II and phase-III trials and once the approval process begins, more clarity on this segment will emerge. The company has enough capacity to cater to the upcoming demand in GLP-1 segment, the management said.

CUSTOM SYNTHESIS BOOST

Divi's Labs posted a healthy growth in earnings in Jul-Sept, on the back of the custom synthesis business, the management said. The company's net profit for the quarter was INR 5.18 billion and revenue INR 23.02 billion. The net profit was up 51.5% on year and revenue up 23.2% on year. Both the metrics were above the Street's estimates.

The company's management said expansion in customer base, addition of new clients, and enhanced products helped the growth. While 51% of total sales of the company comes from this segment, generic active pharmaceutical ingredients account for the remaining 49% of the total sales. The company said customer interest in the company's custom synthesis products is rising on the back of quality and enhanced capacity.

However, the company's generic active pharmaceutical ingredients, also known as the bulk drugs segment, is facing pricing pressure across regions, and it may take 6-12 months for the prices to stabilise.

The company said raw material costs have stabilised in the last six months, and it does not expect any rise in the near future. However, the company said the supply chain is becoming a major challenge due to continued disruptions in the Red Sea area. The company is diverting its shipments via South Africa to avoid any loss, the management said. To address the supply chain challenges and delays, Divi's Labs is planning to advance its shipments from Oct-Dec, the management said.

KAKINADA PLANT

Divi's Labs said commercial operations of its greenfield plant at Kakinada in Andhra Pradesh are to begin from December, and it will ramp up the production in phases. The company has spent INR 11.81 billion on this project, as on Sept. 30. It expects INR 10 billion more capital expenditure in Oct-Mar, taking the total capex in 2024-25 (Apr-Mar) to INR 16 billion. The Oct-Mar capex includes further spending on Kakinada unit and general capex on other locations, the company said.

As on Sept. 30, Divi's Labs had a cash balance of INR 36.02 billion. On Friday, shares of the company closed at INR 5,949.85 on the National Stock Exchange, down 0.2% from the previous day. End

Edited by Ashish Shirke

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