Laurus Labs Retains $1-Billion Revenue Target For FY23 Despite Cost, Supply Issues

Laurus Labs Ltd. expects to meet $1-billion revenue target in FY23 despite raw material pricing pressures and supply chain disruptions that plague the pharma sector.

To achieve the revenue target, a lot of groundwork done in FY21 and FY22 has set the base for growth in FY23, Satyanarayana Chava, founder and chief operating officer at Laurus Labs, told BloombergQuint's Niraj Shah. "We developed more products, added more clients, created more capacity, and got more approvals."

FY23 Ebidta And ROCE Targets

Contract development and manufacturing organisation or CDMO revenues were doubled over a year earlier in the fourth quarter of FY22, said Chava.

However, margins were lower (27.8% versus 33.4%) as solvent, power and fuel costs went up. And there was stress on pricing for active pharmaceutical ingredients or APIs and formulations, he said.

While the company was confident of 30% Ebidta margins—FY22 Ebidta was around 28%.

"In the coming quarters, they will move closer to 30% Ebidta," Chava said. He mentions the change in product mix with increased contribution from the non-ARV or anti-retrovirals business as the key for that.

"We do not expect raw material prices softening in the coming quarter at least in Q1 FY23." The company is also not relying on taking price hikes on products.

Because of the investments done in FY22 that can be used now, the company intends to move closer to 30% return on capital employed in FY23, Chava said.

Is Russia's Pain In Europe India's Gain?

"We will not be affected negatively or significantly positively by the geopolitical crisis," Chava said.

Laurus Labs does not have any approvals in Russia, so there are no opportunities to sell, he said.

According to Chava, the company has only three products in Europe despite eight approvals and these products have seen strong demand. He does not expect the company to get a bigger share in the U.S. and Europe due to the crisis.

With regards to Paxlovid, an oral pill designed to treat high-risk Covid-19 patients, he said that it was too early to comment on whether the opportunity for Laurus Labs would be large.

Capacity Expansion Plans

• API: In second half of FY22, two large API plants, constituting around 20% of earlier capacity, were added. Laurus Labs is building more manufacturing facilities for APIs. Two more production lines, which is around 15% additional capacity, will come on-line in Q2 and Q3 of FY23. "But we don't need these capacities to achieve our revenue target of FY23," said Chava.

• Formulation: On the formulations front, Chava said that their brownfield facility will be fully operational in first quarter of FY23, to be able to provide for new launches planned in the U.S. and Europe in Q3 and Q4. This facility is needed for fulfilling commitments of their European partner, he said.

• CDMO: Greenfield facility for CDMO will be operational in FY24, said Chava.

Watch the full interview here: