Alembic Pharma lowers US sales guidance from $500 mn to $300 mn for next 3-4 years

Facing headwinds due to US drug regulatory compliance issues, coupled with price erosion in the US market, Alembic Pharmaceuticals has reduced its US sales outlook from $400-500 million to around $300 million for the next three to four years. 

Around 29 per cent of the total business of the Vadodara-based drug maker comes from the US sales which manufactures and markets generic drugs which are reverse-engineered, cheap versions of branded patented drugs.  Pranav Amin, Managing Director, Alembic Pharmaceuticals Limited said that as its peer in the industry saw a healthy growth, Alembic could also see the guidance of over $300 million to $400 million. 

“It was really optimistic $400 million and could go $500 million. There could be an opportunity to go to $300 million plus. But everything has got pushed back by about two, three years, so because of the delay in the execution of the new plants and the pricing erosion has increased, the company has reduced some of the outlook. Around $300 to $400 million is still a potential for another three to four-year period,” said Amin during the conference call after the Q3 FY23 consolidated results. 

The company last week reported its consolidated financial results for the quarter and nine months period ended December 31, 2022. While the net profit for the quarter at Rs 122 crore, the 9M FY23 net profit stood at Rs 189 crore. US Generics business of Alembic grew 10 per cent to Rs 432 crore in the quarter. 

“The US business continues to remain challenging on account of the competitive intensity, but we managed to grow the business by 10 per cent, some of it was due to the current strong flu season that we saw in the US. Our goal is to work on improving the efficiencies and execution in the midterm. We are looking at cost reduction, as well as reducing R&D grid going forward for the US market,” said Amin. 

According to the company, it filed 4 abbreviated new drug applications (ANDA) during the quarter and cumulative ANDAs are 246. According to the US Food & Drug Administration (UFDA), an ANDA contains data which is submitted to FDA for the review and potential approval of a generic drug product. Once approved, an applicant may manufacture and market the generic drug product to provide a safe, effective, lower cost alternative to the brand-name drug it references. 

“We also received 9 approvals in the quarter and cumulatively have 178 ANDA approvals. We launched 2 products in the US and plan to launch another two in the fourth quarter,” said Amin. In terms of regulatory agencies and compliance, the USFDA conducted an inspection at the company's Oncology facility F2 and issued four observations. 

The company has its manufacturing facilities in Vadodara Gujarat and Baddi in Himachal Pradesh. “We have replied to the observations already and sent the responses. After that, we have already received three ANDA approvals from this particular site. That USFDA also inspected a new oral solid dosage facility F4 in December. They have issued five observations,” said Amin. “We have sent our responses, and we have already received approval for one product from this facility,” he said. 

Analysts from ICICI Securities said that commissioning of oncology and injectable facilities in coming quarters should pave the way for decent launches in the US over near term. Alembic’s oncology and general injectable facilities are expected to commercialise from Q4FY23 and Q1FY24. However, for US, there has been no decrease in price erosion, on company as well as industry level. “We expect near-term earnings to be impacted by price erosion in key products in the US and additional costs (Rs 300 crores-400 crores annually) towards new plants. However, these costs would be absorbed over medium term with product approvals and launches, leading to increasing capacity utilization,” said Vinay Bafna and Rohan John, research analysts from ICICI Securities. 

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