Beta Drugs Limited (BETA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to H1 FY '26 Conference Call of Beta Drugs Limited, hosted by PhillipCapital PCG India. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sri Surya from PhillipCapital. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of PhillipCapital PCG, I welcome you all to the H1 FY '26 Earnings Conference Call of Beta Drugs Limited. Today, from the management, we have Mr. Rahul Batra, Chairman and MD; Mr. Nipun Arora, CFO. I now hand over the conference to Mr. Rahul Batra for his opening remarks, and then we'll open up the floor for the question-and-answer session. Over to you, sir.

Thank you, Mr. Surya. Dear all, a very good afternoon. On behalf of Beta Drugs family, we wish you all a very happy Diwali and a prosperous New Year. Before we begin, I would like to share that today, we have got a call from NSE, and they have said that they will be giving a principal approval to migrate to the main board. So by next weekend, a maximum 10 days, we'll be migrating on NSE main board. To start with, we would like to share the numbers. The total sale of the company is INR 204 crores as compared to INR 180 crores last year of the first half FY '25. Although the growth is 13%, and there were some factors, by which the production was a challenge for good 15, 20 days. There were bad rains across North India and we had 2 audits that was from Mexico and Colombia, which took 12 days as we were going for a complete plant audit, and it was done successfully without any critical observations. The EBITDA margins rose by 17% that is to INR 47 crores as compared to the first half of FY '25, which was INR 40.3 crores. EBITDA margins grew from 22.36% to 23.08%. The major achievement this in first half is the derma division has generated a positive EBITDA of 11.32 lakhs in the first 6 months. However, if we exclude the dermatology EBITDA margin, the total EBITDA margin stands at 24.12%. The PAT margins if we exclude onetime interest of the convertible debentures stood at 14.10% as compared to 13.55% last year. The PAT numbers are INR 28.71 crores, that is excluding the interest on debentures as compared to INR 24.3 crores last year. The total PAT has increased by 18% as compared to last year, that is excluding the interest on convertible debentures. Now coming on to the key highlights of the first half. At Beta, we have successfully completed our COFEPRIS audit, that is Mexico, and parallelly have also filed 16 dossiers and in process to file 15 more dossiers in the next 6 months in Mexico. We have successfully done our first in-licensing with an Italian company to get the fillers in the aesthetics market. We are the first and the only company to get approval of our first NDDS of Methotrexate Oral Solution in India after a long effort of our 3 years. We have recently acquired a new facility for further backward integration to produce our own intermediates and further strengthen our DMFs and reduce our dependency on the China market. We have also cleared INVIMA audit for injectables and are ready to file 10 doses for this year-end. I will take you through the different verticals. First, coming on to our own brands. Own branded business has shown a growth of nearly 20% -- approximately 20% as compared to last year. The top 10 brands have contributed more than 15% and will continue to grow at the same pace. The single molecule that is Caxfila OS suspension, which we launched last year, is now close to a 10 crore brand with a larger prescriber base. The orals have contributed 48% of the total own branded business, which is again a very positive trend for the company. There are total 6 brands, which have become -- which will become a 5 crore brand this year. The total number of prescriber base has increased by approximately 8% in this first half of the year. Coming on to the exports now. Although the growth in exports has delivered 10%, that is from INR 39.7 crores to INR 43.2 crores, but this will totally change in the next half of this financial year. This half, we have filed more than 80 new dossiers in different geographies. A total of 43 new approvals across different geographies, especially Colombia, Central America, Jordan, Philippines, et cetera, has opened access to bigger market share. We are in a process of doubling our regulatory team and to file 150-plus doses in coming 2 years. We have allocated certain budget to do all the bioquivalences for the 11 identified products in orals and apply for the registration in the regulated markets. The Europe approval has been delayed for long, but finally, it will happen in the first quarter of next year, that is between January and March. The preparations of the doses and the development of products for Europe market and all the regulated market has already started. We will be the first cytotoxic suspension plant to be inspected by Europe, which will give us an edge as a premium cytotoxic player globally. Coming on to the CDMO. The total sales of CDMO has shown 8% growth over the last year. We have added many new products with our current partners. With increase in capacity at Adley Formulations plant and being backwardly integrated, BDL poised to become the most trusted CDMO partner in India. By assuring best of our quality, timely deliveries, BDL is always the preferred choice for CDMO. Coming on to our API. The API sales has shown a growth of 14% as compared to last year. This will continue to grow in the coming years. At Adley Lab, we have increased the number of people in R&D to support the new development across cytotoxic segment. The first international audit from Mexico has been completed and the CAPA has submitted to get the approval. We have recently acquired, as discussed a new intermediate facility to further strengthen our production, quality, most importantly, the DMFs as we are planning to enter the regulated market. Two new products have already been delivered to the formulation plant in this half and will be ready to launch this year. We are also developing 4 new products, which will be given to the formulation to be launched in the next 2 years. Three new products have already been developed at API plant and given to formulations for which the DCGI filing has already been done. Coming on to the cosmetics and derma. This half, as we discussed earlier, the division has become profitable and has grown by 45% as compared to last year. We have signed and registered our first in-licensing product, which is the key to growth over the coming years. Further, the Rx, the prescribers have grown almost by 70% in this half of '26 as compared to last year. We are also registering some Meso-fills, which is again a niche market to be tapped and will further drive growth for this division. Going ahead, Beta has planned a robust portfolio, both in onco and derma. In oncology, we are expecting 2 more NDSS to be launched next year, which will be again the first time in India. Also, we have filed 3 new drugs which the API has also developed in-house. This will give us the driving growth for the next 3 to 5 years in the domestic market. As the main focus lies on the export side, we have planned everything and now the execution has already started and prioritized to make our presence in the regulated markets. Simultaneously, the growth will also be derived by the API sales in the international market. Now we welcome all your queries and questions.

[Operator Instructions] The first question is from the line of Aastha Jain from Pkeday Advisors.

So, my first question is with respect to the gross profit. Sir, our gross profit margins were down by 3% if I exclude the other income. So, what was the reason for that?

Nipun?

Hi Aastha, this is Nipun. See, our gross margin on a consolidated level is less than -- I think it is between -- it is 1.5% less than the last year. This is basically because of the product mix only. I mean in CMO, products are there, which we cannot keep it constant every time. Some price erosion is there, something like that. It is just because of product mix. It is not more than 1.5%. Last year, it was 53.8% and now it is 51.35% and other income have no role in this.

So sir, in my understanding is that sir, our contribution from domestic owned brands was approximately 34%, CDMO was 39% international was 21%...

No, no, no. I will rectify it. If I talk about our EBITDA margins from the branded business is somewhere around 35%, 36%. From the CDMO side, it is 16%, 17%. You said, I think, more than 30%.

No, sir, I was talking about the revenue mix, because you said that the gross profit margins are down because of a change in product mix, right? So segment-wise...

No, what I mean to say is like you cannot see this constant any time. Sometimes a product which is sold is carrying a higher margin, sometimes the products are carrying a lower margin. So you cannot keep the product mix every time.

Nipun, I'll take up from here. Aastha, actually CDMO, you have seen the sales have grown by 8%. So sometimes what happens is like there are demand comes from Platin groups, right? And for Platins to, continue the business with all the partners, you have to supply all the products. And for particularly those products, there the margins are very less. So that's why there might be a slight difference between the GP margin. Otherwise, if you see on the export side and the own branded side, the GP margin rather has increased by addition of new products.

So, can you just give me the segmental revenue mix? I mean from CDMO, how much was the contribution to the total revenue from domestic, from international API and dermatology?

I'll give you that. So out of the INR 204 crores, INR 60 crores was branded oncology, CDMO was INR 79 crores, exports was INR 43 crores, API was INR 12.25 crores and derma was INR 9.25 crores.

Okay. [Foreign Language] So that comes to our revenue mix in percentage terms. CDMO is 39%, domestic owned brand is 34%, international is 21%, API is 6% and dermatology is 4%. And the margins you have said for CDMO, it was approximately 16%, 17%, domestic is 35% approximately, international...

16%, 17% is EBITDA, not GP margin.

Yes, I am going to EBITDA margins. Sir, your EBITDA margins have also come down. I'm assuming that has been grown from...

No, No. If you see our EBITDA margin has grown from 22.36%% to 23.08% rather they have come up. And if I exclude dermatology, sorry?

Sir, I think there is some doubt on the EBITDA margins. We have given everything on the presentation. The entire numbers are there. You can just have a look once again because as per our information, as per our thing, the EBITDA margins have grown as compared to last year.

Okay. Sir, my second question was with respect to the international business. So we have grown only by 10%. What was the reason for that?

So the international market globally, it is dominated by tender business. India is the only market in oncology, which is -- which it has a private business and a tender business. So globally, 90% of the market is tender business. So the most of the tenders tend to come in the later half of the year. So that is between October to November. So the award goes somewhere in December. So the sales will reflect generally from January, February and March. So that's why when I made an announcement when I was telling about the export business, I clearly said that you will see a different picture altogether in the second half.

The next question is from the line of Avnish Burman from Viakarya Consultants, LLP.

Rahul, if you can just -- on the Platin business, if you can just quantify how much of the Platin business do you do in the 3 segments, which is the third party, the brand and the exports?

So Platin business, especially on every aspect, we tend to do very less, but still no chemotherapy is covered without Platins. So if a patient goes to a doctor, the basic protocol starts from a Platin only. So we cannot avoid giving a Platin to anyone, whether it's in the CDMO business, whether in the exports, whether it's in the own brand. So the quantification of a Platin business, we cannot give it to you right now, but Platins, we cannot deny. It is like a basic. Supposingly you're going to a dermatologist, supposingly you're going to a cardiologist, they will always give you PPI along with any medicine. So this is the basic protocol, but it starts from -- even you go for immunotherapy, anything, Platin has to be given. But what we do is that we sometimes we -- supposingly the demand is for 10,000 vials. So we tend to do only 2,000, 3,000 vials only. And this is how we are controlling our margins in spite like getting a growth in the sales also.

Yes, yes. So I was trying to understand, if you look at your overall revenue, what percentage contribution would be coming from Platins?

It's not more. It's less than 5% -- 7% only.

Okay. And out of the 7%, I'm assuming it will be divided into the 3 segments. In what part are you able to pass on the increase in, let's say, platinum prices? And what part do you have to kind of absorb it in your P&L?

So increase in prices, we have to part from every division. It is not only that own branded, we can increase the prices. Everyone understands in this dynamic market that if the prices are increased, they have the price that manufacturer cannot bear from their own profit. So we increase the prices. But yes, the GC we earn in the other product where it is at 60%, 70% or 50%, the GC comes down to 10%, 15%. So that is the only thing. But see, this is only about the Platins, right, we are talking. But what about the new innovation, new products which we are employing in the -- which we are launching now. So every product has a cycle. So once you launch a product, first year, it is always low. Second year, it picks up the pace. But third year, that product will contribute more margins. So this will overpass the product which has less margins. And we as company, we are focusing on developing new molecules. We are launching new molecules every year. And this year, after this Methotrexate, you'll see that picture change in the next half.

Got it. And regarding the guidance, I mean, you want to revise the guidance in the call, I believe the previous guidance was for about -- I think if I'm not mistaken, about INR 450 crores for FY '26 revenue? Would you like to guide something on?

So we actually, we never gave INR 450 crores. We said we will continue to grow at 20% to 25%. Although this year, this time, the growth was only 13%, but we are -- we will be having the strong numbers for the next half of the year.

And any ballpark estimate on the EBITDA margins for the full year?

EBITDA margins will remain between 23% to 24% to 25%. Within 23% and 25%.

Understood. I just wanted some clarity on whether there was any impact on the business because of the GST change that happened? And were there any loss sales in any business division? And if there were, will they be recouped in the third quarter numbers?

So the sales was stopped for 5, 7 days, but eventually, we have built them up and there is no loss in the sales. Actually, the product is prescribed by the brand name. Even the hospital take it as a brand name. Second, GST is only -- it's a benefit to the patient. It's not a loss to the company. It's just a benefit to the patient they have passed on. So by reducing the GST rate, nothing has impacted on the overall business. Yes, the billing was stopped for 5, 7 days. We were calculating we had to do some advertisement regarding the revised GST rate so that the patient should not be charged more. But overall, the sales were not impacted. It was just halted for 7 days.

Last question from my side. Can you talk a little bit about this Italian product, I mean the promote idea, whether it's a single product, multiple products, what is the potential? And what are the time lines that you are looking at?

So we have just got -- so we signed an in-licensing agreement last year, and then we started the registration process. So we just got the registration last month. And now we are conducting all the CMEs through different doctors and the doctors are joining from Italy to train the Indian doctors about using these fillers. So this is one. And second, we are also coming up with -- we are also in a process to register Meso-fills. So Meso-fills is one therapy, which is being promoted in India as an unregistered source. So most of the Meso-fills are being imported from Korea. So this will be the first registered product in India, which will be having some vitamins from the European company. So the total market size is close to what we estimate since it's a non -- like catchable sales, it is not catchable as it is same like oncology. The total market size, which we see, which we analyze is close to INR 1,000 crores. So we want to have and we will have a very good market share in coming 3 to 5 years in this market.

And by good, it will be like between 10 to 20, would you consider that a good market share?

No, 10 to 20. If it's INR 1,000 crores, so we should be having at least INR 50 crores to INR 100 crores market share.

INR 50 crores to INR 100 crores sales, you mean?

Yes, in the coming 3 to 5 years.

The next question is from the line Veera, an individual investor.

The first question is when is the interest component on convertible debentures need to be planned for, number one. Number two, normally, your H1 to H2 top line is flat. So, how do you see the current year? Though you answered that the exports you would see a higher number this year but that would normally be the case in the previous year as well. So, if you could address some seasonality in the business between H1 and H2? And three, when is the EU audit planned for?