Supriya Lifescience Limited (SUPRIYA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Supriya Lifescience Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sneha Salian. Thank you, and over to you, ma'am.

Thank you, Shubham. Good morning, everyone. On behalf of Supriya Lifescience Limited, I extend a warm welcome to all participants for the Q1 FY '26 financial results discussion. Today on the call, we have Dr. Satish Wagh, Executive Chairman and Whole-Time Director; Dr. Saloni Wagh, Managing Director; and Mr. Krishna Raghunathan, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion and expectations as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, I would like to hand over the call to Mr. Krishna Raghunathan for his opening remarks. Over to you, sir.

Thank you, Sneha. Good morning, and a warm welcome to all the participants. Thank you for joining us today to discuss the Q1 FY '26 results of Supriya Lifescience Limited. On the call with me today are Dr. Satish Wagh, Chairman; and Dr. Saloni Wagh, Managing Director; and our Investor Relations team from Ernst & Young. I hope you have had the opportunity to review our financial results and investor presentation, which are available on the stock exchanges and on our company website. With that, let me take you through our quarterly performance. Revenue for the quarter stood at INR 145 crores, reflecting a 10% year-on-year decline. The drop was primarily due to a delay in the production facility campaign following repair and maintenance work at our Lote Parshuram facility. Several scheduled [Technical Difficulty] intermediates produced in blocks A, B and C. Currently, these blocks cannot handle the load required to support module E. The repairs are therefore critical to improving the efficiency of these older blocks as without such upgrades, fully utilizing module would be challenging. During the quarter, the EBITDA stood at INR 52 crores with 36% year-on-year despite the dip in our revenues [Technical Difficulty] The mainstay of our business, contributing 85% of Q1 FY '26 revenue. Within this, the European market share increased from 36% in Q1 FY '25 to 41% in Q1 FY '26. Backward integration continued to improve, rising to 81% from 69% in Q1 FY '25. This progress has strengthened our control over key inputs, reduced dependence on external sources and delivered further cost savings. As stated in our previous call, Ambernath site has started validation campaigns and will commence production of liquid anesthetics and oral solids, a significant milestone for our CDMO strategy. We expect commercial contributions coming in from Q4 of this year. We remain confident of delivering 20% annual revenue growth with EBITDA margins in the range of 33% to 35%. We expect the second half of the year to outperform the first as the delays in production and sales from H1 are recovered in H2. Our goal of reaching INR 1,000 crores in revenue by FY '27 is supported by a strong pipeline, 3 to 4 product launches planned for FY '26 and rising demand across key therapeutic areas such as anesthetics, antidiabetic, antianxiety, vitamins and ADHD treatments. With rising customer interest and a focused strategy to grow registrations and strengthen market presence, we are well placed to capitalize on long-term opportunities and remain optimistic about the years ahead. We are on course to achieve both our short-term as well as long-term goals. Regarding the U.S. tariff situation, while this market accounts for a small share of our revenue, we continue to track developments and assess any potential implications. Our primary focus remains on expanding in other high-potential regulated markets. Our competitive advantages lie in strong backward integration, well-established regulatory credentials across major markets and an extensive range of distinctive products. We remain confident in our strategy as we work towards creating value for our stakeholders. Let me all take you through the operational highlights of the quarter and full year, following which we will open the floor for questions and answers. The company reported revenue from operations of INR 145 crores in Q1 FY '26 as against INR 161 crores in Q1 FY '25, a degrowth of 10% year-on-year. EBITDA in Q1 FY '26 stood at INR 52 crores as against INR 63 crores in Q1 FY '25, a degrowth of 17% year-on-year. EBITDA margin stood at 36% for Q1 FY '26. PAT stood at INR 35 crores in Q1 FY '26 against INR 45 crores in Q1 FY '25. PAT margin stood at 24%. Our CapEx for Q1 FY '26 stood at INR 14 crores. Going forward, we expect CapEx to close around INR 65 crores for remaining FY '26 primarily directed towards maintenance CapEx and certain small projects like Rabo Block and other requirements in formulations plant. On borrowings, we would like to report that for the last 6 months, we have not utilized any working capital limits, except for letter of credits and bank guarantees. With that, we can open the floor for question and answer.

[Operator Instructions] The first question comes from the line of from Rachana A from SIMPL.

Just wanted to understand the revenue contribution from backward integrated products has increased to 81%, which is the highest till date. And this appears to be reflected in stronger gross margins as well. Going forward, if this mix normalizes back to our historical range of 65% to 75%, should we expect gross margins to normalize accordingly? Or would this be offset by better pricing and product mix as we expand further into our key regulated markets? This is my first question.

So, our focus as a company has always been on backward integration. So, you will see that in the coming few years also, even the new product launches, what we are doing will be with fully backward integrated model. So, the backward integration percentage would sort of be maintained between the 75% to 80%. As regards the gross margins, typically, we don't talk on gross margins. But at the EBITDA level, it is mainly a combination of, of course, the backward integration efforts that we are undertaking as well as the average selling prices what we are getting for these products in regulated markets. So, it is a mix of both. So, moving forward, I think we would be in the same range of 75% to 80% on the backward integration. And on the EBITDA margin front, we have always guided 33% to 35% EBITDA margins, which we are confident we'll be able to maintain.

Okay. My second question was we had filed several products with PEP approval. One of them was bisoprolol fumarate. And if you could provide an update on how these products have scaled in regulated markets. And these products were expected to gain traction in Europe markets as well. So, if you could guide on that, how have these products performed?

So yes, we are getting good traction for these products in regulated markets. In fact, in terms of the volume contribution and revenue contribution from this particular product, we have seen a good growth in the last 2 to 3 years. As far as the Europe market is concerned, customers have just started taking trial quantities for their validation. And once their validation is completed, which takes typically between 9 to 12 months, we will start seeing good commercial revenue also coming in for this product from Europe. So next year, you can expect good revenue contribution from Europe for bisoprolol fumarate.

Okay. My last question, while we have maintained our guidance of INR 1,000 crores target by FY '27 and also a strong contribution from CDMO or CMO segment, along with healthy EBITDA margins

Yes, I'm able to hear you.

Yes, I'll repeat my question again. While we have maintained our guidance of achieving INR 1,000 crores revenue by FY '27 and a good contribution from CDMO and CMO segment as well along with healthy EBITDA margins. What would be the key drivers of us which we will be focusing beyond FY '27? Specifically, what would be our key growth drivers beyond FY '27? And would we be able to sustain momentum?

Yes, absolutely. I think beyond FY '27, the 2 most important growth drivers for us is going to be introduction of new products in the portfolio. We are actively introducing about 3 to 4 new products every year. We are also introducing newer therapies in our product portfolio to make it more robust. So once these products start gaining traction in semi-regulated and regulated markets, the revenue from these products will really amplify the sales. So, I think the first key growth driver is going to be addition of new products. The second thing for us is going to be in the CMO, CDMO space, both in terms of advanced intermediate API and also the finished formulation site, which we are setting up in Ambernath. So, the Ambernath site would be, it is already commissioned, and we'll start seeing commercial revenues from this site maybe quarter 4 of this year. So, I think that also will sort of add to the revenue moving forward. So just to summarize, new product addition and CMO, CDMO opportunities, both on the API as well as the finished formulation side.

[Operator Instructions] The next question comes from the line of Adityapal from MSA Capital Partners.

Just wanted to understand a bit more on the decline in revenue. I was hearing CFO's discussion, but didn't really catch a good hold of it. If you can help me understand a bit better, that would really be super helpful.

So, the revenue drop was primarily due to the delay in the production facility campaign, which happened because of the repair and maintenance work that we had taken up at the , Lote Parshuram site. As you know, we have recently started commercial production in our module E, which is one of our biggest production blocks with a capacity of 350 KL. Now to support the module E, there we are actually envisaging a good growth happening in our existing set of products as well as some of the new products we want to scale up from the module E. So, in order to support that module E, we had to take up a lot of maintenance work in our older blocks, which is the module A, B and C. And because we initiated this maintenance activity in the month of April, we actually lost a good amount of production days, which has sort of translated into the lower revenue. So this is the main reason for the dip in the sales of quarter 1.

Understood. Understood. And the management was also discussing a couple of quarter con calls back that because our module A, B, C are quite old when we compare to our newer blocks, and we were planning to either reinvest or refurbish the equipment over there. So was this the plan and now the refurbishment and the repair and maintenance work that we had envisaged earlier, this is done in A, B, C.

Yes. So... Correct. So not fully. We have not fully 100% debottleneck the older blocks. But to at least sustain the output from module E for the next 1, 1.5 years, whatever little maintenance work we had to do that we have undertaken. You can expect maybe 1 year down the line; we'll still have to do further debottlenecking to fully optimize those blocks because those blocks are still not fully automated. So, once we introduce automation in those blocks, we can really optimize the capacity utilization there. But yes, some part of it to support module, we have undertaken in the month of April.

Understood. And so last quarter, I believe that we had launched our anesthetic drug, Sevoflurane, the entire Sevoflurane family. if you can help me understand because obviously, we have launched these molecules first in our semi-regulated markets. If you can help me understand how they're doing, how they're coming up? And when do we plan on our CEP and DMF filings?

So yes, we have launched one product from an aesthetic category in the last quarter, and we are getting very good traction for the product. We have already started some commercial supplies in domestic market. And most of the regulated customers have taken samples and now they are qualifying the product. We are expecting maybe by quarter 3, we should be in a position to file the U.S. DMF and the CEP. But overall, we are getting very good traction for the product. And for you to see the full commercial revenue generation from this product, I think it will take at least 3 to 4 quarters because it will take us about 9 to 12 months to get the approval on the CEP and the U.S. DMF as well.

Understood. Understood. Just one last question on the regulatory aspect that when we, so there are a lot of products that we have not yet filed our successful products that we have not filed in DMF with FDA. How do you, because our revenues from the U.S. geography is lower, do you think that maybe in the next couple of years, maybe, say, starting mid- FY '27, we will aggressively start expanding, looking at the U.S. geography with a keen eye. I am assuming that the tariffs don't come on API and pharma products.

So, Europe for us, Europe and Latin American markets like Brazil, Mexico, they have always been the larger markets for us, mainly because of the product portfolio that we have. Of course, we have seen some improvement in our North American sales, and we are expecting that with the new product launches that would further improve. But having said that, even with that, in the next at least 3, 4 years, Europe and Latin American market would still contribute to the larger chunk of revenues. In terms of the...

Just talking about delta perspective, that is it.

So in terms of regulatory filings, of course, any new product that we launch, we always have a global view in mind, and we definitely want to get the regulatory approvals for that product across all markets. So, for all the new products that we would be launching, we would definitely be filing the U.S. DMF as well. So, the number of US DMF filings in the next 3 to 4 years will definitely be much higher than what we are doing today.

Understood. Just one last question before I come back...

Sorry to interrupt, Mr. Adityapal, request you return to the question queue. The next question comes from the line of Krisha Kansara from Molecule Ventures.

Yes. So, my question is on the CDMO segment. I would like the management to provide us with the latest update regarding CDMO contracts, which are key to the company. One is the DSM contract for vitamin D. Second is the Whey Protein contract and the third is the contrast media. So, on the Whey Protein side, we were about to sign a contract with a distributor. So, is there any update on the same? And can we expect this particular product to start contributing to our volumes in H2 of FY '26? This is my question related to Whey Protein. And then I'll come to the other...

Yes. So, the contract that we were looking to sign, it is at a final stage. We are expecting to close this contract and sign it probably end of quarter 2, a little before that actually. Already, the validation batches and all have been supplied to this particular customer. And we are expecting some small revenue generation happening from this particular contract maybe in quarter 4 of this year. In the next 3, 4 years, this product has a good potential to give at least a INR 40 crores, INR 50 crore revenue. And maybe beyond that, let's say, if we take a 5-year sort of 5, 6 years sort of a guidance, this can really scale up to INR 100 crores revenue as well. But everything depends on how the contract moves because this is a very new product in the Indian market. It's the first time somebody is launching optimized Whey Protein. So, we also have to see how the market is sort of responding to this particular product. But if all goes well, these are the kind of projections we can achieve in the next 4 to 5 years.

Right. So, in the last con call, you had mentioned that we can do a volume of 100 metric tons in this year in this fiscal year. So, do we expect to the guidance and this kind of volume in Q4 of FY '23?

So, 100 metric tons this year would not be possible considering the contract has taken a bit of time. But yes, about 50 tonnes, we will be able to achieve in this year. If all goes well, if the trial goes well, about 40, 50 metric ton is something that we expect to achieve this year. But of course, we'll keep guiding and we will keep correcting the guidance as and when the contract is signed and once we start getting the purchase order from the customer.

And did we clock any revenue from the DSM contract in this quarter or that will be for the H2?

Yes, we have started generating revenue from the DSM contract. In this quarter also, we, in the first quarter also, we have supplied to them some small batches for their customer trials, mainly in the food and field space. But the revenue generation is very, very miniscule at this point. However, this year, we are expecting in quarter 2, quarter 3 and quarter 4 good volumes coming in from the DSM contract. And for this year, I think about INR 30-odd crores of revenue we are envisaging coming in from the DSM contract. So that is well on track. And already we have received our CEP for this particular product for DSM. So, Europe market has also started gaining traction. We are now waiting for the Japanese PMDA approval. Once that also comes in and the pharma customers approve the product, then the volumes will really start scaling up.

Right, right. Okay. So that contract is all that. And anything on the...

Sorry to interrupt, Ms. Krisha.

This is my last question, so is there any update on the contrast media side? So, you mentioned that we are already in discussions with global comp...

So for the contrast media product, we are actually launching this in quarter 2. We have not yet launched the product. Once the product is launched, we are in initial discussions with a lot of companies for some tie-ups. But I think once the product is commercially launched and all the documentation part is completed, we would be in a better position to guide on that.

So, the launch can expect the launch in next month?

Yes.

The next question comes from the line of Ashish Upganlawar from InvestQ.

If I could understand clearly from what the commentary on the call has been regarding the Q1 numbers slipping a bit, is that there was certain disruption due to kind of supply side issues at our end and no demand side issues at the customer end. So, I just wanted to check on that. And secondly, on the, I mean, will this volume, which has not been done in Q1, is it going to be made up in Q2 and that's why Q2 can be a bit better. So, I just wanted to confirm that there is no demand side issue as such because your commentary also said that from H2 numbers will be better. So does it mean that there is something in the macros, which is of concern to us.

Absolutely. We are very confident that whatever we have guided, the revenue growth of 20% plus and the EBITDA margin guidance, whatever we have given, we are very confident that we will be able to achieve them in the remaining quarters. H2 would definitely, for us this year be much stronger. In quarter 2, you will see some part of that sales getting recovered. There is absolutely no issue on the demand side. It has only got to do with the maintenance activities and the loss of production days, which has sort of translated into the lower revenue. But if I look at the other aspect of the business, Europe sales have gone up from 34% to 41%. Even in our product portfolio, anesthetic, antihistamine, all the sales are on an upward trend. Export percentage has gone up to 85%. Our capacity utilization has gone up to 76%. So, there are all the positives which are there in the business. Only because of the setback because of the maintenance activities, we were not able to cater to the demand of the customer. But in the coming few quarters, you will see that we will be compensating for that. In quarter 2, we'll not be able to fully compensate. So, I think the greater revenue will come in H2 of this year.

Okay. Second question would be that, see, right now, I think we are all transpiring as far as demand, new products, new filings and that will be, I mean, adding to our revenues over the years. So, I think all the drivers that need to be there for our business to consistently grow at a very good pace that seem to be there. But historically, what we have seen that the business of CDMOs, APIs basically is a bit cyclical in nature. So is our story going to be intact in case there is some kind of lull in the demand side because historically, no one has been able to time it. Inventories take shape at the customers end and then the cycle goes for a gross margins go for it. So, anything in the environment as of now to read anything like that maybe after 1 year or maybe immediately? And secondly, our growth guidance of 20% plus with maybe market share gains and our new products, is it devoid of that? I mean, are we in safe zone if anything like that happens? And are you reading anything which is of concern? There's nothing right as of now?

So, our guidance of 20% growth is factoring in all the different risks to the business. We have a very robust portfolio between APIs. Even on the CMO, CDMO front, we are not only working in APIs, advanced intermediate, but also finished formulation. And most of our projects and product selection in this space is very, very niche. So, these are molecules wherein there is only one manufacturer or concentrated manufacturing where we will be able to create a lot of value for the customer by the way of backward integration and regulatory approvals. So as such, I don't see any issues for the kind of growth what we are guiding. And that 20% growth is sort of factoring in a little bit of sales dip in one of the portfolios of the company that is already factored in. But having taken into consideration all of that, we are still confident that we'll be able to maintain our growth pace of 20% plus.

Just to add, is there a possibility of going beyond 20%, can we be a bit higher because of size as such versus the opportunity that is still seems to be small. So why, is it a very conservative number of 20% growth? Can it be 30%? I mean some guidance on that. I mean, how is this the base because...

We operate actually in a very regulated space. As you can see, 85% of our business is exports and in that 85%, also closer to 50% comes in from regulated markets. The regulated market business takes time to develop, regulatory approvals take time to come in. So of course, there is a chance that we can grow beyond 20%, but keeping in mind the regulatory implications in all the business verticals that we operate in, 20% is something that we would like to guide

The next question comes from the line of Karan from Invexa Capital.

Just to get a sense on the pipeline beyond FY '28 for our CDMO CMO as well as new molecules. So, can you just provide some outlook? So, what sort of therapy area are we targeting? And in terms of the market potential for those drugs, will it be very similar to what we do currently, or it will be a larger TAM that we are targeting for those molecules?

So as of now, we can guide till FY '27. In till FY '27, the molecules or the therapies what we are targeting is anesthesia, ADHD, antidiabetic cardiovascular, these are some of the therapies where we are trying to launch products in these therapies. For us, CMO, CDMO, like I said, not only API advanced intermediate, but it will also come from finished formulations. So, in finished formulations, we are also targeting oral solid dosage, injectables and of course, our liquid and aesthetic line. So, till FY '27, these are the 4, 5 areas that we are targeting for the new molecules and the new launches.

Okay. In the earlier call also, we have for the CMO, on the new molecule side, we have guided for that we are working on a cardiovascular drug. So where are we in terms of development and in the commercial side of that molecule?

Sir, I will tell you, this is Dr. Satish Wagh here. You see the products which we have targeted, and we are going, you must understand there is no competitor for us in India. Our chemistry is not to fight in India. Our chemistry is to crack the Chinese molecules and take the business of Chinese. So currently, when we are sitting here, the 2 products which we are already launched, they are very big volumes. Like anesthetic is almost a product of $6 billion. Now if $6 billion, I can take a few hundreds of crores, I will definitely go for that opportunity to encash, because more of the people like multinationals and big companies would like to leave China and go to India to buy this product. So, when we are already having a vision that we will get business, a good amount of EBITDA, we'll not invest our time on other things. We'll concentrate to utilize the maximum capacity, which we have installed for which we have already spent money on it. I'm sure you understand that.

Yes, yes. I get that. But sir, can we assume that this, whatever guidance we have given '27, this is one of the products that we have considered for that guidance?

So, we have considered only part of that because for any new product, like I explained before also, for any new product to sort of scale up in regulated market, it takes about 2 to 3 years from its launch. So, some part of it, yes, we have considered, but not to the full extent of the market size of this product...

The next question comes from the line of Rupesh Tatia from Shrirama Managers PMS.

Before I ask my questions, one clarification on Slide #14. It says in Q1 capacity utilization is 76%, but our capacity went up from roughly 600 KL to 950 KL. So, this 76% is on the older denominator, right? Is that a correct understanding?

Yes.

So, I mean now with the new capacity commission, the capacity utilization has significantly dropped now much around 50 like that, right?

So, in terms of capacity utilization, what has happened is module E, which is one of our largest blocks, that utilization has gone up because most of our large products are now scaled up there. So yes, although it is on an older denominator, minorly, it would have dropped, not to the level of 50% or something.

Okay. Okay. And for both CVS product and ADHD product, can you give some timelines about launch in India, for example, when will it be filed and end-to-end product sites, both the products, CVS products and ADHD products?

So, for the ADHD product, we are actually expecting to launch by quarter 4 of this year. So, we are still 2 quarters away from the launch of that product. The total market size of this product at the API level would be about USD 90 million. For the cardiovascular drug, the advanced intermediate, what we are launching, we have already launched this in quarter 1. And for that advanced intermediate, the global volume as of now is about USD 40 million.

And for both these products, there is no manufacturer in India?

No. So for both these products, like our chairman said before, we don't have an Indian manufacturer, especially for the cardiovascular advanced intermediate, we don't have any Indian manufacturer. It would be a replacement product from China.

And globally, how many manufacturers for both these products?

Globally, maybe 1 or 2 manufacturers.

Okay. Okay. That's clear. Yes. And the contrast media product, I think last call, I think we were expecting, hoping to win 20%, 25% market share in the contrast media product. So, I mean, and I know we're launching it in Q2. So how is the customer seeding sampling? What gives us this confidence that we can win this market share? Is it the cost advantage? Is it the technology advantage? Is it the quality advantage? Some color around that would be helpful.

So, it is definitely the cost and the technology advantage that we have. As you know, Supriya, we believe in having a backward integrated business model. So, we are fully backward integrated this product all the way till the key starting raw material level. Our technology is also far superior as compared to the technology available in the market. And along with that, we have already set up a very large capacity for this product in our current blocks. We will also be going in for full regulatory approval. So, a combination of all these 3, 4 things, we are very confident that we'll be able to gain good market share. In terms of that 20% market share, what we are getting, this will take time. It will take at least 3 to 4 years. Like I explained before also that regulatory approvals take time. So any product scaling up and getting that kind of market share from its launch takes about 2 to 3 years. But we are very confident with the technology and the backward integrated model that we have, we are very confident that we'll start getting good traction from the customers.

[Technical Difficulty] Is that understanding correct?