Non-compliance with global norms a risk: Alembic

The company is debt-free and is positive that it will help it mobilise funds at low costs from external sources to implement its capital expenditure plans

Alembic Pharmaceuticals fears that lack of sufficient products in the pipeline may come in the way of meeting market demand. In its latest annual report, the firm has also pointed out that its inability to comply with global norms was a risk which could impact prospects in the long-term.

Recently, US Food and Drug Administration made four observations about its Panelav unit in Gujarat. The unit is critical it’s the only one to export products to the US and Europe. The US FDA issues “form 483” observations when it has to communicate concerns to a manufacturer. After posting a profit of 45 per cent year-on-year in the June quarter, it plans to enter verticals where it does not have presence currently.

These include dermatology, oncology and injectables. The company has so far been strong in the branded formulation and API segment as well as in the analgesic, anti-infective and cough therapies. It is also looking to increase its market share of chronic-therapy drugs.

The company is debt-free and hopes to mobilise funds at low costs from external sources to implement its capital expenditure plans. The company has net cash of Rs 318 crore. This will be used in funding its new verticals like oncology and dermatology for which the company has realised it will require spending in the next five years, after which these segments are likely to show significant growth. The company said it is “favourably placed on account of its low gearing, making it possible for it to mobilise external funds at low costs and strengthen sustainability.”

Alembic plans to add facilities with around Rs 1,000 crore investments over the next two years.

Among the challenges it faces, the company has listed the downward price revision of Althrocin, because of which Alembic’s topline and margins were dented. Raj Kumar Baheti, chief financial officer of Alembic, said, “The acute drugs segment registered single-digit growth with a price moderation in Althrocin, denting our topline and margins”. Althrocin has been a key brand in Alembic’s anti-biotic segment.

Like a lot of other pharmaceutical companies, Alembic too feels that the policy on Fixed Dose Combination or FDC’s is regressive. Recently, the government banned Fixed Dose Combination drugs.

The company’s current liabilities increased by 12.18 per cent from Rs 684 crore as on March 31, 2015 to Rs 767 crore as on March 31, 2016, primarily due to an increase in trade payables even as short-term borrowings declined by 39.68 per cent over the previous year. “The increase in trade-payables facilitated a reduced reliance on external funds for managing working capital,” said the company.

Alembic hopes that its New Jersey and Algeria facilities will start adding value to its balance sheet.