With 350% stock gain, drugmaker Laurus Labs seeks to boost capacity

Indian pharmaceutical company Laurus Labs Ltd. plans to spend as much as 15 billion rupees ($202 million) over the next 24 months to expand its production capacity, according to its chief executive officer.

“We have a good visibility of orders going forward and this large capital outlay will help us meet the needs of the customers,” Satyanarayana Chava, also the company’s founder, said in a phone interview Thursday after it reported second-quarter profit that rose more than fourfold from a year earlier to 2.43 billion rupees.

The pharmaceutical sector is the top performer in India’s $2.1 trillion equity market this year after the coronavirus pandemic turned global investors’ spotlight on health-care companies. Laurus, which supplies ingredients used in antiretrovirals to treat HIV, has seen its stock surge 350 per cent so far in 2020, the second-biggest gain on the 69-member S&P BSE Healthcare Index, which is up 44 per cent.

‘Huge Influx’

The capital expenditure will help to double capacity for its formulation business and also raise the capacity for its active pharmaceutical ingredient, or API, business by 50 per cent, Chava said. Funds will also be used to create a research and development facility and a new unit for contract development and manufacturing.

“It’s not a flash in the pan but a more structural change for this company,” said Sapna Jhawar, an analyst at Dolat Capital Market Ltd. “Given the huge influx of orderbook they are getting right now, they are setting up more capacities.”

The capital expenditure will be funded through a mix of internal accruals and some external debt, Chava said.

Laurus Labs is a global supplier of of antiretroviral APIs and intermediates. Oncology is one of its core areas in the segment and it plans to expand its portfolio by focusing on molecules in diabetes, ophthalmology, and cardiovascular therapy. The finished dosage segment is involved in developing and manufacturing oral solid formulations for low and middle income countries, North America and European Union markets.

“We have to now move from one orbit to the other, get leadership in products and expand into new geographies,” Chava said of the company’s future plans.