Shilpa Medicare Ltd Q1 FY2025 Concall Summary

Key Takeaways

• 15% YoY revenue growth, licensing and formulations lead: Top line driven by emerging-market formulations and a licensing segment that signed a new client deal every quarter for the last four quarters.
• Seventh straight quarter of margin improvement: EBITDA margin expanded again on a richer business mix (licensing income, higher-margin formulations) and operational efficiency, even as API faced its seasonally soft Q1.
• The pipeline is converting from promise to orders: A client’s breakthrough-designation NDA molecule generated a pre-launch order, Unicycive signed as a landmark CDMO deal with a dedicated facility, and peptides/polymers moved into clinical-stage supply.
• Regulatory doors are opening in multiple geographies: ANVISA Brazil GMP cleared for 29 products, Adalimumab won first export approval in Morocco, and a Korean client confirmed Shilpa as primary biologics CDMO supplier after a successful audit.
• What to watch next quarter: The K Code reimbursement decision for Pemetrexed in the US, the pace of new CDMO signings (two biologics projects likely in Q2), and whether the USFDA formulation facility review stays on track for a Q3 reapplication.

Licensing & CDMO: The New Earnings Engine

• Licensing income is recurring and growing: Revenue comes from a mix of milestones on existing deals and new contracts, with at least one new client deal signed in each of the last four quarters. Management calls the stream “very sustainable.”
• Unicycive deal resets the CDMO bar: Shilpa will supply finished formulation with its own API for Oxylanthanum Carbonate, earn up to \$10 million in milestones, and build a dedicated facility funded by the customer. Initial launch quantity orders are already received.
• More long-term CDMO deals targeted: Management is actively planning similar arrangements to Unicycive, aiming to lock in assured long-term business.
• Polymer segment building toward a ₹100 cr target: One US MNC client was added in Q1 for a complex polymer, joining an existing US customer where pilot quantities were supplied and big launch orders are expected in upcoming quarters. Management says the target is achievable in two to three years but calls it “early days” for client-level order visibility.
• Peptides pipeline hits validation milestones: Liraglutide plant validation is complete and the drug master file was made ready in Q1; Semaglutide large-scale development is finished. Both are complex APIs with global market potential.

Keshav Bhutada: “I can tell you we are planning to do similar such arrangements in the quarters to come so that will give us more assurance on the long-term business.”

Formulations: US Reimbursement Catalyst and Pipeline Build

• Pemetrexed injection awaits a reimbursement unlock: Amneal has sold over 1,000 vials post-launch. A J Code for premium pricing is already secured; the K Code for insurance reimbursement is expected this quarter, after which management expects a jump in sales. A one-time Q4 supply at a floor price explains the sequential US revenue dip.
• US formulation pipeline built for the long term: The portfolio is described as “very well built up” and includes complex, differentiated products. Investment is disciplined: the company only funds programs where it has a partner and confidence of selling.
• Nilotinib launch set for Q3 in Europe: Regulatory review is complete and the product is partnered with the number one generic oncology company in Europe.
• Transdermal patch entry begins in September: Two new patch deals were signed this quarter, and the first product filing is planned for Q2 FY25.
• USFDA facility reapplication on track: A meeting with the agency has been held, subject experts appointed per USFDA suggestion, and an internal review is underway. Reapplication is expected after the review completes in Q3 FY25.

Keshav Bhutada: “Company is very focused on cost spending, and we are only investing on programs where we have a partner and where we are confident of selling those products.”

Biologics & Albumin: Early Commercial Signals

• First biosimilar export approval secured: Adalimumab was approved in Morocco, marking the first biologics export market approval for the group.
• Aflibercept advancing toward Phase-III in Europe: European scientific advice was positive, and the company will submit permission for a Phase-III study in Q3 FY25 while starting partner discussions for the European market.
• Biologics CDMO gaining traction: A Korean client passed its GMP audit and confirmed Shilpa as the primary supplier for Phase-I and Phase-II supplies. Two additional CDMO projects are likely to be signed in Q2 FY25.
• Albumin Phase-I completed, Phase-III starting: The study was run against a European reference product. Phase-III will start in Q4 FY25 with a one-year duration; parallel studies serve India/emerging markets and Europe, with the European arm expected to run closer to 15 months.
• Albumin excipient grade opens a parallel revenue stream: A US DMF has been filed, and the team will promote the excipient grade to potential users. Management sees the combined excipient-plus-therapeutic offering as a wider market than competitors who sell only therapeutic grade, but says it is too early to quantify customer interest or pricing strategy.

Keshav Bhutada: “What we are doing is we will be offering a combo which will be excipient grade as well as therapeutic use. So, for us, the market will be much wider than Albumedix.”

API & Intermediates: Seasonally Soft, Strategically Deepening

• Q1 is a seasonally soft API quarter: The base business faced its usual Q1 softness; robust growth is expected going forward.
• Oncology pipeline adds complexity and captive value: The company is building a long-term complex pipeline where existing APIs also serve captive formulation consumption for four products. Two new oncology molecules are expected to complete plant scale-up and validations in Q3 FY25.
• Non-oncology API targets import substitution: Ursodeoxycholic Acid received a European CEP this quarter, opening a large export opportunity, and an NDA formulation is under development. Two additional non-oncology molecules finished lab validation and moved to plant scale-up.
• Pembrolizumab enters the pipeline: Initial lab-scale development is finished; the program will move from large-scale development to validation and then clinical studies in coming quarters.

Margins, Tax & Balance Sheet

• EBITDA margin improvement is mix-driven: The main contributors are licensing income with its lower associated costs, decent growth in the higher-margin formulations business, and an active focus on operational efficiency. Management expects margins to remain in a similar range.
• Higher tax rate is structural for now: The Q1 rate reflects intercompany interest where income accrues in a higher-tax entity while expenditure sits in a lower-tax one. Some loans have been converted to equity. Management expects to maintain a rate of about 35% for FY25 and declined to discuss FY26.
• Loss from JV and associates rose on a catch-up adjustment: One associate company’s earlier-period losses were taken into account upon receiving financials and corrected this quarter.
• Debt prepayment on schedule: The company is on track to prepay Rs 300 crores of NCDs in August.

Guidance & Commitments

Key Metrics