Alkem Labs, the midcap pharma company that could
While DivisLab got some good news today, with the US FDA lifting its import ban and closing the warning letter on one of its Vizag units, the larger pharma firms have yet to see such luck - Sun Pharma and Dr. Reddy's are still struggling to address FDA issues raised on the manufacturing units at Halol and Bachupally, respectively. Overall however, FY18 is projected to be a better year for Pharma midcap companies like Alkem Labs. One move that is levelling the playing field is new Indian regulation limiting how much field reps can market their products to doctors via gifts. The new law clamps down significantly on this practice, which has been viewed by regulators as akin to bribing doctors to prescribe a particular company's medication. This will push company marketing to more formal channels, which will include direct marketing efforts as well as online ad efforts. Midcap pharma company Alkem Laboratories is an early mover in the digital marketing space, and most well-placed to benefit from the new regulatory steps. Its business has nearly 70% of its revenues coming in from the domestic market. Post GST channel re-stocking is expected to drive the company's revenues 11-12% in the September quarter, according to analysts like HDFC Securities. The Alkem management is also looking to ramp up its US business, and it has got off to a start here with the US FDA clearing its US plant inspection without an observation. One thing to watch will be Alkem Labs EBIDTA margin, which at around 20% is lower than higher value chain players in the industry like Aurobindo, whose margin stands at 25%+. Alkem's share price has been trending up in the leadup to results (expected on November 10)02-11-2017
