How Satyanarayana Chava converted Laurus Labs into a leading integrated pharma company

Laurus Labs, once a leading manufacturer of antiretroviral (ARV) drugs, is undergoing yet another transformation under Satyanarayana Chava, its Founder & CEO. Until 2011, ARVs—a group of medication used to manage and treat human immunodeficiency virus (HIV) infection—accounted for a substantial portion of the company’s revenue. Then it made a strategic shift towards becoming an active pharmaceutical ingredient (API)-focussed company.
Subsequently, the company forayed into the formulations business in 2014, which helped it become an integrated pharma company by 2020. As a result of that shift, the ARV API contributes only 25% of revenues now, while the contract development and manufacturing organisation (CDMO) segment has seen significant growth.
The success of these shifts is evident in the numbers. Over the past five years, Laurus Labs, which was founded in 2005, has seen a significant growth in revenues, rising from Rs 2,292 crore in FY19 to Rs 6,041 crore in FY23, an increase of 164% over the period. However, there has been a slight dip in revenues in the first nine months of FY24, settling at Rs 3,601 crore.
Further, Laurus Labs’s biotechnology business represents a strategic diversification into a high-growth sector with significant potential for development. The biotech business is relatively new, launched in 2021 through the acquisition of Richcore Life Sciences, a pioneer in microbial fermentation technology.
By leveraging its expertise in fermentation technology and focussing on sustainable and innovative products, Laurus Bio (what Richcore is called after acquisition) aims to capture a significant share of the growing biomanufacturing market—which is valued at $216.7 billion in 2023, according to business consulting firm Grand View Research, and is projected to grow to $420.7 billion by 2030, with a CAGR of 9.5%. Rising demand for sustainable solutions, bio-based products, and advances in biotechnology are driving this growth. India, which is emerging as a significant player in this space, also has a thriving biomanufacturing market estimated at $58 billion in 2023, per the national investment promotion agency Invest India, and is anticipated to double every two to three years, and could reach $300 billion by 2030.
“Our investment in [the] bio [space] in 2021 helped Laurus offer a combination of biology and chemistry for sustainable products. Laurus’s recent investment in ImmunoACT, launching the country’s first indigenously developed CAR-T [cell therapy] for cancer treatment, is another area of interest. These investments were augmented by licensing patents from IIT Kanpur on certain rare disease molecules,” says Chava.
Chava, winner in the pharma & healthcare category of the BT-PwC India’s Best CEOs ranking this year, is now targeting investments in emerging areas such as precision fermentation, viral vector manufacturing, and cell and gene therapy, with the CDMO segment expected to lead near-term growth. Chava, who has a master’s degree and a PhD in chemistry from Andhra University, an Executive MBA from the Indian School of Business, and a postgraduate diploma in quality management from the World Quality Council, brings over three decades of pharmaceutical experience.
Pharmaceutical analysts are upbeat about the company as the CDMO segment’s project pipeline is expanding, and the animal health unit is expected to contribute gradually from Q4FY24. The biotech segment is witnessing momentum, with plans for capacity expansion.
Gross profitability has improved, with potential margin improvements as sales volumes increase, analysts say. Significant investments in capex have been made, with expectations for future demand. Commercialisation of CAR-T therapy has commenced, with profitability expected in Q4FY24. “Laurus Labs would incur a cumulative capex of Rs 2,800 crore over FY22-24, across CDMO, non-ARV formulation, and non-ARV API segments. Further, it is undergoing a validation phase for products in the animal health segment, and capex for the crop science segment. It is [also] building a product pipeline in the non-ARV formulation segment,” says Tushar Manudhane, Research Analyst at brokerage firm Motilal Oswal Financial Services.
But there has been a dip in revenue and profits in FY24. Speaking about this, he says, the anticipated increase in sales from CDMO and non-ARV segments has been delayed. The company experienced adverse effects on its performance, especially in the third quarter of FY24, adds Manudhane.
A report from research firm K.R. Choksey Research indicated that despite underperforming on profitability in Q3FY24, Laurus Labs could see improvement in its margins. “Regulatory compliance remains robust, with significant investments in R&D and capacity expansion in high-growth segments like CDMO and bio,” said the research firm’s report.
With the pieces falling into place, it’s no wonder that the analysts are upbeat about Laurus Labs.
Source: Businesstoday