Alkem Laboratories reported 10.7% Y-o-Y growth in Q3 FY26 total revenue, reaching INR37,368 million, driven by a 26.6% surge in international sales. The company detailed its strategic entry into medical devices via the acquisition of Occlutech, which is expected to become a key subsidiary with projected 25% EBITDA margins in 4-5 years. Management expressed confidence in scaling the MedTech segment globally, focusing initially on ortho and cardio, while the domestic business showed stable growth.
Q3 FY26 Financial Performance Summary
Alkem Laboratories announced stable performance for the third quarter of FY26, supported by strong domestic fundamentals and international execution. Total revenue grew by 10.7% Y-o-Y to INR37,368 million. International sales showed robust growth at 26.6% Y-o-Y, totaling INR12,157 million. India sales registered a 5.5% Y-o-Y growth, reaching INR24,959 million. The EBITDA margin stood at 22.2%, translating to INR8,280 million, a 9% Y-o-Y growth. Net profit grew by 1.6% Y-o-Y to INR6,360 million. An exceptional item of INR528 million related to the Government of India’s Labour Codes notification was noted.
Domestic Business Traction
The domestic market showed growth of close to 10% YTD. The company is seeing very strong growth in its chronic business, registering high-teens growth overall. Alkem outperformed the IPM in six key therapies, including growing 1.4x in anti-infectives and 2x in vitamins and minerals. Prescription business growth remains strong as reflected in IQVIA data.
Strategic Focus: Entry into MedTech via Occlutech
The call featured significant discussion on the acquisition in the medical devices space, viewed as a highly valuable subsidiary alongside biotech. Sandeep Singh estimates the MedTech market in India is a $10 billion opportunity with significant headroom. The primary focus areas for the play are ortho and cardio.
- Growth Projection: Within the next 3 to 5 years, the MedTech segment revenue is projected to reach around INR1,000 crores, achieving EBITDA margins of 20% to 25%.
- Investment: An incremental investment of INR200 crores to INR300 crores is estimated over the next 3 to 4 years, though a significant portion of this is considered already committed.
- Occlutech Rationale: The acquired company specializes in a niche, high-entry-barrier segment of interventional cardiology (occluders, treating ASD, heart failure, and stroke prevention). It currently generates 85% of its revenue from the US and Western Europe, where it already holds the number 2 position in Europe.
- EBITDA Trajectory: Occlutech is already EBITDA positive in CY2026, with estimates targeting 23% to 24% EBITDA margin within 3 years.
Occlutech: Pipeline and Financials
Kaustav Banerjee detailed the pipeline, noting that the company is awaiting approval for a Left Atrial Appendage (LAA) occluder, a product in a global market valued at $1.4 billion. Furthermore, the PFO launch in the U.S. is anticipated by June 2027. The gross margin for the acquired company currently stands at close to 73%, with planned improvements driven by operating leverage and utilizing Alkem’s shared services infrastructure (GCC) to reduce SG&A.
Capital Allocation and Future Outlook
Management confirmed a conservative approach remains but justified the MedTech acquisition as being focused on acquiring talent and proven technology, rather than in-house development. For the existing business, the management reiterated confidence in exceeding IPM growth by 100 to 150 basis points domestically. The debt refinancing for the acquisition loan is expected to reduce the interest rate from 10% down to 5% or 6% using corporate guarantees, though Alkem India itself will not provide direct loans.
Trade Generics Update
Regarding trade generics, sales were described as flattish for the quarter, with YTD sales in a lower single-digit decline. The EBITDA margin for the generics segment is typically 2% to 3% lower than the corporate EBITDA. The impact of the MIP announcement for PenG is estimated to be around INR80 crores to INR100 crores, which the company believes can be partially mitigated by passing costs to customers on non-regulated products.
An Investor Meet focusing on the strategic direction of Alkem MedTech is scheduled for February 18th.
Source: BSE
