ALKEM LABORATORIES LTD.

PART 2

GROUP 6
Prashant Makwana
Swapnil Kumar Prajapati
Gareema Rao
Rutva Patel
Rakshit Patel
Dhruvi Patel
 INDEX

SR NO Content Page
1 Overview and latest updates 3
2 Financial overview, Reviews 5
3 External Analysis 6
4 Internal Analysis 10
5 SWOT Analysis 12
6 Summary, Conclusion and Strategy Issues 13
7 References 15

OVERVIEW
Management Performance

Alkem Laboratories is led by a capable and experienced management team who play an important role in
steering the company toward its objectives and expanding operations. The following is an overview of
key members of the management team:

CEO: Dr. Vikas Gupta is the CEO of Alkem Laboratories. The company has made significant progress
under his leadership, as evidenced by continuous improvements in financial performance and operational
efficiency. Dr. Gupta's strategic vision and operational expertise help Alkem's growth trajectory.

Senior Management Team: In addition to Dr. Gupta, Alkem's senior management team includes
experienced professionals with expertise in various aspects of the pharmaceutical industry, such as
research and development, manufacturing, marketing, and regulatory compliance. Their combined
experience and diverse skill sets enable the company to successfully navigate challenges and capitalize on
growth opportunities.

Board of Directors: The Board of Directors provides strategic direction and oversight to Alkem
Laboratories. Comprising individuals with extensive experience in business, healthcare, finance, and
governance, the board ensures that the company adheres to high standards of corporate governance and
remains committed to its stakeholders' interests.

Alkem Laboratories' strong management team, financial resilience, focus on innovation, and commitment
to quality position the company well to meet future goals and expand its market presence in the
pharmaceutical industry.

Latest Updates on Alkem Laboratories:

Financial Performance:

Alkem Laboratories Ltd. recently reported standalone and consolidated financial results for the third
quarter ended December 31, 2023. The highlights of these results are:

 Alkem reported ₹33,239 million in total revenue from operations, a 9.3% increase from the
previous year. India's sales increased by 12.1% year on year to ₹22,328 million, while
international sales grew by 3.1% to ₹10,240 million.
 EBITDA Margin: The company's EBITDA was ₹7,076 million, resulting in a 21.3% margin,
compared to 19.7% in Q3FY23. This represents an 18.1% year-over-year increase in EBITDA.
 Alkem allocated ₹1,111 million for R&D expenses during the quarter, accounting for 3.3% of
total revenue from operations, compared to ₹1,297 million in Q3FY23.
  Profit Before Tax (PBT) and Net Profit: PBT before exceptional items was ₹7,062 million, up
31.0% from Q3FY23. The net profit after minority interest was ₹5,950 million, up 30.8% from
the previous year.

Operational Highlights:

 Alkem's India sales increased 12.1% year on year in Q3FY24, reaching ₹22,328 million. India's
sales for the nine months ended December 31, 2023, were ₹64,613 million, a 7.9% increase from
the previous year.
 In Q3FY24, Alkem's international sales increased by 3.1% year on year to ₹10,240 million. In the
nine months ended December 31, 2023, international sales increased by 19.8% to ₹30,928
million.

R&D Investments and US FDA Inspections:

 Alkem maintained its focus on research and development, receiving six ANDA approvals
(including one tentative approval) from the USFDA during the quarter. For the nine months
ending December 31, 2023, the company filed four ANDAs with the US FDA and received 17
approvals (including three tentative approvals).
 Alkem provided updates on recent US FDA inspections of its facilities, demonstrating its
dedication to compliance and quality.

EXTERNAL ANAYLSIS

PESTEL ANAYLSIS

Factors Analysis
Political  Regulatory compliance initiatives are mentioned in the news release,
including reacting to FDA inspection findings. This emphasizes how crucial
 regulatory compliance is to the political climate around the pharmaceutical
business.
 As stated in the press release, government attempts to increase healthcare
affordability and accessibility may give Alkem with chances to broaden its
market reach.
Economic  The news release talks about financial performance indicators that show the
company's performance and overall health, like sales growth and EBITDA
margins.
 Information about Alkem's economic exposure to different markets can be
found in insights into the growth of its overseas sales.
Socio Cultural  The news release's operational highlights, notably revenue growth in
important therapeutic categories like anti-infectives and gastro-intestinal,
are indicative of shifting consumer tastes and healthcare demands.
 The reference to Alkem's business performance for biosimilars highlights
the company's reaction to new trends and patient requests for non-
traditional treatment choices.
Technological  The press release highlights Alkem's technological prowess and innovation
dedication with information on R&D spending and ANDA clearances.
 Updates on facility capabilities and US FDA inspections demonstrate the
company's emphasis on technology-driven compliance and quality control.
Environmental  Although environmental issues may not have been specifically addressed in
the press release, Alkem's dedication to environmentally friendly operations
and sustainable practices is evident from these initiatives.
Legal  The press release highlights US FDA inspection updates and compliance
initiatives, highlighting the importance of the legal and regulatory
environment to Alkem's business operations.
 Allusions to litigation risks and the preservation of intellectual property
rights serve to subtly draw attention to legal issues that impact the
business's risk management and competitive posture.
 1. Alkem Laboratories operates in a macroeconomic environment influenced by a variety of factors.
The company demonstrates resilience in dealing with political, economic, socio-cultural,
technological, environmental, and legal challenges.
2. Favorable government initiatives and market conditions create opportunities for growth, while
Alkem's emphasis on compliance and innovation allows it to remain competitive and compliant.
3. However, challenges such as high entry barriers, supplier negotiations, and competition
necessitate strategic responses.
4. Despite the dynamic and challenging macroeconomic environment, Alkem's strong financial
performance, international expansion, and commitment to R&D position the company well in the
pharmaceutical industry.

Portor’s Five Forces

Factors Analysis
Threat of High entry barriers: The news announcement from Alkem emphasizes the
New Entrants considerable R&D costs and regulatory obligations, which point to high entry
barriers.
Well-known brand: Alkem is the fifth-largest pharmaceutical firm in India and is
present in over 40 foreign markets, indicating that its name is well-known and
discourages competitors from entering the market.
Bargaining Moderate supplier power: Alkem's worldwide operations and existing contacts may
Power of allow for the negotiation of advantageous terms, even if raw material suppliers may
Suppliers still have some sway.
Strategic alliances: Research and development alliances are mentioned in Alkem's
news statement, suggesting a proactive approach to supplier connections and possible
 negotiating leverage.
Bargaining Moderate to high buyer power: When making large purchases, healthcare providers
Power of and insurers may have a big say in how much things cost.
Buyers Brand loyalty: Alkem's prominent market position and place among India's top
pharmaceutical companies point to a certain level of brand loyalty, which may
somewhat reduce buyer power.
Threat of Generic substitution: As the news release points out, the pharmaceutical business is
Substitutes threatened by generic alternatives, especially in price-sensitive regions.
Constant innovation: By providing unique products, Alkem can lessen the threat of
alternatives, as stated in the news announcement, thanks to its concentration on R&D
and invention.
Rivalry Competition is fierce: The news release's description of Alkem's fierce competition
and aggressive marketing tactics show how cutthroat the company's sector is.
Product differentiation: The press release highlights Alkem's focus on biosimilars
and novel medicines, which suggests a strategy to set itself apart from competitors
and keep a competitive advantage.

1. Alkem Laboratories operates in a competitive environment characterized by high entry barriers,

moderate supplier power, moderate to high buyer power, the threat of substitutes, and intense
rivalry.
2. Despite these challenges, Alkem's strong brand presence, innovation focus, and strategic alliances
enable it to navigate competitive pressures effectively.
3. Continued investment in R&D and differentiation strategies will be crucial for sustaining
competitive advantage and mitigating threats from substitutes and new entrants.
4. Overall, Alkem's positioning in the market, coupled with its financial performance and
operational efficiency, positions it favorably within the pharmaceutical industry despite the
competitive dynamics.

OVERVIEW

Alkem Laboratories' external analysis reveals a complex macro environment shaped by political,
economic, socio-cultural, technological, environmental, and legal factors. While regulatory compliance
and government initiatives provide opportunities for market growth, challenges such as fierce
competition, regulatory obligations, and the threat of substitutes remain. Alkem, on the other hand,
benefits from its strong brand presence, innovation focus, and commitment to compliance, allowing it to
capitalize on opportunities and mitigate threats. The company's strategic emphasis on R&D, technological
advancements, and market differentiation strengthens its competitive advantage in the face of changing
market conditions.

Opportunities: Expansion opportunities driven by favorable political and economic factors. Market
growth potential through product innovation and meeting evolving socio-cultural demands. Technological
advancements enhancing R&D capabilities and market competitiveness.

Threats: Challenges from regulatory compliance and legal requirements impacting operations and risk
management. Threats from substitutes and intense rivalry in the pharmaceutical sector necessitate
continuous innovation and differentiation strategies.

INTERNAL ANALYSIS

VALUE CHAIN ANALYSIS

Porter’s Value Chain Analysis is a strategic management tool used to dissect a company's
internal activities into primary and support functions. It aims to identify sources of competitive
advantage by analysing how these activities add value to the final product or service, thus
informing strategic decision-making and enhancing overall performance.
1. Inbound Logistics: Inbound logistics is the way materials and other goods are brought into a
company. This process includes the steps to order, receive, store, transport and manage incoming
supplies. The company mainly imports the products from China. Alkem is leading importer of
TRIMETHOPRIM BP98/USP24, METRONIDAZOLE BP 98, METRONIDAZOLE BP98,
TRIMETHOPRIM BP98/USP24, PARACETAMOL BP98, having HS Codes 29332900.
2. Operations: Operations include procedures for converting raw materials into a finished product
(final medicines). Alkem has an extensive manufacturing footprint which has a total 19 facilities
in India and 1 in USA.
3. Outbound Logistics: In value chain analysis, outbound logistics occurs after production. From
the 19 manufacturing facilities, the products are transferred to the respective locations.
4. Marketing and Sales: It includes selling products and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners, and society
at large.
5. Services: It includes all the activities required to keep the product working effectively for the
buyer after it is sold and delivered.
All these activities provide Alkem Laboratories with a competitive advantage over other
pharmaceutical companies.

VRIO Analysis
VIRO Analysis looks at whether an organization’s strengths are.
 Valuable
  Rare (within the market)
 Inimitable (not easy to replicate)
 Organized (full advantage of the resources and capabilities)

Resource VALUAB RARE INIMITAB ORGANIZE IMPACT ON

LE LE D COMPRTITIVE
ADVANATAGE
Strong YES YES YES YES Realized Sustainable
Global Competitive Advantage
Presence
Products YES NO NO YES Realized Competitive parity
Logistics YES YES NO YES Realized temporary
Skills Competitive advantage

Strengths:
1. Diverse Product Portfolio – As per Annual report of 2022-23, the company’s 18 Brands were in
the top 300 Pharma brands & 6 Brands in the top 100 Pharma brands. It is ranked one in Anti-
infective, second in Nutrients segment and third in Gastrointestinal segment. The company have a
widespread product portfolio comprising branded generics, generic drugs, active pharmaceutical
ingredients, and biosimilars. They offer an extensive portfolio that spans 800 brands and more
than 1,300 SKUs that meet a variety of downstream requirements.
2. Strong Research and Development – Alkem has five research and development (R&D) centres
located all over the world. These centres are dedicated to creating novel drug delivery systems
(NDDS), transdermal drug delivery systems, oral films, difficult-to-produce technology-intensive
products, and generics. Their competent and robust research staff, consists of over 500 scientists,
who oversees these R&D centres.
3. Global Presence – After operating internationally for 50 years, Alkem Laboratories is a reputable
Indian generic pharmaceutical company that has grown to become one of the biggest names in the
pharmaceutical market. Apart from the United States and India, they operate in more than 40
international countries worldwide, marketing their products via our subsidiaries and partner firms.
Our primary markets include Australia, Chile, Kazakhstan, and the Philippines.
Weakness:

1. Inefficient use of capital to generate profits - RoCE declining in the last 2 years– In the year
2021-21, RoCE was 21.3% which reduced to 20.4% in 2021-22, and further to 12.6% only in the
last year 2022-2023.
2. Vulnerability to Intellectual Property Risks: The company's competitive edge may be weakened
by any patent challenges or infringements, since the protection of intellectual property rights is
critical to its success.
3. Lower Interest Coverage ratio- The Company reported a lower EBITDA margin YoY on account
of higher marketing spends, increased freight cost, foreign exchange losses and increased travel
cost.

Opportunities:

1. Growth in Pharmaceutical industry - Using invoice pricing levels, the global medication industry
was estimated to be worth US$ 1.5 trillion in 2022, up from US$ 1.42 trillion in 2021. Through
2027, it is predicted to increase to approximately US$1.9 trillion at a 3-6% CAGR, led by Asia-
Pacific, Latin America, Africa/Middle East, and China, all of which are predicted to outpace
global volume growth. In FY 2021–2022, the pharmaceutical business in India reached US$ 49.5
 billion, including US$ 24.62 billion in exports of bulk medications, completed dose formulations,
Ayush herbals, and surgical. Over the last nine years, the industry has grown at a compound
annual growth rate of about 9.4%, placing it in third place globally in terms of volume. The
pharmaceutical market in India is the fourteenth largest globally in terms of value. The Indian
pharmaceutical market is projected to reach US$ 130 billion by 2030.
2. Biosimilars and Biologics – As per WHO, Biological therapeutics, also referred to as Biologicals,
are that class of medicines which are grown and then purified from large-scale cell cultures of
bacteria or yeast, or plant or animal cells. The U.S. Food and Drug Administration (FDA) defines
a biosimilar as “a biological product that is highly similar to and has no clinically meaningful
differences from an existing FDA-approved reference product” in terms of safety, purity, and
potency. The global biosimilar market size reached US$ 16.8 billion in 2022. The market is
estimated to reach US$ 240 billion by 2030, with the Indian market at US$ 35 billion. In
developed markets, there has been an increasing interest in biosimilars as a means to reduce
healthcare costs and increase access to biologics.

Threats:

1. Regulatory risks- Numerous governing organizations have established a number of rules and
regulations that apply to the Company. Inadequate observation may result from noncompliance or
misunderstanding. Additionally, the Company must be ready to abide by any new regulations or
changes made to already-existing legislation. Unsafe discharge methods, careless waste handling,
and poor trash disposal all have a negative effect on the environment. To comply with regulatory
standards, the company needs to implement conscientious waste management procedures.
2. Competition - The fierce competition among the many firms in the pharmaceutical sector for
market share and pricing pressure could have an impact on Alkem's profitability. It also faces
competition in the areas of cost, new product development, legal compliance, and distribution
systems.
CONCLUSION

Alkem Laboratories has demonstrated resilience and strategic agility in navigating the ever-changing
pharmaceutical landscape. The company's recent financial performance demonstrates its ability to seize
growth opportunities while successfully managing challenges. Here's an updated assessment of Alkem
Laboratories' business performance and competitive positioning:

Performance: Alkem Laboratories reported strong financial results for the third quarter, which ended
December 31, 2023. The company's total operating revenue increased by 9.3%, thanks to strong growth in
both domestic and international sales. Notably, India's sales rose by 12.1%, demonstrating the company's
strong market presence and effective marketing strategies. Alkem also maintained a healthy EBITDA
margin of 21.3%, demonstrating operational efficiency and cost control. Investments in R&D remained
significant, demonstrating the company's dedication to innovation and product development.

Competitive Position: Alkem Laboratories operates in a competitive pharmaceutical market marked by

high entry barriers, moderate supplier power, moderate to high buyer power, the threat of substitutes, and
fierce competition. Despite these challenges, the company's strong brand presence, diverse product
portfolio, and emphasis on innovation give it an advantage over competitors. Alkem maintains its
competitive advantage and market leadership through strategic initiatives such as global expansion, R&D
investments, and differentiation strategies.

Strategic Issues

 Regulatory Compliance and Risk Management: Alkem Laboratories faces ongoing regulatory
risks as a result of complying with changing regulations and standards. Ensuring strict adherence
 to regulatory requirements and implementing strong risk management practices are critical for
maintaining operational efficiency and mitigating legal and compliance risks.
 Sustaining Profitability in the Face of Intense Competition: The pharmaceutical industry's
competitive landscape presents challenges in terms of pricing pressure and market share
dynamics. To maintain profitability and market leadership in the face of fierce competition,
Alkem must continue to differentiate its offerings, improve operational efficiency, and seek out
new market opportunities.
 Innovation and Product Development: As the pharmaceutical industry evolves, innovation and
product development are critical to staying relevant and meeting changing consumer demands.
Alkem Laboratories must continue to invest in R&D to develop novel pharmaceutical products,
particularly biosimilars and biologics, in order to capitalize on emerging market trends and
maintain a competitive edge.
 Efficient supply chain management and logistics optimization are critical for ensuring product
delivery on time while minimizing operational costs. To improve operational efficiency and
maintain a competitive edge in the market, Alkem Laboratories should focus on strengthening its
supply chain capabilities, negotiating favorable supplier terms, and optimizing distribution
networks.

Finally, Alkem Laboratories' strong financial performance, global expansion initiatives, and strategic
focus on innovation position the company for continued growth and success in the pharmaceutical
industry. Addressing strategic issues such as regulatory compliance, competition, innovation, and supply
chain management is critical to maintaining market leadership and long-term success.
REFERENCES

Alkem Laboratories. (n.d.). https://www.alkemlabs.com/annual-reports.php

Rating Rationale. (n.d.). https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/

AlkemLaboratoriesLimited_September%2022,%202023_RR_326295.html

Money Control Alkem Laboratories - Competition Comparison.

https://www.moneycontrol.com/competition/alkemlaboratories/comparison/AL05

Print Release. (n.d.). Alkem Labs

https://www.alkemlabs.com/pdf/quaterly-result/Press_release.pdf

Consolidated Results. (n.d.). Alkem Labs. https://www.alkemlabs.com/pdf/quaterly-

result/Alkem_Consol_results.pdf