Solara Active Pharma Sciences hit a lower circuit limit of 20% at Rs 775.05 after the company reported consolidated net loss of Rs 139.87 crore in Q3 December 2021 as against net profit of Rs 65.80 crore in Q3 December 2020.
On a consolidated basis, net sales fell 76.48% to Rs 100.34 crore in Q3 December 2021 over Q3 December 2020.The company reported operating EBITDA loss of Rs 81.7 crore in Q3 December 2021 as against profit of Rs 88.5 crore in Q2 September 2021 and profit of Rs 122.7 crore in Q3 December 2020.
Solara has long operated as a dominant player in the global Ibuprofen market. Over the last 4-5 years, an acute shortage in the capacities of Ibuprofen enabled Solara to increase its market share significantly, especially in the regulated markets.
As a result of the COVID-19 pandemic, Ibuprofen, being an acute product, witnessed a considerable decline in the demand in the regulated markets which impacted the business of Solara.
To address the demand decline, Solara pursued new opportunities in the less regulated markets which were predominantly through channel partners. With increased inventory levels across the value chain and significant pricing pressure, this model led to a lower price realization which impacted the overall company margins.
Further, a delay in approval of Molnupiravir and demand softness of Favipiravir resulted in underperformance of the COVID portfolio.
Commenting on the performance, Rajender Rao Juvvadi (Raj), the newly appointed MD and CEO of the Company, remarked "Q3FY22 was a challenging quarter for Solara as we took a major decision to reset our commercial business strategy. Solara has pursued a change in the commercial model from distribution-led to direct sales to customers in the less regulated markets. While this decision had a one-time impact on the revenues and profitability, we are confident that the new model will deliver a significant long-term value for the Company and enables a higher focus on customer-centricity. Besides this one-off impact, Solara's Q3FY22 performance was muted mainly due to subdued regulated market demand and higher costs driven by volatile material pricing environment and increased logistics cost. That said, we believe that the situation has bottomed out on the demand side, and the business would start seeing normalcy from the Q4FY22.
From a long-term perspective, we have redesigned our playbook to aggressively focus on newer growth segments, including an uptick in the non-ibuprofen product sales, CRAMS, and the newly launched niche APIs. We shall continue to emphasize cost efficiencies and bring operational excellence through different manufacturing and R&D led programs. We have also started seeing green shoots in the ibuprofen demand, and in the coming few quarters, we should expect that business to recoup its growth momentum. We remain committed to delivering our long-term goals on growth and profitability, and we expect to bounce back from the second half of next fiscal. In the near term, we expect the topline trajectory to be back to pre-Q3 FY22 levels."
Meanwhile, the company announced that Rajender Juvvadi Rao will replace Bharath R Sesha as managing director & chief executive officer of the company. Sesha has decided to pursue new opportunities outside of Solara.
Bengaluru-based Solara Active Pharma Sciences offers a basket of diversified, high-value commercial APIs and contract manufacturing services in over 75 countries. It has a manufacturing base comprising five globally compliant API facilities, with approvals including the USFDA, EU GMP, and PMDA in Japan.
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