Alkem Laboratories: Strong Q2 FY26 Performance Driven by Domestic and International Growth

Alkem Laboratories, a leading Indian pharmaceutical company, has delivered a robust performance in the second quarter of Fiscal Year 2026 (Q2 FY26), showcasing significant growth across its domestic and international operations. The company reported a total revenue from operations of INR4,001 crore, marking a substantial 17.2% year-on-year (YoY) increase. This impressive top-line growth was complemented by a strong improvement in profitability, with Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) soaring by 22.3% YoY to INR920.8 crore. Consequently, the EBITDA margin expanded to 23.0% from 22.0% in Q2 FY25, reflecting improved gross margins and operating leverage. Profit After Tax (PAT) also saw a healthy rise of 11.1% YoY, reaching INR765.1 crore.

The company's performance was bolstered by strong execution in both its core Indian market and expanding international footprint. Domestic sales grew by 12.4% YoY to INR2,766 crore, contributing 69.9% to the total sales in Q2 FY26. Alkem demonstrated significant outperformance in the Indian Pharmaceutical Market (IPM), particularly in six key therapy areas: Anti-infectives, Gastrointestinal, VMN, Pain, Respiratory, and Derma. The company's acute segment achieved the number one position in the IPM this quarter, underscoring its strong market presence and strategic focus. International sales were a major growth driver, increasing by 29.5% YoY to INR1,189 crore. The US business, a critical component of international revenue, grew by 28.0% YoY to INR764.9 crore, primarily fueled by new product launches such as Sacubitril/Valsartan and contributions from its Contract Development and Manufacturing Organization (CDMO) business. Non-US international sales also recorded a robust 32.4% YoY growth, reaching INR424.1 crore, with strong traction observed in Australia and key European markets.

Strategic Initiatives and Future Outlook

Alkem Laboratories is actively pursuing several strategic initiatives to sustain its growth trajectory and strengthen its market position. A significant development is the strategic collaboration between Alkem Foundation, the company's Corporate Social Responsibility (CSR) arm, and the Indian Institute of Technology Bombay (IIT Bombay). This partnership aims to establish a first-of-its-kind research centre in India dedicated to immuno-therapeutics and regenerative medicines. Alkem Foundation will contribute a substantial 20-25% of its cumulative CSR obligations over seven years to this pioneering initiative, which is expected to foster cutting-edge research and innovation in complex disease areas with significant unmet medical needs. This collaboration highlights Alkem's commitment to scientific advancement and addressing unmet medical needs through a multidisciplinary approach.

In its international business, the US CDMO plant, which became operational in September, is a key focus area. The company anticipates an annual run rate of INR300 crore from this facility within the next 12 to 18 months, despite incurring initial operational expenditure of INR50-60 crore per quarter in H2 FY26. Management expects the CDMO business to reach breakeven within this timeline. Furthermore, Alkem is poised for the launch of GLP-1 products in India for diabetes indication, having received approval from the subject expert committee and awaiting formal marketing authorization. The company aims to be among the first players in this segment in India, with international launches planned based on patent expiry timelines.

Operational Efficiency and Market Dynamics

Alkem's focus on operational efficiency is evident in its R&D investments and management of new ventures. R&D expenses for Q2 FY26 stood at INR130.2 crore, representing 3.3% of total revenue from operations. The company expects R&D expenditure to be within 4-5% for the full year, with a catch-up in the second half. While new initiatives like the Medtech and Adroit businesses are still in their early stages, they are showing initial traction. The Medtech business, which has completed approximately 900 knee replacements, generated around INR2.5 crore in revenue but recorded an EBITDA loss of INR5.5 crore in Q2 FY26. It is projected to break even by FY28. The Adroit business is currently at a breakeven run rate of INR15 crore per quarter and is being integrated into the domestic business. The company also reported a gain of INR14.29 crore from the sale of its Indore facility in H1 FY26, demonstrating disciplined asset management.

Management has provided a positive outlook, guiding for a double-digit growth for the full year, assuming the IPM grows at 8-8.5%. They anticipate outperforming the market by 100-150 basis points. The full-year EBITDA margin is expected to be in the range of 19.5-20%, with a projected 1% improvement in overall margins from FY27 onwards. The US business is expected to achieve a low double-digit growth of 10-11% for FY26. However, the company acknowledges potential impacts from the GST revision, which is expected to result in a INR50-60 crore impact in H2 FY26 due to the loss of a benefit from the Sikkim facility. Price erosion in the competitive US generics market also remains a factor to monitor in subsequent quarters.

Alkem Laboratories continues to demonstrate strategic clarity and disciplined execution, driving sustained growth across its diverse portfolio. The company's focus on R&D, strategic collaborations, and expansion into high-growth segments positions it well for future success, reinforcing investor confidence in its long-term potential.