Good day, and welcome to Maine Pharma Group Limited Full Year Results Call. At this time, I would like to turn the conference over to Mr. Scott Richards. Please go ahead.
Thank you, operator. Good morning, everybody. Thank you for joining us today to discuss Naim Pharma's full year results for 2021. Joining me on the call is Peter Poldeglue, our Chief Financial Officer. As with past practice, I will provide a note of the results and our key strategic priorities, and Peter will provide further details on the financial results, and then we will open up the call to questions.
On Slide 4, we outline some of the key operational and financial features of our results. In terms of the numbers, our results were impacted significantly by foreign exchange. On a constant currency basis, revenue was $401,000,000 down 3% versus last year. Reported EBITDA was $66,000,000 down 5% and underlying EBITDA was $75,000,000 down 10% excluding Nextelis setup costs. A key feature of the result was a significant spend reductions with operating expenses decreasing $26,000,000 or $18,000,000 on a constant currency basis.
And at the bottom line, we recorded a net loss after tax due to the noncash intangible asset repayment of the generic portfolio that was reported in the first half. While these results are not at all where we want our business to be, We have made strong progress on our strategy to reposition our company for growth. We achieved the first half FDA approval from Nextelis and established a new women's health platform in the U. S. We significantly expanded our dermatology and women's health portfolios, adding 11 new products and continue to grow our contract services business in both in the U.
S. And in Australia. Both CDMO businesses grew double digits in their base currency, and the number of development projects grew 17% versus last year. In terms of COVID, our Specialty Products business was the most impacted across the year with reduced rep access to physician offices compounded by either office closures or offices operating at significantly reduced capacity, which collectively drove down prescribing. As we've emerged through the post vaccine era in the U.
S, we've seen improved physical access to prescribers over the past quarter, running at around 80% of pre COVID levels. I would note, though, that there are different levels of access at different in different parts of the country, and we have recently seen a stalling of positive trends here with the emergence of the Delta variant. Internally, we continue to be focused on protecting the health and safety of our employees and ensuring an uninterrupted supply of medicines to our customers. To that end, we maintained strong throughput at our manufacturing site with volumes up 30%, and we have seen minimal disruption through our 3rd party supply chains. While the ongoing challenges in the U.
S. Generic sector are well documented and our retail generic business continues to negatively impact our group results, I'm encouraged by the performance of our other business segments. Contract Services delivered double digit growth in U. S. Dollar terms as a revenue, gross profit and operating profit line.
Specialty Products, which includes our dermatology, women's health and infectious disease portfolio, has delivered strong operating profit growth. And our international business, or MPI, delivered double digit growth at the gross profit line. Slide 6 of the results presentation shows our gross profit broken down into dermatology, women health, contract services, international and the U. S. Retail generic business.
Excluding the U. S. Retail generic business, the remainder of the business now accounts for 82% of gross profit, up from 56% 2 years ago, highlighting the rebalance of our company into what we believe are more durable and predictable businesses where we have a strategic basis to compete effectively. Moving now to operational highlights. Main Pharma achieved its 1st ever NCE or new chemical entity approval for Nxellus in April this year.
This is the 1st approved product containing ADCETROLA E4 in the United States and the 1st new estrogen introduced to contraceptive use in the U. S. For over 50 years. As a reminder, E4 is a low impact estrogen with a unique mechanism of action that offers potential advantages over other estrogens. More than 10,000,000 American women use short acting contraceptives with more than 99% containing ethanol estradiol, which is a synthetic modified estrogen.
C4 is a naturally occurring estrogen now produced from a plant source. Slide 8 outlines the key features of Nextelis, but essentially this contraceptive offers a predictable menstrual cycle with an excellent bleeding profile and a low rate of typical adverse events such as acne and weight gain. Nextelis was launched in late June following the recruitment and training of a new 70 person women's health sales team. The new team has now been in the field for 7 weeks and has made over 20,000 calls to high decile prescribers and held almost 2,000 educational promotional lunches. In this short time, we've reached in person more than 60% of our target audience, which is ahead of plan.
Our marketing strategy at this early stage is focused on building awareness of Nextelis amongst key health care providers that write branded contraceptives, which are typically OBGYNs and allied nurse practitioners. We recently received the results of our 1st market survey of prescribers since launch and are encouraged that 47% are aware of E4 and 68% are aware of Nextel's. This compares with 2% and 15% awareness, respectively, at baseline following the approval in April. This awareness is translating into outcomes, with 24% of those that are aware of Nextelis reporting that they are writing prescriptions and 36% reporting the intention to prescribe over the next 6 months. Slide 10 of the presentation outlines the principal Nextelis performance metrics we track internally.
Gaining commercial insurance coverage is key in ensuring women can access Nextelis at an affordable price. The vast majority of the oral contraceptive market flows through the commercial channel, and we are making very good progress with top payers and are currently sitting at 50% commercial coverage, of which 38% is unrestricted. Our goal by the end of this year is to have 60% unrestricted access, which has been a solid base from which to shift our marketing focus to the consumer. As Nextelis is an NCE, there is a heavy sampling focus initially. Over 30,000 samples have been distributed to physician offices, and our modeling indicates approximately 5,000 women are currently trialing the product.
We have good visibility on prescription data and can track growth scripts written, scripts that are in the process of being dispensed and scripts that are dispensed through the retail channel or through our specialty pharmacy partner, where more than half of that dispensed prescription volumes is today. There are over 1,000 prescriptions that have been written since launch, the majority of which are in the process of dispensing due to women still using up their samples. As a reminder, Nextelis participates in the combined hormonal contraceptive market, which is valued at US3.5 billion dollars Our business plan for Nextelis is targeting peak net sales of more than US200 $1,000,000 which represents 2% of the market by unit volume. Women's health is a core therapeutic area for Maine, and we plan to create a leadership position in this market over time through the addition of novel therapies in areas of unmet need. We also want to leverage our generic portfolio of contraceptives, which covers more than 75% of the U.
S. Oral contraceptive market and include pipeline products such as a generic version of Muvaring, which is pending at the FDA. Our second key therapeutic area is our dermatology business, which represents 29% of our gross profit. Over the last 2 years, this portfolio has faced challenging market conditions with COVID and declining commercial insurance coverage. We've responded to these market dynamics by continuing to adapt our go to market strategy together with restructuring our sales team, which has included operating expenses declining by $9,000,000 versus the prior year, which has significantly improved operating profitability.
Today, the dermatology sales team promotes more than a dozen branded and generic products with support from an extensive network of independent specialty pharmacies across the U. S. We believe our dermatology platform offers advantages in terms of greater convenience and price transparency for patients, reduced administration for the physician and improved economics for the dispensing pharmacy. The last few months have been very active in dermatology on the business development front with 4 new supply agreements signed with leading pharmaceutical companies, including Sandoz, Time, Cassette and Upsher Smith to add 11 dermatology products to our portfolio. The interest we are seeing from other pharma companies in partnering with Maine has grown substantially over the last 12 months and validates our innovative business model.
The 2 largest pipeline products have combined IQVIA sales of US300 $1,000,000 with limited competition and are expected to be meaningful contributors to our business this fiscal year. We expect all of these products to launch across fiscal 2022 with strong contribution to sales and earnings from the past.
I now want to make
a few comments about our U. S. Contract services in the international business. Matrix Contract Services has demonstrated a solid track record of double digit growth over the last 8 years and remains one of only a few U. S.-based CDMOs capable of early stage development through the commercialization from a single contiguous site.
It has over 100 clients and supports 13 of the top 20 global pharma companies. In the last year, the business delivered strong results with sales up 10% and gross profit up 18% in U. S. Dollar terms driven by new commercial manufacturing revenues. The second half performance was even stronger with sales up 20% on the first half.
We continue to see favorable dynamics in the CDMO market with the growth of compounds in clinical development and growing outsourcing trends. Our capabilities are focused on high potent oral solid dose processes, which is very aligned to the growth we are seeing in new molecule programs in the oncology space. Going forward, Metrix has a buoyant pipeline of development projects across the pharmaceutical value chain, including 22 projects in Phase 1, 20 projects in Phase 2 and a dozen projects in Phase 3. In fiscal 2022, 5 Metrix clients are expected to file NDAs with the FDA. MPI, or our international business, also has a demonstrated track record of growth since fiscal 2015.
The international business operates out of the Salisbury, South Australia facility, which is the largest Australian owned full service solid dose site manufacturing both PGA and FDA registered products. In fiscal 2022, the business benefited from strong sales growth in its CDMO unit, which grew 11%, and Australian product sales were up 6%. At the gross profit line, NPI achieved double digit growth, benefiting from record volumes at our Salisbury plant, which were up 60% from the prior corresponding period. The outlook for the international segment is very positive with a solid pipeline of new product launches expected to support growth of the Australian products business. Solarize, gel and Actigirl topical solution were recently added to the Australian portfolio.
Both products are indicated for the treatment of actinic keratosis, and these will be promoted by our existing sales team, focusing on dermatologists and general practitioners that specialize in skin cancer. And next year, we have the potential launches of Nextelis and Fabiora in Australia, which are both pending at the TGA. With that, I'll now hand over to Pete, and he'll go into further details about the results.
Thanks, Scott, and good morning, everyone. I will take a few minutes to provide a brief overview of our financial results for the year. On Slide 21, you will see that foreign exchange has clearly had a material negative impact this year on our results with the average U. S. Dollar strengthening over 10% from $0.67 in the prior corresponding period to $0.75 in financial year 2021.
At the top line, reported revenues were $401,000,000 down $56,000,000 versus the prior period with a weaker U. S. Dollar accounting for $40,000,000 of the sales decline. On a constant currency basis, revenue was down 3%. The balance of the sales decline was due to further erosion of the retail generic segment of GPD.
Reported gross profit was $182,000,000 down 5% on a constant currency basis, and the gross margin of 45.4 percent was essentially flat. Reported EBITDA was $66,000,000 which steps up to $76,000,000 on a constant currency basis, representing a 5% decline versus the prior period. We have provided 2 versions of underlying EBITDA in the documents today, one excluding NextElla setup costs as we did in the first half and one including these costs to be consistent with how analysts have treated Nextelis in their research reports. The total FX impact of the EBITDA line was around $10,000,000 as noted earlier, which includes the translation FX impact of $7,000,000 a transaction currency impact of $1,000,000 and the balance from the revaluation of trading assets. Slide 22 of the presentation outlines the underlying adjustments to EBITDA.
The 2 key ones are the non cash credit of $20,600,000 arising from a decrease in the fair value of earn out liabilities and $15,000,000 of restructuring costs comprising organizational changes we implemented across our global business throughout the year and the discontinuation of certain non viable generic products and development programs. These changes are expected to drive annual cost savings of up to US10 $1,000,000 in financial year 'twenty two. At the bottom line, we reported a net loss of $208,000,000 A key component of this result is the non cash impairment of our generic intangible assets, which was taken in the first half. In terms of our operating businesses, Scott has already talked about MCS and the international segments. I will now make a few high level comments on the Specialty and Generics businesses.
The Specialty Products segment, U. S. Dollar sales and gross profit were essentially flat versus PCP. Operating profit, however, was up 66% due to the significant reduction in marketing expenses following the restructure of the dermatology platform and refresh of our go to market strategy in this segment. Dermatology sales were down by US3 $1,000,000 with COVID affecting access to physicians as well as a tougher managed care environment with increased rebating required for commercial coverage.
SPD benefited from the launch of Nextelis and Saltamox, which contributed US3.5 million dollars in sales. Nextelis sales in June were driven by inventory stocking into key wholesalers. Going forward, we expect limited sales of Nextelis in the Q1 of the fiscal year with the Q2 expected to see sales revenue more closely track prescription demand. GPD revenue was down 10% versus PCP impacted by ongoing pricing pressure across the portfolio as wholesaler bidding activity stepped up. 2 new competitors launched on liothironene in the second half, impacting sales of this product, which were down over 50% versus the first half.
While this represented a significant headwind in our financial year 2021 result, further rationalization is occurring across the generics industry in the U. S, driving incremental new opportunities in select product markets, which we continue to carefully monitor. Across the period, more than 10 products were transferred into our own facilities or into new manufacturing sites, which will provide a stronger basis for competing in the coming year. Future performance of the generic segment will continue to be heavily influenced by the timing of FDA approvals and the competitive intensity of key product markets. We continue to optimize the performance of our generic portfolio, including discontinuing unprofitable products, reducing stock obsolescence and streamlining our cost base through realignment of supply chain activities with raw material suppliers and CMOs.
Moving to expenses. Our OpEx cost base reduced in total by $26,000,000 or $18,000,000 on a constant currency basis. This excludes NextElla setup costs. Within OpEx, marketing and distribution costs were down by $16,000,000 or $11,000,000 FX adjusted, reflecting the restructure undertaken last year in the dermatology business, both to reduce costs and improve alignment with our business model. Admin and other expenses were down $13,000,000 but this includes a number of non cash and non operating items.
Note 4 of the accounts provides a detailed disclosure on our admin expenses. Excluding these non cash and non operating items, admin and other expenses were down $10,000,000 or $7,000,000 FX adjusted. In terms of the other key expense buckets, gross R and D spend, including both capitalized and expensed amounts, was $26,000,000 down $9,000,000 on PCP, whilst net R and D expense was $22,000,000 down $3,000,000 on PCP. The R and D capitalization rate fell from 31% to 18%, reflecting the reduced generic R and D spend as we continue to pivot our development activities towards specialty products. Total finance expenses increased by $1,000,000 although this includes interest expense and a number of noncash items such as the discount unwind on earn out liabilities.
This item increased $5,000,000 in financial year 'twenty one due to the full year effect of the Nextelis earn out liability. Interest expense related to our debt facilities was $11,000,000 down $3,000,000 from the prior period, benefiting from an improved cost of funds with the average interest cost declining from 4.1% in financial year 'twenty to 3.7% in the current financial year. In terms of cash flow, operating cash flow represented an inflow of $59,000,000 for the year. Whilst down significantly from financial year 'twenty, the prior year benefited from a $50,000,000 release of working capital. Adjusting for these working capital changes and additional favorable cash tax impacts, operating cash flow was $62,000,000 versus $65,000,000 in the PCP.
This year, there has been a small investment in working capital due to a number of factors, including the launch of Nextelis, sourcing decisions related to API and finished dose manufacturing and supply continuity of key products during COVID. We note that our supply interactions with Teva have largely wound down with extensively all manufacturing activities now moved to their final destination sites. The key cash flow investing items were $17,000,000 of CapEx spent on our 2 manufacturing facilities, $24,000,000 of earn out payments, dollars 3,000,000 on product acquisitions and $5,000,000 for capitalized R and D. Included in the investing cash flows was the FDA approval milestone of U. S.
$11,000,000 paid to license partner, Mitra, in April earlier this year. After investing cash flows, the company produced free cash flow of $10,000,000 enabling net debt to fall by that corresponding amount. In terms of bank covenants, our bank leverage ratio was 2.6x versus a covenant of 3.75x and interest cover was 7.9x versus the covenant of 3x. The shareholders' fund covenant continues to remain in compliance with shareholders' funds of over $770,000,000 Looking forward, we remain focused on generating free cash flow, deleveraging the balance sheet and prudently controlling our spending. Capital efficiency and allocation will be a key area of emphasis in financial year 'twenty two as we continue to look for further opportunities across our balance sheet to optimize returns to our shareholders.
We have a significant asset base across both key geographies, which provides optionality as to further non dilutive funding to support our growth strategy across the group. We have many programs underway to further improve our cost base, strengthen our supply chain and reduce product manufacturing costs. We anticipate upsizing our receivables financing facility this year to fund the working capital investments we expect for a number of new product launches on the dermatology side and also to support the ramp up of Nextelis. And with that, I will now hand back to Scott.
Thanks, Peter. So look, in summary, Main Pharma's key priorities for the coming year are the successful commercialization of Nextelis in the United States, the launch of more than a dozen dermatology and women's health products also in the United States accelerating the growth of Metrix Contract Services and our international business whilst, of course, continuing to drive an efficient operational cost base across the company. And with that, I'll now hand back to the operator, and we can take questions.
Thank you, will take our first question from our participants.
It's Saul Vadassen at Barranjade Capital. Can you hear me, Scott?
Yes, I can, Saul.
Thanks for taking my questions and good morning, Peter as well. Scott, just the first one, and Peter might have covered this, I might have missed this in his remarks about Nextelas sales through FY 2022. But can you give us any sense of your expectations, just noting that inventory build into the back end of FY 2021? Any rough guess of where those sales might end up through FY 2022?
Yes. Look, so we haven't provided any specific guidance on sales for FY 2022. Obviously, it's a critical year. The launch ramp is critical for our ultimate destination with more than $200,000,000 in peak sales. I think we'll have a better idea and we'll be able to provide probably more color on that once we get through this sampling phase with patients.
But as I said earlier, in my opening comments, every key performance metric we're tracking today is either on plan or ahead of plan. And our plan is consistent with our ultimate debt. But peak sales will be as we've always said, peak sales will be in 3 to 4 years' time.
Yes, understood. Thanks, Scott. And just another one. The slide where you talk about the dermatology products that have been licensed with partners in the generic space, Can you just confirm, you mentioned most of them don't have significant competition. Where it talks to the number of approved dermatology products by partner, are they current the drugs currently in existence in the market?
Are you adding to those numbers with entry in terms of the level of competition across those products?
Yes. So we are partnering with companies that have either have an existing presence in the market, but we are their exclusive distributor in our independent specialty channel, where as I think you realize dermatology products have a significant distribution presence. So in some cases, in most cases, there is an existing product that partner, but it's not in the channel of business that we are in because that's where we have expertise as opposed to, say, in the retail channel. So that's the basis of the partnerships, generally speaking. And further, 2 of the products, in particular, our Syngenta and Star, as I mentioned, USD 300,000,000.
They are products that are meaningful in terms of their potential for us in our channel and both have limited competition and both have, if you like, some intrinsic barriers to entry as well.
Great. Thanks, Scott. And just last quick one for Peter maybe. Peter, just looking at those covenants that you have and I guess particularly focusing on the shareholder capital base or shareholder funds base, I guess the headroom there is somewhat limited if there was to be, say, for example, further impairments in the generics business. What's your sense as to whether that's likely to occur?
Or if you think you've now reached a floor in terms of those the write down in that division?
So we had 2 CGUs that are related to our generics, assets in the U. S. One of those we classify as GPD Other and that has a relatively small amount of intangible value that remains ascribed to that CGU, whilst GPD Women's Health, our other generics CGU has a slightly higher number. Both, as you will see, in Note 13 of the accounts have reasonable headroom from a recoverable value sense to their carrying value. So we feel reasonably comfortable that we're in a good position on both of those CGUs going forward.
Great. Thank you, guys. That's all I had. Thanks, Phil. We will
take our next question from our next participant. Your line is open. Please go ahead.
Hi. It's Gretel Janue from Credit Suisse here. First question, just on Specialty Brands. So second half performance on a constant currency basis was actually below first half, just when I look at it on a half on half basis. So what happened in second half to drive that lower revenue performance?
Yes. Thanks, Gautam. Well, look, 2 things or 2 or 3 things. One, there was an ongoing as I said in my opening comments, there's been ongoing pressure on commercial insurance coverage on some of our dermatology brands. That's part of the story.
The other part is there is a significant difference between first half and second half, and you'll see that in the prior year. If you look at the prior year across our dermatology brands, there was a significant downturn in the second half versus the first half. And in fact, the second half of the year we just had is quite comparable to the second half of the previous financial year. And the reason for that, as I think I've talked about before, is that in January, there's basically everybody's insurance program. Those people are on a high deductible insurance program, which is an ever increasing number of Americans, get their deductible reset.
So as a result, we're covering more patients with our co pay card. And therefore, our net selling cost is effectively a dropping. That then recovers through the year. So there's always a pretty significant half on half, January to June versus July to December effect as those deductibles are burned through and the co pay card support that we provide starts to come off. So I would encourage you to look at the dermatology business half to half versus TCP, if that makes sense.
I mean, COVID, of course, continues to be an effect. But COVID was an effect, of course, in the first half, but it's also there was a significant COVID effect in the first in the Q1 of this calendar year. As I said in my remarks, it's been getting better in terms of access to physician offices in the Q2, but beginning to stall a little bit again right now.
Understood. So I guess just in terms of the exit run rate then for the Specialty Brands, I guess, how much recovery have we seen from that COVID downturn? Like, and should we be expecting stronger growth into FY 2022?
Yes. Look, you should certainly be seeing I mean, there's 2 elements of growth. I mean, certainly, the half on half phenomenon around high deductible plan resets and then patients meeting their deductible and the manufacturer taking less of the burden, that will be an ongoing phenomenon for our brands from the first half of this calendar year to the second half as we've seen in every other prior year. Of course, with the restructuring of our sales force, not only have we taken operating costs out, that we had the benefit of, of course, in fiscal 2021, but we've also changed quite radically our go to market model with the remaining team. And look, I can say at this early juncture, we're already beginning to see some of the benefits of that in terms of our underlying prescription data on key products.
So I think those two things, just the time of the year on the high deductible piece and the benefits coming from sales force effectiveness are going to be tailwinds we should enjoy. And then of course, I mentioned the addition of 11 dermatology products of which all of them are important because we're building a portfolio approach here. The 2 of them in particular could be material to the dermatology business across fiscal 2022. And one of them is going to launch very shortly and the other hopefully in the not too distant future. And both have limited competition.
And of course, the way we sell these products, even though they're generics, we don't really sell them as generics. We're dealing with physicians. We're dealing with our specialty pharmacies. We're dealing with patients. We provide support to patients so they pay a reproducible price.
And as a result, we can command a premium over the retail channel. So this is quite a captive market, and it's the reason why. And our ability because of our sales team and our relationship with these specialty pharmacies and our relationship with doctors gives us the ability to drive a segment of business that generic companies can't. And that's why we've been successful at partnering with a number of companies that we've just announced.
Great. That makes sense. Thanks, Scott. And then can we get an update on Taltura, please? So I know COVID has disrupted the ramp up, but should we expect now that hospitals are becoming more open in the U.
S. A significant ramp up in FY 'twenty two?
Yes. Look, thanks for that question. I mean, it's look, we're seeing good rebound from Tolsera in the second half. And then look, the product is still small because COVID is still the biggest the product that has had has been impacted the most by COVID in terms of physician access has been TULSURA by far because we're dealing with mainly infectious disease physicians and we're dealing with hospitals. So I think and that's whilst it's getting better, we are seeing some pullback there now because of the Dola variant.
It is certainly better than it was, say, 6 months ago. What I can tell you is that whether it's units or scripts or new prescriptions, the metrics for Taltura half on half are significantly up, more than 50% in all of those categories. So look, the team is enthusiastic. The team expects to grow strongly in fiscal 2022. The only caution I would have right now is obviously the environment concerning the Delta variant.
So we'll just have to wait and see.
Thanks. And then just one final question on Extellus. So your operating expense guidance of $50,000,000 for FY 2022, how much of that is related to launch costs as opposed to what we should consider then as being kind of the underlying cost base going forward?
Peter, maybe you want to answer that.
Yes, sure. Thanks, Scott. Gretel, the $50,000,000 is all related to underlying OpEx in fiscal year 'twenty two. We're through the setup and launch phase now that we've commercially launched in June. So you should think about that as the underlying cost base for the women's health platform in the U.
S.
Great. Thanks very much.
Thanks, Greta.
We will take our next question from our next participant.
It's John Deacondele here from Citi. My question was just a follow on from that last question there. On the OpEx, Peter, for FY 'twenty two, can you just overall ex the cost for Exelis? Are we kind of at that run rate in the second half of that's stable now? Or are there further cost to come out?
I think a couple of factors there, John. One, we alluded to some of the restructuring costs at 30 June in my speech where we expect further run rate efficiencies in fiscal year 'twenty two, and the company is continuing to look at ways of optimizing our underlying cost base across all of our operations globally. So the exit run rate should be a good direction for what the 'twenty two cost base would look like, but we expect it to be ahead of that based on some of those restructuring activities we've done across the year. The second aspect is obviously Nextelis is incremental to that, the women's health infrastructure. So when we think about the base business, we're continuing to drive efficiencies, as we mentioned, around dermatology and supply chain efficiencies, etcetera, even efficiencies across our gross net activities with our U.
S. Commercial activities. So the run rate should be stepping down into 2022 and although, of course, the Nextelis piece is incremental.
Yes. Okay. And the I think in the second half, there was a $15,000,000 impairment unrelated to the write downs. Was that just restructuring like redundancies and stuff like that?
No. That impairment charge was related to in process R and D, John. Right.
In process R and D. So things that you thought would work, but you that aren't going to work. So you're reading things
off? Correct. Okay.
And could we just get an update on NuvaRing, Scott, perhaps the likely time? It's obviously been a long time coming. And then also, perhaps, just on the broader your view of the broader generic price deflation for the next 12 months.
Yes, sure, John. Well, we filed our complete response letter to the FDA in March this year. So we expect the potential from the FDA potentially as early as the end of September, but it could be as late as the end of January. And the reason why I say that is that if the FDA wishes to reinspect Mitra, either physically or virtually, then they will comply with that later date as a target action date. As we sit here now towards the end of August, we're unsure.
We're attempting to find out more from the FDA, but I must say transparency with the Office of Generic Drugs is not a strong suit. So the response we made to the CRL in March was very thorough with great support from Mitra. So look, we're getting closer. I'd like to be able to be more specific than that. It still remains a very buoyant market, whether we're the 3rd generic or the 4th generic.
This is still going to be relative to our current generic business. This is still going to be ultimately an important product for us. And as far as just a general comment on price deflation, look, the sector remains volatile. Wholesalers and the 3 big buying groups continue to strive for incremental savings even on products that one could say are already commoditized. And I suppose as long as manufacturers continue to offer prices, then buying groups will continue to seek bids even on mature product lines.
So we've seen a bit of that, and we've been hurt, obviously, significantly. So look, we expect ongoing erosion. We continue to plan for ongoing erosion. But as Peter talked about, we continue to try and offset that with as many things as we can possibly do on the cost side. And we are seeing potentially some interesting capital light opportunities to take advantage of our distribution infrastructure with some additional portfolio.
So it's a tough business, but obviously, we want to harvest those cash flows at the very least as long as we can and to put as much stability into that business as we can for obvious reasons.
Thanks very much.
Thanks, John.
It appears there are no further questions at this time. Mr. Scott, I'd like to turn the conference back to you for any additional or closing remarks.
Thank you, everybody. And I look forward to talking to some of you through the course of the next week. Have a good day. Bye bye.