Good afternoon, and welcome to Lupin Limited Q4 FY 2024 earnings conference call. Please note that all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the opening remarks. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you.
Thank you. Good afternoon, friends. I'm very pleased to welcome you to our Q4 and end-of-fiscal year 2024 earnings call. I have with me our MD, Nilesh; our CFO, Ramesh; and our head of investor relations, Ravi. We look forward to sharing with you our highlights for the quarter as well as the full year and outlook for fiscal year 2025. We're very pleased to close the year on a strong note, continuing to improve our operating margins and maintain the business momentum for the last many quarters. Revenues in the quarter have grown 30%-13%, rather-year-over-year, driven by all major regions, in particular U.S., India, EMEA, and APAC. Gross margins and operating margins improved in Q4 based on better business and product mix, in particular in the U.S., and also higher efficiencies.
We were very pleased that EBITDA margins improved quarter over quarter despite higher R&D investment and Q4 seasonality impact in U.S. and India. Our U.S. business continues strong at $200 million+ revenues despite lower seasonal products and reduction in products like Darunavir that experience additional competition. Our base business performed well, and new products like tiotropium and generic Prolensa helped offset the seasonal product decline. We're at a good level with 30% substitution with tiotropium 10 months into the launch. We expect tiotropium to continue to be a major growth driver in fiscal year 2025. Albuterol being the meaningful ones. We expect to sustain our U.S. business at the $200+ million level going ahead with the continued ramp-up of tiotropium and new product launches in fiscal year 2025. We have 10+ launches during the year.
Our India business has grown 8.3% year-over-year in the quarter and 9.6% for fiscal year 2024. Within this, our India prescription business has grown 8.7% year-over-year and ex year-over-year on a full-year basis. This was 1.2 times IPM growth. Core therapies like cardio and respiratory segments have grown well ahead of the market, 30% over IPM in fiscal year 2025. We already started to see this in April. We have also carved out our trade generics business into a 100% wholly-owned subsidiary to enhance agility and drive focus on this high-growth segment. Apart from the U.S. and India, other regions have performed well, too. EMEA and APAC recorded strong double-digit growth in the quarter, driven by Fostair generic in Europe and strong growth in markets like Australia as well as Philippines.
We complement with the acquisition of two accretive established brands from Sanofi for Europe and Canada. During the year, we also closed a Medisol transaction, the French complex injectable company, which expands our position in complex generics, in particular in Europe. On the R&D front, we have continued to pivot to more complex products, in particular inhalation and complex injectables. We spent around 50% of our R&D investments in these two platforms portfolio, which we expect to increase to about 50%-60% in the next few years. In the fiscal year 2024, more than 80% of our new product revenues in the U.S. were from non-oral solid products. This offers well for sustainable growth of our generic business going forward. Switching to compliance, we have continued to build on our momentum with recent inspections at Aurangabad and Dabhasa with positive outcomes.
We are on track with our remediation efforts at our Tarapur and Mandideep unit-one sites, and all our sites are compliant with best-in-class GMP standards. Reflecting on the year gone by, fiscal year 2024 has truly been an inflection point for our organization. We are very pleased to turn around our business and deliver on our promise of sustained and profitable growth, driving the shift to complex generics, getting our India business growth to 20%-30% above market, improving our GMP compliance position, and continuing to drive efficiencies. It has also been a year of growth across all our regions and business segments. As we look to building our business, building on our portfolio evolution into complex generics and specialty, we are truly excited about the potential we have ahead of us. With this, I will hand it over to Ramesh for a deeper analysis of our performance.
Thank you, Vinita. Friends, I welcome you all to our Q4 FY2024 and FY2024 annual earnings call. I'm happy to report that this quarter we have delivered another quarter of strong performance with EBITDA growth of 65% year-on-year and consistent 20-plus percentage EBITDA margins. As you would have seen, we've improved our EBITDA margins quarter-on-quarter by about 30 basis points despite higher R&D costs during the quarter. In fact, for the full year, we've handled of growth and profitability. Going into the numbers, sales for Q4 FY2024 came in at 4,895 crores as compared to 4,330 crores in Q4 last year, a growth of 13% year-on-year. We have registered robust growth across most of our key geographies. North America has grown at a strong 23% year-on-year.
India business has grown at a healthy 8.3% year-on-year, while EMEA grew at 17% year-on-year. Our ROW grew 8% year-on-year, and growth markets grew at 16% year-on-year. On a full-year basis, sales have come in at INR 19,656 crores, a growth of 21% year-on-year, and 20% year-on-year adjusting for NCE income received during Q1 of FY 2024. All key segments, excluding LATAM, have delivered strong growth. In particular, U.S. grew 29% in constant currency terms, a formulations business excluding India during this period. The U.S. business: during the quarter, the U.S. business recorded sales of $209 million, marginally lower than Q3 levels on a constant currency basis. While pricing on base businesses remained relatively flat, decline has been due to the lower volumes on seasonal products and lower sales of products like Darunavir.
For the full year, the U.S. business has recorded sales of $850 million as against $632 million last year, registering a growth of 29% year on year in constant currency terms. This has been led by volume growth in our base business and healthy contributions from new products. As Vinita mentioned, our strategy of focusing on complex products in our pipeline has paid handsome dividends, and more than 80% of the sales from our new products this year have come from non-oral solids. In fact, if we look at our pipeline for FY 2025, more than 70% of the new launches in the current year will be non-oral solid in nature. The India region: the India business has grown by 8.3% year on year during the quarter and 9.6% year on year in FY 2024.
Specifically, during the year, the prescription business has grown 8.7% year-over-year and 9.3% ex-Cidmus, outperforming the IPM growth during the year. Segments like respiratory, cardiology, and oncology have performed IPM growth in their respective segments. The share of in-license products in the quarter has reduced to around 11% of our portfolio from around 15%-16% last year, while also having a positive impact on our profitability going ahead. We've launched 28 products in FY 2024 and plan to launch about 20 products in FY 2025. I'm also happy to report that our diagnostics business is scaling up very well with revenue growth of 160% year-over-year and around 40 labs under operation. EMEA: our EMEA region, which constitutes our EU business and the South Africa business, registered strong growth of 17% year-over-year during the quarter and 24% year-over-year in FY 2024.
This has been driven by steady growth in key EU markets like the U.K. and Germany for NaMuscla inhalation products and also partner business. Growth markets: our growth markets include the APAC and Latam regions. The APAC market grew by 33% year-on-year during the quarter, led by strong growth in markets like the Philippines and Australia. The Latam market, however, declined by 6% year-on-year in the quarter due to ongoing headwinds in Brazil, which are partially offset by growth in Mexico. Other operating income: our other operating income at INR 66 crores has decreased by 34% year-on-year during the quarter. This decrease is primarily on account of the facing of PLI benefits during the year. On a full-year basis, other operating income came in at INR 355 crores against INR 372 crores last year.
Gross margins: coming to the profitability, Q4 FY 2024 gross margins were 67.8%, up from 59.6% in Q4 last year and 66% recorded in Q3 FY 2024. While we have seen improvement driven by multiple factors, which includes better product mix, lower share of in-license products, increased volumes, the gross margins have also benefited from higher inventory, which we are carrying on account of, as a risk mitigation measure due to geopolitical tensions in the Middle East. For the full year, reported gross margins have come in at 66.2% as compared to 58.3% last year. Adjusted for NC income, gross margins are at 65.8%. Employees' benefits expenses: at INR 90 crore increased marginally from INR 889 crore in Q3 FY 2024, translating into 18.4% of sales versus 17.5% last year last quarter. This change is largely attributable to higher impact of ESOPs offset by lower seasonal domestic sales during the quarter.
For the full year, employee costs have increased by INR 4.7 crores, led mainly driven by the annual salary hikes and the India field force expansion, which we undertook last year. This translates to 17.8% of sales on a reported basis and 18% on an adjusted basis as compared to 19% of sales in FY 2023. Manufacturing and other expenses: Q4 FY 2024 manufacturing and other expenses came in at INR 1,490 crores, which translates to approximately 30.4% of sales as compared to 30.7% of sales in Q3 this year. The expenses are lower in spite of higher R&D due to lower business settlement expenses, lower litigation costs, and lower SG&A costs due to seasonality. Manufacturing and other expenses in FY 2024 came in at INR 6,073 crores, an increase of INR 1,019 crores as compared to FY 2023.
This translated to 30.9% on a reported basis and 31.2% of sales on an ex-NC basis as compared to 31.1% last year. This has been led by primarily higher R&D outlay, higher SG&A on account of field force expansion, and higher volumes from increased sales. R&D is at INR 426 crore. That's 8.7% of sales in Q4 FY 2024 as compared with INR 305 crore at 7% of sales in Q4 FY 2023. For the full year, R&D is INR 1,527 crore versus a guidance of about INR 1,500-INR 1,550 crore, translating to 7.8% of sales. EBITDA: excluding forex and other income, EBITDA was at INR 997 crore, up 65% year-over-year. Margins for the quarter were higher at 20.4% versus 20.1% in Q3 FY 2024 and 13.9% in Q4 last year. For the FY 2024 period, reported, EBITDA margins are 19.3%, and excluding NC income, are at 18.5%.
Depreciation amortization at INR 457 crores as compared to INR 264 crores last year. This recognized an impairment of INR 201 crores relating to the intangible assets, which are essentially discontinued NDAs and certain tangible assets. ETR was 26% in Q4 and 20.1% for FY 2024. Operating working capital was at INR 5,691 crores, as of March 31st 2024 , which translates to 105 days of net working capital. While this has been a reduction as compared to the last year, it has increased by, from the 96 days recorded last quarter, primarily on account of, higher inventory that we are carrying given the disruption, and the geopolitical tensions in the Middle East. Net debt stands at, INR 477 crores. It's reduced from INR 2,527 crores in, March 2023, indicating a reduction of more than INR 2,000 crores during the year.
On the ESG front, of course, we have done extremely well, as you would be aware, and we have got a S&P DJI score of 69 over 100, kind of reflecting exceptional performance, placing us at the top 95th percentile for the pharmaceutical sector as a whole. With this, we open the floor for discussions.
Thank you, Vinita, sir, for the insights. We will now begin the question-and-answer session. Please raise your hands from the participant tab on the screen to ask questions. We will wait for 30 seconds for the queue to assemble. Thank you. Okay, thank you for the patience. The first question is from Neha Manpuria. Neha, go ahead, please.
Yeah, thanks for taking my question. My first question is on, you know, the U.S. pipeline, two products specifically. First on, you know, Mirabegron, we saw that we launched the product, you know, and then we got an injunction. You know, how do you think is our position in the litigation given the win in the lower court? You know, do you think this is still a credible launch for this year? And second, on Spiriva, we have seen some moderation in market share in the last few weeks. You know, so what's your sense there? Your opening comments did mention traction in the product, so, you know, what are we expecting in terms of market share when you think about Spiriva going into next year?
Mirabegron, you know, we have a temporary restraining order. You know, they were not given the preliminary injunction.
Yeah.
So, we feel pretty good about our position, and, you know, we'll have a read on it over the next few days. Hopefully, we should be able to launch the product again. You know, I think that Astellas has really filed multiple patents after patent, and, you know, to prevent an affordable generic to come to market, but we feel pretty strongly about our position both from a non-infringement as well as invalidity standpoint. So we should certainly have the opportunity to relaunch the product shortly. On Tiotropium, you know, we had guided at the beginning of the year that, typically, in the first year, the first 12 months, you see a generic product take 25%-30% share. And we are, you know, right now, 10 months in, at 30% share.
You know, a couple of weeks can be up or down, but we're not seeing any tapering off of, you know, on the, on our order book or, you know, share standpoint, so we feel pretty good about the 30% so far. We're also going to take a look at what happens over the next couple of months. In June, the brand has announced, as part of a response on respiratory products, you know, the pressure that they had from Congress, they had announced a $35 cap on out-of-pocket pay, you know, to patients. We'll see if there's any impact of that, if it suggests that we should modify any of our strategy. But so far, it's been pretty good. We've been pretty much on track on the share and very favorable on the pricing front as well.
Are we still okay with the 40% market share that we had, guided to previously, for Spiriva in the next year?
So we had said 30, 35, and we'll see, you know, based on, again, what is, you know, what, what you know, we want profitable share at the end of the day, so we'll see.
Yeah, makes sense.
Yeah.
Understood. My second question is on the, you know, gross margins, a very strong, gross margin performance. How should I think about the gross margins, you know, going into next year? You know, is this the base that we should assume that we build on, or should I take a more blended, you know, three-quarter, you know, for gross margins given the higher inventory impact that you talked about?
So, current quarter has, of course, been, you know, influenced by the sales spikes and, of course, tailwinds on account of the input costs, and, there's, of course, the higher inventory buildup. I would imagine, given the buoyancy at the, you know, the top line, the kind of products that they are bringing in and, the emphasis on, in fact, route synthesis, potentially alternate vendor strategies and the like, we should be able to kind of maintain, sustain these levels of gross margins in the days to come.
Got it. Thank you so much.
Thanks, Neha. The next question is from Kunal Dhamesha. Kunal, go ahead, please.
Yeah. Yeah, good evening, and thank you for the opportunity, and congratulations on a good set of numbers. Just the first one on, you know, the top-line growth expectation for FY 2025 overall and, the EBITDA margin expectation.
We should be at, you know, close to 10% level in terms of revenue growth and EBITDA margin at 20% plus.
Would this EBITDA margin expectation include Mirabegron, or, if Mirabegron happens, there would be potential upside to this?
Yeah, hopefully, we have some upside to it.
Okay, perfect. And, secondly, on the India business, now that, you know, we have again started growing at almost low double-digit, how do we see this market growth in the next year and probably in the next over the next two to three years, given that we have one patent expiry, which, which is coming? What would we do to offset that? And, as a second part of that question is, the number of medical representatives we have in the business along with the first-line manager and excluding the first-line manager. Thank you.
Sure. So I think on the India business, you know, our goal has been to grow at, you know, 20%-30% ahead of the market. The market, for example, in Q4 was sluggish, you know, grew only 5.7%, but for the year, the market grew at 7.6%, so we obviously grew ahead of the market at 8.7%. We would want this to step up even more, so I'm hoping, you know, we're hoping for the market to grow at a slightly higher pace, and obviously, we should be close to double-digit growth in India accordingly. I don't have the exact specifics on the sales force numbers. It's roughly about 7,500 med reps, and 10,000 people altogether.
Okay, perfect. And, if I may, one more on the diagnostic business, you know, we have seen strong growth, etc., but how do we see deployment of capital from here on? And, you know, in terms of profitability, it is obviously a drag right now, but when do you see that, you know, probably become breakeven?
Yeah, so I think at the board level, we've built clear guardrails for all the adjacent businesses, whether it's the diagnostic business, whether it's the digital business, whether it's even our investments into areas like OTC. On diagnostics in particular, the burn went up in the last year versus the previous year, so it was higher in FY 2024 versus FY 2023. In FY 2025, we basically see it at a similar level, and then we see it coming down. So in the next 2 years, we see significant improvement on the business from a profitability perspective.
Okay. And in terms of any, you know, revenue guidance, revenue growth guidance for that business, the entire other business apart from the pharma business?
Yeah, so I think we are calling it out separately in our numbers as we're reporting them now. So the numbers that are reported, I think INR 60-odd crore is basically all diagnostics at this point of time. That number will obviously grow to a multiple of that in the next five years. Still very, very small and certainly not the focus area for India. The core pharmaceutical business will always remain the focus in India.
Sure. Thank you and all the best.
Thanks, Kunal. We'll take the next question from Bino Pathiparampil. Bino, you're up.
Hi, hi. Good morning and good afternoon. Vinita, first, on Spiriva, can we assume that, an authorized generic is now not going to come, or is it still a risk?
It's hard to tell, Bino. You know, we hope that, given the share as well as, you know, the current status of the market, that, you know, that we continue as, both the brand and generic, but it's hard to predict.
Okay. In Myrbetriq, you launched only the 25 mg and not the 50 mg. What was the reason for that?
We were just prepared with the 25 mg, and, you know, yeah, just to have 20 mg was where we were ready to launch.
Okay. So if the TRO is lifted, you can potentially launch 50 as well? You would potentially?
Yeah, potentially.
Okay. And just one question on the market size on Myrbetriq. You know, as per IQVIA and as per your PR, of course, quoting IQVIA, the market size is around $2 billion. But if you look at Astellas's annual report, it seems to be very different, only at around $700 million or something. Is there such a big rebate or something in there, or how do you read that?
Yeah, we believe that there is that gross to net that Astellas has contracted with PBMs.
Oh, okay. And if I may push one last one, the Oracea generic opportunity, the sales number you, you have quoted, again, quoting from IQVIA of around $128 million or so, is that the market for just Oracea or the entire, entire doxycycline market, generic doxycycline market?
No, it's just Oracea. I mean, doxycycline is really large, many different brands. You know, that's been a really nice launch for us in April.
Oh, okay. Understood. Great. Thank you. I'll join back.
Thanks.
Thanks, Bino. We'll take the next question from Nimish Mehta. Nimish, are you there? Hello, Nimish? Okay, so we'll go with Shyam Srinivasan.
Can you hear me? Can you hear me now?
Yeah, yeah, yeah. Nimish, we can hear you.
I'm sorry. Yeah, I'm sorry. I'm thinking it was unmuted.
Please, please.
Yeah, thanks for the opportunity. See, what I understand for the U.S. generics industry is that in the month of April, we have seen some significant price reduction across the board. One wanted to know your views and also the impact on our portfolio.
So the price erosion actually has been pretty reasonable over the last 12 months, I would say. We experienced a single-digit price erosion, and there still continues to be a very strong, you know, drug supply shortage issue in the U.S.. We were just in Washington, D.C. last week along with a number of our peers and, you know, heard a lot of concerns about drug shortages. So we expect that that should really keep price erosion at a reasonable level going forward, you know, at least in the next 12 months. So we don't really see this April impact. You know, you probably are looking at IMS data, which, you know, really does not give you a real picture of net pricing.
So, the reduction that is seen in April is not something that we, you know, in nature of not seen on the ground. Is that what you're saying?
Yeah, we haven't, like I said, you know, the last 12 months has been a single-digit.
Understood. Okay. The other question I have is regarding the domestic market. We have seen government cracking down on a lot of the smaller CMO suppliers, and so you know, wanted to know how is it impacting Lupin, and will that also mean that we will have more capacity to build so that you know, we kind of do not get into any problem related to CMOs' quality issues or anything like that?
Yeah, and I think that's a great question. I, I think that clearly the government is showing intent to move up on quality, which is why they've been cracking down on some of the suppliers. You would have seen today they talked about new standards for exports as well. So I think there is a clear intent to move up on quality, which is great for companies such as us. We've not had any disruption with any of these. Most of these suppliers we've not worked with or, you know, we've had mitigation plans in place as these issues may have arisen as well. We have a pretty robust process of vendor management in place, so not impacted. I think there's a bigger opportunity in the longer term to manufacture more ourselves, and that's something that we will explore.
Understood. And if I may, the last one only, trade generics, that will be very helpful. I mean, we have seen, you know, all the large companies, including ours, to be launching a separate trade generic business either in the form of a company or a division. So what is that trigger, and how do you think this will play out again, you know, versus our own brands? So do you think that at an aggregate level, this will grow significantly enough to kind of challenge the pricing, for the whole industry?
Yeah, so I think the trade generics is a growth opportunity. Clearly, it's a higher growth segment. That being said, it's going to remain a portion of the market. It's not going to be the dominant portion of the market. And our focus, you know, just like others, would be to, you know, bring that focus, bring that agility, bring that clear accountability into managing that business very closely. This business has to be managed very closely. It has to be managed much more aggressively than even the Indian domestic business. So and I think that was the main reason to spin it into a separate entity. But, you know, again, like just like with any, every anything else, there are guardrails that are built into this, and, you know, we don't think this is going to be the dominant element of the Indian market.
I just wanted to know, what is the trigger for which it will grow? Because this has been there since many years now, right? What is the change that has happened in the market which you see is going to trigger this growth in this generic business?
I think whether it's organized retail, whether it is the hospital segment, whether it's more institutional buy, obviously there is more of this business happening there, and therefore that is the opportunity as well, including to you know tier two, tier three kind of towns as well.
Okay, okay. Thank you very much.
Thanks, Nimish. We'll take the next question from Shyam Srinivasan.
Yeah, hi. Good evening, and thank you for taking my question. Just the first one on the US business, right? So we have done an annual revenue of $815 million. And just want to see how should we should look at it in a medium to longer term. Can we go back to $1 billion, at some point of time? What are some of the drivers of that, particular thing? I think that's the first question I have.
Yeah, so certainly with the pipeline that we have over the next two years, you know, next year being both a combination of some of these C4 products where we should have some upside opportunity and, you know, some nice injectable products as well. The following year, you know, potentially the launch of tolvaptan, which we're an exclusive generic. You know, that plus our injectable portfolio, products like liraglutide, Victoza, Saxenda, glucagon, you know, we expect fiscal year 2026 to be a, you know, certainly a year where we have, you know, if not at $1 billion, we should be close to it.
Understood. Vinita, so it's still close to what about 10%-12% kind of growth, right? Won't we see a more faster growth? I'm just wondering why, why not? Sorry.
Well, we still assume that the older products will come down, you know? We still assume in our plan that we will see additional competition on existing products, that new products, you know, offset and help grow. So, you know, hopefully, potentially, there's an upside if you don't see that kind of price erosion.
Got it. Helpful. Just the second one is on the 80% of new products are non-oral in nature. If you were to look at the map the margins on that portfolio vis-à-vis the orals, you know, should one actually expect higher margins, or you think even non-oral margins have actually come down to what about the 20% odd that we are showing? How should we look at that?
No, definitely much better margins. That's what's, you know, helped us really shore up the U.S. business profitability and the company profitability as well to a certain extent. It's, you know, the complex products are, you know, relatively speaking, better margin products.
So yeah, just trying to tie this to the guidance then, so last question for Ramesh. When we talk about gross margins not improving further from here, but all this contribution of non-oral continues to remain in the forward path, so just trying to tie, are we at gross margins, we should see benefit, but we might give it back elsewhere, is it? Is that how we should look at it?
There is going to be a higher quantum of R&D spends, you know? It's kind of reflected in the current quarter itself, you know? So about INR 150 gross. So that run rate will certainly be, you know, would be there, you know? So, and while, of course, there will be improvements on the gross margins front, there are also tailwinds. You looked at, for example, the freight element. You know, there's uncertainty there and so on. So we can't actually provide for all kind of ups and downs in the future. So to that extent, we would prefer to be prudent in our guidance also.
Understood, yeah. Thank you, and all the best.
Thanks, Shyam. So before we move to the next question, there's a reminder to request all the participants to raise their hands from the participant tab for more questions. So we'll take the next question from Surya Patra.
Yeah, thanks for this opportunity. Ma'am, first question is about the Spiriva. So, how should we think about the pricing of Spiriva, or how sustainable is this pricing given the kind of cap on the overall cost that has been that you mentioned?
So far, it's been very stable. You know, we priced based on the brand price and the minimal amount of discount that we had to give to be able to get substitution. And we will see what the brand does. You know, we'll see the impact of the change in coupon that is expected to come in June and determine if we need to do anything more than that. But at this point in time, it feels it looks like it's very stable.
Okay. And in terms of the list price correction for the brand, have you seen any change in the initial period of this quarter?
No, we haven't.
So, is it fair to believe that the list price is likely to be maintained for the entirety of the year?
I would expect so. I wouldn't, we don't have any indications that, you know, of course, a bank can do what the brand wants to do, but they typically don't change list price.
Okay. The second question is about overall respiratory sales contribution to the business. So is it possible to say, like, what is the respiratory sales mix for the U.S. business, and what is, in general, for your overall, Lupin-wide business?
So company-wide, it's at 25%, you know, given the strong presence in the U.S., India, and Europe, and also growing presence in other countries. We just launched tiotropium in Canada. We're launching in Australia. So, 25% company-wide. The U.S. is close to 40%.
Okay. And, this quarter, it looks like that we have seen some sequential uptake in the Albuterol market share. So could you share what is the market share currently that we are enjoying, and what is your outlook there in terms of pricing as well as, in terms of the competition that you might face for the?
Yeah, so it's pretty stable at that 23% level, market share. There's been some uptake because of seasonality in the past couple of months, but it's tapered off a little bit because the flu season was short. But it's been fairly stable. And you know, also from a competition standpoint, we've actually, you know, it's a very difficult product to make. It's not easy to make the MDIs and DPIs as we find as well. So we hope to see more, you know, more stability in this portfolio.
Okay. See, while you have mentioned that going ahead by FY 2028, you are likely to introduce many complex products, around 20-odd products over three, four years. So, given those kind of pipeline, where do you see your respiratory portfolio playing for your overall growth strategy?
It's a significant growth driver for us for the next five years. Now, as we look at, a five-year plan, I mean, both the respiratory and injectable products where we have, you know, an increasing percentage of our investment, they, they're going to be a larger part of our portfolio going forward.
Okay. Okay. Just, last one question, if you can, comment on the Lupin Life initiatives along with the diagnostics and that helping to your domestic portfolios, domestic business as a whole. So how all these are integrated, and how are these going to help you in the domestic positioning?
Sure. And that's a question that we ask the team regularly as well. I think when it comes to diagnostics. Sorry, there's background noise. I think on diagnostics, you know, one part obviously is the role that key opinion leaders have played on diagnostics. We're looking at companion medicines between diagnostics and drugs as well. So we're looking at pathways there. So, you know, there are certain synergies, but I think other than that, obviously, the bigger thing is to be a trusted provider of healthcare, which is why we have that business. On digital, I think that is much closer to our cardiovascular metabolic play. And, you know, I think it's the same doctors.
It is, we're reaching the same target audience for an additional set of prescriptions, and hopefully, we will get substantial rub-off benefit of that. That business is obviously, you know, it. I think we're talking about changing doctor prescribing patient behavior, and they're, you know, that's obviously more challenging from that perspective. But we've had some nice wins to start.
Okay. Just last one question, if you allow, about, could you give us some update about the, Fostair inhaler market share progression in Europe as well as, for, what is the progress that we have seen for our, Enbrel in Europe? What is market share that we would be happy?
So, Fostair, we still, the dominant share in most of the European countries. We've launched, I think at this point, we're in 13 countries, and, through both our direct presence as well as our partners, and have continued to really build on our share. So it's been a material growth driver for our European business and this past year. It continues to be a very strong product for us, largest product for us in Europe.
Is it a $15 million-$20 million product, ma'am?
It's more than that.
Oh, okay. And, Enbrel?
Yeah, Enbrel also has improved. We have had growth in Enbrel revenues this past year. You know, in Europe, certainly, the shares grow, but we have launched also in other countries, like Russia, the product was launched. You know, we also have countries like in Latin America that are on the table right now. We are launching in the Middle East and Australia. We just announced also this last week, we launched in Canada through our Sandoz partnership. So the product continues to grow in all of the available markets.
Sure. Yeah, thank you, ma'am. We see all the interested partners.
Thank you.
Thanks, Surya. Can we sincerely request everyone to limit your questions to maximum two so that we can accommodate more participants? You can always get back in the queue for more questions. Thank you. So we'll take the next question from Tarang Agrawal. Tarang, are you there? Hello?
Yes. Hi. Yeah, hi.
Thanks.
Hi. Good evening, and congratulations for an extremely strong set of numbers. Couple of questions. One, you know, we read a lot around shortages in the U.S., both around injectables as well as the oral solids. There seems to be a fair bit of traction from regulators and state actors as well. But, I mean, you being there, are you witnessing anything structurally changing in this market? One. Second, versus how things were, say, a year back, how have things evolved, and how do you see these things moving forward? So those are two sub-questions. Second, if you could give us some sense on what's happening with your biosimilar business. Thank you.
Yeah, so, we certainly have seen things stabilizing, you know? When we looked at the number of the drug shortages and analyzed the root cause, the largest percentage was they were economically not viable. So companies like us, a number of our peers had gotten out of these products, because they were just, from a pricing standpoint, had come down to a level where it didn't make sense to continue to manufacture them. So there's been a good amount of recognition of it, both with our customers as well as, you know, the other stakeholders, you know, the U.S. government, the FDA, the FTC, you know, there's been a good level of, you know, concern across the board in the U.S., on these drug shortages and the cause for drug shortages.
You know, we think that that's the reason that price erosion has stabilized to some level, and you know, we are going to hopefully continue to see this going forward. Structurally, I'd say that there are a lot of stakeholders, you know, in Washington, D.C., that are looking hard at the reason for these drug shortages and are working hard to see what they can do to prevent these. So, there is a good amount of scrutiny on the market dynamics that are causing companies to you know, exit products. Hopefully, that will bring some level of balance in the marketplace or continue to maintain the balance in the marketplace, which will be promising for the U.S. generic market.
On biosimilars, you know, our focus so far has been really more focused on development and manufacturing of the products that we have chosen to go get into. We have Enbrel, of course, Etanercept that we partnered with Mylan, which is now with Biocon. We have other partners like Sandoz in Canada, and we have the right to the U.S. ourselves, which comes available in 2029. So that is kind of a partnered product so far. We have pegfilgrastim that we are still waiting to get FDA approval. In fact, we just resubmitted our supplement, the CRL response. We are actually in the process of resubmitting it shortly, but believe that we are in a very good position there as well to get FDA approval. So far, we've got European, Japanese, every other regulatory authority, but not the U.S. FDA approval.
That's going to be an important one for us, in fiscal year 2025. And then, we have other products that, we have pretty far along, like, Lucentis, Ranibizumab. We intend to file in fiscal year 2025 to the FDA and, as well as other parts of the world. So that should be a good opportunity for us, on the ophthalmic front. And then we have a couple of respiratory products that we are pursuing as well, Mepolizumab and Benralizumab, and tracking the market, very closely to see if we can, try to get the products through some of the countries without a PD study.
So, we continue to build on our biosimilars platform and strategy, but cautiously, I would say, because there are tremendous amount of hurdles as well on the biosimilars front that we have seen, both from a you know, regulatory perspective in terms of what it takes to get it through FDA and other agencies as well as market access, you know, from a go-to-market standpoint, and then at the end of the day, the contracting strategy of the brand. So cautiously building that portfolio, which will serve us long-term as a really nice, you know, additional platform that will help us differentiate our portfolio.
Okay. Thank you. All the best.
Thank you.
Thanks, Tarang. We'll have the next question from Girish Bakhru.
Yeah, hi. Thanks for taking my question. Rita, you commented on Spiriva, AG, not sure, but any update on the next ANDA filer when we can see Spiriva update on the Chinese product line it was trying to bring?
Yeah, hard to predict, really, you know? We know how long it took us. It was 5 years. And, you know, it's a complex product to make. So we'll wait to see. We think, yeah, there's a hurdle pattern in 2027, which it's hard to get around. So, you know, we expect the next couple of years should be, you know, fairly sustainable.
Understood. And, just commenting again on this few pipeline products you mentioned, especially Victoza, Saxenda, none of the Indian generics have settled, whereas we have seen so many MNC companies have already settled with Teva possibly forming the market later this year. Just trying to assess how competitive this will be in FY 2026 and whether it will be meaningfully different depending upon what device every generic brings.
Yeah, so we think that it could potentially be very competitive based on the number of companies that have filed. But just looking at how long it has taken companies to get approval, there might be, you know, a very different kind of approval scenario in the marketplace that should help, you know, make it a pretty attractive opportunity. So, you know, hard to predict, really, who's going to get approved when. But in the next couple of years, certainly, you know, we should see a few competitors in the marketplace.
Last one, I mean, Dulera Organon is still expecting a generic this year. Any thoughts on your CRL update?
Yeah, so we are still working on our response to the FDA. Our team has met with the FDA recently, had a, you know, pretty good clarity on what it would take to respond to the agency. We expect to respond this fiscal year. So we don't expect to launch in the next 12 months.
Understood. Thank you.
Thanks, Girish. Can we have the next question from Harsh Bhatia?
Yeah, thank you. Am I audible?
Yes.
Yes, you are.
Yeah, thank you. Just two quick questions. One is from the Nagpur Unit 2, I think so. Glucagon is launched from that plant. From the next 12 months' perspective, which of the products do you think can come from that particular plant?
Sorry, I didn't catch the name of the product you mentioned.
Glucogen.
Do you mean an injectable plant? Because I still can't recall the product.
Yeah, Glucagon. Nilesh, it is Glucagon.
Yeah, we haven't launched Glucagon. We have launched ganirelix.
So I think there's 5 or 6 launches that we would expect from the Nagpur plant, 5, 6 filings as well. It's still in ramp-up mode, really. There's only 1 or 2 products, one for U.S., one for elsewhere, that we sell from that plant right now. This is a world-class plant. So I think from that perspective, you know, 5, 6 filings and 5, 6 launches is what you would expect on a steady state going forward.
This would be for a period of next 2-3-year period, right, the filings launches?
Yeah, if at all, we should accelerate.
Oh, okay. Okay. And when was the last inspection for the plant, the Unit 2?
A couple of months ago.
We were inspected,
A few months ago, actually.
12 months ago.
Yeah, that was the oral solid, about 12 months ago.
Yeah.
Yeah.
Okay. Unit 2 as well, the injectable block.
Injectable plant is what we're talking about.
Okay. Could you comment anything on Ellipta? I think so last time, we had spoken about a few quarters back that we were looking at filing the product.
Yeah, we're still working on it, making good progress on the platform as well as the two key products. You know, hope that end of this fiscal year 2025, we're able to report material progress.
Okay. Thank you. Thank you.
Thanks, Harsh. The next question is from Damayanti, did I?
Hi. Thank you for the opportunity. Just wanted to understand your big margin improvement trajectory better. So Ramesh mentioned it's a combination of multiple factors. But if you can help us understand, say, how much is broadly contributed by process efficiencies, which you have brought over the last few years, and what could be broader contribution coming from new launches, etc., and leaving apart the inventory gain which you had seen during fourth quarter. So very broadly, you can also help us understand which are the visible pockets of improvement, which is there for you. Because last quarter, I guess you talked about your aspiration margins around 22.5%-23% for next few years. So any commentary on that will be helpful.
Actually, you're asking for too many questions in the same breath, but let me explain what I mean. Firstly, on the, you know, Bio/NCE actually contributed. So, for example, the Spiriva launch itself brought in about 4-5 percentage points, so to speak, you know, on the gross margins and the like. But of course, we've been working on a host of other initiatives, you know, which actually helped out on the gross margins, essentially, in terms of route synthesis, AVD programs, vendors, and the like. That contributed about, and over the last 3-4 years, I would say about $400 gross. Though, of course, a part of this was eroded by potentially price, you know, erosion and the like.
The second part, of course, is we kind of identified a host of things that we thought were inefficiencies in the system, which included, for example, you know, failures to supply. We had issues in terms of air freighting. We had issues in terms of inventory write-offs, and a host of other things, you know? So we worked on that as well. And that, apart from, of course, what we worked on, you know, below the gross margin line, which included the, you know, workforce rationalization schemes across factories, R&D, and the like. So all of this put together, idle time, footprint reduction in some ways, all of this contributed, I would say, another about 400-500 gross. And this has brought us to the levels that we already are in, you know, which is around the 20-20.5 percentage points.
We have also identified newer strategies for some of these adjacencies, and businesses that we would like to spin off on, you know, spin and so they kind of rotate on their own axis, which is, you know, including product, you know, you know, verticals like potentially the, the API, CDMO, and at some point in time, the biosimilars and the like. If once all of this is actually done, surely we would be, you know, to be something to be around the 23-24 percentage points, in line with our peers, so to speak.
Okay. So, from this EBIT margin rate of 20%+, there is good headroom to go up to, say, 23%, if all these things work out for you?
Which we think will happen in the next 2-3 years, for sure.
Okay. So 2025, you guided for 20%+ margin. And then, this 20%+ margin can move up to, say, 23% in another two years or so. Is that the trajectory we are broadly looking at?
That's a very good understanding of the situation.
Okay. And my next question is on a few of the peptide products, I guess, which we earlier discussed. So anything, I guess, which should be meaningful from Lupin's perspective in next two years? So you mentioned Liraglutide, I guess, is the nearest opportunity in this space.
That's right.
Yeah.
Our first peptide launch was Ganerelix, and liraglutide will be a material opportunity over the next few years.
So, from your filing perspective, it's, like, what are the remaining steps? Say, like, you are done with the process. It's a review by the FDA and final approval, which is to come, or there are some pending steps which you need to complete before these products come in market?
No, so we have filed a while ago and expect that we should get approved, you know, hopefully soon. And, you know, based on the patent settlements and outcome, we'll plan to launch.
Sure. My last question is, are you,
Damayanti, Damayanti, I'm sorry. We'll have to request you to get back on the line, please, because there are many callers.
Okay.
I'm so sorry. Thank you. We'll take Alankar Garude next, please. Alankar, are you?
Yeah, hi.
Yeah.
Yeah. Thank you for the opportunity. First question, regarding the INR 200 crore impairment charge, how many ANDAs have you discontinued in this quarter, and what were the reasons for the same?
See, some of these were, actually, all of the ANDAs were essentially bought-out items, you know, and a lot of this resided in America. Three of those actually reside but are sold in India, you know, something which actually came out of our, Anglo-French, you know, acquisition that we did in India a couple of years ago. We, you know, essentially, because of our NB and, you know, our ruling with the, you know, Indian authorities, we discontinued a couple of products. Those are the things that we wrote off and, of course, the, you know, the products that we are not selling in America. Apart from that, we also took a, you know, our accelerated write-off and it came to a few assets which we are not putting to use.
Understood, sir. Second question, would it be fair to assume that the impact of competition in Suprep will be seen more in the first quarter and there was not much of an impact in the fourth quarter?
Yes, it's been a very good, very stable product so far.
Understood, ma'am. Thank you, and that's it from my side.
Thank you. Maybe we'll take five more minutes?
Yes, ma'am. So we'll have the next question from Nitin Agarwal.
Hi. Thank you for the great question. Briefly, just on Myrbetriq background, what I'm assuming the TRO gets lifted, what sort of exclusivity period are we looking at, the current state of affairs for the product before fresh competition comes in?
It's hard to predict, but we think that, you know, it should be two or three players in the near term, in the next 12 months.
Okay. But we do stand to get with, I mean, the current two-player market situation last another 5-6 months?
We think so.
Okay. And secondly, beyond this, for the rest of the year, which are the other meaningful launches that we can look forward to here?
So doxycycline, Oracea has been a good launch for us, in the background, of course, a large one. Slynd, another P4 that, you know, August is going to be, we'll gonna get a read on our litigation as well as product approval. And then we have multiple ophthalmic products, including some interesting ones like prednisolone, is a nice one. We have a couple of products where we have, you know, settlement dates within the year, but unfortunately, cannot share. I mean, we have two or three products like that. And we have a nasal spray product, and some injectables. We have a couple of injectable products as well.
Thanks. That's helpful. And lastly, you know, any color on, you know, we've got a meaningful size of emerging markets now. I mean, how these markets, some of these key markets have progressed over the last, you know, couple of years, and where are they on the profitability front, you know, some of these bigger markets for us?
Yeah. So, you know, when I look at the other emerging markets, looking at Latin America, Mexico, Brazil, as well as Philippines and South Africa, and they've done extremely well in Philippines. It has really been very stable, high-growth business for us, and highly profitable, you know, compared to the company level of EBITDA. South Africa business has been a really good scale but had got under a lot of pressure with the currency issues there and the fact that majority of the portfolio is imported into the country. That has turned around in the last couple of quarters, and, you know, the business has started growing very nicely as well. So South Africa is in a pretty good position both from a growth as well as an EBITDA standpoint.
In Latin America, you know, both Mexico and Brazil. Mexico, actually, we had a significant challenge last year with our facility being closed down for 10 months, which actually caused a lot of disruption in product supply. And that has. We, you know, we were back into the market with the ramp-up of our portfolio, have seen a really good resurgence there of our business. So we expect fiscal year 2025 to be really strong for us in Mexico. Brazil continues to be a bit of a challenge for us when we are looking to, you know, find ways and means of, you know, improving that business. But that continues to be a low-margin business for us.
Yeah. The only thing that I would add to this is essentially, once we recognize the potential and the possibilities, there's also the risk of Forex, which generally sometimes eats into, the gains that we make.
So I know that we are out of time, but we'll maybe take. We see there are a number of folks with questions, so we'll take five minutes more.
Thanks, ma'am. So we'll take the next question from, Saion Mukherjee.
Yeah. Thanks for taking my question. Just a quick one. Can you share, Vinita, the number of ANDAs filed in this fiscal year?
Yeah, ma'am. Beholding, yeah.
The US ANDAs was a small list. There were six products that were filed in the year we submitted.
Okay. Is there any reason the intensity of filing has come down this year?
So we have started focusing quite a bit on the complex products where, you know, you're gonna see fewer filings but more impactful filings.
Yeah. I think this year was also a repurposed year. So I, you know, we do see a ramp-up in the, filings that will happen in FY 2025, where just FY 2024 went to kind of an all-time low.
There's some that slipped into also the first quarter, you know, this quarter right now, so.
Okay. So should we expect around 15 odd filings going forward? Is that, or would it be higher?
11-15, I would say, because, again, our focus is on more complex filings than the number of filings.
Understood. Okay. Thank you. Yeah.
Thank you, Saion. We have, the Amey Chalke, please. Amey, you can go next. Amey, are you there?
Go next.
Yeah. Hello.
Hello. Am I audible?
Yes, yes, you are. Please go ahead.
Yeah. Yeah. The first question was on the spending. Considering that, our visibility on the product launches is quite good for the U.S., we will be having good cushion on the margin front. So are we going to up the spending on the marketing and R&D, or you will keep the cap on the R&D and marketing spend going ahead? How would be the thinking on the spending front?
We would obviously keep an eye on all the lines, but we do recognize the potential to, you know, to increase R&D a bit, and that's what we have done for the next year at least. For sure, there would be a tight leash on all kind of costs.
Sure. Second question, if we can, give clarity on the Respimat and AmBisome, we were supposed to file in FY 2025, on that going?
Yeah. So, Respimat is progressing pretty well, and we should make significant progress this year, hopefully file at the end of this fiscal year. It is very much dependent on supply of the devices that we manufacture outside. We don't do it in-house, but you know, it's progressing extremely well. AmBisome, actually, we got out of the transaction, and we took a charge earlier this fiscal year 2024. You know, we were not seeing the product progress from a development perspective. And you know, with a partner, we decided to focus on Doxil that we expect to launch in fiscal year 2025 but also saw additional competition in AmBisome, so decided to repurpose that investment into other products.
Sure. Just the last question, on the biosimilars, like, product like Pegfilgrastim, where, what were you thinking of follow-on players who are coming now, after market has been genericized so much? Is it, for you, it would be a learning curve from this product, or you would really want to see a substantial gain in the market share in these kind of products?
No, I think with a late entrant, you know, we will certainly use it as a learning opportunity for us. I mean, we certainly should have a good cost position but would want to gain profitable shares. So, I wouldn't say that is a material share opportunity unless folks get out of the market. So it's really gonna be more of a learning opportunity for us.
Sure. Thank you for taking my questions.
Thank you.
Thanks, Amey. Thanks, Amey. We'll take one last question from Tushar Manudhane.
Thanks. Thanks for the opportunity. Am I audible?
Yes.
Yes.
Just taking this, biosimilars also, the overall, how much investment you would have done biosimilars till date, and how much of the R&D spend, say, for FY 2025, would be towards biosimilars?
About in terms of infrastructure extra that we have catered between INR 450-500 crore is the figure. And in terms of R&D expenditure, you know, we also have this policy of partnering with, in fact, the passive financing, you know, financing company.
It'll be less than 10% for FY.
Yeah. R&D spend.
R&D spend for FY 2025. Understood. And just one more.
I think also, one thing that we did not mention is, in a biosimilar strategy that we also leverage the capability for pipeline for India, which is a tremendous opportunity for us, you know, to build, especially in oncology and immunology, products.
Understood. Understood. Just one last clarity on the U.S. sales while there's a good pipeline to be, in terms of approved as well as launches for FY 2025, still you have indicated that U.S. quarterly sales to sustain at $200 million is that what you commented, or I heard it from you?
Yes, that's what we said because we do expect some products to see pressure. Like, Suprep will see some pressure, while we continue to build, on, on tiotropium and other new product launches. So a combination of all of that, we said that, will get us to the $200+ million. And, hopefully, with, some litigation wins like Myrbetriq, we should be more than that. And then certainly going into fiscal year 2026 where we have, more, our exclusive large exclusive products like Tolvaptan as well as, you know, our peptide injectables, we should be able to build it to a, you know, closer to $250 million per quarter level.
Understood, ma'am. That's helpful. Thank you.
Okay. Well, thank you. So that was the last question. Hopefully, we were able to respond to all your questions. I just say that, you know, it's been a very strong year for us as an organization. The team is all charged up with what we have delivered. You know, we feel like we're in a very good position, you know, in all of our major markets, you know, India and the U.S. in particular but also the other developed, the other emerging markets, based on the market position as well as the portfolio position, you know, to really drive our business going forward to where we wanna go. We certainly have, like Ramesh mentioned, that 2023, 20, you know, mid-20s EBITDA margin very much on our radar for the next few years and gonna continue to work to be able to get there while evolving our business.
Thank you again for all your support and questions, and we'll look forward to connecting with you next quarter.
Thank you very much, ma'am. On behalf of Lupin Limited, that concludes this session. Thank you for joining us, and you may now exit the webinar. Thank you.