Ladies and gentlemen, good day, and welcome to Q2 FY23 earnings conference call of Torrent Pharmaceuticals Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sudhir Menon. Thank you, and over to you, sir.
Thank you. Good evening and welcome to quarter three FY 2023 earnings call. Quarter two revenue growth was around 7%, which was aided by performance of the branded generic market, which constituted around 70% of the total revenue and registered a YOY growth of 13%. Growth in the branded generic market was driven by new launch momentum and performance of the top brands. In terms of financial performance during the quarter, revenues were INR 2291 crore, up by 7% on year-on-year basis. Gross margins were 72% and has improved on a sequential basis. There is a one-off income of INR 7 crore in the line item operating income, and adjusted for that, the operating EBITDA stands at 29.4%.
I now hand over to Aman Mehta for the India performance.
Thanks, Sudhir. India revenue at INR 1,224 crore grew by 13%. As per AIOCD AWACS data, Torrent's growth in Q2 was 19% versus the IPM growth of 13%. Torrent's growth was aided by new launches, performance of top brands, and market outperformance across our focused therapies. As per the end of the quarter, Torrent now has 12 brands with more than INR 100 crore sales as of the MAT September 2022 data set and 17 brands in the top 500 of the IPM. A few highlights from the recent new launches. Sitagliptin was launched in July, and Torrent is ranked first out of all the new launch brands in July. We expect the launch momentum to continue and are positive on maintaining our leadership position in this market.
The rest of the launches from the earlier quarters continue to perform well in leadership positions. Our acquisition of Curatio Healthcare was completed on 14th October 2022, and it's been about a week now since the business has been integrated, and we will update on the progress of integration by the end of next quarter. I will now hand over to Mr. Sanjay Gupta for the international business.
Thanks, Aman. Starting with Brazil, which is our largest branded generic market outside of India. Brazil revenues were at INR 185 crore, were up by 19%. Constant currency revenues were at BRL 121 million, up by 10%. During the quarter, we experienced enhanced competition on one of our key launches, Rivaroxaban, and another cardio product, which led to price reduction, a substantial price reduction. There are currently 13 branded generic players in Rivaroxaban. Adjusted for the price reduction, our growth for this quarter would have been close to 20%. On Rivaroxaban, our market share is progressing well, and it stood at 4% in August as compared to 3% in June.
As per a secondary data set from IQVIA, Torrent's branded generic business is currently growing at 14.4% as compared to a branded generics market growth of 12.1%. Our CNS field force is being expanded in a phased manner. We currently have 396 sales reps in Brazil, including 41 CNS reps that were added in November 2021. Results of this expansion have been positive. With the market growth of high single-digit to double digits, we expect Brazil to continue its growth momentum backed by performance of our top brands, new launches, field force expansion, as well as our generics division. Moving on to Germany. Germany revenues were at INR 220 crore, down by 12%. Constant currency revenue was EUR 27 million, a degrowth of 5%.
Revenues bottomed out in Q4 of last year and have grown slightly in Q1 and Q2. The latest stability and a slight incremental growth is coming from new launches, of which we had four in Q1, and we also had six launches in Q2. These launches included one day one launch in Q1 and four day one launches in Q2. Q2 day one launches were towards the end of September, so the positive impact will be seen in subsequent months. We expect our sales in Germany to continue on a positive trend at a modest pace until major trends begin to kick in towards the end of the year. Moving on to the U.S. US revenues were at INR 292 crore, up by 3%. Constant currency revenue was at $37 million.
During the quarter, US FDA inspected our manufacturing facility at Indrad, Gujarat, and at the end of the inspection, we got a Form 483 with three observations. Torrent has already responded to the US FDA within the stipulated time, and we expect to hear back from the FDA in the next 90 days. To conclude, I would say that we expect our growth momentum to continue in branded generic market, particularly in India and Brazil, backed by new launches, market outperformance, field force expansion and the acquisition of the acquired portfolio. Germany should continue on a modest positive trend. Operator, we can open the call to questions, please.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Good evening. Thank you for the opportunity. My first question is on India business. First, can you split quarter growth into price, volume and new launches? Continuing question on India business is, you have seen very healthy 13% growth in 2Q as well as in the first half. Do you see like sufficient leverage to sustain this kind of growth, or do you think we can move to higher growth trajectory with Curatio portfolio coming in and some of the previous initiative working for the segment?
The AIOCD AWACS data reflection shows 19% growth. Obviously that's a slightly higher reflection this quarter than the reported numbers. The breakup of the 19% is 6% volume, 9% price and 4% new products. We believe that the internal growth is pretty much in line with the earlier quarter and the market trends. Maybe by next quarter there should be a better reflection of the AIOCD AWACS dataset in terms of volumes and new products. In terms of sustaining this growth, we think we are confident of maintaining this level of double-digit growth, 13%, 14%. Last quarter was 14%, this quarter is 13%.
No reason to think that there's anything that could change over here as long as the market remains at this level. Of course, by the end of this quarter there should be just over two months of the Curatio sales that will come in. That will be a, I guess, one-off base impact that we should see. At the underlying level, this level of double-digit growth for India is something that we are confident in sustaining.
Okay. My second question is on Germany. If I'm not mistaken, earlier you mentioned the new contracts will open up somewhere in September, October of this year. Apparently that was not the case. When you are hoping to bid in new tenders with better prices which you have worked on?
I think earlier we had communicated that you would start seeing the impact of new tenders from Q3 onwards. You would see a slight impact in Q3. You'll also see the impact of the four launches we had towards the end of September, and then you'll see a larger impact in Q4 of the new tender wins.
Majority of improvement should be visible in the last quarter of this fiscal for Germany business.
Correct.
Okay. Okay, thanks. I'll get back in with you.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is from the line of Pramod from Tattva Capital. Please go ahead.
Hi. Thanks for the opportunity. There's a question regarding Curatio. Just want to understand. See, after Finance Bill, 2021, amortization of goodwill has been disallowed for claiming deduction in income tax. How exactly are we going to treat the excess consideration paid the book value for Curatio?
Yes. I think as a process there is a purchase price allocation, which will be carried out. As goodwill is concerned, yes, it cannot be amortized. If you are creating intangibles which are in the form of brands and maybe non-compete stuff, those amortizations are still available.
Understood. Thanks. Yeah. That's all from my side.
Thank you. The next question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead.
Hi, thank you for taking my question. Just on the Germany, when we are expecting the good ramp up from Q4, would it be on the back of the new product or gaining back share in the older product?
It's a cumulative impact, right? The impact is coming essentially from some tender wins that we have already had those wins. The sales would start in Q3 and Q4, plus the impact of new launches, of which we've launched 10 products in the first half of the year and expect to launch five-seven more products in the second half of the year.
Okay. How does the competitive intensity there, in terms of when you say you have basically won the tender for some of the products, would the pricing be very similar to what you would have seen last year or whenever the last tendering happened, or is it very different now?
No, the competitive intensity in the generics market goes up every year, so the pricing tends to go down. Germany is not very different. The rate of price deceleration is slightly, I mean, lower than in the U.S. Also the business is more stable because most tender wins are for two-year periods. There generally there's no switching within the two-year window. Hence, the market is more stable. The trends are in line with other generic markets.
Okay. Yeah, that's it from my side. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Yeah. Hi, thanks. On the US market, you know, one is like what is the intensity of price erosion? Any comments there? On Indrad side, how many Indias are pending from there? If you can throw some light on the nature of observations, and in case it gets cleared, what would it mean for our business? Any interesting high-value launch that can come through?
Essentially on from Indrad, we have about 19 projects, products which are pending approval. We would hear back from the FDA in 90 days. I would not like to speculate on what the FDA's decision-making would be. I mean, we have responded to the best of our ability with the CapEx that we proposed for the three observations. Once the FDA, if it converts the status from OAI to VAI or NAI, we can expect approvals to trickle in. The approval for the 19 currently pending projects on Indrad would take, after January, between six-12 months. It won't be an immediate switch-on type of scenario, and these approvals would come in a trickle manner.
What we would expect is that there is already a high degree of competitive intensity on most of these projects. The economic impact for Torrent would be limited. There are still a few products which have potential for revenues. Let's see how it goes. You know, first we have to do FDA clearance and then get approvals and then launch in the market context at that point in time.
Any comment on the pricing in the environment in the U.S.?
Price erosion continues. I would say at a substantially higher level. Torrent, as we have only a base older portfolio, we've not essentially had new launches since March of 2019. We would be disproportionately impacted. I would say that a mature portfolio like ours is double-digit price erosion. It continues. You know, we are compensating it with some of the volume increases as well as some of the few launches that we've had in the last two, three years from external parties. No change in the price erosion trend.
Okay. Another question, if I can ask on the cost. Sudhir, can you throw some light as to what how different cost items have moved, where are they versus last quarter, and how you see costs, you know, the key cost item panning out going forward?
Saion, compared to quarter one, I would say quarter two is looking quite stable. There's no major increases which we have seen in the cost side.
I mean, is it coming down or is it still stuck at an elevated level?
No. I think as far as the key raw material part is concerned, there are pockets where the prices have gone up and there are pockets where the prices have come down. On an overall portfolio basis, what I'm saying is, it's looking quite stable. The other big impact item for us was on the logistics cost, which still has not come down. It's at the same level as quarter three of 2021-2022, I would say.
Okay. Overall, you see the margin profile to sort of remain at the current levels, both at the gross and EBITDA margin level?
I would think so, because I don't see any major change happening, at least in quarter three.
Okay, thank you. I'll join back. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. We'll move on to the next question. That is from the line of Neha Manpuria from Bank of America. Please go ahead.
Yeah, thank you for taking my question. Sanjay, on the Brazil market, you mentioned price competition in two of your products, you know, leading to lower growth versus what we would have ideally seen. Just wanted to understand, was this not expected and hence, you know, were we surprised by the price erosion? Because, you know, it's a branded market, so was this like a one-time revision in pricing that we saw? Just, you know, getting some color on that.
Essentially, Neha, I would say that when we launched the product, it was not expected because we were among the first five people to launch. Besides, after we launched, about two companies have come to the market at lower and lower price points. At some point in time, the launch price becomes non-sustainable. That was one of the reasons why we took a major price decrease on Rivaroxaban, which, as you know, is one of the largest markets in Brazil. We are seeing that. I mean, initially our priority remains to penetrate the market, to get some of the originator share.
Hmm.
We felt that the price reduction at this point would keep us competitive. We were surprised by the large number of players who entered subsequent to our launch.
You know, given that a large part of the business strategy that we talk about is based on, you know, new launches coming through, and driving that double-digit growth, is the existing scenario probably an example of how the other launches could also, you know, pan out and therefore could the growth in Brazil be slower than what we're expecting given the competition that you've seen, you know, in the current quarter?
Well, I have launched 7 products in the last, let's say, 18 months.
Mm-hmm.
It's a little bit all over the place. If you take the largest products that we launched, which is Rivaroxaban, there are 13 players. The other product we launched is different Dapagliflozin, where there are 11 players. We've also launched products like ticagrelor, where we are the only generic on the market. We've launched Rivaroxaban, where we are the only generic. We've launched bisoprolol. We are number three in the market, three players. Lacosamide, we are the second generic. It's a little bit all over the map, right? The biggest products tend to attract a lot of, let's say, competitors. Mid-size or smaller products, you know, you can still find opportunities where it's not a double-digit number of competitors.
We're still confident about growing the Brazilian business double-digit, you know, based on the pipeline.
Absolutely. Also in the most competitive categories we are used to winning. I mean, the current business we have is not in, I would say by any chance in limited competition markets. Our biggest product is Rosuvastatin, where we sell more than INR 100 crore of Rosuvastatin in Brazil, and I stopped counting competitors after 20.
In the you know, product where you've seen higher competition, have you been able to retain share or grow share despite, you know, the higher competition that we have seen?
I would say, the answer is, categorically a yes. You know, if you take the largest product I just mentioned, rosuvastatin, where currently let me see. I have the share with me. Let's see. It's a double-digit share that we have on rosuvastatin. Rosuvastatin, I don't have the share with me, but it's in the mid-teens. And we also grown share in the large products like rivaroxaban, lapatinib, amlodipine. And the brands are very strong. We continue to perform well in large competitive markets.
Understood. Aman, on the India market, could you give us, you know, some color on how the trade generic is progressing? We were supposed to launch more SKUs in the trade generic. You know, how has that done in the quarter?
Yeah, that's on track. I think the growth has been quite robust last two quarters as well. We believe that this target of 2.5%-3% contribution in the near term is something that would be possible and sustainable. There is a very stable, steady trend in the business that we're seeing.
Okay. The contribution even in this quarter would have been in the 2.5%-3% range.
That's right. That's right.
All right. Got it. Thank you so much.
Yeah, just to complete, Neha, on the market share that we were discussing, on Rosuvastatin for example, we have a market share of 23%. Nebivolol we have 47%. Glipizide we have almost a 70% market share. Donepezil, 28%. Market shares are quite healthy across the board.
Understood. Okay. Thank you so much.
Mm-hmm. Thanks.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi. Thank you for following. My question is on US business, from a slightly longer term perspective. It appears that the market will continue to remain very challenging, and then we have other challenges such as, regulatory or other compliance, et cetera. Is there a possibility that, a few years down the line you, plan to, I'll say, curtail your presence in U.S. or altogether exit that part of the business and then focus better on the branded generic market?
No, I don't think we are considering that possibility right now. What we've done over the last few years is rebalance our investments. We are not making new manufacturing related investments to the U.S. You know, our last investment was the Dahej. After that, we believe we have a substantial capacity for the next several years. There is no new CapEx being done for the US market. In terms of R&D also, we have decreased the number of projects that we do for the U.S. We've increased the complexity, but the goal of the company is no longer to file a high double-digit number of ANDAs, and we kind of rebalance our R&D investment more in favor of markets like Brazil and Germany.
All that kind of rebalancing has already taken place. In the future this trend is continuing. I would just like to say that there is no plans to become non-competitive or to reduce our presence in the U.S.
Okay, that's helpful. Going ahead, you will continue to focus mostly India and branded generic market for, from a capital allocation perspective. Curatio was one recent deal. Any other plans which are in, say, near term, 12-15 months, where you plan to add on?
Sudhir, can you comment on that?
No, I think currently, that's it. I mean, Curatio we did. Nothing, which is there in the pipeline.
Okay. My last question on India business is, do you have any contribution from PLI scheme in current numbers?
Yeah, it's very insignificant, Damayanti.
Okay. Will it be meaningful anytime in near term?
Possibly from next year, I would say. Okay. Thank you. I'll get back in touch with you.
Thank you. The next question is on the line of Karan Vora from Goldman Sachs. Please go ahead.
Yeah. Thank you for taking my question. Am I audible?
Yes.
Actually, even I wanted to ask more on the capital allocation front. From a three-five-year perspective, say if you are allocating INR 100 crore of capital, how would you allocate it or what is the thought process of allocating it between your geographies? That is my first question.
Inorganic will remain India as a priority. I would think that if you're looking at 100 INR in the next five years, maybe, minimum 90, even up to 100 could be in India for inorganic growth. Organic will obviously depend on the geographical need and maintenance CapEx, which will be insignificant. For acquisitions or inorganic growth, India remains the only focus right now.
Now given that you don't have any CapEx requirements, like, your business will continue to churn a lot of cash. Can we assume that you'll be actively looking out for more inorganic or you would pay out dividends? Like, how, what is the cash allocation? How will it be used?
Sanjay, you wanna take that?
Oh, yeah. I think if the cash is not getting utilized or allocated for incremental growth, then yes, what you say is right. I mean, it'll come back as dividends to you.
Okay. Fair. Lastly, basically on India, U.S., Brazil and Germany. In terms of growth prospects for the next three to five years, is this understanding correct that India and Brazil would be double digits and Germany could be high single digits or you think you can push the double digit barrier for Germany as well?
India, Brazil, depending on how the market growth continues, which we believe that this, double digit, close to double digit market growth should continue for both, then yes, there should be this continued delta of, 3%-4% above market growth that we should be able to deliver. Germany, I'll hand over to Mr. Sanjay Gupta.
Yeah. Germany, we're looking at, I would say single-digit growth. That's more likely. I mean, it can be mid- to high single digits, as we get results from more tenders. We bid for many more tenders recently and we are awaiting results. If these come out on the right side, then the growth rate would accelerate. If these come out on the wrong side, it will slow down. It's a little bit, you know, I would say mid- to high single digits at the moment.
Okay. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Harsh Bhatia from HDFC Mutual Fund. Please go ahead.
Hi, this is Harsh Bhatia from Bandhan AMC Ltd. I just wanted to get a sense on the Sitagliptin on market right now, particularly at a broader level from the diabetes space. What really is happening at the type 1 and type 2 level from Glimepiride or gliptin perspective as well as insulin. That is one. Just wanted to get a sense on the strategy for our Sitagliptin products, because I think the pricing is not too different for the players who have launched at the generic level. Just your thoughts.
The new wave of launches in DPP-4s and SGLT2s, Sitagliptin being one of the latest DPP-4s launched in the market. There is a clear wave of a shift in preference of prescribers to these molecules. Since all of the existing brands or molecules, such as Sulfonylureas from earlier are all chronic therapies, so they cannot see any major disruption. We believe the long-term trend already shows that there is a shift to these newer generation molecules and seems to be so far that Sitagliptin is one of the bigger benefactors there. We had undertaken an expansion last year for the chronic divisions where Sitagliptin was one of the reasons where we had to focus on additionally.
I think that's where we have been able to have an edge for some of the competition.
Right. Would it be fair to say, for example, in one of our top ten products, Azulix MF, which is a Glimepiride, metformin. There you see, enough stability to continue in that product itself?
Yeah. Mid-single digit is what we're seeing. Even for the market, it's been slowing down, but it's not looking like it's going to de-grow from here. It'll remain at this level because either patients continue on existing brands or they gradually shift when they go back to see the doctor if there's some additional diagnosis required. It's a very, very gradual shift. We've seen this happen earlier also when the earlier wave of SGLT2s were launched. The shift was very gradual, but the benefit that Torrent as a diabetes company can get is that we are relatively a small player in diabetes at rank nine. For our diabetes base, these new launches can add a significant amount.
Sure, it helps. Just one last bit on the gastro portfolio. We are seeing a lot of tailwinds. I wouldn't say exited, but since we are at the far end of COVID. Anything particular or trend-wise you are seeing in the gastro space, or rather Pantoprazole or Esomeprazole or anything in particular that you could share?
These brands and markets did see a continued uptick even post the Delta wave last year, which would be Q2 last year. That continuation of that base made sure that market for the full year was growing very fast. Obviously, that growth would get normalized this year. Hence the absolute growth numbers may look slightly low, but overall the market is growing quite well. Our brand Nexpro is our leader brand, INR 365 crore on a net basis. This quarter has grown about 14%. Veloz, on the other hand, has grown at about 20%, which is nearly a INR 200 crore brand.
Our PPIs together, Nexpro and Veloz, which are now nearly INR 550- INR 600 crore, we believe high double-digit growth, high teen growth is something that will be sustainable there.
High teens at the normalized level.
High teens at the normalized level. That's right.
All right, sure. Thank you. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Sir, hi. Thanks for opportunity again. Now since you have completed the Curatio deal, can you provide some more clarity on the funding part of the deal? In the call you mentioned that it will be likely funded through debt, but now do you have better clarity on that part?
Yeah, Damayanti, it's substantially debt-free now.
Sorry, the entire funding will be through debt?
Yeah, it's substantially through debt, I would say.
Okay. The average cost for that debt will be?
Should be around 7.2, I would say.
Around 7.2. Okay. This year you'll be adding on debt for this funding. On the existing debt you had earlier made plan to pay off debt substantially. For this year, how much debt reduction you should set on the debt part?
The existing debt which will be paid off is INR 900 crore. Then there's on top of that, there's two thousand crores. I think there would be a net addition of roughly INR 1,100 crore-INR 1,200 crore at the year-end.
Okay. Nine hundred crore debt payment on the existing obligation, and then this Curatio will add on. Let's say this is around twelve hundred you are saying.
Correct.
Okay. Okay, sir. That's helpful. Thank you.
Thank you. The next question is from the line of Mehul Sheth from Axis Capital. Please go ahead.
Yeah, thank you, sir. Just one question, like, the AIOCD Q2 growth is somewhere in range of like 15%-18% growth. Your reported numbers are around 13% growth. Why is there a 3%-4% difference between the reported and the AIOCD numbers? Is there any specific reason for that?
No, it's not really clear yet, but this is something that happens occasionally. I mean, even in the previous quarter, the market was showing 2% growth, and even the normalized, COVID normalized market was showing, you know, mid-single digit growth. Compared to that, our growth was 14%, reported. I think if you probably look at the AIOCD growth on a MAT or even YTD basis right now, which is showing about 7% for the market, as against that, Torrent reported growth is about 13%-14%.
Okay. Just one question on your other income side, which is lower, like, for this quarter. Any specific? Is there any forex elimination other income side?
Correct. I think that movement which you're seeing is basically because the Forex gains have come down this quarter.
Okay, also you have mentioned about some sales of one or two other operating. Is this related to which part of the business?
No, no, it's related to U.S. part. It's not INR 12 crore, it's INR 7 crore.
INR 7 crore, sorry.
Yeah.
Okay. Thank you, sir. Thank you. That's from us.
Thank you. The next question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead.
Thanks for the follow-up. A very basic question again. Between, let's say the Brazil branded generic market and India unbranded generic market, how would you know, basically what would be the key difference in the way the business is conducted in both of these markets?
India and Brazil are intrinsically similar markets because they're both through physician coverage. We have a field force in both markets meeting doctors. We have divisions. The regulations are slightly different compared to India in Brazil. For example, there is the NLEM piece that we have in India as one regulatory framework, which is slightly different in Brazil, which maybe Sanjay can explain a bit more. Broadly speaking, the market dynamics are quite identical in terms of sales and marketing, in terms of market potential, in terms of competitive positioning.
Great. I mean, that's the reason why Brazil was one of the first geographies we chose outside India, because it resembles India quite closely. It's a self-paying market. Patients pay for most of the medications themselves, and doctor prescriptions are respected a lot. Essentially you build equity with physicians, and that's what we've managed to do over the last 15 years in Brazil. It's a long-term game, and we're playing the brand extension business quite along the same recipe as we do in India.
Can you just elaborate the difference on the NLEM piece? How they are different.
Yeah. Brazil is slightly different in the sense that all products have some kind of price regulation. What the government does is differentiates the products into three categories based on the intensity of competition. Category one, two, three, one being the most competitive and three being the least competitive. The least competitive tend to get lower price increases, authorized price increases every year, and the most competitive get higher price increases. These are list price increases, and after that, companies are free to do whatever they want in terms of the actual price increases that they take on any particular product. That's how the difference in India, the NLEM is a list. In Brazil, there is no finite list.
All products are subject to price regulation, I would say. The price regulation takes place through annual increases that are allowed, but different level of increase by category of the market.
Okay. Isn't it little bit counterintuitive, like, you know, most competitive would be allowed higher price increases, because people will not take it because of the prisoner's dilemma, is the way to put it.
Yeah. The market is not concentrated, it is diluted. If there are 10 players, they allow a higher price increase because they think that the competition will drive the price down lower.
Let's say a slightly longer term, you know, question from the India chronic therapy segment, right? I think currently, as per IQVIA, 36% coming from the chronic and I think maybe 15% is semi-chronic. But when I look at just the chronic piece, 70% is just three therapies, cardio, anti-diabetes and then CNS. Do you see, you know, let's say five, 10 years down the line, there will be significant shift in the proportion from different therapies, emerging therapies like derma, onco, maybe, you know, accounting for higher proportion. If yes, then how much that proportion will be?
Yeah. Chronic therapies will remain to be the dominant growth drivers for the IPM because of increasing prevalence in lifestyle diseases, particularly diabetes and cardiac. Given the kind of new launches that have now come on the market at affordable prices, that should also lead to further expansion in the diabetes segment because more and more patients can get access to high quality drug, which was not the case before. That market should also see a pretty good volume expansion. We believe that over the medium to long term, there is still a big under-penetration in the overall wellness space through VMS or skincare, which as disposable incomes increase, awareness increases. That segment should also increase from where it is right now.
Hard to give a, you know, proportion of where it would go, but these are at least two, three areas that we are quite confident about that over the next five-year horizon, let's say, they should increase in contribution.
Perfect. Thank you.
Thank you. The next question is from the line of Karan Vora from Goldman Sachs. Please go ahead.
Yeah. Thank you for the follow-up. Yeah. Firstly on U.S., what is the current capacity utilization for across all your plants catering to U.S.?
I think, Sanjay , you wanna take that?
I think the plants are fungible. All plants put together, the capacity utilization is roughly 54%, I would say.
54?
Yeah.
Okay. Like, how do you see this moving, like, in two years, three years?
I think, at this point in time, we feel the capacities are enough for the next three years. No major expansion to be planned.
Yeah. No, no. I meant, can this go to 70, 80, 60 or like how is in that way?
I think the higher volumes have to come from generic businesses, right, which is essentially Germany and U.S. We'll have to see how these play out over a period of time. Yes, I mean, there's potential of bringing in large volume products out of Germany into the manufacturing capacities we have. That will happen in a gradual way. Based on the cost competitiveness, right? I mean
Okay. Secondly, on Brazil, you mentioned that you entered Brazil because the market was broadly similar to India. Are there any other geographies you think branded generic geographies, like maybe Philippines or any other, which you think are interesting and you may want to have a look at it? If you could name some of them which you think are interesting.
Torrent is already present in several branded generic markets, so generally we don't comment upon them because the sizes are much smaller. Brazil, like Philippines, you know, roughly a business of about $40 million. Mexico, about $15 million. Those are BG markets of the future where we are investing and we are continuing to grow. I would say there are at least seven-eight BG markets where we have a decent momentum.
Okay. No plans as of now to, like, make something meaningful out of any of those specific geographies?
No, no, don't get me wrong. There are plans to make it meaningful. It's on the way. As soon as it becomes like, you know, substantial, we will start communicating on it. It's the work that is done which is not put in the public eye yet because it's still, I would say, quite modest in terms of overall size.
Got it. Okay. You can't name one or two, or Philippines and Mexico would be the one or two which you prefer?
I mean, we are pretty decent in Malaysia. We are good in Thailand. We are building in Kenya. South Africa is another country. Russia, we are making efforts. All of these are more in the, let's say, $10 million range countries. I would say that we will give them prominence once they come across the $50 million threshold.
Okay. Got it. Last, on the Forex hedging part, like what is the general company policy like? What percentage of revenues, Forex revenues are hedged and, like for how long? What period?
We do a 12-month forward cover every month on a rolling basis. At any point in time, we are covered for the next 12 months. 100%.
Okay. Got it. Fine. Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Sanjay Gupta for his closing comments.
Sure. To conclude, I would just say that we expect our growth momentum to continue in the branded generic markets, particularly in India and Brazil. This will be backed up by our new launches, market outperformance of current brands, field force expansion and acquisition of the acquired portfolio. Germany should continue on a modest positive trend. With that, I would like to conclude and wish you all a happy Diwali, and a good break on next week. Thank you.
Thank you. Ladies and gentlemen, on behalf of Torrent Pharma Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.