Ladies and gentlemen, good day and welcome to Q2 FY 2027 Earnings Conference Call of Evonile Pharma, formerly known as Novartis India 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, President. Thank you, and over to you, Mr. D'Souza.
Thank you, Renju. First, welcome to everyone to Evonile Pharma's Q2 FY 2027 Earnings Call. I would like to start by introducing the management. We have with us Mr. Vikas Gupta, MD and CEO of Evonile Pharma, Bhagwat Singh Deora, the CFO, on this call, and myself, Jason D'Souza. Before we start this call, I would like to read out the disclaimer. This call has been organized by the management of Evonile Pharma Limited. Certain statements made during this call may not be based on historical information or facts, and may be forward-looking statements based on currently held beliefs and assumptions of the management of the company, which are expressed in good faith, in their opinion, reasonable, including those related to the company's general business plans and strategy, its future financial conditions and growth prospects, and future developments in its industry.
Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual results, financial condition, performance, or achievements of the companies or industry results to differ materially from those expressed or implied by such statements. Past performance is not necessarily indicative of future results. This presentation is for general information purposes only, without regard to any specific objectives, financial situation, or information needs of any particular person, and does not constitute an offer or invitation to purchase or subscribe for any securities. No part of it should be formed basis of or to be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. With this, I would like to hand it over to Mr. Vikas Gupta, Dr. Vikas Gupta, for his opening remarks.
Thank you, Jason. A very good afternoon to all of you and very warm welcome. Thank you for joining us for our first results call as Evonile Pharma Limited, formerly known as Novartis India Limited. For nearly eight decades, this company has been home to some of India's most trusted medicines, whether it is Voveran, Methergin, Calcium Sandoz, Myfortic. These are the names that doctors across the country have prescribed for many years, and each of them still holds the number one position in its covered market. In Q2 FY 2027, we began a new chapter in that story, and I'm glad to have you with us at its start. Let me begin with the business, giving a background of the business we inherited. We inherited legendary brands with strong prescriber recall, but there was limited focus and investments in these brands.
The majority of the sales was through to a single customer. Further distribution and field presence was limited with hardly any promotion on the brands. Demand rested largely on the loyalty that doctors had built up over the years. In other words, we had the brands, but not the platform. Building that platform is the single largest opportunity in front of us, and it is exactly what we set out to do this quarter. Let me give you a brief of what we have built in few months. In just a few months since the change of control, we have moved from a single customer model to an independent company with its own distribution network, which markets its own brands. First, the distribution network. We have onboarded more than 20 CFAs.
That gives us a nationwide network, last-mile reach, and for the first time, a direct control of supply chain. Second, people. We are building a dedicated therapy-aligned field force to connect with doctors in metros and towns beyond metros, and to bring the new focus to brands that have been under-promoted for some years. Then the systems. We have moved out of the global systems and set up our own platforms for accounting, HR, field reporting, which lets us execute much faster and more independently. We have also strengthened our board with an independent chair and brought in an experienced leadership team from some of India's leading pharmaceutical companies. This, in effect, is building a new organization from the ground up. Many of the key building blocks are now in place. First and foremost, strengthening the portfolio. Alongside this, we completed two important strategic transactions during the quarter.
We acquired Minipress XL from Pfizer. It is a market-leading cardiology brand with more than 50% market share and gives us a strong entry into cardiology, which is one of the largest therapy areas as far as IPM is concerned in India. We also signed an exclusive distribution and promotion agreement for a retina portfolio with Accentrix and Pagenax, which takes us into ophthalmology with innovative products and strong specialist equity. With these, our flagship brands now span across six priority therapies, which is cardiology, pain management, wellness, transplant, gynecology, and neurosciences. In addition to that, we have ophthalmology, which we have added with the in-licensing of these brands. To sum up this quarter now, some of the key highlights for Q2 FY 2027.
To sum up the quarter, we now have our own route to market, a stronger portfolio with two new therapy areas, and an an independent organization with its own systems. Not only systems, its own board and a leadership team. Let me tell you how we read this quarter, and I would ask you to read this quarter's numbers in the light of this shift. Q2 is the quarter in which the old model ended and a new one began. That brings one-time costs, a one-time correction in revenue, and upfront investment in people and systems that goes ahead of the revenue. The important point is that these are transition effects. They do not reflect any change in the underlying demand for our brands. Our revenue from operations for Q2 FY 2027 was INR 56 crore compared with INR 90 crore in Q2 FY 2026.
Out of the INR 90 crore in Q2 FY 2026, INR 41 crore was on account of sales to a major customer. On the half-yearly basis, we have recorded a revenue of INR 160 crore against INR 178 crore last year. Employee costs rose to INR 14 crore from INR 5 crore last year for the quarter, as we started building our own field force and the corporate team. Other expenses were INR 11 crore, which is almost flat on last year after excluding the one-off expenses. As a result, the adjusted operating EBITDA for the quarter was negative INR 16 crore. For half year, the adjusted operating EBITDA was INR 19 crore. As we said in our September call, our team is sized for the future potential of the portfolio, not for today's base. Employee and selling costs will be stepped up in phases through the second half.
I would like to especially call out that there are two sets of one-time items in the quarter amounting to INR 83 crore. First, an exceptional item of INR 68 crore that comprises of INR 61 crore from the termination of the exclusive promotion rights and the related inventory purchase arrangements with one large customer. Second, one-off expenses of about INR 15 crore relating to the transition and the acquisition-related costs of Minipress XL. These are reported within other expenses.
We have set ourselves clear priorities for FY 2027. One, stabilize and scale the business with seamless execution across operations, supply, and our commercial model, and complete the market availability through our own network. Second, complete the infrastructure build-out. Our distribution and corporate infrastructure is now in place, and the complete field force will be in place by Q4 FY 2027. And third, reducing debt significantly. Looking further ahead, our ambition is clear.
We want to move from a stable business to a business that grows above the market, from a portfolio concentrated in a few flagship brands to a broader basket with regular in-licensing, acquisitions, and new launches, from a single standalone asset to a platform that grows through disciplined M&A, and from cash sitting on the balance sheet to a business focused on growth, ROCE, and free cash flow. Our brands have always had the trust of doctors, and now they finally have a team behind them. We are still in early stages of organization buildup, and we are realistic about the work ahead. But the progress we have made in last few months gives us a lot of confidence. We are building an organization with the capabilities, infrastructure, and ambition to unlock the full potential of Evonile Pharma. Thank you for your time and your support.
Bhagwat, Jason, and myself will now be happy to take if there are any questions for us.
Shall we open the line for questions?
Yes, please. Yes.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may 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 comes from the line of Aman Goyal with IIFL Capital. Please go ahead.
Thank you for taking up my question, sir. My first question is on the MR strength. We have targeted almost 900 MR. As of now, how much is our MR strength? Secondly, the current MR strength, how much is it located to the Minipress, and what is the experience curve for this MR strength currently? I mean, whether they are frontline manager or an area manager.
Aman, thanks for your question. Our recruitment, our hiring is going on, and we are pretty much satisfied with the pace at which we are progressing. At the current speed, it appears that by end of Q3, we should have everybody on board in field. We are not taking freshers. We are taking experienced people from the industry. It is the complete structure, like it is there for any domestic pharmaceutical company. Our hiring is happening in line with what industry does, all the leading players of the industry do. I think by end of Q3, or say, at the most, beginning of Q4, we should have almost everybody on board. Specifically for Minipress, we are planning around 300 people out of these 900 to promote Minipress.
About itself. Sir, second one is on the Minipress also. We have acquired that brand. What is the amortization period we are looking to amortize that goodwill?
Sir, planning to amortize it over 20- 25 years. That is the range which we have taken for amortization of this.
Okay. The last one, sir, since, sir, we are targeting above IPM growth, what is the IPM growth we are expecting over next two, three years? What is the factors for this growth for overall industry?
See, again, it is too broad a question. My sense is industry has. There have been bad years for the industry, there have been good years for the industry. This year, we are seeing a very good year. But if you look at the long-range period, industry's growth has been pretty much within 8%-10%. We believe that it should be within that range even going forward. Our sense is that, this is going to be a mix of price, volume, and NIs, these are the components. I guess, the volume growth traditionally has been around 3%-4%, price growth of around 5%-6%, 1%-2% of new introductions. I think these are the various levers of growth, and that is why, that is how we see it even going forward, for it to continue.
Thank you, sir. That is all from my side.
Yeah.
Great. I think with that, Vikas, we will just take a few questions which are coming on the board. I think the first question that is coming is, revenue is only INR 56 crore. The question is, when will you start selling DRL life products?
Okay.
When will overall revenue start reflecting in sales?
From 1st October, as I mentioned, we have put up the entire distribution network. I think in Q3, we will start reporting the when we will report Q3 revenue. From here on, the revenue would be comprising of all the products, the whole portfolio, that we have inherited. From here on, I think that will be a complete reporting of the revenue. Yes, we are in the process of building up team. We are in the process of going through the transition, through the shift of change of hands of controls, setting up the new marketing machinery. I believe if there has to be a clear sense of what is going to be our stable run rate, I think Q1 of FY 2028 should be the right measure, while it will start reflecting from Q3, Q4 as well.
Somewhere, Q4 or Q1 of FY 2028 should be right measure of as to where we stand in terms of our annualized base. Our sense is that, this is what we have given, looking at our progress. Our first intent would be to stabilize that base as fast as possible. I believe Q4 or Q1 of FY 2028 should be clear indicator of where we stand. Yeah.
Just a follow-up on the sales question is that, how do you see growth rates over the next three to five years for Evonile Pharma?
I have mentioned it in the earlier call as well. Organically, whatever is our now base, which after inheriting the brands and in-licensing the brands and what we have inherited, we should be at a, say, a base of close to around INR 600 crore, give or take, little bit here, there. From here on, our intent would be next five years or five to six years, whatever that timeframe is, organically, we would like to double it up in that much time. Whatever acquisitions we go after, we would be on top of it. I think that is the whole intent. That is what we are attempting.
And the last question on cost. There have been a number of one-time costs during this quarter. Can you give us an explanation on that and anything else that you would like to
I think in my commentary, I called out those numbers very clearly. I think the impact of those one-time costs amount to INR 83 crore for this quarter, and largely, two broad buckets, INR 68 crore cost, that comprises of around INR 61 crore from the license, sorry, from the agreement termination as well as the inventory purchase arrangements that we had with one large customer. Second is on account of the one-off expenses, which amounts to around INR 15 crore, which is relating to the transition as well as the acquisition-related costs of the acquired brand.
And any cost that should come up in the next few quarters or any quarters?
Yeah, we are in the process of building. I believe in Q3, we may have another INR 15 crore-INR 20 crore of one-time costs that may come in, which is what we anticipate. But by Q4, I think, all that should have got stabilized. I think in Q3, we may expect few more one-time costs. Going forward, then we can have a more stable normal cost structure.
Okay. We can go back to the queue operator.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Akash Dobhada with Investec . Please go ahead.
Yeah, thanks for the opportunity. My first question is on Minipress franchise. Given you have acquired it from Pfizer and you are not taking in any field force from the Pfizer, have you lost any market share during transition? How much are you confident of retaining the existing prescription and market share, given you are putting in incremental field force on this brand? Yeah.
Akash, I think we are pretty confident of growing the brand in our hands. If you look at the trajectory, the history of the brand, the market has grown at around 9%, whereas the brand has grown at close to 6%. We believe that when we are putting up a team behind this and getting it on promotion, we are very hopeful that we will be able to grow it much ahead of the market, as far as the brand is concerned in our hands. We are pretty confident about it. But yes, we have just inherited it. We have started recruiting people. Of course, it will take one or two quarters for it to really scale up, and that's what we are going through right now.
Got it. Given you have aspiration to double the revenue over next three to four years, from which legacy brand do you see that greatest growth headroom, and how much incremental volume growth and market share improvement can we see from these brands?
See, it is going to be a mix of not only the legacy brands growth. There will be various levers. One is what the legacy brands would grow in our hands. Second, the brand extensions that we would do in the lifecycle management that we would do in the legacy brands, where new introductions, the new extensions would be introduced for various brands. And third is, on the back of these brands, when we will be meeting a particular specialty of doctors in that particular therapy, what more we can introduce in terms of new products. I think the aspiration that I have spoken about organically is a function of growth driven by these three parameters put together. And we are pretty hopeful of getting there, or we are not calling out individual brand-wise growth aspirations.
But of course, put together broadly, if I have to give you a playbook, this is how we are looking at growing these brands in our hands.
Got it. Thanks. That is it from my side.
Thank you, Akash.
Thanks. Vikas, there are just a few more questions that have come on the wall. How do you see new product introductions from Evonile, and what is the strategy for new product introductions?
Speaker, sorry for interrupting. The questions are not audible. Can you speak a little louder with the questions? Thank you.
The question is, when would we see new product introduction from Evonile Pharma, and what is the strategy for new product introductions?
Okay. So I think our teams are getting on board now. So, late Q4 or Q1 is when we will start introducing newer products to these teams. On the strategy of new introductions, like I said, it will be on two accounts. One is the brand extensions on the existing brands, more for lifecycle management or the opportunities that we see in the existing brands. Second will be with the same specialists, what is it that we can carry, what our teams can carry as new introductions, so that we can maximize the productivity of people. So, I think this is the line of thinking as far as new product introduction is concerned. It will be in this regard.
Yeah. So two more questions, Dr. Vikas. First is, can you let us know how our resourcing efficiency is planned as we now have control on the supply chain? When will we see [GM], which is a right representation of all the efforts that you're putting in—
Yeah.
—in terms of the quarters?
Okay. So, I think we have carried some bridging stock for most of the products that we have in our company. There is a very strong group that is working on bringing in wherever these efficiencies can be brought in without compromising in any way on the quality of the product. So, I think the real gross margin changes should be visible only after Q1, or starting Q1. Because one is we carry certain stocks with the old inventory, or there is stock in the market. So I think Q1 onwards, we will start seeing the impact on the gross margin. So, of one, both the product mix as well as the new sourcing wherever we would have done.
Great. Coming back to finance, what will finance cost be for Q3, Q4, and when do we expect debt to reduce, and what will net debt be as of March 31, 2027?
Yeah. Broadly, this is again, once we come up with our overall plan is to keep it significantly reduced by March 31 by rights issue. Once the whole plan on rights issue is out, we can give the exact cost of finance plan. But overall finance cost will be within INR 15 crore for Q3 and INR 10 crore-INR 15 crore in Q4. That will be the range of finance cost.
Just to add to what Bhagwat is saying, our intent is to keep the balance sheet as less stressed as possible as far as the long term thing is concerned. If you look at any point in time, we would not be keeping a very high leveraged balance sheet, as a very high debt on our balance sheet. Whatever is reasonable is going to be there. I think that's the whole intent.
I have one last question on finance on the wall. Employee cost is at INR 14 crore, other expenses is at around INR 11 crore. How do you see these two expenditures over the next few quarters?
See, as we scale up, I think Q4 should give you a full-blown employee cost or the other costs, because by the time all the whole hiring gets completed, would be. I think Q4 should be a good indicator of having the overall loaded employee cost. Not only employee, even the other costs that we would put behind the overall expense structure. I think, as we called it out on the previous calls, we assume that when we are fully stable, around INR 45 crore-INR 50 crore additional expenditure every quarter may be visible, as compared to the previous base of our expenses that has been there quarterly. On top of it, another INR 45 crore-INR 50 crore. Sorry, around INR 50 crore-INR 55 crore.
Yeah, so INR 45 crore-INR 50 crore. The base, when Vikas is speaking, it is like Q1 base.
Yeah
Which is around INR 15 crore. This quarter, we have already increased it by INR 10 crore. If you look at the reported numbers, employee benefit expenses and other expenses together are around INR 25.4 crore. When we say INR 45 crore incremental, it is compared to Q1.
Right.
If you are looking Q1 versus the Q4 comparison, it will be higher by INR 45 crore. We are in that journey.
Yeah.
Great. The last question to sum it up, how do you see the organization, Evonile Pharma, playing out over the next three to four years in terms of top line, EBITDA?
Yeah, I think it's a journey. We've just started that journey, so I wouldn't call out any numbers. If I have to give you a view, I think we would be a company that has a strong domestic play. We would be a company where capital allocation decisions will be taken very wisely. We would be a company which believes in creating shareholder value. In terms of our overall operating margins, I think we will be pretty much in line with any company of that size that you see, that size and that gross margin. So, we would be pretty much in line with any of the downform players as we move along. I think I will take it as it comes. As I mentioned, we have our priorities for the near term very clearly spelt out.
We would be focusing more on that to begin with. We'll keep setting our goals as we move along during this journey.
Thank you. Over to you, moderator. You can check if there are any questions.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Once again, we have a question that is from the line of Candice Pereira with Dolat Capital. Please go ahead.
Yeah, thank you for taking my question. So, you were saying that by Q3 end and Q4, we will have all the MRs in place. So, does that mean by Q4 end, the business will be fully stabilized, including internal controls and everything?
Yeah, guys, so that's our intent. Depending on how it plays out, by the end of Q4, or that's why I said Q1 of FY 2028, I think these would be the quarters where you can assume that we would be getting stable.
Okay. Do you all have any internal forecast by how much growth you all would like to see by FY 2028, 2029?
No, I think I have really called out those numbers. If you see, we would be wanting to grow much, much ahead of the market. If you look at our base of, say, a Q4 or a Q1, we should be, if we are within the range of around INR 150 crore of revenue, that means we would have stabilized the business. I think our journey would begin from there, and we would continue to clock a growth much faster than the overall market growth. I think that is how I see it playing out.
Okay. Will we be looking at more deals like we have done with Pfizer?
We would want to be a very acquisitive company going forward, but wherever we feel that we can create value, wherever we feel that it makes financial prudence as well as strategic synergy, I think that is where we will be continuously on the lookout for various assets. This is always opportunistic, so we will play it as it goes.
Okay. Thank you so much. That is all from my side.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Once again, a reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, as we have a question that is on the line of Sanjay from Goldstone Capital. Please go ahead.
Yeah. Hi. Thank you for the opportunity. My understanding is that you are guiding for the FY 2028 to be around INR 600 crore. That's my first question.
No, Sanjay. What I said is the stabilized base would be around that number, but FY 2028, we would be growing on that base.
No, I haven't understood. FY 2028 would be more than—
Yes.
—than INR 600 crore?
Yes.
Oh, okay. The second question is for the new launches. Are we already in talks with someone, and what would be sort of the timeline to be able to do the new launch from a new medicine which is going to be introduced into the Indian market?
Yeah. I think you missed the earlier question on the new launches. I already addressed it. Our sense is that, once our teams get stabilized, by end of Q4 or Q1 onwards is what we will start introducing new products in our teams. The work is already on for those launches.
But what would be the sort of a Is there a bar, or it is going to be really opportunistic, where we will be talking to existing and maybe some new players also coming from the biotech?
Yeah. It is going to be a mix of all the opportunities. Wherever we see that there is right synergy for the teams, wherever we see that there is enough opportunity for us to play in that market, I think that is where we will introduce. That is how I think the whole industry works on introducing new launches. So, we will be pretty much in line with that.
Okay. Thank you.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I now hand the conference over to Mr. Jason D'Souza for closing comments.
Thank you, moderator. We'd just like to thank everyone for participating in Evonile Pharma's Q2 Earnings Call. We will end the call here. We would like to wish everyone a happy Diwali. Vikas, do you have any
No, I think thank you so much for joining us for our first call and your guidance and your questions. I really take this opportunity to wish all of you a very, very happy festive season ahead to you and your families. Thank you so much.
Thank you.
Thank you. On behalf of Evonile Pharma, formerly known as Novartis India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.