Ladies and gentlemen, good day, welcome to Q1 FY24 earnings conference call of the JB Pharma. 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 this conference call, please signal an operator by pressing star then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jason D'Souza, Executive Vice President, JB Pharma. Thank you, Over to you, sir.
Thank you, Nidok. Welcome to the earnings call of JB Pharma. We have with us today, Nikhil Chopra, CEO and Whole Time Director; Kunal Khanna, President, Operations; and Lakshay Kataria, Chief Financial Officer at JB Chemicals & Pharmaceuticals Limited. Before we begin, I would like to state that some of the statements in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q1 FY24 investor presentation that has been sent to you earlier. I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call for his opening comments, after which Mr. Lakshay Kataria will address the financial highlights. Over to you, sir.
Thank you, Jason. A warm welcome to all of you. Thank you for joining us on the first quarter call to discuss JB's- JB Pharma's performance. I will begin with the operating and strategic highlights, and will be followed by our CFO, Mr. Lakshay Kataria. He'll be sharing the financial highlights and his thoughts on the performance. Subsequently to our comments, the forum will be open for the questions, and we'll be glad to address those. Dear friends, quarter one has marked continuation of the trends set in the previous year. Growth across both domestic and international businesses have been good. To share some numbers, in quarter one, we reported a revenue of INR 896 crores, marking a growth of 14%.
The key aspect being that we crossed a milestone of INR 400 crore in quarterly run rate in the international operations at INR 407 crore, growing at 11% year-over-year. This followed good traction in our CDMO business. Domestic business delivered 17% growth to touch INR 489 crore on the back of impressive growth in the acquired and chronic portfolio, where most of these brands have completed 1 full year as a part of now JB portfolio. On the chronic side, JB continues to outpace the chronic IPM by a wide margin. Certain parts of acute portfolio saw weaker seasonal demand build-up. Turning the discussion to our branded portfolio, we have made good gains in the track brands, which you would have seen in our investor presentation.
As per IQVIA Map, June 2023, JB showed a growth of 20.7%, contrasting with the 10.6% in the Indian pharma market growth. Our biggest brands have grown even bigger. We are pleased at how the market has responded to Azmarda, our heart failure pill, where we had reduced the prices by 50% in December 2022, before the loss of exclusivity. The team has been particular about the lifecycle management of existing products while successively introducing new offerings. Our task is simple: to make these star brands even bigger. This is visibly working both in our own as well as acquired portfolio.
The recent acquisition, that is, Razel, is Rosuvastatin portfolio, is gaining good traction, and its monthly sales have jumped from a monthly average of INR 5.5 crore in the year FY22, that is, prior to us acquiring that brand, to INR 6.7 crore in June 2023, as per IQVIA. Our portfolio in cardiac is complete, with every product registering a good performance. At this juncture, I must say the acute segment has witnessed several challenges due to late monsoon. While the acute business performance was moderate during the quarter, we hope the uptake will increase in the second quarter. Moving on to our international business, we have seen healthy numbers. Our international formulations have grown at 12% to INR 275 crores.
The strong growth came in CDMO, which has been continued. Business has achieved close to 20% growth in the quarter. However, we will need to closely watch the upcoming winter season, as that will drive the secondary demand probably for Q3 and Q4. The prevailing geopolitical issues continue to cast uncertainty in the markets that we operate, translating into impacted demand in some of the cases, and currency devaluation in some of the markets. The silver lining here is that logistics and freight costs have stabilized. We have witnessed some benefits on margins on that account. Operating margins have improved for the quarter on account of better business mix, increased efficiency in sourcing and higher volumes. The South Africa business is going through a transformation. We have made choices with respect to certain product portfolio in public businesses.
This is impacting growth in our international formulation business as overall. Our endeavor remains to drive India as well as CDMO business combined to contribute 75%-80% to our revenues, which we have been talking previously in our conference call. Both these businesses give us high returns and operate at good margins, which overall helps us to reinvest in the business. The path forward is predicted on driving our core strategies in both domestic as well as international markets. Domestic with sheer trust on big brands and active product management, we have a sharp focus on CDMO business and scale up in our ROW market and in our international operations. As we grow, we are making sure that cost savings are put on priority wherever possible, so that we are more resilient to operating challenging environment.
With this, I will hand over to Mr. Lakshay Kataria, to walk through in detail about our financial performance for the quarter. Over to you, Lakshay.
Thank you, Nikhil. A very good afternoon, everyone, welcome to our earnings call. I will now take you through the financial highlights of Q1 FY24. Revenues for the quarter were at INR 896 crore, representing an increase of 14% year-on-year. The domestic to international business mix was at 55%-45%, respectively. The domestic business achieved revenues of INR 489 crore, with a growth of 17%. As Nikhil mentioned, acquired brands performed well, continue to deliver healthy returns. The international business demonstrated 11% year-on-year growth, generating revenues of INR 407 crore. This was driven by the CDMO business, which grew by 19% year-on-year, the international formulation business improving by 12% year-on-year. Reduction in logistics and freight costs have positively impacted our operating margins for this business.
We do see some softness on the Ruble and ZAR from a currency perspective, which has impacted our reported performance for the quarter. Gross margins for the quarter stood at 65.4%, expanding 270 basis points from last year's same quarter. In the quarter, our operating EBITDA, excluding ESOP cost, was at INR 243 crore, reflecting a 28% year-on-year growth. The margins were at 27.1%, an expansion of 290 basis points, as compared to 24.2% in the same quarter last year. On the expenses side, the total employee costs, including ESOPs, increased by 11% to INR 149 crore. Employee cost as percentage to sales, improved to 16.6% from 17.1%, reflecting operational efficiency. Non-cash ESOP cost was at 5% of the reported EBITDA versus 10% year-on-year.
Our other expenses increased by 11% to INR 205 crore, and as % to sales, improved by about 100 basis points. Depreciation included an amortization charge of INR 14 crore on account of acquired brands. Profit after tax was at INR 142 crore, which increased 35% year-on-year. We continue to focus on working capital efficiency and cash generation from the business. Happy to report that our net debt, as of 30th June, came down to INR 102 crore from INR 266 crore in the prior quarter of 31st March, 2023. While our operating margins have improved significantly in Q1 FY24, we reiterate our guidance for operating margins between 25%-27%. On the balance sheet side, we continue to focus on managing our working capital efficiently and improving our ROCE.
Our operating cash flow continues to remain healthy. We expect to become cash positive in FY23, FY24. We continue on this journey of growth and transformation, we remain confident on a positive outlook through opportunities for the company and providing value to all our stakeholders. That concludes my opening remarks. I now request the moderator to open the forum for Q&A session. Thank you.
Thank you very much. We'll now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their 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. Participants, you may press star and one to ask a question. The first question is from the line of Rahul Jiwani from IIFL. Please go ahead.
Yeah, hi. Thanks for taking my question. Sir, on the CDMO business, have we been able to add any new customers or new product technologies, which we have talked about in the past? What is the outlook for this business for the rest of the year, given that you indicated that we need to watch out for how the winter season plays out?
As we have been talking, Rahul Jiwani, in terms of, about whether product or partner, it's work in progress. We'll be able to add more color probably in coming quarter. There are some developments which have happened, and as I spoke earlier, we have healthy order book for Q2. September, probably mid-September, we'll be able to at least get some inputs from our partners in terms of how the winter season is setting in. That is where we stand. Yeah. What we are trying to do that, we are looking at with the same partners, newer geographies we are trying to get in. That has happened, which is overall helping us. If you look at in terms of what we have demonstrated overall in Q1, close to INR 120 crore delivery.
That was the initial phase which we were working with, that with the existing partners, new geographies, for, for the portfolio that we have, that has, that has helped us, and that is helping us for quarter two. New products, new partners, still, I think, we'll be able to add more color probably next 3-4 months. Yeah.
Sure. then are you disclosing these new geographies which you have been able to add? Are these Southeast Asian markets largely?
Sorry, are we?
On the-
Rahul, sorry to interrupt you. Rahul, sorry to interrupt you. Can I request you to speak through the handset, please?
Yeah, sure. Sir, I was asking regarding these new geographies which you have been able to add. Can you... Are you disclosing the names of these geographies?
Rahul, we cannot disclose specific geographies. It's confidential information. It's part of the regions which we already predominantly operate in.
Sure, sir. Then on the domestic business, our traction on the acquired portfolio has been good. Can you quantify in terms of how the trends have been with respect to Azmarda? Because in last quarter, you had indicated that we had seen 25% higher volumes as compared to pre-expiry volumes. How are the volume trends sustaining on Azmarda, and what has led to this strong growth in Razel as well?
On the Azmarda front, post image, LOE, immediately there was a ramp-up in the volume, and this ramp-up was seen in the overall R&D market and, you know, for our product as well. Having said that, you know, the market is also stabilizing a bit right now, and, you know, one cannot expect that the sequential growth of 20-25% month-on-month will continue. Our overall thesis on the overall market opportunity attractiveness and our play of, you know, having an established brand like Azmarda continues. The market is very, very attractive. R&D adoption across cardiologists and physicians is seeing a massive uptake, and we continue to be extremely bullish on, on, on, on this particular segment.
On Razel, what you are asking is overall, the focus is more on adding the prescribers, because overall, when you see the fabric of the brand, it was more physician-prescribed product than it was with the company we bought. We are trying, we being a company close to cardiologist, we are looking at how do we get more and more cardiologist prescribers for Rosuvastatin in combination. That work is in progress, and we are more focusing on secondary demand, generating more prescriptions, and that is, that is what, Rahul, we have been doing for more and more number of portfolio. We are confident of at least growing this brand at double digit as compared to the brand has been going, has been flat on growth for last 3 years, CAGR.
That is where we stand from a Razel portfolio.
Sure, double-digit growth on this brand versus flat growth over the past three years?
Yeah. Yes, yes, yes, yes, yes.
Sure, sir. Last question before I come back in the queue. Sir, our API business sales were sluggish this quarter, so there was a 40% YoY decline. Anything to call out for in, in terms of, what led to, muted sales on the API business?
Nothing much. It's just postponement of some orders with one of our key customers. As a business also, we have traditionally seen that H2 tends to be much, much higher. We will be kind of ensuring that we cover up major part of, you know, the muted trend, which we saw in Q1 over second half of the year.
Okay. Sure, sir. Thanks, thanks.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Sriram from BNP Paribas. Please go ahead.
Yeah, thank you for the opportunity. Mr-
Sriram, sorry, but there is a lot of static noise coming from the line.
Is it better now?
No, sir, it's still the same.
Go ahead, ask your question, Sriram.
Hello?
Yes, go ahead.
Yes, sir.
Yeah. One question on the gross margin. I mean, it has seen decent improvement this quarter, of course, because of the raw material cost softening and all. How should we look at this number going forward? I mean, is it likely to sustain or may improve further from here on?
We will pretty much be closer to the range of 55-66, right? That's, you know, the number we are looking at for the year. Basically, this is the improvement that you're seeing in margins is coming on account of, you know, three drivers. One is, you know, the business mix, given, you know, the performance in chronic, the focus on private market in South Africa, you know, that's driving the margins healthy. Second, we have driven sourcing initiatives, on Azmarda and rest parts of our portfolio, so that's contributing to gross margin. Third, yeah, inflation is a little bit soft, so that's also helping us from a perspective of gross margin, and I think we should be able to be in the range of 65-66.
Got it. Sir, is there any reason to, to maintain the guidance of 25%-27% EBITDA margin? Because assuming that gross margin remains around 65%-66%, and our endeavors have been to increase the chronic contribution as well as, in the South Africa market also to focus on the private market. And we are trending higher than the range as of now. Can there be positive surprise to that, or how should we look at that?
See, overall, the guidance that we have been, been given and, and, and what we could see this quarter is one of the best quarter that we could deliver, mid-teens growth and, EBITDA margin close to 27%. Now, that is why, we are giving a range. With gross margin, we are fortunate that all the 3, 3 aspects of what improvement that we wanted to see has worked in our favor in this quarter.
As you know, the markets are so dynamic that the cost of intermediates and APIs just shoot up, and you conceptually, for the business continuity plan, for securing your partnerships with some of the big partners that we work, or for being a responsible company in India, for making the products truly available throughout the year, you have to abide by the regulations that you are working in the environment. This is the range that we have given. We'll be more than happy to be on the higher side of the range, but all the three aspects have worked for us in terms of top line, in terms of mix, in terms of efficiency. That is where we stand as a company.
Our guidance continues to be between 25%-27% of EBITDA margin. For India business, what we have been talking, that we should be growing better than the market. If you see today, today also, the IMS figures have come for the month of July, where the market is showing 6% growth and JB continues to grow at 11%. We are the fastest growing company in top 25. This for the month of July, we are now 22nd ranked company in the market. That is what we demonstrate over a period of time, and that is what we have demonstrated over the last now 8-10 quarters. For international market, we should grow at double-digit.
That is, that is what overall the guidance that we would like to keep for the rest of the year.
Sure. Very helpful, sir. Thank you so much.
Thank you.
Thank you. Participants, you may press star and 1 to ask a question. Next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity. My first question was on the India business. We called out that Razel is having INR 6.5 crore kind of a monthly run rate. If you strip that out, the base business would be growing at close to 12%-13%, but that, as you mentioned, would have some impact of the price reduction what you have taken in Azmarda. Adjusting for that, you know, could you please help us understand what would be the core brands or, you know, or the earlier brands, growth rate in terms of your base business?
Our we don't get into specific growth business or brand, but I think, I think as IMS reports, we are sharing our investor presentation. Let me talk about overall the way we look at business. Our chronic portfolio continues to grow at mid-teens. Our entire growth in India probably has been, is been backed up by the entire performance that we have demonstrated for our chronic portfolio. As earlier also, Mr. Kadir, we have been commenting on the contribution that we want to take up on chronic part of the business, close to 60%, which is pretty close to around 54% within India business. Unfortunately, for in quarter one, our portfolio in acute part of the business is more gastrointestinal depend, dependence, where we have not seen, where we have not seen that uptake.
That is why my Rantac and Metrogyl and Sporlac have not grown at the pace that we were expecting. The entire, entire hard work that we are trying to do, more looking at hypertension, heart failure, lipid-lowering products, that overall has helped us to demonstrate 17% growth for the quarter, and that will be the agenda going ahead.
Sure, sir. Also my second one is on the M&A strategy. I know clearly when we have the visibility that we would be turning net cash this year. I mean, going ahead, what would be the focus area? I mean, would it be, you know, to acquire the right kind of brands which would suit in the current portfolio, or to venture out into some therapies, you know, which would we be more inclined towards?
The agenda on M&A continues to remain same. We continue to evaluate assets. We continue to look at in terms of what value will suit us in terms of being on the buying side. What we look at? 3, 4 aspects. We look at if we can grow the asset at better pace as compared to where it stands today, or we can improve gross margins of the business that we are acquiring by better sourcing or looking at things from in-house manufacturing of API. From a perspective, how much synergies that we can build in in terms of the therapy areas where we want to play and win.
Those are the aspects that we have kept in mind for M&A, and we continue to evaluate assets. I'm not running away, like, we are not in that process. We continue to evaluate assets, and at the right time... If we see that any opportunity is building up, we'll be more than happy to share with all of you at that time. That's what I can comment.
Sure, sir. Thank you, and wish you all the best.
Thank you.
Thank you. Participants, you may press star and 1 to ask a question. Next question is on the line of Tausif from BNP Paribas. Please go ahead.
Sir, thanks for the opportunity, congrats on a good quarter once again. One question on domestic business: What would have been your market share Azmarda in this quarter? It's still in the range of 18%, have you seen any improvement over there?
We are trending in the region of 16%-18%. That's correct.
Okay, thanks.
Thank you. Next question is from line of Alka Kothiyal from Baroda, Baroda BNP Paribas. Please go ahead.
Yeah, hi. sir, just wanted to know, now, how has the export formulation business been in Russia, and how has the growth been? also, if you can, you know, share some color on the South Africa business.
On the Russia front, you know, despite some of the uncertainties in the market, we have been able to hold demand. Again, you know, given our portfolio mix, we actually see peaks happening, post-September, October only. That's when the season is. As Lakshay mentioned, that, there is a slight concern on the Forex part. Apart from that, you know, for both Russia and CIS region, despite some of the uncertainties, we would say that, the secondary demand is still holding up. We just need to be much more cautious about the, Forex part.
On the South Africa front, I think we have been very clear, and Nikhil also mentioned in his commentary, the focus going forward clearly is how do we kind of improve the margin profile of the business, and therefore, the entire trust on driving better private mix, that continues to remain up.
Sure. The number of launches will continue to remain 2-3?
For South Africa, we'll certainly be slightly more aggressive in terms of launches because, you know, we want to improve our private mix there. Certainly that's part of our pipeline strategy. For Russia, we'll be more on the conservative side.
Okay. Okay. Lastly, on the US front, now, like, how are we going to, like, you know, in going ahead in terms of launches?
Last year, we did 4 filings, and the next 12-14 months is about ensuring that, you know, the approvals for these filings come through. In addition to that, we'll be maintaining a run rate of 2-3 filings per year.
Sure. Thank you. Just quickly on this, CMO segment, so, are we still in the process of launching other lozenges segment, like motion sickness and all?
For motion sickness, for sleep disorders, anti-inflammatory lozenges, those are the some of the lozenges, immunity, those are some of the products, and more expanding portfolio in the world of cough and cold. Those all things are working. See, what I've been telling in the world of CDMO, the entire business, adding new partners, adding new products, has got its own gestation period. We are in a very sweet spot in terms of that we have got very good partners, and the relationship has been there for last now two decades plus.
Now with the capacity close to 2 billion lozenges that we can manufacture annually, so that overall helps us in terms of sustaining the business for existing products, looking at doing business with the existing partners in new geographies, and also looking at adding more partners and adding more products with the existing partners. These are all things we are trying to do. And business touchwood has been close to INR 120 crores for the quarter. What I can say at this moment of time that our order book for quarter 2 is also healthy. Equally, we are waiting for some indications from our partners that should come in probably in the month of September, which should help us to give more color on this, on this portfolio.
Also, existing portfolio, for example, we had, we last year could conclude our relationship with Reckitt, where we had launched, where we could manufacture Strepsils for them. The lifecycle management, where the teams at JB and Reckitt Benckiser have done, and now we are able to extend that partnership to Strepsils Immune. Those all things continue to happen in terms of lifecycle management, new geographies, existing product lifecycle management. That is helping us where we stand from a CDMO business. I think this helps overall.
Sure.
because many, many of your colleagues also will be having questions, so where we are, where we are in the world of CDMO, so this is what I wanted to share.
Sure. Sure. Thank you. That answered my question.
Thank you. Next question is from the line of Girish Bakhru from OrbiMed. Please go ahead.
Yeah, hi. actually, first question is on clarification on Azmarda. you were talking about month-on-month growth still being very strong, but I'm just seeing the data QOQ, has the volumes come down a bit? Is the market resetting from that perspective?
The overall market, so what we were maintaining was the overall market when the price was reduced, was at an inflection point, and therefore, what you saw sequentially at that point, the growth was much more rapid. Now, to maintain that same momentum going forward is not at the same rate, is something which may not be possible to sustain, but overall, the market still will continue to grow. One cannot expect that, you know, the volumes which grew in March and April, at almost 30, 35% on month-on-month, you know, that month-on-month increase in volumes will continue. That's what we maintain.
When you see the market, right, right now, let's say it's maybe doing about 18, 20 million units per month. This was about 10 million before the expiry. Do you think still that this can potentially double, triple in next 2, 3 years?
For sure. For sure.
There is lot of, like, underdiagnosis, which is yet to get covered in the market?
We have always maintained that, and that was a going-in thesis for this brand. The sharp rise which you saw with the price reduction itself is a reflection of what the market opportunity is, really. Whatever change you have seen over the past five to six months is not happened because systemically, the market has changed, right? Suddenly, overnight, the diagnosis rate did not increase. It was only the affordability factor. Over the next three to four years, when you see some of the systemic changes happening in the market, which are more related to therapy shaping, diagnosis and all, you will certainly see that the market will continue to grow. That's where we are taking the lead.
You know, even Nikhil mentioned that, you know, our main focus is how do we really influence therapy shaping initiatives, heart failure clinics, to ensure more diagnosis. That's going to be our thrust for the next 3-4 years.
That's very helpful. The second question on Sporlac. Last time, of course, we indicated that probably market share is about 10% now, about 90 growth sales. How do you see this going, and is it going to be the leading brand within the probiotics?
For, obviously, for us, it is a leading brand in probiotics because that is the biggest brand that we have got. When we acquired, this was close to around INR 60 crore-INR 65 crore. Now we stand around close to INR 90 crore, and rightly so, the market share is 10%. What has helped us in terms of looking at the entire strength of JB as a company from a distribution perspective, from synergy in prescriptions, from life cycle management, all those has helped us to scale up this brand to close to INR 90 crore. The brand, overall, the portfolio, Sporlac as a, as a portfolio for us, because there are half a dozen brands continue to grow at mid-teens, and this will continue to happen. Overall, from overall, probably quarter to quarter or for this year to year, you should see us only gaining market share.
Because, sir, I was actually mentioning this leading brand within the probiotic market, like, is it, is it bigger than Vizylac right now, or?
It's bigger-
Unit-wise.
Unit-wise, better. There are the big brands in, in the overall probiotic market are your Econorm, Enterogermina, Sporlac...
Vizylac.
Vizylac, Vizylac. I think, we are almost number 3 to number 4 brand. That is where we stand.
In terms of prescriptions and volumes, we are much bigger. You know, but traditionally, this has been a brand which has been always been much more affordable in the probiotic space. Therefore, value-wise, you know, there is a difference of INR 1 or 2 lakhs.
among these top 5, 6 brands which are in the probiotics, would you say most are covered via GP, and what would be the mix, let's say, RX versus OTC for most of them?
Just to clarify, we don't operate in the OTC segment, right? There may be repeat purchases of probiotics, but that's not our thrust area. The other three to four players also who are operating, every player has a different strain, and we also have our own strain. We have done some life cycle management initiatives on the strain, and we'll continue to do that. End of the day, or across these five brands, there may be overlap of one or two brands where the strain is common. Otherwise, there are different strains, and these are prescription brands. We are not talking about OTC category.
Most would be via GP, right? Irrespective of the strain.
Most will be?
It's a combination of GP, pediatrician. It all depends upon the strain, GP, pediatrician, gastro. We have probiotics, where we go and promote to nephrologist also, one of the brand which we have, Globan. It's an INR 20 crore or INR 30 crore brand, which is basically responsible for halting the progression of chronic kidney disease, which is an INR 30 crore brand. There are, depending upon the strain, the content, depending upon the indication, that is how probiotic as a product behaves in the market.
Understood. Thank you. Very helpful. Thank you.
Thank you. Next RN1, you ask the question. Next question is from the line of Nitin Gosar from BOI Mutual Fund. Please go ahead.
Hi, sir. I wanted to understand Russia piece. The broad understanding was over last 2 years, we would have gained a bit of more traction, assuming some of the players or the global players would have exited the market. A, wanted to understand the size of business for us today, the Russia carries, and B, how do we hedge the, you know, ruble piece that's been pretty volatile over the last 3-4 years?
We, we will not certainly disclose, you know, segment-wise, you know, revenues, but you know, the business still last year also grew at a healthy rate of mid-teens. Of course, the currency played a very important role that time. We have always maintained that, you know, we are adopting a cautious approach in this market. We're ensuring that whatever we have on the ground, we completely optimize, you know, those resources on the ground. Don't get into any investment mode, but, you know, get the best out of what we have.
...We have been fairly successful in doing that. Yes, last six months, particularly the currency volatility is slightly high. We are keeping a close watch. We've kind of hedged some part of it, we'll have to wait and watch on how the scenario unfolds. We cannot completely, you know, undermine the Forex risk. However, we have a very strong hedging policy, and our exposure to that extent is not significant.
Okay. Would it be fair to assume that the exposure we had two years back would be similar to that level? Would it, would it have gone up, reduced? Anything that you can throw some color?
We've always been cautious on global hedging. Even when in 2022, the war situation happened, you know, it did not significantly impact us. We continue to maintain a conservative policy on hedging, and we minimize the exposure.
Fair enough, sir. Thank you.
Thank you. Next question is from Harsh Bhatia from Bandhan AMC Limited. Please go ahead.
Yeah. Thank you. Good afternoon. Can you help us understand a little bit more on what's happening for the Sanzyme portfolio, particularly with regards to Pubergen and Gynogen, because that is the conversation that you are having through IV clinics, right? Can you throw some more color on that front?
That business is close. That business would be, would be close to 25% of the business that we acquired, close to 20% of the business that we acquired. Fortunately, our teams are able to cover close to 1,500 infertility clinics in the country, and both the products, as you mentioned, Pubergen and Gynogen, are well-recognized and well-accepted and trusted brands from the IV infertility specialist. We continue to leverage that strength of Sanzyme as a company, and we continue to source that product from Sanzyme, and that is a continuity plan. Overall and, and overall, if you look at the entire world of infertility, which is only, the demand which is only going up, we also are growing that portfolio at mid-teens. That is what we can say. That is what we can comment on this.
Sure.
We organically at JB also have launched some supportive therapies for infertility, which is helping overall teams to go with a wider portfolio.
Sure. What would be the volume of run rate for Rantac right now for the first quarter of this year versus the first quarter of last year, financial year?
We would be flat on volumes, in terms of... I think that has been shared here in the investor presentation deck. It would be close to around INR 15, INR 18, INR 15-16 crore. That is where we stand as a brand monthly.
25-50 lakh units, that's the broad range which we are operating in. Whenever the season comes up, you know, it goes up to almost 65-70 lakh-
Yeah
in terms of volumes.
Okay. Lastly, the broader price to volume split for the India market, for the first quarter, the 18% growth, can you just provide the split?
If you look at, volumes, close to high single-digit, that is where we stand. Price is close to 5%-6%, and new product contribution is close to 2%-3%.
Okay, sir. Thank you.
Whereas market is probably flat or negative in volume for first 4, 5 months.
Sure, sir. Thank you.
Yeah.
Thank you. Next question is from the line of Maulik from Anand Rathi. Please go ahead.
Hi, sir. good afternoon. I just wanted to know, have we increased our number of MRs, and what is the MR productivity now in terms of the organic business also and acquired business also?
I will talk to you in totality in terms of the productivity. Last year, our productivity was around close to INR 6.2 lakh, and this year, with 50-70 people that we would, we would have added in some of the portfolios, today the MR, total number of MR count is close to around 2,200. Our productivity plan that we have put in place is, the aspiration is close to INR 7 lakh. That is where we stand.
Okay. Okay. The second question is, are we more... I understand the go-to-market strategy which we have. Are we more focused and penetrated in the tier 2 to tier 6 towns and cities or more in the metro city? Can you just shine some light on understanding on it?
This was a scenario, I think, couple of years ago, but if you look at, if you look at today, I think the scenario would have changed, tilting contribution increasing to metro and tier one part of the country. Because overall, when you look at the heart failure product, the result portfolio, overall, what launches we have done, we are looking at how do you improve your contribution of prescription from the specialist as compared to generalist. We can't run away from generalist because with Rantac, Metrogyl, Purlac, those are mass brands, Nicardia. You are right. I think, if, if, if a ballpark figure, it is not, it is not, in black and white. Our contribution was close to 65% maybe from the tier two, tier three parts of the country, and 35% from the metro and tier one.
that was 2 years ago, but today, I think it will be 40% plus from metro and tier 1 part of the country, and it will be progressively, it will, it will only increase. That is where we stand.
Okay, sir. Thank you so much.
Thank you. Next question is from Mr. Dhawal from Jefferies, India. Please go ahead.
Hi, thank you for taking my question. First one, just a clarification, on the EBITDA margin guidance of 25%-27%, is it operating EBITDA or is it after-?
Operating, operating EBITDA.
Okay. Okay, thank you. Second one, just wanted to know on your M&A appetite, so, do we have any absolute number that we can go up to? Or is there any leverage number that we have in mind, and that determines what kind of M&A we could potentially go up to?
We can go up to 1.5% of our EBITDA absolute. That is what the threshold we have kept, but it is not, it is not hard and fast that we have to go to that level. It all depends upon, it all depends upon the, the quality of asset, and if we as a team think that we can turn around and what you are seeing, what we have been, what we have been talking about, whether it is enzyme or whether it is for heart failure pill or what we want to try to do with Razel, if that confidence we as a team have, then we will look at in terms of how much maximum we can go to this threshold that we have kept for ourselves. That is there.
By the way, there is no pressure on us to do any M&A, just for the sake of doing acquisition. Rightly, the way GB as a company is placed, being a dominant player in the world of hypertension, heart failure, we have got a good product, progressive product in the form of Sacubitril/Valsartan . We have got a product for entire range of Rosuvastatin for lipid-lowering agent. We are into probiotic market, we are into infertility market. We are now a good dominant player in the world of pediatrics. We have got a good range of products portfolio in the field of respiratory.
We have got enough, we have got enough in terms of what we can-- how at least we can grow the business in terms of what I spoke earlier, our productivity can go up from INR 6.2 lakh to INR 6.2 lakh to INR 7 lakh. If there is any good asset available, we would not like to miss on the right valuation that we think will suit us in terms of turning around the asset, at least looking at the payback period close to six years.
Okay, thank you. Sir, just one last one from my side. What is our current spend on R&D in the U.S. and, you know, what's the factor that determines this? Will it be the number of filings that we are fixated and that will determine the R&D? Or is it, you know, you have some kind of revenue target or it's, you know, investment that in the R&D that will be the limiting factor. How do you decide on the investments on the U.S. side, and what are the current R&D spends?
Our R&D spends are sub 2%, first of all. There's no determination as compared to more than US. I think what earlier was spoken is the progressive work that we are doing in terms of getting into new, new therapeutic segments in the world of CDMO with assays. That also is a part of our R&D spend. Second, I think what was spoken earlier, that we continue to file 3 to 4 NDAs every year. Third is the filings, the B filings that we have been doing. Last year, we could file around close to 10 products in our ROW market. That is the rest of the world, BGX market, which is with the business today is close to $40 million. That is our presence in Sub-Saharan Africa, Latin America, South Asia, and Middle East.
This entire model of business is distributor-led model. Last year, we could file 10 products. This year also, we want to file 10 more products. That is a part of our R&D investment. It's a combination of developmental work that we do for CDMO, the filings that we do for ROW market, and what we are trying to do in terms of filing 3 to 4 NDAs in US every year. Our R&D spend earlier was sub 1% when we came in. Today, at least it is, it is close to 2%. Progressively, it will go up. That is, that is where we stand as a company.
Okay. Just one last one. I think, you know, you made a press release that you have formed a Philippines JV. Can you throw some light on that market? What's the breakup, you know, in terms of whether it's branded and what proportion of the market is branded, what's the growth rate of the market, and how, how we are seeing, you know, the scale-up that we'll be able to do going forward?
You know, we've been present in this market historically through our distributors, so we've not had a direct presence. The intent is to get into a direct presence, and the opportunity lies both on the institutional side and the B2C side, right? That's really the opportunity we are looking for. We surely want to invest in new products in the market, build our product portfolio, and then sort of, you know, invest in a direct go-to-market model in this subset. Having said this, you know, there is a regulatory timeframe around getting these product registrations, you know, in place and making that change in the go-to-market, which should happen somewhere in FY25. Our aspiration is over the next, you know, 3-4 years, we would at least want to get to about $4 million-$5 million of revenue from this subset.
Okay, thank you.
Thank you. Participants, you may press star and one to ask the question. Next question is from the line of Srikanth from Asian Markets Securities. Please go ahead.
Good afternoon. Thanks for the opportunity. Nikhil, can you please call out the capacity utilization at the lozenges facility?
Sorry, sorry, I could not get. Sorry.
On the lozenges capacity utilization, we can manufacture 18 crore lozenges. Currently, we are manufacturing and packing close to 11 crore lozenges. From a packaging standpoint, we have a capacity which will, in the next two months, go up to close to 15 crore lozenges.
Okay. Because this year we have done quite well in, in the lozenges business, I was wondering if we need to add any more capability or capacity next fiscal year?
Certainly, our focus is on de-bottlenecking some of our packaging lines. That does not call for a significant investment. The efforts have already been put in there. As we speak, as, you know, mentioned that we'll be reaching 14 crore packaging capacity. That over the next 12 months also will be touching close to 18-20 crore lozenges.
Okay. Okay, and, and, any guidance you would like to provide, for the next fiscal on the, lozenges business?
Right now, we believe that, you know, the CDMO business continues to grow healthy, you know, double-digit figures. Yes, last year there was a significant spot, we really see a very good, healthy order book situation. As Nikhil mentioned, that, you know, we have to watch out for how the seasonal trends kind of reflect over the next 3 to 4 months to give you a firmer view of almost next 10 to 12 months. Irrespective, this is a very important strategic area for us. Quite easily, it will, over the long term, continue to grow in healthy double digit range. In the next 12 to 14 months itself, that's why we have taken the effort of almost taking our manufacturing and packaging capacity to almost 18 crore lozenges.
All right. On the domestic business, can you call out the acute/chronic mix during this quarter?
acute was, close to... I'm just giving you a broad range, but acute was closer to 44-45, and the chronic close to 54-55.
Okay. Because, I was thinking that there has been lower chronic, sorry, very high acute... sorry, I'm sorry. The chronic business has done well, I was just wondering if there was any positive insight, because chronic has done well, and at the same time, the acute has seen significant, a slight dip in the contribution. Is that right assumption to make on this?
Overall, our, I think, chronic contribution last year was close to 53%.
53, yeah, that is the 100.
That is what was, I think, what Kunal's focus, our chronic contribution should be close to 54%, 55%, and acute contribution would be close to 45%.
Understood. Last question, so in, because we are putting a significant focus on the chronic business, so what will be our target in two to three years' time? Where do we see the acute/chronic mix heading to?
This I spoke earlier, our chronic, our contribution of chronic business, we want to take it to 60%.
All right. Thank you so much.
Thank you.
Thank you. Participants, you may press star and one to ask the question. Next question is on the line of Rahul from Emkay Institutional Equities Please go ahead.
Yeah, sir. sir, in the domestic business, apart from Sporlac, do you see any pricing, big pricing differential between your brands and competition? Are there any efforts to narrow this pricing gap versus competition?
Rahul, even if there is a pricing difference, for all the scheduled products, you cannot go beyond 10% range, right?
Mm-hmm.
you know, while there is a pricing difference for Sporlac, the maximum increase you can take from a price standpoint is not beyond 10.
Okay, okay, okay. Apart from Sporlac, there, none of your other brands would have a meaningful discount versus competition?
Apart from, yeah, that, it's, we are pretty much on parity with respect to our brand.
Sure, sir. Some of your peers have called out the NLEM price cut impact during this quarter. Did we also, our NLEM exposure has significantly come down to Santec getting out of price control, but did NLEM price cuts impact our gross as well on the India business this quarter?
There is a very marginal impact on Metrogyl, very, very marginal. Nothing to kind of comment on.
Sure, sir. Thank you.
Thank you very much. I now hand the conference over to the management for closing comments.
First of all, let me thank you, thank all of you, for coming for the call today, and at least patiently listening to our commentary. We were more than happy to at least take your questions and give the answers in the capacity that we can, we could. Overall, once again, reiterating, reiterating that our guidance going ahead for the next three quarters should be what, what we have been spoke, what we have spoken earlier is beating overall India pharma market performance by 300-400 basis points, and that is what we could demonstrate in the month of July also. What I shared earlier, the IMS figures that we have demonstrated for last four months, and which it will continue.
Our, our entire focus within India would be how to continue to work on the theme of making big brands bigger, particularly in chronic part of the business, and aspire to take that contribution to 60%. More than happy in terms of the portfolio that we have acquired and the new brands that we have built, is only helping us to not improve our ranking in value, but also to, also improving our ranking in prescriptions. That is, that is what we fundamentally believe, that how do you build your business, which is, which is fundamentally strong. This was on India. International, the focus will continue to be on the CDMO business, continuously working with our partners, and equally looking at what opportunities we can explore in the BGX market.
Also, as stated earlier, South Africa this year, the entire aspect of transformation of business, looking at how we can improve our contribution from private market, will happen over a period of time. So international business growing at double digit, touching double digit growth, and India market beating beating IPM by 300-400 bps. The margin guidance that we have stated earlier also will be between 25%-27%. That is where we stand as a company, and committed overall, not only in India, but globally, to deliver quality medicines, which comes from the House of JB. Thank you all once again for coming for today's conference call, and we'll continue to touch base with you in coming quarters. Thank you.
Thank you very much. On behalf of JB Pharma, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.