Ladies and gentlemen, good day, and welcome to the Gufic Biosciences Limited Q4 FY23 earnings conference call. 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 Ms. Ami Shah from Gufic Biosciences Limited. Thank you, and over to you, ma'am.
Hello? Hello, am I audible?
Yes, ma'am, you're audible now. Please proceed.
Okay. Yeah. Good evening, and a warm welcome to Gufic Biosciences Limited earnings conference call for the Q4 of financial year 2022-2023. Along with me is Mr. Pranav Choksi, Chief Executive Officer and Whole Time Director, Mr. Devkinandan Roonghta, Chief Financial Officer, and Mr. Avik Das from Investor Relations team, to give the highlights of the business performance of the company. We will begin the call with business highlights and an overview by Mr. Avik, followed by financial overview by Mr. Roonghta. After the opening remarks, the operator will open the bridge for Q&A sessions. I'll now hand over the call to Mr. Avik. Over to you.
Thank you, Ami, welcome to our investor call. I'll give you all the key highlights of each of the divisions. To begin with critical care: Within critical care, we've completed a detailed door-to-door market mapping for the various molecules that are offered by Sparsh division. We've surveyed almost 8,000 hospitals, we have commenced supplies of medicines to a few of these hospitals. In the coming financial year, we have devised strategies to increase our penetration and coverage with these hospitals. We will also be increasing the universe of the hospitals in the coming year for this division. We've also received the DCGI approval for Biapenem Dual Chamber Bag. The launch of Ceftazidime-Avibactam was very successful, we've received good initial response.
In the coming year, we should be able to increase our market presence in this particular product. We also plan to launch the novel once-a-week anti-infective, Dalbavancin, for the first time in India, in H1 of the coming year. Both these molecules will also be offered to a select few CMO partners of ours in the coming year. On the penem front, it gives us a lot of pleasure to inform all of you all that most of our captive requirement now is being fulfilled by the facility at Navsari, which was initially being outsourced. We've also initiated the process of filing for registrations in certain regulated markets from this new facility at Navsari. Within this division, we also plan to launch the oral form of itraconazole. We've already launched the injectable form.
The launch went off very well. Coming to our other division, which is Ferticare. The launch of Dydrogesterone was successful, and to increase our presence in this particular market, we also plan to launch a sustained release form of the same in the coming financial year. We anyways, we earlier also informed that we have market leadership position in HMG and HCG, and we have now launched a more potent form of HMG, which reduces the chances of failures of IVF cycles. Innovations like these will help us solidify our position as a top five player in the infertility segment. Our trials with Thymosin Alpha injection for endometriosis is progressing well, and we'll keep you all informed of further developments as and when we have any to share.
Now coming to the other divisions, which are healthcare, Stellar and Spark. The trials for a new product, which is derived from Boswellia serrata, has gone off well, and this particular candidate will be used for management of asthma. We plan to launch this in the coming financial year. Our brand, Sallaki, continues to be a market leader in Boswellia serrata products. The launch of a new zinc-based Multivitamin has also gone off well and has contributed to sales in our mass market division. Moreover, in this particular division, we plan to launch a novel Analgesic in the coming year, Polmacoxib. It's a first-in-a-class NSAID for relief of signs and symptoms in osteoarthritis. This is one-of-its-kind drug, which will definitely improve the way patients are currently treated with these with osteoarthritis.
Coming to Aesthederm, we have successfully completed a split phase trial between Stunnox and Botox. Stunnox continues to increase penetration in the market, and our brand, Stunnox, is now the second largest player in the Botulinum Toxin Market in India. We've also initiated the process of registrations for a range of fillers to complement and augment our basket of products in this category.
... on our, on the international business front, it gives us immense pleasure to inform you all that we cleared the Anvisa Brazil audit successfully without any observations. Moreover, we have received 4 new registrations, and details of which we've mentioned in our investor presentation. A quick update on our Indore project . We are, we are going as per the timelines that we had planned, and we anticipate that the validation of the facility will be completed by Q2 and subsequent to which we should commence our commercial production. I'll hand over the call to Mr. Roonghta to give an update about the financial performance.
Thank you. Thank you, Avik. Good evening, good evening. I'm giving a financial highlights of financial year 2022-2023 versus 2021-2022, and Q4 of 2022-2023 versus Q4 of 2021-2022. First off thing, the financial results of 2021-2022 versus 2022-2023 is not comparable, because in the financial year 2021-2022, the total revenue includes around INR 170 crores of sale from COVID-related product. Out of the total revenue of INR 779 crores, if I minus the COVID-related sale of INR 170 crores, the net sale is INR 610 crore rupees, against which the current year sale is around INR 691 crore rupees of sale. The EBITDA last year was INR 151 crore. This year, the EBITDA is INR 137 crore.
The EBITDA margin for last year, 19.4%; this year it has improved from 19.4% to 19.9%. Profit before tax last year was INR 127 crores, this year it was INR 117 crores. PAT margin last year, 16.3%; this year, 15.5%. Profit after tax last year was INR 96 crores, this year it was INR 80 crores. PAT margin 12.3% last year, this year 11.4%. If I compare the Q4 of current financial year versus last financial year, the turnover of last financial year was INR 162 crore, this year it was INR 173 crore. EBITDA was INR 32.7 crore, this year it was INR 32.8 crore. The EBITDA margin has reduced from 20.2% to 18.90%.
Profit before tax last year was INR 26.2 crore, this year INR 23.9 crore. PAT margin was 16.1% last year, before this quarter it was 13.8%. Profit after tax was last year INR 20.3 crore, this quarter it was INR 18.1 crore. PAT margin last year was 12.5%, this year 10.5%. Thank you again.
Should we open up for questions?
Yeah, we can open up for questions.
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 Bhavya Sonawala from Samaasa Capital. Please go ahead.
Hi, sir, thank you for the opportunity. Am I audible?
Yes, Bhavya, you are audible. Please go ahead.
Yeah. Just a couple of questions. The first, just wanted to know, if you can throw some light on the receivables and inventory, there's been a spike up. Just to understand on the inventory side, has there been some lag of demand or, if you can help us understand that?
I'll answer the inventory point, and then I'll come to the receivables point. The inventory point because of two specific things are there. If you see the major increase has happened because of the launch of Sparsh, which has been there. Sparsh has been envisioned for, you know, with the launch of around 85 SKUs in the first phase. And in the next phase, there are going to be, I think 50, sorry, 45 more, so 130 molecules have been selected.
These are the same molecules where we are going to do a sort of a process validation as well as dossier creation also, because the efforts which we take to make 1 dossier, we thought that the sales, once the 3 Validation Batches are taken, the sales can be done in Sparsh in India, at the same time the dossier can be created for international markets. One of the reasons is Sparsh. number 2 reason is that also, we are, if you recollect, that we were supposed to launch the Dual Chamber Bag, in, I think, September to October 2022. Now, because we did not get the approval for the price increase, from the government, for Meropenem and Pip/Tazo, we, I mean, we got an approval of 15%, 20%.
However, efforts are still on to go for a higher, what do you call? price basket. Because, you know, the costing is not conducive in that 15%-20%. We had ordered, keeping in mind our 6 months forecast, because these bags are coming from Europe. The 6 months inventory of bags which have been ordered from that time are still staying in our thing. Anyway, what we have decided now, because Sparsh has come and also Critical Care is there, we will be launching Biapenem and Teicoplanin, which are anyway not controlled by NPPA right now. Side by side, our efforts will be on to, you know, get these bags approved for Meropenem and Piperacillin-Tazobactam also. Meropenem, the NPPA clarification has come on 1st of April.
Now I feel that maybe in this question of a month or 2, that meropenem clarity should come. We, I feel that inventory, which are majorly because of these 2 factors. I'm saying of course there are other factors also because we have now the divisions and we have other things also. Inventory overall, we are also keeping a much more healthy position. The major 2, I would say, non-current reasons are Sparsh and Dual Chamber Bag, and both of them should be harmonized in this year going forward. This is in about for inventory.
Coming to receivables also, if you see post-COVID, most of the people in terms of contract manufacturing or exports for that matter, because suddenly we saw that inventory, you know, being built up, and then, you know, COVID also our sales really went down, and we also had to take some stocks, right? People have now stretched the normal payment terms to 90 to 120. That I'm referring purely to the contract manufacturing as well as to the, you know, export sales. 90 are the official terms, but normally this has become sort of a norm in terms of exports and as well as contract manufacturing.
There have been some, I would say, new parties which have been opened up in terms of export in certain countries where it is mostly related to, I would say, hospital-based businesses in big countries also like UK or Germany, for that matter. Keeping the transit time, the entire, you know, testing time, QP release, as well as 90-100 days of normal payment cycle, what we normally, and working capital is normally what we envision. This is the two main reasons for the trade receivables as well as the inventory, which I mentioned before.
Okay. Got it, sir. Just one last question. When we had the call, just after COVID, you had mentioned INR 170 crores of revenue, and plus you had also mentioned that because of COVID, a lot of our verticals couldn't show their true performance.
Right.
With respect to that, how have the verticals performed according to you and your expectation? Have they been, in par with, you know, the company or particularly your expectations? If you can throw some light on that. Thank you.
I would say, there are mainly three verticals which are further divided into eight different divisions. But I would say Critical Care and Infertility, Gynaecology, and Mass Marketing are the three main verticals of the domestic pharma space. Critical Care took a hit this year because there were two things. Inventory was built up post-COVID, where the sales just fell drastically, as well as a lot of channel-based inventory was taken back by us to normalize the outstandings and all that. Critical Care suffered last year, and we saw a decline growth happening in the Critical Care division, which I feel, with the launch of Cefiderocol and others, should go away. It's not a problem.
This year, I think, I mean, we have taken more than, I think, INR 26 crore-INR 28 crore goods return only in the critical care division last year, which was a big hit for us here, which is reflected in our top and the bottom line, which was, I think, a one-time we had to take a hit. Infertility is something which I was very confident that has really paid off well. We saw more than expected returns in infertility, and it's not only with the launch of, I would say, Dydrogesterone, which is still a decent component, it's still a small component. However, you know, the hormone business, the HMG, the FSH, the HCGs and the cetrorelix, and also with our other, you know, hormonal range of estradiol also picked up really well.
enoxaparin to some extent, helped us, but it was more or less stable. Infertility was the main growth driver for us in the domestic market space, followed by healthcare, with not only the Sallaki brand, but also Gufican being launched and also, like Avik mentioned, the Multivitamin being launched. Going forward also from this year to next year, with the launch of Polmacoxib and one other SKU in the cannabis range, we are expecting that, this healthcare should continue the growth. Spark, even though it's a smaller division, part of the mass marketing division, also grew by almost, I think 22%, but because of the small base, it's not, adding much in the total revenue, followed by Stellar and Aeptepro.
Botulinum toxin is another, like I said, it's a small base, but that is growing at much faster rate. I think it'll have significance value maybe towards the end of this year or maybe by Q2 2024, sorry, Q2 2025, it will have relevant value in the total revenue of Gufic. Other divisions have picked up well, but the critical care hit was something which we had to take last year, and we had to, we get it done with.
Okay, I got it, sir. I ask a few more questions and I'll come back to you then. Thank you.
Thank you.
Thank you. The next question is from the line of Nirali Shah from Ashika Group. Please go ahead.
Hello?
Yes, Nirali, please go ahead.
Yes, could you please provide an update on the contribution of Ceftazidime Avibactam to our overall revenue? Also it would be helpful to understand the revenue breakdown between in-house and revenue generated through CMO.
If you refer, the overall pie chart, which we have given in the investor presentation, that will give you a total revenue break up, I would say specifically, however, if you want some specific percentages, I can always ask Avik from IR to get back to you. Coming to Ceftazidime Avibactam , as you know, the Patent went off in January end 2023. We launched the molecule on the day of, I mean, just, you know, as the Patent was going off and, you know, we had worked before. February, March, I would say, again, I can give you numbers, but, you know, as compared to the entire revenue, it might not be even a thing. From April, May, you will get a much bigger number because you'll get a complete, full financial year.
However, if you're still, and I'm just trying to calculate the numbers, but I still feel it should be around some, because there were two Ceftazidime Avibactam is sold by us, not only as our own brand in the Indian market, but it's also sold as a contract manufacturing option for our clients. Again, revenue, I might be wrong. I'll ask Avik to get back to you, but as a number of vials, I'm aware because we just finished the review last week. And there we have told, from only in the month of January all the way to March, close to approximately around 98,000 vials to approximately 98,000-99,000 vials, combining both contract manufacturing as well as this also, our own domestic market also.
Yeah. My question is actually, how much % do we earn from in-house and from CMO?
So, uh, again-
Second one.
Domestic marketing, India would be more than 50% to 55%. CMO would be approximately close to 20% to 25%. I think I can ask Avik to correct me if I'm wrong, but according to me, it's 55% and 25% as of now.
Understood. Understood. My next question is, could you provide some insight into the sales performance of Stunnox in FY23, and if you could share the guidance for FY24 as well?
I will divide Stunnox, as we say, I will divide the botulinum toxin business in two parts. Like I mentioned, the Stunnox was something which has a legacy of more than a year now. Zarbot is something which we have launched, which is same botulinum toxin, but specially for medicine as well as neurological, I would say, conditions. Of course, Zarbot was launched only, I think, in 2023 mid, sorry, 2022, 2023 mid. Stunnox had a complete 12-year run rate, so 12-month run rate, sorry. Stunnox, of course, has become almost two and a half times. Like I said, the base is quite small, the two and a half has no relevance over last year.
Zarbot is still taking time because I feel that initially we tried launching the products through our critical care division. We clearly quickly realized that, you know, our critical care team doesn't have equation with the right target audience who handles these specialty products for neurological conditions as well as, you know, spasticity, strabismus, hemifacial spasm, et cetera. We got a new team actually recruited by October, November 2022. Of course, the launch was in December when we invited a international faculty to come and train them personally and train them in our Resia center upstairs. January is where the actual Zarbot launch has happened. Zarbot is still way below our expectation because we have around 12 people team completely selling Zarbot, and we are going to expand to 16, but very high.
It's like a special, highly effective task force. You can say like a commando team who have been there, done that, and worked in companies earlier who have sold botulinum toxin. Going forward, I feel, of course, Stunnox, our idea would be to again keep that run rate of at least one and a half times to 2 times of, you know, revenue of previous year. Zarbot, since the base is almost nothing, we foresee that, Zarbot also should come at least close to, at least 40%-50% of Stunnox sales.
Continuing ahead, what is the current market share that the company holds in the relevant market for Stunnox and Botox? Like, if we are ranking second in the world, if you could...
No, not in the world.
expand on that.
I hope I will be ranking second in the world. I'll be very happy. Right now, I'm not ranking second in the world right now. I'm ranking second overall in the represented area for botulinum toxin in India, as per ORG IMS. There, we currently again, I think, maybe I can get back this data to you at the end of this call, because I'll ask Avik to quickly go through the IMS and give you sort of a percentage, which will be a clarity. Also, just to clarify, and this you should know, that the total market represented by us is taken in two ways. One is the total market which is imported.
We take the number of vials which are imported into India, because most of the products except Cupix, Stunnox, and Zarbot are imported into India. We come to know the market size from there, because the current ORG IMS does not capture the entire market. Even though we are second, whatever I tell you will be as per the ORG IMS percentage. However, I know that the market for a fact is much bigger than that, what is actually represented in the IMS. Just allow me some time. I think I'll request Avik to quickly go through IMS and just give us a percentage, if that is possible.
Sure. got it. The third question is: What is the current % of revenue that is allocated to R&D, and does the management plan to increase this % in the future?
Till now, very frankly, we were spending more than 10%-12%. Last year was higher, this time also 10%-12% because of some biological platform. This year we might take a little bit, you know, I would say, reduced percentage on spending on R&D. The very fact is that Indore will be starting very soon, and a lot of our energy, revenue, and resources will go in the Validation Batches in Indore. There will be, you know, some sort of a balancing which will be done at our end, that, you know, we don't want to go overboard, that we continue to spend crazy amount of money in R&D as per our size, as well as we have to spend a lot in creating Indore's validation plan for certain molecules also for export.
There will be a balance. This year, it might fall down to maybe 6%-7%, what I feel, only for this year. Again, from next year, we want to come back to that average of 10%-11%.
Perfect. Perfect. Thank you so much.
Thank you. The next question is on the line of Nitya Shah from KamayaKya Wealth Management Private Limited. Please go ahead.
Hi, sir. I just wanted to understand that, considering there are so many different kind of products being launched in the market, what's the plan with the field force going ahead? You have around 1,000 med reps at the moment. What's the outlook on this? How do you plan on, you know, leveraging this correctly so we can improve our growth? I just wanted to get some understanding on that.
If you see since the last three years, even before COVID, we have not gone for any expansion of our field force, except maybe the new launches division, which is like Aesthaderm or Stellar, or now even it will be Sparsh. In the existing divisions, what we have, we are now again emphasizing on PCPM, and that is where the emphasis and the progress is also happening. When you take a division like a critical care or IVF or healthcare or Spark for that matter, which are our legacy divisions, now, because they have been there at least five, six or seven years in what do you call it, an action. There, we have not gone for any expansion, and we continue not to do so.
If there's a new product like Zarbot, we have a special task force coming in because that we tried in critical care, it did not work, and we needed a separate focus. The field force expansion, as of now, would not be there in the legacy divisions. Sparsh has been launched with a field force of around 33 people, aiming with a PCPM of at least INR 10 lakhs-INR 15 lakhs, because they have a good product line to go for. They already have reached INR 5 lakhs by, I mean, I'm saying 15th to 20th May numbers I'm talking about. That is right now for PCPM. The Sparsh, and I think to some extent Aesthaderm and NeuroCare would be a division for expansion, but that would hardly be, you know, 5, 10 or 15 people division-wise.
Maximum maybe 20, sorry, I would say 20-30 people on an annual basis would be added in the field force of Gufic in India.
Understood. Thank you. Thank you. The next question is from the line of Yogansh Jeswani from Mittal Analytics. Please go ahead.
Hi, sir. Thanks for the opportunity. My question to you is on the Center of Excellence that we have set up. Firstly, when did we start this, and how much have we spent on this entire facility?
The Center of Excellence already has started as a dry run all the way from December 2022. We already have had more than 4 to 5 different trainings there and workshops there, both for Neurocare as well as facial and body aesthetics. We are hoping now that, you know, along with more and more trainings set up, and now because of the new, different, I would say, indications of toxins as well as now fillers also being added to the portfolio in the next 3 to... I mean, next 4 to 5 months, we are going to do more of these trainings of toxin fillers as well as energy-based devices, where it can be, I mean, where the entire basket can be a little bit more holistic.
It has already started, and it's continuing, right.
Sir, how much have we spent on setting this up?
Believe, it should be in the tune of something around, I think Roonghta sir might be much more accurate to the number than me. I will request Roonghta sir to please throw some light over it. I don't want to give any wrong number.
It will be around INR 9 crores, which is the extent of this project cost.
Okay. Sir, the thing you mentioned that you'll be adding more fillers and toxins and, a few more capabilities. Will that be something that you have products in pipeline and the infrastructure is in place, so we won't have to spend more? Instead, it will be just, you know, scaling this up. Basically, what I want to understand, is there any more capital that needs to go into this, INR 9 crore?
No. I think very good question. If you see, last year was the year where we have done most of our CapEx, and maybe it will continue till only September this year, most of the CapEx should be done, the major CapEx. Now, when you talk about just the Center of Excellence , it has been brought with the mind of training and knowledge impartation. Toxin is something that we already have in place, and we are working on, of course, new types of toxins and new drug delivery systems type of toxin, but they are not capital intensive, they are mostly regulatory intensive.
Coming to the fillers, it has been taken a very cordial call that we would be importing those fillers first, because there's no use investing in the CapEx of making the fillers till we actually have economics of scale to market them. The next 2 years, 3 years, we would be just importing the fillers from abroad, and that's where it's already in place. It has been selected. The file has been sent to the honorable Drug Controller General of India, I think in the last quarter, we hope to get the permission, like I said, by Q2 2024.
In terms of the energy devices, it's just the thing that we already have invested this money in the energy devices where we can actually show and train doctors at how sophisticated, you know, machines can be used along with toxins and fillers to get a much more desirable chiseled effect. Today, as you know, the toxin and fillers help to contour the body and help to get wrinkles done as well as lead to some sort of a facial improvement. When we use energy devices, the entire output is much amplified. Answering your question, there's no further CapEx required for that.
It's just now knowledge, you know, impartation, which will be happening from the Center of Excellence going forward for the next three, four, five years, and so on, sorry.
Got it. I think, if I understand this correctly, Center of excellence will help you bring together the doctor community and explain it to them how particularly you can use these Stunnox and Botox and basically all these botulinum toxins. You're trying to educate and grow your market in India, right?
You can say, yeah. If you see, I feel that the market of toxin and filler and even energy device is still in a very neonatal stage in India, where a lot of people's awareness is not there. At the same time, like you said, there are a lot of amazing doctors we have in India who know how to use it very well, but they want to impart training to also the new generation of the new category of doctors who also feel that this is the right profession for them to follow, apart from the just the basic MBBS or just the basic dermatology. Not only facial and body aesthetics, there are a lot of clinical, I would say, indications of botulinum toxin, like hemifacial spasm, blepharospasm, spasticity, cerebral palsy, and, I mean, there are more.
I can keep on going on and on and on. The, lot of these in migraine, for that matter, a lot of people are not aware in India that, you know, even botulinum toxin can give a relief for such matters for a period of 3 to 4 months. Our center just serves the purpose of linking the trainers to the people who want to be trained. At the same time, we have our own faculty, which we have in-house, Dr. Rajesh Lalchandani, who also has a lot of international networking, where we try to get faculty from abroad also. Dr. Lalchandani also has his own knowledge base, which he also pass it on. Like, I'll give you a small example.
There are a lot of, gynec, you know, I would say IVF specialists or gynecs, who wish to do a mommy makeover once the baby has been delivered. Vaginal tightening and vaginal rejuvenation is post the delivery of the, you know, the lady, and that is something which we also. Today, we want the doctors to be imparted more and more, I would say, new, I would say, techniques, as well as new, therapy exposure, by which, you know, we can help them to serve their patients beyond their conventional, field of expertise. This is just in a nutshell, I'm telling you, but I hope you get my point.
You know, I feel that tomorrow, the sales of my products will only increase once we share knowledge, you know. Once the knowledge is shared, there will be more and more people who will be able to service new customers. Then new customers will get, you know, aware about that such therapies are also available for us to experience. That is the concept behind the Center of Excellence .
Got it. Next two, three years, our effort is not to generate revenue from Center of Excellence , but rather, you know, creating awareness and educating people so that we can push sales of our products two, three years down the line, and then.
That has been the purpose of Center of Excellence , not to... I mean, we foresee that the revenue of this Stunnox and I mean, fillers and or even the other things can be much bigger if we can reach to that level of penetration all India level. Yes, you perfectly summarized it well. Thank you, sir.
Got it. Secondly, like you were mentioning about your, one of your learnings with Xeomin that you were, you know, you had clubbed it with the critical care division, while Stunnox was in another division. Now, how is the structure like? Have we started putting in a team which will completely focus on this, and, what would be the team size of it?
Right now, like I said, it's around 11, 12. We are hoping to get to 18. We have a separate team who have worked and handled toxin in the past. Their entire role is just handling only Xeomin, nothing else, at this moment. They are a specialized team who have either worked with... Again, I don't know if I can name the companies, but they have worked with, you know, the big, MNCs who have the innovator of the product toxin, as well as the Indian companies who have outlicensed it abroad and done it.
we have handpicked a team of people who know, who can actually talk about the different indications in a much more sophisticated manner, and also create a need for new and new doctors to be trained by these experts whom we already are in touch with. That is for Xeomin. For Stunnox, as we already have a separate Aesthaderm team, there, apart from Stunnox, they also are handling certain other cosmetic products, and now very soon, in the next quarter or two, they will be handling fillers also.
Understood. One question, if I can squeeze in lastly, could you share the number of Sallaki sale for FY 23 whole year?
The number. I don't know if I have the number right now. Sallaki is a big group, along with liniment and ointment and tablets and also Sallaki T-Olet . I don't know if we include or not, because that's also part of Boswellia serrata. I will get back to you. I will ask Avi if we can get the data ready, and we can give you at the end of this call, please.
Sure, sir. Thank you. I will get back immediately.
Yeah.
Thank you. The next question is on the line of Rajat Setiya from iThought PMS. Please go ahead.
Hi. Thanks for the opportunity. My question is with regards to the Sparsh division. We are targeting, many hospitals. What's our strategy to really convince the hospital managements or the doctors there to, you know, take our product or try our products? Because I'm guessing competition there would be pretty high.
I think very interesting, you know. Why the concept of Sparsh came, I'll just maybe give you a little bit of a light there. When we did the IMS data study, we saw that, you know, out of that INR 1.8 lakh crore or INR 1.9 lakh crore, which was the total Indian pharma market size as per the data, we were covering in critical care only an X% out of it. There was still a Y% which we could manufacture or we were making on contract manufacturing, but we still could not take it to the different part of, you know, the country.
At the same time, our critical care were doing a good job in handling, and they are still doing a good job in handling, I would say, complex products, first time in India products or something, you know, new anti-infective or, you know, some in internal medicine products, which are very unique and which are very different. Now, I can't use their bandwidth to maybe sell an entire basket of products which are, you know, just, you know, a part, which form a part of the ICU setup. We saw that there are, in phase I , these, you know, 85 products, and then another 45 products, and then we have something else lined up.
At the same time, we have in-licensed some unique wound management products which go in a ICU setup or in a hospital setup, which will be very differentiated than the rest. You rightly said, most of these molecules can be me too or can be a commodity, but the important thing what we offer is, you know, that we have seen the Indian market is very fragmented, and there's a big, you know, I would say, by the time a manufacturer sells the product to a, you know, end user uses it, there is a lot of layer. At the same time, the access to a high-quality product at the right basket, at the right price is still a big issue to go....
We foresee that the Indian pharma market should at least double or triple up in the next, I would say 8-10 years, as what the data has been given to me by one data, and I don't mind sharing that data with you also. We saw that the post-COVID also, or even after that, a lot of number of secondary, and I would not say rural markets, let me just rephrase it, because even in the area of between Mumbai to, you know, Navi Mumbai or Mumbai to Vapi also, there are a lot of these secondary and tertiary, I would say primary and secondary hospitals which are coming up, where our field force being only maybe 180 or 200, they cannot go to them. Their bandwidth is only there.
They can manage maybe maximum 30, 40, 50 counters, 50 hospitals. They can, you know, go and extend their products to only maybe 100 to 150 doctors. There are so many other counters which want quality medicines, which have the need of a complete basket, and they want good quality, and they want it from a EU-approved facility, or they want it from a, you know, a regulated facility and at a good price, provided the supply is good, and at the same time, they can offer everything under one thing. We actually came up with this unique thing where we did our own, I would say, first RCPA for the first 3 months, all the way from December, January, February, even till March, till the sales started.
We were just collecting, in five states, or I think seven states, I'll just recollect, that how many secondary, tertiary, I mean, primary, secondary and tertiary hospitals are there beyond what we already are meeting via critical care field force. We identified there are 8,300 or something, which I've mentioned in our investor presentation, where we have never set up foot also in the market and everything, or each of these hospitals have a potential of at least, you know, INR 50,000 or INR 60,000 per month, all the way till around INR 10-15 lakh per month, also potentially going forward. They might be...
This is a good RCPA to also pass on the information to our critical care team or to our IVF team, because Sparsh team has a very fixed set of products which is not much overlapping with the critical care or not at all overlapping with the IVF setup. A lot of these centers are also the centers where you not only, you know, use these products, but are critical care high-end products also. Some of these centers have now even, you know, I would say, divided or expanded into more of infertility sort of a setup. You know, gynae, delivery, infertility also has coming up. Multi-specialty setups are coming up now in secondary hospitals also. We have now a single channel partner in all these areas, so we completely bring the entire layer to a single layer.
How much are the hospitals buying? What is their how much do they buy? When do they buy? What is the average rate what they buy? What is their frequency and what is, you know, how is the trend of their products also? How are they moving from a gram-positive, gram-negative? Is it seasonal or is it related to maybe any, does any new molecule come up with a new trend in prescription? A lot of database is coming from the Sparsh division via these softwares and these apps which we use, which we are trying to apply to the critical and infertility division also. That is how been the approach of Sparsh.
Touch wood, till now it has been quite rewarding to us, especially not only for Sparsh itself in terms of revenue, but also for the information and the data which we are getting from the grassroot level. If, again, I'm repeating, it's not for rural market, even the urban market to rural, we have not actually reached the rural yet. Only from going from the urban to even the semi-urban, we have found so many centers which we have not gone for. Now we feel that, oh, we either be a party, we can put a person here, we can put a person there, but we are going step by step. First, we are filtering the hospitals, getting the business output, seeing the range which matches our product much more.
We are assigning people on a step-by-step level, till we reach a particular PCPM, and then we expand by one more person, handling those counters.
Understood. Thank you so much for the very detailed reply. You are saying basically, people, there is demand for quality products and there is a gap there.
Yeah.
I mean, when it comes to competition, because what I have seen
Yeah, because of the multiple layers, you know, the pricing is. What you see is now price is the main point because so many layers are involved. Once you remove the layers and you try to reach the end customer, you feel that they want, and the price is quite good, sometimes even better than Bombay or Delhi or Bangalore, but they only need service and consistent, you know, meeting. Sometimes we feel that there's a better profitability in these centers than even the high-end centers in.
What I have, ... Am I audible?
Yes, please go ahead.
Yeah. What I have also seen is that lot of regional local brands, I mean, their compliance, their costs may not be very high, and they are reaching out to these hospitals and selling through them because there's good volume that they get through the hospitals, rather than reaching out to the retail outlets.
Yes.
Because ultimately it will come down to who is giving more money to the hospital, and what kind of margins are we giving to the hospital versus, you know, the other guys. In such scenarios, how do you, how do you plan to, you know, make a name for yourself?
Very frankly, I think, you know, very interesting point you brought out. When we started off, now we thought that the only driving force behind Sparsh would be just the margin between what we give them and what do they get from others, and how much we are doing it. You know, you would be surprised to find out, and even I was surprised, very frankly, I would not say that price is not important. More than price, sometimes what we see is more important is the, you know, the service, the basket which we offer, and also, to that matter, even, I would say, the right access to quality. Today, when I go and talk to them, that, "Oh, currently you're using this gram-negative injection, which is, you know, fine.
You've been using it for donkey's years, and it has this thing. You know, now with the new sensitivity that is coming up, you know, there are more and more issues coming up, the resistance has come for this particular gram-negative. You have this new gram-negative product which is out, which is, I would not say the cost of therapy is double or even 1.5 times or something. It's only 1.1 or 1.12 times. Because of this, the entire ICU stay gets affected or gets, you know, reduced, and you have so much load on your ICU. I'm just giving an example. When we talk about all these things with them, you see a much better.
Like, I'll just tell you, we have launched a new product, which is in license from US, is a CeraSeal. CeraSeal is a new product which is launched, which is for wound management, where a lot of people either do cauterization, which takes 30 to 35 minutes, where the blood loss is so much that, you know, your patient has to be given another set of bottles just to compensate that blood loss. When you have something where the wound, I would say, can be sealed and the clotting can happen eventually after that, when the wound can be sealed and the blood stop, the blood flow stops in 30 seconds to 1.5 minutes, depending on the patient's condition, you're saving a lot of volume of blood there.
Such things become our entry points in the hospital, and that's where the entire basket just enters after that. Because you are giving them a solution which they don't have right now. Today, a surgeon, after surgery, spends 30, 45 minutes to get a particular cauterization or some sealing of wound and where blood is being lost, but he's wasting his time also in the entire process. When you give something where he's in and out in 15 minutes or even 10 minutes, I think he will always thank you that, you know, I mean, why didn't you give me this option before? This is what our idea is. It's not only that, you know, we are there to talk price.
Price is always going to be there for everyone, but these services and this exposure and this awareness will not be created by regional people who just buy from a manufacturer and sell to the hospital, and they just act as middlemen, I mean, trading companies or whatever. Apart from that, economics of scale always helps us to become much more, I would say, durable and sustainable because we are really talking huge volumes with RBs, what we have right now. Anyway, we'll be always in a better position to do all these activities, at the same time give price to ensure that we will take that counter much better than the other players would be able to take.
Sure. Thank you so much. What would be the sales from the new-?
May we request that you return to the question queue, there are participants waiting for their turn.
Sure. Thanks.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.
Yeah. Good evening, sir. My first question is?
Mr. Aman, we are not able to hear you.
Hello, am I audible?
Sir, your audio is sounding very muffled.
This is better?
Slightly better. Please proceed.
Yeah, yeah. My first question is because this was the first non-COVID year as for a company at the company level. If you can talk about what is the now PCPM range across the four divisions. Also, you've talked a little bit about the MR addition and all those things, what is the current MR split among the three, four divisions? That is the first question. I'll talk about second question after this answer.
Yeah. COVID, like I said, we have not increased our field force in the legacy divisions in the last 3 years, maybe ±2%-3%, depending on new area or new geography otherwise. Critical care would be still leading with the PCPM. I would say critical care would be leading with the PCPM last year, would be around another maybe around 7, 8, if I'm not mistaken, but I'll still be corrected by Avik if I'm saying anything wrong. Infertility would be following after that with around 5-6. Then would be healthcare, and then... Sorry, it would be healthcare or toxin and Aesthaderm division side by side, followed by Neurocare and then Spark and then Stellar.
In terms of the field force, we have I think the total marketing people, I believe, are around 1,000, plus or minus. The first line or the MR level, we might have something around maybe 700-750. I'm saying, of course, this might not include Sparsh. Sparsh now coming in, properly in terms of sales from April, I mean March and April 2023, would be adding another maybe 50 people overall and 33 people in terms of the first, I mean, the MR level. I foresee down the line, PCPM to further increase by at least, I mean, maybe Sparsh being a little bit team is lucky because they have more products, and they have the CeraSeal and other things which are almost INR 15,000-INR 20,000 per vial.
Their PCPM would be expected to be number 1 this year, followed again by critical care and infertility going forward. Overall, if I say on average, we are hoping that we divide the company into specialty and mass marketing, and the specialty should be coming close to 10 as much as possible, and maybe 8 for infertility or 7 for infertility. Mass marketing, we hope we can come to around INR 3 lakhs per month, as soon as possible overall.
Thanks, Sunny. My second question is, if you look at our 2 main divisions, critical care and fertility care. Last 2, 3 years, one was growing, the other was not growing because of XYZ reason. On this space, do you see these, first of all, fertility care continuing the strong growth like we did last year? On the critical care side, if you can talk about, we have launched some very innovative products, like Ceftazidime , plus Avibactam, and where do we see this product in terms of our ranking, because a lot of other companies have also launched this product?
Over the next 1-3 years, do you think we can be placed in the top three, or do you think, no, it will remain maybe a small thing for us? Dalbavancin has been delayed by almost six months. It was supposed to launch in Q4, so if you can talk about the same.
Yeah. Yes, I feel that, during the COVID, critical care was going up and infertility was getting affected. Last year, rightly so, infertility could have got a good jump, good bounce back. I feel they will continue because of how the April and May is progressing, I am sure infertility will continue the growth going forward, and they should come close to their target this year. Critical care, I believe last year, I mean, as two years ago, was. Of course, I'm trying to be as clear that, you know, at the time when the country needed us, critical care delivered, and, you know, we have seen, I would say, crazy numbers in the COVID year. Last year, equally, we saw the lows because we had inventory pile up.
We had high-level inventory of meropenem and oxacillin, plus we saw INR 26 crore worth of return coming back. I feel all that has been, you know, now done and taken care of. I hope this year, both critical care and I would say Ferticare also should continue the growth. I hope both grow the way they are, because coming to Ceftazidime-avibactam , we feel that, you know, it'll be a big loss if we are not there in the top three. I would, internally, I would aim for number one, the way we have launched and the amount of contract manufacturing which we do for this molecule, because we make the basic API of avibactam in-house, and that is where the advantage is.
We feel that number one or number two should be our target going forward at the end of this year when we see the ranking of septra and avibactam going forward. The market is quite good. Pfizer has done a wonderful job with septra, and we feel that if we can also continue our own foray by educating more and more doctors about the molecule and you know, maybe making them more aware, that will be really helpful. I feel it will definitely be a role this year in terms of the numbers of recovery for critical care. Dalbavancin, like I said, it's something where we had to do a phase 3. The phase 3 went well. We got the final permission, and we are more than happy to launch now. Q4, we were supposed to launch.
Unfortunately, Q4, because of the, I believe the change in DCI, the new DCI also, it took time but I think he's going very step by step. We got the final approval now. We feel that, now, maybe in Q1, maybe, I don't know if we have enough time to launch it in June, but at least I'm... You're right, I think Q2 will be where we will see the actual launch of Dalbavancin. One thing has to be very kept in mind, that Dalbavancin has been launched keeping in mind not only the domestic market, but the international market also. Gram positive till now, but not much in India as much as it was internationally. Teicoplanin and daptomycin and Dalbavancin are much bigger products in the international market, especially US, Europe and other markets.
India, this product will still be a product of reserve for the doctors initially. We have done right now a trial against linezolid, and I would say vancomycin. We feel that certain specific indications beyond critical care, like in cardiac surgery conditions or even in, you know, ortho surgeries, this product can be an excellent choice with the ease of... I think so you require only 2 injections on the 1st day and the 3rd injection on 8th day, whereas otherwise, the normal conventional products would have to be taken every day, you have to give the IV. The patient would have to be kept in the hospital. Here, with this option, the patient not necessarily needs to be in the hospital. You just give them post-surgery, give them...
I mean, on the day of surgery, you just give them or post-surgery, just give them two injections, and after that, on follow-up, on seventh day, you can give them the third injection. There have been now new reports where all three injections are also given on the first day, and you're getting it done with. I mean, two injections or three injections, depending on the, I would say, the data of the patient, and then you don't need any, you don't need the third injection also, or so on. This is a very unique molecule where I feel the challenge would, I would say, is that I would be happy to do it as a contract manufacturing first. My ortho surgery and my cardio surgery background is still something I have to build upon.
My critical care team will definitely try to work on our own selling of Dalbavancin going forward. Otherwise, I feel that this molecule will take time to set up, but it's a molecule of the future for India. Whereas in the international market, it's already a molecule which is well established. For Indore and Navsari, for next year, this will be a very interesting molecule for exports. For India, you will start seeing it pick up gradually from year one to year two to year three.
Thank you, Pranav, for it .
Thank you. The next question is from the line of Aditya Pal for Motilal Oswal Financial Services. Please go ahead.
Hello, am I audible?
Yes, Aditya, please go ahead.
Yeah. Just wanted to understand, so Sparsh will be a different vertical from critical care, right?
Yes.
In terms of, revenue potential, say, three years down the line, how are we thinking around it? I understand that we are targeting and we are getting good, demand also. If you can just highlight that.
Definitely it has the potential to supersede, I'm saying 3 to 5 years, supersede, I mean, become one of the major contributing revenues for us in the Indian market by, because of the sheer size of the basket, what we have and the level of penetration we are getting into. Of course, like I said, you know, today, critical care is a little bit more of a sophisticated, you know, specific marketing, specific medical input and new age products, which have to be, you know, educated, have to be, you know, really hit on, and a lot of other activities go behind it. Sparsh is, you know, where you just go for, you know, you can keep it.
Like, as the name suggests, you just go for the penetration, the touch, and come up with some unique in-licensing thing, which just gives you an immediate solution to an existing problem. We foresee that, yeah, the numbers should gallop much more. I think, again, I would request you that I would be able to answer this question in a much more better way, maybe at the end of six months or nine months, that I have at least, you know, a proper six, nine months of run of Sparsh, when I can become more confident about it. Right now, it's just the first two months of sales only till now, and till now, it's positive.
You know, once the money starts coming in, the cycle gets over, and then, you know, we get the repeat business in the next three to six months, I'll be better to answer this question in a better way.
Sure. Just another question. In terms of our international business, how much does it contribute as a revenue? Also, sir, because we filed so many DMFs, what is the growth that we are looking at over there? I can see that we grew at 25% this year, and going forward, because we are also launching new molecules.
Yes. As the international base is smaller, I think at one time it was 8%, now it's gone to around 15% of our revenue should be international, both direct, indirect. What we do directly also, and what we do via our, I would say, other export agents also, which are the legacy export agents. This base is still small. Like we said, as more and more geographies are being opened now, like, we just give an example of Anvisa. We got a one-time approval during COVID, which was mostly, you know, one time. Now we had a proper full-fledged audit in the month of, I think in the Q4 2023, and that audit went off well, and we finally got the approval there. Now, Brazil will start with at least 2, 3 molecules.
You know, U.K., which has already had vancomycin, should now start with teico and another. We foresee that these are little bit markets where we have a better chance of growing much more, even countries, small countries like, I wouldn't say small, but reasonable-sized countries like Malaysia and Colombia are reacting well to us. Once Canada opens up and Russia opens up, Russia is opening, but right now only for one molecule. Those Russia, Canada and South Africa, another big members apart from Brazil, it should give us good numbers going forward. Again, in terms of growth, yes, definitely it will be one of the growth drivers, because whatever we are compensating in terms of a loss of CMO, we are trying to get via exports and others. We hope that trend continues. Indore will take time.
Indore will come post Q3. Six months, we'll try to take care of domestic business to get the Validation Batches done. Once Indore starts filing, we are planning to open up more geographies which were beyond our reach till now. Let's hope so. Yes, it will continue the growth %, as what we have seen in the past.
Perfect. Just a bookkeeping question. There is a line item which forms in our operating revenue. It's called processing fee. It's a very small item. In FY 2022, it was around INR 63,636 million.
Mm.
Just wanted to understand what it is. Is it part of a normal business, and how do we earn it?
If I'm not mistaken, I'll ask Roonghta to answer, but I believe it's a loan licensing fee, what we get. Sometimes we give our factory to these clients for them to make their own products. We get just a conversion cost fee, which is a very small part of our revenue. Correct me, Roonghta sir, if I've understood that.
Perfectly right.
Yeah. I believe last year, because of remdesivir, you must have seen a bigger number, because we did a lot of loan licensing for that. This time, again, we have come back to our original business, which is more where it's our product which are being out-licensed, or it's our product we give on third party, it's our product which we give for export, so that revenue must have gone down. Processing fee is nothing but the loan licensing charges or job work charges which we get from clients of our factory.
Got it. I have more questions. I'll get back in the queue. Thank you so much.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Ms. Ami Shah for the closing comments.
Thank you. In case you have any further questions, please feel free to reach out to our investor relations team. I'll just read the disclaimer before we end the call. The information, statement and analysis made in this document, describing the company's objectives, projections and estimates are forward-looking statements. No representation or warranty, either expressed or implied, is provided in relation to this document. The document should not be regarded by recipients as a substitute for the exercise of their own judgment. The company undertakes no obligations to update or revise any forward-looking statement, whether as a result of new information or future events or otherwise. With this, we can end today's call. We thank you all for joining.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Gufic Biosciences Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.