Ladies and gentlemen, good day and welcome to Jubilant Pharmova Limited earnings conference call for the quarter and half year ended September 30, 2022. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Surajit Pal, Head, Investor Relations. Thank you, and over to you, Mr. Pal.
Thank you. Good evening, everyone. Thank you for being with us on our Q2 and H1 FY 2023 earnings conference call. I would like to remind you that some of the statements made on the call today could be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release that has been shared on our website. On the call today we have Mr. Shyam Bhartia, Chairman. Mr. Hari Bhartia, Co-chairman and Managing Director. Mr. Arvind Chokhany, Group CFO. Mr. Pramod Yadav, CEO, Jubilant Pharma. Mr. Giuliano Perfetti, CEO, Jubilant Biosys. Mr. Syed Kazmi, CEO, Jubilant Therapeutics. M r. Arun Sharma, CFO, Jubilant Pharmova. I now invite Mr. Shyam Bhartia to share his comments. Over to you, sir.
Good evening, everyone. Thank you for joining us on Q2 FY 2022 earnings conference call of Jubilant Pharmova Limited. During the quarter, the company reported significant improvement in revenues, especially due to strong performance in specialty chemicals, CDMO sterile injectables, and CRDMO, which was offset by lower revenues in generic segment. On year-on-year basis, however, the revenues were marginally lower as performance of the CDMO sterile business normalized due to tapering of COVID deals and weaker performance in generic segment.
In specialty pharmaceuticals, radiopharmaceuticals business reported increase in revenue year-on-year, driven by higher volumes with normalization and demand as pandemic eased off. Our energy business continued to grow with higher volumes. In CDMO sterile injectables, revenue normalized year-on-year due to tapering of one-off COVID-related revenues in the corresponding quarter. There was, however, sizable improvement sequentially due to higher volumes.
Generic business revenues impacted year-on-year with pricing headwinds and import alert challenges. Management begins implementation of strategic reorganization, cost optimization, and reprioritization of geography mix in generic business. CRDMO, our drug discovery services continues to maintain momentum from strong order book, and our API revenues stood higher on volume growth and is poised to gain further from the asset upgradation program at Nanjangud plant.
During the quarter, we refinance our existing INR 200 million bonds and $150 million term loan with five-year $350 million term loan facility at favorable terms with lower interest costs. This enables us to optimize our finance costs. We incurred foreclosure charges in the refinancing transaction, which we expect to recover over the tenure of new $350 million facility. I would like to mention that we have appointed Mr. Jaidev Rajpal as head of our generic business from October 2022 onwards.
Jaidev joins us from McKinsey and has over two decades of rich experience in management consulting, advising, and transforming leading generic pharmaceutical companies in India and global markets. Jaidev's appointment will help the company in transforming its generic business through commercial and operations excellence, including portfolio and R&D relevance. With his appointment, Jaidev will take over the generic business from Mr. Pramod Yadav, who will continue to be the CEO of the specialty pharma, radiopharma, and allergy immunotherapy and CDMO sterile injectable businesses. With this, I hand over to Pramod to discuss about the pharma business in detail. Before that, on behalf of the entire Jubilant team, we wish our investors and everyone present on this call a very joyful, peaceful, and safe Diwali. Thank you.
Thank you, Mr. Bhartia. A very good evening to all of you. With this, I'll share performance of our various businesses in second quarter of financial year 2023. We witnessed significant improvement in performance of our specialty pharmaceutical business during the quarter. In Q2 FY23, the revenue from the specialty pharmaceuticals was at INR 814 crore, up from INR 651 crore in Q2 FY22, and INR 722 crore in Q1 FY23. The EBITDA was at INR 198 crore, up from INR 130 crore in Q2 FY22, and INR 117 crore in Q1 FY23, with a margin of 24.4% versus 19.9% in Q2 FY22, and 16.2% in Q1 FY23.
Radiopharmaceutical business witnessed improvement in the revenue year-on-year and quarter-on-quarter, driven by higher volumes. Higher sequential revenue were also on account of customer orders rescheduling in Q1 FY23. The radiopharmaceuticals business witnessed growth due to higher volumes resulting from recovery in the demand as pandemic impact waned. Turnaround plan working well as reflected by volumes at pre-COVID levels and lower losses. We have good news to share on the regulatory front as U.S. FDA completed audit with zero observations in our Montreal radiopharma plant during its inspection in early October 2022. The allergy immunotherapy business reported healthy revenue growth, which was driven by the volume growth, price increase and geographic expansion.
CDMO sterile injectable revenue were at INR 299 crore versus INR 409 crore in Q2 FY 2022, and INR 263 crore in Q1 FY 2023. The EBITDA was at INR 71 crore versus INR 203 crore in Q2 FY 2022, and INR 132 crore in Q1 FY 2023. The quarter-on-quarter variations in margin in Q1 FY 2023 and Q2 FY 2023 is due to plant shutdown twice in a year and COVID-related deals. In Q2 FY23, we witnessed about INR 22 crore of COVID deals versus about INR 162 crore in Q2 FY22, and about INR 70 crore in Q1 FY23. Generic revenue were at INR 161 crore versus INR 333 crore in Q2 FY22, and INR 178 crore in Q1 FY23. Revenues and profitability lower versus Q2 FY22 due to pricing pressure in the U.S. generic market, lower volumes resulting from the Roorkee import alert and lower remdesivir sales. We have responded to the U.S. FDA with a CAPA plan post-audit of the Roorkee plant that had resulted in six observations.
To put the business on path of sustainable growth and the profitability, we have kicked off a large-scale business transformation, which is focused on strategic reorganization of the generic business and the generic-wide cost optimization, including direct and indirect costs. Also reprioritizing the geography mix to accelerate growth in the branded markets such as India. We have identified and are in the process of executing annualized cost opportunities worth around INR 100 crore across direct and indirect spend. These will be implemented by Q4 FY 2023, which, while we work on identifying additional cost saving opportunities. With this, I hand over to Giuliano to provide insight into contract research development and manufacturing organization business, and wish you all a joyous and prosperous Diwali.
Thank you, Pramod. In CRDMO business, we witnessed year-on-year and sequential improvements in revenues, led by strong performance of drug discovery service business. API business also reported double-digit year-on-year growth in revenues driven by higher volumes. CRDMO revenues were at INR 320 crore versus INR 258 crore in Q2 FY 2022, and INR 280 crore in Q1 FY 2023. EBITDA was at INR 68 crore versus INR 69 crore in Q2 FY 2022, and INR 46 crore in Q1 FY 2023, with a margin of 21.3% versus 26.6% in Q2 FY 2022, and 16.3% in Q1 FY 2023. CRDMO revenues were at INR 600 crore versus INR 451 crore in H1 FY 2022.
EBITDA was at INR 114 crore versus INR 122 crore in H1 FY 2022, with a margin of 19% versus 27.1% in H1 FY 2022. In our drug discovery service business, we witnessed strong demand from target customers for integrated drug discovery services, functional chemistry and DMPK. However, the market is adopting more selective approach in launching new projects. Strong incremental overflow supported by the Greater Noida facility that was commissioned in September 2021. Sequentially revenue higher in line with historical trends of Q2 being the stronger quarter. The commissioning and validation of the Greater Noida DMPK in vitro facility to enable comprehensive service capability from the site. With this, a warm Diwali wish to all. Now I hand over to Syed to discuss the proprietary novel drugs pipeline.
Thanks, Giuliano. Good evening, everyone. In our proprietary novel drug business, we are focused on developing potential first-in-class and best-in-class precision therapies in oncology and autoimmune space. The company uses Jubilant's proven discovery engine with a structure-based drug discovery expertise and a track record of partnerships. Phase I/II trial is ongoing for JBI-802, a dual LSD1 HDAC6 epigenetic modulating agent for patients in advanced solid tumors, with the primary objective to identify the recommended phase II dose and to evaluate the safety and antitumor activity of JBI-802. Target indications include subsets of small cell lung cancer, neuroendocrine prostate cancer, and other neuroendocrine tumors with specific genetic signatures. We expect to have initial clinical data by early next year.
We have received FDA clearance of the IND for our second program, JBI-778, an oral brain penetrant and selective PRMT5 inhibitor for the treatment of solid tumors with brain metastasis and as well as primary brain tumors. We recently published cutting-edge findings on the effect of our first-in-class GSNOR inhibitor in halting cancer progression and tumor metastasis in the prestigious peer-reviewed Cancer Research journal, jointly with the Wistar Institute in Philadelphia.
We also presented preclinical data on the activity of our lead dual epigenetic modifier, JBI-802, in hard-to-treat MYC-amplified neuroendocrine tumor models at American Association for Cancer Research, AACR, Epigenomics Conference. These presentations show that our company's R&D is gaining global recognition in the field of cancer research. Jubilant Therapeutics is now a clinical-stage biotech with higher value creation opportunities, driven by emerging data from first-in-human studies and additional R&D files. With this, I now hand over to Arun to discuss the financials and wishing you and your family a very happy Diwali. Thank you.
Thank you, Syed. A very good evening, and thank everyone for taking out time and joining us on our quarterly earnings conference call. I would like to highlight the company's financial performance for the second quarter and first half of financial year 2023. Q2 FY 2023 financials. Jubilant Pharma's revenue were at INR 1,600 crore versus INR 1,657 crore in Q2 FY 2022, and INR 1,452 crore in Q1 FY 2023. Reported EBITDA was at INR 233 crore versus INR 344 crore in Q2 FY 2022 and INR 204 crore in Q1 FY 2023. Depreciation amortization expense during the quarter was at INR 94 crore versus INR 100 crore in Q2 FY 2022. Finance cost at INR 42 crore versus INR 35 crore in Q2 FY 2022.
Exceptional cost of INR 57 crore included INR 48 crore of foreclosure charges related to bond repayment and balance due to write-off of capitalized debt origination cost. We expect savings from the lower interest rate pursuant to the refinancing will enable recovery of this cost over the tenure of this new facility. Debt was at INR 5 crore as compared with INR 143 crore in Q2 FY22 and INR 147 crore in Q1 FY23. Normalized debt was at INR 62 crore as compared with INR 143 crore in Q2 FY22 and INR 47 crore in Q1 FY23. EPS was INR 0.34 per share versus INR 8.97 in Q2 last year and INR 2.96 in Q1 FY23. Normalized EPS was at INR 3.88 per share in Q2 FY23.
Net debt on constant currency basis at INR 2,204 crore as on September 30, 2022 versus INR 1,951 crore as on June 30, 2022. Capital expenditure excluding R&D capitalization was at INR 128 crore for the quarter. We expect to incur capital expenditure of around INR 700-INR 750 crore in FY23, primarily towards expansion CMO business and announcement of drug discovery service capabilities and capacities. In addition, we expect product development expenditure of INR 250-INR 300 crores. Now moving on to H1 FY23 financials. In H1 FY23, company's revenue were at INR 3,051 crore versus INR 3,292 crore in H1 FY22. EBITDA was at INR 436 crore versus INR 723 crore in H1 FY22.
PAT was at INR 52 crore as compared with INR 303 crore in H1 FY 2022. Normalized PAT was at INR 108 crore in H1 FY 2022. EPS at INR 3.30 per share versus INR 19.06 per share in H1 FY 2022. Normalized EPS was at INR 6.81 per share versus INR 19.06 per share in H1 last year. Capital expenditure for H1 FY 2023 was INR 226 crore. Blended interest rate on average basis for H1 FY 2023 was at 4.81% versus 4.62% in H1 FY 2022. With this, I would like to conclude our opening remarks. We will now be happy to address any question that you may have and wishing you and your family a very happy Diwali. Thank you.
Thank you. We will 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 your questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Veera from Abakkus. Please go ahead.
Sir, good evening, gentlemen. Pramod, sir, just a quick question on the Radiopharma business. Are we touching the 90%-95% utilization across all the molecules now, DaTscan, MAA?
Yeah, Rahul, that's a good question. We are touching more than 95% in all the molecules except DaTscan.
Okay. Fair point.
DaTscan has not yet come up and we are waiting, but rest of the products have come up to the pre-COVID levels, more or less.
Sure. This is a good improvement, sir, as compared to the last couple of quarters. Sir, just on the financial side of it, wanted to understand the additional cost. Like, what was the tenure of this bond and what is the new bond, what is the interest and the tenure of the new bond? Just trying to understand the gap between the how the cost savings come through.
Rahul, this earlier bond was due in March 2024.
Okay.
This was at 6%, this was at 6%.
Okay.
There was a term loan of $150 million, which was also due somewhere in around March 2024. There was no urgency to refinance this, but because of our advanced planning, we refinance this term loan and bond for a five-year tenure. Now this goes from 22 July to 27 July. Refinancing has been 5 years at a very competitive cost. If you look at our coupon on this is less than 2% over SOFR. That will give a phenomenal cost saving within next two years time itself.
Okay. Fair point, sir. I'll come back in the queue, sir. Thank you so much, sir.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Aditya Khemka from InCred PMS. Please go ahead.
Yeah, hi. Thanks for the opportunity. Sir, can you elaborate on the generic business? I think Hari Bhartia, in his opening remarks mentioned restructuring the business, finding more cost efficiencies. Can you give us a little more color on what kind of restructuring or reorganizing you are looking at? What kind of cost efficiencies you are looking at, and how are they supposed to materialize, and by what timeframe?
Yes, Aditya. As of now, the strategic reorganization is bringing the business into a separate leadership with a very specific laser-sharp focus to transform the business. We are already looking at cost efficiency, and as I mentioned, more than INR 100 crore has been identified, which will get materialized by next quarter. Then we will continue to get the benefit of that. While more cost savings across the entire cost area is being looked at, it will be little too early to get into the details of that. Maybe the next quarter will be a better opportunity to have a discussion in detail.
Sure. This also includes rebalancing of our R&D portfolios.
Basically rationalizing R&D spend also.
That's right.
Understood. Do we have an update on MIBG diagnostic molecule that we were working on? At what stage are we? When do we see potential approval of the product? When do we see a potential commercialization timeline? As you know, there are the two trials going on. One is the phase II trial for the relapse and the refractory, in which we have to do about 70 patients and we are close to 40%-45% of the patients already enrolled and dosed. The other trial, which is for phase III, which will be the first line of therapy, which is a COG trial along with the CHOP. In that, there are about 700 patients and we have already done more than 450 patients. The trials are progressing well.
The phase two approval we expect in FY25, and phase three approval we expect in FY26.
Actually we can market the drug after phase two approval pending phase three.
If given that phase II works out properly on the safety and efficacy profiles, you can launch the product sometime in FY26. Is that fair?
We are trying to launch in FY 25.
O kay.
That's for the relapse and the refractory. Once the phase III is also completed, it will be the first line of treatment, so it will open up the additional market.
Sorry, sir, you were saying something. I interrupted you. My bad.
No, no. No issue. Once the phase two is done. It's for the relapsed and refractory.
Yeah.
For which we are saying that we have close to 800 patients in the U.S. on an annualized basis. Now, out of these 800, some are the MIBG avid and some are not. When they are being dosed with the chemo or other antibodies, when the disease relapses, that time the phase II will be given if it's a phase II approval. When the phase 1 approval is there, then the patient will be dosed even during the chemo stage itself. Once the drug is in market, the doctors are free to use the way they want to use. Currently
Okay. I now understand that.
Currently, it is also being used under a special FDA program. Doctors are already using the drug, but only that we don't get the price. The doctors are already using the drug in at least about 14-15 hospitals.
Yes, close to 16-18 hospitals they are using.
Already drug is being used under special access program of U.S. FDA.
Right. I understand that. Sir, the more I read about MIBG, the more I get interested into the molecule. Seems pretty revolutionary in nature. I also wanted to understand what are we doing for developing the molecule beyond the U.S. market? That's part one of the question. Part two, what is the potential size of the market, refractory plus first-line, both markets included in the U.S., potential market size in the U.S. and outside the U.S.?
Having said that, I think the largest market is in U.S. because U.S. is a market where they allow even for a few years of good life, they allow the use of the drug. In many European markets, et cetera, it is very difficult for the patients to avail under the NICE program of U.K., et cetera, it becomes very difficult. It is very important from this point of view that it is for the pediatric, that is children. Now, in the children, the life of the children improves substantially. They can go back to school. They are cheerful if this treatment is given. Even if it lasts for four, five years, it is very important in the life improvement because when they go through the chemo or any other drug program, their quality of life is very low. When they go for MIBG, the quality of life improves substantially. That is why from the parents' point of view, they prefer this treatment.
Right. I get that. Maybe in Europe, because, you know, most of the governments.
First we would like to see the drug approval in U.S. I think once it is approved in U.S., we will definitely try in other countries in E.U. We have not yet started anything to do with E.U. as yet.
Understood, sir. That was my question. Understood. What is the potential market size of the product in U.S., including the therapy and first-line?
Yeah. It will be in excess of $200 million on annualized basis.
Got you.
With a 100% potential.
Got you. Thank you. Last question, sir. On the CRDMO business side, so been a phenomenal performance and phenomenal traction obviously. Recently, you know, given the gas price situation in Europe, and given that most of your largest CRDMO peers are based out of Europe, do you see any business migrating from the European region to countries such as India where there is relatively more stability in input cost? Or do you expect that to grow organically and Europe business to survive this turmoil?
Are you talking related to drugs, drug discovery services or related to sterile injectable?
Both. I think drug discovery won't be as much impacted simply because that's more manpower, less materials. I'm talking more from a manufacturing standpoint where power cost becomes more relevant to the scheme of things.
For the external business generally, like, especially into Europe and the US, where we are doing this business for the innovative pharma companies, they like this sterile injectable fill finish to be closer to them within the geography so that they can have a better, the supervision on the quality systems and the releases, et cetera.
They do the marketing of that globally. So far, because of this power cost, et cetera, we have not seen the business moving out of Europe to the U.S. It will be too early to comment on that. I would like to further add that, you know, whatever pharma companies are producing in our plants, they are being shipped to Europe with the European approvals. They have been shipped to even Japan. They have been shipped to many other countries from our facility itself. Our facility is approved with Japanese.
Europe
European authorities. It is the innovator companies, they market the drug globally from our facility. That means we are definitely competitive. That is why we do it. We have seen that our power cost in U.S. is, in fact, better than in Europe. As of today, Europe is in a bad shape because of the fuel prices. In any case, even earlier than this crisis of Ukraine, our costs were very highly competitive in U.S.
Fair enough.
Yeah.
Last question, with your permission. On the Roorkee and Nanjangud compliance with the FDA, any update?
On the Roorkee, I mentioned that we were audited in the month of July. There were six observations. We have submitted our startup plan to the FDA. The FDA generally takes around 90 days to come back on that. We expect FDA to come back on the Roorkee sometime in the mid of November. We are already end of October, so very soon we should be hearing. With regards to the Nanjangud, I'll let Giuliano speak.
Yeah. Thank you. Thank you, Pramod. For Nanjangud, we got the last inspection was 2018. We are now waiting for the new inspection. Of course, we don't know exactly the timeline of this. From our side, we worked intensively to prepare, to be prepared for these inspections. In addition to the internal task force, which was allocated and did a very detailed and rigorous work, we also hired external consultant, both from India and globally, in order to be fully prepared for this session. At the moment it's difficult to provide you the timeline. We try to even ask the FDA to mention that we are ready for inspection. We are waiting for their news.
Giuliano, just a follow-up on that. Nanjangud, given that it is not able to supply to the American market because of the import alert, what is the kind of losses we are incurring at the plant level there? Because I understand the plant would be operating at a sort of level despite no production, and we would definitely be incurring overhead expenses on the plant. Any flavor or color you can provide us there?
Yeah. I think to answer your question, the previous inspection was mainly focused on the nitrosamine issue. The related impact is on the Sartan product. As you know, in Sartan there is a large use of solvent recovery. The impact so far, I think, we are not recovering solvents and thus we are not exporting these substances to the U.S. by using solvent recovery. While we are exporting to Europe because this was fully in compliance.
But, but-
Because-
Giuliano, just to
Yeah.
Giuliano, I'll be
Then let-
Just to set here.
Yes.
Just one minute, Giuliano. We are exporting. All products are going to U.S. I think that's. We must clarify first.
Yeah, not all products.
All products are going to U.S.
If the products which were marketed in U.S. are going to U.S., products are going to Europe, products are going all over, U.S. also products are going.
No. Just one minute. There is no restriction for our existing products to be supplying to U.S. I think the question was that we are not able to supply to U.S., that's why we may be incurring losses. There is no loss related to non-U.S. supply.
Oh, thank you for the clarification. Maybe I need to continue the question. I reinforce that we are exporting to all the countries, including to the U.S., Europe and Japan, and all the countries where typically we are exporting. The impact on this OAI is limited to the fact that we can't, let's say, position new products into U.S. market. That's the current impact we have. Once we will be cleared, we will start to position the new products into U.S. market as well.
Got it. Thank you. I'll come back in the queue. I have a couple more questions, but, I'll come back in the queue.
Thank you. Our next question is from the line of Amit Goela from Rare Enterprises. Please go ahead. It looks like Mr. Goela is out of the queue. We'll take our next question from the line of Nitesh Shah from Nirmal Bang. Please go ahead.
Thanks for taking my question. Again, just using the generics part, last quarter, I was expecting the margin also flipped out. This quarter margin could be a 50-50%. You said that will be. You're giving a better guidance next quarter. Can you say something about that it is restricted or we are expecting a similar kind of losses in, at least in the next quarter?
The margins in this quarter is lower than the expectation, because when in the month of July, the FDA came for the audit, we were to complete all the remediation before the audit and then ramp up the production in this quarter. Now, because of the audit, our ramping the remediation activities got impacted because we had to put them on hold and complete the first audit and make the CAPA plan. In the remediation, it was a widespread remediation with the support of various equipment suppliers and the partners on the software development side. During that audit, they all had to go back, and then we took time to mobilize all over all these. Which all are now getting completed by end of October.
Now we are in a position where we will be ramping up the production over there and sending the products, mostly into the non-US market. Clubbed with this, all the initiatives we have taken on the business transformation, looking at overall cost, across all the sectors, all the geographies. From here onwards, quarter-on-quarter, our EBITDA will continue to improve.
That's it. Thanks for the clarification. My second question would be on the CDMO segment. Like you said that margin variance in the sequential, mainly due to the plant shutdown. Revenue has increased sequentially and the margin has came down almost to the half. What is the reason for that actually? Because a shutdown of the plant should reduce your revenue as well as the-
You are comparing margin with previous quarter or the last year?
Quarter-over-quarter.
Quarter-on-quarter. On this business, quarter-on-quarter variation, we will have to start learning little bit more. We have to take two shutdowns of the plant in a year, which is as per the regulatory compliance. Each shutdown lasts more than three weeks. What happens a month in which we take the shutdown, and once the batch is produced, it takes time for our batch to get released from the quality. The quarter in which we take the shutdown, we still have the batches to be released in the market because they are in the queue and they continue to get sold. The next quarter, we sell from the inventory, so you have the inventory adjustment.
In the next quarter, then, when the shutdown is not there, then you produce at a full blast, but you sell only half of the batch. Balance go into inventory, so inventory adjustment happens. The quarter-on-quarter, these, the variations will continue to happen in this business, and especially when we have two plants, one in Spokane and one in Montreal, this also becomes a little tricky to track at both the places. However, on an annualized basis, when you look at and if you remove the one-off, the COVID-related, the impact, in the CMO business, we are back to the margins level, what it used to be pre-COVID, which are as such very healthy margins, and we will continue to operate the plant at those margins.
With regard to your top line variance, I think you may have understood that how it impacts, even though the margins are going up and down because of inventory adjustments. Between these two quarters, however, there was also COVID-related deal impact. As I mentioned in my call, we had the INR 22 crore COVID deals in Q2, while it was INR 70 crore in Q1. That also had an impact.
Got it. The last question is on the CDMO API. Your CDMO API margin has improved sequentially. It's still at 8.5%. How much would you expect that there would be room to further go on to at least double digits?
Can I ask you just to repeat the last part of the question because I didn't get fully?
My question is about the CDMO API. Last quarter, the CDMO API margin was 4%. This quarter it would be 8.5%. I just want to know why it's a single digit. Can we expect to be even at least on a double-digit margin? What is the scope to be improved at?
Yeah. First of all, yes, we do have an increase with this quarter. The reason for that, you may recall that we mentioned we are working on the plant upgradation and some capacity unlock. This program was targeted to be completed in the first half of this year, which is just concluded now. From the next quarter on, we do expect that we will grow in volume, and we do expect that we grow also in profitability. Target for this is really to come back in the near future to the same level we were used to have in the past years.
Okay. That's it from my end. Thanks a lot.
Thank you. The next question is from the line of Amit Goyal from Rare Enterprises. Please go ahead.
Sir, there's been a significant improvement in the performance of radiopharmacies, like the debit loss now at 5%. Are you expecting break-even a little bit earlier than previously guided?
Sir, Amit, we had guided that by end of FY 2024 we will be sort of breaking even in this business.
Okay.
Yeah. Let's stay with this guidance, please.
Okay. Now it is out by 5%, sir. It will be a major difference to the numbers if it comes through earlier.
Yeah. Of course, the efforts are to break even much earlier, and the team is working on that. We are continuing to see our top line growing, both because of the organic growth of the products, what we had, as well as the products, the new products which we have launched, like the PSMA, et cetera. The top line continues to grow. At the same time, our operational efficiencies are also improving month on month, quarter on quarter. The improvement is being seen all around. Yes, we should be breaking even earlier, but let's stay with the guidance what we had given earlier.
Okay, sir. Thank you so much, sir. All the best. Yeah.
Thank you, Amit.
Thank you. Participants, if you wish to ask any questions, please enter star and one. Next question is from the line of Aditya Khemka from InCred PMS. Please go ahead.
Yeah. Sir, just one more question on the reorganizing. You know, when we did the demerger of Ingrevia and Pharmova, we created a lot of wealth for our shareholders because, you know, those were two completely different businesses being run under one entity. When I look at Pharmova today, it is still, you know, one company owning three, four very, very different businesses. It's very little synergy to each other. I just wanted to pick your brains on, you know, how do you see that and how does that complex nature of business does it create issues because you're running so many different houses under one house? Or does it create synergy because there might be certain, you know, sharing of expenses? Just any thoughts on the way the business is structured today?
Yeah. Let me tell you, we have a specialty pharmaceuticals business and which is headed by Pramod, and generic business is headed by Jayesh. The generic business we wanted to put a special emphasis because this needed a special emphasis on generic business. Now, other business like Biosys is a CRDMO business and discovery services and.
API.
APIs. These are the three manufacturing businesses what we have. Now, other business what we have is the Jubilant Therapeutics, which is a drug discovery business of new drugs.
No, I understand that, sir. My question was, does the running so many different lines of businesses under one umbrella of Pharmova, does that not create challenges in terms of how you are managing these different pieces? Obviously, it does confuse the shareholder because we don't know what we are really buying. Or let's say if I just wanted to buy a CRDMO business, I can't do that. Or if I just wanted to buy a generics business, I can't do that, because it's all housed into one, you know, big brand of Pharmova. So, any thoughts on that?
We have started reporting the business separately.
That is true.
You get a view of the businesses separately.
Right. Any thoughts on, you know, what you did with Pharmova and Ingrevia? Any thought of doing that within Pharmova in terms of, you know, demerging these businesses into separate lines so that shareholders have the ability and the liberty to choose what line of business they want to, you know, participate in and what lines of businesses they don't want to participate in?
There's no plans as yet, but I think we'll have to see in next couple of years how the each businesses are panning out.
Understood. Also, any thoughts on the generic formulation business, how that is, you know, sort of, performing? We understand that the pricing environment in U.S. remains very, very challenging, and how do we plan to sort of, you know, turn around that business?
I think we just explained that, you know, in the generic business we are trying to reorganize and reduce cost of operation and also rebalance our R&D. You will see that in quarter-on-quarter we see the reduction in costs because pricing you have no control over it. Only thing what we can do is reduce cost of operations and cost of R&D.
Right. Sir, in your CRDMO business et cetera, where you must have seen some inflation in input cost, how are you finding the ability to pass on such inflationary pressures to your customers, both in Radiopharma as well as CRDMO businesses?
In Radiopharma and CMO business, yeah, you are right, our costs are going up little bit at a higher pace than the normal because the inflation in the U.S. is on a higher side, so employee cost goes up because of that. The cost of some of the components have also gone up little bit more than what otherwise on a annualized basis they used to be. Now, we have the various contracts with the customers. Some of the contracts are like pass through, some of the contracts are open, we can increase the prices. Some have a limit to increase the price. It's a mix. Overall I can say that we are able to more or less pass on the increase. See, every year it is indexed to the increase in pricing. Every year we can revise the price with both of our customers.
Understood. That's it from me, sir. Thanks a lot for answering my question.
Thank you. Participants, if you have any questions, please enter star and one. Ladies and gentlemen, a reminder to all, if you wish to ask any questions, please enter star and one. We have a question from the line of Vijay Irani from Canria SFOGMCC. Please go ahead. Sorry, we have lost the connection for Vijay. Ladies and gentlemen, if you wish to ask any questions, please enter star and one. As there are no further questions, I now hand the conference over to the management for closing comments.
Well, thank you so much for joining on this conference call. In case you have any further questions, our investor relations will be happy to answer all other questions, or our CEO, Pramod, or Arun Sharma, our CFO. Thank you. Happy Diwali.
Thank you so much and Happy Diwali to all of you.
Thank you and Happy Diwali to all of you.
Thank you.
Thank you. On behalf of Jubilant Pharmova Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.