Thank you. Ladies and gentlemen, we, I now hand the conference over to Mr. Vineet Mayer. Thank you, and over to you, sir.
Thank you, Tanvi. Good evening, everyone. Thank you for being with us on our Q1 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 Chokhani, Group CFO, Mr. Pramod Yadav, CEO Jubilant Pharma, Mr. Giuliano Perfetti, CEO Jubilant Biosys, Mr. Syed Kazmi, CEO Jubilant Therapeutics, and Mr. Arun Sharma, CFO Jubilant Pharma. I now invite Mr. Shyam Bhartia to share his comments.
Thank you, Vineet. Good evening, everyone. I hope you and your family are safe and healthy. During the quarter, the company reported year-over-year improvement in sales in Specialty Pharmaceuticals and CRDMO, which was offset by CDMO and sterile injectable and generic segment. In Specialty Pharmaceuticals, the radiopharmaceutical segment reported higher sales and profitability on account of recovery from COVID-19 impact. While radiopharmaceuticals business witnessed higher sales on account of recovery from pandemic and launch of new products. Our allergy business continues to perform strongly and witness healthy growth year-over-year. In the CDMO sterile injectable segment, revenue stood lower year-over-year as in Q1 FY 2022, the business realized higher revenue from COVID-19 related products as compared to this quarter. Generic segment's performance was impacted by pricing pressure in U.S. market and import alert related challenges, which resulted in lower performance as compared to Q1 FY 2022.
In CRDMO, our drug discovery services segment continued to report lowest growth, led by higher volumes and stable pricing. The CDMO API segment reported lower revenue as the Nanjangud plant is undergoing asset replacement and plant upgradation, which contributed to lower revenues. In proprietary novel drug business, phase I and II trial is underway for our lead program, dual LSD1/HDAC6 inhibitor. Second program, brain-penetrant PRMT5 inhibitor, IND was done in Q2 FY 2023, and we have now received FDA clearance for IND. I'm glad to share that the API demerger has become effective with April 1, 2022 as appointed date. This demerger will enable us to create synergies between CRO and CRDMO businesses, and help in supporting our customers for their needs for early stage of research to commercialization of active ingredients, and will provide competitive edge to this business.
I would like to inform that for better understanding of performance and outlook of our various businesses, the company has reorganized the reporting segments from Q1 FY 2023 onwards, and the details will be covered by Pramod and Giuliano in their parts on this call. With this, I hand over to Pramod to discuss the pharma business.
Thank you, Mr. Bhartia. A very good evening to all of you. I would like to mention that as part of our segment reorganization done in this quarter, our pharmaceutical operations are split into Specialty Pharmaceuticals comprising radiopharma and allergy immunotherapy segments, into CDMO sterile injectable segment that was previously named CMO, and into generic segment. Along with the re-segmentation from this quarter onwards, we have started providing revenue and EBITDA details of various business lines to provide more insight to investors on performance of our various businesses. I would like to highlight that due to seasonality and other factors, the performance of business can vary quarter on quarter. Hence, we believe annual performance tracking can be better indicator of performance of a particular business. With this, I'll share performance of our various businesses in the first quarter of financial year 2023.
Q1 FY 2023 revenue from Specialty Pharmaceuticals was at INR 722 crore versus INR 632 crore in Q1 FY 2022, and EBITDA was at INR 117 crore versus INR 75 crore in Q1 FY 2022 with a margin of 16.22% versus 11.9% in Q1 FY 2022. Radiopharmaceutical business witnessed improvement in sales driven by recovery from easing of COVID-19 pandemic. Sequentially, sales were lower due to some customer order scheduling in the previous quarter. The RUBY-FILL installation shows encouraging trend. Sales increased both on a year-over-year and a sequential basis in Q1 FY 2023. The radiopharmaceuticals business witnessed growth year-over-year and sequentially due to higher volumes led by continued increase in market share of existing products as well as launches of new products. The turnaround plan is working well, which is reflected by higher volumes and better operational efficiencies.
The allergy immunotherapy reported healthy revenue growth year-on-year, and business continues to operate at volumes higher than pre-COVID levels. CDMO sterile injectables revenue at INR 263 crore versus INR 373 crore in Q1 FY 2022, and EBITDA at INR 132 crore versus 216 crore in Q1 FY 2022. The revenue and profitability lower versus Q1 FY 2022 as business witnessed higher COVID-related business during the previous quarter. In Q1 FY 2023, we witnessed COVID-related deals of INR 70 crore versus INR 220 crore in Q1 FY 2022. Sequentially, the revenue lower due to shutdown in Q4 FY 2022 and some stabilization issue post-shutdown in Q1 FY 2023 that led to a lower volumes during the quarter.
Generic revenue at INR 178 crore versus INR 432 crore in Q1 FY 2022, and the revenue and profitability was lower in Q1 FY 2022 due to pricing pressure in the U.S. market. During this quarter, the business witnessed sharp fall in certain prices and that impacted performance. Lower volume due to import alert at the Roorkee plant and lower remdesivir sales due to fewer hospitalization also impacted performance of this business. In Q1 FY 2023, we witnessed nil sales of remdesivir versus INR 133 crore in Q1 FY 2022 and INR 4 crore in Q4 FY 2022. In July 2022, U.S. FDA announced the removal of olanzapine, spironolactone and valsartan from the list of accepted products with respect to Roorkee import alert post its review of the product supply situation and company's compliance status.
U.S. FDA has recently completed audit of the Roorkee facility and has issued six observations. The company will submit action plan on same and will engage with U.S. FDA. I am happy to inform you that Health Canada also inspected our Roorkee site in early June and awarded compliance rating. With this, I hand over to Giuliano to provide insight into contract research, development, and manufacturing organization business.
Thank you, Pramod. I would like to mention that pursuant to the completion of the demerger of the API business, we have clubbed our drug discovery services, earlier called as contract research and development services, and CDMO API business, which was really called as API, into a single segment called Contract Research, Development and Manufacturing Organization, CRDMO. The CRDMO platform will enable us to provide end-to-end services to pharmaceutical customers from drug discovery, to clinical research, to development and manufacturing of innovative and generic APIs. We will do some CapEx in this platform to increase our development capabilities. This merger will enable us to grow both our CRO and API manufacturing operations at a faster pace in the medium term. The CRDMO segment reported sales of INR 280 crore versus INR 193 crore during Q1 FY 2022.
The EBITDA of the segment was at INR 46 crore versus INR 53 crore in Q1 last year. Drug discovery services revenue at 118 crore versus 88 crore in Q1 FY 2022 had robust volume growth year-on-year revenue increase. Higher demand from biotech companies for integrated services, functional chemistry, DMPK, discovery biology, and clinical trial data management supported growth first half Canada. Volumes increase supported by the Greater Noida facility that was commissioned in September 2021. Sequentially lower revenue in line with historical trends of Q4 being the stronger quarter. Strong CapEx plan underway in view of the robust demand conditions in this business. CDMO API business revenue was at INR 102.50 crore versus INR 105 crore in Q1 of FY 2022 due to higher volumes.
Sequentially revenue lower as there was a shutdown in one of our plants at the facility as part of the ongoing asset replacement programs for plant upgradation and capacity expansions. With this, I now hand over to Syed to discuss the proprietary novel drugs pipeline.
Thank you, 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 our first program, JBI-802, a dual LSD1/HDAC6 inhibitor 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 and neuroendocrine prostate cancer with specific genetic signatures. We expect initial clinical data from first three to four cohorts by end of the year, and the completion of the dose escalation part of the trial early next year. I would also like to mention that Jubilant Therapeutics has received FDA clearance of IND for JBI-778, an oral, brain-penetrant, selective PRMT5 inhibitor for treatment of solid tumors with brain metastases and primary brain tumors. Covered under our out-licensing agreement, Blueprint Medicines has initiated the phase I/II trial of BLU-451 in patients with EGFR-driven non-small cell lung cancer harboring exon 20 insertion mutations. This led to a milestone payment from Blueprint to Jubilant Therapeutics, with potential for additional milestone triggers as the program progresses through clinical development.
We presented emerging preclinical data at two major international oncology conferences this quarter, American Association for Cancer Research in New Orleans in April, and American Society of Clinical Oncology in Chicago in May. Jubilant Therapeutics was also selected by BIO International Convention in San Diego to chair and moderate a scientific panel discussion on epigenetics therapies in cancer with subject matter experts from Pfizer, Dana-Farber Cancer Institute, and Lunarity. Jubilant Therapeutics is now a clinical stage biotech with higher value creation opportunities given by emerging data from first-in-human studies and additional IND filings. With this, I hand over to Arun to discuss the financials. 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 Q1 FY 2023. Jubilant Pharmova revenue stood at INR 1,452 crore versus INR 1,635 crore in Q1 FY 2022, and INR 1,528 crore in Q4 FY 2022. Specialty pharmaceuticals revenue was at INR 722 crore as compared to INR 632 crore in Q1 FY 2022. CDMO sterile injectable revenue was at INR 260 crore versus INR 373 crore, and generic segment reported revenue of INR 178 crore versus INR 432 crore. The CRDMO segment witnessed strong growth, with revenue at INR 280 crore as against INR 193 crore in Q1 FY 2022.
Reported EBITDA during the quarter was at INR 204 crore as compared to INR 379 crore in Q1 FY 2022, and INR 244 crore in Q4 FY 2022, with margin being at 14% versus 23.2% in Q1 FY 2022, and 16% in Q4 FY 2022. Depreciation and amortization expenses during the quarter was at INR 95 crore versus INR 88 crore in Q1 FY 2022. Finance cost is at INR 40 crore versus INR 35 crore in Q1 FY 2022. CapEx was at INR 47 crore as compared to INR 160 crore in Q1 FY 2022, and INR 59 crore in Q4 FY 2022. EPS was at INR 2.96 versus INR 10.1 in Q1 FY 2022, and INR 3.74 in Q4 FY 2022.
Net debt on constant currency basis on June 30th, 2022 was at INR 1,951 crore versus INR 1,954 crore as at June 30th, 2021. Average blended interest rate for Q1 FY 2023 is at 4.84% has increased from 4.56% in Q1 FY 2022. CapEx excluding R&D capitalization was at INR 98 crore for the quarter. We expect to incur CapEx of around INR 700 crore-INR 750 crore in FY 2023, primarily towards expansion in CMO business and enhancement of drug discovery services capabilities and capacities. In addition, we expect product development expenditure of INR 250 crore-INR 300 crore. With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have. 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 a handset while asking a question. Ladies and gentlemen, you may enter star and one to ask a question. We will wait for a moment while the question queue assembles. The first question is from the line of Amit Goela from Rare Enterprises. Please go ahead.
Yeah, sir. Hi, good afternoon, and thank you for the opportunity. Firstly, thank you for breaking out the business in so many different manners. It makes it so much easier to keep track of it. That is a really nice presentation, sir. That's really appreciated, sir. A couple of questions I have, and if you feel I'm running out of this thing, please let me know and I'll come back on in the queue. Sir, regarding radiopharmaceuticals, good to see the radiopharmacy number and the EBITDA over there. One is when do you expect breakeven over there? Number two, sir, why would the numbers decline sequentially in terms of top line for radiopharma business? Is the margin decline only because of volume decline or would there be some pricing pressures also there, sir?
A change in product mix?
Yeah, Amit ji, Pramod here.
Yes, sir. Hi.
On the first question about the pharmacies, we have been indicating that we expect breakeven in FY 2024. If you look at the numbers and the trend, you will see that we are on track. We are confident that in FY 2024, the business will be breaking even.
That, that'll be great, sir.
With regards to sequentially lower volume in radiopharmaceutical, lower revenue, if you recall in the last quarter also we indicated that in Q1 the performance or the volumes were higher because of some customer scheduling, which will get corrected in Q1 of this year. As we had predicted, so that has happened. This is more of the scheduling and really nothing much to read into that. That's what I mentioned in my opening remark also, that in such business, the quarter-to-quarter variations will be bigger. It would be good to see overall the annual and the yearly numbers.
Okay. Sir, do you expect our margins to go back to historical margins in this business as the COVID effect goes away and the business settles down, sir?
You are talking about radiopharma or radiopharmaceuticals?
Sir, radiopharma, sir.
Yes. In the radiopharma, as our losses of the radiopharmacies keep on coming down, we expect the margins to continue to improve. We also have launches of the new products in the pipeline.
Yes, sir.
We are also ramping up the RUBY-FILL. As these three action plans keeps on getting implemented, the margins will definitely continue to improve from the current levels.
Fair enough, sir. That's great, sir. Sir, regarding this sterile injectables, when do you expect the new capacity to come online? And when do you think that the entire COVID business will be nullified and we'll be back to normal case?
Entire COVID business has almost nullified in this quarter. There's very little revenue left, which we have to recognize in rest of the three quarters of this financial year.
Okay.
Yeah. At the same time, let me assure you that, when we look at the business, non-COVID, in that term, the business is very stable with healthy margins. In FY 2023, we expect it to be doing better than what it used to do during the pre-COVID levels, when we exclude the COVID case.
Okay. You think this business will be better than 1920, sir?
Yeah.
2021.
Yeah, from FY 2020 levels, I am talking because 2021 onwards we had the COVID impact.
COVID business. Fair enough. Sir, the new capacities, when do you expect them to come in place?
Yeah. We had made announcements in three phases. One is the additional line for Spokane, which was our first announcement. That will be coming up by end of calendar year 2024. After the last call, we made the announcement the next day for another line which takes the Spokane capacity to 100% from the current level. That line is expected in FY 2027. Thereafter, we also made announcement for Montreal expansion. There also the first line will be up and running in FY 2024.
Sir, in terms of FY 2024 end, in terms of vials, what would be the capacity in terms of like the number of vials or whatever? I'm not asking for the price or volume, value. In terms of vials, sir, what would be our capacity?
It's very difficult to calculate that way because it will also depend upon the vial size. There are various vials from 2.5 ml going right up to 50 ml. It will depend upon which vial size are you using, and then whether you are filling the liquid or the lyo. Even in the lyo, the different products have the different batch size. Anyone who talks about their capacity in terms of the vials is a little theoretical, because it will depend upon the various factors.
Fair enough, sir. Point accepted, sir. Sir, coming down to this drug discovery business, sir, is there. Sir, I thought it would be a very stable business, so why would there be quarterly volatility, sir, like 142, 118, and that kind of stuff, sir?
Yes. Yeah, Giuliano.
This is Giuliano.
Yeah, hi, Giuliano.
Thank you for your question. The CRDMO business has shown a robust growth versus last year.
Yes, sir.
The subsequent quarter one, quarter four is slightly below. This is due to the seasonality of the business. Every quarter one is typically less robust than quarter four, and that's the only reason. We foresee still a robust growth for the rest of the year.
Okay, sir. Sir, given your expansion which is going on, by the fourth quarter of FY 2024, what would you be thinking? What would your exit rate be in this business, sir? What would you be looking at, sir?
So-
If you can guide on that.
Basically, yeah. Basically, we are running a very large and robust CapEx plan.
Yes, sir.
We announced that in addition to the Greater Noida site, which was commissioned in September 2021, we are also expanding Greater Noida site. This will be completed in the Q2 of FY 2024. Overall, we are trying to position ourselves in the better way to support the growth and to keep the same or almost the same pace of the growth we registered in these last quarters. Overall, I would say that in the range of 20%-25% will be the kind of capacity we want to add.
Okay, sir. Annually, sir, we can look at 25% growth?
That could be the range we do expect.
Okay, sir. Sir, two more questions, last two questions. Sir, one day in your CapEx of INR 750 crore, you said you'll be doing product development of INR 250-odd crore. Is this your normal R&D and will this be written off or like this will be capitalized?
It depends, most probably because if we do in dosage it is capitalized. In API if we do, that is written off.
Okay, sir. Sir, lastly, whenever you get an opportunity, maybe today or maybe in the next call, if you could give us a little bit more color on your generic strategy, that will be very helpful because that is one of the weaker businesses, sir. Whenever you feel like it, like maybe when you are ready, maybe next call or today or whenever, if you could just give a little bit more color on how you plan to make grow that business and make it more profitable, that would be very helpful, sir.
Yes, I can give a little bit of insight right now if we have time.
Yes, sir. Yeah, I have all the time.
I mentioned.
Up to you.
Yeah. Yeah, as I mentioned that U.S. FDA has completed the audit and they have issued six observations. If you ask me, I will say that the audit outcome is very good because in six of the observations, there is no observation which is related to data fraud. There is no repeat observations. Most of the observations are related to the process improvements, and such type of a thing. We will be engaging with the FDA. We are hopeful, but we will get to know the outcome after about three and a half months.
Saying that, you are already aware that we are spending money into the R&D because we have focused more and more into development of the complex generics which are difficult to enter into the market, so that as and when the sites are out of the compliance, we are able to launch the products with the higher margins. In the meantime, to de-risk our business for our existing products, we are already moving them to the CMO sites, where we expect to start generating revenues in this financial year itself.
Okay.
At the same time, we are also focusing on the non-U.S. markets, where we do not have any compliance issue and we will be increasing the volume. We are strategizing, we are implementing all those strategies properly. Yes, as of now the generic business financials are a kind of a drag, but we think that it's for the short term.
Okay, sir. You think you will be able to see a turnaround there by the end of the year, sir? Or it'll take longer?
I'll say that there's a very high probability or quite a good chance that by end of this year it should be breaking even because we are hopeful for the U.S. FDA outcome. As it's a regulatory agency, so we should keep the fingers crossed.
Okay. Thank you so much, sir, and all the very best. Thank you, sir.
Thank you.
Thank you.
Thanks.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Rahul Veera from Abakkus Asset Manager LLP. Please go ahead.
Good evening, sir. Would like to really appreciate the team because of the detailed presentation. Sir, couple of questions on the generic side again. In Q1 FY 2022, if you see we've done INR 430 crore of top line with EBITDA at INR 33 crore. Wanted to understand, like, what would be the contribution of revenue from Remdesivir route here. Was there any contribution of Remdesivir route here?
I think on my call I mentioned that the remdesivir in Q1 was INR 133 crore versus zero this year. That had impact. There was the impact of the import alert and impact of the sartans prices and impact of overall the pricing pressure in the U.S. market.
Sure, sure. Just want to understand, like, before this certain price rise happened since 2018, 2019 when the ratio started moving up and the prices started moving up, were we making money in this business on the generic side? Or we were at capital loss?
You are asking when the current prices are higher?
Yeah, before that. Before the certain prices moved up.
Yes, of course, we have been making good money in the generic business. It's only after the import alert and the pricing pressure in the U.S. market the impact came in. As I just explained to Mr. Goela that we feel that we should be out of the compliance soon, and we are also working on the various other strategies. This should be a short term and the business will be breaking even sometime by the end of this year. As soon as our site is out of the compliance, we have lot of pending ANDAs for which we'll start getting the approvals, and we have the launch plans in place to keep on launching the products.
Sure, sure. This is helpful, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.
Yeah, thanks a lot, and good evening, everyone. First question I have on the radiopharmacy business. I haven't checked today's presentation, but in a couple of recent presentations, it has been mentioned that the company has presence in 48 pharmacies in the U.S. Can you give some sense out of these 48 pharmacies, what percentage of these pharmacies would be break even or would be generating positive EBITDA at this moment?
Yeah. See, so far we have not been discussing business-wise the revenue and EBITDA. Now we have started giving business-wise revenue and EBITDA. That itself is quite a lot of disclosure from our side. Going pharma-wise, the EBITDA or gross margin or the product-wise contribution, et cetera, then we also end up giving too much information to the competition, so let's avoid that.
Sir, I'm not looking for exact numbers here. I mean, what I'm trying to sort of understand is that if there is a certain proportion of pharmacies which are kind of profitable today, there might be some commonalities between those pharmacies, and that can give some understanding on the ones which are not generating positive EBITDA today. What might it take to bring them up and running in terms of generating positive EBITDA? That was the only indication, understanding that I'm trying to understand. Is there a decent proportion of pharmacies which are today EBITDA positive? I'm not looking for any specifics here.
You know, definitely some of the pharmacies are more profitable, some of the pharmacies are less profitable, some of the pharmacies are incurring losses. That is why the whole system is incurring losses. Now, what we are trying to do to improve profitability is the pharmacy which are incurring losses, either we convert them to be profitable or if they are not possible to be profitable, we review their operation differently. Those who are less profitable, we want to make it more profitable. There are two ways to make it profitable. One is the increase in sale of existing products and add new products. By both this method, we are trying to make it profitable, because if every pharmacy is profitable, then we would not have incurred losses.
Okay. A question attached to this. Let's say, do you have a hard timeline in your mind that the pharmacies which are today not generating cash flow you would take a hard stance and actually right size or downsize your pharmacy network if the turnaround doesn't happen what we are envisaging over the next 10, 12, 15 months? Any timeline that you have in mind?
Yes. You see, we have a complete program. That is how we will become breakeven. Complete program of converting these pharmacies. Some of the pharmacies who are less profitable, make it more profitable. Some of the pharmacies we are making losses, make it profitable. Next we will review and we review every month and every quarter what is going forward. Our strategy is always very flexible, and we keep on reviewing it. That is how we have promised that by next year it will be breakeven.
Sure, sir. Second question is, sir, on the-
Quarter-over-quarter. You will see quarter-over-quarter better results in this.
Understood, sir. That's fair enough. Sir, on the generic side, if I look at this quarter numbers, INR 178 crore of revenues and INR 70 crore of EBITDA, negative EBITDA that we have generated. If you were to break even in this business, I would imagine that minimum INR 160 crore, INR 170 crore of more revenue would be required, to kind of be a bit of neutral, in this particular business, and that amounts to almost, INR 700 crore of incremental revenues. Do you think that eight months down the line or nine months down the line, whatever sales for today is happening, there might be competition that is coming into the product which you're not able to sell today.
You can immediately generate this INR 700 crore-INR 720 crore of sales once your import ban gets lifted, and then that itself, the timeline can be quite extended.
Pramod here again. This quarter, our overall revenue of the generic is low, not only because we have not been able to sell the volumes. We had on purpose reduced the volume because our site was busy in doing all those remediation activities. We had committed to FDA that we'll be completing the remediation by end of July, and we have been seriously working on that. FDA did walk in as a surprise inspection towards the mid of July. Since due to the remediation our volumes were low, now the remediation work is completed. U.S. FDA inspection is over. Now we need to increase the production and get back into the market, especially into the non-U.S. market, where we have been going slow.
Would it be fair to assume that there is some cost sitting in the INR 74 crore loss, which is kind of non-recurring in nature, maybe little remediation or exceptional closure of certain lines?
Yes. They were unabsorbed cost for the overheads since plant was not really running at the capacity. It was running at a much, much lower capacity. They were unabsorbed costs.
Okay. Sir, one final question on the radiopharmaceutical manufacturing business. You have also talked about certain launches that have taken place in this business. Can you give some sense, annually in 2022, 2023, 2024, 2025, how many launches are you planning in this particular business? Some update on the market potential for MIBG. When is the data due for that particular initiative?
As of now, we have planned to launch at least four products. Probably we are trying one in FY 2023 and three in FY 2024. Within these two years, the running year and the next year, at least three to four products we will be launching, and then we will be launching one or two more later. Once these products are launched, which already have a market quite a lot, and there's very few players, we expect that we will be able to very easily get close to 30%-50% market share from year one onwards at a good prices and a good margins.
Can you throw some light, sir, on the existing competition in these products? Is it a one or two-player market or there are two or three players? Some color here.
In nuclear medicines, for most of the products there is only one or two players.
Okay.
There are a few products where there are more than two players.
Got it. The sales potential from these products, I'm not sure how many products you are manufacturing today, but whatever the run rate today is per product, excluding MAA and DTPA, would these products have the same potential as the rest of your products, excluding MAA and DTPA?
Sorry, I couldn't understand the question properly.
What I'm trying to understand is that if I exclude the two big products, MAA and DTPA, whatever run rate you have on sales for the remainder of the portfolio on a per product basis, would that same run rate apply to these launches as well, that you're planning in 2023 and 2024?
Other than MAA, DTPA, even in the other products what we have, there's one product where there's only one more small competition, otherwise we are the only one. For the other products, there are some more players. When we launch these products which are in the pipeline, and at least some of them have quite a good market size and very few players, these products will have much higher run rate.
Got it, sir. One final question, sir, on the Spokane CapEx that you are undertaking. Any broad sense that you can give on the return on capital employed that the Spokane initiative can generate for the company? What can be the risk to what the current expectation you have on the ROC that you believe this business can generate?
If you already looked at our CMO business, even without COVID deals, it's with very healthy margins. Now this CapEx what we are incurring, generally in any sterile business, the ROC remains little low because the payback period is longer. It takes time for you to create the capacity, almost four to four and a half years. Then you build the pipeline after those are getting the products approved. In our case, the story is different. Out of $285 million which we'll be spending in Spokane, almost $150 million is kind of the grant, which we don't have to pay back.
The investment in terms of the CapEx is much lower, and hence these expansions will have very healthy ROC, and also very healthy EBITDA because lot of existing cost of the existing infrastructure and of the existing talent pool will be utilized. The incremental cost will be much lower than the current operations. It will have higher EBITDA as well as higher return on capital.
That's helpful, sir. Thanks a lot.
Thank you. The next question is from the line of Vinay Jain from Karma Capital Advisors Private Limited. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just wanted to understand when was this Roorkee inspection conducted by U.S. FDA?
It concluded yesterday.
Okay.
It was for 10 days.
Understood. The other thing was, what happens to the import alert status? This continues till we hear again from U.S. FDA? Like you said, it could take around three months.
Yeah. How FDA works is that once their inspector gives the observations-
Mm-hmm.
Those observations, company has to give their response in 15 working days.
Okay.
That will be somewhere 24th, 25th of August.
Mm-hmm.
FDA generally takes around three months to take the decision based on inspector observations and the company response, that what should be the compliance status of the site.
Mm-hmm.
with that timeframe in the mind, it will be some time in the month of November.
Okay. Even if, as you said in your opening remarks that there are no repeat observations, there are no observations related to data integrity. Even if it is an OAI, the import alert could be removed, right, on the site?
Yeah. FDA has two options. If they are satisfied with our all the GMP standards.
Mm-hmm.
They can downgrade from import alert to OAI.
Right.
In that case, our exports to U.S. market will start.
Okay.
The new approvals will still remain on hold.
Mm-hmm.
FDA can also directly go to the VAI.
Right.
Where they can remove the import alert as well as OAI in one go. It will depend upon the type of observations, our response to the FDA and the review by CDER in FDA, how they view overall compliance status of the site.
Any incremental cost which would be incurred towards remediation in the coming quarters?
No. Most of the observations are leading to the minor improvements in our practices. They are not going to incur any remediation cost.
Understood. Lastly, any update on the Nanjangud inspection by U.S. FDA? By when can we expect that?
Giuliano here. Thank you.
Yeah.
You know that probably you may remember that we got the last inspection a few years ago. Precisely it was more than two years. We basically after that inspection we did all the applied to FDA and we've done a strong and I would say dedicated plan for the rigorous next inspection. We were expecting the FDA to come in any time from now on. Of course we don't know when the FDA would come for another inspection but we basically issued a letter to kindly ask to inspect us.
Okay.
That was the result of this preparation work, where we engaged also specific consultants for any kind of capability which will be subject to the inspection.
Understood. Yeah. That was helpful. Thank you.
Thank you. Participants, if you wish to ask any questions, please enter star and one. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yes, thanks for the opportunity. First on sartans, what is made the price fall in sartans? Is it to do with the inventory channel or some new competition that has come out?
In the sartans there was earlier some impurity issues because of which the number of players had gone down, and the companies had to invest money in cleaning up the processes. Now since most of the companies have done that, and some other companies who saw the opportunity because of the higher prices have also jumped into the game. Now there are the more number of players, who are able to provide the product without impurity, and hence there's a price reduction.
Approximately like how much price reduction would have happened because of this situation, let's say over past two, three months or maybe five months?
It will be a little difficult to quantify because the prices depend from customer to customer and market to market, then there are the different sartans, like the valsartan and the losartan HCTZ. But yes, each product has faced the pricing pressure in almost all the markets.
Okay, sir. Considering the Q1 overall EBITDA of roughly INR 200 crore, and at the end of FY 2022, we had commented about at least maintaining the overall performance for FY 2023, FY 2022 at EBIT of roughly INR 1,100 crore-INR 1,150 crore. Considering the Q1 performance, considering the import alert situation continuing for three months or at, I mean, at least three months till the regulatory outcome comes through and certain operational issues in the CDMO segment. How are you thinking on the overall FY 2023 EBITDA now?
I think on EBITDA front, we had mentioned earlier that FY 2023 will be slightly muted than FY 2022. In terms of the quarterly trend, I'd say generally in our business, the second half is better than the first half. In the Q2 you will see performance more or less closer to the Q1, and then you will see improved performance in Q3 and Q4.
That is for Jubilant Pharma.
Yeah, that is for Jubilant Pharma. Sorry. Then for the other businesses, Giuliano can comment for CRDMO.
Yeah. I think on CRDMO, particularly on the drug discovery services, I already mentioned that typically quarter four is more robust than quarter one. So substantially, I mean, sequential quarter one should be lower than quarter four. Then along the years, I think the majority of the growth happening in Q3, Q4. I think on the API business, quarter analysis is a little bit too tight, so this should be analyzed in the perspective of a longer term, consistently with the production cycle and the typical, I would say dynamic of the business. So this should be seen on a yearly basis or at least half yearly basis. In the specific for the API, we'd expect a second half which is higher than previous halves for FY 2023.
that is consistent with the action we are taking, which are set for achieving higher volume, which is guiding the growth.
Got it. Just on this routine inspections, what triggered the inspections? I mean, it's really appreciated that on the import alert, the U.S. FDA inspectors have come quite fast to the site. What triggered the inspection?
U.S. FDA now has started doing the surprise inspections in India also. Earlier they used to do the inspection with the prior information. In some other countries globally, like especially in North America, anyway they do the surprise inspection.
Yes.
From the last two, three months, if you recall the U.S. FDA, that the Congress has also passed a special bill for the funding to the U.S. FDA to start the surprise inspection. It's part of their, the revised strategy. Nothing specific which according to us had the trigger. It was just that where we had come into the priority of the U.S. FDA.
Interesting. Just lastly, if you could comment on how much would have been the quarter-over-quarter increase, let's say, in the number of installations for RUBY-FILL?
In Q1, our RUBY-FILL installs were, I will say, one of the highest in any of the quarter we have done.
Okay. Okay.
They were higher year-on-year. They were also higher sequentially and as such one of the highest in the quarter.
Got it. Thank you. Thank you, sir.
Thank you. Participants, if you wish to ask any questions, please enter star and one. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.
Thank you everyone for joining the call. Have a good day.
Thank you very much. On behalf of Jubilant Pharma Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.