Ladies and gentlemen, good day, and welcome to Jubilant Pharma Limited, earlier known as Jubilant Life Sciences Limited Q3 9 months FY 'twenty one 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. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Hemann Bakhru, Head, Investor Relations.
Thank you, and over to you, Mr. Buckru.
Thank you.
Good evening, everyone. Thank you for being with us on our Q3 FY 'twenty one earnings conference call. Please note effective 1st February 2021, the Life Sciences Ingredients business scans demerge into Jumilit and Gravia Limited and has been classified as discontinued operations in Q3 results. Further, name of Jubilant Life Sciences has been changed to Jubilant Farm Oil Limited effective 1st February 2021. 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 Bhatia, Chairman Mr. Hari Bhatia, Co Chairman and Managing Director Mr. Pramod Yadav, CEO of Jubilant Pharma Mr. Rajesh Srivastava, CEO of Jubilant Engraver Mr.
Syed Kazmi, CEO of Jubilant Therapeutics and Mr. Arun Sharma, CFO. I now invite Mr. Sam Bhatia to share his comments. Over to you, sir.
Thank you, Hemant. Good evening, everyone. I hope you all are in good health and keeping safe. We are pleased to report a strong quarter across all business segments. Despite enhanced restrictions and closures in several U.
S. States due to COVID-nineteen pandemic. Over the last few months, Pharma Business registered a strong EBITDA growth, especially led by new business sign ups in CMO announced earlier in H1 FY 2021. Genomics and API segments did well too. COVID-nineteen continued its impact the radiopharma business due to increased restrictions in U.
S. Energy business had also reached at pre COVID levels during Q2 FY 2021. Also saw a bit of impact on volumes due to COVID-nineteen. We continue to see new business opportunities in CDMO, generics and specialty pharma segments. LSI segment's performance continued to be strong quarter on quarter as well as year on year EBITDA growth.
Our contract research and development services witnessed strong growth led by healthy demand from customers during the quarter. We continue to expect strong performance in our businesses in Q4 FY 2021. The company reduced its net debt on a constant currency basis by INR 5.70 crores in 9 months FY 2021. This is in addition to INR 5.14 crores reduction in net debt during FY 2020. We remain focused on further deleveraging by generating healthy cash flows.
We received final NCLT order approving demerger of our LSI business. Demerger creates separate and focused entities for pharmaceutical and life science ingredient businesses that will help in unlocking shareholder value. The life science ingredient business will stem, emerged into Jubilant Engravia, which would be listed in NSE and BAC with the Meredith Shareholding of Jubilant Pharma, earlier known as Jubilant Life Sciences. I take this opportunity to thank all our employees who have worked tirelessly across all our plants and offices to ensure continuity in company's operations, while continuing to serve our global customers. With this, I hand over to Pranod to discuss the pharma business.
Thank you, Mr. Bhatia. A very good evening to all of you. We had a very strong quarter for Pharma with Q3 revenue growth at 17% year on year, led by strong performance in CDMO and generics. CDMO revenue grew 66% year on year and 28% quarter over quarter.
We continue to see a strong outlook for the segment on back of 5 deals signed in H1 FY 2021. As highlighted earlier, the 5 deals that we signed in H1 FY 2021 could contribute up to INR 500 crores in revenue over the next 12 to 15 months depending upon product approvals by the U. S. FDA. We have realized approximately half of this.
We do see potential upside to this revenue and will update you as we get greater visibility. We have been manufacturing REMS lasers for DILRs. We also started contract manufacturing
of Allied
Release bamlanivimab, a drug that has been granted emergency use authorization by the FDA for treatment of COVID-nineteen. And COVID-nineteen vaccine candidate, NVX COV-two CoV-two thousand three hundred and seventy three of Novavax, a biotechnology company developing next generation vaccines for serious infectious diseases. As highlighted earlier, CMO capacity was expanded via debottlenecking initiatives, including new LION installations and 20 fourseven operations in all areas, including inspection and packaging. We are excited about the new business opportunities in the CMO business. Within CDMO, API business grew well on back of the volumes.
We are pleased with our generics business, which experienced a 57% year on year increase in revenue for the quarter, driven by launch of remdesivir in India and other licensed countries and also limited competition in select products in the U. S. Markets. We remain confident of continued growth in this business. With increased closures and restrictions across numerous states and the recovery in specialty pharma, both radiopharma and allergy businesses has been impacted.
Specialty pharma segment revenue declined by 24% year on year. Hospitals continues to prioritize treatment of COVID-nineteen cases. Further, there is continued impact on lung procedures to avoid risk to medical staff. We have had 1st commercial launch of Rubafil in Europe in Q3 FY 2021. We are also focusing to expand the specialty pharma business in international markets.
EBITDA for the quarter was at INR 4.99 crores as compared to INR 411 crores in Q3 FY 2020. We continue to execute on our strategic initiatives across the businesses and expect strong performance in Q4 FY 2021 as well. Our Roorkee Doje's form and the Nanjangur API manufacturing facilities have already completed remediations with respect to bonding letter and official action indicated issued by the U. S. FDA.
We are awaiting U. S. FDA inspection. We are confident that our remediation efforts and engagement with the U. S.
FDA will soon resolve OI and bonding letter status for our 2 manufacturing sites. We are pleased to report that our manufacturing facilities in North America and India have been fully operational through Q3, notwithstanding increase in COVID-nineteen cases and restrictions across numerous states in the U. S. With this, I hand over to Rajesh to provide insight into LSI and Contact Research and Development Services business.
Thank you, Pramod. Very good evening to all of you. I would like to start by highlighting that despite the challenging market scenario due to COVID-nineteen pandemic, Life Science and Gradient Business segment reported EBITDA of INR INR 155 crores, which is higher on year on year as well as quarter on quarter basis. Our Q3 FY 2020 1 EBITDA margin is at 17.4%, which is up 4.83 basis points year on year. I am pleased to inform that we continue to have normal operations at all our facilities without any disruption.
In our Specialty Chemicals business, Pharmaceutical segment witnessed significant improvement in demand, though agrochemical segment demand was lower due to inventory corrections by companies. Our Nutrition and Health Solutions business has shown strong revenue growth of 27% year on year during the quarter. Business performance was supported by price recovery in vitamin B3 and other products from low levels of FY 2020. Vitamin B3 business demand picked up in Q3 after the destocking seen in Q2. We continue to see the strong demand going forward.
Our Life Science Chemical business delivered revenue growth of 14% year on year, led by strong demand of all the products, including acetic anhydride in domestic and export markets, driven by higher demand in Pharma and Consumer segment. We continue to focus on optimizing product portfolio to improve margins in Life Science Chemical Business. Overall, LSI segment revenue was at INR 8.93 crore as compared to INR 7.97 crores in Q3 FY 2020. As informed in the previous quarter, we expect LSI business to achieve close to double digit growth in revenue and significant growth in EBITDA and higher margins and a very healthy cash generation in FY 2021. Our contract research and development services business continued to deliver healthy performance during Q3, driven by strong demand from biotech companies, from integrated services and functional chemistry.
The business has healthy pipeline of new contracts and customer acquisitions. Q3 FY 2021 revenue increased by 17% year on year to INR 79 crores. EBITDA stood at INR 29 crores, up 30% year on year. As we informed in the previous quarter, the business has committed investment to double the chemistry research capacity. Project is progressing very well, and we expect the facility to be ready by end of Q1 FY 'twenty two.
With this, I'll now hand over to Syed to discuss the proprietary novel drug pipeline.
Thank you, Rajesh. In our innovative therapeutics business, we are working on more than 4 programs to deliver precision medicines focused on both 1st in class and validated but intractable targets to address unmet medical needs in the area of oncology and autoimmune disorders. Our 1st in class lead programs, LST1, HDAC6 dual inhibitor and PAD4 inhibitor, which are the most advanced in the class today, address multibillion dollar segments in hematological malignancies, solid tumors and autoimmune disorders such as rheumatoid arthritis. These 2 lead programs are undergoing investigational new drug studies, IND studies, with a goal to file INDs and initiate 1st in human clinical studies in second half of FY twenty twenty two. We presented efficacy and biomarker data at the Annual Meeting of American Society of Hematology in December 2020 for the novel dual LST1 SPAK6 inhibitor for the treatment of hematological cancers.
The lead molecule, JBI-eight zero two, showed a stronger and more potent anti tumor effect than the standalone inhibitors in multiple AML preclinical models. We are also excited about the potential biomarkers we have identified specifically for the DAL inhibitor, which will be highly valuable in identifying sensitive patient populations and the evaluation of treatment response in clinic. For
our 1st in class
PADD IV program, we recently announced a research collaboration with the Vistar Institute in Philadelphia to evaluate our inhibitors in reducing severity of COVID-nineteen pathologies due to cytokine storm. As we've tried to transform JUVELINE Therapeutics into a clinical stage company, we are fortunate to have Doctor. Robert Glassman join us as independent non executive board member recently. Doctor. Glassman has worked as Senior Investment Banker at Merrill Lynch and as Vice Chairman, Healthcare Group at Credit Suisse.
Doctor. Glassman is now with OrbiMed Advisors as public equity venture partner. Doctor. Glassman is a Board certified hematologist oncologist, who remains on the faculty as a clinical assistant professor of medicine at Weill Cornell in New York. With this, I now hand over to Arun Sharma for discussing financials.
Thank you, sir, for taking A very good evening and thank everyone for taking our time and joining us on our quarterly earnings conference call. I would like to highlight the company's financial performance during the quarter ended 31, December 2020. Revenue from operations during the quarter was at INR 2,665 crores as compared with INR 2,315 crores in Q3 last year. Pharma revenue was at INR 1692 crores versus INR 1450 crores through Q3 2020. While LSI reported revenue of INR 8.92 crores as compared with INR 7.97 crores during Q3 2020.
Contract Research and Development Services revenue was higher by 17% year on year INR.79 crores. Reported EBITDA during the quarter was INR 6.53 crores as compared with INR513 crores in Q3 FY 2020, with the margin at 24.5% versus 22.2% in Q3 FY 2020. For my EBITDA margin grew 46% quarter on quarter and net SA EBITDA grew 12% quarter on quarter. Depreciation and amortized expense during the quarter was at INR 1.27 crores versus INR 111 crores in Q3 2020. Recurrence cost during the quarter was at INR 59 crores versus INR 72 crores in Q3 2020, a reduction of 17% year on year.
Average blended interest rate for Q3 FY 2021 was at 5.63 percent, comprising of INR loans at 7.27% and ULT loans at 5.07%. Reported debt during the quarter was at INR 310 crores, up by 53% year on year and 39% quarter on quarter. EPS for our Q3 FY 2021 is INR 19.25 per share versus INR 12.8 per share in Q3 FY 2020. The company's net debt on a constant currency basis is stood at INR 2,686 crores, a reduction of INR 5.70 crores as compared to March 31, 2020. We continue to have a strong cash position and expect to generate healthy operating cash flow during the year to further reduce our net debt levels.
As of Q3 FY 2021, the estimated net debt of Juglansarlomoma is rupees INR 2,044 crores and shipment in the area is at INR 5.29 crores. Further, we wish to inform you that Jullian Pharma Limited held on January 29, 2021, redeemed the principal amount of $100,000,000 on a pro rata basis out of 300,000,000 senior notes due 2021. We have also announced the redemption of RMB 100,000,000 on March 5, 2021, whereupon the notes will be paid in full and no amount will be outstanding under the notes whatsoever. Out of the total redemption of $200,000,000 between January March 2021, we have refinanced $150,000,000 and remaining $50,000,000 is being paid out of company's cash balance. Capital expenditure excluding R and D cash mentioned was at INR 104 crores for Q3 FY 2021 and INR 285 crores for 9 months FY 2021.
For FY 2021, we plan to spend around INR 400 crores in half. Before I conclude, I would like to provide an update on our reorganization proposal. We received the final NCIC order, approving the composite scheme of arrangements. With SKF 1st February 2021, LSI Business demerges from Life Science, which is now renamed as Jubilant Pharma Limited. And LSI Business merges into Jubilant in Gray Area Limited.
We have already announced 5th February 2021 as we record this for shareholders who will be entitled for allotment of 1 equity share of Guggenheim Limited for every one share for 1 equity share held in dividend power mover, first while dividend has benefited. With this, I conclude my opening remarks, and we will now be happy to address any questions that you may have. Thank you so much.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of takishjunjanwala from Rave Enterprise. Please go ahead.
Sir, congratulations on a very high performance. I'd like to ask you why is your data pack so high What's the rate of tax here maximum 25% with 20% in America? I don't understand this question. Hello?
Yes. We are not able to hear you fully.
Mr. Bhatia, what is the rate of tax applicable for that? I thought it should be more lower.
No. We are in the 32% bracket. So, Abhishek, the deferred tax, it is the rate of applicable tax is this.
No, no.
So, other scheme in India, the rate of tax is more than 25.14%.
This is Anush Sharma. Last year, we had a lower rate of tax because of May beginning adopted 4, but this year it's a normal tax, so it is little higher this year, as we look into it.
Tax in India is 25 percent. The corporate rate of tax in India is 25%.
But for us, we have not opted for 25% because We have a carry forward deferred tax available with us. So that is why we don't want to opt at this stage.
How much is the actual outflow?
Arun, what is the actual outflow? The real outflow will be around 24%.
And how much is the double tax? How much is the deferred tax which you are carrying forward now after this quarter?
Just exact figures, we can get back to you maybe after this call.
Okay. And even congrats on the fine performance. And how is the specialty business that STING business and Lidoo Pharma doing in the current quarter?
So Satish, Pramod here. On specialty business in radiopharma in U. S, as you are aware that the number of cases continue to increase after having grown down in Q2. So the business still continues to update at about close to 90% of the pre COVID levels, plus some additional impact in
Because the 90%, how much was it in the 3rd quarter?
In the 3rd quarter also, it's about 90% of the pre COVID levels, plus there is some additional impact on one specific product DTPA, which is used for the lung perfusion imaging, where patients have to breathe in and breathe out. So that product is impacted a bit more.
So you expect recovery once the COVID is recovered, is there any impact?
Yes. So when the COVID recovery happens and hospitals starts giving priority to the diagnostic procedures also, then we expect vigilance to come back tomorrow.
We'll explain. Rakesh is with the vaccinations. We hope that in next 3 to 4 months, 3 months' time, the COVID should come down, hospitalization rates would come down if the vaccination rate increases in U. S.
Right. And what the CDMO business is now at full capacity or there is still scope increases?
As of now, because of this extra demand of the vaccines, the plant is running at full capacity.
Right. Then you are you are debottlenecking an increase in the capacity?
So we had done those initiatives, as I mentioned in the call, by running all the lines on 20 fourseven and installing additional lines, by which we had we had debottleneck capacity more than 30%. So that's coming very useful and handy as of now, and it's running on full load.
And when do you expect the listing of the LSI business?
I think by 19th March, 2018, 2019 March.
It will be a strategy within this financial?
Yes, yes, sure.
And from next quarter, we will be giving different results. Both the companies will call differently?
That's right. Yes.
And you'll retain the same Board of Directors in both the companies?
No, they will have a there is changes in the directorship.
We'll keep you informed.
Thank you, sir, and congrats on a very fine performance.
Thank you, Rakesh. Thank you. All the best.
Thank you.
The next question is from the line of Alankar Karoudi from Macquarie. Please go ahead.
Hi, sir. Congrats on completion of the demerger and a strong performance. So firstly, can you give some broad indication as far as the revenue contribution from these 3 COVID-nineteen products or other 2 COVID-nineteen products and the vaccine is concerned? And any color on the margins of this portfolio?
So as we mentioned that we increased capacity by about 30% and as of now the capacity running on full load, it will not be appropriate to talk about the product specific revenue because of confidentiality with the customers. But that additional capacity is leading to the good growth in the CDMO business segment.
And any comment on the margin profile, sir?
Yes. So the margins are also higher. We had mentioned earlier that this vaccine business is at a higher margin than the normal margin. Plus the contracts have been burdened with some additional the impact in the revenue with the capacity charge, etcetera. So the margins are better.
Understood. My second question, sir, is if you look at our CapEx, it's actually lower than trending lower than what we had guided earlier. You are at INR 500 crores of guidance earlier for this fiscal. Now you I think you said INR 400 crores in your opening remarks. And this is significantly lower than, say, what it was a couple of years back, INR 700 crores.
So does this mean and be operating at full utilization, full capacities at for our CDMO facility, better demand for generics as well as API, should we expect some increase or some meaningful increase in our CapEx intensity over the next couple of years?
You are right, you are right on this. But what we did, we conserved on the CapEx is because of the pandemic, uncertainty of the businesses. Now going forward, we are taking steps to increase capacity in our CMO business and also in other business.
Sir, any ballpark number you can share for FY 2022? What is the CapEx you're looking at?
I think by March end, we'll be able to share some exact figures. We are continuously evaluating it now.
Fair enough. And so my final question is on NAA, what is the latest there as far as the pricing after the new competitor has come in as well as the market share. So any color on that? And how do you see the molecule progressing for us going forward?
I presume you're asking for MA. Yes. So we had covered this in the last call and we mentioned that the price drop had not been much. There had been marginal price drop. And the market share also what we gave is much lower than our earlier expectations.
So that is not off material.
Okay. And you expect more or less that to continue going forward?
Yes, because this business runs on the multi year contracts, so those contracts are already in place.
Fair enough, sir. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Rahul from Abaqis. Please go ahead.
Hi, sir. Congratulations for the good set of numbers. Pramod, sir, this question is specifically just to understand ex of the COVID portfolio, what will be the key trigger for our EBITDA to move from the current rate of INR 2,000 crores to INR 2,500 or possibly INR 3,000 crores?
Can you please repeat the question? I couldn't follow it.
Sir, ex of our COVID portfolio, if we keep our COVID portfolio aside, what will be the key trigger of the catalyst which will help to move our EBITDA, pharma EBITDA of INR 2,000 crores to INR 2,500 crores?
So without going specifics into the numbers, it's not only CMO, even our other businesses have also done very well, which is including API and the generic business. In both the businesses, we have seen higher volume growth and we have seen the better pricing. And in CMO business, even other than the COVID products, the other product also continues to see higher demand. So it's not that after the COVID product, again, the capacity utilization will come down. We expect the good demand to prevail and the plant to run on the capacities.
And with regard to Specialty Pharma Business, as earlier mentioned by Mr. Garcia, when this vaccination in the U. S. Picks up and the COVID cases continues to go down, we expect all these diagnostic procedures to come back to the normal to the pre COVID level, both in radiopharma as well as into allergy.
Right, right. Fair point.
And COVID portfolio also is not going to go away. The vaccines are required every will be required every year. So it will only is going to go up going forward. Sure.
So our contracts will be like annual contracts for these vaccines or how will it work?
As you know, there has been lot of uncertainties related to COVID when these contracts were done. So they have been done as of now for 12 months to 2 years. But COVID situation will continue to evolve. If there is going to be demand of the extra shots every 1 year, every 2 years and the demand will be there in the market, then we are confident that these contracts will be rolled over.
Okay. Okay. And another quick question. In the presentation, we have given us INR4 crores revenue from a new product, from a novel product. Can you just throw some light there for what is the potential of the product?
What is the total market size?
Is
it novel product, yes, novel product portfolio. So, it
will be novel drive. Those are not revenues. Those are just cost adjustments. Okay. There is no revenue there now.
Okay. So from our Jubilant Therapeutics, there are no molecules that are commercialized as of yet?
No.
Okay. Okay. Fair point, sir. That's it for my answer. I'll come back in the queue.
Thank you so much, sir.
Thank you. The next question is from the line of Rakesh Jhunjhunwala from Rail Enterprises. Please go ahead.
I have two questions. How significant is the launch of the resale in America? And are we the other ag pharma products for sale? Because Europe must be a large market.
Sir, unlike U. S, Europe market is not fully developed yet. But we you are right, that is a high potential. And that's why from the last 2 years, we have been making the efforts to get the RubikFill registered over there in the Europe. Now that has been done.
And we are focusing on developing the Europe market also as strongly as U. S.
And what is the net debt of the pharma business on January 31?
Sir, we have declared that debt as of December 2044, but I think it should be in the same range as of January end. But the audit is going on and I think in the March quarter we will be able to formally tell you what's the debt. But it should be the same deal.
December 31st?
Around INR 3,000 crores.
Pharma business and of the lifetime?
Life Science, as of March is 5.29, and we expect as of March end because LSI business is doing well to generate cash flows and we should end at around 5.00%.
Okay. So to an upfront process, the debt as of December, the net debt? Yes.
Net debt, yes.
Thank you, sir.
Thank you.
One more question, how can be the growth this contract research business? Hello?
Yes.
No, we did 80 crores turnover in that business quarter, no?
Yes, 80 crores, yes, 79
crores. So, in So, isn't the year continuously?
Yes. So, contact research growth is continuing and our current capacity utilization is more than 90%, 92%. And that's why we have also we are also planning to add capacity because we have currently more business than what we can deliver. So our new capacity, which is coming up and running sometime in Q1 next year, will give us opportunity to take more business. But just on the same
Sir, how big is the expansion?
So on chemistry side, we are increasing to almost 100%, so double the capacity today.
So then it can be a big business, 80 crores to double the capacity. That can be very good and margins are very good.
Yes.
Is your business similar to the 5th anniversary?
This business is the integrated drug discovery business. So this is definitely much different than the normal contract research business. So this is valuable business and most of the contract goes for longer term.
This can be a significant contributor. Thank you.
That's right. Thank you.
Thank you. The next question is from the line of Mr. Barkha from Motilal Oswal. Please go ahead.
Hello, sir. Thanks for the opportunity. And regarding this INR 500 crores worth orders, which you mentioned in the CMO business, I just wanted to confirm how much of this has already been realized in this quarter?
Since the time we entered into the contracts, up to the last quarter, we have realized about half of that. And So, I
think it's almost 50,000,000 question.
Yes. And I said that we still see upward potential into those estimates and we'll continue to update you as we get a better visibility.
Okay. Thank you.
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Thank you, sir. My questions have been mostly answered. Just one question on the proprietary novel drugs business. Now there are many companies which do such drug development and that ends up being a very high gestation period as well as highly cash negative sort of a business. So what's the thinking around it?
What kind of cash burn do we envisage in the coming years in this business? And do we have any immediate triggers to realize the potential of any of these things that we are
developing? Yes. This is Hari Bhardia. And to your question, our business model is this is not to take it to commercial. So that is why when Saiyad explained that we are at an early stage of discovery and we are presently taking it to Phase 1 that is to the clinic.
And normally, we start looking at opportunities of out licensing it end of Phase 1 or beginning of Phase 2. That's the stage we look at. And as you also know that we also have the opportunity when we have a portfolio of products to also raise funds at the jubilant therapeutic level as biotechs have done at on early stage compounds. But normally the late stage work, it will be licensed to mostly large pharmaceutical companies.
Understood. So we would not have any significant cash burn in this business because we will try to license it out either side.
You are not going to the market. Yes. We are not going to commercialize this product. That is a long term it takes much more time and that's not our objective. What we are good at is early stage science and translating it to the clinic stage.
And that's where major value creation happens and we would look at out licensing it. And the idea is to build a portfolio. There will be successes and there will be failures.
Understood, sir. And on the generic side, we have seen a fairly strong sort of traction in this quarter as well as the 9 ms. So if you can give some commentary, is there some one offs in this particular growth?
It's Kumar here. So not a specific one off except that we had launched the Ramda series. So that becomes added product in the portfolio, which brought the revenue from India and also the other licensed countries that had some impact. But even other than that, our normal other products also had a higher demand during the quarter. And some of them also had quite good margins.
So and we see that the demand on those products continue to remain stable.
Understood.
Sir, our Life Sciences Chemicals business has seen a lot of volatility in the margin profile. What should we be given where the product mix stands right now and the opportunities that lay ahead of us? Where should we see the sort of a cross cycle steady state EBITDA margin number for that particular business?
So if you can see the Life Science and Gradient performance for large P4 quarters, it's more or less static or growing. Now the volatility as you see in Life Science and Gradient business comes mostly from the acetic acid prices and some of the commodity prices. But more or less now all these commodities are at a very high level. So you will see that going forward, this volatility will be reduced and our performance will be more or less
consistent. And instead of looking at margin in the Life Science business, you should look at the overall EBITDA growing. EBITDA value, yes. EBITDA value, because that's very important because of Life Science Engagement, this Life Science Chemical business within the business, where margin keeps on varying, but the total EBITDA growth is there.
Okay. So in a different way, what kind of incremental ROICs that or the IRRs that you are looking at when you are spending cash on this particular business to expand it?
So our ROI has increased significantly from last year and this is really improving because if you see we have not spent a lot of money in last 1 year and our EBITDA has been growing. So our ROI is standing in a very good level as it is close to around 20%.
And that should be the steady state sort of a number like 20% ROIC on this particular business?
I would say more or less same. Of course, it will depend on the future investment on the growth, but I think it will be on the same range of 18% to 20% or it will be better depending on the product portfolio and business prices.
Understood, sir. Thanks a lot and all the best for the coming quarters.
Thank you. The next question is from the line of Pratik Uttari from Unique AMC. Please go ahead.
So thank you for the opportunity and congratulations on good set of numbers despite subdued contributions from Specialty Pharma. A couple of questions. First, if you can bifurcate the depreciation numbers between LSI and Pharma?
And 4% goes to the GBS business. That is the data of the acquisition among these businesses. Okay. Fair enough, sir.
And on the Gible and Therapeutics side, what would be our R and D spend annually? Much do you spend
differently? So on the therapeutic
side, in FY 2021, we as we have given the number, it's in the 9 $1,000,000 range. And now that the programs are going forward and moving to clinic, assuming success in some of these milestones, the expenses are going to expected to be higher than FY 2021.
Okay. Sure. Then my last question is, given the asset base that's here, can you just briefly talk about what kind of potential do we what kind of revenue potential that we have? So on the drug discovery side, we did mention that we are doubling the capacity. On the CDMO pharma side, we talked about increasing capacity by 30%, but it's completely utilized now.
Specialty Pharma, I believe, will come back in a few quarters down the line. So given the asset base before the start term, is there a difference from next year, what kind of growth can we see? What kind of potential
do we have? See, we are as we said, we are looking to expanding our CMO business both at Montreal and in Spokane, the two sites. In both the sites, we are finalizing our plans to expand that CMO business. So that is a very good traction in future. And at the same time, we are also looking at debottlenecking some of the capacities at the different plants.
We have expanded the Roorkee Doje formulation plant a year ago. That has a capacity to fill up the additional demand. And as of now, we are also expanding the capacity doing the debottlenecking into the Maryland plant, into Salisbury plant for the Doge formulation. And that will start generating additional volumes from the mid of next year, next financial year.
Okay. And on the LSI side?
Sorry, can I come back with the
question, please? On the LSI side, any capacity debottlenecking or expenses?
Yes. So some of the product debottlenecking is happening. So that will give us additional revenue from the existing assets, but also we have expenses planned for future.
Okay. Which we'll be declaring in the next quarter call, right? Yes, please.
Sure. Thank you, sir, and all the rest.
Thank you.
Thank The next question is from the line of Vishal Manchanda from Nirmal Bank. Please go ahead.
Thanks for the opportunity.
I joined the call a bit late. So I'm not sure whether you have commented on RubiFin. So wanted to understand if there is an update there in terms of market share, how are we progressing?
So Rubip's been mentioned that we that after we got the approval in Europe, we have launched our 1st commercial site in the Europe in last quarter. And we will be investing our time and effort to develop the Europe market because there is quite a lot of potential. So we'll be doing that. As regard to Rubicel into U. S, we continue to do installations at the new site.
But yes, not as per our earlier estimations because due to COVID, there are the restrictions in the hospitals and the imaging centers or the travel related issue and doing these additional installations. Though we continue to generate very high number of inquiries and the customers' interest is there, we have quite a good funnel where the launches or the installation should happen as soon as the COVID situation improves.
Could you give a sense on what will
be our market share now, say low teens or some color there?
So market share continues to increase. And what I can share with you is that in spite of the COVID issues, we will be doing the additional installations more or less same as we did last year. So what I was hinting earlier is that in the past, we have been growing 2 to 3 times. So instead of 2 to 3 times, it's only growing one time. So that is the impact of COVID in this year.
So we continue to increase our market share rapidly.
But for now, so as I understand, there were long contracts, long duration contracts that the competitor has. So this is no longer a major hurdle for you to ramp up the 2 decent market share?
It depends from customer to customer, but quite a lot of those contracts have expired. And that's how I mentioned that we have a very healthy funnel of the additional inquiries or the new business development opportunities. Some customers also earlier had the hesitation because of the patent with the litigation which was going on into the ITC court. On which the decision has already come in very much favorable to UBLED. And though the backhoe has made an appeal, but we have a very strong case and the customers also understand that.
So that issue is more or less behind us.
And just on Examinator in the other radiopharma product you had launched sometime back, maybe close to when you launched Rubipen. Is there is that a materially important product for you now or that hasn't transacted?
For that product also, we were growing the market share. But as of now during this COVID when as such the demand is low, then the customers also do not have that much of the incentive to make a switch. So it's not of that much material, but the product is performing as per our expectation.
Okay.
And finally on the allergy immunotherapy side, is that kind of market saturated now and difficult to build growth on the current base?
No, the market is not at all saturated. In fact, that's the market which still has huge potential, and that's what we are exploring, we are looking at. Within U. S, there's a huge potential to share with you like the venom where we are the sole supplier in the market. So the number of the venom steams what you have and the number of patients who are on this the venom immunotherapy, the market potential is almost 4 times of the current number of customer base we have.
Plus, it has huge potential outside U. S. So far in the past, we were limited with the capacity and we have done the investments. We have we had the other line which was available for which we had taken the U. S.
FDA approvals. And now those capacity issues have been resolved and we are in the process of developing the market internationally into many other geographies other than the U. S. And same way
even in I'm sorry, sir, go ahead.
Yes, even in non venom extracts also, there is quite a good potential for the growth within U. S, but also huge potential outside U. S, which we are addressing.
Okay. And then on CDMO side, how long will it take other book you have in hand on vaccines and other, can existing capacities help you serve that demand or you would need to implement new capacities before you can meet the demand?
We are not taking additional orders which we cannot serve. So that's why I said that plant is almost on capacity. In this business to put up a capacity and then do the validation, take the customer's approval and FDA approval takes a little time and the period could be somewhere around 3 years.
How much time?
3 years.
So, sir, the run rate that you have achieved in this quarter on the CDMO side, will that peak out at current levels? Or is there a scope for that to go up in the near term, maybe because of the mix on pricing or
Yes. So you are absolutely right and that's what I mentioned in the call that the vaccine contracts what we have done are at much higher margins than the other products what we had in the portfolio earlier. So as the market continues to remain short on the capacity and then our other contracts comes up for the renewal, we have opportunity to roll over them at a much higher margins. So the margins in this business have the potential to continue to improve. Okay.
And just one more on the LSI side on vitamin B3. B3. There has been an approval for your pharma grade vitamin B3. So has that pharma grade component ramped up in the vitamin B3 sales or it is entirely animal feed as of now?
So in vitamin, we have pharma grade, we are still working on. That should be ready sometime in next 4 to 6 months. But yes, we have got the new business from good business from food segment. We have got good business from cosmetic segments. So our expanding the volume of vitamin to other segment other than feed has been having very good traction, which is going to continue in future also.
And in addition to that, now we are working to introduce our vitamins into pharma business in next 4 to 6 months' time.
Okay. Currently, the feed business would be, say, 80%, 90% of the revenues?
Yes, it should be close to 80% or little less than 80%.
Okay, sir. Thanks. And that's all from my side.
Thank you. The next question is from the line of Rahul from Abaqis. Please go ahead. Mr. Rahul from Abaqis, you may please go ahead with your question.
Yes. Hi, sir. Sir, on the LSI segment, for the past 10 years, we've been moving our advertising moving around INR 400 crores to INR 600 crores. It's been oscillating in that range. So, sir, just So, sir, just trying to understand what would be the key catalyst to move from like INR 600 crores to INR 1,000 crores kind of EBITDA over the next 2, 3 years?
So, if you are talking about last 10 years, then probably we have increased from a level of, let's say INR 300 crores to today. Today in the range of about 5.50 crores or so. So it is not stable, it is growing. And the major growth has come from our new product, which we are now continuing further and the utilization of capacity. So that's why the if you see last 10 years, there has been growth in EBITDA and we will now continue to see the growth going forward as well.
Sure. So what will be
the key catalyst for the
like capacity increases or number of products coming up or what will be the key catalyst there? So what for last 2, 3 years, we have been improving our product mix. So that is why you see that EBITDA value has been growing. We have been focusing on improving our product mix to improve EBITDA. Now going forward, some of the debottlenecking, which is on base, will give us the additional EBITDA and also the expansion of capacity of those products where the demand is growing, that will also give us additional EBITDA.
Sure. So far in terms of percentage capacity, what is the total percentage capacity going to increase over like 1, 2 years? That's what as Mr. Bhatia had mentioned, we are still evaluating on our expansion plan and sometime by end of March probably we'll be ready to share something in specific things. Sure, sure.
Fair point, sir. Thank you.
Thank you. The next question is from the line of Alankar Garude from Macquarie. Please go ahead.
Sir, can you update us on the progress of the ongoing improvements at TIRED in terms of increasing the networks, winning more contracts, adding headcount or anything on the cost efficiency front. But largely on the growth front, if you could highlight on that?
On the growth side, the expansions during the time of the COVID, as Mr. Barkay mentioned earlier, we had curtailed our CapEx. So we wanted to wait and see how this KOLI situation evolves. As of now, that business remains impacted due to COVID and I mentioned we're operating at about 90% of the pre COVID level. But now since the vaccines are getting rolled out and we are seeing that for the remainder quarter or 2, the COVID should settle down.
Now we are again in the process of evaluating those expansions, which we have kind of put on goal and we plan to roll them out.
And in terms of winning new contracts or regaining some of the lost contracts which we hired say 3, 4 years back, what is the progress on that? Maybe COVID you might have hit a speed bump because of COVID. But maybe once things normalize, are we on track on winning those contracts and executing them?
We have a lot of ongoing discussions with the customers. But especially during the time of the COVID, the customers are also not interested to make a switch. It takes little bit efforts for them to make changes when they switch from one source to other source. But we have a healthy funnel over there, but the customers are also waiting for this COVID situation to get settled down. So in terms of the top line, I'll say that we are more or less stable as of now.
Understood, sir. And my other question was on the generics business. So we have 36 pending ANDAs and I assume all of these are from Roorkee. And on the other hand, we are also doing a capacity expansion for Salisbury. So have we side transferred any of these ANDAs from Roorkee to Salisbury, at least the important ones?
We are evaluating that option. You are very right in doing that assumption. And that's what we are also evaluating. But as you may know that if the NDA is not approved and in between it's due to the site transfer, then it requires additional investment for the BAB studies, etcetera. So that strategy will depend upon product to product.
Some of the products which requires the immediate priority will be a good candidate for that. But having said that, we don't expect the routine warning letter situation to last so long. As we mentioned that we have done all the remediation of us and we are just waiting for U. S. FDA inspection to happen.
As of now, those inspectors are not traveling because of COVID. Sometime soon, they will either start traveling or they will adopt the alternate mechanisms for the inspections they're doing it through documents or virtual. So we expect the ZERUKI site as such to go to the boarding letter soon. And then that situation will not be there, But we may still be doing that for some of the products to have 2 sites instead of having only one site.
So there is an economic advantage in producing in each of the sites, then we decide. It's basically because of economic advantage.
Understood, sir. And in terms of new filings, is Salisbury site, are you looking to do incremental findings more from Salisbury more from a longer term perspective, any thoughts on that or Roorkee will continue to be the most important facility for us going forward?
See, we decide on the basis of, as I said, economic advantage. There is a best economic advantage, looking at the transportation cost, looking at the conversion cost, etcetera. We decide on the basis of that. We don't decide on the basis that we'll not file from Roorkee, we will file from Perista or we file from Roorkee. So it is not like this.
We decide on the what is the best economics for that trial and which gives the best value.
Okay, sir. And one final question on the API business, we continue to see a strong order book. Any thoughts, sir, as far as any expansion for API specifically?
In API plant, as such, we have a lot of scope for doing the debottlenecking and increasing the capacity. We have already evaluated various schemes through which we are confident that within the same plant, we can debottleneck it to more than 35%. Plus, other than that, we are also evaluating option for doing expansions of the additional plant either over there or at some other site and that's under evaluation currently.
And this 35% sir is from current levels and when do you expect that to be completed?
That we have already made the plan depending upon the various product streams and their demand what we see in the market and we hope to implement that in another 1 or 2 years time frame.
Understood, sir. That's one from my side. Thanks and all the best.
Thank you.
Thank you. Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Thank you, everybody, for joining this call. In case you have any further clarifications, Eiman is available for you as a point of contact. She'll be happy to answer all the questions
going forward. Thank you.