Hello, and good morning. Welcome to Aurobindo Pharma Quarter Two FY 2023 Earnings Call. Please note that all participants line will be in listen-only mode, and there will be an opportunity for you to ask questions after the opening remarks. Please note that this conference is being recorded. I now hand the conference over to Deepti Thakur for the opening remarks. Thank you, and over to you.
Thank you, Aditya. Good morning, and a warm welcome to our Second Quarter FY 2023 Earnings Call. I'm Deepti Thakur from the investor relations team. I would like to introduce my senior management team today on the call with us, represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines and Peptide businesses. Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialties Limited. Mr. Sanjeev Dani, CEO and Head Formulations, Aurobindo Pharma Limited. Mr. S. Subramanian, CFO, and Mr. Swami Iyer, CEO of Aurobindo Pharma USA. We will begin the call with summary highlights from the management, followed by an interactive Q&A session. Please note that some of the matters we will discuss today are forward-looking, including and without limitations, statements relating to the implementation of strategic actions and other affirmations on our future business development and commercial performance.
While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors may cause actual developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligations to publicly revise any forward-looking statements to reflect future events or circumstances. With that, I will hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir.
Good morning, everyone. We are here to discuss the results for the second quarter of the fiscal year FY 2023 declared by the company. For Q2 FY 2023, the company registered a revenue of INR 5,739 crores, a decrease of 3.4% over last year. The EBITDA before ForEx and other income was INR 836.9 crores. EBITDA margin for the quarter was 14.6%. The net profit decrease for the quarter stood at INR 409.4 crores. In terms of the business breakdown, the formulation business in Q2 FY 2023 witnessed a sales of INR 4,770 crores and contributed around 83.1% of the total revenue.
API business contributed around 16.9% and clocked a revenue of INR 969.4 crores for the year. For the quarter, the revenue from U.S. market declined by 11% year-over-year to INR 2,637.6 crores. We have received final approval for nine ANDAs and launched six products in the quarter under review. We have filed 14 ANDAs, including two injectables during the quarter. Revenue for Aurobindo Pharma USA, the company making the oral products in the U.S., has decreased by 19% year-over-year for the quarter in U.S. dollar terms. Revenue for Eugia US, formerly known as AuroMedics, the injectable business, decreased by 27.6% year-over-year to $49 million for the quarter.
The company as on 30 September 2022 has filed 756 ANDAs on a cumulative basis of which 527 has a final approval and 36 having a tentative approval, including eight ANDAs which are tentatively approved under PEPFAR, and the balance 193 ANDAs under review. For the quarter, the European formulation clocked INR 1,516.2 crore, a decrease of 8.8% year-on-year, mainly due to euro currency depreciation. On base currency business, the revenue was EUR 189 million against EUR 191 million on year-on-year basis. For the quarter, the growth markets witnessed a growth of 17% year-on-year to INR 431.9 crore. The quarter performance was led by strong growth in Canada.
This includes domestic Indian sales of INR 65 crores. For the quarter, ARV business stood at INR 164.3 crores, a growth of 13.3% year-on-year. R&D expenditures are INR 276 crores during the quarter, which is 4.8% of the revenue. Net organic CapEx during the quarter is around $82 million. The average ForEx rate was 79.6123 rupees in September 2022 and 76.9795 rupees in June 2022. Net cash including investment at the end of September 2022 was $337 million. The average finance cost is 1.9%, mainly due to us availing multiple currency loans. The business generated a free cash flow before CapEx and other items of $82 million during this quarter.
This was spent towards CapEx, including $31 million for PLI Pen G, Penicillin G project. With this so far, the investment in PLI Penicillin G project around $63 million against the budget of $235 million. This is all from our end, and we are very happy to take your questions now. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may raise your hand from the Participants tab on your screen. Participants are requested to use headphone or earphone while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from Damayanti.
Hi, good morning. I hope I'm audible.
Yes.
Okay. Thank you. Thank you for the opportunity. Sir, my first question is on the U.S. business. What has happened? Like, this quarter was obviously much lower than what we have seen in the previous quarter. Especially if you can comment on the Eugia performance, and how do we see sales moving in coming quarters? My second question will be, do you maintain your guidance for global generic injectable sales, what you have provided earlier, $650 million-$700 million by FY 2024?
Swami?
I think, the first we want to take injectables?
No. First please comment on the U.S., like what has happened and how do we see?
Yeah.
Things moving there.
Okay. Thank you, Damayanti, for that question. Now there are two components to this. Obviously, the oral solids and the injectables. I'll talk about the oral solids. We have seen a lot of competition, and then this led to price erosion during the quarter and shelf stock adjustment. We also saw some drop in volume or demand for certain key products, which could be seasonal because we don't think this is long term. This was the main reason for the shortfall in the revenue for the quarter.
Okay. That's on the oral solid portfolio specific or same is true for injectable business also?
I think I'll comment on this, Damayanti. I think you asked two questions. One is on quarter performance for injectables, like, let me put it as specialties, overall specialty business, and also the future guidance. Let me address both of the things. Number one, yes, quarter two is a bad quarter. In fact, we have seen two, three effects. Number one, we have seen volume drop to the tune of around 20%. Also we have seen price erosion. In essence, it's single digits. We also had to take some SSA adjustments, shelf stock adjustments on vasopressin from quarter one to quarter two. That has actually decreased the revenue. In general, we don't see this as a trend going forward, but this is one-off quarter. That's what we feel.
It should come back to the normal run rate. Number two, going forward, our future guidance. I think going by the current events, what's happening, we are still observing what's going on in terms of, because the overall, if you see the elective surgeries, everything, hospitals are full. What we are seeing is there is a significant volume drop, not only for us in quarter one and quarter two, and it is we have seen that for multiple competitors. Probably it has to do with some inventory adjustment, and it should come back. At our guidance, based on current events, we feel it might get delayed by a year unless something substantial and some big upside happens. Going by the current events, we feel like it might go into a bit later.
Okay, sir. I think that's very helpful. My last question is, if you can update on the Vizag Plant in terms of where the plant is currently standing, whether it's tracked its right trajectory. Yeah.
No. In fact, like, the construction is complete and we are doing the line qualifications. As I mentioned in the last quarter, we will be taking exhibit batches in this year, and we will start filing in H1 of FY 2024. We still are confident that by end of FY 2024, it should start generating some revenues. We will be filing it for all markets, US, Europe and emerging markets from this plant. The plant construction is complete and lines are under qualification right now.
Okay, doctor. Thank you very much for your answers.
Thank you.
Thank you. Next question is from Alankar.
Hi. Good morning, everyone. My first question is on the recent promoter development. Given that Mr. Sarath has been relieved from his executive responsibilities, can you please explain what were his exact roles and responsibilities in the first place, and who will be taking charge of his responsibilities?
Mr. Sarath has been looking after the IT, engineering purchases as well as the logistics. That is being allocated between the whole-time directors and that will be continued.
sir, any particular reason for retaining him as a director, sir, considering that, his ability to discharge those responsibilities as well, would be limited now?
No, he's not going to be an executive director, and so he'll be a non-executive director on the board as a promoter director only.
All right. Okay. Maybe one other question on this front, sir. Any other member from the promoter family who's involved in some of the non-Aurobindo businesses wherein Mr. Sarath was involved? Because we have been getting those questions from investors. Any clarity on this would be really helpful, sir.
See, first of all, let's put it like that, the matter is under sub judice. We don't want to talk about this matter. I, to the best of our knowledge, no other directors are involved in this, in that business.
All right, sir. My second question is, given that, shareholder wealth creation has been an issue for the last, five, six years now, how are we thinking about this as well as capital allocation? Now considering that we have been generating, good cash over the last few years, is the board, incrementally open to buybacks?
Let me put it like that, as of that we are having around $337 million net cash. If you really see the we have embarked on couple of projects which are very, very important from both from the company point of view as well as from the nation point of view, especially the Pen G project, which involves a capital outlay of INR 2,000 crores, right? Probably we are thinking of can we able to accelerate that, we are thinking. At this stage, probably unless that some clarity comes on that and then move forward, this issue relating to the capital allocation like this, like, buyback et cetera, will not be taken up.
Understood, Subbu, sir. That's all from my side. Thank you.
Probably maybe in another six months we'll get some better clarity on the Pen G project.
Understood, sir. That's all. Thank you.
Thank you. Next question is from Neha Manpuria.
Thanks for taking my question. Sir, when you say clarity on the Pen G project, I mean the INR 235 million is already earmarked for that, right? Do you mean additional CapEx on the Pen G project over and above what is earmarked?
There is, I mean, the INR 235 is the budget based on the current currency exchange rates, et cetera. What we mean is we have not taken any bank loan, et cetera, as on date. What we are saying is if you are able to accelerate et cetera, probably the INR 337 million net cash we are carrying in the books will come down. Right, going forward in the next two quarters, the major outflow will happen. Based on that outflow and what is our new cash generation, et cetera, will be known. We also committed if you're releasing some, we are going to put additional Biosimilar Plant around INR 300 million rupees-crores. Keeping in mind various things, it'll be deferred, and it'll be reviewed only in the May board meeting in my view.
Basically any additional, you know, buyback or dividend et cetera, will be considered only in the May board meeting.
I am not saying it will be considered. It will not be taken till that time.
All right. Understood. Thank you so much. Sir, on the U.S. business, given there was a fair bit of shelf stock adjustment in both the oral solid and injectable business, would it be possible to quantify that number for the entire US business? I know you can't mention product-specific, hence I'm asking. Just wanted to understand, you know, how much of the impact that we've seen quarter-on-quarter is actually one-off and what's the new base for the U.S. business.
First let me take the oral solids, Neha. After that, Yugandhar Puvvala they can talk about the injectable. The oral solid, the shelf stock adjustment has been pretty normal, the way it happens. Only thing is, since we had the price erosion, which is little higher, the shelf stock adjustment would be proportionately higher. Otherwise, I would think that there's no abnormal increase in shelf stock as far as the oral solids are concerned.
Yeah. I think it is the same, Neha. It is one-off product which we had to take the shelf stock adjustment. It is not a general phenomenon. I said it is driven by the three factors. One is the volume drop, and which we feel with the way things are going and all the business back to normal in all the hospitals, we feel volume should go up going forward. Two is related to the price decline, what we have seen in single digits. Third is one-off shelf stock adjustment, mainly I can say that it is on Vasopressin. Okay, so like we had to take that. That's why I said this quarter is bad, but we are very, very positive going forward.
Sorry to harp about this, but in that case, is it fair to assume that the $330 million that we have reported this quarter becomes, you know, the base for the U.S. business? You know, and I'm just trying to understand our ability to regain the volume that we have lost. Is this market share loss both in the oral solid and the injectable business or you know, how much of it is actually something that we can get back in the subsequent quarters?
Neha, like I just said, number one is we haven't lost market share. We have seen a significant volume drop across various categories. It has nothing to do with the market share loss. We haven't lost the market share. What we are seeing is a general lesser offtake in this quarter, both in oral solids as well as injectables, and which has nothing to do with the market share loss. That's why we feel it will come back.
Understood. Okay. My second question is on, you know, on the injectable. You mentioned that the specialty guidance has been delayed by a year. You know, in terms of, you know, a more one-year outlook, do you see, you know, injectable momentum? You know, now we've not even gone back to pre-COVID levels. You know, how confident are we of our pipeline coming through to go back to the $70 million run rate that we were doing, you know, pre-COVID?
Yeah. Neha, like, number one is from a perspective of future outlook, we have been like launching significant number of products, and I expect to launch roughly around 20 products in this financial year, and we are filing 20 products every year. So from a pipeline point of view, we have been very, very robust and substantial in terms of the filings. Number two is we are expecting some limited competition product approvals, hopefully starting from next week. I'm sure that that should give us a significant impact going forward. Third is, as you know, like we do have a settlement on Lenalidomide, and that will give us the impetus which is required for us to take go towards FY 2025 and our delayed guidance.
Because some of the upsides, what I thought would pan out, didn't pan out the way they were supposed to. That's why I am just saying that it might get delayed by a year.
Understood, sir. Thank you so much.
Thank you. Anyone who wishes to ask a question may raise your hand from the Participants tab on your screen. Next question is from Surya Patra. Yes, Mr. Surya, you can unmute yourself and ask the question.
Yeah. Okay. Thank you for this opportunity, sir. Sir, when you said about across-the-board volume decline in the U.S., is it a industry-wide phenomenon, sir?
So-
Yeah, go ahead, Swami. Go ahead.
Yeah. I'll say this from the oral solids side. What we have seen, we cater to certain portfolio product. Among the top 20 products we are seeing overall volume decline. I don't want to comment on industry, but we are talking about the product that we are dealing with. We are seeing some decline there.
Yeah. It is, Surya, it is similar because, as we are not, we don't want to comment on the overall industry, but what we are seeing is the category of products, what we are dealing with, have seen a decline in volumes. It is general. It has nothing to do with, again, it can be one-off here and there, some market share loss, but mainly driven by the, I think at this juncture, our guess is, it is a lower offtake and, probably related to inventory adjustments at the wholesalers and distributors. The way things are going, we feel the volumes will come back.
Okay. Sir, my second question is on the branded Oncology business. The trend-wise, what we are witnessing there is, there's a slight, I mean, gradual drag, although it is not very significant, from the time of acquisition. This portfolio, how should we think going ahead, whether our specialty product will be complementing this one or we will continue to see a kind of a drag till sometime when our specialty possibly will start contributing beyond, let's say, FY 2024 or so.
Yeah. Thank you. I'll take that question. We are talking about the Oncology brand product, correct?
Yes.
The Oncology brand product has been steady. That's what I would say, and it continues to be steady. We have been looking for business development opportunities outside, and we have been successful in tying up a few of them. We expect some of these products to start generating business sometime in late 2024, early 2025, I would say. For the fiscal year 2025, we expect some business to be generated in other products. We are very optimistic about the branded product. We have a few other things which is under development, so we feel very optimistic about it.
Okay. With regards to US injectable plant and its filing momentum, sir, can you update us what is the status there? Also if you can provide some update about your specialty product, let's say biosimilar, peptide, vaccines, like that.
Yeah. I think I'll just talk about U.S. plant, then I'll ask my colleague, Satakarni Makkapati, to talk on the biologics part. U.S. plant, as you know, like, we have completed the project and we already done exhibit batches, and we expect to start filing from quarter one of next financial year. We have a pipeline of roughly around 20 odd products which we have identified. We will start filing every quarter. Our target is we wanted to do three products. I think the first product we will start filing from May 2023, and after that it will keep going on. Okay, that's on the U.S. plant. Both Vizag Plant and U.S. plant the timelines will be similar in terms of filing products. Satakarni Makkapati, would you like to comment on biologics?
Thanks, Yugandhar Puvvala. Thanks for the question on the biosimilars. I would answer your question in two parts, one for the biosimilars and one for the vaccines.
Yeah.
The three biosimilars in phase III efficacy trials are progressing as desired. If you remember my last update, I talked about the Oncology biosimilar and the large trial that we have been doing in metastatic breast cancer patients even during the COVID headwinds period. Now I am pleased to inform that we have completed randomization of all 690 metastatic breast cancer subjects in our phase III efficacy trial, comparing therapeutic version of biosimilar to the innovator's product.
We plan to unblind the clinical trial data starting end of Q3 this financial year with a series of filings to begin from Q1, Q2 the next fiscal year starting with India emerging markets before June 2023, and the big filings of EMEA which we expect to close by August, September 2023, and FDA filing by October, November 2023. That's the big filing that we are looking at in the next year. The other two biosimilars in phase III clinical trials are also progressing really well. What is important to note is also that from an Oncology therapeutic segment focus, we are now advancing also our immunology pipeline.
One of our immunology products, which we think we are one of the first three or four to be filing in 2024, 2025, is now closing on its phase I trial in Australia and New Zealand. This is a product which serves both in respiratory as well as in dermatology segments. The dermatology segment is very important to my portfolio of products for revenue differentiation. We will be entering into phase III first patient ingestion milestone by Q4 of this fiscal year with immunology program. This is a large trial which will be carried out in around 13 countries and 85 sites. We are excited at the prospect that we'll be able to close this trial somewhere by Q1 of 2024, that hits the filing process in Europe and U.S.
That's about biosimilars. With respect to the vaccines question, in the area of vaccines, I'm also happy to inform that our PCV15 vaccine comprising of the 15 serotypes conjugated to the carrier protein CRM197 had shown to be immunogenic and induced a functional antibody for all vaccine serotypes in the 3+0 trial that we conducted in pediatric population. The 13 serotypes that we were evaluating versus the Pfizer's Prevnar 13 showed similar or slightly higher immune response and the clinical endpoints have been met. The two other serotypes which we additionally have other than those in Prevnar 13 have also shown non-inferiority. We have submitted this filing last week for market authorization approval to the Indian regulator.
I expect the regulatory process for approval to unfold in the next two to four months' time. Meanwhile, as part of the regulatory requirement and as part of our aspirations to make this a WHO program, we have also initiated on the 7th October a 2+1 regimen pediatric trial in India. At this time, I think we are well on track to get this product approved in India, followed by our continued impetus to make this product better and increase the safety database by conducting an additional 2+1 trial and building on another trial for the WHO markets. I believe that we'll have a WHO filing in 2024. We'll provide guidance on this product as the regulatory queuing procedure evolves with the Indian regulator.
Probably in the next earnings call I'll be able to provide you good news on this product.
Okay.
The other early-stage vaccine programs are progressing as expected. I hope I have answered your question.
Sir, is it fair to believe that the contribution of these specialty projects from the advanced market is likely only in, let's say, FY 2026 or so?
Can you elaborate your question a bit more? FY 26-
From the advanced market, let's say Europe and U.S.
Okay.
That is a large market if you consider.
Yeah.
Those are the incremental business from those advanced markets from these specialty products...
Mm-hmm.
..is likely only then, 2026 or 2027, or beyond 2025, FY 2025. Is it so?
In the area of biosimilars, we are expecting a product approval next year with the filings that we have in Europe. We expect the revenues to kick in sometime in Q3, Q4 of next year. That's when we will see the commercialization to begin for biosimilars in certain regulated markets. With the ongoing clinical trials, the three large antibody clinical trials that we are doing globally, 2025, 2024/2025 is a fair assessment for the revenues to kick in because the regulatory process takes anywhere between 9-15 months in Europe and the UK.
Okay. Just last one question from my side.
Mm-hmm.
I want to hear about the European market and generally about the margin profile of the consolidated operation. The European, obviously, generally the cost pressure what we are witnessing, it is common for all the markets. In our key market, which is our key earning contributor, that is U.S., is facing obviously the pricing pressure as well as the cost pressure. Same should be there even in the European market, I believe, which would have to some extent pressurize the overall margin. Here, if you could share some idea about what is the current situation or current challenges that you are facing in the European market, and how long that can have similar kind of impact on the overall margin profile.
Having seen a kind of margin correction in the gross margin level from last year for the consolidated operation, how should one really build in the gross margin scenario for Aurobindo going ahead for this year and, let's say, next year?
Yeah. On European business, I will answer and then CFO will answer on the overall on Aurobindo. During the quarter, we have not seen a margin compression. In fact, our margins have strengthened because of the various opportunities which have thrown up because of the supply chain disruption in Europe with other competitors. If you really see our business, our top line has been rock steady at about EUR 190 million. We discontinued two loss-making countries' business in the first six months. Actually, if you discount for the last year's base of these two companies, we have grown by 3% in the top line. Our EBITDA has strengthened actually to 13% of net sales.
I do agree that there is a pressure on gross margin and also maybe expenses, but we are better positioned versus competition.
Sure, sir. On the margin profile front,
Yeah. Well, Kunal, Surya, as Sanjeev said, we have been, if you really recollect, last year we were telling about the low teens, et cetera, then the position has slightly improved. Going forward with the euro, it started appreciating. I mean, hopefully it'll get appreciated. I think we can see some improvements only, right.
Okay.
In terms of the overall company, European business remains at around 26%, and it continues to remain the same position. Overall, if you really see Aurobindo as a whole, the gross margin as well as the EBITDA margins slightly improve based on the performance of the European business.
Okay. Yes, sir. Thank you. Thanks a lot.
It may not be very significant, at least in basis points, maybe around 10, 20, 30 basis points like that it can start moving up only.
Next year should be meaningfully different?
See, at this stage we may not like to comment on the European because the global.
Generally.
Yeah.
Generally for the consolidated operations.
Consolidated operations are quite significant as we've started manufacturing in India. If you recollect, in the last three, four years, they have really taken around, if I'm right, Sanjeev, can you confirm, we have already moved around 50% of the products to India and in a more cost-effective.
Yeah, it is about 55. 55.
55% cost-effective manner. This process is being continued. I don't know, Sanjeev, would you like to talk about European business, about injectables moving to Europe, biosimilars you are thinking? Can you like to elaborate on that?
Yeah, yeah. Actually going forward, I mean, we have seen that our business has been growing double the market growth rate. We expect 5%-7% growth to continue. Secondly, we are developing more than 200 products, which include, of course, injectable biosimilars, but mainly the broadening the product portfolio of oral solid also. Over next 2 years, we will be launching these products. Also we see that there are a lot of opportunities which are coming up because of competition is not able to maintain the steady stocks in the market.
Okay. Yeah. Sure, sir.
Thank you. Wish you all the best.
Thank you. Next question is from Kunal Manpuria.
Good morning. Thank you for the opportunity. First on the Pen G project, where we are planning to invest $235 million. Can you provide, you know, some kind of color on what are the major parts to that $235 million, including, let's say, equipment, the other infra, the land cost, et cetera.
The overall project, 235, the major will be the, we are planning to put a desalination plant and, we are also planning the fermentation process, right?
Mm-hmm.
Power blocks. Like that multiple things are being done. Those are all purchase orders have been issued and the work is being done by the respective suppliers, et cetera, which is expected to come in this quarter and the next quarter. Significant portion of the buildings have been done for all the blocks. It has been done. We believe by next, say September, October, the installation should be over, right? After the trial and other things, I mean pilot batches, et cetera, will take place starting October next year onwards. Our target is to complete the project by March 2024 and it's our endeavor always to advance it.
The capacities of production, how much would be the production capacity with this capacity?
The production capacity is around 15,000 metric tons.
15,000 metric tons. Okay, sure. Coming to, you know, the R&D expense, it seems to be kind of, you know, I think we have guided between 5% and 6% of the revenue, and this quarter I heard it's 4.8%. Do we expect it to go up given that we now have phase III trials for biosimilars running or would you say the majority of costs for those phase III trials are already baked in and we would see similar run rate?
Kunal, you are absolutely right. Coming quarter, I think the December quarter and the March quarter, some of the phase III trials are being conducted as Satakarni Makkapati explained very clearly. We expect the overall percentage should go up and probably it may go up to 6% level. I mean, this quarter is 5% because of the timing of the expenditures and other things, right? Certainly we'll be sitting around 6%.
Sure. One follow-up on the profitability of the biosimilar business, especially in Europe, where the price erosion seems very strong. What are your views? Currently we are doing low double digits in Europe, once the biosimilar business comes in, could that have a, you know, material delta or, you know, how should we think about it?
Sandeep?
Yeah, Europe business, even without the specialty products, will strengthen the EBITDA margin. That is what our endeavors are with the launch of more new products. Biosimilar and Oncology and injectable will definitely help to improve the margins. However, I mean, it depends on the expectations, but we think that it should reach beyond 15% in the coming quarters.
The last one on the biosimilar, we have said again, we are investing another INR 300 crore. What kind of bioreactor capacity we are looking at with that investment?
Um-
Sandeep.
Kunal, we are looking at about 15 KL manufacturing bioreactor footprint. That probably makes it the largest monoclonal antibody manufacturing capacities when it becomes fully operational in the country. We also think the 15 KL manufacturing footprint would provide the foundation for our company's contract manufacturing aspirations, you know, and also add in additional capacities for our own products. We look at this plant becoming operational and ready for commercial supplies in 2025-2026.
What would be our current capacity for biosimilars?
Uh-
Current gross block.
At present we are having 140,000 sq. ft. manufacturing footprint with around 4 x 2,500-liter capacities for our internal programs, that is around 10 KL capacities for our internal programs. We are for the first two or three monoclonal antibodies that will come out of our CuraTeQ facility well aligned to capture up to 5%-10% of the market share without any hiccups. If you can go through the press release that we have made about this INR 300 crore investment, this is primarily to stretch our aspirations into contract manufacturing, creating a huge manufacturing footprint that allows us to make solid foundation to attract contract manufacturing opportunities in this segment.
Sure. Thank you. I'll move back in the queue.
Thank you.
Thank you. Next question is from Prashant Poddar.
Hi, guys. Thank you very much for the opportunity. Subbu, first of all, there are two concerns I will point out. First one is on the governance standards, given the experience of the chairman in compliance. Investors who have been with you for more than five years, a decade, et cetera, would expect better governance standards wherein the you know, side businesses of directors should also be reported and should be public rather than coming to know about it much later. The second one is on your use of cash. I just could not understand your response, honestly. We don't want a buyback or anything to be announced immediately. Obviously, the use of cash is something that the board of directors have to decide.
Your confidence in saying that this money will be needed before till May, you do not have any clarity on that. The response that the capital expenditure will suddenly be increased, I just could not understand that with $337 million cash and INR 800 crore, a quarter EBITDA. It just does not. I mean, we can't understand how this cash can be so quickly utilized, and we don't want it to be used for buybacks or anything. Your lack of clarity on what it will be used for, you just could not add numbers for me. So honestly, this is a disappointment from our perspective. We just want a candid feedback and we
Yeah.
You know, we need better communication from Aurobindo on all these things.
Prashant, your point is taken. In terms of the Pen G plant, we are already putting around INR 2,000 crores, and out of that we have spent around INR 500 crores. INR 1,500 crores is going to be spent in the coming year, right? We'd like to accelerate as much as possible. Second point, if you really see, we are once we get a clarity, we are already having a gross debt of something like $400 million. All right? We will likely use the cash and reduce it, so as much as possible, that's what we are trying to do there. It is not the entire cash.
The cash is kept as a reserve, and there is a debt of around gross debt of nearly INR 4,000 crore, which translates to nearly which has been forming part of the earnings presentation also. We will likely use it and reduce the debt, so that is also we are working on that, right? This quarter we could not do because of so much volatility, we do not know when we need to bring it and whether the rupee will touch 85 rupees or not. We don't want to bring it at a low price and then later rupee is getting depreciated. The third point which I want to say is we talked about this INR 300 crore which has already been announced and Satakarni has explained to that, right? Plus apart from that.
Yes.
There are certain running projects out there which is expected to complete in that, and we have already guided in the past really. We will be doing a CapEx of around $150 million, at least $125-$150 million every year. Because we are already having around 23 plants and some more plants will come into operations in the coming year also. Because of these reasons, we have been a little bit conservative, and we like to look at it in the month of May. That is what I said. When I say May, it is the March results.
Yeah, we understand that, Subbu. Only that at the beginning of every year, you know, when the board of directors meets, like any large company needs to do, you need to, you know, be very clear about the use of cash rather than thinking it through as it happens. The CapEx is not, you know, it's not easy to just increase the CapEx speeds as, I mean, as much as we can. So the use of cash, you know, with large shareholders would only want it to be more stable to get a more stable outlook on that rather than very, you know, quick changing ones. Lastly, on the corporate governance, you know, serious work needs to be done there about what directors are doing, et cetera.
I mean, just because some of them are promoters, they cannot do anything that they want, right? I mean, such a responsible position, that of a director of a large company which is making more than $400 million EBITDA a year and such large responsibility, as an exporter, the largest exporter of pharma from the country, largest manufacturer or supplier to the drug consuming industry of the U.S., it is disappointing to. You know, because this does not, this would not even work well with your buyers. I mean, they would also want you to abide by certain corporate governance, I would believe. That's all from my side.
Okay.
Bye. Thank you very much.
Yeah.
Thank you. Next question is from Rahul Jeewani.
Yeah. Hope I'm audible, sir.
Yes.
Yeah. Sir, I just wanted one clarification. Your injectables or specialty revenue guidance of $650 million-$700 million does that factor in contribution from Revlimid as well?
Yes, it does.
Okay, sir. How do you see the revenue momentum on the injectables business to sustain, given that Revlimid will be a short-term opportunity for most of the players, so that opportunity might last only 2-3-year period, but beyond that, how do you then see the growth on the injectables business?
What we have actually done, Rahul, is what we feel is based on our filings and the approvals, what we are getting, we feel double-digit growth on a regular basis, even if I take out the Revlimid, will continue to happen quarter on quarter. That is what we have baked in, and we have good enough pipeline to take care of that.
We have added significant capacities looking at the future growth of this business, our double-digit growth.
Sure, sir.
I'm also keeping Revlimid as yeah, it'll start for FY 2024 and it will remain till FY 2026, 27. Like that, I'm just keeping that 3-4 years of opportunity. I'm keeping that aside going forward, whatever it is. It's a regular or normal trending of business should happen in double digits.
Sure, sir. If you can just comment, what was the global injectables revenue for the quarter? I missed that number.
In fact, we don't actually put it as segment-wise results, but it is in the range of around INR 100 million.
Okay. Sure, sir. At least the thought process which I was working with was that given Revlimid at the end of the day is an oral product, although I know you classify specialty or onco as part of your global specialty business. My sense was that the $650 million-$700 million growth will be driven by the injectables portfolio rather than Revlimid being such a large contributor to the growth which you are talking about.
Yeah, I appreciate that, Rahul, but that's why, like, if you see Revlimid, initially we were like, well, based on our settlement, we were supposed to launch only in October 2023. In FY 2024 revenue, Revlimid would have been an insignificant portion from an overall numbers perspective. Most of the numbers were supposed to come from the regular portfolio of products. The guidance I'm giving, and as I said, like it is going into FY 2025, is mainly that regular portfolio also should go to that level. We need to see, wait and watch. At this juncture, it is too early for me to comment based on the last two quarters events.
Sure, sir. That implies that your contribution assumption from Revlimid would have been very negligible given that you were launching only in second half of FY 2024.
That's right.
Okay, sure, sir. Thank you. That's it from my side.
Thank you. Next question is from Tarang Agrawal. Tarang, please unmute yourself.
Hi. Good morning. Am I audible?
Yes.
Yes. Okay. Just a couple of follow-ups. One, Yugandhar Puvvala, did you suggest that you wanna be probably launching 20 products in this financial year?
That's right, Tarang.
In the next half a year we should see 20 products. Is that, is that how I should look at it?
Yeah. Overall this year, we should have around 20 launches.
Okay. That's one. Second, if you could give us a sense on what's happening on the Depot business. Is it status quo from your earlier update or has there been any developments there?
It is status quo, Tarang. As I mentioned last time, we have finished one product and that is on stability, and the other two products also we should complete it in this year. Post that, we expect the filings to happen from 2024 onwards and status quo literally.
Okay.
Everything is going as per what I updated last time.
Okay. Thank you. Dr. Satakarni, just wanted to get a sense on, I mean, I think the three Biosimilar products that have been filed, they've been filed somewhere in September and January. Any status on, you know, product approval inspection from the regulator?
That's a good question, Tarang. We had two filings with the European Medicines Agency in the Oncology space with an abbreviated clinical path. The EMA had suggested a clock stop for seven months. We have completed all the procedures and responses leading up to day 120. But because of the paucity of auditors to come and do a GMP inspection, the clock has been stopped by EMA, so that's something which is not under our control. The clock stop will be until June 2023. If the situation changes, if the inspectors are available ahead of time, then EMA will give us a notice in months' time for the GMP inspection.
With respect to our filing of our non-small cell lung cancer drug biosimilar with MHRA in the UK, where we file this product with only phase I, three-arm phase I data of our test biosimilar versus the U.S. and EU-registered reference products. This is the first time ever that a monoclonal antibody has been filed with only phase I and not the phase III efficacy trial. You should understand that we are pushing the regulatory barriers here. I'm pleased to inform that the day 80, which is an equivalent to day 180 with EMA, the day 80 procedure has been adopted by MHRA and it is very highly likely, and now this is a forward-looking statement.
It is very highly likely that this may become the world's first Monoclonal Antibody Biosimilar that may be approved by a developed regulated market, regulatory agency, without the need for a phase III efficacy trial. I'll keep you posted on it. You should understand that this is a forward-looking statement, and then we are pushing the regulatory barriers. Day 80, the only point that is left after day 80 is the GMP inspection. We are waiting for a GMP inspection for all the EMA as well as the MHRA filings. We'll keep you posted as and when things evolve.
Correct. Just a follow-up. So on the Europe filings, would it therefore, given that the regulator, there's positives or inspections or impediments from the regulator's end, would that, would it therefore mean that your product approval inspection might perhaps been pushed to June 2023?
No. What we have been told, what we have been communicated by them, is to take a clock stop until June 2023. They are expecting the regulators schedule to be available starting Q1 of the next calendar year. If the situation changes, they will keep us informed and carry out the inspection with one month's notice. Based on the formal letter, we expect the inspection to only happen now in June. An inspection between January to June cannot be ruled out, Tarang.
Got it. That's helpful. Swami sir, just wanted to check, I mean this is again to an earlier question. Does the base, which is the U.S. base between OSDs, injectables, OTC, everything, which has come down to about $313 million, would it be fair to presume that this $330 would be the new base going forward or a different number? As a base, just for us to understand how, if we were to ignore the one-offs of this quarter, how should this number or how should this business look like going forward from Q3 onwards?
Yeah.
That's it. Thank you.
Thanks, Tarang. Tarang, actually we need to split this into two. One is the injectable side and then the other one is others, specialty side and others. Because as you know, injectable business we are considering separately for Eugia, the specialty. With regard to the other business, as far as the oral solids are concerned, the generic market would continue to remain competitive in the next few quarters. We believe that this could be due to overcapacity or number of approvals that's coming in. You know, we have a very broad and strong base portfolio, and we have a fairly robust pipeline. Recently we got the Unit 7 clearance. We also have other NDA which are ready to be launched.
We are looking at a potential launch of around 40 products for the next 12 months. We think that we should be able to regain some the market in terms of value. Then we also seeing. You know, we have such a broad portfolio of product. We also see sometimes surge in demand. Right now we are doing good. We are seeing good surge in demand as far as the antibiotics are concerned with the onset of flu season. I think overall our base should be better. I mean, we should go back to or close to the earlier base or at least to that level. That's what we think. With regard to the OTC product, they are doing well. They continue to do well. We have no issues at this point there.
Okay. Yeah, that's it. Thank you.
I think Yugandhar Puvvala has already answered on the injectable part.
Yes, yes. That's been answered. Yes.
Yeah.
Thank you.
Thank you. That was the last question. I now hand the conference over to the management for the closing comments.
Thank you all for joining us on the call today. If you have any of your questions unanswered, please feel free to keep in touch with the investor relations team. The transcript of this call will be uploaded on our website www.aurobindo.com in due course. Thank you, and have a great day.
Thank you. On behalf of Aurobindo Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar.
Thank you.