Good morning, ladies and gentlemen. Welcome to the Q2 FY23 earnings conference call of Glenmark Pharmaceuticals Ltd. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Utkarsh Gandhi, General Manager, Investor Relations for Glenmark Pharmaceuticals. Thank you, and over to you, sir.
Thank you, moderator. Good morning, everyone, and a very warm welcome to the Q2 FY23 results conference call of Glenmark Pharmaceuticals Ltd. Before we start the call, a quick review of the operations for the company for the quarter ended September 30, 2022. For the second quarter of FY23, Glenmark's consolidated revenue from operations was at INR 33,752 million, as against INR 31,424 million in the corresponding quarter last year, recording a growth of 7.2%. For the six months ended September 30, 2022, Glenmark's consolidated revenue was at INR 61,005.5 million, as against INR 61,001.3 million, recording an increase of 0.7%. We provide some key highlights for each of our businesses, starting with India formulation business.
Sales for the formulation business in India for the second quarter of FY 2023 was at INR 10,916 million, as against INR 9,689 million in the previous corresponding quarter, recording growth of 12.7%. India business contribution was at 32.3% of the total revenues in the second quarter of FY 2023 compared to 30.8% last year. As per IQVIA March-September 2022 data, Glenmark India formulation business ranks 14th with a market share of 2.19%. During the quarter, Glenmark India business continued to strengthen its position in its core therapy areas in terms of market share.
As per IQVIA data, the cardiac market share increased to 5.3% compared to 2.73% last year, while the antidiabetic market share increased to 1.82% compared to 1.79% last year. In dermatology also, the market share increased from 8.12% to 8.16%, and in respiratory the market share changed from 5.3% to 5.37%. As per IQVIA data, the company ranks second in the dermatology segment, fourth in respiratory, and has increased its ranking to fifth in the cardiac segment. The company has nine brands in the IPM top 300 brands in the country on the basis of the IQVIA March, September 2022 data.
The company launched 9 new products during the quarter and continued to gain market share in some of the key launches in cardiac and antidiabetic segment. The key new launches which are driving growth in the antidiabetic segment include sitagliptin and its fixed dose combination with metformin and dapagliflozin, respectively, all of which were launched at the start of the second quarter of FY 2023. The company has introduced 8 different combinations of sitagliptin base drugs under the brand name Sitagip and its variants to increase accessibility to affordable and quality treatment options for patients with uncontrolled type 2 diabetes. In the first quarter, Glenmark had also become the first company to launch teneligliptin pioglitazone fixed dose combination drug for type 2 diabetes under the brand name Zita Plus Pio.
At the time of launch, it was the only available DPP-4 pioglitazone combination brand in India. Glenmark also recently launched a combination of empagliflozin with dapagliflozin. Recently, Glenmark also became the first company in India to launch liraglutide 0.5 mg under the brand name Lirafit for the treatment of uncontrolled type 2 diabetes. With this launch, the company aims to increase liraglutide levels in uncontrolled diabetics and create a pathway to treat insulin resistance in India. Glenmark now has a strong portfolio of products across various levels of intervention for the treatment of type 2 diabetes in India. The company has an overall healthy pipeline of differentiated products which it plans to launch in the market going forward. The consumer care business in India.
The primary sales for the BCC business in Q2 was INR 555 million, with a growth of 8%. This was mirrored by strong secondary sales growth of 11%. As of YTD September, the BCC revenue was at about INR 1,203 million, with a growth of 42%. Our flagship brand, Candid Powder, delivered strong revenue growth of 11% for Q2 and 44% for the first half of FY 2023. La Shield portfolio, which is our second brand, delivered 31% growth in Q2 and more than 100% growth in the first half, while Cal Plus portfolio recorded 18% growth in Q2 and 28% growth in the first half of FY 2023. Moving on to North America.
North America registered revenue from the sale of finished goods formulations of INR 7,533 million for the second quarter of FY 2023, as against revenue of INR 7,543 million for the previous corresponding quarter, recording a decline of 0.1%. North America business contributed 22.2% of the consolidated sales in the second quarter of FY 2023 compared to 24% in Q2 last year. In the second quarter of FY 2023, Glenmark received final approval for norethindrone, ethinyl estradiol capsules and ferrous fumarate capsules, one mg slash twenty micrograms for the brand name Taytulla. The company filed one NDA in the second quarter and plans to file 10-12 NDAs in FY 2023. Glenmark marketing portfolio through September 30 consists of 176 generic products authorized for distribution in the U.S. market.
The company currently has 47 applications pending at various stages of the approval process. Moving on to Europe. Glenmark's Europe operations for the second quarter of FY 2023 recorded revenue of INR 3,785 million as against INR 3,383 million, recording a growth of almost 12%. Europe business contributed 11.2% of the total revenues in the second quarter of FY 2023 compared to 10.7% last year. The company continued to achieve a healthy double-digit growth across all key markets in Europe in the second quarter of FY 2023, in spite of strong macroeconomic challenges. Glenmark's 7-market growth continued to remain strong across both Western Europe and Central Eastern Europe, markets. This business growth in Western European markets such as U.K. and Germany remains strong.
While CEE markets like Poland, Czech and Slovakia benefited from new product launches. Overall, Glenmark continued to launch multiple new products across various markets, and the respiratory portfolio in Europe also continued to gain share across both Western Europe and CEE countries. ROW, which consists of Asia, Middle East, Africa, Latin America, and Russia CIS. For the second quarter of FY 2023, revenue from the ROW region was INR 6,154 million as against INR 7,486 million for the previous corresponding quarter, recording a decline of 17.8%. The decline is on account of a high base last year due to strong sales of the COV portfolio. Adjusted for that, the revenue recorded 50%+ growth in Q2.
Our ROW business contributed 18% to the total revenues in Q2 of FY 2023 compared to 23% in Q2 last year. While the macroeconomic situation continued to remain challenging, the pharmaceutical market in Russia has remained stable and provided opportunities for growth. Overall, Glenmark's Russia business recorded a positive trend in the second quarter. For the month of September, Glenmark outperformed the retail market by value and also gained key positions in terms of the overall rankings on the retail market. Glenmark also gained key positions and was ranked 8th on the dermatology market, while it continued to be ranked 2nd on the ophthalmic market in Russia. Business growth was aided by strong performance in key products such as across the dermatology market, as well as additional promotion on the new indications for Ryaltris.
Asia region recorded a slightly subdued growth in the second quarter. Markets such as Malaysia and Philippines recorded double-digit secondary growth, but there were multiple headwinds in other Asian markets like, Myanmar, Vietnam, and Sri Lanka, which led to a slightly lower growth. As per IQVIA MAT 2020 data for the Philippines, Malaysia and Sri Lanka markets, Glenmark is ranked sixth overall in the overall product market and ranked first in the dermatology segment. Our partner Yuhan Corporation received approval for Ryaltris in South Korea towards the end of the second quarter, and also Ryaltris continues to do well for us in, India and the Philippines, where the product has already been launched. In Middle East and Africa, the region recorded 21% growth in secondary sales during the second quarter of FY 2023.
While growth in Kenya was marginally impacted by macroeconomic factors, Glenmark continued to achieve strong secondary sales growth of 30+% in South Africa and Saudi Arabia. As per IMS MAT data, Glenmark is ranked third amongst all generic pharma companies in Kenya. Latin America business growth of 22% at a regional level, with most of the markets recording good growth during the second quarter. The respiratory portfolio in Latin America continues to gain significant scale, particularly in large markets like Brazil and Mexico. The company is planning to launch additional products in the region to further augment the overall portfolio. Some updates on our global respiratory business for the second quarter, starting off with RYALTRIS. In FY 2023, RYALTRIS is targeted to be approved slash launched in 34 markets globally.
As of September 30, 2022, we have already received approval or launched the product in 16 markets, either through our own team force or through our partners. We are further awaiting approval in emerging markets, which are expected to be received in the second half of FY 2023. Glenmark's partner in the U.S., Hikma, commercially launched Ryaltris in August 2022. As mentioned before, Glenmark also supplied product with partners in South Korea, Yuhan, upon its approval in the second quarter, and we enabled them to complete the commercial launch of Ryaltris in October 2022. Following approval in Canada, Glenmark's partner, Bausch, intends to launch the product in the fourth quarter of FY 2023.
Additionally, in the second quarter, Glenmark received marketing authorization grants for Ryaltris in Malaysia, Kazakhstan, Moldova and Dominican Republic, and also submitted the MA application in Vietnam and Zimbabwe. The company is awaiting regulatory approvals for its filings in Brazil, Mexico, Vietnam and several other emerging markets. Ryaltris sales continued to grow in various markets where the product has already been launched across the globe. Some of the key markets include Australia, the U.K., Czech Republic, Poland, Italy, Russia, South Africa, and the Philippines. Glenmark's partner in Europe, Menarini, intends to launch the product in H2 of FY 2023 in additional key European markets.
Glenmark's partner in mainland China, Grand Pharmaceutical Group, has made significant progress on the enrollment in the phase III study, with approximately 70% of the recruitment being completed by the end of second quarter. Grand Pharma aims to complete the study in 2023 and submit the NDA application by the end of 2023. In terms of other key respiratory products, I mentioned in the first quarter also, clinical trials continues to move forward as per plan for the generic Flovent pMDI, and we expect to file the product in the calendar year 2023. We plan to file at least one more generic respiratory pMDI in the U.S. in the calendar year 2023 and continue filing momentum beyond that. Some updates on our innovative R&D pipeline.
GRC 54276, which is our HPK1 inhibitor, is the company's oncology pipeline asset being developed as an orally administered IO treatment for patients with solid tumors in oncology. Our phase 1 dose-escalation study is ongoing in India as per plan. Successful recruitment of patients in cohort one was completed in the second quarter of FY 2023. There were no dose-limiting toxicities observed in the first cohort, and subsequently, cohort two has also been initiated. In total, 10 patients have already been dosed with the drug. GRC 39815, this is the RORγt, and the company's respiratory pipeline asset being developed as an inhaled therapy for the treatment of mild to moderate COPD. This is currently under phase 1 clinical development in the U.S.. A quick update on Glenmark licenses.
Revenue from operations, including capital sales, was INR 5,093 million as against INR 5,618 million, recording a YoY decline of -9.3% due to the high base of COVID products last year. During Q2, regulated market contribution increased to almost 74%, with growth of 7% QOQ. CDMO business also recorded strong growth of 10.7+% QOQ. GLS filed four DMFs, CEP during the second quarter and also made progress on the capacity expansion initiatives as per its plans. External sales for Glenmark Life Sciences in Q2 FY 2023 were at INR 3,744 million as against INR 3,364 million in Q2 FY 2022, recording a growth of 11.6% YoY. For further updates on GLS, please log on to their website, glenmarklifesciences.com.
Lastly, on Ichnos Sciences, Glenmark has invested INR 1,727 million, almost $22 million in the second quarter of FY 2023 compared to INR 1,850 million, which was about $25 million in the corresponding quarter last year. For the first six months of FY 2023, Glenmark has invested INR 3,363 million compared to INR 3,467 million invested in the corresponding period for the previous financial year. For further updates on the pipeline and the organization, please log on to ichnossciences.com. The pipeline update for the second quarter of FY 2023 has been published on their website. I would just like to state a few objectives for FY 2023, which remain unchanged from the start of the year.
Revenue growth of 6 to 8% during the year, sustaining EBITDA margin performance at similar levels as of FY 2022. CapEx of about INR 700 to 800 crores, keeping a focus on enhancing free cash generation and debt reduction, and closing out 1-2 outsourcing deals across our innovation pipeline. Some additional notes to the results before we open the Q&A. Our reported EBITDA excluding other income was at INR 612.6 crores with a margin of 15.4%. There was a COVID-related inventory provision of INR 31 crores in the second quarter. Adjusted for that, EBITDA for Q2 was INR 652.6 crores with a margin of 19.3%. Forex gain for the quarter was at INR 81 crores, which is recorded in other income.
Gross debt for the period ended September 30, 2022 was at INR 3,954 crore as against INR 3,670 crore as of March 31, 2022. Net debt for the period ended September 30, 2022 was at INR 2,715 crore as against INR 2,260 crore as of March 31. The increase in net debt was primarily on account of adverse forex exchange impact during the first half of FY 2023. Working capital inventory for the period ended September 30 was at INR 2,865 crore as against INR 2,500 crore in March. Receivables were at INR 3,328 crore as against INR 3,101 crore.
Payables was at INR 2,338 crores compared to INR 2,289 crores. Total asset addition in the quarter was INR 134 crores, most of which was related to tangible assets. R&D expenditure in Q2 FY 2023 was around INR 230 crores, which is close to 10% of revenue from operations for the second quarter. For the full year, we expect R&D spend to remain around 10% to 11% of our sales. Before we open the floor up for Q&A, I would like to introduce the management of Glenmark Pharmaceuticals on the call today. We have with us Mr. Glenn Saldanha, Chairman and Managing Director, Mr. V.S. Mani, Executive Director and Global Chief Financial Officer, and Mr. Brendan O'Grady, Chief Executive Officer, Global Formulations Business.
With that, we'd like to open the floor up for Q&A. Over to you, moderator.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to unmute yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.
Hi, good morning. My first question is on the other expenses. They have gone up almost 18% year-on-year, much higher than the, you know, the way the top line has grown. If you can just elaborate on this, why the expenses are moving at a much faster pace.
Good morning, Saion.
Yeah.
Nomura. I'll respond to this question. Saion, obviously last year, if you recollect, you know, the first quarter and a little bit of the second quarter, we had some amount of the COVID effect, okay? Obviously current year we don't have COVID effect, and obviously everybody's ramping up on their, you know, marketing initiatives, et cetera. The cost is a little up. I would also, you know, urge you to look at, see on a half-yearly basis if you look at it, yes, it is definitely higher than the sales growth. On a half-yearly basis, year-to-year it's about 12% growth, okay? The first quarter was still a little low. Second quarter has been little high, but obviously we are trying to, kind of take some initiatives and therefore the spends are a little higher.
I think overall even still if you take that, our other expenses to sales is about 25 odd %. Over the years we've kind of brought it down to 25-26 compared to what it used to be. I think we'll try our best to keep it around those levels only.
Okay. The second question is on your net debt level. It has gone up for the six months. I think one of the objective is to, you know, organically, you know, to kind of bring down the net debt. What's your comment for the second half, and how you see net debt level by the end of the year?
Saion, absolutely. That's been one of our key objectives over the last couple of years. We made some progress there, but I think definitely we would like to do more. What I would like to say is that obviously the objective remains the same, but, and also, you know, we certainly will see it, assuming that currency remains at the current levels or, you know, kind of goes lower and there are no major disruptions in the supply chain, okay?
One of the reasons why you can see over the last couple of quarters the inventory levels, while they're still useful and they're still important and we need to keep it at those levels, bit of the inventory, I mean, a bit of our debt increase also is due to some of the inventory and some of the working capital issues that we had. That's across the board, everybody.
Okay. Just one final question, if I can ask on the U.S. market. What would be the, you know, million dollar impact because of the Baddi import alert, and what's your outlook therefore on the U.S. market going forward?
Yeah. Saion, as you can see that, you know, we had also kind of indicated that it is about 1% to 2% of our overall global sales. It's about, at best, you know, about INR 20 million or so. I think, but also we'll work actively on site transfers, etc., to mitigate what we have. Obviously we'll try to best ensure that it will not get impacted. But if you're asking an impact, this is what it could be at best, okay? For a full year.
Okay. Thank you. I'll join back.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. Just on this other revenue, other revenue as a segment, has significantly upped this quarter. Is this to do with some milestone income and if you could quantify?
Yeah. A certain portion of that is due to the, basically a milestone that we have received. Normally we don't give an indication what is the amount, because these are between agreements between us and the party concerned. A decent part of that is still sustainable, okay? That's what I can guide you on.
You mean to say this other revenue as a quantum is sustainable for the remaining-
Not the full amount, but at least a certain portion of that, at least 20-25% is definitely sustainable.
Just as a clarity, this inventory provision is done for INR 31 crore in COGS or in other expenses?
No, it is done in sales. You get a goods return, no? It goes to sales directly and then obviously it has no value. It immediately impacts your COGS as well as your result. It goes straight to the return. You sold a good, it came back to you, it has no value today, you write it off immediately. That's how it's valued.
Right. It is deducted from sales itself as well.
Exactly. Straight. It has no value to it.
Understood. Right. That's clear. Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah. Just a first question on RYALTRIS, and we've launched through the partner in August. Any early signs or anything that you can share there? You have now launched in multiple countries. If you could help us understand how large this is or any outlook here will be very helpful.
Sure. I'll take that question. We launched in the U.S. RYALTRIS. The launch date was August thirtieth. I don't expect to see a ton of uptake in the fall allergy season because it'll take the reps, you know, a couple months and a couple cycles to see physicians to generate demand. What I've seen to date is the uptake has been good. It's been well received. I think it's gonna take a little bit of time to get payer access. Again, I reviewed the plan there, and they're a little bit ahead of where I thought they would be with payer access.
I think as we work through the rest of the late fall, and we get into the early spring, I think RYALTRIS will be successful. It's on a good trajectory in the U.S. As far as other markets, I think as we mentioned, we've launched sixteen through the second quarter, another five so far year to date, so up to 21. We'll have 34 by the end of the year, six directly and then seven through partners. RYALTRIS is off to a certainly good start. And from a revenue perspective this year, I would expect probably INR 20 to 30 million in revenue for RYALTRIS for Glenmark.
Got it. That's very helpful. My second question is, just again on the U.S. business. So it's declined about 11%. I'm just talking dollar terms here. If you could help us understand what's happening in terms of the base business, and how are we mitigating? How should we look at it in the second half? Will it stabilize here, or you think there is erosion still ahead?
Yeah, I mean, thanks for the question. I mean, if you think about the U.S. business, I think it's a challenging market for everybody. We continue to see price erosion, you know, along with the market. I think that, you know, the regulatory environment has been challenging as well. You know, trying to get new products approved in Washington market is key to combating price erosion. I think that if you look at the U.S., we'll be probably about flat to where we were last year. I think that you'll see third quarter improve over second quarter, and I would expect that fourth quarter, even with the Baddi impact, fourth quarter will improve over third quarter. So we're gaining momentum as the year goes along.
Again, we'll probably be relatively flat to last year and, you know, we hope to see several new product approvals as we go through the rest of this year.
I'm just trying to do the math here. We had about INR 410 million or INR 412 million something last year. We have done for the first half, like INR 180. We should be getting there, right?
I think we'll be close to right around 400, give or take, somewhere in there. We'll see how things go, but relatively flat to last year.
Got it. That's helpful. And my last question is on, I think, the gross margins. I think is this just the impact of that, out licensing impact? Or how should we look at gross margins, for the rest of the year right now? Should I just strip out. You've not quantified it, but how should we look at just the gross margin now?
So gross margin, you know, currently, I think, you know, last one, two quarters, we had some challenges because of the input cost, payment, et cetera. We've seen it slightly taper down. So I think gross margin, you should look at anywhere between 64% and 65% this year. That's historically where we are. We should more or less be there.
The adjusted EBITDA, V.S. Mani, are on 19%, that is sustainable. Is that the, like, an outlook?
Yeah. It is sustainable, yeah. Got it. Thank you on all that.
Shyam, just one thing, maybe may not be so important, but when you said in dollar terms, our quarter was lower by compared to. Decline was about 7% to 8%. I mean, 11% was a little higher than this one.
Okay. I had a historical number of $107 million, probably that's lower than that, you're saying, last year number.
Yeah, actually lower than that.
It was 102 last year actually, and this year we are about 95. Anyway, that's okay.
Fair enough. Thank you.
Thank you.
Thank you. The next question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.
Yeah, thanks for the follow-up. Just one question on India. You reported around 13% growth. Now you mentioned also that this INR 30 crore is a return, sales return. Is it true to assume it is in India? If we had to add that, then we get to more like 15% to 16% growth, I guess.
Yeah, it should be. You'll have to add that to India, and it should be a higher growth, yeah.
Lastly, you would have had some you know, FabiFlu in the base also, right? I'm just wondering, this growth number looks a bit high.
No, second quarter didn't have any major FabiFlu at all in the.
India. Shyam, last year we had FabiFlu in,
Aradapi.
In Aradapi. Okay.
In second quarter.
Glenn, like, I mean, what kind of growth expectations you have for India, I mean, for this year and also in the sustainably going forward?
I think India, it's safe to assume we are growing between 10% to 15% on a sustainable basis.
Okay. That's it. Thank you. Thanks.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks for taking my question. Again, on the U.S. plant, you know, by when are we expecting the Monroe re-inspection to be done? We are currently in the remediation mode, Nitin. We are hoping in Q4.
You know, we will get an inspection, right. Next year we're hoping to commercialize products in the U.S. from Monroe.
How many ANDAs would we have in Monroe filed by now, roughly?
I'd say about 6 to 8 ANDAs.
Okay. All put together, including the filed and approved.
That's correct.
When you are doing your non-incremental ANDA filings, I presume you will not be going ahead in Monroe for the time being. Is there some impact on your plans on account of that, where some of the filings that you were supposed to do from Monroe you probably couldn't do right now, and you may be doing alternate filings from there for the filings?
I mean, clearly, Nitin, obviously, because of the Monroe situation, a lot of our filing plans got pushed out, right, from Monroe. Some of those filings will hopefully come through next year, right, in terms of new filings for injectable products. We have some alternate strategies around injectable products that we can't really elaborate right now.
Thanks. Second on RYALTRIS, you know, the guidance that we gave for $20 to $30 million of revenue this year for RYALTRIS. Now, given the fact that you've got multiple partnership agreements which are there on the product, is it fair to assume a lot of the $20 to $30, whatever revenue that you will make on RYALTRIS would be, essentially just a royalty income and profit share for us?
No. I think we are launching on our own, Nitin, in many markets. I would not assume that it's only profit share or royalty income, right. A lot of it is our own sales, right, for the year. Also going forward, you know, it's a mix, right. We have some markets where we commercialize on our own, markets in South Africa, markets in Russia, markets in Asia, multiple markets, right, which we sell on our own. It's a mix.
Glenn, when you talk about this number of $100 million plus, peak revenues for RYALTRIS, the assumption is that bulk of these revenues will be coming through our own Glenmark sales.
Again, it's a mix, Nitin. That's why the margin profile on this INR 150 million will be significantly higher, right? Because it will also have partner royalties flow in there, right. Partner royalties and partner transfer prices, right? I think it's really a mix.
Right. On that, again, on RYALTRIS, you know, we did book some milestone this quarter. Across the partnerships that you've done, you know, are there meaningful milestones still to be realized, or it's gonna be largely somewhere around royalty income and sales income that will come through on RYALTRIS?
I think constantly there will be milestones coming through, right, Nitin, right, on a consistent basis. One is of course some sales link milestones. Two is some development milestones, right, on RYALTRIS. I think milestones will keep coming through, right, on an annual basis, right, to us, in addition to, of course, royalty income and other, you know, other transfer pricing income that we make through partnerships.
Okay. Lastly, on the innovation-based R&D portfolio, I mean, how should we look at the next maybe 6 to 12 months on this portfolio from an inflow perspective, from a licensing perspective?
Currently, I think it's safe to assume that we close at least one licensing deal a year between GPL and Ichnos, right, on a consistent basis, right, on the innovation side. If we achieve that, I think we would have done well, right, on a consistent basis. We closed Almirall. Obviously, Almirall, the product is now in phase one. There will be subsequent milestones coming through from Almirall on a consistent basis. I think this can be a good revenue stream for us, right, between you know, new deals, existing deals, Ryaltris milestones, Ryaltris royalty, inflow on a consistent basis, which will help shore up the overall revenue line item, the EBITDA margins on a consistent basis.
Glenn, we are already in mid-November. You know, for FY 2023, do you still see the prospects of a licensing deal coming through from the portfolio?
We still continue to maintain that we will try and close the licensing deal this year.
Okay. I think posing one last question. On the net debt, given, I mean, there was some working capital pressures in H1. Now for the year, do we see our WC able to generate cash to maybe make some impact on the debt levels going forward by the end of the year?
Certainly, Nitin. I think that when we end the year and anyway the rupee remains stable and also the disruptions are lesser in the second half, we should definitely see some improvement in this.
Okay. Thank you.
Thank you. The next question is from the line of Harshil Haria from Spark Capital. Please go ahead.
Good morning. Thanks for the opportunity. In your presentation, you've talked about plans to file one additional respiratory inhaler product in the U.S. in the next calendar year. This is apart from generic of Flovent. Have you started clinical trials for this? Any color on this product will be helpful.
At this point, we can't give any visibility to what the product is or what we're doing in terms of the development pathway. We still maintain that we will be able to file the traditional product next year.
This is a inhaler product, just to confirm.
That's correct.
Trying to understand the compliance situation at Baddi a little better. They've been non-compliant at this facility from early 2019, and I presume you've undertaken a fair bit of remediation measures before it got reinspected early this year. You know, that inspection as well didn't really go too well, which we received an import alert post that. What exactly are the challenges specific to this facility and what's really led to this import alert situation despite our remediation efforts? Have we undertaken any measures across the network to improve our quality systems? Because we've had a couple of other OAIs as well in the recent months.
Clearly we are disappointed about Baddi getting the import alert. We're working with the FDA to see how we can remediate and bring the facility back on track as soon as possible. I think we've also taken many measures across the firm, right, to ensure that you know we strengthen our quality systems and we continue to excel you know in the quality area across all our sites, right, across the network. I think there are several things we've done and we continue to work through, right, to strengthen our network our capabilities and the quality there.
Okay. Understood. Last one. The capital raise at Ichnos, which you talked about in the past, is that plan still on or are we shifting our focus more towards licensing some of the, candidates?
I think at our investor day, which is coming up, right, we will give much more visibility on the roadmap there.
Okay. Very clear. Thank you.
Thank you.
Thank you. The next question is from the line of Kunal Randeria from Nuvama. Please go ahead.
Hi. Good morning. Just quick one on RYALTRIS, again. Being a branded product, have you already invested or still investing in sales force in the countries that you are going to market it yourself?
The good news is we are continuing to leverage the existing sales force. I mean, the reason we built out some of these segments in emerging markets is precisely that, right? Now we are actually getting the benefits of the investments we've made by way of sales force in these different countries. The network, the sales force that we have is we're able to better leverage them through the launch of Ryaltris in almost all of our countries. We've not added sales force anywhere to the best of my knowledge, right across the network.
Sure. You believe these are sufficient to sort of, you know, for RYALTRIS to achieve its potential?
Yeah. We think we'll get to the, you know, the INR 150 million mark in the next 4-5 years using the existing infrastructure.
Got it. Thank you. Sorry.
Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.
Hi. Good morning. My first question is on the revenue guidance shared for FY 2023. I think 68% is the number that has been shared. First half you have grown it on a flat-ish level. Second half I would also suspect that India is usually seasonally weak, especially because of respiratory. You guys also may be having the impact of the import alert. What will drive this growth in the second half and that too on a reasonable base in second half of FY 2023?
Well, clearly, see, I mean, if you assume that we currently have the same run rate, okay, of INR 3,300 crores, INR 3,200 crores a quarter, right? That itself will take you to very close to the guidance, right? I mean, what we did in Q2. Very clearly outside of that also we have most of our markets, as Brendan O'Grady mentioned, you know, U.S. Q3 will be better than Q2. Q4 will be better than Q3. India continues to perform well for us in the second half. Europe is doing well, ROW. I think overall the Baddi impact we think will hit us in Q4, and even there, given the launches, given all the other things we have going on, we believe Q4 will be strong. Overall, you know, we continue to maintain the overall guidance.
Just to add further, the first half looks a little flattish because we had heavy COVID sales in the first half. First quarter was India, second half was ROW. Second quarter, second half of the year will be more normal to normal. Okay?
If you strip that out, clearly we are, you know, well ahead of double-digit growth, right, on an overall basis.
Right. Any guide for LT that you are expecting in second half, which will also reflect numbers in second half of FY 2023?
Sorry, we couldn't get the question. Say that again, Nikhil.
Any royalties from RYALTRIS? Are you expecting that in second half?
We don't guide to royalties, Nikhil. Right. I think you know, they'll keep coming as we go along, right? Depending on markets and depending on as the products get commercialized.
Right. On usage of cash, I think there is significant amount of cash in the balance sheet. Obviously debt is also high. So why don't you take growth from that cash? I mean, in an interest rate rising cycle, especially because your debt is predominantly in USD. Wouldn't that help your finance cost in the beginning?
Just to answer that, obviously my cash is slightly lower compared to the last year end. Besides that, almost INR 350 to 400 crores are lying in GLS. That's a separate listed company that's consolidated along with us, I think. Those are not something that we use. In any case, Nikhil, any company of our size with so many locations around, we definitely need some cash with us to manage the day-to-day, you know, how we take care of it. I mean, at best, here and there, 100 or 200 you could manage, but that's about what we can. Besides that, you know, we're running so many enterprises across so many geographies. We need some cash. The collections keep coming in and they keep some of them remaining in the cash and bank.
Sure. Any guidance you can give on the tax rate? It seems to be running high for perhaps, if you can comment on this.
If you look at it, compared to last quarter, this is better. For the year, we're guiding around a little less than 40%. Going forward it will come lower as we go by. Cash taxes. Also the reason is we have been using our bank credit over the last two quarters in a good way. Obviously it doesn't amount to cash tax. On a cash tax basis, our tax rate was about 27%, I think. I think in a couple of years we'll be able to use up our MAT, and therefore naturally we can opt for a lower tax rate. Tax laws allow you to do that. You can opt like for a 25% tax rate.
The other thing that will happen is also as we grow our sales, our profitability, and the way we have been quite tight on our R&D spends and especially the innovation side, that should also contribute to improvement in the overall tax rates, yeah. That's how it is.
24 and 25, so the timing will be mid-30s, somewhere around there?
Sorry.
On the book tax rate in FY 2024 and 2025, it will be around 35% to 40% level?
Yeah, it should be 35 or lower, yeah. That should be around this level.
Okay.
Cash tax will be still around.
Yeah, that's fine.
20 to 22. We're not paying any cash because we have to use the MAT also, right?
Right. Okay. Sure. Thank you so much.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. Participants, in order to ask a question, you may please press star and one. The next question is on the line of Sachin Kasera from Svan Investments. Please go ahead.
Yes. Hello, good morning, everyone. A question for you, V.S. Mani, sir. What gives you the confidence in terms of being able to reduce the target of debt and, you know, meet the full year target? Is it that you're expecting significant freeing up of working capital, or you're expecting the profitability to grow significantly, hence being able to pay down the debt?
Obviously, cash comes from profits. We should be able to significantly improve. As you can see, we have guided to a higher number in terms of our turnover in the second half, so that's one part of it. As far as working capital goes, obviously if the disruptions are not so much and they improve as we are seeing clearly, it will definitely help us to reduce our debt level, yeah.
Sure. Secondly, will you be able to give us some sense what is the type of impact Monroe is having in overall profitability of the company?
Monroe as such, I mean, obviously there's strategic and all that, but we have not really started any major sales from there. To that extent, it is not really hit us in that sense. Broadly that is where we are. Okay? Maybe if it was there, some opportunities could have been there, but today it's not there. We're waiting, remediating it and hoping that we should be able to start.
Yeah. I think it must be having some impact because of the cost that you're incurring apart from remediation, also establishment cost. Is it a large number to have some impact or it's a very small number?
Remediation cost, if you recall that last year we had taken something to our P&L. We are seeing how it goes along. Maybe there could be some in future, something little bit coming more. See this is part and parcel of the business, right? I mean, obviously, and the cost obviously we're being as careful as possible now that we have it under remediation. These numbers are baked in with those numbers as well. Okay?
Okay.
I mean, this is the challenge of running a plant and having some issues. I think in the long run it will serve us well. Yeah. That's what we see.
Sure. Lastly, on the domestic sales, to sustain this 10% to 15% growth, you're looking at adding MRs next couple of years or the existing workforce and product you have in next couple of years you can pull through?
I think India, you know, we will continue to expand and grow in India. I mean, we'll give some visibility at the investor day, right, on what is the roadmap, right, for some of these geographies. Clearly India is a great destination from a growth perspective, so we will continue to expand in India.
Sure. Great. Thank you.
Thank you. Ladies and gentlemen, that is the last question. I would now like to hand the conference over to Mr. Utkarsh Gandhi for his closing comments.
Thank you, Madhurima. We'll give the disclaimer before we end the call. The document has been prepared by Glenmark Pharmaceuticals Ltd. The information, statements and analyses made in the document describing the company or its affiliates, objectives, projections, and estimates are forward-looking statements. These statements are based on current expectations, forecasts, and assumptions that are subject to risks and uncertainties, which could cause actual outcomes and results to differ materially from these statements depending upon economic conditions, government policies, and other incidental factors. No representation or warranty, either expressed or implied, is provided in relation to this document, and it should not be regarded by recipients as a substitute for the exercise of their own judgment. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, subsequent