Ladies and gentlemen, good day, and welcome to the Q2 FY 2022 earnings conference call of Glenmark Pharmaceuticals Limited. 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 would now like to hand the conference over to Mr. Ravi Agrawal. Thank you, and over to you, sir.
Thank you, moderator. Good morning to everyone and welcome to the Q2 FY 2022 results conference call of Glenmark Pharmaceuticals Limited. Before we start the call, a review of operations of the company. For the second quarter of FY 2021-2022, Glenmark's consolidated revenue was at INR 31,474 million as against INR 20,525 million, recording an increase of 6.6% year-on-year. For the six months ending September 30, 2021, Glenmark's consolidated revenue was at INR 61,123 million, as against INR 52,973 million, recording an increase of 15.4% year-on-year. Onto the businesses. First, the India business.
Sales from the formulation business in India in Q2 FY 2022 was at INR 9,689 million as against INR 10,507 million in the previous corresponding quarter, recording a degrowth of 7.8%. As per July-September 2021 IQVIA data, while the growth has been impacted by lower contribution from COVID products as compared to the last year, the non-COVID-based portfolio of the company grew 16.7% as compared to the non-COVID IPM growth of 15.3% during the quarter. The India business continues to outperform the industry growth and has grown consistently over the past several years. Glenmark is the fastest growing company amongst the top 20 companies on a March-September 2021 basis.
As per IQVIA in March, September 2021 data, Glenmark's India business recorded growth of 26.89% as compared to the IPM growth of 16.77%. The company has increased its market share ranking to 13th from 14th, with market share of 2.51% as compared to 2.31% in the same period last year. Glenmark is ranked first in antiviral, second in derma, fourth in respiratory and sixth in the cardio market in India. The company launched 10 new products during the quarter. Among key launches, the company launched super bioavailable form of itraconazole under brand Cinfac SB and Canditral SB, further building on its antifungal franchise. SUBA-itraconazole provides higher bioavailability at lower dosages as compared to traditional itraconazole. The India formulation business has achieved several important milestones.
As per IQVIA in March, September 2021, FabiFlu was the second-largest brand across all brands in India during the period. Telma became the second brand of the company to achieve sales of INR 300 crores as per IQVIA. Ascoril D Plus became the tenth brand of Glenmark to enter the IPM 300 brand league. Glenmark's novel patent-protected and globally researched sodium-glucose cotransporter-two inhibitor, remogliflozin, continues to do well in India. The company launched Remo MV, Remozen MV, which is the first triple combination of remogliflozin, vildagliptin, and metformin for type two diabetes in adults at an affordable price in October 2021. This strategy is now showing results with total remogliflozin sales, including brand extensions and combinations, growing in strong double digits during the quarter.
Phase III clinical trials for nitric oxide nasal spray to be launched under Glenmark's brand FabiSpray are currently ongoing, and the company expects to commercialize the product during the calendar year. Glenmark has an exclusive long-term agreement with Canadian biotech SaNOtize to commercialize FabiSpray for COVID-19 treatment in India and certain other Asian markets. Glenmark's consumer care business recorded revenue of INR 496 million in the second quarter. Secondary sales in Candid cream grew 46% year-on-year, while La Shield recorded its highest secondary sales in the quarter with growth of 130% year-on-year. Candid powder maintained its dominant market leadership status with a market share of 64.2% for H1. Coming to North America.
North America registered revenue from sales of finished dosage formulations of INR 7,543 million, which is $102 million for Q2 FY 2022 as against revenues of INR 7,522 million, $101 million for the previous corresponding quarter. Glenmark received final approval for clindamycin phosphate 1% during the quarter. In addition, Glenmark launched telmisartan and hydrochlorothiazide as tablets. The company filed 11 ANDA applications with the U.S. FDA, including three filings from Monroe in H1 FY 2022, and is on track to file 18-20 ANDAs in FY 2022, including four-five filings from Monroe. Glenmark's marketing portfolio in the U.S., as on end-September 30, 2021, consists of 175 generic products outright for distribution.
The company currently has 47 applications pending in various stages of the approval process with the U.S. FDA, of which 20 are Para IV applications. Now coming to RC's Asia and EMEA region, what we call ROW markets. For Q2 FY 2022, revenue from ROW was at INR 6,526 million as against INR 3,806 million for the previous corresponding quarter, recording growth of 71.5% year-on-year. The company witnessed healthy growth in the region, aided by strong traction in the COVID portfolio and also strong growth in the base business. Secondary sales in Russia grew 14% and 49% year-on-year in value terms in Russia and Ukraine respectively. As per IQVIA, Russia segment grew 22.8% in value terms as compared to retail market growth of 14.6% in Q2.
In Q1 FY 2022, the company had successfully commercialized RYALTRIS in Russia with indications of seasonal and perennial allergic rhinitis in patients over 12 years of age. The company has expanded its respiratory franchise with the launch of RYALTRIS Mono during the quarter. The company also witnessed signs of recovery in Asia with strong secondary growth, sales growth led by positive momentum in key markets like Thailand and Philippines. The growth across all the major MEA markets, including Kenya, South Africa, and Saudi Arabia was positive. Europe. Glenmark Europe operations for Q2 FY 2020 was at INR 3,383 million as against INR 3,181 million, recording growth of 6.2% year-on-year. The company witnessed a mixed performance in the Western European region.
While growth was affected by continued COVID restrictions in some countries, key markets like U.K. and Netherlands witnessed positive growth. The Central Eastern European region witnessed healthy growth across most key markets. For H1 FY 2022, the European region signed seven contracts for in-licensing products. In line with the company's global focus on the respiratory segment, the company launched tiotropium dry powder inhaler, the bioequivalent version of Spiriva HandiHaler in Netherlands, Spain, and Norway during the quarter. Further, the company launched Ryaltris in U.K., Poland, and in the Czech Republic in October 2021. The company has detailed plans to launch both these products in multiple other markets in Europe, both with our front end and with our partners. Latin America. Glenmark's revenues from its Latin America and Caribbean operations was INR 960 million for the second quarter of FY 2022 as against INR 984 million.
Revenue growth was impacted by Brazil, where the market remained challenging due to the pandemic. However, we have begun to witness recovery in this region, with most of the other markets recording positive growth momentum during the quarter, including Mexico, which grew 27% year-on-year during the quarter. Glenmark's specialty and innovative R&D pipeline. RYALTRIS is currently under review with the U.S. FDA as a treatment for seasonal allergic rhinitis in the U.S. Glenmark's response to the agency's CRL was submitted to the FDA in July 2021, with a PDUFA goal date in January 2022. During the second quarter, Glenmark received regulatory approval for RYALTRIS in Philippines and Botswana. Glenmark also received MA grants for RYALTRIS in several EU markets subsequent to conclusion of the DCP procedure in the first quarter.
Sales continue to progress well in Australia, South Africa, Ukraine, and Uzbekistan, and is gaining traction in Russia post-launch. The company launched RYALTRIS in U.K., Poland, and in the Czech Republic in October 2021. Glenmark is targeting launch in other key European markets as well as Philippines, Peru, and Ecuador in the coming quarters. GBR310. Glenmark has announced successful phase I results for GBR310 that suggests similarity in pharmacokinetic, pharmacodynamic, safety, and immunogenicity profiles between GBR310 and the reference product omalizumab, marketed in the U.S. under the brand name Xolair. The company is in discussion with potential partners and is targeting to conclude a deal before initiating phase III studies. GRC39815 is currently under phase I clinical development with a single ascending dose study in the U.S. The phase I study is expected to be completed in the next few quarters. GRC17536.
Phase IIb study was initiated in Q2 FY 2022 and is currently ongoing in India with 80 patients randomized to date. The company is evaluating further options, including out-licensing for the molecule GRC 54276. Preclinical in vitro and in vivo profiling was completed in Q1 FY 2022, and preclinical DMPK non-GLP and GLP toxicity studies are currently underway. IND-enabling studies are planned to be initiated shortly, with phase I submission to DCGI planned in Q4 FY 2022. Glenmark Life Sciences. For the second quarter of the financial year, revenues from operations including captive sales was at INR 5,618 million as against INR 5,208 million, growing at 7.9% year-on-year. The EBITDA margins stood at 30.2% for Q2 FY 2022.
External sales for GLS was at INR 3,354 million as against INR 3,213 million, recording growth of 4.4% year-on-year. The growth was impacted due to higher base of COVID products in the previous year. GLS is in the process of executing brownfield and greenfield capacity expansion projects to support strategic growth initiatives. GLS declared an interim dividend of INR 10.5 per share on a face value of INR 2 in the quarter. For further updates on the organization, please log on to www.glenmarklifesciences.com. Ichnos Sciences. For the second quarter of the financial year, Glenmark invested INR 1,850 million, which is $25 million as compared to INR 2,250 million, which is $30.09 million invested in the corresponding quarter of the previous financial year.
For the first six months of the current financial year, Glenmark has invested INR 3,467 million, which is $47 million as compared to INR 3,980 million, which is $53.23 million invested in the corresponding period of the previous financial year. For further updates on the pipeline and the organization, please log on to www.ichnossciences.com. The pipeline updates for the latest quarter of this financial year are published on this site. The key objectives for FY 2022. We expect the revenue growth to be around 10%-15% during FY 2022. We expect to sustain EBITDA margin performance at similar levels of FY 2021. We expect to reduce debt by at least INR 16 billion in FY 2022 through a combination of free cash generation and IPO proceeds.
Post FY 2022, the strategic priority is to enhance the free cash generation for further debt reduction. We prioritize this over R&D investments and capital expenditure. We also expect to close one-two out-licensing deal agreements in Ichnos during the current financial year. Some notes before we open for Q&A. Forex loss for the quarter was at INR 25.9 crores, which is recorded in other income. Gross debt for the period ending 30th September 2021 was at INR 3,587 crores as compared to INR 4,687 crores as on 31st March 2021, which is a reduction of 1,100 crores. Net debt for the period ending 30th September 2021 was at INR 2,159 crores as compared to 3,549 crores as on 31st March 2021.
The total net debt reduction in H1 was at INR 1,390 crores from a combination of IPO proceeds and internal cash generated. The company further incurred cash expenditures of INR 40 crores in ABCD Technologies, $7.5 million premium on prepayment of FCCBs, and a dividend payout of INR 70 crores in first half FY 2022. Inventory for the period ending 30th September 2021 was at INR 2,531 crores as compared to INR 2,277 crores as on 31st March 2021. Receivables for the period ending 30th September 2021 was at INR 2,810 crores as compared to INR 2,572 crores as on 31st March 2021.
Payables for the period ending 30 September 2021 was at INR 2,379 crores as compared to INR 2,238 crores as on 31 March 2021. Thus, the net working capital for the company has increased by INR 351 crores in H1 FY 2022. The total asset addition was at INR 171 crores in the quarter as compared to INR 260 crores in Q2 FY 2021. Of this, the tangible asset addition for the quarter was at INR 132 crores. R&D expenditures for Q2 were at INR 329 crores, which was 10.5% to net sales for the quarter. Before we open the floor for Q&A, I would like to introduce the management of Glenmark on the call. We have Mr. Glenn Saldanha, Chairman and Managing Director, Mr.
V.S. Mani, Executive Director and Global CFO, and Mr. Robert Crockart, Chief Commercial Officer. With that, we'd like to open the floor for Q&A. Over to you, moderator.
Thank you very much. Ladies and gentlemen, we will now begin the question answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Damayanti Kerai from HSBC Securities. Please go ahead.
Hi. Good morning. Thank you for the opportunity. My first question is a clarification on IPO proceeds. Did you receive around INR 10 billion of proceeds during the quarter, which was utilized for debt reduction out of the INR 12 billion which you earlier indicated?
Damayanti, good morning. This is Mani here. For the IPO, we received about INR 1,513 crore, of which all of it has gone in debt reduction only. I mean, and out of which, about INR 160+ crore we have spent on actually the issue expenses, plus there were some taxes on the offer for sale. Net we received about something like INR 1,350 or so. All that has gone in debt reduction. Yeah.
Okay. Remaining amount you should be receiving in the second half.
No, there's nothing to receive. No. We have received everything. That's what I'm saying, INR 1,500+ crore we received as IPO proceeds. Of which INR 1,060 crore was primary, INR 460-odd crore was for the offer for sale. I've received both the moneys. Out of both the moneys also when you do an issue, you have to spend some money on the expenses, plus an offer for sale because it's like a secondary sale. You have to pay some taxes on that. Net of all that, we received about INR 1,350 crore. That has all gone to reduce the debt only. As you can see, my net debt has gone down to almost INR 1,400 crore, so this has gone a big way in reducing that. Plus we got some internal accruals as well.
Okay. Thank you for clarification. In the second half, whatever like our debt reduction target, it will be mostly done through the internal cash generation.
Absolutely. Whatever we have said, INR 200+ crores will happen in the second half to reach our target of at least INR 1,600 crores or whatever.
Okay. My second question is in ROW market, very strong performance during the quarter. Obviously COVID could have some contribution. Can you clarify, like how much sales you have received on part of COVID products, and how is the base business going, and how should we look at this part of the business?
Hi, good morning. It's Robert here. I'll take that. Just, in short, if you look at the base business excluding our COVID products, we've been looking at around about 20%+ growth. We've seen across our COVID products very positive results across multiple markets.
We continue to believe that the base business will continue to grow in those spaces.
Okay. My last question is in U.S. I feel it's pretty good performance in a difficult environment. What is the price erosion which you are witnessing in your portfolio? When you see some normalcy to set in the market?
Okay. Look, I think, yes, you're right. I mean, it's been a very tough environment out there, and pricing has been the number one reason for us finding it extremely difficult. We found that the pricing is up to as high as 15%, around in that region, 10%-15%, the price erosion.
Sorry, it's around 15% you mentioned.
No, no. The price erosion on the entire portfolio is around 6%-7%, somewhere thereabout.
Okay. When do you expect some normalcy to set in here?
I think on the price erosion, you know, on a consistent basis, you know, for us, you know, given that we have a lower base, we think overall, you know, the U.S. will continue to grow year-over-year in the second half, right? Continue to grow quarter-over-quarter, right? Price erosion is gonna continue to sustain. It's gonna be high. I don't think you can expect, you know, a significant improvement in the price erosion environment.
Thank you, Glen. Thanks for your response. I'll get back in the queue.
Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from Saion Mukherjee from Nomura. Please go ahead.
Yes, thanks. Good morning. Glen, on the India business, you know, given that, there have been some generic competition in, Flozins and Gliptins, is that impacting your growth? Because if I look at a two-year CAGR, it's sort of in single digits. So is the growth in India slowing down? Can you just talk through what the positives and negatives are that we can think of for the India business and, you know, what sort of growth you are expecting, going forward?
I think India continues to do very well for us, right? I mean, we continue to remain the fastest growing company. We are consistently outperforming with FabiFlu, without FabiFlu, the growth numbers also remain very strong, right? I mean, that remains consistent. To answer your question about the diabetes franchise, there has been a slowdown, obviously, because of, you know, dapagliflozin being frozen and some of the other ones. We're still growing year-over-year, right, in the diabetes space. Q2 was a good quarter because the launch of the triple combination that really helped the overall diabetes franchise. I mean, we remain very confident of India, right? If you see IMS also, IQVIA puts us at 15%+ growth. It's a strong franchise, and we see those growth trends to continue.
Glen, this Remo, till how long do you have patent protection here? Will that be an issue whenever it goes off the patent?
I can't comment on specific patent expiry, but, you know, as far as Remo goes, as you know, you've already witnessed dapagliflozin erosion in the same class, right? There are lots of players who are in the dapagliflozin space, right, in the SGLT-2 space. I think, you know, we don't anticipate that there'll be a significant, you know, dent in the franchise, right, beyond a point. Obviously, growth, the extraordinary growth that we were seeing in Remo, there is a slowdown there, right, because of the dapa generic launches, and soon it will be empagliflozin and some of the others also, right? The franchise is still growing for us year-over-year and on a consistent basis.
Okay. My second question is on the U.S. market. There is a fair bit of a decline sequentially. Now, what I also noticed is that there has been a lot of product recalls, particularly injectables from the Monroe facility. Is there any challenge that you're facing on the manufacturing side? And how much of an impact those had on your revenues? You know, products like Brovana and all sort of not fail to sort of pick up. If you have any comments on what's happening on the manufacturing side and product recalls.
We had a voluntary recall that was done out of some of the products that we were manufacturing from Monroe. Clearly, this was not initiated by any regulatory actions, but it was a voluntary recall because of some quality issues that we faced. I think you know, as far as the recall goes, the impact has been minimal so far, right? I think second half, H2, you should see some of these products coming back and our market shares coming back, right, on these products.
Okay. If I can ask one more question, Glenn, if you can update on anything incremental on Ichnos as far as, you know, out-licensing or fundraising is concerned. Also, you have the biosimilar Xolair, which you have mentioned for some time now. You know, is there an issue with the product as such that, you know, we haven't seen a licensing deal there? If you can give any insight on that product as well. Thank you.
Sure. On Ichnos, I mean, there are two things, right? One is the products, right? I mean, both ISB 1342 continues to do well in clinical trials, and now ISB 1442, we are preparing for it to enter the clinics this year. We'll have two very strong bispecific antibodies in the clinics in this year. Then we have a trispecific which will come in next year. I think the platform and the technology is doing really well for us. As we guided this year, we will close one or two licensing deals, we are very close to doing one deal. And, you know, we still remain on course to doing one, maybe even two deals yet this year, right, which will bring in some upfront payments into Ichnos and some cash flows this year.
Next year, of course, you know, with two to three assets being in the clinics, that franchise becomes exceedingly valuable, right. At that point, and with ISB 1342 POC hopefully coming through, right, closer to the end of this year, we think, you know, there's a strong possibility at that point this company will get valued appropriately, and we'll be able to do a capital raise.
Okay. Glenn, are you saying that the capital raise efforts are not being pursued at this point? You're waiting for more of this to play out over the next 12 months before you again restart the process?
I mean, all I can say is for this year, till we see POC for ISB 1342, right, we will not go in for a capital raise.
Okay. Any comment on Xolair, Glen?
On Xolair, we still continue to pursue partnerships for the asset.
Yeah. Any hurdle you, if you wanna kind of call out or anything you want to share on that?
I mean, you know, we are phase III ready with Xolair. Obviously the investment has to be made. We've clearly decided we will not invest in the phase III, and hence we want to partner it out. Otherwise, it remains a good opportunity overall.
Okay. Thank you.
Thank you. Reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Good morning. Thank you for taking my question. Just the first one is on the margin dynamics. I think we saw gross margins go up, but I think the other operating expenses have increased to kind of keep the margins where they are at about 19%. Just want to understand some of the dynamics behind that.
Shyam, Mani here. Two things. Obviously, our gross margins on a historical basis or whatever, we are seeing the trend normally being at about 66-67%. When there is no COVID products, it will obviously go very close to that. As far as the other expenses are concerned, obviously we have controlled it better in the past couple of years. I believe that while it may be a little higher in the second half, it may go up to maybe 25-26, but only in the second half mainly. I think broadly you can see our EBITDA margins, I mean, staying at about 19%, yeah.
Yes, Mani. I was saying in the second half, I'm just correlating to your guidance. It's we go to 65, 66, but the 26% other expenses-
Yeah.
Do the math, it goes to about that.
Broadly, you know, we take care of our, and that's working well as per, you know, the way markets are there and how it is. I think from 19% EBITDA is pretty much on.
Got it. Helpful. Second question, just to the earlier participant who had mentioned for the U.S. price erosion at about 10%-15%. It's one of the higher numbers we have heard during this earnings season. Is it a function of our portfolio? Is it because we are the challengers and we are taking those price cuts to gain share? If you can help us understand, Bob or Glen, if you can help us understand what's happening on the pricing environment, and are we the ones that are reducing prices?
I think, Sham, Robert was referring to prices on a specific portfolio. I think overall it's in the range of 6%-7%, right? What we are seeing right now.
Okay. It's not a double-digit plus. If you see, I think, Glenn, I think some of the commentary has also been inventory destock from the channel. Are you experiencing that as well during the quarter? U.S.
I mean, I think the U.S. environment continues to remain challenging, right? In terms of the number of competitors, the new product approvals and the pricing, right? It's a very tough environment, right? It's more rapidly commoditizing, so.
Got it. This is how it's gonna remain at least in the foreseeable future at this point.
That's what we think.
Okay. Got it. Second question is on RYALTRIS. You've got approvals and maybe launch in the U.K. and Europe. Any early indications or color that you have got, and how should we look at the overall opportunity for this?
Yes. I think RYALTRIS in general, we've had very positive momentum. When you look at our launches in Australia, South Africa, Ukraine, Uzbekistan, more recently also in Russia, the momentum's been very good. We have multiple countries that we're launching as we speak. Just in October, we've launched in the U.K., Poland, Czech, and so on. Yes, I think we're ahead of the game and we expect it to continue in this way.
Got it. Thank you, and all the best. Thank you.
Thank you.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi. Thank you, and good morning, everyone. Glen, once you out-license one or two from Ichnos, then what does it mean for Glenmark's R&D investment into Ichnos on a quarterly basis? Does it bring down the rate meaningfully?
Sameer, if you see this year itself, the R&D spends have come down overall, right? They're at about 10.5%. Also Ichnos' burn rate has come down, and it's constantly on the decline because you know the big spender was ISB 830, which we were running the phase IIb. You know, since that's over, now we're running, we have one asset in the clinic and another one entering. The overall spend rate has come down for Ichnos, and it will stay lower, right? That will be the P&L impact for me, right? In terms of when you consolidate. Obviously the deals will bring in cash, right? Our cash investment in Ichnos will come down on a consistent basis, right? Starting this year.
If this year we are investing, you know, we were on a regular basis, if we were to invest INR 90 million, that'll come down by INR 10 million or INR 20 million or INR 30 million, depending on what the upfront looks like. Then subsequent years also with the capital raise and further licensing revenues, the cash investments will keep coming down.
Okay, that's great. One lead candidate that's, you know, very likely to get out licensed, that's ISB 830?
I think both ISB 830 and ISB 880, right, are the two assets, right, that we are hoping to out-license this year. We're pretty comfortable that at least one of the two will get done pretty quickly.
Okay, that's great. Glen, any thoughts on Spiriva, tiotropium for the U.S. market?
We are working on it, Sameer. All we can say is, you know, our respiratory launches in the U.S. will start from FY 2024 onwards, right? If I look at the next few years, you know, next year RYALTRIS will be a big driver to our revenues globally, right? Basically, pan-Europe, along with Menarini, U.S., along with Hikma, and in the rest of the world we'll be commercializing in multiple markets on our own. FY 2023 and FY 2024 will be big years for RYALTRIS in terms of the revenue scale-up. The way the product is doing, as Robert mentioned, right, since it's doing really well, we're able to get share. That should be a good contributor to us.
From 2024 onwards, we hope to start bringing some of the respiratory products to the U.S. market, FY 2024 onwards.
Glen, how many of your inhaler products are presently in phase III clinical?
Sameer, we can't comment. We have one which is initiating phase III or is in phase III. On the rest we can't comment.
Okay.
No, no. I mean, we have three products in Europe, right? I mean, we have Salmex, right? We have budesonide DPI commercial, we have RYALTRIS commercial, right? These three are commercial. We have one more product, which is, we're hoping to commercialize next year, which is a big product. So I think we'll have four, five products in Europe by next year in FY 2023 on the respiratory side. In the U.S. we will start commercializing from FY 2024 onwards, either on our own or through a partnership.
Okay. Sorry, can I just follow up on this? Can you disclose the name of this big inhaler launch in Europe next year you just mentioned?
No, we haven't spoken about it.
Okay. Okay, that's great. One final question, if I may. How are you seeing the input cost pressures, Glen? It could be raw material side, on energy side or freight or anything. Any thoughts on that?
Sameer, this is V.S. Mani. On the raw material side, obviously, on and off we see some uptick and, you know, some of the supply chain issues. On an overall basis as a firm, we've always taken some strategic calls to actually improve our inventories, et cetera, to take care of ourselves. I think broadly, you know, with the initiatives we do on the raw material side, we see margins very close to where we always were. As of now, at least, we don't see a big dent or anything on that. On the other side, if you ask me on the logistics side, yes, there have been increases on the freight costs, but people have been, again, a little smarter, you know. They increase more of sea than air.
A lot of, you know, efficiency improvements are there to take care of some of these headwinds, okay? All in all, I mean, as I alluded to one of the earlier questions, I mean, we are definitely there on the EBITDA margins at about 19%.
Okay, great. Thanks. That's all for now. Thank you.
The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Yeah. Hi. Thank you for taking my question. I have two questions. The first being on CapEx, if you could give, like, some outlook or guidance on how we see CapEx for the second half of this year as well as maybe FY 2023. My second question is on Ryaltris for the U.S. FDA approval timeline. Is there a broad timeline that we're expecting them to respond to our response for the Ryaltris launch?
Krish, I'll take the first question. On the CapEx, as we had guided earlier to about INR 650, between INR 650-INR 700, I think the first half clearly indicates we are very much on the same trajectory. Whatever number we had, 337 or something, so broadly we should be in and around 650 plus. Next year also we see ourselves around those levels only. As we had guided earlier, in the past we used to have a lot more, but over the years some of the expansions, et cetera, have been taken care of. At least for the next one-two years we see these numbers being there. Yeah.
On RYALTRIS, you know, with the PDUFA date being January, so we are hoping to get approval around that time frame.
Okay, thank you so much, and all the best.
Thank you. Reminder to the participants, if you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Vishal from Nirmal Bang. Please go ahead.
Thanks for the opportunity. On RYALTRIS, can you explain how is it differentiated versus other anti-allergy nasal sprays, like Dymista, and other such nasal sprays?
I mean, we have a big phase III study which has actually shown superiority of mometasone and olopatadine to the monotherapies, right, of plain mometasone and other ICS products, right, in the phase III. There is clear evidence of better efficacy, right? That's the biggest driver for the product.
Okay. Any color on how the product is doing wherever it is launched?
Yeah. The product's doing well across all the markets, right? I mean, it's
I can repeat that. I mean, I think it's, as I said earlier, you know, we've launched it in multiple countries, and with all the countries where we've launched, we're ahead of the game. We're expecting multiple. We've just launched in four more countries just in October. In the coming months we expect a similar trend.
Will you also get to launch it in India, or you've already launched it in India?
No, we haven't launched Ryaltris in India. We have a product, Ryaltris-AZ, which is mometasone azelastine in India, but we don't have Ryaltris in India yet.
Okay. Just on this SaNOtize nasal spray, when should we expect the phase III dapagliflozin on it?
We are hoping to complete the trial. As you know, the number of COVID cases have come down in India significantly, so we are struggling from a recruitment perspective. We're hoping to try and finish the trial, you know, around the December-Jan timeframe.
Okay. The approval will take longer.
Approval should be around Q4, is the worst case for us.
Okay. Is there enough manufacturing capacities here on SaNOtize Nasal Spray?
Yes, we do have capacities.
On Molnupiravir, are you working on that molecule?
We can't comment on our pipeline, right, for India.
Okay. In the previous quarter, you had highlighted two large launches that you expect to make, two meaningful launches, probably in India, I think. Have those happened or they're yet to happen?
We launched SUBA-itraconazole, which is a huge launch, first time in India. We launched Vilor F, which is vilanterol/fluticasone, again, first time in India. These are the two big ones. We launched a triple combination of remogliflozin, right? We had three big launches in Q2.
Okay. Now, one final one. In the U.S., you have launched theophylline and Brovana, but I think the market share ramp up is not good enough. On theophylline my sense is you have low-teens market share despite being the only player. Is there an issue ramping this product up?
I think, you know, as regards theophylline, you know, we're still working on driving our market shares, okay, as we go forward. As regards Brovana because of the recall that we had, you know, we need to go back and, you know, again, start driving our shares.
Theophylline ramp up any timeline from where we should be and, in terms of market share and by what time?
We can't guide to any specific timeline, but we still continue to drive our market shares for theophylline.
Okay. Okay. Thank you.
Thank you.
Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Hi, good morning. Thanks for taking the question. Glenn, on the Monroe asset, you know, it's one of our largest CapEx investments, you know, so far. From a returns on this asset perspective, I mean, how should one think about about returns on this asset incrementally going forward?
I think, Nitin, given that, you know, we have three lines there, right? We have injectables, pre-filled syringes, we have nebulizers and oral solids, right? We feel pretty comfortable. I think starting next year, right, you'll see a host of launches coming out of that asset, right, and that facility, which should justify the drive the payback, right, for our investment.
Okay.
Nitin, basically, obviously we did invest some amount of money, but the OpEx should be about $ 35 million. Broadly we see, you know, when the production ramps up and products start coming out, it should more or less take care of it, you know, very well, easily. Pretty strategically.
Right now, just to sort of take from there, the plant is losing about $30-odd million because there's not much revenue from there right now, right?
No, not all of it gets spent every year. No. See, as and when we launch, I'm just trying to tell you the OpEx what could happen in a year. A decent amount does get spent, but we do make some products in the first half. Also we did put some products in the market. I think, as and when it ramps up fully, it will take care of itself very well.
From a timing perspective, when are you penciling, you know, the business sort of covering its OpEx and delivering possible profitability to the asset?
Yeah, I think there is a good, I mean, next year we see it, you know, more or less taking care of itself.
Secondly, just sort of kicking off from there, you know, on the margins, we've been at about this scaled up to 19-odd% margins now. Where do we go from here over the next two-three years? And in your assessment, what has been the driver of the margin expansion from here on?
Nitin, if you look at it, see, I mean obviously, we've grown it well and reached it to about 19%. Hereon we'll try and add on to it, but we wouldn't like to commit to a number. I mean, the way, and also you see some headwinds here and there in terms of cost, et cetera. On a very broad way, when we do our workings and look at our plan, we see 19 to be very comfortable.
I think Nitin, to add to what Mani is saying. The key for us is our spends in Ichnos. While on the P&L level, we'll remain at around 19 odd%. The cash at the cash level. Because of our lower investments in Ichnos, the overall cash margins will be significantly higher. That's the way to think about us.
Then from a business perspective, you know, how do you see the various parts of the business in terms of where they stand? I mean, I guess with the IPO fundraise and with CapEx sort of coming off, so hopefully that the cash flow picture clearly seems to be a lot clearer than it was earlier. Now, from a business perspective, you know, how are you looking at, you know, the core business in the next three years from a scalability perspective?
I think, I mean, our view, Nitin, is this business can grow 10%-15% CAGR, right, over the next 5 years very comfortably. You know, that's a good enough trajectory for us, right? As I said, next year, you know, because of the high base of of COVID product sales in this year, right, you know, next year, you know, our growth could be challenging, but I think from the following year, of course, RYALTRIS should be a big contributor next year, right, to the top line.
I think from the following year, very comfortably with all the respiratory launches we have in the U.S. and some complex generics coming to market from FY 2024 onwards, we see this business scaling up quite nicely, you know, with a 10%-15% CAGR over the next 3-5 years.
Squeezing the last one. Glenn, the other big asset, sort of, capital allocation for us in the last several years has been the European business, where we bought a bunch of brands over the years. In your assessment, where has the business reached from a stability perspective, and where does it go from here?
I think it's doing very well for us. I mean, even this year, you know, I think we're anticipating around 15%-20% in H2 growth numbers. I think next year also will be strong. Europe is doing well for us. With the launch of RYALTRIS, that will further accelerate things. You know, it's about a $200 million-$250 million business for us. It should continue to keep scaling at a pace which is faster than some of our other geographies.
Right. Glen, in terms of your investment requirements by way of further brands or acquisitions, is that still an imperative for the business? Or, I mean, has the business reached a size where I don't really need to do that anymore that aggressively.
Yeah, I think, Nitin, we have reached definitely a critical size. As you can see in the first half of this year also, we spends on some of these in-licensing has substantially come down. I think we have ramped up well. I mean, people can take various routes to reach an end. Somebody would acquire a company, somebody would in-license. I think we have done well to put up a good business of INR 200 million, close to that. I think overall it has reached a critical stage, I think it works well for us.
Okay. Thank you. That's last.
Thank you. A reminder to the participants, if you wish to ask a question, please press star then one on your touchtone telephone. I'd like to remind all participants, if you wish to ask a question, please press star then one on your touchtone telephone. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ravi Agarwal for closing comments. Over to you.
Yeah. Thank you, moderator. We will read the disclaimer before we end. The information, statement, and analysis made in this presentation 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 those statements depending upon economic conditions, government policies, and other incidental factors. No representation or warranty, either express or implied, is provided in relation to this presentation. This presentation 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, future events, or otherwise. With this, we end the call today.
A very big thank you to all of you for joining us on the call.
Thank you very much. On behalf of Glenmark Pharmaceuticals Limited, that concludes this conference. Thank you all for joining. You may now disconnect your line.