Ladies and gentlemen, good day, and welcome to the Q4 FY23 earnings conference call of NATCO Pharma Limited, hosted by Nuvama Wealth Management. 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. Kunal Randeria from Nuvama Wealth Management. Thank you, and over to you, Mr. Randeria.
Thank you, Michelle, and good morning, everyone. On behalf of Nuvama Group, I welcome you all for NATCO Pharma's Q4 FY 2023 earnings call. With us, we have NATCO Pharma's senior management team, represented by Mr. Rajeev Nannapaneni, Director and Chief Executive Officer, and Mr. Rajesh Chebiyam, Executive Vice President, Crop Health Sciences. Over to you, Rajesh, for opening remarks.
Right. Thank you, Kunal. Good morning, everyone, welcome to NATCO's conference call, discussing our earnings results for the fourth quarter and the full year of FY 2023, which ended on March 31, 2023. During this call, we may be making certain forward-looking statements or statements about future events, anything said on this call which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I'd like to state that the material of the call, except for the participant questions, is the property of NATCO, cannot be recorded or rebroadcast without NATCO's express written permission. We'll begin with the results highlight then follow with a interactive Q&A session. As always, hope you have received our financials press release that was sent out earlier. This is also available on our website.
NATCO has recorded consolidated total revenue of INR 2,811.7 crores for the year ended on March 31, 2023, as against INR 2,043.8 crores for the last year, reflecting roughly around 37.6% growth. Net profit for the period on a consolidated basis was INR 715.3 crores, as against INR 170 crores for the last year. The increase in revenue and profits for the year was driven by business growth in the US market and growth in Canada and Brazil, where we have our subsidiaries. Our Crop Health division started off well and with strong potential growth for coming years.
For the fourth quarter, which ended, 31st March 2023, the company recorded a net revenue of INR 926.9 crores on a consolidated basis, as against INR 610.6 crores during Q4 of last year. Profit for the fourth quarter on a consolidated basis was INR 275.8 crores, as against a loss of INR 50.5 crores in the last quarter, prior year. We have shared the segmental split in our press notes. I will not reiterate the numbers, but we will take the Q&A from now. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may press star and one to ask a question at this time. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We have the first question from the line of Rashmi Shetty from Dolat Capital. Please go ahead.
Yeah, thanks for the opportunity, and good morning, everyone. Sir, my question is on domestic business. You know, we have seen pressures in FY 2023, but how many product launches we have done in FY 2023 for the full year, mainly in the cardiac and diabetic segment, if you can throw some light. For FY 2024 and 2025, how should we look at the total domestic business? Will it be still under pressure and be like a flattish growth, or we might see some sort of growth coming in? That is my first question.
Domestic is doing well. As of this year, I think the numbers obviously are a little lower than last year. We had a one-time return of one particular COVID product, so that's the reason why. We have a run rate of about 100 crores per quarter in that business. I know it's not grown. I mean, we are also, I mean, we're looking at different things that we could do. One is an acquisition mode. We've been talking about that. I think, we are looking at those assets, and also I think organically as well, we have about 10-15 launches a year. In terms of, what do you call, how many products we launched last year? We launched total about 11 products last year. I think, Does that address all your questions?
Yeah. 2024 and, in 2024, we will be able to see growth, right, on FY 2024?
I think so. I certainly think so. I believe that we should grow at about 8%-10%. I think. Because we have cash on books, we are looking at some strategic opportunities with, hopefully, with we do a small acquisition, you know, we can, I think we are internally targeting in co-- acquisition plus organic growth, I think we should compound that business around 20%-25% a year. I think that is the internal target. I think we're working on that target.
Okay. Sir, on API business, you know, are we using it more for the captive consumption or that, you know, our business has only dropped, and how should we look forward for the API segment? My last question is that whether the buyback effect has already come in or it will be coming in FY 2024 balance sheet?
Okay. Yeah, let me answer that question. API business has de-grown slightly, this year I think it should do well. Our internal projection is that our business should grow around 20-25% this year. Second question you had was on the buyback, correct? Yeah.
Yeah.
Buyback, I think a lot of the buyback has happened in the April, May month. We have closed the buyback. We have bought back almost 35 lakh shares. Our equity was INR 18.25 crores, now it's dropped to INR 17.91 crores. 2% of our equity, nearly 2% of our equity has been bought back, and it has happened in the April to June quarter.
Understood, sir. Thank you so much. That's it from us.
Thank you.
Next question.
We have the next question from the line of Atharva Bhutada from Purnartha. Please go ahead.
Thank you, sir, for giving me the opportunity to ask you this question. After Revlimid, when Revlimid sales slow down or there is heavy price erosion, how would the company look forward to increase international sales?
We have multiple strong strategy on international business. One is, I think we have subs, which we didn't have, which gave substantial amount of revenue. I think when you look at this year's balance sheet, our subs have contributed nearly INR 555 crores of revenue. If you net off the inter, the sub transfer, the actual sale is INR 375. If you look at the front-end sale that we have had, we've had about INR 555 crores. The major highlights are Canada has done almost CAD 40 million. Brazil, I think, has done about INR 20 million odd. I think the subs are doing extremely well. The future of business is the subs.
As we have, you've seen in our press release, I think we are setting up a sub now in Colombia. A few weeks ago, we announced we're setting up a sub in Indonesia. We're also looking to buy an asset in the U.K. I think that's the strategy that we're doing on the international business. We're trying to globalize and use the R&D pipeline that we have to extend multiple number of markets so that we can extend the base business. Couple, we have very good filings that we have done in the last few months. I mean, you know, it's very hard to get, you know, you know, sole FTFs and all. As you know, it's a very competitive business, but I think we've pulled off Olaparib Lynparza, first to file.
It's a joint venture with Alembic. Another good filing we have is the Ozempic filing with Mylan on semaglutide. That's a, you know, a diabetes product, which is doing extremely well. Some of the strengths are shared first FTF, but one particular strength, we have sole FTF. That's another very good one. In the last 12 months, we have delivered 2 sole FTFs, which is very interesting. I think the way this business works is honestly, I mean, you got to, you know, plug it along and you build a global business and keep trying different things. You know, over the next... I mean, we're spending very aggressively on R&D. We look at the cash that we have generated, I think we spend a lot of it on R&D use.
Our raw material consumption is high, our other expenses on biostudies and chemicals are high. We're putting, you know, whatever surplus we have back in R&D, and, you know, hopefully, we're able to strengthen our pipeline. Yeah. Okay?
I have 2 more questions. One more regarding DASH.
Just one more, my friend. We want to give everybody a chance. Yeah, one last one.
Can you speak up, please?
You're speaking soft. You can speak a little louder, please.
I had a question on DASH. You bought DASH, so I just wanted to understand how are you going to scale it up in, like, on the sales force in U.S.?
Dash is, you know, our U.S. front-end setup. Dash, right now, what we're doing now is whatever pipeline ANDAs that we have, which have been dormant in our pipeline. As you know, a lot of our old strategy was, you know, doing partnerships. Some of the older ANDAs, which we are not active, we'll use Dash to relaunch those products. I think the sub should... I mean, right now, it's not making money, but I think we believe in the next one, two years, you'll see the benefit of our own front end and some of our products, you know, will go through the subsidiary. I mean, some complex generics we're doing through partnership, but, you know, we're gonna do a mix.
I think some we keep with our own sub, and some we are launching through partnerships. Thank you.
Okay. Thank you.
Thank you.
Next caller, please.
Yes, sir. We have the next question from the line of Anuj Momaya from Ideal Investments. Please go ahead.
Thank you, sir, for giving me the opportunity. First question is what is the inventory scenario in the agrochemical business?
Agrochemical specific inventory. I think we've now liquidated a lot of the inventory. We sold about INR 40 crores last year. As of now, to be precise on what's our inventory on agro, it will be about INR 100 crores change. I don't remember exactly on the dot. It's in that region, INR 100-110 crores region.
we are confident of able to liquidate?
Sale happens only in June and September quarter.
In the curry season, we'll be able to liquidate this?
I think so. I think so, yeah. We are, we are right. I, we believe that we'll be able to liquidate. The traction is very good. I think we got the approval very late, and by the time we could, you know, set up the whole sales channel and all, you know, we didn't have a chance to, you know, exploit the opportunities that we could have. Now that I think everything is clear, we have set up everything. We're present in all the major states, and all the sales is, you know, channels are well oiled. I think we should do well, and I think a lot of that inventory you will see will go away in the next few months. Yeah.
You have to remember, like, because of sale, and by March, this inventory will be high, but a lot of this 70%-80% sale happens between June and July. You need to stock up in March and then get liquidated between June and July.
Okay.
That's the nature of the business.
Yeah. My second question is on Revlimid. We had, I think, a step up in the market share in the year 2. This quarter, is the only supply that you have booked, or even the profit share has been accounted for, or we'll see the profit coming in the next quarter?
We have booked the supply, I think we also booked. We had to pay, our raw material supplier a little bit, so as part of a pre-agreed agreement. That is booked in the raw material. We have not sold all the quantity. I think we have sold about quarter of what we got allocated so far. We still have 75% left. I think around that, in that region. I think we'll sell it off, I think, in the next couple of quarters, June.
We'll be recognizing the profit share along with that?
Yes, absolutely correct. Yes. I think, but we have a lot of it still left, so I think, I think we will do well in June, and I think some still in September. I think that's our expectation.
Thank you. I have further questions. I'll come back.
Okay, fine. Thank you.
Thank you. The next question is from the line of Ritika Agarwal from ValueQuest. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question. My first question is on gross margin. This quarter, we've seen a significant gross margin decline QOQ as well as YOY. Any major reason for this?
Yeah, sure. I mean, I think as the gentleman asked me earlier, there was a one-time INR 50 crore charge to our, we had to pay our supplier for the success of our first file. I think that was pre-agreed in the contract, so that is reflected in the consumption. Additional INR 40-50 crore, I mean, we had a lot of R&D and bio studies that we have spent, and then we had some, you know, regular stock write-off and all. I think it's par for the course, I mean.
Sure. This one time, INR 50 crore charge is for Revlimid, is what you alluded?
Correct, correct, correct. Absolutely.
Right. Okay. Secondly, as in the cash flow, we see some intangible asset purchase of INR 50 crores. What would that be?
Intangible assets is about INR 50. That is the goodwill on the acquisition of DASH Pharmaceuticals.
Okay. sure. Lastly, what would be the net cash on our balance sheet currently?
As of March 31, 2023, the cash is INR 1,089 crores.
Okay.
We have borrowing of about INR 165 crores, of which about INR 95 crores is, bill, foreign bill, discounting. It's 165 minus 95. INR 70 crores is the actual bank borrow. Okay?
Sure. Okay, thank you so much, sir.
Thank you.
Next call.
The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks for taking my question. Raju, just following up on the previous question about the expenses. Even if we account for the INR 50 crore one-off you talked about in the raw material costs, I mean, versus our historical numbers and the raw material is little on the lower side. I mean, the raw material consumption is little on the higher side. Anything else that you want to just highlight, given the fact this is such a large component of, you know, of U.S. sales in this number?
No, I think. See, there are two, three things, Nitin. I think what we're doing is, I see, the, I get to ask this question even in the last call as well. I think the question that NATCO is facing is we, what do we do with our surplus, right? I think, I have decided that I'll use the surplus for spending money on bio studies and new exhibit batches. I think it, because of the strength of the balance sheet, we're using this money for, you know, strengthening our pipeline. I think as a few minutes ago, I told the other caller as well, that we delivered two, you know, interesting FDFs. I think this is where you have to spend your money on, and I think a lot of the money is geared towards exhibit batches and bio studies.
I think that's where we are spending our money.
Raju, how much did we spend on R&D this year on the revenue front, and how much would be for the quarter, if you can give this number?
I think, see, there are two, three ways. Generally, our R&D is about 7%-8%, and the exhibit batches and all are reflected in the consumption and other expenses.
7%-8% of the revenues you booked this year is R&D?
Yeah, yeah, absolutely.
These are on these elevated R&D, revenue numbers?
Yeah, on the higher revenue number, no?
Yeah. I think we had about a INR 27 crores revenue, so about INR 200 odd crores is what we spent on R&D this year, roughly?
I think, let me get my number here. Just give me 1 second, please. I think 8% of our revenue is what we have spent on R&D, yeah, as of this year.
Okay, thanks. Secondly, on the crop protection, you know, barring the inventory, dis- liquidation that you will do on CTPR, any more color on how do we see this business over the next two, three years?
I think the business should do well. I think we just got started. I think we did only INR 40 crores last year, but this year, I think our projections are we should do about 150+. I think we're targeting 200, but I think 150+, I think conservatively is what we're looking at. We have other product ideas, and I think a lot of these filings are being done this year. This year will be the year of CTPR. I think the full value of CTPR, I think we will to realize in this financial year. Subsequent years, we have a pipeline. I think we are hoping that this business grows to about 10% of our sales. I think that's the stated goal in time.
Okay, thank you. I'll come back later.
Thanks. Thanks.
Thank you. The next question is from the line of Rajat Setiya from ithoughtPMS. Please go ahead.
Hi, thanks for the opportunity. Sir, with regards to our base business, which you have been mentioning in the past, because that it is generating a PAT of around 40, 50 crores on a quarterly basis. How was that number in this year? Could you quantify the total number for the full year, last year?
I think that's a fair estimate. I think it's the same number. I don't think any different. I mean, I think it's in the same range.
Okay. How do you see this base business, which is basically ex-enzalutamide, I think everything else? How do you see this business growing over the next 2, 3 years?
I think that's what we are trying to talk about. I think what we're trying to do is spend money on R&D so that we can strengthen our subs, and hopefully that business takes off, and then that can strengthen our base business. We are spending our money on doing more filings. I think, for example, our stated goal is U.S. certified 8-10, Canada, we need to file about 8-10, Brazil, we need to file 8-10, which are the three key markets. In addition to that, we had to launch about 10 products in India. That's a stated goal.
In terms of where do we see this growth coming from. We personally believe, I think once you strengthen this business and build a pipeline, including a combination of both FDFs and the base business, I think we have mentioned about two FDFs that we have achieved in the last 12 months. I think we target similarly another. The key here is you build a strong pipeline in multiple markets, and then you target about 8-10 FDFs, or niche or hard-to-do generics, and somewhere in that, I think you will get some success. I think that's the strategy.
Sure. In this base business, do you expect any products wherein profits can further fall because of price decline or competition?
Which product you're talking about?
Not any specific-
The base business, you're saying?
Yeah. This base business, I mean, the business as a whole, used to generate INR 400, minimum INR 400 crores of profits, in a 5-year time period. Continuously, it has done that. Now it is probably down to INR 200 crores. Now can it further go down, is what in the immediate future?
I don't think so. I think if you look at it, we have, you know, we've built a sub business. The subs are doing about, you know, INR 20-25 crores of quarter, I think that's that has done well. I see another big change is the agros. agros losing about INR 45-50 crores a year. We won't lose INR 45-50 crores this year, because obviously, the launch is there and the full year advantage is there. These are the major changes. Domestic, you know, in combination with acquisition and growth of 10%, I think we should be able to see some positive cash flow. The objective is that we build this business back to about INR 100 crores type of PAT, minus the bigger products.
I think that's the objective, and we have the pipeline, we have the filings. I think we are confident that we'll be able to pull this off in the next few months.
Sure. With regards to the acquisition, you mentioned that with the acquisition, growth in the domestic business can be 20%-25%. Are we targeting just a INR 50-60 crore kind of acquisition? Isn't that too small?
I mean, we look at different acquisitions. We're not closed anything, so I can't really comment specifically on a particular transaction. I think that's the objective. I think, yes, we're looking at such transactions, yes.
One small question on the subsidiary side. In this quarter, if we just reduce, if you just deduct standalone numbers from the console numbers, the EBITDA for subsidiary is coming around INR 11 crores. I mean, it has declined a lot. Is that understanding correct? What is the reason, if that's so?
I don't think the EBITDA is INR 11 crores for the subsidiaries. If I can read my numbers in my sheet here, the profit for the subs, this for Q4, is INR 28.97 crores.
You're talking about, EBITDA?
Yeah, this is PBT, boss. PBT.
PBT. Oh, oh, all right.
If you offline, you can speak with IR and get a clarification. Yes. Yeah?
Okay, sure.
Thank you. Thanks a lot.
Thank you. The next question is from the line of Ishita Jain from Ashika Group. Please go ahead.
Hi, thanks for taking my question. What was the percentage R&D spend in FY 23, and what is your guidance for the next 2-3 years?
I think, last year was about 8%. I think we believe we should spend. I want to spend about 10% this year. I think that's our guidance.
Got it. What is the timeline on semaglutide? Is this an FDF? If you're going to do semaglutide, are we also looking at Wegovy and RYBELSUS?
We're looking at everything, but as of now, I don't want to speak about that. I think I can only speak about the one that we have filed. Timeline, I can't give it, all depends on the patent litigation, so I can't answer that question at this time.
Understood. Just one last, you mentioned that there is one product that is not partnered, and we are going solo on it. Are you disclosing what product that is and its timeline, if any?
I don't know which one I'm talking about. Generally, I'm saying some products we are going solo and some we are not partnered, but as a general strategy of ours, it's not specifically one particular product.
Oh, understood. Yeah.
If you have seen our investor presentation in our 4th, to give you an example, like Lonsurf, we are litigating, it's a shared FTF, it's with us. We have First-to-File on the Idelas we have sold FTF, and we will be doing it ourselves. I mean, these are examples where we're doing it ourselves. It all depends on the product, because some of them are already partnered with us in the past. You know, those are all contractually obligated. The newer ones, we're doing a mix of this, direct and partnership.
I got it. Got it. In these direct ones, we are expecting to set up front-end, this is mostly for regulated market, right?
Yeah, you know, the front-end is already there, no. I think we spoke about DASH functions, I think that's the front-end.
Right. Right. Understood. Got it. Thank you so much.
Thank you. The next question is from the line of N.K. Arora, an individual investor. Please go ahead.
Congratulations, sir, for a good set of numbers. I just wanted to know, sir, what would be the likely % growth in revenue and profits for the next financial year?
Thank you, Mr. Arora. I think we should do well, Mr. Arora. I think we'll have very good growth this year. How much in all? I don't want to say it at the beginning of the year, because I think once the year progresses and, maybe in the next call, I'll give some, you know, we can get some clarity on how it is here. I think very clearly it will do much better than this year. What percentage growth? I don't want to say anything right now. I want to reserve that comment for now. It will do well. I think we'll do extremely well.
I think that's our expectation, because of, you know, our, launches in the U.S., and also because the agro has turned around, and I think with the stabilization of our subs, and also our domestic also should be stable. I think all these factors will contribute, and I think we should do well.
Thank you. Thank you so much.
Thanks. Thank you. Next follow, please.
Thank you. The next question is from the line of Ahmed Madha from Unifi Capital. Please go ahead.
Yeah, thank you for the opportunity. Just I wanted to understand that this year, for the sub, we did 550 crore top line. Last year, FY 2022, how much was that number?
Give me one second. I need to look at my papers. Give me one second, yeah?
The top is INR 375.
I think gross is INR 555 crores, and INR 375 is the net, because you have to deduct the sale that you sent from India to the South.
Okay.
Okay. The last year, if I may, give me a moment. I only have the net number. It's INR 181 crores.
181. Okay, fine. Got it. The second question is on the nature of the 50 crore charge which we took. Can you explain the detail? I mean, little more clarity, what was the 50 crore charge for?
INR 50 crore charge is that what we pay the raw material supplier for. We said that if we get success in our product, we will share a certain amount of money with them. I think as part of the pre-agreed agreement, we paid them that INR 50 crore.
Okay.
to our API supplier.
Okay, got it. Fine. Fine. That's it from my side. Thank you so much.
Okay. Thank you.
Thank you.
Thanks a lot.
The next question is from the line of Cyndrella Carvalho from J M Financial Limited. Please go ahead.
Thanks for your question, Rajeev. You are taking some time for the guidance, and you're saying that, you know, it will be excellent growth in FY 2024.
Sorry to interrupt. Ms. Carvalho, your voice is not clear.
Is this better?
There is a bracket also. Please use your hands.
Is this better?
Yes.
Is this better now?
Please proceed. Yes.
Yeah, yeah. Thank you so much. Coming back to the guidance part, you're saying you might take some time more, for us to come up with a growth guidance. However, just to confirm, the volume share increase has been already taken for Revlimid, and that will meaningfully play out in the first and the second quarter. Is that correct understanding, Rajeev?
That's absolutely correct.
Okay. Any color on the U.S. environment that you would want to provide, excluding the generic Revlimid part?
I'll give you a general perspective, Cynderella. I think what you need to understand is you cannot ignore U.S. U.S. is 50% of the U.S. generic business. I think any company which is operating in this space has to be present in the U.S. Regarding the challenges in the U.S., I mean, you're going to have some good years, you're going to have some bad years, and I think you need to be present and you need to play in the game. I think that's when you get the opportunities. The real value in the U.S. is when you do hard-to-do generics or niche generics, and I think that's always been the position of NATCO, and I think that's where you get the upside. That's how you do this business.
I think you have to be present, you have to have a basic portfolio, you need to have a pipeline, and somewhere, you'll get a hit somewhere. I think what you just have to. It's a waiting game. You just have to be patient, and you have to be, you just have to wait. Somewhere in your pipeline, you'll get what that hit is and all, I mean, you know, I can only make an educated guess, and I can speak about it in a call, but what will come through, it nobody knows. I think it's a, it's still a good business, and I think you can't discount that away.
Okay. I was asking more from a pricing environment.
Pricing environment, you know, competitive. I, in a way, I've answered your question. I'll, let me rephrase that in a way that, I mean, hopefully, I, you can understand what I'm saying. In a multi-generic source, there's no money. It's the honest truth, and I think there's, that's the way it is, and that's the nature of the beast. What I'm trying to say is that you have to be present in the business, and there's always opportunities where somebody else doesn't turn up, and then suddenly you know, you get an upside. You do a niche or hard-to-do generics, there's money to be made. The environment is what it is.
I mean, you can't change it. I think we have spoken many times about this, that the consolidation of the buyers, the number of Indian suppliers that are there, it's a very competitive business. You need to find a sweet spot. I think that's the trick in the business here.
On the subsidiary side, on the Canada and Brazilian, would you like to help us understand how should we look at FY 2024 and 2025? Number of launches, anything improving there in terms of profitability? How do you see these subs performing?
I think the subs have done well, and I think we're very happy how they've done. It's. I think we expect that this business will grow around 15%-20% in the coming year. I think we've spoken about the numbers. I think we did about CAD 40 million in the front end in Canada, Canadian. I think $20, 21 million in Brazil, I think. I think that should grow around 15%-20%.
Our core launches in these subs, how are they performing? Have you able to get approval for all the core launches, or we are still awaiting some key approvals?
Which sub, miss? I'm sorry, I didn't catch that.
Canada and China also, we were planning.
I think we have a steady pipeline. I think we file about seven to eight products. I think, you know, we do litigation, so I can't specifically tell you which product, when and all. I think Topomed, I can't answer that question. I think, we are expecting that will grow around 15%-20%. I think that's, I can answer that much.
Okay, thank you so much. I have more questions. I'll call back in the queue.
Thank you. The next question is from the line of Rushmic Oza from Nine REZ Equi Research. Please go ahead.
Yeah, thanks for the opportunity. Sir, just to, you know, correct myself, we have sold around 25% of our allocated share of Revlimid, and 75% is still pending. Is it right?
Absolutely, that is.
Can you give a little bit of understanding out of the 75, how much could come in June quarter and, how much could come in, September quarter?
I think a lot of it will come in June, and I think some of it will come in September.
Okay.
A lot of it will be captured in June and the September quarter. I think that's our expectation.
Okay. sir, as more players enter this space, you know, from here till January 2025 or maybe FY 2025-2026, any color on what kind of market share you want to, you know, retain or gain, in this Revlimid product?
It all depends on how the market players are acting. You can aspire for something, you know, how the market players are. I can't predict the pricing environment a few years down the line. I can't answer that question. Sorry.
Okay. Thank you, sir.
Thank you. The next question is from the line of Rohit from IPMS. Please go ahead.
Hello. Am I audible, sir?
Yes, please proceed.
Yeah, please go ahead.
Sir, in the answer to earlier participant question on your base business, you mentioned that the target is to get to from the current profitability of about INR 40-50 crores of quarter to about INR 100 crores. What is the broad timeline that you're thinking on this? I mean, is it in the next in this next couple, two quarters, or, like, how are you thinking about this?
I think it'll take time. I think our view is that, you know, agro should do well, I think that's it. I can only tell you, I mean, when and all, you know, it's very difficult to answer such questions, but I think what I can tell you is the agro should do well. I mean, I can tell you what factors will get to that number. I think agro should do INR 150-200 crores. Our domestic has to grow around 15%-20%. Our subs have to grow around 15%-20%. When you say, with building a base business, then you need to have the whole base grow and your multiple country strategy should work. I think you just have to keep watching.
I think I expect in the next 1.5 years, 2 years, I think that's the aspiration, I think, based on these assumptions.
Sure. Just, like, slightly longer term in terms of, I mean, obviously, our strategy is to sort of go for some new products and done very well in the last decade or so in that regard. Moving ahead, I mean, I don't know how much you can share, but as you go beyond 2025, 2026 calendar year, how do you see, I mean, if you can talk some of the opportunities, you were quite bullish on the pipeline in the last two calls. If you can talk a bit about that, whatever you can share, that would be really helpful. To think about what can be the next big, I mean, thing for NATCO beyond Revlimid, yeah.
I think we spoke about that. I think, you know, I gave examples of semaglutide. I gave example of olaparib. I think you need to understand, I think our company has this innate ability to identify good opportunities and deliver, and I think we've done that successfully in the last decade, and we reach this stage every day with the pipeline. The problem with these doing these hard to do generics, complex generics, which are linked with litigation, is you can't give timelines that this launch will happen at this particular date and this particular time, because there's a lot of factors that play a role, you know? I think what I can do is file, I think objective internally is that we should file seven or eight or 10 of these, and hopefully we get three or four right. I think you're set.
I think let me Okay, I'll challenge you the other way. I think you can't tell the timing, but if you get it right, it'll be, you'll do well. I think that's how you have to look at this. If you look at the competitive nature of the generic business, you need to understand that you have to deliver these niches, and that's where you get the kick in the earnings. Otherwise, you want to say that, I mean, people are keep asking me on base business growth and all. Base business will only get you like, you know, it'll be very, you know, meager earnings. It's not gonna change the needle dramatically. I think you need... That is important.
I'm not saying it's not important, but you also need to deliver the niches, and if you don't deliver the niches, you'll never get that growth. I think that's where we're good at, and I think that's what our focus is on. We need to balance, of course, you know, the base. But when you do a product where there are 15 generics, I mean, how much money you can truly make? You can't really make much money. The same impact everybody's having in our business today, I think because of the high base effect, even if you get on, you know, 10 or 20 of these launches where you are in hyper competitive market, it's hard to do well. You need to deliver something special as well.
I think you need to balance it out, and I think you need to look at the business in two ways. You got to have your niches and your hard to do generics that you need to deliver, and also you need to build the base. I think you got to judge the company on both. I think that's how I would look at the business.
Sure. Very helpful, and all the very questions, very clear on your side. Thank you.
Thank you. The next question is from the line of Mitesh Shah from Nirmal Bang Securities. Please go ahead.
Thanks for taking my question. I have a question about R&D. You said 10% of sales, so it would be like almost this year, 8% would be around INR 200+ crore, then you expecting would be INR 350+ crore R&D next year?
I think, depending on how we do well, I think I want to spend more than 300 crores. I think that's the objective. I want to spend 50% more than what I did last year, I think it all depends on cash flow. See, I measure the R&D based on the cash flow we have, right? I think we have good cash, we spend more. If you have less cash flow, then you kind of, you know, spend less and then try to do more partnerships. I think it's all a function of cash flow, my friend.
Got it. Got it. Any about the Lenalidomide again, that you said you sold 25%, so that you supplied or that is booked profit by the partner?
It's the sale that was booked by our partner.
Got it. Got it. That's it from my end. Thanks.
Okay.
Thank you. A reminder to the participants, anyone who wishes to ask a question, may press star and one now. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks. Rajiv, on the R&D, now, the R&D spend that we are taking are almost all of them towards the US, or there is a considerable amount you're looking to spend now towards the non-US markets also?
No, I think we're spending in all the major markets, Nitin. I'll give you an example of what I'm trying to do, and I think you'll get a feel of, you know, what we're trying to attempt. Let's say we're doing this one particular oncology product. I don't want to reveal the name, but to give you an idea of what we're trying to do. The bio study for this will cost you about, let's say, $2 million. If you want to do a bio study for Canada, it's $2 million. You want to do a bio study for Brazil, it's $2 million. You want to do a bio study for Europe, it's $2 million. 2 plus 2 plus 2, $6 million. One product, I'm spending $6 million.
The reason I'm doing that is because I believe this is a very niche, smart product, and I think our expectation is when the launch happens, we will, you know, we'll do well with it. Will I be right? I don't know. These are the gambles that we're trying to make. We're spending $6 million on 1 product, we identify 5 products, and, you know, which are difficult to do, then suddenly you're down $20 million-$25 million of your R&D money on this. I think, again, it comes back to the original question, Nitin, what do you want to spend your money on? Do you want to spend on a simpler ANDA, where you know for sure there's going to be 15 people?
Do you want to spend on an ANDA where you know for sure there'll be only 2 or 3 guys, but the entry bar is higher? I'm choosing the latter as opposed to the former. I think, am I, will I be right? My senses, I'll be right, because again, you can always argue that there's volatility in the earnings, but I believe the real value of the business is here. I think if you do it well spread over multiple geographies, I think you will get a very consistent set of earnings. I think that's what I will personally believe. I think. You want to chart your own course.
I think it's very important that you don't spend money on things where you believe that there's going to be a lot of competition, because in the end, what is the point of spending money on something that's not going to make too much money, right? I mean, you can always have the basket strategy and all. I think we can always play that argument, but the value in the business doesn't come from basket. I completely... Basic basket is required, of course, when you go to customers, and it is absolutely understood, but the real value in the business is doing the hard generics. It's not in the me too.
I know it's a little different from conventional wisdom, but I strongly believe I think you'll never get a bump on your earnings if you do that.
No, that's agreeable. Secondly, you know, just on that you mentioned that you're looking to do 10 filings in U.S., 10 in Brazil and Canada. I presume there'll be a significant overlap in these products, right?
I think that's where the synergy comes from, Nitin. You spend, let's say, INR 3 million, INR 4 million on the exhibit batch, and you spend INR 2 million, INR 2 million, INR 2 million on the bio study. Suddenly you're spending INR 10 million, but you're getting three markets. Each of these countries requires you to do the, you know, with the local RMDs. I think that's the challenge. I think that's how you do this.
Lastly, on, you know, in terms of, your filings, or rather, possible launches over the next maybe 2 to 3 years, you know, what is the visibility in terms of incremental launches that, which could be say, $10 million-$20 million plus launches, which can happen? How many such launches you can do, I mean, which you have visibility on over the next 3 years or so?
Some we do and some we don't. I mean, the smaller launches, I mean, we have a settlement on Tracleer, which is it's I don't remember the sale of the product. It's below $50 million type of product. Then we have a settlement on idelalisib, which is also below that size. I think you need to have a pipeline of these, and I think we'll update our investor presentation with start these filings. These, I mean, we can't discuss the pipeline, what you call time, the time of the launch, because they're bound by confidentiality. We'll actually disclose it in our presentation. Will that move the needle, Nitin? Yeah, a little bit, but not enough to cause a disruption in the earnings.
I think our base will become so large that a $10 million doesn't make too much difference. You need to have a whole pipeline of these ideas.
Absolutely. This last one, on the base products, which are there in the U.S., ex of Revlimid, I mean, have you seen any change in the dynamics, any improvement or any competitive dynamics on the existing products, ex of Revlimid in the U.S.?
I think the products where you are niche and all, they're doing well, Nitin. I think there's a limited amount of competition, I think you're doing well. Products where you have multiple generics, there's enough competition from India. People say the pricing environment has changed and all. I'm not a big believer in it. I think somewhere in one product and here and there, you'll see, but overall, the in a multi-generic environment, you can't make money in it. It's occasionally you'll get one hit here or there. It's a mathematical possibility, but I personally, I don't believe it. I know it's contrarian to everybody, what everybody says on the street. I don't, I do not believe that you can make money on these products. You will have it as a basket, as a...
Maybe pay for the taxi overhead or something like that, but these are not disruptive or great products, which you, where you can stand to make money. I disagree with that position.
Thank you.
Thank you. The next question is from the line of P.D. Gupta from Investors Forum. Please go ahead.
Hello, good morning. Are you hearing me, sir?
Yes, we are, Mr. Gupta. Welcome.
Good morning to everybody, and for the given opportunity. Sir, now, specifically, I want to know, what is the contribution of Revlimid in our top line as well as bottom line for the quarter and year-ending March 23?
I will not answer that question, Mr. Gupta. I don't want to answer because it's competitive information. I don't want to answer that question.
Not available, sir. Can I try to get it on the phone?
No, no. My friend, I'm not gonna answer. I think a lot of times we ask. You're just giving away this competitive information. I don't want to answer that question.
No idea, sir. I have one more thing, sir. Actually, other companies are also entering U.S. in Revlimid recently. I was going through a detailed report on Revlimid in U.S., and I got one information in that during the calendar year, not financial year, calendar year 2025, the contribution of our NATCO Pharma will be around $1.1 billion. Is it correct? Calendar year.
I don't know. I don't want to judge pricing situations on that, but I can't answer that question, Gupta. Sorry, I can't.
Is it possible?
I don't want to answer that question. I, you're asking me to predict what happens in the future, which I refuse to do that. I'm sorry, sir, I can't answer that question.
Thank you. Thank you. Okay, thank you.
Okay.
Thank you.
Thank you.
The next question is from the line of Rajat Setiya from ithoughtPMS . Please go ahead.
Hi, thanks for the opportunity once again. sir, with regards to Revlimid, were we able to sell our allocated volumes in the first 12 months?
Last year's quantity you're saying, or this year's quantity you're saying?
The first 12 months cycle that began.
It's all done. It's all done.
We were able to sell completely whatever we were allocated, right?
What was allocated last year, it's done and dusted. What we're selling now is this year's allocation.
Okay. For this year, do you expect the volumes to be, I mean, is it safe to assume the volumes can be 2x of the last year?
It'll be better than last year, and our earnings hopefully will be better as well. It all depends on the pricing. Yeah, I think so. We should do better.
Okay. I mean, in terms of volumes, like, we know where we are gonna end, which is probably 1/3 of the overall market, and we started with somewhere mid-single digits. Going by that, is it now safe to assume that we'll be doing 2x of the volumes, 2x volumes of the last year?
I can't answer that question, my friend. I can't answer it. I can't give any guidance. Sorry.
... regards to the, again, on Revlimid only, with regards to booking the manufacturing sales in Revlimid, did we do that in Q4, or did we do that in Q3?
We already booked the manufacturing, in the last financial year. Manufacturing and the raw material, cost.
Yeah. For the second year, I mean, did you do that in Q4 or Q3? Second year of Revlimid sales.
For this, I think we did part in Q3. I don't remember exactly. We did some in Q3 and some in Q4. I mean, Q4, obviously, the expense was booked. I can't recollect much. It's somewhere in between.
Okay. All right. All right, sir. Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Cyndrella Carvalho from JM Financial Limited. Please go ahead.
Yeah.
I am your voice.
Yeah, go ahead, Cynderella, please.
Yeah. Yeah, just wanted to understand, initially, we were looking to acquire, do some acquisition in domestic market, while now you're saying that you want to invest more in the R&D side, globally. Is there any change in any thought process from us?
No, I'm not saying. I'm saying both, Cynderella. I'm not saying only R&D. I'm spending money looking at acquisition and also looking at R&D, both. I never said that. It's not or.
Understood. Is there any update on the local, I mean, domestic side? Are we looking at any of the brands? Is there anything?
We are looking at different transactions. Hopefully, we'll be able to get something. I think as of now, nothing.
The idea again remains around INR 150 crore-INR 200 crore kind of, piece that we are looking at in terms of acquisition, domestic, the size?
We're looking at different transactions. I don't want to answer that question directly. I think we're looking at different sizes. I think we'll come back once we consummate something. Yeah.
Okay. Thank you so much.
Thank you.
Thank you.
The next question is from the line of Mitesh Shah from Nirmal Bang Securities. Please go ahead.
Thanks for my question. Okay. sir, I just have 1 question on the Revlimid. Revlimid, what is the pricing scenario versus last year and this year, that you already have booked 25% of profit, might be you worried about that?
It's doing well, my friend. I think I can't answer that question directly, but we are happy with things that are. I think things are okay, and I think we should do well.
Got it, got it. Again, following the last participant questions, I think, as you said, that the competition increasing, I think most of the players are looking on the specialty or the complex products. Do you think so that the, still the opportunities are large for the complex or the niche products, or it will be eventually competitive again, like the normal one, and the opportunities would be reducing?
You see, the question is, you can look at something, doesn't mean that you'll deliver, no. There's a difference between looking at something and delivering it, right? I think the guy who delivers is where is the person who's going to do well. I think there's a lot of gap between delivery and, you know, looking. I think that's where, that's what's going to separate people who are successful or not. Coming back to what the gentleman said, and I want to reiterate it again, you need to do the initiatives, otherwise you'll not succeed and get meaningful earnings growth. I believe unless you do specialty top generics, I think the business has very little value. Again, it's my personal view, and maybe everybody doesn't agree with me, because obviously different people have different models.
In my personal view, if you're going to be in the genetics business and you want to be a global player in the genetics business, you got to do the initiatives and the hard-to-do genetics. Sometimes the predictability of the launches will be difficult to judge, but that's where the real value is.
Got it. Actually, my question is mainly regarding the, your past, history is always you finding out the gap and you, targeting those gaps. It would be, like a similar gap you can be seeing in the future, or it would be narrowing down because of the competition?
I mean, just coming back to your original question, I think, do you see more, more people doing it, therefore, the opportunity is dwindling? No, I don't think so. There's enough opportunity. You just have to be patient. You got to spend the money, and I think there is an opportunity. I don't feel so negative. Thing is, see, the entry barrier for this money, the money that you're spending is also very large, right? I mean, I just said a few minutes ago, we have to spend INR 6 million or INR 8 million to get a global launch on 1 particular product on just on a clinical trial. I mean, these are the ones that you need to do, and I think that's where the real money is, and I think these products surprisingly does hold up.
I mean, not all the time, every time, but the mathematical probability of a success is much higher in these sort of products, and that's how you need to structure your business.
Got it. Thanks for the answer. That is from my end.
Please follow up.
The next question is from the line of Anmol Soni from SUD Life. Please go ahead.
Hello, am I audible? Hello.
Go ahead, Anmol.
Proceed with your question, Mr. Soni.
Yeah. Sir, you have said on the call that you have booked around INR 50 crores of cost against one FTF. What is the revenue contribution with regarding this?
This is regarding the supplier of the API. I think I've said that I will not answer. Yeah. Thank you.
Sir, what will be the revenue contribution?
I'm not answering that question, my friend. I'm sorry. I don't do a split of the products.
Okay, okay. for just follow up on the.
You're just giving away where you're making money, I think, and how you're making money. This, I've been asked this question many times. I'm not answering the question.
Okay. On the Revlimid, you have said that over 25% is being sold right now. Is it from the date of launch, or is it from the calendar year or financial year?
From the date of launch.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Ritika Agarwal from ValueQuest. Please go ahead.
Thank you for the follow-up. I had two questions. For your API business, we've seen a very good growth on a QOQ basis, almost 70% growth, from an INR 40 crore-INR 50 crore run rate to now INR 70 crore plus. What led to this kind of growth, and what is the driver on what we are guiding of 15%-20% growth going ahead in this business?
I think we have confirmed orders from our customers for our various products that are there from that division. Based on that guidance, I think we are, we feel confident that we should be able to grow that business.
Sure.
There were some delays in some supplies over one particular product. That's the reason why it got shifted to the Q4. I think that's the reason why there was a drop in Q3. I think now we're more comfortable, and I think we should do well.
Sure, sir. Does API involve CDMO also, or is it a pure API supply?
It's pure. I don't believe in CDMO business because I think if you want to be an aggressive, generic company, I think you can't do CDMO. Personally, I'm not a big fan of CDMO because I think the way, I mean, I'm a little harsh in my comment, but I think there's a reason for that also. Because if you want to be an aggressive, successful generic company, you need to go after every patent. If you're doing CDMO business for multinationals, you can't, you don't have the flexibility. I mean, there are other people who do that business and who have done well with it, but that's their strategy. My strategy is to go after patents. In my personal view, I think it doesn't work. You can't play both sides. You got to choose a camp.
Sure.
I don't. Firstly, to answer your question, it's a straight API business. It's not CDMO.
Got it, sir. Sir, second question. Again, subsidiaries, we've seen a very good growth from INR 80 crore kind of run rate from last four quarters to now INR 117 crore, INR 18 crore. What led to this growth? Were there new launches this quarter? Again, we are expecting some 15%-20% growth going ahead. Will it be led by new launches again?
Absolutely, because of new launches. I think we have some very good launches in Brazil. I think that's made a lot of difference. We won some good orders in Canada as well, some tenders as well. The business looks consistent. To answer your question, it is because of new launches, some new approvals, I think, and some tender orders that we have won in some countries.
Sure. Sir, could you point out which are these launches that we are looking ahead, going ahead?
Generally, I, we generally say we don't give away the product. See, I tell you why we don't give away products, because sometimes the big ones we do mention. I mean, for example, you know, in Brazil, I think apixaban has been the biggest product, that has done extremely well. We don't give away the pipeline because it's for competitive reasons. Generally, you don't give away your portfolio, you know, so.
Sure, sir, that's helpful. just last question? where are we in the domestic acquisition front? Anything that you can comment or anything, yeah?
Hopefully, I'll be able to close something this year. Yeah, hopefully, I'll be able to close something. I mean, I've been saying that for the last two years. I know I've not delivered, so I'll be honest with you. Hopefully, we're able to get something this year. Yeah.
Okay. Thank you so much, sir. All the best.
Thank you. The next question.
I think that's the last call, yeah?
Yes, sir.
Thank you so much, everyone. Yeah, I appreciate it.
Sir, can we take one more last question, please?
Okay, sure. No, one last question.
Yes, sir. The next question is from the line of Rajat Setiya from ithoughtPMS. Please go ahead.
Rajat, go ahead.
Yeah. With regards to our agri business, what's our strategy to grow this business over a 4, 5-year time period, given the only product that we have, which is CTPR, may start seeing competition and contribution may start coming down from here? What's our overall strategy here?
I think CTPR is a good start. I mean, you need to understand CTPR is, it's like 15% of the whole agro business. I think it's a very important launch. This sets up the base for us to launch other products. I think it's a very strategically important launch, that cannot be diminished. Of course, I mean, we have to move past CTPR. We have a last list of almost 6, 7 products, which we are working on, and all of them are first-time indigenized products. We're not revealing the pipeline. I think all are under review in the CAB, I think we'll reveal in the next 12 months when we're coming closer to the launch. They're all very exciting products, all first time in India, indigenously produced.
I think I'm very excited. Generally, what happens with these sort of products, I mean, I know we obviously, as a public company, we have to disclose what we are doing, but you can't give away your pipeline because that kinda, you know, gives people a heads up, and I think you don't want to do that. When the right time comes, we'll reveal the pipeline. To answer your question, we have a list of about five, six products that we expect to launch in the next two years, based on the success. Some of them are litigation-driven, some are not. I think it depends. It's a mix of both, but I think we are very, very bullish about the opportunity there. Yeah.
Thank you, sir.
Thank you so much.
Just one small
Yeah, go ahead.
In terms of market size, for these molecules, what is the range for the smallest and the largest?
I think we are looking at ranges between INR 50 crores-INR 400 crores.
Thank you. Thank you so much. Appreciate it.
Thank you so much, my friend. Thank you again. Thank you so much. Thanks for arranging everything, Kunal. Thank you so much. Thank you all. Yeah.
Thank you, sir.
Kunal?
As that was the last question for today, I would now like to hand the conference over to Mr. Rajesh Chebiyam for closing comments. Over to you, sir.
Yeah, thank you all. Again, I appreciate all your questions. As always, you know, the questions and the recordings will be shared. This would be available shortly. Thank you all, and have a good day.
Thank you very much, sir. Ladies and gentlemen, on behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.