Ladies and gentlemen, good day and welcome to NATCO Pharma Limited Q2 FY 2023 earnings conference call hosted by Nuvama Wealth. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kunal Randeria from Nuvama Wealth. Thank you, and over to you, sir.
Thank you, Vivian, and good morning, everyone. On behalf of Nuvama Wealth, I welcome you all to NATCO Pharma's Q2 FY 2023 earnings call. With us, we have NATCO Pharma 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, Rajeev, for opening remarks.
Thank you, Kunal. Good morning and welcome everyone to NATCO's conference call discussing our earnings results for the second quarter of FY 2023. During this call, we may be making certain forward-looking statements or statements about future events, and 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 that follows except for the participant question is the property of NATCO, cannot be recorded or rebroadcast without NATCO's express written permission. As always, we'll begin with the results highlight, and then we'll follow up with the interactive Q&A session. I hope all of you have received our financials and the press release that was sent earlier yesterday. These are also available on our website.
To summarize, NATCO had recorded consolidated total revenue of INR 452.6 crores for the second quarter of FY 2023, as against INR 415.2 crores for the same period last year, reflecting approximately over 9% growth. The net profit for the period on a consolidated basis was INR 56.8 crores as against INR 65.1 crores same period last year. During this second quarter, the profit share associated with export of an lenalidomide product to the U.S. was minimal, as was also communicated during our prior calls. Pharma domestic business is beginning to show growth. In the Crop Health Sciences division, the CTPR associated products were launched, which we are excited about and expected to boost growth in the near future. I think we'll take the Q&A questions right now.
The split in terms of revenue has already been shared, so we can address those questions if you have. Over to Q&A.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Participants who wish to ask a question may kindly press star one on your touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Participants are requested to restrict your questions to two per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Kindly press star one to ask a question. The first question is from the line of Rashmi Sancheti from Dolat Capital. Kindly proceed.
Yeah, thank you for the opportunity, and good morning, everyone. Sir, can you update on India business, like, you know, how many launches, new product launches have you done in first half? How is our Oncology business, you know, ramping up now? And also about your cardio and radiology segments, you know, and any price hikes we have taken, and have you added any new markets because we were also planning to do that from the second quarter?
Sure. Let me answer your question. Domestic is looking stable now. In the first half of the year, we launched about four brands, sorry in the Q2. Regarding the, you know, in terms of growth of the domestic, I think we're looking at multiple acquisitions, and hopefully we'll be able to find something. We're hoping to close the transaction in the next few months. So we're looking very seriously at multiple acquisitions. This, I think, will drive the growth of the domestic space.
Sir, how is your Oncology business going on? I mean, are you seeing stability in that business or we are still seeing pricing pressure?
There's not much pricing pressure. Things are more stable now. The Oncology revenues are stable. We are having some good launches on Oncology in the next few months. I think we see all these businesses growing. I think that to get a big bump in domestic, I still feel we need an acquisition. I think the challenge that we have is we only cover, you know, specialty doctors. We don't cover, you know, general physicians and larger segments of doctors. I think, that's what I believe. You know, either we do it through increase of field force or we do it through an acquisition. I think that's what we're working very hard at this.
Okay, sir. My second question is related to the CTPR.
In the current quarter, have you realized any sales or it is all foreseen sales only in your agro breakup? Also if you can update us, you know, have you hired any new MRs for your CTPR products or, you know, we are planning to add, you know, MRs over there?
Yeah, sure. I think CTPR, we didn't have any sales at all. I think all the sales almost. I think it was actually no sales at all almost. Lot of the sales will come in the coming quarters. We are very excited about the opportunity. I think the near term that's gonna drive the earnings. We have stock and we have orders from the trade, and we're looking forward to the Rabi season, which is coming up in the next two months. Also for the Kharif, we're fully geared up. We are splitting this business up into two parts, our own brand and also third-party support.
Both places are getting very good traction, and I think we have a lot of people reaching out to us from the trade and from other B2B customers. Our other corporates. We believe we should do very well, and I'm very excited and I think it's. You'll see a good bump in earnings in the next few quarters from CTPR. That will drive our business in the next year. Thank you. Next question.
Thank you, sir.
Thank you.
Participants, if you wish to ask a question, please press star one. The next question is from the line of Darshita from Antique. Can we proceed?
Hi. Thank you for the opportunity. My question was regarding CTPR. I wanted to understand how we are scaling up this product and what kind of revenue distribution do we expect from B2B and B2C? Are we looking at 50% B2B and rest from B2C? I wanted some idea from that. Secondly, I wanted to understand how are we placing a product at a discount to the current MNC's product that is available in the market? How are we trying to sort of gain the market share from the MNC who is already there in the market?
In terms of discount, our discount is about 25% on the MRP, and I'm giving additional discounts to the trade, so the incentive to stock our product and push our product. We're definitely far, you know, more profitable to sell than the competitor. In terms of the split between B2C and B2B, I think the way things are looking, again, unless the numbers come, I can't guarantee, but I think 50%-60% of the sale or even more will come from B2B and about 35%-40% will come from B2C. I think that's the split I'm expecting. Again, until the numbers come, we can't say. Majority will come from B2B. I think that's how that whole business works.
I think people not only sell their own brand, they also give to other people for better reach. I think that's how the whole business works. That is my reading. I missed the question from the earlier lady. I think we are hiring reps actively now. I think we're gearing up for the Rabi and the Kharif season. I think we're in good shape. Again, I'm super excited. I think you'll see the benefit of our foray in the next few quarters. Thank you.
Any plans on starting exports for the product, or are we only going to first continue, like, you know, concentrating on the domestic market and then probably like three or four years down the line?
Yeah, domestic is the one that's opening up first. I think domestic is gonna drive the near-term earnings. Meanwhile, our team is also working on some export registrations. That's also parallelly ongoing. That takes time because registrations take time outside India. I think over a period of time, we'll also see the benefit of that. In the near term, it'll be driven by domestic.
Great. Okay. I just had one last question on the B2B part. Could you give us a highlight on who are your clients on the B2B end? Are they MNCs or domestic or?
We are still negotiating. It's a little unfair to ask that question, but I think once you'll see the benefit of the earnings and the partnership. I think we'll speak about it as we go along. As of now, I think we're negotiating with everyone.
The understanding is for CTPR currently, we will start working on the B2C opportunity first with the Rabi season coming up. Then eventually, maybe in the second half of CY 2023, we'll have some revenue coming in from the B2B aspect.
We are working both of them parallelly at the same time. We'll get benefit of B2C and B2B starting from the December quarter itself. It will scale up a bit in March, and it will peak in June, because that's when the Kharif is.
Okay. Okay.
A very, you know, good growth slowly. I think it'll start off slowly in the December quarter. It will improve in the March quarter, and it'll peak in the June quarter. I think that's my expectation.
Okay. Just one last question on are we planning, like, are we expecting any kind of backlash coming in from the MNC anymore? Are we clear on that front?
Okay. That will be the last question from you. I'll go to the next participant after this.
Yeah.
In terms of, I'll just clarify the legal position and the legal update. I think we won the single bench order, and we've also announced that they have challenged this in front of the double bench. Let's see how that goes. The order has been reserved, so let's see how that goes. We're very confident about our position. We believe strongly that I think we have a good legal position and that we are non-infringing. I think the single bench order should be upheld by the double bench. I think that's our personal view. Thank you.
Okay. All right. Thank you so much for the opportunity. Good day.
Thank you. Next caller, please.
Thank you.
The next question is from the line of Nitin Agarwal from DAM Capital. Kindly proceed.
Hello. Thanks for taking my question. Rajeev, just speaking on CTPR again, what's your sense on has there been any more generic launches apart from yourself in the market so far?
I think from what I understand, a lot of people are working on it. I think I heard about three or four companies who are working on it, but the only one that I've seen in the market so far is Descovy.
Was the litigation position different than ours up to?
Again, see, Nitin, I don't know exactly what their position is. From what I understand, what is available in the public domain is that they have also launched. From what I also understand, their legal position in terms of their process patent has not been resolved yet by the single bench judge. I think they have launched it at risk and their legal position not resolved. I would believe, you know, our position is, you know, cleared by the single bench. I think we have a better position, I would believe, on that count. We also believe that, you know, we have stock, we have the inventory, as we all know. We have the material.
I think we're good to go. I think it's still a limited competition product, so I think there's enough money for everyone. As I said, the strategy clearly is, you know, doing both B2B and B2C, so we're hedging on that. I think we're very excited. Yeah. Thank you.
Secondly, on the U.S. business, so you talked, there was a very limited contribution from lenalidomide this quarter. I guess effectively till the time next cycle starts, I think we're done with our contribution or share of lenalidomide. You know, I think for Q3 also, there's not much one should expect on this account.
I think so, yeah. Q3 will be primarily driven by the base business. I think there'll be some improvement in the base business from this quarter, hopefully because of the CTPR numbers. I think we should do better than Q2, you know, Q2 in Q3. The contribution from lenalidomide will be minimal, so they'll not have an impact on the earnings. You'll see the benefit of that possibly in Q4 when we get our fresh quantity and Q1 of next year. I think Q4 and Q1 will be, you know, like what we had in the previous Q4 and Q1. I think my sense is that I think these quarters will be extremely good, and Q3 and Q2 will be little mellow compared to Q4 and Q1.
Because of our agro business, you know, that also will, you know, complicate things a little bit because generally Kharif and Rabi is where most of sale happens. Our agro gets, you know, the sale from those seasons will be primarily driving the sale because we don't have much of an international business so that we don't get a consistent revenue in all markets. In a way, Q4 and Q1 will be very exciting for two reasons. One is lenalidomide, second is agro. I think that's how the earnings are gonna be. There'll be a certain amount of seasonality, but I think all investors understand that. I think considering the nature of our business and the way we do things, I think you have to take a, you know, a 12-month view on our earnings. Yeah.
Okay. Last one, you know, when you look at this quarter, so effectively whatever EBITDA that you generate, it's fair to say bulk of it is base business, recurring business, nothing. Is that a fair assumption to make?
Absolutely correct. I think this is. I mean, people always ask me, you know, what will happen if, you know. This is actually a good example of a quarter where, you know, we had practically very little lenalidomide, and we had deferred shipment of glatiramer, so that's why the API was slightly lower. I think everything was stripped off. Still, I think we had a very strong core business, which was what we got, and which is gonna improve next quarter because of CTPR. So I think, yeah, that's a fair assumption. I think it stripped off all the big jackpots, yes. Thanks.
I think for the very last one, you know, when you look at the base business apart from the CTPR launch, what other things can one sort of look forward to over the next 12-18 months?
I think CTPR is gonna drive the earnings the next few months. Clearly, I think that's gonna be the overwhelming one. In terms of other launches, I think we're very excited about our subs. I think our subs are doing extremely well. Our Brazilian sub and Canada sub have done extremely well. Now, if you look at the consolidated numbers, largely almost 40% or 50% of profitability is coming from the subs now. If you look at the differentiation between the standalone and the sub, I think a good amount of earnings are coming from the subs. I think we should look forward for further growth in the Brazilian business and the Canada business.
Last quarter, I think, if I recall, I think Canada was about $6.5 million, and I think Brazil was a little less than $3 million. I see these numbers improving dramatically in the next two quarters. This is about $9-$10 million business, which should increase to $15 million, I think, per quarter, I think the next two quarters. I think that's our expectation. That's what you need to look forward for in addition to CTPR on the base business. Okay.
Okay. Thank you, Rajeev.
No problem.
Thank you. Participants, if you wish to ask a question, kindly press star one. The next question is from the line of Bino Pathiparampil from InCred Capital. Kindly proceed.
Hi. Good morning. Rajeev, just a quick question on generic Copaxone in the U.S. You had approval in 2020, but now the FDA website shows it's discontinued. What's the update on this product?
This has been approved, and we have a launch date sometime in the future, few years from now. The exact date we can't reveal because of the confidentiality agreement. It's just that it's not an active ANDA, you know, 3-5 years, et cetera, but the launch will happen. It will happen in due course, and we have a settlement date in the future. Which I'll
The FDA website shows it, but it's not cutting it. It doesn't mean anything.
No, it doesn't mean anything. That's what I understand.
Okay.
Because it's not, if we're not running the product, I think that's what happens. I think I'll get again the website thing. I can tell you from our position is that we have an approval, we have a full approval, and we can launch it, and it is determined by the launch date. Got it signed and that's it. I think sometime in the future we will launch it. The exact date will reveal, I think when it comes closer to the launch.
Great. Thank you. Thank you very much.
Next caller, please.
Thank you. The next question is from the line of Nikhil from SIMPL. Kindly proceed.
Yeah. Hi, good morning. I'm audible?
Yeah. Yes, you are.
Yeah, I have just three questions. Rajeev, one on CTPR. In the initial press releases which we had sent, we had said the whole molecule size was INR 2,000 crore. In the recent press release where we had launched a combination, it said it was INR 800 crore. This 2,000 is pure CTPR and there is something more over the combinations or INR 2,000 crore includes everything, combination, pure, everything?
Well, it's like this, INR 2,000 crore is plain and INR 800 crore is combination. So two together, I think it'll be less than INR 3,000 crores together.
Okay.
What happened was we launched the CTPR first, that's why we announced that first, and then we have launched the combination later. I think that's why we announced that later. Together it is about a little less than INR 3,000. I think that's our market estimate based on our market returns.
Okay. We have launched both the pure as well as the combinations now?
That is correct. Absolutely correct.
Okay. Secondly, on the domestic part of the business, you mentioned that we are looking for acquisitions. If you can just help us understand, not on exact numbers, but what is the size or kind of acquisition you would be looking at? See, our current domestic business is around INR 400 crore. Would you look to see that through an acquisition we cross INR 1,000, INR 1,500 crore kind of a domestic business scale? Or would we look at smaller acquisition? Just some sense, maybe not exact numbers, but just some sense on how you are thinking.
I'm looking at a smaller one right now, Nikhil. I think we just need to fill some gaps in our portfolio. We're looking at something around INR 100-150 crores worth of sale at this time. Those are the assets we're looking at. Nothing large. You see, INR 1,000 crores or more will become a very large acquisition, so that I think, you know, am I ready for something like that? The answer at this time, no. I think we'll probably do a smaller one and we'll see how that goes. I think as I said, we're actively looking at couple of transactions. Hopefully we'll able to close something if all goes well with the due diligence. I think that's the near-term plan. Okay?
Okay. Lastly, on the subs you mentioned that, the scale up, I think, it would be pretty significant scale up when if we say the sub would be doubling their revenue in next few quarters. Is it more driven by, increased, market share in the molecules we had launched or is it like some more new molecules we would be launching? Just some sense what drives this.
We got some, you know, some good orders and some tender orders and some government orders we got in one particular sub. Also we have good launches in terms of new molecules. We launched, for example, Apixaban in Brazil. We launched Apixaban in Canada. I mean, it's driven by new launches and some, you know, one times that have been driving. Overall the subs are doing well. I think as the other caller asking about the base business, what has happened is the subs have taken up the slack of the decline in the base in the standalones. I think that's where we are getting a good traction.
Okay.
I think my view of the business is also that we need to go global and add multiple territories and multiple countries with pipeline so that we, you know, globalize our business and bring about more stability in our mix. I think we started this endeavor about 3, 4 years ago, and I think a lot of the things that we've done in terms of, you know, globalization that we have done and setting that it has actually played out where subs are contributing. Also we've done one more launch in Australia, I think, just to give a flavor. I mean, it's quite a huge launch, of course, but again, it's the first wave generic. Us and Sandoz are the only generics which have launched Pomalidomide in Australia.
We don't have front end presence in Australia. We did it through a partner. We're trying to globalize our business, use, you know, the filings that we do in as many countries as possible so that we get a better return on R&D. I think that's how this business is gonna be. Yeah. Thank you.
Just one question, if you will permit me. On Revlimid Australia, there was some issue with respect to the settlement agreement. What's the sense? Because we were quite optimistic on Revlimid.
It's all done. It's settled. Both Pomalidomide and Revlimid are settled, and we have a fixed launch date for both Pomalidomide and Revlimid. Pomalidomide has already been launched. Revlimid also will happen soon. We can't disclose the date because of confidentiality, but I think as soon as the launch happens, we will also disclose that as well, once we're closer to the launch. It's all sorted.
Sure. Thanks. Thanks a lot.
Thank you. Next caller, please.
The next question is from the line of Cyndrella Carvalho from JM Financial. Kindly proceed.
Thanks for the opportunity. Rajeev, if you look at the domestic business, pure domestic business, how is the onco performing? If I look at the IQVIA number, we are seeing a much faster growth than what is reflected in our numbers. Where is the gap, if you can highlight these two things?
IQVIA numbers for NATCO or IQVIA numbers for the industry as such?
NATCO.
I see. IQVIA now are not a true representation of anything because the problem with them is they don't capture the frequency properly. Basically what happens in our business is there's X and then there's bonus units. We give higher bonus units, technically your volumes are higher, and it shows higher sales. It doesn't necessarily mean that you have higher revenue, right? That's why the difference between what you see in IQVIA and what you're seeing in our actual stated numbers. What really matters is the numbers which we get, right? In terms of cash flow, I think generally IQVIA is not very accurate for like the specialty business that we do. I think it's good for like more mass brands. It's not so good for the more specialty products.
Okay, that's helpful. On the Onco side, how are we seeing the traction? Are we seeing some-
I think things are stable now. I think onco is doing reasonably well. Let me just look at my numbers. Give me a moment, yeah?
Sure.
This quarter, I think is about INR 55 crores onco out of the sales for this quarter. Onco is very stable. We have a couple of good launches coming up by the end of the year. One big launch is, you know, there's a court verdict pending on a product called Ibrance. Delhi High Court has reserved the verdict on that. If that gets cleared up, then, you know, that'll be a very good addition in the mix. There are few other products that we're launching. Overall, it's exciting. It's good. I said, you know, obviously, you know, to get good growth in that business, we need to expand the scope of the doctors that we're covering.
Because we cover limited specialty doctors, we are unable to grow. I think we need to get out of that. I think the only way we can do that is by either building ground up or we need to do an acquisition. I think in my mind, I believe an acquisition is what we need and then add, you know, our ready portfolio to that in the acquired domain of doctors, and increase the sales. I think that's how I look at it. Okay.
That's helpful. Just on the subsidiary side, like, Canada, Brazil and China and other Asian markets. How should we look at it from key launches perspective? Anything that we should be looking at in terms of key launches with the subsidiary or the other EMs that you would like to highlight?
I think we've mentioned it. I mean, I've mentioned about Apixaban launch in both the key markets, and I mentioned about Pomalyst launch in Australia. I guess another gentleman asked me about Venclexta, so that also the launch will happen. I think we'll announce it when it happens. I mean, you know, these are the major ones, and we have other smaller products. Good pipeline and good set of filings that we have planned. I think we are excited. I think, we have consistent pipeline coming through. I think we believe that we should grow this business.
That should be over 18 months time frame or a little longer than that?
Well, in the next few quarters, we'll announce that when the launches happen.
Okay.
Yeah, I think that's what we have good traction in those apps. Yeah. Thank you. Thanks a lot.
Thanks so much.
Thanks.
Thank you. Participants, if you wish to ask a question, kindly press star one. The next question is from the line of Harsh from IDFC Mutual Fund. Kindly proceed.
Yeah. Hi. Am I audible?
Yeah. Go ahead. Go ahead.
Yeah. You've spoke a little bit about the size of the domestic asset that you're looking at. Just to clarify, would it be fair to assume that your existing base of MRs around 300-400, that would be enough to sort of help the acquisition? Would you have to add more MRs for the business?
We need to probably add more MRs where possible. It depends on what segment we acquire. It depends on what acquisition will come through. See where we are present? Let's answer that question first. We are present in oncology, we're present in Gastro, and we're present in Cardio. Cardio, again, specialist cardio, not your, you know, general physician cardio. Only in this case, we are only present in these three segments primarily. If you add, let's say, a brand again, I don't want to give too much away because nothing has come through. You know, unless you close an acquisition, I can't answer this question. If you buy outside these three segments, then you need to add reps. If you buy within these three segments, then you don't have to add reps.
You know, again, you're asking a very hypothetical question, but I think I'm very clear that either we enhance the strength of this portfolio or we add addition for, you know, you know, portfolios in terms of a therapeutic area so that we can expand our presence, depending on what we could close. Yeah.
Sure. In terms of valuations, because we are seeing a pretty expensive valuations come into the market.
When you do the deal, you'll know. I think I will disclose it. Yeah. These are all things that you can only talk about once you close the transaction. I think pretty much it's true, I'd say, in most of the cases. Okay.
Fair enough. Anything on the inventory side? Last quarter we had almost INR 100 crore of inventory. This quarter we are somewhere around
In terms of standalone inventory, if I remember my numbers, I'll just check it now so that I can be precise with you. INR 665 crores is the inventory in our books, as of September 13th, 2022. Of which about 110 is the agro inventory. Yeah. So if you remove that out, I think it's a fairly reasonable amount of inventory that we have. So I think we're good to go. Includes raw materials, intermediates and the finished products and all. Generally, supply chain has become very painful now post-COVID, as you know. I think what you could buy deliveries for three months, four months earlier, now it's a 6- 9 months cycle. So if you want to plan a launch of something, you need to have a 6- 9 months headstart.
I think because of that, I think the inventories are a little bit on the higher side, but we are planning to bring this to reduce. I think we're all learning as to the situation.
Sure. Thank you. Thank you.
Thank you. Thank you.
Thank you. The next question is from the line of Kartik Mehta from Klay Capital. Kindly proceed.
Yeah. Hi. Thank you for your opportunity. I just have one question.
Okay.
Can you throw some color on how the Revlimid market share will or other launches will impact very specifically on the fact that you mentioned that Q4, Q1 is when you and your partner would or at least you would be recording the sales. Is it possible to have some color on when is the inventory reset in terms of achieving market share? Is it after six months at the start of the calendar year? Thank you.
I think we get additional point with Kartik, and I think the earnings of that will reflect in Q4 and Q1. I think we're ready with the product. We're good to go. Does that answer your question or
Yeah. Every year it will be in that Q4, Q1 calendar year 2025 as per the settlement. Is that fair to assume?
That's correct. Yeah. Because the launch year is March first. No, Kartik.
Correct.
One year is March first. That's why the cycle is around that. See, the others are, like, booking in September because their launch date was in September. Right.
Correct. Rajeev, I just
Everybody has a different cycle because of their launch date. Yeah.
Yeah. Just trying my luck here. Is it safe to hazard a guess that everybody's reset closes after 12 months or is it at this?
Kartik.
I'm just trying to.
I can speak about myself. Don't ask me about others. I think based on what they were told us, this is what our information is. Other people you ask them. Yeah. Leave me alone out of this. Yeah. Thank you. Next caller, please.
Thank you. The next question is from the line of Ritika Agarwal from ValueQuest. Kindly proceed.
Yeah. Hi, sir. Thank you for the opportunity. My first question is on CTPR. What is the kind of market share take up we expect in the next one and a half year? Secondly, what is the competition that we expect again in the similar kind of time period in CTPR?
I think we should take good share, Ritika. I think my view is that internally we are being very conservative. I think 10%-20% share at least we should get or even more if we're lucky, but I think that's the minimum we are targeting. It's a very good product, so I think we should get good traction. Competition wise, my expectation is obviously Descovy you already mentioned, they're already there, and maybe another two people will join. We have limited number of suppliers. We do not have too many suppliers. I think there'll be limited number of suppliers, but the market is so large, you know. I think there's enough money for everyone with this narrative for the next few quarters for sure.
We have a very good head start, and we have a very reasonable legal position. I think we're in good shape. How much we will make, again, time will tell. I don't want to hazard a guess. When market formation happens, I think we'll give you more insight. I mean, if you ask me instinctively, the answer is that I think we should do well. I think that's our expectation. Okay?
Sure. Secondly, can you talk a little more about your pipeline in the U.S. going ahead post Revlimid?
Sure. Absolutely. I believe, I mean, again, you know, the U.S. is going to be a super competitive business. I, again, these are my personal views. I'm, again, I don't necessarily subscribe to the general wisdom, but I still believe that you need to deliver at least three, four very large, you know, FDF type of products or complex generic type of products to be competitive in the U.S. You'll have, you know, the more competitive products, the more common products you do, the more competitive it is, there's less value in that business. You need to have a mix of both.
I think our target internal, I think I said this in the past, if you're able to deliver another three, four products like, you know, Revlimid in the next decade, I think your whole decade is set. I think we're working in that endeavor. We're primarily focusing on oncology, peptides and oligonucleotides. Hopefully, I mean, we've honestly done two other filings recently, and we believe both are interesting FDF products subject to confirmation of FDF position. I think we can speak about that. I think the R&D focus is on that track, and I believe we've been able to deliver.
Sure. Last question. What's our cash balance currently?
Give me a moment here. Sure. Rajesh, can you answer that question?
Sure. Cash and cash equivalents right now as of end of Q2 is about INR 1,000 crores. Borrowings about INR 82 crores. Of that, INR 50 crores of the borrowing will discount associated.
Sure. Thank you, sir.
Thank you. Participants, if you wish to ask a question, please press star one. The next question is from the line of Tarun Shetty from Haitong Securities. Kindly proceed.
Yeah. Thank you for the opportunity. Just one question from my side. Any update on IMBRUVICA?
We don't have an update on IMBRUVICA at this time.
Okay. That's it. Thanks.
Next question.
Thank you. The next question is from the line of Nikhil from SIMPL. Kindly proceed.
Hi. Thanks for the opportunity again. Just one follow-up on the acquisition. Rajeev, what I'm trying to understand is that if you look at, like, a small acquisition of, say, INR 100-150 crore, what kind of a scale advantage or what we plan to achieve from such an acquisition? Because even at INR 100-150 crore, considering the size of the domestic market or even our current size, it won't materially change the way the business profile is. I'm just trying to understand what's the idea behind a small acquisition, and even when we have a good cash balance and we see cash only accruing for us.
See, because you are asking a very complex question. I'll split the question into two parts. What's the point of buying a smaller brand? I think the question is, you're buying a smaller brand because you're getting access to, what do you call, a market which you're not present in. Let's say I can't give too much away, but let's say you're operating in segment A, B, C, and you want to enter segment D. INR 100 crore acquisition allows you to enter segment D, which gives you access to those doctors and the therapy segment. Okay. You build a business brick by brick. You can't, you know, say that I, you know, I build a house in one shot, buy a house in one shot.
You either take an approach of buying a house or you do it by brick by brick. This will take care of a brick of you. This is approaching a brick also. You're getting that therapy segment which you're not there. Okay? I think that's how you build businesses. You add a country, you add a therapy, or you add a product. That's how you have to scale it, right? Your specific question, what am I looking at? I answered it directly, what I'm looking at this time. You asked a bigger philosophical question. Rajeev, what is 400-500? Will not make much difference. How do you take it to 1,000 or 2,000?
Which means that you need to do a very large acquisition, which will double our revenue. You know, something very substantial. Even that, it is something that we are looking at, but at this time, I mean, you know, we have to get the right asset, and these are not easy acquisitions to do, and they won't happen overnight. I am looking and I believe that something like that has to be done so that we can increase our scale. Absolutely, yes. To answer that question, I'd say yes. Is it gonna happen now in the next quarter? You know, yeah, that's a bit, you know, it's a bit much to ask.
At a philosophical level, yes, I agree with you that because we are we have to build scale, and it's the only way you're gonna compete in this business. I think at some level, we have to do a very large acquisition, which will help you build that scale. Hopefully we'll, you know, be able to speak about that over a period of time. Yeah.
Sure. Thanks. Thanks for the explanation.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Kindly proceed.
Thanks, Rajeev. Rajeev, on the filing that you mentioned in the U.S., by when do you get a sense about your approval status on these products?
I don't know, Nitin. Both of them we filed. I believe that we have an interesting position. First we have to wait for the acceptance of the ANDA, and then we'll know what date it got accepted. Then we'll have clarity whether we have an FDA. Both of them are same files. Typically acceptance and all takes about 60-90 days. We'll hear about it in the next few weeks, hopefully, if all goes well. Assuming we end up with an FDA. I'm assuming we have a chance, but again, until you file and get the acceptance, you can't, you know, confirm that. But to answer your question, in the next 60-90 days.
Right. Sorry, if you probably answered that earlier, I missed it. If you look through, you know, the U.S. pipeline beyond FY 2023, you know, how many, you know, “+ $10, $20 million launches” that you think, broadly speaking, that you can have over the next 3, 4 years?
How much? 10 million launches or 100 million launches?
$10-$20 million +. Say, $20 million + launches.
In our pipeline you're saying, already which we have filed?
Yeah, ones that you already filed, and which you can probably get approval over the next say 3-4 years.
Yes, sure. I mean, I can run through the ones. It's there in our investor presentation. I think the $10-$15 million type of products, I think, you have carfilzomib, triazolam. We have first to file on one particular strand, and we have shared first to file on the biggest strand. Then you have busulfan. Then we have trabectedin. Then we have idelalisib is another one that we filed. These are like some of the ones that we have publicly disclosed. I think these will play out in the next few years. Yeah.
Okay. Secondly, on the subsidiaries, you know, these. You talked about a significant delta in the subsidiaries. These are again, what, largely driven by, you know, Revlimid and Copaxone launches or something else that will drive these subsidiaries?
No, they're different portfolio, different products. I think Canada, we have Revlimid is big in Canada as well, so that's a significant one. Brazil is driven by, I know, I think, a few other products. I think everolimus and pixantrone. There are different products in different territories.
Lastly on the agri bit. Barring the CTPR launch in India, if I get it right, you said you're also looking at exploring opportunities for exports on CTPR registrations overseas markets. How do we look at the agrochem piece beyond CTPR for India as well as overseas?
I think we need to build a reasonable size in domestic with CTPR. Again, we're also expecting reasonable orders from export. Plus we have other product ideas. We have pipeline. We have about 5-7 products we have pipelined in CTPR in the agro business, which will play out in the next few months. These filings will be done in the next, you know, few months. Once we do the filings, I think we'll update the market. We've not done the filings, that's why we're not talking about the pipeline. To answer your question in short, we have other products, you know, similar to CTPR, which are interesting, which I believe will bring value.
On these products, your launch strategy is again driven around you know, sort of plugging loopholes or figuring loopholes and also leveraging loopholes in the regulatory processes or if you've got litigation or regulatory driven opportunities even in the newer molecules?
No, I think our strategy will be driven primarily by the science of the product, where we are doing interesting product or driven by, patent litigation, which is what our strength is, I think, in that area.
Okay. Thank you.
Also within like we're focusing also on molecules which are what we term as like a 9(3) applications which are a little bit more unique first time, which differentiates us than the common.
Rajeev, we're not looking at partnerships here, which is what probably most of other Indian companies have been doing. We're looking at
Doing that.
We're not looking at that part.
No, no. CTPR also we have said that, no. I think 50%-60% of the revenue we're getting from partnerships only. I think 35%-40% is our brand. We are-
No, no. What I meant is with the innovators.
See, Nitin, We had this conversation in the past as well. I think generally we are a very aggressive generic company. When you're in a very aggressive generic company, you can't do innovator brands. You can't have it both ways. You can't say that, I'll go after your patent, but I will also supply this product to you. It doesn't work like that, Nitin. You have to choose one camp. My belief is we are an independent, aggressive generic company, and I think you have to stick to your core strength there. I think if you're doing innovative business, then you can't be aggressive on patents, is it? I mean, you have to let go of certain portfolio. You need to let go the whole concept of doing patent challenges. That's not the business we are in.
I think I'm very clear in my mind. I think we will go after anyone as, if we believe that there's a, you know, a patent weakness and we believe that there's a way to win. I think that's the business model we have chosen, and we're gonna stick to that. Okay?
Okay. Thank you.
Thank you.
Thank you. Participants with questions, kindly press star one. The next question is from the line of Ahmed Madha from Unifi Capital. Kindly proceed.
Yeah, thank you. On CTPR, just one clarification. The double bench order, you said it's reserved. Is there a possibility of the innovator getting a stay? Because we have planned sales for both Rabi and Kharif. Is that even a possibility?
I don't think so. I think the hearing went well. Again, you know, obviously I said hearing has happened, order has been reserved. I think we believe very strongly in our position, and I believe. I think it'll, the single bench order will be upheld. I think that's. We'll give a legal update as soon as the double bench decides on it. Yeah.
Okay, great. We will go ahead and start building inventory for the Kharif season also.
I think that's the idea. I think we have enough stock for the next Rabi, and I think we'll try and build stock for Kharif as well, because the inventories won't be adequate. That's correct.
Okay. Thank you. All the best.
Thank you. Thanks.
Thank you. The next question is from the line of Cyndrella Carvalho from JM Financial. Kindly proceed.
Thanks. Just one question on the capital allocation. We understand the part from an organic acquisition perspective, but is there any other thought process that you carry apart from, you know, building the product basket in various geographies? That also we have understood. Is there anything because there will be a significant cash flow coming to us in these coming 2-3 years?
I didn't understand your question. What about the cash flow you said in the end? I didn't understand your question. Can you restate that question, please?
I just want to understand what is the capital allocation plan for us?
Capital allocation plan for the cash that's coming in in the next few months?
Correct.
Did I understand that question correctly? Okay. I think we'll do some dividend. I think about 20%, 25% dividend we are doing. So that is anyway gonna be done. Anyway, we're doing some small level acquisitions, which will not be too much stress on the balance sheet, but however we can, you know, we can use that. I think that's the near-term plan. Some of the cash flow that's coming through, we're also investing in R&D, in capital and in also doing interesting Para IV. I think broadly, little bit in dividend, little bit in accumulation of cash, keeping it for an acquisition and bit in R&D. I think that's more or less what the plan is. Okay?
Thank you so much.
Thank you. Thanks. Next call.
Thank you. The next question is from the line of Darshita from Antique. Kindly proceed.
Thank you for the opportunity again. I wanted to understand the manufacturing capacity we have currently for agro. I suppose we'll be manufacturing the technicals and then probably formulating the product as well or are we selling the technical directly in the market?
We're doing primarily we are manufacturing the technical and the formulation. Both facilities are ready. This is a separate facility that we built in Andhra Pradesh, it is running and it's good to go. What we'll sell more and less and all, I think time will tell. You know, again, we're trying to close contracts depending on different customers have different needs. Yeah, I think as much as possible, we're trying to sell the formulation, but we'll see how it plays out.
What is the capacity for technical?
Capacity, I think we're good. I think to service the 20%, 25% market share, I think we're good. We're extremely comfortable. I think we have enough capacity both in the filling line and also on the technical side.
This will be a dedicated plant or will it be an MPP, as you mentioned that we have another 5-7 products in the pipeline, will we be able to manufacture those products?
No, we can do other products also. It's a multi-product capability. You can do other products as well, but this is gonna be the key product. This is the product that's gonna drive the revenues.
Okay. All right. Okay. That's about it. I just had one question on the DS Agro which. Are we challenging them? I mean, because I suppose we have the 90 registrations for the product, and we should be ideally given a patent of about three years from the Central Insecticides Board. Are we challenging, like, you know, DS Agro in terms of being able to sell that product in the market at all?
Challenging? What do you mean by challenging, Darshita?
As in, I mean, given that we have the 90 registration, how are they selling their products in the market? I mean, what kind of loophole have they
See, I tell you. He's, we're challenging them means we're competing with them. I think that's all I can say. That's how I look at it, challenge.
No, challenging in terms of like, you know, from legal perspective.
No, not with them. Our challenge is only with FMC, not with DS Agro, no.
All right. Okay.
Okay.
That's all from my side. Thank you so much.
Sure. Thank you.
The next question is from the line of Narendra, an individual investor. Kindly proceed.
Yes, sir.
Hi. Hi, Rajeev. I have two questions here. One is in the past, we talked about filings in China. Are we pursuing them or stopped doing that? Another question is on expenses front. Are there any one-off expenses in employee costs or other expenses or R&D?
Okay. To answer your first question, you said are there any filings in China? We actually have multiple filings in China, and we also actually got one registration in China, too. I think we got registration for oseltamivir capsules in China. We didn't do so great in the tender. I think we got some small orders, but nothing large. The China business also is interesting. Provided you're like the first, like every generic business, you have to be in the first wave with a unique product. Otherwise, you know, it doesn't work in any market. That's the only USP that works. I think to answer your question, we are active in China, but through partnerships, of course. So we have about five or six products that we are actively pursuing registrations for, of which one came through. Yeah.
Your second question was on the, what did we say about salaries and other expenses?
What was the question, sir? I didn't understand your question. Can you say that again?
One-off expenses, like only those expenses that
One-off expenses this quarter? No.
Those will not be reoccurring for the quarters.
In terms of employees, I think we already dealt the charges already. I think whatever employees that we did the VRS scheme, I think a lot of the VRS was reflected in the previous quarter, the previous quarters rather. This quarter doesn't reflect any VRS numbers. Other expenses and all, it depends on the product. Sometimes if you do an interesting filing and then, you know, then suddenly there could be a pop of INR 20 crore-INR 30 crore in other expenses. But otherwise nothing. I mean, these are fairly normalized other expenses. But sometimes we could have a pop based on if you're doing an allocation for a particular R&D project. But to say that they are, you know. It happens based on the project. At this time, for this quarter at least, it doesn't matter.
I think that's the best way I can answer that question. Okay?
Yeah. Clear. Let me confirm that.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Again, thank you, guys. Thank you for your questions, and thanks for your time to interact with us. Have a good day and bye-bye. Thanks.
Thank you all.
Hmm?
Yeah.
Thank you. On behalf of Nuvama Wealth, that concludes this conference. Thank you for joining us. You may now disconnect your lines.