Ladies and gentlemen, good day, and welcome to the Sun Pharmaceutical Industries Limited Q2 FY 'twenty one Earnings Conference Call. 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. Please note that this conference is being recorded. I now hand the conference over to Mr.
Namish Desai from Sun Pharmaceuticals Industries Limited. Thank you, and over to you, sir.
Thank you. Good evening, and a warm welcome to our second quarter FY 'twenty one earnings call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q2 financials and the press release that was sent out earlier in day. These are now also available on our website.
We have with us Mr. Dilip Shanghvi, Managing Director Mr. C. S. Moliharan, CFO Mr.
Abhay Gandhi, CEO, North America and Mr. K. T. Ganopar, Head of India Business. Today, the team will discuss performance highlights, update on strategies and respond to any questions that you may have.
As is usual, for ease of discussion, we will look at consolidated financials. Just as a reminder, this call is also being recorded, and a replay will be available for the next few days. Call transcript will also be put up on our website shortly. The discussion today might include certain forward looking statements, and this must be viewed in conjunction with the risks at our business meeting. You are requested to ask two questions in the initial round.
If you have more questions, you are requested to rejoin the queue.
I also request all of you
to kindly send in your questions that may remain unanswered. I will now hand over the call to Mr. Samir.
Thank you, Nimish. Welcome and thank you for joining us for this earnings call after the announcement of financial results for the second quarter of FY twenty twenty one. I hope you and your family are safe and healthy. Let me discuss some of the key highlights. Consolidated sales for the quarter were at INR8459 crores, recording a growth of 6% year on year and 13% quarter on quarter.
Our Q2 performance reflects our focus on business improvement, which has enabled a gradual recovery in all our businesses compared to Q1, despite market conditions that have not fully normalized. We continue to focus on growing our top line, gaining market share, control costs and ensure business continuity. We will continue to serve our patients and customers while ensuring safety of our employees. Let me now update you on our global specialty business. For Q2, our global specialty revenues was approximately US108 million dollars across all markets.
Specialty R and D accounted for 37% of our total R and D spend for the quarter. We have recently launched ILUMYA in Japan for treatment of plaque psoriasis and have received a good initial response from the market. Abhay will give you more details on our specialty business later. I will now hand over the call to Mr. Murli for discussions of the Q2 financial performance.
Thank you, Mr. Shangri. Good evening, everyone, and welcome to all of you. Our Q2 financials are already with you. As usual, we will look at key consolidated financials.
Q2 sales are at INR8459 crores, up by 6% over Q2 last year. This is the highest ever quarterly sales that the company has recorded. Material cost as a percentage of sales was 25.4%, lower than Q2 last year due to product mix as well as optimization of cost. Other expenditure was at 28.3% of sales, lower than Q2 of last year, mainly due to reduced marketing, selling and distribution and traveling expenses across markets. EBITDA for Q2 was at INR 2,099 crores, up by 30 year on year with resulting EBITDA margin at 24.8%.
Reported net profit for the quarter was at INR1813 crores, up 70% over net profit of Q2 last year. The reported EPS for the quarter was INR 7.56. Adjusted net profit for Q2 was INR $15.90 crores, up by 49% over Q2 last year with resulting net profit margin of 18.8%. Let me now discuss the key movements versus Q1 FY 'twenty one. Our consolidated sales are up by 13.3% quarter on quarter and reflects recovery in sales post gradual lifting of lockdown restrictions across markets.
We have added almost INR1000 crores of incremental sales for Q1. Material costs at 25.4% of sales are lower than Q1 due to product mix, cost optimization measures and higher sales of specialty products in The U. S. Other expenses at 28.3% of sales are marginally higher than Q1, mainly due to increase in R and D spend. We had a ForEx loss of INR116 crores for Q2 as against ForEx gain of INR17 crores in Q1, leading to an impact of INR195 crores.
EBITDA for Q2 at INR299 crores was higher by 22% compared to Q1 despite the adverse impact of this ForEx loss. Adjusted net profit for Q2 at INR1590 crores was higher than the adjusted net profit of Q1 by about 39%. Now we will discuss the half year performance. For the first half, net sales were at INR 15,926 crores, a degrowth of 1.7% over first half last year. As indicated in the past, the first half of last year included contribution from a nonrecurring special business in The U.
S. And hence, the year over year sales numbers are not strictly comparable. Material cost for H1 as a percentage of the sales was 25.8%, which was lower than H1 last year, mainly due to product mix. Other expenses were at 28.2% of sales, lower than H1 last year, driven mainly by reduced marketing, selling and distribution and traveling expenses across markets. As a result of the above, the EBITDA for the first half was at INR3824 crores, a growth of 9% over the first half last year with resulting EBITDA margin of 24%.
Excluding the exceptional items, adjusted net profit for H1 FY 'twenty one was at INR2736 crores, up 12% year on year with resulting net profit margin at 17.2%. Reported net profit for H1 FY 'twenty one was at INR157 crores. The company has repaid debt of over US300 billion in H1 of the current fiscal. Let me now briefly discuss performance. Taro posted Q2 FY 'twenty one sales of US142.8 million dollars a net profit of US45.1 million which represents a growth of 2151%, respectively, for Q1 FY 'twenty one.
On a year on year basis, sales for Q2 FY 'twenty one were lower by 11%, while the net profit was lower by 20%. I will now hand over to Mr. Kirti Gonorkar, who will share the performance of our India business.
Thank you, Morley. Let me take you through the performance of our India business. For Q2, the sales of branded formulation in India were INR 2,531 crore, a growth of 1% over Q2 last year and 6% on quarter on quarter basis. India business accounted for 30% of consolidated sales for Q2. Our growth for Q2 was in line with overall market growth, led mainly by chronic portfolio, which grew in a single in high single digit.
The growth in semi chronic portfolio has started recovering, while the acute segment has recorded a decline, although compared to Q1, the degrowth in acute segment is much lower. For both Q1 and Q2, the chronic segment has continued its growth trajectory. The acute segment still is facing some challenges due to lower incidence of infections and less patient football at doctor's clinic. Our medical representatives have started work across the territories, barring those areas that has been designated as a containment zone by the respective authorities. The doctor call rates have improved significantly compared to Q1.
Our expansion of the field force in India is complete, and it will help us in the long run to enhance our geographical and doctor reach. For Q2, we launched 22 new products in Indian market. Transpharma is the largest pharmaceutical company in India and holds approximately 8.1% market share in over INR 142,000 crore pharmaceutical market as per September 2020 AIOCD aVAXMAT report. We also continue to remain the partner of choice for in licensing given our strong number one position in many therapy areas. I will now hand over call to Abhay.
Thank you, Kirti. I will briefly discuss the performance highlights of our U. S. Businesses. For Q2, our overall sales in The U.
S. Were flat over quarter two of last year at US335 million but recorded a good recovery sequentially by over US50 million dollars driven by both the specialty and generic businesses. U. S. Accounted for about 30% of consolidated sales for the quarter.
Our specialty revenues in U. S. Have increased over Q1. And for products like ILUMYA, CEQUA and Oremzo, sales are at pre COVID levels. Levulan sales are yet to recover fully for the obvious reason that patient visits for treatments at dermatology clinics have not yet reached pre COVID levels.
Given our unwavering focus on the specialty business, for most products, we have gained market share despite the challenging market conditions during the last six months. Doctors' clinics have been gradually opening up during the quarter, although patient flow and access to industry is yet to fully normalize. Let me now update you on our U. S. Generic business.
As all of you have seen, The U. S. Generic business continues to be competitive. The Sun generics business has stabilized and has shown growth year on year. I will now hand over the call to Mr.
Shanghvi.
Thank you, Abhay. I will briefly discuss the performance highlights of our other businesses as well as give you an update on our R and D initiatives. Our sales in emerging markets were at US210 dollars for Q2, up by 4% year on year and by 21% over Q1 FY 'twenty one. On a year on year basis, the underlying growth in constant currency terms was higher at about 9%. Emerging markets accounted for about 18% of total sales for Q2.
Formulation sales in Rest of the World markets, excluding U. S. And emerging markets, were US178 million dollars in Q2 FY 'twenty one, up by 10% over last year and 31% over Q1 FY 'twenty one. This was mainly driven by all round growth in multiple markets like Japan, Europe, coupled with growth in Taro's Rest of the World business. Rest of the World markets accounted for approximately 16% of Q2 revenues.
We've also done well in our API business with Q2 sales at INR $5.10 crore, up 9% over Q2 last year. We continue to invest in R and D for enhancing our specialty and differentiated generic pipeline. Consolidated R and D investments for Q2 is INR613 crore, accounting for 7.2% of sales. Our current generic pipeline for The U. S.
Market includes 92 ANDAs and six NDAs awaiting approval with the U. S. FDA. With this, I would like to leave the floor open for questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. The first question is from the line of Prakash Agarwal from Axis Capital. Go ahead.
Hi, good evening. Thanks for the opportunity. So first question on the India business, if you could help us give us the split of chronic, subchronic and acute. As I understand, 1% growth is just about the industry growth, and we have seen peers doing much better. So a, the breakup and if you could highlight what the daily I mean, you said subchronicity recovery, acute is still declined, but if you could give some granular detail, that would be also helpful.
Sure.
Yes. So as I said, compared to Q1, Q2, most of our businesses are doing well. We have divided this into like chronic, subchronic and active business. So chronic business, both in Q1 and Q2, has shown good growth, and it is a high single digit growth. Semi chronic, they suffered in the Q1, but they are recovering very fast in Q2.
And they are also showing single digit low single digit growth. The most affected business is acute, where we see some recovery compared to Q1, but Q2 still, it is showing a negative growth, though it is better than Q1. So overall, there is a recovery in this business from Q1 to Q2. And as the lockdown is opening up, more number of doctors coming to clinic and footfall of the patient is improving and our call average also is going up, we see that Q3, we will even have better growth numbers.
The, breakup, sir? Chronic, sub chronic, actually?
Generally, we don't provide the breakup for chronic, sub chronic business. Yeah.
Roughly ballpark, sir?
Yes, Mr. Roughly, if you Mr. As I said, we don't provide, so there's no point in just roughly giving you the numbers, yes.
Okay. And secondly, on Halod facility status, have we heard anything in terms of inspection and also an update on the Kappa plan?
So I think last time also,
I
updated that we are waiting for the we've completed all our, what you call, responses, and also all the deficiencies have been completed. So we are awaiting any further response from agency. As you are aware, agency is still not visiting international facilities. We are requesting them in case if based on what you call disc audit, they can approve. But I don't think agency currently has a process by which they can approve a facility.
So I think it continues to be a work in process.
Okay, great. Thanks. I'll join back the queue. Thank you.
Yes. Thank you.
Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Sir,
just correct me if I'm wrong, but did you mention that specialty revenue for ILUMYA, CEQUA and Yonza are back to pre COVID levels? Or did you indicate prescription?
You heard it right, Neha. The revenues are back to
pre COVID levels.
Okay. And sir, in case of CEQUA, hypothetically, if we do see a generic entry for a competitor product, could you highlight some thoughts on would this mean a slowdown in our subscription momentum? Or would it be actually loss of prescription share? Some thoughts there?
I mean, it could probably also grow the market. So sure, it will have some challenges in terms of access because you will probably then have to go through a step through where generic may be first recommended. But it may also lead to an expansion of market. So we remain positive. And the experience of doctors who have used the product is quite good.
So they have experienced a good product, and we are hopeful a lot of them will continue to prescribe, which will help us.
Understood. And my second question is on the email launch in Japan. How should we look at ramp up in Japan? If you could give us some color on how exactly it works there?
So so Japan as a market, I think, as you are aware, is a hundred percent reimbursement market.
Mhmm.
And it's state funded. So we have a price approval. We need to kind of go to the next stage of getting our product in various formularies in different hospitals because biologics in Japan are used only in hospitals. And looking at our early response, we are quite optimistic about the acceptance and potential success of the product. However, we need to keep this in perspective that the biologics for psoriasis is only $500,000,000 in Japan, unlike a $10,000,000,000 market in The U.
S, but it's growing very rapidly. So I think in excess of 20%, twenty five % annual growth. So we hope and we have great expectations about this product. Our acquisition of Pola and our familiarity with dermatologists will help us further, even though the field force that is promoting ILUMYA is a totally independent and a separate field force.
And sir, this entire process of getting it to various formalities and hospitals, is this like a multi month process? Or does it take longer?
No, it's a multi month process.
Okay. Thank you
so much, sir.
Thank you. The next question is from the line of Kunal Dharmesh Shah from MK Global. Please go ahead.
Good evening. Thanks for taking my question. So first question is on the ILUMYA, especially on the European psoriasis market. So after the launch of Enbrel and Humira biosimilar, have we seen any early trends in terms of how the market will pan out, whether it increases the market size or it kind of increases obstacles for the targeted biologics in terms of growth? Any early trends that you have seen?
And second question, on the selling and promotional expense for the specialty business in U. S. So I think that has reduced significantly in quarter one and quarter two. So will there be some structural saving there going forward? Or will it come back to normalized level?
So Abhay, will you take the question for Europe?
The first question was on Europe. So I'm not really sure of the current trends. I think as part of our steering committee, I think in the next one or two months, we will have more granular details of how they look at the business. Probably
this question is coming back to you. My understanding is that even when we launched the product, I think biologics were biosimilars were already there in the market. So I think in any case, looking at the safety and the overall effectiveness and response rate and we've recently announced our five year safety data safety and efficacy data. So I think it's clearly a significantly different product compared to the older biologics. So so and the number of nonresponders to older biologics will always be moved to this.
However, as you estimated, maybe initially patients will be used and put on biologics as they are also put on other biologics in The US. But we expect all the IL-seventeen, IL-twenty three towards increasing future penetration and increasing market share in all the markets, including Europe.
Answering the second part of your question, I think in Q3, definitely, of the savings which you have seen in sales and marketing will continue. Q4, even I am not so sure, to be honest, as of this moment because in The U. S, the number of cases of COVID have gone up significantly in the past one month or so. So how Q4 will pan out, to estimate. But I would not look at it as a structural saving.
Given the choice, some of that we would like to do. And if the situation normalizes, I think the spending should come back to declining levels. But in Q3, I think some of that savings will get carried forward. Okay. Thank you.
Thank you. We'll move on to the next question that is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Hi. Thank you for taking my question. So I had two questions. The first was that historically when you look at our financials, we used to be at a much higher EBITDA margin profile in excess of 35%. So now as we see specialty finally picking up and we know we're making cost and making profits on it in the future, do you think we can scale back to those historic margin levels?
No. I mean, unfortunately, we don't give out long term forecast of both profitability as well as top line. I think, philosophically, we would always like to grow faster and improve profitability. So that would be the effort. How successful we will be and what will be the opportunity, we will not know.
But you need to also keep this in perspective that in investment in r and d, as we continue to grow our specialty business, we will always continue to invest in that business with a view to create a much bigger future for us in future. So we've just started the the clinical studies on EDG agonists. And these are phase two studies, and they will go on to become Phase III studies. So there will be while profitability and turnover and contribution for specialty business will grow, expenses will also continue to grow till we become a meaningfully sized specialty business.
Okay. And my second question was, can you provide the actual gross and net debt numbers for the quarter ex DARO?
So, Murali, maybe you can brief.
Sorry. Yes.
Ex DARO number. One second. We have got net debt as of September of over $400,000,000 ex TAR.
Okay, thank you. That's net debt, right?
Net debt, correct.
Okay, great. Thank you so much.
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Hi, thank you and good evening everyone. So just thinking about your global specialty business, how do you plan to expand the product portfolio, that innovation portfolio going forward? So, Sameer,
I think you are aware that we're doing additional studies on ILUMYA for psoriatic arthritis. In the same way, like, that we're also working on the DG agonists, and that has potential usage in multiple other indications. We are also looking at if if there is a opportunity for us to develop a much better product for out of ILUMYA for gastroenterology indications. So I think the idea would be to kind of looking at our existing portfolio, create a, what you call, a base business, which can then justify and sustain and support our future investments.
Yes. Thanks for this. Sir, are you looking at another late Phase II, Phase III type of in licensing acquisition deal of $500,000,000 plus minus. Is that something is this the way you think you can grow this portfolio?
So we always remain opportunistic about potential acquisition opportunity. However, every acquisition needs to kind of justify itself both in terms of strategic compatibility as well as value for future that we can create. Our belief is that with Sequa as well as ILUMYA, we have one major product in both the therapy areas which we can build on. And odomzo in what you call odomzo and what you call Lebulon give us a potential success in Hong Kong dermatology. So I think there is a existing portfolio that we can build on, but we we will remain opportunistic.
I I don't think we have any currently, I mean, investment that we are investigating or seriously looking at, but we will remain opportunistic.
Great. And sir, my second question is on The U. S. Generic side of the business. Any thoughts on the pricing environment over there and our expectation of volume gains and new launches, sir?
Abhay, would you like to respond?
I mean, in every call, I'm repeating the same thing. We haven't seen the pricing environment softening, so to say. And within the current environment, I mean, we try and look for opportunities where we can get our share of the business.
Sir, anything on new launches, if you can share?
I think in every quarter, we are able to launch two to three products, which incrementally add to our business. We had the same in quarter two as well. And we're hoping that in quarter three, we will have another two, three launches coming up.
Okay. Thanks, sir. Just one with your permission, one clarification. Did you say net debt is $400,000,000 I thought it was $415,000,000 by end of Q1, and you have, further deleverage $100. So it should be actually be $315,000,000 or so.
No. No. Samit, Samit, the net debt at the end of the thirtieth September ex Taro is around $400 plus million. You listen correctly. Yeah.
No. What's up I think what he is asking is that at the end of first quarter, the number was the same. So if you've repaid what you've repaid, then how the number hasn't changed? That's his question. So the end
of first quarter number was different, sir. I will take it offline with him.
Okay. Yeah. You should take it up offline with him. Okay. No worries.
Thank you. This time, of course, we will be, what you call, also publishing partial balance sheet numbers. So that will become.
Yes, sure. Will do. Thanks.
Thank you.
Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Thanks for this opportunity sir and congrats to the absolute numbers. So just first question on the specialty business. So just recently what we have announced about the five year sustainable sustained efficacy and safety data. So what significance it has to the ILUMYA's progress, although we have seen a kind of strong sequential as it is Y o Y growth for Illumina's prescription count in U. S?
That we essentially give the doctors the confidence that when they start putting a patient on ILUMYA, it not only works, but works for a long period of time. And I think five years data is significant, where a lot of patients actually on biologics may or may not be able to sustain results for that period of time. So I think skin clearance up to a 90 plus plus level for five years is very significant from a customer perspective. And when I say customer is both doctor as well as patients.
Any commercial sense out of it, sir? Is it possible?
I mean the data is hardly a week or ten days. So maybe you haven't done any modeling on how this particular data will impact your commercial sales? But obviously, when your team members are able to use this and speak about this data to doctors, I mean, we definitely hope commercially it will benefit the product and give it one more fill it to grow the business. Okay. So just to extend some
of this question, sir, see, in fact, for the overall specialty business, how should one really look
The voice is breaking up probably, so
Yes, yes. Just a second. Is it fine, sir?
Much better. Thank you.
So I am saying, sir, so how should one really look at the specialty business, let's say, three to five year period in terms of sales progress or profitability or in terms of the core IRR of the business? Why because we could be seeing a depressed earnings at this current moment because of the promotional spend on selective projects, which can gradually see a kind of a better improvement with the penetration and all that. But subsequently, we can add a couple more projects there, which can further bring in some kind of weakness in the overall earning efficiency of the specialty project. So in fact, if you can provide some clarity, let's say, over three to five year period, what business looks one should really anticipate for the specialty business? And also, if you search since this is a global practice also that for any lead molecule, if you can provide at least the competitive positioning progress and all that, at least quarterly for your lead molecules in the specialty side that can really help in evaluating and valuing the company better?
I couldn't understand what part of it was the question. The
question was yes, so my question was that, over five year period, if we just try to evaluate or see what kind of business progress the specialty efforts can see and what IRR kind of target that you'll be having or that you're anticipating for this business, sir?
I mean, I'm speaking from a U. S. Perspective, but the specialty business is something we are also trying to reach a global market, not just The U. S. However, of course, will be a significant part of it.
But and the idea which we have been saying on calls, and Mr. Shanghvi has been saying this, is to create this into a meaningful business for the organization, which can both bring in top line reasonable profitability and enable us to keep investing in the business. Having said that, I mean, IRR numbers, I don't think we are giving out on calls. Each part of the business is different. So for example, you will have let me take an example.
The Levulan business will already be a profitable business because it's a legacy business which was acquired. But there are certain parts of the business like ILUMYA, which we are in the investment phase and are likely to continue to invest for the next maybe a couple of years. So different parts of the business are in different stages of its own life cycle. So at an aggregate level, I mean, we hope that sooner rather than later, we start generating returns from the business.
Okay. Just a similar question, sir, on the domestic formulation side. What I was seeing that obviously that the domestic formulation business, obviously, this is undisputed leadership position that we are having in most of the therapies where we have kind of a meaningful presence. But it is so it is I believe it is just like a kind of FMCG kind of a business where because sure it is the brands are ever rising and consistently gaining momentum, expansion and all that, and no greater investment and all that. So then obviously, this is a kind of a business which can which ideally should be valued at a significant value significant multiples.
Just like any FMCG company, like, for example, similar size of the business of India, domestic business, if you consider the company like, let's say, Nestle, who is having a similar revenue base, but it is valued like possibly a few times of the equity value for the domestic business what we are currently having. So it is I think, sir, if we can possibly aggregate our business and report the segmental performance, let's say, into the four broad categories or whatever the broad categories like U. S. Specialty, U. S.
Centric, branded business, it could be including domestic as well as ROW market and separately API. So that also can provide a kind of a better understanding about the progress of each segment and hence the proper valuation of the company like Sansama, which I believe it is really undervalued.
No. And I agree with you. I mean, generally, when you tell any entrepreneur that your business is undervalued, you will see very little resistance.
So so so that
part, I
think, is clear. And my suggestion to you is that we have challenge in terms of segmental revenue sharing because it will potentially create some future challenges for us in operating challenges for us. But if you wish to look at our India business, even though SPLL, which is a 100% subsidiary of Sun Pharma, and we give separate annual report of SPLL. Even though it's not a complete India business, but it still represents a significant part of our India business, and you will get comprehensive information about growth, profitability, cost, it is So hopefully, that will help you understand understand and value the business differently, if you think that is useful. And we will continue to internally debate that whether we want to or we should, at this point of time give segmental revenue.
Sure, sure.
That would be really helpful. Many thanks for your question.
Yes. Thank you. Thank
you. The next question is from the line of Shatayu Mehta from Tata Investment. Please go ahead.
Yes. Good evening, everyone. I just wanted one question accounting your subsidiary Sun Pharma Global Ferry. It had made a loss of around INR 3,000 crore in FY twenty twenty. If you can just help me out how the performance has been in first half, please?
So Murali, maybe you can respond.
So Sun Pharma, SST is a pass through entity. So Yes. That's not a reflection of the number what you're treating. And you also see in the notes that the entity is under merger with us. So we are going to merge with the Indian SPIL, SPIL.
So in the first half, there is no concern as such.
Okay. But can you just share what kind of number it is?
For the subsidiaries, in the interim period, we don't disclose numbers separately. However, in the annual reports, all the subsidiaries, as Shagvi pointed out recently, will be available for you.
Correct. But whether it has been turnaround or whether it is
No. It's a past due entity.
So I we don't Okay.
So what loss you see there is not actually a business loss,
I think.
The next question is from the line of Shyam Shree Nawasan from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question and good evening to all.
To interrupt, Mr. Shree Nawasan. Sir, your voice is sounding very soft. Can you speak a bit Yes,
sure. Is this better now?
Much better. Thank you.
Thank you. Good evening all.
Thank you
for taking my question. Just the on the U. S. Elections, last day of polling today, both candidates have actually talked about price control, drug price control. And if the polls were to be believed, I think, Democrats, if they were to come, any thoughts on now that you have a U.
S. Specialty business, what are your thoughts on drug pricing? How do you ensure that payers, patients paying them get the best value for money? So if you could share your thoughts around that. And now that ILUMYA has been two years in The U.
S, if you could share something in terms of what are the price net price increases that we have taken on that front?
So Abhay, you can talk of the price changes for ILUMYA.
Yes, yes. The price change we have taken this year to give you
Okay. Okay. So so I think we if I see the various announcements which president Trump has made and also what I see as a what you call manifesto and poll or election promises of both the candidates, Both of them want to find a way to effectively control drug prices. There are some potential directions coming out of their answers. Say, like, they want to negotiate Medicare prices because as on today, the government doesn't negotiate.
So like that, they are talking about a few things. But we have to finally see how it turns out and then assess what is the final impact of that on the business. However, if I look at the valuation of the major pharma companies, I don't see any significant negative impact of this pronouncement on their valuation. So I have no clue as to finally what is going to be implemented. Because that's a idea and execution.
I have big challenges in The US system because it needs to get approved by senate. It needs to get approved by even if the president wants to do few things. Abhay, you have to something to add, or maybe I said something which is not correct?
No. I think we are only as wise as what we read today. Both the precedents and the incumbent and the challengers have made different announcements. But what actually will get implemented and in what form, I think we have to wait and see.
Sure. Are we on the net price increases for ILEMIA?
I said we have taken a 5% increase this year.
Okay, got it. And my last question is on the gross margins. I was just trying to clearly, Taro's gross margins have been coming down. But if I just strip that out and just look SunEx Taro, gross margins have actually been going up. In fact, this quarter number was on 77%, seventy eight %.
So just want to understand from perspective, some of the drivers of that margin going up, if
you could help us understand qualitatively?
Murali, maybe you can respond.
Shyam, as I said in my readout, the margin expansion into the gross margin is contributed both by the product mix and the various cost optimization measures and of course the higher special revenues in the current quarter. And this has been a continuous effort to improve overall the margins for us through various cost optimization measures.
Muralid, just if you could rank order, I'm not looking quantitatively because the numbers seem to be almost like one way. So I'm just trying to curious, is it specialty where the realization is now starting to improve? What could be the bigger drivers if you were to rank them? That's what I'm looking for.
No. So in the quarter, we have said that higher specialty sales in the current quarter did, of course, one of the components. In the readout, I did mention that. So that's one of the but then we are seeing continuous focus on cost and improvement measures also is the major contributing factor. Got it.
Yes.
Thank you and all the best.
Yeah. You. Thank you.
We'll move on to the next question that is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yeah. Hi, sir. Good evening. A question, Abhi, on CEQUA. Just trying to understand, could you just give a sense that out of the total patients that we're serving today on CEQA, majority would have been new patients to the therapy?
Or would they have those patients would have tried either Zidra or ReSAPIS and would have come to SUPER, just as a rough, rough which will be bigger segment. So in the initial phase and Sequa is now almost a year old product we launched somewhere in November of last year. So in the initial phase of the first, let's say, four to six months, there were a lot of warehouse patients, which we were able to move to the product. But I think today, there are two segments. And I think the larger segment is new prescriptions.
We still get patients who have failed on either of the two competitors onto the product. But my sense is that the larger component will be newer patients. Okay. That's helpful. And second is what are your thoughts on DTC campaign for CEQUA?
I know last six months have not been the right period to look at it, but at some point of time, would you look at it? We are initiating the DTC from this month, actually. But of course, having said that, it is not going to be television advertising like we did for ILUMYA. So it will be using other channels to reach out to consumers and customers both. Okay.
Okay. That's helpful. And second question was on ABSORICA and the ABSORICA low dosage version. So we are almost two months away from entry possible generic entry in this product. Because of situation in The U.
S, IQVIA suggests we have been only able to shift about 20% of the market rate. Is there any other difference that we have that we can like save a larger franchise of Zorica getting impacted from potential generic entry over there? You're right. I mean we have been able to take 20% share from Zorica onto the LED formulation. But as you know, because of the COVID environment, we have lost valuable time, trying to do the best we can.
But if there is a generic which comes in December, that could have an impact on the business. So there's no other difference that we can still available with us, which can just leave us at the last moment? Not from a product perspective, but there are other strategies we are toying with. But obviously, on the call, I will not be able to spell out some of those strategies. Sure, Abhi.
Thank you very much. Thanks.
Thank you. The next question is from the line of Ritesh Rathod from Nippon India Mutual Fund.
Post the five year data, strong five year data of the ILUMYA, would there be any change in DTC strategy for the ILUMYA?
Not much from the DTC. I think the first objective will be to use this data to communicate with the doctors. And I think that is where I think the medical reps and the MSLs and even the SRMs who will speak to the payers would be more important. And I think the focus will be on communicating with the health care professionals, think, which will be the key. Okay.
Thanks. That's so much.
Thank you. The next question is from the line of Namish Mehta from Research Delta Advisors. Please go ahead.
Yes. Thanks for the question. And following up on the previous question, now that we have the strong five year data, is there any idea as to which other companies would have done the similar trial? And if yes, how does it compare? How does our data compare with other companies?
In the IL-twenty three space, I haven't seen five year data from the competitors.
Abhay, we announced also at the press release that this is the first IL-twenty three five year data.
But within the IL-twenty four? Yes.
I said that they would also be working on that kind of data. And at some point in time, they may be able to present it. But I think being first to market with this data is a huge positive from our perspective. And we'll try and use that time to the best of our advantage.
And also, I think, Abhay, I think if you see qualitatively,
the the data
reflects that over time, actually, the percentage of PASI 90 and PASI 100 increases.
It improves.
Yes, yes. Yes, sure. No, the data looks very strong. I'm just trying to see if there is any comparable data. Even in IL-seventeen, if you know of any company which would have undertaken such trials, perspective, how does it compare with any other?
Not IL twenty three, we are the first one, but within IL seventy, how does it compare?
So my sense is everybody will have a five year data because these are regulatory requirements for you to do five year safety studies.
And so how many would have published it so far?
Everybody would have. I think if you can see Cosentyx and all, all of them came before us. So their five year data should be available.
I see. But do we have any idea as to how does it compare? How does our data compare with their data? Obviously, we can look up No.
No. I think I think, generally, doctors who use both IL seventeen and IL twenty three, their feedback has been that IL seventeen produces faster response, but IL 23 produce durable response. And within IL 23, we believe that ILUMYA has done even better, both in terms of durability as well as in terms of improvement.
I see. That's very interesting. Yes. And the second thing I just wanted to know about the generic business. I mean, we have had some time since we had a, you know, low competition launch.
So any idea? Or is it kind of contingent upon our Hello status? If not, then when do we when are we likely to see any important launch, which where we might be the first or second one to launch, let's say, in the market? That perspective will be helpful. No.
I think, unfortunately, we've not given any data about growth for this year. But whatever information that we share about potential annualized growth will factor our expectation of approval of these products.
That I understand, sir. I'm just trying to understand, you know, the launches of important complex generic product. I don't want the number of launches. But
No. But I think you you have to understand that the for difficult to make products for which no generic exists, FDA on last day can also ask you a question that can potentially delay your approval by one year. So I don't think that it's fair for me to give you any date unless and until we have an approval.
I see. Okay. Okay. Okay. I understand.
Thank you.
So we have a peptide product in which now FDA has asked us that you compare your impurity level at different stages in your shelf life compared to the innovator product. Okay. So I have to then do stability study for both my and innovator product for two years before I can respond.
Oh, I see. Okay. Okay. And following up on that is, you know, with your permission. Is there a policy likely coming from FDA related to complex entities?
We have been hearing about it some time back as to whether they will help generic companies expedite complex centric support. Now that they also
define No.
I I think there is a existing policy where people who have filed or who wish to file, FDA consults. But FDA will not help you make the product. They will tell you what you are supposed to do, and they will talk more frequently to you than otherwise.
Okay, understood. Thank you very much.
Yes, thank you.
Thank you. The next question is from the line of Sanjay Shah from Alphalined Wealth Advisors. Please go ahead.
Yes. Thank you for opportunity, sir. And pardon me for any pronunciation mistake, if I do. Salim, as regard to the Liminea, we have different dosage that is of two hundred mg lumetriq. What we have got approval from EU, correct me if I'm wrong.
So what is the potential of that going ahead?
Abhay, you will respond?
I don't think I've understood the question because He
says that two hundred mg will
we have two hundred mg. So I think
in Europe, Abhay, we have both one hundred and two hundred.
Yeah. Yeah.
Absolutely. Yes. Yeah. Yeah. So what he's saying is, what is the potential for two hundred?
In in Europe, you're asking
In Europe. In Europe. In Europe.
In Europe, I think the product is designed and marketed as a self injectable product, where I think they have a value for both the strengths. The data that we had submitted in The U. S. And the permission for which we have is only for the one hundred milligram. And the product is designed to be a medical benefit product.
So in Europe, I think ILUMETRI, they have both the strengths. But even there, I think my sense is and I don't have updated data, maybe we will try and get that. But I think one hundred milligram in Europe still sells more than two hundred milligram, but I could stand corrected. I can't clarify that.
Abhay, you're right because two hundred mg is only for obese patient above a certain weight class.
Sir, my second question is regarding API. What opportunity do you see in that API?
would you be able
to hear hear now?
A little better.
Yes. It was saying that APR
Actually, it's gotten worse.
Sorry, interrupt, sir, we're not able to hear you. Hello?
Can you hear me now?
Yes, sir.
Sorry, sorry, sorry. Sir, it was regarding API business I was talking. What opportunity do you see on that side? And do we have any plan to grow that business?
So we clearly look at API as an important component of our business, but primarily with a view to strengthen our dosage form business. However, looking at the diversity of products that we make, many of these products have significant potential to sell. And that is the reason why we are focusing on it. And now that we are focusing on it, I think it's growing quite decently. So we will continue to grow that business.
Fine. So we have not planned any massive CapEx for that or increasing that ramping up the business No. We are just sales.
We are we are all the time investing in that business because today, our API turnover is almost twice the turnover of what it was three years or four years back. What you see is the external turnover. What you don't see is what it is supplying to Sun Pharma. If I look at the total volume produced by API business, it's more or less doubled in four years.
Ladies
and gentlemen, that is the last question. I now hand the conference over to Mr. Nimish Desai for his closing comments.
Thank you. Thank you, everybody, for taking time out and joining this call. If any of your questions have remained unanswered, please do send them across and we will have them answered. Thank you and have a good day.
Thank you.
Thank you.
Ladies and gentlemen, on behalf of Sun Pharmaceutical Industries Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.