Good evening and a warm welcome to our Q3 FY 2021 Earnings Call. I'm Nemesh from the Sun Pharma Investor Relations team. We hope you received the Q3 financials and the press release that was sent out earlier in the day. These are also available on our website. We have with us Mr.
Dilip Gangvi, Managing Director Mr. C. S. Moolidharan, CFO Mr. Abhay Gandhi, CEO of North America and Mr.
Kriti Ganorkar, CEO 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 the ease of discussion, we will look at consolidated financials. Just as a reminder, this call is being recorded and a replay will be available for the next few days. A call transcript will also be put up on our website shortly.
The discussion today might include certain forward looking statements and this must be used in conjunction with the risks that our business faces. You requested to ask 2 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 today. I will now hand over the call to Mr.
Sangli. Welcome and thank you for joining us for this earnings call. After the announcement of financial results for the Q3 of FY 2021. 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 INR 8,782 crores, recording a growth of 9% year on year and 4% quarter on quarter. Our Q3 performance reflects continued profitable business growth in a market that is gradually recovering from the impact of the global pandemic. Most of our businesses have done well Over Q3 last year, our India and U. S. Businesses have also grown sequentially.
We continue to focus on top line growth, operational efficiencies and Business Continuity. Let me now update you on our global specialty business. For Q3, our global specialty revenues was approximately US148 million dollars across all markets. Global ILUMIA sales for 9 months ended December 2020 have already crossed last year's last full year sales. Specialty R and D accounted for approximately 27% of our total R and D spend for the quarter.
We've recently initiated Phase 2 clinical trial for SCD-forty four in patients with moderate to severe plaque psoriasis. The Phase III clinical trials for ILUMIA for psoriatic arthritis indications are also ongoing. Abhay will give you more details on Specialty Business later. I will now hand over The call to Murali for discussions of Q3 financial performance.
Thank you, Mr. Shanvi. Good evening, everyone, and welcome to all of you. Our Q3 financials are already with you. As usual, We look at key consolidated financials.
Q3 sales are at INR 8,782 crores, up 9% over Q3 last year. This is the highest ever quarterly sales that the company has recorded. Material cost as a percentage of sales was 26.6% lower than Q3 last year due to product mix and other efficiencies. Other expenditure was at 27.9% of sales, lower than Q3 last year, mainly due to lower marketing and traveling spend in U. S, India and other markets.
As indicated in our past earnings call, these expenses will see an increasing trend in future once the market situation reaches full normalization. As a result of the above, EBITDA for Q3 was at INR 2351 crores, up by 36% year on year with resulting EBITDA margins at 26.8%. Reported net profit for the quarter was at INR1852 crores, up 103% over net profit of Q3 last year. The reported EPS for the quarter was INR 7.72. Let me now discuss the key movements versus q2 FY 2021, our consolidated sales are up by 4% quarter on quarter, driven mainly by strong sequential growth in the U.
S. And India business. Material costs are 26 0.6% of sales higher than Q2 due to product and geography mix and certain one time charges at Taro. Other expenses are 27.9 percent of sales are marginally lower than Q2, mainly due to lower R and D spend. We had a ForEx gain of about INR 72 crores for Q3 as against ForEx loss of about INR 116 crores in Q2.
As a result of the above, EBITDA for Q3 at INR 2.351 crores was higher by 12% compared to Q2. Net profit for Q3 stands at INR1852 crores, was higher than the adjusted net profit of Q2 by about 16% and was 2% higher compared to the reported net profit of Q2 FY 2021. Now we will discuss the 9 month performance. For the 9 month period, net sales were at INR 24,708 crores, a growth of 2% over 9 months last year. As indicated in the past, The 9 month period of last year included contribution from a nonrecurring special business in the U.
S. And hence The year on year sales numbers are not strictly comparable. Material cost as a percentage of the sales was 26.1%, which was lower than 9 month period last year, mainly due to product mix and efficiency initiatives. Staff costs at 24% of sales were higher than last year, mainly due to addition of field force in India and U. S.
As well as the annual merit increase. Other expenses were at 28.1% of sales, Lower than 9 months of 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 9 months was at INR 6,176 crores, A growth of 18% over the 9th month last year with resulting EBITDA margin of 25%. Excluding the exceptional items, adjusted net profit for 9 month FY 2021 Was at INR 4,589 crores, up 36% year on year with resulting net profit margin at 18.6%. Reported net profit for 9th month FY 2021 was at INR 20.10 crores.
The company has repaid debt of about $490,000,000 in 9 month period of the current fiscal. Let me now briefly discuss Taro's performance. Taro posted Q3 FY 2021 sales of US140 million Our net profit of US33 $1,000,000 which was down by 2% 27%, respectively, over Q2 FY 2021. On an year on year basis, sales for Q3 FY 2021 were lower by 5%, while the net profit was lower by 51%. For the 9 months, sales were at $401,000,000 down 14.7% And adjusted net profit was at $107,000,000 down 43.6% over the 9 months last year.
I will now hand over to Kirti Ganorkar, who will share the performance of our India business.
Thank you, Murali. Let me take you through the performance of our India business. For Q3, the sales of branded formulation in India were INR 2.753 crore, A growth of 9% over Q3 last year. We have also recorded a 9% growth on quarter on quarter basis. India business accounted for about 31% of consolidated sales for Q3.
Our growth for Q3 was led mainly by chronic portfolio. For most of our therapeutic segments, we have either outperformed Our growth in line with the segment growth. As reported by AIO CD, AVAX, Our overall market share in the domestic market has also recovered to 8.0% in Q3 compared to 7.78% in Q2. Growth in semichronic and acute portfolio has started recurring. The acute segment is still facing some challenges due to lower incidence of infection and less patient flow to the doctors' clinic.
Our medical representatives are fully operational on the field and are visiting doctors for promoting our products. About 90% to 95% of specialty doctors have restarted their practices, But the patient's footfall is not yet fully normalized and is at about 70% to 75%. The doctor call rates are improving and are near to normal. For Q3, we launched 27 new products in the Indian
market. ConPharma
is the largest pharmaceutical company in India And holds approximately 8.2 percent market share in over INR 1.45,000 crore Pharmaceutical market as per December 2020 AIOcd Avax MAT report. We also continue to remain the partner of choice for in licensing of products given our strong number one position in many therapy areas. I will now hand over the call to Abhay. Thank you, Kriti. I will briefly discuss the performance highlights of our U.
S. Businesses. For Q3, our overall sales in the U. S. Grew by 7% over Q3 last year, US374 million mainly driven by ramp up in sales of specialty products and the extero generic business.
U. S. Accounted for about 31% of consolidated sales for the quarter. Our specialty revenues in U. S.
Have increased significantly over Q2 and have crossed pre COVID levels driven by ILUMIA, CEQA And I'm Zorika, MD. Sales of Lebuena have recovered compared to H1, but yet to be fully normalized. Alumia sales in U. S. For the 9 months ended December 2020 have already crossed last full year sales.
We continue to improve our specialty revenues in the U. S, driven by a gradual increase in market share for key products. The generic for Esarica is yet to enter the market and as of now we do not have any visibility on the generic entry. Doctor. Phoenix have been open during the quarter, although patient flow and access to industry is yet to fully normalize.
Let me now update you on our U. S. Generics business. As you have seen, The U. S.
Generic business continues to be competitive. The Sun ex tariff generics business has recorded year on year growth driven by a combination of market share gains, better supply chain management and incremental upside from strategies of competing products. As of December 2020, generic prescriptions for Sun portfolio have reached close to 3 COVID levels. I will now hand over the call to Mr. Shanvi.
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 $204,000,000 for Q3, up by 5% year on year. The underlying growth in constant currency terms were higher at about 11%. Emerging Markets accounted for about 17% of the total sales in Q3.
Formulation sales In Rest of the World Markets, excluding U. S. And Emerging Markets, dollars 173,000,000 in Q3, up by 12% over the Q3 last year. This was mainly driven by All round growth in multiple markets like Japan, Europe and coupled with growth in Taro's Rest of the World business. ROW Markets accounted for approximately 15% of consolidated Q3 revenues.
API sales For Q3, we're at INR 450 crores, down about 10% over Q3 last year. We continue to invest in R and D for enhancing our specialty and differentiated generic pipeline, Consolidated R and D investments for Q3 were at INR 560 crores accounting for 6.4% of sales. Our current generic pipeline for the U. S. Market includes 90 ANDAs and 8 NDAs awaiting approval with the U.
S. FDA. Board of Directors today decided to issue a dividend, interim dividend of 5 50 percent or INR 5.5 per share. With this, I would like to leave the floor open for questions. Thank you.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Ash Mukherjee from Nomura. Please go ahead. S.
Mukherjee, your line is in, Takmor. Kindly go ahead with your question, please.
Hello. Are you able to hear me? Hello? Yes, we can hear you.
So for a bunching up of launches or any new thought process that you have on product launches in India, are the number of launches going to be a lot higher going forward? Can you just So, Thorson right
here. Yes, I think I could not hear the earlier part, but you are asking about new product launches in India. Yes, yes. I think if I see last 3 quarters consistently, we are launching somewhere between 20 to 25 products in India, which includes the line extension and new product, and I think this will continue going forward also.
And so the next question on specialty, is there any material contribution from launch in Japan Of Innovia or is it largely driven by the U. S. Ramp up? So I think
we have Recently launched Illumia in Japan and in the COVID restrictions, I understand that the product has been very well received. And as we are able to reach The hospitals which allow medical representatives to visit, we are seeing good acceptance of the product. And we remain very optimistic about the potential of the product and expect it to become an Important medicine for treating psoriasis patients in Japan. Okay, sir. Thank you.
And I'll join back.
Thank you. The next question is from the line of Prakash Aggarwal from Axis Capital. Please go ahead.
Yes, thanks for the opportunity. Good evening to all. So first question on the cost side, So both on R and D, last time we mentioned and this time also that there are additional indications for alumina. So the thought was that incrementally R and D would inch up, it's actually in stone. So what's the thought there going forward?
And also on the SG and A, I think, Kirti said that India, we are seeing Both there are marketing and promotions coming back, Vifor is coming back. So, thought that the cost would also increase Q on Q ex R and D. So We got it there. So the I think some of the R and D expenses for clinical studies, I think are also relatively slow because the Patient enrollment is slow because of the COVID in many geographies. However, I think when Things start becoming normal.
We will see that increase. Kirti, maybe you can respond about the cost of operations. Sure, sir. As you know, like Q1 and Q2, as an example, like the trial expenses both for field and Head office were very less. But as the economy is opening up and things are normalizing, And as I said, almost 90% to 95% of the doctors are practicing.
And we are reaching almost our call average to pre COVID levels. So our traveling costs have gone up and it will continue to go up in next quarter also. There will be some still say some of the savings on promotional materials, but that also will catch up as we go forward. So as I see Like in quarter 3 quarter 4, these expenses will keep on increasing because now we are coming to almost like a pre COVID level in terms of activities with the doctors. Still some of the physical Conferences and other activities have not started in big ways, but small, small conferences of like 10, 15 doctors Started happening in December January.
Understand that, but we are still down 4% Q on Q On the SG and A ex R and D, so I was just trying to understand that if Moli sir can help.
So I have specifically mentioned that as reiterated in the past earnings call, the selling and promotion, marketing and traveling spend We'll continue to see an increasing trend in the future as we are achieving the market normalization, which Kirti just mentioned, and this is going to be across geographies. That's what We are reinforcing. In October, in India and other markets also, the expenses will increase as the market position normalizes.
No, no, I understand that, but my question is coming down by 4% Q on Q despite that statement. So what is leading to, is it Expenses related to specialty in the U. S, which is still low or is down or what are the other elements to the lower cost?
There are many moving parts. So, not like to get into specific or any particular segment.
Abhay, maybe you can respond if there are specific things in the U. S. That you can think of. Yes, some color would be helpful. Specifically, I think travel in the U.
S, which is not back to normal. Everybody on this call knows that U. S. Is reporting high number of COVID cases. I think the last 7 day average is Close to 160,000 new cases a day.
So travel is restricted. To that extent, I think our travel and Related costs are continuing to be lower than what we had factored. Okay. And just last part on the R and D side, what's the outlook here for next year, sir? So next year, I think we will give our guidance about the R and at the end of our Q4 call.
But I see that The R and D spend for specialty product, looking at the number of studies that we've initiated is likely to grow over the current base. Okay, perfect. Thank you and all the best.
Thank you. The next question is from the line of Anubhav Agrawal from Credit Suisse. Please go ahead.
Actually, continuing with the previous question, if I look at an absolute basis other expense that we report, on a quarterly basis, We are the run rate is roughly about INR 200 crores lower when we compare to pre COVID level. I have my question is that, Didipay, how much of this you think can be permanently saved here? Amazon like to like, I'm not talking about launching more products here for this. As the growing company, it will increase. I mean, roughly INR 50 crores a quarter can be saved here roughly or you think everybody everything will come back in a quarter or 2.
No, I hope that we can save, but what I my Interaction with all the country leadership teams have essentially meant that Once things come back to normal, they don't expect any significant long term reduction in the marketing expenses, accepting some of the expenses, which they currently feel do not produce any significant value, but They may divert those resources on some other more productive investments. But study state, we will see Better growth and also possibly increased costs. Okay. That's helpful. Second question is for Abhi.
This question is on Abrilica LD. I just wanted to check with Abhijat IQV has still reports low conversion, but Your sales does not suggest that. So is it that the IQOS under reporting your conversion authority early, the number from last quarter 20% would have significantly gone up now? Hello? Yes.
Abhay, did you hear the question? I heard the question. Sorry, I started answering on mute. So yes, sorry about that. What I was saying is our conversion still is at around 20%.
I don't think that number has gone up significantly. But yes, every week that we get extra of being in the market, we are trying to I see that the conversion rate improves. What's the hurdle here? My doubt is that product is good here. I saw the formal coverage for between Absorica and Absorica LD is a little bit better only for Absorica LD.
That's not the constraint here. I don't know what is the activity level. This activity level of reps within doctor is less than 50% in the U. S. So why is this product not picking up despite all being positive of the new formulation?
So two major reasons. We launched it literally a month before COVID hit us and The footfall at the dermatology mix even today is nowhere back to normal. So that has been a big contributing factor towards the slow ramp up. The second reason is you also understand that in the U. S, whenever you launch a new product, there are many payers and PBMs Who take nearly 6 months to start covering your product.
You have a new to market block. So when you have when you combine these two That you have a COVID environment and a new to market block for 6 months. Then it always slows down the I think it's the reason why we are on purpose lower than what we would have expected. If I can just ask a clarity on that. What is the level of field force activity in the U.
S. Right now when KPI in the Indian The voice is sometimes maybe To a certain extent guessing your sentences. I'm sorry, I'll speak a little louder. I was saying that Salesforce activity in the U. S.
Right now, when in India it's 90%, 95%, what's the activity level in the U. S. Right now for the Ballard business? It's a little different across therapy, but if I have to say generalize, I think face to face interactions are at 40% to 50% of where we would like it to be in a normal circumstance. The rest has been tried to make up The reps trying to make it up by making the virtual calls.
But yes, and both put together, we would be like 80% of where we would like to be. So it's much different from what Kirti spoke about India. I can only envy those India kind of Call numbers, but we are not there yet. Okay. Thank you.
Thank you. The next question is from the line of Neha Manpuria from JPMorgan. Please go ahead.
Thank you so much.
Abhay, on CEQA, Now that Kala is launching their Acute Dry Eye product, do you expect a slowdown in momentum in the product?
I don't think so, because the Kayla product is essentially For acute treatment, like you rightly said. And to my understanding, doctors will be able to find the usage For both the products. So we are actually quite bullish on Sequoia and how we think we should be doing with the product.
Okay. So you don't see the traction in the color product impacting our ability to scale up Sequa?
I don't think so. I think we will continue to try and grow our product.
Understood. And my second question is on ILUMIA. Given the long term data that you've seen and now I'm assuming you would have shared that data with the doctors. Are we seeing improved traction from doctors based on the long term data? I mean, are you seeing a repeat description from these doctors based from these doctors based on the data that we've got the long term data.
Q2 performance as we said is much better than Q2 and difficult to isolate only one reason for it. But yes, we have been using the 5 year long term data with doctors and that would have contributed. But The whole marketing and promotional exercises not just one thing, there are multiple things that we do and to be able to I select just one reason and say that's the reason for the sales for the quarter is always difficult. But yes, we are excited about this data and customers we have spoken to are very enthused about this data. So there would be a contribution, That's for sure.
Understood. Perfect. Thank you so much.
Thank you. The next question is from the line of Damiani Kherai from HSBC Securities and Capital Markets. Please go ahead.
Hi. Thank you for the opportunity and congratulations on a great On the specialty side. So my first question is regarding the Phase 3 study for psoriatic arthritis indication. So how many patients you are aiming to recruit for this study? And what will be the cost allocated here?
And on same line, what are your plans for study for the gastro indication?
So I think our study is adequately powered so that we can Highlight the strength of the product for psoriatic arthritis and we are conducting 2 studies. We do not Share study specific costs. It's included in our, What I would call specialty R and D cost, and it would be amongst the larger component of those costs. As to gastro indication, I think we have to Seriously evaluate because clearly we will be lost to the market because all other Products are way ahead of us in terms of clinical studies. And in terms of Enrollment of patients when we are talking to specialists, we see that even the existing studies are suffering in terms of Getting adequate number of patients.
So we've not taken a decision finally whether we will be Developing ILUMIA for gastroenterological indication or not, but we are seriously evaluating the When we decide, when we will share that with you.
Sure. Thanks for that. And my second question is on the DTM spend for ILUMIA and CEQA. So compared to initial phase of launch, How are these calls looking right now? And what are your plans I heard like it will see better ramp up or these kind of spend level are sufficient to continue the momentum, which we have seen recently?
So, I'm not sure if I heard the word correctly. Did you say detailed expenditure or did you say
DTM, direct to market Spent for Illumina and Sequa, yes. Yes.
So I think Illumina, we have more or less optimized In the last maybe 2 quarters to where we need to be and looking at what we need to do. So I'm pretty comfortable with our strategy for Illumia. Sequa, actually, we are now starting the DTC campaign, not used in television, of course, but we are using latest plug in India. And the campaign has been rolled out in the last couple of Weeks, but of course, the spend will not be as high as what we had for the new year. So But I think it's a campaign which has hit the market initial responses very good.
We are getting pretty good coverage with that. And I think you will also be seeing that some of the other in the public domain now. It's also on the website, so
Okay. So we should not be expecting these promotional spend to Pake up significantly from here. Like you mentioned, DTM we are broadly optimized now and Sequa spend will be much lesser than what we had spent for Illumina.
So for Q4, I have seen a
visibility, but of course, for next year, we are in the process of a budgeting cycle. So we have to see what it looks like, but we will be prudent. At the same time, cognizant of what the market means for the product to be
Sure. Thanks for your response. That's all for my side.
Thank you.
Thank you.
The next question is from the line of Sameer from Morgan Stanley. Please go ahead.
Thank you and good evening everyone and congrats on a great quarter. So is there any update on hollow remediation? No, there's no update that we can share Beyond what we shared in the last quarter is that we've addressed all the efficiencies, updated the agency and we Continue to be in the dialogue with the SDA about the Having the site reinspected. So sir, any idea based on what FDA is doing that Could it be first half calendar twenty twenty one, second half for FDA to come down for inspection? No, I don't think I have any clarity on that.
And I don't think they have shared this With us either as a company or even as an association that what is their plan about restarting international audits. Okay. And on Eleumia, So good performance, sir. And what's helping you over here in Illumina ramp up? And more specifically, have found your niche in the market and you're doubling down on that.
Is that the way to think about it? Or are you on the main street and Fighting out as hard as you can. In a competitive market, I think fighting out It is the only way out. At the same time, we are now clear of what we need to do, whether you call it an insurer, Specific customers we need to focus on and specific strategies that we need to do. So I think it's trying to It is developing comfort with the market now and being clear of what we need to do to make it successful.
And I think I must give also credit to the team for the execution that they have done of these strategies. So it's a combination of all these. And which means therefore that there is now a good growth runway when it's 1, 2 or 3 years as we move forward? Again, I'm sorry, it's a little bit of a garbled sound. So if you can come closer to the microphone, please.
Is it better? Let me speak of it now. So does this mean that you have identified what needs to be done and therefore there is Growth visibility of this product over next 1 to 3 years go forward. I think let me take it here on here, but we are confident we will continue to learn and that's the ask and that's the task. Okay, great.
So one more on CEQA. I just wanted to understand the USP of both Zebra and Equa is early onset of action, 2 weeks 12 weeks, if I'm not wrong, versus Restasis. So even after 4 years of VEDRA launch, its market share, I think, is just about 25%. We are sub-five. So since that this proposition has not been so well received by Ofgem, Is this the way we should think about it?
I mean, there's some growth, some you can mine some more share, but not an incredible lot. And especially once resatternics come in whenever they do. I'm trying to really understand the question and I'm not sure I've understood it correctly. Can you rephrase it for me? Yes, sure.
What you're asking for a little better? Yes, sure. So Restat is, as you know, is the onset of action is 24 weeks and the proposition by Sequoia is 12 weeks and by Zebra is 2 weeks actually. And Zebra has been in the market for last 4 years. And even after that with such uniqueness of 2 weeks, it's just got 25% market share.
So they were putting this in context, has this Benefit of early onset of action been well received by doctors, I mean, it doesn't look like and therefore, How much you can go further with CEQA may be very limited? In my view, the early onset of action, and I can only speak for Srikho, I'm not going to be speaking about Xiidra on this call. The early onset of action is just one of the things that we have been focusing on. I think it is the again, looking at Product patients who have not done well on the competing products when they have used Sequa have gotten good results. I think that is the other thing that we have focused on.
And that has also helped us and doctors who have used the product have seen that the Product works and works very well. So that has I think has helped us. So we haven't really focused only on one aspect, But we have tried to promote it as a package of benefits to our doctors, which they can use on their patients and see results for themselves. Okay, great. Thanks.
That's all from it. Thanks.
Thank you. The next question is from the line of Kunal D from MK. Please go ahead.
Thank you for taking my question and congratulation on good set of numbers. This question relates to the molecule XAV-forty four, which we have been licensed from Spark. So what is the thought So in terms of selecting moderate to severe plaque full glasses as an indication, I know there would be clinical consideration and Then there will be commercial consideration. So given you already have a one product in this category and also this entire bonded to CGR plaque Sudiasis is kind of moving towards more towards biologics. So why not go for a mild to moderate Sudiasis, which is still dominated by 30 year old molecules
No, I think it's a good question.
Challenge is that for mild to moderate subset of stations, I am not very sure as to what would be the openness of the various formularies to Except a high priced differentiated product when Large number of generics are available. At the same point of time, I believe that while There is an increasing acceptance of biologics for treatment of Moderate to severe psoriasis. There is a clearly differentiated and a different market for Oral agents. So if you have a relatively safe oral agent, which does well And produces good overall outcome. I see a continued opportunity for that.
If I See, that was the view shared by Amgen when they bought the product which they bought from Celgene. Also BMS when they prioritize their TYK2 inhibitor for psoriasis over other indications. So I think This market will continue to increase. Okay. But as far as Kind of why I understood the NGEN bought this product and now they are currently planning to go from mild to moderate Suriyases as well for the feed product.
So, I think I agree with you and even if you don't have mild to moderate Suraj is in your gable. There's nothing preventing a doctor from using it from mild patients. So I think the question is, how do you prove your product for Difficult patients, so that you can develop the confidence of the doctor about the overall efficacy of your product. So if something works for moderate to severe, it's also going to work for mild patients. You don't want to be classified as a drug, which can be used only for mild patient in the beginning.
Okay. So first, basically, we'll go for moderate to severe and relatively once we have Then it is okay to talk about mild to moderate. Okay. Thank you for that. And the second question, at the sound it's sounding repetitive, but I believe our spend in U.
S. Specialty, especially towards the union as we have optimized on many fronts, including BTM campaign or maybe targeting the doctors that we want. So don't you think that some of the savings, which we have kind of as a maybe side effect of COVID, we have realized that these These were not important from the growth perspective. We are growing and we didn't make that investment, but still we are good. So Will these spend for, let's say, ILUMIA or specialty will continue at this level In the U.
S. Market, or how do you think about that? Let's say, travel expenses could come back, but let's say, VATM expenses will not come back Some of the other activities based on the I think Morley means readout indicated that Many of the expenses as this life comes back to normal will continue to rise for all markets. That's what I think you said. So I don't think that our expenses today are only reduced because there are many other expenses, Including multiple conferences by doctors, our participation in various, what you call, global meets.
So all of these, we are not able to currently invest on, which we will once the life becomes normal. Abhay, maybe you can add. So nothing to add to what I said earlier in what you are explaining now. So We have to see how the situation evolves. And like you said, when life gets back to normal, a lot of the expenses, as you were doing, This work will probably return back to where it used to be.
Thank you.
Thank you. The next question is from the line of Krish Mehta from Inner Holdings. Please go ahead.
Hi. Yes, congratulations on a great set of numbers and thank you for taking my question. I have two questions. The first one was about EBITDA margins. Like many people have asked already about costs being sustainable or going up.
Would you then agree that the EBITDA margin seen this quarter is a one off? Or do you think sustainable going forward as promotions, marketing costs, R and D all go up?
I think generally we don't guide for EBITDA numbers or profitability numbers. At the same point of time, I think I have even in the previous calls said that our focus would be to Find a way to increase our EBITDA, increase our return on investment and return on capital. So I think if you see as a result of our focus on cash flow generation, you're now down to Around $250,000,000 of net debt. And in the same way, as we will focus on improving all of this, I am expecting the improvement. However, as you rightly analyze, I think there are expenses which are going to go up.
Hopefully, our sales growth will make up for That, but our focus on improving profitability will continue.
Okay. And the other question I had was about ex Starro consolidated debt. So could you just give the figure for what it is as of today for Xtaro?
Yes, Bhurgh Lim maybe.
Yes, Exstaro consolidated net debt is around $250,000,000 That's what Shaoghu just said, Exstaro.
It's 250,000,000 or 150,000,000?
250,000,000 net debt.
Okay. Thank you.
Thank you. The next question is from the line of Vishal Manchanda from Nirmal Bang International Equities. Please go ahead.
Thanks for the opportunity. On traveling and promotion cost, could you share at what Percentage would be compared to last year? Say, if we had 100 spend on last year, are we at 50% or are we at 25%.
Can you just repeat the question please?
It was not clear. On traveling and promotion spend, Where are we today in terms of percentage? So like compared to last year, are we at 25% or we are at 50%?
The overall other expenses constitutes many moving parts, so which Very difficult for us to pinpoint percentage of any particular nature of expenses to disclose at that level.
Okay. 2nd one on Absorica. So once Genrex entered in Absorica, would you still continue promoting that So I'm asking so is will the kind of quantum of sales around that product allow you to spend on sales force? So ALD, we will clearly continue to promote because it is a different product. So we will continue to promote the AAV.
And of course, we will be making changes To see that the spend is such that we are able to continue to work with the field force that we have and we're able to grow the brand. And just last one on CEQA. Our majority of the patients who are on CEQA would be kind of Fair to say our non responders to RESTASIS and any sense you would have on whether those So those non responders are have start have do respond to CEQA. So non responders should restat is responding to CEQA. So really speaking that kind of granular data, I do not have to be able to very clearly answer your question.
Yes, in the initial phase for the 1st few months, we actually got the variance patients of non responders. As more and more doctors have used the product and seen that the product is good on its own merit, we are getting fresh starts also. Exact proportion and how much of it is fresh and how much is non responder, I would not really have to break up.
Okay.
Okay. Okay. That's all from my side. Thank you.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yes. Thank you for taking my question. The first one is on the non Taro U. S. Revenues.
They are up Quite a lot sequentially, 22%. I know you don't disaggregate into special revenues and generic revenues there, but just wanted to get a sense of How the generic piece is performing in terms of at least the direction? And I think in the opening remarks you also talked about Shortages, so is it related to generics again? So I think in a market which is very competitive, I said in my readout as well that the generic business have actually shown growth So whether you look at quarter on quarter or you look at 9 month over 9 months, so I think they have done well. It's a combination of gaining market shares of Products that we felt we had scope to grow it.
And a lot of credit goes also to the team back in India Operations and quality and supply chain, set in a difficult environment, they have been able to keep the supply chain Very, very functional and that has helped us to mix the most of some of the market opportunities which came during the last 9 months. So I think it's good execution by the team on multiple trends, which has helped the business to grow. So Abhay, in terms of pricing environment, are you seeing what we saw in 2020 kind of remain relatively benign, relatively is the word I'm using? Or you think as things are opening up again, you're starting to see Pfizer also come back? I wish I could give you better news, but I would not say it's relatively benign.
It's only product specific. So there are certain products where it is literally benign. Certain products, nothing much has changed. It's a combination of it. But Overall, directionally, we still continue to see pressure.
Got it. My last question is on the India business, Grew 9%, and I think the opening remarks talked about chronic growth. So, I'm assuming it's growing faster given where acute demand is. So just want to understand how the price and the volume dynamics are. Recollect last few years you had a challenge growing volume growth in I'm talking about industry here, but just want to get a sense of how your domestic chronic business is panning out?
Yes. So as I said earlier, this is Kiri. In amongst the three businesses, what we have chronic, so chronic and active portfolio. Kronic has done relatively well and it has not impacted much by the pandemic. So we are continually growing both in terms of units As well as in terms of value, and that is also helping us to gain a market share.
So The issue is with the 2 other businesses where Subchronic is now started showing a rebound. And in quarter 3, it is already showing a good rebound in quarter 4, also it will improve. And Acute business will take some more time to come back to like a normal situation or pre COVID levels. So overall, to answer your question, yes, we are growing both by volume as well as by value in chronic segment. But is there a disproportionate or a higher than usual contributions on price you think, Kriti?
Or how should we think about it? No, no, no. If you can all this will be in public domain, if you look at IOVAC and IMS data, there is no disproportionate growth from Value. So what we are growing is almost in line with market in terms of both volume and value. But our entire focus of India business for last 1.5, 2 years, we're focusing only on unit growth.
All our efforts, all our communications, everything towards field is more focusing on how do we grow on unit And how do we generate more prescriptions, new prescription from the doctors? So there's a lot of emphasis on the unit growth. So if you want to gain a market share, then we have to grow faster in units. That's what we are tracking. Got it.
Thank you and all the best.
Thank you. The next question is from the line of Nitin Agarwal from Dam Capital. Please go ahead.
Hi, sir. Thanks for taking my question, sir. Just quick question on the generic business that we discussed. So we're still spending a fair bit of R and D spends on generics. That's a client share of our R and D spend.
And the business essentially has not grown much in the past because of various competitive pressures in the market. And Overall, qualitatively, how are you viewing this business in terms of is this still a focused business for us? Is there some change in the way we're looking at growing the business incrementally going forward? What kind of opportunity do we see here in the business?
So first important information you need Keep in perspective that when we say generic, it's not only U. S, it's U. S, Europe, rest of the world and India. All of these R and D expenses are captured in the generic heading. So and what you're looking for is only growth Out of our U.
S. Business, so I see return on investment for R and D, then our overall growth And investment is justified in terms of continued investment. So I think, while we will continue to invest in the R and D for January and find a way to grow faster than the market in each of the geography. We will also ramp up gradually the spend on innovative R and D and Hopefully, as we continue to ramp up our innovative product sales, it will justify that investment. And so, generics as a business, are
we still do we still still remain U. S. Generic, right? Does it still remain attractive business for us
It is an interactive business. Okay. Thank you and best of luck.
Thank you.
Okay.
Our next question is from the line of Nithya from Bernstein Research. Please go ahead.
Hi, thank you. So I just had one question on brand building in the U. S. So there is of course the cost of building out a sales force versus just setting up a brand. But in terms of marketing spends, including B2C spends, how do we know how should we think about it?
Is this something that's likely to substitute Should the life of the brand or is this something that will come down after 2, 3 years because you've achieved a minimum level of awareness? How does it typically work for a brand?
Typically, when you launch a product, you have disproportionate expenses to try and get quick access. I'm answering this question very broadly because your question also is a broad one. But once you have a certain foothold Taken a certain decent share of the market. Then that pulse that you see in the initial phase always stabilizes to a certain extent And you're able to then as a proportion of sales expenditure expenditure or the percentage of sales expenditure will start coming down And the percentage of sales.
No, sorry, if I might just clarify. I think as the revenue ramps up, I'm sure you're driving operating leverage. But at an absolute level, do the spends actually come down because let's say, you've done your television, you've achieved Some basic level of awareness that you wanted, would you actually stop spending on television? Would you take your spend and would that normally come down? On an absolute level, it's expected to continue to grow a little bit.
As I said, we're still working out on the budgets Next year, so at an absolute level directionally, I don't think it will come down significantly. It may not go up significantly, But it will not come down significantly as well.
That's very helpful. Thank you.
Thank you. The next question is from the line of Anubhav Agrawal from Credit Suisse. Please go ahead.
Yes, just one question. One clarity on the U. S. Atiktok Global Specialty Sales. The $40,000,000 increase that you've seen sequentially, is there any restocking benefit there because some of our Areas are ophthalmic, dermatology, etcetera.
So is there any restocking benefit there? Or this is a new normal we'll only grow over this stage from now? So December month does see a little bit of a buying, But it is not an extraordinary level. And remember, in the context of the market, we are Much smaller as a total business. So the buying will not be as higher for some of the major brands.
So December always sees some buying, Not just for the specialty business, but to serve to an extent even for the generic part of the business. But that's not something which is so Hi, that I will start clearly fairing the next quarter. I hope that answers your question. Sure. Thank you, Vida.
Thank you. As there are no further questions, I now hand the conference over to Mr. Nimish Desai for closing comments.
Yes, thank you. Thank you everybody for taking time out for this call. We know it's been a busy day with multiple pharma companies announcing results. So thanks for 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