Ladies and gentlemen, good day and welcome to the Q1 FY 'twenty two Earnings Conference Call of Sun Pharmaceutical Industries Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please signal an operator by pressing star and 0 on your touchtone phone. I now hand the conference over to Mr. Nimish Desai, Head of Investor Relations.
Thank you, and over to you, Mr. Desai.
Thank you. Good evening and a warm welcome to our Q1 FY 'twenty two earnings call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q1 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. Billip Stangvi, Managing Director Mr. C. S. Muralidharan, CFO Mr.
Abhay Gandhi, CEO of North America Mr. Kriti Varunkar, 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 ease of discussion, we will look at the consolidated financials. Just as a reminder, this call is being recorded and the 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, 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. Sangul.
Thank you, Nimish. Welcome and thank you for joining us for this earnings call. After the announcement of financial results for the Q1 of FY 'twenty two. I hope you and your family are safe and healthy. Let me discuss some of the key highlights.
We recorded the highest ever quarterly revenue IN the Q1, consolidated sales for the quarter were at INR RMB96694 1,000,000, recording a growth of about 29% year on year and a growth of 14% quarter on quarter. All our businesses, excepting API, witnessed strong growth driven by a combination of robust core business growth, low base of the last year sales of COVID and associated products. However, we are enthused by the all round growth across all our businesses compared to Q4. Let me now update you on our global specialty business. For Q1, our global specialty revenue was approximately $148,000,000 across all markets.
Global Specialty sales do not include ILUMETRI end market sales. Specialty sales have increased over March '21 quarter despite the enki of Absorica Generics and the subsequent reduction in Absorica sales. Iluvia sales have increased both on year on year end quarter on quarter basis. We are encouraged by the sequential growth recorded by Illumia and also by Sequa, and we expect it to record strong double digit growth during the year. ILUMETRI sales are also ramping up as it gets launched in more European countries.
Specialty R and D accounted for approximately 26% of our total R and D spend for the year. Abhay will give you more details on the Specialty business later. I will now hand over the call to Murali for discussions on the Q1 financial performance.
Thank you, Mr. Shongvi. Good evening, everyone, and welcome to all of you. Our Q1 financials are already with you. As usual, we will look at the key consolidated financials.
Q1 sales are at INR 96,694,000,000 up by 29% over Q1 last year. Material cost as a percentage of sales was 27.4%, which is higher than Q1 last year due to product mix and geography mix. Staff cost stands at 18.2 percent of sales. RR Expeditions stands at 26.6 percent of sales. Increase in absolute value of other expenses is attributed towards higher selling and promotional expense and R and D, while in Q1 of last year, these expense were lower on account of total lockdown across markets.
As indicated in our past earnings call, the expenses are seeing an increasing trend across all the markets as we reach full normalization, though they are currently restrained. ForEx RMB799,000,000 compared to gain of RMB792,000,000 of Q1 last year. As a result of the above, EBITDA for Q1 was at INR 27,717 million, up by 59% year on year the resulting EBITDA margin at 28.7% compared to 23.3% for Q1 last year. Let me now briefly discuss the exceptional items for Q1. Taro has made a $60,000,000 provision relating to its ongoing multi jurisdiction civil antitrust matters.
The exceptional items also include charges of INR 1503 1000000 towards impairment of DXA site and acquired intangible asset under development INR382,000,000 on account of write down of a manufacturing facility, which has been classified as asset held for sale as per the requirements of Ind AS 105. Excluding the impact of exceptional items, the adjusted net profit for the quarter was at INR 19,792,000,000 up 73% or adjusted net profit of Q1 last year. Reported net profit for Q1 was at INR 14,442,000,000 while reported EPS for the quarter was INR 6 0.02. Let me now discuss the key movements versus Q4 FY 'twenty one. Our consolidated sales were higher by 14% quarter on quarter at INR 96,694,000,000.
Material cost stands at 27.4 percent of sales, which is higher quarter on quarter on account of product mix and geography mix. Stock cost stands at 18.2 percent of sales. However, in absolute terms, the stock costs have increased on account of annual merit increases. We had a ForEx gain of about INR 799,000,000 for Q1 as against ForEx loss of about INR 708,000,000 in Q4. As a result of the above, EBITDA for Q1 at INR 27,718,000,000 was higher by 39% compared to Q4.
EBITDA margin for Q1 was at 28.7% compared to 23.5% for Q4. Adjusted net profit for Q1 at INR 19,792,000 was higher than the adjusted net profit of Q4 by about 47%. The company has repaid debt of about $185,000,000 in Q1 FY 'twenty two Since over the last five quarters, we have repaid debt of about USD 768,000,000 as of 30 June 2021. We are net cash positive even at the ex Taro level. Let me now briefly discuss Taro's performance.
Syro posted Q1 FY 'twenty two sales of 147,000,000 an adjusted net profit of $41,000,000 On a year on year basis, sales for Q1 FY 'twenty two were higher by 25%, while adjusted net profit was higher by 42%. I will now hand over to Mr. Kirti Donorkar, who will chair the performance of our India business.
Thank you, Murali. Let me take you through the performance of our India business. For Q1, the sales of branded formulation in India were RMB33,084 million, recording a growth of 39% over Q1 last year. India business accounted for about 34% of consolidated sales for Q1. The growth was driven by a combination of core business growth, sale of COVID related products and low base of last year.
Sale of products used in treating COVID symptoms another associated product accounted for about 8% to 10% of India sales for Q1. However, I am happy to announce that we have recorded a strong growth in the underlying base business even if we exclude COVID related product sales. In terms of the growth over business growth, we continue to witness good growth in chronic segment, while the subchronic segment was a significant growth contributor for the quarter. The second wave of COVID 6th June, which has resulted in savings in selling and travel costs. For Q1, we launched 13 new products in the Indian market.
Sanfirma is the largest pharmaceutical company in India, and we have about 8% market share in the domestic market. As per June 2021, AIO CD Avax MAT report. As per SMSRC report, we are number 1 ranked by prescription with 10 different doctors' categories. We also continue to remain the partner of choice for relicensing of product given our strong number one position in many therapy areas, including therapies for the treatment of COVID infections coupled with our large distribution network. 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 Q1, our overall sales in the U.
S. Grew by 35% over Q1 last year to US380 million dollars While all our businesses in the U. S. Have grown, the main driver of growth was the specialty business. U.
S. Accounted for about 29% of consolidated sales for the quarter. Our specialty revenues in U. S. Have grown over Q1 last year, mainly driven by Iromia, Sequa, Levelarm and Absorica AB.
Vocality sales have also grown compared to March 2021 quarter despite the drop in Absorica sales. While doctor clinics have been opened in the US during the quarter, the situation is yet to fully normalize. Patient flow to doctor clinics as well as frequency of doctor calls by our medical reps are both still below pre COVID levels. All of you would have seen a recent announcement of in licensing of WinDuty in U. S, an anti acne specialty products subject to HSR clearance.
VENDEVI is a new class of medical medication in dermatology and the complement of existing oral acne portfolio. The addition of Vinulary further strengthens our position in the Acme segment. It is already approved by the U. S. FDA, and we expect to commercialize it in the U.
S. In the October December 2021 quarter. Let me now update you on our U. S. Generics business.
While the U. S. Generic business continues to be competitive, the Sun exterogenerate business has recorded growth both on year on year and quarter on quarter basis. This growth is driven by a combination of new launches and business supply chain management. 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 $2.18 million for Q1, up by about 25% year on year. The underlying growth in constant currency terms was about 19%, And emerging markets now account for about 17% of total sales of Q1. Formulation sales in rest of world markets, excluding U.
S. And emerging markets, Vales, where US185 million dollars in Q1, up by about 35% over Q1 last year. ROW markets accounted for approximately 14% of the consolidated Q1 revenues. API sales for Q1 INR 5,149,000,000 down by about 7% over Q1 last year. We continue to invest in building a R and D pipeline for both our Global Generics and the Specialty Business.
R and D efforts are ongoing for the U. S. Emerging markets, ROW markets and for India. Consolidated R and D investments for Q1 was at INR 5,926,000,000 compared to RMB 4,206,000,000 for Q1 last year. Our current generics pipeline for the U.
S. Market includes 86 ANDAs and 13 NDAs awaiting approval for the US FDA. Let me now update you on our specialty R and D pipeline. Multiple clinical trials ongoing for enhancing our specialty portfolio. The key molecules include ILUMIA, which is undergoing Phase III clinical trials for psoriatic arthritis.
SCD-forty four undergoing Phase II clinical trial for atopic dermatitis and for moderate to severe Plaxolysis. AMM2 is also undergoing Phase II trial for treatment of knee pain in patients with symptomatic knee osteoarthritis. And Finally, our GLP-one agonist is in Phase I trial for diabetes. With this, I would like to leave the floor open for questions. Thank you.
Thank you very much. The first question is from the line of Neha Manpuria from JPMorgan. Please go ahead.
Thank you for taking my questions. A bit on the recent windsurfing in licensing, just wondering when we launched this product, given we have the Adoreca sales force and the derma sales force already, how should we look at the incremental cost associated with launching win level in the later half of this year? And second, could you explain the differentiation of this product versus the this is a new mechanism of action that
Can you start with the last question first, Alan? Clearly, acne, as you know, may have the market checkpoint condition. And at least there are 4 different factors The first one. And it at least addresses 2 distinct pathways out of the 4. And therefore, in hormonal acne, whether it is in names or females, this would be a very good addition to the hormone mutated anti doctors.
On the other hand, if you see Absorica, the indication is very specific. It's only in CE of body neuracne that cannot be cleared by any other treatment, including antibiotics. So it has a niche in the treatment of acne. Our expectation is that Binberry will have a far more broad based appeal. So for us to be able to handle 2 ethnic products in the same team that he thought it was should be definitely possible.
So the Absolica team, which already has the relationship with the customer, will be the one that will be marketing this product and I think they are best positioned to make it into a good successful product for the company.
And in terms of launch activity, would this require Higher spend given this is my forecast in Absolica was and I'm assuming you have scaled on Absolica spend over the years.
So in the SFR series, I mean, we are not allowed to plan ahead of what we will do. But conceptually, as it's a new product, So Bharat, clearly, yes, we will have to do some investment in target product. To be honest, how much amount we haven't even figured it out
And my second question is on Sequoia. We launched the DTP earlier this year. Last call you also indicated more sort of setting up on the promotion efforts that has sort of gotten impacted because of COVID. Where are we in the entire process? And by when do we expect to see momentum in the equal market share?
I know you mentioned there has been 4 on 4 growth.
So I think we are gaining market share. That's my understanding. Yes, sure. All of us would like even faster growth than we Srinivasan. But I think we are gaining market share.
So I think for a new product, it will take time to ramp up. And we started DTC as a 22 quarters ago, which will be the 2nd full quarter of DTC. Sorry, I think we will see improvement and that's what the team is focused on anyway.
Thank you so much, Abhijit.
Thank
you. Thank you. The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets. Please go ahead.
Hi. Hello?
Yes, yes, please go ahead.
Okay. Thank you for the opportunity. So my question is on Illumia. Can you specify the sales number the way you have done in previous quarters? And I just also wanted to know the progress of launches in other markets such as Japan, Australia.
If you can share some update in quantitative terms, say, market share gain or sales, how we are progressing in ex U. S. Market variable we have launched. So that's my first question.
You, Anam? No. Abhay, I think we've Shared the annual number.
Total Specialty Business is what we have given.
Yes, correct. We've not given
That is what we have this year. Last year? 81. 81. Yes.
So what are specific numbers you haven't given? So this is talking specialty business that we have given?
So Q1 last year, our total global specialty revenues was $81,000,000
Okay. So you're not specifying product specific number for the quarter just to clarify?
Yes. We are not specific product specific. We have been sharing global specialty revenues of all the branded products.
Okay. And so progress in other geographies, the key geographies where this product has been launched, say Japan or some other markets, big markets?
So Japan, I think we are in the process of gaining I mean, gaining entry into hospitals because unlike many other countries, Japan still has restrictions on COVID and medical reps being able to visit hospitals. So the offtake is a little bit likely a little bit slower, but Japan is very confident about becoming successful with their product. Australia also, I think we continue to grow the product month after quarter. And In terms of getting new patients, I think it's competing quite well within the IL-twenty three class.
Okay, sir. That's helpful. My question is on U. S. Gendered business.
So You mentioned business remained competitive, but like what are your observation on U. S. Pricing environment recently some of your peers have faced some challenges. So on your portfolio, what kind of changes or Caitlin, you are observing on the pricing part. And how do you see U.
S. Generic business moving up from current level in terms of growth over next few quarters.
We have consistently maintained that the pricing environment remains challenging. And it is, of course, the product specific thing depending on the planet you could face slightly more or slightly less pressure. That's been a consistent trend then and nothing has changed, Having said that, in that environment, I mean, we have to continuously try and find ways to growth in business, new product launches as well as revenue and of course trying to increase the share of existing portfolio of products through both in market activities as well as the pre management of supply chain, I think are the critical components of our
thank you. The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Hi, congratulations on a great set of numbers and thank you for taking my question. So I wanted to ask on the plaque crisis, second indication for alumina, which I think
you said was psoriatic arthritis.
So the Phase III trial, when are you expecting the results?
I think there's some confusion. I said that ILUMIA is undergoing a Phase III study for psoriatic arthritis. It's already approved for plaque psoriasis. Right, right. That SCD-forty four,
the product that
we licensed from Spark, undergoing Phase II trial
Say, oral
ADG1 antagonist. So and we are very That the product is likely to be very effective orally working agent.
And what's the market size for psoriatic arthritis if the product gets approved?
Abhay, you want to respond about Telenia?
So I don't have the exact number in which I can speak to as you know it's a large market. But to be able to break down by indication different products is a difficult task. So I don't have that granular detail where I can give you a number and say it's A market of this size? Right.
And just to follow-up on the first one, just to clarify, the It's a large indication that lets you
It's a
large indication in a large size of market. I don't want to misquote by getting your number in mind.
Right. And just to clarify on psoriatic arthritis, it's undergoing Phase III trials, right? So when do we expect these results?
I mean, we haven't disclosed the time line, but I think the trial is currently recruiting patients across centers.
Okay. Thank you so much.
Thank you.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
No, I was talking about the outside trending that you launched. He's asking AGM, ADR or generic. I think it will be in the generic states. And with the lower cost that we're running right now. Anupam, you are breaking up.
So I don't know what the question is for, but I'm not able to get part of your strength in. I was saying that for the special items, now we have the highest gain and lower cost.
No. We shared a period that Hopefully, by next year or in subsequent year, it will become positive. So that's not changing.
So you mean to say, did it by FY 'twenty three, you expect it to be a bit positive?
I mean if we are able to gain market share and grow, then hopefully, we should be able to. And I think that I'm happy with the progress that we are making.
Thank you. We move to the next question. The next question is from the line of Sameer Desirwala from Morgan Stanley. Please go ahead.
Thank you and good evening everyone. Sir, the first question is on Benelabiv. I'm just wondering if versus the mature market in the sense that you've got other options for topical treatment of acne. So how important is the new mechanism of action if the old mechanism is working perfectly fine? And just on the reimbursement environment over here, I would imagine that there will be a lot of generic lower cost options available.
So who would you be competing against? Would it be these generics that you need to convert back into significantly higher price than the just your thoughts on this? When you speak to doctors, The level of breast cancer is current available options for the treatment of acne are very rare In the doctor's mind. Because really speaking, what will work and what will not work and the level at which the doctors will see a skin clearance for acne patients is a challenge that they all face. And that's the reason why In acne, polypharmacy is very commonly used by doctors.
And the rate of changeover from one drug to the other is also pretty high. So the need of a drug candidate, something more and especially a new mechanism of action. It's very real. And so I don't think it's a frustrating market the way you say. Sure.
Some molecules like the one that we probably are alluding to are genotypes, but there is always a place for a new mechanism of Generally, when we talk about access, a new mechanism of action, it's always helpful to gain access. And I think we haven't even started the work till DHLGR clearances are through. But Yes. Thanks, Abhay. That's very helpful.
Just a small point, your voice is a little Can you speak a bit maybe it would help? The second question I have is about the generic business in the U. S. A couple of points. One is, it's been very long, I would say, 10, 15, even 20 years since the pricing has been eroding, not only for new products, even for the base business.
I mean, is there some sort of time when you say we are at the bottom of the pricing? How can it Go on eroding the base business, the older molecules. That's one. And second, so where do you see the opportunity for complex generics the over next 5 year period and how Sun Positioning to benefit from this? So I mean, you have a very important question which I don't think everything in the industry has an answer to of credit to bottom.
So, really, there is no answer to that. I mean, we all hope it is today, not even tomorrow. But I don't see that happening in the near future at least. How the industry will pan out and reorganize itself going ahead is A question on everybody's mind, but no real solution. What is the other question, Anubhav?
Sameer, I think Abhay is asking more about the complex generics and How are we positioned for that? But before you respond to that, Sameer, my own view is that This business will continue to see price erosion because there will always be some products which have excess margin. I think you reach a saturation of pricing on some products. When they reach there, then I think competition clears out And maybe the product may see also price increase in future. But that's how the business is structured.
Yes, Abhay.
And surprisingly, if you see that even in the last 4 or 5 years, with the price pressure being there, You can see that the large number of companies, new companies are still coming into the market Enterprise Distribution product, maybe a single product, maybe 1 or 2 products. But competition is intensifying. FDA is giving provisions, approvals to products. So the competitive environment is actually gaining strength rather than reduce it. Thanks, Alistair.
The second part, complex genomics. So complex genetics is something that we are focusing on and some of the products that we have launched, Yes, yes, able to do reasonably well. It's also a learning process for us because sometimes for a complex generic, the modem phase at which you sell a normal integrated generic versus a complete generic retrofit. You have to go through the specialty network and so on. So it's a good learning process, and I think we are learning rapidly.
And in whichever products we are launching, we can always be happy with the share that we are starting to see. So the question is about next 5 years, where do you see the opportunities? Just a broad segment, Is it oral modified release or sort of a long acting injectables or some of those categories. I just wanted to ask here, is it a fertile ground? Or is the ground drying up and there aren't too many opportunities.
So, Abin, I cannot pinpoint to a technology and say that if you have a portfolio of, Say injectable surface, so that in a best way the opportunity is. I think we tend to look at opportunity more from a product of the portfolio point of view and the channel in which we can have a substantial offering, which you can then become meaningful to the buyer. So that's how we tend to look at it rather than focus on technology platform in the complex generic. Yes, sure. A lot of them happen to be in the injectable space.
Some of them happen to be the inhalation space. So that does happen. But our focus is more to try and look at it from AB customer and secondly from a product perspective rather than get technology focused. Okay. Thank you very much.
Q1. Thank you. The next question is from the line of Anmol Ganjul from JM Financial. Please go ahead.
Yes. Hi. Thanks for taking my question. My first question is on domestic formulation. I know there's been commentary to the effect that it does contain a fair amount of COVID contribution.
But if I look at our portfolio and a sequential bump up of close to INR 600 crores in domestic sales. A significant part of it has to be driven by some of the other factors like pent up demand and some normalcy in this quarter as well. Besides that, we've also seen things like consolidation of market share. So I just want management commentary to the effect that how much of incremental INR 600 crores sequential sales is attributable to COVID? I know I won't get a number for that answer, but any help directionally
would help.
I think I already shared at least directionally the COVID numbers, like 10% of sales for the quarter. So I think the way we should look at is we have grown on a base business also. So I'll put this into 3 buckets: 1 is the chronic business, then semichronic and acute. So what we saw, our chronic business, which is a good growth, then semi chronic has done exceptionally well. And the Acute business is also in line with the expectations.
So in quarter 1, all three businesses has performed well. And in addition to that, we got some upside from the COVID sales. But this is some form of performance, but if you look at both in IMS and as well as in IRVAX. Overall, the Indian Pharmaceutical market has also grown substantially during this 1st 3 months. So we are in line with market.
We are not very different on market, but I'm happy that In spite of COVID and challenging times in the month of April and weather lockdowns, our team could perform well and our base business has grown in double digit.
Okay. Thank you. That's helpful. My second question is to deliver by deliver. This is with reference to some of your earlier remarks.
You said that at some point, obviously, there are a large amount of products in the U. S. Where competition will withdraw into the challenged pricing scenario. Just trying to understand in your assessment how far are we from that because you have been contrary to a lot of industry commentary for the last 6 quarters, emphasizing that U. S.
Pricing has not turned the corner and a lot of trends have Validated W. Also trying to understand from a 3 to 5 year standpoint, given now that the cash machine is chugging $185,000,000 repaid in the quarter. Are we ready to make incremental investments in the specialty portfolio to take it to the next level? Or will await execution milestones on the existing portfolio?
Thank you.
So I think we believe that we In addition to our existing business, with our cash flows and our ability to finding the appropriate place for this cash flow, opportunity to invest in creating a global scale as well as global specialty business is an important opportunity for us. And we are focusing on strengthening our ability to succeed in that. I am happy with the progress that we've made, and this progress allows us to confidently look at potential future opportunities that will come our way because If we are able to successfully execute, that will give us the confidence to do more transactions. So we will continue to focus on growing our existing business and also look at additional opportunities for us to grow. Because you've seen Sun Pharma, I think it's a history of organic growth and bolt on acquisitions or sometimes more strategic acquisitions so that we can continued to grow at a significant pace even on our very large base business.
And the earlier part that we'll be also positioned for the fact that
at
some point generic pricing will bottom out. What in your assessment, what is the distance we are away from it, if
at all or
No, I think for you, generic price is amorphous statement. For us, in the industry, we look at product wise pricing. So at any point of time, there are products which are, let's say, likely to see a price increase. At the same point of time, there are products which are likely to see a price reduction, and some products may remain stable. So the impact of this on different companies is different because which Is it larger percentage of the product portfolio?
Yes. This is something which we have to keeping our perspective so that we can anticipate and say if you Paro has shown significant price erosion quarter after quarter over last maybe 3, 4 years. Similar level of price erosion, Sun hasn't seen because we had larger percentage of product in, what you call already highly competitive marketplace. So I think it's a price erosion is an impact which is different for different companies. And that's not going to change.
So tomorrow, let's say, we have it out of our existing business, a large percentage of business coming from high priced, very profitable product. Then with new competition coming, we will also see price erosion. The trick is to keep on rejuvenating our product portfolio so that you can continue to grow the business in spite of eroding part of your sales.
Thank you. The next question is from the line of Nitya Balasubramanian from Bernstein. Please go ahead. Yes.
Hi. I had one question on VINNEREBEE. So is the licensing agreement restricted only to the approved brand? Or Will this also extend to any future optimizations that acute care might do on the clascocetone formulation?
So right now, it is on the approved only and for both U. S. As well as Canada. And to the best of my knowledge, I don't think they have any product life sector management research going on on the prospect of the product in question.
Okay. The other one was actually on India SG and A expenses. So if I look at your other expenses line item, it's broadly flat quarter on quarter. Just wanted to get a sense of would you say that sales and marketing expenses in India have largely normalized? Was Q1 another quarter or there were of course, these 2 are we should we expect to see these numbers in short when things are hopping back to normal?
So in our readout also, I have said that the current quarter expenses Harris Trane. Yes, the 2nd wave was more so in India and not same across all geographies put together. There are expenses which have increased over there are a lot of moving parts, like we have some savings in traveling maybe in India, but at the same time, the other expenses, we have the R and D, which has increased a good component of that. So we do expect expenses to increase as full normalization happens, but we saw definitely in this quarter the expenses are currently restrained. That's
the next question is from the line of Surya Patra from Philip Capital. Please go ahead.
Yes. Thanks for this opportunity and Congrats for the great set of numbers. Just on the branded business, it's almost like 70% of the core Then all these markets have really delivered strong double digit YY growth And sequential improvement is also in the range of 15% to 30%. So is it driven by some kind of Tianjin Shinging because we are coming out from a lull period to a kind of normalized period. Is it that and hence accordingly we have seen kind of composing the overall profitability of our margins.
Can you just add something to this, whether this is a kind of a quarter specific trend or kind of a possibility of continued momentum that we can see.
So I think
We need to factor multiple issues before we respond. Because current COVID status across different markets is very different, and we have no understanding of how That is likely to impact the business. And I'm talking specifically about international business. Actually, even in India, we are looking at a potential 3rd wave, And we have no understanding of how severe that will be. So in such a situation to give out a long term or even a significant guidance number that we will continue the growth or not continue the growth, I think, would be responding without having adequate operating control.
I think what we are happy about In a challenging environment, all our businesses have found ways to Yes. So I think That part, I think I am reasonably confident that
Okay. But just but this is not the channel filling kind of development and which led to The branded market, strong growth in the branded market. Is that correct, sir?
Yes. I mean that's something that We are very, very closely monitoring all the time. We track secondary inventory in the marketplace with customers On a basis.
Okay. My second question is on the speciality expenses. So now since we are getting ready for a kind of additional product introduction and we are also seeing a kind of healthy progress in the overall specialty portfolio and hence possibly incremental spend that we should be possibly seeing. So given these two facts, so is it fair to believe that SG and A spend on the specialty side It's likely to either remain flat or kind of correcting kind of a trend that
Abhay, maybe you can respond.
I got the question in very jiffy, but so If I have to state what I have understood, your question is
Yes. Considering new product introduction and also potential mix reduction in the current spend rate
So first of all, how much we are going to spend on the limb lady? We haven't even reached this till we complete the HSR phase. Having said that, as I said, conceptually, a new product will require some investment going in. But you also have to factor in your thinking that the kind of expenses we used to make on Exotica will come down. There will be an expense on Exotica, it will be for sure, But still, there will be some reduction in the expense, which we have otherwise determined to hold the Zolica franchise on a higher turnover.
So that to some extent, and that's my hope, and I said we haven't done the work in years yet, will normalize to some extent. Other businesses were required, which we have to invest in this, keeping a long term view in mind. And where we think the spending has been optimized and on the same expense base now is the real task is to grow share of market. We will go on those directions. So again, it will be dependent on a particular product, what kind of life cycle it is in, what kind of investment it requires.
And we will look at it definitely very prudent, please.
Sure, sure. Just a small clarification, This is the Lebanon has become normalized in this quarter, that is 1. And secondly, if you can share the share of idemia in the IL-twenty three category in
So Netherlands share has normalized, but remember that quarter 1 is also a low quarter for Netherlands because of the seasonal factor. Also, if you see the overall market, I don't think it has come back to normal number of cases So the doctor is able to see the social distancing norms and arms is lesser than what it used to be maybe a year, year and a half ago. So, the same margin lines, I mean, it is up from the COVID times, but I don't think it is back to where it Should be in a pre COVID environment. Sure. So two ways of looking at the whole thing.
And your second question was shared of alumina of the IL-twenty three market. I think I don't recall the exact number, But in the ballpark, I think it should be in the range of around 8% or so. Okay.
Okay. Sure. Thank you, sir. This is all the best.
Yes. Thank you.
Thank you. The next question is from the line of Nimish Mehta from Research Delta Advisors. Please go ahead.
Yes. Thanks for the opportunity. Just one That still remains like that as an increase in sales. Are you more confident about that? Or what is the new understanding of the trend?
Abhay, you're responding?
No, sir. I didn't get the question. As I said, I'm not getting the voice very clear.
He's saying that IL-twenty three over IL-seventeen, If doctors prefer it, then
Right.
I mean, that's what I understood, Mimesh. So what is your Correct.
Yes, it's the same. So earlier, we had this assumption of sales and
I just want to know whether we still hold on to
it or is there any change
in the view Even if it is consolidated, that would be answered from you. So I should have not understood the question. What is the
What is the You said in one of your trials saying that doctors like IL-twenty three or IL-seventeen. So whether that's still your view?
No, that is still my view, clearly. Yes. And I think
there's no reason to kind of look at this any differently because even though IL-seventeen is growing, IL-twenty three is growing much faster.
Exactly. You should see the top three products in terms of growth in the overall therapy. The IL-two thousand three hundred and thirty one, which are driving the market. Skydee is number 1 and Illumina is number 2 in terms of growth. So the driver for growth of the overall category is driven by IL-twenty three and therefore I think I'm comfortable standing by my view Doctor.
Wagner, happy with the performance of this class of drugs. Understood. Yes. Thank you very much. That's all it.
Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question and good evening everyone. Just the first one, margins have clearly surprised on the EBITDA side this quarter. We moved out of that range of about 20% to 24%. So just want to understand, I know you don't give leg point guidance, but how should we look at this as we go forward?
I'm just trying to tie some of the comments around SG and A going up, but is there something that we need to keep in mind? I just noticed that this is the one of the few times that gross margins have come down, but EBITDA margins have gone up. So I know there are a lot of main parts, but just anything that can help us directly on EBITDA
margin. So Shyam, as we said that the expenses in the current quarter relatively moved up comparatively. However, different geographies have different impact of the second wave in India, still in April, May, they were impact. So overall, what we are saying is that the expenses will in chip as normalization increases. How the company continues to focus heavily on cost optimization and improving efficiencies.
That's one of the reasons if you see last 8 quarters, there is a consistent improvement we're trying to make on the overall EBITDA margins. The effort will still continue as pushed by the strong growth in top line and operational efficiencies.
Got it.
Got it. That's very helpful. Last question is on R and D. I think you've called out quite a lot of clinical trial activity. We are at about 6 Is there anything that we are budgeting higher, is it 6% to 7% or 7% to 8% like we see in some of your press releases?
So I just want to understand How should we look at R and D? Is that going to be bunching up? Or you think the way it is in terms of the different trials for the different candidates? How should we look
at that number? Thank you.
I think you should range between 7% to 8%.
Got it. Very helpful. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of San Tan Mashi from Credit Suisse. Please go ahead. We can't really hear you.
I can't hear you at all.
Mr. Naidu.
Is this better?
Yes. Please go ahead.
Okay. My first question was on Selimya. Just wanted to get a very broad clarity. If you consider the segment Commercial segment and the Medicare segment, of the total sales today, which will be the largest segment out of these 2? The commercial segment will clearly be the dealer segment.
And the second question was on the ventilator. When we validate the molecule, Yes. Yes. When we what? Sorry, your voice is breaking from me.
When we what? Today is Bad Day, sir. Then we evaluate the vehicle. Evaluate. Okay.
He's talking of Ben Levia, right?
Yes, yes, yes. Yes. So Cassiope talks about them having the pre discussion with the doctors, talking about efficacy levels similar to Epidio and Exon, But both the molecules will go generic soon. So in your evaluation, what's the impact? So those molecules, the kind of 1,000,000 plus prescriptions they have done, what would be the impact of them going generic before or around the time when you'll be launching this molecule?
So my answer is what I said earlier. I think for a new mode of action, There is enthusiasm at the doctor's level because of the dissatisfaction with current therapies and the outcomes and also the use of polytherapy. So I think both things gave me the optimism that despite the fact that 2 products We'll be going generic around the same time that we launch our product. There will be interest in the deductible community initiating the use of our product. So we and that's one of the things that we factored in your right, near or dear right our entire evaluation of the product.
Okay. Thank you, Abhi. Bilbao, just a question to you on the Specialty segment. This is a question
I think I'm not able to hear you very clearly. So we don't break out such detailed responses, but I think my long term view It's always that at some point of time, this business will become far more profitable and will justify with return on investment in line with our other profitable businesses. So We will continue to invest on this business. And also, I think like what Abhay said is that even though all our businesses in the U. S.
Of Our specialty business has grown much faster. Now And we are expecting that because we have a relatively low share of the overall business,
we'll take that as the last question. I would now like to hand the conference over to Mr. Nimish Desai for closing comments.
So thank you everybody for taking the time out and attending our call. If any of your questions have remained unanswered, do send them across Thank you.
On behalf of Sun Pharmaceutical Industries Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.