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Everyone on the Street wants more details on the USFDA inspection of your Indore facility. What was the nature of those five observations?
VS Mani: The inspection in Indore was happening after six years, so it was quite detailed and those five observations are something that we can respond to. We believe we do not have any DI (data integrity) issues, We will watch and wait for further details here.
Do you have details on the nature of those five observations clearly?
VS Mani: Clearly, there is no DI issue in those and we can respond to those five observations and we can work with the FDA to resolve these issues.
How much does this Indore facility contribute to your overall revenues?
VS Mani: Overall US revenues contribute about 25%, but in terms of new launches, these are mainly for the oral solids. Our respiratory medicines are not from this plant. In that sense, while we would want things to work out very well, it is about 25% of our US business.
Coming to your earnings, give us a sense of your India business as well because back in Q2, you did highlight that there could be some slowdown impact and for the whole pharma industry, you were projecting a low single digit growth. But given Q3 performance, India business was seen to be taking a backseat. Going ahead, in Q4, what sort of recovery can we see and what is the outlook for the pharma space?
VS Mani: Let me give you a broad feel of our whole India business. We had guided that in FY25, we would do about Rs 1,100 crore per quarter. The first half was very good. It went really well. But even taking into account the third quarter, we still had about 6.5% growth. Overall for the year, we should see the year end on an average of about Rs 1,100 crore per quarter and then we will see how Q4 goes.
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As of now, the acute respiratory business is a bit under pressure. That is important for us. We will see how it goes. But for the full year, we continue to maintain our guidance.
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You did speak about respiratory. I was going to come to that because your results were pretty good. Two segments have not performed well – the respiratory and diabetes segments. Can you help us understand why these segments are lagging and what is the way forward?
VS Mani: We will also have to look at what works well for us. We have been saying that acute has not done well. We are hoping that in the coming quarters, it will pick up. But what has done well for us is the chronic business.
From our India business perspective, we have these BeiGene products with whom we are tied up, Tislelizumab and Zanubrutinib. I think this should continue and that should help us to do well. As far as the diabetes product goes, we have a good product in Lirafit, we had some supply issues, but we are hoping from this quarter it will do well.
In terms of the earlier products that we used to have, Remogliflozin and Teneligliptin. There are some new DPPs and SGLTs which are better but on an overall basis, if you look at the rest of the business, and the cardiac segment or our derma, we continue to do well. In India, even if you look at IQVIA, as of December, we continue to outperform the market. We will see how the acute respiratory business works. We should be able to take care in the coming quarters.
How was the performance of the US business in particular and the pricing environment?
VS Mani: Let me take the overall US business. In the current and the last couple of quarters, we have not had any meaningful launches. That is the reason why even in this quarter, it is more like a flat quarter. But going forward, we have already given in our call as well that we have our generic Flovent coming up and as well as we also have some nasal sprays and respiratory launches coming up.
Besides that, we also have eight injectable products coming up. All in all, in the next couple of years, we look at US business improving from here on. As far as the pricing environment goes, it is all lower single digit erosion, but product launches are key and in the coming quarters, we have lined up quite a few exciting opportunities. Those should help us to do well.
It has been a low single digit decline in the US pricing, but going ahead, what is the outlook? There is much chatter around the implications of US tariffs on the Indian pharma industry. On one hand, in the US, the government is focusing on bringing the cost of medicines down, especially for the generic markets, but on the flip side, there is the risk of tariff imposition. How are you foreseeing the situation panning out and impacting the industry?
VS Mani: As far as the price erosion is concerned, over the last couple of quarters, that has stabilised a bit. It is not like how there used to be very high single digits or even some one or two quarters of double digit growth in the past. But the double digit declines are also not there now. But as far as the tariff goes, we have to watch and wait.
From our business point of view, the US contributes 23% overall business; our Europe and ROW are about 22-23%, and India anyway is about 30% plus. So, we are well spread and do not depend on only one geography or one segment to take care of our overall business. But as far as the tariff situation is concerned, we have to watch and wait and see how it pans out.
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What about the product launch pipeline? What is happening on that particular front because the company was awaiting approval for about four respiratory products that were filed in Q4 of FY23. Help us understand the pipeline. What is the timeline one should expect?
VS Mani: In the US, we have a couple of respiratory launches coming up. One is a generic Flovent and then we are also looking at the nasal sprays. Even in the longer term, we could have three launches coming in. Our US business looks on a better trajectory in the coming months. As far as these four respiratory launches are concerned, in Europe, even during the last quarter, we are waiting and in six to nine months, it should come. But in the meanwhile, Europe business continues to do well, Ryaltris continues to do quite well.
As we had indicated during our call, Ryaltris is almost like 80 million businesses this year. So, that is where it is. As far as India goes, I did tell you about this overall oncology portfolio that we have from some two of the key products from BeiGene. These things will help us. Even in the emerging markets, our respiratory products continue to do well.
Ryaltris continues to grow very well. All in all, it does look good for us in terms of product launches, as well as in terms of the growth that we see in the coming quarters.
How much revenues are coming from Ryaltris? It is expected to be launched in about 12 to 15 additional markets over the next few quarters. How much will it add to your revenues going forward?
VS Mani: Right now, it is about 80 million and we have looked at peak sales of between 150 to 200 million. Year after year, it should continue to do well. Last year, we almost doubled from where we were. That may not be possible every year. But since the product is doing well and it is getting launched in various markets, we see very good growth. In the next two to three years, we see 150 to 200 million kind of sales coming from this product.
For FY25, your EBITDA margin guidance was close to 19% and your gross margin guidance was in the 67-68% range for the upcoming years. Are you sticking to that particular guidance or are any revisions being made there? Also, what is the likely impact of the forex on your margins and what is the outlook there?
VS Mani: I will comprehensively answer both the gross contribution as well as the EBITDA margins. First of all, in the current year, we had guided to a sale of about 13,500. We have already done about 10,000 plus and Q4 is normally good. We should meet our sales guidelines. Besides, as far as our EBITDA goes, we are at about 18%, but we did have some currency losses in the current quarter, which was about Rs 71 crore.
We expect that we should be close to 19% in the current year and also, and even earlier, during our investor conference, we said we will improve by a percentage of every year that should happen in that sense. As far as the gross margin goes, we have consistently been at about 67 to 68. Going forward, it should be the same. With some good launches, it could improve slightly as well. Other guidance that we had given in terms of our R&D capex was very much within what we had guided.
So, should we not expect any revision or are you looking to revise by any chance?
VS Mani: No, we are not revising anything. I just gave you an indication that even the EBITDA without the currency losses would have been closer to the numbers that we had indicated.
