Alkem Laboratories Limited — Q1 FY24

ALKEM Q1 23/24 Earnings Conference Call https://stockanalysis.com/quote/nse/ALKEM/transcripts/303109-q1-23-24/ Published: sourced from public earnings transcript

Operator Ladies and gentlemen, good day, and welcome to Alkem Laboratories Limited Q1 FY 2024 earnings conference call, hosted by Motilal Oswal Financial Services 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. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services Limited. Thank you, and over to you, Mr. Manudhane. Tushar Manudhane Research Analyst, Motilal Oswal Financial Services Thank you, Michelle. Welcome to 1 QFY 2024 earnings call of Alkem Laboratories. From the management side, we have Mr. Sandeep Singh, Managing Director, Mr. Rajesh Dubey, CFO, Mr. Amit Ghare, President, International Business, Mr. Yogesh Kaushal, President, Chronic Division, and Mr. Amit Khandelwal from the finance team. Over to you, Amit, for the opening remarks. Sandeep Singh Managing Director, Alkem Laboratories Thank you, Tushar. Good afternoon, everyone, and thank you for joining us today for Alkem Laboratories Q1 FY 2024 earnings call. Earlier during the day, we have released our financial results and investor presentation, and the same are also posted on our website. Hope you have had a chance to look at it. To discuss the business performance and outlook going forward, we have on this call the senior management team of Alkem. Before I proceed with this call, I would like to remind everyone that this call is being recorded, and the call transcript will be made available on our website as well. I would also like to add that today's discussion may include forward-looking statements, and the same must be viewed in conjunction with the risks that our business faces. After the end of this call, if any of your queries remain unanswered, please feel free to get in touch with me. This, I would like to hand over the call to Sandeep to present the key highlights of the quarter gone by and the strategy going forward. Over to you, Sandeep. Thank you, Amit. Good afternoon, everyone. In quarter one FY2024, we witnessed good revenue growth in operations with an impressive increase of 15.2% year-on-year. This growth was primarily fueled by strong performance of our business in international markets, wherein we have crossed INR 1,000 crore for the quarter for the first time. Several key factors, including the softening of select raw material prices, a favorable currency impact, easing of freight costs, and the successful implementation of our cost optimization efforts, has led to better operational performance, resulting in a EBITDA margin of 13.1% for the quarter. We remain focused on optimizing our operations and driving profitability for sustained long-term success. The quarter also witnessed good cash generation, resulting in robust cash position of INR 2,430 crore. Coming to India business, we remain highly optimistic about our continued progress and firmly believe that we are well-positioned to deliver market-leading growth as we have always done in the past. Our growth in chronic therapy segment continues to outperform the market, delivering sales of 15.8% year-on-year, whereas the industry only grew by 9.9% year-on-year for the quarter. During the quarter, we also gained one rank, both in antidiabetic and also in Neuro CNS therapy. Thank you. With this, I think we are open for Q&A. Operator Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may please press Star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press Star and two. Participants are requested to use handsets while asking our questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take the first question from the line of Saiyon Mukherjee from Nomura. Please go ahead. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Yeah. Hi, good evening. Yeah, my first question would be, you know, in the light of the first quarter results, you know, with respect to your guidance that you had given of double-digit growth in India and around 16% EBITDA margin on a consolidated basis. How should we think about that, and are you sort of revising any of these numbers? Sandeep Singh Managing Director, Alkem Laboratories Yeah. On the guidance of revenue growth side, I think double-digit growth currently seems challenging, but it'll be very high single digits for sure. It also depends because the acute focus on seasonality of Q2 and all, so we'll have to watch out for that, to be honest, Saiyon. If your question is also because on the EBITDA margins, there we feel confident that the guidance of 16% EBITDA, we feel confident of achieving that, Saiyon. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. On the raw material pressure easing, is there more room for it to improve, gross margins to improve in the coming quarters? Sandeep Singh Managing Director, Alkem Laboratories It's quite possible, but, you know, we'll have to watch out for that. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Sandeep Singh Managing Director, Alkem Laboratories I mean, yeah, it seems to be that there is some relief there. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay, thanks. My second question would be the pickup in international market, both in U.S. and other markets. If you can give some color as to what is driving, are there any one-time opportunities? There's a very steep rise or any country, specific country, which has contributed. Any more color if you can provide on the ramp-up that we are seeing in the international business and how sustainable it is going forward? Yeah, thanks. Sandeep Singh Managing Director, Alkem Laboratories Mr. Amit Ghare, can you take that, please? Amit Ghare President, International Business, Alkem Laboratories Thank you, Sandeep. There's no particular market per se, which has contributed to this growth. Of course, the overall growth in the U.S. has been much more than the previous quarter, certainly more than the last 4 quarters that we've seen sequentially or even year-over-year. That has kind of overall contributed, but you'll also see other international business crossing INR 300 crore. Not one particular market has helped the growth. I think a lot of markets, working together, as in, growing very well, has contributed to the final numbers. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. So you think this number is sustainable, the, the, the international business revenues, both in US and ex-US, we, we should have this, you know, sustainable going forward? Amit Ghare President, International Business, Alkem Laboratories For sure it's sustainable. Obviously, the pricing pressures or how the price deflation works, particularly in U.S. and in a few other markets, will kind of define going forward. As, as you asked in the first question or the first time, there is no opportunistic business, included here or no significant opportunistic business here. No one-time businesses here. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Cool. Thank you. Thank you. I'll join back, please. Operator Thank you. The next question is from the line of Foram Parekh from BNK Securities. Please go ahead. Ms. Foram, I have unmuted your line. Kindly proceed with your question. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Am I audible? Operator Yes, ma'am. Please proceed. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Yeah. My question is, we have good net cash of INR 24 billion. Can you just share on your capital allocation plan? Like, how do you, you, how do you intend to utilize this cash? Do we see any sort of M&A activities, or do we only want to expand on, you know, MR front? If you can just give some sense on, you know, how, on your capital allocation plan. Sandeep Singh Managing Director, Alkem Laboratories Right. Ma'am, capital allocation plan is the same as we have already discussed in the last few quarters. Nothing has changed. That's number 1. Obviously, you, you can't deploy capital of this kind on this, you know, employing or deploying medical reps, so that's out of the question. We also think we are, we are more than adequately already deployed medical reps, so there is no expansion happening there as well. Mr. Dubey, would you add something on that, I think? Rajesh Dubey CFO, Alkem Laboratories No, I think, you have already covered that. In fact, in, in most of the quarterly earning, earnings call, similar kind of, clarification is provided. Yes, of course, if we get some better opportunity, then definitely we have resources. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Okay. My second question is on the U.S. front. Can you just give us some color? Are we seeing any easing of price erosion or stability in price erosion? What kind of price erosion, you know, are we seeing right now? Sandeep Singh Managing Director, Alkem Laboratories Mr. Ghare, please, can you take that? Amit Ghare President, International Business, Alkem Laboratories Yes, sir. Thank you. Yes, we have seen some easing of pricing pressure. In the whole of last fiscal, it may have been different quarter on quarter, but overall, in the entire fiscal last year, we had double-digit price deflation. For this particular quarter, our pricing deflation was in single digits, though it was in higher single digits. Now, currently in the middle of Q2, the pricing deflation still is in the higher single digits, but it's not in double digits, so it's better than what it was last fiscal. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Okay. The margins, EBITDA margin is one of... It's kind of the lowest, you know, in the industry. In this kind of, you know, good track times when we are seeing easing of freight cost and, you know, API cost is easing. Do we not see us expanding our EBITDA margin guidance, you know, from 16% ±1%? Sandeep Singh Managing Director, Alkem Laboratories No, no, absolutely not, ma'am. We knew this. I mean, see, freight was all-time high last year, so obviously there was some indication it will come down. All this is factored in when we gave a guidance of 16%. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Okay. Sandeep Singh Managing Director, Alkem Laboratories We acknowledge we have one of the lowest EBITDA margins, so work is on on that, but we are not upgrading our guidance what we gave last time. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Okay, in, in, near future, like 2-3 years' time, do we see it going back to something in 20, what we saw earlier achieved? Sandeep Singh Managing Director, Alkem Laboratories We were never in 20s, as far as I remember, but you all can correct me. We must be like, from one freakish year, it could be where we could be close to that. Every year, let's say, we have given 50 to 100 basis point, we'll try to increase, and that's what we stick with. Foram Parekh Fundamental Equity Research Analyst, BNK Securities Okay. That's helpful. Thank you. Sandeep Singh Managing Director, Alkem Laboratories Thank you. Operator Thank you. We'll take the next question from the line of Abdul Kader Puranwala from ICICI Securities. Please go ahead. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities Hi, sir. Thank you for the opportunity. My first question is on the St. Louis facility. Is that completely shut down or- Sandeep Singh Managing Director, Alkem Laboratories If you can be a bit louder. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities Is, is this better? Sandeep Singh Managing Director, Alkem Laboratories Yes. Yeah. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities Yeah. Yeah. My first question is basically on the St. Louis facility. Have we completely shut down that in Q1? Is the cost savings now reflective into this 13% margin what we have reported? Sandeep Singh Managing Director, Alkem Laboratories A large part of it, but not all of it. Plant is on, is on the winding up stage, so it's not completely shut, but we have, like, one-fourth of employees which we had last year. Maybe we'll taper it down the next couple of months. We could potentially have a buyer or shut it down. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities Sure, sure. So your single-digit guidance for, growth guidance for India, is it possible to break it down between the branded generics and trade generics as to, you know, what could be the scenario for 2024? Sandeep Singh Managing Director, Alkem Laboratories I think the percentage we have given first, it would remain. The percentage of ratio will not change between trade generics and branded. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities Okay. In terms of your revenue contribution, how much would be that in trade generics for the current quarter? Sandeep Singh Managing Director, Alkem Laboratories It's, it's, it's high, high double digi... High, it's in- Rajesh Dubey CFO, Alkem Laboratories 19, 19. Sandeep Singh Managing Director, Alkem Laboratories It's close to around 17%-18%. Abdulkader Puranwala Vice President and Research Analyst, ICICI Securities All right, got it. Arjun, thank you. Thank you. Operator Thank you. We'll take the next question from, from the line of Saurabh Kapadia from Sundaram Mutual Fund. Please go ahead. Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Yeah, thanks for the opportunity. Sir, if you can talk about the NLEM impact on your Q1- Operator Excuse me, sir. I'm sorry to interrupt, sir. Your voice is muffled. May we request you to use your handset please? Saurabh Kapadia Fund Manager, Sundaram Asset Management Company There you go. Sir, if you can talk about the NLEM impact on the Q1 numbers. Rajesh Dubey CFO, Alkem Laboratories If I heard you correctly, Saurabh, you are asking NLEM impact? Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Yeah. Rajesh Dubey CFO, Alkem Laboratories Yes, N, NLEM impact, actually, we have a, a opportunity. Actually, we already exercised that opportunity to increase our DPCO covered products price increase by 12, 12.24%. In this quarter one, it has come later part of the quarter, from the month of June. Still this price, increase impact in totality is, is, is expected to be there in quarter two and going forward. Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Okay. Second question, now, what was the CapEx for Q1, and what has been... Is there any additional investment which has gone to Enzene? Rajesh Dubey CFO, Alkem Laboratories CapEx for the quarter is somewhere close to INR 80 crore, INR 78 crore, INR 80 crore. We have already given guidance of INR 300 crore-INR 350 crore for entire year. Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Okay. any additional investment in the biosimilars? Rajesh Dubey CFO, Alkem Laboratories This INR 350 includes even biosimilar CapEx also. Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Okay. Rajesh Dubey CFO, Alkem Laboratories Major chunk is for biosimilars only, for your understanding. Saurabh Kapadia Fund Manager, Sundaram Asset Management Company Okay. Okay, okay, fine. Yeah. Thank you. Operator Thank you. We'll take the next question from the line of Kunal Dhamesha from Macquarie. Please go ahead. Kunal Dhamesha Equity Research Analyst, Macquarie Group Hey. Hi, thank you for the opportunity. The first question on the trade generic number that you suggested around 18%, 17%, 18%, is that percentage of total revenue or is it percentage of India revenue? Sandeep Singh Managing Director, Alkem Laboratories Total domestic, sir. Kunal Dhamesha Equity Research Analyst, Macquarie Group I mean, as far as I was aware, we were somewhere around 21%-22% on an annual. Is there a seasonality in the business or? Sandeep Singh Managing Director, Alkem Laboratories Yeah, there is, there is, there is a full seasonality. There are a lot of other things, yeah. You know, 18, 20, it could hover around that quarter-to-quarter, year-to-year, yeah. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay. Would you say the growth rate of the branded business and trade generic business are now moving in- Sandeep Singh Managing Director, Alkem Laboratories Sorry? Kunal Dhamesha Equity Research Analyst, Macquarie Group Growth of branded generic and the trade generic is moving in tandem, or would you say trade generic is still faster? Sandeep Singh Managing Director, Alkem Laboratories This quarter has been lower for both. I think this quarter will not be a good answer to answer that. Kunal Dhamesha Equity Research Analyst, Macquarie Group I'm, I'm not saying this quarter, like, you know, maybe for last 12 months. Sandeep Singh Managing Director, Alkem Laboratories Yeah, trade generic is always higher, Chief. Kunal Dhamesha Equity Research Analyst, Macquarie Group Yeah. Sandeep Singh Managing Director, Alkem Laboratories It's like that in the past. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay. Okay. Okay, perfect. Let's say our cost efficiency measure, you know, I'm not sure, I might have missed it, I joined little late. Has that kind of contributed in this quarter or is it going to contribute? Sandeep Singh Managing Director, Alkem Laboratories It has contributed, Chief. Kunal Dhamesha Equity Research Analyst, Macquarie Group It has contributed. Sandeep Singh Managing Director, Alkem Laboratories Okay. Kunal Dhamesha Equity Research Analyst, Macquarie Group We are basically, let's say, to achieve that 16% EBITDA margin guidance, generally Q2 and Q3 needs to do much better than what we are doing, right? Which is generally the case because of actually it being higher. Sandeep Singh Managing Director, Alkem Laboratories Right. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay. Okay, perfect. Yeah, I have more questions. I'll join back you. Thank you. Operator Thank you. We'll take the next question from the line of Bino Pathiparampil from Elara Capital. Please go ahead. Bino Pathiparampil Head of Equity Research, Elara Capital Hi, good afternoon. Couple of questions. One, on the, on the depreciation and amortization, I see a decrease year-over-year. Is that because of the write down that we took in the last quarter? Rajesh Dubey CFO, Alkem Laboratories Voice is not clear. Bino, you are not very clear. Operator Yes, sir. Bino Pathiparampil Head of Equity Research, Elara Capital Sorry. Is it better now? Operator Yes, sir. Please, please proceed now. Bino Pathiparampil Head of Equity Research, Elara Capital Okay. Okay, there is a YOY decrease in depreciation and amortization. Is that because of the write-off that we took last quarter? Rajesh Dubey CFO, Alkem Laboratories There was, there was some 1-off related to our U.S. entity. Actually, we took additional depreciation in quarter one of last year. Bino Pathiparampil Head of Equity Research, Elara Capital Okay. Okay, so this is the new base. Okay. Second, in the U.S., there was this double action product, which you couldn't launch because of supply issues, et cetera, et cetera. Any update on that? Sandeep Singh Managing Director, Alkem Laboratories Amit, you want to take that? Rajesh Dubey CFO, Alkem Laboratories Sure. I guess you're talking about double action, and double action, we are still not in the market. We are still working on sorting our supply chain. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Also an update on Suprep, if you planning to launch any time soon? Sandeep Singh Managing Director, Alkem Laboratories Am I- Rajesh Dubey CFO, Alkem Laboratories Do you want me to take that? Sandeep Singh Managing Director, Alkem Laboratories Yeah, yeah. Rajesh Dubey CFO, Alkem Laboratories Yeah. Okay. Okay. Yeah, yeah. No, no, we are not in the market, in the recent future for generic Suprep. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Oh, okay. Thank you. Operator Thank you. We'll take the next question from the line of Damayanti Kerai from HSBC. Please go ahead. Damayanti Kerai Research Analyst, HSBC Hi. Thank you for the opportunity. My first question is, if you can update us on your cost saving initiative. You mentioned earlier annual target around INR 200 crore-INR 250 crore savings. How you are doing there? Like for, say, 2024, are you confident about achieving the entire savings or it will be gradual move to that stated goal? Sandeep Singh Managing Director, Alkem Laboratories Our CFO will take that question. Rajesh Dubey CFO, Alkem Laboratories Yeah. Definitely, our cost saving exercise is going as per our plan. In this quarter also, we have sizable amount in our bottom line. Your second question was whether we'll be able to achieve INR 200 crore in this year. I think, for sure, INR 110 crore we have already taken in our budget. We'll see. Our endeavor will be to have maximum, but. Sandeep Singh Managing Director, Alkem Laboratories Not all of it. Rajesh Dubey CFO, Alkem Laboratories I, I don't think it will be INR 200 crore, but definitely we'll try to add maximum. Damayanti Kerai Research Analyst, HSBC Okay, but say, if not in this fiscal, that's your, I'll say, medium-term goal, and as you progress more there, we should be seeing, gradual upticks from the 16% margin target, which you have, indicated for FY 2024. Should we work with that assumption? Sandeep Singh Managing Director, Alkem Laboratories Well, I think she would. We've we already said that, you know, go every year we'll try to increase by 50-100 basis point, and that, that's actually what we are doing. Damayanti Kerai Research Analyst, HSBC Okay. Okay. My second question is, you talk about softening raw material prices. Does that include softening prices for Penicillin G also, or that remains elevated? Sandeep Singh Managing Director, Alkem Laboratories I think that's non-Penicillin G. Penicillin G is still tough. Cefoperazone is still tough. Damayanti Kerai Research Analyst, HSBC Okay, still tough. My last question, if you can state the current MR count and your productivity for India business? Sandeep Singh Managing Director, Alkem Laboratories Sure, Yogesh, yeah. Rajesh Dubey CFO, Alkem Laboratories Total, we have now 12,000 representatives, okay? Our productivity average at Alkem level is around 5.4. Damayanti Kerai Research Analyst, HSBC INR 544 lakhs. INR 5.4 lakhs. Rajesh Dubey CFO, Alkem Laboratories Yeah. Damayanti Kerai Research Analyst, HSBC That's our average. Rajesh Dubey CFO, Alkem Laboratories Yeah. Damayanti Kerai Research Analyst, HSBC If you can split that among acute and chronic, that will be also helpful. Rajesh Dubey CFO, Alkem Laboratories Acute around 5.9 and chronic 3.5. Damayanti Kerai Research Analyst, HSBC 3.9. Okay. That's all. All the best. Operator Thank you. Thank you. We'll take the next question from the line of Saion Mukherjee from Nomura. Please go ahead. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Yeah, thanks for the follow-up. Isn't it, you know, on the capital allocation question, you know, given the continuous generation in cash and historically, Alkem is very conservative, is there a possibility to significantly increase the dividend payout going forward? Sandeep Singh Managing Director, Alkem Laboratories Going forward, I mean, never say never, but as of now, we don't. We have not revised our dividend policy, so nothing in the near term or as in, science. Yes, if this cash becomes, like, swelled up in a couple of years' time, we are still conservative in acquisition targets, yes, then we will revise this side. We are still away from that. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Okay. One more, if I can, on biosimilar initiative. You, I mean, have been talking about, you know, certain technologies which differentiate you. If you can, you know, give some more color as to how do we think about Enzene going forward from, let's say, INR 140-150 crore that you have over the next two, three years? Thanks. Sandeep Singh Managing Director, Alkem Laboratories Yeah. Saion, thanks for that. I think Enzene will continue to grow rapidly, and we are looking at Enzene not just for biosimilars right now, but we also, we also think the CDMO part of that business would, would also look pretty healthy. Obviously, in early days, we can't be dead sure that this would be right, but I think CDMO and bio technologies are also a huge opportunity. I think the business from this year will be close to INR 150-INR 135, I think. This, I think we can dou- double this in a couple of years' time, maybe. Let's watch for a time, take it with a pinch of salt. I think CDMO is a lumpy business. We really don't know how much will come, what, what, what's going to happen. I think in the next six to eight months, we'll be very clear on, because this is also a new segment we are trying to learn and build it. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Based on the traction in CDMO, is it with the innovators, biotech companies, or with the biosimilar companies, where are you seeing? Sandeep Singh Managing Director, Alkem Laboratories Biosimilar is the award, because any biosimilar is a low price business for them to, you know, make it as someone else's plant is difficult. Most of them are innovators, but obviously small biopharma to some subsidiaries of a large innovators company also we're working at. Yes, we are, we are in talks with some mixed, like, large and small, both. Some of them seem to be finalizing also. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay, great. Yeah. Thank you. Thank you. Sandeep Singh Managing Director, Alkem Laboratories Thank you, Saion. Thank you. Operator Thank you. We'll take the next question from the line of Rashmi Shetty from Dolat Capital. Please go ahead. Rashmi Shetty Director of Research, Dolat Capital Yeah, thanks for the opportunity. You mentioned that, you know, we are running Enzene biosimilar plus Enzene CDMO segment, sales are around INR 150 crore-INR 175 crore. How much have we done in this quarter one? Sandeep Singh Managing Director, Alkem Laboratories Right. Actually, you know, thanks for bringing it up. I think I stand corrected. I think this will be at close to INR 240 CR in the end of the financial year. Rashmi Shetty Director of Research, Dolat Capital This financial year, you will end up doing INR 240 crore. That is what you- Sandeep Singh Managing Director, Alkem Laboratories INR 250 crore. This quarter one, we did a sales of around INR 57 crore. Quarter one. Rashmi Shetty Director of Research, Dolat Capital Okay. At the EBITDA level, you know, are we doing still losses or, I mean, expected to do losses at the end of the year? Sandeep Singh Managing Director, Alkem Laboratories Yes, mild losses end of the year, in Enzene, yes. We'll not be breaking even this year. Rashmi Shetty Director of Research, Dolat Capital Okay. We should expect that, that should happen, in the following year. Sandeep Singh Managing Director, Alkem Laboratories Yes, that's right. Rashmi Shetty Director of Research, Dolat Capital Okay. How much of the R&D expenses is allocated to this business, you know, out of our total R&D? I mean, in percentage terms, if you can explain. Sandeep Singh Managing Director, Alkem Laboratories One-third of our R&D budget is for biotech right now. Rashmi Shetty Director of Research, Dolat Capital Okay, got it. Just on India business, you know, I'm just, feeling that, you know, you're giving a very conservative number of high single digits, because normally for Alkem, second and third quarter is very good in terms of the domestic business. That is what I understand. Don't you think that, you know, with the anti-inflammatories and everything is picking up in next two quarters, you know, we should actually, be able to do at least, low double-digit sort of growth in domestic business? Sandeep Singh Managing Director, Alkem Laboratories I hope what you're saying is totally right, and we pray for it. Look at quarter one, we have slowed down compared to the IPM. I think it would be prudent to temper our expectations. We have no incentive to give a lower guidance or manage it, but, yeah, we really think that it's going to be tough to go to double digits. We might. I, you're right, Azevi, we are a acute-based company. The season really supports, but that's like hoping that everything will go right. Rashmi Shetty Director of Research, Dolat Capital Okay. We are in the middle of the second quarter, so are we seeing any sales pick up, or you feel that still it is less than your said? Sandeep Singh Managing Director, Alkem Laboratories We don't see a very significant uptick compared to quarter one. Rashmi Shetty Director of Research, Dolat Capital Understood. Got it. Thank you. That's it for me. Operator Thank you. We'll take the next question from the line of Kunal Randeria from Nuvama. Please go ahead. Kunal Randeria Director - Research, Nuvama Wealth Management Hi. Hi, good afternoon. Mr. Gadiyada, on the U.S. business, you said there was no one-off opportunity, right? Where did this such a sharp growth come from? Were there new launches or, you know, some market share gain in some products, if you can just highlight? Sandeep Singh Managing Director, Alkem Laboratories No, it came across from the, more from the existing business than really from the new products, but new products obviously did contribute to the growth. I just want to make sure that, you know, it's understood correctly. Q1 of last fiscal was down quite a lot. If you really compare, you know, 2 fiscals back, the growth is pretty modest or, you know, more or less like little bit of growth. Really that's where we are. Whatever kind of we lost last year, we have sort of gained back. Kunal Randeria Director - Research, Nuvama Wealth Management Got it. okay, but I mean, I mean, just, just to push a bit more, while I understand Q1 base was unfavorable, but it's nothing out of the ordinary. I mean, by that, I mean, maybe some competitors withdrawing from some molecule or anything of that sort. This is just normal business. Sandeep Singh Managing Director, Alkem Laboratories That's correct. There's nothing abnormal here or unsustainable here, to be honest. Like I said earlier, the easing in pricing pressure also helps us overall. Kunal Randeria Director - Research, Nuvama Wealth Management Right. Got it. My second question is on the trade generics business. Now, in the last 12 months, several new, you know, big pharma companies, domestic pharma companies have entered this business. Do you think in the longer run, it could cannibalize the branded business for the industry? Sandeep Singh Managing Director, Alkem Laboratories Sorry, your question was on trade generic? What was it? Kunal Randeria Director - Research, Nuvama Wealth Management Yes, yes. I'm saying a lot of people, a lot of big pharma companies from India have entered this business. Could it cannibalize the branded market that would like to grow branded market in the longer run? Sandeep Singh Managing Director, Alkem Laboratories I think in the long run, there would be some impact, but in the long term, there could be some structural impact. I think one is trade generics, private labels from pharmacy chains, all that we keep hearing. Yeah, long term, there could be some impact. Kunal Randeria Director - Research, Nuvama Wealth Management Sure. Since, Sandip, you are maybe the largest or second largest player in this, is there any moat to this business? If so, so many players entering. Sandeep Singh Managing Director, Alkem Laboratories That's a great question. You know, actually, these are brands in itself, because, see, they have the brand names also, and the, the chemist and the retailer, the retailer and the stockist push it. Your moat is your relationship with the stockist and retailer, which is built over a long, many years. Even the consumers, I mean, I mean, who consume the medicine, they know about these companies. It's not only a pricing game. It's, you know, that's a misconception. In fact, as I kind of said some time back, I think trade generics is also not a great word for this business because these are brands actually. These are trade brands, we could call them. Lot of pro-products from Alkem are picked up by the consumer by taking the brand name. We don't call on the doctor, but we call on the stockist and retailer. Rajesh Dubey CFO, Alkem Laboratories ... Great, great. Got it. Thank you, and all the best. Sandeep Singh Managing Director, Alkem Laboratories Thank you. Operator Thank you. We'll take the next question from the line of Chirag from DSP Mutual Fund. Please go ahead. Chirag Dagli Fund Manager, DSP Mutual Fund Yeah, sir, thank you for the opportunity. Sir, have you taken any price hikes in the trade generic business also? Sandeep Singh Managing Director, Alkem Laboratories Mr. Dubey, you can take that. Rajesh Dubey CFO, Alkem Laboratories Yeah. Yes, definitely price hike is there. That is, one component of, growth, we forecasting trade, trade generic. There, there, a lot of analysis needs to be done, to what extent we can, take price. Sandeep Singh Managing Director, Alkem Laboratories We have taken in the quarter, 1 just 1. Rajesh Dubey CFO, Alkem Laboratories We have. Sandeep Singh Managing Director, Alkem Laboratories That's a great question. Again, it proves it that we have a brand, it's not just pricing. Chirag Dagli Fund Manager, DSP Mutual Fund You know, when we think of the business longer term, in general, when we think of the branded business, we think about it as a 3%, 4%, 5% kind of price hike, you know, generally. Is that true for trade generic also? Although it may not be as linear, but generally, when you think of it in blocks of, say, 3 or 4 years, does that kind of price hike come through? Sandeep Singh Managing Director, Alkem Laboratories I would say not like the brand, branded, like prescriptions. It depends on the segment. If it's has an OTX component, you can have a price rise 3%-5% every year. On the others, it depends on some, some dynamics of competition and things like that also. Chirag Dagli Fund Manager, DSP Mutual Fund Sir, my question is based on historical data. Over the last 4, 5 years, have you seen low single-digit kind of price hike in your portfolio? Sandeep Singh Managing Director, Alkem Laboratories We have, we have, but it comes in lumps. Chirag Dagli Fund Manager, DSP Mutual Fund Correct. Understood. you've seen, but you've seen, you know, mid-single digit or low single digit kind of price hike, in that business over a 4 year? Sandeep Singh Managing Director, Alkem Laboratories IRR, yes, we kind of take a hike, yes. Chirag Dagli Fund Manager, DSP Mutual Fund Understood. Okay, fair point. Sir, you also talked about, you know, the India business growing in high single digit this year for you. In your assessment, how much will IPM grow this year? Sandeep Singh Managing Director, Alkem Laboratories In my assessment, IPM will grow by maybe 8%. Chirag Dagli Fund Manager, DSP Mutual Fund In that context, you are thinking about, Alkem's business growing in, a similar, you know. Sandeep Singh Managing Director, Alkem Laboratories Similar to maybe 100 to 200, maximum 200, make us reach double digits, but yeah, close to that. Chirag Dagli Fund Manager, DSP Mutual Fund understood. Okay, fair point. you know, when you typically, your procurement for, you know, for your large molecules in the coming season, when does it start, and how does this play out for penicillin G based products for the coming seasons? Rajesh Dubey CFO, Alkem Laboratories Mr. Dubey, yeah. Yeah. Our raw material procurement and other excipients or packaging material, it keeps on, on continuous basis. Normally, we build inventory of RMPM for our production schedules. I think, but wherever we foresee and we get indication prices are going to increase, definitely we try to make inventory little bit on higher level. Beyond certain extent, you can't have inventory. Just to answer to your question, it, it is continuous exercise. If Penicillin G prices are on higher side, and in fact, you, if it is expensive, you cannot avoid. Instead of one and half months or 2 months, raw material, and excipient, you can go and add for another 15 days, not beyond that, or a month or so. Answer to your question, if prices are on higher side, definitely it will be part of our COGS. Chirag Dagli Fund Manager, DSP Mutual Fund Understood. Okay. Just the last question, sir, if I can, please. The chronic business today, is it contributing to EBITDA? Rajesh Dubey CFO, Alkem Laboratories Yes, yeah, it does. chronic almost contribute close to 20% to the business. I mean, you know, to overall chronic business, if you ask, chronic contributes to itself around 18%-20% EBITA. Sandeep Singh Managing Director, Alkem Laboratories EBITA margin for Chronic. Rajesh Dubey CFO, Alkem Laboratories Yeah. This is EBITDA margin to the chronic business, I am saying. Chirag Dagli Fund Manager, DSP Mutual Fund Chronic business margins are also similar to what you make on a in the India business basically? Sandeep Singh Managing Director, Alkem Laboratories No. I mean, yeah, overall, yes. Yeah. That's beginning, it should be make far higher. I mean, I'm sure you know. Yeah. Chirag Dagli Fund Manager, DSP Mutual Fund Mm-hmm. Perfect. Thank you so much, sir. Thank you so much for it. Operator Thank you. We'll take the next question from the line of Mehul Sheth from Axis Capital. Please go ahead. Mehul Sheth Analyst, Axis Capital Yeah, thank, thank you for the opportunity. Sir, first question on domestic side. When we see around 7% growth in Q1, can you break it down between the volume price and new launches, how the growth was? Similarly, you are expecting high single digit growth, so will it be like a volume price and what are your expectation on these growth drivers for the IPM? Sandeep Singh Managing Director, Alkem Laboratories Yogesh? Rajesh Dubey CFO, Alkem Laboratories Yeah, quarter, if you ask me, then the, the volume growth is close to 1%, new launches is 3.7, NRE is 2.3. Mehul Sheth Analyst, Axis Capital For the full year, like when we say a high single digit growth, say, around 8, 9% or 8 at par with market, then what will be your expectation like? Is your volume recovery visible or? Rajesh Dubey CFO, Alkem Laboratories Yeah, you can expect a reasonable good recovery from NRV because of our DPCO impact. You know, the price impact will be seen more in quarter two onwards. Large impact will come through NRV, and a reasonably good amount will come through volumes as well. These two will contribute to the growth factor in the next two to three quarters. Mehul Sheth Analyst, Axis Capital Sir, last, last on some tax rate side. This quarter was around 18%, so what will be the annual ETF for the coming? Rajesh Dubey CFO, Alkem Laboratories Yeah, actually, we are revising our guidance on effective tax rate. It is going to be in between 17%-19%. If we compare with last year, definitely it is on higher side because of some compliance related things related to marketing services. Now, some of the marketing expenses we considered as disallowances. Second thing, our profit from no non-exempted plant, it increased. That, that is mainly our export business. If that mix is going to change, then definitely we are going to have higher effective tax rate. To conclude, for this year, we are going to be in between 17%-19% on effective tax. Mehul Sheth Analyst, Axis Capital Sir, one last, like, one more question. Any, like, any impact on other expenses or other, because of your take, subsidy? Rajesh Dubey CFO, Alkem Laboratories Sorry, I'm not very clear on, on your question. Mehul Sheth Analyst, Axis Capital Because of your subsidy. Chirag Dagli Fund Manager, DSP Mutual Fund Your voice is breaking, sir, now. Mehul Sheth Analyst, Axis Capital Am I audible now? Chirag Dagli Fund Manager, DSP Mutual Fund Yes, sir. Please proceed. Mehul Sheth Analyst, Axis Capital Yeah. Yes, so, Chirag Dagli Fund Manager, DSP Mutual Fund Please keep your mic little bit farther from your mouth as we please. Mehul Sheth Analyst, Axis Capital Yeah. The question was like any Forex impact in other expenses side because of this subsidy? Rajesh Dubey CFO, Alkem Laboratories No, it is, it is not there in other expenses, at least for this quarter, because, we have positive impact of Forex, and it has not gone under other expenses. Mehul Sheth Analyst, Axis Capital Okay, sir. Thank you. Thank you, sir. That's all from us. Thank you. Chirag Dagli Fund Manager, DSP Mutual Fund Thank you. We'll take the next question from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Yeah, good evening. Am I audible? Chirag Dagli Fund Manager, DSP Mutual Fund Sir, your audio is too low. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Is this better now? Chirag Dagli Fund Manager, DSP Mutual Fund Uh. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Little bit louder. Chirag Dagli Fund Manager, DSP Mutual Fund Please proceed. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay. Sir, the first question is around the other expenses for the quarter. It's up 21% year-on-year against the sales growth of 15%. You know, if I adjust for R&D, which is actually slightly lower year-on-year, then the other expenses, excluding R&D, are actually up 28% year-on-year. Can you explain and elaborate there? I mean, I would have thought that you are undertaking cost-cutting exercises, this should reflect in the other expenses line item. Rajesh Dubey CFO, Alkem Laboratories Yeah, generally, it, it depends on what kind of phasing you have for your marketing expense. In, for this year, in quarter one, phasing related to marketing expenses on little bit on a higher side. Definitely, to a certain extent, it got neutralized because of softening of freight, especially export freight. That's very true. Yes, even R&D spending is, is on little bit on the lower side, but it's, it's a phasing of marketing expense, so we spend little bit higher in quarter one. Definitely quarter three, quarter four is going to have impact of that to a certain extent. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors I mean, are you suggesting that, in the coming quarters of the year, the other expenses line item can actually be lower because you've upfronted a certain amount of your marketing expense in the first quarter itself? Rajesh Dubey CFO, Alkem Laboratories Yeah, obviously, because, our annual EBITDA target, is, guidelines is 16%. Definitely, that is, going to, reduce, going forward. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors I mean, this quarter, your sales mix, you know, India to exports is 2/3 to 1/3, whereas normally, you know, for the full year, I think it's, it's, it's higher for India. So the sales mix would also, you know, have had some impact on, on margins. Would it then be fair to assume that as the sales mix normalizes, it should show up in margins going ahead in, in the, in the quarter? Rajesh Dubey CFO, Alkem Laboratories Yeah, you are very right. Actually, sales mix, if it improve, improves for domestic, then definitely we are going to have better gross margin as well as EBITDA margin. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay. You indicated that, you know, you were able to take the DPCO linked price increase only in the month of June for the first quarter. It was not effective for the first 2 months. If that is the case, then again, sequentially in the second quarter, even that should help your gross margins and EBITDA margins. Would that be a fair assumption? Rajesh Dubey CFO, Alkem Laboratories Yeah, Gagan, actually, in fact, our guidance of 16%, we have factored all these things. Increase in DPCO price, whatever it has not come in quarter one, that also is factored. I think you have given answer to most of the thing. If our product sales mix is changing, definitely we are going to have better margin. Right now, our projection and our guidance of 16%, most of the thing we have already factored. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Right. Right. I take that, sir. Last one, if you could just clarify, I, I didn't, I didn't hear the, the, the Enzene top line number. I was not able to hear it clearly. You indicated a certain sales number for the year and for the as- aspiration for the year and, and actual number for the quarter. If you could just kindly repeat that? Sandeep Singh Managing Director, Alkem Laboratories INR 240, INR 240 for the year. Rajesh Dubey CFO, Alkem Laboratories Yeah, yeah. Sandeep Singh Managing Director, Alkem Laboratories Yeah. Rajesh Dubey CFO, Alkem Laboratories Yeah. For the year, total top line, for Enzene on consolidated basis, it is going to be INR 265 crore, or INR 260 crore around. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors In what, last year? Rajesh Dubey CFO, Alkem Laboratories Last year it was around INR 160 crore. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors You recently launched, I think, 3, you know, additional products, Cetuxa and, and some, some more. Is there anything more in the pipeline that you intend to add this year? Sandeep Singh Managing Director, Alkem Laboratories Yeah, yeah. Every year we intend to launch two to three products. There's certainly something coming up in the next quarter. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay. You foresee a break even in Enzene, in the coming years, right? Sandeep Singh Managing Director, Alkem Laboratories Next year, yes. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Right. And, and how have, how has been, you know, the, the reception of your, of your ophthalmic portfolio? I, I, I know it's early days, but if you could give some idea on ophthalmic and also on the diabetes and cardio side. I think last year, cardio was, was, was weak, if I, if I recall it correctly. Sandeep Singh Managing Director, Alkem Laboratories Ophthalmic is very early. I would refrain from answering. I would love to answer you, but just give us a quarter more. Cardio and diabetes, Yogesh, you can. Rajesh Dubey CFO, Alkem Laboratories I think you're right. Diabetes, you know, that we are, we are outperforming the market reasonably well. Cardiac, I think we have significantly improved now. Compared to last year, where our EI, evolution index, was below 90, now in this quarter, we have reached 98, and for the month, it is 101. If this trend continues in the next quarter also, we have an EI more than 100, and that is, you know, outperforming the market. Cardiac is reasonably settling. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors For the chronic portfolio in India, would it be reasonable to assume, you know, that, that you can sustain a mid-teen sort of a growth for, for the, for the year? You've already got that sort of a number in the bag for the first quarter or do you believe, you know, there's potential for it to be better? Rajesh Dubey CFO, Alkem Laboratories No, we should be in around that. We will aspire for better. Mid-teens is what we should be surely driving. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay. Thank you. I'll get back in the queue. Thank you. Operator Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to 2 per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We'll take the next question from the line of Punit Pujara from Helios Capital. Please go ahead. Punit Pujara Research Analyst, Helios Capital Yeah, hi. Thanks for taking my question. I hope I'm audible. Rajesh Dubey CFO, Alkem Laboratories Yes. Punit Pujara Research Analyst, Helios Capital Yeah. For the quarter, you added $12 million-$13 million in the U.S. business, both on quarter-on-quarter and year-on-year basis. I just wanted to know, because of that and cost-cutting measures would have aided your EBITDA profile. I wanted to know, are we in profit in the U.S. right now? I'm not looking for a number, but just directionally, is it profitable at the current juncture? Rajesh Dubey CFO, Alkem Laboratories Mr. Dumet. Sandeep Singh Managing Director, Alkem Laboratories Yeah. Answer to your question, at business level, are we profitable? Yes, definitely we are profitable without taking few of the overheads. Here I'm referring corporate overhead or similar kind of overheads. Definitely we are in profit. And I'm sorry, what was your first question? Punit Pujara Research Analyst, Helios Capital No, that was, the question was on profitability only. I was not slicing or dicing anything. After RNP and overheads, everything put together. That was my question, sir. Sandeep Singh Managing Director, Alkem Laboratories At business level, we are in positive. Punit Pujara Research Analyst, Helios Capital Understood, sir. Sir, last... Updated on Enzene, I mean, you had communicated that you are incurring CapEx. Operator I'm sorry to interrupt, Mr. Pujara, your voice broke. Can you please repeat your question? Punit Pujara Research Analyst, Helios Capital Sure, sure. Is it better now? Operator Yes, sir. Please proceed. Punit Pujara Research Analyst, Helios Capital Yeah. Sir, last quarter, you had indicated that you are incurring CapEx for Enzene in the U.S. What are the project commissioning timelines, are you anticipating? Sandeep Singh Managing Director, Alkem Laboratories We are one and a half years away, at least from that. One and a half years away. Punit Pujara Research Analyst, Helios Capital Sure. A quick last question from my side. What's the R&D guidance for the full year, considering the revenue, guidance revision? Sandeep Singh Managing Director, Alkem Laboratories I think we... 5% is a good estimate. Punit Pujara Research Analyst, Helios Capital Understood, sir. That, that answers my question. I'll join back the queue. Thank you. Operator Thank you. We'll take the next question from the line of Akash Dobaria from Motilal Oswal Financial Services. Please go ahead. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Thank you for the opportunity. Just want to know the gross margin guidance for the year? Rajesh Dubey CFO, Alkem Laboratories Gross margin guidance, we have already given 59%-59.5%, and that we maintain. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay, thank you. Operator Thank you. We'll take the next question from the line of Amar Maurya from AlfAccurate Advisors. Please go ahead. Mr. Mourya, I have unmuted your line. Kindly proceed with your question. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Yeah. Yeah. Sir, my first question is on the, you know, the MR strength. What would be the breakup, broad breakup between the acute and chronic? Rajesh Dubey CFO, Alkem Laboratories We have, you know, 20% of our, you know, overall, reps is chronic. Out of 12,000, 2,400 for chronic. Amar Mourya Fund Manager, Investment Advisory, AlfAccurate Advisors Okay. basically, sir, I think earlier, the productivity level, if I see, has significantly improved in the Chronic. Yogesh Kaushal President, Chronic Division, Alkem Laboratories ... versus the acute, which we were expecting to improve further, I think that has not inched up to the level which we were expecting. Any specific reason for that, sir? Rajesh Dubey CFO, Alkem Laboratories This is largely because of expansion. While at broad level, blended level, you might see a productivity is, is stagnated, you know, but this is because of in-increase in manpower. Last year, we expanded close to around 800 odd reps, so that dilutes our productivity. That's the reason you might be seeing a, still, you know, stagnated productivity. Yogesh Kaushal President, Chronic Division, Alkem Laboratories Okay. Now, now, given the pickup and all, it should improve from here on? Rajesh Dubey CFO, Alkem Laboratories Yes, sir. Yeah, yeah. Yogesh Kaushal President, Chronic Division, Alkem Laboratories Okay. Fine, sir. Thank you. Rajesh Dubey CFO, Alkem Laboratories Thank you. Operator Thank you. We'll take the next question from the line of Kunal Dhamesha from Macquarie. Please go ahead. Kunal Dhamesha Equity Research Analyst, Macquarie Group Yeah, thank you for the opportunity again. I just wanted to understand on the Enzene business. Right now it's all revenue coming from India. Secondly, on the same Enzene business, if you could help us understand the economics of the business as to the gross margins right now and the fixed cost, fixed operating cost. Once you grow, how much improvement can come from there? That is the first question. Sandeep Singh Managing Director, Alkem Laboratories Sure. I think we'll answer not all of it, honestly. It's too early to answer on gross margin and fixed cost and all. We'd love to answer it when it's a larger business. We'll give you a split between international and India. It has international components, not on India. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay. Sandeep Singh Managing Director, Alkem Laboratories International is 20% and domestic is 80%, including CDMO and products both. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay. The plant, you know, if you can help us with the, let's say, bioreactor capacity, and has it been inspected by which agency till now? Sandeep Singh Managing Director, Alkem Laboratories Yeah, it's inspected by the TGA, Australia. We have five EU, so they would also come in in some time. TGA approved in in, regulated markets, it's TGA approved. Inspected, yeah. Kunal Dhamesha Equity Research Analyst, Macquarie Group Sure. The capacity front, bioreactor capacity? Sandeep Singh Managing Director, Alkem Laboratories We'll come back on that. We don't have it offhand. We can answer you separately on that. Kunal Dhamesha Equity Research Analyst, Macquarie Group Secondly, on the EBITDA margin improvement, let's say beyond FY 2024, which we are suggesting 50 to 100 basis points every year. Now, the way I see it is there are three, four drivers, right? At least for FY 2025, we would see incremental cost efficiency and then Enzene profitability improvement, then the general operating leverage in India. I mean, so my question here is, does this 50, 100 basis points incremental improvement, would that also assume raw material prices of some of our key molecules going down? Sandeep Singh Managing Director, Alkem Laboratories Yes. Kunal Dhamesha Equity Research Analyst, Macquarie Group Or- Sandeep Singh Managing Director, Alkem Laboratories For some part of it, that would have to play out. Kunal Dhamesha Equity Research Analyst, Macquarie Group I see. Sandeep Singh Managing Director, Alkem Laboratories Operating leverage would play a large part of it beyond 2025. Kunal Dhamesha Equity Research Analyst, Macquarie Group Okay, sure. The last one, if I may, on the trade generic business, you said that we can take price increases, et cetera. Generally, I mean, when I look at our trade generic, you know, prices as compared to the branded prices for the same molecules, they are generally only around 10%-15% cheaper, right? To that extent, we don't have that much kind of leeway. Is it a fair assessment or I'm wrong here in terms of numbers? Sandeep Singh Managing Director, Alkem Laboratories I think we don't have that much of leeway compared to branded, for generics for sure. That's a fair assumption. Kunal Dhamesha Equity Research Analyst, Macquarie Group Mm-hmm. Sandeep Singh Managing Director, Alkem Laboratories We stand by what we said. There is, we do take a price increase in trade generics as well. Not as structured as branded generics, but they do come, and they, they come in lumps. Kunal Dhamesha Equity Research Analyst, Macquarie Group Mm, mm, mm. Sandeep Singh Managing Director, Alkem Laboratories Yeah. Kunal Dhamesha Equity Research Analyst, Macquarie Group At, at any point, have you thought about, you know, some of our peers have changed their strategy by, you know, putting this, some of the big brands into the consumer healthcare bucket. Would we also plan to do this at some point? Then what- Sandeep Singh Managing Director, Alkem Laboratories Certainly, we'll do it, and we do think about it, and that's very interesting. We also have to think that, you know, it's a huge franchise. We have the doctors, so we have to be careful on that, but we certainly think about that to answer you. As a possibility in the next couple of years, we might see more of that. Kunal Dhamesha Equity Research Analyst, Macquarie Group What benefit could it bring for us? You know, on a broader level, I'm not asking for exact benefits in terms of margin, et cetera, but like strategically, you know... Sandeep Singh Managing Director, Alkem Laboratories I think just a larger consumer base. Whenever this is done, normally you do see a dip in the first year, year and a half. There are a lot of examples what it happened in Ranbaxy, when they was in Ranbaxy, when they went from RX to OTC, they did become large brands, Revited and the other painkillers of Moveran and all that stuff. Kunal Dhamesha Equity Research Analyst, Macquarie Group Mm, mm, mm. Sandeep Singh Managing Director, Alkem Laboratories Yeah. Kunal Dhamesha Equity Research Analyst, Macquarie Group Sure. Thank you and all the best. Sandeep Singh Managing Director, Alkem Laboratories Thank you. Operator Thank you. We'll take the next question from the line of Rashmi Shetty from Dolat Capital. Please go ahead. Rashmi Shetty Director of Research, Dolat Capital Yeah, thanks for the call. Sir, do we have any claims of overpricing from DPCO or NCP, NPPA, where they are considering this amnesty scheme? Rajesh Dubey CFO, Alkem Laboratories Not, not any significant, as it has come to our notice. The DPCO, they keep, keep on communicating, and then we clarify them. Nothing significant as such. Rashmi Shetty Director of Research, Dolat Capital Okay. For the U.S. market, how many launches have you planned for this year? Any specific numbers you would like to call out? Sandeep Singh Managing Director, Alkem Laboratories ... Mr. Ghare, you can take that, please. Amit Ghare President, International Business, Alkem Laboratories This year we have planned, about 8 launches in the U.S. Rashmi Shetty Director of Research, Dolat Capital Okay. These are all mainly OSD, right? Amit Ghare President, International Business, Alkem Laboratories That's correct. Like we have said in the past, we also do liquids, we do powders, we do nasal sprays. So yes, they are spread across these dosage forms. Rashmi Shetty Director of Research, Dolat Capital Perfect. Sir, on international business, can we take this as a new base of, quarter one of roughly INR 319 crore? You know, as you already mentioned, that all the markets are contributing to the overall growth. Amit Ghare President, International Business, Alkem Laboratories Yes, there is nothing which is one time here, so to that extent, this base can be taken. Of course, quarter on quarter, some variance will always come. Rashmi Shetty Director of Research, Dolat Capital All right. Thank you, sir. That's it for now. Operator Thank you. We'll take the next question from the line of Mehul Sheth from Axis Capital. Please go ahead. Mehul Sheth Analyst, Axis Capital Yes, thank, thank you for the follow-up. Sir, just one clarification. When you said your tax guidance of 17%-19%, it is for FY 2024 or even for FY 2025 and FY 2026? Sandeep Singh Managing Director, Alkem Laboratories The, this was for FY 2024. FY 2025, we'll come back to you, after, after, seeing, 2024. This 17-19% is for 2024. Mehul Sheth Analyst, Axis Capital Okay. Sir, just one more like, when we talk about capital allocation, do you have any plan like to foray into ventures like consumer healthcare or anything like your peers or some of the peers are doing that? Sandeep Singh Managing Director, Alkem Laboratories No. Sorry, your question was, our plan is on what? Consumer, what? Mehul Sheth Analyst, Axis Capital Consumer healthcare is kind of a ventures like. Sandeep Singh Managing Director, Alkem Laboratories Yeah. I mean, we think about it every day. It's interesting, but the better margin is impacted, so I think we'll have to think about that because, you know, the first two, three years would be, Marketing spend would be high. We'll time it adequately, but right now we don't have any plans to foray into it. Mehul Sheth Analyst, Axis Capital Okay, sir. Thank you, thank you. Thank you for the clarity. That's all. Operator Thank you. Ladies and gentlemen, this will be the last question for today, which is from the line of Saion Mukherjee from Nomura. Please go ahead. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Yeah, yeah. Thanks for the follow-up again. Just 1 clarification on the international business. I mean, typically, we have seen a lot of volatility with many companies, but for Alkem, it has been a very steady growth. If you can give, you know, some idea as to, you know, is this entirely branded generic kind of business, or you also have some tenders which can go up and down? The nature of the business at an overall level and, you know, some of the markets like KD and all, which is a large market, we have seen consistently 30%-40% CAGR kind of a growth in the last 4-5 years. How are you sort of driving this, if you can, you know, give some idea on that? Sandeep Singh Managing Director, Alkem Laboratories Mr. Ghare can take that. Amit Ghare President, International Business, Alkem Laboratories Sure. There, there are businesses which have the institutional component, so no two things about it. The overall business is obviously achieved based on each market, looking at their numbers and, you know, looking at all the areas that we can expand or grow in. And the first point really trying to answer your question was, we have a bigger slice of the interchangeable generic business versus the branded business. So that clearly is our split, or that's clearly the way we operate our asset base. There's no one particular market which kind of jumps out, and there is, like I said earlier, there is no one-time business that came into these numbers. So we strongly believe that these are sustainable. Having said that, there will always be some variance quarter on quarter. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. What is the split between institution generic and branded generic, approximately? Amit Ghare President, International Business, Alkem Laboratories There's nothing like institutional, so I don't want to split it that way. Interchangeable generic versus branded generic, that split is 90% is interchangeable generic, 10% is branded generic. This is overall international business. Saion Mukherjee Managing Director and Head of Equity Research, India, Nomura Okay. Thank you. Thank you. That's all. Thanks. Operator Thank you. As that was the last question for today, I would now like to hand the conference over to Mr. Amit Khandelwal for closing comments. Over to you, sir. Sandeep Singh Managing Director, Alkem Laboratories Thank you everyone for attending the call. If any of your queries are unanswered, please feel free to get in touch with me. Thank you. Operator Thank you very much, sir, and the members of management. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you. Powered by