Sunpharma Ltd — Q1 FY24

SUNPHARMA Q1 23/24 Earnings Conference Call https://stockanalysis.com/quote/nse/SUNPHARMA/transcripts/71161-q1-23-24/ Published: sourced from public earnings transcript

Operator Ladies and gentlemen, good day, and welcome to the Q1 FY 2024 earnings conference call of Sun Pharma. 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 call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Dr. Abhishek Sharma, Vice President, Head, Investor Relations and Strategic Projects. Thank you, and over to you, sir. Abhishek Sharma Head of Investor Relations, Sun Pharmaceutical Industries Thank you. Good evening, a warm welcome to our first quarter FY 2024 earnings call. I'm Abhishek from 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. Dilip Shanghvi, Managing Director, Mr. C.S. Muralidharan, CFO, Mr. Abhay Gandhi, CEO, North America, and Mr. Kirti Ganorkar, CEO, India Business. Today, the team will provide an update on financial performance and business highlights for the quarter and respond to any questions that you may have. We will refer to the consolidated financials for management comments. The call recording and call transcript will also be put on our website shortly. As a part of the press release, we have added a section on status of specialty projects. In the future, we will be adding more information to this section. The discussion today might include certain forward-looking statements, and these must be viewed in conjunction with the risks that our business faces. You are requested to ask two questions in the initial round. If you have more questions, you are requested to rejoin the queue. I also request all of you to kindly send in your questions that may remain unanswered today. I will now hand over the call to our CFO, Mr. Muralidharan. C.S. Muralidharan CFO, Sun Pharmaceutical Industries Welcome, thank you for joining us for this earnings call after the announcement of financial results for the first quarter of FY 2024. Our Q1 financials are already with you. Q1 FY 2024 sales were at INR 117,852 million, a growth of 10.7% over the same period last quarter. Material cost stands at 23.4% of sales, lower year-on-year on account of higher specialty products and better product mix. Stock cost stands at 20.4% of sales, higher than Q1 FY 2023 on account of annual merit increases and consolidation of Concert. Other expenses were at 29.3% of sales, higher year-on-year on account of increase in selling and distribution expenses and consolidation of Concert business. Forex gain for the year was INR 20 million, compared to a gain of about INR 1,457 million in Q1 FY 2023. EBITDA for Q1, including other operating revenues, was at INR 33,080 million, up by 14.7% over Q1 last year, with EBITDA margins at 27.8%. Adjusted net profit, excluding the exceptional items for Q1 FY 2024, was INR 23,454 million, up 13.8% over Q1 last year. Reported net profit for Q1 FY 2024 was INR 20,225 million, compared to net profit of INR 20,609 million for Q1 last year. Exceptional items include a charge of INR 1,492 million towards impairment of an asset acquired, namely, AS012, which was in clinical trials for vitiligo. As of June 30th, 2023, net cash was $1.7 billion at consolidated level and about $436 million at ex-Taro level. Gross debt decreased from the level of $754 million as of March 31st, 2023 to $472 million on June 30th, 2023, thereby $275 million repaid during the current quarter. Let us look at the key movements versus Q4 FY 2023. Our consolidated gross sales were higher by 9.9% quarter-on-quarter at INR 117,852 million. Besides the seasonality usually seen between Q1 and Q4, a prominent factor was higher sales of lenalidomide quarter- on- quarter. However, we expect lenalidomide sales will remain episodic in future. Material cost stands at 23.4% of sales, higher quarter- on- quarter, on account of expected normalization that we had flagged off in our Q4 FY 2023 earnings call. Stock cost at 20.4% of sales were higher in absolute terms versus Q4 FY 2023 due to annual merit increase and first full quarter of Concert consolidation. Other expenses were at 29.3% of sales, were lower than Q4 FY 2023 due to sales and distribution in R&D. EBITDA margin for Q1 was at 27.8%, compared to 25.6%, 6% for Q4 FY 2023. Reported net profit for Q1 stands at INR 20,225 million. Moving on to Taro's performance. Taro posted Q1 FY 2024 revenues of $158.9 million, higher by 1.4% over Q1 FY 2023, a net profit of $10 million. One-time expenses include those related to planned relocation of Alchemy operations. E xcluding the impact of one time in Q1 FY 2024, net profit was $14.9 million. I now hand over the call to Mr. Kirti Ganorkar, who will share the performance of our India business. Kirti Ganorkar CEO of India Business, Sun Pharmaceutical Industries Thank you, Murali. I shall, I shall take you through the performance of our India Business. For Q1, the sales of formulation in India were at INR 35,604 million, recording a 5.1% growth over Q1 FY 2023. India formulation sales accounted for 30% of total consolidated sales for the quarter. We have shared CEQUA was launched from our global specialty portfolio in our home market of India. Initial response has been good, and we hope that it will be an important addition to moderate to severe dry eye treatment here. Sun Pharma is ranked number one and holds 8.33% market share in the over INR 1,860 billion Indian pharmaceutical market as per AIOCD-AWACS MAT June 2023 report. Corresponding market share for the previous period was 8.5%. As per SMSRC MAT June 2023 report, we are number 1 ranked company. Sun Pharma is also ranked number 1 by prescription with 12 different doctor categories. For Q1 FY 2024, the company launched 10 new products in India. I will now hand over the call to Abhay. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Thank you, Kirti. I will update on the performance highlights of our U.S. businesses. For Q1, our overall sales in the U.S. grew by about 12% over Q1 last year to $471 million. U.S. accounted for over 33% of consolidated sales for the quarter. U.S. specialty business has continued to do well and has grown well over Q1 FY 2023. We did witness seasonality in Levulan sales , leading to a dip in revenues on a quarter-on-quarter basis. The underlying business, however, and the prescription trend for the specialty business remains strong. We remain excited about our specialty product portfolio in both near term and the long term. For Q1, we launched two generic products in the U.S. on an external basis. I will now hand over the call to Mr. Shanghvi. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you, Abhay, good evening to all of you. I will provide an update on the performance highlights of our other businesses, as well as give you an update on our R&D initiatives. Our branded formulation revenues in emerging markets were at $261 million for Q1, up by 6.5% over Q1 last year. The underlying growth in constant currency terms was about 14% year- on- year for Q1. Emerging markets accounted for 18% of total consolidated revenues for Q1. Amongst the larger markets in local currency terms, Romania and Brazil have done well. Formulation revenues in rest of the world, excluding U.S. and emerging markets, were $195 million, up by 2.6% over last quarter. Rest of the world markets accounted for approximately 14% of consolidated Q4 revenues. We continue to invest in building our R&D pipeline for both the global generics and the specialty businesses. Consolidated investment towards R&D for Q1 FY 2024 stands at INR 6,796 million, 5.8% of sales. This compares to INR 6,657 million, 6.2% of sales for Q4 FY 2023 and INR 4,608 million, 4.3% to sales for Q1 FY 2023. Moving on to update on global specialty with highlights for the quarter. In Q1 FY 2024, our global specialty sales were up by 21% to reach $232 million. Specialty R&D accounted for 35.8% of our total R&D spend for the quarter. In June, we presented data from two phase I studies of Sun's GLP-1 receptor agonist at ADA conference in San Diego. In one of the studies, GL0034 reduced body weight after a single dose in obese individual without diabetes. In other study, reduction in body weight of up to 10.7% was observed after treatment with relatively low dose of GL0034. I mean, this was eight weeks duration. We are quite excited with these early results and plan to initiate phase II clinical trials to start shortly. Moving on to ILUMYA's ongoing phase III studies in psoriatic arthritis, we've taken steps to accelerate the pace of the trial. This includes creating new enrollment at sites which have worked for us thus far, as well as activating more sites. We will share expected trial completion timelines once we start seeing good traction in enrollment. Further on specialty, in May 2023, we entered into an exclusive agreement with Philogen for commercializing specialty product Nidlegy in Europe, Australia, and New Zealand. Nidlegy is currently in phase III trials for skin cancers. When approved, it can be prescribed by the same doctors as ODOMZO, as a good follow-on product for patients that do not respond to current treatment. In June 2023, we received approval from Health Canada for our acne product, WINLEVI. With this, I would like to leave the floor open for questions. Thank you. Operator Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions, please press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from the line of Saion Mukherjee from Nomura. Please go ahead. Saion Mukherjee Head of India Equity Research, Nomura Yeah, hi, thanks. My question is on the domestic market. We have seen around 5% growth. You know, I'm just, you know, thinking about this in the context of field force addition that we had done last year, plus some price increases, which generally takes place. On the other hand, you have, you know, the possible impact of NLEM and Sitagliptin. I'm just wondering, you know, this number looks, you know, lower than, you know, compared to the IPM growth. If you can just explain the dynamics there, and how should we think about growth going forward? Also, sir, we know we have seen, you know, companies getting into trade generics. There is aggressive competition from some of your peers, particularly in the chronic segment. Has the market dynamics, is the market dynamics changing, you know, in a meaningful way to impact growth? Thank you. Kirti Ganorkar CEO of India Business, Sun Pharmaceutical Industries Sure. I think the quarterly sales growth means it's becomes little difficult to comment on, but what I can say, in last year, Q1 2022-2023, we had a sitagliptin product which was under patent, and the patent expired in July. That time, after the patent expiry, we have made the product affordable, and there was a price reduction. That's why there was a loss in a value. In volume terms, we are doing good. There was another reason, is impact of NLEM. NLEM was also announced in the month of December and January, and the full impact has come in this quarter, where we see because of NLEM also, the growth has been subdued in Q1. I'm very, quite positive and hopeful that, in coming quarters, we, we will see that we grow in line with market and try to see that we grow even better than the market. Saion Mukherjee Head of India Equity Research, Nomura Okay. My second question is on the specialty sales. You mentioned Levulan seasonality, was it something significant this year? If you can also, you know, give any update on the Concert Pharma drug in terms of, you know, filing or any other, you know, any other discussion that you might have had with the U.S. FDA on this product? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries If I see the underlying base business and the prescription trends of all our major products other than Levulan, I think, we are on the right trajectory. Last year, Q4, there was also, a finance factor which has to be considered, and that has, had a small impact. Overall, I think we are on the right track. On the second part of the question, Dilip, if you would like to respond? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah, I think we don't have an update at this point of time. We will share as soon as we have this update with you. The idea is to file this product at the earliest, is what I think the focus is. Saion Mukherjee Head of India Equity Research, Nomura Okay. Thank you. Operator Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead. Tushar Manudhane Senior Equity Research Analyst, Motilal Oswal Financial Services Yeah, thanks for the opportunity. From the R&D expense front, given these set of trials to start for the products you highlighted in the opening remarks, so the full year guidance remains as it is, as you had highlighted at the 4Q FY 2023 comment? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think if, as on today, you should consider the full year guidance. If there is a need for us to make any change, we will update. Tushar Manudhane Senior Equity Research Analyst, Motilal Oswal Financial Services Okay. Sir, other expenses, excluding R&D, have been sort of bit volatile, the number varying from, say, INR 2,600 crore in Q1 FY 2023 to going up to almost INR 3,000 crore in Q4 FY 2023, and now we are back to close to, INR 2,770 crore. Any particular, line item which sort of deviates these other expenses? C.S. Muralidharan CFO, Sun Pharmaceutical Industries In our Q4 call, we already said that, the sales and distribution in previous call, that these costs have some catch-up and unless it escalates on the same pace going forward. There may be sales-related growth, related expense from selling distance going forward. Tushar Manudhane Senior Equity Research Analyst, Motilal Oswal Financial Services Okay. Just lastly, on the base business extremely made in the U.S. generics, what kind of price erosion are we looking at now? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I mean, you, you don't have to respond, no? No, I think, ultimately the U.S. business dynamics, all of you are aware. We don't generally respond on specific product pricing or specific product sales. Tushar Manudhane Senior Equity Research Analyst, Motilal Oswal Financial Services Okay, sir. Thank you. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. C.S. Muralidharan CFO, Sun Pharmaceutical Industries Thank you. Operator The next question is from the line of Damayanti Kerai from HSBC. Please go ahead. Damayanti Kerai Senior Equity Research Analyst, HSBC Hi, good evening, and thank you for the opportunity. My question is again on the U.S., not product specific, but if we exclude Taro and specialty, you have seen meaningful pickup sequentially. Can you bit explain, like, what has led to it? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries No, we couldn't fully catch the question. Can you repeat? Damayanti Kerai Senior Equity Research Analyst, HSBC Yeah, my question is on your U.S. business, excluding Taro and specialty sales. If we exclude these two part, you have seen good sequential pickup. Just wanted to understand what has led, led to sequential pickup for your base generic business, whether it's good demand in channel or like improved supplies from your plants, where we had some setback earlier. Bit more of clarity here, here will be helpful. C.S. Muralidharan CFO, Sun Pharmaceutical Industries Yeah. Abhay, maybe you would like to respond. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah, sure, sure. Damayanti, I think Mr. Murali, in his readout, has mentioned this, that we have significant sales of linzymate in the quarter, and that may be episodic going ahead. In the first quarter, that was a significant contributor. Damayanti Kerai Senior Equity Research Analyst, HSBC Okay. Some of your peers are talking about improved, channel demand, etc. Are you seeing similar, situations? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries It's product specific. For certain products, you are right, there is a channel demand which is seen, but for certain products I don't see. On an aggregate level, you know, I would not characterize it as a, a significant channel uptick in demand. Damayanti Kerai Senior Equity Research Analyst, HSBC Okay. My second question is on your specialty business. Abhay, you mentioned you are on track for prescription trajectory, etc, and except Levulan, others are going as per your expectations. Can you bit comment on the pricing part also? Are we seeing any notable changes there or it's more steady? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries In the U.S., on the specialty side, I mean, the pricing generally, increase that we take is very nominal. Therefore, I think there has been no significant impact on pricing in the, growth of the business. Damayanti Kerai Senior Equity Research Analyst, HSBC Okay. My last question is: can you provide any update on your plan to acquire remaining stake in Taro, which we spoke last quarter? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think, what we've shared with, you in the past is that we've made a proposal to the Taro board, and Taro board, as a response to our proposal, has formed a special committee. They need to finalize the lawyers and bankers and all of that, that special committee. At some point, the negotiation will begin. We have no further update beyond what we've shared. Damayanti Kerai Senior Equity Research Analyst, HSBC Okay. Thank you. All the best. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. Operator Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Neha Manpuria Senior Equity Research Analyst, Bank of America Yeah, thank you for taking my question. Abhay, my first question is on, you know, Mohali. I'm assuming we would have seen some impact from the Mohali, you know, consent decree, and temporary suspension. Has that fully normalized? Should we expect, you know, any market share loss that we have had, due to this temporary suspension to probably at least regain, a large part of it in the course of the year? How, how should we look at normalization of supplies from Mohali? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Right now, the supplies from Mohali have not really started. Whether we'll be able to regain all the market share will depend upon the market dynamics and the number of competitors. A nd the length of the contracts that the buyers have signed up at the point at which we enter the market. The second part is very difficult to estimate. We will see when we get there. Neha Manpuria Senior Equity Research Analyst, Bank of America You know, is the supplies restarting dependent on, you know, re-inspection? Is that what we are waiting for, or is, is it just remediation from your end, which is delaying the starting of supplies? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah, I think there is no need for a re-inspection at this. I mean, for of course, for having the current restrictions cleared, we will need a re-inspection, but for restarting supply, there is no need for a re-inspection. Neha Manpuria Senior Equity Research Analyst, Bank of America Understood, sir. By when do you think both Mohali and Halol would be ready for re-inspection in, in your assessment? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think once we inform the agency that we are ready with for a re-inspection, we will share that information with all of you. Neha Manpuria Senior Equity Research Analyst, Bank of America Understood, sir. My second question is on deuruxo. Given post the halt from the U.S. FDA on the 12 mg, you know, the 8 mg, have we slowed the pace of that also as we decide on, you know, what we're going to file, etc? Or that's going, you know, as planned and there's no delay in, you know, the OLE studies for the lower dose? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries So broadly, our understanding is that the partial clinical hold, which has been lifted now, was for 12 mg. Neha Manpuria Senior Equity Research Analyst, Bank of America Yes. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries There is no slowdown in 8 mg dosing. Neha Manpuria Senior Equity Research Analyst, Bank of America Okay. That continues as planned? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yes. Neha Manpuria Senior Equity Research Analyst, Bank of America Okay, Thank you so much, sir. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. Operator Thank you. The next question is from the line of Suryanarayan Patra from PhillipCapital (India) Private Limited. Please go ahead. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Yeah. Yeah. Thank you for this opportunity, sir, and, congrats for the good set of numbers. Hello? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah, yeah, please. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Yeah. My first question is on the specialty business and that to the specialty outside of U.S. During this quarter, we got the, we have announced, the Chinese partner, CMS, has got the approval for Ilumetri, the commercialization there. How bigger or how exciting development it is for us, and, because in terms of the patient population there in the psoriatic, this thing, if I see then it is similar to U.S. Can it be the, the largest market outside of U.S. so far as ILUMYA is concerned, sir? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries No, I think China can be an interesting market. Once we, I think, launch the product, we will get a better sense. We believe that CMS, because of its significant existing linkage with dermatologists, is quite well positioned to work for a good market share for the product. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Okay. And, this is also a kind of a partner for other specialty products also for us in the U.S.. In China, right, sir? Can this association be a kind of a relatively important and larger one, so far as global specialty business outside the U.S. is concerned? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I mean, we have licensed one or two generic products as well as sequel to them. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Yeah. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think our view is that managing multiple relationship is far more difficult and challenging than to manage limited number of relationships. At the same point of time, innovative products to be marketed, the company also needs to evaluate its ability to reach customers cost effectively. Incidentally, CMS has existing business presence in both ophthalmology as well as its dermatology, and that makes it easier for them to promote both these products. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Okay. The second question is on the again, ILUMYA, the progress of the ILUMYA for the psoriatic arthritis indication. Whether the clinical and commercial development of this molecule will follow the similar order, what ILUMYA, ILUMYA had seen for the other indication in terms of the market of approval. I mean, even if the approval has to come, that will come in the U.S. first, then followed by other countries. Is the kind of chronological development that we should anticipate for that, sir? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Surya, you mean deuruxo , you mean? Surya Narayan Patra SVP of Equity Research, PhillipCapital India No, no, no. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries No. Surya Narayan Patra SVP of Equity Research, PhillipCapital India No, no, ILUMYA. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries ILUMYA. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Okay. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah. No, I think, the plan is, of course, to file the product first in the U.S. Also since it's an additional indication in the other geographies, we should be able to get that filed in a relatively short time. The idea would be to augment the indication in all the geographies that we are marketing the product. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Okay. Just an extended one, from this question only. Let's say the R&D spend, if I see, excluding of, the specialty, it is remaining or, in the kind of a similar range and, higher number itself. Whereas the filing of ANDAs, if you see for U.S., that has to some extent got moderated. How should we see that? Is it right to think that, now our focus is diversifying our strength, R&D capability, and all, for developing products for not only U.S. market, but, all major markets, including India, and also, leveraging the products of U.S. could be the specialty products for other markets? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think my understanding, and I, I don't have exact response, but one of the reason why I think the filing numbers that you see is lower is also because of the ransomware attack that we had seen. Since we were unable to retrieve the data of many of the products, it impacted our filing capability. As I think we are going back to normal, we should then be able to file those products. Surya Narayan Patra SVP of Equity Research, PhillipCapital India Sure, sir. Just one single line of distinct question. For the global specialty business, outside of the U.S., whether it is, a kind of a low double-digit number in terms of shares, or can you give some sense? Because we are seeing multiple development outside of the U.S., either it is Canada for multiple products or, various other, you know, Japan, now, Australia and New Zealand and all that. Have you seen a kind of a low double-digit, kind of a share for our global specialty business outside of U.S.? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries No, I think it's difficult for us to quantify overall value. Generally, people say that, typically for most of the companies, rest of the world, especially for biosimilars, would represent anywhere between 25%-35% share of the global market. In that, Japan is a major, I mean, sorry, Europe is a major market, and Europe, we don't capture the full value of sale. We only capture the value of sale that we make to Almirall in our numbers. Operator Thank you. The next question is from the line of Nithya from Bernstein. Please go ahead. Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein Hi. Thank you. One question on Taro, if you can help us understand the strategic intent behind consolidating the assets, as well as how you're thinking about bringing it back on the growth path. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I mean, what is the question? Is it why are we buying it now? Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein Why are we buying? Why are you buying it? Why are you buying it now? Once you do consolidate, what will change in terms of the strategy for Taro? How can you bring it back on the growth path, which has been lacking for the last several quarters? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries My own assessment is that the dermatology business, which is focused on, which is the primary focus for Taro, is a business under constant, what you call, increasing competition pressure. As a standalone company, it will be very difficult for Taro as an independent company to continue to operate that business profitably. That broadly is the reason why we felt that it's useful for us to consider, integrating that with Sun Pharma. Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein Why? I understand that it then gets subsumed under a lot of other things you're probably doing in the U.S.. Would there anything that you would change, to try and inject some growth into the into that business? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think there are I mean, some of these issues that you're raising, I think is difficult for, because it will then be selective disclosure or disclosure on behalf of Taro. I don't think it's appropriate for me to respond at this point. Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein All right. Second question on your R&D strategy when you're thinking about specialty. If you look at the kind of assets you're working on, while the dermatology assets are obviously complementary to your existing portfolio, but osteoarthritis or a diabetes asset, these are again, assets for which you will actually have to take it to a very different set of physicians, probably, especially in the U.S. How are you thinking about the long-term strategy when you're working on so many different therapeutic categories? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think these are valid questions, and we are also questioning some of those, best options for us, is that whether we are the best company to commercialize this asset, or we should consider licensing. Osteoarthritis, I think once we get a psoriatic arthritis indication, there is a certain amount of overlap with the potential prescribers in some of the geographies. I think for diabetes or weight loss or even in NASH or any other indication where GLP-1 potentially can be used, it's a generally a large field force requiring indication. It's possibly closer to when we need to take a decision. We will need to get co-marketing partners for many of the geographies. In emerging markets, India and in other markets where we have significant share in prescription business, I think we are well positioned to leverage that product to become very successful. Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein Mr. Dilip Shanghvi, isn't your energy and R&D monies better spent on more assets that are complementary to your existing portfolio? I'm not denying that there might be, there is option value here. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I mean, at a. If I look at our evolution as a company, I think, generally we've found a way to enter markets using a successful, good product, and then gradually expand our businesses to different specialty. That can and will continue to work for us in emerging markets in India. In large international markets, I think for acquisitions as well as for licensing products, we are looking at ophthalmology and dermatology as our focus. Only for, let's say... For other products, we want to look at what is the best option for us. I think we are also not ruling out future acquisitions, which can also help us in ability to market this product more effectively when they are closer to market. Nithya Balasubramanian Senior Equity Research Analyst, Sanford C. Bernstein All right. Thank you so much. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. Operator Thank you. The next question is from the line of Bino Pathiparampil from Elara Capital. Please go ahead. Bino Pathiparampil Head of Equity Research, Elara Capital Hi, good evening. Just some questions. First off, Abhay, you had some mention about lenalidomide sales in your opening comments, but I couldn't quite understand. Did you mean the June quarter lenalidomide sales is higher than March quarter or lower than March quarter? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I mean, exact numbers, as a comparator, we generally will not disclose, but for the quarter that we are talking about, it's a significant contributor. Bino Pathiparampil Head of Equity Research, Elara Capital Okay. Okay, you don't want to say which quarter was bigger? Hello? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah, that's, that's the answer which I've given. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah, that's what I said. Yeah. Bino Pathiparampil Head of Equity Research, Elara Capital Okay. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah. Bino Pathiparampil Head of Equity Research, Elara Capital Second, on this Forex loss, one-off Forex loss that you booked in Nigeria, what is that? What nature is that? Is it a write-off of inventory or receivables or something? What, what exactly would that be? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries This, you are talking about the one-time write-off? Bino Pathiparampil Head of Equity Research, Elara Capital Correct. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yeah, Murali, maybe- C.S. Muralidharan CFO, Sun Pharmaceutical Industries Seee, in the readout, we have mentioned that we have provided for about INR 114 crore towards an acquired intangible asset, which was under development, which is AS012 for clinical trials for vitiligo. Bino Pathiparampil Head of Equity Research, Elara Capital No, I'm not asking about that. There is a Forex loss, one-off Forex loss included in your one-off item. There is a Forex loss of Nigeria. C.S. Muralidharan CFO, Sun Pharmaceutical Industries Yeah, the Forex loss, the Forex loss in the month of June, the Central Bank of Nigeria had removed the trading restrictions on its official market, which eventually led to the Nigerian currency dropping significantly record low to U.S. dollar. This provision, exceptional item is towards that. Bino Pathiparampil Head of Equity Research, Elara Capital Yeah. Is that on the inventory or receivables or some assets? That is my question. C.S. Muralidharan CFO, Sun Pharmaceutical Industries It's on a mark-to-market payable. Bino Pathiparampil Head of Equity Research, Elara Capital Mark-to-market payable. Okay, thank you. Operator Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Thank you for the opportunity. The first one on the specialty R&D, sequentially, if I look at almost $25 million, specialty R&D has gone up, to around $30 million, and in quarter three, it was somewhere around $21 million. Would you say the primary, driver for this, let's say, jump from quarter three level to the current level, would be Concert Pharma? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries O ur recommendation would be that probably, looking at a quarterly or R&D numbers may not be appropriate. However, Shanghvi already mentioned that we're working towards the various clinical trials of various candidates, what we have, and we are on track to achieve the R&D guidance for the year. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Would you say that Concert has already been factored in, almost fully because that trial is ongoing? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yes, Concert is part of our R&D guidance. Kunal Dhamesha Senior Equity Research Analyst, Macquarie I'm saying Concert is fully factored in this quarter. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yes. Kunal Dhamesha Senior Equity Research Analyst, Macquarie That trial is ongoing. Okay, perfect. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Yes, yes. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Perfect. Second one for Mr. Gandhi on the, you know, ILUMYA, since we have ILUMYA biosimilars been launching over the last one quarter, have we seen any impact, you know, in terms of acquiring new patient for ILUMYA? Would you say the new patient growth trajectory largely remains intact for us? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries W e haven't seen any negative impact because of the entry of the HUMIRA biosimilars. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Even on the new patient acquisition? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries No, we haven't. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Okay. And, let's see, you know, when we conduct this trial, of psoriatic arthritis for, I mean, for ILUMYA, and, if we get an approval, how does the exclusivity period work for the new indication for biologics? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries So my understanding broadly is that there are product patent, which basically means compound patent, then there are method of use patent, and then there are indication patents. Many of the products which I see, like HUMIRA, have multiple indications. Depending on the geography, people have to do both multiple indication studies as well as interchangeability studies, because these are all chronic treatment products. Kunal Dhamesha Senior Equity Research Analyst, Macquarie My question was more related to, from the U.S. FDA data exclusivity, with generally for biologics is around 12 years. Right, but if we get the same product approved for another indication, do we get another, you know, data exclusivity for that indication, with a separate 12 years? Or, you know, how does it kind of work? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries You know, honestly, I don't think I have looked at. I think our focus would be, I think we would have some, some kind of patent on indication. That basically means that people will have to, will not get this indication on their label. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Sure. The last one on the generic, you know, side. You know, since, you know, we have this Halol plant trouble, from last 7-8 years now, would we have not de-risk our key products, you know, by doing a multi-location filing or multi-plant filing for the bigger products, you know? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think at a concept level, it works. At operational level, especially when you have specialized product requiring very different kind of manufacturing infrastructure, it's very difficult to execute. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Okay. Does U.S. FDA also not look this kind of things very kindly, because it kind of increases administrative burden on them to kind of, you know, go and inspect two plants versus one plant for the same product? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries I think if you file from a new product, it's filed from new product. If it's an additional plant, then there is a regulatory process. They can't be happy or unhappy about what is their regulatory process. Many multinational companies have same product manufactured in multiple facilities, so they inspect and approve all of those. Kunal Dhamesha Senior Equity Research Analyst, Macquarie Perfect. Thank you, and all the best. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. Operator Thank you. The next question is from the line of Harsh Bhatia from Bandhan Asset Management. Please go ahead. Harshal Bhatia Equity Research Analyst, Bandhan AMC Yeah, thank you. Hope I'm audible. Good evening. Just one quick question, broader aspect. There's a lot of news flow in terms of the number of people being kicked off or rather losing their Medicaid coverage. I think the last figure that I could see was 4.5 million, but some sources indicate that that could go up to 15-20 million. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries I'm sorry, you're very, very soft-spoken. Can you just amp it up a bit, please? Harshal Bhatia Equity Research Analyst, Bandhan AMC Is this better? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah, better. Thank you. Harshal Bhatia Equity Research Analyst, Bandhan AMC Yeah. My question was very broader in nature, to the sense that there's a lot of news flow in terms of the number of people losing their Medicaid coverage in the U.S. At the last figure that I could see was 4 million people, and there were some indications that it could go up to 15 million people. So, m aybe not in particular with regards to Sun Pharma as a whole, but any broader thought or anything that we should read into it from the industry perspective for the U.S. market? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries It's a very broad and, sort of, you know, question that you wish to learn. What I would suggest is that I will brief Abhishek separately, and he can share the details with you. I understand where you are coming from, but, maybe a better way would be that I brief Abhishek, and he in turn can speak to you and give you the details. Harshal Bhatia Equity Research Analyst, Bandhan AMC Sure. Thank you. Operator Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead. Saion Mukherjee Head of India Equity Research, Nomura Yeah, hi. Thanks for the follow-up. Just one clarification. Actually, your comment means that from Mohali, there was no sale this quarter, and it was a bit of a surprise. I think, in the last call, I got an impression that, you know, things should start flowing from Mohali. If you can just, you know, give us an update there. Is it true? Is it like there's zero sales from Mohali, including generic Pentasa this quarter? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries I mean, I didn't say there was zero sales from Mohali. I said supplies from Mohali have not resumed. We had some inventory, and therefore, there would be some residual sales that happened. Saion Mukherjee Head of India Equity Research, Nomura Okay. Okay. But it would be sort of materially lower versus, say, Q versus last quarter? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries That would be correct. Saion Mukherjee Head of India Equity Research, Nomura Okay, great. Mr. Shanghvi, just, you know, a few questions, for you. I remember, like, maybe two years back, you mentioned about biosimilars, and Sun Pharma's, you know, intent to build capability on that sphere. We haven't heard, any, any sort of an update on that. What are your thoughts now, given, you know, the market has evolved to an extent? How is Sun thinking about building capability in that area? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Even I think at that time I was very tentative because that time also my concern was that product investment on individual product is very large and not very different in some cases to what you would require to invest for developing a specialty product. I remain equally tentative now, which means that we are not kind of all in, in biologics, unlike many companies who have significant investment and exposure to that business. Saion Mukherjee Head of India Equity Research, Nomura Understood. Mr. Shanghvi, the other question, again, for the India market. A lot of your peers have started, you know, doing trade generics. Sun Pharma has a very wide portfolio of products. Do you think strategically it makes sense to sort of take these products to, let's say, tier two, tier three, on smaller cities and towns through the trade generic route? Any thoughts from your side on this? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Kirti, maybe you would like to respond. Kirti Ganorkar CEO of India Business, Sun Pharmaceutical Industries Yeah. We remain focused on generating prescription through a super, super specialty and specialties and physicians. That's, that's the core part of our business, and, and I think there is a great opportunity in that business even to grow from where we are today. That remains our core focus, I think. Operator Thank you. Before we take the next question, a reminder to participants that in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. We take the next question from the line of Cyndrella Carvalho from JM Financial. Please go ahead. Cyndrella Carvalho Senior Equity Research Analyst, JM Financial Yes, thanks for the opportunity. You generate business, so would you be able to help us understand if these shortages, supply challenges, highest drug shortages in the last decade, so where are these opportunities? Are we seeing these opportunities across the product basket, or they are largely concentrated on the injectable side, and where, where we can participate? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries No, I don't know. Abhay, whether you understood the question, but I couldn't fully understand. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries No, I did not. I was trying to, yeah, I could not understand the question. Ma'am, can you rephrase, please? Cyndrella Carvalho Senior Equity Research Analyst, JM Financial Sure. I was asking, we are hearing highest number of drug shortages in the U.S. market from the generic side, and largely concentrated on the injectable side. Are we also experiencing some opportunities from our product basket side? If we are able to participate, then, how long do you see any visibility on these kind of opportunities or one-time buys that you are seeing in the market right now, specifically on the U.S. generic side, please? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Right. Correct. Thank you, now I understand. I think whenever the buyers or from marketing point of view, we get to know about a certain product being in short supply, we, we do an overlap analysis and see whether there is something for an opportunity. As of now, for our range of products, I haven't seen any big opportunities which can turn dependent on, so to say. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Also, Abhay, I think we don't have a very large portfolio of injectable products. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries We don't, yeah. Cyndrella Carvalho Senior Equity Research Analyst, JM Financial Right. Specifically on WINLEVI, sir, we are seeing some uptight from the volume side. Any commentary on that? Are there any strategy change that we are working on, which is helping us? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Sorry, can you again repeat? We have seen a what? We have seen a what? Cyndrella Carvalho Senior Equity Research Analyst, JM Financial In case of WINLEVI, volumes, we are seeing some uptake. Would you like to comment if any specific strategy helping us around here or any trends which are working in our favor? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries I think if you look at the overall context of WINLEVI, and it's important that we understand this. If I look at the branded basket of products, that is where we essentially compete. You can't compete with the generic Sun price. Out of the almost 10 branded products in acne, we have a 26% share of market. In terms of, let's say, number of customers who have used the product, 91% of acne prescribing doctors have given a trial. Sorry? I heard something. Cyndrella Carvalho Senior Equity Research Analyst, JM Financial No, no. Continue, sir. I'm listening to you. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah. I think, this indicates to us that the product is accepted by the doctors. We, of course, continually try to see that we improve the access. One of the reasons for the uptake that you saw is because of one important payer, agreeing to cover the product, a couple of quarters ago. That has been one of the major reasons, and it's an ongoing process. We continue to work on improving the access every single day, every single quarter, and we hope that the momentum sustains. Cyndrella Carvalho Senior Equity Research Analyst, JM Financial Thank you so much, sir. All the best. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Thank you. Thank you. Operator Thank you. The next question is from the line of Ishita Jain from Ashika Stock Broking. Please go ahead. Ishita Jain Senior Equity Research Analyst, Ashika Group Yeah, hi. Thank you for giving me this opportunity. My first question is, maybe a little into the future, but what is our assessment on capturing the market for deuruxolitinib, given that there is another JAK inhibitor that got approved recently and is a much more convenient dosage of once daily, whereas our product is twice daily? Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Abhay, you will respond? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Yeah, I can. I mean, when we see the data for our product, we feel we have a very competitive product. For the indication that we are talking about, which is alopecia areata, I mean, the patient involvement is very high. To get the better results, I think an OD versus a BD dose will not really change the uptake, is what we feel. Ishita Jain Senior Equity Research Analyst, Ashika Group Got it, t hank you. My second question is, so products like XELPROS are currently under supply shortage in the U.S. as we're in the process of shifting them from Halol to a regulatory compliant unit. Can you provide an update on that? Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries It will take us some time to come back to market with the product. We will eventually, and work is being done towards that end. Ishita Jain Senior Equity Research Analyst, Ashika Group Got it. In terms of SEZABY, it's been half a year since launch. If you can give some idea on how the uptake been? Last question. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries I think in one of the earlier calls, I said this, I mean, it is not a single source of purchase. We have to go hospital formulary by formulary, involving different stakeholders, right from the purchase committee to the technical committee and so on. It's a gradual uptake that we see, not an immediate, big spurt. Ishita Jain Senior Equity Research Analyst, Ashika Group Got it. I mean, I guess that would probably be the way to go since it is, probably first in line treatment or first product at all. Is that correct? In our indication. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries No, sorry, I didn't get that question. Ishita Jain Senior Equity Research Analyst, Ashika Group It is, it is the first product- Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries You're still talking about SEZABY, right? Ishita Jain Senior Equity Research Analyst, Ashika Group Yes, I am. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Doctors will always have two options here. They will either use the phenobarbital or product SEZABY maybe, or they could use levetiracetam. Doctors have two options, and depending on the doctor, they will have a different line of considering what is essentially first line. Through years of experience, I mean, phenobarbital as a molecule really has a very good acceptance. Ishita Jain Senior Equity Research Analyst, Ashika Group Great. Thank you. Operator Thank you very much. Well, that was the last question for the evening. I would now like to hand the conference back to Dr. Abhishek Sharma for closing comments. Abhishek Sharma Head of Investor Relations, Sun Pharmaceutical Industries Thanks, everyone, for dialing in. For any remainder questions that you may have, which are unanswered, you can reach out to the IR team. Thank you and have a good evening. Dilip Shanghvi Managing Director, Sun Pharmaceutical Industries Thank you. Abhay Gandhi CEO of North America Business, Sun Pharmaceutical Industries Thank you. Operator Thank you very much. On behalf of Sun Pharma, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines. Powered by