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Alkem Laboratories Ltd
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Ladies and gentlemen, good day, and welcome to Alkem Laboratories Q3 FY '23 Results Conference Call, hosted by Motilal Oswal Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services. Thank you, and over to you, sir.
Thank you, Tanvi. Welcome to 3Q FY '23 Earnings Call of Alkem Laboratories. From the management side, we have Mr. Sandeep Singh, Managing Director; Mr. Rajesh Dubey, Chief Financial Officer; Mr. Amit Ghare, President, International Business; Mr. Yogesh Kaushal, President, Chronic Division; and Amit Khandelia from the Finance team.
Over to you, Amit, for the opening remarks.
Thank you, Tushar. Good evening, everyone, and thank you for joining us today for Alkem Laboratories Q3 FY '23 earnings call. Earlier during the day, we have released our financial results and investor presentation, and the same are also posted on our website. I hope you 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.
With this, I would like to hand over the call to Sandeep Singh to present the key highlights of the quarter gone by and strategy going forward. Over to you, Sandeep.
Thank you, Amit. Good evening to all of you, and thank you for joining us today for our quarter 3 FY '23 earnings call. I will briefly take you through the key operational and financial highlights of the quarter gone by and would then leave the floor open for Q&A.
And this quarter has been a strong quarter for the company with year-on-year revenue growth of about 16%. EBITDA margin improved substantially from the previous 2 quarters and came in at 19.7% and the PAT after minority interest at about INR 450 crores.
During the quarter, we generated cash in excess of INR 500 crores, which has helped us further strengthen our balance sheet with a strong net cash position of INR 1,900 crores as on December 2022.
In a recent development with regards to our biosimilar business, Enzene Biosciences, this company has raised about INR 161 crores and partnered with Eight Roads Ventures and F-Prime Capital. This further instills our confidence and reaffirms the journey towards building a leading global biological company that leverages innovation to enhance global health.
After having commercialized 3 products in India -- in Indian market, Enzene has launched Adalimumab in this quarter. Enzene has also received approval for Cetuximab, which would be a 5th biosimilar product in Indian market. We are seeing good traction on CDMO side also, and we expect CDMO segment to make a meaningful contribution to Enzene in the coming years.
Building on the pace of quarter 1 and quarter 2, our India business delivered a good growth of 9.7% year-on-year during the quarter. We have outperformed the market in all quarters of the financial year. And in quarter 3, our performance is even starker than the Indian pharmaceutical market as the secondary sales data by IQVIA.
While IPM grew by 10%, Alkem grew by 16.7%, thereby beating market by 670 basis points. We have gained market share across all acute therapies, areas of anti-infective, vitamins, minerals, nutrients, pain management and gastrointestinal.
In chronic therapy areas like antidiabetic, neuro, CNS and urology, we are growing far ahead of the market. Our growth in this therapy is more than 3x the market growth rate. We have gained 3 ranks in anti-diabetic, 2 ranks in neuro, CNS and 4 ranks in Urology during the quarter.
Moving on to our international business. After 2 quarters of subdued performance, our U.S. business posted a strong growth in quarter 3 on the back of good season in U.S. market. U.S. business posted a year-on-year growth of 33%, a sequential growth of 26% in rupee terms. During the quarter we filed 2 ANDAs with the U.S. FDA and received 3 approvals, including 1 tentative approval.
Our other international markets delivered a year-on-year growth in excess of 15% on back of good performance majorly from Chile and Kazakhstan.
Coming to regulatory inspection conducted by USFDA during the quarter. In terms of regulatory status of our manufacturing facilities, St. Louis was inspected in the month of November for which EIR is received. All our manufacturing facilities applying to the U.S. market have an EIR as on date.
To summarize, we have delivered another quarter of market bidding performance in our domestic franchisee, and we would continue to maintain our leadership position. A lot of cost optimization projects are underway in the organization, benefits of which will start occurring the coming period.
With this, I would like to open the floor for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Saion Mukherjee from Nomura Securities.
Sandeep, first question on the U.S. market. There's a strong sequential momentum. How sustainable is that because there might be some seasonal benefits if you can guide for the next quarter and quarters ahead on the U.S. market?
Saion, I would like Mr. Amit Ghare to take this question because I think it's much closer to reality. Amit, over to you.
Thank you, Sandeep. Saion, you're absolutely right. Most of the performance in the quarter came because of the season, because -- especially of the flu season. We do have a lot of anti-infectives and other products related with that.
Quarter 4 guidance certainly will not be similar to quarter 3 for sure. We are hoping it will be better than quarter 1 and quarter 2 or certainly in line with that.
Okay. That's helpful. And also on the cost front, how you're seeing raw material cost? Your other expenses are also somewhat -- the growth was muted. So if you can talk about the cost, how that's sort of playing out? Any changes you've seen in the recent past?
Mr. Dubey, over to you.
Yes. Saion, as you see in quarter 3, our gross level margin, 100 basis point improvement is visible. So 58.9% margin we have, whereas in sequential quarter, it was 100-plus basis point down. As far as cost of material is concerned, I think we have not yet come pre-COVID level. So raw material prices, they are on higher side, but manageable unlike what we saw in the month of November and December of last year.
Second, going forward also, DPCO price increased because of higher inventories. We were not able to take 100% benefit till quarter 3. Quarter 3, I think that benefit has also come. So these are the 2 major reasons.
And as we guided earlier, I think we are going to remain somewhere close to 58.5% at gross margin levels. As far as your question on other expenditure is concerned, if you are referring quarter 3, definitely in quarter 3, it is on lower side. In fact, it's 22%, whereas in earlier quarters are on an annualized basis is higher. There are 2 major reasons behind it. One, currency fluctuation positive. It has come in this quarter, because mainly Chilean peso, it got stable. That was one big factor. And another reason being some of our R&D related expenditure, it has got deferred for the period, so not in quarter 3. So we have a little bit on the lower side.
So there are some marketing expenditure related also a little bit on lower side, but they are not very significant. These are the major 2 items, which has -- which is indicating other expenses on lower side. If you have any further question, I will be happy answering.
Yes. Just one clarification. I mean, I think the foreign exchange fluctuation had a negative impact, if I remember correctly, in the first quarter. So that has got reversed. And like, what is the quantum here?
For quarter 3, it is to the tune of INR 50 crores. Because in quarter 2, there was negative of INR 20 crores and we have positive of INR 30 crores. So sequential quarter, if you see, impact is around INR 50 crores.
And that is under other expenses?
Yes.
Okay. And just one last point. Sir, I mean, with the China opening, you mentioned raw material prices are high, and it will remain there. So you do not expect any moderation in raw material costs? Or you don't have any signs of that happening?
I think particularly anti-infectives surplus for the men. I think now prices again started going up. [ Penji ] we can clearly see prices have started going up. So we don't know. But going forward, we think it will get normalized and situation will be in control. But currently, yes, definitely anti-infective, especially, we can witness rising price of raw materials.
The next question is from the line of Kunal Dhamesha from Macquarie Group.
Just a couple of clarifications. First, I think here we've seen some kind of supply issue with one of the products in the U.S. in quarter 2, where probably we also have exclusivity. Has that been resolved in this quarter and that product contributed meaningfully in this quarter?
Amit -- Mr. Amit Ghare, you can take that.
No, that supply challenges to remain. That product has not contributed meaningfully in this quarter, perhaps not at all.
Okay. And then going forward, how we see competitive landscape there? Are we able to resolve those challenges and we still see opportunities for that product? Or once the exclusivity period is over, the competition will take over?
The exclusivity in any case was the shared exclusivity, more than 2 players who are there in the market had or could have got approval. So obviously, they have not got approval because of their own reasons. It's very difficult to say when competition will come in. As we speak today, the opportunity still remains, but we need to get a good hold on our supply chain like we discussed in the earlier quarter.
And then what is this issue basically, is it related to API on -- is it an in-house API product or partnered API product, where you see issues that we are facing?
I don't think I'm at liberty to discuss that at a product-specific level in detail.
Sure, sure. And the second question is on India business. Can you provide some kind of color in terms of what was the growth in the trade generic business in the quarter or maybe the contribution of trade generic business in this quarter?
Can you repeat your last line, I couldn't hear?
The contribution of trade generics business in our India business in this quarter.
Yes, it's around 20% -- it's 20% to the total business for the quarter.
20% for the total business. And for the 9 months?
Almost similar. Almost similar.
And lastly, on the cost efficiency side. If I have to attribute to a particular geography, which geography would you be targeting more from the cost efficiency perspective? Or is it a general kind of improvement, of course?
So I think that's -- Sandeep, I think that it is general, but it's more U.S. led to some extent, but it's overall, it's a company-wide kind of initiative, which we are taking up.
Okay. And have you [Technical Difficulty]
Sorry to interrupt you. Kunal, your voice was not audible in between.
Yes. I was just saying the last one. Have you taken some steps, which might start flowing from maybe next quarter or maybe even within a couple of quarters? If yes, what could be the quantum?
No. I think we, obviously, we have taken steps which will start benefiting us, but the quantum might not be substantial next quarter or something. I think these are medium-term projects. So I think next year, you could see a benefit. And this is similar to what we have guided in the last call. So I think all that is part of that. So there's nothing which can be added on top of what we have said. So it's an ongoing thing. We will see an improvement in EBITDA margin in next year, but nothing substantial in the next quarter or something.
The next question is from the line of Rashmi Sancheti from Dolat Capital.
As you mentioned in the call, that some of the expenses have been deferred to quarter 4 and normally quarter 4 is a soft quarter, where we see most of the expenses coming in. And our 9-month EBITDA margin is roughly around 14.4%. So do you think that the earlier guidance of 15% EBITDA margin achievement in FY '23 is now looking a bit challenging? If you can update on that.
Yes, Rashmi. We remain with our guidance on EBITDA margin. So we have reasons to believe why we are going to land somewhere 15% to 15.5%. And reason being we have a sizable spillover revenue recognition, which is going to happen in quarter 4. That is one thing.
And then second, our business is moving as per our estimate only. So we don't think this year quarter 4 is going to be so soften as it used to. We believe quarter 4 is going to be good. On an overall basis, we are confident we'll be somewhere where we have guided to.
Okay. And sir, on India business, how do we see our India growth? Are we expecting that quarter 4 growth to be higher and we can actually complete FY '23 growth at around high single-digit growth?
Yes. Certainly, we can. There's no reason why we should not be able to do that.
Okay. And on India business, have you launched Valsartan/Sacubitril product? So have you added any new MR for that or segregated some of your MRs from the current strength for this particular product and how are you seeing the competitive intensity in this particular product?
Yes. So Sacubitril/Valsartan renew is going to be intense. So we have created a separate team where we have done a product rationalization. So that we have launched a second cardio-diabetic team. So we have separated 2 brands so that we make space for Sacubitril/Valsartan. And we have been preparing this almost a year before. So we understand the market dynamics, and we are prepared. We should do good here.
Okay, sir. And finally, on the U.S., if you can update on number of launches that you did in 9 months and also on the price erosion in the oral solid space, how is it for the company?
Mr. Amit Ghare, you can take that, please?
Sure. Thank you, Sandeep. A number of launches so far, I think, have been 8 over the 9 months, if I remember correctly. And the price erosion still continues from an overall deflation perspective. It is still in double digits for us. It did reduce in quarter 3. But for 9 months, it continues to be in lower double digits for us.
The next question is from the line of Prakash Agarwal from Axis Capital.
My question is, one, is on the cost saving initiatives that we had taken. So you mentioned it is on track. What I'm trying to understand is, it is like the INR 250 crores kind of cost savings, is it for the year fiscal '24? Or is it -- how do we see that over which -- what period of time do we see that?
Prakash, yes, fiscal '24, next year.
So which is about 2% of the overall company EBITDA margins. So we could see the pace of about 15-odd percent this year. So how should we think margins for next year, broad color will help? What are the levers in terms of base business apart from the cost saving initiative?
No, sir -- I will -- okay. So I will not try to segregate between usual and a part of like special cost savings, because we always do these things when we spoke about it last time. We also had in back of our mind. And keep in mind that we might gun for INR 250 crore, but all might not happen. So I would try to curve enthusiasm over there to really say that we can get all the INR 250 crore. It doesn't happen like that in life. So I mean, same thing, Prakash, we spoke last time, whatever we learn this year we could go 200 basis points above that next year.
Okay. And how do we make sure that there is no revenue impact of the cost-saving initiatives that you are taking? I mean, have you thought about that?
Of course, of course, that's my job, Prakash, I'm paid for that. So obviously, I don't cut costs and we let go of revenue. That -- we are very, very conscious of that, Prakash. We are a sales and marketing, a strong company. We don't do things for short term and create long-term pain, sir.
So why I'm asking this is like the PenG and PenG prices on the raw material side and a couple of products in the U.S. really shook the margin trajectory. I mean, Alkem 70% India, very steady margin with very steady growth rates in the past. I mean, last 9 months, 6 months have been a little volatile compared to the history. Hence the question sir.
No, no. So -- no, no. So I mean, your question was that whether we'll cut costs such a way that revenue will get impacted? The answer is clear no. Now if you're coming to on RM and PenG stock, that's a different ball game. Also keep in mind, Prakash, that within 1 year's time PenG will be produced in India. I'm not here like talk about other companies, but we know those large companies doing it. So we don't know, Prakash, but I think it will stabilize.
I mean, -- and even if it does not -- we have to live with it and there could be other avenues to work on it. But I'm still positive, Prakash, that -- it cannot go completely buzzard, like end of the day it's an antibiotic. The cost has to be cut in somewhere even at the government level and things like that. I'm sure it will not go buzzard.
Yes. Secondly, sir, congrats on the Indian deal. So can you speak about what is the 3-year plan here? How many products are under development? And have you taken any product to rest of the world markets? What's the 3-year plan here and what is the revenue recognition here? Is it captured as -- how is it captured in the balance sheet?
Yes. So I think the financial question is Mr. Dubey, you could take that of the revenue recognition and balance sheet. And then on the products and market, I'll take up.
Yes. So revenue recognition is as per accounting norms, Prakash. If you have any specific question, whatever revenue is accrued as you, that is recognized in our financials. So if you have something specific, I will be happy answering.
Other -- accounted for -- there is no other income impact, right? So -- sorry, other income impact.
Other income impact on what?
On the sale or partial sale of the equity.
Still, I'm not very clear what you are asking.
I'll take it offline, sir. Okay.
Okay.
And lastly, if I may add just one more. So, January was a little softer month for everybody given high Omicron base. So is it just the base related or the market itself was softer in terms of volume? What is our take on that? And secondly, on the NLEM list, which had come with revised prices in December, what is the impact that we can see for our portfolio?
Yes. Prakash, this January month, I'll take this question. See, it was actually not a softer month. Last year's January, we have Omicron. So some of the therapies, particularly anti-infectives, multivitamins and pain, these 3 had inflated days last year, and therefore, you might see some diluted growth in the month of January. But overall, if you look at broad therapies, they have shown a good growth. Internally, also in line with this, we have done well. Actually, January month overall for Alkem was a good month across therapies.
Okay. And then, NLEM.
Yes. NLEM we have minor impact. We have an impact of close to INR 40 crores in quarter, and we are set to compensate this through our unit growth. So we should manage this.
Yes. And Prakash, Sandeep here, you are asked on Enzene. So I think we did not finish it. On financials, as you said, you'll take it offline with Mr. Dubey. So we don't give numbers, but I'll tell you for, Enzene, we do on a small base, I think we are doubling every year, and next year also we'll do the same. We've got 3 products going for global development. One is in clinical trial stage. And the other 2 are -- 1 is in preclinical, that is about to enter clinical. So we're not doing a lot of it because the costs are very, very high on this.
What we try to do is we try to out-license the product to at least one key geography, so that licensing fee kind of funds, some amount clinical trials. That's how we plan to kind of keep it, let's not say very high the clinical trial cost in terms of impact on P&L.
And in India, we have got approval of 5 biosimilars, 4 have been launched. So I think it's going great. And Enzene has a strategy of working with everyone. So it's B2B business, which is larger than what it supplies to Alkem offers to that. So Enzene, independent company, we wanted to do business with everyone, and it's growing well. I think in the next 2, 3 quarters, we'll able to share a lot more color to it.
The next question is from the line of Damayanti Kerai from HSBC.
My first question is on India. So trade generics is around 20%, as you highlighted earlier. So between these 2, like what is the growth differential? Are we seeing more growth in the branded portfolio or it's similar for both? And how should we see growth profile for these 2 segments going ahead?
No. Our branded portfolio has grown faster than generic. Generic is roughly around 5% to 6% while formulation is healthy double digits. So our formulation is really much faster than -- double of generic. Yes.
Okay. Had question from the slide which you shared earlier. So you have outperformed market in most of the therapies, which Sandeep also highlighted earlier, but one segment, I believe, Cardiac is one where you have grown below market. So what exactly is happening in that particular segment? Anything to point out?
I think cardiac, to be very honest, we have to address this strategically, and this is a good question you asked. We were focusing more on very niche product, particularly products for atrial fibrillation and anticoagulants like Dabigatrans and all. So though we did very well there, but from the volume point of view, it is not bigger market. So what strategic change we have done is that we'll focus more on mass molecules like telmisartan, olmesartan and all those, which are big volumes. And of course, your lipid regulators, your rosuvastatin. So these 3 constitute close to around 65% to 70% of cardiology market. So we will slightly restructure our strategy and see that from quarter onwards, you should see a better trajectory in cardiology as well.
Okay. So shift in strategy here to move towards the higher volumes...
Yes, yes. Because niche although -- niche will create a good impression, but doesn't give us volume. So they will do a strategic change. And this will show us results soon.
Okay. Okay. Got it. Okay. My second question is on your margin guidance for FY '23. So you mentioned you should be maintaining somewhere 15%, 15.5% outlook for the year. And you mentioned there was some spillover sales, which I missed. Can you clarify, like you said some slower sales will be the end of fourth quarter?
So Damayanti, I think you are talking for margin of '23 sales?
Yes. Yes.
Yes. So as we discussed and we reconfirmed our EBITDA margin is going to be in the range of 15%, 15.5%. As far as spillover of sales is concerned, as per our accounting norm, whatever revenue recognition, we cannot recognize because of non-completion of entire revenue recognition cycle. And in that, it's a very specific delivery of goods, whatever you have sold. So that needs to be recognized when you deliver it and when risk reward is getting passed on.
So in quarter 3, as of 31st December, we have material sales which needs to be recognized revenue in quarter 4 in the month of January itself. And since March, most of the company, they complete their sales, order cycle, dispatches, everything well before year-end closer. So spillover is hardly anything for the month of March. And that's the reason I mentioned one sizable material amount, we have to be recognized as revenue in the month -- in fourth quarter.
Okay. Understood. My final question is on how do you see R&D costs moving ahead, now like Enzene obviously have sufficient funding. So how should we look at this part moving ahead? And where you'll be spending most of your R&D budget?
Yes. So most of the budget would still, I mean, be for small molecules because that's traditionally a large business. We will manage, as we said last time, everything within 5.5% including biosimilars, R&D clinical trials, everything.
Sorry, Sandeep, within 7%?
No, 5.5% I said. No, no.
5.5%. Okay. So despite progressing in some of the clinical programs, you should be sustaining that?
Yes, yes. Don't say 7%, everybody will fall off the chair over here.
Okay. Sorry. That's my mistake.
No, no. I'm just kidding.
The next question is from the line of Neha Manpuria from Bank of America.
Amit, on the U.S. business, we've seen a lot of our peers indicate base business margin -- sorry, base business improvement because of supply disruptions, players exiting, et cetera. Is Alkem also seeing similar trends in our existing product that could play out in the near term?
So most of the improvement in business in quarter 3 actually came from all the legacy products, but those were because of the seasonal effect. Coming to your question in general, overall, not just seasonal products, but overall, we definitely are seeing a lot of customer inquiries and calls coming through in terms of -- because of either discontinuations or regulatory challenges to competition. However, how much of it will actually get realized to us as the ongoing business remains to be seen. Because essential road block is pricing. So I'll leave it at that. As our performance comes through for quarter 4, we will be able to witness it or not witness it.
Understood. So just to clarify, obviously, Alkem taking up the additional revenue would depend on a better pricing versus the existing for some of these products. That would be a fair assumption?
Yes. What I mean is that, obviously, there are -- the customers need product and if the existing supplier discontinues or has a different challenge, the customer will look for an alternate supplier. And the question is, is that alternate supplier Alkem or someone else takes that position is what kind of remains to be seen.
Understood. Okay. Got it. And my second question is on the cost optimization. Sandeep, I know you mentioned cost optimization in the amount, but given that we are making progress on it, could you highlight 2 or 3 areas in terms of where these cost optimization is being implemented? And what's the progress that we've made, just for that for us to understand when we can start seeing contribution into margin?
Right, right. So these are, as I said, company initiatives, 20%, 30% of it kind of we have identified, rest we are identifying. Some part of it is getting implemented. So these are from manufacturing to R&D. And these are manpower in both of them. It could be even kind of some project reduction and some pipeline being more stringent about what kind of products we do. So it's encompassing. And we're looking at the whole stuff.
And so largely R&D and manufacturing, I would say, and then some amount of rationalization, we could even look at going forward in other areas as well. Manufacturing cost, restructuring, those are also on the play and we will disclose in the next couple of quarters.
And when you say rationalization, could this be portfolio rationalization, let's say, markets like U.S.?
More than portfolio, it could be some kind of plant optimization, those kind of stuff. Letting go up products may not be like right for us, but yes, we could find better ways to do it for sure.
We'll move to the next question from the line of Bino Pathiparampil from InCred Capital.
Just a couple of follow-up questions. One on Dabigatran in the U.S. So you have the supply issues which you are working on. Do you have any visibility of sorting that out in a quarter or 2 quarters or so? Or is it still a fluid situation?
Amit, over to you, but we know what you want to say. Amit, over to you.
Sure. Now we are working on 2 strategies to restore our supply chain. And we think it is still going to take about 6 months to do that. But then there could be a few regulatory pathways, which could make it sooner unlikely, but could delay it as better.
Okay. So is this a difficult product or it's one of its components that will be very difficult to source thing that not practically nobody getting approval, nobody is being able to launch or ramp up, et cetera? Is it a technology challenge or a social challenge?
So for us, it's the supply chain challenge. For others, I would not like to comment.
Understood. Okay. The second question is about the ForEx loss -- ForEx gain of INR 50 crores. So it's there in other expense. I would just like to understand the accounting there. Is the INR 50 crores, is it related to some hedges that you make?
No. It is not hedges. It's a conversion. Currency conversion. And mainly, it is out of Chilean peso to dollar and then dollar conversion to INR. So it is not related to hedging.
Okay. So if I understand, you would have booked the sales related to this maybe in a quarter -- last quarter or a couple of quarters back. And when you finally realize the receivables, you get a higher amount, is that correct?
It's a conversion when we prepare our financial statement. Local currency needs to be converted to reportable currency. So the currency difference needs to be accounted as the income or losses in financial statement. So yes, you rightly mentioned in earlier quarters, there were loss, whereas now CLPs firmed up against U.S. dollar and that has given us benefit.
If you recollect in our earlier quarters also when we recognize notional loss in our financial statements. Deliberately, we kept remittance on board because we wanted currency to take some reverse. And after getting this reverse, we started actual realization. So you can say in earlier quarters to a certain extent, it was notional. Current -- in quarter 3 also unwind has had happened. And now quarter 4 actual realization is happening, where we found this, but are becoming [indiscernible] Whether it was -- I was able to clarify your queries?
In some sort of, but just one follow-up. So is it that you have a subsidiary in Chile, which you are consolidating and that is why this is coming?
Absolutely.
Okay. So it's basically balance sheet consolidation coming from.
Yes.
Okay. My impression was that, that gets clubbed with other income.
No. If you have gain, it will go in other income. If you have losses, it will come under other expenses.
This quarter, we had a gain, so it should have gone in other income, right?
Here, we are talking quarter-to-quarter actual currency fluctuation. So when you see YTD, ultimately, reporting is going to happen at YTD level. Quarterly, of course, there is a gain, but YTD, there are still some small amount of negative is there. That's why it has gone in other expenses.
Next question is from the line of Sumit Gupta from Motilal Oswal.
I just want to know regarding the overall investment till date, which has been done in Enzene by Alkem and other investors?
Other than investor, our investment is INR 915 crores, if I'm not wrong. And other investors' investment is INR 161 crores. So you can see somewhere INR 1,170 crores.
Okay. And sir, what are the biosimilar sales in India for the 9-month or 12-month basis?
Do you mean to say Enzene sales or total biosimilars?
Overall. Enzene and biosimilar both.
It is in the range of around INR 90 crores to INR 95 crores on YTD level. So here, we are considering whatever Alkem has sold and whatever Enzene has sold to third party, not intercompanies.
Include CDMO.
Yes. And CDMO income is also included in this.
Okay. So it is Enzene plus CDMO?
Yes, that is Enzene CDMO. So Enzene's non-biosimilar work as well.
Okay. Okay. And sir, last question is regarding the currency benefit, which was there in the third quarter. Do you expect it to continue in the fourth quarter as well?
Sorry?
Currency benefit...
Currency benefit, nobody can predict, sir, but we hope similar kind of trend is going to continue in next quarter also. But nobody can say with confidence.
The next question is from the line of from Yash Tanna from ithought PMS.
Congratulations on good set of numbers, Sandeep and his team. My question was refer on diabetes. Over the last 2 years you've done some significant brands from, I think, 21, now they're 15, 16. And we're also growing significantly ahead of market. So what is our ambition to sort of get into the top 10? And what will get us there? Are we looking at any sort of brand acquisitions? Or will it mostly be organic?
Yes. So diabetes, we are being strong there. And what has led us over here and will take us to future is our success of new products, particularly Dapagliflozin and allied and then Sitagliptin, and Vildagliptin. All 3, we have done good there. We are exceptionally good there. So we now intend to build this molecule to big brands of INR 100 crore plus types. These 3 brands we are investing heavy and we should do good. Along with that, we have our GVC brand like Glucoryl and all, which will keep on supporting. So overall, we expect from rank 15, our aspiration is to be amongst the top 10.
Okay. Any time period you would like to share for the same?
I know but it's going to be challenging, but around 3 to 4 years, we should be amongst the top 10.
All right. That's helpful, sir. One question on the MR productivity. So I wanted to understand at what number does the operating leverage start paying out in a number of activity, especially for the cronin servicing. The last quarter, you mentioned about INR 3.8, INR 3.9 lakh MR productivity we have. So after what number would we start seeing operating leverage and margin improvement for the division?
So see, number of reps is very subjective, but a headquarter gives us a breakeven at around close to INR 2 lakh side. So if headquarter does at close to 2 lakh productivity, we get a breakeven. So in line with that the divisional breakeven starts here.
So we are already much higher than that. So anything more would just start contributing to the margin?
Yes, correct. Any additional productivity now will contribute to the net margin.
All right. That's helpful. One question on Enzene. I think we've spoken on a lot, but about -- sorry, am I audible?
Yes.
We have raised money now from independent -- from different investors. And is it right to understand that going forward, Enzene will be independently funding [indiscernible] as peer growth? And what is our long-term outlook? I mean do we see it as a separate independent entity in the next 3 to 4 years?
I think it is already a separate independent entity. So -- I mean, your question, I'm not very clear. Do you mean that will it not need to raise funds? I'm not sure what you asked.
Not much of Alkem support in terms of development...
No. I think we evaluated if we find it attractive, we'll continue to invest in Enzene. I think it will continue to be a very attractive, I think, growth engine for Alkem. So I mean it's possible we keep investing. And it's also possible that we'll keep taking outside money as well. So I mean. Yes.
We have the last question from the line of Kunal Dhamesha from Macquarie.
So couple of questions. First, on the trade generic, you have alluded we have seen 5%, 6% growth. I believe it's kind of a multi-quarter low kind of growth. So is it a function of more competition or high base from the last year same quarter or basically the market being slow?
I think it's a combination of the first and the last one you said, that the base is very high this year. Because of the last year, we all know the base acute sales and trade generics and all that was substantially high. It's coming off a high base. And the market is also slow, I mean, because of the same kind of reason. So it's a one-off. I don't -- there is nothing -- so we cannot anticipate -- so just like how U.S. high sales, we don't think will continue, similarly, U.S. generic low sales will not continue. They both are abrasions.
Okay. You meant the India trade generic as well?
Yes, yes. Yes.
And secondly, I think on the new business opportunity in U.S. which we are still not sure whether that will accrue some of that to us -- those products will come to us. But let's say, hypothetically, that does come to us. Does that kind of delay the cost efficiencies that might not impact margin?
No, no, no. No, it will not delay any cost. There is nothing to do with the launches and things like that. No, nothing...
Because we have -- will be -- focus is on manufacturing rationalization, et cetera, participate more products, which means more...
No, no. I told you no. And I sure I understand, it will not matter.
I now hand the conference over to the management for closing comments.
Amit Khandelia this side. Thank you, everyone, for attending this call. If any of your queries are unanswered, please feel free to get in touch with me. Thank you, and have a great weekend.
Thank you very much. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.