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Aurobindo Pharma Ltd
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Welcome to Aurobindo Pharma Q1 FY '24 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to management for opening remarks. Thank you, and over to you.
Thank you, Anders. Good morning, and a warm welcome to our first quarter FY '24 earnings call. I'm Deepti Thakur from the Investor Relations team. We hope you have received the quarter 1 FY '24 financials and the press release that was sent out on Saturday. These are also available on our website.
I would now like to introduce my senior management team on the call with us, represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines and Peptide businesses; Mr. Yugandhar Puvvala, CEO, Eugia Pharma Specialties Limited; Mr. S. Sanjeev Dani, COO and Head Formulations, Aurobindo Pharma Limited; Mr. Swami Iyer, CEO, Aurobindo Pharma USA; and Mr. S. Subramanian, CFO.
We will begin the call with the summary highlights from the management, followed by an interactive Q&A session. Please note that some of the matters we will discuss today are forward-looking, including and without limitations statements relating to the implementation of strategic actions and other affirmations on our future business, business development and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors may cause actual development and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect in future events or circumstances.
With that, I will hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir.
Thank you. Good morning to all, and a warm welcome to this earnings call. The quarter has been robust in top line and margin expansion due to overall performance improvement across the business segments.
We will now discuss the results for the first quarter of fiscal year FY '24 declared by the company. For Q1, the company registered a revenue of INR 6,850 crores, is an increase of 9.9% year-on-year and 5.8% quarter-on-quarter. The EBITDA before ForEx and other income grew by 19.3% year-on-year and 14.9% quarter-on-quarter to INR 1,151.4 crores. EBITDA margin for the quarter was at 16.8%. Net profit increased by 12.8% quarter-on-quarter to INR 570.8 crores. EBITDA margin before R&D is 22.5% for the quarter against 21.8% over the last quarter.
In terms of the business breakdown, Formulations business in Q1 FY '24 witnessed a growth of 6.6% quarter-on-quarter to INR 5,817.2 crores and contributed around 84.9% of the total revenue.
API business contributed around 15.1% and clocked a revenue of INR 1,033.3 crores for the quarter, registering a growth of 14% on a year-on-year basis, led by improved demand for some of our key products.
For the quarter, the revenue from US Formulation increased by 11.2% year-on-year to INR 3,304.1 crores. On a constant currency basis, U.S. revenue increased by 4.2% year-on-year basis to USD 402.2 million.
We have received final approval of 19 ANDAs and launched 15 products in the quarter under review. We have filed 12 ANDAs, including 1 injectable during the quarter. The total of filings at the end of June '23 is 814.
Revenue of Aurobindo Pharma USA, the company marketing overall products in U.S., has increased by 11.8% quarter-on-quarter.
Revenue of Eugia injectable India injectable in U.S. business increased by 11.7% year-on-year and 11.4% quarter-on-quarter to USD 80.1 million for the quarter. The total Eugia specialty business in U.S., including the specialty OSD, amounts to USD 91 million.
During the quarter, the Eugia performance in various fiscal parameters are better than the last quarter. Globally, Eugia Pharma Specialty has achieved a sale of USD 122 million on a pro forma basis. We had a total of 169 injectable ANDA filings as on 30th June 2023. Out of which, 130 have received the final approval and the other 39 are under review or are tentatively approved.
The company as on 30th June 2023 has 814 ANDAs filed with the U.S. FDA on a cumulative basis. Out of which, 613 are final approval and 34 await tentative approval, including 8 ANDA which are tentatively approved under the PEPFAR, and the balance, 167 ANDAs, are under review.
For the quarter, Euro Formulations revenues clocked at INR 1,836.8 crores and an increase of 18.6% year-on-year growth. In this currency terms, the euro clocked a revenue of EUR 205.4 million against euro of another EUR 188.8 million of last year Q1.
For the quarter, Growth Markets increased by 12.9% year-on-year to INR 486.1 crores. This includes PLI incentive of INR 40 crores against INR 63 crores from last quarter.
For the quarter, ARV Formulations clocked a revenue of INR 190 crores.
Gross margin for the quarter was marginally lower at 53.9% against 54.7% of last quarter, mainly due to the business growth, product mix. Also, around 6.6% drop can be attributed to lower other operating income, mainly the export benefits on account of timing issues. EBITDA margins have gone up due to improved operating leverage. Capacity utilization for major businesses have gone up well in this quarter.
R&D expenditure is at INR 387.6 crores during the quarter, which is 5.7% of the revenue. As on date, out of 18 U.S. FDA-regulated units, 17 units are having classification of VAI, and only 1 unit is under warning letter.
Net CapEx for the quarter is $95.3 million. Out of which, PLI CapEx is $34 million. The PLI-cumulative CapEx for PenG till June amounts to USD 160 million. The average USD-INR exchange rate is INR 82.15 in Q1 FY '24, against INR 82.196 in Q4 FY '23. The average finance cost for the quarter was at 4.7%, mainly due to availing multiple currency loans.
The business generated a free cash flow of USD 29.5 million during this quarter before the PLI investments and investments in new markets. As a result of the strong cash flow generated during the quarter, the net cash flow, including investments at the end of June, was $178 million. The gross debt is $644 million.
Outlook. Our financial performance in Q1 was on the back of a positive business environment in key markets as well as our continued focus on driving growth and efficiency. We remain committed to strong execution in the coming quarters while adhering to the highest quality standards.
Some of the key highlights for the coming quarters are summarized below. Quarter 1 clearly indicated the price for now has been flat. We remain optimistic about Q2 in terms of the margins. Our endeavor is to achieve an internal target of 18-plus percent EBITDA for the year plus margin on special products, and we are on track. PLI facilities and investments are targeted to be completed before 1st April '24. Commercialization of some of our other new projects in China and India by Q1 FY '25.
With the above actions, including commercialization of PLI and other projects over a period of time and stabilization of the manufacturing processes, EBITDA margin is expected to cross 20% based on the current market conditions.
BOD, the Board of Directors, have decided to explore the possibility of restructuring of Eugia vertical. Acquisition of ANDAs and market authorization based on market opportunities, thereby reducing the gestation period. Progression of our biosimilar pipeline and other commercialization starting from FY '25 onwards. Continuing CapEx related to debottlenecking and maintenance, thereby increasing the manufacturing capacity and efficiency.
So this is all from my end. My colleagues will give more clarity on it in our Q&A session. We are happy to take your questions now. Thank you.
[Operator Instructions] The first question is from Damayanti Kerai.
Subramanian, sir, clarity on margin outlook. You said by second quarter, we should be crossing 18% margin. And for full year, it should be ahead of 20%.
No, I [indiscernible]. For the year is 18% plus special product. I made it very clear.
For special products, not on the consol basis?
Consol basis, when the special product. As on the development, Mr. Yugandhar will be talking about it when he is addressing the Q&A. Excluding that, I will be targeting around 18% for the year.
Okay. Okay. So excluding Revlimid, 18% plus and post-Revlimid launch in second half, it could be in 20% plus?
No, I have not said that. I said for the year, 18% plus excluding Revlimid, plus whatever margin on development, we...
Okay. Okay. Got it, sir, got it. Sir, you talked about Eugia vertical restructuring. Can you talk a bit about more like what is going to change and how we should look at that vertical?
So if you recollect, last year, we made an account to do the restructuring of Eugia vertical by carving out into a separate entity. But due to market conditions and slowdown in the U.S. FDA inspections at that particular point of time, we have put it on hold. And we are now targeting -- put it on hold and terminated the process. And now we are planning to start the process. How it will take a shape, we'll come to know maybe in the next 1 or 2 months. The decision has been taken only a day -- I mean on 10th of August only, so we'll come to know of it clearly in the next 2, 3 months.
Okay. And my last question is, Europe has seen a very good pickup. What has led to strong performance? Are we seeing better supply, especially the injectables to Europe now?
Let me -- yes. Damayanti, the real driver of the performance has been overall. And because of our broad product portfolio and excellent customer coverage, we are in a better position to gain market share when the competitors have shortages. So this has resulted in our better performance and better margin also.
But given the orders, as you said, market conditions are more conducive, which is...
Exactly. Exactly. Yes. The injectables will get a full blast when we start getting supply from Vizag.
Thank you. The next question is from Neha Manpuria.
I just wanted to get some color on the U.S. business. We've done very well quarter-on-quarter, particularly on the oral solid business, but that does not seem to reflect in our gross margins. I mean gross margins were still pretty okay quarter-on-quarter. Was there any one-off in the U.S. business? Also, what would be the impact of the Puerto Rico shutdown? And how should we think about that for the subsequent quarters?
Swami?
Thanks, Neha. Subbu, can you talk about the gross margin?
Yes, I will talk the gross margin. Yes.
Okay. You want to do and take that first or I can...
No. I'll do it next after revenue. Yes.
Okay. So then from the U.S. side, there has not been any one-off, which has been negative. That's number one. Number two, the Puerto Rico, again, whatever has happened, Subbu can give more color, but I think there's been no impact. There will be no impact right now because we had some revenues, which is marginal and the bottom line, the profit for that is very minimal. But Subbu can give probably more color on that, too. Otherwise, we hope to redo the facility, and we'll get back into business quickly.
So Neha, let me address the gross margin issue, which you raised. The first point, if you really see the press release, is the API business overall grown by 1.6%, but really, we have grown in the EBITDA [indiscernible] by 12.8% and the non-betalactam degrew by 17.3% this quarter. I'm talking about the external [ sale ]. However, the betalactam gross margins are lower and the non-betalactam gross margins are higher. So there was a business mix we -- I mean there was a product mix -- product category mix within the business of API, right?
And second, Europe business has done extremely well, while the Europe gross margins are lower compared to the overall corporate gross margin, but they have done well, so it's slightly pulled out. Having said that, the increase of the gross -- the increase in the European business has led to increased operating leverage, which has helped in improving the overall margin of the company.
The third point is in terms of the export benefits, PLI, we are entitled for INR 200 crores in a year. I mean as per the last guideline -- I mean, official, unofficial, I don't know. The last May and last proposal which has been circulated, which is under discussion, every company is entitled to around INR 200 crores. And we have accrued INR 40 crores because we have to meet certain eligibility criteria. With the revenue coming in this quarter and next quarter, we will be able to achieve that and the year as a whole. We are targeting to achieve INR 200 crores.
So overall, the 0.6% drop is attributed to the drop in the export benefits. It's a timing issue, right? And as I said, with the improved capacity utilization and the operating leverage, et cetera, we are poised to achieve the 18% EBITDA margin and the EBITDA also [ grew up ].
The last point which I talked about is the Puerto Rico. Puerto Rico, the -- practically, we are having a 0 EBITDA, et cetera, with the shutdown and the restructure of the entire plant and other things which we are likely to -- in the immediate term, we are likely to see our EBITDA margin improving by 0.5%, but -- 0.5%, yes.
Does it answer your queries, Neha?
So, Sir, Puerto Rico, what was the sales contribution to the U.S. business? Was it $20 million, $25 million?
Typically, they contribute around $15 million to $20 million, anywhere between $15 million to $20 million.
For quarter or this is...
So last year as a whole if you have really seen the press release and [indiscernible]. If I recollect, our contribution for the last year was around $52 million.
Okay. And so this sales for the time being will go to 0, so we shouldn't [indiscernible].
If we go back, there is no impact on the profitability. Rather, the overall EBITDA margin goes up.
Okay. Understood. And sir, for the injectable business, Yugandhar, could you give some color in terms of what we are seeing there? How much of the quarter-on-quarter improvement is essentially existing business, market share gains, product disruption? And how sticky do you think the situation could be going forward?
In fact, like it is general growth Neha, in terms of overall injectable business, mainly in U.S. It is quite sticky in terms of -- I think it was a general improvement. I know like I -- there's no one-offs, and there's no one-off opportunities or anything which has driven this number. It's a general growth across molecules and probably like driven by better market conditions and good tailwinds.
And do we expect to see incremental benefit in the short term because of the Vizag plant damages?
I don't think so because it is -- mainly, the damages is to the warehouse and not the manufacturing facility. So in general, what we will see is probably it'll be 1, 2 months of delayed supplies from Vizag. To that extent, we might get some small business gains, but we don't expect significant things changing. We do have overlapping portfolio between that particular plant and with us, but only thing is we have not seen anything which is significant.
The next question is from Shyam.
So just first one on the U.S. run rate quarterly. So we have reached $400 million, I think, after like maybe 2 years plus. So I just want to understand how the base business performance will likely continue or how -- what's the outlook for the base business for the U.S.? If you could also talk about pricing erosion, we've been hearing commentaries about improving price erosion. So how should it pan out for the remainder of the year?
And also in terms of whatever you can share on Revlimid, thank you, Subbu, sir, for giving the separate margin guidance, so that's helpful, but just how should we look at that as an opportunity as well for us?
Subbu, I can take this question, our development. First, let me take the 2 questions. Thanks, Shyam. First, let me address your question on the growth in the U.S. We had a volume-led strategy in the U.S., and we have delivered strong underlying growth for our business by leveraging our global scale. We have large manufacturing facilities, and this comes in very useful. Our demand for our portfolio of products is quite steady, and we had strong growth in volume during this quarter. We are building our strong track record, and we are well positioned for a stronger year across a broad range of products.
Swami, sir, so all the dollar revenue growth, let's assume, is it all coming from volume? And price is stable, how do you classify the pricing cost?
So let me go to the second point you raised about the prices. I would say the prices are stable now. We have seen continuation of that. We saw some during the last quarter, and this Q1 has been somewhat similar.
And the outlook, Swami, sir, do you think it will now last for the remainder of the year? And what's driving this stability?
So I did mention about the outlook. I said that we are building on a strong track record, and we are progressing well with our pipeline. And then we have also augmented a bit with some India purchases. We believe that we would have a decent growth going forward.
Got it, sir, helpful. Subbu, sir, on the Revlimid?
I think Yugandhar is the best person to answer.
Yes. I think, Shyam, let me put it this way. We see stable demand as one-off opportunity. And so we will just keep that -- and I'll answer that as well. See, at our overall level in U.S., we have moved from $70 million to $80 million to this quarter. We have touched $90 million. And overall Eugia as a global entity, like we have passed $122 million. So our endeavor is to make it $100 million plus per U.S. and overall to $130 million. So that takes us to almost a $500 million entity. That's our endeavor for this year. That is excluding Revlimid. And Revlimid, whatever comes, we will launch it from 1st of October. That's the settlement date. So we will treat that as a one-off opportunity, and whatever comes, it comes.
I just want to add one point. Whatever year that said $500 million, you need to look at it against the $411 million, which the Eugia business achieved on a pro forma basis last year.
Sure. So I think my question just on the second piece this was just coming to was on the Eugia global sales has done better than -- I know $10 million has increased in the U.S., but I remember the run rate was $100 million overall or $110 million, maybe I'm wrong, last quarter. So that has moved to this $120 million. So Revlimid, we don't have elsewhere in the world, right? We are only U.S. Can you clarify that?
Revlimid, we do have elsewhere, but only thing is U.S. dynamics -- pricing dynamics are different from rest of the world. We have launched Revlimid in Europe last year itself, but the pricing dynamics in Europe are completely different. And the U.S., it is completely different, okay? So the opportunity in the U.S. is much bigger than rest of the world. Revlimid, it is there. They're all across wherever there is a patent expiry. We did launch. But in case of U.S., it is percentage-based settlements for various generic companies. And so we'll be launching based on our settlement date with the innovator.
Yugandhar, sir, my question was the non-U.S. global Eugia. How has that grown Q-o-Q? That was the question. And what is the...
Yes, it's basically like I think you are bang on because we used to be in the midst of around $100 million to $110 million for last few quarters. That has gone up to $122 million now. And that is -- our endeavor is to grow that business to $130 million plus starting from next quarter. That's our endeavor. So that we wanted to grow that business. That is what Subbu said that excluding the Revlimid, last year sales at a pro forma level was $411 million, and we -- our endeavor is to make it $500 million plus for this year.
The next question is from Kunal Dhamesha.
So first one on the Eugia business. When you say restructuring, is it that the out of U.S. is still not included in the entity, and hence, we are putting it as a pro forma, and we are trying to bring it [indiscernible]?
No. No. U.S. entity has been fully part of the Eugia already in the carve-out, with effect of 1st April [ '22 ]. There are some small -- I mean like Canada, we are in the process of moving because there's a lot depending upon the regulatory approvals for most of product from Aurobindo to Eugia. So those are all the markets, small markets.
The majors markets have been achieved. Europe has been achieved. U.S. has been achieved, which is around 92%, 93% has already been achieved. Probably 4%, 5% is what pending, which we will complete in this -- I think, over a period of next 3, 4 months' time.
Okay. Sure. So then the entire injectable and specialty OSD business globally should come under that bucket?
Already, it is more or less 95% is already forming the Eugia balance sheet.
Okay. Perfect. And then in the -- we had this guidance of $650 million, $700 million, and we are seeing $500 million for this year. So are we still sticking to $650 million, $700 million and now that within this $500 million, we have excluded Revlimid? So within that $650 million, $700 million also we'll be excluding Revlimid? How to think about it?
No. In fact, Kunal, like I stopped giving that guidance. That was given 2 years back, and we said just based on the current market conditions, we will see how it -- how the business actually grows, but that $600 million and $650 million like we stopped giving that guidance. So the first thing is like we will treat these as 2 different things. One is how do we grow the base business. That is the $500 million, how we can go to $550 million and all plus Revlimid. Put together, it might be $600 million, $650 million. It might happen, but only thing is at this juncture, we stopped giving that guidance.
Okay. And then just on the U.S. generic side, I think we have grown sequentially by almost from 9% at least in the INR terms. I think we have said the price erosion has been kind of our pricing has been flat. Would that be the same assumption you would be making when you'll be giving the 18% EBITDA margin guidance for the full year?
In terms of -- I think I'll ask Swami also to respond to this, but what we have seen at least in the last quarter is almost negligible price erosion. So we expect probably the next 2, 3 quarters to span out the similar way for the overall injectable and specialty business.
And Swami, in case, if you want to just talk about the business?
Yes, sure. The price erosion, like I said, has leveled off, and it's stable now, and the price is stable, I mean. And we think that this would continue given all the supply disruptions and the customers wanting a stable supply of the products. We believe that this would continue.
As far as the gross margin or the EBITDA is concerned, I think, Subbu can answer that better about the 18%, how -- what exactly is factored in.
Kunal, we have given very clear clarity. As updated, it's 16.8%, right, with the export benefits, et cetera, coming back to -- it's a timing issue, which I said there, which will land on the 0.5%. And I also said Puerto Rico will add another 0.5%. So if you really see the adjusted EBITDA, it's already 17.8%. That's absent [indiscernible] take another [indiscernible], right?
Going forward, if the price remaining flat and we are able to improve the operating leverage, et cetera, we will certainly cross the 18% benchmark which we have put a target on ourselves. Even though we have not given that as a guidance, right, we will certainly be able to achieve it. It's our strong belief.
Sure, sure. And the last one, sir, on, from my side on the PLI scheme. I believe that our PLI capacity for PenG is roughly half of the India usage. But if I have to kind of put it relative to, let's say, the global consumption, where that would feature?
I think your -- that is not possible to know, everything will go to India, et cetera. We do not know. And second, the plant which are putting it is predominantly for Indian markets and the rest of the world market as on date because we are not going to wait for the necessary regulatory approval from the various regulatory agencies.
So what we are trying to look at it is the Indian capacity is estimated. Even though there is no authentic information, estimate is around 20,000, and we have put a capacity of 15,000. And out of that, our consumption will be around 40% to 45%. This is what -- but also, we said it will take some time to ramp up properly because it is not that you put the button, next day, 100 materials, 15,000 tonnes will come like that. So we will gradually ramp it up by which probably next year, mid of this by -- maybe by October, November, we'll get the full ramp-up, et cetera.
So it's too early to talk about that. We have to first integrate the MDI processes and establish the yields and other things. So probably, as I said -- probably we'll get a clarity in the month of February.
The next question is from Surya Patra.
Yes. Sir, just a first question on the overall injection business, the legacy injection business. So I think we are seeing this quarter is the strongest quarter so far. And generally, first quarter is a relatively lean quarter compared to other quarters. So are we -- or is it fair to believe that the ramp-up subsequently in the subsequent quarter, what we are likely to see, that will lead to a kind of a meaningful strong double-digit growth for the injectable business? If yes, then what is driving this, sir? Is it new product launch or it is the price improvement situation or it is the one-off -- onetime kind of supply benefits that you might be getting? What is the outlook here in the injectable business?
Yes. Surya, like, I think I explained this previously like yes, it's a start. It's a decent start for the year, and we expect that it will ramp up further. And if you just see like $122 million in [ '24 ], it should be $488 million, but we are saying we wanted to hit $500 million plus for this year. That's our endeavor, but it has nothing to do with the current shortages. It is a general growth in volumes and H2 launches and the launches for this year. So it's a general overall performance of the business but has nothing to do with the current shortages in the U.S. market.
Okay. Sir, any pipeline-related confidence that you were having for your expectations? If yes, then if you can share the key product opportunities that you are targeting apart from Revlimid, let's say?
Yes. It is -- there are no blockbusters. In fact, we have done -- we have been doing, and we expect that we will continue to do well on new product approvals and launches. And that's the -- we wanted to maintain that [ 20-plus ] launches track record for our Eugia business. So it will be a timing issue in terms of when each product ramps up, but it will be a general overall trend, no blockbusters.
Sure, sir. Sir, just on the Revlimid because what we have witnessed for a couple of your Indian competitors. So the volumes here, what we have grabbed is kind of a decent number of more than 5%. Multiple players have grabbed it. So when you are launching relatively lately, and that is also a kind of volume-limited [ ramp-up ]. So what is the pricing scenario that you do anticipate once you launch in the third wave, let's say? And what would be your volume expectations?
I think you answered the question in terms of volume expectations, Surya, because this is -- we are not supposed to tell what exactly is the volume settlement. So obviously, we are in the third wave. We are expected to be much lower than the other players who have launched in the early settlement regime. So -- but we expect the pricing to be stable because there's -- you know it very well. It's a limited volume, and that limited volume, I can only supply to probably 1 or 2 customers. So we expect the pricing to be stable until the end of 2025.
And the supply would be evenly distributed?
Yes. It is depending on how the settlement terms and what is the volume percent is. And based on that, we will accordingly distribute that.
Okay. Sir, my next question is on the European business. So sure also, we are seeing a kind of a best-ever quarter. What is driving this? And what is the outlook that one should really have? And sir, currently, what is the sale of injectable business in the overall European business and, going ahead, what it could be? So because that was our aspiration to achieve a kind of a sizable sales of revenue coming from the injectable even in case of our European business. If you can give some sense about it, so that will be fine.
Yes, sure. Yugandhar, you want to answer?
No, no. Go ahead, Sanjeev.
Yes. So Surya, basically, the, I mentioned this earlier in the call that because of our very broad product portfolio and even expanding and excellent customer coverage, we have gained a market share because some of the competitors have been in shortages. So that is the -- we are the preferred partner for pharmacy as well as the hospitals. So that is the first driver.
Second is that going forward, we have this transfer of products manufacturing to India source. So that is driving the margins and making us more competitive and ability to increase our market share. And we are having more than 200 products under development or already filed. And as and when they are launched, we will be gaining in the product portfolio. We don't normally give guidance, but we have said earlier that we'll grow faster than the market, about 5% to 8% growth on year-on-year. That is what we are expecting at a constant currency basis.
And as far as injectable is concerned, Yugandhar, you want to answer, but it is EUR 18 million to EUR 20 million per quarter right now. And for Vizag plan, over to you, Yugandhar.
I think that, Surya, you're right. Future growth will come from Europe, but currently, we are not that big. Out of the overall $500 million, what we are aspiring to do for this year, probably like Europe will be $60 million to $70 million. And that is what we're going to take it up to $100 million plus, but U.S. continues to be the big brother, and the U.S. will contribute to have significant sales for Eugia.
Okay. And sir, with the improved European performance this quarter, the best-ever quarter, could you give some sense what is the kind of overall margin that we should be tracking here?
We have reached mid-teens in EBITDA percentage to net sales.
Okay. So that's a marked improvement compared to the last full year number, right, sir?
Yes, that's right.
The next question is on Nitin.
Sir, my question is on CapEx. Barring PLI CapEx, can you just help us what are the major CapEx -- timing of the major CapEx in commercial lines over the next 12 to 18 months?
So apart from the PLI now, we are putting some forward derivative plans linking to the -- I mean, the PenG plan, right? Those are all -- may not be a very significant, maybe around INR 150 crores, INR 200 crores like the 2, 3 plants, we are putting it. So that we will also able effectively utilize the PenG, we are doing that, right?
Apart from that, the China plant is also, we have done it, and the exhibit batches are getting filed. And that is also expect us to, as you know, that European inspection is also over that. So those is expected to start by, we are saying if not earlier, at least by April '24, we should start from the Europe business. Like that, we are working on that. All these things, we are working on that.
And sir, the Chinese plant is largely made for European supplies? Or are you looking at [indiscernible] Chinese goods market also?
No, no, we are working for all markets. I mean no plant is -- except we have the unit 15, which is dedicated Europe plant in India. I think China plant is -- it's for China market, Europe market, and if possible, U.S. market, also, we may do that.
And Yugandhar, on the injectable business, what opportunity you see for extending our injectable pipeline to the ROW market?
We keep extending it. In fact, we do have a decent size of business in ROW market and also Growth Markets and that we are present in multiple markets but, obviously, not of the scale. The scale is there in 6 European countries, Canada, Brazil and Colombia, but the rest -- and South Africa, but the rest of the markets also, we do supply, and we do have filings. But the scaling up, I think what we wanted to do is once the restructuring happens, then we will also put significant efforts in scaling up the rest of the world markets.
And lastly, sir, on the biologics, sir, you indicated that you spent almost $280 million in the biologics business. In terms of the return on this investment, sir, how do we -- what kind of time lines do we see -- what should we keep in mind?
Nitin, can you repeat the question? You are not audible.
No, I said -- I'm saying in the biosimilars, as we talked about, you spent $280 million in both CapEx as well as revenue expenditure. In terms of return on this investment, what kind of time frame should we start looking at when this investment begins to yield results for us?
Well, so we are -- as you know, that we have completed the license or clinical trials for 3 programs, and we are expecting to having launches in several markets starting next year. In fact, we could have one launch for an oncology biosimilar in the Indian market this year. But next year, FY '25 would see a spate of launches, which we expect to start bringing in the revenues for this biosimilars business.
Sir, do you have a broad indicative number over a period of time that we can aspire to get to in the business?
No. To be very honest, I stay away from giving any guidance on the revenue projections for biosimilars business because the landscape, the marketplace is evolving fast, but we have our own internal projections. We have a healthy product portfolio spread across oncology and immunology segments. We expect by 2028, we would have at least 4 oncology products in Europe and at least 2 oncology programs, products launched in the U.S. So we expect an overall product portfolio of around 6 to 7 products in the regulated markets and exactly the same number or maybe 1 or 2 more in the immunology segment in the ROW markets.
So yes, I mean, we have internal projections. It's -- it will be a healthy one, but I stay away from giving projections which are far ahead from now, which is at least 4, 5 years ahead from now, Nitin.
No, that's fair. So lastly, on the pneumococcal vaccine, any update on that, sir?
So as I have provided guidance in the last earnings call, we received an SEC, subject expert committee, recommendation for manufacturing and marketing the 15-valent pneumococcal conjugate vaccine. I also told you that, we have an ongoing 2-plus-1 dosing trial in about 550 children where we completed a 3-plus year trial already. So at this point, we have applied for a manufacturing license. We are still hoping to conclude the documentation formalities. Usually, it takes anywhere between 3 to 6 months. It's been now 4 months. So we are expecting it to -- we are expecting to obtain a manufacturing license some time.
But having said that, we are reprioritizing on certain things in the pneumococcal conjugate vaccine business. As you can see, the national tender, which forms the core of the market, that window has passed for the year. So the next tender is expected only in May and June next year. So I'm more -- we are not pretty interested in the retail business, which forms a very minor segment of the business in India.
So our target is to essentially make it a vaccine for WHO markets. With the ongoing 2-plus-1 trial, we will add more safety database, and we still need about another 1,000 subjects of safety database to really make the solid transition from making it an India-only or India-centric vaccine to a larger marketplace, which is a WHO market vaccine or the Gavi vaccine, which covers about 70-plus countries. So that journey is ongoing.
So while we strive to get the manufacturing license, essentially this year, because the national tender phase has passed and we are not keen to bring it into retail segment at this point, the window of opportunity for the next 2 quarters to bring this product in the market has more or less passed.
The next question is from Bino.
A couple of questions from my side. One, on a couple of products in the U.S. on which you have approval. One is generic OPSUMIT and another generic Myrbetriq. Are these products likely to be launched this financial or next financial year?
Swami?
Yes. Sorry with that. I think it's unmute. Okay. So your question was on new products. One was Optus. Yes, OPSUMIT, right?
Yes, OPSUMIT. That's macitentan.
Yes. [indiscernible], right. So that -- it's [ tentatively approved ]. It's under settlement. The launch would take some time.
Okay. Could you confirm is it next financial year?
Next financial year, you mean '24, '25?
Yes.
No. We don't believe so. It could be sometime later.
And Myrbetriq, which is mirabegron?
Yes, that's an OTC product, I believe.
Mirabegron also will have a subsequent launch. I don't think it will happen any time soon, Swami.
Yes, yes.
Okay. Second, I just wanted to understand this final thought process regarding this Eugia restructuring, what's in my [indiscernible] is it like separately listing or you plan to spin it out? What's the ultimate thought process there?
I think this will get evolved over a period of time depending upon the interest levels and other things, will get evolved. We will certainly keep the market informed as and when some concrete things happen.
Understood. And finally, you mentioned about one biosimilar launch in India next year -- or this year or next year. How are you going to sell that in India?
This is Satakarni. So Bino, we are looking at co-marketing opportunities. We are, in fact, also looking inward and trying to see whether we can directly get into domestic marketing ourselves. But the initial, the first year of sales would technically come from the co-marketing and the work in India while we will also attempt to establish our own domestic marketing footprint for the oncology and immunology biosimilars in India. I can provide you more guidance a quarter or 2 quarters from now about our plans to commercialize biosimilars in the domestic market.
Just to clarify, Bino, this -- as you Yugandhar said, mirabegron is also not likely to launch now, but it's under settlement, mirabegron, yes.
The next question is from Tarang Agrawal.
Three questions from me. Congratulations on a strong set of numbers across businesses. 1 on Eugia and 2 on Europe. On Eugia, sir, could you give us a sense on what your volume share in that business is in the U.S.? And how has that moved maybe over last year or over the previous quarter?
Yes. I think it is, we are growing by around 10% of volume. And we have reached in U.S. and the injectable segment to the sixth position. We used to be around 9, and we reached 7. Now we are, as per latest figures, we reached sixth. So as I said, it is a general portfolio growing, and the volumes are also growing.
Okay. That's helpful. On Europe, I mean congrats getting north of EUR 200 million. How should we see this moving forward? Should we be able to maintain this level? Or we could see some glitches going forward?
Yes, you can expect. I mean we have not given a specific number, but around this, depending on the seasonality because Europe does have a purchase pattern in terms of season, holiday season, et cetera. So I think within plus/minus 5%, this range should be retained.
Okay. And sir, second question, given the nuances of the market, how should we -- or what would be the drivers of improvement of margins in the business? I mean is there a potential to improve gross margins from where they are currently, or perhaps, gross margins might remain where they are, and we will probably see the benefits of operating leverage to drive EBITDA margins moving forward?
You're talking about Europe or...
Europe. Europe.
Okay, so Subbu, I'll just go ahead. So there are 2 parts to this. First is that the gross margin also is fluctuating because of the mix of the country because there are different business model, where there are higher gross price and then we give discount and then we achieve the net sales. But there are certain tenders where there is a straight-away -- sale is -- the price is quoted. So actually, the gross margin in both the businesses will be different. So it is slightly fluctuating. Plus/minus 2, 3 percentage of gross margin will be affected.
But overall, you are right, we are looking at operating leverage because of our broad product portfolio, which is expanding. At the same time, we have a very good positioning with the customer. So when there are gaps in the market from competition, we should be in a better position to capitalize on that.
Having said that, we also have some shortages, but I think overall, we have managed better than the competitor. So going forward, I would look at operating leverage much better than just gross margin expansion.
We can close, Anders, if there are no more questions.
Yes. As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Thank you all for joining us on the call today. If you have any of your questions unanswered, please feel free to keep in touch with the Investor Relations team. The transcript of this call will be uploaded on our website, www.aurobindo.com, in due course. Thank you, and have a great day.
On behalf of Aurobindo Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar. Thank you, thank you.
Thank you.