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Aurobindo Pharma Ltd
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Welcome to Aurobindo Pharma Q3 FY '23 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, Vandit. Good morning, and a warm welcome to our Third Quarter FY '23 Earnings Call. I am Deepti Thakur from the Investor Relations team. We hope you have received the Quarter 3 FY '23 financials and the press release that was sent out yesterday. These are also available on our website.
I would like to introduce my senior management team today on the call with us. Represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines and Peptide Businesses; Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialities Limited; Mr. 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 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 developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect in the future events or circumstances.
With that, I will hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir.
Good morning, everyone. I wish you all a very happy and prosperous New Year. We are here to discuss the results for the third quarter of the fiscal year FY '23 declared by the company.
For Q3 FY '23, the company registered a revenue of INR 6,407 crores, an increase of 6.7% over Q3 of last year, and 11.6% over the previous quarter. The EBITDA before ForEx and other income stood at INR 954 crores. EBITDA margin for the quarter was 14.9%, an improvement of 30 bps over the previous quarter. The margins improved on a quarter-on-quarter despite increased R&D spend during this quarter by INR 140 crores over previous quarter. The additional R&D spend amount to 1.7% on the EBITDA margin. The net profit stood at INR 491 crores, increased by 19% over previous quarter.
In terms of the business breakdown, formulation business in Q3 FY '23 witnessed a growth of 9.2% year-on-year to INR 5,452 crores and 14.3% quarter-on-quarter and contributed around 85% of the total revenue. API business contributed around 15% and clocked a revenue of INR 955 crores for the quarter. For the quarter, the revenue from U.S. market has improved by 9.3% year-on-year to INR 3,001.2 crores. On a constant currency basis, U.S. revenue were flat year-on-year and improved by 10.3% quarter-on-quarter to USD 366 million. We have received final approval for 15 ANDAs and launched 11 products in the quarter under review. We have filed 11 ANDAs including 6 injectables during the quarter.
Revenue for Aurobindo Pharma USA, the company making oral products in the U.S. has increased to 2.5% year-on-year for the quarter in rupee terms. Revenue for U.S. specialty business in the U.S. increased by 6.1% year-on-year to INR 501.5 crores for the quarter. Including the direct sales, the overall sales amount to USD 252 million against USD 230 million of previous quarter, i.e., a growth of 9.5%. The company as on 31st December '22, has filed 767 ANDAs on cumulative basis, of which 542 has a final approval and 38 having tentative approvals, including 8 ANDAs, which are tentatively approved under the PEPFAR and the balance 187 ANDAs under review.
For the quarter, European formulation revenue clocked INR 1,701 crores, marginal increase of 4% year-on-year growth, an increase of 12.2% quarter-on-quarter. On a constant currency basis, Europe revenue touches EUR 203 million against EUR 189 million of last quarter. For the quarter, the growth market witnessed a growth of 26% to INR 499 crores. The quarter performance was led by a strong growth in Brazil and Canada business. For the quarter, ARV business stood at INR 251 crores, growth of 61% year-on-year. Growth in dollar terms, the growth was 47%.
R&D expenditure is at INR 415 crores during the quarter, which is 6.5% of the revenue against 4.8% of the previous quarter. Net organic CapEx during the quarter is USD 82 million. This includes normal CapEx of $43 million; Penicillin G project, $23 million and third-party development expenditure around $16 million. The cumulative PenG capital expenditure is USD 89 million against the estimated expenditure of USD 250 million as on 31st of December. The average ForEx rate was INR 82.1075 in December '22 against INR 79.6123 in September '22.
Net cash, including investments at the end of September of $203 million. The average finance cost is 4%, mainly due to earning multiple currency loans. And with the increase in the Fed rate, the interest cost has gone up. Against the total finance cost of $45 million, we earned INR 42 crores as investment income from our investment. So net-net, our net finance cost is around INR 3 crores. Gross debt remains at $495 million. The gross debt reduced from $831 million to $700 million at the end of the quarter.
This is all from our end, and we are happy to take your questions now. Thank you.
[Operator Instructions] The first question is from Damayanti Kerai.
My first question is on U.S. So quarter-on-quarter, you have seen good recovery. So how should we see U.S. trending ahead? And which are your focus segments? So we understand injectable is one, which is picking up well. But if you can just talk about U.S. outlook in coming quarters or so.
Yes. Thank you, Damayanti. So this has been a good quarter for us. We witnessed relatively better quarter on all major parameters like demand, volume, net sales and we had stable pricing. There have been higher demand for some of the product, partly due to seasonal factors. We also anticipate that the present trend would continue going into the next quarter and next fiscal year.
Okay. You mentioned stable pricing. So this is for your portfolio or you are observing in general a similar trend for the industry?
We can talk about our portfolio because that is something we have firsthand knowledge. We really can't say beyond that. Some of our products -- see, this is on a net basis. We have some prices. There's already some prices which goes down, some prices which goes up. We have seen in the past that mostly it has been going down. But now we see -- if you ask me net-net, I think we are pretty neutral.
Okay. And my second question is on your R&D. So obviously, I understand due to some progress in clinical trials, et cetera, we have seen sharp jump. But in general, how should we again look at this part moving ahead?
So the overall R&D cost, we had $415 million -- INR 415 crores for the quarter against INR 276 crores in the previous quarter. The main constituents of the R&D cost is the CuraTeQ biosimilar. I suggest Satakarni, can you like to elaborate on the biosimilar?
So Damayanti, as Subbu had mentioned, the contribution towards the R&D expenditure primarily is because of the advancing Phase III portfolio of our programs. As we talk now, we have 3 products in Phase III clinical trials. One of them reaching the closure of the clinical trials and 2 of them actually in clinical trials now with about 30%, 40% of the recruitment done. So we forecast the clinical expenditure to continue for at least another 6 to 7 quarters time from biosimilars because the pipeline is maturing, which is good news for the organization. So yes, that's my guidance on this subject.
Okay. And my last question, so last quarter, we obviously heard a lot of, I think, issues due to what we saw on the -- like what was there with the management team, et cetera. So in terms of government improvement, what steps you have taken so far, say, compared to previous few quarters?
So in terms of -- what is that, you said? In terms of...
Sir, like previous quarter, obviously, I think we had seen some development related to...
Okay. You're talking about that. In terms of -- during the quarter, what we have done it based on the discussion which is going on with the investors in the last 1 year, et cetera. We have increased our independent -- I mean, directorate by about 1 number, and we have appointed -- the Board of Directors have appointed Mr. Santanu Mukherjee, who was the ex-Managing Director of State Bank, 1 of the subsidiaries of State Bank of India, as Independent Director. He came with a rich experience of about 30-plus years. And this is 1 significant step which we have taken, and he will be forming part of the governance board for the company. That is a very significant step we have taken. Yes, please.
So this -- like we have plus 1 independent director now, and you think like this is a major improvement.
Now the number of independent directors in our company is 5 out of 10.
So almost 50% are now independent.
Yes, 50% is independent directorate. And we have 4 executive directors, and 1 -- I mean, I'm sorry, 3 executive directors and 2 promoter directors.
The next question is from Ronak.
I just wanted to understand, recently, you got a U.S. FDA approval for Linaclotide. So can you just throw some light on that, that what's the expected revenue you are envisaging for the next few quarters?
Not an injectable product. Which product are you referring to, Ronak?
I can take that. I can take that.
Please go ahead.
Yes. Subbu, shall I go ahead?
Yes, please.
Okay. So we got a recent approval, but the issue there is we've also got settlement on that, and we are not able to launch it now. I think you're talking about Linaclotide capsule. Yes. So that we can't do the -- I mean, we can commercialize it because we have a settlement on it. It's sometime beyond the immediate future.
The next question is from N. Jayakumar.
In line with shareholder value and everything else, I think governance you've addressed. But 1 of the things that for a company that's trading at 5x, 5.5x EBITDA and almost single-digit PE multiples. It's almost logical when you have net cash to look at the buyback as a way of rewarding shareholders and reducing the undervaluation, if you will, especially in comparison with other peer group pharma players. Any steps towards that? Because I noticed certain changes in articles that you've talked about, anything to do with this that you can throw some light on?
Yes. I'll address it in 2 parts. So, first part is, this question came up in the last quarter itself. And we have addressed this buyback -- this will be addressed in the May Board meeting. If at all, it will be addressed, it will be addressed in the May Board meeting. Because we have taken a very huge task of accelerating the Penicillin G project, which is one of the future potential for the company, and that involves quite a significant money to the tune of around $250 million, right? So we said we will be addressing that.
And in terms of the second part of the question, which you said article, yes, you are right to some extent because the articles which we are having is -- it's a pretty old one, and it is not yet fully compliant with the Company's Act. So what we have done is, we have reviewed the entire classes, and we have replaced wherever it is not in congruence with Table F, Schedule 1 of the Companies Act. we replaced it, which involves the buyback provisions also apart from the other provisions.
Could you be more specific? I have not understood the...
Yes. Because our existing articles of association will not permit to -- for the Board directly to approve any buyback. If it is less than 10% of the net worth, right, we need to go to shareholders, which means another 50 days. So what we have done is, first, we want to amend the articles in line with the Companies Act Table F of Schedule 1. That is what we have done, which means the Board will be at liberty as and when they decide to move higher with the buyback. It can be implemented quite fast.
Understood. I have, in fact, a second question, which is I don't know if I missed this thing and it has been addressed earlier, which is the pricing pressures in the U.S. and logistics costs. I understand from other listing that the logistics cost in general have come down, which has been a cause of some margin compression in earlier quarters. Is that the case with us as well in terms of -- and in terms of pricing pressures [ at there ] significantly.
As said, the logistics cost is concerned, Subbu can corroborate this because India sends the product to us. We have seen better pricing in terms of logistics. That's one. As far as the U.S. pricing on our products is concerned, I had mentioned earlier that we see some kind of stability. There will always be some price changes. There will be some downs and there'll be ups. In the past few quarters, it has been mostly down. So now we see fairly stable prices. That's what I would like to say.
In terms of freight cost, which Swami has mentioned, we are seeing a significant price freight cost reduction between last quarter, I mean, Q2 as well as Q3, right? Overall, there has been an improved freight cost. I mean, reduced freight cost between last quarter to this quarter -- I'm sorry, Q1 to Q2 as well as Q2 to Q3. Does it answer your query?
Yes. All the best.
The next question is from Aishwarya. The next question is from Neelam. We'll take next from Nitin Agarwal.
Two, three questions. One is on the U.S. business. Have you started to see a pickup in new business orders again, given the fact there have been a recent round of FDA regulatory action on certain companies, and that has led to an increase in NBOs in the past. Have you seen the trend happening all over again?
Swami?
Sorry about that. Okay. So we have seen better demand, better volume growth in this quarter. And we believe that this is -- this will sustain. This could be various factors. One was seasonal. The other could be some other competitor or some other company not being able to supply -- whatever. We have seen definitely better growth, and we are confident that this will sustain going forward.
And Swami, just on that, through the last maybe 3 or 4 months, as we've been through, for example, October to January and now, have you seen this trend improving or it's been sort of steady? How would you qualitatively assess that? Demand of...
I'm sorry, what's improving? Referring what?
I mean the demand trend or the volume growth trend, has it been improving through the months over the last 3 or 4 months? Is it getting better?
I would believe so. See part of this could be seasonal, but I think on an overall basis, even other than the antibiotics and seasonal product, we have seen some amount of surge. Yes.
And sir, secondly, on the U.S. business, apart from the base now -- in terms of the new product launches, what should -- can we look forward to? How many launches and how many potential launches that in your assessment could be more than $20 million plus for the year?
Sir, last -- in the last quarterly earnings call, we had mentioned that we are looking at some new ANDAs being commercialized over the next 12 months. I think we talked about 40 NDAs being commercialized. We still hold that view. In fact, we have got some approvals, and we are in the process of launching in the current quarter.
In terms of top line, I would say that conservatively, we would expect about $50 million on an annual basis, maybe a little higher, but that's what we'd expect. Obviously, it's not going to happen next quarter, next month. It's going to be over a period of time. I'm talking over the next 12 months, we would see some kind of increase.
Okay. And if I can on that, so Yugandhar, on the injectable business, we've seen a pretty strong recovery. I think this is probably 1 of the better quarters we've had in the injectable business in some time. How should we look at this business now on a next few quarter basis?
We are quite positive, Nitin, in terms of the way we have weathered the storm and first 2 quarters were not great. But third quarter we have seen stable pricing and increased volumes and with the new products, in fact, like we are launching almost 5 new products every quarter. And some of the new products and sustainable pricing and volume recovery. We feel like going forward into quarter 4 and quarter 1 of next year, we do feel that it could be a double-digit growth quarter-on-quarter. That's what we see. And we already launched Amphotericin B in January. And we do have some interesting launches coming forward.
So just to reconfirm, you said we were about $74 million this quarter. Are you talking about Q-o-Q growth in Q4 and Q1 on this number?
That's right.
That's very helpful. And lastly, on the U.S., in terms of the nonoral presentations, nonoral, noninjectables, we've had some filings for inhaler, transdermal and some of the other new presentation formats. Any of those do you see getting commercialized this year?
When you said this year, by March, no, we don't see that happening.
No. No. March '24 -- FY '24, I'm sorry.
So I think that would be a really aggressive time frame. It could possibly little later. But we have got an oral solution now from 1 of the facilities. So obviously, we are looking forward to other introductions. This could take a while.
If I squeeze a last one. Subbu sir, on the PenG project, if you can give us some sense on the project size, the commissioning time and what can it really entail in terms of possible revenues at the current levels of PenG prices?
So regarding the PenG project, the size of the project we are working is around $250 million, plus or minus 5% contingency, right? And so far, we have spent around $89 million. The D-date for the PenG project is 1 April '24, while the D-date 1 April '24, it is always our endeavor to advance it. That's what we are working on. As on date, the installation is expected to be over by September, October of this year, and we will be doing the pilot batches between November, December and -- I mean till the time [ it succeed ] we'll do it. But in any case, it will not be later than March. And if the pilot batch has succeeded in the first iteration itself, it can be advanced also.
In terms of the execution, et cetera, a lot of people working and things are going up pretty fast. And we are looking forward to this project really speaking. And I think I'm sure government being the major sponsor for the project by way of the PLI incentive scheme system, they are also looking at it. And every one of us are looking forward for that.
Next question is from [ Vinod ].
Subbu, could you please explain a bit on this sale of non-antibiotic API business to the subsidiary, what's the rationale? What's the thought process?
So the thought process is API business, today, we are having around -- including antibiotic and non-antibiotic, et cetera, we are having around 10 units. And what we are planning to do is bring all the regulatory units under one -- all regulatory APA units under one. Wherever the major contribution the regulatory in nature, we'll try to bring it under 1 umbrella. This is to have ensure that the -- mitigate the risk factors like regulatory risk, margin risk, everything. We want to bring it under -- give you a massive focus into the overall value creation for the stakeholders. That is the whole idea. And this also will help in terms of improving the operational efficiency. And today, if you release the regulatory units, what we have been majorly around more than 75% is supplying internally and about 20% external. So by creating under 1 umbrella with the new management, can be able to focus more on the external also. Like that, we are looking to all possible options by which we can create value for the shareholders. That is the overall idea.
And at the end of the day, if we can -- we have really strategic tie up, et cetera, we can always look into that. Like what we have been trying to do for Eugia, we will try to bring underway a separate professional management, all these things we are trying to do that.
Does this have any tax implication?
No tax implication. It is a 100% subsidiary. Any 100% subsidiary, it is exempted under the -- I mean no transfer -- no tax on the transfer of the assets. It is exempted as per the income tax law, not an issue.
Understood. My last question on generic Revlimid, now that the market has formed, lot of your competitors have entered, and you also have a settlement. Would you be able to give some time line about your launch? Would it be FY '24 or FY '25?
It's Q3 FY '24.
The next question is from Tushar. The next question is from Aishwarya.
I have 2, 3 questions. One is that how we should see the compliance, especially when you guided that there should be increase in the revenue number by $50 million in the next 12 months. So which are the key 2, 3 plans, which are associated with this revenue growth and how the compliance over there in terms of FDA inspection and any 483 resolution.
Aishwarya this question is 2 parts, if I'm right. One is relating to the increase, which Swami can address. In terms of the compliance, I think today, if you really see the formulation, all the units are under VAI, and apart from that couple of units, I mean, 1 unit has been inspected recently or 2 units, APL Healthcare Unit 1 and 3 that has been inspected. And that is also we have informed to the exchanges, if you have noticed. So as on date, in the formulation business, we don't have any issue in terms of the regulatory compliance. In terms of capacity, there is enough capacity to augment the supplies, et cetera. In terms of the growth percentage, Swami can explain that.
Yes. In terms of -- with regard to the -- what guidance we are saying about 40 products that's likely to come over the next 12 months. We have factored in any compliance issue that could be there as -- but small as on date, if an APA plant has a problem, we consider those factors while decided what are these 40-odd products that we are going to commercialize. So we believe at this point of time, this is realistic. Going forward, obviously, if there is any inspection, we need to see the outcome of it. But to -- we have factored in this compliance matter.
Sure. And 1 more question from my side is, how we should see the free cash flow generation going forward in the next 2 years where we need to factor in how much you spend on R&D, how much is CapEx. So...
So with -- I should have to put it with this maximum -- we have achieved INR 415 crores per quarter is the maximum R&D spend we have done in any quarter to the best of my memory, right? Even if you continue with that, I don't think we'll be continuing INR 415 crores. Probably it may be slightly lower, right? And with the PenG project and some of the projects going to take place next year, this will -- we will be able to achieve the good free cash flow coming from the project.
Even the biosimilar also, as Satakarni said, we have already said in the past meeting, earnings calls, et cetera, we have filed 2 products, 1 more product also we are going to file it, et cetera. This is expected to generate cash flow starting FY '25 onwards. So I can clearly see FY '25 PenG project will generate cash. And you are -- but I mean our biosimilars will generate cash, plus various projects are in the process of commissioning, et cetera. If 1 or 2 of them have been successfully commissioned apart from what I mentioned, that also will jump in the cash flow. I think going forward, I can see very clearly cash flow generation will be very good starting FY '25 onwards.
Sure. And how about '24, sir?
2024 also, I think we should be able to generate the cash flow because apart from the existing -- this one, we have not undertaken any new project, no new projects, except the 1 which have announced recently that biosimilar on CMO facility, we are thinking of putting in. Other than that, I don't see any new major greenfield projects are being not tough. If any decision taken, et cetera, we'll be informing in the normal earnings call.
Most of the projects are either 40%, 50% completed, like biosimilars CapEx is over. It's only the clinical trial, which is forming part of the R&D costs, which is being factored as far as the P&L. Then if you really see the U.S. CapEx, most of the projects have been completed. They're waiting for the exhibit batches and the final approval. You take China plant. China plant is -- installation is over, and we are doing the exhibit batches. And like that so and so. So we don't see a major stress on the cash flow on account of the projects and business is also doing well, and we expect to do a good cash flow.
And here, sir, like we know that the U.S. business is standing a bit more difficult because of the competition. So with that into consideration, we have less control on the revenue side. Anyway, we are doing extremely well. Despite that, we don't see very meaningful growth coming on the top line. So the levers left out how to control the cost side or the CapEx side. So do you see any levers which are visible in say, '24, '25, which have not been discussed so far?
Sure, if you really see the annual report at the 31st March '22, we have identified the 5 levers. And 1 is biosimilars and second is the API -- PenG plant. Third is the API business. And fourth is the Eugia, which earnings call in the last time itself, Yugandhar has given a clear road map for the Eugia business. And fifth is the India business. India business because of the other priorities is growing -- I mean, not taken on, but other things have taken off on going in an accelerated pace.
As talking more on the -- I mean, absolute numbers in terms of cost side or the CapEx side, which probably will be the...
One of the significant -- you are right. One of the significant steps which have taken is carving out the API business to achieve the operating efficiency to improve the capacity utilization and service the market. We are already carving out and we are in the process of doing. And this will take effect from first April, we are working on that. And that also will contribute. We can see improved performance from the API business, which means which is the main cost base for the entire company. You can see an improved performance. And on the antibiotic side, PenG is coming, which is another major cost saver because we have been buying all the related KSM and the intermediates, et cetera. So these are all the steps being taken by the company.
The next question is from Nikhil.
Sir, I wanted to first check on the R&D side. Now there's a pretty sharp jump on a quarter-on-quarter basis. I understand that there are a few clinical trials that are ongoing. But I also wanted to check, is there some change on the R&D front -- strategy front that has happened in the last quarter or so? Is it that the U.S. outlook seems a bit improved. And because of that, there's a step jump in the R&D spend ex of biosimilars as well?
No. I think the key contributor to the R&D spend this quarter is the biosimilar compared to INR 75 crores expenditure on last quarter, this is INR 180 crores this quarter. We have explained in the last quarter itself, our R&D spend for the year will be somewhere between 6% to 6.5%. The first half has not taken place, and we'll be focusing -- we will be incurring more costs because the timing of the clinical trial, et cetera, also required, et cetera. And because of that, these 2 quarters, there will be a good R&D spend that will happen, which has been already informed in the earnings -- last earnings call.
Okay. So sir, this quarter, the R&D to sales at around 6.5%. Do you see a gradual moderation in this number in the coming quarters or year?
Ideally we should take around -- ideally, we should take around 6% to 6.25%. 6.5% will be outer limit -- but I am talking from the absolute amount. It's a function of the turnover also. So 6% to 6.25% on the existing turnover. I mean, achieved turnover is the norm, which we are looking at.
Okay. So if the revenue goes up, this number will come down because you are starting...
Yes. Because we are talking about the absolute number only.
Current. Okay. Okay. Understood. And also, Subbu, I just wanted to revisit CWIP number. I think at around September, this was INR 3,200-odd crore. So what is the capital work in progress today?
So the capital work in progress today is something like -- it's around INR 4,000 crores, it is around -- exact amount if you really see, it is INR 4,200 crores, tangible and the intangible around INR 800 crores, right? The major CapEx is the China plant, which more or less it's completed at INR 600 crores, as I told you, installation is over. CuraTeQ, we have already incurred the cost. It is a question of clinical trials only, which I explained, right? And we are putting 1 Eugia manufacturing plant in Vizag. So that is -- that the expenditure is still going on. Like that some of the projects, either it has been installation level, it is more or less 90% over, or it may be in the process of 40%, 50% is over, as I said, these are all expected to start commissioning by 31/3/24 onwards.
Okay. So it will take still a year for the expensing out of this CWIP to happen?
No, this will get capitalized on our -- I mean at least some of them will get capital on or before 31 March '24.
Okay. Understood. And also, sir, in the CWIP number, how much is the preoperating expenses that has been capitalized whether R&D or whether other plant-related expenses?
It is getting -- I'll get the data separately, Nikhil. I don't have it right now with me. I have the overall WIP number only.
But is it a sizable number because, I mean, that directly impact...
Cannot be sizable. Any project, if I'm talking INR 4,200 crores, is that tangible, no, you can take something like 10% will be the preoperating including all. And that is a guess, but I will get the exact number later.
Okay. Understood. Also, sir, I mean, revisiting the PLI project as well, so $90 million incurred out of budgeted $250 million. The timeline seems pretty tight. I mean you have only 5, 6 months to incur the remainder CapEx. So I wanted to understand, is the entire $250 million needs to be spent to commence the project or you can commence the project partly as well, maybe, I mean...
No, I think, Nikhil, what we need to look at it, in the case of the project, it is -- when we said $90 million is the cash spend, it doesn't mean we are going to start some of the work now. We have issued the purchase orders long time back. So these -- all the projects will have a gestation time in terms of completing the work and then installation. And the payments will be on successful implementation on successful dispatch of the material. So most of the material will start coming between April to June, and it will get commissioned. I mean, installed -- not commission is not the right word -- installed between July to September. So that's the way you have to look at it. That as and when they start dispatching, we need to make the payment or based on the successful assembly, it has to be paid, something like that. You got it?
So civil works have been done.
Civil works more or less, I would say, around 75%, 80% is already completed. Even the mechanical and engineering -- I mean, mechanical and electrical is also -- purchase orders have been -- purchase orders have been issued more than INR 1,500 crores already. I think in the last earnings call itself, if I'm right, we have issued more than INR 1,500 crores purchase order, probably by this time they would have issued the balance also -- could be another INR 200 crores, INR 300 crores.
Right. And also finally, on this one, 15,000 tonnes was the planned capacity and there was a captive and a merchant share. Can you also again share those numbers, please?
No, no, no. 15,000 tonnes is the total PenG capacity. And as we said in some of the previous calls, our captive consumption equal and PenG is something like 6,000, around 7,000 tonnes, right? That is a thing and the balance will be for -- it will be for external sales.
Okay. And sir, what is the pricing scenario today? I mean when the project was envisaged versus now, how has the prices moved?
I don't think, today the prices are very high because of various reasons, but we'll not guess anything now because the project is at least 1 year away, and I don't like to guess any number right now.
But sir, with China opening up, I mean, my limited understanding of what's happening in the commodities, I think normalization can happen. So do you think that -- or would you mind sharing some ballpark sensitivities around -- if pricing does by this much percentage, you will still be making good economic value. Can you share some...
Yes. We will make economic value that much I can say. But I may not like -- with all your contacts and the interaction with the International Limited, so we don't have that much of interaction with anybody. So what -- I can say 1 thing, even if the price goes to pre-COVID levels, et cetera, also, we'll be well within the selling price. Our cost will be well within the selling price.
Okay. Understood. And sir, 1 final question on the biosimilars front. Can you share some quantitative guidance on what absolute sales you're targeting from biosimilars in 2 years', 3 years' time frame? And also in the U.S., how many field force strength is there from the Spectrum acquisition? And would that be leveraged to commercialize the initial biosimilars? So would there be any incremental spend required initially to commercially the biosimilars -- especially in the U.S.
Satakarni?
Yes. So I will answer your question in 2 parts, Nikhil. With respect to biosimilars for the next 2 years, as you know that we have 2 products right now with EMEA. We have filed a monoclonal antibody in oncology with MHRA. With antibody in oncology segment, we have completed the necessary regulatory procedure with MHRA with 1 major pending action, which is the GMP inspection. The required on-site inspection is hindered by the availability of inspectors at this time, and our regulatory team is continuing to work with MHRA and the subject. At this time, the agency and we have agreed to take a clock-stop until April and are hoping to have GMP inspection announced within this time frame. So once that happens, then I probably think we'll have at least 1 quarter of sales in this year provided I will be able to obtain an approval for this antibody by Q2 of the next fiscal.
With the biosimilars [ file ] with European Medicines Agency, I have provided an extensive guidance in the last earnings call, that going to the COVID-19 workload and paucity of inspectors, we are stuck at day 180 of the clock. And on the advice of European Medicines Agency, we have taken a clock-stop until the June of 2023. Now the agency had mentioned that the situation will change as and when inspectors become available to travel and audit us. At this point, I am pleased to state that auditors have indicated end March as the dates for on-site GMP inspection. So in the last week of March, we are having a GMP inspection announced.
So with this development, we are reasonably confident that the post audit regulatory process will conclude at least for 1 of these products, and we shall be able to initiate the commercial activities in EMEA or the European region for at least 1 product before the end of next fiscal. And for the second product, probably in the first quarter or the second quarter of the next fiscal. So I am hoping for a continuing engagement with the agency and taking necessary regulatory formalities at this point of time. Additionally, we have also started filing with Health Canada, and Health Canada also had acknowledged the incept of our file and started the review procedure. We have an audit announced with Health Canada in the first week of May. So I believe if things go well, we would also have the commercial sales kick in either in Q4 of the next fiscal or the early Q1 of the [ frontline ] fiscal, which is FY '25 in Canada as well.
So I think overall we are looking at least 2 biosimilars to be commercialized in EMEA, Health Canada and MHRA. And importantly, as you know that we have concluded -- we are concluding the large metastatic breast cancer trial in 690 subjects, we will start the filing process of this monoclonal antibody in India and emerging markets in July of the next fiscal. And by September, we will file it with European Medicines Agency. And by December, it is our intent to file with the USFDA. Now I'm optimistic that in '25, we will have this product approved in -- with EMEA. And also, hopefully, if things go well, will also be approved with FDA. So I see '25 as an inflection point with this antibody kicking in, in the commercial markets, both in EMEA and FDA. I expect at least 1 quarter sale from this antibody in India to start within the next fiscal, with EMEA being '24, '25. So that's the guidance on biosimilars, which is part 1 of your question.
The second 1 is about the spectrum or the commercial field force that we have in the U.S. with Acrotech Pharma. We have a presence in oncology segment. We are going to leverage the commercial front sales team or the team that we have with Acrotech, who will also be the front end for biosimilars in U.S. We expect the first biosimilar in the U.S. to be approved in 2025. And we will leverage on the field force that we have with Acrotech Biopharma to take this product into the market.
We are also planning to bring an immunology biosimilar by '25, '26 in the U.S., which is used in dermatology indication. Again, as you see, if you have followed Acrotech Biopharma, they're investing in dermatology products and brands. So essentially, the idea is that Acrotech Biopharma will position our biosimilar brands in the U.S. market. I stop here, and I ask if I have answered the query or if there is any further follow-up.
The next question is from Tarang.
Okay. Three questions from me. First 1 is on Europe. I think it's good to see that you come to a EUR 200 million quarterly run rate. The last time this happened, if I recall, was in March '20, but what I understand was there were some bunch up of sales that happened then. So from here on, is this a base that we can expect you to maintain? If you could give us some sense on what's happening in Europe? And how should we look at it going forward from here?
Yes. So we had a good quarter in Europe in the third quarter. And you have seen that actually in quarter 2, we were at EUR 190 million. And this quarter, we have exceeded EUR 200 million. But quarter 3 is always strongest for us. But on a year-on-year, we have a 7% growth. And even on a quarter-on-quarter, as I said, that is a seasonality 2% growth. But considering the discontinued business, then the quarter-on-quarter was a 5% growth. So I guess that about [ EUR 185 million to EUR 190 million ] is the base line. And actually, based on the seasonality and some of the opportunities which come up, we may grow at a middle level of a single-digit growth.
Okay. That's helpful. The second is on Eugia. Yugandhar, when should we see the Vizag plant revenues starting -- in my sense is, you'll commercialize it, then the exhibit batches approval from the regulators. So if you could just give us an updated time line on this? And second, last quarter, at least the commentary that we received that -- was that -- especially in injectables, there was heightened competitive intensity, which are showing up in your numbers and also in the numbers of the peers, and that seems to -- at least from a number basis for Eugia that seems to have reduced. So if you could just give us some sense on what's happening in the injectables market space?
On the first thing is on Vizag plant. We will be starting exhibit batches from this month onwards. And we already requested European authorities to inspect the plant in November of this calendar year, which in November '23, and we expect that in the best case scenario, it might be quarter 4 of FY '24 commercialization, worst case, it might be quarter 1. And we are also going to file some of the shortest products of U.S. to trigger an early audit for the plant. That's on the Vizag plant. So you can take it as FY '25 is the commercialization for Vizag plant. And in this entire fiscal year will go into various exhibit batches, inspections and all that stuff.
On the U.S. front, in terms of what we have seen, first 2 quarters, there was a significant pricing pressure for a variety of reasons. And -- but quarter 3 and quarter 4, how we are observing is, the pricing has stabilized. The demand is -- the volumes are improving significantly. And also, I think, probably regulatory action on some of the other competitors is giving some minor tickling business at this point of time. But we will see like how it goes. But what I'm very confident of and very hopeful of this, my team can generate double-digit growth going forward.
Okay. And how much was 9 months FY '23 revenues for Eugia? And what was the similar number for 9 months FY '22?
It is flat because we don't give a separate listing in our P&L because it's on a pro forma level. But as you can see, it is just flat from FY '22 to FY '23.
Okay. That's helpful. The next is on biosimilars. Dr. Satakarni, you spoke about doing some filings in Canada. Is it 1 of the products that you've already filed in Europe or MHRA, or is it a different product?
Essentially the same product that we have filed in Europe and MHRA, they are -- 1 of them is filed in Health Canada, and we are planning to file the second 1 with also with Health Canada.
Okay. That's helpful. And second, I mean, I noticed that in Q2 of FY '23, there is a biosimilar subsidiary that was incorporated -- if you could give us some sense, what was the purpose? And second, some update on what's happening on vaccines, specifically, you did get some regulatory pathway in your PCV vaccine this quarter.
Yes, Tarang. So on the vaccine front, we are encouraged by the fact that the Subject Expert Committee panel operating under the AGs of CDSCO or DCGI has reviewed our Phase III pediatric data for the Pneumococcal 15-valent vaccine. The data suggests that our 15-valent Pneumococcal vaccine would be anticipated to help protect against the serotypes covered by the Pfizer's Prevenar 13 and also expand coverage to include 2 additional pneumococcal serotypes, causing potentially a serious disease in infants. Thereby, how do we view at this SEC recommendation? The SEC recommendation should be viewed in the sense that they have granted a recommendation for manufacturing and marketing of the PCV15 vaccine to our JV company. So at this stage, we are going through the regulatory process of obtaining a manufacturing license, which is a normal course of regulatory procedure. I am optimistic that this procedure will conclude in the next few weeks, probably around 6 to 8 weeks' time.
Since the 15 serotypes included in our vaccine are responsible for good majority of global pneumococcal disease cases, I'm excited by the potential the broader coverage we can offer with the PCV15 vaccine. I plan to commercialize it 2 quarters from now, provided I will -- we will receive the manufacturing license in April, May. Then 2 quarters from now, we would commercialize this PCV vaccine. So that's part 2 of your question on the vaccine's front. What was your part 1 of the question, Tarang?
There is a biosimilar subsidiary that's been incorporated...
That's right. So there is this subsidiary called Theranym Biologics, which you were talking about, right?
Yes.
Theranym incorporated and we talked about it in the earnings call, I think the last quarter or the previous quarter. So the idea is to expand on the capacities to support any CMO opportunities in biologic space. At the same time, with our oncology biosimilar coming in, we would like to -- we would like to scale it up to an extent where we become extremely cost competitive in these low and middle income countries. So that's the idea. But right now, we are still discussing on how to shape up this project in the next fiscal year. So I'll provide guidance as things evolve. But the idea is to become a CMO and also use additional capacities to make it more cost effective for our biosimilars to go into low and middle-income countries. That's the vision behind this.
The next question is from Sriraam Rathi. The next question is from Abdul Kaleem.
Sir, I just wanted to get a clarification on this one. You told that there is some process that is going on for making the buybacks easier for this one. Technically, I did not understand what exactly that was. But I just wanted to know whether the management is seriously thinking about buybacks, at least in the near future. And what will be the time line for that.
See, we are not averse to buy back, okay? So at the same time, the buyback management -- it is a decision of the Board, keeping in mind and Board will decide, keeping in mind various financial commitments on various projects and other things, Board will take the decision at the appropriate time.
Okay. you can't give any time line for that...
Management cannot give a time line for that.
Okay. But there is a thought process that is going on there...
Yes, there is a thought process going on. That's the reason why we have been trying to make comment the articles and other things.
Okay. Sir, another last thing, sir. Because it is repeatedly it will be coming in the social media, so that if the clarification comes from your side, it will be helpful for the shareholders. What is the formal relation between the Aurobindo Pharma and Aurobindo Realty, if you can just enlighten on that. Aurobindo Realty, sir.
Aurobindo Pharma and Aurobindo Realty are totally independent, they are no way connected except both are having a common promoter.
Okay. So there is no formal connection...
No connection between Aurobindo Realty and Aurobindo Pharma. The only -- if at all, there is a small connectivity in the Galaxy building where we have stay, wherein -- that is held by a company called Raidurgam Developers, where Aurobindo Pharma is having a 40% stake and promoter group is having 60%. But Aurobindo Realty is no way directly connected.
We'll take the last question Shyam Srinivasan.
Subbu sir, just on margins, just going back. I know R&D has gone up, but historically we used to be a 20% EBITDA margin company. So I just want your thoughts on when we can look forward to those kind of margins. We have now started growing and looking from the commentary on this call seems to suggest that growth can be sustained. So just want some of the levers of, say, reaching historical margins. Is there any time line or any specific product mix that you would like to highlight that will help us reach there? Or is it just ongoing growth?
One is ongoing growth and second is 1 of the key thing which the management is taking -- embarking on the actual plan is to increase the capacity utilization. That is also 1 of the reasons which we have said. We will bring more focus on the API. That's the reason why we are carving out into a separate subsidiary company. The 20%, if you ask me, while we may not able to give you a guidance, but certainly with the PenG project being successful, we may be able to reach that, it's my feeling at this point of time.
Subbu sir, PenG project will start first April, right, 1 April 2024?
1 April 2024, that is the thing, because it will add some more top line as well as it can reduce some cost like that. But this is -- I mean, we don't want to guess at this point of time, nearer the date, probably in the November earnings call, we may able to give clarity on these aspects.
Just following up on this. So from a cost perspective, you talked about logistic costs. You also talked about input cost inflation. Those you are now having a better visibility. And the only thing that...
Yes, we have been tracking all the freight costs, et cetera. We are trying to optimize all the costs from -- overall leveraging the capacity, overall operational leverage, we are doing everything. Whatever possible we want to do, we have been doing that. And at the end of the day, all are a function of the top line, which there is some improvement started taking place, which Swami has clearly explained with the new products coming, what is the new launches he is planning, everything, Swami he has clearly explained. With that, hopefully, we'll also move towards that goal of 20%.
Got it, sir. Just my last question is on injectables, again. I think $73 million, I'm just calculating it from the $366 million at least for the U.S. business. But what is the global injectable size? I think Yugandhar mentioned it's flat Y-o-Y, but is it closer to that $100 million still? And what are aspirations for $650 million. I think we pushed it out by a year, but just want -- if some of those aspirational targets can be reiterated, please.
Yes, Shyam, I think you said it right. We are $100 million plus for quarter. And we want to go towards $120 million, [ $125 million ] next financial year. And yes, we are still quite hopeful that even after pushing by 1 year, like FY '25, we should be around the numbers what we've indicated in the past.
As there are no further questions from the participants, I now hand the conference over to the management for the closing remarks.
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 the website www.aurobindo.com in due course. Thank you, and have a good 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.