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Aurobindo Pharma Ltd
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Ladies and gentlemen, good day, and welcome to Aurobindo Pharma Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Kiran. Thank you, and over to you, sir.
Thank you. Good evening, and a warm welcome to our fourth quarter full year FY '21 Earnings Call. I am Krishna Kiran from Aurobindo Pharma Investor Relations team. We hope you have received the Q1 FY '21 financials and the press release that were sent out earlier. These are also available on our website. With me, we have our senior management team represented by Mr. P.V. Ramprasad, Chairman, Aurobindo Pharma USA; Mr. N. Govindarajan, Managing Director; Mr. Sanjeev Dani, COO, Head of Formulations; Mr. Santhanam Subramanian, CFO; Mr. Swami Iyer, CFO, Aurobindo Pharma USA; and Mr. Arvind Bothra, Head, Investor Relations and Corporate Communication. 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 limitation statements related to the implementation of strategic actions and other information on our future business, business development and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning development of our business, a number of risks, uncertainties and other important factors may cause actual developments and results to materially differ from our expectations. Aurobindo Pharma takes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances. And with that, I will hand over the call to Mr. Santhanam Subramanian for the highlights. Over to you, sir.
Thank you, Krishna. Good evening, everyone. I hope that all of you and your families are safe. While the uncertainty due to the pandemic continues, we, at Aurobindo, are trying our best to be at the forefront in fighting the challenge. We are committed in protecting the health and well-being of our employees, their families and our stakeholders. Also, we'd like to express our sincere gratitude towards the frontline and health care workers and our employees across the globe who are tirelessly working during this pandemic. We will now discuss the results for the fourth quarter and full financial year 2021 declared by the company. Please note that I will be referring to ex Natrol financials.For the year, the company clocked a total revenue of INR 23,681 crores, an increase of 8% over last year. The EBITDA before ForEx and other income increased by 9% year-on-year to INR 4,997 crores. EBITDA margin for the year was 21.1%, an improvement of 20 bps over the corresponding previous year, despite approximately 200% -- 200 bps increase in R&D. Adjusted net profit, excluding the exceptional items increased by 10% year-on-year to INR 2,992 crores. I would like to draw your attention, the company has spent in R&D, INR 1,510 crores for the year against INR 958 crores last year to augment the future growth. In Q4 FY 2021, revenue improved by 2.1% year-on-year to INR 6,007 crores. The EBITDA before ForEx and other income stood at INR 1,276 crores, decreased by 2% year-on-year. EBITDA margin was at 21.2% for the quarter under review. Net profit declined by 5% year-on-year to INR 802 crores. However, this is not comparable fully as the last year includes export benefit of INR 83 crores, net of tax of INR 68 crores. Certain tax benefit like R&D weighted deduction, et cetera, we've maintained the margin -- despite increase in R&D, we maintained the margin sequentially. In terms of the business breakdown, Formulations business in FY '21 witnessed a growth of 9% year-on-year to INR 20,592 crores. For the quarter, Formulations business clocked a revenue of INR 5,211 crores, increased by 2% year-on-year. API business clocked a revenue of INR 3,086 crores for the year. For the quarter, API business increased by 5% to INR 794 crores. In the Formulations business, U.S. business posted a growth of 8% year-on-year to INR 11,231 crores in FY '21. On a constant currency basis, U.S. business increased by 4% year-on-year to around USD 1.5 billion. For the quarter, on a constant currency basis, U.S. revenue ex Natrol of USD 393 million, increased by 5% year-on-year. We have received the final approval of 9 ANDAs and launched 19 products in the quarter under review. For the year, we have received approval of 42 ANDAs and launched 53 products across oral injectable and OTC segments. We have filed 9 ANDAs during the quarter and 55 ANDAs during the year. Revenue of Aurobindo Pharma USA, the company marketing oral products in USA has increased by 8% for the year and declined 5% year-on-year for the quarter due to lower sales from antibiotics. Revenues earned against our generic injectable business declined 10% year-on-year to USD 249 million for the year due to a reduction in hospital procedures on the back of COVID-19. For the quarter, AuroMedics sales increased by 13% year-on-year to USD 67 million. We have filed a total of 145 injectable ANDAs as on 31st March 2021. Out of this, 91 have received the final approval and the balance 54 are under review. European formulation revenue clocked in INR 6,061 crores in FY 2021, an increase of 2.3% growth over last year. For the quarter, European formulation revenue clocked at INR 1,553 crores, declined by 6% over corresponding previous period due to stock up at the start of the pandemic in Q4 FY '20. Growth markets witnessed a growth of 6% year-on-year to INR 1,438 crores in FY 2021. For the quarter, growth market declined by 19% year-on-year basis to INR 306 crores due to low patient footfall to hospitals and pharmacies in certain markets owing to COVID situation. In FY 2021, ARV formulation business grew by 49% year-on-year to INR 1,863 crores. In Q4 FY '21, ARV revenues grew by 29% year-on-year to INR 491 crores. Our global generic injectable consolidated revenue is USD 395 million for the year. Apart from this, Acrotech, our branded injectable business achieved a revenue of USD 103 million. R&D expenditure is at INR 457 crores during the quarter, which is 7.6% of the revenue. For the year, R&D expenditure is at INR 1,510 crores, which is at 6.1% of the revenue. CapEx for the quarter is around USD 88 million. The closing rupee versus U.S. dollar was INR 73.11 in March '21 and INR 73.06 in December '20. Net cash, including investments at the end of March '21 was USD 113 million. The average finance cost is 1.4%, mainly due to availing multiple currency loans. We would like to welcome Mr. Arvind Bothra to the Aurobindo family. He will be heading the Investor Relations and Corporate Communications at Aurobindo. We wish him a long and fruitful association with us. This is all from our end, and we are very happy to take your questions now. Thank you.
[Operator Instructions] The first question is from the line of Rahul Veera from Abakkus Asset Management.
Sir, only 1 question. In Q4, we saw the ARV growth of around 29%. How much of that would you attribute towards the COVID-related molecules?
I don't think that this can be related to COVID-related molecule. Most of the growth has come from Dolutegravir and its combinations, Rahul.
[Operator Instructions] The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets India Limited.
Sir, can you provide update on our COVID-19 facility, like when do you expect to complete the expansion? And also on progress on the vaccine candidate, UB-612? Similarly, if you can provide us some update if there some discussions are ongoing for the contract manufacturing, which we can see some certification in near term? So that's my first question.
Okay. So that's kind of 3 parts, Damayanti. Let me answer the first. I think the first question when you asked about COVID facility, I presume you supposed vaccine facility, is that correct?
It's for COVID-19 vaccine facility.
So the -- basically, our viral vaccine facility equipment should all be installed and all the qualification for the equipment should be completed by June end. From July onwards, our process validation would start, and we can continue the commercial after the process validation is completed. But meanwhile, our Vaxxinity -- the COVAXX company, UB-612, they rechristened their name as Vaxxinity. Their product actually can be manufactured even in our existing bacterial facility because it is a non-vaccine -- technically, it's a peptide-based product, so it is not restricted that it has to be manufactured only in viral vaccine. It can get into a bacterial facility or even a general injectable facility. So to that extent that we have the facility ready for running their product right away. The second question is about UB-612. Originally, the collaborator part that they would do the trial in Brazil, and they had actually waited for 4, 5 months to kick it out, but it did not work out because I think the variant was changing and they didn't want to like thing drag that. Hence, they decided to do the trial in India. They had already filed for the Phase II/III application to DCGI 2 days back, but we had -- even had a pre-submission discussion. So to that extent, we don't expect too much of queries since most of the queries have been already like taken in consideration in the application. We expect the SEC approval to happen as we progress. And once that approval happens from the DCGI, we would be starting the trial in India. So that is as far as UB-612 is concerned. The third question is related to your -- I mean, can you repeat your question, Damayanti, the third question? The contract manufacturing?
Yes.
As far as contract manufacturing is concerned, we have been exploring opportunities. But as such Vaxxinity itself is expecting their emergency usage authorization from Taiwan between mid of July to end of July. And they're already in discussion with us to start manufacturing in anticipation of their approval to start with, say, 25 million doses. It can be expanded as the requirement goes up. So yes, I think that opportunity as a contract manufacturing would also start in the near future. Does it answer your queries, Damayanti?
Yes. Just a clarification, this 25 million doses to start. It's for the UB-612 vaccine only for Taiwan market, right?
It may not be only for Taiwan market. Yes, it is for UB-612 product only, but it is not, need not be restricted to just Taiwan. Based on the emergency usage authorization of Taiwan, they would apply for approvals in various countries. So it could be for a bunch of markets rather than only for Taiwan.
Okay. That helps, sir. Sir, my second question is on vaccine facility at Vizag for Europe and RoW market. So again, what is the status of that facility? When do we start -- when we can see start of supplies from that particular plant?
The facility in terms of the Europe facility, our RoW facility is not a vaccine facility. It's an injectable facility. And the objective was because our current general injectable facility in Unit 4 is already like, I think, chock-a-block in terms of supplying to the regular market -- rather US market. So we wanted to have to flexibility in having capacity there as well as having dedicated capacity to focus on Europe and RoW market. So that would be ready in the next 12 to 14 months, Damayanti.
Yes, sir. My bad, I said it's a vaccine plant. Yes, it's the injectable plant. And my final question, you are doing some capacity addition in the injectable part for the U.S. market also. So are you broadly done with those expansions?
Yes, the US plant is already in production.
[Operator Instructions] The next question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one on the outlook for fiscal '22. If you could talk us about the main geographies. U.S., you had 50 launches. I just want to understand how should we look at the U.S. business facility? And maybe if you have a guidance for the rest of the business as well? That will be my first question.
Shyam, you know that we don't give forward-looking statement, but what I would only give you some sense of what is currently happening. As far as the U.S. business is concerned, there is a bit of erosion. We always budget for a mid-single-digit erosion, and we have seen that mid-single digit at this juncture. As we progress, we will recalibrate on how the market is performing. But as you are aware of it, that since we have several revenues in terms of the U.S. market, so we don't see -- that could be a minor blip in terms of the short term. We don't expect that to continue for a longer term. That is as far as U.S. is concerned. I would request Sanjeev to throw some light on Europe as well -- on Europe and RoW as well.
Yes. So in Europe, as you know, the vaccination is progressing very well, and we have seen about 40% of population being covered, at least received 1 dose. And overall outlook is quite optimistic as compared to the previous quarter. We think that the footfall and the patient -- patient flow will resume in a hospital for elective surgery as well as in pharmacy. So we are quite optimistic that there will be normalization of situation as the summer progresses. However, we have to keep it in mind that there has been a stocking up last year even in April. So some impact of that will be seen. In RoW, by and large, Canada and Brazil, there have been a lockdown situation and there also, the population will be covered 100%. I understand in Canada in a couple of months and situation should be normalizing.
Got it. Just stepping back, Govind, we're at USD 3.3 billion. So just from a growth perspective, do you think there are still enough avenues for us to grow? We have been probably executing better over the last 2 to 3 years related to, say, rest of the pharma. Just want to understand how should we -- is there any broad guidelines we can keep in mind? And which are the engines you think will help drive growth going forward?
You have to look at it in a way where, for the future, the company has been investing very well in terms of the differentiated portfolio. And I don't want to waste your time by running through the entire opportunity because you are aware of it starting from the peptide to depots to like vaccines to biosimilars to like I think their marked portfolio to like, I think there has been enough investment which has gone in. And the next 2 to 3 years, most of it would have reached critical stage of commercialization. And definitely, like I think we are absolutely convinced about like whatever investment which has been made. And we are confident about the return from those investments, which has been -- which has happened so far. Having said that, in the short, until we reach that particular fructification of those opportunities, we have enough opportunity in terms of the filings which has happened in terms of our orals and also injectable. You already heard that in the next 2 years, we would like to almost reach around $700 million. Over and above that, even in the general injectable, as you heard earlier, the European facility should get ready, which will also like add to the both top and bottom line. So we have enough over and -- on the last one, I think we are also expanding in API in terms of ensuring that we have certain large volume products, which will also like add the growth to the API as well. And you know about the PLI scheme. So we have enough engines, which are also available to continue the growth is what our belief is. But you are also aware that we don't give any specific commitment in terms of the future numbers.
Got it. And lastly...
In biosimilars, we are filing this year 2 products and next year 2 products.
So when will be the earliest biosimilar launch? Is it fiscal '22 or you think fiscal...
Second half of next year?
Fiscal '23, you mean. Okay.
Yes.
Got it. Last question is on the...
Calender year, it is second half, '22.
'22, not '23. No, no. He thought it is '23. It is '22 second half, he said.
Yes. Yes.
Got it. Last question, Govind, is on margins. So we have seen -- I recognized that R&D costs are going up, and you have called that out. But just from a perspective of, again, just looking ahead, how should we think about margins? Specifically, you're talking about injectables being a larger percentage of revenue. So I just want to understand how should we think about margin?
I think we've seen -- as you are aware of it, we always had maintained that we would like to first put our efforts in maintaining the current margin before we start talking about the expansion. While the margin expansion would happen as we start getting into more of these newer opportunities, which you had mentioned, in the interim, we'll be happy with the current margin is what I would say. Like yes, our efforts would be to improve it, but we also are conscious that we don't want to drop the margin as well.
The next question is from the line of Amit Goela from Rare Enterprises.
Sir, this question also relates to injectables only. Sir, like now when the injectables have become so large, like 400 million of generic and then 100 million of specialty injectables, which is much bigger than your competitor who is listed. Would you give some color -- would you be interested in giving some color on the margins of this business, one? And the second is, sir, like from the restructuring, it seems to be going on like which have been announced over the last 2, 3 quarters, like more or less, your injectable units, except Unit 4 seem to be all under -- coming under Eugia. So what are the plans over their, sir? Is Eugia consolidating a big thing over there, if you could throw some light over this?
Yes. So as far as margin is concerned, Amit bhai, they are not separated so far. So I'm not going to separate it right now and give a specific number for you. As far as your restructuring is concerned, I think we'll be discussing more on this in our next Board meeting, and we will take a decision because currently, we already merged that the Unit 16 and Aura Cure facilities with the step-down subsidiary of Eugia. That has been done to also achieve the operational efficiencies and also to get better focus on the business segment. But obviously, the Board will evaluate various options to ensure the value creation for all stakeholders is always approved. So that is something which definitely Board will consider. So we'll be taking it up in the next Board meeting, whenever it happens.
Okay, sir. And sir, I've got one more question. Sir, in terms of like we've been hearing like in terms of just like in Europe, it was said that a lot of elective surgeries and all got postponed and all, which will come back now. Would you envisage a similar situation in U.S.? And would you have specifically lost some business which can come back?
Yes. Swami would be able to specifically answer this. Swami?
Sure. Sure. Thank you, Govind. So thanks for the question. Yes, in the U.S., we had seen loss of elective surgeries because of the pandemic. We have seen a good improvement in the recent past, and we're also seeing some more traction in terms of the customers wanting -- the hospitals wanting to meet our territory managers. So we are cautiously optimistic on this.
Any number you would like to quantify in terms of how much you would have lost or anything like that?
No, all that I can tell you is that despite all the constraints, we have -- despite the constraints, we have done -- we have been fairly stable. That's all I would like to say.
The next question is from the line of Cyndrella Carvalho from Centrum Broking Limited.
Am I audible, sir?
Yes, ma'am.
Yes. Sir, I understand that the vaccination is improving in the U.S. and Europe region. So specifically, any observations like how far are we from a pre-COVID level? If you could help us understand that.
So I would put it this way, like I think the second half of the current financial year, we would prefer to have it. But as you would also appreciate that these are all predictions. These are all not based on a specific data saying that we will have it. This is all -- we would be happy if we can get that. That's what I would say.
Sir, any data comparison like footfall level or a prescription level that do we see it, anything that we have?
If you heard from what Swami said is that I think the footfalls have improved, but it has not reached the pre-COVID level. You might have heard that clearly. So to that extent, I think we are still waiting for that particular level of -- achieving the same mark like what we used achieve in the past. It has not been achieved is what has been clarified. We'd be happy to reach that level is what I'm also trying to mention, ma'am.
Okay, sir. And sir...
Govind, as on today, the antibiotic sale, there is no much movement, but we are -- that is the barometer, antibiotics, cold medicines and those things where we are having, we have not seen much movement. But definitely, we are expecting in the coming quarter onwards, it will surely improve and maybe the correct -- par with the before years, maybe it will take another 4 quarters.
Yes. Majority of the consumption would happen in winter, but the procurement will happen in summer. I think next 2, 3 months, we will have a clarity on where we stand, madam. At this juncture, it is fluid is what I would say, specific to antibiotics, as Mr. Reddy was explaining.
Antibiotics or any cough and cold medicines.
OTC also, yes.
Sure. That's helpful, sir. And sir, similar situation in Europe as well?
Sanjeev?
Yes, same.
Okay. And sir, if we look at our overall business, we -- ex Natrol also now, we will be having more share from injectables. And if we consolidate everything and if there is any opportunity that is going to be discussed, but how should we look at the business ex the injectable business, if there is any thought to it that you can share?
No, I'm sorry, ma'am, I didn't get you. Like I think when you -- can you repeat the precise question, please, if you don't mind?
Yes, sir. So I'm saying that we have consolidated most of our injectable business under one entity right now, and you're planning to do that in the process. So if we look at our business ex injectable, sir, is there any thought process to look at the business like that?
No. So obviously, madam, when actually injectable business is part of this entity and if you are trying to get it under one umbrella. So obviously, without that umbrella will be the existing business. So I mean what exactly I'm trying -- you are trying to drive at, I'm trying to understand that.
I'm saying is there any thought process in terms of how should we look at the ex injectable business for Aurobindo in terms of our entire consolidated entity? What would remain with us in terms of growth and...
I understand, madam. When we talk about currently the injectable consolidation, madam, I think we are talking about only as Mr. -- the earlier person mentioned the question, except Unit 4 at this juncture it has happened, like I think the only part we are talking about is Unit 4 at this juncture. But keeping that aside for a minute, we -- on the -- let us take for an example about the existing business. Other than injectables, we have a pretty decent size at this juncture. Apart from that, we have a large investment which has been made on the differentiated portfolio, which includes biosimilars, as Mr. Reddy was explaining about 2 products getting filed this year, 2 products next year. There is a pipeline of products which are coming up in biosimilars. We have vaccines. We have peptides, depots, and we have enough opportunities in the differentiated portfolio, which are not necessarily part of this current injectable part we are talking about. So we have enough opportunity to grow the noninjectable business extremely well is what I would say, at this juncture. Does it answer your query, madam?
The next question is from the line of Nitin Agarwal from DAM Capital.
Govind, on the Eugia business, has the business -- have we commercialized all the product approval that we got so far? Or are we still waiting for the critical mass to meaningfully sort of a growth -- I think you were waiting for certain number of critical -- number of product approvals to launch the business?
Yes. So overall, 10 harmonal and 63 oncology products are under development with addressable market size of more than $45 billion. As on 31st March '21, we have filed 41 NDAs, including 31 oncology. That is including the 13 orals and 18 injectable and 10 hormonal products. So we have enough headroom for us to continue working on that. And at this juncture, we have got approval for 15 products, and we have launched 13 products.
Okay. And sir, just on that point, during the quarter in the press release, you mentioned, you launched 19 products, including 10 of the injectables. I mean, in your assessment, has there been any impact or a meaningful impact of these launches on the current quarter's revenues? Or is it all of it is -- most of it is going to come through in the subsequent quarters?
I think you will start seeing more of it in the coming quarters.
Okay. And our bag lines have also got recommissioned again, Govind?
Yes, sir. Two quarters back itself, if I remember it right. Mr. Reddy, like I think 2 quarters back itself, we have pushed -- I mean pushed the bag lines into the...
Yes, yes, yes. Yes, it is.
Okay. And lastly, if I can squeeze in this one, on the vaccine bit you mentioned, Govind, that our capacities will come through in June. The other point you mentioned is you wanted extra capacity. You did mention that for the UB-612, our existing capacities are enough to manufacture it. So how do we -- I mean what are we envisaging for -- this is a large capacity that we put out, right, the new viral vaccine facility. I mean why just -- how do you see that getting utilized over the next few quarters and years going forward? Because I our own candidates are far behind, our own internal development candidates. UB-612 you mentioned that you can do it in the current property itself?
Yes. I think, first of all, our UB-612, even though like I clearly mentioned, our viral vaccine facility is getting completed in terms of all aspects of equipment qualification by June, and by July, the process validation would start, we don't need to wait for that facility for producing even the UB-612 because it can be even made in our existing PCV facility because this product is not specifically like I think it has to be -- it doesn't need to be produced in a viral vaccine facility. It can be produced in PCV facility or even an injectable facility. To that extent, I think that is not a concern at all in terms of utilizing this product into the existing facility. And as the volume grows up, it can move into the newer facility because please remember the fact that our PCV product, we expect the approval to happen somewhere in the middle of next year. And we need to start producing that product at least 5, 6 months earlier because it's a long synthesis, and we need to be ready. So we've got a narrow window in terms of utilizing the PCV facility. And as soon as the new facility is commissioned, we'll move into that facility. That is as far as UB-612 is concerned.From a capacity perspective, we had mentioned in the past like I think we had around 250 million doses, which could have been made in our existing PCV facility. And around 480 million doses can be made in terms of the new viral vaccine facility. And as of now, we are also looking at creating some more capacity if the need arises. But the most important point as to answer your question in terms of how those capacities would be utilized. I have already answered you for the PCV, how it will be utilized. The Vaxxinity itself currently are starting with 25 million, but they need large volumes as they progress. And by the time, I think if everything goes well, which I have to be carefully wording it because we are yet to get Phase II/III application approval from DCG. If everything goes well, we can even look at some launch -- I mean approval in India towards the end or the beginning of next year. Then in that case, I think that facility would be not only catering to the Vaxxinity's global market, it has to cater to the Indian market as well.
Okay. And if I can just add on that, you are not exploring opportunity for further utilization of the capacity for any other contract manufacturing services for any of the other vaccine manufacturer?
We are exploring as well, Nitin, and anything which moves positively, I think you'll hear it from us.
The next question is from the line of Harith Ahamed from Spark Capital Advisors.
On the ARV segment, we've seen a 50% growth this year, and you commented on how the transition from TLE to TLD is driving this. So once this transition from TLE to TLD is completed, how should we think of the sustainability of the current base of revenues in this segment? Will there be a decline once the transition is going forward?
Yes. First of all, I would like to clarify one important aspect of it, that you cannot see a 50% jump because of the simple reason, it is not that it has been growing and suddenly, you have seen a 50% jump because prior to the transition to Dolutegravir, for almost a period of 2 to 3 years, it had a drop in business. I think from the peak, it has come down. So from the drop-down business, it has now improved to this particular level. So over the next couple of -- at least starting from the current year and next year, you should look at more of a flat level or continuously like I think maintaining this level is what I would say, or minor growth. You cannot see continuing like I think such a double-digit growth and all, we are not budgeting for. We'll be happy if we get it, but we are not budgeting because we expect to maintain this business is what I would say.
Okay. And on the biosimilar launch, which you guided for in the second half of FY '22. So have there been any filings already or we will be making filings in the -- filings in the coming months? How should we read that comment?
First of all, I think my apologies in case if I had -- we have been misunderstood. What Mr. Reddy said is second half of next calendar year is what he was mentioning, which is -- which will be technically FY '23. So that's when that number would arise. Is that right, Mr. Reddy?
Yes, it is calendar year second half of FY '22 -- sorry, not FY '22, calendar year 2022.
Okay. So earlier, there was a guidance of making our first biosimilar filing towards the end of FY '21. So have we been able to achieve those time lines in terms of our first -- filing first -- or first few filings in biosimilars?
So the current status is we expect to file 2 products in the second half of this financial year. And that would -- that is what Mr. Reddy was talking about, those launch would happen in the subsequent year. Considering even the 7 months of fixed review and considering some buffer, I think definitely that approval will happen and we'll be able to launch those products. Apart from that, Mr. Reddy has also already guided, we'll be filing 2 more products the next year.
Okay. Last one, if I may. When I look at the operating cash flows for FY '21, there is a decline compared to FY '20 and despite our EBITDA being higher and our working capital cycles remaining almost flat. So anything that you would want to call out here in terms of maybe some of the nonoperating working capital items or any other reasons for a lower operating cash flow in FY '21?
Subbu?
Our operating cash flow during the year has improved really. If I recollect, for 30 -- for FY '20, that is 31/3/20, we made a total operating cash flow of around INR 392 million -- I mean, $365 million, if I'm right? But this year, we have made an operating cash flow of around $421 million. So the total PBT for the year is around, I'll just put the broad numbers, the PBT for the year is around $612 million, and we had a depreciation of around $143 million, and we paid tax and others around $168 million. So the net cash inflow during the year is around $587 million. And we have the working capital and the small investments in various subs -- I mean, joint ventures, et cetera. So the net cash flow from operations is $421 million. And this $421 million, we have bought over Eugia, the balance share from the JV partner, that's taken away $105 million. We spent a CapEx of around $247 million. We got a net cash from Natrol of around $435 million after the tax under the sale. We paid a dividend of around $32 million, but the total free cash flow available after everything is around $475 million. And net debt at the beginning of the year was minus -- I mean net debt was $359 million -- that is minus $359 million. Our free cash flow was around $472 million, and other investments we made around $43 million. So the closing cash, including the investment is around $113 million. So we are better actually. This year, we are better off because of one is that profits have improved; and second is compared to the last year, working capital -- last year also, we had a similar number for the working capital. We got the similar number. But overall, the cash part has improved really this year.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Sir, is it possible for you to expand a bit more on your biosimilar strategy in terms of which countries would you be filing? And what kind of products are these that you're working on?
Yes. I think the first 2 products we'll be filing for Europe, and it would get filed in U.S. later, a bit later. Because in Europe, we got a waiver in terms of a Phase III. With the extended Phase I itself, we are able to get an approval. That is the first 2 products would get into Europe. As far as the next 2 products, whatever Mr. Reddy had mentioned is actually for the global market, including U.S. and Europe.
Okay. Great, sir. And so what kind of -- are they immuno, onco or what kind of products -- are these monoclonals or...
Yes, onco-based biosimilars.
Onco. Okay. All right. I get it, sir. And the second question is, is there anything that you're seeing for the U.S. market in terms of alternate channels? And when I say that I'm referring to e-pharmacies or online, maybe people like GoodRx or Amazon. Is this getting to be a meaningful part of your sales?
Mr. Reddy...
Govind, do you want me to take that?
Yes, go ahead, Swami.
Yes. So as far as the e-commerce is concerned, we already launched some products in the e-commerce platform for the OTC products. And then we also have certain auction sites for some of the Rx. With regard to Amazon, we have initiated some discussions. And we are looking at wherever opportunity comes in this area, we would like to look at it. But at this point of time, it's primarily limited to the OTC products.
So what's the outlook for this, say, in next 2 or 3 years on e-pharmacies, GoodRx, et cetera, and Amazon? Can this be a $500 million kind of a product? Would this be a big channel for the U.S.?
I don't know if I can give you the number. But all that we know is Amazon Pharmacy has started selling the product through their pharmacy business, and we have to see how far that grows. They have started in the recent past.
The base amount in OTC even though is small, every year, it is growing at a 100% basis. And we are going to see that and we will reach in next 2 to 3 years in the OTC private label business. It may reach around $10 million -- $10 million to $15 million business come only from the Amazon and those people. And we're also listing their newer products in our new nutraceutical division, that's also we are listing. So things are very -- the most growth is coming only from those areas.
Okay. Great. Sir, if I may, last one from my side. Can you update us on your complex injectable products portfolio? How many filed? How many you're targeting to file as you go forward?
As I said in this complex injectables, there is at least 15, 20 products and so-called depot industry, which we are talking since years together and at last, we are going to file. We are going to take the 4 products exhibit batches in next 3, 4 months, and where filing may happen end of this year or end of this financial year. And majority of the -- majority of the critical injectable, the major products in U.S. planned some because of some specialty manufacturing lines required. Those things now we are taking the exhibit batch in the pending injections, those things. So a lot of things are happening in the injectable side in the specialty products, difficult to develop products.
The next question is from the line of Tarang from Old Bridge Capital.
A couple of questions from my side. If I look at the oral solids business in North America, ex Natrol and ex injectables, the business has grown about 8% on a year-on-year basis from about $1,060 million to about $1.18 billion. So just wanted to check, are there any specific drivers in this year, which drove this business? it's almost 8% constant currency growth.
Swami, you want to answer or shall I take it?
Yes, if you can, sir. I'm not very clear, Govind. Other than this so-called one, we have OTC business is growing 30%, 40% in this year. And we have -- our branded business is very stable. There is -- there may not be this year...
His question is specific to oral solids have had a 8% growth. Is it a specific growth? Or is it a general growth is the question, sir? Okay. I'll put it this way, sir. The answer is like I think it is -- on any given year, there can always be a few products, which can be a star, sir. It is not that it has been budgeted, it has just been planned. And you know that I think as far as oral solid business is concerned, there are -- one is the base business, which is a regular business, which happens. The second is the launch of new products which can happen. Apart from that, we also got something called new business opportunities. When somebody is not able to supply, that will come as an NBO. And typically, in NBO, sir, we have probably 10%, 15% better margin than the regular products what we can have. And the final one is something called onetime business, sir, like I think that is not on a contract or long-term basis. One time, they will come and buy it, and that again has a better margin than the typical products. So what happens is that because of the length and breadth of the portfolio, what we have, sir, certainly in the specific year, there can always be a couple of products, we'll get opportunities, and we'll be able to take advantage of it. Since we are also backward-integrated, we are able to that need across the entire spectrum, whatever I had mentioned.
Got it. My second question, your Europe business clocked about EUR 700 million in FY '21. It was largely flat if I were to normalize the pile up that happened in Q4 FY '20. So given how all the investments are already made in this part of the business, from a medium-term perspective, how do we see this? And how should we see it significantly helping in margin expansion?
Yes. So actually, you said rightly that the top line is definitely governed by the external market growth rate. However, below the top line, there have been significant growth levers, which are working. First is about switching the products to the lower- cost base like in India. And second is launch of the new products into our 11 focused countries. So during the year, we had improvement of almost 36% volume being sourced from India. So that is improving margin, plus we are talking about launching the new products. As you heard, we have more than 200 products under development in general category, which will be launched over the next 2 to 3 years. Plus, Eugia oncology, we have 55 products under development, out of which 5 have already been launched in last 1 year and 2 more being launched this quarter. Plus, we have not launched Ertapenem and the penem block is being expanded. So we will be launching and looking forward to that very soon. Last, you heard about the Vizag injectable, general injectable plant, which will be in operation and we are developing close to 50 products, which is going to be very helpful for our hospital task forces, which are there. And we have a very good market share in hospitals with products, which are sourced from Europe. And plus the biosimilar, which will be filed next quarter. So you can have a complete picture that we are moving towards higher-margin products and opportunities.
Okay. And the final question. So you have about $800 million of cash in books. Are there any inorganic opportunities, some bolt-on inorganic opportunities that you're looking at? How should we look at this cash moving forward from these levels?
No, as far as inorganic opportunities -- go ahead.
First of all, we don't have $800 million cash.
Tarang, this $800 million cash don't go by -- because these are all the numbers which are coming at the end of the quarter because there will be quite a lot of collection which will come on 27, 28, 29, 30 like that, which will automatically be used to repay, right? So $800 million is on a particular date. That is the thing, okay?
Okay. So on the inorganic opportunities, sir, we have a very clear defined way, which is in terms of like I think we will look at it in case if there is a market expansion possibility or any portfolio That's how we have done Profectus Life Sciences, and that's how the market expansion has been. We have done Apotex Eastern Europe as well. So I think we will definitely, like I think, keep continuously looking for these 2 defined ways. We are not looking at any large ticket acquisition at this venture. There can always be like medium ticket sizes, which can happen as we progress if there are some value add possible because suppose if there are some people -- set of people who are having a set of ANDAs, which will fill in the gap in terms of our existing portfolio, we'll be happy to do that. So such opportunities we'll definitely be happy about it. But we are definitely not looking at any large ticket for at least the next couple of years. Anything you would like to add, Mr. Reddy, on this?
No, wherever is required, we are investing wherever the good opportunities are there. And otherwise, we have recently in the branded one, also, we have invested, some unknown customer. And I think we will continue to invest in either, preferably, organic is less and more on the requirement-based in-licensing or the smaller. Wherever the gaps are there, we are going to invest continuously.
The next question is from the line of Prakash Agarwal from Axis Capital.
My question is on this restructuring exercise that you're doing on the injectable side. I understand you've taken Unit 16 to Eugia. But what about Unit 4, how do we think this asset, why not consolidate the entire injectable business?
We'll consider it at an appropriate time is what we said, Prakash. Earlier itself this question was raised and we had answered that the Board will consider this at an appropriate time. Even we had -- we had even mentioned, it will be considered in the next Board meeting is what we had said.
Okay. I mean that is part of the plan is what I'm trying to understand, right?
That is what is being evaluated is what we would say. We cannot say anything firmly until and unless the Board approves, Prakash. You would agree with that.
Okay. Understood. And secondly, on raw material side, we have seen some companies talking about increase in API prices for particular products. How are we placed for the upcoming quarters?
Yes. As far as API is concerned, I think you would appreciate the fact that external sales still predominantly is antibiotics; almost 60% would be antibiotics, 40% would be non-antibiotics. As far as antibiotics is concerned, you have heard enough from us. On non-antibiotics, selectively, we are seeing some price improvement, but not en masse is what I would say.
No, no. I meant from our gross margin perspective, I mean, we use our in-house, but we also import a lot of intermediates and API, right? So I'm trying to understand that how does the gross margin look from here?
If differs -- we cannot again mention it as en masse. There are certain products, I mean specific products, certainly because of the nonavailability of raw material or the raw material supplier has increased the price, there are certain specific products, they have increased the price as well. But you cannot generalize it is what I'm trying to tell, Prakash.
Okay. And last one on ARV side, you saw phenomenal growth with TLD, TLE moving. But how do we see the year ahead? Sorry if you've already answered.
We'd be happy to maintain the current level. We'd be happy in case if minor growth happens, but we don't expect a tectonic growth on the ARV portfolio for at least next 1 or 2 years. Because you would remember, Prakash, when the transition happened from -- I mean, into Dolutegravir regime, I think you remember, we had a drop in business for a couple of years and then only Dolutegravir started picking up. So we have reached now a stable level, and we'd be happy to maintain this level for at least 1 or 2 years.
Maintain the growth or maintain the absolute?
Maintain the business -- current business. We are not talking about maintaining growth.
The next question is from the line of Ritesh Rathod from Nippon India Mutual Fund.
I hope you haven't answered this one. I joined a bit late. Any thoughts on dividend payout given the high cash value from the book? And what you are going to accumulate in next couple of years?
I think you might have seen that we already announced that we are going out of PLA scheme. We're also looking at expanding injectable business by creating a capacity in Vizag, plus we are investing in API capacity creation. So after considering all this, I think we will always like, I think, decide about -- the Board will consider all this and then take the decision on the dividend. So obviously, like I think current level, this CapEx also has to be focused on.
Okay. So basically, it will be in line with the historical number is what you are saying or that will be regarding once this decision comes after a couple of quarters?
Yes. So my answer is that I think the Board will consider the current CapExs and they will decide. But one thing is like I think we have been fairly like, I think, distributing dividend and even slightly improved in the last year or 2. Like I think we would like to look at like, I think, maintaining -- ensuring that at least first dividend is payed and whatever improvement can be made always will be considered by the Board.
The next question is from the line of Surya Patra from PhillipCapital.
Sir, if you can just indicate about the -- you mentioned about commercialization of this new U.S. injectable facility. So whether it is ready for commercialization, whether it has completed all the inspection and all that? Or how significant this capacity would be as an kind of incremental growth driver for our U.S. injectable business? Any color on that, please?
So currently, the exhibit batches are being run. And as we progress, I think we'd be more color in terms of the size and shape on what it can take.
Okay, okay. No, why because -- the specific question was because we are having that constraint and that is why we have created 2 dedicated ones, one in U.S. for U.S. and in India for EU and -- as well as RoW. So that is why I was trying to understand that, okay, while there is a kind of double growth guidance that is there on the injectable side over 3- to 4-year time frame. But how significant this asset could be or would we require additional CapEx to achieve that? So that was my specific point. So that's why.
I don't think that we need to have -- other than whatever we have mentioned about the Vizag capacity and commissioning the U.S. capacity, we have that additional capacity for reaching the number what has been projected already, that is number one. But two is the currently U.S. facility, Mr. Reddy also may correct me if I'm wrong, like I think around 20 products exhibit batches will be run 12 to 14 months. So obviously, like I think this facility, the objective is -- I think this U.S. facility has 2 objectives. One is this is for more of high-value, low-volume product and also the mitigation for U.S. market as far as Unit 4 is concerned. So definitely, it's a very important capacity, and this will also add value. In terms of our larger goal of reaching the INR 700 crores, this will also play a role, apart from the Vizag facility and Unit 4 as well.
Okay. My second question is on the European business side, sir. So is it possible to share what is the portion of that EU business currently would be exported from India? And let's say, last full year, what margin that we have achieved for the European operation?
We crossed about 50% of volume sold in Europe being sourced from India now. And we have a double-digit percentage in EBITDA margin in European business on the whole?
Okay. Sir, this margin indication, in the previous quarter, you had mentioned, I think, 15% the blended margin for European region. I think that was a kind of...
That was without Apotex. As you know, the Apotex business of EUR 170 million, that is a loss-making one. And we were earlier looking at like-to-like comparison, which was previous acquisition of Actavis for organic launches. But after the loss-making business of Apotex, which was close to 20%, we have again regained to double-digit percentage.
Okay. Okay. But sir, in fact, my another extended question on this Europe is that, see, from various studies that we are finding, this Indian export to Europe was one of the best in last 1-year period. And I think that was a kind of a trend reversal in terms of growth, Indian pharma expo Europe. It's been over last 1 decade kind of a very low single-digit kind of growing business otherwise. But now that was about the industry as a whole. But so far as -- so given the kind of strong export trend what we observed for the industry, our performance looks muted on against that. So -- and that is one. And secondly, any specific reason that we are seeing sequential decline in the European business?
First of all, as I mentioned in response to earlier question, Aurobindo Pharma exported volume increased by 36% last year in FY '21, okay? So when you are looking at the export out of India to Europe, it was definitely led by Aurobindo Pharma in terms of volume. And that was because we switched 13 products from Europe to India last year to a lower cost base and also 10 new products were launched. So totally 23 products were added to the portfolio. Now we are exporting close to 225 products to Europe. And that's why I said that whatever volume we are selling in Europe, now more than 50% is being sourced from India. And you are looking at only the India export to Europe, but we are sourcing another 50% of volume from Europe itself to sell in Europe. So that growth rate is separate. Now sequentially, if you are talking as well as Y-o-Y, first of all, the Y-o-Y basis, last year, same quarter, quarter 4 of FY '20, we had 26% growth in euro terms. And as you are aware that the markets are growing only about 2% to 4%. So that was because of the stocking up which happened in the COVID-related situation. You know that Italy and Spain were the first of the countries which were affected, and there was a high stocking that happened in February and March, and some country followed in April also. And out of 26% growth of euro terms, we expect that at least 15% to 18% were stock up. When you are looking at last year this quarter, EUR 207 million that we sold, close to EUR 37 million, we think it was because of stock up. And that's why the base -- real base was EUR 170 million. And this quarter, which we are reviewing right now, is EUR 177 million. So we have not lost sales. We have grown, if at all, slightly. Yes, it is below expectation, but then the market is degrowing. And in fact, I just reviewed normal patient footfall is not more than 7 out of 10 as compared to pre-COVID. So we expect that actually now Germany and other U.K. also, even though it's not part of Europe, strictly speaking, but they have already crossed 40% and 50% of the population in vaccination. It is catching up very well even in Italy and Spain and other countries. So we think that the summer is going to be coming back to very much normal. And we are optimistic that footfall will come back to normal, but we can say only as the time goes by.
Okay. And sir, if you can just briefly say about your antibiotics share in the overall European business and also similar...
I have a request, sir, like I think there are still 1 or 2 participants might have questions. Sir, if you don't mind, would we like to run it through Krishna later offline, and we can answer that, sir. I'm sorry about this.
Yes, yes, sure.
The next question is from the line of Mr. Nishid Shah from Ambika Fincap.
Govind, just a follow-up question on vaccine. You mentioned earlier that the trials are going on for UB-612 in Taiwan, and results are expected sometime in July, middle of July. Now with the revised guidelines of Government of India, if that trial is WHO-approved, can we use that trial data to start producing and selling in India also?
No, sir, because they have clearly mentioned the countries they will encourage in terms of U.S., Europe and Japan. And unfortunately, Taiwan is not part of the list, which would be accepted by the Indian government in terms of replicating their emergency usage authorization issued. But at the same time, they can always consider their immunogenicity data, which can save some time for us, but not -- they cannot give an emergency usage based on Taiwan approval.
So we will need to do a clinical trial out here, and that would take how many months according to you?
So I think the clinical trial, if you are talking about the full subjects, might take more time, but there are certain criteria based on that we can request for an earlier approval in terms of emergency usage authorization subject to triggering certain aspects, sir. Those are like part of that calculation. Like they say, n equal to 60 or 70. Once they reach, they can ask for emergency usage authorization. So that can happen earlier.
Right. So basically, it will take a couple of months before we start selling it in India. But in the meanwhile...
No, no, no, Nishid bhai, I'm not saying a couple of months it will happen. I'd be happy in case if it happens towards the end of the year -- end of the calendar year or beginning of next calendar year, I would be happy. So definitely, it will not happen in the next 2 months.
And what about WHO and the UNICEF-related sales? Because we have arrangement whereby we have India, WHO and UNICEF. So for that also, we'll need to do a separate trial?
No, you don't need to, sir. That approval is -- I mean they would give the approval once Indian emergency usage authorization is arrived. They will -- UNICEF and GAVI also can buy from this.
Okay. Okay. Understood. Okay. And they will be able to sell only in Taiwan, that's what -- once the Taiwan approval comes, right?
No, sir, what I mentioned earlier is based on the Taiwan approval, they would be applying and getting approval in certain other countries, which is willing to accept the Taiwan emergency usage authorization. That is they are planning to make some product and keep it ready and then they will increase the volume as they see more progress on the sale of the product.
So if I may ask which are the countries where they will be targeting or where they will be able to sell, Govind?
There are certain Central America, Latin American countries, they have mentioned, sir. I don't want to get into the specific country name because it might be confidential for the collaborators, sir.
Thank you. That was the last question. I would now like to hand the conference over to the management for closing comments.
Thank you all for joining us on the call. If you have any questions unanswered, please keep in touch with Investor Relations. The transcript of this call will be uploaded on our website, www.aurobindo.com in due course. Thank you.
Thank you. On behalf of Aurobindo Pharma Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.