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Cipla Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Cipla Limited. We have with us today, Mr. Umang Vohra, Global Managing Director and CEO; Mr. Dinesh Jain, Global CFO; Mr. Naveen Bansal, CFO, International Market and Investor Relations. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Naveen Bansal from Cipla Limited. Thank you, and over to you, sir.
Thank you, Rituja. Good evening, and a very warm welcome to Cipla's quarter one FY '23 earnings call. I'm Naveen from the Investor Relations team at Cipla. Let me draw your attention to the fact that on this call our discussions will include certain forward-looking statements, which are predictions, projections or other estimates about future events. These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainty, including the impact of COVID-19 that could cause our results to differ materially from what is expressed or implied. Cipla does not undertake any obligation to publicly update any forward-looking statement, whether as a result of new confirmation, future events or otherwise.
With that, I'd like to request Umang to take over please.
Thank you, Naveen. Good evening to all of you. I hope that all of you and your families are safe and well. We appreciate you joining us today for our first quarter earnings call for financial year '23. I hope you have received the investor presentation that we have posted on our website. We will shortly release our integrated annual report for the financial year 2022. This is our fifth integrated annual report and reflects our relentless focus on improving transparency, governance and setting best-in-class disclosure practices.
I'm pleased to share our quarter one FY '23 performance, which demonstrates strong commercial execution and continued investments in portfolio, sustainability and growth-linked initiatives. Coming to the key highlights for the quarter. As anticipated, the incidence of severe COVID infections came down significantly and seemed more manageable with routine medication during quarter one FY '23. Consequently, the contribution from COVID products has normalized. Despite the normalization, we have been able to drive strong core revenue growth through focused execution, operational efficiencies and maintaining high serviceability across our markets.
The overall revenue for the quarter was INR 5,375 crores, which is 2% lower than last year's reported base, and last year's reported base included a strong contribution from COVID products. Excluding the COVID portfolio from last year, the core revenue growth was a healthy 6% for the quarter. Our reported operating profitability for the quarter came in at 21.3%, which is tracking in line with the full year 21% to 22% range we guided to earlier. For the quarter our One-India business across the prescription, trade generics and consumer health businesses recorded a robust 9% year-on-year growth adjusted for the normalization in COVID portfolio over last year's base. The core growth momentum on last year's high base reflect the strong equity of our flagship brands across key chronic therapies as well as in-clinic excellence and our digital engagement.
Big brands in our trade generic business maintained a healthy scale and our digital engagement across the channel partners continues to witness seamless traction. Our global consumer franchise continues to witness strong traction across brands in India and South Africa. The contribution of our global consumer franchise now stands at 9% of overall supplier revenue for the quarter. We position to boost our wellness portfolio and diversify into the nutrition category we have acquired Endura Mass in July of this year. Including this acquisition, our domestic consumer business and the supply health is well poised to achieve an annualized INR 600 crore franchise, led by category expansion with new extensions, coupled with sustainable growth in the operating profitability.
Similarly brands with consumer potential sitting in our prescription and trade generics stable in India and the OTC franchise in South Africa continued to deliver robust performance. Our U.S. business continues to grow sustainability over the last year base with a steady momentum in overall portfolio and improved its contributions from our respiratory and peptide products. In line with the operating environment, we experienced modest price erosion on the overall portfolio, which is reflected in our run rates. We believe this impact will be offset by upcoming new launches scheduled for the later part of the year.
The uncertainties and challenges related to geopolitical conflicts and associated supply chain challenges continued through quarter one of this year, keeping procurement and freight costs at very elevated levels. We have mitigated this incremental -- these incremental costs and the ForEx downside to a certain extent while the price hikes reflecting the strength and nature of our brands and business. Our API numbers for the quarter reflect normalization in scale. Last year, we spoke of a profit share on the commercial supplier from API to a partner, a good share of which was recognized in the previous year's quarter. This is also reflected in the operating profitability for the quarter at the company level, which I will come to in a bit.
Our reported gross margins after material costs stood at 62.3% for the quarter, it was broadly in line with last year's figures. The gross margins for the quarter have baked in higher procurement rate and ForEx to the extent of 170 basis points, which was offset by calibrated price hikes as well as the benefit of decline in the low-margin COVID portfolio. Total expenses, which included employee costs and other expenses stood at INR 2,207 crores, declining by 6.6% on a sequential basis.
Employee cost for the quarter stood at INR 956 crores, an increase by 7% versus the last year's quarter, mainly driven by increments. The other expenses, which include R&D, regulatory, quality, manufacturing and sales promotion are at INR 1,252 crores, declining 15% sequentially driven by lower R&D spend, judicious promotional and growth-linked developments. Total R&D is at INR 274 crores or 5.1% of revenues. The absolute trajectory remains in track with assets progressing in clinical trials and other portfolio developmental efforts ongoing.
Reported EBITDA for the quarter was at INR 1,143 crores or 21.3% of sales. On adjusting the normalization in the COVID portfolio and the API profit share from last year's base, our core operating profitability for the quarter grew by 12%. As alluded earlier, the reported 21.3% EBITDA margin has absorbed 170 basis point impact of elevated cost base as well as our ForEx changes to deliver higher margins than last year. The 21.3% tracks closely with our guidance of 21% to 22% range for the full-year '23.
Tax charge for the quarter stood at INR 268 crores, and the effective tax rate was 27.5%. Profit after tax was INR 686 crores at 12% -- As of 30th June, our long-term debt stands at ZAR 720 million in South Africa and $7 million in Uganda. We also have working capital loans of $49 million, EUR 3 million, GBP 3 million and others, which acted natural hedges towards [indiscernible]. We are driven by the relentless focus on generating cash and are continuing to focus the discipline on -- rigorous discipline and cost. We continue to be appropriately hedged for key global currencies as per our policies.
Coming to detailed updates for the quarter by market. Our One-India core portfolio, excluding the COVID products as we mentioned, grew by 9% over the previous year. The branded prescription business demonstrated a 9% growth and we continued to maintain healthy ranks and market share in key therapies. The consumer health business, as we mentioned earlier, is now EBITDA positive, and we wish to grow this sustainably in the coming quarters. There's been very strong sharp consumer insighting and strong on-ground execution in this business.
Over the last few years we benefited from our strategic partnership with GoApptiv for digital solutions in China. With our incremental investment, we hope to further widen our patient reach via end-to-end brand marketing and channel engagement for the Tier 2 to 6 times. I'm also pleased to announce our investment at Achira Labs, which is engaged in development and commercialization of point-of-care medical test kits in India, this partnership will propel Cipla's entry into the POC diagnostics and AMR space through the design, development and manufacturing of microfluidic-based technologies, which increases patient access to innovative, affordable and quality diagnostic solutions.
Coming to U.S. generics and lung leadership, the U.S. core formulation sales for the quarter were $155 million and registered a growth of 10% on a year-on-year basis. We continued to manage healthy market share in our respiratory products despite price erosion. I alluded to earlier that our DT and respiratory franchise continues to perform well and grew by 22% over last year, and we have now reached a top 3 rank in terms of market share in the generic respiratory space. From a launch perspective, we have geared up for some of the upcoming complex launches and closely working with the USFDA and approval time lines.
On the pipeline front, clinical trials and respiratory assets and filings on the complex generics portfolio, including our peptide injectables are on track. There is a slide in the investor deck that will give you more details on the progress of our key assets across the respiratory complex generics and peptide injectables. During the quarter, we had a routine pre-approval inspection at Indore for our -- for enacting ANDA file from the site. We received 2 minor observations and we have responded to the FDA. For our Goa plant, we continue to work with the USFDA on inspection time lines.
Coming to our SAGA business, which includes South Africa, Sub-Saharan and CGA, the overall SAGA region declined by 10% on a year-on-year basis in dollar terms. The South Africa private business experienced muted primary sales growth in Q1 FY '23, which is expected to recover in the coming quarter. In secondary terms, strong demand continues with the private market outperforming our South Africa SAGA market outperforming the industry. We continue to maintain a third position with a market share of 7.4% and grew by 10.6% versus 7% of the overall market as per IQVIA MAT May 22. In markets outside South Africa, the CGA business maintained its scale, while the Sub-Saharan business growth was driven by traction in other -- across region terms.
Our international markets business grew by 18% year-on-year in dollar terms across emerging markets in Europe. The growth numbers include the benefit of last year's low base where we experienced timing deferrals pertaining to in currency -- in country currency allocation for our Middle Eastern supplies. We continue to closely monitor the volatile operating environment for currency and demand headwinds and explore options to mitigate risks and protect our margins. Our DPM franchises continued to deliver strong double-digit growth, which helped offset the emerging market ForEx volatility and muted B2B demand that we have seen.
To summarize, we are witnessing strong growth in our One-India business despite the normalization in the COVID portfolio. We see strong and steady momentum in our U.S. portfolio and upcoming launches are on track. Our international markets business continues to grow despite ongoing geopolitical volatility and our reported EBITDA margin of 21.3% with the elevated cost base baked in tracks closely in our guidance of 21% to 22% range for the full year. On adjusting for the normalization in the COVID portfolio and API profit share in last year's base, our core operating profitability for the quarter grew by 12%.
Turning now to the outlook. We do want to accelerate our growth in the One-India engine with a sharp focus on building big prescription brand across therapies, driving accessibility to create generic brands for unmet ailments and sustained expansion in our portfolio and wellness categories in our consumer wellness franchise. We want to sustainably scale up our U.S. formulation business driven by the high serviceability of our current product portfolio and closely launching and monitoring upcoming high-value launches in the second half of the year.
Continue our execution on branded and generic portfolio brand building and portfolio inventions in our -- portfolio interventions in our emerging markets in South Africa business. Very strong cost focus, calibrated pricing actions and other interventions to navigate the inflationary headwinds that we are seeing on procurement and freight, and focus on regulatory compliance across our manufacturing facilities and implementing globally benchmarked ESG practices.
With this, I'd like to thank you for your attention and we request the moderator to open the session for Q&A.
[Operator Instructions] The first question is from the line of Saion Mukherjee from Nomura.
I have one -- interested if you can give some color on the peptide asset that you've launched in the U.S. in terms of pricing, market share and how you are seeing that ramping up. And secondly, presentation suggests you made around 5 filings on peptide. If you can throw some light on the opportunities and are these near-term opportunities, something around the time line and the size of these opportunities?
So I think as we look at the -- I'll come to the peptide portfolio later. But if you -- the current peptide product in the market is scaling up as per our plan. We had guided that we would be in the teens market share by the end of the year, and we are well on track with that. I don't want to comment too much on pricing at this stage. But our market share, we are ramping up fairly with our overall commitment that we have made for the product. On the rest of the portfolio, I can give you a sense that we have launched -- that we are -- we have 5 peptide products. And I think hopefully, one is probably either at end of the year launch this year or early next year. And then the other 2 are -- 2 after that are probably launches in late next year.
And do you think this would be meaningful in terms of opportunity?
I would think so. I would think that they would be fairly meaningful launches to our trajectory.
And my second question would be on generic Revlimid. So you are scheduled for launch in September in the second wave and where you stand on the approval?
We will expect approval, Saion, hopefully, when the market forms.
Okay. But can you confirm a September launch?
Well, I can't give you an exact date because this is a settlement agreement. But as we mentioned earlier, we will be -- when the market forms, we are expected to launch as well.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
Considering this quarter EBITDA margin 21.3% and then adjusting for the 170 bps impact, it's quite healthy at 23% and kind of a base quarter for FY '23. However, the EBITDA margin guidance still remains kind of conservative at 21% to 22% wherein we have a good niche launches lined up in second half. So any particular reason you're kind of conservative on this guidance?
Naveen and Dinesh, can you take that, please?
So just to answer there. See, the reason for that is the freight cost and the other procurement cost related increase. We expect it to continue for some period of time. So therefore, we want to -- and maybe they're expecting that launches will [indiscernible] for that increase. And therefore, we want to give guidance in this range only.
So the Revlimid and [indiscernible] launch are kind of factored into this margin guidance. Is that safe to assume?
Yes.
The next question is from the line of Prakash Agarwal from Axis Capital.
Just continuing with the previous participant's question, so the procurement in freight cost, which we've already seen in this quarter, right? I mean, incrementally, what I see from data is that Q-on-Q it is actually kind of dipping, coming down a bit. So what is holding us with a clear guidance of meaningful products in second half. And so if you could just give us more color, that would be helpful. Trade and procurement is what I understand is actually coming a little bit off versus quarter-on-quarter. And please correct me if I'm wrong.
Yes. So we are seeing that coming off. At the same time, we are seeing our R&D costs likely to increase in the quarters ahead. So there will be a balance on account of that. And because we have given a guidance, it doesn't mean that we will hold to making sure that we are within this range. It will be what the business mix of the -- what the business mix allows us to do.
In R&D, what guidance sir we have given?
R&D, we have said that we will likely be about closer to 5.5% to 6% for the full year.
And my second question is actually on the India business. So I understand ex-COVID, we have 6% growth. So 2 parts here. One is, is it pure core products or is it direct, indirect related products as well? And if you exclude that, would the growth would have been higher? And secondly, if you could split it, and call out that is it volume-led, price-led and the outlook for the same given that there is -- there has been a volume dip in the past, but any outlook on the volume improvement that one can see. Prices clearly known that everybody has taken price hikes. So, 2 parts...
So a couple of points to your question. I think on India, we are seeing -- so these India numbers are only excluding from last year, the COVID number -- sales of COVID products, which means Remdesivir; you know, Remdesivir, Molnupiravir, the antibody cocktail, those are not part of the numbers comparison. So the rest of the products that went up with COVID, those are very much part of our base. So it's only the COVID portfolio which is knocked off, not -- and normalized. So we see roughly a 50-50 percent breakup between volume and price in terms of growth.
And outlook, sir?
The outlook, as I mentioned, we will continue to grow higher than industry. And depending on where the industry grows, I think our growth will be higher than that. So we still think that core base business should continue to grow in India, which is if you take out the impact of COVID, et cetera, to the tune of about 10% in the full year.
For you or the market?
For the market.
The next question is from the line of Kunal Dhamesha from Macquarie Capital.
So first one on Advair. So we had the inspection, but any update on the filing, any queries that are pending or we have responded?
Yes, we have responded to queries on Advair. And it's being part of it. I think the inspection was also related to the Advair program.
So there are no currently any pending queries related to it?
Yes. Not that we are aware of.
And have you seen any pricing aggression in that market very recently?
Well, I think that -- let me answer by saying we believe that the last entrant has also gained some share. And so I think the market is -- we haven't seen any significant price aggression.
And second question on Lanreotide. Is there any supply constraints that we are facing in that product?
No, we do not have any supply constraint right now.
And for our targeted market share also, we don't see any issues?
No.
The next question is from the line of [ Vinod from Infra Capital. ]
Just a follow-up on Revlimid, most of the -- most or at least some of your competitors were planning September launch as cost and basic approval is in place, there is [indiscernible], is ther anything to read into it or is it a technical?
No, it's just that we don't comment on exact dates for the market, if it is a settled product.
And for Advair and Abraxane, do you still hold to a second half FY '23 launch guidance?
Yes. For Advair, we are hoping it's the earlier part of half 2 and Abraxane will be the latter half also, half 2.
And just one last one Lanreotide. What are you seeing in terms of [indiscernible] gathering in the market? Are you mostly giving any new treatment initiations or are you seeing some conversion from existing users to your product?
So it's difficult to plot that for us because beyond the sales to the channel partners, we don't have exact visibility of whether this is going to only the new patients or the old patients or a combination. So we will think based on whatever we've learned, it could be for both categories of patients.
The next question is from the line of Sameer [indiscernible] from Morgan Stanley.
It was a pleasant surprise to see the pipeline slide. And even more pleasantly surprised to see 5 peptide products already filed. So good job done there. Just a couple of questions on this. For the first 2 or 3 launches that you talked about, can you help us with the addressable market, a) and b), are these patent protected or are you limited by your own approval to enter the market? And c) related -- I mean, do you see a generic competition there or do you think you will be the first entrant in these first 3 products?
So Sameer, for a few of those products, we know we are not first, but the addressable market is fairly sizable for 2 or 3 players to exist together. We think there could be 2 or 3 players in each of these markets. I don't think we are first in any of them, frankly. So I think that's the -- that's what I'd say at this point in time. I think the market is fairly large. I mean, for any peptide, for the ones that are there, I think it will not be uncommon to see our product in the $35 million to $50 million range if executed well. I think on the exact question of -- sorry, what was your third question, Sameer? It escaped my mind. I was on a flow trying to answer it, and then I just lost track of it. So you asked me about the addressable market, you asked me about whether the competitive nature, whether we'd be first, what was the third one you asked?
Are these patent protected today or...
Yes, sorry. Yes, so I think one of them is, I know for sure, has lost its patent. The other 2 have some patents which probably from what we had -- from what we understand will go -- have either gone off and a few of the remaining will go off in the next year.
And also for your partnered integration asset, I think it's -- the size says that it was filed in 2017. So why is it taking so much time?
There were queries that the agency had, Sameer, on it. They were not completely satisfied from what we've heard from the partner and for which the partner had to do additional work and has filed and resubmitted that.
And it still remains a relevant opportunity or has it shrunk over time?
I think the market stays relevant even now. There is no generic entrant on that particular product.
And one final is, any update on Abraxane? I think you were also expecting FDA inspection for that product.
Yes. I think we are hoping that there would be an inspection soon because in terms of -- when we make a list of what we need to do, I think we've addressed significantly most of the items on the product, but the inspection is critical for it to come in -- for it to be launched.
The next question is from the line of Nithya Balasubramanian from Bernstein.
I've got a couple on India and one quick one on the U.S. So in India, Umang, several of your peers have announced that they're actually adding people on the ground? Any plans to do so for Cipla? And the second question on India is, we are now seeing a lot of these diabetes brands lose exclusivity. Cipla actually licensed a bunch of branded DPP4 and Hcl 2 in the recent past. So now that there is competition from these generic brands, how do you see Cipla being positioned to grow in diabetes?
So I think on diabetes, Nithya, let me take that one first. I think it's pretty clear. We've actually not [indiscernible] -- we don't have a [indiscernible]. We were never selling [indiscernible], we didn't have it licensed from any innovator. So for us it's an opportunity. At the same time, having said that, several players have launched on it, actually more than several launched on day one. So we continue to stay extremely excited about what the potential for diabetes is because also our relative size is significantly lesser. I think on the other, we are taking calibrated costs. In some cases, we are going ahead with the partnership with the ability to stay in the market even after the patent expires with potentially our own product in -- with the same brand name, et cetera, or we are finally having conversations with the innovators to stay relevant in the category. So I think both options are open.
On the India field force, yes, we are expanding, but our expansion news are not big news in terms of numbers. What we try and do is look at pockets and we don't have a one -- we sanctioned x number of expansion per year. We actually are beginning to look at more India's pockets because I think the expansion thesis for some territories plays out very well. So for example, as health care deepens in Tier 2 to 6, we think there's a lot of expansion potential in, let's say, in certain markets, in UP, in certain markets in Tamiladu, as against -- and an overall team to experience in source in a particular division across the country. So we're taking those views. And I think we also have -- I think last year also, we had expanded a set of people and this year also we will expand, but won't be out of one big announcement and how many we would expand for the full year.
Umang, one quick follow-up on your diabetes response. I think my question really was we had licensed Linagliptin and Empagliflozin. We now see lesser potential for these products now that there are competing products in the same class that are genetic. And my second question on the U.S. was on the pipeline slide, you have a complex inhalation assets right on top, which is approved. I'm assuming this is not as you draw your -- any of the other assets you have in the market. If it's approved, can you talk to us about what product this is?
Sure. I think, Naveen, you can provide clarity on what that asset is specifically, but let me just take the diabetes one. So Nithya, on that one, we're very clear. I think if we feel that the potential for a particular category class is diminished, then we would have the conversation with the branded company to either return the asset or continue to sell it with modification, et cetera, in terms. So that's where we are having those discussions. And the overall objective should be that we stay relevant and competitive in the diabetes category. Naveen, you want to clarify on the asset?
Yes, Umang, we'll come back on this. We will double check on this and come back.
The next question is from the line of Kunal Randeria from Edelweiss.
Umang, the first question is the domestic grade generic business. For the last couple of years, we've definitely seen quite strong growth. But now we are seeing a few more players have entered. So I just would like your thoughts on how you see this market evolving in the next couple of years and where does Cipla stand now, now that you've built a critical scale here?
I think we are very bullish about this market, especially as health care deepens in India. And I think the other players who've entered are also -- we know that they are also doing well based on competitive intelligence that we've gathered. But we've continued to grow significantly higher than market in the trade generic category. And I think it's probably because of our legacy of the business that we have here. So it's very strong growth that we forecast for the trade generics segment, and we believe that deepening of health care will yield in that.
So I mean, should we sort of assume that this will grow faster than the branded business?
Well, it historically has. Historically, it has grown either at the same level as the branded business or marginally higher. And I think that trend should probably continue.
And my second question is competition in Advair. I believe Lannett's files have been delayed to 2024 now. So any other players are you aware of that could maybe come sometime next year after you?
Don't have color on that. I'm not that we are aware of right now based on what we have reviewed, but we don't have full color on that.
The next question is from the line of Nitin Agarwal from DAM Capital.
Umang, on the -- when you talked about the complex launches in the second half of the year, I mean, can you just put a number to the number of potential launches you're looking at? We've talked about 3 of them. Are there more than 3 or is there the 3 that we talked about at various times in the conversation?
I think we put out a detail on which are the significant ones expected. I think that's the reason that those 3 had come out. There may be one or more launch, but they will not be meaningful in terms of trajectory elevation.
And likewise, would sort of put it a little forward, do you have similar launches of similar sort of size even in '24?
I think some of the peptides that we have mentioned will come in that range. But -- yes, and there are a few others also depending on timing. There will also be a full year effect.
Secondly, on the biosimilars bit, is there any sort of update on your thoughts on how you're looking about this opportunity now?
Yes. So biosimilars, we've actually progressed, one asset is moving forward and -- between Kemwell and us, and I think we're very happy about the progress of that asset, but it's a long-term out. It's not a launch in the next -- it's a launch only after the next 5 years, 5 to 6 years. So we've got the asset early. We believe it's a good respiratory biosimilar to be after. And we are also developing products for the India biosimilar franchise. And I think that's -- those are the 2 categories that work is on. A second product for the regulated markets will be shortlisted very soon.
[Operator Instructions] The next question is from the line of Krishnendu Saha from Quantum Asset Management.
The good launches that are coming up in second half. Just wanted your thoughts, the U.S. profitability, how's that compared to the last year, is it improving significantly? And as we come through the -- is it really about the -- it's going to be about the average of the company? The first question is, could you throw some light on that, please?
Naveen and Dinesh, would you like to take that?
Yes, it is in line with the company average.
So it is in line. But in H2, if launches do come through, so they will be better than the company?
No, compared to last year it is in line. And I think when the launches happen, then it will become in line with the company.
And on the partner products, when you talk about partner products, what kind of economics do we look at it, are we [indiscernible] the bill for us or the partner, how does it work for us? Could you show some economics around that please. And just on one thing on the financial. The other income has increased drastically this quarter. I just forget the number, the INR 106 crores -- so could you fill me up on that please. These are 2 questions.
I can take the lead and then Dinesh can comment on the other income. We don't divulge the economics for the product. But I think it's a fairly healthy share of the product economics. The product is made at Cipla. So there's -- the economics are fairly healthy from our perspective. And it's in line with what the company -- what the industry averages for these type of products are. Maybe, Dinesh, do you want to comment on...
Just whatever we will partner will be manufactured from our facilities, be it indoor be it -- is that one manufacturing thought?
No, it is manufactured at our facility. Product is manufactured already at our facility, yes. Dinesh, do you want to comment on the other question?
No, the profitability -- deal economics, I think it is better than a normal purely in-licensed product. As you rightly said since it is going [indiscernible] again, we are partnering in the development process also, the deal economics will be much better. But we can't diverse actual numbers, it is vary with the product.
I can't understand. I'm talking about the other income. It seems to be a little bit higher than the quarter-on-quarter numbers, so I'm just relating to that fact, if I'm right.
I think it may be more accrual specific. Dinesh, the deltas on account of what specific -- how much is the -- so you're comparing this with quarter 4 or quarter...
I think I'm comparing it quarter 4 -- nothing big, but it just caught my eye, so just...
It is mainly on account of the -- there's an exchange in the quarter 4 because of the depreciation -- we had an exchange loss. So this time it was higher compared to what we gained on our USD. In the current quarter, we have an exchange gain, which is a positive number. And also the finance income is slightly higher than the quarter 4.
The next question is from the line of [indiscernible] from Credit Suisse.
My first question is on Albuterol. So in this quarter, so 1Q FY '23, have you seen incremental price erosion due to the entry of a new player versus 4Q '22 or the ramp-up of a new player?
Yes. Actually, for Albuterol, every quarter we see a little bit. So we've seen it in quarter 4. We saw it in quarter 3 as well. And I think there is incremental price pressure every quarter, actually. But it's not deep discounted erosion, if that's what your question is.
Okay. But -- so my question was mostly around -- so in 1Q FY '23 versus 4Q FY '22, so has the erosion been higher compared to what you would usually see quarter-on-quarter or has it been at a similar trend?
I'm not sure -- well, yes, there is erosion. There is erosion, but I haven't been able to look at the numbers to see whether it is higher or lower or as a trend. But every quarter we see some erosion, a little bit always happens.
And second question is on R&D. So this quarter was a bit lower than our full year guidance. So when do we see it increasing? Does it increase uniformly over the next few quarters or will it be more back ended?
Yes. I think as our clinical trials begins to enroll more and more patients, I think you will begin to see this peaking out in Q2, Q3, Q4.
[Operator Instructions] The next question is from the line of Tarang Agrawal from Old Bridge Capital.
Just further to one of the earlier participant's questions on the semantics of partnered products, so basically what I wanted to understand is how is it really flowing through the P&L and the R&D. So for instance, if it's a partnered product and if development costs are being shared, then clearly a portion of it will be reflective in R&D when the product is being developed. But as the product gets an approval and the commercialization takes place, in case the product is being manufactured by the partner, do we buy the product and then sell it so we will have a revenue and a cost line item or do we directly sell it and there's a percentage of profit coming in which will directly flow to EBITDA against our R&D investments?
Which specific product are you asking about because then I can give you an answer.
Yes. For instance, the peptides portfolio, I believe the peptide portfolio, the manufacturing is happening with a partner with obviously -- so how would it I mean the...
We would buy it. So the cost of it would come into our gross margin and the sales would be captured in our sales.
Against whatever we would have invested in terms of our R&D in the earlier period, right?
R&D was anyways is charged off.
Correct.
So a lot of the R&D is charged off. Whatever milestones we may have paid the partner, that is anyway getting amortized over the usual life of the asset.
And our arrangement with the partner is on a fixed procurement -- fixed price procurement or does that vary as the marketplace behaves?
Well, it's a mix of both. It's a price that is set. And then on top of that, there is a share in that happens.
[Operator Instructions] As there are no further questions, I'd now like to hand the conference over to Mr. Naveen Bansal for closing comments.
Thank you, Rituja. Thank you so much, everyone, for joining us on the quarter one FY '23 earnings call today. In case you have any follow-on questions, please feel free to reach out to the Investor Relations team here at Cipla. A very good evening to all of you. Thank you so much for joining.
Thank you. On behalf of Cipla Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.