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Cipla Ltd
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Ladies and gentlemen, good day, and welcome to the Cipla Limited Q2 FY '22 Earnings Conference Call hosted by Kotak Securities Limited. [Operator Instructions] I would now like to hand the conference over to Mr. Kawaljeet Saluja from Kotak Securities Limited. Thank you, and over to you, sir.
Okay. Thank you, Stanford. Good evening, everyone. On behalf of Kotak, I thank the Cipla management for giving us the opportunity to host their 2Q FY '22 earnings call. From Cipla, we have with us Mr. Umang Vohra, Managing Director and Global CEO; Mr. Kedar Upadhye, Global CFO; and Mr. Naveen Bansal from the Investor Relations team. I now hand over the call to the management team for their opening remarks. Over to you, Naveen.
Thank you so much, Kawal. Good evening, and a very warm welcome to Cipla's quarter 2 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 discussion 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 uncertainties, including the impact of COVID-19 that could cause our actual 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 confirmations, future events or otherwise.With that, I would like to request Kedar to take over, please.
Thank you, Naveen. Good evening to all of you. We appreciate you joining us today for the second quarter earnings call for the financial year '22. Before I begin, I hope that all of you and your families are safe and well. These are also festive times ahead. And I always believe that pharma is an amazingly complex sector, and you all keep doing amazingly good work, a lot of hard work during the course of the year. I'm always impressed by your commentary and your direct and indirect push to management teams to improve the performance. So I wish that you get to spend decent time with your family during this festival days ahead.Coming to the quarter, we are pleased to report historically the highest quarterly revenue with a 10% Y-o-Y growth. Our continued regard on cost and operating efficiency while continuing our focus on growth-linked investments have helped us deliver robust EBITDA margin ahead of 22% for the quarter. We expect these efficiencies to continue in the coming period as well. The 10% growth was driven by sustained momentum in branded and -- branded markets of India and South Africa and emerging markets.On a high base of FY '21 last year, the growth in One-India is impressive and is led by sustained traction across core therapies, both in prescription and trade generics business, despite significant moderation in the COVID contribution. EBITDA percentage of 22% ahead is in line with our guidance and includes inventory provision being appropriate for the COVID inventory that we are carrying.Our working capital levels reflect our commitment to ensure the continued serviceability of supply given several headwinds in the sourcing environment. Our U.S. revenues continue to see desired traction led by albuterol and now with arformoterol in quarter 2. We also witnessed steady momentum in the select products, which positions the portfolio to better respond to price erosion seen in the rest of the portfolio, and our free cash generation and operating efficiencies continue to drive our strong net cash position.Coming to the financial performance, we want to highlight certain specifics. At a company level, the contribution of COVID was a little more than 5% for this quarter, adjusted for the same revenue growth of the company is at a strong trajectory of more than 10% on a like-for-like basis of last year. As alluded in Q1 call, while our emerging market business has recovered during the quarter, select products in our European operations have seen some bit of competition.Similarly, tender flows in SAGA was also partly impacted by some delays in the order confirmation from clients. For the quarter, overall income from operations stands at INR 5,520 crores. Gross margin after material costs were at 61.3% for the quarter. While the gross margin was in line on a year-on-year basis, the sequential decline of 100 basis points is attributable to change in mix on account of normalization in the COVID portfolio and normalization of the API profit share with some inventory provisions that I referred to earlier.Total expenses, which include employees costs and other expenses, stood at INR 2,157 crores, increased by 3% on a sequential basis. Employee costs for the quarter at INR 878 crores, it declined by 1% on a sequential basis. The other expenses, which include R&D, regulatory, quality, manufacturing and sales promotion stood at INR 1,279. They increased by 6%, largely driven by sales linked to variable expenses that we incurred for various geographies. Total R&D investment for the quarter is about INR 274 crores or 5% of revenue. All priority projects continue to be on track, and we expect R&D spends to respond to the clinical trial program going forward.Reported EBITDA was INR 1,226 crores or 22.2% of sales. The effective tax rate is 28.5%, and we reported profit after tax of INR 711 crores or 12.9% of sales. As of 30th September, our long-term debt stands at ZAR 720 million. These are for operating requirements at South Africa. During the quarter, we have prepaid the outstanding $137.5 million in merger and acquisition debt, but that will completely repaid all the loan for the U.S. acquisition. We have working capital loans of $74 million, ZAR 337 million and AUD 5 million, which act as natural hedges towards our receivables.Driven by our relentless focus on cash generation and regard on cost discipline during the quarter, we continue to be a net cash positive company. Outstanding derivatives as a hedge for receivables as of 30th September are USD 155 million, ZAR 666 million, AUD 17 million, GBP 7 million and EUR 6 million. Further outside in [indiscernible] hedges for payables as of 30th September are USD 11 million and EUR 1 million. We have also hedged a certain portion of our forecasted export revenues. Outstanding cash flow hedges as of 30th September are USD 280 million, ZAR 460 million and AUD 9 million.We have -- as you are aware, we had announced a scheme of demerger for our consumer health business and the India-based assets of the U.S. business. We continue to believe that this scheme will simplify the structure, maximize efficiencies, and it has the potential to unlock value for all the stakeholders of the company. We did an extensive assessment, and we understand that certain changes in the regulatory environment have made it feasible for the proposed transfer to be done quite efficiently through an alternate option and without the need for a scheme of arrangement. Accordingly, in the meeting today, the Board has approved not to proceed ahead with the scheme and to examine transfer of these businesses by way of a more efficient option.To close, we saw a robust momentum across portfolio and geographies for first half. Growth levers in the subsequent quarters will include continued momentum across all regions, robust traction in our respiratory franchise in the U.S. and continued launches. And thirdly, reverting businesses to sustain strong execution and driving expansion in the operating profitability.I would now like to invite Umang to present the business and operating performance. Thank you.
Thank you, Kedar. I hope I'm audible. I would like to wish all of you and your families good health, and I hope that everyone is safe and well. We continue to support the government efforts on ensuring availability of our COVID and other life-saving products. We are pleased to see the robust vaccination rates in the country and are happy to report that 89% of our colleagues across our operating geographies have taken at least 1 dose and 59% have been fully vaccinated.Coming to the strategic updates and operational performance, I'm pleased to see continued delivery reflected in the robust performance for the quarter driven by our branded markets of India and South Africa supported by the unlocking of our respiratory franchise in the U.S. and traction in emerging markets despite geopolitical headwinds. Our EBITDA margins for the quarter came in at 22.2% and continue to reflect our commitment to maintain the trajectory in FY '22 despite significant moderation in the contribution of COVID versus the previous year.In India, One-India strategy continues to see seamless execution after delivering over $1 billion for our One-India franchise in fiscal year '21. We are tracking towards delivering $1 billion of revenue for a branded prescription business in India. On a high FY '21 base, which included COVID products, the One-India business grew 16% year-on-year driven by robust traction in core therapies despite expected normalization in the contribution from COVID product levels that we witnessed in the earlier days.The revenue growth of 25% adjusted for core COVID products over quarter 2 of the previous year stands a testimony to the strong on-ground engagements with health care professionals and the strength of our large brands. We believe and are hopeful that this traction is likely to continue for the rest of the year as COVID-19 cases respond to the vaccination drive across the country.The branded prescription business continued its strong performance during the quarter, driven by sustained volume growth across almost all our therapies. Our acute and respiratory nebulization businesses are also tracking well. As per IQVIA MAT September '21, we continue to maintain ranks and market shares in our key therapy areas across respiratory, urology, anti-infective and cardiac.Over the last 2 years, we have forged strong partnerships with several [ MMC ] organizations for the strategic widening of our therapy base with specialty offerings across cardiology, antidiabetic and the oncology franchise. With an ambition to increase access to innovative medicines and enhance our chronic portfolio, we have also recently announced a partnership with Eli Lilly for the diabetes franchise. This is, of course, subject to regulatory approvals. The trade generics business and consumer businesses have continued to deliver strong growth across flagship brands in respective businesses for the quarter.Coming to our North America business. The U.S. generics core formulation sales for the quarter were a multi-quarter high of USD 142 million, in line with our expectations for the sequential run rate. Select products like diclofenac, sertraline, escitalopram and esomeprazole have witnessed steady momentum, which along with albuterol, has helped in inching up the run rate and offsetting the price erosion in the rest of the portfolio.As per IQVIA week ending 8 October '21, we have clocked an 18% share in albuterol. And arformoterol, which we launched in the current quarter, has gathered about 39% share in the generic market. Difluprednate ophthalmic emulsion, which was also launched during the quarter is also tracking well in terms of the desired contracted share.We continue to maintain strong focus on the adequate supply of products and prepare for upcoming complex launches in the subsequent quarters. On Advair, we have responded to the CRL to the U.S. FDA, and we will continue to share the updates on progress on the file as we hear more. We have been in continuous communication with the FDA for the Goa plant. We are awaiting the inspection scheduled from the agency.Coming to SAGA, which includes South Africa, Sub-Saharan Africa and CGA, the overall SAGA region reported robust growth of 8% on a year-on-year basis in U.S. dollar terms. Our South Africa private business reported 20% growth over last year for the quarter in local currency terms. In secondary terms, we continue to maintain market rating growth of 8.7% versus the 5.4% private market growth as per IQVIA MAT August '21. The Sub-Saharan and CGA tender business, as we mentioned earlier, witnessed some delays in order confirmation from the plant.Our international markets reported 14% revenue growth year-on-year in U.S. dollar terms. Our emerging markets business rebounded after resuming Middle Eastern supplies, demonstrated strong performance in our direct-to-market businesses and from the contribution from COVID therapy products. We have witnessed incremental competition in Europe for the select category leading to lower-than-anticipated performance. We expect to offset some of these headwinds with traction and new launches in the subsequent quarters. During the quarter, we launched bevacizumab biosimilar under partnership in Spain to strengthen our oncology portfolio.Turning now to our outlook. We continue to strengthen our revenue streams with a differentiated portfolio, our product development capabilities and derisking the supply chain across the markets. We are witnessing emerging demand patterns across our businesses amid gradually recovering COVID environment. We are geared up to capitalize on the opportunities across the health care ecosystem to drive a robust portfolio momentum and strategic capital allocation.Our near-term priorities include the continued execution on the demand lever in the chronic and acute therapies; improvement in manpower productivity across the branded and generic markets of India and South Africa; active advancement on innovative consumer-centric products to accelerate the augmentation of a global consumer [ vendors ] franchise across both India and South Africa; continuing to lead and grow respiratory categories like albuterol and achieve our fair share in several other products that we are likely to launch; monitor our key filings and accelerate our global lung leadership aspirations; maximize the value opportunity in the U.S. complex generics, with continued launch momentum and manufacturing facilities in a state of compliance and control; and continue the high vigil on cost and cash management, operating margins and the return on capital employed.With this, I would like to thank you for your attention. I wish you a very happy festival season, and for those of us in India, a very happy Diwali, and will request the moderator to open the session for Q&A.
[Operator Instructions] The first question is from the line of Prakash from Axis Capital.
My first question is on the gross margins. I mean, you had a good growth across India and South Africa, all the branded and generic market, which has very good gross margins. In U.S., you are good market share across key products.Just trying to understand what has led to a marginal dip in the gross margins. Has the increase in raw material led by China or other factors affecting us? And what is the outlook on the same?
Yes. Prakash, there is some escalation on the Chinese source items, which was there actually in first quarter as well and some of that last year as well. I think incremental to the quarter is the provision that I referred to, some of the COVID inventory we had to add just based on the recordability. So that's the only thing which is incremental to the quarter, Prakash.
How much is that? Sorry, I missed that.
So about -- maybe you should take somewhere 80 to 100 basis points.
So this is nonrecurring, is what you're saying?
Yes. I mean every quarter, we will have to sort of keep making an assessment. As of now, our assessment based on the existing balances that we're carrying, I think we have taken this provision in the books.
So see, if we adjust for that, your gross margins were actually better than what you've seen in the past?
Correct.
Okay. And is there any outlook? How do you see it forward?
See, actually, if we go geography by geography, what we are driving is mix improvement, what we are driving is discipline on pricing and the best we could do to deal with some of the headwinds and I see a lot of headroom to improve for each business and at a company level.
Yes. So on a blended basis, it is looking not worse [indiscernible] what it was?
Yes.
Okay. Perfect. And my second question is on the U.S. So U.S., while you alluded to increase in market share, plus you had a couple of new launches where you've got very good market share, you see that Q-on-Q performance is pretty flattish. Any particular reason? Is there a base business price erosion which has increased? Or is this not converted into realization and it would be converted into upcoming quarters? How should we think about it?
No, I think, Prakash, here, the issue is that your price erosion is there on the rest of the portfolio. Our launch momentum is continuing to keep us ahead. I think we are one of the few companies which is recording a growth actually quarter-on-quarter sequentially. In the U.S., the growth should be higher when we have our new -- when we have the bigger launches coming.
Okay. Okay. And lastly, on Advair, is there any color which you can share or the progress?
Well, the agency we know is reviewing our file. We haven't expressly got any further communication from them.
Okay. It remains a fiscal '23 approval and launch?
Yes, that is correct.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.
First, on the biosimilar front, you have a good number of products now, which are like kind of out-licensed. But if you could throw some light in terms of the overall investment, which you would like to do in this segment in terms of manufacturing or product development?
I'm Sorry. Could you repeat your question, please?
So we have a decent number of products in terms of out-licensing in the biosimilar-s field. I would like to understand like if there are any thoughts on the investment in this segment in terms of manufacturing and/or product development.
We have recently announced a JV for the regulated markets in the world and overall biosimilar development. So that, over a period of time, I think the costs will come in for that. And the objective is to take a few products to the market. The rest of the partnerships we have are more commercial partnerships on biosimilars. So they are already in our numbers.
Got it. So in terms of like the number or the amount of investment which we envisage over the next 2 years?
I don't think 2 years will be significant at all because some of the products we are after are going to be launching after 4 years or 5 years. So I don't think the next 2 years will see that amount of investment, but it will gradually build up.
Got you, sir. And just secondly, anything further on Goa site?
I'm sorry. I could not hear that very well.
Anything further on Goa site from the U.S. FDA [indiscernible]...
Yes. Umang, the question is do we have an update on the Goa site? So to start, there is -- I mean nothing specific that we can give. We are in touch with the agency. Updates are frequently being sent. We believe we are in a good shape for the agency to inspect the plant, and we are working with them for a reinspection.
The next question is from the line of Foram Parekh from Choice Institutional Broking.
Sir, I just wanted to know like ex of albuterol, what would be the price erosion in our base portfolio in North America region?
It is not -- Foram, it is not across the historical percentage. It's still -- I mean, if I recollect, it used to be mid- to high single digits. At an overall portfolio, I think it is still at that level, but product by product, the trends could vary. And I think the price erosion in my view and my experience is always a product-by-product metric, which plays out.While we may mathematically add up at our overall business level, that's not how it plays out in reality, as you can guess. So I don't have any evidence to say that it is either significantly reduced or significantly gone up compared to the historical enrolling percentage.
Okay. So then we can assume that the new launches in albuterol would continue to mitigate the price erosion going forward?
Yes, that's true, mitigate and grow -- grow the base. Correct.
7Okay. And my second question is, sir, you had -- you had guided last con call that EBITDA margin for FY '22 would be about 22%. So do we still stand tall on that amidst the raw material price hike and China issues?
Yes. Our attempt will be to stay in line with what we spoke. There are headwinds, but there are tailwinds as well. And as I said, I think improved pricing discipline, mix improvement, whatever we could do on addressing cost base, I think all the levers are available for us to stay within our guidance.
Okay. And sir, last question, if I may squeeze in, please. So can you just guide on the CapEx side, what would be the incremental CapEx, if any?
The CapEx for the current year is in the magnitude of INR 800 crores to INR 900 crores or so for us. That includes investments for automating our manufacturing infrastructure. That includes a couple of API projects, a couple of new lines, capacity additions on reactors and maintenance CapEx and some laboratory -- lab set of costs as well.
The next question is from the line of Anubhav Aggarwal from Credit Suisse.
Umang, just a couple of questions. One is on the albuterol. I think 18% market share you mentioned on this out of the generic suppliers only, right? Not of the total market. Because IMS total shows 15%.
Yes. We have mentioned, Anubhav...
That is correct?
On the slide, we have mentioned 18.2% is between authorized generics and generic generics. In the total market, it's a little less than 15%. You're right, Anubhav.
Sure. So just 2 observations there. One is that the banks are not losing market share. So they are still about -- all banks put together are still about 20% share for some time now. And second, Cipla's share has been -- its good share at 15%, but it's been around a 15% now almost more than a quarter or so. Can you just comment on both the observations? When will Cipla start to show increasing share and by [indiscernible]?
Anubhav, I think this is a category where, frankly, all the shares that have been gathered by the 2 recent entrants are all from the brands only. I don't think that over the last 1, 1.5 years, the share that people have increased, I think brands have also lost share. There is one brand which does not have a generic alternative yet, and I think that brand may have also a strategy for holding on to the share in the marketplace. So -- but I think the gradual -- the brands will gradually begin to lose share. I think the initial uptick in the shares has happened, and I think that from a simpler perspective, we have guided earlier also that we will see a gradual ramp-up from here on, on shares. You know, Proventil used to be a 8% to 7% -- 8% category. It's now 15%, 16% category of the total market. And we kind of see that this will continue to inch up but gradually.
Sure, sure. That's helpful. And the second question is on the margin expectation for next year. I'm not asking for guidance there, but if let's say, Advair approval for us get delayed, for whatever reason, right? So let's say, would you still think that this margin trajectory for the company, 22.2%, can continue? With or without Advair?
Yes, I'd like to believe it. I mean I think the big one there would not be so much whether the core business margin would continue, because the core business stands today without Advair or anything else. But it's also a combination of how our R&D spends begin to ramp up with respect to the new respiratory products that will go into clinical trials. So I think there could be 1-odd percent of R&D increase and some operating efficiencies balancing that out, but by and large, we are committed to this strategy.
Sure. And just last question on the COVID run rate. So we were doing about INR 100 crore a month COVID run rate in second quarter. By and large -- would this run rate would have come down to less than INR 50 crores per month now with much lesser COVID cases?
Yes. Broadly, for India, yes, you are right. Our COVID run rate is probably down to that -- I mean, it fluctuates month-on-month, so there's no real -- I can't say it's INR 50 crores per month or INR 60 crores per month because it's now become more localized as outbreaks happen. But yes, we are significantly lower, significantly lower versus last quarter as well as actually versus the previous year quarter on COVID.
Yes. I mean just some numbers about the model. I think especially India revenue has seen a 60% dip between quarter 1 to quarter 2. So if India was INR 150 crores per month, now quarter 2 is only INR 60 crores per month. And you have to see how that stays in the balance of the quarter. So that's the India COVID revenues for you.
And some COVID will always stay. [indiscernible] disappear. Some part of the revenue base will stay.
The next question is from the line of Kunal Dhamesha from Emkay Global.
So the first one is on the other expenses. On a sequential basis, if I exclude the R&D, the other expenses has gone up by around INR [ 67 ] crores. But do you think that the INR 1,000 crores run rate, which we have in this quarter, that is the run rate which will continue? Or do you see some more costs coming back [indiscernible] because I think July, August was also slightly impacted by COVID? Any color would be helpful on that.
No, I think on the cost with respect to the detailing work which is happening in India, some of the [indiscernible] activities in the international markets and all others activities in the plants and [indiscernible], I think current quarter builds most of that. This quarter sequentially has gone up, which I referred to in my section, is all because of the variable sales-linked expenses.So we do have some sales commissions and commercial fees. The increase is all on account of this variable sales-linked expenses, and that part will be trending appropriately with the sales level. In my view, the fixed part, which is outside this variable, I think mostly current quarter bakes in all those [indiscernible].
Okay. Sure. And that part might not move a lot and gross margins could improve by 100 basis just because of nonrecurring inventory. So isn't there a chance for higher margin for the second half?
I mean, the overall margin will always be subject to several variables. We have committed to what we've spoken in the past on the margin trajectory. I mean it becomes difficult to sort of give quarter-by-quarter guidance or estimate of the gross margin because it's subject to several variables in revenue, top line costs or activities. So we wouldn't want to get that. We would stay with what we have communicated. And obviously, long term, as we said, there is a headroom to improve for each region and at the overall company level.
Sure. And in that case, would you just like to -- can you provide, let's say, some more detail on a couple of headwinds or tailwinds, which you see which could impact the profitability?
Yes, the biggest tailwind -- sorry. The biggest tailwind is the launch momentum, and the biggest headwind is the commodities inflation and the escalation in the Chinese raw materials. Some of that we have already seen in the first quarter and second quarter as well. But the last [indiscernible] will be the biggest tailwind.
The next question is from the line of Surya Patra from PhillipCapital.
Just on first question on the respiratory business. So we have seen, obviously, you are doing well in terms [indiscernible] your lung businesses [indiscernible] market, with domestic delivering strong growth, 20% kind of growth and albuterol also doing so great. So in the global market, if -- the cost headwind there is [indiscernible] inflation and in the domestic market or in the emerging market, the strong growth, is it also currently influenced by the COVID-related effect and the [indiscernible]? So if you can clarify on these 2 aspects of [indiscernible].
I think it's -- let me put it this way. The first is there is a technical barrier to respiratory. I think in most emerging markets we [ prospered ] and recently in the launches in U.S. also, we're showing that we can do that. And of course, the launch is different, each product is different. So we have to stay humble because it's not a tracked launch that you've launched an MDI so you can launch a DPI. So we are well aware of that and are working expeditiously to launch this.So one is the technical ability to get the product -- to get a robust replicable product, integrated approved. And of course, in some of the emerging markets of the world, cost is also a very important part of the overall supply chain. I think we've been both cost and capacity, and we have both of those.
And COVID influenced -- and whether it is also benefited in any way by COVID a little bit in the domestic as well as emerging market is [indiscernible].
Yes. In the when the COVID wave was pretty high, when it was in early part of quarter 1 and also to some extent, in U.S. and, I would say, 12 months back, we saw that the COVID rate was high. That time, of course, there was a little bit of benefit for the inhaler sale as well.
Okay. Okay. Sir, even second thing on the in-licensing business activity that [indiscernible] almost gradually over last, let's say, 12 months to 18 months kind of [ licensing ]. So there is a significant sum that we have seen in all of our important markets, in domestic market, Africa, emerging markets [indiscernible] and all that.So there is a rising trend of licensed products and important ones. So is there a kind of a conscious decision to expand and monetize the reach or the marketing capability so that it will indirectly to some extent complement our margin expansion from the [indiscernible] quarter?
Look, I think the way we look at the in-licensing strategy is with the product patent regime in India, the ability for Cipla to offer itself as a partner to take therapies deep for some of our multinational partners. That is what we are -- that is the alliance we are signing up, and I think this gives a good leeway because the product patent regime in India, you can't really launch products unless the patents are off. So collaborating for in-licensing some of these products is a good model in our view. And it also gives us a head start when the product goes generic.
Sure. Just last one question, sir, on the [ result ], is there any kind of preparedness from our side for the ultimate launch plan for regulating the unit?
I mean if the question is, will we be prepared to launch when we are allowed to? Yes. The answer to that is yes. And just like any other launch, we will be prepared.
The next question is from the line of Nithya Balasubramanian from Bernstein Research.
Umang, can you update us on generic Abraxane? Where are you on the review with the FDA as well as some color you can give us on the respiratory pipeline?
Yes, certainly. I think on Abraxane, we are in communication with the agency. And the review of our file and the questions that are being asked, I think we are responding to that.On the -- your second question was on the respiratory pipeline. I think the progress is pretty much on track with how -- what we communicated last time. and we will be introducing more products into the clinical trial as well. Meanwhile, the review of the files that we've already filed are ongoing.
Umang, on the generic Abraxane, do you have a TAD date from the FDA?
Well, the TAD date is there, but it's -- the TAD date is -- it's consequential and inconsequential in some way. It's consequential for our own review, but there is a market formation date, which is probably more important in the case of that product.
And I presume the Goa facility inspection is also a critical part.
Yes, that is fair. For Abraxane, the inspection has to happen because it is from the Goa facility.
Understood. On the respiratory pipeline, I think, Umang, you had mentioned the partnered asset, which you already filed and 2 other assets, which are supposed to be in clinical trials. So are you on track to -- I think the last time, you mentioned you will be filing somewhere in FY '23. Are you still tracking on those time lines? And any updates you can get on the partnered asset?
Well, the partnered asset is already -- I think the data has gone out, and we -- obviously, the FDA is reviewing it. So that is on -- that is consistent. I think the other product also, yes, we are on track to filing another product also at the end of FY '23, and we will be initiating clinics on one very shortly.
Understood. My second question was on if you could help us understand the rationale behind the CHL demerger because your One-India strategy was supposed to enable you to leverage synergies across your branded trade generics and consumer products, and this seems to be not in line with that strategy. If you can help us understand your thought process there.
Yes, certainly. I think it's -- the CHL, the strategy for the One-India [indiscernible] is to look at products and where they create maximum amount of value both for the company as well as for the stakeholders of the company. And I think if you look at the CHL platform, it's a great platform where we built tremendous capability in being able to brand products, the consumer division and the marketing division looks very good.So it's all one entity. It is one Cipla. And we figure out which part of the business is best placed to take a particular portfolio, and products that lend themselves to consumerization have the ability to go down a certain route. And I think the aggregation of a branded business in one entity gives tremendous options to shareholders and stakeholders at a later date, both from the placement and the marketing of the product in the current term as well as from the ability to look at a branded business in total at a later time.
That, we get. My question is if that is the case, then why the demerger and how does it help you?
Well, the demerger helps because you're putting all your branded and consumerized assets into one entity. That doesn't mean that because the entity is -- or right now, all these entities are subsidiaries of Cipla. So the One-India strategy happens irrespective of which subsidiaries it may lie in.For example, some of our brands that we sell in the prescription business maybe lying with another subsidiary of the company, but that doesn't mean that they don't belong to the One-India business. It's just the placement of assets here. And I think at a future date, there will be options available on how we could structure a branded business to continue to further the progress of some of these plans.
The next question is from the line of Nitin Agarwal from DAM Capital.
Two questions, one is on albuterol. In recent times, have you seen how price there is actively increasing and [indiscernible] competition [indiscernible] because of the strategy for companies coming to and leading to heightened pricing of erosion in the overall sale versus what you see in the initial days?
Well, there have been more entrants certainly. I mean from the time we came in, there's also been another competitor. I think we see normal price erosion on albuterol, not something which is destabilizing the market, if that's your question.
No, what I really meant is it leading the situation where our, say, a pricing depression, [indiscernible] the volume increase sort of letting itself out in terms of our ability to get incremental absolute dollar increases on our contribution from the product?
Yes. Actually, where we are, we are very happy with how the overall value monetization for us has happened in this space. And as I mentioned earlier, we are okay with -- we've been mentioning this over the past 2 or 3 analyst calls that we are okay with a gradual increase in share from here as against upticks in share where we pick up 5.5%, 7% chunks of market share.I don't think that's where we want to go. So we are okay with a gradual ramp-up from here. We are conscious of the amount of effort that goes in to manage and maintain a supply chain as well as we are conscious of how best we have served with the share value dynamic.
Secondly, when we look through the U.S. business, we look at the next 4 quarters [indiscernible], how do you see the complex or meaningful $10 million, $20 million launches in the portfolio? How should we look at that from a timing perspective?
I think most of -- look, we have tactics which are there, but realistically, I mean, if I was to probably hedge a little on the side of comfort, I think starting quarter 3, we should have a fair number of high-value launches coming in for the U.S. business.So I think it's really the next 2 or 3 quarters where we -- even with launches, I think I'm also quite confident that the next 2, 3 quarters will result in some potential meaningful launch or launches. But I think the bulk of the work will really happen from the quarter 3 of next year.
In second half next year?
Yes, second half next year, I think the launch trajectory is very well shaped up. And I think in the interim, also, we will have launches. But really, the big momentum will come [indiscernible].
And lastly, on the India market, I think this quarter was a slightly unusual quarter. I mean in the sense of the very high acute [indiscernible] industry. I mean as we head into the winter season, which is the lower acute -- lower quarter from acute perspective, how should we look at One-India business in the second half and sort of going forward given the fact you've got a pretty substantial base over the last 3, 4 quarters [indiscernible] very high infection in this quarter.
Yes. I think we had 2 impacts versus the previous year. The previous year had a significantly larger COVID base, and it had very little anti-infective base, and because there were hardly any viral infections and other infections going around when the COVID outbreak was there in the previous year. This year, we've seen almost a significant reduction in the COVID and an increase in anti-infective.I think the winter season typically for Cipla is when the respiratory sales begin to peak. But if your question is whether I can give you a certainty in terms of what -- how each of these will play out, I think it constantly change. Every 15, 20 days, we are seeing different market shifts and patterns. I think we are hoping to see a relatively strong respiratory season this time in quarter 3. And I think over a period of time, the India growth will begin to moderate back to its historical average of 10% to 12% in the industry growth. And of course, we will try to be higher than that.
The next question is from the line of Charulata Gaidhani from Dalal & Broacha.
Yes. My question pertains to the [indiscernible] providers. Do you expect the degrowth now onwards?
No. We should be able to hold on to the current base. For the quarter, we explained there was some bit of a delay in order confirmation from some of the tender-based agencies, but we don't expect significant decrease from you. We should be able to hold on to the current base.
Okay. That is for SAGA.
Yes, I was referring to CGA, which includes ARVs, largely.
Okay. Okay. And what about ARVs in India?
See, ARVs in India, in fact, is doing well, and we don't carve that out separately. But there, we have won a couple of high-value tenders, and that's going fine.
Okay. And can you give the value for consumer health and trade generics in the quarter?
We can. We'll take it off-line, Charulata. We don't necessarily mark that separately, but we could give you indicative numbers. From the investor deck, you have seen the kind of brands which are there in the consumer health business. We have spoken about Omnigel growth. We have spoken about Cipcal. So Omnigel has grown by 41% in the first half. Cipcal grew at 16%. Cofsils grew at 58%. Nicotex, which is the flagship brand, grew at 13%.There are a lot of emerging consumer brands in India also. We have Prolyte ORS. That, in fact, grew at 110%. So I'm giving you first half Y-o-Y growth, Charulata. Clocip grew at 59%, Cipladine grew at 52%, Maxirich grew at 24%, and then there are brands in South Africa also. And all of this is seeing very healthy traction.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Just taking the previous Nitin's question. So when you, Umang, when you're referring to a strong second half next fiscal, you have in mind Revlimid, Abraxane and Advair in mind?
Yes. I mean those would be our pipeline products, Sameer. Yes. I have that in mind.
And these are sort of looking at the progress or settlements that -- regulatory progress or settlements, et cetera, they are heading towards that second half, next fiscal sort of time zone.
That is correct, yes.
Okay. Great. And just on biosimilars, your JV with Kemwell. If you can just share what would be Kemwell's role. Is it only product development? Or would they also be doing commercial scale manufacturing? And second is, is it limited to respiratory biosimilars? And if so, then what about onco and immuno biosimilars?
I think Kemwell is very strong in manufacturing. Manufacturing and analytical capabilities related to manufacturing. So they are our chosen obviously partner and that their role is basically doing this. And of course, the 2 organizations -- we do the commercialization and the 2 of us do development together. So right now, where we are is we're trying to set this up.We have not -- obviously, it's a new JV and it's -- we have -- the first thing that we need to put in place is a team, which is the work in progress. On the product selection, yes, I think there could be a combination of respiratory and oncology. But this product will have its own merit of being chosen, with the perspective of trying to be among the first to enter the market.
Okay. So it's not only respiratory that's going to take up the assays?
No, it's respiratory. It's largely -- it's going to be more structured around respiratory, but if we come across an exciting product on the oncology immuno space, we will pick it up.
And through the JV only?
That is correct.
And what's the current contribution from biosims in your overall sales?
Across our markets? I don't have that number readily available. Maybe Kedar can send it later.
We can come back. We can come back.
Okay. I mean it will be less than 5% sort of a number or...
Yes, yes. That's right.
Okay. Okay. Great. And just on India business, Kedar, just to clarify, did you say that it's 5% contribution from COVID to your overall India sales?
No, no, that's total at a company level. The India COVID sales in -- from quarter 1 to quarter 2 have got moderated by 60%, yes. But what we mentioned overall percentage is at the company level. So there is some international revenues also, which we have shipped this quarter.
Okay. Very clear. Okay. And just on the field, on the ground activity in India. Is everything normalized -- medical reps and doctor calling, et cetera? Is it back to life sort pre-COVID? Or is it any different?
It is back to life. Everything may not be off-line. So I think some of the training, some of the cycle meetings, some of the operating interactions. In terms of number of activities, I think our attempt is to go back to what we were, but I think the mode of that is not exactly in line of pre-COVID mode. And some of that may be off-line, some of them will be online. But yes, our people are on the ground. The attempt is to meet identified set of doctors per day. So I think it's a hybrid model, more off-line than online if you compare to last year.
Okay. I mean where do you think this is going to sort of mature or stabilize between virtual doctor calls and physical meet? Is it like 80-20? Or anything in your mind?
Somewhere there, Sameer, somewhere there. And our feedback suggests that both the pharma companies and the channel partners and the customers, doctors are sort of adjusting to this hybrid modality. So whether it's 80-20, 90-10, I think the times only will tell.But in terms of the detailing activity, most of that is back, except, as I mentioned, the cycle meeting, et cetera, may not be 100% there. Conferences are not happening. International travel is very smaller compared to what it was, but everything else is largely started.
The next question is from the line of Anubhav Aggarwal from Credit Suisse.
My question 1 is on Abraxane. The comments that you mentioned, so is it that we have to do any data on that, we do the data? Or is it just some questions which you need to respond and you can still launch by September timing [indiscernible] assessment?
No, I think we have to respond to some questions as well. And obviously, some of those questions mean we have to redo some of the data, et cetera, to respond to it, which I think we are doing on that.
Data that you'll have to do, is there a risk that you may not be able to come by September '22?
No. Look, I don't know whether we're confirming a September date or not. But I just know that most of these launches will happen in the second part in quarter 2, quarter 3 because the product is also -- I mean the settlement terms are confidential for each party. So I can't confirm the September date. I can just say that, yes, we are on track. And most of these launches will happen in the second half of next year.
And second, Umang, we have this [indiscernible] investor question, which for some reason, keeps coming every quarter. But would you like to reassure the investors that you continue to [indiscernible]?
Based on what we've heard, I should have already have left and I'll be sitting somewhere else. But no, my confirmation is that I'm very much here. I am actually in the role, have just signed a new contract, so very much here.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you, everyone, for joining us on the call today. In case you have any follow-on questions, you'd like to ask on Investor Relations with a follow-up call, you can reach out to either myself or [indiscernible] the Investor Relations team. Have a good night ahead. Thank you so much for joining us.
Thank you very much. Ladies and gentlemen, on behalf of Kotak Securities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.