Glenmark Pharmaceuticals Ltd

NSE:GLENMARK

Earnings Call Analysis

Glenmark's Q2 Growth and Margin Outlook

Glenmark Pharmaceuticals showcased significant growth in Q2, particularly in European and ROW (Rest of World) regions. European revenues jumped to represent 16.7% of total revenue, up from 11% last year, powered by a 30% growth in Western Europe driven by generics and respiratory products. Ryaltris cements itself as a major contributor across multiple markets. In the ROW, revenues rose to INR 7,324 million from INR 6,154 million. The company forecasts Europe to see a minimum of 15-20% growth, while Latin America's EBITDA margin is expected to improve by 3-4% annually. U.S. performance remains uncertain. Glenmark also finalized a deal to distribute Winlevi in Europe and South Africa.

Glenmark's Growth Amidst Challenges

Glenmark Pharmaceuticals' journey through FY '24 has been marked by both growth and challenges. In Q2 FY '24, the company achieved a consolidated revenue of INR 35,879 million, a 6.3% increase compared to the same quarter in the previous year. This resilience was reflected in the six-month period ended September 2023, with revenues climbing 13.6% to INR 69,895 million. Despite divesting some noncore brands and facing price revision impacts alongside a slowdown in the acute respiratory and dermatology areas, the Indian formulation business persisted with a 2.8% growth. Glenmark not only retains a significant presence in India, ranking 14th with a 2.11% market share but also partners with OMRON Healthcare to foster blood pressure awareness. The Consumer Care business is prospering too, highlighted by impressive growth across flagship brands like Candid Powder and Scalpe.

Diverse Geographical Performance

Glenmark's global footprint has seen varied performances, with North America experiencing a slight decline of 1.9% in Q2 revenues, owing to the competitive landscape. However, the European operations presented a remarkable 58.4% year-on-year growth, buoyed by strategic product launches and increased market penetration. In Asia, the company's sales are bolstered by key markets such as the Philippines, Sri Lanka, and Vietnam, with dermatology and respiratory therapies being major contributors. Glenmark's Ryaltris has garnered impressive shares in markets like Australia and South Korea, indicative of its competitive strength in the respiratory segment. Furthermore, the Middle East and Africa regions showcased a 15% growth in sales, while Latin America registered double-digit growth, with Brazil and Mexico as standout performers. These regions are spurring Glenmark's growth trajectory, reinforcing the company's robust international business strategy.

Strategic Initiatives and Financial Outlook

Glenmark is strategically divesting a 75% stake in its subsidiary, Glenmark Life Sciences, anticipating a significant impact on FY '24's Q3 results. Looking ahead, FY '25 is earmarked for improved EBITDA margins, projected to increase by approximately 2% due to lower R&D spending. Moreover, operational expansions in Europe and Latin America, along with upcoming product launches, are expected to boost margins further. Collectively, these factors are anticipated to drive a substantial increase in PAT margins for FY '25.

Enhancing Profitability and Operational Efficiency

Glenmark's commitment to innovation is expected to contribute 2% to the margin expansion, with an additional 1% increase envisioned from market-driven growth. The company is set to benefit from operational efficiencies as new facilities, like Monroe, come online, reducing overall operating costs. The cumulative effect of these initiatives is projected to elevate the EBITDA margin to nearly 19% for FY '25, marking this fiscal period as a transition year. With these strategies in place, Glenmark is poised to solidify its financial position and continue its upward trajectory.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, ladies and gentlemen. Welcome to the Q2 FY '24 Earnings Conference Call of Glenmark Pharmaceuticals Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Utkarsh Gandhi, General Manager, Investor Relations for Glenmark Pharmaceuticals. Thank you, and over to you, sir.

[Utkarsh Gandhi, executive]

Thank you, Lizan. Good morning, everyone. Welcome to the Q2 FY '24 Results Conference Call of Glenmark Pharmaceuticals Limited. We'll just review the overall performance of the company for the second quarter of FY '24. For the second quarter of FY '24, Glenmark's consolidated revenue from operations was at INR 35,879 million, as against INR 33,752 million in the corresponding quarter last year, recording an overall year-on-year growth of 6.3%. For the 6 months ended September 30, 2023, Glenmark's consolidated revenue was INR 69,895 million as against INR 61,525 million, recording an increase of 13.6%.

Some key updates on the formulation business, starting with India. Sales from the formulation business in India in the second quarter of FY '24 were at INR 11,217 million as against INR 10,916 million in the corresponding quarter last year, recording a year-on-year growth of 2.8%. The lower growth was mainly on account of the impact of the divestment of few noncore brands and some impact of the NLEM price revisions as well as an overall slowdown in the acute respiratory and dermatology therapy areas in the first 6 months of FY '24.

The India business contribution was at 31.3% in the second quarter of FY '24 compared to 32.3% last year. The Indian pharma market witnessed a slowdown in the acute segment, particularly on the respiratory side. Volume growth in the key therapy areas such as respiratory and dermatology were hence impacted in the first 6 months. Accordingly, as per IQVIA data for the second quarter, Glenmark's India formulation business recorded a growth of 5.4% compared to overall market growth of about 6.9%. In the second quarter, Glenmark's growth remained strong in the cardiac segment, but was impacted in other therapy areas. Glenmark's India business continued to be ranked 14th with a market share of 2.11% as per IQVIA MAT September data.

The company continues to have 9 brands in the IPM top 300. And in terms of key therapeutic areas, Glenmark is ranked second in both dermatology and respiratory and fifth in cardiac segment and 17 in the diabetes segment as per IQVIA MAT September data. Glenmark has improved its market share marginally in spite of the challenging environment in Q2. And if you see the IQVIA MAT September data, we have improved our market share in most of our therapy areas, most of the key therapy areas.

In August 2023, Glenmark also announced that it had joined with OMRON Healthcare India, the Indian arm of the Japanese global leader in home blood pressure monitoring and solutions for cardiovascular disease to raise awareness on measuring blood pressure at home from the age of 18. This collaboration is named as Take Charge @18 initiative and comprises of generating effective communication to enhance awareness about blood pressure monitoring in India. The company continues to have a healthy pipeline of differentiated products, which it plans to launch in the market going forward.

In terms of the Consumer Care business in India, primary sales for the GCC business in the second quarter was INR 634 million with a growth of 15%. Our flagship brand, Candid Powder, delivered revenue growth of 10% in the second quarter. La Shield portfolio delivered 23% growth and the Scalpe portfolio recorded about 29% growth. Scalpe Pro also recorded 41% growth in new to brand orders, and it is also amongst the leading anti-dandruff shampoos in large e-commerce channels such as Amazon. And recently, Candid Dusting Powder was also recognized with the Economic Times Iconic Brand Awards in 2023.

Moving on to North America. The North America business registered a revenue of INR 7,392 million, which is about USD 89.4 million for the second quarter as against revenue of INR 7,533 million, which is about $95 million for the second quarter of FY '23. This translates into a Y-o-Y decline of about 1.9%. For the second quarter, the North America business contribution was at about 20.6% compared to 22% last year.

In the second quarter, Glenmark launched the previously approved Norethindrone, Ethinyl Estradiol capsules and Ferrous Fumarate Capsules, the generic for Taytulla. Glenmark received approval and launched Saxagliptin tablets and Tacrolimus ointment, 0.03%. Glenmark also launched varenicline tablets through a partnership. These launches are expected to contribute to the overall sales growth for the region starting the third quarter of FY '24. Glenmark filed 2 ANDAs during the second quarter, and the company plans to file a total of 10 to 12 ANDAs for FY '24. Glenmark's marketing portfolio through September 30 consists of 185 generic products authorized for distribution in the U.S. market, and the company currently has 51 applications pending at various stages of the approval process with the U.S. FDA, of which 21 are Para IV applications.

In August 2023, Glenmark Pharmaceuticals Inc. announced that it had entered into an agreement with the U.S. Department of Justice, Antitrust Division to resolve all of its court proceedings with the DOJ involving historical pricing practices by former employees relating to the generic drug pravastatin between 2013 and 2015. The company has entered into a 3-year deferred prosecution agreement. And if the company adheres to the terms of the agreement, including payment of $30 million, payable in 6 installments, the DOJ will dismiss the pending superseding indictment.

Moving on to Europe. Glenmark Europe operations' revenue for the second quarter of FY '24 were at INR 5,997 million as against INR 3,785 million, recording a year-on-year growth of 58.4%. Europe business contributes 16.7% of the total revenues as of Q2 FY '24 compared to about 11% last year. Glenmark's revenue. European operations continued their strong trajectory driven by a robust uptick in the branded business and a sustained growth in the generics business as well. The Western European business clocked a strong 30% growth for Q2, mainly led by the key markets such as U.K., which recorded strong growth on the back of generics business as well as uptake from the respiratory pipeline.

The Czech and Poland market in the Central and Eastern European region also recorded strong double-digit sales growth during the quarter. Glenmark continues to outperform the Czech market in terms of growth as per IQVIA MAT September data. The respiratory portfolio launched by Glenmark in Europe continues to do well. Some of the key brands such as Ryaltris and Salmex continue to sustain their market share, both in terms of value as well as volume across the central and particularly across the CEE market. During the second quarter, Glenmark also launched Ryaltris in Slovakia, which is another key CEE market for us. And Menarini, Glenmark's partner for Ryaltris in the European market recorded strong growth across multiple markets where it has launched the product.

In Q2, Glenmark Specialty, a subsidiary of Glenmark and Cosmo, announced the signing and distribution agreements for Winlevi, which is clascoterone cream 1% in Europe and South Africa. Under the terms, Glenmark will receive the exclusive right to commercialize Winlevi in 15 EU markets as well as South Africa and the U.K. Cassiopea, which is a subsidiary of Cosmo, shall be responsible for the marketing authorization submission at the EMA, and Glenmark will undertake the registration for the product in the U.K. and South Africa.

ROW region. For the second quarter of FY '24, revenue from the ROW region was at INR 7,324 million as against INR 6,154 million, for the corresponding quarter last year, recording a growth of 19%. For the second quarter, the ROW business contribution was 20.4% compared to 18% last year. The company continued to witness strong growth in the base business across the subregions of the ROW market. In Russia, as per IQVIA Q2 and MAT data, Glenmark business recorded a 16% and 17% growth in value, respectively.

This has been driven by key brands, including Ascoril, Montlezir, Ryaltris. Ryaltris has sustained its momentum and continues to gain market share even during the second quarter. In terms of key therapeutic areas, Glenmark recorded 21% growth in value in the dermatology segment versus the overall dermatology market growth of about 9.6% as per MAT September data. And amongst the dermatology companies, Glenmark is now ranked eighth as per the MAT September data. And amongst the companies present in the Expectorant market, Glenmark maintains a strong position, ranking second. Key recent launches in Russia include Ascoril LS and Fenismart, which is the dimetindene gel.

The Asia region recorded about 10% growth in secondary sales driven by markets like Philippines, Sri Lanka and Vietnam. Dermatology and respiratory continue to be the key therapeutic areas, contributing significantly to the overall sales in Asia. Ryaltris, which was launched by Glenmark in Malaysia in the first quarter of FY '24, has seen a strong pickup in the market. Ryaltris also in Australia launched by a partner, continues to hold about 18% share across the top allergic rhinitis product. And in South Korea, where the product was launched recently by our partner, Yuhan Corporation, Ryaltris is now ranked first in the combination prescription market and fourth in the overall prescription market for inhaled nasal sprays. So that -- it has seen a strong start in South Korea as well.

The Middle East, Africa region recorded about 15% growth in sales during the second quarter of FY '24. Glenmark continued to be ranked third in the overall Kenya market and has recorded 25% growth in secondary sales. Further, the company continued to achieve strong secondary sales growth across other key markets in the region like South Africa, UAE and other African markets. Respiratory and dermatology again are the key therapeutic areas in this region, and Ryaltris was launched in Saudi Arabia in the first quarter of FY '24, and the product has received good response in the market. The product will be launched in other Middle East, Africa markets in Q3 and Q4 as well.

Latin America achieved double-digit growth in second quarter of FY '24. The respiratory portfolio remains the key contributor for Glenmark in this region. Glenmark Brazil achieved about 20% growth in the covered market as per IQVIA YTD August 2023 data, and it continues to maintain its rank amongst the top companies in the covered market of chronic respiratory segment in Brazil. And secondary sales growth has remained strong in Mexico as well, and Glenmark is growing at about 18% value in terms of the covered market as per IQVIA YTD August 2023 data.

In terms of our respiratory pipeline, some key business updates for the global respiratory business, starting with Ryaltris. As of the second, end of second quarter of FY '24, marketing applications for Ryaltris have been submitted in more than 70 markets. The product has been commercialized in 29 markets, including all the major markets that we alluded to earlier. Glenmark's partner in the EU, Menarini, intends to launch the product in other additional new markets in FY '24.

Hikma, Glenmark's commercial partner in the U.S., continued to see strong prescriptions in the second quarter. And Glenmark's partner in Mainland China, Grand Pharmaceutical, has successfully completed the Phase III clinical trial with the product meeting the primary endpoint. And the NDA submission to the National Medicines Product Administration is targeted for December 2023. We have provided some key market shares for Ryaltris across the key geographies.

In terms of other key respiratory products, the clinical trial is ongoing for the generic Flovent pMDI. We expect to file it in FY '24, and we plan to file one more respiratory pMDI in the U.S. in FY '25 and continue the momentum beyond that.

A quick update on our innovative R&D pipeline. GRC 54276, which is the HPK1 inhibitor. This is a novel, orally active HPK1 inhibitor that demonstrate stand-alone efficacy and enhances current immunotherapy efficacy. It is being evaluated in the First in Human Phase I study. Part 1a of the monotherapy phase is ongoing in India since July 2022. Additional subjects are being recruited in the 50 mg monotherapy backfill cohort. And the Phase I Part 1b combination study with pembro limzumab and atezolizumab was initiated in India and the U.S. in the first quarter of FY '24 and second quarter of FY '24, respectively.

And as of the second quarter, two-dose cohorts have been completed and the study is ongoing. And GRC 39815 is the company's respiratory pipeline being developed as an inhaled therapy for mild-to-moderate COPD. It is currently under Phase I development in the U.S.

Glenmark Life Sciences. External sales for GLS in the second quarter were at INR 3,930 million as against INR 3,744 million in Q2 last year, recording a Y-o-Y growth of 5%. In September 2023, Glenmark announced that it had entered into a definitive agreement with Nirma Limited to divest 75% stake in its subsidiary, Glenmark Life Sciences, at a price of INR 615 per share for an aggregate consideration of INR 56,515 million, subject to closing adjustments. Glenmark would continue to own 7.84% in GLS after the divestment. The transaction is subject to some customary closing conditions precedent, including receipt of regulatory and shareholder approvals. For further updates, you can log on to the GLS website.

And a quick update on Ichnos. So Glenmark invested INR 1,613 million, which is about $19.6 million in Ichnos in the second quarter of FY '24 compared to about $22 million in the corresponding quarter last year. For the first 6 months, Glenmark has invested INR 3,030 million, which is about USD 36.8 million compared to about USD 43 million, which was invested in the previous year.

Some additional notes to the results. ForEx loss for the quarter was about INR 43 crores, which was recorded in other expenses. If you exclude this, the EBITDA margin for the consolidated business was at 18.8% in the second quarter. Exceptional items in the quarter and for the half year, respectively, comprised of the U.S. DOJ settlement, related costs to the settlement and the remediation cost for the manufacturing facilities in India and the U.S. Some key figures for the consolidated business. So R&D expenditure in the second quarter was around INR 324 crores, which is 9% of the revenue from operations. And the Ichnos investment, as we noted earlier, was $19.6 million for the second quarter.

Consolidated total asset addition in the quarter was INR 249.7 crores, of which tangible assets was about INR 162.8 crores and intangible asset was about INR 86.9 crores. Consolidated gross debt for the period ended September 30 was at INR 4,921 crores as against INR 4,348 crores as of March 31, 2023. Net debt for the period ended September 30 was at INR 3,355 crores as against INR 2,905 crores as of March 31, 2023. Increase in net debt was mainly on account of the settlement payment for the generic retail litigation and payment related to the settlement agreement with the U.S. DOJ.

In terms of working capital, at the end of September, inventory was at INR 3,319 crores as against INR 2,978 crores at the end of March. Receivables was at INR 3,679 crores as against INR 4,099 crores at the end of March and payables was at INR 2,289 crores as against INR 2,392 crores at the end of March.

And given the changes in the organization, mainly the GLS divestment, we would just like to provide some key comments on how we see the way forward for Glenmark before we start the Q&A. So the first important point is that we are expecting the GLS transaction will get recognized in Q3 FY '24 after receiving the required regulatory and other approvals. We are considering this year as a transition year on account of the GLS divestment, which has obviously been a big event. In FY '25, the GPL core EBITDA margins will go up by approximately 2% due to the lower R&D spend, primarily on account of the lower innovative R&D expenditure.

Additionally, we are expecting further margin expansion in FY '25 to come from Ryaltris and operating leverage kicking in across markets like Europe and Latin America. And we expect significant PAT margin growth in FY '25 due mainly on account of the lower interest, depreciation and tax expenses once we consummate the GLS transaction.

So with that, we can open the floor up for Q&A. I would just like to introduce the management on the call today. We have Mr. Glenn Saldanha, Chairman and Managing Director of Glenmark Pharmaceuticals; Mr. V.S. Mani, Executive Director and Global CFO, Glenmark Pharmaceuticals. So over to you, Lizan.

[Operator]

[Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services.

[Tushar Manudhane, analyst]

First, on the bookkeeping part, INR 325 crores is the exceptional loss. Even if I exclude $30 million of that settlement payment, still the remaining amount is considerable. Is it largely to do with the remediation measures?

[V. Mani, executive]

Yes. I'll take that, Tushar. So obviously, one is the remediation is only about INR 26 crores in this quarter, Tushar. INR 20 crores in India and about INR 6 crores in the U.S. As we -- earlier also, we all had sort of guided that as we go along, these costs are coming down, and it's come down in this quarter. So the balance is basically about the DOJ settlement of $30-plus million and the allied legal cost that we provide with that, which will be part of that. So that is the reason why it is about INR 324.

[Tushar Manudhane, analyst]

Understood. Sir, derma, the therapy in India has witnessed good slowdown. So any particular reasons to highlight here?

[Glenn Saldanha, executive]

So I think, look, in the second quarter, right, we saw a slowdown in 2 of our core therapies, right? Main is respiratory, the acute business. There was a slowdown in the acute business in the second quarter, which impacted our respiratory sales. In derm, there has been a slight slowdown in the second quarter.

However, we are seeing a strong recovery in the third quarter. So in the month of October, we grew 19%, right, as per IMS. So India business, we think from hereon, right, will come back strongly. And I think respiratory has been a big dampener in the second quarter, which is coming back strongly in the third quarter. So I think overall, we continue to believe that India will do well this year and going forward.

[Tushar Manudhane, analyst]

Understood. Thirdly, the U.S. sales have been gradually slipping [ some $100 million ] now. So when do we see this segment reviving?

[Glenn Saldanha, executive]

So U.S., second quarter was a tough quarter for us because when you think about, we had some supply disruptions because of some of the remediation work that is ongoing in the second quarter.

However, in the third quarter, we think we've resolved all that, and we are back with full supply in the third quarter. Additionally, I think in the third quarter, they have almost 4 or 5 good launches. I think the varenicline partnership that we did with MannKind, the product being licensed, we've got some good market share there. And I think we have almost 3 injectables getting launched in this quarter through some partnerships. So that, coupled with some of our in-house launches. So I think from third quarter, you should see U.S. sales come back to the original levels, right? So second quarter we think was an aberration.

[Tushar Manudhane, analyst]

Understood, sir. And just lastly, this upfront payment of $5 million to Cassiopea, this would happen in this third quarter? Or how do you think about it?

[V. Mani, executive]

Yes, it will happen in the third quarter, yes.

[Glenn Saldanha, executive]

But I think third quarter against, we also have an income coming from Austria, right, almost $15 million we've already received from Austria in Ichnos, right? So there is some income also in terms of on the innovation side.

[Operator]

The next question is from the line of Damayanti Kerai from HSBC.

[Damayanti Kerai, analyst]

I just need some more clarity on margins. So obviously, you mentioned '24 will be a transition year. And then for FY '25, you mentioned I think 200 basis points better margins on the core business part. But for the quarter, say, if I look at the numbers, 14.4%, I'm excluding the ForEx part. So that is anyway, I think, looking much lower than what we had seen previously. So can you specify whether the slower performance in India and U.S. contributed majorly towards it? And maybe in third quarter and fourth quarter as India and U.S. comes back, we'll see better margins?

[V. Mani, executive]

So first and foremost, obviously, if you factor in the currency loss, it will come to about almost 15.7%. What we are saying is that this being a transition year, going forward, we are looking at, absolutely, we've already guided in the past. Also, we look at about a 2% improvement because of reduction in the R&D cost, plus we also have in the initial commentary we gave that we are also looking at improvement in the margin expansion from various from Ryaltris as well as from across other geographies like Europe and LATAM, okay? So therefore, this should significantly take our margins. So in terms of whatever we've been guiding in the past, we'll be closer to 19%, okay? That's what we are working towards.

Even in the second half, I do agree with your point that as India and the U.S. kicks in better, so obviously, you should see it improve, okay. So I think this is the trajectory we are looking at.

[Damayanti Kerai, analyst]

Okay. So you maintained that 19% margin trajectory for your business?

[V. Mani, executive]

Yes, yes. I mean as we already alluded, that is a transition year, but we are working towards that. I mean over the years, we are trying to improve that, yes.

[Damayanti Kerai, analyst]

Okay. My second question is on the U.S. business. So you mentioned some supply challenges which you have resolved now. But can you comment a bit on the pricing part also? Because I guess what others or your peers have commented that prices are more or less stable. So how was it for your portfolio? And how do you see it for next, say, coming quarters?

[Glenn Saldanha, executive]

So the pricing environment seems to get -- seems to be stabilizing. However, we are still seeing standard price erosion of roughly mid-single digit, around 5-odd percent, right, across the portfolio.

[Damayanti Kerai, analyst]

Okay. And can you also share update on Monroe regulation part? Because earlier, if I remember correctly, you mentioned somewhere in the second half of the fiscal, we should be seeing some notable updates there.

[Glenn Saldanha, executive]

So in Monroe, we are pretty much done with most of the remediation. We are starting taking engineering batches this month and followed by validation batches and commercial batches. So the remediation is pretty much done. Obviously, we would have a dialogue with the FDA before resuming commercial sales, either by way of a meeting, and we are also expecting an inspection at some point.

[Damayanti Kerai, analyst]

Any time line, where do you expect like FDA can likely reinspect the facility?

[Glenn Saldanha, executive]

It's extremely hard to predict that. But we have started the work where we've started taking batches and both -- first with engineering matches followed by validations and then commercial batches.

[Damayanti Kerai, analyst]

Okay. And in terms of cost also, you mentioned INR 26 crores was the remediation cost. That was especially for the U.S. plant? Or...

[V. Mani, executive]

No, no. That was -- India was about INR 19.9 crores, INR 20 crores and U.S. is about INR 6 crores. U.S. is much lower.

[Damayanti Kerai, analyst]

Okay. U.S., you're broadly then, okay.

[V. Mani, executive]

Yes, it's [indiscernible], yes.

[Glenn Saldanha, executive]

I think remediation, we are mostly done with everything at this point in terms of expenses. And I don't think, going forward, we would have an exceptional item as a remediation going forward.

[Operator]

[Operator Instructions] The next question is from the line of Vikas Sharda from NTAsset Management.

[Vikas Sharda, analyst]

Two questions. One is that the Ichnos spend in the first half has been higher than full year run rate guided of $60 million. So how should one look at that in the second half? And secondly, this 200 basis point margin expansion next year is only from R&D? Or you're building in the price risk and the operating leverage in that?

[V. Mani, executive]

Thanks for the question. So as you can see, in the current year, in the first half, we have spent about $36 million, which last year was almost $43 million. So in the $36 million also, we have in the first half of the year, normally, we pay out bonuses and there are some severance costs as we are going about restructuring the operations out there. So we still are pretty much guiding to close to $60 million-plus is what we had said, we'll be thereabout. So we're not expecting that to substantially go, give and take a few million here or there.

So as far as Ichnos, that's where we are. And as you know, this year, in the third quarter, we also received $15 million on licensing out. So those are other incomes that will keep coming in. And as far as the margin expansion is coming, 2% is basically from Ichnos innovation. And the balance is what we are saying that when we say that we'll take a trajectory from where we are today, almost 3% plus, it's [ 2% is here ], plus a 1% plus will come from all the margin expansion that we'll get from getting the -- increasing our businesses, operating leverage in Europe, LATAM. So those are the things.

And what we have not specifically even called out here is that as Monroe goes live, we'll also get -- today, we have a $25 million operating cost, which is also baked into our numbers as we go along. Even that will kick in next year. So I think all in all, that's how we are trying to run the run rate closer to where we are.

[Vikas Sharda, analyst]

Yes. Very good. One more question. How much of the Zetia payment has already been made and how much is pending? And also in the balance sheet, there's an item called current assets others, which has gone up in 6 months, like by almost INR 400 crores. So what is that for?

[V. Mani, executive]

Yes. So good questions again. So one is, obviously, we have paid more than $35 million plus for the Zetia and also, we also paid about 1 installment of the DOJ that came in. So these are all that went in. As far as the other current asset is concerned, Vikas, we had an input receivable going up to almost INR 190 crores. That is largely on account of, as you know, when we make these payments outside India, we have to pay GST on that, which we can take credit against that. But as of now, that money is gone, okay? So that is one money that has gone.

Also, the other thing is that we have in the other current assets, PLI, which you accrued about INR 80-plus crores in the current year, which we had to get money from the government. I think they will plan somewhere in the second half to give us money. Also, apart from that, we also had some increase in our prepaid expenses of about INR 60 crores, INR 70 crores, some advance payment of supply. So that is why it looks like a INR 400 crore jump. But I think the second half goes back at least the input tax, some of those credits we can take and it will come off. So I think overall, with the improvement in the business in the second half also, we should see cash coming back in the business.

[Operator]

The next question is from the line of Nitin Agarwal from DAM Capital.

[Nitin Agarwal, analyst]

Mani, on the guidance, can you be -- can you help us understand the guidance of '25 a little better in terms of what EBITDA levels -- EBITDA margin levels are we looking at?

[V. Mani, executive]

So as I just guided that going forward, I mean, currently, obviously, this quarter, we are a little less than 16%, but we give a glide path how we'll go there. We said 2% will come basically from innovation, R&D spend reduction and 1% from the expansion in the various markets. Also, obviously, as Monroe goes live, we'll also get some benefit. I've not put that in this. So overall, based on this, we are looking at a trajectory close to 19%.

[Nitin Agarwal, analyst]

19% for FY '25?

[V. Mani, executive]

Yes, 19% for '25, yes. This is a transition year, Nitin. I think we'll have to take it as a year comes by.

[Nitin Agarwal, analyst]

Which is fine. Secondly, on the remediation costs, what kind of positive impact do we see on account of that next year?

[V. Mani, executive]

I don't see -- I mean, you're talking of remediation costs further in the next year. Is that what you're saying?

[Nitin Agarwal, analyst]

No. What I meant is because you're saying they're going to be almost 0 this year from hereon. So what is the amount that we -- so how much have you spent this year?

[V. Mani, executive]

So this year, so far, I have spent about INR 77 crores. So that will not be there next year. But in any case, I'm calling it out separately. So that is not there next year, yes.

[Nitin Agarwal, analyst]

That is an additional lever, which is probably there for us.

[V. Mani, executive]

Yes, there are additional lever in terms of profit.

[Nitin Agarwal, analyst]

And then Glenn, on the India business now, what is -- how are you looking at India from again a 2-, 3-year perspective hereon?

[Glenn Saldanha, executive]

I think, I mean, our view, Nitin, is our India business continues to remain very strong, right? I think between the Rx business, mainly driven by the respiratory, cardiac is doing exceedingly well for us, derm and then diabetes, right? I mean we are pretty much leaders in 3 out of the 4, right? They are among the top 2, 3 players in 3 out of the 4 segments.

So India business, Rx continues to be strong. OTC, we are doing exceedingly well. So that's another growth lever going forward, which will contribute significantly to our India business. And then we have some reasonable institution business that's doing well in terms of hospitals and institutions. So that will come up as a new growth lever. So I think all in all, India will do well for us. I mean on a sustained basis, we feel very comfortable with like a 12% to 15% growth coming out of India, right, for the next 3 years.

[Nitin Agarwal, analyst]

And likewise, on the U.S., while this year, again, is up Q2, you mentioned it's a soft year. Things will bounce back from Q3. But with [ Monroe and all ] probably beginning to come back from next year and I guess some of your -- I mean, how do you -- how should one think about U.S.? There has been some improvement in the outlook which has happened in general for other players on the U.S. side?

[Glenn Saldanha, executive]

So I think the U.S. business next year will be mainly driven by some of the Monroe, bringing back Monroe, some of the new launches that we have next year, right? And I think respiratory, our respiratory play will start from -- hopefully, from next year, we are hoping to get our first approval in the respiratory space, and then we'll keep getting approvals from thereon every year. So I think our -- a lot of our U.S. build-out is primarily driven by some -- driven by respiratory and some complex products that we are working on. So it's hard to predict specifically in terms of numbers, but I mean, we have a good portfolio of products that we are filing, right? And assuming they all get approved and things are on track, right, the U.S. business should look strong, right, in the years to come.

[Nitin Agarwal, analyst]

And on that Glenn, are we looking to file the Flonase ANDA?

[Glenn Saldanha, executive]

So the MDI, right, the Flonase, the fluticasone MDI, right, I mean, we are hoping to file around the end of this year, early next year. So between Q4 and Q1, right, we will file the fluticasone MDI.

[Nitin Agarwal, analyst]

Okay. And lastly, there's been very strong growth in both ROW and Europe. Now how much of it is -- is it largely Ryaltris driven? Or there is more things which are sort of driving it?

[Glenn Saldanha, executive]

I think Europe is more broad-based beyond Ryaltris. Ryaltris is a big contributor, but we also have the 4 or 5 respiratory products that we are selling there are doing exceedingly well. And I think going forward, we still believe that Europe will continue to outperform, right? I mean 15%, 20% is the minimum growth trajectory that we are seeing for our European business.

ROW also is doing extremely well. We've got a big approval in Brazil of salmeterol, fluticasone, where we're the first -- it's the first generic approval salmeterol, fluticasone MDI. We also have the rest of ROW, which is Asia, Latin America, Middle East, Africa, Russia's here, all these geographies are doing well. Russia also, we got Ascoril LS, a big approval which will be a big driver. And in most of these geographies, they continue to do exceedingly well. So I think these are going to be -- these 2 geographies will be significant growth drivers for us in the years to come.

And of course, India continues to do well. So U.S. is a big unknown. We are doing the right things in terms of portfolio, but given the uncertainties, we really struggle to put any number for the U.S. business.

[Nitin Agarwal, analyst]

If I can squeeze a last one. On the scale-up which you're talking about in Europe and ROW, I mean, what kind of margin operating leverage do we see playing out in this business? I presume -- I mean, and at some level, are these businesses below corporate-level margins? Or are they now past it?

[Glenn Saldanha, executive]

So Europe, obviously, was below corporate level until last year, right? I think this year, it has come up closer to corporate level. And I think from next year, you can see further margin expansion coming out of Europe, right, as we go forward. ROW, most geographies were almost at corporate level. Latin America was way down, right?

I mean I think that is adding almost 3% every year from hereon, 3%, 4%, right, in terms of their EBITDA margin. So that itself is giving you some significant leverage coming through, right, as we go forward.

[Operator]

The next question is from the line of Krishnendu Saha from Quantum AMC.

[Krishnendu Saha, analyst]

Just a little clarification, accounting clarification and with the margin put together. From FY '25 onwards, we would not have the agenda slide revenue and the margins in the comms. So I'd just like to put it as to how much is...

[V. Mani, executive]

Please repeat. We cannot hear you.

[Technical Difficulty]

[Krishnendu Saha, analyst]

Yes. Can you hear me now?

[Operator]

Slightly better. Please proceed.

[Krishnendu Saha, analyst]

Yes. Yes. Just on the file coupled with the margin question. Just as I understand, Glenmark Life Sciences revenue, which was not -- which is right now currently in the consol account, it would not be there from FY '25 onwards. So just trying to understand what kind of contribution do you do at the current level on a reported basis, say, FY '22, '23 onwards? And how do we -- that 19% margin, but it doesn't seem affected because that number is not going to be there in the consol for FY '25, the sales...

[Glenn Saldanha, executive]

Sorry, we are struggling to hear you. Yes, we just can't.

[Krishnendu Saha, analyst]

Hello. Hello, can you hear me?

[Technical Difficulty]

[Operator]

Mr. Saha, your voice is sounding very muffled.

[Glenn Saldanha, executive]

Yes, it's completely muffled.

[Krishnendu Saha, analyst]

Just give me a second. Yes, just wondering on the accounting part -- just on the accounting part and on the margin part. Just wondering because Glenmark Life Science will not be in the numbers from FY '25 onwards. How does the margin look because they do contribute quite some time something to the margins on the consol level. So just trying to understand that part.

[V. Mani, executive]

So Krishnendu, this is why we have, as per accounting standard, this is how you will see the margin today. And the earlier questions are also for the same. We have a continuing business, and we have a discontinued business. So on the continuing business, taking ForEx loss, we have a current quarter profit -- I mean, EBITDA margin of about 15.7%, which we have given a clear trajectory and a glide path how we'll go to 19%, 2% from innovation, R&D and yes.

[Krishnendu Saha, analyst]

Yes. But I'm just wondering if I did the consol when Life Science are currently -- when Glenmark Life Sciences has been consolidated and in FY '25 they are not, does it not impact the EBITDA margin?

[V. Mani, executive]

So that impact is only we are absorbing. So I can't hear you clearly, but I'm just gathering what you're saying. It's hard to hear you. From what I understand, you are telling that GLS margin will not be there, I agree. That is what we are making up by virtue of these measures by which we are reducing our innovation R&D spend, and we are looking at other markets which are doing better and growing, whose margins are expected to improve. So both put together, that is how we are expecting and also with some support from as we go along with Monroe, et cetera, we're very confident we'll come closer to 19%.

[Glenn Saldanha, executive]

And I think Krishnendu, over and above that, the key to take notice of is the PAT margins, okay, because in next year, you will see a significant improvement in the PAT margin. So not only are we maintaining, getting to that 19-plus percent EBITDA margin, right, but we're also expecting a significant improvement in the PAT margin compared to where we've been, right, along with GLS. So that should drive the next year.

[Krishnendu Saha, analyst]

Yes, that's what I call it, absolutely on the spot. Just so I understand, this has nothing to do with your guidance or whatever, just to understand, is there a 100% consolidation on the PAT margin for GLS on the consol level? Or is there something getting -- something because we're not 100%. So how does the consol -- or do we have 100% of the profit of GLS in the consol? That's what I'm trying to understand. That's the last question.

[V. Mani, executive]

So the entire 100% of the EBITDA margin all is removed of GLS. There is nothing of GLS left back in the continuing business. It's completely out, yes. In future, whatever we buy, we buy at arm's length, okay? So there is no [indiscernible].

[Krishnendu Saha, analyst]

No, sir, I'm talking about historically so FY '23, '22 numbers, the numbers which are getting consolidated, do they much total the 100% of the profit of GLS into the consol? Is it like if they are on 100%, does it reflect 100% in the EBITDA margin? Is it like that on a historic basis?

[V. Mani, executive]

The entire margin of GLS is removed from here, okay? It's not there in the continuing.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Utkarsh Gandhi for his closing comments.

[Utkarsh Gandhi, executive]

Thanks, Lizan. We'll quickly read the disclaimer before we end the call. The documents prepared and discussed during the call today, including information, statements and analysis, describing the company or its affiliates' objectives, projections or estimates are forward-looking statements. These are based on current expectations, forecasts and assumptions and are subject to risks and uncertainties, which could cause actual outcomes to differ materially from these statements, depending upon economic conditions and other incidental factors.

So no representation of warranty is provided in relation to this document, and it should not be regarded by recipients as a substitute for the exercise of their judgement. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

With that, we can close the call. Thank you, everyone, for joining us today.

[Operator]

Thank you, members of the management team. Ladies and gentlemen, on behalf of Glenmark Pharmaceuticals Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.