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Ladies and gentlemen, good day and welcome to the Q3 FY '20 Earning Conference Call of Glenmark Pharmaceuticals Limited.[Operator Instructions] Please note that this conference is being recorded.I would now like to hand the conference over to Mr. Jason D'souza. Thank you. And over to you, sir.
Thank you, moderator. Welcome to Glenmark's Q3 Earnings Call.First, a review of operations for the quarter ended December 31, 2019.For the third quarter of FY '19/'20, Glenmark's consolidated revenue was INR 27,355 million, as against INR 25,500 million, recording an increase of 7.07%. For the 9 months ended December 31, 2019, Glenmark's consolidated revenue was at INR 78,734 million, recording an increase of 7.83%.India business. Sales from the formulation business in India for the third quarter was at 7,888.39 million, as against INR 6,675 million, recording a growth of 18.17%.The India business continued to outperform the industry growth. As per IQVIA Q3 FY '20, Glenmark's India business recorded growth of 13.65% compared to IPM growth of 9.03%. As per IQVIA MAT December 2019, the India business recorded growth of 12.98% compared to IPM growth of 10.10%. Glenmark's India formulation business is ranked 14. Glenmark has 9 brands among the top 300 in the IPM. In terms of market share, Glenmark's India business strengthened itself in its core therapy areas such as cardiac and respiratory. Glenmark is ranked second in the overall dermatology market, third in the overall respiratory market and sixth in the cardiology market in India.In April 2019, Glenmark announced the launch of its novel, patent-protected, globally researched SGLT2 inhibitor Remogliflozin etabonate in India. Glenmark is the first company in the world to launch remogliflozin, and the response from KOLs has been extremely positive. As per IQVIA December 2019 data, the sales for remogliflozin is tracking at INR 5 crores per month. Remogliflozin is the most successfully launched SGLT2 inhibitor in the Indian market in the first few months from launch. Glenmark has also launched the combination of remogliflozin and metformin for adults with type 2 diabetes in India. The combination has received a good response from the market.Glenmark Consumer Care business maintained its strong growth momentum with 14% growth at INR 377.6 million for the quarter. The effort is led by Scalpe shampoo franchise with 32% growth and VWash Plus with 28% growth in Q3. The growth was aided through the modern trade and e-commerce channels, increasing its contribution to GCC business to 22% in Q3 versus 19% in Q3 of the previous financial year.The U.S. business, Glenmark Pharmaceuticals U.S.A., registered revenue from the sale of finished dosage formulation was at INR 7,998 million, $112.70 million, for the quarter ended December 31, 2019, a de-growth of 6.53%.In the third quarter, Glenmark received final approval and launched adapalene and benzoyl peroxide gel, 0.1%|2.4% (sic) [ 0.1%|2.5% ]; and Glumetza. In addition, Glenmark launched the previously approved ezetimibe and simvastatin tablets. The company received an overall of 13 ANDA approvals including 11 approvals, final approvals and 2 tentative approvals in the first 9 months.The generic industry continued to be subdued, with the overall generic topical dermatology market continuing to witness price erosion of 6% to 7% on a Q-on-Q basis. On a YTD basis, the overall generic topical dermatology market is estimated to have witnessed price erosion of around 17% for the first 9 months of this financial year. During the first 9 months, the U.S. business was significantly impacted in terms of sales on account of 3 products, mupirocin cream and also atomoxetine and calcipotriene cream. Further, the sales in the quarter was also impacted due to ranitidine.The company filed 3 ANDA applications with the U.S. FDA in the quarter, taking the tally to 7 for the 9 months; and plans to file an additional 5 applications in the forthcoming quarters. Glenmark has 5 U.S. FDA formulation manufacturing facilities. In September 2019, the U.S. FDA inspected the manufacturing facility in Goa, and we received an EIR regarding that inspection. In September 2019, the U.S. FDA also inspected the manufacturing facility in Indore, and we received an EIR for that inspection also. The Baddi facility was inspected by SÚKL of the Czech Republic and was issued a certificate of compliance for the audit in October 2019.Africa, Asia and CIS region. For the third quarter FY '19/'20, revenue from Africa, Asia and CIS region was INR 3,413 million, recording an increase of 0.37%.As per IQVIA data for MAT 2019, Glenmark Russia recorded growth of 7.7% in value vis-à-vis overall retail market growth of 6.5%. Glenmark overall rank is 48 in the Russian pharmaceutical market. Glenmark Ukraine showed secondary sales growth of 43.5% (sic) [ 45.5% ] in value in the third quarter of FY '20. The Asia region recorded moderate performance in the third quarter, with secondary sales growth of 6%. Growth remains subdued across all major markets for Glenmark.The Africa region also recorded moderate growth in the third quarter.Glenmark's Europe operations for the third quarter FY '20 was at INR 3,089.36 million, recording a de-growth of 3.98%. Glenmark Europe's operations recorded strong growth in the third quarter of the previous financial year. Thus, in the current third quarter, the growth is suppressed to that extent. However, we still expect the European business to grow at a steady pace in the coming quarter. The European business, however, recorded growth quarter-over-quarter. Despite the high base effect, the Central, Eastern and the Western European business recorded moderate growth, as compared to the previous corresponding quarter.Further, GSK has concluded a settlement agreement concerning the existing litigation against Glenmark and Celon regarding the shape of their inhalation products containing salmeterol and fluticasone, named Salmex, in selected European markets. Under the settlement agreement concluded between the parties, Celon and Glenmark are permitted to sell Salmex in certain European markets in an agreed shape of inhaler device free from intellectual property challenge.Latin America. Glenmark's revenue from its Latin America and Caribbean operations was at INR 1,563 million, recording an increase of 54.11%. The Brazil subsidiary continued to record good grade -- good growth because of the launch of the 3 respiratory products licensed from Novartis. The Brazil subsidiary recorded growth in excess of 50% in the third quarter on a constant currency. The Mexico subsidiary also recorded growth in excess of 20% in constant currency.GPL speciality and innovative R&D pipeline.Ryaltris nasal spray is the company's respiratory pipeline asset and is currently under review with the U.S. FDA as a treatment for seasonal allergic rhinitis in the U.S. The company is currently in the process of bringing in a partner to commercialize Ryaltris in the U.S. market. Additionally, Glenmark is also working to close a partnership deal for Ryaltris in various markets, including the EU. During the third quarter, we filed an application for Ryaltris approval in the European Union. The company has already completed partnership deals for Ryaltris in other markets such as Australia, New Zealand, South Korea and China; and will continue to evaluate partnership opportunities in various markets and launching the product in some of our key markets.During the first quarter of FY '20, the U.S. FDA issued a CRL pertaining to the new drug application for Ryaltris. We continue to work with the agency to resolve the issues raised in the CRL. During the third quarter of the financial year, Glenmark announced that its partner Seqirus has received marketing approval for Ryaltris from TGA Australia. This paves the way for the launch of Ryaltris in Australia through Seqirus. Australia will be the first market globally where Ryaltris will be launched.GBR 310. During FY '19, Glenmark announced results from the Phase I study that suggest similarity in pharmacokinetic, pharmacodynamic, safety and immunogenicity profiles between GBR 310; and the reference product, omalizumab. The company is in discussion with potential partners and is targeting to conclude a deal before initiating Phase III studies.GRC 39815 is an NCE currently being evaluated as an inhaled compound for the possible treatment of COPD. The compound is currently in preclinical development, and the company plans to initiate a Phase I study shortly.Glenmark Life Sciences. For the third quarter of FY '20, external sales for Glenmark Life Sciences was at INR 2,621 million, recording growth of 9.58%. The U.S. and emerging markets led growth in the third quarter, with the U.S. growing in excess of 125% over the corresponding quarter in the last financial year and 60% over the previous quarter. The emerging markets sales grew at 25%. The U.S. market growth was led by products such as aprepitant. The organization continues to look at opportunities in emerging markets and has begun seeding multiple products across the region. The company has begun filing products in China. GLS has been working on strengthening the business with top formulation companies, especially specifically in the EU region, and continues to work on them for new launches. GLS remains on track to launch 3 or 4 products in the next quarters.Ichnos Sciences. During the first half of FY '20, Glenmark invested INR 3,835 million. For the third quarter of the financial year, Glenmark has invested INR 2,108 million, USD 30.01 million, totaling to INR 5,943 million for the first 9 months of the financial year. Ichnos Sciences will initiate the process to raise capital in the U.S., starting Q4 of this financial year, to fund the development of its pipeline and for future growth plans. For further updates on Ichnos Sciences' pipeline, please refer to the website www.ichnossciences.com.Before we begin the call, a few notes to mention.ForEx gain in other income was to the extent of INR 28 crores. R&D for the third quarter was INR 352 crores, which is 13% of sales for the quarter. R&D for 9 months was INR 1,002 crores, which is 13% of sales. Working capital, inventory for the period ended December 31, 2019, was INR 2,148 crores. Receivables was INR 2,140 crores and payables was INR 1,940 crores.Tangible asset addition for the 9-month period was at INR 459 crores. Intangible asset addition for the 9-month period was at INR 180 crores for brand and licensed and INR 30 crores for software, totaling to INR 210 crores.Before we open the floor for Q&A, I would just like to introduce the Glenmark management team. We have Glenn Saldanha, Chairman and Managing Director; V. S. Mani, Executive Director, CFO, Glenmark Pharmaceuticals; Bob Matsuk, President, North America.With that, moderator, we would like to open the floor for question-and-answers. Over to you.
[Operator Instructions] We take the first question from the line of Neha Manpuria from JPMorgan.
My first question is on the U.S. If I remember correctly, we had mentioned in the last call that, ex mupirocin, prices have started to bottom out for other derma products. Has something changed in the quarter, for the 6% to 7% quarter-on-quarter erosion? And a follow-up on that: Are we not seeing traction in our new product launches or launches that we did earlier during the year, or market share gains? Because the quarter-on-quarter decline seems pretty sharp.
Yes. This is...
So -- go ahead, Bob.
Yes. So just a couple of points. We did see some acceleration in the derm on the price erosion. I think the other thing that we're seeing specifically on the mupirocin cream and the calcipotriene cream is some volume erosion, and that's across the board. While we've maintained market share, overall demand for the products or prescriptions sold for the products have declined. And that's kind of where we're at on the derm side. On the new product launches, we're continuing to gain traction, and you'll see better traction, I think, in the current quarter.
And in terms of the volume erosion from mupirocin and calcipotriene, is it done now? Are we seeing a stabilization, or should we expect a further erosion on these products?
I think you'll see somewhat of some further erosion until -- and then you'll see some stabilization in about a quarter or so.
So Neha, the other thing that impacted the quarter was ranitidine, right? We've stopped selling ranitidine in the quarter, and that -- we lost sales on account of ranitidine in the quarter, right? So while the derm, we've had significant erosion in 3 products during the last 9 months, right, basically mupirocin, atomoxetine and calcipotriene cream. I mean the erosion has been a significant deal. To answer your question on whether this is over: We think today, if you see Glenmark's portfolio, not a single product is more than INR 25 million in sales. So whatever price erosion had to happen, right, is already; all the products have come off significantly, right? So we think this is pretty much the bottom in terms of price erosion. And we are hoping it will normalize from here. Mupirocin is 1 product where it's hard to tell, because of the volume declines that we're seeing, whether we may see some further declines in Q4 and going forward, but the rest of the portfolio, we are pretty much at the bottom in terms of price erosion. And I think, the new products, we are seeing some good traction. And I think going forward you should see some growth coming back into the U.S. business.
And this would be from -- I'm assuming this would be from FY '21, first quarter of FY '21, rather than...
I mean even Q4. I think, Q-over-Q, we will have some growth, but I mean clearly, FY '21, you should see the business growing back again.
Okay. My second question is on the other expenses. If I were to -- our R&D expense is pretty flat quarter-on-quarter, but it seems that, that number has increased pretty sharply. Is there a one-off element there? What drove the sharp increase?
So in terms of the -- this is Mani. In terms of the other expenses in this quarter, there was -- I mean there was a little higher spends on the marketing and promotional items. So I mean on a 9-month basis we're still trending, I mean, pretty much similar to what we were last year, but only this quarter was a little bit higher, on that account.
And this was in India, sir, or any other market?
It was India and some of the other geographies where we have -- where we are present in those markets in terms of branded generics.
Okay. So the quarter-on-quarter increase of about 120 crore, a large part of that would be sales and promotion.
A large part of it, compared to last year and, yes, compared to the last quarter. And if we see, last year also, in the similar quarter, there was a little bit higher spends on those. So I think sometimes some of these expenditures do get a little bunched up and they come more closer in a particular quarter.
Okay. And sorry, one other related question to the ranitidine discontinuation. Are all costs associated with the discontinuation incorporated in the quarter?
I mean we will have some recall expenses coming up in Q4, but I think the stoppage of sales has actually impacted Q3.
[Operator Instructions] Next question is from the line of Saion Mukherjee from Nomura.
Glenn, on this settlement on the GSK on Salmex, if you can throw some light what it means for the opportunity now.
Well, we feel pretty good about it. I think next year should be a really good year for Salmex and for Europe overall because it's a pretty large product. And I mean I think net-net it's a positive for the company.
But will it allow you to launch in some of the key markets like U.K. and Germany?
Yes, absolutely. So we are -- this will allow us to launch mainly in Germany as well as the U.K. Yes, all the big markets will be there.
Okay, okay. And when do you plan to start selling it again?
I think the real impact, Saion, will start coming from Q1, right? But we can relaunch it in Q4.
Okay. And the second question is on Latin America, strong growth on account of the Novartis products. So did these products have any sale when you took it over? Or this is something which you have built? And is this entirely attributed to that?
I think one is Novartis products were the biggest -- I mean, is the biggest driver. These products had sales. So we took over the existing sales, but I think over and above that we got a couple of good approvals in Latin America, which should drive growth going forward. I mean just recently we got mupirocin nasal spray, right, which should help next year, which is the first generic there. So that could be a big...
[indiscernible].
I'm sorry. Mometasone nasal space, right? So that could be a big one. We got glyco approval last year in Brazil, which is also helping. So I think -- so we've got a couple of good launches in Brazil. And of course, the rest of Latin America continues to see good growth overall. I mean Mexico, Colombia and various other markets.
[Operator Instructions] Next question is from the line of Nitin Agarwal from IDFC Securities.
Glenn, on the U.S. business now, you have 45-odd ANDAs which are pending. [ That is ] a reasonably [ tenured ] pipeline versus a lot of our peers as well as our size of the business. How do you now look at the -- I mean, how should we look at the U.S. business? I mean, how does it -- in terms of how you are strategizing on the U.S. business in this sort of new environment where I think it's becoming incrementally more difficult to make significant amount of money on niche opportunities? So how should -- do you have thoughts on that going forward?
So we continue to stay positive on the U.S. And I think you're right. I think product approvals have slowed down, but I still think it remains an attractive market on the generics side. We typically would get 10 to 15 approvals a year. So we are hoping to sustain that run rate. I think the other key thing is compliance, right? So as long as we stay compliant, I think the U.S. business will continue to grow on a consistent basis.
But do you have any thoughts on -- there is this thought in terms of people moving to a -- some of your peers also trying to move towards a more broader portfolio rather than just focusing on select specific products. Do we still continue with the strategy of focusing on niche, specific molecules? Or do you think there is -- or you will probably reevaluate the strategy in terms of being broad-basing your portfolio a whole lot more, probably focusing a lot more on volumes than value going forward?
Well, I mean our game is, I mean, we will continue to look for value opportunities as opposed to just volume. The big driver for the U.S. will be some of the injectables that we hope to launch going forward. So that could be an exciting portfolio for us and a new portfolio for us. We've launched forms. We've launched some various dosage forms, new dosage forms that we've got into, will drive some of our U.S. growth.
Okay. Secondly, on Monroe site, what is the status on that site? Have we started commercializing production there?
Not yet. We are hoping to start from Q1.
And so a good chunk of the 45 ANDAs still pending are from that site?
That's right.
Okay. And secondly, on the API business, Glenn, given the fact that there has been a general upswing in the momentum on the API side of the business, how are we looking at this business incrementally now going forward? Have you seen improvement in the quality of the inquiries and all which have come through across different markets? Or I mean, how do you see the business really plays really going forward here?
So I mean it looks -- I'll say Q4 looks to be a good quarter for the API business, but I think overall, if you look at APIs, I mean, our view is we think this business can grow between 10% to 15% CAGR for the next 3 to 5 years. And there is significant opportunity, also what's happening in China. And I think a lot of those flows will start coming to India. So it remains an exciting business for us, and we continue to run it pretty efficiently.
Okay. Last, if we can squeeze in one more. What proportion of our gross block -- I presume, for example, Monroe is one asset which is almost like $100 million, if I recall, which is not being utilized. Are there any other large chunky pieces of our gross block which are not utilized currently?
No. Nitin, this is Mani here. They're not much here. I mean, on and off, you may have some lines being put up which may be in CWLP, but largely this Monroe site is [indiscernible].
[Operator Instructions] Next question is from the line of Chirag Dagli from HDFC Mutual Fund.
Sir, mupirocin at peak used to be about $70 million. Now you're saying it is less than $25 million. And so is this -- if you'll -- if you think about the last 2, 3 years, is this a predominant reason why your sales appear flat?
Absolutely, Chirag. I mean it's, look, there's nothing we can do to reverse the mupirocin trend, okay, because we are the sole sellers of mupirocin cream today in the U.S. And it's unfortunate. I mean there's a lot of changes in the market access situation in the U.S., right, which is basically driving down mupirocin cream demand, right? And so I think you're right. The bulk of the decline, I mean, we are seeing on account of mupirocin. And if I add calcipotriene cream and I will add atomoxetine, right, I mean, you're looking at very, very large numbers just on account of these 3 products that we've lost, right, which we've more than been able to compensate with some of the new product launches. And we continue to gain share with the new products.
So like we quantified, mupirocin $60 million, $70 million going to $25 million now, can you also quantify calcipotriene and atomoxetine?
Unfortunately, I can't, Chirag, but they're big numbers.
Okay -- no -- but in terms of ranitidine, how big was this product for us? And has the impact only come in the third quarter?
Yes. So ranitidine sales were around $2 million to $2.5 million a quarter.
Okay, fair point. And Jason, can you give the debt numbers?
Yes. The debt number is gross debt is about INR 4,680, and the net debt is INR 3,650.
INR 3,650, okay. And just on the Monroe bit, how should we think about this facility, the scale-up? And what sort of returns do you think this can start generating over a reasonable future?
So I think, starting next year, Monroe should be a good lift in terms of our overall U.S. sales. In fact, I anticipate a lot of the growth will come out of Monroe in the next few years for the U.S. business, primarily on account of injectables, nebulizers. Both the lines, we have lots of filings. And the oral solids.
So if you think about this facility, say, 3 years out, Glenn, how -- what contribution can this be for the overall U.S. business? As in I'm trying to understand what part of your U.S. sales could come out of U.S. and India.
I mean, Chirag, I can't give you a number, but I can say the bulk of the growth, right, in the U.S. business will come from Monroe and some of the filings sitting there.
Right. And the CapEx number, sir, FY '21.
FY '20 or '21?
'21.
'21, we are looking at about anywhere between INR 700 to 800 crores, all put together.
So Glenn, your peers who are much larger in the U.S. are investing -- or are reducing CapEx. They are reducing R&D, albeit generic R&D, but your CapEx numbers are similar to peers who have much larger U.S. businesses. How should we think about this CapEx coming down, if at all? And if you can just broadly discuss where this INR 700 crores, INR 800 crores have been spent.
So obviously -- this is Mani here. So obviously, compared to the last year, it is much lower in the current year. And we're projecting it to be lower in the next year also. I mean, in a way, if you cut it in terms of CapEx, obviously, one is the routine CapEx that you do spend. Almost half of that would go towards that. And then obviously, as we have put up Monroe, we'll keep up -- I mean, initially at least, say, there'll be some new assets, et cetera that will require some equipment, et cetera that do come in. And also, we have a decent bit of in-licensing that we keep doing across the world. So all this put together all comes in here only together.
So in the past, we've talked about INR 200 crores sort of in-licensing.
We are around that level. And in some years it's a little higher. Sometimes, it is a little lower, but it's thereabouts, yes.
So just to sort of get the numbers right: INR 800 crores will be spent in CapEx, INR 400 crores on maintenance, INR 200 crores of tangible on growth and INR 200 crores on in-licensing.
Broadly, yes.
All right. And this growth -- this maintenance number of INR 400 crores, do we see this coming down over time?
We will make efforts to bring it down, but as you know, the regulatory environment is also tough. One needs to keep up. Every now then, something or the other is required. We'll look at it that way. So I think every -- even our peers, [ all of whom later ] spend on routine CapEx. Otherwise, how do you maintain your CapEx the way it is?
[Operator Instructions] Next question is from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one, on the India business. Numbers have come pretty good. I think you called out remo, but how is this -- INR 5 crores is the number that you've put out as per IQVIA. Do you think this can -- there's a scope for this doing even better hereon on a sequential basis? That's point number one. And non-remo, can you talk about the portfolio as well?
Sure. So I think, I mean, overall, India continues to be very exciting for us. So remo, I mean, we are seeing month-on-month growth, right, addition of, I will say, at least INR 40, INR 50 lakhs a month. So it continues to be an exciting product for the company, and it could be really big in the next 12 months. The rest of the portfolio: So respiratory, we are doing a good job, right? I mean we have Glycopyrronium, which is doing well; some new products, Glycopyrronium, glyco formoterol. So these are some of the new respiratory products doing well. On the derm side, we continue to gain some share. And our cardiovascular franchise is doing well with the entire Telma range. So I think all in all India continues to be strong for us, and we think you will see strong growth continuing to come out of India.
So then we can maintain this low- or mid-teens kind of growth, do you think, fiscal -- I'm looking at fiscal '21, but...
'21, I think between 10% to 15% is what we anticipate, right?
Got it, okay. My second question is on China and the API business, the life sciences business. So just quick thought on any of the supply chain issues that concerns have risen with the virus situation. Are you okay? And I also noticed that you've started to file for China. So just if you can give us an update on both those.
So on the supply side, Q1, we are covered. I think -- I'm sorry. This quarter, we are covered. Q4, we are covered, and part of Q1, we are covered. After that, it will all depend on how things evolve in China. We've also started bringing back some of those backward integrating further into some of these products in India as a backup, right, to prevent our supply chain getting hit. So these are some of the efforts on -- to hedge ourselves against the coronavirus situation. As regards filing in China, we have some partnerships in China and mainly on the generics side. And we are hoping to continue filing in China, but on the generics side, most of -- our business model is to continue with the partnering model, as opposed to trying to set up a commercial front end there.
Yes. So Glenn, will we do -- go through the auction route? Or do you think it's like a broad-based strategy where we look at through-the-partner "feet on the ground" types? How would this pan out?
So it's -- clearly it's more of a supply-type arrangement, as opposed to feet on the ground.
Okay, got it. Last question, just a clarification. What goes into Ichnos versus what stays in Glenmark speciality? So for example, I just note -- I may be wrong. GBR 310 is with us. 830 goes into Ichnos. So how do you kind of split these things out?
So Ichnos is focused on immunology and oncology, right, as things stand, right? And mainly, the biological assets are being run out of Ichnos, right? And Glenmark is focused on respiratory, so the respiratory assets will stay in Glenmark, right? So derm and respiratory are the 2 segments where we are operating. 830 is more immunology, right? I mean across the different portfolios you've got, right, from atopic dermatitis. You've got RA. You've got SLE, multiple possible indications.
[Operator Instructions] Next question is from the line of Prakash Agarwal from Axis Capital.
On the cost side, I think Chirag asked this question, but more on the R&D side, my question is more on the operating costs side. We are seeing global generic companies as well as Indian generic, larger companies. They've been critically focused on reducing their cost base. And we have in the past mentioned about this. We have seen some improvement, but is there more scope for the cost, operating cost reduction?
I think, next year, FY '21, you should see a very good reduction and particularly in our overall R&D spends as a percent of sales, right. It should come down quite sharply. So I think that is 1 element which we think will help FY '21. And our margins, effective EBITDA margins, will go up in FY '21. So that's 1 element. The other thing is on manpower costs. We think there will be -- Y-o-Y, there will be a reduction in manpower costs as a percent of sales. So these are the 2 areas where I see improvement in FY '21.
When you say R&D, it will be more a function of the merged entity Ichnos. Or you are seeing -- on a like-to-like basis, you are seeing reduction [ in R&D ].
On a consolidated like-for-like basis, right, you will see a reduction in R&D costs, right, coming up next year. And that is without assuming any capital raise or anything else, right.
Okay, okay, but what is the range we are looking at next year?
Sorry, Prakash, I can't give you a number right now.
Okay, fair enough. And one more question on the domestic piece. We have seen [ a number or a lot of ] players coming in for vildagliptin. I understand there was totally different, but it targets the same therapy. So if you could just broadly make us understand. Like is there a chance or there is no chance of vilda taking some share?
So far, we are not seeing any impact of vilda. So we have teneligliptin, which is a big molecule for us. We've not seen any decline in sales there. And we have remo, right, which is continuing to grow and gain share. Of course, remo is in a different area altogether, right? The SGLT2s are looked at very differently from the DPP-4s, but even internally we are not seeing any decline in sales. So the sales continue to remain strong.
Okay. And just last one here, in terms of new launches for India. Like we had a blockbuster remo kind of product, which is still catching up. Any major products and -- or major -- and major -- any therapies that you are planning or [ planning on ]? Because you will have a good base this year, right?
Yes. So we have a host of launches coming up...
The first-in-class [indiscernible].
Okay. So look, we have a number of products which are potentially first in class, right? Let me just leave it at that, right? I don't think we have anything like another remo in our pipeline, okay, because remo is a unique opportunity. So I don't think -- at least for the next year or 2 years, we don't have another remo, but we have a number of first-in-class launches, potential first-in-class launches. And you'll see them as they play out.
We take the next question from the line of Tushar from Motilal Oswal Securities.
Just on the India business, if you look at [indiscernible] number of MRs and how many MRs you intend to have.
So right now, we are up to, I think...
3,800. 3,800...
3,800 sales reps, right? And currently, there's no major expansion.
So this is the number to go about for next year as well, more or less.
Yes, I mean, we are not guiding to next year, but more or less, you can assume that you're not going to see some massive expansion next year.
And just if you could just help us. Sequentially how much net debt reduction. Or additional help...
So we gave the number of -- on the debt. It was INR 3,650. So sequentially it has come down. It was INR 3,665, the net debt was, as of 6 months ended.
[Operator Instructions] Next question is from the line of Nitin Agarwal from IDFC Securities.
Glenn, on R&D, how should we look at R&D spends over the next, say, couple of years? With -- I mean. And where does Ichnos fundraise come in -- I mean if you just sort of put that into perspective. I mean how you overall look at -- and what are the focus areas of -- for us on R&D on an ex Ichnos basis going forward?
Okay. So I think -- so R&D spends will come down as a percent of sales, okay, going forward. I mean that's what I've stated, right? So FY '21, you should see a lower R&D spend on a consolidated basis, right? I think -- I mean, ex Ichnos, I think Glenmark's focus is primarily -- the bulk of our expenditure is on the generic R&D, but we also have a good specialty differentiated portfolio in other markets ex U.S. and Western Europe. I mean that's the only visibility I can give you, Nitin.
But Glenn, do you have a number on -- a broader number on where do you see this number settling as a percentage of sales on R&D front?
We can't give it right now, Nitin, but as I said, next year will be lower. And then after that, we will sustain that on an ongoing basis.
Okay. And maybe my last one, bookkeeping question on Monroe. Has it been capitalized and will have impact on the depreciation charges and all going forward?
Yes. I mean, going forward, once we do, next year, we capitalize it. And the depreciation will go up a bit, yes.
[Operator Instructions] Next question is from the line of Surajit Pal from Prabhudas Lilladher.
Just one question is that you have guided for manpower costs year-on-year to be lower in FY '21. What are the sources for lower manpower costs?
Well, I think, as a percent of sales, it will come down, right? So we have no major expansions coming up in FY '21, right? So I think overall, as a percent of sales, we expect manpower costs to come down.
Okay. So well, not in real terms, okay. Another point is that this R&D cost earlier, if I can recall the conversation, was at around 50-50 versus distribution of R&D between NCE and generic and specialty. So should we go by that distribution? Is that after Ichnos has been separated? So that much of revenue -- that much of cost will be saved for the company.
So just to say it correctly. I mean we normally -- I mean currently it's been about 13% in R&D, of which 8% is on the innovation side, okay? So we'll have -- I mean it's not 50-50, it's more like 60-40 or thereabouts, okay? So going forward, that's the way you'll see the distribution, yes.
[Operator Instructions] Next question is from the line of Alok Dalal from CLSA.
Mani, what are the plans to bring down debt levels next year? And can you guide towards a number?
So I think, Alok, this year, we have some divestments, right. We -- of some noncore assets. I mean we did a divestment of [ Garnett ] portfolio in India, and there are several others happening. So I think leverage will continue to come down quite substantially [indiscernible].
But Alok, we will probably not be in a position to guide you to a perfect number right now, but the plan is that -- I think we announced already one, and there are a few more that will be announced. So those will definitely bring down the debt, yes. And as we can see, over the last couple of months, in spite of currency movements upwards, we still managed to keep our debtors well in check, yes.
And I think one more point is, next year, FY '21, with the lower R&D spends and manpower costs, right, we anticipate the business to generate some decent cash, free cash, in FY '21.
So fair to assume that debt levels probably have peaked out now at 9-month '20 number.
Correct.
Yes, yes.
[Operator Instructions] Next question is from the line of Alankar Garude from Macquarie.
So firstly, on Ichnos, what is the progress on the fundraising front? Has the process started? And what are the time lines we are looking at?
So as per our plan, we are just kicking it off as we speak. I mean Q4 is when we anticipate that we will start initiating the fundraise, and we are starting it any time now.
Okay. And secondly, sir, so if I just look at U.S. sales, $103 (sic) [ $113 ] million. And you have said that possibly in Q4 we might see some more pressure coming through on mupirocin, but that will be compensated by the new launches. So how should we look at the quarterly U.S. sales? Is $110 million, $112 million kind of the base number to look at? And anything lower than that shouldn't be the case. Is that the way we should look at the U.S. number here on?
So Q-over-Q, as we said, Alankar, we will still grow in Q4 versus Q3, right, in the U.S. So I think, from here on, you should anticipate that we are at the bottom right now, right, in terms of U.S. sales. And you will see an improvement. The improvement because there is still some amount of mupirocin in the base, right? You may see the improvement being gradual over the next couple of quarters, but thereafter it should kick on. And I think quarter-over-quarter you should see growth from here on in the U.S.
Understood. And one final question from my side, Glenn, on the API divestment. Any update there? Or the plans have been shelved.
Right now, the plans have been shelved, Alankar.
Well, ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Jason D'souza for closing comments.
Thank you.The final disclaimer. The information statement and answers made during this call describing the company's objectives, projection and estimates are forward-looking statements and progresses within the meaning of applicable security laws and regulation. The analysis contained herein is based on rigorous assumption. Actual results may vary from those expressed or implied, depending upon economic conditions, government policies and other incidental factors. No representation or warranty, either expressed or implied, is provided in relation to this presentation. This presentation should not be regarded by recipients as a substitute for the exercise of their own judgment.With this, we end Glenmark's Q3 Earnings Call. Thank you, everyone.
Thank you. On behalf of Glenmark Pharmaceuticals Limited, this concludes this conference. Thank you all for joining us. You may now disconnect your lines.