Glenmark Pharmaceuticals Ltd

NSE:GLENMARK

Earnings Call Transcript 2024-Q4

[Operator]

Good morning, ladies and gentlemen. Welcome to the Q4 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, Lizanne. Good morning, everyone. Welcome to the Q4 FY '24 Results Conference Call of Glenmark Pharmaceuticals Limited. Before we start the Q&A, we'll review the overall performance for the company. for the fourth quarter and the full year 2024. For the fourth quarter of FY '24, Glenmark's consolidated revenue from operations was at INR 30,630 million as against INR 30,005 million in the corresponding quarter last year, recording an overall year-on-year growth of 2.1%.

For the 12 months of FY '24, Glenmark's consolidated revenue was at INR 1,18,131 million as against INR 1,15,832 million, recording a Y-o-Y growth of 2%. In terms of key highlights for the fiscal year '24, so across businesses, there were some key highlights. In the fourth quarter, Glenmark gained 2 positions to be now ranked as the third largest company in the cardiac segment of the Indian pharma market as per IQVIA March data.

Glenmark's Europe business registered a strong growth, 33.7% for the full year, and the ROW business also recorded a robust growth of 16.1%. RYALTRIS was launched in 7 additional markets across the globe, either on our own or through a commercial partner. And as of March 2024, RYALTRIS has now been launched in 34 markets across the world. The company also enhances global branded portfolio through the in-licensing of Envafolimab for India and ROW markets and WINLEVI for some European markets, U.K. and South Africa.

Ichnos Sciences announced the worldwide out-licensing agreement for its OX40 portfolio, including ISB 830 with Astria Therapeutics. Glenmark and Ichnos entered into an alliance of Ichnos Glenmark Innovation to accelerate new drug development in cancer. And Glenmark completed the divestment of 75% of its stake in Glenmark Life Sciences to Nirma Limited.

In terms of our over -- performance across regions, starting with India. So sales for the formulation business in India for the fourth quarter of FY '24 were INR 9,391 million as against INR 8,316 million in the corresponding quarter last year, recording a growth of 12.9%. In terms of secondary sales, Glenmark India business continued to outperform the overall industry in terms of growth as per IQVIA March 2024 data, Glenmark's India formulation business recorded a growth of 11.4% in the fourth quarter and about 10% growth as of March '24. In comparison, the IPM grew at 5.6% in the fourth quarter and about 7.5% as of March '24. And Glenmark continues to outperform the market in terms of its key therapeutic areas of cardiac, respiratory, dermatology. We have provided a table in terms of our Q4 and MAT growth in the MD&A.

Glenmark's India business continues to be ranked 14 with a market share of 2.16%. The company continues to have 9 brands in the IPM top 300. And in terms of key therapeutic areas, Glenmark is ranked 2nd, both in dermatology and respiratory segments. As mentioned before, Glenmark is now ranked third in the cardiac segment and is ranked 17th in the diabetes segment. As noted in the MDA, Glenmark has also improved its market share across some of the key therapy areas. In Jan '24, Glenmark and Pfizer joined hands to launch JABRYUS, which is Abrocitinib, which is the first of its kind oral advanced systemic treatment for moderate to severe atopic dermatitis in India. Developed by Pfizer, JABRYUS has received marketing authorization from the CDSCO in India and is also approved by the U.S. FDA, the EMA and other regulatory agencies. So Abrocitinib, which is the molecule is being co-marketed by Glenmark under the brand name JABRYUS and CIBINQO by Pfizer, respectively.

In terms of our Consumer Care business in India, the primary sales in Q4 were about INR 673 million with a growth of 3% for the full year. GCC business recorded growth of INR 2,570 million, with a growth of 14%. The company's flagship brand delivered growth of 15% for the full year, Candid powder and La Shield portfolio delivered a Y-o-Y revenue growth of 8%, while Scalpe grew by 23% in full year FY '24. During the year, various line extensions were launched and performed well, particularly a couple for La Shield and Scalpe.

North America business. The North America business registered revenue from the sale of finished dosage formulations of INR 7,557 million, which is about USD 91 million for the fourth quarter of FY '24 as against INR 8,628 million, which was $105 million for the fourth quarter of FY '23 and INR 7,629 million, which is about $91.6 million for the third quarter of FY '24. This translates into a Y-o-Y decline of 12.4% and a Q-o-Q decline of about 0.9%. The overall business remained challenging on account of lack of any meaningful product launches and delay in scale-up of some recent launches.

In FY '24, Glenmark was granted final approval on 3 ANDAs, Saxagliptin, Apremilast and Tacrolimus 0.03%. In the fourth quarter, Glenmark launched levocetirizine dihydrochloride. Glenmark also launched several products under the licensing agreements, including some of the injectable products, as mentioned in the last call. The company filed 6 ANDAs with the FDA throughout the year and 2 ANDAs in the fourth quarter. Glenmark also leveraged its strong capabilities in the respiratory area to build a portfolio for the U.S. market. As mentioned in the Q3 call, Glenmark has filed 2 ANDAs for the generic nasal sprays and is awaiting approval for the same. In addition, happy to report that the company has filed the ANDA for generic Flovent 44 mcg pMDI in May 2024. Glenmark also plans to file another generic respiratory pMDI for the U.S. in FY '25, and we'll continue filing momentum beyond that.

In terms of another update, there's a change in leadership for the North America business, Marc T. Kikuchi will be joining the company as President and Business Head, North America effective 28th of May. Marc joins us from Dr. Reddy's Laboratories, where he was CEO of the North America business since 2019. Overall, he has more than 3 decades of experience across the pharmaceutical industry.

Moving on to Europe. Glenmark's Europe operations revenue for the fourth quarter of FY '24 was INR 6,118 million as against INR 6,078 million in Q4 FY '23, recording a Y-o-Y growth of about 0.9%. The European operations continued to remain strong in terms of overall business performance. The branded market has performed well. The growth in the fourth quarter was impacted due to some softness in the tender markets. Key branded markets across the CEE such as Poland, Slovakia recorded double-digit growth.

The respiratory portfolio that we have launched in Europe continues to do well. So key brands like RYALTRIS and Salmex continue to sustain their 15-plus percent market share across some of the markets, both in terms of value and volume. The company is continuing to sustain the increasing contribution from the branded markets in Europe. It is awaiting approval of 4 respiratory products, which were filed in the fourth quarter of FY '23 and we are also planning to launch WINLEVI which was licensed in this year in some markets of Europe starting FY '26.

Moving on to the ROW region. For the fourth quarter of FY '24, revenue from the ROW region was INR 7,528 million as against INR 6,864 million, for the corresponding quarter last year, recording a Y-o-Y growth of almost 10%. As per the IQVIA data, Glenmark Russia business continues to perform well, both in terms of Q4 as well as MAT March data. In terms of our key therapeutic areas, Glenmark continues to record strong growth, and we are ranked 9th in the dermatology market of Russia and in the respiratory expectorants market, we have grown in line with the overall market and continue to be ranked second as per the IQVIA MAT March data.

RYALTRIS continues to gain market share in the allergic rhinitis market in Russia. Latin America witnessed strong growth in Q4, respiratory portfolio doing well. Glenmark Brazil achieved high single-digit growth in the covered market. And the company maintenance ranked amongst the top 10 companies in the covered market of the chronic respiratory segment. Glenmark launched the first generic Salmeterol Fluticasone MDI in Brazilian market in Q4 FY '24. And across the other big market, Mexico, secondary sales growth continued to be strong. RYALTRIS has been approved in Mexico and will be launched soon.

In Middle East and Africa region, company achieved secondary sales growth in some of the key markets like EMEA, South Africa. RYALTRIS continues to be the leading nasal sprayer in the allergic rhinitis market for South Africa and the product was launched in markets like Kenya and Saudi Arabia in FY '24. It is also expected to be launched in other key Middle Eastern markets, such as UAE in the forthcoming quarters. The Asia region recorded a slightly subdued growth in terms of secondary sales across its key markets due to some macroeconomic challenges in some countries, top contributing brands across the key therapeutic areas have continued to do well. And Glenmark has received some good approvals in the region, mainly in the dermatology, respiratory and oncology segment. And RYALTRIS again continues to do well across the Asian region.

In terms of our endeavor to create global brands, starting with RYALTRIS. As of March 2024, marketing applications for RYALTRIS have been submitted in more than 80 markets. Product has been commercialized in 34 markets. Our Glenmark commercial partner in the U.S., Hikma recorded substantial increase in the last quarter performance on a Q-o-Q basis. This was backed by strong demand and increasing coverage across major pharmacy chains. Menarini-Glenmark's partner in the EU has witnessed steady increase in market share across markets. Glenmark's partner in Mainland China, Grand Pharma has received acceptance of the NDA in February 2024. The company expects approval to be received sometime in FY '26. And in the MDA, we have provided the market share across the top 15 markets in terms of IQVIA December 2023 data.

Moving on to Envafolimab. So in Jan 2024, Glenmark announced the licensing -- the signing of a license agreement with Jiangsu Alphamab Biopharmaceuticals and 3D Medicines Beijing for Envafolimab for India and ROW markets. Envafolimab under the brand name ENWEIDA has been approved in China by the Chinese NMPA in November 2021 as a global first subcutaneous injection PD-L1 inhibitor for the treatment of adult patients with previously treated MSI-high or deficient MMR advanced solid tumors. 30,000 patients have already benefited from this innovative treatment in China, where it has obviously been included in the list of breakthrough medicines. Envafolimab is also being currently developed in the USA by Tracon Pharma in a pivotal trials of tissue sarcoma subtypes, including some specific subtypes and Glenmark plans to file Envafolimab in more than 30 markets in FY '25, and the first market launch is expected in FY '26.

Lastly, WINLEVI in Q2 of FY '24, Glenmark and Cosmo Pharmaceuticals announced the signing of distribution and license agreements for WINLEVI, which is clascoterone cream 1% in 15 European markets as well as the U.K. and South Africa. Glenmark plans to launch WINLEVI in its license markets starting FY '26.

Glenmark Life Sciences. In September 2023, Glenmark had announced that it had entered into a definitive agreement with Nirma Limited to divest 75% stake in its subsidiary, Glenmark Life Sciences. Subject to closing adjustments, the consideration was INR 56,515 million. In March 2024, the company completed the closing formalities of the divestment and Glenmark continues to now own 7.84% in GLS after the divestment.

Ichnos Glenmark Innovation. The company had recently announced the launch of their alliance with its subsidiary, Ichnos Sciences called Ichnos Glenmark Innovation or IGI to accelerate new drug discovery in cancer. This combined Glenmark's R&D proficiency in small molecules with those of Ichnos and novel biologics to develop continue -- to continue to develop cutting-edge therapy solutions for hematology, cancer and solid tumors.

And going forward, all of Glenmark Group's investments on innovative assets will be channelized through IGI. IGI has 2 autoimmune assets that have been out-licensed to leading companies. And apart from that, we have a robust pipeline of 3 innovative oncology molecules targeting multiple myeloma and acute myeloid leukemia and solid tumors. These are all undergoing clinical trials. We have some further updates on the IGI pipeline on the website.

In terms of our key objective for FY '25, consolidated revenue target is INR 135,000 million to INR 140,000 million. R&D investment for FY '25 is targeted to be around 7% to 7.25% of the total revenue. EBITDA margin target is close to 19% for full year FY '25. Consolidated capital investment would be INR 7,000 million for FY '25 and we are targeting double-digit PAT margin for the full year FY '25.

Some notes to the results before we open the Q&A. Other income primarily includes the mark-to-market value, Glenmark's 7.84% stake in GLS. Exceptional items in the consolidated and the full year result is a loss of INR 446.78 crores and a loss of INR 900.95 crores on account of a few items which are listed in the P&L. R&D expenditure in Q4 FY '24 was around INR 265 crores. Consolidated total asset addition in the quarter was INR 280 crores, of which tangible was around INR 159 crores and intangible asset addition was about INR 121 crores.

Gross debt for the period ended March 31, 2024, was at INR 990.6 crores. And net cash for the period ended March 31, 2024, was at INR 667.7 crores. In terms of our working capital at the end of March '24, inventory was at INR 2,513 crores. Receivables was at INR 1,858 crores and payables was at INR 2,535 crores. We have the management of Glenmark Pharmaceuticals on the call today, Mr. Glenn Saldanha, Chairman and Managing Director; Mr. V.S. Mani, Executive Director and Global Chief Financial Officer; and Mr. Ashish Mukkirwar, Group Vice President and Head of Strategy. The management will be presenting its long-term vision and outlook during the upcoming Investor Day. So today's call will be more focused on the Q4 results.

With that, we can open the floor for Q&A. Over to you, Lizanne.

[Operator]

[Operator Instructions] The first question is from the line of Saion Mukherjee from Nomura.

[Saion Mukherjee, analyst]

Sir, my first question would be on the exceptional items that you had. So firstly, on this write-off that we had for INR 2,180 crores. If you can give some color, what is this related to? .

[V. Mani, executive]

Yes. Thanks for the question. So you're talking about this write-off that we have given in our notes for the U.S., right?

[Saion Mukherjee, analyst]

Yes. .

[V. Mani, executive]

So this was basically -- one was the impairment of assets in Monroe. And the balance was basically the working capital rationalization that we did in terms of some provisioning for rebates, et cetera, and also inventory write-down Yes.

[Saion Mukherjee, analyst]

So, this is mainly working capital and...

[V. Mani, executive]

No. It's mainly impairment of assets in Monroe as we knew that we had 3 lines there, right? We had the nebulizer, we had the overall solids. And lastly, we had the injectable. So now we decided we are working only on the injectables as we've given also in the note. And the other 2 lines we wrote down. That is a major one, more than 50% of that. The balance is basically on inventory write-down and some rationalization of provisioning, et cetera.

[Saion Mukherjee, analyst]

But sir, this number is $263 million. If I recollect the total CapEx at Monroe was at a lower number, right? This appears much higher?

[V. Mani, executive]

Yes, I'll answer you that. So about almost $127 million is basically the Monroe part of it, what assets that we wrote off. The balance is mainly about $130 million is basically inventory and provisioning both of them put together 100 bps.

[Saion Mukherjee, analyst]

Okay. And sir, I also noticed that the receivable number has come down significantly, almost INR 1,800 crores. So is that part of this write-off and then we should see this number higher going in the next quarter?

[V. Mani, executive]

Sure. I'll answer that. So as you know, in the balance sheet, there is a reduction of almost INR 1,800 crores. So there is a cash flow impact also, almost about INR 970 crores. So basically, this is on account of 2 reasons, Saion. One is, obviously, if you know, third quarter also we did some work on the India piece, which give us some benefit. So that would be closer to INR 600-plus crores. The balance is -- obviously, there are 2 more reasons. Like in this quarter, there was not so much growth. But in the going forward, we expect it to be about INR 3,400 crores to INR 3,500 crores per quarter sales. So automatically, debtors would go up. And therefore, you would see it stabilize by about 10 to 12 days more, it would stabilize by about 70 to 72 days in the medium term. .

[Saion Mukherjee, analyst]

Okay. And sir, the other one is intangible, which is $133 million. Maybe if you can talk about what led to this intangible number write-off, what is the nature of provision?

[V. Mani, executive]

Yes. So just to give a little color, as we went about this GLS transaction, we decided to have a good look at some of our businesses across especially the key ones. So one I just spoke to you earlier about the U.S. piece. The second was obviously intangibles that we have. So over the years, we've been in-licensing products, et cetera. So obviously, we felt some of those which probably I'm not looking that good. So we decided that we'll impair them. So those are the reasons. We used to have a book almost of INR 2,000-plus crores of intangibles. We reduced about $133 million, yes. These are all noncash write-offs.

[Saion Mukherjee, analyst]

Okay. Sir, just one last one. This gross margin is very high in the fourth quarter. So material cost to sales around 32-odd percent. What's the steady sustainable number we should see on the gross margin going forward?

[V. Mani, executive]

Sure. On a going forward, it should be around these levels give and take plus/minus 1%. Because, obviously, this quarter, we get the benefit of India being a little higher. But in the coming year also, if I look at it, with RYALTRIS expected to sort of grow substantially or almost double up from where we are, it should automatically help us to do better.

[Saion Mukherjee, analyst]

Okay. So there is no one-off in this number?

[V. Mani, executive]

Yes. See, mix also keeps changing, no?. Sometimes the sales mix also changes. But on a broad basis, we'll be very close to these numbers. As I said, give and take plus/minus 1%.

[Operator]

The next question is from the line of Gaurang Sakare from HSBC.

[Gaurang Sakare, analyst]

I had a couple of questions. Firstly, on Monroe. What is the status update from U.S. FDA? When can we expect reinspection? And how is our remediation going?

[Glenn Saldanha, executive]

So on Monroe, we are pretty much done with all the remediation, right? We've been done and we are requesting FDA for a meeting and a possible inspection. So we are hoping that in the first quarter, they will come in the next couple of months, I'm guessing. So all [indiscernible] we are now taking batches of product and some exhibit batches for the rest of the year.

[Gaurang Sakare, analyst]

And second one, actually, at the start, I missed the comment on this other income being higher actually, my line just got distorted at that time only. So can you please repeat what you said?

[V. Mani, executive]

So we still continue to have a 7.84% stake in Glenmark Life Sciences. The mark-to-market of that was almost INR 750 crores. That's it.

[Operator]

The next question is from the line of Kunal Randeria from Axis Capital.

[Kunal Randeria, analyst]

Sir, just want to reconcile this net cash [indiscernible]. So in H1, you're on INR 3,300 crores debt and today you are around INR 700 crores net cash. From the cash flow statement, it seems that you've got around INR 5,450 crores, and then there was some tax impact of [ INR 500 ] crores. But your working capital also [ INR 1,600-odd ] crores, right? And incremental CapEx is INR 500 crores. So I'm just wondering, I would have thought maybe the net cash now would have been slightly higher. If you kind of run us through how you are able [indiscernible] .

[V. Mani, executive]

Sure. I'll try to be as helpful as possible. So obviously, we got about INR 5,450 crores net of the transaction costs. The tax is about 17.5%, so we get about INR 4,500 crores. You are right. At the end of December, we had about INR 3,960 crores plus. As you can see, now our cash has also increased by INR 500 crores, that kind of balances each other. On the other side, if I look at business, we had an EBITDA of almost INR 1,195 crores, and we had a cash interest of about INR 517 crores. The cash tax that is less because most of the taxes this year were for this. So if you take INR 80 crore, INR 90 crores tax also still, we get about INR 580 crores or so. But if you take the other side, there is assets [indiscernible] there is dividend, there are some other exceptional items in terms of the litigation and remediation costs, what you have there. But the big piece is the litigation that we paid on the Zetia piece almost INR 498 crores. I think that could probably be the difference that you're looking for.

[Kunal Randeria, analyst]

Right. But is my understanding wrong that your working capital also improved around INR 1,500 crores, sir?

[V. Mani, executive]

No. Working capital, as you can see, even in my cash flow statement, improved by about a little less than INR 800 crores, okay, INR 796 crores.

[Kunal Randeria, analyst]

Okay but I was just looking at the H1 numbers, your receivables and inventory was around INR 800-odd crores higher than what you had given in the presentation now. So now it's -- your inventory is around INR 2,500 crores, it was around INR 3,300 crores if I'm not wrong.

[V. Mani, executive]

No, I'll explain to you. In the receivables piece, there is another -- as we explained in the previous question, there is a write-down of almost INR 837 crores. So that's the piece. Just some receivable -- I mean the rebate provisioning across most geographies, especially the U.S. So that could be a difference.

[Kunal Randeria, analyst]

Secondly, on generic Flovent. So since you have filed it, I'm just wondering -- when do we expect approval? And what is during the year-end because GSK had discontinued the product and now. There is only AG in the market. So your thoughts on this product.

[Glenn Saldanha, executive]

We believe that we are the first filer on this product, okay? So I mean it's launch on approval, basically. right? And since we filed now, so sometime next year, we are hoping we can launch the product, FY '26, right? It's a big product, about $400-plus million in sales, just as 1 SKU as per IQVIA and we're working on the subsequent SKUs, right, which is the INR 110 crores and INR 220 crores. So I think collectively, it's a $1.6 billion drug with just the AG out there, GSK launched NAG.

[Kunal Randeria, analyst]

Got it. And lastly on RYALTRIS, see in a lot of markets, you have reached double-digit share. So I'm wondering now from FY '24 to let's say FY '26, which are the markets where you expect the growth from?

[Glenn Saldanha, executive]

So I mean, we've just started the launch phase of RYALTRIS. So RYALTRIS, we think -- I mean, our peak sales now will look more like $200 million to $300 million over the next 3 to 5 years. And if you look at the markets, we just started launching, as Utkarsh mentioned, Mexico, we just got approval. So we're launching. There are some very big markets where we still don't have a presence, right? Mexico is one. Brazil, we are hoping to get approval either this year or next year. So FY '25 or '26, then of course, China, which will be a big launch for us, right, starting FY '26.

So there are a host of markets where we still don't have the product itself. And among the products -- markets where we have the product, right, the uptake is rampant, right? So first 3 years, you'll see very substantial growth, right, almost 80%, 100% till the brand gets established. Post 3 years, it will grow, it will start slowing down, right? So I mean, we are in that phase right now where sales are doubling, basically, right? So this year, we anticipate RYALTRIS will be over $80 million in sales. right? We are in that phase right now, the launch phase. Also, we are expecting better performance from the U.S. market from our partners, Ichnos this year and next year. that will further help the brand grow substantially. .

[Utkarsh Gandhi, executive]

So I would like just to add, even if you take the top markets, right, I mean, we have about 15-plus percent in only 3 markets as of now. So there is still -- even in the markets where we have launched, there is still significant scope for us to expand. And obviously, this is also a value of -- or a factor of when the product has been launched. So as Glenn mentioned, some of the launches have happened more recently. So the market share uptake will be visible in the next few quarters. .

[Kunal Randeria, analyst]

And you still expect emerging markets with a key growth drivers, right?

[Glenn Saldanha, executive]

I think we're seeing growth across markets, not just emerging one. Europe is doing exceedingly well, right, for RYALTRIS. The U.S., we still have some ground to cover, right, as I mentioned. But Europe and emerging markets, it's a big product.

[Kunal Randeria, analyst]

Sure. And just one last, if I can. The INR 700 crores of CapEx for next year, if you can just outline your plans on how it will be spent.

[V. Mani, executive]

So basically, the INR 700 crore CapEx, obviously, till last year, we had GLS also in the CapEx. Going forward, it will not be there. But on -- on and off, we obviously required to invest in additional lines. As you know, business is growing well also. And we see some lines for that. And also, we are looking at sometimes in-licensing some good products. Well, we may not do a big bang M&A, but we'll do definitely in-license products as and when we require. You've already seen us do 2 last year. So I think we'll add to it.

[Kunal Randeria, analyst]

Yes. Sorry, just to push you on this because I would have believed with the U.S. is not doing very well at this point in time. Your capacity might not be optimum, not fully utilized, so just wondering why you will need so much CapEx?

[Glenn Saldanha, executive]

So I think, I mean, you are seeing substantial growth across the business, right? I mean every year, we are adding a substantial amount, right? And FY '26 will be a big year for the company. That's what we believe, right? In terms of overall growth, right, top line growth. So in order to plan for FY '26, right, we are putting up the CapEx this year, right? So we're adding additional lines across our portfolios, for example, RYALTRIS and multiple other areas, right? Now with generic Flovent coming in. So I think there's a significant amount of front-ending CapEx required this year to get to the FY '26 performance, right?

[Operator]

[Operator Instructions] The next question is from the line of [ GVK Choudhary ] from PD Investments.

[Unknown Analyst]

My question is about legal settlements in U.S. What is the further payment required for the 2 settlements that you have already entered? And is there any hope? What would be the liability on that count?

[V. Mani, executive]

So there are -- I mean, obviously, for these 2, we have to pay about $30 million; $30 million for the criminal one and $25 million for the civil one. And in the next coming year, we have to pay about INR 300 crores. Some payments are still due of the Zetia that was there. Most of it was paid last year, but some are still there. Plus, as you know, we have given clearly we pay these settlement over 5 years. So -- after that, it should be much lower, okay? The year after that, it will lower.

[Unknown Analyst]

So next year, I mean, FY '25, the liabilities be about INR 700 crores.

[V. Mani, executive]

Liabilities will not be there, sir. Liabilities are already taken. I'm saying the payouts in terms of cash flow INR 300 crores.

[Unknown Analyst]

I'm asking whether it has been provisioned?

[V. Mani, executive]

It is already provisioned sir, like Zetia [indiscernible] There will be no impact on P&L.

[Utkarsh Gandhi, executive]

The cash outflow will be about INR 300 crores in FY '25.

[Unknown Analyst]

Monroe, is there any possibility of you being able to use the facility at all in the future? The other 2 other than injectables?

[Glenn Saldanha, executive]

No, the other 2 lines we've already embedded. So it's basically the injectables that we will commercialize. We are hoping to start this year, right, commercialization of the products.

[Unknown Analyst]

Is there any possibility of you being able to dispose those 2 lines to someone else?

[Glenn Saldanha, executive]

So we are doing that. We have -- so we'll see, basically, we are impairing it, so we can't use it much. So that it will be more of scrapbook.

[Operator]

The next question is from the line of Aditya Thakur from 5G Capital.

[Unknown Analyst]

As you told, FY '26 will be a better year for Denmark pharmaceuticals. You have already given guidance for FY '25. If you could do the same for FY '26, like any ballpark guidance in terms of sales and profitability?

[Glenn Saldanha, executive]

I think it's too early to guide on FY '26. I think at our Investor Day, which is coming up this week, right, later this week, we will provide a much more longer-term horizon right on the business. So that should give you a clear idea of where the business is going. At this point, specifically FY '26, we wouldn't guide. It's too early.

[Operator]

The next question is from the line of Krish Mehta from Enam Holdings.

[Krish Mehta, analyst]

So I just wanted to ask that around 2 years ago, we had kind of guided that Ichnos R&D and cash spend would be made nil. So on that basis in that backdrop, could you please tell us for FY '25 what the Ichnos cash R&D spend will be from Glenmark?

[Glenn Saldanha, executive]

So the IGI spend in '25 will be about $50 million. We brought it down substantially, right, over the years. And now this year, it will be about $50 million. And I think going forward, we will make sure it stays at $50 million or comes even further below that.

[Operator]

The next question is from the line of Vikas Sharda from NTAsset Management.

[Vikas Sharda, analyst]

Two questions. The receivables is down sharply this quarter. Could you explain how -- I mean, is it because of the provisions for rebates that you have made? Or how should one look at it? And also, what is the nature of this provision for rebate? I mean what was the need of making this provision? And how should one look at that?

[V. Mani, executive]

Sure. So Vikas, I explained earlier but I'll do again. So obviously, the reduction in the receivable is on account of 2 reasons. One is, obviously, there was a better cash flow as we explained earlier. In Q3, we had sort of brought down our inventory in the channel. So that added to the -- reducing the receivable by about INR 600-odd crores. We said the growth in this quarter was a little less. Therefore, obviously, the cash flow is a little better on that account also. Now going forward, the way to look at it is that if we are going to have a sale of almost INR 3,500 crores, if you add INR 500 crores more, obviously debtors will go up. So that should go up by 10 to 12 days.

And your second question on the provisioning. Obviously, you have to provision for various reductions, including rebates, et cetera. So as we said earlier, after we did the GLS, we looked at across all the businesses, and we saw that we could sort of looked at the provisioning. And therefore, we saw that it could be increased. So that's the reason why we did that. And -- that's the reason why it looks lower.

[Vikas Sharda, analyst]

Okay. So this is like INR 1,100-plus crores of reduction in the debt. So INR 600 crores is because of India and what would be the remaining INR 500 crores for?

[V. Mani, executive]

No. I'll put it this way. Almost INR 900-plus crores is cash flow. About INR 800 crores is basically the provisioning increased, okay? You saw the debtors have come down by almost INR 1,800 crores, right? I'm giving a breakup of that.

[Utkarsh Gandhi, executive]

Year-on-year, basically.

[V. Mani, executive]

Yes.

[Operator]

The line for the current participant has dropped off. The next question is from the line of Saion Mukherjee from Nomura. .

[Saion Mukherjee, analyst]

Just one, this INR 300-odd crores of exceptional that you have, which includes the remediation cost and DOJ settlement. Can you just give a broad breakup for this quarter of this INR 300-odd crores?

[V. Mani, executive]

In this quarter, there is not much remediation, Saion. Till last quarter, all together for the full year, we are at about INR 98 crores. It's about INR 30-plus crores in U.S. and almost INR 70 crores in India. And the -- as far as the settlement is concerned, that's a separate line item, almost $60 million of that. We said that we obviously had to spend something on extra on the litigation costs that can go about closer to little less than INR 200 crores, we have to pay for all the legal bills.

[Saion Mukherjee, analyst]

This number that you are having -- so I was looking at the INR 300 crores for the quarter, so there is not much remediation there in that INR 300 crores.

[V. Mani, executive]

No. There's not much mediation in this quarter. It is more of the bills for the legal settlement and obviously, mainly that's one of the key reasons, yes.

[Saion Mukherjee, analyst]

Legal settlement is $30 million, right, sir?

[V. Mani, executive]

Yes, $30 million, $25 million in this quarter.

[Utkarsh Gandhi, executive]

DOJ.

[V. Mani, executive]

Yes. DOJ, civil.

[Operator]

The next question is from the line of Vivek Tulsyan from Newmark Capital.

[Unknown Analyst]

My question is to Manish. Sir, if you could explain, so there exceptional item...

[Operator]

Mr. Tulsyan, we are not able to hear you clearly.

[Unknown Analyst]

Yes. What I was asking was, if you look at the exceptional items, there is a loss of about INR 447 crores. Could you take us through the bridge from the income that we would have made from sale of GLS to how do we get to INR 447 crores of loss?

[V. Mani, executive]

Sure. So the sale of GLS was about INR 5,500 crores. Obviously, there was this -- the GLS reserves, which are the -- this is clear accounting. So about INR 2,200 crores and apart from that, as we have provisioned for DOJ, civil and criminal. I mean the civil part of it, this time. And then there were exceptional legal fees and remediation cost. Remediation is not much in this quarter, about INR 60 crores only, I mean on the impairment of assets, which I already explained to you on Monroe about INR 1,052 crores. You also spoke of working capital rationalization. We also said about Europe intangible impairment of INR 1,100 crores. Broadly these are the breakups to reach to INR 447 crores.

[Unknown Analyst]

Okay. So on the stand-alone, there is an exceptional gain of INR 5,000 crore, but on the consol the number might be lower. Is that the way to... .

[V. Mani, executive]

Exactly because most of the write-downs are outside, yes that's the reason.

[Unknown Analyst]

Understood. And the second question is on R&D. So our R&D target for FY '25 is about 7%, 7.5% on our guidance of INR 13,500 crores of revenue. If I do the math, that's about INR 1,000-odd crores, which is not very different from the amount we spent in FY '24. So is that the steady-state R&D going forward?

[Glenn Saldanha, executive]

I mean, clearly, the generic R&D spend is going up and Ichnos -- IGI is coming down, right? So you're right. Going forward, we'll have a similar run rate on R&D. About as a percent, you should take the R&D spend at around going forward also around 7-odd percent, right, in that ballpark, right, in subsequent years.

[Unknown Analyst]

Got it. And just one final question on Monroe. So we have -- like you mentioned, we've taken a little bit of impairment of our assets. So what is the remaining value of the assets at Monroe now?

[V. Mani, executive]

Yes, it's about $150 million, yes still. That is the injectables and utilities.

[Operator]

The next question is from the line of Utsav Jaipuria from DAM Capital.

[Unknown Analyst]

Just a couple of questions from my side. Firstly, on this working capital bit, you've said that receivables are expected to increase by 10 to 12 days. So can you give like a similar guidance for the inventory in payables?

[V. Mani, executive]

Inventory would means marginally go up, but to that extent, you'll make up with your creditors, okay. So I'm just saying, overall, if I take the net working capital, it should be about 70 to 75 days.

[Unknown Analyst]

That's helpful. And secondly, on the tax rate. So from next year onwards, what kind of ETR and also cash taxes we can expect?

[V. Mani, executive]

So the ETR would be roughly around 25% to 27%. And the cash tax would be very close to that only.

[Operator]

Thank you. 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]

Yes. Thanks, Lizanne. So before we end the call, we'll just read out the disclaimer. The discussion during this call, including information, statements and analysis describing the company or its affiliates' objectives, projections and estimates are forward-looking statements. These are based on current expectations, forecasts and assumptions and are subject to risks and uncertainties, which could cause the actual outcomes to differ. So -- the discussion should not be regarded by recipients as a substitute for their own judgment, and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of any 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.