Jubilant Pharmova Ltd

NSE:JUBLPHARMA

Earnings Call Transcript 2023-Q3

[Operator]

Good evening, ladies and gentlemen, and welcome to the Jubilant Pharma Limited Q3 and 9 Months FY '23 Earnings Conference Call.

[Operator Instructions]

Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Mayer, Investor Relations and Corporate Finance, Jubilant Pharmova Limited. Thank you, and over to you, sir.

[Vineet Mayer, executive]

Thank you, Indira. Good evening, everyone. Thank you for being with us on our Q3 and 9-month FY '23 Earnings Conference Call.

I would like to remind you that some of the statements made on the call today could be forward-looking in nature and a detailed disclaimer in this regard has been included in the press release that has been shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman and Managing Director; Mr. Arvind Chokhany, Group CFO; Mr. Arun Sharma, CEO of Jubilant Pharmova; Mr. Pramod Yadav, CEO of Specialty Pharma and CDM of Sterile Injectables business, Dr. Jade Rajpal, CEO of Generics; Mr. Giuliano Perfetti, CEO, CI DMO; and Mr. Syed Kazmi, Jubilant Therapeutics.

I now invite Mr. Shyam Bhartia to share his comments.

[Shyam Bhartia, executive]

Thank you, Vineet. Good evening, everyone. Thank you for joining us on Q3 FY '21 Earnings Conference Call of Jubilant Pharmova Limited. During the quarter, company reported higher revenue year-on-year, led by increase in sales in radiopharmacies and LSC business and stable revenues in radiopharmaceuticals and CRDMO sterile injectables. In CRDMO drug discovery services, business reported stable volume and CDMO API business reported higher revenues during the quarter.

The company's profitability stood lower in Q3 FY '23 versus year-on-year and quarter-on-quarter due to lower COVID-related deals in CDMO sterile injectable business, industry-wide issues of generator supply outage that impacted radiopharmacy business.

Lower production in CDMO API business and lower volumes in drug discovery services business. In generics, the company has undertaken a large scale business transformation focused on turnaround through cost optimization and driving growth in branded markets in India and select international markets.

In FY '24, the company's profitability is expected to improve, driven by growth in radiopharmaceuticals, LNG immunotherapy and CDMO sterile injectable businesses.

Recovery in generics, API businesses and radio pharmacies will also contribute to better profitability. The company has several growth levers across its various businesses of radiopharma, LLG immunotherapy, CDMO, sterile injectables, generics and CRDMO, which shall drive sustainable growth for the company in the medium term.

In our proprietary normal drug business, we have several high-potential programs, which are a preclinical and clinical stage.

With this, I now hand over to Arun to discuss the performance of various businesses and financial performance in detail.

[Arun Sharma, executive]

Very good evening to all of you. I will start by sharing performance of our businesses for the third quarter FY 2023. In a specialty pharma business, Q2 revenues were at INR 760 crores versus INR 635 crores in Q3 FY '22 and INR 814 crores in Q2 FY '23. EBITDA in this business stood at INR 117 crores versus INR 116 crores in Q2 FY '22 and INR 198 crores in Q2 FY '23 with a margin of 15.4% versus 18.3% in Q3 FY '22 and 24.4% in Q2 FY '23. Radiopharma revenues were at INR 613 crores versus INR 510 crores in Q3 FY '22, and INR 658 crores in Q2 FY '23. Radiopharmaceuticals business reported stable performance year-on-year. Sequentially, revenue variation is due to customer order reselling for some products in Q3 FY '23.

Radiopharma sees business reported higher revenue resulting from rise in volumes of new products launched. Sequentially, the business witnessed lower sales due to shortage of radio isotopes for around 3 weeks during the quarter.

Turnaround plan in radiopharmacy business is on track to achieve breakeven in Q4 FY '24. Now moving on to allergy immunotherapy. Revenues were at INR 147 crores versus INR 124 crores in Q3 FY '22 and INR 156 crores in Q2 FY '23. Revenue and EBITDA growth was supported by better prices versus Q3 last year.

In the CDMO Sterile Injectable business, revenue stood at INR 272 crores versus INR 265 crores in Q3 FY '22 and INR 299 crores in Q2 FY '23. EBITDA was at INR 56 crores versus INR 116 crores in Q3 FY '22 and INR 71 crores in Q2 FY '23. Reported EBITDA margin was at 20.7% in Q3 FY '23. CDMO business, stable performance during the quarter was on account of higher sales of other products during Q3 FY '23 permits 0 revenue from over deals.

Reported EBITDA declined year-on-year due to substantially higher base of COVID related business in Q3 FY '22. Business reported revenues of INR 89 crores and INR 22 crores from deals related to the COVID products in Q3 FY '22 and Q2 FY '23, respectively and 0 sales in Q3 FY '23.

Quarter-on-quarter variation in margin in Q2 FY '23 and Q3 FY '23 is due to plant shutdown, which happens twice a year due to COVID deals in the comparable period.

Now moving on to the generics business. Generic revenues were at INR 223 crores versus INR 171 crore in Q3 FY '22 and INR 161 crores in Q2 FY '23. Reported EBITDA was a negative INR 36 crores versus negative INR 43 crores in Q3 FY '22 and negative INR 82 crores in Q2 FY '23. Q3 FY '23 performance improvement was on account of higher production at Roorkee plant and sales in non-U.S. markets. This was partially offset by shutdown at [indiscernible] plant to upgrade part of our Hatchback systems.

Businesses also benefited from onetime gains due to a legal award to settle customer dispute. We continue to undertake quality improvement initiatives and are engaging with the U.S. for resolution of regulatory situation at our Roorkee plant. The company has undertaken a large-scale business transformation focused on strategic reorganization of generic business, business like cost optimization, direct and indirect, reprioritizing geography mix to accelerate growth in branded markets such as India and select international markets.

During the previous earnings calls, we mentioned that company has identified annual savings of INR 100 crores in operating costs. The implementation of these cost optimization is on track and is expected to be completed by March 2023. Benefits of these cost optimization initiatives are going to reflect in our performance from Q1 FY '24. We have further identified additional cost optimization opportunities of INR 50 crores, the implementation of which is expected to be completed in H1 FY '24.

Now moving on to our CRDMO business. Revenues were at INR 291 crores versus INR 236 crores in Q3 FY '22 and INR 320 crores in Q2 FY '23. EBITDA was at INR 39 crores versus INR 35 crores in Q3 FY '22 and INR 68 crores in Q2 FY '23 with a margin of 13.4% versus 14.9% in Q3 FY '22 and 21.3% in Q2 FY '23. Drug Discovery Services business witnessed several year-on-year revenues amid slowdown in U.S. and select approach by our clients. Demand growth likely to remain moderate in the year from near from target clients for integrated drug discovery services and BNPK, currently witnessing key clients adopting selective approach in launching new projects.

Sequentially, revenues were lower at -- as Q2 FY '23 had one-off revenues from fee for service FFS in drug discovery Services. DMPK in vitro facility at Gator Noida has received validation which enables the site to provide comprehensive drug discovery service offerings. In our API revenues were at INR 168 crores versus INR 116 crores in Q3 FY '22.

Revenues were higher due to increase in utilization and higher volumes as Q3 FY '22 witnessed lower production due to plant upgradation. U.S. FDA during its December '22 audit of Nanjangud facility issued some observations. We are engaging with the U.S. FDA to resolve the regulatory situation at these facilities.

Now moving on to our proprietary novel drug business. We recently received Orphan Drug Designations, ODD, from U.S. FDA for our lead program, JBI-802 and oral potent and selective dual inhibitor of 2 genetic targets of the cost complex. LFP1 and [indiscernible] for SCLC and AML and our second program, JBI-778 are green penetrant DRM D5 inhibitor for neoblastoma. The orphan drug status allows a 7-year market exclusivity, specifically to the designated orphan use. The filing fee for the initial NDA is lived, and FDA provides other development incentives, including clinical protocol, design assistance and potentially accelerated review time.

We are excited to give you an update on the emerging clinical data from our first in-human trial for our dual inhibitor of LSD1 and [indiscernible] JBI-802, especially under the recent announcement of acquisition of Imago Bioscience [indiscernible] for USD 1.3 billion. As indicated by Merck, the acquisition is based on activity shown by Imago LSD1 inhibitor, we divested in its Phase II trial that shows a decrease in the excessive creatine level in these patients with our myelo [indiscernible] disease essential from virusus cythemia EPI. We have now seen in the context of our first in-human studies, dose-dependent reduction of platelet levels in humans, confirming that we have achieved pharmacology active LSD1 facts, which represent a human proof of principle for our molecule to be potentially improved alternative to inhibitors, developing essential thrombocythemia and related to [indiscernible]. We believe that JBI-802 has the potential to be a better alternative to other LSD1 innovative and we look forward to generating additional human data in 2023 towards maximizing value of this program.

We are also exploring strategic partnering opportunities to continue development and unlock value for our Phase I study -- Phase I read, PRMT5 and other IND track pipeline programs.

Now I would not like to highlight company's financial performance for the third quarter of financial year 2023. Revenues were at INR 1,553 crores versus INR 1,311 crore in Q3 FY '22 and INR 1,600 crores in Q2 FY '23. Reported EBITDA was at INR 155 crores versus INR 200 crore in Q3 FY '22 and INR [ 233 crores ] in Q2 FY '23.

Depreciation and amortization expense during the quarter was at INR 94 crores versus INR 93 crores in Q3 FY '22. Finance cost was at INR 51 crores versus INR 37 crores in Q3 FY '22 and INR 42 crores in Q2 FY '23. Higher costs -- higher finance costs was on account of an increase in global interest rate benchmark on [indiscernible] so far has increased to 4.36% on December 31, 2022, from 3.05% on September 30, 2022.

1 month so far stood at 0.3% as of March 31, 2022. Reported tax was at negative INR 16 crores as compared with INR 51 crore in Q3 FY '22 and INR 5 crores in Q2 FY '23. Net debt on cost as currency was at INR 2,407 crores as on December 31, 2022 versus INR 2,204 crores as on September 30, 2022.

Capital expenditure, excluding R&D capitalization, was at INR 218 crores for the quarter and INR 498 crores in 9 months ending December 31, 2022. Average blended interest rate for 9 months FY '23 was at 5.06% versus 4.58% in 9 months FY '22. Detailed 9-month FY '22 financials can be accessed through our results presentation, which is uploaded on a vest.

With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have.

[Unknown Executive]

So that's it, thank you. We're ready to take the questions. Please go ahead.

[Operator]

[Operator Instructions]

We take the first question from the line of Vinay Jain from Karma Capital Advisors.

[Vinay Jain, analyst]

Just had a few questions pertaining results, starting with the radiopharmacies business. Again, like this quarter on a similar revenue, the losses have again gone back to INR 45-odd crores level. Can you specify the reason for the same? Because the top line seems to be consistent with the last couple of quarters. But despite that, losses have increased again.

[Pramod Yadav, executive]

Yes, Vinay, this is Pramod here. As we mentioned, Paul and Mr. Bhartia also mentioned, there was a onetime event in the industry where industry went through the shortage of technicians generator. In our fares, most of the [indiscernible] what we dispense in that area to isotope, which is used in the technician, which is produced out of Moly and this all comes from the nuclear reactors, there are about 7, 8 nuclear reactors throughout the world, which are supplying only for this medical cancers. Unfortunately, all of them were in the maintenance and one which was running had also gone -- had a breakdown and the altar industry then was depending only on smaller reactor which were done. And then there was a shortage of 3 weeks. So almost everyone got got impacted because of that. So there was no supply of the Moly and hence technicolor available. This happened in the month of November. So that had an impact. So we had all the costs in the system, but not enough revenue to cover it for those 3 weeks.

[Arun Sharma, executive]

Revenue sequentially isn't far off. So INR 410 crores is what we did during the previous quarter and this quarter, it's around INR 400 crores. It's not that far off from what we did in the previous quarter.

[Pramod Yadav, executive]

Yes. So what happened as I mentioned that fixed costs remain there, but when you lose the revenue like this entire contribution goes and impacts EBITDA, and some of the recision which we could manage that we had to purchase at a high price from the smaller reactor which is running.

[Vinay Jain, analyst]

Good thing for radio a issue or it's a radiopharmacy issue.

[Pramod Yadav, executive]

So this was the issue of the radio pharmacy, but please please appreciate it overall number of doses, which are getting dispensed in the pharmacy have gone down. [indiscernible] that expense ultimately the consumption of the radio pharmaceutical products also goes down.

[Vinay Jain, analyst]

No, my only reason for asking this is, since the time of acquisition, we would have incurred almost INR 1,000 crores of EBITDA losses on this radiopharmacies business. Last couple of quarters, we saw the losses coming down, but again, this quarter, there is this volatility and higher losses. So one or the other reason -- for 1 of the other reasons the losses keep coming back to those almost INR 50 crores quarterly run rate. So now also, we are talking about being breakeven by FY '24 end, but this is something which we need to maybe have a look at in a realistic manner. Can we continue to sustain the company by incurring such high losses on this business?

[Pramod Yadav, executive]

So the losses numbers you were indicating was there in the year FY '21, when we also had the impact of the COVID. In FY '22, the losses have come down drastically, FY '23 also the losses in Q1 and Q2 were in the range of INR 20 crores, not [ INR 50 crores ], and in Q3, if this event was not there, then the losses would have been much, much lower than what we have reported. And if we don't see any such disturbance in Q4, you will see that the Q3 losses are even much lower.

[Vinay Jain, analyst]

So you mentioned that happened in November, has it normalized now in December and January.

[Pramod Yadav, executive]

Yes. Effective first week of December, all the supplies are back to normal.

[Vinay Jain, analyst]

So the losses should come down in fourth quarter then?

[Pramod Yadav, executive]

Yes. Yes, absolutely. Absolutely. That's what I was saying.

[Vinay Jain, analyst]

Okay. And on the generic business, what was the onetime gain. Can you quantify that, please?

[Pramod Yadav, executive]

Yes, on account of settlement, the legal settlement?

[Unknown Executive]

Yes. I think this is [indiscernible] Rajpal. The gain was due to settlement of a long long-pending customer dispute. However, we generally do not comment on individual customer-related contract due to the confidential nature of the settlement, as you can imagine.

[Vinay Jain, analyst]

I just wanted to know from a core business perspective, how has been the losses. So this INR 36 crore loss includes the onetime gain. So excluding that, what would have been the loss trajectory is something which I wanted to understand from you guys.

[Unknown Executive]

I understand the question. I think the -- as you can imagine, there are some onetime events last year, which was [indiscernible] sales.

[Vinay Jain, analyst]

I'm comparing your business on a sequential basis, there's no point comparing it on a year-on-year basis.

[Unknown Executive]

Yes. I think the -- as I mentioned, it is it not appropriate to give what was the exact loss due to the exact award, the award, the legal amount.

[Vinay Jain, analyst]

Okay. So in the coming quarter now, hopefully, with Salisbury also coming on stream in the fourth quarter the absolute loss numbers reported this quarter. So fourth quarter should be lower than this by when are we expecting to be in the black as far as the operating profit is concerned for the generics business?

[Arun Sharma, executive]

So I think the question is by what is our expectation on improvement in generic profitability that's your question, I guess.

[Vinay Jain, analyst]

Yes, yes.

[Arun Sharma, executive]

The expectation in generic profitability is that from this 9 months, which is close to approximately minus 34%, we should, in the next year and FY '24 year, should be -- we should significantly improve, but should be close to negative mid-single digits is what we expected.

[Vinay Jain, analyst]

So next year, again, we are expecting -- so this is despite the cost optimization activities, which we have talked about. Despite that, we would be incurring losses in the generic business next year as well.

[Shyam Bhartia, executive]

Yes, at a much, much lower thing. As you can see, this year has been the significant losses this year, but those ended much lower.

[Vinay Jain, analyst]

And just on the regulatory part. So where are we so we were supposed to get an update from U.S. FDA on the Roorkee plant in November. So what is the update on that? And also if you could comment the same for our Nanjangud plant as well.

[Unknown Executive]

Yes. So this is, again, Jerry Rajpal. So let me just take -- give you an update on the regulatory status of the Roorkee plant. As you recall that we had a -- we had an audit last year in July 2021, which resulted in an import alert with a few products extension. We had a follow-on audit in July 2022 for which we received the same status, which was the OAI before and continued OAI in October. We have disclosed to our press release. And at this moment, we have 1 product exemption that we continue to supply to U.S., right?

Beyond that, and we have -- as I said, we have completed all the CAPAs that we had committed to U.S. and [ UK ]. Beyond U.S., we continue to supply to all other markets, which includes Japan, Europe, Germany, that is Nordic countries, South Africa and a host of other African countries as well. So other than U.S. FDA, at this moment, we are continuing to supply to all the markets. In U.S., we continue to supply the product, which is under exempting, one product is under exempting.

[Vinay Jain, analyst]

I get that, but I just wanted to understand if the import alert, that remains as it is. So there is no change on that.

[Shyam Bhartia, executive]

No. No. As you mentioned, in October, we received continuation of the similar status, which was OAI with importer.

[Vinay Jain, analyst]

Okay. And lastly, if you see, sir, API business, again, plant upgradation happened in the first quarter, and we were expecting revenues to see a bump up in the second half. But if I see for the last 3 quarters, there hasn't been much improvement on the API business as such. The numbers have been hovering at around INR 160 crores to INR 70-odd crores. And again, because of that, margins also are taken ahead. So what is the outlook on the API business per saving because clearly, things are not turning out the way we had earlier [indiscernible] over the year.

[Pramod Yadav, executive]

Yes. Thank you for the question, Juliana perfectly speaking. So let me divide your question my 2 questions. One is on the FDA inspection and Engine Group. And second is about the third quarter subsequential revenue versus. So on the first part, as we mentioned in the past, the site is currently in OAI status. So we are selling all over the countries. And you asked FDA completed its audit in Nanjangud used in December 2022, issued for FDA, [indiscernible] and which was continuing inspection and observations. So Jubilant's timely reply to this observation within 15 days precisely on January 1, 2023. FDA has a knowledge up to now, the receipt of this treatment response and Jubilant's response described the actions being taken to address the inspection of provision.

So the company will be using FDA regularly on its progress. But today, we have not received any further communication from FDA regarding the inspection or our response. So this, of course, pending the qualification, we can just say that we can -- we will keep the update on the outcome of this. For the moment, nothing is changing from the previous status.

So coming on the second question, you are right. We were mentioning that quarter previous year, we were expecting to grow in revenue. By the way, we grew in revenue versus previous year significantly, which was more than 45%. But as sequentially, we were basically aligned to the previous quarter. There are 2 reasons for that, which have been briefly called out before by Michael Liberum.

The first reason was plant is going through a complete planned of relation. And currently, in the plant, we do have in the site, we will have 6 plants, 4 of them have been stated. The last updating, which was supposed to be completed in quarter 2 was prolonged even in quarter 3, and this created some lower volume because of the shutdown. This delay was due to the situation linked to the instrument and late coming versus the expected one. In addition, there was also some lower volume in specific products, which we are selling in the U.S. and particularly Losartan.

[Vinay Jain, analyst]

But our understanding was that the plant upgradation was done and completed in the first quarter itself maybe there is some lack of communication also which is happening from the management side because if you see your presentation in the first quarter, you have mentioned that the plant of radiation is completed and you should see a revenue bump up happening in the second half of the fiscal year. And also it's pointless to compare it on a year-on-year basis because last year, in which was there was maintenance shutdown, which was there and which impacted our revenues. So just one last thing, again, like the company, the way things have been going, again, we seem to have bounced back sharply from the coal. But one of the other reasons, the numbers have been disappointing. And maybe we might have to take some hard calls if necessary when it comes to the radiopharmacy business as well.

If things are not planning the way we had at some point in time, we might have to maybe have a relook on that decision. Yes, that's all from my side.

[Operator]

[Operator Instructions]

Our next question is from the line of Rahul Veera from Abakkus Asset Managers.

[Rahul Veera, analyst]

Just wanted to understand on truck discovery side, usually, like whenever our molecules have been moving the R&D expenditure, you actually would move very sharply up. Are we expecting any kind of sharp approval in our R&D expenditure going forward.

[Arun Sharma, executive]

Can you repeat the question? What do you need for sharp on R&D expenses?

[Rahul Veera, analyst]

Our new chemical integrate on that business segment.

[Pramod Yadav, executive]

[indiscernible] take this question. I think this is sort of proprietary novel drugs.

[Syed Kazmi, executive]

Okay. Yes. I'll take that question. This is Syed Kazmi. So our spend really depends on how programs move forward based on the emerging data and the collaboration opportunities. So depending on how the data transforms. Yes, you have to mute the video.

Okay. So all I was saying that the spend really depends on the emerging clinical data. So once we have collected some human data in the ongoing study, then we will be able to determine how fast we have to expand those studies. And then we can manage and report our expenses accordingly.

[Rahul Veera, analyst]

Sir, and one more question from my end. In terms of the commentary that we've provided specifically for our high-margin business, that is the drug discovery sciences. You mentioned that the growth may moderate. Any particular view on that, sir?

[Pramod Yadav, executive]

This is for Giuliano, this question on the contract research discovery yes, uses.

[Rahul Veera, analyst]

Usually we do 30%, 33% EBITDA, but this time, it's come at 29% margins plus we mentioned that the business may moderate. I wanted to understand some insights on that will be helpful.

[Giuliano Perfetti, executive]

Yes. I think what is happening on the market is that overall, the markets remain healthy in terms of demand. In total, I mean, despite the fact that in this quarter, there are signs that we called out also in the previous call of a more selective approach of our customers to run programs in Grades Covera. This is resulting in a slight, I would say, lower growth than in the past, which is in this case, is almost keeping the same level of volume. And we do think that this probably will stay also for the short term, for the next quarter. But there are our view and there are views that the market will restart grow into at the same level that we had previously even from the second half or end of this year, this fiscal year.

In terms of profitability, this market from the way we we discussed in the past, it was expected to generate an EBITDA around 30%. If you compare to previous quarter last -- to same quarter last year, EBITDA was a little bit on the peak for this incidence of FFS business, which was affected positively the previous year quarter.

In terms of the way we see the future, what we are doing now is we are continuing our program of expanding our capability. And I'd like to mention that the commission within the quarter that capability within the greater oil side. So we have now completed the first phase of this chemist and PK excellence center. And we are still developing our talent pools of scientists in order to be ready to cash to grow once the market will return to the level that we do expect. And based on the fundamentals of this market, there are no other reasons for not going back at that level.

[Rahul Veera, analyst]

Sure. Sir, we have -- do you have any contracts or any queries for this facility now? Like do you already have clients on board for the new facility?

[Giuliano Perfetti, executive]

No, the new facility is fully operating, what we commissioned in September 2021, and we run at a high level of capacity utilization. But we call out that we will further expand the facility in order to be ready to catch additional demand that we do expect starting from end of FY '24.

[Operator]

Our next question is from the line of Raghav [indiscernible] from JM Financial.

[Unknown Analyst]

So I have 2 questions. The first is, where do we see the long-term margin back and what will be driving these margins? And the second question is with respect to the CDMO business, how do we see this growing in the future?

[Arvind Chokhany, executive]

Yes. This is Arvind here. So with regard to the sustainable margin, we have very strong pillars of growth in radiopharma, pharmaceutical, allergy, CDMO, generics and also drug discovery services. And there are the pillars which will drive the sustainable growth in the medium term. But in the short run, we have to overcome some challenges, which both [indiscernible] as well as Giuliano have articulated. So the 3 challenges we have to overcome is breaking given the generics, which we are targeting for next year, improving the API performance through remediations as well as breaking even the pharmacies. So the management team is working on a very strong KPI for all of these 3 things, and we can assure you that all these businesses are being closely monitored through various project programs that we have. I hope that answers your question, Raghav.

[Unknown Analyst]

The second question is regarding the CDMO business, how do we see this growing?

[Giuliano Perfetti, executive]

Yes. I think we need to distinguish for drug discovery side for drug discovery business. We do see double-digit growth happening -- starting from end of this year, and we see that the outlook in midterm is quite robust in terms of demand for new projects and the way the company's position, particularly in as where we have a large presence in terms of customers biopharmaceutical and meet large customers. So we think that this growth is definitely would be on that level. On API, I can provide at this stage, any guidance for the next year because of the pending outcome from the inspection.

What I can tell is that we have a strong plan, which is focusing the cost containment within API to reduce structurally the cost. We do have in place a quality transformation program happening at the site. And the third pillar is we are acting -- we are focusing of our portfolio of products in order to target the progress which are more profitable, a little more potential for growth.

[Operator]

We have the line for Mr. Giuliano connected. Over to you, sir.

[Giuliano Perfetti, executive]

So I don't know if I finished my third pillar was on the portfolio rationalization, and with the three pillar increase both the basis point further growth of API and thus the entire [indiscernible].

[Operator]

[Operator Instructions]

We will take our next question from the line of Mitesh Shah from Nirmal Bang Securities.

[Unknown Analyst]

I have a couple of questions regarding the margins. Is the supply constraint has also impacted the margin of our radiopharma business as well?

[Pramod Yadav, executive]

So Mitesh, this was a technician generator issue was related to the radiopharmacies, which is the part of the Radiopharma business. In the total margin core impact. New pharmaceutical. Is that your question?

[Unknown Analyst]

Yes, yes. strategically because it came down from 32% to 10% this quarter. I mean, the pharma business is scaled down to [ 65.61 ] also.

[Pramod Yadav, executive]

There in the Q2, we had the higher sales of our higher-margin product and if you recall in the Q2, we had indicated that this is a one-time bump where the customer has [indiscernible] extra quantities. And we indicated that in Q3, it will be [indiscernible] corrected. So that correction took place because the sales of that high-margin product work as per the expectation in Q3, not as per that higher base of the Q2. That area impact. And then we have this impact in the rare pharmacies because of [indiscernible].

[Unknown Analyst]

Got it. Got it. And the -- again, on the generic front, what is the mapovation between the U.S. and the other markets in other [indiscernible].

[Pramod Yadav, executive]

Sorry, can you repeat your question?

[Unknown Analyst]

What is the bifurcation -- geographical bifurcation between the U.S. and the other geographies for generic market, specifically generic business.

[Unknown Executive]

Right. So we segment our business in key geographies in Maria ROW and India. And if you look at from the presentation that has been uploaded on our website, on a 9-month basis, on a 9-month basis, this is approximately INR 383 crores out of INR 563 crores sales North America, INR 150 crores on ROW and INR 29 crores is India that should give you a rough estimate of the bifurcation of the geography [indiscernible].

[Unknown Analyst]

And a sequential jump in the generic business, can we as you mainly both on the margin and the revenue trend was mainly because of this onetime case? Or should I exclude them, we also have an improvement in the margins and the growth as well.

[Unknown Executive]

So onetime settlement did contribute significantly to the margin gains in the quarter 3 FY '23. And therefore, it is likely that in the next quarter, this may or may not be sustained. Having said that, the revenue gain, the revenue growth in generics was not limited only to onetime gain. As we've mentioned, this is also due to resumption of production at our Roorkee facility, as you would recall, was undergoing implementation of Capa as an outcome of U.S. FDA.

So in this 2 months of this quarter, we resumed full production at Roorkee facility, which was -- which continue to supply, as I mentioned before, markets such as Japan, Germany, Nordic countries, U.K., South Africa and 1 product to U.S.

[Operator]

Our next question is from the line of Sumangal Puglia from Rare Enterprises.

[Unknown Analyst]

My first question is on the radiopharmacy. Since our EBITDA margin losses is wide quarter-on-quarter. So how confident are you on breaking guidance for Q4 next year.

[Pramod Yadav, executive]

This question, Vinay, had also read earlier, and I couldn't comment on that when we made the last statement that the management needs to take a hard look. As we have been saying from last few quarters, we are extremely confident that our turnaround plan on which we are working into our pharmacy business is absolutely on track. If no such untoward event happens, which happened in the month of November, then in FY '24 by end of FY '22, we are very hopeful that we should be breaking even in this business.

We are growing revenue, if you have seen, we are growing revenue with the ordinary growth from existing products. We are growing revenue by taking new products in our [indiscernible], we are increasing our market share. We are bringing the operational efficiencies and that we see quarter-on-quarter the impact of that on to the bottom line. So as I speak, we remain hopeful.

[Unknown Analyst]

Okay. On the generic side, I just wanted to get a flavor of the cost that we are looking -- the cost savings that we identified and this year and then another 50 by first half next year, these are significant amounts. So are these excesses in the system or can you just give a kind of insight into what are these costs nature of these costs?

[Arun Sharma, executive]

We got the first part about the INR 150 crores, the second part, we could not understand your question. What about that you want to know.

[Unknown Analyst]

No, I just want to understand the nature of these costs that we are cutting down.

[Arun Sharma, executive]

You're saying what is the source of the cost savings? Where are these cost savings coming from?

[Unknown Analyst]

Yes, correct.

[Arun Sharma, executive]

So let me answer your question in 2 parts. The first question is, as we mentioned in our last investor call, we had identified INR 100 crores of savings which -- the saving implementation program is on track and is expected to complete by March '23. Therefore, we should see these cost savings in our next year's performance. As we've also mentioned, you've identified a further INR 50 crores cost savings implementation program will begin next year, which is first quarter 1, which is April to January -- June quarter of FY '24.

It is expected to finish by September '23, which is -- '24 second quarter FY '24. The nature of savings is coming, it is broad-based. It's coming from 3 major sources. Source #1 is we have had direct cost production that we have managing our number of people on our role. So direct cost savings. Second is that we have serial cost saves. We are identifying wherever feasible, alternate vendors for our material. So that's the end. And the third source is that we have taken we have modified our operating model in product development that we are increasing the usage of external R&D only from internal R&D. So this is a 3-way savings that is helping us. So it includes both, as I mentioned, a direct cost savings, the internal savings and fee change in the operating model.

[Unknown Analyst]

And my final question is on the novel drug, how close are we to this capital raise or a commercial licensing or are agreement? Or how -- what is the stage? How should we look at that business?

[Syed Kazmi, executive]

So this is Syed. To answer your first question on the capital raise, as you well know, the biotech market in the U.S. is still in the process of recovery. And in the current environment, investors are looking for more mature data reveal, especially from clinic. So we have started our clinical program. We are in the process of collecting clinical data. And at the same time, we are also having discussions over the investors in terms of to what extent the landscape has evolved with regard to requirement of clinical proof of concept data before they come on board with the funding.

So we hope that by end of this year, we will have enough critical mass of clinical data to enable external funding at a favorable term. And that's what we are shooting for. But in the meantime, we will continue to have those discussions and assess the market interest. And because of the recent transactions that have happened, especially the one that we mentioned in prepared remarks about acquiring a company called Imago for $1.35 billion. In this space we are working on, I think that transaction has created a lot of interest for our programs.

Our program is this behind the Imago program because that's what has been going on for 7, 8 years, but we are certainly optimistic that with the market improving on one hand and the Imago transaction on the other, we are getting traction now with regard to some of these meaningful discussions. So we have already collected some human data, but are looking to generate more robotic clinical data later this year and to hopefully get back to fundraising at an appropriate valuation.

With regard to partnering, I think with large pharma and biotech, we will continue to pursue those discussions similar to what we have done with our 2 prior partnership programs, including licensing that was done to Lange Therapeutics. And we have mentioned about the blueprint acquisition of Lange for which we did receive some portion of the upfront that we have plowed back into the business. We are looking to partner with the assets at the right inflection point and not just partnering, which will be typically after IND filing or early clinical proof of concept essentially to maximize our deal value.

[Unknown Analyst]

Sure. Are you guys willing to share any kind of sort of estimate on what it can be the potential monetization and a broad range also.

[Syed Kazmi, executive]

I mean, it all depends, right? It's all contingent upon the program, the data, the strategic fit. So there is a huge big range. So it's very hard for me to give you a meaningful response so that it all depends on the program and the data that's emerging, like I said before. I mean, as we have mentioned, for a very early stage program like Lango, we have received about $6 million in FY '22, which, as I mentioned, has been plowed back in the business.

And then as part of our confidential licensing agreement and M&A deal terms over the next 5 years will be entitled to additional milestones as well as royalties. So again, every deal is different. And it all depends on the data package that we are able to generate. We are feeling pretty confident about the differentiation of our programs as they are moving through various preclinical and in one case, clinical stages.

So we are very excited about building some of these new novel medicines to meet the unmet medical need, and we certainly hope that there will be a fraction on the partnering front once we have a critical mass of data available.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments. Over to you, sir.

[Vineet Mayer, executive]

Thank you. Thank you for joining the third quarter earnings call for Jubilant Pharmaova and look forward to see you all in the next quarter. And until then, please send in your queries to the Investor Relations team. Thank you very much, and good evening to all of you.

[Operator]

Thank you, members of the management. Ladies and gentlemen, on behalf of Jubilant Pharmova Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.