Lupin Ltd
NSE:LUPIN
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 198.15
2 290.2
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Lupin Ltd
Earnings Call Analysis
Q3-2024 Analysis
Lupin Ltd
In the exciting narrative of the company's journey, the third quarter stood out as a shining chapter, marked by record-high quarterly sales surpassing the INR 5,000 crore milestone. More importantly, it's not just about soaring numbers, but a well-rounded performance with sales, profitability, and strategic initiatives piecing together the success puzzle. Each major region has made a mark, contributing significantly to revenue growth. The U.S. business, in particular, has been robust, boasting six consecutive quarters of EBITDA improvement and a second successive quarter clocking over $200 million in revenue. The Indian market outperformed, posting double-digit growth and shining as the leader in new product launches.
The tale of profitability is equally compelling. The U.S. business saw a volume-led growth, particularly from their respiratory portfolio and Tiotropium. There's a ray of optimism as they forecast sustained revenue levels with plans to introduce a diverse range of products. India, no less impressive, recorded a staggering 1.6 times the growth rate of the Indian Pharmaceutical Market (IPM), standing tall with over 60% sales from chronic therapies. Outside these regions, areas such as Canada, the Philippines, Australia, and South Africa charted a stunning 30% growth year-over-year for the formulations business. With such geographic diversity in growth, the company exemplifies a global player with local strengths.
Innovation isn't taking a back seat in this financial fairytale; the R&D narrative is rife with activity, spotlighting First-to-File opportunities and complex generics. With 14 ANDA approvals including Ganirelix—their first peptide injectable product—and the launch of other significant products hailing from their strong pipeline, including exclusivities, the R&D chapter is setting the stage for a sustainable competitive edge. Compliance, the cornerstone of their operations, remains impeccable, with successful remediation efforts ensuring that regulatory nods become a routine part of the company's story.
Stepping into the financial landscape, Q3 paints an excellent picture with a top line growth of 19.7% year-on-year and EBITDA margins that have leaped impressively to 20.1%. This performance—inclusive of gross margins of 66%—is a tale of judicious product mix, operational efficiencies, and a strategic reduction in reliance on in-licensed products. The company's financial health is underpinned by a strong balance sheet, illustrated by a reduction in net working days and a decrease in net debt, further establishing the narrative of a company primed for growth.
The company also weaves a thread of sustainability through its corporate tapestry. Progress in areas of environmental, social, and governance (ESG) saw them accelerate past regional averages and the broader bio-pharm sector in the carbon disclosure project, nudging their score from C to B. This advancement pinpoints a future where the company not only excels economically but meets the imperative demand for sustainable performance, potentially adding another layer of value for socially-conscious investors.
You don't have any saved screeners yet
Good evening and welcome to Lupin Limited Q3 FY '24 Earnings Conference Call [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you, ma'am.
Good evening, everyone. I'm very pleased to welcome all of you to our Q3 Earnings Call. I have with me our MD, Nilesh; our CFO, Ramesh; and our Head of IR, Ravi. We look forward to sharing our Q3 highlights and the outlook for the fiscal year. We're very pleased to have delivered another quarter of strong performance, continuing to build on the momentum over the last many quarters. We delivered our highest quarterly sales so far, crossing the INR 5,000 crore mark. What is very heartening is that all our major regions have performed. Not only have you seen revenues grow across our key segments, but we also achieved higher profitability, both at the gross and operating level.
Our U.S. business delivered a second consecutive quarter of $200-plus million revenues and a sixth straight quarter of EBITDA improvement, which is a very heartening. This has been aided by a volume-led growth in our base business, augmented by contribution from seasonal products and our respiratory portfolio, including Tiotropium. As mentioned in our earlier interaction, we expect to sustain our U.S. business and the $200-plus million levels in the next few quarters as we get into the next year with the continued ramp-up of Tiotropium and launch of new products, including multiple ophthalmic and complex injectable range.
Our India business recorded strong double-digit growth this quarter with a 1.6x IPM growth rate. Most of our therapeutic areas like respiratory, GI, Gynecology have outperformed IPM during the quarter. We have launched around 21 products in the year so far. And for IQIVIA, we are ranked #1 in new product launches in India. We have a strong chronic focus, as you know, with more than 60% of our sales contribution from chronic therapies. We believe that we are in a very good position now to deliver above-market growth consistently going ahead led by higher productivity from our sales force expansion, new divisions and enhanced penetration and reach. Apart from the U.S. and India, other regions have performed very well, too. Ex U.S. and India, our formulations business has grown 30% year-over-year during the quarter and 22% in the 9 months during the fiscal. The strong growth recorded in key markets like Canada, Philippines, Australia and South Africa and also a very strong ramp-up of generic Fostair in our direct markets, U.K., Germany, as well as through partners in the rest of Europe.
Switching to R&D. On the pipeline front, we have continued to build momentum with both material First-to-File and complex generics. We received 14 ANDA approvals during this quarter, including key product approvals like generic Tolvaptan and Ganirelix which is our first peptide injectable product. We also launched Bromfenac ophthalmic solution, the generic version of Prolensa. Thanks to our Pithampur Unit-2 facility approval.
And as you know, we have 6-month exclusivity on this product. Out of Somerset, we launched Diazepam rectal gel, which has also been an extremely nice launch for us. In terms of key filings, in the last quarter, we filed Risperdal Consta product out of Nanomi, which is a significant validation of the platform as well as strong complex injectable product filing for us.
So as I mentioned before, our R&D is evolving to more complex products, especially on the inhalation and complex injectable front, which augurs well for the sustainable growth of our business going ahead. Compliance is our #1 priority, and we are fully committed to ensure that all our sites are fully compliant with FDA and other regulatory agencies around the world that we serve. We have completed remediation efforts at Tarapur and Mandideep Unit 1 and are confident that we will get these sites cleared as we have done with the others in the near future. We are delighted to have delivered on our promise of sustained and profitable growth during this year. We feel confident that our strategic focus on R&D, patient centricity on the brand front, and continued cost business optimization sets us in a path of sustainable growth going forward.
With this, I will hand it over to Ramesh for a deeper analysis of our performance.
Thank you, Vinita. Friends, I welcome you all to our Q3 FY '24 earnings call. I'm happy to report that this quarter, we have delivered a highest top line number in our history. And after many quarters to the first time we have surpassed the 20%-plus mark on the EBITDA front as well.
Diving into the numbers, sales. Sales for Q3 FY '24 came in at INR 5,080 crores as compared to INR 4,245 crores in Q3 last year, a growth of 19.7% year-on-year. On a quarter-on-quarter basis, the company reported growth of 2.8% as compared to Q2 of FY '24. We have registered robust growth across most of our key geographies. North America has grown at a strong 24% year-on-year.
During the quarter, the U.S. stayed steady at Q2 levels in constant currency. This has been due to volume share increase in base products Inhalation products this quarter is around 40% of U.S. sales. Coming to India. The India business has grown 13.4% year-on-year. Prescription business has grown 12.9% year-on-year during the quarter and 10% during 9 months FY '24 and simply outperforming the IPM growth during the period. Also, if we exclude the impact of the in-licensed products, in our diabetes portfolio has grown at 2x the TA growth during the quarter. The share of in-licensed products to date has been reduced to 10.2% of our portfolio from around 15% to 16% last year, and this has a positive impact on our profitability.
Our EMEA region, which constitutes our EU region and South Africa business, continues its outperformance in this quarter as well, with strong growth of 36% year-on-year. Growth in EU has been driven by [ partnered ] business and our inhalation business going strong. Our South African business has also grown on a strong 21% in local currency year-on-year. The operating income has increased by 51.4% this quarter, and this is essentially coming in from enhanced PLI benefits.
Gross margins. Coming to profitability. Q3 FY '24 gross margins were 66%, up from 59.8% in Q3 last year and 65.5% in Q2. This improvement was driven by multiple factors, which includes product mix, lower share of in-licensed products and increased volumes. [Technical Difficulty] came in at INR 1,563 crores, which translates to approximately 30.7% of sales as compared to 31.5% in Q3 last year. On an absolute basis, costs have remained flat quarter-on-quarter. While there has been a marginal reduction in the R&D expenses on account of facing the higher volume demand at the higher manufacturing costs over there this quarter. R&D is INR 357 crores, which is about 7% of the sales in Q3 FY '24 as compared to INR 290 crores at 6.8% in Q3 FY '23. For the full year, however, we expect it to be in the region of INR 1,500 crores to INR 1,550 crores.
EBITDA. In the quarter, as you see, we have made improvements across all lines, our gross margins are higher. There has been increase in the operating income and the higher sales ensured higher operating leverage as well. Subsequently, this has resulted in driving the EBITDA margins considerably higher. Excluding ForEx and other income, EBITDA was INR 1,022 crores, up by 98% year-on-year. Margins for the quarter were significantly higher at 20.1% vis-a-vis 18.7% in Q2 FY '24 and 12.2% in Q3 FY -- Q3 last year. For the 9 months period, the EBITDA margins, excluding NCE income, are at 17.8%. And so far as the tax rate is concerned, our ETR was 15.8% in Q3 and 18.6% for the 9 months FY '24. For the full year, we expect it to be around 20%.
Moving on to the balance sheet. Operating working capital as of 31 December translates to 96 days of net working capital. This is reduced from 135 days as of 31 December 2022. Our net debt stands at INR 1,043 crores which has reduced from INR 2,527 crores at the end [Technical Difficulty]
DJSI index scores have been reassessed pretty recently resulting in an overall score of 69 for Lupin in the S&P ESG assessment 2023. This increase from my initial communication underlines our continued effort to excel in sustainable performance, positioning us above the global average. Our latest carbon disclosure project scores are in, and they speak volumes about the progress we have made in our sustainability journey.
For the last 2 years, our diligent efforts and collective commitment evaluate the climate change disclosure from C to B, in the carbon disclosure project. This surpasses both the Asia regional average and the biotech pharma sector average, reflecting steady determination to mitigate climate and embrace sustainable factors across all our operations.
With this, may I open the floor for discussions.
[Operator Instructions] So we'll take the first question from Kunal Dhamesha.
Congratulations on a good set of numbers. First on the Tiotropium, if you can share some of the trends in terms of prescription share that we have been able to gather till now? And where do you see we reaching, let's say, in a fair amount of time, that would be great.
[indiscernible].
Can you hear us?
Kunal, can you repeat your question?
Kunal, are you there?
Okay. We'll move on to -- I'll will take the question from Neha Manpuria.
Vinita, on the U.S. business, I know you mentioned there was some amount of seasonal impact in the quarter. Was it meaningful enough to have offset the channel inventory that we had in Spiriva?
Actually, so there was some impact on the seasonal products, but also the baseline products have been very strong in the quarter. So products like lisinopril, sertraline and the like have also performed pretty well. So the big line improvement plus a couple of million dollar impact of seasonal products helped to offset the Tiotropium channel impact. And Tiotropium just from scripts perspective is ramping up extremely nicely. So that gives us really good confidence of growing units and revenues over the next few months alongside the prescriptions.
And Spiriva, If I would generic, Spiriva, if I were to look at market share in IQVIA we're already close to the 31% number. Correct me if that number is off for you. And we indicated getting to 35%, 40% share sometime next year. Given how well we have done in the last 2 quarters, do you think that that's an achievable number or we can do higher than that?
I mean I think we will still target that 40% level just given the strong ramp rate in the last couple of months, I'd say we'll be more at the 40% plus level as opposed to the 35%. So it's turning out to really do extremely well.
Sorry, Vinita, go ahead.
No, in terms of substitution, I was saying...
And we -- currently, nothing on the AG, right? Any visibility there or anything that we've heard, your sense?
Nothing that we have seen so far.
Understood. And on the launch pipeline for FY '25, now that you have $200-plus to 15 -- sort of $1 million base, how should I look at the build for the U.S. business? Erosion will be what it is, but you'll have a couple of products with erosion. So how should we think about the build from this level over the next year -- next 2 years probably?
So we have a good number of products next year, so 10-plus products, good 6 injectables with a couple of meaningful products like glucagon, fosphenytoin that we intend to launch.
And then on the ophthalmic front, we have some really good launches Prolensa, which is going to ramp up as well as we have Loteprednol and a couple of other ophthalmic products around 4 or 5 ophthalmic products. And then potentially a couple of oral solid upsides depending on patent litigation outcome, Mirabegron, Slynd to material opportunities that we should get good amount of clarity about -- in the next couple of months.
But even without that, I would say that given the Tiotropium ramp-up, plus these new product launches, plus they will more than offset some of the erosion that we're likely to see in the oral solids, including erosion in products like Suprep. So we very much expect the business to grow in the next year to maybe a single-digit growth rate. And if we are -- if we get some of these panel litigation products, out successfully, hopefully, double digit. And then as we look at the year next, we have significant products there with Tolvaptan as a material product launch early in fiscal year '26. The other injectable products, liraglutide as well as others that come to market. So very confident of double-digit growth into fiscal year '26. Hopefully, we can get from single digit to double digit also in fiscal year '25.
We'll take the next question from Amey Chalke. Are you there?
The first question I have is on Spiriva. If we can give some clarity on the [ Alvogen ] filing and possible launch, is it really a near-term launch as per your expectation? Or do you think that it will be post FY '27?
And the second question I have is on Dulera. If you can give us some clarity on the CRL, which we have received and possible launch for that product as well?
Yes. So we definitely feel on Spiriva that we're in a very strong position. [Technical Difficulty]
Ma'am the voice is breaking. I mean we're losing -- I mean I think there's some...
We filed, which we believe protects the market for us. So we feel good about the potential of being alone in the market over the next couple of years. And if you just look at what it took for us to get approval of the product, it was 5 years at the FDA. And that was because the product is a pretty challenging product. So we feel pretty good about the next couple of years, hopefully building Spiriva to a very good level.
On Dulera, I mean, we've had an extremely good meeting with the agency back in November, and that gives us confidence that the response that we are putting together is going to meet the agency's requirements. So in the next 3 months or so, we are planning to get response together to the agency.
We'll take the next question from Shyam Srinivasan.
Just the first one is on the trajectory of the U.S., right? So I know there's some channel filling last quarter, but we have seen market share gains in Spiriva, for example. So I just want to understand, is it because of channel feeling that the Q-o-Q momentum seems to be slow? And as we progress, this should kind of start inching up. How should I look at that dynamic?
Yes. We should certainly see an increase in both the unit sales as well as. [Technical Difficulty]
Sorry, I think the audio keeps going away. Operator, maybe...
Can you hear us?
Yes, we can hear now.
Now, we can hear you.
Now we can hear you. But Vinita, we couldn't hear you in parts, if you could repeat, sorry.
My apologies. What I was saying was we certainly expect as the channel inventory is normalizing our revenues -- units, revenues to grow in line with our prescriptions in the months and quarters to come.
Yes. And again, sorry about this, but the opening remarks again, when you gave the guidance for the new base, if you could again repeat that, I'm sorry, but it's parts of your conversation, just went away, sorry.
Yes. Can you just give us -- can we'll just pause for 2 minutes...
Yes, sure, sure. I'll be here, yes.
Is this any better?
Vinita, I can hear you. This is Shyam, yes.
Okay. So this is good?
Yes. This seems better. Operator, maybe you can confirm?
Okay. Apologies. I didn't know -- we didn't know that you could hear us. What I mentioned was that having now delivered 2 consecutive quarters of $200 million plus we are confident of continuing to deliver at that $200 million plus mark in the quarters to come. And I also said that in the next year, we should grow our U.S. business single-digit percentage, but hopefully, more if we have a couple of the key litigation products pan out. So -- and then that's what we have guided.
Got it. So a few clarifications. The presentation talks about you can maintain share on the base business. So have you seen any levels of price erosion that you can guide on the oral solid side of things?
It's been a very low single-digit price erosion on the oral solids for -- in the quarter for us, offset by volume growth.
And Vinita, this prognosis for the future like 2024, let's assume calendar year. Any dynamics around supply chain or buyer groups? Is it changing, even shortages?
Yes. So drug shortages have been really strong over the last couple of months and quarters. And that continues to be the theme as -- so that has really helped normalize price erosion to the low single-digit level. Again, we expect that in the oral solids, we'll probably see a little more -- price erosion versus areas like inhalation and injectables.
Got it. Helpful. Just my second part of the question is on the India business. We have now done better, right? And I remember our guidance earlier was for like in 2025, but it looks like Q3, we have done better. So is this a one-off? Or do you think some of the declines that have come because of the in-licensed portfolio is behind us. So just some path around even the near-term India growth and maybe a reiteration of the -- like fiscal '25 or beyond what our growth levels could be?
Sure. I think -- so Q3 has been a bit of a catch-up. But if you really see on a 9-month basis, we are staying within that 20% to 30% ahead of market growth, which we would expect to continue. That's what I see for the foreseeable future. And it's driven by our key therapy areas. Obviously, we grow faster in some. So respiratory, for example, we're growing at -- anywhere from 2 to 3x the market growth rate. But in diabetes where we had the in-licensed portfolio, we're still growing at a single-digit kind of number, although we're growing a bit ahead of the market now. But I think short answer will stay at the 20%, 30% ahead of the market growth rate. We do expect the market to stay at high-single digits. So hopefully, we'll keep this at double-digit growth rate for the future.
And Nilesh, anything in terms of our distribution. Are we now feel forced, if you could just refresh some of the numbers around our distribution? And is there any plans to increase it?
Sure. Sure. So I think the entire India region team is close to 10,000 people now, about 8,000 plus in the field itself, about 32 divisions at this point of time, we launched 6 or 7 divisions in the last 9 months now. And we will launch a couple of more divisions in the next 2 quarters. But I think we're pretty well set now. I think the part which I'm really excited with is an extra-urban division that we've launched last, that's where we'll be adding sales force in the months to come.
And I think the idea is to make bigger brands. We're doing that in respiratory, we're doing that in cardiovascular and diabetes as well. But there's also this opportunity to focus on extra urban. So we are doubling down on India. The new product pipeline is also shaping up very nicely for India. So we had 21 launches in the last 9 months. We were #1 in new launches in the last 12 months. But I think the focus on launches for India is going to be made -- some very nice launches in respiratory, some of them first in the world as well. But that will continue. And I think we're still -- we're not even got into new modalities or enough biosimilars and the like. So a lot more to come for India..
[Operator Instructions] So next question is from Damayanti Kerai.
I hope I'm audible?
Yes.
Okay. My question is on your EBITDA margin trajectory, a remarkable improvement, which we have seen in few quarters. So how should we look EBITDA moving from here on? And if you can also elaborate a bit like where do you see significant headroom for improvement in terms of cost or digitalization, et cetera? So that's my first question.
From my perspective, they're pivoting to a complex generics is really headed. And it's fairly sticky as you recognize in America and in Europe and the like. And there's been secular growth in other markets as well. But they would also recognize that whilst there's a lot of room for optimism. There are certain dark clouds in the horizon also in terms of the Red Sea disturbances, airfreight going up and the like as well. So several moving parts. Having said all of that, fact of the matter is our EBITDA margins are still lower than the competition and we would like to get to the 22.5% to 23% range. But given all of this, the moving parts, we would like to be I would like to state that it should be between the 19.5% to 20.5%. But clearly, the pathway is to get to the 22%, 23% as early as possible.
Okay. This 23% kind of margin, that should be over what 3 to 4 years from now? What is your target in mind very broadly?
Earlier than that, hopefully -- much earlier than that.
Okay. And you mentioned about this Red Sea situation. Are you seeing like impact of the geopolitical issue in your freight cost in the current month or so?
Yes, it is. It's actually gone up by good 30%, 35% already.
Okay. And if it doesn't say -- we don't see any improvement there, then the impact should be majorly reflected in March quarter numbers or maybe beyond that?
In some ways, it gets inventorized because what we move out here would potentially go into the cost, which will get built, and will be there in the balance sheet, but it will certainly hit us in the quarters to come, at least in the first year -- in the next fiscal.
Okay. Understood. Okay. My second question is you talked about like you're focusing a lot on complex products, et cetera. Can you talk a bit whether you are working on this GLP anti-obesity products? And how far these products are from launch from your perspective, if any?
Yes. So the GLP-1 products, you have the earlier products, the Victoza, Saxenda, liraglutide products which we've already filed and should come to market in '25, '26 time frame. And then there's semaglutide that I think is in '28, '29 time frame and the latest products that you see like Mounjaro, they are, of course, out. Can you still hear us?
Yes.
We just wanted to make sure. Yes. So the latest products like Mounjaro and Ozempic are out a little bit further. So all of them are part of our pipeline and portfolio, being material products and injectables in particular. So over the next few years, we'll start seeing some of these generic versions come to market.
The next question is from Kunal Dhamesha.
Can you hear me this time?
Yes.
Congratulations on a good set of numbers. First one is on the India business. While you have given good clarity on the in-licensed portfolio, which is currently at around 10% of revenue. Let's say, in the next couple of years, do we see any part of this portfolio having again losing patent expiries or -- any issues and if yes, what proportion of this 10% is at risk?
Yes. So maybe the end of FY '25, we see a couple more products going off patent. We'll still grow. There in the diabetes space, we'll still grow but we will see that coming off. But we're down to the 10% or 11%. Our hope is to also create more in-licensing deals which will likely increase this number. I think this is almost an all-time low for us at this point of time. And that is driven by the exclusivities that went off and the product segment of as well. We've obviously supplemented that with our own portfolio, including generic versions of some of those products as well. But I think there will be a little bit more decline in the diabetes space. Hopefully, we'll make that up with some of the other therapy areas.
Sure, sure. Can you give the percentage of the brands that are going off patent? What is the percentage revenue right now?
I don't have it off hand, but it's -- that 10% will go down by 1 or 2% if at all.
Okay. Okay. Okay. Sure, sure. And second question is on Tiotropium with our launch of HandiHaler have we seen any market share shift or unit shifting back from the newer version to the older version because of the generic availability or that has not been the case?
So it's too early to tell because it's just really been few months after the launch in August. But I'd say that the share has kind of stabilized, HandiHaler with the brand as well as our product at that 40%, 45% level and Respimat at that 60% level.
Sure. And what would be our gross debt currently?
The net debt is INR 1,000-odd crores. So essentially, gross debt really doesn't matter so much.
Okay. And when you -- yes, when you said the 22%, 23% EBITDA margin, if everything goes well, does that bake in the some of the litigation product that we talked about?
Well, so essentially, it will come in the MTP period anyway, if not next year itself. Your first question on the gross debt, it's INR 2,600 crores.
INR 22,600 crores.
INR 2,600 crores, I said.
INR 2,600 crores.
Okay. Okay. Yes. And then on the EBITDA margin, this 22%, 23% assumes some of those litigated products. How should we think about it?
Yes, it includes a pipeline that includes products that are [ deep certain ] launch as well as litigation.
I think in general, like Vinita said, I think from generics to get that single-digit or double-digit growth rate, where markets like India growing at either high-single digits or double-digit numbers. So there's going to be this growth momentum. And then there's obviously operational efficiencies and operating leverage that we would expect all of these two together contribute to the number that Ramesh talked about.
Yes. On the cost front, there's never going to be switch-on, switch-off situation. So essentially, for example, if you're talking about addressing idle time, looking at, in fact, a bit like footprint and all of that, it takes time, right? So that's the reason why we're giving us...
So I think at some point, we had this INR 500 crore cost reduction plan, right? If I remember it correctly, if you can provide if there is any update, some parts we have achieved and what more can be done?
We've achieved quite a bit on that. But obviously, it gets camouflaged in terms of rising wherever we invest ahead of the curve as the case of sales and promotion expenses across various parts and the like. But to be sure, there are still some inefficiencies that we believe that we can bring down, which could include things like, for example, inventory write-offs, there are some FTS, there is something on the idle time and the like. We're still airfreighting some products and so on. It really is based on demand. So from that perspective, we would like to cut all of that. It's always going to be an approaching target in that sense.
We're having some disturbance on the line. Can you hear us?
We can hear you Ma'am. It is -- I think it's the background -- where Kunal was speaking. We'll take the next question from Bino Pathiparampil.
Can you hear me?
Yes.
A couple of questions on products. Vinita, Do you still expect pegfilgrastim to come in FY '25?
Yes. Pegfilgrastim, we have a CRL that we have just received that we are planning to respond to in the next 3 months. So we should get approved in...
Either at the end of FY '25 or just after.
Okay. Understood. Second, on your glucagon product, can you give an idea of the addressable market and what's the competitive scenario like?
I know that it is a high-value, low competition market. I don't have the exact competitive landscape there. But maybe Bino, we can take that offline. Ramesh can connect with you offline.
Yes, Bino.
Great. And recently, you had this approval of [indiscernible]. Is that going to be significant? And what are the time lines like?
[indiscernible] so we will -- maybe get back to you. I mean when we look at the next 2 years, the major products for us, as I mentioned, are injectables that we've already filed that we are well on our way for approvals, ophthalmics, products like glucagon, fosphenytoin, as well as prednisolone, Loteprednol, like ophthalmic products. And then in the fiscal year '26, as I mentioned, products like Tolvaptan and like liraglutide products, will be material products that gear for us as well as Risperdal Consta that we have now filed this past quarter. We hope that in fiscal year '26, we're able to get it to market.
Okay. And one last, if I may push in. In Mirabegron, you said you're waiting a litigation outcome possibly in the next couple of months. In case the outcome is favorable when would we see the product? And in case the outcome is not favorable to you, then what happens? Does it get out by some time? Or does the opportunity go away?
No, it doesn't go away for sure based on the patent scenario. I mean, if the outcome looks promising, for us to launch. I'd say that Q1 fiscal year '25 could be a really good time line to launch the product. And -- if not, they'll have to really be based on the litigation outcome we have to determine what is the potential launch date.
We'll take the next question from Surya Patra.
Yes. Congrats on the great set of numbers. My first question is, this inhalation portfolio. You -- for the U.S. business -- can you hear me?
Yes, we can hear you. There's some background noise. So do you want to join again, maybe?
Surya, you want to join back again after some time?
We can start with Krishnendu Saha.
Yes, yes. We'll take the next question from Krishnendu Saha.
Can you hear me?
Yes, we can.
Just quickly, last time we -- respiratory possibly the revenue was around 45%. This time, I heard Nilesh speak about 40%. Those are absolute numbers, [indiscernible]. What -- like -- so just wondering what happened out there like [Technical Difficulty]
So we couldn't -- part of your question was muffled.
Yes. Last time -- in the last quarter, we spoke about respiratory being 45% of the U.S. revenue. Now we speak about being 40%. So I was just wondering what the difference could be is because of Brovana falling up the cliff? Or still we have a large head of Brovana? That's the first question.
My second question is, we have a large [indiscernible] of approval for Xarelto, blood thinner I suppose. It's pretty -- it's a tentative approval. So is there anything much to it according to the press release, is $8.5 billion -- $8.3 billion market. So is there anything to read into that?
On the respiratory side, there's nothing that has fallen off. I mean, the major difference, the 45% to the 40% plus level is primarily the Tiotropium loaded into the channel for in Q2 versus Q3. And some seasonality impact in albuterol because some of our customers bought ahead of the season to be prepared, but it is stable in terms of share, albuterol as well. So really pretty strong foundation there on the respiratory side of the business. And Xarelto, I don't see it as a product launch in the next 2 years. But certainly, is the fact that we have a TA, perhaps we can get back to you in terms of the potential launch date.
Sure. Sure. Just sorry, I'm a little bit sketchy about all the data meets, I'm not a pharma hardcore. So Spiriva, just if you can directly tell me, do you expect competition in the next 2 years? Or what is your thought process? And just on the margin front, the steadiness in the margin is partly -- is it because of product mix or domination of product mix and the cost initiative which has kicked in? And also -- sorry, the last question again, we had an increase in [ AMR ] last year from [ 7,000 to 9,000 ] has they been optimized in your manner? Or do you think the PCPM could improve from here onwards? Sorry, too many questions, I know, too, but you can help.
Your first question was on Spiriva, right?
Yes, best guess, what do you think?
In terms of competition, we believe that till '27, the key patterns that one has to get around in '27. There are good number of hurdles for some competitors to get in. There's also our patents, Lupin patents that one will have to get around. So that gives confidence of no additional generic competition over the next couple of years. What was your second question?
Field cost and the Indian field cost increase has the efficiency has been factored in and the improvement in margin, is it a combination of product mix and a little bit of cost improvement or does a lot of cost improvement still to be done?
So I think, obviously, this drugs have been added only in the last year. So we are seeing them improve. All of them have been -- almost all of the divisions have been performing as per execution, but you would expect the per capita to keep improving though. So we would definitely see more leverage coming out in that we've added. So we then add few more people, but obviously, had a bit of a big bang catch-up kind of increase which happened. With that, obviously, the mix would continue improving as well. And I think that's what you're seeing reflected in the overall gross margin.
And any target...
So it varies per division, right? So for example, we've launched the extra urban, we would never expect it to get to cardiac kind of level where I think -- I think we're usually in the top 2 or 3 -- across therapies.
Since we still have a few minutes to go, we'll leave the floor open to take a couple of more questions. [Operator Instructions] The next question is from Harith.
So I'm trying to understand our inhaler pipeline beyond Spiriva and Dulera. So are there any inhaler products that are in Phase III trials currently which can get into a stage of filing in the next 12 or 18 months?
Yes. So we have a few products that are pretty far along in development. I mean, we have Dulera 1 that's already filed where we have a CRL response that we're going to be filing based on the feedback that we got from the agency. So that, of course, is one. And we have the Respimat products actively in development as well as the Ellipta products, pretty far along. And we are -- in the next 12 months, at least one, if not two, of the products along the 2 platforms, we should be taking exhibit batches, potentially filing.
Okay. Vinita this product, Xopenex HFA, which we had acquired from Sunovion, over 12 months back, how has the ramp-up been for that product when we acquired the Rx was not very material. How does it look now?
It's actually grown, it was a very stable product, and it has grown without any promotional effort over the last 12 months. So at this point in time, we are actually looking at potential avenues to put some effort behind it to grow it even more. So it's been a very nice addition to our portfolio.
Then in terms of generic competition there, what is our expectation?
We don't think that it is not a large product to really justify clinical development. And so we think that the product should remain exclusive. And also, we have plans with the product in terms of life cycle management to really do 505 (b) (2) on the inhalation front that we are working on. So hopefully, we are able to, in the next 12, 18 months make progress on that front as well.
Okay. Last one with your permission on generic Suprep. We saw a couple of generic approvals towards the end of Q3. So trying to understand if the contribution for us from generic Suprep in 3Q was as significant as it was in the second quarter? Or was there a sharp decline?
I mean there was a decline of -- between Q2 and Q3 on and we expect although it wasn't very sharp because the competition did not really come in, in the last quarter. It's really going to be this quarter where we start seeing competition on Suprep.
The next question is from Saion Mukherjee.
Ramesh, if you can -- like we have got to 20% EBITDA margin. So if you can sketch in terms of markets, which are the ones where you see the margins much higher than 20%? And which are the ones which are sort of lagging behind and how the dynamics on margins for the -- for each of the markets or the key markets, if you can highlight?
I guess the only market where the things are lagging is before taking into account corporate expenses. If you take corporate expenses, obviously, things could be a little different. But I think Latin America is one where it has been lower, at least in recent times, Mexico more because of certain issues on the factory front. And whilst Brazil, of course, has got some issues on the business front itself and we are working on that. And then more importantly, I think one has to recognize that we have, in fact, a host of adjacencies to be created in the recent past. If I were to knock that out today, my margin would be a good 2.7% higher. So whilst I say it's 20.1% and so on, you need to actually add about 2.5 percentage points for in fact, adjacencies to be created, which includes your digital, your diagnostics and some of your -- the OTC business and the like as well.
And all of this actually have -- they have a pathway for actually kind of not monetizing it, I would say, it's actually saying that allowing it to kind of raise their own resources and spending on their own access. And once that happens, you would expect those margins to -- and the overall core margins should go back at least 2 to 3 percentage points. So that's where we are today. I think it's basically a combination of, in fact, the newer businesses that we started and some -- the conventional business are still -- Mexico is just -- it's a year in our story, while, of course, Brazil is a little more medium term.
Perhaps just to add to that, I'd say that the EMEA region, which has grown very nicely is still in the investment mode. So it's not at that 20% plus level as of yet. But we will get -- it's getting there with operating leverage and our portfolio, tremendous potential there as we look at the next couple of years.
Okay. And any comment on the API business because it's small, but it has been a big drag, at least in the recent past, I understand.
Yes. So yes, we were almost flat in the quarter. It was a slight decline. And so I think there's -- these products which have scaled up nicely and others which are still continuing to be challenging. I think the PenG situation continues to have some challenges, and therefore, products like cephalexin and cefadroxil will remain impacted. Products like [indiscernible] remain impacted as well. We are seeing -- we do see growth in the next year. So you will see a bump up in the API business. But I think it has to be driven more from our perspective with some of the stuff that we do in LMS, local manufacturing solutions in terms of new products and building that book of business. And bringing more new launches because we're still primarily working off our own portfolio at this point of time in the API business.
Understood. And Vinita, I just missed you mentioned in your comment on the inhalation filing you mentioned like Respimat or Ellipta or one of two of these products will get filed over the next 12 months? Is that what you mentioned?
Yes, it should be an exhibit batch or potentially filing.
We'll take the next question from Nikhil Mathur.
Yes, I hope I'm audible.
Yes.
Sorry, if there's some background noise. So I have two questions. The first question is on the margin trajectory over the next 2, 3 years. So while you are kind of guiding to a glide path of 20% to 23% EBITDA margin at some point in time, what kind of generic cycle are you building in and when you're trying to achieve these margins, I would imagine that there is some support from below-trend generic pricing erosion currently. But we have seen in the past, these tends to be pretty cyclical. We don't know. I mean maybe in FY '26, there's a big down cycle again. So when you are expecting margins to improve going forward over the next 2, 3 years? What kind of generic cycle are you building into your base case assumptions?
So I think on the generic price erosion, that's what you're asking about, right?
Yes. I mean if there's a big down cycle again, let's say, 12 months down the line or 15 months down the line, then what our 20% to 23% EBITDA margin be a farfetched thing to kind of to achieve?
I would say that given our mix has evolved to more complex generics, 40%, 45% inhalation next year, adding injectables where one does not see this kind of price erosion gives us the confidence on that we have a growth segment pipeline that helps us grow the margins. Second, I'd say that the oral solids, which have gone through a lot of price pressures over the last couple of years and stabilized over the last 12 months. One has to realize that companies got out of the market. Therefore, you saw a drug shortages -- sorry?
Sorry, there's some background noise at my end, so sorry about that.
Yes. So as -- the oral solids also there's a lot more awareness now that putting pressures on manufacturers will cause exits, more product exits like we did in the past couple of years. So we do think that things are somewhat better for the oral solids, although not as good as the complex portfolio. So combination of that gives us the confidence that we should continue to improve the margins. Like our U.S. business, I mentioned 6 consistent quarters of improving margins, and that was a combination of both business upsize product portfolio mix towards complex generics plus efficiency measures on the logistics cost returns, freight as well as write-offs and things. So -- and we continue to really have that focus on driving the subparts of the generic business.
Right. And can you comment a bit on your strategy on the oral solid side over the course of next 2, 3 years? So obviously, the pricing environment is slightly better than what it has been. But do you feel that you, as a company, will again be looking to gain volumes or kind of chase volumes and in turn, kind of fill your capacities? Or do you think that it's not the right strategy to be going back to where this industry was 2, 3 years back. And hence, it's a bit -- your strategy should be a bit more cautious in terms of how you target the oral solids business?
We focus on oral solids is the baseline, we want to manage it as efficiently as possible. So very, very strong focus on cost improvements there through KSMs and other related spend, making sure that we don't have idle costs. So in doing that, you can't really afford to really hold on to capacities with the hope that you will share, right? I mean -- so it's not to say that we will not be opportunistic. I mean, when there are opportunities, especially on our products where we have a strong position, we will certainly want to be able to gain volume as well as serve the market. But we have optimized and we'll continue to optimize the oral solids to minimize any idle cost and other measures that -- to ensure that we run the business as efficiently as possible while driving the portfolio shift to complex generics.
Right. And sorry to just hop on a bit more on this. So a couple of years back, you had taken a call on discontinuing a portfolio of products, which -- I mean, which wasn't making sense on the margin front. Do you still stick to that strategy? Do you have a threshold margins below which you are not willing to work, it would be great if you can communicate what margins below you're not willing to work, but I mean it might be difficult for you to comment, but does that strategy still hold irrespective of how the pricing environment behaves?
Absolutely. We're not going to sustain products that don't contribute to our P&L. So we have to as much as we are very proud of our position as a company that serves a major cause on the generic front. We also have to be a viable manufacturer. So -- and it's not any particular margin because every product has a lot of -- can contribute to overheads and improve the margin for our site. So there is no one number that is a cut off, but we have a very, very disciplined framework now on a month-on-month basis to look at margins, look at products that are getting to low margin and determine what our position is going to be.
We're out of time, so maybe we can take last 2 questions.
We take the next question from [ Ritesh Rathod ]. Ritesh, are you there?
Can you hear me?
Yes, we can.
Given the strong free cash flow generation, and we are on a quarterly EBITDA run rate of INR 1,000 crores, we would be net cash in a couple of quarters. Where do we deploy -- we plan to deploy our free cash, which would be generating next 2 to 3 years? Would it be any particular area? Or would you like to give it back to shareholders? And do we have any formal payout policy?
So we do have -- so our dividend policy is not going to be any different from the past because we believe that there are a lot of opportunities in our space to actually invest. We believe that over time, we will be able to get to returns, which would be far higher than what the individual shareholder would be able to get for themselves. And we have always been an acquisitive company. So as and when this proposition is compelling enough, we would look at various acquisitions. And we've also kind of -- we are nurturing our specialty aspiration as well. So it is a question of time if we actually get to that. We've been studying this space for quite some time now. Our first [indiscernible] was obviously not very successful, but doesn't necessarily mean that we're going to stay away from it for too longer time. It's just a question of time before we get back.
And what would be the areas, where do you like to invest if you want to put it in a priority or in a defending way?
So we'll say that while we'll be opportunistic in terms of the areas that we can play in, where we can make a difference. But respiratory is one that we really like based on the position that we have built, I mean today, respiratory is over 25% of the company's global revenues. When you look at both the India business as well as the U.S., Europe, Canada, all of the different markets that we have, and we have significant capabilities there. So suddenly, respiratory is one where we believe that we have the right to play and look at opportunities to both organically as well as inorganically to build our portfolio. If we have other opportunities like Xopenex we will certainly look at them seriously.
The other area that we like based on -- in Europe, neurology, with NaMuscla , the orphan product that we have. In Europe, we have successfully launched it in multiple countries there and have started the study for a broader indication for the product even though it still be an orphan indication and looking to really expand that portfolio with other CNS neurology assets.
So those two are certainly areas that we are looking at programmatically. And then others opportunistically. Likewise, we're looking at therapy areas in India and the TAs where we want to build a stronger position for the future, we are strategically looking at opportunities to buy brands and portfolios.
And in Specialty, can you elaborate more what areas you will try to do attempt this time like organically or inorganically?
Like I mentioned, the two that we have been looking at exploring our respiratory and neurology.
Okay. In U.S. also, you meant that?
Yes.
Apart from, of course, the opportunities if they arise in India as well.
So that concludes the Q&A session. Thanks for the active participation. I now hand the conference over to the management for the closing comments.
Thank you, everyone. Apologies for the poor audio this time, and we'll be happy to answer any questions that remain unanswered, but we are very energized by the performance our team has delivered over the last 3 quarters. Our team is very energized, as you can imagine. And we expect to close this fiscal year pretty strong, continuing on the momentum that we have built over the last 3 quarters.
And starting the next fiscal year very strong as well to improve both revenues as well as profitability going forward to get to our goal in the next 3 years like Ramesh said to that 23%, 24% EBITDA.
So look forward to connecting with you again over the next couple of months as well as the next quarter. And thank you again for all of your questions on the call today.
Thanks, ma'am. So thank you very much to all the analysts and the participants. On behalf of Lupin Limited, that concludes this conference. Thank you for joining us, and you may now exit the webinar. Thank you.