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Lupin Ltd
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Good afternoon, and welcome to Lupin Limited Q4 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.
Thank you. Good afternoon, friends. I'm very pleased to welcome you to our Q4 and end of this year '24 earnings call. I have with me are MD, Nilesh; our CFO, Ramesh; and our Head of Investor Relations, Ravi.
We look forward to sharing with you our highlights for the quarter as well as the full year and outlook for fiscal year '25. We are very pleased to close the year on a strong note, continuing to improve our operating margins and maintain the business momentum for the last many quarters. Revenues in the quarter have grown 13% rather year-over-year driven by all major regions, in particular, U.S., India, EMEA and APAC. Gross margins and operating margins improved in Q4 based on better business and product mix, in particular in the U.S. and also higher efficiencies.
We were very pleased that EBITDA margins improved quarter-over-quarter despite higher R&D investments and Q4 seasonality impact in U.S. and India. Our U.S. business continues strong at $200 million plus revenues despite lower seasonal products and reduction in products like darunavir that experienced additional competition.
Our base business performed well and new products like Tiotropium and generic Prolensa helped offset the seasonal product decline. We are at a good level with 30% substitution with Tiotropium 10 months into the launch. We expect Tiotropium to continue to be a major growth driver in fiscal year '25. [indiscernible] being the meaningful ones. We expect to sustain our U.S. business at the $200-plus million level going ahead with the continued ramp-up of Tiotropium and new product launches in fiscal year '25. We have 10-plus launches during the year.
Our India business has grown 8.3% year-over-year in the quarter and 9.6% for fiscal year '24. Within this, our India prescription business has grown 8.7% year-over-year on a full year basis, this was 1.2x IPM growth. Core therapies like cardio and respiratory segments have grown well ahead of the market, 30% over IPM in fiscal year '25. We already started to see this in April.
We have also carved out our trade generics business into a 100% wholly owned subsidiary to enhance agility and drive focus on this high-growth segment. Apart from the U.S. and India, other regions have performed well, too. EMEA and APAC recorded strong double-digit growth in the quarter, driven by faster generic in Europe and strong growth in markets like Australia as well as Philippines. The [indiscernible] with the acquisition of 2 accretive established brands from Sanofi for Europe and Canada.
During the year, we also closed a Medisol transaction, the French complex injectable company, which expands our position in complex generics, in particular in Europe.
On the R&D front, we have continued to pivot to more complex products, in particular, inhalation and complex injectables. We spend around 50% of our R&D investments in these 2 platforms [indiscernible] portfolio, which we expect to increase to about 50% to 60% in the next few years. In the fiscal year '24, more than 80% of our new product revenues in the U.S., both from non-oral solid products. This augurs well for sustainable growth of our generic business going forward.
Switching to compliance. We have continued to build on our momentum with recent inspections at Aurangabad and Dabhasa with positive outcomes. We are on track with our remediation efforts at our Tarapur and Mandideep unit one sites and all our sites are compliant with best-in-class GMP standards.
Reflecting on the year gone by, fiscal year '24 has truly been an inflection point for our organization. We are very pleased to turn around our business and deliver on our promise of sustained and profitable growth, driving the shift to complex generics, getting our India business growth to 20% to 30% above market, improving our GMP compliance position and continuing to drive efficiencies. It has also been a year of growth across all our regions and business segments. As we look to [indiscernible] our business, building on our portfolio evolution into complex generics and specialty. We're truly excited with the potential we have ahead of us.
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 Q4 FY '24 and FY '24 annual earnings call. I'm happy to report that this quarter, we have delivered another quarter of strong performance with EBITDA growth of 65% year-on-year and consistent 20-plus percentage EBITDA margins. As you would have seen, we've improved our EBITDA margins quarter-on-quarter by about 30 basis points despite higher R&D costs during the quarter. In fact, for the full year, we [indiscernible] the growth and profitability.
Going into the numbers, Sales for Q4 FY '24 came in at INR 4,895 crores has come back to INR 4,330 crores in Q4 last year, a growth of 13% year-on-year. We've registered robust growth across most of our key geographies. North America has grown at a strong 23% year-on-year. India business has grown at a healthy 8.3% year-on-year whilst EMEA grew at 17% year-on-year. Our ROW grew 8% year-on-year and growth markets grew at 16% year-on-year.
On a full year basis, sales have been -- have come in at INR 19,656 crores, a growth of 21% year-on-year and 20% year-on-year adjusting for NCE income received during Q1 of FY '24. All key statements excluding LatAm, have delivered strong growth. In particular, U.S grew 29% in constant currency terms. Our formulations business, excluding India during this period.
The U.S. business. During the quarter, the U.S. business recorded sales of $209 million, marginally lower than Q3 levels on a constant currency basis. Whilst pricing on base business has remained relatively flat decline has been due to the lower volumes on seasonal products and lower sales of products like darunavir. For the full year, the U.S. business has recorded sales of $850 million as against $632 million last year, registering a growth of 29% year-on-year in constant currency terms. This has been led by volume growth in our base business and healthy contributions from new products.
As Vinita mentioned, our strategy of focusing on complex products in our pipeline has paid handsome dividends and more than 80% of the sales from our new products this year have come from non-oral solids. In fact, if we look at our pipeline for FY '25, more than 70% of the new launches in the current year will be non-oral solid in nature.
The India region. The India business has grown by 8.3% year-on-year during the quarter and 9.6% year-on-year in FY '24. Specifically, during the year, the prescription business has grown 8.7% year-on-year and 9.3% ex CNS outperforming the IPM growth during the year. Segments like respiratory, cardiology and oncology have performed IPM growth in their respective segments.
The share of in-licensed products in the quarter has reduced to around 11% of our portfolio from around 15% to 16% last year, whilst also having a positive impact on our profitability going ahead. We've launched 28 products in FY '24 and plan to launch about 20 products in FY '25.
I'm also happy to report that our diabetics business is scaling up very well with revenue growth of 160% year-on-year and around 40 labs under operation. EMEA, our EMEA region, which constitute our EU business and the South Africa business, registered strong growth of 17% year-on-year during the quarter and 24% year-on-year in FY '24. This has been driven by steady growth in key EU markets like U.K. and Germany NaMuscla inhalation products and also partner business.
Growth markets. Our growth markets includes APAC and LatAm regions. The APAC market grew by 33% year-on-year during the quarter led by strong growth in markets like Philippines and Australia. LatAm market over declined by 6% year-on-year in the quarter due to ongoing events in Brazil, Japan, partially offset by growth in Mexico.
Other operating income. Other operating income at INR 66 crores has decreased by 34% year-on-year during the quarter. This decrease is primarily on account of the pacing of PLI benefits during the year. On a full year basis, other operating income came in at INR 355 crores against INR 372 crores last year.
Gross margins. Coming to the profitability Q4 FY '24 gross margins were 67.8%, up from 59.6% in Q4 last year and 66% recorded in Q3 FY '24. Whilst we've seen improvement driven by multiple factors, which includes better product mix, lower share of licensed products, increased volumes and gross margins have also benefited from higher inventory, which you're carrying on account of as a risk mitigation measure due to geopolitical tensions in Middle East.
For the full year, reported gross margins have come in at a 66.2% as compared to 58.3% last year. Adjusted for NCE income, gross margins are at 65.8%. Employee benefit expenses at INR 900 crores increased marginally from INR 889 crores in Q3 FY '24, translating into 18.4% of sales, vis-a-vis 17.5% last year -- last quarter. This change is largely attributable to higher impacted [indiscernible] offset by lower seasonal domestic sales during the quarter.
For the full year, employee costs have increased by INR 407 crores, that mainly driven by the annual salary hikes and the India field force expansion, which took last year. This translates to 17.8% of sales on a reported basis and 18% on adjusted basis as compared as to 19% sales in FY '23.
Manufacturing and other expenses. Q4 FY '24 manufacturing and other expenses came in at INR 1,490 crores, which translates to approximately 30.4% of sales as compared to 30.7% of sales in Q3 this year. The expenses are lower in spite of higher R&D due to lower business settlement expenses, lower litigation costs, lower SG&A costs due to seasonality.
Manufacturing, other expenses in FY '24, came in at INR 6,073 crores, an increase of INR 1,019 crores as compared to FY '23. This translated to 30.9% on a reported basis and 31.2% of sales on an ex NCE basis as compared to 31.1% last year. This has been led by primarily higher R&D outlay, higher SG&A on account of field force expansion and higher volumes from increased sales.
R&D is at INR 426 crores, that's 8.7% of sales in Q4 FY '24 as compared to INR 305 crores a 7% of sales in Q4 FY '23. For the full year, R&D is INR 1,527 crores vis-a-vis a guidance of about INR 1,500 crores to INR 1,550 crores, translating to 7.8% of sales.
EBITDA. Excluding ForEx and other income, EBITDA was at INR 997 crores, up 65% year-on-year. Margins for the quarter were higher at 20.4% vis-a-vis 20.1% in Q3 FY '24 and 13.9% in Q4 last year. For the FY '24 period, reported EBITDA margins are 19.3% and excluding NC income are at 18.5%.
Depreciation and amortization at INR 457 crores as compare to INR 264 crores last year. This recognized an impairment of INR 201 crores relating to the intangible assets, which are essentially discontinued end and certain tangible assets. ETR was 26% in Q4 and 20.1% for FY '24.
Operating working capital was at INR 5,691 crores, as of 31st March '24, which translates to 105 days of net working capital. Whilst this has been a reduction as compare to the last year, has increased from the 96 days recorded last quarter, primarily on account of higher inventory that we are carrying given the disruption and the geopolitical tensions in the Middle East.
Net debt stands at INR 477 crores, which reduced from INR 2,527 crores in March '23, indicating a reduction of the INR 2,000 crores during the year. On the ESG front, of course, we've done extremely well, as you would be aware. And we have got S&P DJSI score of 69 over 100, kind of reflecting exceptional performance, placing us with the top 25 percentile for the pharmaceutical sector as a whole.
With this, we open the floor for discussions.
[Operator Instructions] So the first question is from Neha Manpuria.
My first question is on the U.S. pipeline, 2 products specifically. First, on Mirabegron, we saw that we launched the product and then we got an injunction. How do you think is our position in the litigation given the win in the lower court? Do you think this is still a credible launch for this year?
And second, on Spiriva, we have seen some moderation in market share in the last few weeks. So what's your sense there? Your opening comments did mention traction in the products? What are we expecting in terms of market share when you think about Spiriva going into next year?
So Mirabegron, we have a temporary restraining order. They were not given the preliminary injunction. So -- and we would -- we feel pretty good about our position, and we'll have a read on it over the next few days. Hopefully, should be able to launch the product again.
I think that Astellas has really filed multiple patents after patents to prevent affordable generic to come to market, but we feel pretty strongly about our position both from a non-infringement as well as invalidity standpoint. So should certainly have the opportunity to relaunch the product shortly.
On Tiotropium, we had guided at the beginning of the year that, typically in the first year, the first 12 months, you see a generic product take 25% to 30% share. And we are, right now, 10 months in, at 30% share, couple of weeks can be up or down, but we're not seeing any tapering off of our order book or share standpoint. So feel pretty good about the 30% so far. We're also going to take a look at what happens over the next couple of months.
In June, the brand has announced, as part of a response on respiratory products, the pressure that they had from Congress, they have announced a $35 cap out-of-pocket, pay to patients, you'll see if there is any impact of that, if it suggests that we should modify any of our strategy. But so far, it's been pretty good. We've been pretty much on track on the share and very favorable on the pricing front as well.
So are we still okay with the 40% market share that we had guided to previously for Spiriva in the next year?
We have said 30%, 35% and we'll see based on again, what is -- what -- we want profitable share at the end of the day. So we'll see.
Yes, it makes sense. Yes, understood. And my second question is on the gross margins, very strong gross margin performance. How should I think about the gross margins going into next year? Is this the base that we should assume that we build on or should I take a more blended 3 quarter for gross margins given the higher inventory impact that you talked about?
So current quarter has, of course, been influenced by sales mix and of course, tailwinds on account of the input costs and there's, of course, the higher inventory buildup. I would imagine, given the buoyancy on the top line kind of products that we are bringing in and the emphasis on, in fact, route to synthesis, potentially altered vendor strategies and the like, so we should be able to kind of maintain, sustain these levels of cost margin if the day should come.
The next question is from Kunal Dhamesha.
Congratulations on good set of numbers. Just the first one on the top line growth expectation for FY '25 overall and the EBITDA margin expectation?
So we should be at close to 10% level in terms of revenue growth and EBITDA margin at 20% plus.
And would this EBITDA margin expectation include Mirabegron? Or if Mirabegron happens, there would be potential upside to this?
Hopefully, we have some upside to it.
And secondly, on the India business. Now that we have again started growing at almost low double-digit. How do we see this market growth in the next year and probably in the next -- over next 2 to 3 years given that we have one patent expiry, which is coming, what would we do to offset that? And as a second part of that question is, the number of particle representatives we have in the business, along with the first line manager and excluding the first line manager?
Sure. So I think on the India business, our goal has been to grow at 20% to 30% ahead of the market. The market, for example, in Q4 was sluggish, grew only 5.7%. But for the year market grew at 7.6%. So we obviously grew ahead of the market at 8.7%. We would want this to step up even more. So I am hoping -- we're hoping for the market to grow at a slightly higher pace. And obviously, we should be close to double-digit growth in India accordingly. I don't have the exact specifics on the sales force numbers. It's roughly about 7,500 med reps and 10,000 people altogether.
Okay. Perfect. And if I may, one more on the diagnostic business. I mean we have seen strong growth et cetera, but how do we see deployment of capital from here on? And in terms of profitability, it is obviously a drag right now. But when do you see that probably become breakeven?
Yes. So I think at the board level, we've built clear guidelines for all the adjacent businesses, whether it's the diagnostic business, whether it's the digital business, whether it's even our investments into areas like OTC. On diagnostics, in particular, the burn went up in the last year versus the previous year. So it was higher in FY '24 versus FY '23. In FY '25, we basically see it at a similar level and then we see it coming down. So in the next 2 years, we see significant improvement on the business from a profitability perspective.
Okay. And in terms of any revenue guidance -- revenue growth guidance for that business, the entire other business apart from the pharma business?
Yes. So I think we are calling it out separately in our numbers as we're reporting them now. So the numbers that are reported, I think, INR 60-odd crores is basically all diagnostic at this point of time. That number will obviously grow to a multiple of that in the next 5 years. Still very, very small and certainly not the focus area for India, the core pharmaceutical business will always remain the focus in India.
We'll take the next question from Bino Pathiparampil.
Vinita, first on Spiriva. Can we assume that an authorized generic is now not going to come? Or is it still a risk?
It's hard to tell, Bino. We hope that given the share as well as the current status of the market, that we continue as both the brand and generic, but it's hard to predict.
Okay. And then we track -- you launched only the 25 MG and not 50 MG, what was the reason for that?
We were just prepared with the 25 mg and yes, 25 mg was where we were ready to launch.
Okay. So if the [ TRO ] is the lifted you can potentially launch 50 as well? You would potentially?
Yes, potentially.
And just one question on the market size on Myrbetriq. As per IQVIA and as per your PR of course, quoting IQVIA, the market size is around $2 billion. But if we look at the Astellas Annual Report, it seems to be very different, only at around $700 million or something. If there is such big rebate or anything there? Or how do you read that?
Yes, we believe that growth to net that Astellas has contracted with PBMs.
Okay. And if I may push one last one. The Oracea generic opportunity, the sales number you have quoted, again a quarter from IQVIA of around $138 million or so. Is that the market for just Oracea or the entire doxycycline market, generally doxycycline market?
It's just Oracea. I mean doxycycline is very large, many different brands. That's been a really nice pace for us in April.
We'll take the next question from Nimish Mehta.
See, what I understand for the U.S. generic industry that in the month of April, we have seen some significant price reduction across the board. One, wanted to know your views and also the impact on our portfolio?
So price erosion actually has been pretty reasonable over the last 12 months, I would say. We experienced a single-digit price erosion. And there still continues to be a very strong drug supply shortage issue in the U.S. We were just in Washington DC last week, along with a number of our peers and heard a lot of concerns about drug shortages. So we expect that should really keep price erosion at a reasonable level going forward, at least in the next 12 months. So we don't really see this April impact. I mean you probably are looking at IMS data, which really does not give you a real picture of net pricing.
So the reduction that have seen in April is not something that is in nature or not seen on the ground, is that what you are saying?
Yes, we haven't. Like I said, the last 12 months, it's been single digit.
The other question I have is regarding the domestic market. We have seen government cracking down on a lot of the smaller CMO suppliers. And so we wanted to know how is it impacting Lupin and will that also mean that we will have more capacity to build so that we kind of do not get into any problem related to CMO's quality issue or anything like that?
Yes. I think that's a great question. I think that clearly, the government is showing intent to move up on quality, which is why they've been cracking down on some of the suppliers. You would have seen today he talked about new standards for exports as well. So I think there is a clear intent to move up on quality, which is great for companies such as us. We've not had any disruption with any of these. Most of the suppliers we've not worked with or we've had mitigation plans in place as these issues may have arisen as well. We have a pretty robust process of vendor management in place. So not impacted. I think there's a bigger opportunity in the longer term to manufacture more ourselves, and that's something that we will explore.
Understood. And if I may, the last one only, trade generics that will be very helpful. I mean we have seen all the large companies, including ours, to be launching a separate trade-generic business, either in the form of a company or the division. So what is the trigger? And how do you think this will play out again versus our own brand. So do you think that at an aggregate level, this will grow significantly enough to kind of challenge the pricing for the whole industry?
So I think the trade generics is a growth opportunity. Clearly, it's a higher growth segment. That being said, it's going to remain a portion of the market. It's not going to be the dominant portion of the market. And our focus, just like others would be to bring that focus, bring that agility, bring that clear accountability into managing that business gradually. This business has to be managed very closely. It has to be managed much more aggressively than even the India domestic business. So -- and I think that was the main reason to spin it into a separate entity.
But again, just like with everything else, there are guard rails built into this, and we don't think this is going to be the dominant element of the Indian market.
But I just wanted to know what is the trigger for which it will go because it has been there since many years now, right? So what is the change that has happened in the market, which you see is going to trigger this growth in the generics business?
I think whether it's organized retail, whether it is the hospital segment, where it's more institutional buy, obviously, there is more of this business happening there. And therefore, that is the opportunity as well, including to Tier 2, Tier 3 kind of towns as well.
We'll take the next question from Shyam Srinivasan.
Just the first one on the U.S. business, right? So we have done an annual revenue of $815 million. And just wanted to see how we should look at it in a medium to longer term? Can we go back to $1 billion at some point of time? What are some of the drivers of that particular thing? I think that's the first question I have.
Yes. So certainly, with the pipeline that we have over the next 2 years, next year being both a combination of some of these 3, 4 products where we should have some upside opportunity and some nice injectable products as well. The following year, potentially the launch of tolvaptan, which -- they are exclusive generic. That plus our injectable portfolio, products like liraglutide, Victoza, Saxenda, glucagon. We expect fiscal year '26 to be solely year where we have, if not at $1 billion, we should be close to it.
Understood. I mean this was still close to what about 10%, 12% kind of growth, right? Won't we see a more faster growth? I'm just wondering why not, sorry?
So we still assume that all the products will come down. We still assume in our plan that we will see additional competition on existing products that new products offset and help grow. So hopefully, potentially, there's an upside if you don't see that kind of price erosion.
Got it. Helpful. Just the second one is on the 80% of new products are non-oral in nature. If you were to look at the map -- the margins on that portfolio, vis-a-vis say the orals, should one actually expect higher margins? Or do you think even non-oral margins have actually come down to what about the 20-odd percent that you are showing? How should we look at that?
No, definitely much better margins. That's what's helped us really shore up the U.S. business profitability and the company profitability as well to a certain extent. It's -- the complex products are relatively speaking, better margin products.
So yes, just trying to tie this to the guidance then, the last question for Ramesh. When we talk about gross margins not improving further from here, but all this contribution on non-oral continues to remain in the forward part. So just trying to tie, are we -- are on gross margins, we should see a benefit, but we might give it back elsewhere. Is that how we should look at it?
There is going to be a higher quantum of R&D spend. It's kind of reflected in the current quarter itself of about INR 150 crores. So that run rate will certainly be would be there. And so in whilst, of course, there would be improvements in the gross margin but there are also tailwinds if you look at, for example, the freight element there's uncertainty there and so on. So we can't actually provide for all kind of ups and downs in the future. So the action we would prefer to be prudent in our guidance also.
[Operator Instructions] so we'll take the next question from Surya Patra.
My first question is about the Spiriva. So how should we think about the pricing of Spiriva? Or how sustainable is this pricing given the kind of cap on the overall cost that has been -- that you mentioned?
So, so far, it's been very stable. The price based on the brand price and the minimal amount of discount that we had to give to be able to get substitution and we will see what the brand does, we will see the impact of the change in coupon that is expected to come in June and determine if we need to do anything more than that. But at this point in time, net sales, it looks like it's very stable.
And in terms of the list price correction for the brand, have you seen any change in the initial period of this quarter?
No, we haven't.
So is it fair to believe that the list price is likely to be maintained for the entire of the year?
I would expect so. I want -- we don't have any indications that, of course, the brand can do what the brand wants to do. But they typically don't change list price.
Okay. Second question is about overall respiratory sales contribution to the business. So is it possible to say like what is the respiratory sales mix for the U.S. business? And what is in general for your overall European-wide business?
So company-wide, it's at 25%, given the strong presence in the U.S., India and Europe and also growing presence in other countries. We just launched Tiotropium in Canada. We're launching in Australia. So 25% company-wide, the U.S. is close to 40%.
Okay. And this quarter, it looks like that we have seen some sequential uptake in the arbitral market share. So could you share what is the market share currently that we are enjoying? And what is your outlook there in terms of pricing as well as in terms of the competition that you might face further?
Yes. So it's pretty stable at that 23% level market share. There's been some uptick because of seasonality in the past couple of months, but it's tapered off a little bit because the flu season was short and it's been fairly stable. And also from a competition standpoint, we're actually -- it's a very difficult product to make. It's not easy to make the MDIs and DPIs, as we find as well. So we hope to see more stability in this portfolio.
See, while you have mentioned that going ahead by FY '28, you are likely to introduce many complex product, around 20-odd product or in 3, 4 year. So given those kind of pipeline, where do you see your respiratory portfolio playing for your overall growth strategy?
It is a significant growth driver for us for the next 5 years. Now as we look at our 5-year plan, I mean, both the respiratory and injectable products where we have an increasing percentage of our investment, they're going to be a larger part of our portfolio going forward.
Just last one question. If you can comment on the LupinLife initiatives along with the diagnostic and that has been to your domestic portfolios, domestic business as a whole. So how all these are integrated and how are this going to help you in the domestic positioning?
Sure. And that's a question that we ask the team regularly as well. I think to diagnostics, I think -- sorry, there's background noise. I think on diagnostics, one part, obviously, is the role that company leaders have play on diagnostics. We'll create companion medicines between diagnostics and drugs as well. So we're looking at pathways there. So there are certain synergies.
But I think other than that, obviously, the bigger thing is to be a trusted provider of health care which is why we have that business. On digital, I think that is much closer to our cardiovascular metabolic play. And I think it's the same doctors. It is we're reaching the same target audience for an additional set of prescriptions. And hopefully, we will get substantial rub off benefit of that. That business is obviously -- actually we're talking about changing doctor-patient behavior and that's obviously more challenging from that perspective but we've had some nice wins to start.
Just last one question, if you allow. About -- do you give us some update about the Fostair markets at progression in Europe as well as for -- what is the progress that we have seen for our Enbrel in Europe, what is market share that we would be at?
So Fostair, we're still -- the dominant share in most of the European countries. We've launched, I think, at this point, we're in 13 countries and through both our direct presidents as well as our partners and continue to really build on our shares. So it's been a material growth driver for our European business and this past year. It continues to be a very strong product for us, largest product for us in Europe.
Is it a $15 million, $20 million product, mam?
It's more than that.
Okay. And Enbrel?
Yes. Enbrel also has improved. We have had growth in Enbrel revenues this past year. In Europe, certainly the shares go, but we have launched also in other countries like Russia, the product was launched. We also have countries like Latin American that are on the table, right now. We are launching in the Middle East and Australia. And we just announced also this last week, we launched in Canada through our Sandoz partnership. So the product continues to grow in all of the available markets.
So we'll take the next question from [ Tarang Agarwal ].
Congratulations for an extremely strong set of numbers. A couple of questions. One, we read a lot around shortages in the U.S. both around injectables as well as the oral solids. There seems to be a fair bit of traction from regulators and state actors as well. But -- I mean, you being there, are you witnessing anything structurally changing in this market, one?
Second, versus how things were, say, a year back? How have things evolved? And how do you see these things moving forward? So those are 2 sub questions. And second, if you could give us some sense on what's happening with your biosimilars businesses?
Yes. So we certainly have seen things stabilizing. When we looked at a number of the drug shortages and analyze the root cause, the largest percentage was they were economically not viable. So companies like us, a number of peers have gone out of these products because they would -- just from a pricing standpoint and come down to a level there, it didn't make sense to continue to manufacture them.
So there's been a good amount of recognition of it, both with our customers as well as other stakeholders, the U.S. government, the FDA, the FTC, there's been a good level of concern across the board in the U.S. on these drug shortages and the cause for drug shortages. And we think that, that's the reason that price erosion has stabilized to some level, and we are going to hopefully continue to see this going forward.
Structurally, I'd say that there are a lot of stakeholders in Washington D.C. They are looking hard at the reason for these drug shortages and are working hard to see what they can do to prevent these. So there is a good amount of scrutiny on the market dynamics that are causing companies to exit products. And hopefully, that will bring some level of balance in the marketplace or continue to maintain the balance in the marketplace, which will be promising for the U.S. generic market.
On biosimilars. Our focus so far has been really more focused on development and manufacturing of the products that we have chosen to get into. We have Enbrel, of course, Somerset that we partnered with Mylan, which is now the Biocon. We have other partners like Sandoz in Canada, and we have the right to the U.S. ourselves, which comes available in 2029. So that is kind of partnered product so far.
We have pegfilgrastim that we're still waiting to get FDA approval. In fact, we just resubmitted our supplement the CRL response. We are actually in the process of submitting it shortly. But I believe that we are in a very good position there as well to get FDA approval. So far we've got European Japanese, every other regulatory authority, but not the U.S. FDA approval. That's going to be an important for us in fiscal year '25.
And then we have other products that we have pretty far along, like Lucentis, demcizumab, we intend to file in fiscal year '25 to the FDA. And as well as other parts of the world, so that should be a good opportunity for us on the ophthalmic front. And then we have a couple of respiratory products that we are pursuing as well, mepolizumab and benralizumab and tracking the market very closely to see if we can try to get the products through some of the countries without a PD study.
So we continue to build on our biosimilars platform and strategy, but cautiously, I would say, because there are tremendous amount of hurdles as well on the biosimilars front that we have seen both from a regulatory perspective in terms of what it takes together through FDA and other agencies as well as market access, from a go-to-market standpoint and then at the end of the day, the contracting strategy of the brand. So cautiously building that portfolio, which will serve us long term as a really nice initial platform that will help us differentiate our portfolio.
We'll have the next question from [indiscernible].
Vinita, you commented on Spiriva AG, not sure. But any update on the next ANDA filer when we can see the Spiriva update on the Chinese product line it was trying to bring?
Yes, hard to predict, really. We know how long it took us, it was 5 years and it's a complex product to make. So we'll wait to see. We think there's a hurdle pattern in '27, which it's hard to get around. So we expect in the next couple of years should be fairly sustainable.
Understood. And just commenting again on this few pipeline products you mentioned, especially Victoza, Saxenda, none of the Indian generics have settled, whereas we have seen so many MNC companies have already settled [ Victoza ] possibly forming the market later this year. Just trying to assess how competitive this will be in FY '26 and whether it will be meaningfully different depending upon what device every generic brings?
So we think that it could potentially be very competitive based on the number of companies that have filed. But just looking at how long it is taking companies to get approval, there might be a very different kind of approval scenario in the marketplace that should help make it a pretty attractive opportunity. So hard to predict really who's going to get approved when, but in the next couple of years, certainly, we should see a few competitors in the marketplace.
And last one, I mean, Dulera, Organon is still expecting a generic this year. Any thoughts on your CRL update?
So we are still working on our response to the FDA. Our team has met with the FDA recently had a pretty good clarity on what it would take to respond to the agency, and we expect to respond this fiscal year. So we don't expect to launch in the next 12 months.
Can we have the next question from Harsh Bhatia?
Just 2 quick questions. One is from the Nagpur Unit-2, I think, so glucagon is launched from that plant from the next 12 months perspective, which of the products do you think can come from that particular plant?
Sorry, I didn't catch the name of the product you mentioned.
Glucagon.
Do you mean an injectable plant because I still can't hear the product...
We haven't launched glucagon. We have launched ganirelix.
So I think there's 5 or 6 launches that we would expect from the Nagpur plant, 5, 6 filings as well. It's still in ramp-up mode really, there's only 1 or 2 product, one for U.S., one for elsewhere that we sell from that plant right now. But this is a world-class plant. So I think from that perspective, 5, 6 filings and 5, 6 launches is what you would expect in a steady state going forward.
This will be for a period of next 2- to 3-year period, right?
If at all, we should accelerate.
Okay. Okay. And when was last inspection for the plant? The Unit-2..
We were inspected...
12 months ago.
Yes, that was the oral solid. About 12 months ago.
Unit-2 as well, the injectable plant?
Injectable plant is what they're talking about.
Okay. And could you comment anything on ELLIPTA. I think so last time we had spoken about a few quarters back that we were looking at firing the product?
Yes, we're still working on it, making good progress on the platform as well as the 2 key products and hope that end of this fiscal '25, we're able to report material progress.
The next question is from Damayanti Kerai.
Just wanted to understand your big margin improvement trajectory better. So Ramesh mentioned it's a combination of multiple factors. But if you can help us understand, say, how much is broadly contributed by process efficiencies, which you have brought over the last few years? And what could be broader contribution coming from new launches, et cetera, and leaving apart the inventory gain, which you have seen during the fourth quarter. So very broadly, you can also help us understand which are the physical pockets of improvement, which is there for you? Because last quarter, I guess, you talked about your expiration margins of around 22.5% to 23% for next few years. So any commentary on that would be helpful.
Actually, you're asking for too many questions in the same breath but I will try to explain what I would. Firstly, on the buoyancy actually contribute -- so for example, the Spiriva launch itself brought in about 4 to 5 percentage points, so to speak, the gross margins and the like. But of course, we're working on a lot of other initiatives, which actually helped out on the gross margins essentially in terms of routes to synthesis, [ ANDA ] program with vendors and the like. That contributed about -- and over the last 3, 4 years, I would say about INR 400-odd crores.
Though of course, a part of this is eroded by potentially price erosion and the like. The second part, of course, is we kind of identified a lot of things that we talk for inefficiencies in the system, which is included, for example, failures to supply. We have issues in terms of everything, we had issues in terms of inventory write-offs and of course of other things.
And so we work on that as well. And that, a part from course, what we worked on below the gross margin line, which included the workforce rationalization teams across factories, R&D and the like. So all of this put together idle time, footprint reduction in some ways, all of this contributed, I would say another about INR 400 crores to INR 500 crores.
And this has brought us to the levels that we already are, it's around the 20/30 and a half percentage points. We've also identified new strategies for some of these adjacencies and businesses that you would like to spin off on -- or spin and so they can rotate on their own axis, which is including verticals like potentially the API CDMO and at some point in time like the biosimilars and the like. If all of this is actually done, surely, we would be to -- something to be around the 23, 24 percentage points in line with the peers, so to speak.
Okay. So from this exit margin rate of 20% plus, there is good headroom to go up to, say, 23%, if all these things work out for you?
Which we think will happen in the next 2 or 3 years for sure.
Okay. So '25, you guided for 20% plus margin. And then this 20% plus margin can move up to say, 23% in another 2 years or so. Is that a trajectory we are broadly looking at?
That's a very good understanding of the situation.
Okay. And my next question is on a few of the peptide products, I guess, which we earlier discussed. So anything, I guess, which should be meaningful from Lupin's perspective in the next 2 years? So you mentioned liraglutide I guess, is the nearest opportunity in this space.
That's right. Our first peptide launch was ganirelix and liraglutide will be a material opportunity over the next few years.
So from your filing perspective, it's -- like what is the remaining steps? Like you've done with the process, it's reviewed by the FDA and final approval, which is to come or there are some pending steps which you need to complete before these products come in market?
So we have filed a while ago and expect that we should get approved hopefully soon. And based on the patent settlements and outcome, we'll plan to launch.
Sure. And my last question is...
Damayanti, I'm sorry, we'll have to request you to get back on the line, please, there are many callers.
We will take Alankar Garude next.
First question regarding the INR 200 crore impairment charge, how many NDAs have you discontinued in this quarter? And what were the reasons for the same?
So some of these were -- actually all the NDAs essentially part of it and a lot of this resided in America. And 3 of those actually reside [indiscernible] in India, something which actually came out of Anglo-French acquisition that we did in India a couple of years ago. So we -- essentially because of supply and ruling the Indian authorities, we discontinued a couple of products. So those are the things that we wrote off and of curse the products that you're not selling in America. Apart from that, we also took our accelerated write-off and come to a few assets, which we are not putting to use.
Understood, sir. And second question, would it be fair to assume that the impact of competition in Suprep will be seen more in the first quarter and there was not much of an impact in the fourth quarter?
Yes, it's been a very good, very stable product so far.
Maybe we'll take 5 more minutes.
So we'll have the next question from Nitin Agarwal.
Vinita, just on Mirabegron. What -- assuming the [ TRO ] gets lifted, what sort of exclusivity period are we looking at the current of affairs for the product or before fresh competition comes in?
So it's hard to predict, but we think that it should be 2 or 3 players in the near term in the next 12 months.
Okay. But we do stand to get in the current 2-player market situation last another 5 to 6 months?
I think so.
Okay. And secondly, beyond this, for the rest of the year, which are other meaningful launches that you can look forward to here?
So doxycycline, Oracea has been a good launch for us. Mirabegron, of course, the large one. Slynd, another P4 that August is going to be whole -- going to read on our litigation as well as product approval. And then we have multiple ophthalmic products, including some interesting ones like prednisolone is a nice one. We have a couple of products where we have settlement dates within the year, but unfortunately, cannot share. I mean we have 2,3 products like that. And we have a nasal spray product and some injectables. We have a couple of injectable products as well.
That's helpful. And lastly, any color on -- we've got some meaningful size of emerging markets now. How these markets -- some of these key markets progressed over the last couple of years? And where are they on the profitably front, some of these bigger markets for us?
Yes. So when I look at the other emerging markets, in Latin America, Mexico, Brazil as well as Philippines and South Africa. And we've done extremely well in Philippines that has really been a very stable high-growth business for us and highly profitable compared to the company double of EBITDA. South Africa business has been a really good scale, but had got under a lot of pressure with the currency issues there and the fact that majority of the portfolio is imported into the country. That has turned around in the last couple of quarters. And the business has started growing very nicely as well. So South Africa is in a pretty good position, both from a growth as well as an EBITDA standpoint.
In Latin America, both Mexico and Brazil. Mexico, actually we had a significant challenge last year with our facility being closed down for 10 months, which actually caused a lot of disruption in product supply. And that has [indiscernible], first we were back into the market with the ramp-up of our portfolio have seen really good resurgence there of our business. So we expect this going '25 to be really strong for us in Mexico. Brazil continues to be a bit of a challenge for us when we are looking to find ways and means of improving that business, but that continues to be a low-margin business for us.
Yes. The only thing that I'd add to this is essentially whilst we advertise the potential and the possibilities, there also a risk of ForEx, it generally sometimes eats into the gains that we made.
So I know that we are out of time, but we'll maybe take -- we see there is a number of folks with questions. So we'll take it 5 minutes more.
So we take the next question from Saion Mukherjee.
Just a quick one. Can you share, Vinita, the number of ANDAs filed in this fiscal year?
The U.S. ANDA was a small or less of a 6 products that were filed in the year.
And is there any reason the intensity of filing has come down this year?
So we have started focusing quite a bit on the complex products where you're going to see fewer filings, but more impactful filings.
I think this year was also a repurpose year. So we do see a ramp-up in the filings that will happen in FY '25 as just FY '24 went to kind of an all-time low.
There's some that slipped into also the first quarter -- this quarter right now.
Okay. So should we expect around 15-odd filings going forward? Is that -- or it will be higher?
11 to 15, I would say. Because, again, our focus is on more complex filings than a number of filings.
We have Amey Chalke, please.
Yes. The first question was on the spending considering that our visibility on the product launches is quite good for the U.S. We will be having a good question on the margin front. So are we going to up the spending on the marketing and R&D? Or you will keep the cap on the R&D marketing spend going ahead? How would be the thinking on the spending side?
We would obviously keep an eye on all the lines, but we do recognize the potential to increase R&D a bit and that's what we've done for the next year, at least. But for sure, there will be a tight leash on all kind of cost.
Sure. Second question, if we can give clarity on the Respimat and AmBisome, we were supposed to file in FY '25, are we not going?
So Respimat is progressing pretty well, and we should make significant progress this year, hopefully file at the end of this fiscal year. It is very much dependent on supply of the devices that we manufacture outside, we don't do it in-house, but it's progressing extremely well. AmBisome, actually, we got out of the transaction and we took a charge earlier this fiscal year '24. We were not seeing the product progress from a development perspective and with a partner, we decided to focus on Doxil that we expect to launch in fiscal 2025, but also saw additional competition in AmBisome, so decided to repurpose that investment into other products.
And just the last question. On the biosimilars, like product like pegfilgrastim where -- what were you thinking of a follow-on players who are coming now after market has been genericized so much. Is this curve for you, it will be a learning curve from this product? Or you would really want to see a substantial gain in the market share in these kind of products?
No. I think with a late entrant, we will certainly use it as a learning opportunity for us. I mean, we certainly should have a good cost position, but we want to gain profitable share. So I wouldn't say that it's a material share opportunity unless folks get out of the market. So it's really going to be more of a learning opportunity for us.
We'll take one last question from Tushar Manudhane.
Just taking this biosimilars also, the overall how much investment you would have done biosimilars till date? And how much of the R&D spend, say, for FY '25 would be towards biosimilars?
About -- in terms of infrastructure et cetera we've allocated between INR 400 crore to INR 500 crores is the figure. And in terms of R&D expenditure, we also have this policy of partnering with in fact passive financing company...
Certainly less than 10% R&D spend for FY '25.
I think also one thing that we did not mention is in our biosimilar strategy that we're also leveraging the capability for pipeline for India, which is a tremendous opportunity for us to build, especially in oncology and immunology products.
And just one last clarity on the U.S. sales, while there's a good pipeline in terms of accrued as well as launches for FY '25, still you have indicated that U.S. quarterly sales to sustain at $200 million. Is that you commented or I got it wrong?
Yes, that's what we said. Because we do expect some products to see pressure, like Suprep will see some pressure. While we continue to build on Tiotropium and other new product launches. So a combination of all of that, we said that, well, there is the $200-plus million. And hopefully, with some litigation wins like Mirabegron, we should be more than that.
And then certainly, going into fiscal year '26 where we have more exclusive -- large exclusive products like Tiotropium as well as our peptide injectables, we should be able to build it to a closer to $250 million per quarter level.
Well, thank you. So that was the last question. Hopefully, we were able to respond to all your questions. I'd just say that it's been a very, very strong year for us as an organization. The team is all charged up with what we have delivered. We feel like we're in a very good position. All of our major markets, India and the U.S., in particular, but also the other developed, the other emerging markets based on the market position as well as the portfolio position to really drive our business going forward to where we want to go. Certainly have, like Ramesh mentioned, that 2023, mid-20s EBITDA margin very much on our radar for the next few years, and we're going to continue to work to be able to get there while evolving our business.
So thank you again for all your support and questions, and we look forward to connecting with you next quarter.
Thank you very much, ma'am. On behalf of Lupin Limited, that concludes this session. Thank you for joining us, and you may now exit the webinar. Thank you.