Natco Pharma Ltd
NSE:NATCOPHARM
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Natco Pharma Ltd
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Ladies and gentlemen, good day, and welcome to the NATCO Pharma Limited Q2 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Prakash Agarwal from its Capital Limited. Thank you, and over to you, sir.
Yes. Thanks, moderator, and good morning to everybody. On behalf of Axis Capital, I welcome you all for the NATCO Pharma Q2 Fiscal 2021 Earnings Call. Today, we have senior management represented by Mr. Rajeev Nannapaneni, Vice Chairman and CEO; and Mr. Rajesh Chebiyam, Vice President, Investor Relations and Corporate Communications.Over to you, Rajesh. Thank you.
Thank you, Prakash, and good morning, everyone, and welcome to NATCO's conference call discussing our earnings results for the second quarter of FY '21, which ended September 30, 2020. Hope all of you are continuing to stay safe during these COVID times. So during this call, we may be making certain forward-looking statements, which are predictions, projections or statements about future events. Anything said on this call, which reflects our outlook for the future or which could be construed as forward-looking statement, must be reviewed in conjunction with the risks that the company faces. Like to state that the material of the call, except for the participant questions, is the property of NATCO and cannot be recorded or rebroadcast without NATCO's expressed written permission. We will begin the call with the results highlights, and then we follow it up with interactive Q&A session. Again, we hope you have received the financials and the press release that was sent out yesterday. These are also available on our website.So for the second quarter FY '21 ending September 30, the company recorded consolidated total revenue of INR 827.9 crores as against INR 518.9 crores for the same period last year. This is reflecting a 59.5% growth on the top line. The net profit for the period on a consolidated basis was INR 203.9 crores as against INR 117.7 crores same period last year, also showing a growth of roughly 73%. Segmental revenue is again in our press note. This one final statement, the Board of Director has recommended a second interim dividend of INR 3 per equity share for FY '21.
Thank you. Again, we'll take questions now.
[Operator Instructions] The first question is from the line of Ravi Dharamshi from Valuequest.
I just want to understand what is the reason for this big increase in other expenditure?
Okay. So we had 2, 3 events that have happened. One is we had a onetime employee increment what you call -- overall, I'm just giving you a general view of the expenditure. So we had a onetime employee increment because of Q1, because of COVID, we decided to defer the increments. So this time, we did a onetime charge on the increment and incentives. So that happened in Q2. And then we had some costs related to some litigations that we have expensed. I think these are 2 major reasons why -- and we had some cost related with setting up ramps of about 3, 4 products. At the same time, the cost came through. So that's why we had high other expense.
Okay. And the Canada Revlimid settlement, have you recognized all that was to come?
I can't answer that question, Ravi. I think we have already answered that question in the past. I think we have settled the product, as I said, and that's all I can say.
All I'm asking is, have you recognized everything? Or is there still some pending? I'm not asking the specific amount.
I don't -- we recognize revenue based on what we receive. I think everything is -- that's the accounting policy we have.
And any update on the...
[Technical Difficulty] We move to the next question from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Sir, I mean, if I look at the top line in this quarter is a very sharp increase. Just to understand, I mean, if you can give some color with respect to the quantum, which we had got from this Revlimid settlement. I mean would it be like $20 million, $30 million? I mean how should the core business be, if not for this?
I cannot answer that question, my friend. I'm bound by confidentiality agreement.
Sure. And with respect to the launch, I mean, is there any date with respect to Canada, which you can actually kind of give some clarity on whether it will be in FY '21 or FY '22? I mean not specifically asking which quarter or which date it should come through.
I'm sorry, my friend, I can't answer that question. These agreements are fairly strong there, and we are bound by confidentially not to disclose the date.
Sure. And sir, with respect to the earlier press release today with respect to this approval of Pomalyst. I mean this basically says that you have also settled the product. I mean can we get some more clarity on this, whether this is going to be a meaningful product? When can we expect this, et cetera?
Yes. Sure. I mean, as the press release said, we have -- we filed in the first wave, and I think we are one 1 of the first to file. I think there are multiple generics. So far, 2 generics have been approved, from what I've seen in the public domain. I think Eugia and [indiscernible] are the approvals. So it's a very good product. It's a nice REMS product. It's nearly $1 billion in sales. And we got full approval, which is good. And second thing is we also decided not to -- we have decided to settle the litigation. Again, they have decided what COVID -- the date of launch has been kept confidential and -- but we have settled the litigation as well.
Sure. And sir, the same questions with respect to how much -- if you can break the domestic business into primarily oncology, third-party and the hepatitis C, that should be pretty good for us?
I think I'm not doing outright split for competitive reason. But overall, I think the sale numbers of the domestic are reflected. But I'll just give you a flavor of what is actually going on. So basically, what has happened is, I think we are struggling for 2 reasons in the domestic. One is that the hepatitis C sale has dropped. So that has played an impact. The second is because of COVID, number of people who are going to the hospitals for oncology treatment has been problematic. So we are seeing about 70% to 75% of the sale potential being realized because of lower hospitalization in cancer treatment. As you're aware, a lot of patients are deferring treatment of cancer because of COVID fears. And as you know, cancer treatment could also lead to immunosuppression and there's certain concerns. It is -- and it's difficult, and I think that's the reason why our domestic revenue is a bit weak. But my sense is that it'll get better. I think once COVID settles down, I think we're able to see an improvement.
The next question is from the line of Sriraam Rathi from ICICI Securities.
Firstly, sir, on looking at the revenue increase and the EBITDA increase, it's being specifically -- they could be moved to the settlement income only in this quarter. So I mean, is it fair to assume that you would have also supplied for agro chemical initial supplies before launch? Or [indiscernible] ?
I think this quarter has a lot of agro chemical supply. So we fortunately won some very good tenders. So basically, in pandemic, what has happened is a lot of governments have stopped product. There are a lot of government supplies were done. And a lot of private market supplies were done. For example, we launched Tamiflu for the first time in Brazil. We're the first just break in Brazil. So that has been very good. We have had a good order from there. And the -- for that reason, sub has done well. And we had very good government orders from Canada as well. So that we are supplying as we speak. So that has done well. And in the U.S. also, we have stopped the material with our partner. And so basically, what we had -- I know the way we do the accounting is we build the stock to our partner Alvogen. And once they actually sell the product, the profit share is recognized. So I think if all goes well and the tender supplies go on time and everything goes well, assuming all goes well, then we'll able to recognize the profit share, which the benefit of that, you'll probably see in this Q3 and the Q4. So I mean, if you look at even our balance sheet in the past, generally, Q1, Q2 tends to have lower margin because there's a lot of stocking that we do. And Q3, Q4 is when the actual revenue gets realized.
Right. Okay. Yes, that's helpful, sir. That's helpful. And just one more question on the agro chemical, I mean this quarter in the segmental business we see INR 1 million was traded for agro chemical. So does that mean that we have launched any specific product in the market, and how shouldwe look at that?
What we have done, Sri, What we have done is, I think, we have launched a portfolio of products, which are all me too. Again, I'm not going to comment and say that these are blockbuster drugs, but -- products. So we have launched them. And so that what we can do is we have a field force, and they're promoting these products. And they've started off with some modest sales. And as for the accounting side, we have started showing this as a segment [indiscernible]. But this is not -- this helps us get going. But again, the pipeline -- we have one product that we already disclosed, which are awaiting approval. And once all the hurdles are cleared. So that's the big one that we're expecting now. And there are a couple of other blockbuster ideas as well, which we have not articulated in public domain, but we also have. So I'm excited about the vision. I think if all goes well. I think once we get clarity on the regularity and other issues, I think we can probably give us some upside. But what we have done essentially is start the setup and start the marketing.
The next question is from the line of Ashish Thavkar from Motilal Oswal Asset Management.
So again, on the actual part of the business, while we are waiting for the approval to come in for the products, is it possible that we can leverage our distribution network, and we can start selling products of other companies with a profit share model?
Which segment you're talking about? Agro, you are talking about?
Yes, agro, yes.
Agro, I think the model now, my friend, is just we get -- we got started with a basic setup. I think we have the reps and we're covering, and we're trying to get an all-India coverage. So by end of this year, we should have enough reps to launch in all the major agro states in the country, starting from scratch. Selling other people's product, they're all different opportunities we're looking at. See but my strategy always has been trying to launch something unique. I don't like to do, me too. I don't like to do something where I believe that a lot of people are there. There's never an emphasis of strategy. So we're looking for something interesting. We have tied up with couple of companies on some interesting ideas. We'll speak about it, I think, as time goes along, but we have spoken about our pipeline. And the major one I've already spoken about in the past. So that we're awaiting approval. So I think that's where we are.
Okay. And the one big approval that we are waiting for, what's the hurdle now between the launch and approval? Is it the court case?
We have a pending litigation and also the final -- I believe, we are in the final stage of approval. I think we cleared all the hurdles. We'll see how it goes. But again, these things are slightly unpredictable. But I'm hoping we'll -- best case scenario, I think we'll probably -- hopefully, we'll hear about the approval in this quarter. I think that's our expectation. But again, it depends on if there are further queries from the regulators. But things are going well. And as you know, we filed it last year. So I think it's about time we should get it, I think. So about nearly over -- a little over a year, a year-and-a-half since we've applied.
The next question is from the line of Kunal Mehta from Vallum Capital.
I have 2 questions. First, regarding the India business. So we've been hearing some a lot of possible change and a lot of even small entities, I mean, say, tier 2 entities and smaller size entities are that the onco business has recovered for them. And so could help me understand, I mean, that since we have still been cautious in guiding for how the onco business will shape up in the future. So what is the disconnect here? I mean is there some sort of other procedures, which have recovered and the core chemotherapy business, which is roughly 1/3 of all the major onco businesses or hospital businesses? Is that yet to recover? Or is -- could you please help me understand?
I think, again, different people have different portfolios, so I can't judge what other people are doing. But I can really speak about myself. So we are the largest players in this business. And I think what I've seen is, I think, oral business has held up. But I think the chemo business has not done very well. And we are probably at 70% or 75% of the original sale now. So the sale has been very -- see you should understand, the sale of the onco product happens in the big metros. And if you look at -- if you see, most of the sale happens in Delhi, Mumbai, Chennai, Hyderabad and Bangalore. If you take these 5 cities, that represents majority of your sale. And if COVID comes and affects other segments of the hospital, then it has an indirect impact because the patients here are immunocompromised. So the high amount of reluctance. They're okay with taking oral, but there's a lot of reluctance to take chemo. At least this is our experience. I don't know the other people's experience, I know -- obviously, they can speak for themselves, but at least this is our experience. It's not come back to the same level. Actually, that's my personal experience. And I think in pharma, if you see like if you look at antibiotics, if you look at pulmonology business because of the lack of interaction with people going out, there -- certainly, there's been an impact in deceleration in sales. So certain segments have certainly been affected. Except for my -- this is my -- just to conclude the thought, except for cardio and diabetology, which has done extremely well, I think other sectors -- segments have seen different level of decline.
Understood. So is it safe to say that we have not lost any major market share as such. I mean I'm not sure how do you track the market share because the data is not available, so you've not lost any market share on the onco site. If that is safe to assume?
Yes. That is safe to assume. I don't think we've lost much market share. And I think -- but the only issue -- the hospital -- hospitalization rate has not been as strong as pre-COVID. I think this is our experience, okay?
Sure. Sure. Just -- and one last question on my side. So when I compare your numbers for the same quarter last year, and I see that, I mean, the export revenues have shaped up pretty well. And of course, there's that element of segment income of revenue we can't -- haven't recognized. But when I see the corresponding jump in profit, I mean -- I'm sure you -- just to take a normalized -- assume a normalized figure for Revlimid Canada. It's still -- I mean, the jump in profits would have been far better than given this sort of top line numbers. So is it the reason that since we have just booked the manufacturing margin for Tamiflu and the profit share would come later that, that is the reason that the profit numbers are a bit lower than what they could have been?
Yes, that is one reason. And then we had a lot of onetime costs attached to them. See, if you want to set up a REMS in the U.S. -- I mean, to give you an example, see if you want to set up a REMS product for a particular generic cost, it is $3 million to $4 million. And so when you are closer to approval and you're trying to launch a product in any particular market. And see, we decided to do specialties. When you do specialties, you have to spend on REMS. You want to spend on REMS, then you got to do the upfront cost of $2 million, $3 million setting of brands. And the way we do our accounting, I don't capitalize these expenditures. I expense them on the spot. So that's the reason why you have these onetimes. And these -- a lot of these onetimes happened this quarter. But it is what it is, right? So if you want -- see when you want to do a specialized product, which requires specialized marketing, you need to spend that extra money. So it's the big nature of the ways our portfolio is. And I know it's little -- the other expense has, gentleman, I don't recollect the person who asked that question, but the other or expense column as is very high. But these are all -- a lot of it is, a lot of it is onetime. I think when it normalizes, then the base profitability that you see, reduction that you see in this quarter will be normalized, yes?
The next question is from the line of [ Subrata Sarkar from Mountain Intra Finance ].
Sir, just a small like question. Like in the last -- Q1 con call press release, we have guided for 20% to 25% PAT growth. So -- but this -- in Q2 press release, there is no repetition of that. So -- have we changed that? Do you have anything to add on that, sir?
No, no. I think as of now, if things go well, I mean, obviously, whe make positive statement, we make certain assumptions. As of now, if you ask me a straight question. I feel -- I think we should be able to meet that -- I think 20% to 25% reasonable. And I think if you look at the first half of the numbers, I think we're almost there. I think we already achieved, I think, nearly more than INR 300 crores, INR 320 crores of profit. So I think we should do well. I think I'm not -- this is all subject to, of course, how the next 2 quarters go. And I think the time to tenders also the deliveries also would be one major factor. But putting that as a major factor, yes, I think we should be okay. I think we should be able to deliver the number.
Okay. But sir, isn't that given this H1 result, sir, is there greater possibility that we actually surplus that target, sir, like guidance that?
See, I think we have done well. And I think -- see, we are -- this is our expectation. So basically, I make certain assumptions on it. So I think this is our expectation. I think that's all I can say.
The next question is from the line of [ Shanti Patel from Shanti Patel Investment Advisors ].
Yes. Sir, I wanted to know what will be our revenue for the year ended 31st March, approximately, and as on 31st March next year, if you can give some light on that?
I think you're saying March '21, you're saying, financial year earning, '21 March?
Yes. First, March '21 and after March '22.
Okay. Got it. So let me speak about things that are relatively sooner. I think March '21, our expectation is that we should do about 2,400, a 20% growth is what our expectation is on the top line and on the profit. '22 and all, we'll talk about it, I think, once '21 ends. And I think the big factor in '22 will be the Revlimid approval and launch. Because that is plated in '22. So I think once we are -- once I get the approval, which I'm hoping to get in December. And I think we have more clarity. I think we'll speak about it, I think, closer to early next year. I think that will be a more appropriate time to talk because I'll have more clarity on other things that are also happening in our agro business as well. So I think I feel comfortable talking about '22 later, right?
Okay. What about our debts -- loans, loan? What will be the -- Can you give some guide...
I'll answer that question. I think I can speak about what we have as of today. As of September 30, 2020, our total cash and cash equivalents, including bonds, fixed deposits, bank deposits, everything together, shares, liquid shares is about INR 1,065 crores is the cash and the cash equivalents in the books, okay? And the total debt that we have is about INR 431 crores, of which actual borrowing is about INR 105 crores is short-term working capital borrowing. INR 322 crores, we did foreign well discounting, where we have sold a receivable or export receivable, which is of our -- our export receivable. So that's -- and that's where we are.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
So this other expense you said is because of some REMS set up in U.S. So -- but I thought partners, we sell-through partners and partners would be incurring that cost. So can you just explain that part again?
I think some REMS, like the earlier REMS, we had 2 partners, but the newer REMS we are sharing. We have about 5 REMS products that we are doing. And I think we publicly disclosed lenalidomide, not Lenalidomide sorry. Lenalidomide in Canada. We are doing pomalidomide in Canada. We're doing pomalidomide in the U.S. We're doing Bosentan in the U.S. Just giving a flavor of what we're doing. So in these newer deals, we are putting up most of it because they're getting a higher profit share in the newer transactions. So we are putting up most of the cost or major portion of the cost.
So which is a new REMS product launch in the U.S.? Or this is an anticipation of Revlimid?
I only gave you a flavor of dollar REMS products. So we have different expenditures for setting up different REMS for different products in different territories.
Okay. And one other question is on [indiscernible]. So what is the total capital deployed as of now? And how many marketing employees you have in that division as of now?
As if -- I think Rajesh will answer that question.I think total CapEx spend so far this year is about INR 31 crores. Overall, I think we spent about INR 140 crore...
INR 140 crores is roughly the CapEx spend for that.
And in terms of employees...
Mix asset, it shows INR 175 crore. That will be a fair representation, right, segment...
You get me so precisely, I can't -- well, you're more precise. I am giving you a ballpark number, yes. [indiscernible] So I'll go with what you said. I don't have the numbers on hand, yes, it sounds about right, yes.
Okay. And in the marketing division, how many people you have in there as of now?
Yes. On the marketing, what we've done is broadly, we are hiring people. And I think totally, we are expecting to hire about 80 to 100 people to our launch portfolio of products.
But that cost is yet to hit the P&L? Or is it already in the P&L?
It's already hitting the P&L. I think already we've hired about 50, 60 people. That's already being expensed in the balance sheet.
The next question is from the line of Nikhil Mathur from AMBIT Capital.
So my question was on the domestic oncology piece. If I remember correctly, till about first quarter, there was some bit of pricing pressure that was in place in the oncology. And this pricing pressure had kind of emanated from the regulations on trade margins that had been implemented somewhere towards the end of FY '19. So is there an element of further pricing declines that is being witnessed still in this particular space?
I think we spoke about this in the past. I think, again, the stake of reiteration, I think the 2 challenges we are facing, COVID and the pricing pressure to price control. That I think is an issue that we faced last year. I think that issue has settled now. And now the issue that we're facing is COVID. And that's probably -- these are the 2 big reasons why we've seen a lack of growth in our domestic business that's been affecting us.
Okay. Okay. And secondly, on the API business. So first quarter was good, and I -- please correct me If I'm wrong, there would have been somewhat of chloroquine contribution in first quarter in the API sales. Second quarter, again, the number is quite good on a sequential basis, you have been able to grow our API sales as well. So can you give some color, is it a new base we're working with? Or there some element of softening...
No, it's not a new base, my friend. I think most of the API sales about, I would say, I don't recollect the number. Now you hold me to a number I don't recollect, but I think a good portion of the growth has come from the Tamiflu stocking quantity. And these are all onetime orders based on how we're getting your tenders and all. So will it play out sequentially? The answer is no. But will it affect profitability? The answer is no. Because the margins are relatively lower on this.
The next question is from the line of Kunal Khanderia from Edelweiss.
So Rajeev, how has the pricing been on Tami for tenders this time versus last year?
I think different countries are different. I think it's reasonable, but it's not -- I would -- that's a very tricky question. I just add it as what it used to be in the past. The answer is no. But it's reasonable, thing on volume we might make money.
Okay. And then secondly, You briefly mentioned this, but since you have a date confirmed launch for Revlimid in March 22, so would you be sort of only booking cost-plus in that quarter and then profit will be coming the next year?
I don't know, my friend. I think when we're closer to that launch, I'll answer that question. It all depends on how they were -- and how will they give the profit share? I don't want to answer that question now. I think we'll answer the question closer to that date.
Fair enough. And just one more sense [indiscernible]. I think the stand-alone gross margin has come down a fair bit. So is it fair to assume because of your business mix and your higher API and lower domestic as well as the fact that you sent a lot of Tami for this time. So that's premium or gross margin was lower at end.
Yes. And the REMS scotch, all are playing role.
Okay. But REMS scotch, would that impact gross margin?
It will impact the other expenses.
Okay. So the gross margin then should now turn back to the historical levels, right in the coming quarters or...
I think a lot of the onetime costs we have already done. So I think it should come back.
The next question is from the line of Sharan Pillay from Allegro Capital.
I joined the call a little late. So if you could just reiterate what contributed to our significant growth in the quarter?
Can you say it again, my friend. I didn't catch your question. What contributed to what, I'm sorry?
The growth that we faced in the quarter, could you just reiterate what contributed to that?
What contributed to growth in earnings? I think it's there in the public domain. It's already available. Look at the press release. It's already there. It's written all -- it's already there in the public domain.
I haven't -- okay. Can I ask...
Go ahead, go ahead, sir. You want to ask something else go ahead.
Yes. We just put out a press release saying that we got approval for generic Pomalyst. I just wanted to know if there are any timelines in terms of whether we've launched it yet, or when we plan to launch at? What the opportunity is. Just some general information.
I mean I already answered the question, but I'll just repeat it one more time. See the total sale is about a little less than $1 billion. And there are 2 full approvals. I think ours and other [indiscernible]. And so we have a possible first-to-file on it. And so what the press release conveyed was the fact that we got a final approval, which is great. And we also conveyed the fact that we have settled the litigation with the innovator. And -- so we will not disclose the date because the settlement agreement was very particular that we don't talk about the date.
The next question is from the line of Anand Shah Raj Trading.
Congrats on on good chart of numbers. My question just got answered. I also had question on the approval thing, which you have filed. I think just you answered that. So that's it from me.
The next question is from the line of Abdul Puranwala from Anand Rathi.
Sir, my first question is related to the litigation when was the Indian market related to apixaban and ticagrelor. So can you provide any update on this product?
Apixaban, my friend?
Yes, sir.
Apixaban is selling, doing well.
Okay. And sir, any details on the kind of market share, which we were guiding on this product?
I think we're doing well. I -- top of my head, I don't recollect the market share numbers. I think it's us and Pfizer are the only brands in the market. And I think value wise, we're doing reasonably well. I -- top of my mind, I don't recollect, but I can tell you we're doing well. That's all I can say.
Sure, sir. And my second question is related to the agro chem product. It's probably expecting an approval in the near term. So any guidelines you will provide in terms of how the scale-up can happen in this product? Or any other cost involved -- on the agro chem side, where we just mentioned on the call that we are confident of getting this approval in this quarter. Any color on that in terms of the top line or the related experience?
It's a good product, that's all I can say. It's a very good product. I think I understand the sales are at about INR 2,000 crores and that we return to indigenous production of the product. So I'm expecting something good. But again, we are a new player in this business. So I don't want to make any estimations at this time. But all I can say it's a very interesting opportunity. I think once we are closer to the launch, I think we can speak about it. There are a few more hurdles to pass. I think once we are -- once everything is settled, I think we'll speak about it.
The next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.
Rajeev, my first question, actually in the call said that they expect hospitalization rates to go back to 95% of pre-COVID in this quarter. Would there be a similar uptick for the onco part of domestic business?
I hope so. I think if that were to happen this quarter, I think we should be able to see that. But see, expectation is one thing, when it actually happens it's another thing, no? So I -- with COVID and all, I don't want to make any estimations on anything. So I think we are -- I said this many times in the call, I think every month is a new learning. And -- so I want to be cautious about making any estimation about things coming back to normal. Because now there's a lot of strong second wave happening all over the world. Now it has also started, especially in Delhi and all, you're seeing a very strong second wave of COVID. So I don't want to...
But Rajeev, is October better than September, just from a trend perspective?
Honestly, I don't understand this trend at all. I mean you'll have one month, it will be very good, and then you'll have one month, which is very bad. And then you have one month, which is very average. It's a very yoyo kind of trend. You can't make a trend analysis on the last 5, 6 months. I'm unable to make. Honestly, I'm being very honest with you, I am unable able to make any estimates.
No, no, we appreciate it. And secondly, Rajeev, any -- how do you think about [indiscernible]? And is onco a possibility? Have you had any conversations?
You're saying what do I think of [indiscernible] you're saying, right, the price control?
Yes. Is there a possibility of onco coming there...
It's already there. I think that it's already -- a lot of the onco drugs that we are selling were in [indiscernible]. It got -- a lots of notifications happened last year -- in the last financial year, not this financial year. So the impact of that played out in the last financial year.
So in the next term, you don't -- I mean a point...
Whatever decrease that we saw in the sales and all is already factored in. It's already normalized.
Right. And just lastly, from the ag chem business, Rajeev, is the entire sales setup there already now in the P&L cost?
It is already -- the plant, I think, is still not capital. It's still not -- it's been what I call the plant production has not started. So the moment the first -- the commercial lot is ready for production and we'll start expensing it. General expenditures are expensed off like the running costs, like, for example, employees and all that is already in the balance sheet expense. But I think we're not -- the capital cost is still -- I think we -- until the project is completed, it continues to be capitalized. I think my understanding is, let's say, next, say, 2, 3 months, we get -- we get the manufacturing licenses. We are awaiting all the manufacturing licenses, then we'll start expensing the operational costs. So far, the capital expenditure related is still being capitalized.
The next question is from the line of Kartik Mehta from Klay Securities.
Just wanted to understand, this will not be a typical Tamiflu season there. So how do you see the response now? And usually, it is from end of November till probably end of or mid-Feb is when sales are at its speak, so in terms of early trends, and this is in particular only to the U.S. market, how do you see this? And would you throw some color on competition or in terms of expected market share, similar lines as past years?
Honestly, I'm not very excited. I believe that the retail opportunity is not so strong. I think we're relatively were doing better in Brazil and Canada compared to U.S. I think if there any tenders, the government tenders where you have fixed price on a large quantity that they're buying, then there's something interesting, which is what we're waiting on. I'm not very excited about retail, Kartik. I think there are already enough approvals, and I think it's fairly competitive. I'm not very excited. And I think there's a lot of behavior change in the -- among people, people used to go around freely and pick up small colds and viruses, but now I think that behavior is changing. A lot of sanitization, a lot of masks. So I would go out and say that we wouldn't -- that not be that many people will get sick. Again, I'm not -- I don't have a crystal ball, I don't know, but I will urge cautiously and say that the potential is not so good in retail. I mean that's a feeling I have. But again I have time to be corrected with that.
Yes, which is fairly understood and appreciated from a company's perspective and from an individual's perspective, that should -- what be the likely outcome if people remain indoors. But then the agencies there would want to have a stockpile, and they would not want to face a situation where there was virtually a shortage of products to...
I think that's what we're seeing. We are seeing a lot of proactiveness among certain governments to stop products, which they have not stopped in the past, more aggressively. But having said that, retail business is different from government stopping [indiscernible] different pools. Retail is completely driven by disease. Somebody is sick, they'll go to a shop and pick it up. Okay?
Yes. I just have one more if you...
Go ahead.
Yes, yes, yes. In this case, where you see oncology sales is what completely driven on COVID, et cetera. But are you seeing are you seeing any inventory, which is there in the system? I mean are you seeing competitors in this business being aggressive on the prices, especially this has been with regards to maybe hospitals?
Could you rephrase that question, Kartik, I...
Yes. Are you seeing aggressive competitive behavior by competitors in the oncology business in India?
Yes and no. I mean, obviously, there's always aggressive competition in India. But relatively, it doesn't decline like the U.S. because there's an element of brandedness in this business, right, because you're having a brand. So the declines are not as sharp as, let's say, a generic business like in the U.S.. But that's always there, no? I think that challenge you always have in this business. But relatively, qualitatively, I think India is a much better business when you see declines because the branded generic nature of the business, the declines are not as sharp.
The next question is from the line of [ Kashyap Kartik from Blue Tree Capital ].
Rajeev, 2, 3 questions. One, profit shares from the settlement. Have we completely recognized Revlimid Canada? Have we completely recognized this quarter or some more years to come?
I'm not going to answer anything about the settlement, my friend. I mean the agreement is very clear that I should not talk about it. So I will not answer that question.
Okay. And not even about the launch date?
I'm sorry, my friend. I can't answer that question. I know I'm trying -- it's not like I'm trying to avoid your question, but I'm bound by the confidentiality. I cannot answer that question.
Sure, sure. Second question, is Lotus Pharma has got a tentative FDA approval on Revlimid. I mean they filed much, much later than us and have still got tentative approvals. So I mean, have we got some indications from FDA now at least saying, your thing is on the way?
Yes. I think they have got approval before us, that's absolutely correct. And we had issues in our files, so which we had to correct, which obviously took us time. But well -- we think we have addressed all the questions, and we have a tad date in December. So I'm hopeful that we get the approval. Us getting a late approval in fact doesn't impact our -- financially doesn't have an impact because we have a contractual launch date, which is already there. So there's no impact on us financially. But having said that, yes, I'm hoping we'll get the approval. I think we've answered all the queries. And it's also a good sign that somebody else already got an approval, which means that the REMS and everything is set. So I think I'm actually, in a way, more positive that I think it should happen this time.
Got it. Got it. Third question, Rajeev, sorry. Congratulations on the pomalidomide approval. The patent expires 2024 in U.S., Rajeev. So is it a reasonable estimate that we see a launch in FY '22?
I can't answer that question, my friend. I can't answer that question. I'm sorry. It's gone with confidentiality. The only 2 things I can say about that is we got our final approval, and that we settle the litigation with a confidential launch date.
Got it. And that U.S. FDA approval is done for that?
Yes, it's there. It's there on the website also. The final approval is there. I think our -- the handers -- designers on our partners' name. So it's listed as [indiscernible].
Sure. So then, Rajeev, I'll ask a very broader question. I mean we have like 3, 4 molecules, right, Bosentan, Nexavar, Everolimus, lapatinib, pomalidomide, can we at least expect -- I mean -- don't tell us the data, but can we at least expect the launch of these 4 molecules for FY '22 or FY '23? I mean in the next 2 years, at least just from our visibility perspective, don't tell us the year or the date. But just tell us if it's going to launch in next 2 years?
I can't answer. See, what I can tell you, I mean, as you rightly said, these are all exclusivities that we have, as you rightly said, Nexavar, we have sole FTF. carfilzomib, we also have a settlement where we are exclusively on 1 strength where is sole FTF and other 2 strengths we have shared FTF. And other biggest [indiscernible] we have shared FTF. And then we have pomalidomide, then we have -- lapatinib, we are sole generic. We've launched this on last week of September. So we have all these smaller products and some big products. In terms of launch date, I think people tend to be -- sometimes people tend to be open with their agreements. For example, lenalidomide, we actually are able to come out and say we're launching in this particular date. But sometimes, in certain agreements, they're very particular that we should not say the date. And a lot of the newer agreements that we're doing, innovators are insisting that we should not come out and say the date. And that's the nature of the business, and that's the nature of the confidentiality. I know it's frustrating, but it is what it is. I can't help you there. I think we can only say that that they'll happen. That's all we can say.
The next question is from the line of Nikhil Mathur from AMBIT Capital.
My question was on Copaxone. So what gets in also reading is that a competing oral drug in this therapeutic area of, [indiscernible], a lot of approvals have been given certain launch that have happened -- the launches are happening after it as well. Does this have a bearing on Copaxone's volumes and pricing? The reason I ask is that [indiscernible] is a oral solid, it targets multiple sclerosis and possibly, the patient sometimes can be better in this clinical product and with compression coming in, the prices might go down. So have you seen -- have you take out any indications if this is eating into Copaxone shares from them?
I have not seen much reduction in demand. I can't answer that question because I'm not aware of an impact as yet. I don't have an answer to that question. But so far, the volumes have been fairly stable. I think we're doing well with the market share. And we are -- I think I would like to say that we're doing well. So as of now, I can't answer that question. I have not -- I think that's the best way I can say that.
Okay. And second question. I mean NATCO has a strategy and had been following this strategy over the years of doing limited competition products, first to files, entering into settlements with the innovators and all. But there has been also, over the last 2, 3 years, growing activism in the U.S. on pricing. I mean whether, be it explicit price rigging allegations or even on the settlements, there have been allegations that generic companies, along with innovators, haven't been fair in terms of what prices have been [indiscernible] as we launch that. Do you believe that given the so much activism around pricing, your estimates on pricing of certain limited composite products that you would be launching, what estimates you were having 3, 4 years back, that might have come down a bit?
Not really, no. I don't think so. I think estimations and all are -- it depends on how you want to estimate. If you are estimating conservatively, then I don't think you have a problem. If you estimate a little more aggressively on the erosion, meaning that you dig in. I mean to be honest, I'm a fairly conservative person. I think my estimates that I make for my earnings are fairly conservative. And I think we always try to do more than what our own estimators. And the political environment and all, I mean, I can't really answer that question. But to answer your question, I'm not -- I have very conservative estimation. So I'm not -- I'm always positively surprised, not negative surprised.
Okay. So that's why the company isn't really worried about so much of activism around pricing, be it on settlements as well?
I mean -- see, again, we believe -- I think a lot of settlements that we have entered are subjected to scrutiny by FTC. And I think we are fairly -- I think from what I understand, a lot of these agreements are shared with FTC. So I think they are all -- and I think they're all vetted by the lawyers, and I think -- we think they're reasonably done. So I think that's all I can say.
Thank the next question is from the line of Kunal Mehta from Vallum Capital.
Could you just -- could you just give the status on the litigation of CCP, the status at it stands as of today?
Your question is, what is the status of the -- does it...
Yes. Agro chemical.
It's pending in Delhi High Court. It's actually getting [indiscernible] -- it's under our argument.
Okay. And Rajeev, can you at least give me the names you mentioned for the products to the previous caller regarding REMS for which we have done in different markets, U.S., Canada?
You mean the REMS product you're saying or generally products?
Yes, the products for which we have executed the REMS and product cost practicing. I think I've just answered a general question. I think 1 was -- I think we have -- I said I have multiple REMS products. I think 1 product -- lenalidomide was 1 REMS product. And then I said pomalidomide U.S. was 1 REMS product, lenalidomide in Canada is another REMS product, pomalidomide in Canada is another REMS product. And then I said Bosentan is another REMS product, which we have -- and which is the -- and we have a first to file on a new formulation of Bosentan.
The next question is from the line of Rohit Balakrishnan from VRDDHI Capital.
Just 2 questions. So on this Canada settlement. So is there a launch? I don't want to date anything, which you are sorry to answer, if that is just a onetime settlement or there is going to be secured launch also?
I cannot answer that question, my friend. I think we have already said that in the earlier comment that people have asked. We have settled the product, and we have a launch date secured to the agreement. That's all I can say.
Okay. Got it. And in terms of Nexavar specifically, so I saw that your ANDA has -- and it shows discontinued. I mean something -- has something changed, just want to be -- should we be worried about our pending launch? Just wanted to understand that. Whatever you can share?
What is your question? I didn't understand the question. Could you just phrase that question again, please?
So what I saw, I mean, was that -- I think your ANDA for Nexavar discontinued. So just want to understand that has that -- I mean, has [indiscernible] sold the ANDA to another company? Or is there something that we need to be worried about on regular Nexavar, specifically ?
I -- it's on the website listing. We just got approval recently. Till recently, we have not, what to call, we are final approval recently. It's not discontinued by, but I don't think we have discontinued the ADNDA, no. I think we are -- I don't know what why is listed like that on the website. I think maybe because -- I'm only speculating again, I don't have an answer to that question. But maybe because it's not -- we have not sold the product so far. So I think maybe that's why it's not reflected. But I'll just get it -- I'll get it verified. I'll find out what's going on.
The next question is from the line of Sriraam Rathi from ICICI Securities.
Just 1 question, sir, on API sales, I mean, in the half year, we have done more than what we did in full year last year.
Okay. What's the question, Sriraam?
Yes, so my question is that API revenue is higher than the full year revenue last year, so what...
It's because -- as we told, I think it's because of the stocking quality of the...
The bulk trading for September.
For September.So this will be our last question.
Sir, no more questions as of now.
Okay. Prakash, any questions, do you have, Prakash?
Yes. I'll take the last one.
Okay. Go ahead, go ahead.
Yes. Just wanted to understand, how do you think about capital allocation once you start monetizing Revlimid starting March '22, that will be fairly significant cash flows. So have you given any initial thoughts which markets, products, I mean, which areas you would like to spend that money?
I think some portion of the CapEx, I mean, of the capital that we receive usually be given dividend. We're giving what 25%, 30% dividend at this time. So I think, hopefully, we'll -- what to do in March '22 and all, I think we'll decide then. But typically, as a thumb rule, we're giving about 20%, 25% dividend. And in terms of the capital allocation, I think we continue to believe that there's a lot of niche opportunities available in this business. I mean we are looking -- so I'd like to do an idea. Essentially, this business has become -- there are only 2 ideas at work. We do a commodity idea it doesn't work. So you have these 10 million, 15 million ideas, which offset sort of revenues. So those ideas, you need to have about 8 or 10 of those ideas. So you need to have an idea like lapatinib like a pomalidomide, which have that sort of potential, but actually it happens or not, it's a different story. But those are -- you have to have about 5 or 6 filings of those type. And then you need to have like some filings, which can generate about $50 million, $100 million, $150 million. So those are harder to get, but when you get them, there's a relatively very large upset. So you need to mix them up. So you need to build a portfolio of these $10 million, $15 million ideas, about 10, 15 of them, and they need to build 2, 3 big ideas. I think that's what we're looking at. And then you have to focus on NDTA. You need to focus on peptide chemistry or you need to look at a non-impending position. You will take a challenge that a lot of people don't want to take. So you need to have a multiple pronged approach to doing this. I think that's how you want to look at it.
Okay. Perfect. Great. And all the best.We can close the call, moderator.
Thank you so much.
Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.