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 Q3 FY '21 Earnings Conference Call hosted by Investec Capital Services Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anshuman Gupta from Investec Securities Limited. Thank you, and over to you, sir.
Thank you, moderator, and good morning, everyone. On behalf of Investec Capital, I welcome you all for the NATCO Pharma 3Q FY '21 Earnings Call. Today, we have senior management represented by Mr. Rajeev, Vice Chairman and CEO; and Mr. Rajesh, Vice President, Investor Relations and Corporate Communications. Over to you, Rajesh, sir. Thank you.
Yes, thank you, Anshuman, and good morning, and welcome, everyone, to NATCO's conference discussing our earnings results for the third quarter FY '21, which ended December 31, 2020. Hope everyone is doing well as we are finally hopefully recovering from the COVID scenario. During this call, we may be making certain forward-looking statements, which are predictions, projections or statements about future events, and anything said on this call which reflects our outlook for future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. Like the statement at the beginning of the call, except for the participant questions, is the property of NATCO. It cannot be recorded or rebroadcast without NATCO's expressed written permission. We will begin the call with recent highlights, and then we'll follow up with an interactive Q&A session. Hope you all received the financials and the press release that was sent out yesterday. These are also available on our website. So for the third quarter FY '21 ending December 31, 2020, the company recorded consolidated total revenue of INR 386 crores as against INR 513 crores for the same period last year. The net profit for the period on a consolidated basis was INR 63.4 crores as against INR 104.4 crores same period last year. As we mentioned in the release, the decline is primarily due to 2 reasons. One was due to lower sales in the domestic oncology; the second due to weak realization of profits from our Oseltamivir product in the U.S.A. The segmental split for Q3 API were at INR 97.8 crores; formulation domestic total, INR 95.3 crores; formulation exports, which includes the profit sharing and the foreign subsidiaries, 100 -- INR 162.1 crores; other operating and nonoperating income about INR 13.8 crores. Thank you all. We'll open up for Q&A now.
[Operator Instructions] The first question is from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Sir, if you can give us the breakup between oncology, non-oncology, third party and also give us some flavor in respect to the CnD this quarter?
We're not doing a split of the segments, but combined sale of the domestic oncology is about INR 90 crores, something. Seems I already brought it up. I think domestic sale is about INR 95 crores, INR 60 crores plus specific to -- we don't do an exact split, but majority of it is usually coming from oncology. And now I think our cardiology as well is also doing reasonably well. And our expectation is that cardiology should hit about 15% to 20% of our sale.
Sure, and with respect to oncology segment, I mean, if one is looking at it, I mean, even at 50%, 60% or 70%, I mean, this seems to be a kind of a waning proportion right from the first quarter. I understand that it's because of COVID. But can you give some color with respect to, are we seeing any signs of recovery over here? When are we expected to see that INR 90 crores to INR 100 crores kind of a run rate back?
I think the challenge in oncology is this. I think what is happening in that business is things are better. I think it's not that things are not as bad as it -- I said 70% is where we are -- let's say we're doing x earlier. We're doing about 70% of x in oncology. The reason for that is there's a lot of fear for -- coming for special hospital therapies. And I think a lot of people are preferring online therapies. I think the higher-margin products, which are the injectables, we're not getting that sale. And as you know, COVID is there. I think we're all reluctant, but things are getting better. I'm not saying that they're not getting better, but I think it's a process. I think over the next 6 to 8 months, I think things should improve. That's the nature of the beast. I mean, it's -- I mean we're learning as we go. And you're seeing that -- what has happened with COVID is a lot of ICU, transplant, these sort of diseases where there's a lot of immunosuppression, there's been a dramatic drop in sales. I'll give you an example. We used to sell a couple of products for our -- for BMT, bone marrow transfusion. And practically, for 6 months, we had 0 sales in that division. So -- because there are very little transplants happening because of COVID. So these are all, I mean, very peculiar circumstances. I mean there's no -- I can't answer it in a -- any better way, but I -- my sense is, I think once COVID settles down, I think we had a little bit some amount of COVID, but I think if things normalize, I think things will come down, come back to some level of normalcy.
And is the drop in international business largely on account of Tamiflu? Or I mean I would also understand a part of -- I mean, since we also have a very strong disposition to oncology in the U.S. I mean, would there be a little bit of a lower uptake than what we had expected there as well from similar reasons?
U.S. in uptick is mostly oral so then they've been more stable than oncology. Injectable uptick is more in domestic rather than export. That's part of your -- answering the first part of your question. The profit share is lower primarily because Tamiflu has been very -- we had practically very little income on Tamiflu this quarter. I mean that's one of the biggest reasons. Usually, what happens in our earnings is the first 2 quarters, we booked the raw material and the supplies and the last 2 quarters, we book the profit share. So this quarter, obviously, it's been weak. Hopefully, we'll see if this quarter improves, but it is what it is. So because of the nature -- so not a lot of people are coming out. So when people don't come out, they're not picking up flu. If we don't pick up flu then no one use the product. So it's -- you're seeing that across a lot of therapies. I mean a lot of -- because people are not going out. For example, chest infections are lower -- or during peak COVID time, there are very little accidents. So there are a lot of -- less ICU requirements. So these are all very peculiar circumstances, but I think things will settle down as things go by. But it is -- that's the present situation as the way we see it.
Just one question from my side. I mean if I break it out to...
Just pass it on if that's okay. If you don't mind.
The next question is from the line of [ Viraj Kacharia ] from Skill Ventures.
Congratulations for reporting such numbers in such a challenging environment. I just had one follow-up on the domestic oncology business. Sir, if you could just give some perspective compared to the past sales, how much would the market grown -- market degrown? And have we lost any share in oncology in products? So if you can just provide some color on that.
I don't think we lost any share in the oncology market in terms of market share. I think the brand has been fairly steady. I think what we have lost is mostly to do with the fact that there's limited -- the hospitalization has been low. So I think that challenges you're seeing [ across the ] sector. I mean, look at the hospital sector and you look at these segments which require heavy hospitalization, which is the immunocompromised situation. Those products have -- their takeoff has been much slower than -- it's happened not just in India. I mean if you look at the global scenario, this happened in the U.S. and I think to other peers. You have seen their earnings that there's an overall -- hospital-related therapies have -- there's been a decline.
Okay. Just one follow-up on this. So if you look at HCV in other players, they have reported a more normalization in sales by now. So when we look at this business in its entirety, say into FY '22, should we be back to what we were doing, say, in FY '20 kind of a run rate?
I think so. I think what we are betting on is 2 things in the domestic market. See, 1 thing is that things will settle down. I think things are slowly settling down. And that -- even dermatology is doing reasonably well, so that is also improving the strength of our base earnings. And see, our idea is to diversify our revenue base. I mean we've spoken about that many times in the previous calls, like we need to diversify our revenue base so that there's more consistency on earnings. I think one major item that we're going to add in domestic, which is not in pharma, but it is in agro, and that's where we are very excited because we have a couple of launches lined up, very interesting launches lined up. So if that would start kicking in, so that makes it much more interesting.
The next question is from the line of Mitesh Shah from ICICI Direct.
Sir, Tamiflu was low in Q3. So what is the current situation now?
I don't want to judge it now, my friend. I think let's wait for the quarter to -- I think I can speak about it at the end of the quarter.
Okay. And the -- about the [ conversion ] of [indiscernible] asset [indiscernible]. So can you give us some directional guidance or the outlook about this segment? And how do you market this in between partners in the segment? Can you get some outlook on that?
Sure. I mean, what we're thinking is, I think the real value in this business is going to do with, do you do your own brand and launching products? I think that's where we're looking at. And as you know, we got our first big approval, so we're very excited about this. We also know there's a court case pending on it. So -- and I think we released the press release and we'll talk about our launch plan shortly. I think that's our position. We'll come back exactly what we want to do; because the court case is pending, I don't want to speak too much in this call at this time. But we are -- our expectation is that we're able to work on our legal hurdles, and then I think we should be in the market in the coming [ period ], and that's our expectation.
And do you just have a particular company that you've appointed as a [indiscernible]? Or are there any other competitors are there [ in relation ] to that?
I'm not aware of other people. I can only speak about myself. I think we are in the first phase for sure, I think that's my understanding. And I think we have a good position. But again, I don't want to speak much about this part because the legal case is pending. I'll come back with our plans shortly, yes.
The next question is from the line of Nimish Mehta from Research Delta Advisors.
Just a little bit more on the agrochem business, but I understand it that we are focusing on pesticides more. And given that the government's stance is against using pesticides, trying to, yes, promote more of organic manure and everything. What do you think about the overall opportunity? I know you can't speak product specific, but overall, general understanding would really help.
No. I -- what you asked is a very good question. And I think we're very clear in our strategy. I think we have -- the products that we're working on are obviously for pesticide, but we also have a pipeline of products which are also more environmentally friendly and less toxic to human consumption. I mean I'll speak about it shortly. I don't want to speak about it in this call today. But I think clearly, the emphasis that you gave is very important. I think the opportunity in this business is not selling toxic pesticides. The opportunity in this business is actually selling greener pesticides. I think absolutely, I think your pipeline, anybody to be successful in the coming decades, you need to have a pipeline with a mix of both. Having said that, you can go away from the traditional pesticides, but you need to have a mix of products and portfolio. And this is where the world is going actually today. But in terms of strategy, Nimish, I'll speak about it as we go along. I mean we're still early days. So I'd like to speak about it. But you will -- I think you will hear some commentary from the management in a short period of time on what our strategy is. Absolutely, you're absolutely right on that, okay?
The next question is from the line of Sameer Shah from Valuequest.
First question is on Revlimid. We had a [ direct date ] in December. So where are we -- where are we on Revlimid?
Good question. I think we believe -- again, I'll reiterate it again. I don't want to jinx it, but I jinx it by saying it all the time. But it's -- the approval is around the corner. There's nothing serious pending. They're all minor queries. We've answered everything. There's nothing pending on the company's file. I'd like to reiterate it again that we will get the approval. And I think we're very confident we'll get it, and hopefully it comes very shortly.
And sir, secondly, I mean, whatever initiatives we were doing either in India or the other markets like Brazil, Canada, et cetera, was going to be on top of what our base business is. Now given what it is in this quarter, the base business is actually -- there are question marks on whether that base business will normalize or will these initiatives like agrochemicals and stuff, other stuff, will actually bring us back to the previous level? Or is there from whatever initiatives we have, will we actually be in growth phase from '22? What is your sense?
I think there are a lot of moving parts there. So to understand the generic business, it -- the core portfolio will always degrow by 10% to 15%. That's the challenge of doing generics. So I think that's how the business works and everybody knows that. So I think what we are trying to do is 2 things. We're trying to expand the portfolio so that the -- and also build a stronger domestic portfolio where the price erosion or depreciation of the portfolio is not a lot less compared to the export business, as in that slide on our agro initiative. So in terms of strengthening the base business, I think agro is going to be very critical. You're absolutely right. The agro will pull it back and give us that strong base that we -- what we had before. Having said that, in addition to that, we're also very bullish in the launches that we have. We have lenalidomide launches in multiple markets other than the U.S., so -- which we're very excited about. And if it's not launched there in the U.S., in the next financial year. So that's also a very good launch. So [ if it's not ] for the lowest [ trends ] we're expecting soon and the 10-milligram will also, I think, go generic by -- in the financial years '21, '22. So we have very good launches there as well. And of course, the jackpot is always that, the lenalidomide launch in March of '22. So that it will be coming in the end of the year. But however, we'll be booking the earnings at the end of the year. So I'm extremely bullish of '22. And I think what we're seeing is a challenge in a quarter or 2. But it is not going to persist for long. I think -- but it is what it is. I mean, I'm not going to run away from it. But it is -- but what I'm trying to say is that we are very cognizant of what is going on. And I think we're aware and I think we'll be able to pull it back and because of the pipeline that we have had, I know we have publicly announced already that we got approval of 1 big product. And we have other big products in agro, which we'll speak about in a short duration of time. So I'm extremely bullish about '22.
The next question is from the line of Ashish Thavkar from Motilal Oswal Asset Management Company.
Yes. So, sir, could you elaborate more on Brazil and Canada as to how do we see the growth ramping up in the next 1 or 2 years? And between Canada and Brazil, which markets you feel are easy to ramp up?
Both are -- Brazil takes longer, but I think your results will be much better over a period of time. I think the foreign chunk now, U.S. business is booked on an annual balance sheet because we don't have our own hub in the U.S. now. The foreign subs cumulatively have done about INR 41 crores in the last quarter, yes? So we're doing well in the foreign subs all the foreign subs have been -- cumulatively have been profitable. Brazil is profitable this quarter. Canada has been profitable alone. So I'm happy where things are going. We have some very good launches lined up next year in Canada and Brazil. So what is our run rate in that own service for [ four ] quarters? So if you annualize it, it will be about INR 160 crores. So where do we see this business going? I believe this business can grow to INR 250 crores to INR 300 crores next year. It's based on the launches that we have had. So I think that's based on our expectations, yes.
Yes. This is a very -- okay. And then, sir, on the agrochemical side, if you could help us, like what are the [ 9/3 ] products we have -- which are in the pipeline? And what could be addressable market?
I think we only spoke about [indiscernible] now. I think the size of the market from our understanding is about INR 2,000 crores. And it's there in the press release. And what our future pipeline, not -- we're not revealing at this time for strategic reasons. I'll speak about it shortly as we go along when we're getting registration. But I'm very bullish about the opportunity. A lot of these opportunities, my friend, we're looking at, things where we're going to be first to launch. See, as I said, I'm not trying to do a commodity business, and everybody thinks of agro as a commodity business. But NATCO will never do -- I never do business where we believe something is a commodity. We always look for missions, we look for a sweet spot. The first opportunities where a lot of people are either not -- where we believe will be in the first phase. So we're very excited about the opportunity. And I think we're going to see some positivity in that business in the coming [ phase ].
The next question is from the line of Rashmi Sancheti from InCred Research.
Just to clarification on the domestic business again. Sir, I can understand that chemotherapy sales might have affected due to COVID. But in oral oncology segment also, are we seeing degrowth? Or we are -- we have seen recovery in the group?
I think over long term, it has been more stable compared to chemo.
So on a Y-o-Y basis, we are growing in that segment?
Yes. That segment is doing reasonably well. But overall in onco we're degrowing because of the things at the chemo side. So, yes.
Okay. Okay, sir. Sir, then on the international front, just to -- want to understand on the Pomalyst product, where you have already settled the litigation also. And so any plans? Have we launched the product? Are we planning to launch the product?
We already have an approval, miss, on that product. We have a settlement with innovator. The settlement there is confidential, but we have a settlement with that product. And that's all I can...
Okay. So it is not -- Okay. So it is not going to be a 2022 product, sort of?
I think I'll speak about the terms when it comes closer to the launch. Because the launch date is confidential. It's [Foreign Language] confidentiality. I think when it comes closer to launch, we'll speak about it. This time, I can't comment.
The next question is from the line of Ankush Agarwal from Stallion Asset.
Firstly, if you can help me or share some thoughts on how do you see the Revlimid market moving from 2022 to 2026 and the time it goes generic in terms of how the pricing pressure would be and how you see market share moving between you and other players.
Sure, I mean it's there, it's public domain, my friend, but I'll just rehash, repeat it for your benefit. So basically, the agreement says that we can [ introduce ] limited quantity in March '22, and the quantity keeps increasing every year. This becomes open in 2026. And our launch -- our belief is that our launch will be before other generics, I think that's our expectation. And that I think we should have the first-mover advantage.
Yes, but I -- so any thoughts on how do you see the pricing pressure moving between you and competitors? Any thoughts there?
Again, I don't want to say anything about that at the time. When the launch happens, I think we can add more color to it. But I think it should be a very good product for us. I think that's our expectation.
Okay, fine. Secondly, sir, just I mean, how do you see the long-term sustainability of the business model that you operate on? I mean we typically go for big opportunities wherein at the time of launch, we get a huge, I mean, jump in our business and then over time, it kind of falls. So every -- as the business size is growing up, every time you will need a bigger opportunity to not just to get back on the old revenue but to even grow over that. So how do you see that playing out over a long term as your business size grows? Do you see a hindrance over there?
I think it's a challenge because our strength has always been delivering the niches. So I think the niche business will also have its own value. I think as you rightly said, there are huge upside that you get. And I think that is the basic DNA of the company. So we continue to do that. But having said that, we're very cognizant of building the base business. I think that's why we've been working very hard to diversify the portfolio in the -- in domestic by doing agro. So we're trying to do -- we're doing these foreign subs so that we can diversify revenues. So foreign subs are now representing almost 7% to 8% of revenue in this quarter. So we are trying to diversify revenue so that is -- so that the dependence on the one-offs will be less. And -- but I think over a period of time, we'll be able to achieve that. I think it won't happen overnight. I mean, I'm not -- I can be honest with you there. But I think the endeavor is to do that. I think the endeavor is to build a base business, which is always steady and then the upside gets added on the top. I mean that's the objective.
The next question is from the line of Anubhav Aggarwal from Credit Suisse.
First question on the India business. You mentioned that -- you mentioned the trends in this quarter, but if I see the sales from 1Q to 3Q, we're seeing a declining trend. So I would have imagined things would have only improved right now versus -- so we had a higher sales in 1Q and 2Q than what we had in 3Q. So that's what I'm not able to understand.
I think sometimes in a particular quarter, we tend to have stocking of particular products if we're launching a new brand. So that's why there's a difference between 1Q or 2 -- a different Q.
But if you look at just the oncology segment, you would say that 3Q oncology sales would have been higher than 1Q and 2Q?
Could you repeat that question again, sorry?
So I was asking if we look only the oncology part in India, that in the third quarter oncology sales would have been higher than 1Q, 2Q or it would have been lower than 1Q or 2Q, sorry.
It started off at a higher number. It settled on a lower number because we did stocking in the previous quarter. So let's say we're launching something. So to build the market, we tend to stock a little more. And once it becomes steady state, you do a lower sale. And we launched a lot of products at risk. So we're very aggressive when we launch. I think that's the reason why there's up and down in the sale numbers.
Okay. And second, on the export business, would you -- just for [ panics ] I can understand, but very high number in second quarter was also reason why some of the numbers in this quarter are very low on the formulation export businesses.
What happened in Q2 is different from what happened in Q3. So Q2 had -- we've spoken about that already as we had the benefit of the settlement. So I think that's why the difference is there.
So COPAXONE will be more stable product for you? Or does it also when you get the profit sharing on that, that also varies so significantly at first quarter?
I think, like the quarter tends to be lower. Sometimes we have like year-end adjustments. So for example, you could have a charge-like adjustment. So 1 quarter could be low. So a lot of these things you can't trend on a quarter-to-quarter basis, my friend. I think if you have to look at it over multiple quarters and take an average. To start looking at numbers on a Q1, Q2 basis and say Q1 has moved this much, Q2 has done this much, it's not a fair comparison, because our portfolio is not a diversified portfolio like the other big companies that you follow. They're very high -- heavily concentrated. So if you don't get 1 profit share in 1 quarter because there's more in 1 quarter, it will be less in another quarter, then the difference becomes too apparent. So you can't catch a trend. I think our balance sheet cannot be judged like the others.You have to look at a longer trend as the answer. That's what I would say because our portfolio is heavily concentrated. If something doesn't happen, it directly shows on the balance sheet.
And just one last clarity on generic Imbruvica launch, do you expect it first half next year or second half? Have you talked about that?
No, no. I -- we've not spoken about Imbruvica this time. We just had a court case for which went to trial. We're waiting for a verdict. And we will speak about that once we get clarity on the [ adjacent ] side. At this time, I've not spoken about it.
The next question is from the line of Nitin Agarwal from DAM Capital.
So I think two things. On the India business, when we look to FY '22 and '23, maybe [ what does the new pipeline ] look like? Is it both in cardiac and the cardiac, diabetes and oncology?
I -- do I -- say that again, Nitin. I didn't catch your question. So what do -- how do I see FY '22 domestic, is that what you're saying?
Yes, the pipeline in terms of new launches, new launch opportunities.
I think we see a lot of interesting opportunities. I think we have planned about 10 launches in the next financial year. Some of them are first time in India launches. So -- and the launches are primarily, as we said, in the oncology and the cardio segment, Nitin. That's where we are looking at.
Okay. And so you have already been -- had an aspiration of INR 1,000 crores there about domestic business, sir, that you got a [ little in the ] past. I mean, given how things have played out, I mean, how do you look at the target now? And how -- in terms of what kind of timeframe is potentially is the number that's achievable now?
I think that the challenge that we have there is multiple. See one is that the FC portfolio has dropped dramatically. That's one challenge we had. Another challenge that we have had is the domestic oncology is not done as well as we thought because of COVID and the challenges at the time. So the way we're looking at this business is we need we needed 1 or 2 things, Nitin. This is what I -- I mean, I'm giving you a general vision for that business. We have always covered only specialists. I mean that's the uniqueness of our model, that we have covered -- with 200 reps we have built the size of the business, which is -- a lot of people, so [indiscernible] now tend to have 5x, 6x the number of reps that we have. Because we always -- and the number of reps we had have been in a few hundred. We never had 1,000, 2,000, 3,000 reps. So for us to go to the next level, we have to do one or the other. One, we do an acquisition, which allows us to build scale, which allows us to have higher coverage and more therapies, and then we add new products to it and then we grow the business. Or two, we need to add many reps and start new divisions. I think unless we do these 2, it's -- the needle is not going to move dramatically. And I think we have to sort of -- I mean, I'm looking at both options, but obviously, we added 1 segment. So we need to see when will we enter into a more larger mass market segment where we cover [ gynics ] or -- today, we only cover, for example, only cardio, diabetes, onco and gastro. I mean, actually, it's a very small segment of doctors. We only cover, let's say, 3% of all doctors. So I think the scale has to increase, and we need to go and attack the largest markets. So anyway, I'm thinking of different options, but I think that's where the future lies. It's one or the other. I think either we do a larger market coverage or we do an acquisition which allows us to get it. I think that's where we are.
All right. And secondly, on the U.S., so how is FY '20 been -- I think so has '21 been in terms of filings? And in '22 and in the next few quarters, anything that are interesting sort of lined up from an R&D perspective?
We're targeting quite a few interesting filings. We are targeting more of first to file. I think we always have a run rate over [ 6 to date ]. I think we're confident we'll have something interesting. What we are and all -- unless we file it, we get the first [indiscernible] and it will be difficult to say, but we're working on it. There are a lot of ideas we're working on.
Anything that you filed this year? [indiscernible] your strategies, so FY '21?
No. not -- no, nothing interesting. No.
The next question is from the line of Nikhil Mathur from AMBIT Capital.
I had a slightly larger [indiscernible] question on the domestic oncology market. What do you think about the competitive landscape, the way it's shaping up in the domestic onco? Are you also seeing that, from the competing firms which have a broad portfolio and [ strong position ] in global markets, they are getting a bit more aggressive in the Indian market as well?
Could you say that again, my friend? Your phone -- your voice is a little muffled, so I couldn't catch what you said. Could you say that one more time, my friend?
Is this better now?
Yes. Could you repeat that question one more time, please?
Yes, I can do that. Yes. So my question was on domestic oncology. What are your thoughts on the competitive landscape in this space in India? Are you seeing many of the competing firms who are there in the global markets with a domestic front -- varying oncology portfolio getting a bit aggressive in the domestic market as well?
I think the multinationals have always been there. I think our competitors are primarily Indian companies because we sell generic versions of drugs; I think that's our business model. The multinationals are active in India. Some are active, some are not active because a lot of these oncologies are very expensive, so sometimes the market is not large or interesting enough for them to do a [ realization ] in India. Because some of these therapies are sold for $3,000, $5,000, $10,000 per month kind of therapy. See our model is to go after [indiscernible] [ India ], isn't it? So I think that's where we are. So there are opportunities in onco. I think we are doing mostly chemistry opportunities. We're not doing the biotech opportunities. So I think actually, we have limited size and scope, but there's still a lot of opportunities in the chemistry space.
And just a question on altenen. See, I'm not -- my understanding on the altenen side is fairly limited. So what I understand is it's a CTPR-based molecule. I think it's a bit complex in manufacturing because it's a technical product. While I don't debate the manufacturing [indiscernible] in this kind of a molecule. But what I want to understand is from a marketing and a distribution standpoint, and given that you're looking to build a brand in this particular space, how are you going about this? I mean are there any hirings you're undertaking? Or what kind of -- you mentioned capability does on the marketing and distribution side. Is that what you're looking to do?
Yes, I think, we actually built our capability in the last 1 year in our discussion with launch. So we built the reps. We have nearly about 100 employees now in that division. So we have -- and we're doing a lot of promoter boys that are going to hire for the coming career season. And so we're gearing up for the launch. We have hired seasoned hands from the industry who are part of this agro division. See, the real value, my friend, is when you do the front end. Otherwise, where is the value. If you're trying to be -- give it to them on a principle-to-principle basis, you might do it, but there's no value on it. So my thinking on this is do your own brand and try to be the first-wave brand to come in, so that there is a differentiation that you will give to the distributor and pharma so that you don't get -- you don't become one in the crowd. So I think that is the strategy. And then I think when you launch something interesting, people, customers will come to you. And so I think that's what we're trying to do. And then the question is, we don't have to -- I think if you'd ask the question, if you don't have a setup, will you be successful? It's [ particularly ] next question. No, unless we do it, you'll not know, right? So -- but my whole point is that you're doing it and you need to be somewhere you have some interest backed into it. And then as long as you offer something unique, you'll always stand out in the crowd. And I will say that in any business you stand out, do something unique and where in the first wave, you'll always be able to create a new market for yourself, okay?
The next question is from the line of Ravi Dharamshi from Valuequest.
I wanted to just go back to asking the question on the competitive scenario in the agreement, but I want you to give a more generic answer, not necessarily pertaining to Revlimid. Have there been other instances where a large number of generics has settled with the innovators and such kind of a competitive formation has happened? If yes, then how did the market pan out over there? If no, then I would like to know, I mean, how will the competition work over here? I mean usually, the generic want to get onto the formulary list. They have a short supply or something like that. So in this particular case, will there still be like a proper competition between generic players? How will it work?
I think until the market promotion happens, Ravi, I can't answer that question. What I can tell you for sure is we're going to launch first. I mean that's very clear because I am going with the facilities that are given by the other companies that are launching later than us, so which is good. So what I can assure you here is that we have the first-mover advantage. First mover makes a lot of difference because you're obviously there in the formulary ahead of everyone else. And as your market share keeps increasing, you'll be able to able to get good business. That's our expectation. How many guys will come, when and all, is a question that only time will tell. I think we can answer that question. But at the time, but I think for the start, I think we have a good advantage in the beginning. I think that's what we can say.
Just a follow-up to that. Is there a motivation or is there an incentive to [indiscernible] the end of the guys those who come in later? I mean they will have a problem selling their quantity and they'll have to reduce the prices for that? Or is that everyone is assured a particular set of quantity and there is no need to reduce prices? Is that -- is my understanding flawed?
Again, Ravi, I'm not privy to what they're saying, so I can't answer that question. I can't.
And how will Celgene keep tabs on everybody's volumes and quantities?
Ravi, that's a question you have to ask Celgene, not me.
But they would have told you, right? I mean, you're supposed to report it on time.
No, Ravi. I can only tell you what I said. I said we have the first-mover advantage, and we -- our quantities keep going up and the other companies are coming later than us and that's all I can say, yes.
The next question is from the line of Kasera, Vrijesh from Mirae Asset.
Rajeev, just one question on the domestic business. The oncology or the situation that it is, we are doing somewhere around INR 60-odd crores a quarter right now. It is my understanding, if my memory serves me right, a year back, we were doing somewhere around INR 90 crores plus per quarter, right? So are you seeing some traction in the domestic business at this point of time? So as well we can assume in FY '22 very easily that we will be going back to the earlier levels at least very soon?
Hopefully, [Foreign Language] I think hopefully, I think. See, the pandemic has really upended a lot of our businesses and see, overall, this is where if there's chronic usage at home, those have done extremely well. Businesses which are linked with hospitals, which had a very immunocompromised situation, critical strategies, those businesses have not come back to normalcy. So COVID is something that I'm not able to guess where this is going, so...
Rajeev, [indiscernible] time line basis since month-on-month, we will have some clarity right now [ regarding business ] that we are doing.
At a macro level, my friend, I'll say that things will be better in '22 because the things are more normal now. I know what we're dealing with. Now to say that I know what is happening, and as things will come back to normal eventually, it's our expectation, and that's our -- obviously, that's our expectation. But to say that I -- if you want me to give a more emphatic answer, I don't want to say it. I think that's our expectation, I'll leave it at that.
Sure. Sir, one second last question on the overall FY '22, the overall -- the confidence that you have on FY '22 will be normally better. So if I leave aside revenue at this would come in Q4 FY '22, so will that confidence would be mainly on the domestic business actually coming back? The agro business starting to contribute in a meaningful way, and the [indiscernible] launch in the U.S.? Are these the 3 triggers there that I should presume? Or are there any more?
And also, they have -- we have the lenalidomide launch in other markets also. So what you covered is more or less are the major triggers. That's correct, yes.
The next question is from the line of Aditya Khemka from InCred Asset Management Company.
Rajeev, on the question on the India business. A lot of companies talk about first to launch molecules in India, and all of them say that they have launched 5, 6, 10 first-to-market molecules in India. Now what I want to understand from you, and you were pretty much making the same suggestion on cardiology, which you've already done and some of the other segments which you may want to target and where you, again, I'm assuming you feel that there are some additionals you're the first to India in the molecules that you have. My question is how large is that opportunity set? How many are molecules which are present across the globe, but not present in India, present in some countries and not present in India, that all these pharma companies, including yourself, will continue to launch first-to-market molecules over the next 3 or 5 years?
See, there are 2 things in domestic, my friend. One is you can do first-to-launch. But most other -- most products in India, you end up in first wave. You can't be like the only first who launches because they give it to multi -- a particular manufacturer give it to multiple licenses. So it tends to be about 5, 6 or 8 guys launch in the first phase. So typically, but obviously, if you want to be in the first wave as opposed to be in the second wave, that's what happens to more domestic molecules. Another thing that could happen, possibility, is that if it's a difficult chemistry or a difficult patent challenge, and you do something very interesting, you can try -- then you are in the first wave. Then you end up being 1 of the 2 or 1. So that's where the real opportunity is. But what will be in the first wave or whether you'll be the only one in all, we'll not know until we have the launch because typically you don't -- you can't control what other people's behavior is, isn't it? So let's say you think you will be the only 1 in there, but let's say, some other market, another team does the same thing at the same time. Then obviously, it gets diluted. So what -- the way this business works, it's true even in the U.S. as well, is you keep trying 8 or 10, somewhere in between, you'll get something where you will be the only one, and sometimes you'll get somewhere with a lot of competitors.
Understood. You didn't answer my question on how large that opportunity set is?
So large means, my friend -- I'll tell you what it is. If it's like 6 or 8 guys then obviously then that won't be so large. But if you want to be the only one, then sometimes you get a INR 30 crore, INR 40 crore brand. When it's a highly competitive brand, then you'll end up doing only INR 3 crores or INR 4 crores. So I think I answered in a very philosophical level. I mean the opportunities are based on the circumstances. Like there are people who have made INR 200 crores, INR 300 crores when you do it, something like a remdesivir or a [indiscernible], right? I mean the opportunities can be based on the circumstances and where you are. So it's hard to judge. But typically, our success in domestic is anything between INR 10 crores to INR 25 crores is considered success. INR 2 crores, INR 3 crores is a me-too launch, INR 50 crores -- anything over INT 50 crores to INR 70 crores are a super success. I mean if you want to [ grade ] this.
Right. And my second question is on Copaxone. So Copaxone, if I remember correctly, the reading the last press release, they're still doing about $1 billion on an annual revenue basis in the product being the innovator and all. Is there any constraints to you and your competitor in generics space gaining market share from the innovator? Or is it just the authorized generic is doing that kind of [ revenue ]?
See, again, I can't speak about their own balance sheet because I don't know anything about it. I can only speak for ourselves. I think from what I understand, we have about 30%, 35% market share. So we're doing reasonably well for the products like this. And so I think we are happy with where we are and...
Sorry, the first question here, Rajeev, but my point here was that you are 30%, 35%. The other generic which have 30%, 35%, which implies that the innovator is also sitting with 30%, 35%, which is very unlike what we have seen in the past in terms of rate of [indiscernible], right? Once the generic competitors launched, the market share for the innovator is generally going through the [indiscernible]. So I just wanted to understand from you as to is there a constraint you from your side in gaining further market share in Copaxone. Or do you not want to engage in price war and therefore, you want to keep the market share low, keeping the...
We have not like -- I think let me answer your question in a different manner. These are not like a me-too generic endeavor were everything gets substituted immediately. There is -- you need to sell to the patient. You have to register an app. You need to have an auto injector. There are a lot of specialties in selling it. It's a specialty product. It's not like a me-too generic. So it's not strictly comparable to where I got 50%, 60% market share that you get overnight. So that's the first part of your question. I would believe we're doing reasonably well. I think that's how I can answer your question. I think I don't want to comment further than that matter.
The next question is from the line of Nikhil Upadhyay from Security Investments.
Rajeev, most of my question have been answered. Just 2 things. You mentioned in Brazil and Canada we were at INR 160 crores rendered yearly. And you believe we can touch INR 250 crores, INR 300 crores. And if I go back to our commentary in FY '20 before, pre-COVID, we were pretty sure that Canada and Brazil should start scaling up in FY '21. So is it like the launches have got delayed, which we believe should come in FY '22? Or is there some large products? What gives you this confidence that we can -- because we are talking of almost doubling the revenue there.
Based on the launches that we have and, see basically, these are all positive segments, I think, based on 2 assumptions. One we'll get the approval on time. The market formation will have a limited amount of competition, and that we'll be successful and some of the patent challenges we're doing. Based on those assumptions, yes, that's our expectation.
Okay. And multiple times, you've mentioned that lenalidomide launch in multiple markets. Is the market opportunity large enough? And would it be like a competitive, like normal product? Or do you believe it could be limited competition? If you can just help me understand the perspective there.
It's going to be a limited competition, but it's a high-value product. So even if you do small revenue, I think it will be fairly profitable. So I think the gentleman asked me what other big launches we have next year, so I think that's not -- and in that conjunction, I've answered that question. Yes.
And we are close to approval in those markets?
The overall markets, yes, they are very close to approval.
The next question is from the line of Kunal Mehta from Vallum Capital.
Just wanted to understand firstly regarding the regions the opportunities mentioned. On Revlimid, I think there are only 2 brands available right now. One is of the innovator and one is the -- is the one, which we have filed this September. So I think the reasons for the settlement with supplier, the supplier has been allowed to use the advantage to one of the innovators. So I just wanted to understand from a competitive advantage standpoint in terms of gaining more market share, will the revs mix sort of make a difference in the [ claim ] status as we -- because I think if supply is getting the deal, I think that [indiscernible] other people will be settled also like [indiscernible]. [Technical Difficulty] So [indiscernible] for the business?
Mr. Mehta. So this is the operator. There is a disturbance coming from your line. [Operator Instructions]
My friend, I didn't understand everything. So let me -- I will rephrase that question. So just from where I understood this correctly. You're basically asking me by using the innovator's brand, do we have an advantage? Is that correct?
And so do we have this advantage because obviously we have set up our own brands and other players are going to use the innovator brand?
I -- no, no. We aren't using the innovator brand. I think my understanding is that we're using our [indiscernible].
Okay. Okay. Okay. So on the same plane as the other ones who are going to use the innovator brand so that will not make any disadvantage when it comes to maximize our share [ percentage ].
Sorry, I don't think [indiscernible] as I said, okay?
Okay. Sir, secondly, I wanted to understand was on the India business. So when I look at, of course, the only data point I'm studying -- I'm looking -- I have to observe this right now is the ICD numbers where the hospital revenues are not tracked. But when I look at the -- in the onco, when I look at the success of -- when I look at the growth of other players, I mean, players' guidance in the domestic market even during these last 6 months, I think we have been doing a little bit better than what we're doing. So just wanted to understand a lot of these big guys that have been doing big marketing [indiscernible] and the ability to do very well in the specialty space if they want to. So I just want -- so a lot of these big guys when -- I mean -- and I also -- I also get your potential to sell a basket of products through the hospital segment along with your biosimilar [ system ] and the chemistry portfolio. So just want to understand, I mean, are we -- are you -- when you look at the market share for the oncology products on both -- of course, hospital picture is not yet clear as what will emerge, but -- and when it comes to the other products, I mean how confident are you that you're not losing market share in these products?
I think we're doing reasonably well. And I think I'll just come back to what I said earlier. We're doing reasonably well. And I think once this COVID should settle down, I think the oncology will bounce back. I think that's our expectation.
The next question is from the line Sriraam Rathi from ICICI Securities.
Just one question on the APIs. I mean, of course, it's been quite volatile. So I mean this quarter, run rate of this INR 95-odd crores. I mean this is the normal run rate that we can assume and growth of this pace for FY '22?
It depends on, like there's a portion, about 20%, 25% is coming from the tender business. The tender is not repeated, and the base will be a little lower. But see, honestly, see how it's very difficult to judge how next year is going to be. I think closer to next year, I think we'll speak about it. So I don't want to comment on anything about all the -- how sales are going to be. I think it makes sense if you ask me like in the May or June call when we do the final numbers for FY '21 here.
Okay, got it. And just one more question on the export business. I mean, it has been, of course, quite volatile for different reasons. But I mean even if you look and if you assume you're like around INR 150 crores, INR 170 crores for the quarter, but we were doing like INR 200 crores plus INR 220 crores, INR 230 crores on a normal rate generally every quarter. So anything apart from Tamiflu which has impacted this quarter performance or it is only Tamiflu in that?
The biggest impact has been Tamiflu. There's no volatility in there. But we have had like [ lapatinib ] launch. We're the only generic on that part that has done reasonably well. So our expectation is we'll have other projects coming through. So -- but I think if you were to point at any single particular reason, I think that is one of the biggest reasons. But the volatility in the earnings here, okay?
Okay. Got it. Got it. And sir, lastly, 1 thing then on agrochemical, is it fair to assume that you will be able to make comparable kind of margins whenever you have INR 220 crores sales?
What kind of margin will we make, is that what you're saying?
Yes. So EBITDA margin can be in line with company's average for agrochemical?
I think that probably -- so I think, Sriraam, I think that's our expectation. I think the kind of things that we choose are where the margins are good. I think that's what -- our business model has never been to do commodities. But actually, how much money you make, again, is all -- you can't really control that. But I think that's what we're striving for.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Just one quick clarification on your comment on Revlimid. You mentioned that your launch a bit before other generic players and that gives you a competitive advantage. So just curious, because it's a volume-limited launch, and you probably would be getting a, I don't know what, single-digit market share, so what is that advantage that you have by launching before them?
It will be the first generic, Sameer. I think that's the advantage. So I think that's what we have pointed out and we'll be before everyone else because I'm just going by the press statements of the other companies where they said that they'll launch sometime after March. We are launching in March. I think that's the point I was trying to make.
Fair enough, but if it's quite -- it's not as you can go and get 40%, 50%, 60% market share, and that's the advantage that you get by launching before others.
I think we never said that. No, Sameer. I think if you look at the read of the Celgene statement, what we have said is that we'll launch with a single-digit market share, which keeps increasing until '26, and we have unlimited share. The percentages are there in the public domain.
Of course, Rajeev. Of course, it is there, Rajeev, and that's why I'm asking you because it's -- if it's only single-digit market share that you'll be getting, so what is the advantage of launching before those? And [indiscernible] those also launch at the same time, just hypothetically. It makes no difference? Or is it the pricing that you have in mind than others, so then you'll have to scale down your pricing? So I'm just trying to understand your comment. What's the advantage of having the market to yourself with just mid-single-digit market share?
I think -- Sameer, I think the -- we're going to be the first generic and the erosion will be low. I think that's all we are trying to say. And I think that's the only thing I can say, Sameer. I -- I'm not able to understand what your question is. I think that's the best way I can answer that question.
The next question is from the line of Rajat Setiya from VRDDHI Capital.
Sir, my first question is how confident are we about the guidance that we had given for the financial year 2022 in terms of INR 1,000 crores of that?
I think I'll speak about it closer to -- I mean, and let me finalize the numbers, but it predicates on the assumption that we're able to launch Revlimid in that financial year and also predicates on some success in our domestic -- on the agro business. I think that's the assumption. But I think when we close it, I think in the May call and when the final numbers are done, I think we'll speak more in detail about what our assumptions are and what we think -- how things are playing out, okay?
Sure. And do you think that would be the peak for the company? Or you think from thereafter also, one can -- the company may expect to grow in profits?
I think what we have is we are trying to strengthen our business. And I think our percentage of quantity keeps increasing every year for Revlimid. So I think that will drive the earnings over the next few years.
Sir, the other question is on the exports business. So basically, last quarter, we did some INR 480 crores. This quarter, we did INR 160 crores. I think all -- are we saying all the revenue decline is attributable to Tamiflu and the onetime settlement that we got last quarter? Or did we lose some business in Copaxone as well?
I mean those are 2 reasons, that Copaxone are the major reason of declines, yes, that's correct.
The last question is from the line of Vishal Manchanda from Nirmal Bang.
Sir, could you give a sense on how large the oncology market is in India?
How big is the oncology market in India, you said?
Yes.
I -- honestly, I don't know, my friend. Because the [ reality we're in ] and all these numbers don't actually capture it. My estimate is -- I'm making a guesstimate, okay, so don't hold me to it -- it's about INR 3,000 crores to INR 3,500 crores is what I was -- understand informally. But again, I can't back it up with any validation from any agency, okay?
And then, sir, in the U.S., how many launches should we expect in the next 12 months?
How many domestic launches, you're saying?
In the U.S., sir. In the U.S.
U.S. launches next year in the U.S. At least, I think our big launches, I have about 2 or 3. I think we already spoke about it. I think [ Afinitor ] and then [indiscernible] but we have mentioned that there's another interesting launch that you're not [ publicly hearing ], but is -- I think the immunosuppressant is also there. I don't know when the exact launch is. I think we'll come back to you on that on the launch date. So I'll just come back to that. That's also an interesting one. We're rolling out an immunosuppressant. So that will give some clarity on the patent and the approval, but that's also an interesting launch we have.
Earlier, you talked -- you touched -- you talked about everolimus. Is that right?
There are 2 everolimus products, my friend. There is [indiscernible] [ correct ], and there is [indiscernible] those immunosuppressant. So immunosuppressant is a different product. The oncology one is a different product. So there's 2 different brands, and there are 2 different ANDAs.
Okay. And they can be launched next year, could that be?
I don't remember. You asked me what other interesting launch we have. That's the other one also we have, but exact launch date and all, I'm not able to recollect. I'll just come back with you. At the moment, I'm not able to answer the question, but I'll just come back with you on the next congregation, what we mean that -- when the launch -- exact launch date is. I'll come back to you on that.
So this approval is hard and basically getting an approval, U.S. FDA approval, is at hold, [indiscernible]?
I think so. I think -- the 7.5 and the 5 and the 2.5 is only launched in October. The 10 milligram, if I remember right, again, standard [ procedure ], I think it will come, I think, later part of '22 -- '21, sorry, in calendar and -- or launch date in later part of '21. And to us, I don't recollect what's holding it up. I'll just come back to you on that. And let me do some -- I need -- [indiscernible] recollect what's holding this up.
Okay. And, sir, what was the export formulation sales excluding profit share in the quarter?
Sorry, repeat the question again, Vishal.
What was the export formulation sales, excluding profit share?
We are not sharing this. We're not giving this. We're giving it as a combined amount.
Sir, as you indicated, about INR 40 crores of sales in Brazil and Canada. So that's going to be your -- largely your export formulation sales. So is that good to be, like...
See, what happens in the Brazil and Canada, the sale from India gets canceled out because it's sold to your own turf. So we're -- that is [ included as ] separately. So that has a component of transfer price from India to Brazil and then -- or Canada and then the local sales. So we're only reporting 1 sale. So we're reporting it as a subset.
Okay. Okay. And sir, just going back to Copaxone, so from a profit share perspective, the product is probably not as attractive as we would have expected. And one of the reasons could be there is kind of large fixed costs associated with the kind of selling that product in the market, is that right understanding?
[ Mylan ] price erosion is being fairly competitive. I think to get market share in Mylan has been very aggressive. So it has done reasonably well, again, I will not say that it's one of our best products, clearly. I mean that's all I can say. Could that have been bigger than what we had? Again, this is all driven by market dynamics, out of my control. So I think if you ask me, I'm fairly satisfied with where we are with the product, okay?
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Anshuman Gupta from Investec Securities for closing comments.
Thank you all for joining on this call. A special thanks to the NATCO management. Thank you. Bye.
Thank you. Thank you, all. Have a good day. Bye.
Thank you. On behalf of Investec Capital Services Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.