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Natco Pharma Ltd
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Ladies and gentlemen, good day, and welcome to the NATCO Pharma Limited Q4 FY '18 Earnings Conference Call hosted by Edelweiss Securities Ltd. [Operator Instructions] Please note, this conference is being recorded.I now hand the conference over to Mr. Deepak Malik from Edelweiss. Thank you, and over to you, sir.
Thank you, and good morning, everyone. On behalf of Edelweiss, I welcome you all for NATCO Pharma's Fourth Quarter FY '18 Earnings Call.Today, we have with us the senior management of the company represented by Mr. Rajeev Nannapaneni, Vice Chairman and CEO; Mr. Rajesh Chebiyam, Vice President, Acquisitions, Institutional Investor Management and Corporate Communications. I would like to hand over the conference to Mr. Rajesh for the opening remarks. Over to you, Rajesh.
Thank you, Deepak, and welcome again, everyone, to NATCO's conference call discussing our earnings results for the fourth quarter and the full year of FY '18, which ended March 31, 2018.And as a standard disclaimer, during this call, we may be making certain forward-looking statements, which are predictions, projections or statements about future events. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. We also state that material in the call, with the exception of participant questions, is a property of NATCO and cannot be recorded or rebroadcast without NATCO's expressed written permission.Turning to the earnings details. The company is pleased to announce its results for the consolidated total revenue of INR 2,242 crores for the year ended on March 31, 2018, as against for the last year at 2,079 crores, reflecting a year-over-year growth of 7.9%. The net profit for the period on a consolidated basis was INR 695 crores as against [ INR 485 crores ] last year, showing a growth of [ 43%.] For the fourth quarter ended March 31, 2018, the company recorded a net revenue of INR 788 crores on a consolidated basis as against INR 177 crores during Q4 of FY '17, posting an increase of 36.5%. The profit after tax on a consolidated basis was recorded as INR 299 crores for the quarter as against INR 176 crores same quarter last year, showing a growth of 70%.The growth in revenue and profit during the year was driven primarily by formulations business in the U.S.A. that included niche generic product launches of Glatiramer Acetate, Liposomal Doxorubicin and Lanthanum Carbonate. Additionally, generic Oseltamivir sales in the U.S. was a strong contributor for the company in spite of competition.The domestic oncology formulation business continued to be strong during the year in spite of the macroeconomic headwinds, such as impact of GST. This was probably due to some first-to-launch generic domestic oncology products and continued growth of our existing portfolio of products.Now we'll take a pause here, and we'll take questions. We'll take questions.
[Operator Instructions] We have our first question from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Sir, my question is on Tamiflu. I mean, last year, the same period, I remember you have commentary saying that a part of Tamiflu has been shifted to the first quarter. I'm just trying to understand whether a similar thing has happened in the fourth quarter, whether there has been some kind of a shift of Tamiflu to the next quarter?
Sudarshan, I think I said that last time. I'll just repeat it again. I think we expect net revenue on accelerated basis. So what will happen is some portion of the Tamiflu profit has been recognized in Q4, and some of it will also be recognized in Q1 of 2019, March. Okay?
Sure. And any idea how much would that be? Would it be like 50-50? Or what would be the magnitude of the profits as well?
I don't want to be exact. I'll give you a general view guidance in that it will be [ good ].
Sure. And sir, the second question is, I would also like to understand the dynamics on both the 40 mg and 20 mg of Copaxone. And also if you can give some clarity with respect to how are the other molecules like azatadine and Odoxil, how they have also contributed for the U.S. business.
Sure. I mean, as you've seen, Copaxone is doing well. I think, especially 40 mg has done very well. We have got nearly 15%, 16% market share. The ramp-up has been slow, but that's the nature of this product. I think we have seen in the past, even with Momenta and Sandoz, it takes time. I think even Momenta took almost a year to get a significant market share. We are on track, and we're happy. And so I think the benefit of Copaxone, we'll see it over the next few quarters. The benefits we see now is also there, but I think we'll start to see greater benefit as time goes by. So that's on Copaxone. And in terms of profits, I think azatadine has not done so great. I think it's fairly eroded. I think we have about 7% to 8% market share, but nothing -- it's not a large number, which makes a huge [indiscernible]. Regarding the other one, I think Lanthanum has done well because we're the only generic on that. And Doxorubicin also has done well. So the top 4 performers in the U.S. have been these 4 products: Copaxone, Tamiflu, Doxorubicin and Lanthanum Carbonate.
Sure. Sir, one last question from my side. If I'm looking at the India business, both oncology and nononcology, if you can give some clarity, especially with respect to hepatitis C. I think you were supposed to -- we have launched the combination, and the last 2 years has been very good for us as far as traction in this business. How do we see this hepatitis C franchise you bought in India? And as we launch this hepatitis C in emerging markets, do we see probably the erosion of the pace of growth coming down in India to be captured by the emerging markets? And also some thought and clarity on the oncology space, how that's expected to grow for us.
I think, you see, overall, domestic has done well. I think domestic just had a couple of issues. One was the GST implementation kind of threw the numbers off in the June quarter. The second is the way they're setting the numbers. Last time -- last -- earlier years, we've included excise duty. Now we're not including excise duty, where the early accounting is done excluding excise duty, but GST is not included in the sale number, so that kind of shows a slight decline. But overall, I think we're seeing a decline in the hep C portfolio. I think that, that has been reflected in the earlier quarters. Now I think the decline has stopped. I think now we're having a run rate. Last quarter, we did about INR 58 crores in the domestic branded hepatitis C. Quarterly-wise, we're doing around about INR 70 crores a quarter. So that's a run rate that we're comfortable with. About it going up and down, I think we see it now stabilizing. I think that once we are at a mid-cycle [ thing ], I think it should stabilize at a slightly higher number, but I think that's probably around the stabilized number.
We have our next question from the line of Ravi Dharamshi from ValueQuest Investment Advisors.
My question is regarding the cash flows. So we have -- the QIP money raise has been put in the bank, and we're generating a lot of money from Copaxone cash flow this year and Tamiflu also. So what exactly are we thinking about utilizing that cash? We haven't even given a dividend this year, so what are the thoughts on that?
I gave a dividend, Ravi. Year-over-year, dividends were almost -- to be very precise here, we gave INR 181 crore dividend this year, which is about 26% of our last year's sales. So we gave 2 dividends, I think one after first quarter earnings, and the second one after the third quarter earnings. So in total, we gave a dividend of INR 8.25 per share. So I think 26% of our [ cash ] is what we give. So about INR 155 crores in dividend and INR 26 crores in dividend distribution tax. In terms of utilization of funds, I think the cash balance as of March 31 was -- give me a moment there, I'll just pull that up -- INR 856 crores. So most -- if you really look at it, I think we used the QIP money through some CapEx and paid down some of the small debts that we have had. In terms of utilization, I think we believe we'll be spending about INR 350 crores to INR 400 crores in CapEx this year. And also a similar amount of dividend we'll give in 2019. That's our view. And see, in terms of cash utilization, I think we believe we're just keeping the cash tranche for an acquisition or a large business idea. As of today, with the way the business plan is being executed, I don't think we'll be spending more than INR 350 crores to INR 400 crores. And I think most of it will be funded. The CapEx and the dividend will be funded through the cash flows. That's the way we look at it.
What is the status on the Vizag plant? We still are showing quite a large number of capital and working capital.
I think it's not closed. I think -- but I think in another 2.5 to 3 months, we're able to close the plant. I think our idea is that by August, September, we should be able to complete the plant. So by September, we should be on that. I think that's our expectation.
Just one last question from my end. What is the status on Revlimid in terms of approval? And what is your reading of the situation regarding what is happening between Celgene and Dr. Reddy?
I can't speak over their approval. In terms of our approval, I think we had some queries. I think we have got all the data [indiscernible], so we commenting what they're paying now. So if all goes well, we should be able to get an approval by end of this year, early next year. Our settlement date stands, March '22 stands. [indiscernible] I've been watching different the way you ask. So I'm not interested.
So we have our next question from the line of Nitin Agarwal from IDFC Securities.
Rajesh, can you help us with the split of the business as you normally give for the quarter and maybe for the year also?
Sure. Nitin, so on the API business, I'll walk through the quarters, Q4 first. The API domestic, INR 8.2 crores; API exports, INR 51.5 crores; formulation onco, which also includes a small element of CnD business, INR 82.8 crores; formulations, nononco, which is hepatitis C inclusive there, INR 62.4 crores; formulations, third parties, INR 13.3 crores. The total formulations domestics for the quarter was INR 158.5 crores. Okay? And formulation exports, which includes the profit sharing as well, INR 492 crores. Okay, Nitin?
Okay. And would you be able to have [indiscernible] full year numbers also for these things?
Yes. sure, sure. So the full year API gross revenues, INR 285 crores; domestic formulation, INR 720 crores; and export formulation is INR 1,041 crores.
Rajesh, secondly, on the business, how should we look at the business over the next -- say, when we take a 2- to 3-year view, this year, we've got Copaxone, [ Glatiramer ], Tamiflu that will come through in the year. So 2 things. 1 is, a, how do you see Tamiflu in the new season given the fact that there are multiple new approvals which have come through? And how do we grow beyond Tamiflu and Copaxone over the next couple of years?
Sure, sure. I think in terms of future-wise pricing, we are projecting a very base growth of about 8%, 10% on top line and on bottom line. But it's a base number, so I'm assuming that Copaxone ramp-up takes time. I'm also assuming that Tamiflu upside is gone for the next flu season. Even we assume the worst, we still think we're able to grow by 8%, 10%, and that's for 2019 March. And by 2020 and '21, I think I've been -- I mean, I've been saying this the last 12 months, as a strategy, we have decided to focus more on RoW markets: India, Brazil and Canada. These are 3. So we believe that there'll be significant ramp-up in 2020 from these 3 markets with a strong focus on India, Canada and Brazil. And in Canada, we have done almost $15 million top line with very good profit. And Brazil is losing money, but we have about 6 to 7 filings where we're trying to be the first generic in Brazil for certain items. So all these ramp-ups will happen in 2020. And whatever we're able to -- I think, we're able to sustain what we are doing in '18 and '19 into '20 because of our pivot or our focus on RoW.
We have our next question from the line of Dheeresh Pathak from Goldman Sachs.
For hep C third-party revenues, can you share this for the quarter?
Total third-party revenues for the year is -- just one moment. So for hep -- what we have said, we just have -- just one sec. We don't do a split-up of hep C. I think third-party revenue...
Branded sales, you gave, hep C, INR 58 crores, domestic branded.
Are you -- just the quarter, you're saying?
Quarter, for the quarter, I'm saying. So hep C, generally, you give a breakout sometimes between domestic brand, third party, emerging markets.
So I think what we'll do is -- on the hep C, it's 51, you're saying, okay. Hep C is, I think, INR 62 crores was what we said is the hep C -- no, INR 58 crores, I'm sorry. Total for the quarter was INR 70 crores. INR 58 crores is domestic.
Okay. And have you given any color in terms of how much was Copaxone contribution specifically?
We're not doing that specifically. I think because of competitive reasons, we have stopped doing this the last couple quarters.
We have next question from the line of Kartik Mehta from Deutsche Bank.
So on the guidance, so with one of the guys -- one of the companies from India not in Copaxone for entire FY '19, would you assume that the 10% profit growth for FY '19, which you are regarding is a very, very conservative number? And in terms of upside, how do you look at this? Because for the entire year, it might be that there will be only 2 players. Is my assumption right?
I'm assuming again a very conservative number. I'm assuming that next flu season will be very competitive, and that we're not able to complete the numbers. And second, I'm assuming that the Copaxone ramp-up will take time. 8% to 10%, I'd like to be conservative. I think, will it be better than 8% to 10%? I think I can make the assumption as the year unfolds. I don't want to say it right now, I think -- but what's the worst-case scenario? They're uncomfortable saying 8% to 10%. It's being very conservative. If there's anything better, we'll see how the future unfolds. As of now, I don't want to comment beyond that.
Sure. And one question on the way you guys hedge. So -- and I'm not asking for any exact numbers for Copaxone from you. What I'm asking you is that how do you hedge this particular asset now that there is certainty of revenues? Does the weak rupee help you, will keep you on hedge? Will you hedge more? In terms of the way you realize, is it after the quarter? Or is it after 2 quarters? How do you [indiscernible]
We don't hedge. We -- when the money comes, the day when it comes, we enter it. We don't hedge. We leave it open for -- everything is left open.
Okay, okay. And the last, if I may just squeeze in one, is in terms of the milestones for Copaxone, it is fair to assume that, that would be realized somewhere in FY '19, right. Because you will have some milestone number, let's say, beyond which...
I don't -- I can't tell you the agreement. I think all the milestones are considered, and the guidance I'm giving of 8% to 10% assumes all the -- based on the arrangement that we have with Mylan, the milestones will be met, and on a very conservative way, I'm assuming 8% to 10% growth on our base numbers.
[Operator Instructions] We have next question from the line of Kunal Randeria from Antique Stockbroking.
I just want to understand how does the hep C market in India is evolving? Because when we saw a partner reporting a sharp quarter-on-quarter jump, we haven't reported a corresponding jump. I just wanted to understand what is happening there. Is it price erosion [indiscernible]? And what are your thoughts for the coming year?
What has the partner done, they reported or not reported this thing?
They reported a sharp quarter-on-quarter increase in hep C sales.
Again, it's the way he starts and all. Because sometimes we buy [indiscernible] but I can only speak about myself and not about other people. I think I've told you, I think, and reiterated again, I think we have a stable -- we used to have a stable number of INR 110 crores, INR 115 crores earlier. We have dropped to INR 70 crores a quarter now. And it's a number that looks -- in the last few months, that's been the most -- the number outlook today. I think that's where we stand on hep C.
That's right. And the progress in international markets, Southeast Asia?
We are hoping for some openings in certain markets. I think Indonesia has been due for an [ approval ] for some time. Philippines has been due for an approval. There's no generic in Indonesia and Philippines. So we're hoping we get a break-through. So these are 2 big markets where we're hoping. So if that comes through, then I think we'll be able to see some movement. And we also have a good portfolio with [indiscernible]. We're trying to launch other products as well. So I think it should improve, but specific to hep C, I think these 2 markets will be...
Okay. And just one last generic question. Employee expenses have jumped very sharply. So is that a fourth quarter phenomenon? Are there some one-off -- some provisions?
Yes, sure. I think what we have done is, to be very precise, I think we had a very good year for our [ size ] company. So we had to -- we rewarded our employees. So we rewarded, there's a onetime charge of INR 20 crores that we took in this quarter. Because of all the support that we got from our employees, we gave them a onetime bonus. So that's about INR 20 crores for this quarter. And there was a rule change there. [indiscernible] said that employees have to receive gratuity amount, which was 10 lakhs, has been capped at 20 lakhs. So that led to a onetime charge of INR 10 crores. And then we have [ in early topics ] which I think we saw -- will continue on '18 March and '19 March. So that will wear off, I think, towards '19 March. So these are 3 major contributors.
We have next question from the line of Ranvir Singh from Systematix Shares & Stocks.
Sir, one on Copaxone. Just indicated -- in just Q4, Copaxone revenue has been higher than Q3?
It will -- for competitive reasons, we're not disclosing the nature of our contract with Mylan and the revenue share and all that. We're not disclosing that. I think we're giving only [ rough numbers or ballpark numbers ]. [indiscernible] I think, Mylan requested us not to do this, and I think I'm going with that.
Okay, fine. So just indicative -- I didn't want any number, but...
I think that's enough. [indiscernible] I've given you rough number. I think there's a fixed request for competitive reasons. And I just will respect that, okay.
Fine. And hep C, what have been sales in export of hep C products?
Could you say that again?
Exports. If you could split between India and export sales of hep C?
I think export for the -- only INR 2 crores last -- for the year, it's been INR 17 crores, and INR 2 crores for last quarter.
Quarterly, you're saying?
Yes. Quarter -- for the year, we did about -- that's about INR 18 crores. Did about INR 17.83 crores to be precise.
Okay, okay. And just to clarify, for hep C, we have Japan also in our agreement geography?
No, Japan is not covered. It's only third-world countries.
Okay, okay. And one more if I could. I see Revlimid as a major key asset going forward. Can you give some indication if, other than Revlimid, we have something in pipeline?
I think we have said -- I think what we've said is we have a whole bunch of launches right now. You're generally asking me what the launches in the next few years are specific to Revlimid. Or -- we have a whole bunch of first to file, I think, playing out in the next few years. I think in the near term, as I said, Glatiramer, Tamiflu numbers are clearer. I think as the years progress, I think we're expecting Canada and Brazil will kick in starting from '20 March. I think where we have won -- we have filed some first-time January. And later on, we have FTF on lenalidomide. We have FTF on sorafenib. We have FTF on bendamustine. So those are the ones that are there. They're all there in the presentation on the website. And then there's Everolimus tablets on [ quality ] products. These are the big ones in the year.
We have next question from the line of [ Ramayan Dikarai ] from HSBC.
Sir, my question is regarding that you mentioned Brazil is one of the focused markets going ahead beyond FY '19. So we have seen a few Indian companies seeing success there. So what gives you confidence that you will do well in Brazil? And are you seeing any improvement in regulatory approval cycle time line there?
I think, one -- I'll tell you I have confidence for 2 reasons. 1 is that we got our first approval in Brazil after 7 years of setting up this stuff. So we've got an approval [ on Fosrenol ] tablet. So it's not a large product, but that's one. Second, I think they have changed the rules in Brazil, where you have to get a yes or a no within 1 year, whether you're going to get an approval or you're going to get [indiscernible] That is fast tracking things in Brazil. And we have a lot other things that we have filed 2, 3 years ago. Finally, we're able to see some light of the day. So I think that's what gives me confidence. And I think I'm getting more confident because some of the current filings that we've done are first-time launches in Brazil. I think the key is, as I said in the -- at the start of the conversations, we have to get these approvals by '19 March, and we have to see the launches in '20. I think one thing you can look up among -- and we'll make these announcements as we go along, when we get major approvals in Brazil, that in the next 12 months, we're seeing -- we definitely see that we'll get some approvals for some of these major products [indiscernible] that we have filed.
Okay. And again, coming back here, so FY '19, beyond, as you said, India, Brazil and Canada will be our key focus. So does it mean that these markets will be, like, contributing -- or these markets will be forming larger portion of our overall sales or revenue compared to the U.S.? So how do you...
I think what my thinking is that whatever we will lose in, let's say, Tamiflu, and are able to make it up with these 3 markets together: India, Canada and Brazil together. That's the plan, and that's what we are trying to execute.
We have next question from the line of Sriraam Rathi from ICICI Securities.
Three questions, sir. First on Copaxone, I mean, does the export formulations revenue of Q4 capture the proportionate share for Copaxone that is positive until 31st March?
I said that I don't want to do the [ Fosrenol ]. I think the profit share number of Copaxone is included in that number.
[ In terms of profit ], okay. And Copaxone is currently manufactured by yourself and Mylan for [ dosages which are incoming ].
I think we have said that in the past that 20 mg is manufactured at the contract site in India. 40 mg is manufactured in Mylan site in Ireland.
Okay, got it. Got it. And how much has been the R&D for this year in FY '18?
I think it stands at 6%, 7%.
Okay. 6% to 7% of sales.
[Operator Instructions] We have next question from the line of [ Kappelkita Kriplani ], individual investor.
My question is that, I just saw the results on the board thing. So I just saw that there is a board seat given to one of the [ PE from multiples ]. Had they come in through QIP or the promoters have reduced your stake or something like...?
No, no, no. I think they participated in QIP, and QIP happened many months ago as you're aware. Incidentally, I think [indiscernible] has resigned for personal reasons, and so I think what we needed was we need another investor who's a nonindependent investor. and so we look at our portfolio, and we try to identify someone who had a large holding, and we have not yet [indiscernible].
And one more thing. This -- maybe you have already answered this, but this where limited -- when it limits, you're expecting...
The earnings -- the launch date is '22 March, so the earnings will impact [ within ] '22 March.
Your next question is from the line of [ Gagan Kareja ] from Kotak Investment.
Can you give some road map of the development of your cardio and diabetic portfolio for India? Where do you stand today? And how do you see this growing in a 3-year time frame?
I think it's just started. I think last year, we did about -- let me just give you the number last year. I think it's very modest. I think it's about INR 4.5 crores, INR 5 crores last year. Very small, so -- but we hope to ramp it up as we go.
Okay. Certainly, you indicated that between India, Brazil, Canada, in your view, the committed sales should compensate for the loss that you've seen coming through next year. But beyond that, can you give us some idea of what still these 3 geographies will evolve into? Or what do you aspire to maybe in the medium term, 3- to 5-year time frame?
Putting a number on earnings in 2020 today, I think, is really premature, I think. We're given little more time, and we have more client and regulatory approvals and launch plans, I think I'll have it maybe in the later part of the year. I think the question was more of a strategic. I think we're probably one of the first ones to say that we want to deemphasize the U.S. We did that almost 12 months ago. And we largely focus our strength on these 3 markets, and I think we're going to see a lot of this coming to fruition. And we're one of the earliest ones to say that we wanted to be this away from the U.S. and maybe not do big complex launches. I think we -- they're currently finding out, and I think we'll see the benefit of that. So I'm the first one to take notice. I see '18 and '19 are heavily U.S.-dependent. I think what we want to see is by '21, to bring down the U.S. dependency dramatically. I think 2 to 2.5 years is enough time to see the benefit of that. In '20 is where I think we see the benefit of that.
Okay, okay. And finally, if I can ask one more. Maybe is it possible to get some idea on the ramp-up of some of [indiscernible] happened last year [indiscernible] what do you see becoming a few months in these start-ups from a competitive standpoint?
No, we've not seen anyone. Fortunately, we've not seen anyone. I think at the sake of being conservative, we should be able to see -- we'll see if I want to make one for sure. But as of now, we've not seen anyone. And we're in agreement, it's been a fairly competitive product. There's nothing to write home about. The one -- [indiscernible]. We'll get another chance for another product.
We have the next question from the line of Srihari from P.C.S. Securities.
This is Srihari. Firstly, [indiscernible], I would like to know that. And secondly, if I go to the [ specific side ] of marking of the profit share and trying to find the base earnings, that doesn't work out. So can you please tell what is the cost element you're writing out for this profit share?
I think what happened is because our business is heavily dependent on the profit share because our [indiscernible] our strategy [indiscernible] on our balance sheet. Profit share represents a significant part of our earnings, so you can't separate one from the other. I think that's the first thing I'd like to say. Because what we do is we book sale on U.S. cost plus, and we only book our profits on an item only after on a recurring basis. So I think it's not fair we are judging it. Costs are linked to its success, so costs [indiscernible] so you spend more and you make more money, right. So we are -- we knew that a tax law is coming, so that's one reason why we give incentives to employees, or we're willing to spend more money on R&D. So it's not a fair way to judge, again. That's my opinion.
So I mean, apart from noncore expenses, how much of R&D would be attributable to these onetime elements?
R&D tends to be like -- no, for example -- no, what you're asking -- and I think you know well it's a topical answer. I don't want to give you a number answer, so to speak. Let's say you have -- you want to make INR 100 [indiscernible] then your anticipation. So then you're willing to spend at least 20% of the surplus on doing R&D project. But if you know that you only have INR 50 surplus, then you'll say, okay, fine I will only spend INR 5 or INR 6 because you don't want to hurt the cash flow and the CapEx line. So you make those decisions based on the extent of your profit.
And what is the profit share for the quarter?
I'll not give our profit share split, per se, but we're saying composite sale of what we call of export for this quarter is then about INR 433 crores.
INR 433 crores?
Yes.
We have next question from the line of Kartik Mehta from Deutsche Bank.
Sir, how do you see pricing in the U.S. and in terms of your drug business, would you assume that -- is it fair to assume that 10%, 11% overall industry growth would actually see you guys to grow about 13% to 14% x of [indiscernible].
I think so. I strongly believe if you remove the [ exit ] portfolio calculation, I think we will grow by about 23%. I think [ regulation ] about domestic -- model our pipeline and R&D, rupees have been on domestic. So it's a very good output coming out of domestic. And domestic is a good, steady-state business, and I think it continues to be bullish. Regarding U.S., actually, see I think that we're in an unusual situation. I mean, a lot of the items where there's heavy concentration is normally to be made. And biased interrelations really cause a lot of problems in the business. I think we're all hoping, again, optimistically that somehow that this demand continue forever. But as of today, it looks bad. And we're hoping that people have announced -- that people will announce that they will leave this product. And therefore, somehow, there'll be 1 product or 2 products where we are well positioned and things will change the market again. I think that's the hope the industry has. I'm a little more negative about it. I think you can't build a business on hope. I think I'm a little more -- I guess, I don't know. Certainly, my experience is that you can't just build business on hope. I think you need to have a clear strategy, and I think you need, I think that if you have a niche market [indiscernible], you make money. Otherwise, you won't make money in the U.S. And that's what we need to do about it. And if it's not coming through, then let's stop. And people are optimistic of the turnaround, but as of now, we're not trying just to turn around [indiscernible].
We have the next question from the line of [ Pranush Mehta ] from [indiscernible]
Sir, can you [indiscernible] data about the formulation of revenue in terms of exports and oncology?
The total for the export formulation, [indiscernible]. I already told you that. We gave you the rough number of INR 433 crores. The formulation is the same. I think that answers that question. In the domestic one, we're willing to [indiscernible]. I think we already invested, I think, INR 158 crores was last quarter sales for domestic, of which INR 82 crores was from onco, INR 62 crores was from hepatitis C and gastro division and INR 13 crores for [indiscernible].
We have the next question from the line of [ Kunal Mehta ] from [indiscernible] Capital.
I just have one question. We have reached settlement [indiscernible] for [indiscernible]. So any guidance you can give on the possible launch of the product?
We have [indiscernible] I don't want to say on top of my head. We have it, but that is somewhere in this financial year but not very bullish, honestly. I think it's a disaster. I don't think we'll make any money. So we're not talking too much about it. I think there are already 3 [indiscernible]. One, more than 4 guys are there. I think we launch it, but I don't think it'll have any meaningful impact on the U.S. That's my personal view, but I hope I can [indiscernible].
Just a follow-up question, Rajeev. Do you still believe the market is at least -- I mean, the generic side at least [ 300 million ] market?
It's not true. The thing with oncology is the volume of it is small. If the price is good, that is very interesting. But once the price collapses, the whole market collapses. And my reading is it's going to be a tough market. By the time we get enough [indiscernible] I don't think -- I'm not bullish, honestly. I know you are bullish, but I am not. [indiscernible] the other way. But that's the way it is. I mean, any product which has good supply situation where there are 4, 5 generics, it's very difficult to make money.
We have the next question from the line of Dheeresh Pathak from Goldman Sachs.
So Canada, you said that the size of the business is $15 million for the full year, right.
CAD 15 million.
CAD 15 million. What is the size of the Brazil business last year?
The Brazil business, I think is about -- can you give me a minute? I'll just pull that up. I think about 4 million to 5 million, but I think Rajesh will actually bring it up.
I think about 4.5 million to 5 million, actually.
INR 4.5 million to INR 5 million. In that situation [indiscernible].
Okay. And earlier in the pickup, you said export formulation INR 492 crores. Then you gave INR 433 crores, so the difference is that INR 433 crores is just U.S. and INR 492 crores is total yield...?
No, no, INR 433 crores is for profit-sharing product, yes, and INR 59 crores is the rest. So the total [indiscernible] market is INR 492 crores.
We have the next question from the line of Nitin Agarwal from IDFC Securities.
Sir, on Canada and Brazil, your businesses largely are going to be tender-driven businesses or these are going to be businesses that you are putting up your own sales force?
I think in Canada, we have our own sales force. So Canada is our own franchise. I think these 2 countries are -- we're independent. Brazil is dependent on tenders because we're bidding in government tenders. And we have filed for products where we have a limited amount of competition. Again, that's being the underlying statement. Provided we get approval by '19 March in some of these big products, we'll see a reasonable upside in '20 March. I think that's the expectation that we have.
And secondly, on these numbers on Canada and Brazil there, have you earned the INR 492 crores of sales that you mentioned?
No, they're not. No, they're kind of stand-alone, right. This shows in the principal. The difference between the stand-alone and principal is where your asset is found, yes.
Sir, we have the next question from the line of Dhaval Shah from Birla Sun Life Mutual Fund.
I wondered about [indiscernible]. We had a reduction date possibly somewhere in March. Is [indiscernible] the good opportunity we're finding?
I think we have that again and besides that in this financial year again.
Okay. So there were some queries which gave it...
Queries, I think they taxed it. I think they've answered all the questions. Again, I'm working from top of my head. What I can tell you for sure is they have faxed it sometime in the financial year. And my expectation on [indiscernible] is if we get our first wave launch in limited number of [indiscernible], we make money. If we come back, everyone else is finished. I don't think they'll make any money. The question is will this come in the first wave or not is a question that I'm not going to answer. So we'll see. I think based on share price, we're a little conservative side, which was again, if I stayed on the optimistic, that they don't happen [indiscernible]. So on [indiscernible]. I'm not expecting too much on the product side. But I think the sale will only happen provided we have it for sale.
Sir, and when is the time? Which month?
I don't remember. So I don't want to say something I don't recollect. If it's sometime this financial year, I'm not able to recollect [indiscernible] I'm not able to recollect, but sometime in this financial year.
Sure. And second thing is on Copaxone. While we understand that FY '19, you will have a fairly good run because competitors have got postponed. But even after another 2 guys come in, what kind of a price erosion would you think the whole thing settles at and what could be recurring buy in Copaxone after 4 guys have entered the market as well?
I think even if [indiscernible] was there, [indiscernible] related to substitute, it's very difficult. The longer the [indiscernible] stays, it tends to be sticky. The extent of the stickiness and all, the amount and all, if I could, I don't to say something was 20, I think, today at the end of '18. So we'll see what time. But as I said, I think, we've been very conservative in our guidance as I think we assumed very conservative numbers. And any upside in the future, we'll talk about as we go along.
Sure. And would you think the same way for implement in terms of being a good annual fee, as in when it goes generic, of course, post-benefit that we'll have for the first 6 months, et cetera?
[indiscernible] I think I'd probably look at that as well. I think you've seen that time and again, but kind of [indiscernible] behind the thought. You've seen that with a lot of these [indiscernible] products that has limited restriction in the [ race ] markets. So there are -- they're strong and [indiscernible] elements to it. The extent of it, only time will tell. But there are strong elements to it. It's not like a [indiscernible] and [ let them be ]. That's for sure.
We have next question from the line of [indiscernible] from [ Share Count ] Limited.
So I just wanted to know the guidance trend for the year. [indiscernible] when do we see this normalizing again to the [indiscernible]?
You mean in terms of the receivable, you're saying, that receivable amount [indiscernible]?
[indiscernible] Hello?
I'm trying to understand the question here. You're talking about the receivable...
[indiscernible], yes.
Receivable, I think, what happened was [indiscernible] certain. As soon as they are received. Every [ other ], also that they -- they already received the money, so...
Okay. And also the other thing that I want -- like to know about, fee tax rate. So what do we expect it to be going forward for the next 2 years?
[indiscernible] debt, 21%.
21%.
We have next question from the line of Dheeresh Pathak from Goldman Sachs.
Just a quick clarification. So the number that you mentioned, export formulation 492, that is all U.S. formulation? Because these are stand-alone numbers you're mentioning. And Canada, Brazil and other markets, they are not part of stand-alone numbers, correct.
The INR 492 crores predominantly in the U.S., but it also has some non-U.S. sales also but predominantly, U.S. also.
Okay, okay. And the difference between [ console ] and stand-alone is Canadian business?
[indiscernible] the size and strength, I think the actual -- the subsidiary [ P&L numbers ], INR 106 crores.
Okay. But just in terms of the underlying market that it caters to, apart from Canada and Brazil, [indiscernible]?
Those are 2 major [indiscernible]. I think they make up 99% of the sales.
Next question from the line of Kunal Randeria from Antique Stock Broking.
I just wanted to get your thoughts on [indiscernible] products. Because a couple of weeks back, [indiscernible] said that they want to check how these [indiscernible] originators are dealing [ the system ]. Did you ever make a meaningful difference to [indiscernible] going forward to something like a [indiscernible]?
[indiscernible] some of it, these [indiscernible] could come much easier to the market, absolutely, I think. I mean, again, I'm going with what you're saying and whatever is in the press. I -- and anything that improves our asset is great. I think it [indiscernible] for us easily available, I think there'll be more in the next 5 years, and it's good for the [indiscernible] of some of [indiscernible]
So we have next question from the line of Ranvir Singh from Systematix Shares & Stocks.
[ I just want to ] get clarity. 8% to 10% growth guidance, you said, about U.S., or about....
As a company.
As a company. Okay, okay.
[ And ] on revenues [ both ]. For 2000 -- like the [indiscernible] -- let me [indiscernible] to be precise. INR 2,450, INR 2,402 -- INR 2,450 crores. And that goes up 8% to 10% on the INR 695 crores [indiscernible]. Okay?
Okay. And here you mentioned that investment in some complex type of products, what we are planning on unfolding 2, 3 years down the line or maybe longer period. So can you give me a little more color on where actually we are targeting in terms of...
We don't have any filings as yet. I think we'll talk about it, but I think if [indiscernible] is working on [indiscernible] type of products, hopefully, in the last couple of filings in the next financial year. I think next calendar year, I think they're targeting a couple of filings next year.
Yes, so is that in the balance of [indiscernible]? Or just [indiscernible]
Industry products, not complex products. As a strategy, we're not doing by lots.
We have next question from the line of [indiscernible] from [indiscernible] Investments.
Sir, I just have one question. Regarding other income, are you [indiscernible] INR 20 crores?
Well, it's the [indiscernible] INR 20 crores on the top of my head [indiscernible] INR 16 crores, I think, interest income in Q4.
That is interest income, the INR 16 crores?
INR 20 crores other income. You're talking about, is from Q4 you're talking about, right.
Yes, yes. Q4 only. Is this sustainable [indiscernible]? Or this is a onetime other income?
[indiscernible] interest income for what you call from export benefits, softly I'm telling you, so about 20. It is sustainable, I believe, because our cash flow will increase in the next few months because of the receivable that we're expecting. In fact, it'll actually go up in the coming quarters.
We have our next question from the line of Nitin Agarwal from IDFC Securities.
On the emerging markets, apart from Canada, other markets outside of U.S., apart from Canada and Brazil, are there any other markets that you're looking to open up in a meaningful way going forward?
No, these 3 are the focus. I think why I'm a big fan of trying to do one country and doing it well. Basically, what we're trying to do in these countries, in Canada, what we're trying to do [indiscernible] in Canada. In Brazil, we're focusing again on 6 or 7 products that we're trying to first-time [indiscernible] investment and trying to focus on the [ government ] and the business. And India, focusing on the branded generic business. I think focus on these 3 and give you 100%, which is a nice [indiscernible] portfolio. I think that's the real value.
And just these 2 markets, your portfolio is largely -- the U.S. -- the portfolio you've developed in the U.S. is what you're looking to take these markets. Are you create [indiscernible]?
Mostly, mostly, mostly.
Okay. And lastly, for FY '18, has there been any interest in filing that you've done in the U.S., any meaningful time?
Meaningful, I think one -- only one, first of all, we had in '18, and that was Oseltamivir tablets. [indiscernible] It's kind of big [indiscernible] product. But that's the only big one that we find.
We have next question from the line of Srihari from P.C.S. Securities.
And just to get -- just to understand the scalability and potential for Brazil and Canada, so the Brazilian business, is that entirely [indiscernible] driven?
Some of it is branded. Some of it is [indiscernible].
If you can just give an indication about what is the kind of market you're looking at in terms of the tender business? I mean, so how much you baked last year, how much you'll do...
We're in the process of registering products [indiscernible]. We don't have any, what you call, tenders and FX. What they're saying is, I think, 2 things: One is, I mean, [indiscernible] in Brazil; two, get filed [indiscernible] for the product; Three, they're saying that we're hoping we get all approvals by '19 March. And we're hoping to bid in '20 March. And what I'm trying to say is that we are seeing clarity, and we are hoping to see more approvals in '19. And once these come in, we're able to see an impact from the '20 March.
So you expect the growth to be doing [indiscernible] end of the business.
Tender and nontender, both together. And the question that the person asked, I don't recollect the name, was what you were going to do in '20 March because of once the [indiscernible] wears off. I think the point we're trying to say was that if that's what we're, these 3 will substitute what we're going to do. That's what I was trying to say.
Yes. And [indiscernible] Brazilian for these 2 markets to me, internal targets for fiscal '20?
I don't want to say any number right now. I think '20, we'll talk about in late '19. I don't want to talk about the -- I think as the year progresses and you're coming into like end of this financial year, I think that will give you more clarity.
[indiscernible] what you're focusing on. Numbers and all, I think, it's a little premature. It all depends on whether they need [indiscernible] depends on milestones. I think once we meet these milestones and pick a strategy, I think, I'll give you more [indiscernible].
We have next question from the line of [ Rajesh Rasad ] from [Well Spring]
Yes, I -- this question, basically, you mentioned that you need to have a sales force in Canada. So does the Canada generic market works more like a India branded generic kind of a [indiscernible]?
No, no, no. It doesn't, it doesn't. It's -- and I said, the inflow is not right. [indiscernible] no, no, no. Not like that. Our office had 10 employees, so that's all we need. And it seems what happens on the -- sort of the benefit of your question, it is North America, especially U.S. and Canada, they all work on consolidated distribution models. So you don't have to go and promote to a doctor. You promote to the distributor, and you get the business. So -- and there are 3 or 4 [indiscernible] and for the whole business. So you don't need to have -- you need to have inflows in complex amounts, and they get a submission out of medicals on the pharmacies. That's particularly for Canada, but most times, you don't need to [indiscernible].
And my next question was, lately, I see NATCO's strategy as making the money from the first-to-file opportunities. But as the first-to-file opportunities dry up, you either need to move into the complex [indiscernible] or the specialty space, or else, what you mentioned, you need to diversify the geography. So what I hear you say is that geographic diversification and focus on Brazil and Canada as the strategy going forward.
That's [indiscernible].
We have the last question from the line of [ Gagan Tareja ] from [indiscernible] Investments.
Is it possible to understand the single market of your filing in Brazil and Canada to some extent that we know some color [indiscernible] period and maybe the size of [indiscernible]?
Mostly, it'll be oncology and the impacts of -- there's also portfolio invitations. In terms of the addressable market, I mean, I don't want to say any numbers right now. I don't want to talk about numbers. I think we're at an early stage. [indiscernible] files of products and [indiscernible] approach. Once we have clarity on, like approvals and launches, and I think you talk about [indiscernible]. I think -- we think it's large enough which can give you substantial earnings in '20 March. I think that's the [indiscernible], okay. All 3 together, I think India domestic, Canada and Brazil, all 3 together, deliver to offset. U.S. is if you get something big, it's very large. And it's very difficult for 1 set of 3 to cover up what you do in the year. So and that's why I'm trading all 3 together, so all 3 together strategically can make up for a big loss in the year. So I mean that's fair.
[indiscernible] Brazil and Canada generic competition? Is it relatively lessen things in these scientific areas for you [indiscernible]?
Compared with U.S. If you do a baseball portfolio, it is relatively less competitive. But market is smaller, so -- but if you have a good [indiscernible] all these flea markets, whenever [indiscernible] portfolio [indiscernible] it's not a bad number composite.
Are the revenue stream relatively speaking most sustainable than the U.S. market?
I think [indiscernible] have, but it's small diversion [indiscernible].
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir.
Thanks, everyone, and again wonderful set of questions. Any clarifications to the [indiscernible] that were discussed, please feel free to reach out to us.
Thank you.
Ladies and gentlemen, on behalf of Edelweiss Securities, that concludes this conference call. Thank you for joining with us. You may now disconnect your lines.