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Natco Pharma Ltd
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Ladies and gentlemen, good day, and welcome to the NATCO Pharma Q4 FY '19 Earnings Conference Call hosted by Edelweiss Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Malik from Edelweiss Securities Limited. 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 '19 Earnings Call. Today we have with us the senior management of the company represented by Mr. Rajeev Nannapaneni, Vice Chairman and CEO; and Mr. Rajesh Chebiyam, Vice President, Acquisitions, Institutional Investor Management & Corporate Communications.I would like to hand over the conference to Mr. Rajesh for the opening remarks. Over to you, Rajesh.
Thank you, Deepak. Welcome everyone to NATCO's conference call discussing the earning results for the fourth quarter and the full year of FY '19, as Deepak just mentioned. As a timely disclaimer, during this call we may be making forward-looking statements which are predictions, projections or statements about future events. Because these statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. The material in this call, with the exception of participant questions, is the property of NATCO and cannot be recorded or rebroadcast without NATCO's express written permission.We have published the earning details, but just to highlight the earnings, the company has recorded a consolidated total revenue of INR 2,225 crores for the year ended on March 31, 2019 as against INR 2,242 crores for the last year. This reflects a slight decline of less than 1% year-over-year. The net profit for the period on a consolidated basis was INR 642.4 crores as against INR 695 crores for the last year, showing a decline of 7.6%.For the fourth quarter which ended on March 31, the company recorded a net revenue of INR 486 crores on a consolidated basis as against INR 788 crores during Q4 of last year. The profit after tax on a consolidated basis was recorded at INR 120 crores for the quarter as against roughly INR 300 crores the same quarter last year.So as per our press release and what we have stated, although the revenue has been flat year-over-year, the marginal decline in profit was primarily due to a write-off of our Oseltamivir inventory by our marketing partner in the U.S. The flu season in the U.S. was also below our expected demand, resulting in the write-offs of this inventory which is valued roughly at $5.5 million.On the domestic front, in spite of intense price pressure that we've seen in the hep C portfolio, the company has seen growth in the oncology segment. Thank you all. And we have also given the revenue split in our press release. If there are any questions, please let us know.Let's open up for questions.
[Operator Instructions] The first question is from the line of Shashank Krishnakumar from JM Financial.
This is Anmol Ganjoo. Rajeev, during the last conference call, you had said that Copaxone contribution will dramatically increase and whatever we should lose on products like Tamiflu that should get replaced going forward. That clearly doesn't seem to have happened this quarter. So just wanted to know your thoughts and what's changed with respect to expectations?
No, I think it's just a mismatch on the -- because sometimes we tend to have an inventory that is already a there in the back. Our market share has increased. Our orders for Glatiramer has increased. You will at least see the benefit of the higher market share and increased volume in the financial year 2019 and 2020. So nothing has changed, Anmol, I'm very positive. And going forward, for the -- actually, the first thing we need to understand is 2 things here. See, the dependents-- we had Tamiflu earnings which were there for the last 2 financial years, so that's why whatever growth that we've had. So going forward next -- in this year, Tamiflu will completely vanish. So we will replace that with Copaxone and from RoW revenue. So that's what we intend to do. And we're very positive about this year. We think we should able to grow our revenues by about 7% to 8%. And also our profit should also grow by 8% to 10% compared to 2019 March. So I'm very optimistic on it.
So just trying to understand the accounting treatment of this profit share better. Basically, what is it that -- no, no, what is the lag that we should work with because there's clearly a breakdown in terms of correlation of what we see in terms of market share as Mylan talks about it and the way it gets recorded.
Yes. Sure, sure. I think the thing -- the way it worked with Glatiramer was, I think, we were paid a milestone. And the next set of profit share would have been triggered only when the milestone would have passed. And we have passed the milestone. So we will have normal profit share. I think the initial payments was driven by milestone, now it is linked with sales. So I don't think you'll see that accounting issue that we had in the previous year, because accounting, it was -- earlier it was without that milestone. So that's the difference. But I don't think you will -- you will see more consistent revenue from Copaxone starting from this financial year.
Okay. That's helpful. And my second question is on the focused markets for FY '20 and some of the focused initiatives. You've been talking about diversifying revenue to different geographies. So what is it in terms of product catalysts, et cetera, that we should be watching out from an FY '20 standpoint?
So for this financial year, I think what -- the 3 revenue drivers are: one is that EMEA business, I'm expecting will grow by about 15%, 20%. So a second driver will be Brazil. So Brazil didn't do well for many years, so we had some very good launches this year, and so that should drive earnings. And we're expecting some approvals. And then Canada, also we are anticipating a couple of launches and couple of favorable settlements. If they all come through, we should do well, I think I started to mention. So these 3 focused markets together, we're expecting about 30% to 40% growth. So that's what will drive earnings this year.
The next question is from the line of Sameer Shah from Valuequest.
I have 2 questions. One is you said that next year we are expecting profits to grow. And this is excluding Tamiflu, right?
I'm assuming that, my friend, exactly. What I'm telling you today is that even though there's no Tamiflu, we're expecting marked -- any meaningful numbers sometimes, even though that number is not there, our earnings will increase based on our assumption, our domestic market and from the RoW business and from Copaxone.
Yes. So Copaxone, basically what -- from what I understand is, so say this quarter profit, if we normalize the inventory write-offs, will be [ INR 140 crores, INR 145 crores ]. So that makes it INR 600 crores. Whereas during the year and this year's PAT is INR 665 crores. So what we are -- so we have upgraded our Copaxone estimates because of Dr. Reddy's delay? Is that a correct understanding?
I'm not -- I've upgraded my earnings based on 2 assumptions. One is that based on what Mylan has predicted will -- because largely Copaxone market share is driven by annual contracts. So based on the commitment that we got from Mylan on the volumes, we are comfortable with these numbers. That is one assumption I made. The second assumption I have also made is that the RoW business would really do well driven by launches in these 3 markets. So those are 2 major factors that...
And so the settlement that you alluded to in -- given for Canada, that is also included in these numbers? Or that will again be...
Sameer, I will not get into specific market and specific launches.
But that [indiscernible] worrying about this? I mean...
I'll not answer that question because I don't [indiscernible] of the business strategy, but I assume that if all of them come through, we should do well.
Understood. And Revlimid what would be the status of Revlimid approval, have we replied to the queries?
We have replied on all of the FDA questions. We believe we should get -- the only [indiscernible] is pending. So we should have an approval -- I'm very confident we should have an approval shortly.
The next question is from the line of [indiscernible] from [indiscernible] Securities.
I just have to take my question. So my question is recently [indiscernible]. So what does NATCO like, with the retail [indiscernible] are there any market share loss for the NATCO?
No. My understanding -- again, I'm going with what is there in the public domain. They got a launch date in the U.S., which is much after us. How many -- so I don't think there will be any loss. I think that's my understanding based on what is there in the public domain.
[Operator Instructions] The next question is from the line of Nimish Mehta from Research Delta Advisors.
A few questions. One, we had, I don't know, possible launch [indiscernible] and I guess [indiscernible] launch. When are we likely to launch? And I mean the question is…
We have a tentative. So the advertiser running the [indiscernible] this, [indiscernible] running this right now. I think the launch date, I subject myself to correction, I think the end of the year. I don't remember what the exact date, okay? So that answers your first question. The second question is what are my expectations, right? I don't have too much expectations on it. I think U.S., generally, where we are one among the many, I don't have much expectation. I do not -- I don't think it will have a meaningful impact on the earnings.
Okay. The last thing I wanted to know was, do we have -- sorry, correct me, if I'm wrong though. We have a settlement on Sovaldi right now, and if ...
We have but it is very far away and it's a very small product. I think the Sovaldi tablets themselves, the whole market is in the combination. And I think most of the -- I think sale is, if I don't remember exactly, they're below 100 million. I can't recollect what the number is. The sale launch date is also quite far. Again, I don't recollect what the date is, it is quite far. So again, it's a small launch, it's not a material launch, so that's why we have not announced the settlement date...
Understood. Understood. And lastly, lastly on Revlimid, again please correct me. We understand there has been a settlement [indiscernible]. Is that right? And if yes, then what do you think is the outlook for the competition in Revlimid?
In the U.S. you're talking about?
Yes.
I -- again, as I told you, I -- we have a good settlement which allows us to enter early in the market. And we also understand that the [indiscernible] will be much after, so that's my understanding. So I think...
This settlement also is likely to be…
I think our earning projections continue to be strong. And we said this settlement only reinforced the fact that we will have exclusivity and that -- and we should do well.
But the reported settlement is also likely to be similar to the [ Alvogen ] settlement is what we understood.
Again, I have -- I'm not privy to everything that happens, but from what -- this is my interpretation. I think settlement by other competitors is -- only reinforces the fact that I think they'll come much after us and that we'll have a period of exclusivity, which -- where we'll be -- where we'll make [ super normal ] profit. I think that's our expectation, I think.
But I mean, just to take it a little forward, we also know that Teva has actually reduced the value of Revlimid, said that they are quite [indiscernible] settlement. So I mean they probably are expecting lower than what earlier were expected as profits from those asset. Whereas we are still…
I don't know what they're expecting. I think they expected [indiscernible] -- and they are asking [indiscernible] exclusivity. I think in...
That is not true. Okay.
Rajeev, I think we never spoke in that manner. I think we were -- always very [indiscernible]. We said there will be a period of time where we will be exclusive. I don't think [indiscernible] will be only [indiscernible] 4 to 5 years, I think that, that was a mismatch there. But that is their interpretation of what it is. But again, I tell you, for a company of our size, I think even a short-duration of exclusivity is a huge [indiscernible]. Okay?
The next question is from the line of Kunal Randeria from Antique Stockbroking.
So firstly, I just want to understand for this quarter, why do we have such high gross margins despite lower profit share?
Why do we have such high gross margin in spite of the fact that we have lower profit share, you're saying, right?
Yes.
I think it's just the nature of our business [indiscernible]. I think that 2 things are happening. If you look at the numbers, we don't have too much supplies of Tamiflu this quarter, okay? So typically what happens with Tamiflu is we bill and then we wait for the profit to happen. So there is no billing and there is no profit, so therefore that got removed. The second thing is, generally our nature of our business is higher -- fairly high gross margin. I mean Copaxone contributes high margin which is also reflected in the earnings. And our domestic oncology is fairly high margin. Our API business also is fairly high margin. So it is just the nature of our business, I think. In spite of not having [ an end ] result, it's still we did quite well. So we have 2, 3 other products there. We have limited amount of competition.
Okay. So what -- my question was more like, since we have booked mainly [ first class for ] Copaxone in this quarter and going forward we'll be booking their profit share, so will the margins go even higher than this?
I think as I said, I think overall what we are projecting is that we'll grow by about 7% to 8% and -- in the top line. And also we're expecting that our profit also should grow by about 8% to 10% from where we are today. And this is primarily driven by 2, 3 -- we are making 2 assumptions, my friend: that Copaxone should do well for this year based on the demand that Mylan has projected. Two, I'm also assuming that the RoW should also do well based on our launches and our other expectation that we have from these 3 markets.
Okay. The second question is on how -- about how your cardio diabetes division is performing. So you launched the VALSAC which is a fairly limited competition kind of product and the market is growing fairly fast. And I guess you were exempted on [indiscernible]. So what is the outlook for this year? Is it -- and so far has it been as per your expectations? And how do you see this business panning out in the next 2 to 3 years?
I think we've been always aggressive with patents, I think sometimes you do face the results. I think both these launches unfortunately we got exempted. VALSAC, we were able to launch for a period of time but however we couldn't continue to supply the market. Both these cases are pending at Delhi High Court. We're hoping that we'll get a favorable outcome in these cases. And I think our strategy of going after patients will continue the way what we have done in the past. And so we have a good set of launches that we lined up for this financial year as well, as exciting or even more exciting than VALSAC. So I think our strategy continues. And I think it's fair game, sometimes you're successful, sometimes you're not. But you don't shy away from a product so that's how it is, so. And we are ready for next set of launches and I think we're very optimistic that we should do well.
The next question is from the line of Vishal Manchanda from Nirmal Bang.
Could you break up the domestic formulation [indiscernible] oncology formulation [indiscernible] cardio diabetes?
Just one moment.
Yes, I will do that, Vishal. For the domestic formulations, we said we had INR 735 crores for the whole year. And you want the quarter as well?
Yes, for the [ third ] quarter.
Yes, we'll do it for the year. So for the year, the oncology is about INR 397 crores. Brand pharma were INR 246 crores. CnD is about INR 8 crores. Third-party, INR 84 crores.
Okay. And sir, if you could help on the [ exposure ] can you break that up into profit share and basically the…
Yes. The total [ exposure ] INR 136 crores for the year and about INR 750 crores of profit sharing, so it was in combination.
Okay. And one more. On the rest of the -- rest of world package, could you provide some color on what are the launches? So basically, how many launches are we expecting in Brazil and Canada? And so far, have we been -- have we got approvals in line with our expectations of which have been getting delayed also?
I think with respect to -- there's 3 markets that we are expecting launches. India we're expecting about 8 to 10 launches this year; Brazil, we're expecting about 3 to 4 launches; Canada, also we're expecting about 3 to 4 launches. That's the main one.
And these will be kind of -- all of these will be limited competition…
I think that's what our expectation is, yes, that's our expectation.
And so last time you said, you can anticipate $4 million to $5 million per launch for Brazil. So you can maintain that expectation?
I think different products have different outcomes, [indiscernible] how it is less value. So I don't want to give away which product to launch because that gives away competitive advantage. But overall, our expectation is the portfolio should do well and these products are found in the area of oncology. So that's the way to answer it.
Okay. And what is the current base in Brazil and Canada, put together?
I'm sorry, say it again.
What is the current base revenues in Brazil and Canada?
Canada, this year, I think is about INR 196 crores.
Yes.
And Brazil, we think about -- give me 1 minute, yes?
Brazil will be INR 33 crores.
Brazil was INR 33 crores.
INR 33 crores.
INR 33 crores, Brazil; INR 96 crores with Canada; INR 735 crores India. So these were 3…
The next question is from the line of Nitin Agarwal from IDFC Securities.
Rajeev, on the -- your growth guidance for FY '20 is a positive surprise. In your assessment, what could be the risk to the guidance, if any, in terms of on the downside?
Downside will be, one is we have -- Copaxone generics happens sooner than we think, one. Second is the emerging market expectations that we have from Canada and Brazil, there's been an approval delay or any adverse patent issue, then that could have an impact.
And in Copaxone, you're assuming -- what are your assumptions right now, no more generic coming through for the year? No other generics?
I assumed in this model that the novel will come until end of this calendar year, this calendar year, until December. I've assumed that -- and again, we're all making expectations and I think again I'm only making forward-looking statements based on what we believe would possibly happen. But I'm playing around it and setting out the targets. Yes, that's our expectations.
Perfect. And secondly, Revlimid for us begins to kick through from FY '22 onwards.
Yes.
FY '20 is what you've sort of laid out. I mean how should we look at '21? Do you have any color at this point of time in terms of how it could look versus FY '20?
'21, I don't want to say anything, Nitin. Let's see how the year goes, and I'll give you more clarity based on how the other divestments are. See, as I said in the past, '20 and '21 earnings have been driven by emerging markets, right? And if the emerging market launches go well, then I think we should do well. So for now, I think I just want to speak only about '20 because '20 is where I have clarity on. I think this is what our expectation is. And '21 also, I'm very positive that the actual -- see this is what -- '21, I speak about it, I think, as the year goes. But you should look at it like this, Nitin. I think now -- so this year, it's about INR 642 crores of profit. And going forward, '20, as based on our expectation, we should do about close to INR 700 crores. And in 3 years' time or 2 years' time, by '22, our expectation is that we should be able to double our profit based on the settlements and the launches that we have. That's the way you want to look at it.
The next question is from the line of Kunal Mehta from Vallum Capital.
Rajeev, just a single question. We had made a [ patent ] for filing for Imbruvica, [ equivalent ]. So I just wondered on -- I wanted your comments on how do you see the quality of opportunity that this molecule presents? And I think there are I think few small and big players who are fighting for it, around 5, 6 players. So just wanted your view on this one.
See, this is like this. I think a lot of people never did understand what the Imbruvica opportunity is. What the innovator has done is he has launched the capsule first, the 140-milligram capsule. The number of multiple filers that you just heard about are on the capsule who have filed [ an MC-1 ]. But what innovator has done is he has moved all the patients from capsule to the tablet, okay? And there are multiple-strength tablets, 560, 440, 140 and so on and so forth. So basically what he has done is, if I -- I don't remember exactly, but roughly about 90% of the market has moved to the tablet. And here, we have the [ sole ] last year, okay? So that's the position that we have. And regarding expectation, I think it's early days now. We just filed that. So I think with time, I think we can give you more clarity on what the launch date is going to be. But it's a very good filing. For me, the way I look at it, it is my next…
The next question is from the line of Hari Belawat from Techfin Consultants.
This is regarding this expansion foray going into agrochemical. Last time, you said that you're expanding by about INR 100 crores, expanding about that. What is the status of that because the project is supposed to be completed by 2019 end?
It's on track, my friend. It's on track. [indiscernible] has been built in [ Nellore District ] in Andhra Pradesh, and we're building a small technical plant and a small formulation plant for agro. And as you rightly said, it's INR 100 crore investment that we're spending. And our expectation is that the [indiscernible] should be ready by October or November of 2019. I think we are on track.
Okay. So just one more clarification I wanted to know. The company results had been very good. I mean EBITDA margin and profit margins are very good and even there has been a buyback of the shares by the company. But despite all these things, this share price has been taking a beating in the market. I know human has been controlling all these things, these market forces that decide. But in your perception, what could be the reason for, I mean, best of the performance, buy the equity shares, why the share price is going down?
Very good question. I have no answer, my friend. I just don't have an answer to that question. I think what I can only tell you is what the prospects of the company are and what the strategy of it. And share price, I don't think we should -- I think we should just focus on strategy and I think everything has a way of settling down and coming back. So I'll leave that answer to that.
The next question is from the line of Jagannadham from Centrum Broking.
So taking the same question on the buyback and looking forward in that, after spending INR 150 crores of buyback, still we're having cash and buying balances much higher than the previous year. Is there any thought process in terms of launching maybe one more buyback? And is there anything that can be expected in the...
Not right now, my friend, nothing. I think we're very comfortable. I think -- as you've seen, we have a cash balance of over INR 1,116 crores. And for the [indiscernible] business accounting at best is about, a little less, it's about INR 300 crores as of March -- INR 314 crores as of March 31. And so a lot of it -- actually, clearly about [ 140, 150 ] we have paid back in the last 2, 3 months. So we're very comfortable. I think I would make the point that, for now, I don't want to do a buyback, and we continue to focus on our strategy. And I think we'll -- and we'll keep the money for something big in the future.
The next question is from the line of Nimish Mehta from Research Delta Advisors.
I just wanted to know how are we impacted on the oncology pricing that the government keeps slashing down. So do we have any impact of -- because [indiscernible] links directly to gross [indiscernible] premium.
No, Nimish. We don't have any impact on our earnings. Even that has dropped prices, we have dropped our brands from 30% to 70% to 80% depending on which brand it is. But fortunately, we have right -- not much impact on our margin because despite -- control has been driven by our net pricing. What they've done is -- what they said is if your net price is X, the trade margin can be only up, that's the nature of that X. So we have had no impact. The impact has been completely on the distribution channel. Okay?
And the second, on Copaxone, I mean I understand that you're booking [ potential ] increase next year, but what I'm seeing that there are 2 more settlements just last month. And now we are almost file complete [ there are only 2 ] that are in the market awaiting approval and launch. So...
Which product you're talking about -- which product, Copaxone you're talking about?
Copaxone, yes. So there are 2 more settlements, Biocon and Apotex, which has happened in the last [indiscernible] filing company in the settlement that settled that product and awaiting launch upon approval. It seems there is no risk on genericization?
For now, there's no risk. So for now, we have -- we know we launched this nearly 1.5 years ago, and we're doing well, you know. And I think it's a tough product to make. Eventually, there'll be generics for everything. I mean that is the endpoint. For now, we are okay. I think -- it will not, my sense is that eventually, there'll be other generics. I'm not going to say that there'll not be other generics which will come with time. But there'll be a period time which we will have limited amount of competition. And even if another generic were to come you, I mean you've seen Sandoz has come, but it has not really affected our profits or our sales. So -- and there's a lot of market share, annual contracts, marketing, promotions. So there are a lot of aspects to it. It's not like a plain vanilla generics. So it's -- it will be missed opportunity. I think -- and there is a certain element of it which will stay for a long time, I think. I'm not too concerned. And eventually, if we -- I always said this in the past. I think we're working very hard to sort of diversify our revenue. And even though -- for example, even the Tamiflu has now completely vanished. I'm comfortable I'm able to tell you that we're able to replace all that we lost in Tamiflu with other products. So I think that speaks to you about our ability to sort of diversify and build a portfolio of size in the United States. So I think we've been saying it for many years, I think we're probably one of the earliest to say that U.S., you need to do products in the U.S. but you need to stick to more niche portfolio. And I think with diversification you have to build on the emerging market. Okay?
Understood. And yes, just for my understanding again. As of now, we are at what, 60% to 70% price erosion on Copaxone.
I don't want to give it, it's competitive information, Nimish. I'm sorry I cannot...
The next question is from the line of Vrijesh Kasera from Mirae Asset.
Hi, Rajeev, Rajesh here. Sir, just if you could give all your strategy...
Vrijesh Kasera, can you speak a little closer to the handset, please?
Yes. Rajeev, I just wanted to understand your strategy on this agrochemical business. So what exactly you want to do with -- whether we are looking at front-ending on the domestic market, export, contract manufacturing, AI? What exactly are we looking at in agrochemical? And what is the kind of potential that we see around here?
I -- we feel we have some very niche areas in agro, where there aren't too many who are working on. I think these are first in launch in India kind of areas. I don't want to get into details of what we're doing, because again we're giving our strategy away. I think with time we would like to talk about it. I think we have obviously publicly announced that we are doing this. And the benefit of these earnings, you'll not see in the near term. We'll not see it in '20 March. We may see something in '21 March, but I think we'll see more in '22, '23. I think that's where you'll start seeing this benefit of [ our product ]. And what I can reassure you, again, we're focusing on niche, limited competition, high-technology, high-value [indiscernible]. We're not looking at agro as a commodity player. I -- you always know an agro company which always focuses on niche and hard-to-do stuff. We go and look at it as a commodity play. I know most people think of it as a commodity play, but we're not looking at it as a commodity play.
Should I understand that it would be mainly focused for the Indian market, with the products which are not present in India?
I think initially -- I think of the business model that we have laid out, I think 50% to 60% of the revenue we're expecting from India, almost 30% to 40% expecting from export market. Export market will come into partnerships because we don't have presence outside India. India, I -- we're looking at different options. But my gut tells me I think we want to do it ourselves. I think that's where the real value in the chain is. I think that's -- when you go front-end yourself is where the real value is. And I think our unique selling proposition is from the fact that we're doing a niche portfolio. And so let's go [indiscernible]. Yes, it's okay.
And other -- sir, other than this CapEx of INR 100 crores, how much is the OpEx that we might have to spend on people and developing the distribution chain and everything?
It is not much. I think my sense is we probably will burn about INR 10 crores to INR 15 crores a year, I think. That's my sense. That's part and parcel of building a business, so not a tremendously large amount. But it is obviously a reasonable amount. But that's how it works. You have to spend money otherwise you don't get anything. So -- okay. Give opportunity to someone else, yes? Thanks.
The next question is from the line of Nitin Agarwal from IDFC Securities.
I have 2 questions. One is on -- in FY '19, barring Imbruvica, have there been any reasonable launches of you as -- in terms of assessment as you stand, as you can see?
We did about 5, 6 filings, Nitin. But other ones we have not publicly announced, so I don't want to say anything. But -- and in due course, I think we -- I'll -- in due course we'll let you know what these filings are, okay? And what we have done as a filing, but we're not -- there's one that we did where there was like 12 pilots. So there's not real value on the particular product. So once we get clarity on what we call -- what the amount of competition on the other filings is, then we'll probably speak about it. They're the only high -- big, high-value filings that we have revealed. Imbruvica was a big one.
Okay. And secondly, on the hep C exports, is that still a revenue opportunity for us?
It's still there. I think we're expecting 2, 3 approvals in -- I think in Indonesia, Philippines and also we're expecting something. As of now, let me tell you how big it is. Rajesh, how big is it, do you have the number with you?
Export is still small, Nitin, for the quarter it's near about INR 2.5 crores. For the year, we did about INR 11 crores.
Okay. Anything else, Nitin?
No. I just -- sir, in terms of when you see these approvals, Philippines and all these countries, I mean how big can -- even if -- assuming it falls as per you, as per expectations, how big can this thing get for you?
I think it's like this. I think domestic is doing about INR 12 crores a month, so it's about INR 150 crores and then you add that up to do a INR 170 crores to INR 200 crores range. So if you see any -- I think it'll stop further decline, but I don't think you'll see the portfolio becoming very large like in the past. It'll probably be a steady-state sort of portfolio. This problem with this [ product ] -- or the miracle of this product is it's a cure, right? So I think once people take it for 3 months, then a number of patients keep dropping -- so unless you have new diagnosis, it's very difficult to increase market share.
The next question is from the line of Rohan Advant from Multi-Act.
Sir, my question is around some basic understanding of a steady-state base business profitability. So if I understand, INR 750 crores in the profit share and PAT for the year is INR 650 crores, INR 640 crores. So on our profit share as a [indiscernible] on the total PAT. So say Copaxone is [ heavily priced ], Tamiflu is gone and Revlimid is yet to come, what would be the steady-state base profitability? Or we shouldn't think like that where every year there would be either Copaxone or Revlimid. Or how do you think of the impact?
I think we are able to replace it with other products. I -- again, dependency on -- so we have reduced dependency dramatical, and this year's position [indiscernible] but no Tamiflu, of course. That is one. And the problem is the contribution of profit share doesn't just come from only one product, my friend. It comes even from other products also. It's not just Copaxone. We have other products that are aligned with Lupin, Reddy's and other partners as well. So it's very diversified. And -- see what we do is -- I mean it's a little bit -- because we don't have strength in a lot of these markets, we do a low transfer price and, largely, revenue comes from the profit share. And so -- I mean to give away, to answer you specifically how much we make in every product, I don't want to say that. I want to avoid answering that question. But the dependence on Tamiflu was really large last year, and I think this year it is none. And now our Copaxone also will contribute to a significant part of the profit share. But -- however, we're trying to diversify our portfolio. So that's the best way to answer.
Okay. And just to follow up. So on profit share, it flows directly to profits or it doesn't have any cost associated.
Most profit share is just, it adds to the bottom line.
The next question is from the line of Jagannadham from Centrum Broking.
Just the point on that agrichemical [ flexible ] '21. By then, the full financial year effect will be seen on agrichemicals. So how much probably in terms of the top line and bottom line is the contribution from agrichemicals? Will it be like very major opportunity? Or will it be just head on kind of business? How you view the whole...
I think my vision is that it should be about 10% to 15% of our revenues in about -- not today but maybe in about 3 years' time.
Okay. And in terms of profitability, any results which…
[indiscernible] targeting [indiscernible] EBITDA, but it's tough to say, right? I mean you can't really predict what your profit is going to be on a particular item in 3 or 4 years' time. But I think as I always said, I don't look at it as a commodity business. I look at it as a niche value business. So there's a lot of opportunity.
Okay. So I mean -- but that business won't be the main [indiscernible]. It's not like a change in the overall mix of the business wins.
No. Absolutely not. I think as I said, 85% to 90% of our revenues will be driven by [indiscernible]. It's a nice niche portfolio for diversification. And I think -- see, I think we have had this discussion in the past conference calls as well. See, clearly what worked for us in the last 15, 20 years as an industry is not working anymore, and I think you need to think a little bit outside the box. I think -- see, different people have different strategies. Again, for example, somebody like Cadila has bought an OTC portfolio. And the other thing I -- I think people have their own ideas of diversification in their own way, using the skill set that we have. So I think this has to -- I think the way I'm looking at it is I'm looking at a way of expanding this portfolio where we bring in different streams of revenue, which are well-diversified. So then the volatility of earnings will come down. I think that's a concern because we've been so -- as an industry, being so U.S.-dependent, when something happens in the U.S., then the earnings just go -- become extremely volatile. I think our attempt for the last 2 years has been for diversification.
Any more new areas that you are exploring? I mean besides this agrichemical player...
No. No. No. I mean whatever I publicly stated is what we are doing. I think -- with what we're exploring. I think emerging markets and agro, I think that's -- this is how I look at the world. I think -- and we continue to pursue things in the U.S. But -- however, we are looking at a strong emerging market and an agro strategy as well.
The next question is from the line of Rahul Jagwani from SKS Capital.
Actually, I want a clarification on the buyback policy. Because in a previous buyback we bought back [ 70 ] the amount. So I mean -- and right now I think earlier you said that you don't want to do a buyback, but the price is still lower. So -- and you have cash. So what's the logic?
So it's a question of we've said we've done the buyback, [indiscernible] shares we have canceled. Okay, that answers your first question. What is the logic for what? I mean why are we not using our cash? Is that what you're saying?
Yes. I mean is there something specific we need so much cash for or like...
No. I think -- I believe, I'm -- I like to take very high amount of risk, okay? So when I do -- in project initiatives, we take a lot of projects where 4 years, 5 years, 7 years sort of payoff. And I like to keep my -- a company in a way where we have -- always have cash on books. And we use some of the cash to do buyback, and some of it was used for dividend. If you want me to say whether I want to get rid of the cash and give everything back to shareholders at this time, no. The answer is no. I don't intend to do that. I think I want to keep the cash for me to make these high-risk investments. And maybe if there is a huge opportunity that comes in the next few years, maybe we can use this cash for an acquisition or a new business idea. For now, we'd like to keep the money. I don't want to give it away.
The next question is from the line of Srihari C. from PCS Securities.
Firstly, on the domestic market. If you can give some kind of a long-term outlook, of the INR 735 crores. And what is the kind of number you'd be looking at maybe 3, 4 years down the line? And is the inorganic growth a critical part out there? And secondly, I suppose Copaxone -- I presume Sandoz is not doing as well as the -- your combined with Mylan. So strategically, what is the difference between the 2 players?
First question was on how much we expect the domestic to grow. I think our domestic expectation is -- where it will grow? About 12% to 15% this year. I think that's our expectation. And going forward, I'm very bullish...
What about -- what is the long-term outlook?
Long term, I think we can comp in that range, I think. As of now, I feel we can comp on around 12%, 15% comfortably we can comp on, based on the pipeline and what we have. But again, keep that in mind, as a caveat, we do high-risk launches. So there's always a risk of injunction. So it's not -- nothing is guaranteed, but we'll continue to pursue what we pursue. That's the first part of your question. Your second question was on why do we have higher market share than Sandoz. I think one advantage we had is the first-mover advantage. I think Mylan has done a great job in terms of conversion, in terms of marketing. I think that's probably made the difference. As far as more aggressive than Sandoz, I think that's fine. I think we have -- fortunately, we have a good marketing partner.
And you expect that to be a [ variant ] for the other generic players?
My sense is yes, I think. Yes, that's the sense I have. I mean but obviously time will tell. But it's not an easy product for approval. I don't think it's an easy product for marketing. It's not like the [indiscernible]. I think you can't sort of extrapolate what happens in a...
Okay. And on the domestic front, I mean how critical would the inorganic growth be for you?
Inorganic, I'm not looking at anything, my friend. Right now, we looked at a few things. But I feel that there's nothing reasonable available at reasonable valuations. I think sometimes it's just smarter not to do a transaction when things are not reasonable. I think that's how I look at it.
So where is the focus right now in terms of acquisitions?
No. I don't want to do any acquisition. As of now, no.
The next question is from the line of Sameer Baisiwala from Morgan Stanley.
Just to your point that you will double your fiscal '20 profits by fiscal '22, 700 going to say 1,400. Have you made the adjustment that Copaxone can moderate in those 2 years? And despite that, do you think you can double?
Yes. Yes. Based on the settlements and the launches and our strategy, yes. That's our expectation.
The next question is from the line of Raj Kumar from Green Portfolio.
Sir, would you like to shed light on your Tamiflu drug?
What specific question on Tami?
How much it contributed in the 2018 and 2019 and what is your outlook for going forward?
Okay. I think I already answered that question. I think '18 and '19, it's clear [indiscernible] all in the earnings. I've said that. I split by product, I'm not doing for competitive reasons. And to answer your question on FY '20, on our projections, we have removed that from the projection but it will play a very minor role.
Okay. So which drug then will replace it because Tamiflu contributed so much in 2018 and '17 I think, so...
It'll be -- yes, sure. It'll be replaced by -- some amount will be replaced by Copaxone, and some amount will be replaced by the emerging markets.
Emerging markets. Sir, would you like to some -- tell you about the Revlimid medicine? I think it is in the process.
Development is in the -- you talking about U.S. market or...
Sir, when will it launch?
In U.S. market, it's '22 financial year, '22 -- March '22 financial year.
Sir, would you like to some put light on how much revenue we need to come around if there is no Tamiflu in this revenue?
That assumes no Tamiflu, my friend. What position given assumes no Tamiflu. We have done 7%, 8% growth and 8% to 10% growth in profits not -- without Tamiflu is what I was saying.
So Tamiflu, nothing contributing in your profit this year.
We are assuming no meaningful contribution in the financial year '19-'20.
The next question is from the line of Sameer Shah from Valuequest.
Yes. So question is on these domestic litigations that we face injunctions from Delhi High Court, et cetera. How is the legal status on all this and now, given that U.S. is pressurizing India to kind of respect patents more, et cetera? Do you think this strategy will face more difficulty going forward?
The government has nothing to do with legal [indiscernible]. No, Sameer.
Of course not. But I feel all this can be kind of -- how strong are the IP [indiscernible] in India? I mean that's your strategy basically.
I -- okay. I'll answer the question in a different manner. I think IP litigation is difficult in India. I think I'll not say that it is easy, but you've got to keep trying. I think that's all -- that's what business is all about. And you're going to have a strategy, a legal strategy and then you keep trying. Sometimes you succeed, sometimes you don't. And I mean -- I think a few minutes ago, somebody alluded to the fact that we got injuncted twice. But I can give an example of the 7 products that I didn't get injuncted, for which we allowed us to build what we build today. So when you do this business, you want to get at least -- you're going to have some failure, 40% to 50% failure it is baked into the model. I think we just have to keep going. I think that's all it is.
And so basically, say, if we take a case in point of [indiscernible], for example, if that -- if we've got an injunction there, is that opportunity kind of gone forever? Or is there...
Yes and no. It depends on -- see, this quarter, supposed to give an [ audit ]. If, let's say, we win the case and we end up first in the market, then there's some opportunity. Let's say we don't win the case, then yes. And if the case gets dragged longer than we anticipate, then yes, it's gone. It's -- there's no like -- I can't give you an answer for every product, this works or that doesn't work. It all -- it's all a function of how many competitors are there when you win, [indiscernible] win, when the judgment comes, the timing of judgment, when the other patents are there. So it's a case-to-case analysis we have to do. But broadly, if you want something special in domestic, then what you -- on your base business, you have to be aggressive on targets.
Okay. Got it. And second question is on the work -- CWIP is about INR 600-plus crores. So this is the [ development ] plant and the agrochemical plant. Is that the main component of that?
These are -- there are 2 plants. One plant is in Vizag, which we have done almost INR 250 crores is the project cost. I spent most -- about INR 200 crore we have spent on Vizag. So the plant is just getting operational this quarter. So it will get capitalized this year. So about 40% of that is coming from the Vizag facility. And the agro, we have spent about INR 50 crores so far. So that's about 50%. Rest of the stuff is just basic maintenance CapEx and so on and so forth. So -- but these 2 are the big items, so 50% to 55% is contributed by these 2 plants.
All right. And going forward then, with whatever CapEx we have done, would we -- it will be only maintenance CapEx? Or would we -- what kind of CapEx would we need to continue?
I think we feel -- I think -- we did the budget meeting the other day. I think we are targeting about INR 350 crores to INR 400 crores of CapEx a year.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.
Okay. Thank you all for your questions. Again, anything pertaining to the call, what we have discussed, please feel free to reach out. Thank you all. Have a good day.
Again, thank you, Deepak. Thanks.
Thank you. Ladies and gentlemen, on behalf of Edelweiss Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.