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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 '20 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Prakash Agarwal of Axis Capital Limited. Thank you, and over to you, sir.
Yes. Thanks, and good morning, everyone. On behalf of Axis Capital, I welcome you all for the NATCO Pharma Fourth Quarter Fiscal 2020 Earnings Call. Today, we have the senior management represented by Mr. Rajeev Nannapaneni, Vice Chairman and CEO; and Mr. Rajesh Chebiyam, Vice President, Acquisitions, Investor Relations and Corporate Communications.I'd like to hand over the call to Mr. Rajesh. Thank you.
Thank you, Prakash. Good morning, and welcome, everyone, to NATCO's conference call discussing our earnings results for the fourth quarter and the full year of FY '20. I hope all of you have been staying safe during this unprecedented stressful COVID times. So for our call, we may be making certain forward-looking statements, which are predictions, projections or statements about future events. And anything said on this call, which reflects our outlook for the future or which can be construed as a forward-looking statement, must be reviewed in conjunction with the risks that the company faces. I'd like to state the material of the call, except for the participant questions, is property of NATCO, cannot be recorded or rebroadcast without NATCO's expressed written permission.So we'll begin with the call with our results highlights, and then we'll follow up with an interactive Q&A. So regarding the earnings detail, we hope you've received our financials and the press release that was sent out yesterday. These are also available on our website. For FY '20, NATCO recorded a consolidated total revenue of INR 2,022 crores. This was a decline of around 9% year-over-year. Net profit for the period on a consolidated basis was INR 458 crores as against INR 642 crores last year, showing a decline of about 29%. For the fourth quarter ending March 31, 2020, company recorded a net revenue of INR 477 crores on a consolidated basis. This is almost flat compared to INR 486 crores during Q4 of FY '19. The profit after-tax on a consolidated basis was recorded as INR 93.2 crores for the quarter, roughly about 22% lower than the prior quarter.So as we've stated in our release -- press release, the overall decline in revenue and profits from the prior year was primarily due to continued decline in the hepatitis C product portfolio and to an extent in our oncology segment due to pricing pressures. Company also faced slowdown in the business operations during the fourth quarter due to supply chain issues amidst the COVID-19 concerns, which we believe are subsequently resolved. There were -- the details of the segmental breakdown was also given in the press release.Now we'll open up for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Anmol Ganjoo from JM Financial.
So Rajeev, basically, would you like to spend some time on giving some color on the oncology business? Because -- what has exactly been driving the decline? Is it just pricing or the fact that during the quarter, there was a lot of pushout on account of oncology as a practice? Would you like to kind of just -- and how quickly do you expect it to recover? And to that extent, is the demand stable? It has just been pushed out? Any color there would be helpful.
Certainly, Anmol. I think, as you're aware, I think, the COVID fear started around the month of March, even though lockdown was in later part of the March. A lot of people were uncomfortable coming for treatments to the hospital because they was a risk because most cancer patients have immunosuppression and so they could lead to a COVID inflection. I think there's a lot of fear. We're seeing that fear in -- playing out in March and playing out in April, May and June. So if you look at the onco portfolio, because of people not coming out and all, there was an initial decline in sales, but things are picking up now. Especially on the oral onco, I think the sale has become more stable now. I think that's stabilized much in -- I think by the time June has happened. But I think on the chemo side there, we are seeing a lot of pressure. I think people are not coming back at the same level as they used to. So I think there's a fear of infections. I think that continues. So I think there's some pressure in domestic business. There's no doubt about that, especially if it's just hospital related.
But you alluded to pricing, so I think has pricing also suffered because whatever...
I think pricing was the overall trend for the 2019/'20, we're seeing pricing pressure, okay? Now I think the pricing pressure is not the factor anymore. Now it is COVID. I think what you will cite in the press release was -- citing was, there was overall decline over -- during the whole year. So I think that -- and the primary reason why the sales drop was because of the pricing pressure. The secondary factor that is playing now is COVID and COVID specifically to the chemo products. So our portfolio has both oral products, which you can take at home; and chemo products, which are taken in hospital setup. And what I was trying to -- so your question was specifically what was the COVID impact, that's why I stuck to that aspect of the question. So essentially what I'm trying to say is that the oral tablets have sort of rebounded now. I think we are seeing more stability in the business now and things have settled down. All the pent-up demand is coming back. So I think I'm fairly comfortable on that aspect of the business. But the chemo portion continues to be not as strong as what it was because of the poor hospitalization. But again, where this is going? I have no idea, I'm also like everyone else. So -- but as of -- if you ask me, is there a lower demand? Yes, there is lower demand.
Okay. So on the second driver of the performance, which is hep C, now -- and obviously, it's been a long wait, but what do you -- when do you think this stuffs out [Foreign Language] in terms of not dragging our operational performance any further?
Yes. I think the impact -- yes, Anmol, see, I'll tell you what. You should understand, we should put it in perspective. See, these sales of hep C were INR 500 crores about 3 years ago. And today, the sale is down to INR 117 crores this year. So we are seeing actually literally a INR 400 crore decline. So if you look at it that way, I think if you look -- see, but that's a very unusual portfolio. See, when it came, you had a huge pool of patients and in 3 months you're curing everyone. So once you start curing people, then obviously the patient pace drops dramatically. So it's not like a cardio or a diabetic product where, one, you get someone and you get them for a very long time. This is not that kind of product, okay? So now you can look at it like this. I mean, now the contribution of hep C has dropped to about 20% of the business. It used to be about 50%, 60% of business. So if there is -- and because of COVID, not when people are coming and getting tested for the hep C because in the hospitalizations drop. So there's pressure. I'm not denying there's no pressure, but the impact will be less now. So let's say it degrows another 20%, 30%, then the impact is only INR 20 crores, INR 30 crores. When it was degrowing earlier, the impact was more large number, but now it will be less. And I think things are stabilizing, but that's the nature of the business. I mean, they can't do much. But if you leave that issue out, overall I think the portfolio has done reasonably well. I think this year, I think, our sales have clocked -- give me a moment, I'll just pull up the sheet. Total formulation sale is about -- Rajesh, what is the number?
Yes. So the total domestic formulation was INR 540 crores for the year. And oncology recorded about INR 308 crores out of that. And hep C and non-onco related INR 117 crores, as Rajeev was just alluding to. CnD did about INR 45 crores, which is a significant jump on that, where we had almost 0 sale about 1 year, 1.5 years ago. So I think we are trying to diversify. I think we're doing well. But I mean, when dealing with hep C, it's the nature of the business. There's no better way to answer that question.
[Operator Instructions] The next question is from the line of Anand Bhavnani from Unifi Capital.
Sir, in the answer to previous question asked, you mentioned that we are facing challenges in chemo. So can you give us a breakup of between chemo and oral in terms of revenue for us?
I think oral, I mean, back of my head, I mean, I cannot specifically tell you, but I think about 70% -- 65% to 70% tends to be oral, about 30% to 35% tends to be chemo typically, roughly -- I'm giving a rough estimation.
Okay. Okay. And sir, my second question is on Revlimid. Now in U.S., in the state of California, a new law has come up in January 2020, which renders all the agreements between innovator and generic company to limit marketing or sales of generic product as anticompetitive. This law has just come up in January. So do you think this kind of legislation can be a problem to our kind of settlement with the innovator in case of Revlimid?
Again, I need to check with my legal adviser. But my understanding is that we have entered this agreement much before the law has been enacted. And so I don't foresee a problem. I do not know the details of the law to actually comment. But I think that's my initial comment. I don't want to answer at this time. I don't think I can give on the call. I think it will be a little unfair to ask that question because I'm not aware of all the facts, and I don't have all the opinions in place. But I think that if you want me to give answer, that's probably -- that's my understanding. But again, we probably have to do a deep dive to get a better understanding.
Sure, sir. Completely appreciate that. And I'll send it -- the whatever data I have on this law, I'll send it to your company secretary, and maybe you can have a look and in due course of time, we can have a discussion.
Sure. Thank you.
The next question is from the line of Rahul Veera from Abakkus Asset Manager.
Just wanted to understand, what is the status update for Revlimid in Canada?
Canada, we are scheduled for a trial in first week of July. So that's where we are.
Okay. So we are definitely not going for settlement?
It's premature to talk about things of that at this time. I think our stated position is that we are going to trial in first week of July.
The next question is from the line of Tarang Agrawal from Old Bridge Capital.
I have the following 3 questions. The first one, has there been any progress on CTPR countersuit filed by FMC?
On the court case, you're saying or on the approval, you're saying or both?
On both.
Okay, on both. Okay. The file is moving well. We are anticipating approval shortly, but things are moving well. I think we filed it out about 9 months ago. So I think -- but again, I don't have clarity on the actual approval date, but I think things are moving well. We've answered all their queries. And I think we'll have clarity on this issue shortly. And the court case and all, I think there's nothing much to report at this time. There's a pending court case. We have already reported that. So I think there's no -- nothing to report on the court case at this time, which...
So progress is pending from the judiciaries or -- I mean, where are we? Are we waiting for some action from FMC, something to come back from the judiciary? How -- where are we exactly?
Both questions -- I think what I said is we got some queries from the [indiscernible] department. And I think we have answered those queries, and we are awaiting approval, okay? That is the aspect on the regulatory approval. The court case, as of now, there's not much progress. They have sued us. There's no order against us. So that's the position today. I think that's what I said. So I think there's nothing to report right now. I think as things change, we'll probably update, but as of now, that's the position.
Okay. The second one on your investment and associates, so basically, I wanted to sort of get a sense on the purpose of investments in OMRV, Veda Seed Sciences and AACP? And what is the financial commitment that maybe NATCO is willing to provide, respectively, for each of the above?
Yes. So you asked for OMRV, Veda and AACP, okay, right. I'll start with Veda. So Veda, our investment, I don't recollect the number, I think it's like INR 7 crores, INR 8 crores, I think. But I don't remember the exact number, but -- and it was done some time ago. See, when we started the agro business, I think we wanted to understand how the distribution works and how products are sold. So it was sort of, for us, this company is not engaged in chemical manufacturing. They are engaged in seed distribution Bt cotton. So I think for us, it was a learning curve. I think sometimes when you do an investment, I think you get a better idea of what it is. So I think that's what it was.I think OMRV is also similar size investment that we have done this financial year. And also it's the same logic, I think, to understand how hospital business works and it just gives you a see through. These are all small minority stakes. We are not taking management control. There are all single-digit -- low single -- high single-digit sort of positions. There's nothing large.And AACP, again, is a drug discovery company based for the U.S. And again, this is an area that we don't have -- we're doing limited work, I think. So generally, I'd like to associate with companies, so let's say, in the future, you want to do some work in drug discovery, it will be a nice see through when you do these investments because you'll get a feel of how things are done. This company especially works in oncology drug discovery. So we're also bringing programs internally as well. So what these investments do is, allows you to give you a see-through on how things are done, give you a fresh perspective. So these are all -- just to understand these businesses, it's just a small way to learn. I think that's how I look at it. And these are not overly large amounts where we are risking it all -- all numbers below INR 10 crores. Okay?
And sir, in the case of Copaxone, the last I checked, Mylan had achieved 18% market share. So what's the status currently [indiscernible] players are there in the market?
I think it's much higher.
Over 30%.
I think it's over 30%. I think that's what I remember, but I stand to be correct, but I think it's around 30%. I think that's what my gut tells me.
And are there any new entrants in this market?
No, there's no entrants. This is fairly a stable market at this time. And we're continuing to do well [ with effort. ]
The next question is from the line of [ Kshitij Joshi ], individual investor.
So there is an enabling resolution at the Board level to explore opportunities across the specialty chemicals universe, not just agrichemicals, right? So what are your thoughts around that, please?
Enabling resolution, I think particularly it is meant for agro-related business. I think that's what -- that was -- maybe the language was all encompassing. But the specific investments that we're making are particular to agro.
So is it safe to assume it is for agro and not -- just not overall?
No, no. I think there are 2 areas that we are operating. I think we operate in pharmaceuticals and pharmaceuticals chemicals and agro. I think agro is a strategic decision that we've made some time ago. Yes, I think these are 2 areas we're doing it, okay?
All right. And my second question is about how the -- NATCO started with a strong API base. So given the derisking from China to other countries, such as India, do you see an opportunity to scale up API? Because some companies have announced huge CapEx for API these days.
I think we -- our API business is a specialty niche business where we make a lot of our intermediates. Yes, there's some dependence on China for some intermediates, but it's not such a large dependence. Yes. And...
So -- okay. Go on, go on, sorry.
I'll just complete your answer. I mean, whatever government has sort of announced in terms of -- for incentives and all that is for more commodity chemicals. It's a business that we are not in.
The next question is from the line of Ravi Dharamshi from Valuequest.
I just wanted to check what's the status on the Revlimid U.S. approval? I'm not sure if this question has been asked earlier. But if you can just give us some light on what is the status now that, under this COVID, are they -- is there an inspection that is pending? Or are they going to do a virtual thing? Or what are the time lines now going forward for U.S. approval?
Sure, Ravi. I think we had some queries again, Ravi. So I think we have -- it took some time to answer these queries. So we've answered those queries, and we replied back to the FDA recently. So we've not got a target action date at this time, but we have replied everything. So we are hoping again -- I've been saying this again and again, but our understanding is that we have answered everything and all the major questions are answered. So I think...
If you get a target action date, will that lead to a new round of inspection? Or how does that work?
My sense is we've been inspected. So I don't expect an inspection. I don't think inspection is holding anything back. My sense is it's like this, Ravi, I think if we get an action date and if it goes well, I think we should get the approval. I'm very confident that it will happen in the next few months. I think -- I'm hoping -- again, I can -- the expense of taking a risk of being optimistic, I think it should happen very soon. I think that's a sense I have. I think we've answered everything. I think we're in good shape. I'm hoping to hear some good news in the next few weeks of -- at least in the next quarter, I'm hoping that we'll get the approval. I think that's our expectation.
Great. Just 1 last question on the Copaxone side. Mylan has been funding Mapi Pharma for once-a-month Copaxone. How do you think the market will shape up when this product gets an approval? So what are the time lines on that? And how will the market shape up post that?
I don't know, Ravi. I don't know where the status of the trial is. I don't know where that stands. So I can't answer you.
But Mylan is your partner as well as their partner?
I know. Good question, but I don't have an answer. I don't know where the trial is. I don't know where it's going. I have no idea, sorry. Unfortunately, I don't have an answer to the question.
The next question is from the line of [ Kush Agrawal from Stalin Assets. ]
So if you can just give some color on the new launches on the domestic formulation side, specifically on the Dapnat, which you launched in the April and FARXIGA which you -- which we launched in the last quarter? And if there are any other launches that are pending?
I think during this year, again, we have a strong aggressive portfolio. We have about -- last year, we launched about 10 products. And this year also, we're expecting to launch about 8 to 10 products. Dapnat we launched, dapagliflozin. Now we have a court case against us. So I don't want to speak about that product at this time. But what we can say is, we've launched a product in the last quarter. I want to limit myself to that.So second question is, how do we see the portfolio going? I think it's a challenging time to launch, I mean, overall, in COVID because your ability to meet the doctor is limited now and all doctors have not come back. But we are optimistic things will improve. Things are picking up except in the containment zones. So overall, I'm fairly bullish. I think the domestic business should grow. I'm fairly -- how much it will grow, it will be a little hard to say. But overall, I see that it should do -- I'm fairly optimistic about how things are.
All right. Sir, just to pick on the Dapnat, so is it like that we have stopped marketing the product since we have a court case against us? Or how is it working out?
I don't want to talk about it, my friend. There's a court case pending. I've been advised by my legal council not to speak about this product. I would like to decline, yes.
The next question is from the line of [ Ruchika Mehta ] from Axis Bank.
I had just 1 question. So what's your -- as a percentage of revenue, how much do you draw from oncology? And if you can share some rough figures on EBITDA margins or EBIT margins from oncology?
I don't have a specific EBITDA on hand for the oncology. But overall, our last year turnover in oncology was -- give me a moment, it's INR 307 crores. So -- and that's about 15% of our sales. Our EBITDA of that portion of income is higher than the general EBITDA of the company. So that I can tell you for sure. How much? I don't have the number on hand. And overall EBITDA of the company is about INR 690 crores in financial year 2020, March 2020.
So in generally, in oncology, what's the range of EBITDA that one can draw? I mean, because I have heard saying 10% to 15%, it can be...
It can be much higher than the regular business. There's no doubt about that. Now you put me in a spot and say a number, I don't want to say it because I don't have the number on hand. I'm not prepared for that question. But if you can give me some time, we'll come back and we'll probably speak about in the next conversation. I'll be coming prepared. But today, I'm not prepared to answer, but what I can say is much -- it is definitely much better than your regular business. There's no doubt.
And any thoughts on -- you just mentioned that you see recovery in domestic business, but when do you see that recovery from 2Q onwards? Because 1Q, you said, has not been too great?
I think, overall -- I mean, I'll see this, okay. I'll give you a general view without touching on -- so I'll just give you a general view of the business. See, honestly, I don't know where this is going honestly because we don't know how the infection rates are going to be. I don't know how the hospitalization is going to be. But my sense is just going with this quarter, I think we -- as a base case, I feel we should be -- I'll be happy if we repeat the revenues that we did last year because our export business is doing reasonably well. I think we've seen a lot of up and down in the domestic business, but our export business has done much better, and we also benefited from the exchange rate loss. I mean, depreciation of the Indian rupee versus the dollar. So overall, I feel, I think, our base case is that we should able to repeat the numbers that we did last year. But optimistically, again, we can't say it with the same conviction like in the past because of -- there's so many uncertainties attached to it. I think we should grow this year by about 15%, 20% across all our businesses, and especially, I'm very comfortable saying that for our export business. For our domestic, I would like to sort of step back a bit and say that I want a little more time to speak about it because it's just been about 2.5 months into this financial year. I think we'll probably get more clarity on how this year is going to -- domestic is going to play out maybe around the first quarter numbers, which will be around late July, early August, yes. So anyway, we'll announce that.
So just clarifying, you're saying 0% revenue growth is what you would be expecting in FY '21 with 15% to 20% growth from exports. Is that right?
What I'm saying is -- I'm saying 2 things, okay? What I'm saying is, one, at a base case, we think that we'll be happy repeating the same numbers that we did last year, okay? That being the base case. And an optimistic case, what I'm saying is because there's so many uncertainties attached to it, because it's very difficult to predict, I mean a lot of people are shying away from predicting. I'm being a little more brave and giving you a lot of caveats at the same time, saying, I don't really know where this is going, but to really push me and say, I will say it with lot of caveats because I don't know where COVID is going. We don't know how things are going to be. We don't know how the geopolitical situation is. I would say that we'll actually grow. I think we should grow 15% to 20% this year and our earnings are even better. I think -- and the factors determining that is primarily because we believe our export order book looks good, and our export prospects look very good. And in spite of the uncertainty in the domestic market, I think that has been offset by the export business. And to answer your last part of the question to get clarity on the domestic, where the domestic is going, I need a little more time. I -- that's what I'm saying -- what I'm saying is that give me till August, I think, late July to August to understand to get -- catch a trend. As of now, it's difficult to even to suggest it, right?
In terms of hospitalization, what percentage of first-line hospitalization has begun now, say, June month?
It's -- again, I was asking the -- answering the other questions in a few minutes ago, I think the challenge in hospitalization is twofold. Hospitalization leads to chemotherapy, chemotherapy obviously gives you sale, okay? That has not been as robust as we want it to be. That's the first challenge. I guess, people are not visiting hospital to get prescription. You know what I mean? Even for products which you take at home, people are not coming to the doctor. So if you have a small ailment, people are saying, I don't want to come because I don't want to catch a COVID infection in the hospital because hospitals -- there's a fear that hospitals are hotbeds of -- hotspots for infection. So a lot of people are actually deferring their hospital visits. So even that has been putting stress on the system. So as I said, I don't want to answer that question because I don't have an answer to that question. Let's give it some time. I think we'll get more clarity. What I'm saying is, April, May, we've seen reduced demand, but May and June, we've seen good -- June, we are seeing good demand because there's a lot of pent-up demand and there's -- things are picking up. And to predict how things are going to be in domestic, I think I want a little more time. So I think actually that's the best way to answer that.
[Operator Instructions] The next question is from the line of Nikhil Mathur from AMBIT Capital.
Sorry for hopping on the domestic business again. So my question is a bit backward looking. I'm not trying to gauge the outlook on FY '21. If I look at domestic oncology in FY '20, it has kind of declined by 22%. Now there could have been some bit of disruption in 4Q because of COVID. But still, can you help me understand what has been decline in volume? What has been decline in pricing? And has there been 2, 3 product launches in FY '20, that has countered the negative impact to a certain extent?
There have been some new launches in FY '20, which has countered the decline. That's absolutely correct. And in terms of -- see, there were 2, 3 things that have happened last year. I think we spoke about it in the previous call. I'll just repeat myself again. See, one factor that has happened was, if you recollect, before the general election -- was May of 2019, just before the general election, the government did a price control on whole set of cancer products, okay? So they were heavy discounts. So what they've said is, if you transfer price your distributor X, you cannot have an MRP greater than 30% of that X. And -- see, initially what happened was, we readjusted the MRP, but we started getting pushback from the hospitals saying, you know what, we are not happy because you are giving higher discounting earlier, and we want to be compensated for the discounting. So there's pressure back on us to give higher discounts, so -- which has what caused a decline in the revenue of our portfolio. So that explains why it happened and the reason why it happened.And the second part of your question was to get offset by the new launches. Yes, there's been some offsetting that has happened. And to answer the position today, I think things are a little more stable now. I think a lot of these factors now are factored in. So our numbers are now stable, and we're not seeing any further decline.
So would you say that there hasn't been any kind of a negative volume impact in FY '20? And that would imply...
No, there’s not been any -- I'm sorry. Go ahead.
There hasn't been any market share loss in FY '20?
I don't think so. We've not lost so much market share. I think more to do with the pricing scenario.
Okay. Okay. And secondly, on just cardiac and diabetes. Please correct me if I'm wrong here. But I think you have done 6 to 8 launches over the last 2, 3 years in this space. And you are at an annual run rate currently at around INR 45 crores. Now my point here is that in a way -- the way your strategy is positioned, it's more to do targeting products that are going off patent and being the initial entrant in the new products or the higher next-generation products that are going to come up over the next 4, 5 years. So in a way, your growth is kind of linked to the number of products that you can target in the market over the next 2, 3 years. So can you give some sense on the number of products that you can target over the next 4, 5 years, and whether the run rate can be INR 10 crores, INR 15 crores or INR 20 crores, INR 25 crores in each of these individual products?
I think we -- I have an interesting portfolio. I think we have a lot of first-in launch portfolio, so -- first launch portfolio. So I think we're targeting about 10 to 12 products a year. I think do I have a pipeline just will see us through for the next 2, 3 years? Yes, we do. Do we have a strategic intent? Yes. So I think -- I hope that answers. I think that -- I think do we have intent? Yes, of course. I think that's the target, and that's the business model.
Okay. And even in this particular year, now because of so much of virtual connect happening between sales force reps and the doctors, do you see yourself at an -- as a disadvantage versus the larger player, especially at a time when that was trying to grow in this particular segment? So does it put you off a bit in FY '21 and maybe beyond that, things can be a bit more under control given your strategy in this particular segment?
See, if your question specifically is because of COVID, is your ability to launch and market your product limited, the answer is it's true for everyone, right? It's not true for NATCO, right? I mean if that's the question. But people are using different strategies. You're doing online strategy. You're doing webinars. So people are coming up with more creative ways of doing things. My sense is things will settle down. Again, as I said, to give some sort of guidance about 2020, '21, at this time is, I think, it's very -- I don't want to say anything right now. Let's things settle down, I think, and then we'll get more clarity on where things are. But see, what we always say is that we have a good strategy. It will work in the long run. I think that's how you have to look at this business. You can't say what's going on right now is -- obviously, these are difficulties that are -- everybody has the same challenges. It's the environment. You can't do much about that. But you cannot dilute your strategy for it, right? So you stick to the strategy that you're doing, and you will have -- you will get your dividends in the long run. You can't take a 3-month, 6-month view on things. We have to take a 3-year, 5-year view. I think that's where you build value for your brand.
[Operator Instructions] The next question is from the line of Kunal Mehta from Vallum Capital.
My first question is I want to understand the situation in the subsidiaries in Brazil and Canada. So can you just throw some light on how we are progressing on that front? And how after COVID, things will get difficult, especially in the Brazilian market?
I think this year, in terms of the -- subs are doing well. I think our front-end sub sale is about -- give me 1 moment.
INR 108 crores for the year.
No, but that's netting off. But the front-end sale last quarter was about INR 50 crores. So I think the subs are doing well. Except for Brazil, all -- the other subs are not losing so much money. Canada is profitable. Singapore, Australia, we don't have much sales. Brazil, we have lost because of the exchange rate a bit. But overall, I think we are fairly positive about things. I think we have a good portfolio. The demand is very good for the overall products. I think I don't see much challenges in the sub.
So this year as a base case, would you expect subs to at least give you some revenue -- additional revenue for this year?
They will do well. I'm very optimistic. We have some very good litigations pending in Canada, where we are expecting favorable outcomes. We have some very good launches lined up in Brazil and in Canada and Brazil. I'm fairly optimistic, yes.
Yes. And sir, the second question I have is on the domestic oncology business. So if I look at the data of this whole space in the last 3, 4 years, what we have -- what we observe is that there is -- the competition in this space is increasing at a lot of faster pace. So now we have a lot of good large and small companies trying to launch products even ahead of us in a lot of the small products. And the whole space -- I'm sure, you also agree it's the pricing pressures that you have. And the whole space is just getting a lot more competitive than it used to few years back. So I wanted to know your views on this? And how would you approve the strategy? Will you change something on the strategy front for the oncology business? Or what are your views on this, sir?
I think our portfolio is very unique, and we have a very good base portfolio. I think we have done well through our large -- now we have a very large base in oncology to start with. Second is growth. Strategy-wise, see, all the products that we target always try to be first in the market. So our strategy is always very unique. Our strategy is not like the others. And -- see, either we have a very good technology base or we try to -- we are always challenging patents. So those are 2 differentiating factors compared with other companies. Is it more competitive than in the past? Yes, it is competitive. Like everything else in generics, it's competitive. I mean, you can't really say 1 business is easy and that business is hard. I think you just have to be strategic, and you got to be smart. You got to execute better. I think that's what it really comes down to. If we're able to do it in the first place, we'll make money in any business, I can say that. I think that's always the target of the company.
Just a follow-up on this. This is my last question. What -- I definitely appreciate your point. But what I am trying to understand is that, does this business lend itself in scalability, I mean, in terms of the whole opportunity side which you're looking at? So can we actually do -- can you actually grow this business and make it almost double up what it is in the next 3, 4 years? Would you see that our strategy would make that possible regarding the...
I'm optimistic, yes. Over -- if you give me a 3- to 4-year perspective, yes, absolutely. We see this business can double over a period of time. Because with increasing -- I mean, if you remove the COVID issue, generally, the affordability of our products is increasing dramatically. So I think -- and a lot of people are getting affected with cancer. There's a lot of interest in treatment, so -- and especially from Tier 2, Tier 3, you see a lot more demand than what you saw in the past. So it will grow over a period of time, certainly, but this is a high base effect. So that sort of compounding growth that you see with a low base business, you won't see in oncology, but you'll see a reasonable growth.
[Operator Instructions] The next question is from the line of Nitin Agarwal from IDFC Securities.
Rajeev, you've talked about the exports being 15%, 20% of the revenue [indiscernible] 20% in growth in exports in FY '21. I mean what could be the broad contour driver for this kind of a number because U.S., we don't have much to launch this year, right?
We had a good quarter in April to June because of -- some of it was also in March quarter, and we had a very good quarter in April to June, again, because of chloroquine. So we had a good take-off of chloroquine. Now it has sort of slowed down a bit because the infection rates in the U.S. have dropped a little bit. So we're also doing a clinical trial for prophylaxis use of chloroquine. So I think -- but those trial numbers are not out yet. So I think we need to wait for any further jump on that one. But overall, I think we have -- overall, there's been -- there are 2 things that have happened in the export market, Nitin. One is that we have a couple of good pandemic products. We have chloroquine and oseltamivir, which is helping drive the export business. The second is, there's been -- the exchange rate benefit is also there. And the third factor is there's been -- especially for the export product, there's been reasonable amount of stocking that has happened. People are buying product, which has also improved the export orders. And we're seeing very good demand for overall oncology products, especially. I think we were trying to differentiate that a few minutes ago even the domestic. What we're seeing is because people are not going for chemo, there's been a general improvement in oral. So if the doctor is unable to treat a patient for -- and obviously go through a chemo, he may not be comfortable doing -- he probably will do oral after the chemo. But because he's not able to do chemo, doctors are prescribing oral onco products as compared -- as a substitute to chemo. So we're seeing very good demand on that sense. So I think net-net, I think whatever volatility that we're seeing in the domestic has been offset by the export business.
And lastly, sir. How many product launches...
Sir, sorry to interrupt. Nitin, if you can come of speaker.
Hello? Is it better?
You can go ahead.
Yes, it's better.
Yes. I'm just saying, in terms of the new product launches, Rajeev, how do we -- how should we look at the U.S. this year and maybe Europe -- U.S. and Europe this year?
We have -- our U.S. and Europe -- Canada and Brazil have a strong launch portfolio. U.S., we have a couple of launches, nothing big, but we're generally seeing improvement in the U.S. portfolio because of the higher demand and more stable pricing. I think we're more -- it's more to do with the core portfolio, which is driving the U.S. business, and Brazil and Canada has been driven by the newer portfolio.
And Doxil in Europe?
That approval is still -- and we're doing some work on this. I don't have clarity on the launches yet, not at this time.
The next question is from the line of Kunal Randeria from Antique Stockbroking.
So Rajeev, 1 question. So this year, you will not get any revenue from the agrichem business? So sir, what are the costs that you're incurring in the P&L because of that?
I -- okay, I didn't say that we'll not get revenue in agro business. I said we'll get revenue subject to the approval and resolution of the court case, okay? So that's answering the first part of your question.In terms of the CapEx, we -- I think our total CapEx is a little over INR 100 crores on the agro business. That's how much capital that we have sort of thrown at that. So in terms of the expenditure, I mean, there will be obviously a depreciation plus operating cost. It will not impact so much because it's not large. It will have a minor impact on our earnings.
Fair enough. And sir, even if you get approval, isn't that a seasonal product sales and a few months of the year?
Generally, in agro, I think there are 2 seasons, okay? There's a kharif season. There's a rabi season. So kharif season, now the sale happens. Rabi happens about 3 months from now. So kharif tends to be 60%...
60% to 70% kharif and the balance is...
35% to 40%. It depends on the crop, which is about 30%, 35% is in 3 months.
Right. Right. And can you just share what's your cash position? And what are you intending to do with that?
Sure. Our cash position as of March 31 is -- just 1 moment. The total cash we have on our books is, including deposits, shares, bonds, liquid investments is about INR 999,31,00,000. And our debt position is -- our total debt position is INR 314 crores, of which foreign bill discounting is about INR 167 crores and about -- borrowing of about INR 148 crores. So net-net, we have cash less than about -- a little less than INR 700 crores.
[Operator Instructions] The next question is from the line of Vishal Manchanda from Nirmal Bang.
On your limited competition portfolio in the U.S., has the profit share remained stable in FY '20? Or has that seen a decline in the current year?
No, it's been stable, Vishal. It's been very stable.
And when you -- like in your base case, you are assuming the revenues to remain flat in FY '21. So does that assume there'll be no incremental competition in Copaxone in the U.S. in FY '21?
I have assumed that there will not be any incremental completion in the near future, maybe in the later part of the year, but yes. See, there's so many factors, so don't hold me to something because it's very difficult -- so many moving parts to judge, yes. I have assumed that they could be publishing by the end of the year. I think that's the assumption.
On Copaxone, does the -- would the new -- anyone who launches the Copaxone in the U.S., does it require a sales force effort or some infrastructure that would be an entry barrier in terms of the ramp-up in market share that can happen for the new player in the market?
Yes. That's the understanding, yes. I think you need some sort of sales setup. That's correct.
Okay. And could you guide to something on China? We had some filings there in China. So where are we on that?
We have few filings. I think our marketing team is saying, we have done 2 successful vials. We submitted 2 new products. So total, I think, under review, we have about 4 to 5 products in China. Our marketing team is saying at least we get 1 or 2 approvals this year. I think they're optimistic, we'll get at least 1 or 2 approvals. So we'll see how that goes. I think as of now, I don't have any clarity, but we are awaiting something. Hopefully, this year.
[Operator Instructions] The next question is from the line of Nimish Mehta from Research Delta Advisors.
Rajeev, two questions. One, if you can comment on the nature of queries that we are seeing in Revlimid? And basically trying to understand is it a complex product and what kind of product it is? And second, I just wanted your view on the domestic market for overall because for a quite long time, we have seen increase in prices across the market. And whatever is happening due to the pandemic, is there a risk of price decline across the market and maybe more so in our segments?
Let me answer your first question. Your question was, what was the nature of the queries of Revlimid? And were they answered? The nature of the queries were not difficult. I think we have answered all of them. So I think there's 1 query on the [ rem ] setup and some clarity on that. And there were other general technical questions. We have answered all of them. I think we are fairly comfortable with the answers that we gave. I think we are optimistic that we should get the approval soon, okay?The second question that you had was -- I didn't understand your question. Could you just rephrase that question about domestic market. You said something about pricing, I -- could you paraphrase that question?
Yes, sure. So I mean, domestic market, if I am not wrong, has grown for so many years in the last 3, 4 years, let's say. Largely, a big portion of the growth is due to the price increase, aggregate price increase that has happened. And I would assume that, that would be true even for our company. Now given that...
It's not true, my friend. I -- we don't raise prices.
What is not true? What is not true? I mean for the market or product...
We have never raised prices. Our portfolio, we have never raised prices. Very -- only in 1 or 2 cases, but -- and there's price control on raising prices also. Noncontrol, you can't raise more than 10%, that's the law. And second, we generally don't raise prices, because in cancer, there's a lot of price sensitivity. If you raise your price, then the affordability drops dramatically. So it's not like a INR 5, INR 10 tablet, where people raised by INR 0.50, that doesn't have much impacted. You can't do that in cancer, okay?
I see. So I mean, the overall thing is that with whatever happening in pandemic and is there a risk of further price declines in our segment? Because people in other company would want to push their products in some manner...
I -- again, Nimish, I'll come back to the same point that I made. This pandemic has really disrupted so many things. So you can't make sort of a prediction about what is actually happening in the market until you have more clarity. I would again reserve my judgment. Just give it another 2, 3 months. I think what I can tell you is 2, 3 things. One, there was reduced demand in April and May. Things have picked up now. I think that's the only thing I can -- see I'm only judging it for the 2.5 months that we have gone through. I don't want to say anything about what is actually going to happen in this business until August -- July end or August, because then you'll actually catch a trend, then you would have experienced about 5 months of this pandemic. As of now, I would just reserve all my judgment because there are too many moving parts even to make an affirmative statement that this is happening.
The next question is from the line of Anuj Momaya from Valuequest.
I have a couple of questions. First is...
Voice is not clear, Anuj.
Anuj, if you could speak a little louder, please?
Yes. Is this better?
Yes.
Yes. Can you just share from which facility have we filed Revlimid? It's from Vizag or Kothur?
From Kothur.
Okay. And have you done another filings on the agrochemical piece because you have just talked about Coragen filing only. So last time you had said that we'll be doing some more filings in the agrochemical space. So any more color on that?
We have filed another product. I don't think we'll disclose the name of the product. We've filed another product.
And can that be commercialized this year or...
Then the review time takes. Typically, agro licenses take about 9 to 12 months for approval. So nothing at this time.
The next question is from the line of Rajat Setiya from VRDDHI Capital.
Am I audible?
Yes, yes. Please go ahead.
All right. Sir, I just wanted to check, have you taken any settlement in sorafenib because we had thought that Mylan would take a settlement, which could have...
They have a settlement. We have a settlement for sorafenib for launch, and we have possibly 180 days exclusivity on that product. We already have a settlement.
So our understanding was that now that every patent expect -- November '20 and '23 -- November 2020 and 2023 has expired, every other patent except for these 2. So how do you get to benefit from this exclusivity?
We haven't launched it. I think we're not allowed to disclose because of the confidentiality. I think when the launch is sooner -- I mean the launch date is sooner, I think -- it's coming by, then we'll talk about this. We expect to benefit because we believe that we have 180 days. That's our understanding. But I think we'll speak about it when it's closer to the launch because it's rather premature to talk about it at this time. What I can confirm to you at this time in this call is that we have a settlement with the innovator.
And what could be the market opportunity size for the -- for this, I mean, launch...
How big is this product? I understand this product is about -- if I were to guess, it's about USD 300 million something around, in that region. I -- exact IMS numbers, I don't recollect. But I think, if I were to have it a guess, it's around that -- in that region. I think I subject myself to correction, but in that region, is what I understand.
Okay. And for the -- in terms of our supply chain and now that cases are again emerging in China, so do you think we need to be worried about that in terms of securing our supply chain?
I think what I've done is, at least for the key products, I think we have discussed this with the supply chain. At least for our key products, we are keeping about 8 to 9 months of inventory for the key raw materials, for our key products. You can't do that for every product, of course. The key profitable large volume items where large value items, we're keeping almost 8, 9 months inventory. I think for -- we've been successful doing that for most products. Few products, we are still working on it. I think as a policy, we decided to keep long inventory. And if the infections do happen, I think that's a risk that is there. And if it happens in a particular facility, there could be possibly a downtime where you will lose few weeks of production. So I think we should be mentally prepared for that. But our view is that we are -- because we're keeping such large inventory stock, I think we should be able to deal with this. And generally, our portfolio is also very fairly high value. So I think we are -- so I think we are covered. I think the cost of it is also not too large, and I think we should be able to deal with it. I think we made a strategic decision to do that.
Sure. Sir, on Copaxone, would you be able to comment in terms of the absolute profit that we would have generated in this year versus the last year? I mean, what kind of a change would have happened in percentages terms?
Could say that again? Could you rephrase that question? I didn't understand. Please say that again.
The profit that we would have generated from Copaxone in FY '20, that kind of a change we have seen compared to FY '19...
We've been fairly stable. I think there's a slight increase in '20, and the revenues have been fairly stable. In fact, we got more market share compared to what we had previously. So we're doing well.
So pricing-wise, there is not much pressure on the draft in the market?
It's stable, my friend. We have got higher market share and the pricing has been stable, okay?So this is my last question now. It's about an hour since we've started. It will be my last question.
The next question is from the line of Shruti Joshi from [indiscernible].
Sir, just a follow-up question on what Kunal asked on the oncology and competitive intensity. So as we -- correct if I'm wrong, so as you can see now, everyone in the industry is moving towards the complex, generic or the therapy, which is more limited, where we will come oncology multiple myeloma and multiple sclerosis. So how do you see going forward competitive intensity in this therapy, especially in the area of the portfolio that we are targeting in this therapy?
So I think you asked 2 questions. I think, see, as a strategy, we decided not to do biogenerics. Yes, we have decided to focus only on the chemistry products. So that's answering one part of your question. The second part of your question is, do we see a lot of competition? I think there is completion. I think every business has competition. There's no difference between onco and other segments. I think it's a fairly competitive business. But I think we specialize in doing difficult to do generics. So that's what -- so there's always been our marquee thing, and we have done well with this, and I think we have an interesting portfolio. And we've also done a lot of good patent litigation, which has allowed us early entry. So the strategy remains, and I think we're still positive about the future, okay?
Just last question, if I can end up.
Go ahead, go ahead.
You said about -- can you throw some light on what would be our business strategy in agrochemical? It is starting almost like it could -- is it going to be like what we are targeting like patent -- challenging the patent? Or it would be like cost competitive? What -- if you could throw some light on agrochemical business strategy...
I think the model that we have adopted in agro is similar to what we do in pharma is, one, do products where you believe you have a technology advantage and that you're able to start first. Second is to do patent challenges. I'm not a big fan of doing cost competitive. If you look at our portfolio, it's -- our portfolio is always very profitable. If you look at our cost of raw materials, it's probably one of the lowest in the business, raw materials to sales ratio, if you see. And I think -- I never like to compete on price. And I think that's we -- that's never the philosophy of the company. Focus on technology, focus on trying to launch in the first wave. That's always been the philosophy and the same philosophy we are continuing into the agro business.So thank you again. Thanks for your questions. Thank you so much. Thank you, Prakash.
Thank you all.
Mr. Rajeev, you can go ahead.
Yes. I'm just saying like any questions or clarification with respect to the -- what we discussed today, please feel free to reach out to us. We'll also be putting the transcript shortly as soon as it's available. Have a good day and stay safe everyone. Thank you.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may disconnect your lines.