Natco Pharma Ltd
NSE:NATCOPHARM
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
756.3
1 592.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Natco Pharma Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the NATCO Pharma Q4 FY '22 Conference Call, hosted by Edelweiss Securities Limited. [Operator Instructions] I now hand the conference over to Mr. Kunal Randeria from Edelweiss Securities Limited. Thank you, and over to you, sir.
Thank you, Diksha, and good morning, everyone. On behalf of Edelweiss Securities, I welcome you all for NATCO Pharma's Q4 FY '22 Earnings Call. With us, we have NATCO Pharma's senior management, represented by Mr. Rajeev Nannapaneni, Director and Chief Executive Officer; and Mr. Rajesh Chebiyam, Executive Vice President, Crop Health Sciences. So over to you, Rajesh for opening remarks.
Right. Thank you, Kunal. Good morning, and welcome, everyone, to NATCO's conference call, discussing our earnings results for the fourth quarter of FY '22 and for the full year, which ended March 31, 2022.
During this call, we may be making certain forward-looking statements or statements about future events. And anything said on this call, which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I'd like to state that the material of the call, except for the participant questions, is a property of NATCO. It cannot be recorded or rebroadcast without NATCO's expressed written permission.
We will begin the call with the results highlight and then followed by an interactive Q&A session. So we hope you have received the financials and the press release that was sent out earlier. They're also available on our website.
Briefly, NATCO has recorded consolidated total revenue of INR 2,043.8 crores for the year ended March 31, '22 as against INR 2,155.7 crores for the last year. The net profit for the period on a consolidated basis was INR 170 crores as against INR 442 crores last year. The reduction in the profit was primarily due to inventory value write-off and provision of receivables related to COVID products, with inventory value write-off of approximately INR 232 crores and provisions of INR 46 crores towards estimated credit loss.
Export business performed well during the quarter, driven by lenalidomide sales and profits. For the fourth quarter, which ended 31st March '22, company recorded a net revenue of INR 610.6 crores on a consolidated basis, as against INR 359.7 crore during Q4 of last year. There was a loss for the fourth quarter period on a consolidated basis of INR 50.5 crores, again, primarily due to the inventory value write-off and provision of estimated credit losses as against a profit in the prior year of INR 53 crores for the same quarter. Company is confident of strong business growth during the upcoming year, led by export business of lenalidomide and growth in other business segments. The revenue split has already been shared. So now we will open up for a Q&A session and take your questions. Thank you.
[Operator Instructions] We take the first question from the line of Mr. Amey Chalke from Haitong Securities.
So I have 2 questions. First is on the Revlimid. Would it be possible for you to share how much months of sales have been recognized for Revlimid in 4Q? And also after launching this product, what is your sense now on the price erosion side, like compared to the open market where there is no market share cap. If you compare with that, the price erosion is on the higher side or it is on lower side? If you can comment on that? And also the last on the Revlimid, when do you expect to launch the remaining 2 strengths of Revlimid where we don't have a [indiscernible]?
I think in terms of Revlimid development pricing, I mean, I think I've had a conversation with Teva on this. I think Teva doesn't want to reveal the pricing strategy. So I will not give any comment on the pricing, okay? And the second question is on the amount of stock that we have sold, I think majority of the stock has not been sold. The exact percentage I'm not able to recollect top of my head, but I think most of the stock will be sold in the next financial year. We have just had an -- it's only 1 month of launch. So I think I would say about 75 to 80 -- 70% to 75% of the stock will be sold in the financial year '23. I think that's I think, our estimation, okay?
Yes. And when do you expect to launch the remaining 2 strengths?
The 2 strengths will be -- I think my understanding is, again, I stand to be corrected. I think my understanding is that Reddy's has first to file because it was going with what's there in the public domain. So I think after Reddy's launch, whenever that happens.
Sure. And the last question on the India business or the remaining core business which we have, which has been substantially eroded over last 1 or 2 years. What has been the key issue you have oncology treatments where we used to have product portfolio, is treatment shifted from those product lines to the newer product lines? Or have you lost market share in these products?
I think, as you know, our focus -- oncology obviously represents a significant part of our revenue. And I think the growth in oncology has not been coming because of our high base and price erosion that we have seen in that portfolio. And again, we are not spread out in multiple segments. I think we are spread out a little bit in gastro and a little bit in cardio. Those segments have done well with specialists. So we've done reasonably well with specialists. And this quarter, you've seen a higher decline, partly because we've taken a sale reversal on some of the COVID products. And the bet that we made on COVID has not worked. And I think if you look at the money that we have made over the last 2 years and look at the write-off models, I think on a net basis, we've not really made any money. Yes, I think it's been a disaster, but it is what it is. I think it's a business bet that we have made, and it hasn't worked.
The domestic itself, I -- my sense is, I think if you remove out the reversals and all that stuff, I think it's about an INR 400 crore business I think give or take and that's how the base business is at. It's stable. I will not say it's growing or degrowing. I think these are all onetime entries that we had to make. What do I see for the future? I think our base business will grow. And I think at this time, I think our target is about 10% to 12% is what we're going to grow in the next year. I think that's our expectation. The limitation that we have in domestic is, obviously, we don't have coverage outside the core specialty areas. So recently, we started a division to cover the general physicians and all, but that will take some time to uptake -- the uptake to happen or 2, I think, as I said, we had a look at an acquisition. So we're looking at that as well. But I think we have to find something. At this time, we don't have anything, yes? Thanks.
We take the next question from the line of Mr. Ahmed M. from Unifi Capital.
My question was regarding the inventory write-off. So just try to assume that whatever write-off we needed to take has been done in Q4 and there won't be anything remaining for next financial year?
Okay. Ahmed, whatever write-off that is there, we have taken. I think we've taken for slow-moving inventory and COVID primarily. I think COVID being the majority of it. But I think more or less, we made the assessment of the stock and we've done it. The only inventory, I'll not use the word risk, but -- okay, I think I had to use the word risk, is on the agro inventory. So we have an agro inventory and supplier commitments at about INR 85 crores in that region. So if there is -- see, as you know, we've been sued on the process patent. I think that was completely unexpected, but we had to deal with it. So we believe that we are not infringing. And so again, if the -- in the next date of hearings this July and the patent expires in August, the compound so it is when we're looking to launch product. So if everything goes well with the court case, we get clarity on it, I think we can liquidate our stock. But also because the process patent litigation, it actually interestingly presents a very interesting opportunity because there aren't too many people who are aggressively pursuing it. And I think if we win this case and get clarity on it, I think we'll have an exclusive or a semi-exclusive situation, which actually will bode well for our shareholders. But again, we need to have clarity on where we are. And I think that's a risk that you're running on the inventory over and above what is already stated, to answer your question, okay?
Got it. Got it. Now just question on the Copaxone. So there is some erosion, which is visible. So are we holding on to our market share? What is your -- any qualitative comments on Copaxone, how does it look?
Our Copaxone market share is doing well, my friend. I -- top of my head, I don't remember what the number is. I think we're doing 40%, 50% is what I recollect, but I -- top of my head, I think I don't recollect. We've been stable and we're doing well. But overall, as you know, there has been -- some of the market has moved to the orals, I mean dimethyl fumarate and other orals that are there. So I think general -- is a general reduction and a slight reduction in the market size. But overall, as per the generic -- on the generic, I think we're doing extremely well in that product.
Okay. Just last question on the Revlimid. So there will be 2 components, right? One, the inventory will transfer from our balance sheet to Teva's balance sheet. And second will be the profit share that will be accrued to us. So in the current quarter, is the entire inventory which we are supported to sell to Teva at cost or whatever pricing, is it accrued on our P&L?
Yes. So basically, we have already given them the stock in the December quarter. So that is already done. So what we have accrued in this quarter is only the profit share.
Okay. So is it possible to share the amount?
Teva doesn't want us to share. I think Teva is very particular that they don't want us to discuss anything about the pricing strategy and the profit share amount, yes? For strategic reasons, yes? Okay, thank you.
We take the next question from the line of Mr. Viraj Kacharia from Securities Investment Management.
Just 2, 3 questions. You said the normalized sales in domestic business is around INR 400 crores. But the normalized sales in the rest of the business, how much would that be? And a related question is we used to earn a kind of quite healthy operating margin in the domestic business in, say, upwards of 20%, 25% odd, how has that moved given the kind of price erosion competition which we have seen in the domestic business in last 1, 2 years? So that is one. Second is on the CTPR, the innovator has tied up with an Indian company and -- for contract manufacturing in [ Zolte ] and they are looking at this as a more of a $4 billion to $5 billion opportunity. So for us, if there is a kind of a positive ruling, how are we looking to play this? Any update in the status in our play [indiscernible]? And third is, for the Revlimid part, if you can reiterate...
One second, I'll try to answer you. You're asking me so many. I'm losing track. So let me answer those 2 questions at a time. So let me start with your CTPR question. What other people are doing and contract manufacturing and all, I think they're probably part of the global supply chain for the innovator, and that's why they're getting upside. That's not my business, yes? Our business is to challenge patents and to give an affordable product. I think that's what we're looking at. The opportunity, as I articulated earlier, is there. And I think it's a very interesting opportunity because of the litigation and patent land line that is there. If you're able to clear the way, I think it's a very interesting opportunity. I'm very excited about the opportunity. And subject to how the court case goes, I think we can give clarity on how we're going to do with that product. Okay, that's to answer your first question. The second -- what was the very early question that you asked? If I -- if you could refresh about the base -- Revlimid or you asked about the base business, right? What did you ask?
So on the base business, ex of domestic, how is the -- what is the normalized run rate? And then the margin structure in the domestic business, how was that...
See, my margins are always good. I mean if you look at our rep yield, we have almost INR 8 lakh to INR 10 lakh yield per man. I think if you look at, we have one of the best in the industry. After hiring -- actually, our yield is even much higher. It's like almost INR 15 lakhs to INR 17 lakhs because we have hired a [ MEE2 ] division where we started covering [ GP ], that's the reason why the yield per man is reduced. So in terms of margins and all, I think it's a very stable, good business. I think the challenge with our NATCO's business has been that it has not grown and been stuck. And I think we had a COVID pop, which increased the domestic that we touched nearly INR 500 crore this year. But if you remove the COVID products, I think, as I said, it's around INR 400 crore or in that region, okay? So that's the answer on the base business of domestic. Anything else you wanted to ask me, I'm sorry?
Yes. The base business ex of domestic, what is the normalized run rate and...
Again, I don't want to give away too much on Revlimid. So I think I'm trying to avoid that question. But I think you look at the business this way, okay, our general PAT, if there was no Revlimid, for example, would have been about INR 50 crores to INR 60 crores. And whatever we're getting addition on Revlimid is what we're getting. And yes to remove -- maybe if you are doing some extra R&D, then we can remove that out of the EBITDA. But that's how we should think of it. I think our core business does about a little less than INR 300 crores, I would say. And then everything we get on the top is from there and remove if we do some extra R&D and or do some R&D spend because of the cash flow that is there. That's how you want to think of it, yes?
Last if I can squeeze in, if you can -- on Revlimid, if you can reiterate, what is the profit share? Is it like 50% or 1/3...?
No. It's 1/3 my friend. I think it's 30%, if I remember. Yes, 30% is what it is. Yes. Thanks.
We take the next question from the line of Kunal Dhamesha from Macquarie Capital.
So just on the Revlimid, why would it be the case that the inventory would not be moving very fast because it is the REMS program is of innovator and he has been able to control the generic movement. Is that the way to understand?
Is your question why we didn't sell more than what we sold. Is that the question? If I may ask.
Yes. Yes. So why we didn't sell the entire...?
We will sell -- I think the -- we're going to sell a good portion in the Q1 of this year, and there'll be some portion in Q2 and Q3 a little bit. It's just that we just launched it and then we had to set up the REMS because we are a new product and it takes a little bit of time. And we only had 1 month of launch. So it just takes -- the [ sold is too sound ], but I think majority of it will be sold through in the next financial year. I'm not concerned about it. I think we're very comfortable that we'll able to liquidate the stock. Yes.
And in that case, let's say, if the second round of generic entry happens, will we have to take the shelf-stock adjustment in that case?
Not that I'm aware of. Because I think we'll sell through the stock before the other generics will come in. I'm not worried about that. They're not -- I don't see a challenge on that. And in fact, when the second round of generics come in, we will also get a higher share than what we have. So we'll have a higher quantity, so we'll do well. And so -- and I think it's a staggered entry for everyone. So I think this will hold on for some time. So I'm very confident that this will be recurring and it will be stable revenue that we'll get in the next few years.
So -- and the REMS part that you said they were setting up is on its own or we are using the innovator's REMS program?
I think we're using the innovator's REMS, but it's just that they are setting up the reimbursement and all, there are some logistical issues at the launch time, but I think we have done well, I think. I'm not worried about our selling stock. I think we're very comfortable we'll be able to liquidate the stock.
We take the next question from the line of Nitin Agarwal from DAM Capital.
Rajeev, 2 things. One is, a, on Revlimid, you obviously get an annual allocation of your volumes. So is it fair to assume that, for us, the recognition is going to be evenly spaced out through the quarters for the year? Or are there's going to be some lumpiness in the way we recognize revenues through the year?
I think my sense is I think I can't speak about future points. I'll speak about what I feel will happen in the next few weeks. So I think we've recognized some portion. I think we'll recognize a good portion in Q1 of '23 and then it will taper off a little bit in Q2 and Q3. And again, Q4, I think we get to allocation. So I think it will -- again, the earnings will bump up in Q4. So this is what my estimation, and again, we'll see how it plays out and all. And I think we need to speak to Teva and try to understand what will happen. But if you want to make an expectation, I think that's what I feel will happen, but we'll see how it plays out, yes.
And the new allocations happen in February month every year. I mean, till the first time...
It will be annual increase. Now every annual, I think, is my understanding. I think that's what -- that's our understanding, yes.
And secondly, outside of Revlimid, what are your own sort of focal areas for the business for the next 2 years?
I think -- I mean if I look at the positives, I think all the subs are doing very well. I think Brazil has turned profitable. Canada is doing extremely well. We got a very good market share in Canada in Revlimid. I think I would say the IMS numbers are not out, but I think what my salespeople are saying, I think we got almost 40%, 50% market share in Canada. So we've done extremely well in Canada. So all of that is reflecting in the numbers. And the domestic is stable. And I think in terms of -- I mean, for us to do well in our base business, I think there are 2, 3 things we need to -- things to need to happen. I think one is our domestic has to improve, and I think we have to look at doing a couple of strategic initiatives. Two, our agro clarity has to come, which hopefully we will get the clarity in the next 2 months because the office is the impending launch subject to the court clearance. So I think that is probably the 2, I would say, immediate term things to look forward to. But overall, I think our objective is to build a broad-based, multi-country generic business. I think we are present right now in Brazil, Canada and India and U.S. And U.S. also, we have a front end now. So these 4 markets will be the core drivers of our earnings.
And I think -- and in the smaller countries, we are present in Philippines and Singapore. So overall, I think we're very excited, and we had some very good filings this year. I can just articulate what filings we have had. We have 3 FTFs this year. One of them is semaglutide and another one is acalabrutinib both are -- have multiple pilots. So that's on those 2 products. And we had another filing, I think, for a product called [ idalasil ]. So there, we are -- it looks like we are the only FTF. So I think we are looking good, and I think our idea is that we're able to build a pipeline, which can sustain over the next 7 to 10 years, I think in that seg, yes.
We take the next question from the line of Rahul Veera from Abakkus.
Just wanted to know what is this INR 46 crores of ECL losses that we have booked this year?
I think out of INR 46 crores, I think we have done a general business credit loss provision we have made. And we had one particular receivable to the government, one with state government that we did COVID supplies, which has not come and it's almost 1 year was approaching, I think -- and then we made a decision that we should make a provision against that. We're hoping that we'll be able to recover the money. But as prudent accounting, I think we have made a provision against that receivable.
We take the next question from the line of Ankush Agrawal from Surge Capital.
Yes. Rajeev, firstly, based on some of the comments that you mentioned on the Revlimid, so just wanted some clarification. So what you said that we transferred our quantity to Teva in December quarter and whatever what Teva has bought in Q4 is just the profit share, right? And that would continue in Q1, Q2 and Q3? And then again in Q4, we will get another higher allocation based on whatever is there and same cycle would repeat over the year. Is that the right understanding?
That's correct. That's correct, yes. Absolutely. Yes.
Right. And in Q1, you mentioned -- and for the Q1, you mentioned the comment that about 70%, 80% is still left to be sold, right? In March we have sold as around 20%, 30% is what you informed...
I think about -- I think that's my understanding yes.
Right. So what [ assumption should we make ] to the primary -- just profit share, right? Got it. Secondly -- sorry?
Yes, go ahead. Go ahead.
Rajeev, now based on this, we'll probably get a lot of cash flow from this Revlimid opportunity over the years. So would it be a fair understanding that large part of this cash flows would be used to build a base business or you will try to capture some another bigger opportunities that you might have in mind?
I think in the near term, I think the way we're looking at this is we're getting a good amount of money. And I think that way cash flow size, we're extremely comfortable. I think I'm very happy where things are going. We are -- right now, I think we're doing the low-hanging fruit, which is spending on R&D. So I think our expenses have increased slightly because with the buffer of the cash flow that we have had, we are investing in R&D ideas, more bold ideas.
See my friend, you know that this is not -- this is going to be there for the next few years. And I think we have something like a -- see there are the smaller ones, which are like INR 5 million, INR 10 million type of opportunities, and then you have the INR 100 million, INR 200 million type of opportunities. The idea here is that you build about -- I think a few minutes ago, I spoke about 3 Para IVs. Those are like, obviously, a smaller opportunities. But you need to build that big -- one big platform. And I think going forward in the next 10 years, I think at least I have visibility for 5 to 6 years where we have the big jackpots. We need to fill -- at least I want to pull off another 2, 3 Revlimids if all goes well. So I think that's where we want to spend our money on in the near term. And I think -- and we'll take it from there.
Regarding the acquisition, we're looking at it. But my sense is, again, I subject myself to again look at what deals are available, we're looking at both domestic and export. And I think we're very clear that we want to do 1 large acquisition, I think which will strengthen the base business. I think it's what we're looking at and plays into the strategic interest of the company. What that acquisition is? When we'll do it? I don't know. I think we don't have clarity, but I think we have the money, so we are sort of -- I think we can always do it. And I think we just have to find the right asset. And I think we have time. I think, certainly, in this few months we'll able to find something, yes?
Yes. So basically, what you're saying is the base business would be built primarily on the inorganic acquisition and not organically?
Organic, we are doing what we can do in the organic...
Yes, on the smaller front whatever you are doing in terms of agro and all that stuff, but the larger for example, we have acquired the U.S. front-end as well some time back. Right.
Yes. So I think these are all most obvious ones, right, because we do a lot of work in the U.S., and it makes sense to just buy the front end in the U.S. because then we can plug in and launch our own product. See, you need to understand overall generic business today. And I think if you look at most generic businesses are not growing, it's extremely competitive, right? And the only way you can do something disruptive is you need to buy. Otherwise, you're not going to get growth. And this is the elephant in the room. So I -- my sense is that we'll find something. I think that's what we're looking at, so yes. So to answer your question specifically on what do you want to do with the cash? I will say 2 things. One is spend on R&D. Two is look for an acquisition, to strengthen the base business, yes? Thank you.
We take the next question from the line of Sandeep from East Lane Capital.
Rajeev, a couple of questions. First is, if you could just talk broadly on the Revlimid market formation. There are 10 players, but each one has a staggered entry. So this opportunity should be with you till FY '25-'26, would that be a correct understanding? And related to that is the range of outcomes because of the price discounting can be various outcomes. Can the range of outcome of cash flow for you over these 3, 3.5 years be very wide depending on the discounts? Just broadly, if you can just put the framework for us.
I think that's my understand, Sandeep. That I think everybody is coming in a staggered way, and I think there should be a meaningful amount of money that we want to make over the next 3, 4 years, depending on how people end up. That's my understanding. I think that's absolutely correct. And the erosion and all, it's hard to speculate. I think it will be very premature if we talk about how market will form over the next few years. I think we just have to see. But my sense is -- my instinctive sense is that I think we should do well in the next few years, I think that's all I can say at this time.
The reason I asked is that if there is limited entry for everybody, what's the incentive to discount massively and kill the whole market? You can't get more volumes.
I think we'll all make meaningful money. I think that's the best way I can answer that question, yes.
Understood. Understood. The second question is on Copaxone. What is the latest process patent issue, which has arisen on Mylan and yourself, how damaging could it be? Or what is exactly going on?
I think Momenta sued us I think it's very premature to say anything at this time. We believe it's a very frivolous lawsuit. And I think -- anyway, it's the legal matter, so it will be unfair for me to say anything or characterize it. I think we believe it's a frivolous case. And I think, as you know, we've been in the market for more than 5, 6 years. And I think the patients that we've been sued for I think are -- if I recollect I think 2009 or 2010. But as you're aware, we've been making lanthanum much before that. And our licensing deal with Mylan was also much before that, and we already -- so it's all in public domain so what I'm saying. So I believe it's frivolous, but anyway, I think we have to deal with what we have to deal with. So I think we will see how it goes.
And lastly, if you could just comment on Afinitor, how big an opportunity can that be already in the market? Or how to think about that opportunity for NATCO?
Afinitor is doing very well for us, Sandeep. I think I'm very happy with how Afinitor is doing. So I think Afinitor is what is driving our export on our base business. In our base business, I think Afinitor probably represents almost 30% of our sales, yes. So I think it's doing extremely well, and we're very happy with how things area. I think we have a generic in the U.S. We have a generic in Brazil. We have sole generic in Brazil, so which is a very good situation to be. And U.S. also, I think we're doing well. We have a reasonable market share. And we're expecting approval in Canada on this product. So we have done very well on this product. These are -- so I think we're very happy how things are.
We take the next question from the line of Tarang Agrawal from Old Bridge Capital.
Rajeev, just to circle back to the earlier participant's question, given that Glatiramer has been in the market for the time that it's been, what possible outcome would you believe that the plaintiff is looking at to come up with this sue at this point of time? I mean just a little confused when this came up.
I know. Even I'm also confused. So I don't want to speculate Tarang I don't know. I think we'll stick to what we have said earlier. I think it's -- we believe it's frivolous. And I think in any way, we have to deal with it, so we'll deal it.
Got it. Generally, I mean, the way this business is formed, what I understand is the legal intricacies, the outcome of it is actually with the marketing partner. And in a lot of ways, you are hedged. So would that be the right way to look at this as well?
At this time, it's premature to talk about it. Obviously, Mylan will handle -- Viatris will handle the legal aspect of it. And I think I don't want to speculate this time. I think when things progress, and I think you more clarity on where we are, yes?
Sure. Just coming on to DASH. I mean, what kind of investments are you looking at to build this business or to carry it on from where you've picked up from? And typically, it does seem like it is a generic front end now. So this business would generally not require any field for. So really, what is the value that this front end gets because one would understand having a front-end where you have to go out and meet prescribers and get prescriptions. But just wanted to understand the value of this and the kind of investments that this would entail?
Sure, sir. I think we have the Para IV pipeline. So all the Para IV pipeline that NATCO is making will be sold through DASH. I think that's what we're trying to do. So that investment is ongoing and that investment is reflected in the NATCO stand-alone balance sheet, okay?
Regarding DASH, I think at this time, we bought it. And I think operationally, we're losing money. That's the major part that we're losing money. So I think in the quarter, I think we lost -- this March quarter, I think we lost about INR 5 crores, INR 6 crores. So I think that's some belief that we're having on the setup. The idea is that I think we're going to have some launches from our India pipeline that we're looking to launch. Hopefully, in the next 1, 1.5 years, we'll be able to break even. See, at a strategic level, I think U.S. is going through a very -- it's a very hard time, nobody is making money in the U.S. So the idea now is that just to keep the -- take this business from, let's say, we acquired this at INR 17 million, INR 18 million business, take this business to about INR 30 million, INR 35 million, keep it stable and wait for one of our jackpots to come. And then -- and launch those jackpots through this entity. I think that's what we are looking at. I'm taking -- don't take a 1-year, 2-year view on this business. I think we are taking a 7- to 8-year view on this business. And a lot of the Para IVs that we have, and they'll all come to fruition in the next 6, 7 years.
And here, we get to keep 100% of the economics. And I think that's the value proposition on the asset. But in the near term, it's not going to grow dramatically. I think we just want to set the house in order and make sure that we're not losing money. And then get NATCO's name out in the market and have a reasonable basket. So we have the relationship with the customers. And as you said, it doesn't require so much expense in terms of marketing. I think it's a straightforward setup. Yes, that's what we think, yes.
We take the next question from the line of Nikhil Upadhyay from Securities Investment Management.
Three questions. One is, just to understand this profit sharing, which we have booked, that would only be booked when there is actual sales which we have done, right?
That's correct, yes. Absolutely correct, yes.
Okay. So in this, there is no product sales this quarter? So this quarter, revenue when there's INR 465 crore, there is no product sale, it's completely only profit share? From Revlimid?
Yes, that's correct. Yes, that's correct. Yes.
Okay. Okay. And secondly, on Revlimid Canada, I think you've given a good idea now and we've been in the market for now like almost 4, 5 months. How are you looking at this opportunity in terms of sustainability? And can it be materially different from what we had anticipated? And continuing on Revlimid. On Revlimid Australia, we were looking at an opportunity and I think we had filed for a settlement there as well. But what I understand that settlement was turned down. So are you still looking at Revlimid Australia launch? Or how is the status there?
I think Australia is -- sorry, we'll start with Canada. I think Canada is our own front and we're doing extremely well. And as I said, we have very good market share, and that is helping to contribute to our consol. It's one of the most profitable subs that we have. Regarding Australia, I think we are working with our partner Juno. So we don't have direct presence in Australia. So they're handling the regulatory aspect of things. So we have approval for both pomalidomide and lenalidomide in Australia. So we're looking to launch. Regarding the settlement and all, I think it's too premature to say anything. We are working on it. I think we'll give you clarity once we have clarity on this at this time, yes.
Okay. Just one thing, Rajeev. This profit share like whatever calculations I put in my model, I think the profit share looks too high. So if you consider a 30% share. So -- and what I get is like even the regular export business has grown sequentially. So would that be a right conclusion? That sequentially adjusting for that INR 100 crores, which we got in Q3. If I adjust and look at the numbers, it looks like the regular business of Afinitor, Copaxone and all has actually grown, would that be right?
Those businesses have also grown, absolutely. I think as I said I -- again, we don't want to give up too much strategy. And I think you can make your own conclusion, right? I can't answer the questions directly where you would want. But I think the base business does about in that INR 50 crores to INR 60 crores PAT range. And everything else on the top is what you're getting from here. And I think we're recognizing revenue based on how things go. So I think yes, I think that's how you want to look at this.
We take the next question from the line of Sameer Shah from Valuequest.
Just one question. What is the -- what composes this trade receivables as well as inventory, still it seems to be a little high?
I think it is high. And I think what we have decided is, see, my personal view is this, until we looked at our inventory, I think a lot of it was COVID and we had other nonmoving inventory. I think our point was just take write-off and just go forward. And I think there's no point carrying and hanging on to these things. So I think that's why we took a call of writing everything off. And I took a very conservative view. Again, I'm not saying that all of the stock will be -- it's not really 0. I mean you can always -- if you sell some of it, you can always write it back. But I just thought it's better just to remove the hangover of the COVID inventory and then just go forward. And I think that's -- and as said, we have also ascertained but this is a risk that we have and then we just removed it. And I think the other gentleman asked me about whatever risk we have, and I think we also articulated that we have risk. So going into next year, I only want to carry the agro risk. I don't want to carry anything else in the inventory. I think to bring clarity for the investors, I think we thought we will just clean it up and just go forward.
Right. But so my question is this inventory, say, last year was INR 800 crores. It's still INR 760 crores. Receivables have gone up from INR 400 crores to INR 600 crores. So in fact, even after writing off, the number -- absolute number is still very high on the balance sheet.
I think, see, basically 2 things. The cash flow has come through, okay? As you know, most of that receivables -- or a good portion of it has already come through. So there's no issue there. In terms of inventory and all, see, what we have done, see, ours was a very unique business, all the inventory that you see, I think remove the agro portion where we're not having much revenue. So then the inventory is fairly normal. And also if we look at our business, it's a very niche, limited business. And we are the only one who will say very clear, I mean, I can say this, I have no issues dealing with the future 12 months. I have no issues in terms of inventory costs. I have no issue in terms of logistics because we keep -- all our key products, we keep 8 to 12 months of inventory post COVID that we have done. And I think we are able to service the demand on a lot of our products very comfortably because you have planned everything 8 to 12 months ahead because the margin that we make is much higher. I think that's what we have done.
I think probably I will be the only one who's going to give a guidance saying that I'm not worried about what's going to happen in the next 12 months in terms of supply chain challenges or China COVID issues and all. I think we have covered everything. And I think that way that we have the buffer of the -- all our products, I think we have always planned ahead. And the reason we do that also is because of the return that we make because we don't make 20%, 30% return. I think when I go -- whether we end up with 10%, 20% returns, again, it's a market formation thing. But when we target, we target the jackpot. And I think that's the reason why our inventory is always a little high. But again, we are also trying to be more prudent and try to bring down inventory position, I think so that we are more in line with the industry, but definitely a little bit higher than the industry.
Right. And in the next 12 months, what investments are planned, either people or CapEx or anything, any kind of a...
CapEx and all is not required, yes. We are very comfortable. I think we have built enough capacity, and we have a lot of capacity for domestic. We have a lot of capacity for -- in our regulated market. We have 2 plants for U.S. So that way, we are not -- there's no dearth of capacity. I think what we want to invest, as I said earlier was, a little bit in R&D just to enhance our pipeline because we are having extra cash and look for an acquisition. But otherwise, yes, nothing else. Yes.
We take the next question from the line of [ Danesh Mistry from Investor First Advisors ].
I had just 2 questions. The first is that, Rajeev, you talked about some time ago that how you're looking at the domestic business growing at 10%, 12%. So is that essentially just -- so do you feel that the pricing pressure is done in the domestic onco piece? Now from here on, some of it will be also driven by our gastro and cardio business? That's question number one. And question number 2 is that on the agrichem piece. You mentioned that the roll-off of the patent is in July. So I understand that is a court case. But if the patent is rolling off from a very common man kind of perspective, do we still need to wait for a court order to go ahead and launch this product? That's it for my end.
Okay. Let me answer your question on CTPR. I think -- so I'll tell you what just to give you a perspective. So basically, what has happened is we got sued for the compound patent. We have argued that the compound patent is not valid. We couldn't win that decision. So essentially, what the court said was that you can't launch the product till August of 2022. So that was what the decision was. But you should also understand, CTPR has multiple patents and so among the multiple patents, there's another particular patent, which expires in 2025, okay? And we -- our process innovators has been aware. And our process patent has been in public domain all these years. If I remember correctly, I think our process patent has been in the public domain for the last 3 years, it's been published.
We find it very surprising that he's litigating us exactly 2 months before launch on the process patent. But obviously, I think it [indiscernible] later. I think, again, I don't want to judge why he's doing it, but I think it's unfair. He has the -- our process patent has been all along. He is aware of the fact that we want to launch this product in '22. I think he's been aware of it for 3 years. I mean, we've been crying [indiscernible] every day saying that we want to launch this product. So he's aware of it. So we'll see, I think -- and we also believe that our process patent is non-infringing. But again, the court has to adjudicate. So let's wait. I think the next date of hearing is in July. Let's see how it plays out. And I think once we get clarity in the court decision, I think we can look at it.
And as I said a few minutes ago, it's still an opportunity, right? I mean if you're able to clear the away, I would believe we'll be in the first wave. Everybody assumes that there'll be multiple generics in August. Because of the amount of litigation that FMC is doing, it's very clear that there will be only limited competition. And we are probably one of the most forefront litigator in trying to clear the way. I think it's a very interesting opportunity. I think once we get clarity, I think you'll see that it will be a very interesting opportunity. And it's not far away, we'll hear from -- you will hear what will pan out in the next 2 months. And this is what we do. This is what we do. We look for jackpot opportunities and go after them. And there will be uncertainty always. I mean I'll not -- I never will shy away from saying that, but this is what we do. But when we deliver, we deliver big. I think that's how we look at this, yes. Okay.
All right, sir. And the domestic one, the domestic piece.
Domestic piece, I think the domestic piece, I said INR 400 crore, I'm talking about the base domestic for human formulation. I'm not talking about agro. I think we are not mixing them up agro is something driven by this particular product.
Yes.
Okay, thank you.
We take the next question from the line of Mr. Rajat B. from iThought.
Sir, you mentioned that our base business PAT is INR 50 crores to INR 60 crores. So if we look at our annual PBT this year, adjusting for the write-offs, we did somewhere around INR 500 crores. So I'm a little confused what is the base business profits here in that?
I've answered your question, my friend. I said -- I already answered that question. I think I yes, I think I -- I don't...
I think I didn't understand out of this INR 500 crores of PBT in this year, how much is the base business?
I answered the question. I already answered your question. I said INR 50 crore to INR 60 crore is the base business per quarter. I think that's what you need to look at. I think about...
Per quarter is what you are saying. Understood. And sir, second question is around Revlimid. Have we been able to take the maximum permissible market share in the 1 month of sales that we did?
No, I've answered that question, too. I think we have started off. I think most of the stock will be sold in this financial year.
Okay. So basically, whatever volume limits that we have to operate in on an annual basis, it can happen that on a -- in some of the quarters, we can sell less volumes and some of the quarters we can sell more. But that on an annual basis, it comes to that limit that we have.
Yes. Absolutely correct. Yes, absolutely correct. I think what I said -- I think one of the gentlemen asked I forget who asked, I think a good quantity will be sold in Q1, and there'll be some quantity in Q2 and Q3. Again, Q4 will be better, okay. Right.
We take the next question from the line of Nitin Agarwal from DAM Capital.
Rajeev, just 2 clarifications. One is, a, on the 3 products that you -- first of all that you've done, in line with your own front-ending strategy, are all of these now on -- 100% your own? Or these are again partnered out?
Ladies and gentlemen, please be connected. Line for the management is dropped and I will connect them back. [Operator Instructions]
Yes, Nitin, go ahead with your question. I'm sorry, we got dropped out here, yes.
I was just saying on the 3 products that you filed, these are again partnered out or now this is -- in this case, you've chosen to keep them on your own -- for your own front end?
Okay. Of the 3 that I've said. So one was Semaglutide. Semaglutide, we have partnered out. And the other 2 acalabrutinib and [ idalasil ] we kept for ourselves.
Okay. Okay. And secondly, on the India business. So for now, our primary -- bulk of our sales are essentially coming from oncology. How are the other -- I mean, has there been any positive movement on the cardiac, diabetes piece this year? And how do you -- what opportunities do you see next year for this?
I think we're doing well. I think we had a very good brand of apixaban. So I think we have done well. It is -- apixaban is doing extremely well. I think we have a run rate of about INR 2.5 crores, INR 3 crores a quarter on that brand on the secondary. So the brand has done well. This is probably one of the bigger achievements. So this is a generic version of Eliquis. So this has been one. So we have some new ideas. I think we are launching some more products in the next -- I believe it will be a stable, good business. But again, I also said that we need to expand our portfolio. I think we don't have the benefit of doing a large multiple portfolio, diversified portfolio like our other bigger peers. But I think we're working on it. I think, as I said, we have to look at an acquisition and also organically taking a look at things to grow, but we are positive that this business should do well.
And last thing on the agrichemical business, after CTPR, is there another -- do you have filing portfolio there in the business?
Yes, we have very interesting products. I think we'll file them in the next 12 months. They're all very interesting. They are -- but CTPR is also the biggest one, but they're all very smart interesting filings. Some of them are interesting technologies and some of them are interesting patent challenges. We will articulate as and when we file. I don't want to reveal the pipeline. But definitely, you'll hear about it in the next 12 months, yes.
And this would be what, again, to start with an India-focused play? Or are you looking at doing overseas businesses also on that agrochemical piece?
I think as of now, we're focusing on India. I think that's where the real opportunity is. I think we have taken a B2C approach. We want to go to consumer directly. And I think that's where the real value is.
We take the next question from the line of Kartik Mehta.
I just had 2 questions here. One is ex Revlimid in the U.S. So in the event that COVID wave is just not there, is there any outlook on your existing products or the products that you will get approved this year? Second question is, is there any element of higher or nonrecurring element in the other expenses after the inventory also because on a Y-o-Y, it's almost double?
Yes. Sure. I think I'll answer that question. I'll start with the expenses. I think what we have done is there's INR 100 crore become INR 200 crore, and I think about INR 40 crore is the ECL provision. But INR 50 crore-INR 60 crore is additional R&D that we have done. So I think with the surplus that we are having, we are spending on R&D. And I think that's the reason why you see it. And I think depending on which projects we're doing, you are going to see a little bit of extra R&D expensing than normal that we're doing because of the surplus that we have. And the first question that we have is what is -- we have this year. I think we have a few other launches. We have another smaller product for which we want to get [indiscernible] we are going to launch soon -- we'll announce shortly. So we have another big launch coming up. This is -- I mean, these are also going to add to the strength...
You're talking about FY '23? Or is it...
In this financial year. That's correct, yes.
Yes. And just on this R&D, so what should we look at normalized R&D in terms of you -- I mean, so while there is an accelerated effort as you get more revenues from Revlimid, but as a ballpark number, will it be times 4 what you did here? Or -- because see that number on a quarter-on-quarter basis would be in a way and outcome in the way in which you feel that you want to accelerate any of the existing process. So can you help us on that?
I think there will be an increase. How much an increase in all and which quarter it will reflect how and all depends on when the expenditure will kick in. There will definitely be an increase. See, asking me how much an increase is, I don't have an answer right now, Kartik. I think let me come prepared with that answer. I -- we'll see...
Broadly this will be...
It will be more, but how much more and all, we have not done the -- let me do a -- because you are asking me, I'm not prepared for that answer. So let me -- I'll come prepared next time and answer that question, yes?
No. So broadly, will that expense be into product filings? Or will it be -- I mean, is it a mix of product filing and litigation? Or is it for India, or anything?
The extra expenses will be characterized in 3 categories, Kartik. It will be one in bio-clinical studies or clinical studies, two, in, what you call, all clinical studies. And second thing is litigation expenses. And three is raw material expense [indiscernible] of the exhibit batch write-off. Essentially those 3 is what drives the R&D. So our exhibit batch write-off will be reflected in consumption. Legal and, what you call, clinical and bio-clinical expenses will be reflected -- and R&D expense will be reflected in other expenses. I think that's how it works.
Lastly, this will be for products which will come at least after 3, 4 years, right? Is it fair to assume?
See, as I said, no, earlier, I think you need to build the next pipeline. So in addition to IMBRUVICA and Revlimid and Copaxone, you need another 3, 4 jackpots, I think -- but unless you spend a meaningful amount of money, you'll not get. And you won't get by doing INR 5 crores, INR 10 crores. So you have to spend sometimes like semaglutide we had to spend more than INR 100 crores to get an outcome on that. But see the thing is -- but again, there we played a little conservatively by out-licensing that product. But they're really good ones, we will spend big money. I think it doesn't come cheap. But again, big money also means big returns as well, not all the time sometimes. So but unless you gamble and spend that sort of money, you're not going to get anything meaningful. This will be my last question, yes? Thanks. Okay.
Sure. We'll take the last question from the line of Mr. Ravi Purohit.
Most of the questions have been answered. Just one doubt that I have, Rajeev. I think you had mentioned about base business profits being INR 50 crores, INR 60 crores. Are you referring to base business, both India as well as the overseas base business not excluding -- not including Revlimid?
I'm excluding, base business, I'm including the subsidiaries and in India.
Yes. So subsidiary meaning, so both overseas subsidiaries as well as India, both domestic as well as India export business, right?
Exactly. Exactly. That's correct.
So just I think we've mentioned during the call that a lot of our newer products have been very successful, and we're quite happy with their performance like Afinitor and all. So -- and if I look at our performance, let's say, 3 years back or 4 years back, right? So in a sense, is there a case to kind of understand that a large part of the profits of the previous few years of the products, which are still kind of continuing to contribute on revenue be it Tamiflu or Copaxone or domestic onco, the profit margins of those businesses have basically reduced over the last 2 years in the sense that I mean would it be fair to assume that the profit margins have halved in those businesses for us? And they kind of, in a sense, commoditized to a large extent, and it is the Afinitors or, let's say, now Revlimid and Revlimid Canada, which is kind of replacing that lost profit in a sense?
You need to understand how generics business works. I think if you look at the export generic business, it's everything that you do will keep reducing every year by 10%, 15%, 20%. So what -- let's say, what you made in 2017-2018, if you were to look at the numbers today, there will be a 50% collapse in that business. Essentially, it's a treadmill no. So we need to keep coming and launching new products and replacing what you're losing on your base business. That's the nature of the beast. I mean, there's no other way of looking at this. So -- and I think you just have to keep coming up with a new idea. I think if you look at the last 6, 7 years, we always had 1 special idea, which always took the earnings. I mean Tamiflu took care of earnings for almost 3, 4 years. Copaxone has been consistent and continues to be consistent. Then we had [ hep C ] which did extremely well for a few years. So you need to keep coming up with something every year. And I think -- so luckily, we always come up with something every year, which kind of keeps the earnings up. And that's how you have to look at this business. If you take our track record for last 7, 8 years, every year, we're able to deliver something or the other, which allows us to keep our EBITDA at these reasonable number.
And that's how this business is. We just have -- every year, you have to keep delivering something. Something good happens, it takes care of earnings for 2, 3 years. Again, you need to come up with the next big idea. So -- and I think you look at it this way, like earlier, our subs were 0. Now subs represent almost INR 80 crores to INR 100 crores of revenue per quarter. So we have actually replaced INR 400 crores of sales that we have lost in our base business with the subs. But not at the same level of profitability because the profitability earlier was on a lower expense base that we have had. Our expenses have gone up and portfolio is far more competitive than what it is, but that's what it is I mean to keep coming up with something new and then hope that it works. I think that is...
Would you say the domestic business has also gone through a similar path this time around as in the base profitability of the domestic business kind of got cut in half in the last 2 years?
I think our portfolio is very unique. I mean I have lost profitability. And generally, in the industry, things have been more stable. I think I have to admit that because of the nature of our consolidated portfolio, we have lost. But overall, it's been a very stable earnings again. Domestic is always stable. I think there is no doubt in that. But just because we don't have a large portfolio, we're not seeing the impact of that on our balance sheet. Still domestic represents only 25% of our sales. Yes. So it's not -- like for some of our peers, it represents a larger share and more of their EBITDA compared to my EBITDA. Challenge with domestic is building it is very difficult. But once you build it, it's a reasonable annuity. But overall, if you see the base portfolio doesn't -- again, it doesn't grow dramatically. You need to understand. When somebody says it grows around 10% or 15%, half of it is coming from the base portfolio growth and half of it is coming from new launches. What we are able to do is new launches. But what we're not able to do it is get a growth from the base business because our base is very small. I think that's the difference between, let's say, us and everyone else. And how do you fix it? I mean, the elephant in the room is you have to buy something else. But again, when you're trying to buy a business, which grows only at 5%, 6% how much it will need to pay, right? I mean that's a question that we're always trying to answer, and I think, hopefully, I'll able to find an answer the question.
This was the last question. Over to the management for the closing comments.
Thank you all again. The questions related to this call will be available after we get to consolidate all the aspects. Feel free to reach out to us anything specific to the call. Thank you all. Have a good day.
Thank you. On behalf of Edelweiss Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.