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Neuland Laboratories Ltd
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Ladies and gentlemen, good day, and welcome to Neuland Laboratories Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Udeshi from EY. Thank you, and over to you.
Thank you. Good evening, friends. We welcome you to the Q2 FY '23 Earnings Call of Neuland Laboratories Limited. To take us through the results and to answer your questions, we have with us the top management from Neuland, represented by Mr. Sucheth Davuluri, Vice Chairman and CEO; Mr. Saharsh Davuluri, Vice Chairman and Managing Director; Mr. Venkata Bharadwaj Gollapudi, General Manager, Finance and Accounts; and Mr. Sajeev Emmanuel Medikonda, Head, Corporate Planning and Strategy.
We will start the call with a brief overview of the financials by Venkata Bharadwaj, and then Saharsh will give you a broad highlight of the business trends and what he is observing in the markets. And post this, we will open it up for the Q&A session. As usual, the standard safe harbor clause applies. -- as we start the call. With that said, I now hand over the floor to Venkata Bharadwaj. Over to you, Venkata Bharadwaj.
Thank you very much, Ravi. A very good evening to all friends, and a warm welcome to you all for our Q2 FY '23 earnings call. I think that you must have seen the presentation, which Ravi just mentioned, and it is put up on our website. And also, we have uploaded both on BSE as well as on NSE websites. As always, any comments on the content of this presentation, which we have sent will be highly appreciated, and we will do our best to give out additional data points, which will help you to analyze the data points much better.
I will briefly talk about financials now. The total income for this quarter is INR 293.9 crores as against INR 258.1 crores in Q2 FY '22. This was largely driven by growth in our GDS specialty and CMS businesses. Our EBITDA for the quarter was INR 69.4 crores with EBITDA margin of 23.6%, an increase of 690 basis points over previous year, which was 16.7%, and it has been increased by 1,050 basis points based on sequential basis.
I would like to give some context on the increase in EBITDA margins on a yearly basis. The business mix has shifted in favor of high-margin products. While we have continued to witness volatility in input prices, these have experienced some easing on related business. We have continued to focus on execution, excellence and operation-optimize costs to ensure minimization of external events that we are facing. We have also witnessed high manpower costs and other costs arising mostly out of Unit 3 commercialization that we did earlier.
We continue to maintain high levels of inventory to avoid any future possible disruptions, which are happening globally as of now. I would like to share that our focus on improving the business mix has also led to a continued increase in the gross margin. Gross margin was 56.2% in Q2 FY '23 compared to 53.4% in Q1 FY '23 and 49.2% in Q2 FY '22. Further, we expect the shift in portfolio mix to continue to drive higher gross margins. Profit after tax was at INR 38.3 crores as compared to INR 20.3 crores last year. This quarter's EPS is at INR 29.9 per share. On a half-yearly basis, the total income was INR 515.6 crores, an increase of 11.8% from the same period last year.
The EBITDA increased by 39.1% to INR 98.4 crores as against INR 70.7 crores in H1 FY '22. The EBITDA margins came in at 19.1% compared to 15.3% for the year earlier for the reasons which we have discussed just now and including Q1 performance. In terms of cash and cash equivalents, we have INR 5.3 crores as on balance sheet date at the end of September. We continue to make investments in the future and also for CapEx, we have spent about INR 34.2 crores in H1 FY '23. And also, if we talk about our CapEx plan, it is on track and with commercialization of products happening and also for the future prospects. I would like to mention that even though we had done substantial CapEx in date, our net gearing ratio continues to be low. As of now, it is at 0.2% -- I mean 2 [indiscernible]. With that, I would like to hand over the call to Saharsh for his remarks, and thank you very much.
Good evening, everyone. Thank you, Bharadwaj, and my apologies if my tone is not very enthusiastic after the ticket back that we just witnessed. I think in terms of the quarter itself, I'll add a few comments on top of what Voltas has already said, and then maybe we can open it up for Q&A. I think in the quarter in many ways is a representation of the direction that we have been sharing our business towards.
I think the growth driven by both specialty and CMS business, it has meant that we have healthy gross margins flowing through to the rest of the P&L. And while there is continued uncertainty around raw material prices, we have seen certain softening, which has benefited us right now, along with a favorable exchange rate as well. I think other than that, important is that we have our highest ever revenues in the specialty segment. I think we clocked around INR 96 crores, which is quite promising. Products like Donepezil, Ezetimibe and new products like Paliperidone and Apixaban, these have all contributed significantly, and we're very excited about these products. They help us keep healthy gross margins.
And we see new products in our portfolio to have a greater traction as we go along. And with regards to CMS business, we've seen, again, highest revenue at around INR 97 crores, which is also, I think, as indicated, a growth of over 40% year-on-year. And the CMS pipeline is also witnessing a continued growth in terms of molecules moving to commercial stage and contributing to revenues. We've also seen some early-stage projects get added to our business this quarter as well.
And we are continuing to see increasing traction from new customers as our ability to execute difficult late-stage projects distinguishes us and makes us a highly regarded CMO. In terms of the overall business, we are seeing significant shift towards higher-margin business for the long term, which has been our stated aim. However, we must remain cautious about how business mix, raw material prices or even ForEx could negatively impact these margins in the future.
So I think that's something that we would like to investors, analysts and all stakeholders to be mindful of. And I think from another dimension, Neuland has always strived to create value for all its stakeholders and in line with the same. I'm pleased to share that as part of our ESG efforts, EcoVadis has recently awarded Neuland the sustainability rating of silver during the September quarter. I would also like to mention that our Unit-3 is ramping up well and continues to support our growth.
We can see that some of our late-stage CMS projects are being scaled up here. And as some of these products scale up, we see that the unit utilization is gradually going to grow up -- and even as it contributes to rising operating expenses, we will see operating leverage continue to kick in. And I think I see the momentum we have witnessed in H1, we think it's a sustainable momentum. And therefore, we continue to remain optimistic about the future of the business. So maybe these are some of the high-level comments.
So I'll pause here and open it up for Q&A.
[Operator Instructions] We have a first question from the line of Siddhant Maheshwari from Banyan Capital.
We would like to know how significant is revenue from Levi precision for the company, I mean as a percentage of total revenue…
Yes, we don't disclose at a product level, what's the percentage of the contribution. So it's definitely one of our top 5 or 10 products, but we don't have that information.
Okay. But sir, still maybe some broad idea? Like can it be like broad number, like is it falling in the, let's say, around 10% of the total...
One of our top-end products for the company and one of our top 5 products in the generic side.
So I think, Siddhant to answer your question, even as probably it hasn't ...
Sorry to interrupt you sir, your voice is breaking right now.
Okay. So just to answer your question, Siddhant, levetiracetam is still a good contributor, is among our top Prime products. And if you see this quarter, Prime contributed to 30% of our revenues. And within that, levetiracetam is in the top 5 products.
[Operator Instructions] We have our next question from the line of Keshav from RakSan Investors.
Congrats for astonishing performance. Firstly, there are a few trends playing out pertaining to which I would like to understand how we are positioned. So though your opening statement has allied any shares, but still for the sake of repetition. So one thing is that we've seen -- we have small midsized biotechs as our clients. And we are seeing a tremendous amount of innovation from this space in the past decade, but it has been also an era of ample financial liquidity.
So firstly, do you think that as a business model, our clients might be relatively vulnerable and they might reprioritize their assets or might actually face difficulty funding the early-stage pipelines? Or are we seeing any such signs of slowdown, talks of a slowdown or difficulties getting newer clients?
I think a lot of the customers we work on the CMS front, biotech companies, as you mentioned, Keshav. But also, I think it's important to understand that a biotech company is not necessarily a venture-backed company. A lot of the companies we work with, especially the ones where we have more advanced molecules, these are all either NASDAQ listed on New York Stock Exchange listed companies, and they have market cap in excess of $2 billion, $3 billion. Some of them have $10, $15 market cap. So I think the biotech category is perhaps a little loosely defined. But for us, the biotechs, especially the ones where the assets are in late clinical phase, these are all multibillion-dollar market cap company. So they are a little bit more resilient than some of the early-stage companies that you are perhaps referring to.
Got it, sir. And sir, secondly, apart from probably the complexity required in doing deuteration that we've spoken of. Are there any other factors as well because of which deuterated molecules have hardly seen any commercialization in the market as yet because as a concept, it sounds to not be leverage in a simplistically, should it not bring in many candidates with good efficacy that get rejected due to the toxicity profiles or other 505(b)(2) opportunities?
Yes. I think, the caveat that we are not really drug discovery experts, but just someone who has specialization in deuterated chemistry. I think what we understand from the marketplace is while deuterated molecules are safer and more efficacious in nature. I think the -- there have been a lot of challenges in getting commercial approvals for these drugs. And I think there are many factors, which, frankly speaking, we as an API maker don't understand. But having said that, I think over the last 6 months, we've come across a very significant number of clinical candidates of deuterated molecules.
So I do believe somewhere that in the years to come, there shall be more due related drugs out there in the market. But I think, again, when it comes to utilization, I think there are several other factors to be considered. And therefore, it's hard to answer your question as to why there are not more deuterated drugs in the market right now. But we are paying more and more candidates in terms of assets in the clinic or early stage can.
[Operator Instructions]. We have our next question from the line of Kunal from Carnelian. We'll take the next question from the line of [ Mithun ], an individual investor.
Good evening. Congrats for a nice set of numbers. My question is regarding the update molecules in our pipeline. We have been developing semaglutide and liraglutide for the past 4 years, I think. Can you give me more color on this. Have you filed any DMO for something or any update on this?
So I think when it comes to the price that we have in our portfolio and which we have been developing, you are right that we have been working on liraglutide and semaglutide. And -- we have made significant progress in the lab. Even as we had -- we were looking -- this is not a small molecule. So therefore, we are not looking to stay away Google filed a DMF because we are working very closely with the formulator to ensure that we have the right product, which keeps there.
And even as we are looking for the right customer of these 2 products, we have also started development on more molecules in the peptide portfolio. So as soon as we have the right customers, right partners for these products. Sorry to interpret... Your voice is not clear. We will -- as soon as we find the right partners for these products, we will scale them up, you will see the DMF being filed. Can you hear me? Were you able to get what I had mentioned...
Yes, yes.
Okay. So even as you're saying that you are looking to the right partners for these products, we have gone further because we have done the work in the lab for these products. We have added more products to our portfolio. And even there, we are seeing good interest in those products. So I think you will find that in our product list, a product called [indiscernible] as well as tirzepatide, both also we have been working on for the past 6 months or so.
Next question is regarding the molecule tested. Are we seeing any demand for this molecule? How is the customer traction for this molecule?
So this is a recently approved molecule. So we are seeing good traction, but we will be expecting certain small development quantities going out over the next 12 to 18 months or so. But from a commercial perspective, this is a long-term bet, both for us as well as for our customers.
I think this is a patent and molecules.
Yes. It has been really approved, it will be under patent yes.
So are we seeing customer demand for this molecule? I think there is only one customer.
Yes. This is for generic market. So we are seeing interest from generic customers who are looking for their pipeline for people who are looking to file a NC-1 filing, looking at a first to find opportunities. Those are the customers who are showing interest in this product right now.
We have our next question from the line of Ankush Mahajan from Axis Securities. We'll move on to the next question from the line of Kunal from Carnelian.
Can you hear me? Yes. Hello.
Yes. Hello. We can hear you, sir.
I just wanted to understand, in this current quarter, we have done about INR 97 crores in specialty INR 97 crores in CMS in comparison to INR 58 crores and INR 69 crores, respectively, in the last quarter. During the last quarter, if I understand correctly, we had some delayed deliveries in both these segments. So just what is and this INR 90-odd crores, if you could help understand previously, what would be the amount which was continued in the last quarter, which got delivered in the current quarter.
So I think when we talked about our performance in the last quarter, there was an indication that there has been some projects that have been delayed, and therefore, the numbers would have been higher. I think with regards to that question, probably anal, what I would say is the whatever delays would have happened in that quarter are probably a part of these numbers that we are right now forecasting or what we have actually executed -- but I think it's also important to take into consideration that we see -- since we are executing several projects, there is a continued sense of rollover.
So again, we've done INR 97 crores this quarter. But perhaps if we had absolutely no delays in this quarter, we would have done more. So there is, in that sense, a spillover even from this quarter to next quarter. So I think I would ask you to take my opening remarks into consideration that what we have done this quarter, which is around INR 96 crores, INR 97 crores is in some way, not a one-off quarter. It's not that we've had a lot of stuff from last quarter billed over into this quarter. And therefore, we did INR 97 crores. It's just that, yes, we've had spillovers into this quarter. But having said that, this quarter is also, in some ways, a sustainable quarter. So it's not like INR 60 crores, the steady number and INR 97 crores is a one-time number. That's how much I can clarify it.
Okay. Fair enough. And just coming to the prime segment. So now we have been doing like about INR 90-odd crores in the last 2 quarters. So how should one look at this particular segment going ahead now? I mean as you have mentioned that we've been focusing more on specialty CMS and that's getting reflected in our GP margins as well, which have been looking very good. But for the overall revenue thing, you guided for 20% revenue growth in this year on revenue count. So is that guidance on track considering all the segments?
Yes. I think just to clarify, we've not provided any guidance in terms of how our revenue would progress. I think in terms of the prime category itself, I think there has been -- for us, the biggest impact on prime has been because of levetiracetam. And I think that continues to be a concern for us. If -- even in this quarter, we have seen a subdued performance of Levitan. If not, we would have probably had a higher revenue number.
And I think for us, it remains a little bit of a concern because we are not very clear in terms of how and when we will recover. I think other than levetiracetam, I think, to a certain extent mirtazapine also has been a little bit muted compared to how we did last year. I think if not for these 2 products, I think the rest of the product portfolio in Prime is doing well for us. And everything else is moving as per our budgeted numbers. And I think medication also, we are seeing a little bit of slowdown because we had some tenders and all last year, which are not happening this year, maybe they will happen later in the year. I think levitates where there has been a reduction in terms of the volumes that our customers are taking. And I think we've seen these cycles in the past with Let's see some of our other products. This is a long term. Yes, it's not a long-term concern. I think we continue to be very competitive. We'll address them, and we continue to add new products. So I think we expect it to come back sooner or later.
Okay, enough. Just one last question, if I may squeeze in. However, quarterly and underrate of other expenses, I mean, which was 55, 56 for the last 4 quarters has gone up to INR 63-odd crores in the current quarter. So how should we look at that any one-off over year? Or I mean I also wondering that...
I think there has been no one-offs physically in the other expenditure that we've seen -- so I think this should be something which we forecast to happen on a continued basis.
And most of the expenses Kunal are related to investments that we are making, the canal capabilities in R&D and manufacturing for new product development on and so forth. So we expect -- though we've kept a strong cap on our expenses and a lot of initiatives to keep them under control. There's no one-off items that are reflected in a specific quarter. So they will continue.
Okay. And our unit breaking even or there is still some time for Unit-3 to breakeven?
We have not disclosed what the Unit-3 levels are. But I think broadly speaking, it's not yet there. But I think by the end of this year, we should be in a good position.
We have a next question from the line of Ankush Mahajan from Axis Securities.
Congrats for a good set of numbers. Sir, my question is rated to the outlook on the CMS division. As in the last quarter, we have been told that there is a gain shipments orders have been canceled, we can say in this way. So any update on that one that is spillover order was there in the CMS? Or [indiscernible] way I just try to understand what a CapEx we already have done for the CMS and what revenue that we are looking on that, sir. If you throw more light on the CMS, I really appreciate, sir.
We had just clarified this first question earlier saying that whatever pillows that happened have been delivered this quarter. And having said that, what we have done this quarter, we consider it to be a steady performance. So I believe that question is answered. I think second question maybe, Bharadwaj, do you want to answer?
I think the second question is the core -- is there specific CapEx, which is done for CMS projects. And I think if we -- all our CapEx is done both from a GDS and CMS perspective, even if there is a project which is specific to CMS, the overall investment is done on the basis of the fact that it will be fungible capacity. So they are all multiproduct facilities. So we would not be able to think that this is the CapEx amount for CMS projects.
I agree, sir. And sir, a very good set of numbers for this specialty division. So I just try to understand, sir, paliperidone, donepezil and [indiscernible], these molecules are given there. Sir, any plan to launch a new macule in the second half? And what are the 5 current molecules that are contributing to the revenue of specialty?
So Ankush, to answer your question [Technical Difficulty] another product, which we did mention even in our press release is ezetimibe. And I think if you look at our business, we actually develop products many years in advance. And the launch of these products in the market is actually dependent on our customers when they are able to get approvals and how rulings happen in terms of patents and so on and so forth. So to a certain extent, our responsibility, our job is to ensure that we select the right products and that we develop them. So I would not be able to answer if we are launching any product in the H2, but we -- I can -- what I can assure you is that we are the very healthy pipeline of products and customers are looking towards those projects, and we will continue to see good traction from the new products.
Sir, a last one about this CMS side. So any update answers a few molecules that we are looking on for commercialization and in the developmental stage that can add revenue now.
I think on the CMS side, we had mentioned earlier that we have a table that we publish every quarter. And I think if you look at the table, you'll see that there are some molecules listed in Phase III development and commercial. I think they are the candidates for us that are likely to provide good, stable commercial revenue in the future. And as we had also mentioned in some of our comments earlier in the next year or 2, we expect at least maybe 2 to 3 molecules getting commercialized.
And I think in the last 2 years, also we've had at least 2 new additions to the commercial segment of our category. So I think we do expect a steady transition of molecules from development into commercial and those should contribute to commercial revenues for CMS. And I think that's what will contribute to the growth of the CMS business as well. But we cannot give specificity in terms of which molecule, which indication, et cetera.
[Operator Instructions] We have a next question from the line of Ritesh Oswal from opal Industries.
Last year, you have lost 1 customer. Have you started supply to them?
Sorry, can you clarify what customer are you referring to?
Under CMS you lost one customer in last year that deteriorated a product.
So I don't think we have lost any customers. And in respect to last year, I think the only project that we said was that there was an anti-system product has become inert. So therefore, where we lost revenues from that. That was the only reference. There has been no loss as such in terms of any customer.
Okay. One more question. Can we expect same EBITDA level in Q3 as a dollar depreciate sorry, INR depreciates.
So I think even as Saharsh had mentioned during his speech, we expect -- means we expect our business mix to be similar even in Q3. And if -- I mean so therefore, you would see that the margins this quarter are driven by the business mix and certain conditions being in our favor. So when it comes to Q3, the numbers will be a reflection of the business mix and also the external conditions too.
We have our next question from the line of Santanam Surendran. an individual investor.
Congratulations on the good set of numbers. My question was on the utilization of Unit 3. If you want to just put a number to it? And what is that you expect for the next half of this year? And are there any U.S. FDA inspections lined up in the near term?
I think [Technical Difficulty]. Okay. Good. No, I think with Unit 3, that's a difficult question to answer because we're constantly investing in Unit 3 and expanding, and we keep adding products at the same time. So the capacity continues to evolve. Having said that, currently, there is no inspection, which has been formally announced. We are expecting to be inspected as we do continuously. But as of now, there's nothing on the card.
We have our next question from the line of Keshav from RakSan Investors.
Yes. Sir, just one observation. So the later stage soon to be commercial and commercial molecules have gone up in the recent past, and we also mentioned about increasingly focusing on this area and choosing the candidates wisely over there. But I just want to understand if we are selectively forewing a lot of early-stage opportunities as well. I mean, if we were getting a certain inquiries 5 years back, are we getting on an average a bigger number of early-stage inquiries, but we are much more selective now to choose Summit. Is this the correct observation?
So frankly speaking, I don't think we are there, Keshav. I think we would ideally in the future get to a stage where we want to focus more and more on late-stage molecules. But I think today, if you see how our pipeline is progressing, I think even this quarter, we've added, I think, like 3 or 4 preclinical assets -- we've added 1 or 2 Phase I assets. And I think the way the business is evolving. I think 2 things are very important. I think for investors and analysts also to note the timelines between preclinical phase to commercial is gradually reducing. I think especially U.S. companies are becoming more aggressive in their development time line, especially post-COVID.
So I think it bodes well for CDMO to keep continuously working with early-stage assets also because early-stage assets are also accelerating very quickly into late-stage and commercial. However, having said that, in the long term, as we have to keep focusing and getting -- I guess, becoming more selective -- we'll have to come up with a subtle way of looking at assets which are adding more value to the company.
But I would not say that assets which are adding more value to the company are necessarily only late-stage molecules. Sometimes we may not want to do a Phase III molecule for a particular indication, and we might want to do an orphan indication for Phase I. So I think there is a lot of qualitative work done in how one screens for business, which I think is a relevant question. I think we would like to get to a stage where we will be screening for business today. I think we do it early a little bit, not so much.
Okay, sir. And sir, in the NCE pipeline, have any lines seen in any in-licensing deals in the past 2 to 3 years for the substance we are selling...
So if I had to understand your question, you're asking whether any of our customers have seen in licensing. I think with considering that we have close to 30 or even as much as 50 customers for our 87-odd projects. So we see that there will be both the mix of in-licensing as well as out-licensing activity, which happens. So there's nothing specific relevant to our business, which we need to comment on.
Okay. Sure, sir. And sir, another long short question again. So we've been either hearing about nearshoring from even U.S. and now the rhetoric is moving between outsourcing or reassuring. So I understood that the CMS business is strategic and short-term moves don't happen. But from a longer-term perspective, is there any directional shift in say, CDMO capacity is coming up in EU or U.S. closer to the customers?
I think it's a very good question. And I think many of us in the pharma industry were at an important trade conference last week called CPS. And I think one of the takeaways that we had was that European CDMOs are also quite active in terms of getting some of the business from biotech companies as well as big pharma, and they're also looking at creating capacities. So I think they will create a continued challenge from European-based CMOs. I think that challenge will be more prevalent with when we are competing for business with European companies. I think when you are competing with business for a U.S. company, maybe you might still have a little bit of a market. But that's one way to look at it. Sucheth, anything you want to add?
No, I think very similar as promising. I think generally, and I will speak on neck and say this, but I think it's going to be the European API companies and the Indian AI companies that are going to become the formidable supply base for most of the pharmaceutical markets across the world. So I think we're seeing it as an opportunity. Our investments reflect that, and our investments in the future will also reflect the same Angles the best for next quarter.
We have our next question from the line of Sajal Kapoor.
Congratulations for a very reassuring set of performance with time around. My question is an Indian CDMO dominated player who is a relatively large size player and it commentary was that they have seen some accretion and loss of the skilled manpower in their overseas operations. Are we seeing any similar trends here in India, how the attrition levels looking from an industry perspective as well as from means perspective.
Thank you. Ladies and easement. We have the management back on the line. Please go ahead, sir.
And should I repeat the question or did you get it?
Sorry, please go ahead and repeat the question. We had lost the call right after we answered the previous question.
No, no problem. No problem. So my question is, in this MC scale-up and this novel instances a very still intensive. You need a certain capability in the scientific resources, we need a certain infrastructure and one of our [ Image ] and CDMO dominant player. The recent commentary was that they are seeing some attrition in there all these facilities. So they operate out of Europe and U.S. as well in addition to India. And in their overseas facility, there's also nutrition in the CDMO space. Are we seeing any higher-than-normal attrition levels in India? Or are we struggling to hire the scientific talent that we need and to scale up these [indiscernible]
Okay. Are you able to hear me?
Yes.
Yes, so Sajal, since the voice came out really low, I'm just going to repeat the question. Please confirm if my understanding of your question is correct. What you're saying is that for these new chemical entities scaling them up requires a lot of not just infrastructure, but also scientific talent. And for doing -- for executing these projects successfully, does do Neuland any challenges on the scientific capabilities or yes. So Sajal, since the voice came out really low, I'm just going to repeat the question, just please confirm resources itself. Is that -- is that your question?
Absolutely, absolutely. This is my question because some of our other Indian players who operate in this domain, they have highlighted this year mainly from their overseas operations. So they operate out of -- they've got a large base in the U.S. and Europe in addition to India. So they were sounding cautious on the overseas operations regarding exactly the scenario. But is it a risk for mining and Indian industry as well?
Yes, I would agree with the comments that you made based on what you had understood from the industry. I think as we are dealing with not just CMS molecules, but also with the specialty APIs in our business, sales in these molecules is a lot more challenging than the prime APIs because there's a lot of prior art and information available about the scale-up of these molecules. But when it comes to the new chemical entities, especially and when you're working with biotech companies, we are pretty much independently handling the project, and it's like a turnkey project where you're not really getting a lot of insight, information or guidance from the customer.
And in those situations, I think our science competence and our scale of expertise is very important. And some of the delays and challenges that we have talked about in the last year or 2 years are also a result of handling this complex business. So definitely, I would not shirt admitting that it is a challenge. However, I think that's an area that we are also investing a lot of time and resources on. I think getting the right scientific talent, not just for the labs, but also for scale-up and for manufacturing. I think that's very important. So we've been steadily building a pipeline of leaders, not just at a senior level, but also at a lean level at a scale-up level in the manufacturing area. People who understand the techniques of quality by design who are able to study the reactions holistically before scaling them up is very important.
And for that, it's not just the scientific talent but also the right infrastructure, our ability to study the reaction progression and making proper analysis of it before going for scale up, that's very important. So I think it's infrastructure, coupled with the right scenic talent. And one of the things we've been investing steadily in building proper infrastructure in R&D as well as scale up instruments like FBRM,RP1, different poly blocks for studying crystallization patterns. I think all these have become very essential, which maybe were not so essential when we are doing just prime API.
And I think why it may not be possible to have or replicate the scientific talent that is available in the West, what can also be done is have the right scientific advisers, consultants to also guide you. And I think Neuland that way is fortunate to have the right set of advisers who we are able to also tap into and help us publish it when we have challenges. So I think that's a slightly long answer, but it's something that is obviously a high priority for the organization even going forward to keep having the right talent, either as full-time employees or as in tick advisers. No long answer is really helpful separate.
We have our next question from the line of [ Mithun ], an individual investor.
I have asked earlier a question regarding the molecule is appetite. Sorry to presume more regarding this. If my understanding is correct, the innovator who launched this product[ Elim ], has the patent pots molecule up to 2013. I'm now to understanding then how we are getting demand for the generic version of the molecule now. Can you provide more clarity regarding this aspect. Are we partner for Eli Lilly for this molecule?
Thank you. So good in, we are going to understand is here from the generic business perspective, Customers would invest in some of these products, even 10, 15 years in advance. Some of the projects like, say, either apixaban, we had developed back in 2015 and not only we are seeing traction for these projects to be first in the first to file, customers need to be able to file at this point of time or rather start development at this point of time to file at the date of NC Management so that they will have, say, exclusivity or any other rights once the product goes generic. So those are investments which we are making. And even if we look at our products, which we are selecting some of the products are -- we are actually selecting for the next half of next -- of the next decade, and that is how this business is.
We have our next question from the line of Maulik from Anand Rathi.
Hello. Is it better now? Hello?
Yes, sir, please go ahead.
I just want to understand, you broadly explained so that this is not a onetime or one-off revenue for CMS and specialty business. But I just wanted to broadly understand that what is our expected run rate for H2 in terms of CMS and specialty business? And if there's any addition [indiscernible] terms of products or revenue-wise diversion, so just wanted to understand on that aspect.
So we don't have any guidance for H2, but I think what I will just reiterate, mollies that the performance of Q2, I think, is the good representation of what we can possibly do going forward. However, there would be a quarter-to-quarter variation. There would be a product mix-related impact on margins, and there could be other factors which could have a positive or a negative impact as well. So I would probably leave that to the individual judgment to figure out how HP is going to be.
So I think definitely, when it comes to CMS, as we've been maintaining, we've had a flat FY '22 -- and FY '23, there is always going to be a year of growth, given especially that FY '20 was flat. And I think we've also -- I think just given the fact that there are a lot of molecules moving from Phase III development into commercialization. I think over the next 2, 3 years, also, we expect to have a healthy growth for the CMS business and thereby for the overall business as well. So I think that's what I would say and probably not comment too much on how H2 will be vis-a-vis H1. Okay.
I would now like to hand over the call to management for closing comments. Over to you, sir.
Yes. We'd like to thank everyone once again for joining the call and for asking us very pertinent questions regarding our performance this quarter and also the outlook. As we have stated, I think this quarter is the result of the direction in which we have been steering the company. This is not something that we believe will be a one-off, but rather the direction in which we'll continue to see the business happening. So once again, thank you for all the questions. We look forward to reading any further questions to the future would be glad to respond. Thank you.
Thank you. On behalf of Neuland Laboratories, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.