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Orchid Pharma Ltd
Earnings Call Analysis
Summary
Q1-2025
Orchid Pharma reported a robust 34% increase in sales for Q1 FY 2025, reaching INR 244 crores. The EBITDA rose significantly by 71% to INR 41 crores. Operational efficiency improvements and cost controls helped maintain stable employee expenses and reduced other expenses. The company is set to launch Orblices with Cipla, expecting substantial market impact. Land acquisition for the 7ACA project is complete, and trial runs for capacity expansion are ahead of schedule. Management remains optimistic, providing long-term revenue growth guidance of 20-25% for the fiscal year. Strategic partnerships and disciplined execution are key to their continued success.
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Ladies and gentlemen, good day, and welcome to the Orchid Pharma Limited Q1 FY '25 Earnings Conference Call hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Vishal Manchanda from Systematix Institutional Equities. Over to you, sir.
Thank you, Deepika. Good evening, everyone.
On behalf of Systematix Institutional Equities, I welcome you to the Q1 FY '25 Earnings Call of Orchid Pharma. We thank the Orchid Pharma management for giving us an opportunity to host the call today.
We have with us the senior management of the company represented by Mr. Manish Dhanuka, Managing Director; Mr. Mridul Dhanuka, Whole Time Director; and Mr. Sunil Kumar Gupta, Chief Financial Officer.
I now hand over the call to the management for opening remarks. Over to you, sir.
Thank you, Vishal.
Good evening, ladies and gentlemen. I'm Manish Dhanuka, the Managing Director. I'm pleased to welcome you to our discussion on the results for the first quarter of FY 2025. First, let's review the financial performance for Q1 '25.
I am pleased to report that our sales for this quarter reached INR 244 crores, a robust 34% increase compared to INR 182.9 crores in the same period last year. This growth is a testament to our strategic initiatives and our commitment to delivering value. Our overall EBITDA for the Q1 '25 was INR 41 crores, a substantial increase of 71% compared to INR 24 crores in Q1 of financial year '24. This improvement reflects our continued efforts to optimize operational efficiency and control costs.
After analysis of our expenses, I am pleased to report that our employee expenses have remained steady at 8.7% of sales in Q1 '25 compared to 8.8% in Q1 '24. Regarding the other expenses, these have been well controlled, just like the other expenses, standing at 16% of sales in Q1 '25 compared to 17.7% in Q1 of '24. This reduction is a result of our continuous focus on streamlining operations, reducing nonessential spending and improving productivity and efficiency.
Now moving on to our operational updates. I'm excited to announce that we are ready to launch Orblices, O-R-B-L-I-C-E-S, our brand name for Enmetazobactam plus Cefepime combination, which stands as Orchid invented beta-lactamase inhibitors plus Cefepime. We are confident that this product will make a significant impact in the market and to augment its reach, we have signed a marketing agreement with Cipla. This partnership will ensure that Orblices reaches a broad audience and achieve its full market potential.
Regarding our ongoing projects, I'm pleased to report that the land acquisition for our 7ACA project is complete. We are planning to break ground on this project on the auspicious day of Ganesh Chaturthi.
Also pleased to inform that we have obtained our NCF registration for the GST benefit in J&K, which has come at the right time as the scheme has now got closed. This is a significant milestone for us, and we are excited to take this important project forward. Our small capacity rejig that was discussed during the last call is progress -- has progressed ahead of schedule. We have already started trial runs and we anticipate completing the commissioning by the end of this month. This will provide us with the necessary capacity to support our growth and meet the increasing demand of our products.
Other projects in our pipeline are also progressing as per schedule. And at this time, we do not foresee any major challenges. These developments reinforce the importance of our continued focus on project management. Effective project management is critical to our success, ensuring that we meet our timeline, stay within budget and deliver high-quality outcomes that drive our business forward.
Looking to the future, I'm filled with optimism. The strong financial results we have achieved in Q1, combined with our progress on key projects and strategic partnerships, positions Orchid Pharma Limited for a sustained success and growth. Our focus on operational excellence and disciplined execution will continue to guide us as we navigate the opportunities and challenges ahead.
In conclusion, I would like to express my heartfelt gratitude to all our stakeholders, employees, investors and partners for your unwavering support and trust in Orchid Pharma. Together, we will continue to build on our successes and achieve new heights in the coming years.
Thank you for your attention. I now welcome your questions and look forward to a productive discussion.
[Operator Instructions] The first question is from the line of Ahmed Madha from Unifi Capital.
Congratulations on a good set of numbers. I had two questions. First, on the Enmetazobactam. Have we finalized -- I mean has the Allecra finalized the partner for U.S. and China? And second is, whether the royalties from the Europe market, when will we start booking the numbers on P&L?
Yes, Ahmed. On the China front, whatever is in the public domain is they have out-licensed to a company called, Shanghai Haini Pharmaceutical in 2020. And in U.S. market, we are not aware of any new development. As we have explained before, Allecra is a company, which whenever they do something, they put it in public domain, and that's how we find out about it. So that's on U.S. and China.
On Europe, our expectation is we should be looking at booking the first sales in this quarter. I don't have a timeline yet to give you the numbers. But hopefully, by the time of the next conference call, we would have the first sales numbers to report.
Noted. And any update on the U.S. para IV filings. We had a couple of filings for U.S. for para IV. So is there any update on that, on the timelines?
Yes. So we have filed on the due date. And now we have to wait and see, it's a 30 months stay on that and the actual launch can only happen even if we get the first-to-file status by August of '27. So the filing has been done on due date.
[Operator Instructions] The next question is from the line of Rupesh Tatiya from Intelsense Capital.
Hello, sir, can you hear me?
Yes, sir, you're audible.
Congratulations on fantastic set of numbers, sir. I have a few questions. So first one -- first question, sir, is on the cephalosporin capacity in India. One of the recently listed player is talking about putting overcapacity in cephalosporin. One other small listed company is also doing some CapEx in cephalosporin. So how -- what is your view on capacity? And do you -- are you seeing increased competition in the market?
Yes. So I'm really not aware about the news that you're talking who is investing in the capacity. But my take on this subject is that yes, the field is competitive, although Orchid is relatively well positioned to have a wide range of products, especially in the injectables field, and there are not many players who manufacture as many products in injectables as we do.
At the same time, I'd like to say that the demand is continuously growing from various regions, which are not so well, I would say, utilizing the cephalosporins, which are still on the first generation of beta-lactam. So overall, I don't see much of a challenge, yes, but we do have competition in this field.
Okay. Okay, sir. The other question, sir, we were -- I think when we're talking with Allecra only, I think the CEO level kind of like connect was established, which I think you said in the last call and then teams down the ladder, I think they were looking -- you were at a deeper engagement and better tracking and all that. So has that kind of happened? And is there any sales projection or some planning that you're aware of that Allecra is planning for Enmetazobactam in this year and next year?
So unfortunately, they have not shared any sales predictions for the coming years. And considering the 3-year plan, I think that would be delivered only after once they launch and see the actual traction in the market. So unfortunately, no news there.
But the communication channels now are firmly established. Is that fair to say?
Yes, that's fair to say, yes. We're in regularly communication with them.
Okay. Okay, sir. The other thing, sir, is this Cipla deal in India, I mean, can you share any details on, let's say, gross profit sharing? Any which way you want to share?
I can't share the numbers, but the deal is structured like a typical out-licensing deal, which will have a transfer price and some royalties.
So my fear here, sir, is that you're dealing with a very large company who has a very massive distribution, but yet you are the innovator. It's an 80% gross margin product. So my fear is that we might have given too much to them and not get enough for Orchid. So maybe can you address that in some way?
Actually, we are bound by the confidentiality of the agreement, but I mean I can assure you we've done our best -- used our best negotiation skill. And I think Cipla is probably one of the most reasonable and professionally run organization amongst the large pharma companies. We felt very comfortable dealing with them, and they've been very reasonable with us. So we do get a licensing fee in the form of royalties, and we get the right to supply exclusively to them.
Okay. Okay. Sir. And then between Cipla and your AMS division and I think you're looking for a launch in Enmetazobactam pretty soon. Do you have some guidance to give for India market for FY '25?
Yes. So we would -- we have retained the right to market ourselves as Orchid Pharma. So besides Cipla, Orchid Pharma will also be marketing the product. And Orblices that I mentioned will be our brand name. Cipla will have different brand name. So through AMS, I think this is a great launch opportunity for us that we will be entering the market with a new molecule, and our team seems to be very excited about it.
But can we do, let's say, INR 100 crores kind of sales, sir, this year?
No, no, I think that will be very wishful. We are starting with a small team of about 40 to 50 people. And we are projecting...
We have talked about guidance of 3 to -- in 3 to 4 years INR 100 crores for the AMS division. So that's already we have talked about. We're maintaining the same number.
Okay. Okay. Okay, sir. Sir, the other question is now on Cefiderocol. I mean, is there an update on CapEx? Can you give how much amount is spent, where are we on CapEx?
Yes. So we've applied for the approvals over there, and I think we should start the construction there. The groundbreaking ceremony has been done. We should be starting construction in the month of September. So overall, I think we're looking at project being commissioned sometime around '26 -- early '26.
So 15 -- I think $15 million was the CapEx outlook. So what kind of amount are we looking to spend this year? And what kind of amount we're looking to spend next year?
I think it -- the amount spent during this financial year would be relatively less, say, about 1/3, maximum investment will go during the next financial year.
Okay. Okay. I see. 7ACA also, can you give a similar what kind of CapEx will spend this year, what kind of CapEx will spend next year? And when will we be ready for trial commercialization on 7ACA?
For 7ACA, CapEx has already started happening in the form of advances to various equipment manufacturer. And by end of this year, we anticipate a similar number of 30% to be spent. And most of the CapEx will happen in next year -- next financial year.
So can you give an absolute number, sir? 30% is what INR 250 crores this year?
Yes, around INR 200 crores -- INR 150 crores to INR 200 crores would be the right number.
This year, Okay. And INR 400 crores, INR 500 crores next year?
Correct.
Okay. Okay. And then any update on Dhanuka merger sir? Any timelines, what steps are pending, when would the Dhanuka merger be come?
Yes, we're still waiting to hear from the exchanges on that, fingers crossed. So unfortunately, no update.
Okay. Okay. But this year, at least by March, will it be done? Is that a reasonable estimate?
I can't say on the regulatory process. As you are aware, the application was filed in December last year for approval with exchanges and it's been 8 months. So you can't say how much time it's going to take.
Okay. Okay, sir. And then the final question from my side is any -- I mean, any update on business development in U.S.? How would -- is there some update there? Or how would this year look and next year look from U.S. point of view?
Like we said last time, one of our main customers lost its own U.S. FDA. So working with a couple of other customers. And the timeline, I don't think I can give you at this point of time as they would be filing the source change. So it would be difficult for us to comment on the timeline.
The next question is from the line of Nikhil Upadhyay from SiMPL.
Am I audible?
Yes, sir, you're audible.
Congrats Mridul and Manish ji for a great set of numbers. Mridul, just understanding these numbers better, if I go back 2 quarters back, we had 2 smaller capacities which were coming, one on the sterile and one on the oral. It looks like those capacities commissioning has supported this kind of a growth? If you can just help us understand what led to this strong growth? And overall, what would be your capacity utilization, both on sterile and oral?
Yes. So on the sterile, the block is commissioned already and the new sterile block [Technical Difficulty] is roughly 50%. And the oral block we did like Mr. Manish explained in his opening remarks, that is going ahead as per schedule. Right now not yet commissioned. So current our oral capacity at this stage are, you can say, almost fully utilized. We are at almost 90% utilization.
Okay. So is it like this part of like this 50% utilization of the sterile had given the strong volume growth? And is there a pricing element also here? Or is it purely volume growth?
You can say mostly, it is volume. Although product mix also plays a lot in our overall sales because we sell almost 40 products. So it would not be possible to say how much is volume, how much is pricing. I don't think prices have changed.
Okay. Okay. And secondly, so on some of the product launches on -- in U.S., which we were talking about in previous discussions, are you seeing any approvals coming in? Or would they come in this year or would most of that be in next year?
Yes. Just as Rupesh was also asking this question just before you, and Mr. Manish had explained that our -- the largest possible customer had a U.S. FDA issue last year. And since then, we are exploring certain opportunity, but we don't have visibility of any of them as of now.
Okay. And lastly, if you can just share the breakup between regulated and nonregulated markets in terms of revenue, please?
Yes. So even in this quarter, the percentage remains as per our long-term trend at 60% regulated market and -- sorry, 60% emerging markets and 40% regulated markets.
Okay. So when do we see this shift meaningfully changing? Because in the last 2, 3 years, we've been adding new customers on the Europe and all. But is it like they are still not contributing significantly? What is the -- what is taking this time this -- what is creating this delay? If you can just help us -- or my understanding is wrong here?
No, no. Nikhil, we have never said that this number is going to change. And as the things stand, the volume growth largely is going to happen in the emerging markets only. So we have never said that the share of the regulated market is going to increase. In fact, if at all, it is going to be -- it may fall as the volumes in emerging market increase. So we have never said this is going to increase. So maybe there is some understanding gap when you are expecting that increase.
[Operator Instructions] The next question is from the line of Yash Shah from Avanse.
Thank you for the good set of numbers. There are a few queries that I'd like to ask. Sir, you mentioned that your sterile capacity that was already commissioned, sir, what is the status of that? Is the production in the capacity has started? And there were some trial runs and checks also going. So can you give us an update on that? What has happened there?
On the sterile product, I just explained we are at 50% utilization for the new block. The older blocks are at practically full utilization.
I did not understand the next part of your question, for which trials...
Is that you can only sell the product in the developed market -- sorry, in the emerging markets now, there would not be -- you would have to undergo some trials for it to be applicable to be sold in U.S. and Europe?
I'm sorry, I'm not able to understand for which product you're talking about.
And sir, what is the update on oral capacity? Is it -- it was about to complete in the second quarter of FY '25? So is there any update?
It is going as per schedule. We are already undergoing water trial, and it will be commissioned with it this quarter.
Okay. And do you -- you can expect the utilization starting in '25 in this financial year only?
Yes. From next quarter, it should start generating revenue. That means the October quarter.
Okay, sir. And sir, there is some query regarding Cefovecin also. So there was an FDF and API, which was about to be launched in India. So could you just give an understanding of the market price that we can expect from this drug?
You're talking about India or which market you're talking about?
I'm talking about Cefovecin.
Yes, for which market, India or U.S.?
For India, for India.
India. We don't have any plans as of now for India. It's a very expensive product. We have to evaluate what is the sales potential in India.
So just for your reference, Yash, this is a medicine for companion animals, mostly dog. And 1 injection would cost typically INR 1 lakh. So at this price point, we don't imagine they're going to be a market in India.
Okay. Sir, my last question is about Cefiderocol injection. So any idea about the cost of production that you will be having? If you can give us a broad idea?
The cost of production?
Yes.
No. Unfortunately, that is going to be a secret or confidential. What we can tell you is that the current cost of therapy in U.S. market and other regulated markets is about INR 10 lakh a patient. And when we make in India, our target will be to at least reduce it by 50% to 60%, if not more.
Okay. And your deal is your cost plus 20%, PBT?
Cost plus 25%. And this is -- 25% is at a PBT level -- depreciation and interest cost.
Okay. So it should be close to around 50 -- you'll be selling it at around 60% from the cost that it is available in the U.S. approximately. Is it a fair assumption?
I think 40% would be a fairer assumption than 60%.
Okay. So the cost of that drug would be 40% for the end consumer?
Yes, you can think like that. That's what target is. But right now, it is not developed. So it is only -- you can say a guesstimate.
Okay. And sir, we can expect the sales from March '27?
Yes, yes.
Yes, yes. So yes -- before March '27, we should expect it.
Only -- I mean, we can't say about the regulatory hurdle, but I think commercially, we should be ready much before then.
So since the product is registered in India, so we just have to navigate that aspect. But yes, March '27, in that year, we should see definitely sales.
Okay, sir. And are we looking like other countries also apart from India for sales of Cefiderocol? And apart from India, are we looking at Bangladesh and other neighboring countries?
See the license has been given for 135 low-income countries. So the manufacturing is being done for the entire world, which includes 135 countries and where Shionogi will not be present itself. So we will probably be selling across the world. But the commercial rights of that lie with the GARDP, and they will decide on who would be the customer will be.
Having said that, 2/3 of the market is expected to be India.
The next question is from the line of Viraj Parekh from Carnelian Asset Management.
Mridul, Manish, congratulations on good set of numbers. And also congratulations on finally having the land acquired at Jammu and Kashmir for 7ACA. The first line -- first question on those lines, we earlier hoped that it will take 15 to 18 months from the time we break ground there for the opportunity to commercialize. So is it fair to say by the year of FY '27, we will see the facility getting commissioned? And what will be the capacity utilization of the facility in the first year and the second year?
Yes. So the timeline you have mentioned is correct. In the last call, we talked about commissioning by April or so '26. And after that, there would be trials and commercial production will start. So our endeavor would be to run the capacity -- the plant at full capacity from the beginning and the stabilization that stage would be 6 months. So what you can expect is from FY '27 -- sorry, FY '28, it will be 100% utilization. Although in the last quarter of FY '27, also we can expect for 3 months 100% utilization.
Great. My second question is on the newly commissioned the sterile block, which we have the 50% capacity utilization. Is my opinion right that we don't -- we are not selling in regulated markets from that block since we need to have some kind of approvals, and that may take 1 to 2 years' time? That 50% capacity utilization, the new sterile block is currently being supplied to emerging markets and not regulated markets?
That's correct. That's correct.
So how is that that our split is still 60-40. I think that it should be tilted more towards emerging markets, right, if we are getting the additional...
Yes, yes, 60% emerging markets, 40% regulated markets.
Mridul, my question is that -- shouldn't the tilt to be more towards emerging now because we'll have more supply towards the emerging markets from the new capacity?
Yes. So when we said 60-40, we meant that total sales -- sales of oral products that we are selling to regulated markets, that has increased in the last 2, 3 quarters.
Okay. So oral share has increased in the regulated markets, hence, the -- it's balanced at 60-40.
Right, yes. The oral sales of Cefepime and Avibactam to the regulated market has increased.
The next question is from the line of Neeraj from [indiscernible].
I joined a bit late, so I'm sorry if the questions were answered previously. Any status on the royalty? Can we expect this to flow in from quarter 2 of this financial year?
Yes, we can expect some royalty in Q2, although the numbers and the forecasts are not with us yet.
Understood, sir. And this will -- as you mentioned in your previous call, there will be a 1 quarter lag, right? So whatever we get in Q2, those sales would have happened in Q1, correct? So there is a 1 quarter lag here.
So our current expectation is that we should be able to report the numbers in the same quarter. The cash will come with 1 quarter lag.
Okay. Understood. Understood. My second question was around, in your earlier comments, you mentioned about our U.S. partner having some FDA issues. Again, it's a very basic question. The manufacturing would be done by Allecra. So like -- so what's the issue over there in the U.S. partner is having some FDA issues because we are FDA clear, right?
Yes, yes. So we are the API side. Our U.S. -- the customer has a formulation site who buys API from us. So since their site cannot make any product for the U.S. market, therefore, we do not have a customer for -- we cannot sell to the U.S. market directly our APIs. We have to sell to a company which makes the formulation or what we call FDA.
Understood. So -- and as of now, we don't have any visibility on this partner when that plant will get cleared.
Unfortunately, no.
The next question is from the line of Aashita Jain from Nuvama Institutional Equities.
Congrats on the good set of numbers. Maybe a couple of questions. Firstly, looking at the Q1 numbers, the growth looks very strong. Is it possible that in the -- for the full year, we can easily do 25% plus kind of revenue run rate for this fiscal?
That would be wishful, Aashita, although we would very much like it for it to be, but this would be moderated. Even if you look at last year's Q1 number, it was almost a similar number growth. But this would be moderated by the end of the year. And our long-term guidance for full year remains the same, 20% or 25%, somewhere in between. So this will be moderated.
Okay. Okay. And is it possible to share contribution from Avibactam to the current revenue? I believe we've launched in India and some of the EU. So is that a big contributor to our revenues?
It would be difficult to quantify the numbers. That's the confidential information.
Any percentage, any broad percentage...
Percentage multiplied by the revenue give you the number, right?
This will not be very significant. In terms of value, it could not be big. That's a small...
It's not in the top 3 or 4 products, that I can tell you.
That's a small percent, relatively new product. So...
Understood. And could you help us with this oral and sterile revenue breakdown for this quarter?
Yes. That's similar, 1/3, 2/3. So when I say 1/3, 2/3 plus/minus 3, 4 percentage points, I'm just not counting. So you can say that 70% is oral and 30% is sterile.
Okay. Okay. And just lastly, when you said you filed on due date on 30 months stay, I believe this was for Avibactam in the U.S.?
Yes.
What's the update on Ceftaroline?
So Ceftaroline, we are actually trying to persist with a marketing partner and finalize our strategy on whether we want to go alone or tie-up with somebody. As we explained earlier, for U.S., we wanted to file for our own for Avibactam but Ceftaroline, we have not taken that call yet. Maybe by end of this year, we will decide that.
The next question is from the line of Divya Sethi from Electrum PMS.
Congratulations on a good set of numbers. So most of my questions are answered. I just wanted to understand the market potential of this new drug and Mr. Mridul, if you could give some light how big that market is to consider it as an oral drug? So also the breakup between India and the global market, what exactly would be the potential on this one?
That's a very tricky question, Divya. So I'm not sure in terms of potential, the product has very, very large potential. And just to give you some sense of the potential, this product is directly compared to piperacillin-tazobactam. And at patent expiry, piperacillin-tazobactam was a $1 billion product just for the U.S. market. Our estimations are $200 million to $300 million annual global sales over that patent life, so $2 billion to $3 billion of patent life sales across the globe. So now potential could be more, less, I'm not sure.
Understood. So you're saying $200 million to $300 million annual sales is what we are expecting. I mean that is the potential for this drug.
Yes, and that's an average number. So in -- we hope to reach this number in 3 years or something like that.
Got it. And roughly around 6% to 8% with a royalty that's also [indiscernible]
That's correct.
The next question is from the line of Rupesh Tatiya, Intelsense Capital.
I have several follow-up and clarification. So first, sir, is I think Orchid Pharma recently, there was a media interaction. Their CEO, I think, gave an interview and then he said that in AMS division, we are expecting INR 300 crores kind of sales in 2, 3 years. So two questions there. What kind of margins -- do you have some view on what kind of margins we'll make because that's a distribution sort of business? That is one.
And then have we -- are all the teams in the place, hiring is done? And are the costs in the P&L? Because sequentially, I see that employee expenses have gone up.
Yes, Rupesh, you've captured that correctly. So first thing is the team is in place for the first phase of launch. We should be launching in the next month or so. The team is ready for this phase. Over the next few years, we'll be ramping up the team based on how much success we get. And in terms of the number, yes, it's already built into the numbers that you see. And currently, it's an EBITDA drag of about INR 1.5 crores.
And on the last question, when you said INR 300 crores, I think there is some understanding gap. It's INR 100 crores in 3 to 4 years is our target.
Okay. But what -- I mean, any view on margins, sir? It would be like 25%?
It's a new space for us. Right now, I would not like to put a stake in the ground and give you a number on the margin. But yes, it has to be a profitable business by itself.
Okay. Okay. The second clarification, sir, is there any one-off in Q1, I mean, in terms of shipping schedule or some one-off because, generally, we are H2 heavy and 3Q, 4 heavy. And then this time, Q1, I think, is larger than Q4 of last year. So that's -- if we consider these two factors, I think you're looking at a significant growth this year. So...
Yes. So what you're seeing is if you see our presentation also which we have uploaded, what happened was Q3, Q4 typically has been heavier. What we have been focusing on how to utilize our capacities in Q1 and Q2 may be better. What you're seeing now is a result of practically full utilization. And therefore, to an earlier question I had answered, we do not expect this 34%, 35% kind of number for the full year. We continue to expect that 20%, 25% number for the full year basis. So this is going to moderate as we go ahead.
So then my next question, a follow-up to that is, sir, CapEx because I think, previously, you have been saying that current whatever this capacity we are doing with that, we can grow at 20% for 2, 3 years. But now you are saying that in Q1, we are at full capacity. And then I think the rejig is coming end of the month. But then you have to look at some CapEx now in the base business, right?
Yes. So when I said full utilization, I do not -- I'm not talking about the capacity rejig that we are doing for the overall business, which will come online by end of this quarter. And the capacity utilization on the new sterile block is also only half. So those are the things which are going to contribute for the next year or so more. And after that, you will have the other optionalities of the 7ACA downstream and other things kicking into Orchid. So for this business, we will also contribute going forward. So right now, no more CapEx on the sterile and oral side business of the existing business.
So is there some -- I mean if it comes that we need capacity and demand is so strong, is there some capacity in that Dhanuka level that we can use?
You are talking -- so for the next year or so, I don't think we need anything. And based on our downstream plan, we will talk about more CapEx maybe next year. I think it is a little early to talk about when so much CapEx is going on. We have some plans. Rest assured, we will not stop our growth after this.
Okay, okay. And then the other, sir, clarification is this -- you said there was -- I mean, even if this first to file goes through, the launch will be FY '27. Is that Avibactam you're talking about?
Yes. And I said August '27, which would be FY '28.
Even if we get the FDA, it will be FY '28 launch, okay?
That's right.
Okay. And then this Cefovecin in this regulated products. I mean India, obviously, there is no market, but is there like a plan forward in U.S. or some of the European markets, Cefovecin?
The plan is for the U.S. market only. So our team is currently studying and comparing our products with the innovator. They're trying to understand the stability. And once they are confident, we will go for the validation and price.
Okay, okay. And then I think final two from my side. sir. Sir, one is, what could be domestic and export split in Q1?
So roughly domestic business is around 20%.
Sorry, 20% did you say?
Yes, 20%.
Okay. Okay. And sir, I mean, obviously, Avibactam, you don't want to give absolute numbers. But in terms of its potential, I think it's a very -- one of the very good product, successful product, if you look at the history. So would that product grow at 50% high for next 2, 3 years on a small base?
Yes, definitely. I mean I'm expecting a better growth even for Avibactam because, currently, we have just explored the potential of Indian market. And a lot of our formulation customers in India are using our product to file for their formulation exports. In addition to that, we are also filing in other emerging markets for this product with various overseas customers. So I feel there is tremendous growth potential for this particular product in the next 2, 3 years.
Okay. Okay, sir. And then just, Mridul, just clarification. Oral, you said is already at 90% utilization?
Of the existing ones, the new rejig block once online, this number would drop.
But it was very low, right? I think in the last 1 or 2 years calls, it was like 40%, 50%. So it has gone to 90%...
Yes, 2 years ago, it was like that, and we have been consistently working to improve that. And if you see from Q1 '24 to Q1 '25, a large part of that is contributed to from the oral capacity utilization and a small part of that is from the sterile, roughly 40%, 50% of the new block.
So this 90% would drop to what after the new capacity comes online, rejig capacity comes online?
I have not calculated that number. So...
Just ballpark, 50%?
Maybe 70% or something like that.
Okay. Okay. So that plus this 50% of injectable that takes care for us for 1 year. Okay. Okay.
Yes.
The next question is from the line of Varun from Bandhan Bank.
Sir, firstly, we had a plan of catching the INR 100 crores of business from some of your own customers. So how much of that has been captured? How do you see progress there?
Yes, Varun, you are talking about our initial plan which we had shared in the first conference call of this company almost 3 years ago. So some of that was old business was supposed to be in the U.S. and at that time, we were not aware of this customer going to U.S. FDA status. So I can't put a number to that effect, but I can say that part of the acquisition of old customers is completed.
Okay. Okay. And secondly, on OrBion, how do you see our 26% stake in OrBion. What is your plan there?
So we are only a financial investor as of now, and we are talking to them that if they want to buy back this stake. So currently, we are exploring that, but maybe we will know in a few quarters what are their thoughts around it.
So largely, we'll plan to exit OrBion?
Yes.
Sure. And how do you see your relationship with Allecra? I mean are there any areas where you think there is limited clarity or there is ambiguity? Just wanted your thoughts on this.
I would call the relationship to be a very good relationship as of now. But the only thing is that what we don't get is anything which is not in public domain. So no inside information is available to us in advance. Whatever they announce, whatever are their plans, we discuss them, but there is no information which is available to us not in public domain.
So there's nothing that is where we have limited clarity or there is still any ambiguity?
No, no, no confusion areas, no areas like that. In fact, they have supported us significantly the data and other things for the product to get a clinical trial waiver in India. So they have been very helpful.
See, the Europeans, they go strictly by the agreement. So whatever is part of the agreement, we are able to get all that information from them without any problem, but they don't go out of the agreement and give us any extra information.
Yes, understood. And how would we look to your exceptional cash flows from [indiscernible]? How should we think about the direction. Yes, other thoughts on this...
You're talking about the deployment plan?
Yes.
Yes, I think since -- once the launch happens, we are more aware of the cash flow more reliably. That's when we'll come up with the plan for investment. Although the Cefiderocol project is right now planned to be funded internally, one way would be to use the cash there. But without visibility on the cash flow, it's difficult to share a plan.
The next question is from the line of Ganesh Rao from Rupani Capital.
I have a couple of questions. First is, we plan to sell our product in collaboration with Cipla, right? And you just mentioned we've also been selling it in parallel with them using our own brand. What kind of margins would we be expecting on that? Would you be able to discuss that?
You see, it is very important for us when we launch a product in the [indiscernible] range in India to be competitive. So we have kept the price of the product which is in the same range as other therapies available to the clinician. So I would say that considering these factors, the margins are, I would say, higher than what any generic product has. But you -- one should not expect them to be extraordinarily high. Without giving the actual number, I would say it's a very good profit margin business, I think.
That's helpful. The second question that I have is recently Allecra had announced that they had signed agreements with the Gulf Council and South Africa. By any chance, would you know what kind of an opportunity set that is, and how much would that roughly transfer for us?
Unfortunately, those numbers are not available with us, but that should only contribute positively to our estimate.
So I'm just -- probably a basic question. So when they do sign agreements as they've been taking, they don't disclose this to you. But once that agreement happens, eventually, you would get to know what kind of volumes it would be so that you can expect and calculate all the royalties, right? And what kind of timelines would that typically be?
No, so we don't have a timing forecast in the agreement. What we are only entitled to is a post factor reporting of the sales and our expected royalty from that.
Okay, sir. And one last question, this is just a clarification from me. You said that for Cefiderocol, we don't -- we sell only in LMIC which is roughly 135 countries. And where Shionogi does not either sell or have a stake in that country. So is the assumption that the 135 countries that we have, Shionogi does not sell in any of those. I know they can be small countries, but the assumption is that they are not part of the 135 countries, right?
Yes, Shionogi does not want to sell in those countries because the cost of Shionogi's products would not be affordable to those countries. That is the reason you can say on a humanitarian ground, they have out-licensed the molecule because they don't have any commercial interest in those countries.
[Operator Instructions] The next question is from the line of Vishal Manchanda.
Sir, on Zavicefta just a clarification, whether you have partnered on this or it's entirely on your own?
Currently, it's on our own, but we have talked about the intention to partner with somebody for the U.S. market because we do not have that expertise. So we are in discussions with various partners, and we should be concluding the deal soon.
And you have been litigated on this or yet to be litigated?
Litigation is yet to begin.
Okay. So is that -- so is there a 45 days notice period after filing, therefore which the innovator has to file a litigation. Has that concluded that 45-day notice period?
We'll check with our U.S. attorney actually. It's not updated on this subject.
And sir, just one final one, whether we are expecting any USFDA inspection for our sterile or oral facility in the near future?
No. I think these days they come for price inspection. We don't have any notice from their...
So another way to answer the question would be they're due, they came last in July '19, and they can come any time as per their choice. So we are expecting them to come any time.
Right. So are we preparing? Or it's like it is business as usual for you?
Yes, it's business as usual. Orchid undergoes an audit every week from one of its global customers. So that's...
[Operator Instructions] Ladies and gentlemen, I will now hand the conference over to the management for closing comments.
I'd like to thank all of you for your insightful questions. It's a food for thought for us, and we always learn a lot from your questions. And once again, thank you for your continued interest in the company and for your support. Look forward to the same in the future.
Thank you very much. On behalf of Systematix Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.