Shilpa Medicare Ltd

NSE:SHILPAMED

Earnings Call Analysis

Strong Q1 FY 2025 Growth in Formulations and Licensing

Shilpa Medicare Ltd. reported Q1 FY 2025 revenues of INR 302 crores, a 15% year-on-year growth driven by its formulation business in emerging markets and licensing segments. The gross profit margin improved to 68%, up from 66% last year. The EBITDA surged 66% to INR 83 crores, lifting margins from 19% to 28%. Net debt reduced significantly from INR 912 crores to INR 514 crores. The company foresees continued momentum with efficient cost management and anticipates growth in the biologics and licensing areas alongside ongoing R&D investments and strategic partnerships.

Quarterly Performance Highlights

In the first quarter of FY '25, Shilpa Medicare reported a revenue of INR 302 crores, reflecting a 15% year-on-year growth. This growth was primarily driven by the formulation business, particularly in emerging markets and from licensing activities. The company achieved a gross profit of INR 200 crores with a margin of 68%, up from 66% in the same quarter last year. EBITDA showed impressive growth, reaching INR 83 crores (66% increase year-over-year), while the EBITDA margin improved to 28%, up from 19% during the same period last year. This marks the seventh consecutive quarter of improvement in both EBITDA and EBITDA margins, highlighting the company's commitment to operational efficiency and cost optimization.

Segment-wise Insights

The revenue breakdown revealed that the API segment generated INR 173 crores, increasing by 4%, which the management attributed to seasonal effects typical in Q1. The formulation business also performed well, contributing INR 104 crores with a growth rate of 13%. Notably, revenues from the biosimilar segment reached INR 16 crores, representing a significant 81% increase, showcasing the potential of this emerging business. Furthermore, licensing income for the quarter included a milestone from Unicycive Therapeutics and is expected to be sustainable, with a target of maintaining or even improving upon last year’s licensing revenue of INR 150 crores.

Debt Management and Financial Health

As of June 30, 2024, Shilpa Medicare reported a reduction in net debt to INR 514 crores from INR 912 crores at the end of March 2024, indicating effective financial management. In the first quarter, the company allocated INR 58 crores towards capital expenditures (CapEx), primarily for developing its Albumin facility. Moving forward, Shilpa Medicare is on track to prepay INR 300 crores of its debt, contributing to a more robust balance sheet.

Pipeline and Future Growth Prospects

Shilpa Medicare is actively working on several key projects within its API and biologics pipelines. For instance, there are ongoing developments for two NDA molecules in the oncology segment, with one expected to file in Q4 FY '25. Additionally, the Phase I study for the Albumin product has concluded and a Phase III study is set to commence in Q4 FY '25. There is also keen anticipation surrounding the approval of a reimbursement code for Pemetrexed, which is expected to boost sales in upcoming quarters. The management expressed confidence that biologics will deliver strong performance, driven by increasing opportunities in contract development and manufacturing organizations (CDMO) as well as advancements in their pipeline.

Strategic Focus Areas

The management reiterated its commitment to focusing on high-margin formulation offerings and licensing agreements as core growth strategies. They are particularly optimistic about their capacity to monetize existing and new assets, especially in biologics and complex generics. The recent establishment of a partnership with Unicycive Therapeutics for Oxylanthanum Carbonate is projected to further strengthen their CDMO segment, supported by a significant upfront payment of USD 10 million.

Guidance and Market Positioning

While no specific guidance was provided for revenue figures for FY '25, the company indicated expectations of maintaining strong EBITDA margins in the current fiscal year, similar to the 28% recorded in Q1. The emphasis on R&D spending rationalization, operational efficiency, and leveraging existing partnerships is seen as fundamental to sustaining growth. Investors can expect ongoing updates as projects in the pipeline progress, particularly in high-value products like biosimilars and specialty medications.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Shilpa Medicare Earnings Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Runjhun Jain from EY IR. Thank you, and over to you.

[Runjhun Jain]

Thank you, Raj. A warm welcome to all the participants to the Q1 FY '25 Earnings Call of Shilpa Medicare Limited. The financial results and the presentation have been uploaded on the company's website and on the exchanges.

Please note that this conference is being recorded and the transcript along with audio of the same will be made available on the website of the company as well as the exchanges.

I would like to remind you that today's discussion might include forward-looking statements based on the current expectations and assumptions. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Now to take you through to the results and to answer your questions today, we have the management team from the company represented by Mr. Keshav Bhutada, Executive Director of Shilpa Pharma Life Sciences Limited; and Mr. Alpesh Dalal, Chief Financial Officer.

Now I request Mr. Keshav to provide you with a brief update of the quarter. Over to you, sir.

[Keshav Bhutada, executive]

Thank you, Runjhun. Very good morning, everyone. Thank you for joining us today to discuss our Q1 FY '25 results. I'm Keshav Bhutada, and I will share with you various business segments brief overview before handing over to Mr. Alpesh Dalal, our CFO, who will provide the financial highlights. Post that, we can open the floor for any questions that you may have.

Overall, I will majorly give you major growth drivers in each segment and my briefing will be divided into 4 main verticals of Shilpa Group, API, Formulations, Transdermal Patch and ODF and Biologics.

So let me start with the briefing of API business vertical in which in the oncology segment, the major updates are there were 2 NDA molecules, which we were developing for our clients from many years in which NDA molecule #1, which we were developing for our U.S. client, the client has received a breakthrough designation for the same product. And for the same product, NDA is planning to file by our client in Q4 FY '25. We have already secured a prelaunch order in this quarter for which the supplies will be done over current quarter and the subsequent quarters.

For the second molecule, NDA molecule 2, currently, the client project is under Phase III supplies for which already for the Phase III clinical study, we have successfully received order. For the same, the deliveries already finished in the same quarter. And for this product, currently, the client is doing Phase III clinical studies.

Apart from that, 2 new oncology molecules, which is Abiraterone and Methotrexate for which U.S DMF is planning to -- U.S. DMF and European CEP is planning to file in Q3 FY '25. And 2 new molecules planned scale-up and validations in the oncology segments are already initiated and expected to complete in Q3 FY '25.

And for all 4 products, we are also developing our own formulation so that we are not dependent on only external sales. Also, we will have our internal captive formulation consumption. The major focus in the oncology is with the existing portfolio, build a differentiated long-term complex pipeline, which can give us sustainable growth in years to come.

Now I move forward to a non-oncology business, in which the most important update for the company in this quarter was Ursodeoxycholic acid, which is a very complex and niche API, which we have in our group for which the European CEP was received in this quarter. With the approval of CEP, it opens a big opportunity for Shilpa Medicare in export markets. And in the quarters to come, we are confident that this molecule is expected to grow in export market in a large volume.

Apart from that, now UDCA, which is again, NDA molecule which -- for which Shilpa is already developing the formulation. For the same molecule already, the DMF is completed and the initial launch quantity orders manufacturing has already started.

In the non-oncology segment, we have always kept our focus on import substitute molecules and complex molecules.

So we have successfully completed for 2 new non-oncology molecules lab validation. For the same product, the planned scale-up is currently initiated, and we are planning to finish the planned validation and subsequently DMF filing for 2 new molecules, which are complex and import substitutes, which can give us a sustainable revenue in years to come.

Now I move forward to new verticals in which CDMO peptide and polymers, which is again, very important focus for company. In the CDMO space, the major updates are for the U.S. client for which already the preclinical supplies were successfully done. Now the program has advanced to Phase I/Phase II clinical studies for which we have successfully received order and for which the supplies are expected to complete in Q2/Q3 FY '25.

For the second client, which is from Taiwan, the program has moved to the Phase III study. And currently, client has given us order for finishing the planned scale-up and validation batches and making drug master file ready, which again, gives us assurance that we will be one of the major suppliers for the same client. For this product also, we are expecting to complete the planned validation in this financial year. Apart from that, 2 to 3 new CDMO projects were signed in this quarter, for which initial large-scale development is already commenced.

Now moving forward to polymers in which our major focus has always been on developing specialty complex polymers. In Q1, we are happy to share you that we could crack one more U.S. MNC client for which the initial sample order was successfully completed in Q1 and for which the order is already received for the pilot quantity, for which the supplies are expected to complete in Q2/Q3. Apart from that, there are many other specialty polymer projects, which are currently in the development phase.

Now moving forward to peptides in which our major focus has been a mix of GLP-1 portfolio and some complex products. I'm happy to share our first GLP-1 product, which is liraglutide for which the plant validation was successfully completed, which is a very complex API and the DMF for the same is expected to file in Q3.

And the second update in peptides is for one of the European client, which is an NCE molecule for a new indication, we have successfully finished initial development phase of the contract and the initial supplies were finished in Q1. Now going forward, we are expecting the supply for Phase I for which the company is geared up.

Apart from that, semaglutide, which is again a second molecule in the peptide space, the large scale development is finished. And now our target is to finish the plant validation and make drug master file ready in this financial year.

And the last important update is on the regulatory. In the Q1, we could finish the ANVISA-Brazil GMP audit for almost 29 products in Unit 2, and the audit was successfully completed. I'm sure in years to come, this will give us a good opportunity in Brazil market also to sell our API.

Now I move forward to the formulation business, in which the major updates are our first NDA molecule for which we had received approval, Pemetrexed, for which the J-code was already granted. J-code is for premium pricing. Now our partner has already applied for the same product for K-code, which will help them in insurance reimbursement for which they are expecting to get approval in this quarter. So going forward for Pemetrexed in U.S., we are confident that in quarters to come, we are likely to gain good market share.

Apart from that, the second most important NDA molecule for which already company had filed in last financial year, we are likely to get approval for the same products in Q2/Q3 of FY '25.

Now the third update is on the -- there is one more NDA molecule, which is an oncology oral liquid for which our partner had already filed this product in U.S. which is in the oncology space, especially in the oral liquid. It is a first of its kind U.S. NDA, which is filed and for which the approval is expected in Q4.

With this, we are confident that for the U.S. market, the pipeline is very well built up and the same will give us growth in years to come. Apart from that, in Europe market, now I move forward to our upcoming big launch, which is for Nilotinib where company -- I am happy to share that our regulatory review for the same product is already completed, and the launch for the same product is expected in Q3. And for this product already company has partnered with the #1 company in the generic space in oncology selling in Europe. So we are confident that this product also will give us good sales in the Europe market.

The second update in Europe market is on the transdermal patch portfolio, where our first product will be filed in September of this financial year for which the complex clinical studies are already completed and is successfully passing. And the product is expected to be filed in Europe in Q2 FY '25.

Two new transdermal patch products deals were signed in this quarter, again, with our various partners for which the development is already started, which will give us the confidence that on the transdermal patch portfolio, we have a sequential pipeline and a partner ready to sell our product.

Apart from that, when I speak specific on the pipeline, we have 2 NDA molecules, which is SMLNUD07, which we have currently -- company has developed for NAFLD indication for India and emerging markets. Currently, the Phase III studies are expected to complete in Q2 FY '25, and we are expecting to file this product in Q3 FY '25 in India, and we'll start partnering in various emerging markets.

The second product, SMLTOP09, which is for androgenic alopecia, for the same product, already the Phase II studies were completed. And for the Phase III studies already, we have applied in DCGI, and we are expecting to start the Phase III study in Q3 FY '25.

Overall, our focus in formulation has always been to build a differentiated and complex portfolio, which will give us sustainable growth for us. And the company is very focused on cost spending, and we are only investing on programs where we have a partner and where we are confident of selling those products.

Now on the regulatory update, which is on the U.S. FDA audit of our formulation facility. So we have already finished meeting with the U.S. FDA, and they have suggested us to appoint some subject experts for which already the appointment is completed and the review has started. And we are expecting to complete the review in Q3 FY '25 after subsequently post which we will be again applying to U.S. FDA for further course of action.

Now I move forward to biologics business, which has always been our interest and where we have seen a good traction in the last 2 quarters, and the same, you will observe in the current quarter also.

So in the biologics, our first product, Adalimumab, was approved in Morocco market, which was our first biologics approved in the export market. And the same product is already filed in many of the emerging markets currently already we have filed. And we have started discussing on partnering also for the same products with other clients.

Now the second product, the major update is on the Aflibercept, where currently our planned scale of batches are ongoing, and we are expecting to start the Phase III human studies for the same product in Q3 FY '25.

The second major update on Aflibercept is we have already finished the European scientific advise for the same product, where we ask to the EMA agency our study, our development data, we submit them, our R&D data, we submit and we ask them permission to start the Phase III study.

So the initial advice has been positive. And now going forward, we will be submitting the permission for Phase III studies. And then for Europe also, we are discussing -- starting to discuss with various partners on the Europe market.

Now on the CDMO space in the biologics, the Korean clients for which already the complex project was well executed at our end. The various orders for the preclinical and Phase I supplies have already started. And for the same, there was a GMP audit also for -- with the same client, which was very important for us to pass successfully. So company could successfully finish the audit. And now we are confirmed as a primary supplier currently for the client for the Phase I and Phase II supplies.

And apart from that, we have 2 new CDMO projects, which are likely to be signed in second quarter FY '25. And we are seeing very good traction in the biologics business, where there is a lot of opportunity in the care development space, in the manufacturing space. And we are confident that in the quarters to come, biologics will be a very strong portfolio for Shilpa Group.

Now the last and most important update is on Albumin, where I'm happy to share that Phase I study -- Phase I human study for the same product is already completed. And now we are rushing towards starting for getting the permission for a Phase III study. And we are expecting to start the Phase III human study in Q4 FY '25. And the study duration is for 1 year. And the Phase I study, what we have completed was against the European reference product. So the same Phase I data will also be submitted to European regulatory authorities for asking them the Phase III permission.

Apart from that, the U.S. DMF filing for Albumin for the excipient grade was successfully filed, which gives us more confidence on the quality of our product with not only manufacturing but also with the doser quality. Apart from that, the new facility for large-scale microbial fermentation, the project is going well on track, and we are expecting to complete the project in Q3 FY '25.

At last, the major -- last but not the least, we are delighted to announce a key CDMO was signed during the quarter with Unicycive Therapeutics for Oxylanthanum Carbonate. We will be supplying to the finished formulation along with our own API. We will be receiving USD 10 million milestones for this deal, as informed earlier. We will build a dedicated facility for them, which will be funded by the customer.

And initial launch quantity orders are already received from the client for which the manufacturing with the current facility, we will be starting in the quarters to come. Considering all the developments and expected growth in biologics, we have been building our teams further.

In conclusion, we are confident in our ability to continue delivering strong performance, driven by our robust R&D pipeline, operational excellence and strategic focus on licensing and CDMO. And company's major focus has been on monetizing the existing assets, and we'll continue to do the same. We are committed to creating long-term value for our shareholders through consistent execution and innovation.

I will now hand over to Mr. Alpesh Dalal, who will provide a detailed financial overview.

[Alpesh Dalal, executive]

Thank you very much, Keshav. Good morning, everyone. Let me brief you -- briefly take you through the financial performance for the first quarter of the current financial year.

Our top line stood at INR 302 crores, registering a growth of 15% year-on-year. And this was driven mainly by our formulation business, which witnessed a healthy growth of -- growth in the emerging markets as well as in the licensing segment that we are operating in. The gross profit for Q1 was at INR 200 crores with a margin of 68% as compared to 66% in the comparable quarter last year.

The EBITDA for the quarter was at INR 83 crores compared to INR 50 crores in Q1, again, a strong growth of 66% year-on-year. And EBITDA margins were also up at 28% from 19% during the same quarter last year.

I'm also pleased to inform that this is the seventh consecutive quarter wherein we are able to improve our EBITDA and EBITDA margins. And as we continue to optimize our cost and enhance our operational efficiency and rationalize our R&D investment, we expect to continue this momentum, right? Also, our PAT for the quarter stood at 14%, registering a margin of 5%.

Now just a quick update on the segmental performance. Our API business topped a revenue of INR 173 crores, up 4% compared to same quarter last year. And typically, for our API business, Q1 ended up becoming a seasonally soft quarter, which is generally visible during historically as well. But however, we expect that a robust growth should come in going forward in this business as well.

And formulation business for the quarter was at INR 104 crores, registering a growth of 13% year-on-year. And biosimilar revenues were at INR 16 crores, which obviously is a new business that we have entered into, so has a healthy 81% growth rate over that.

Now let me take you through our balance sheet details. Our net debt for the -- as of June 30, 2024, stood at INR 514 crores as compared to INR 912 crores at the end of March '24. And our CapEx for the first quarter was INR 58 crores, which was again mainly driven by our investment in our Albumin facility that we are setting up.

With this brief introduction, I would like to now open the Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Rahil Dasani from MAPL.

[Alpesh Dalal, executive]

We can move on to the next question.

[Operator]

Mr. Rahil, your line is unmuted. Yes, I'll move on.

The next question is from the line of Jigar Valia from OHM.

[Jigar Valia, analyst]

Yes. Thank you for the fantastic, detailed presentation and the elaborate update also. One question, if you can help with regards to Phase II for Albumin. I mean there is Phase I and then all the updates are for Phase III.

[Keshav Bhutada, executive]

Yes, to give you a clear picture. See, currently, in albumin, we have finished a Phase I study in which we have finished the evaluation of safety, immunogenicity as well as efficacy, okay? Usually, Phase II is needed for compounds where if the safety studies are not established in Phase I, then there is a need of Phase II study. So currently, we have done a Phase I/Phase II study, you can just tell that where we have also evaluated the safety of the product.

[Operator]

The next question is from the line of Harsh from Bandhan AMC.

[Harsh Bhatia, analyst]

Sir, 2 questions. One on Albumin again. The Phase I human trials are done and the excipient grade DMF is filed. Once you are done with the Phase III trials, let's say, at the end of fourth quarter of FY '26, should we assume that these are global trials? Or these will be selective market launch, let's say, Europe and emerging markets? How should one think about the human launch in the end of FY '26 or early FY '27 as well as the excipient grade launch?

[Keshav Bhutada, executive]

Yes. See I'll first update you on the clinical study. See the way -- what strategy we have planned currently is there will be 2 studies which will be running in parallel. The one study will be for India and emerging markets, and there will be a separate study, which will be running for Europe market, okay? So the studies will run in parallel.

In Europe, the procedure is once your Phase I study is complete, you have to submit to EMA and take their advice. After that, only you are allowed to start the Phase III studies.

So -- and for Europe, it will be a more elaborated studies. Instead of 12 months, it will be maybe for 15 months. So the strategy, what we have built is we will be doing 2 studies in parallel, one for India and emerging markets and second one will be for Europe market. Is it clear?

And on the second question on the excipient grade. See, for the excipient grade already, the drug master file is filed. So now various people will start using our Albumin as excipient in their formulation. And then further, they will be triggering it in their formulation, and then we will be having the commercial high-value sales for that application. But apart from that, there are many other applications which are non-GMP applications, agriculture-grade and multiple grades in Albumin. So currently, our focus is to build a team which will promote this albumin for excipient grade.

So for this, the right picture, I will be able to give you more clarity on quarters to come, how much sales we can do it. And our focus is on getting good clients, which can give a sustainable growth in excipient grade also.

[Harsh Bhatia, analyst]

So for the Phase I that you have completed right now successfully, this data will then be submitted to EMA for their advice, which will help us to go into Phase III for European studies?

[Keshav Bhutada, executive]

Yes. Correct, correct. So even in Phase I study, before starting the study, we already had done a EMA scientific advice, and we've taken an alignment with EMA for our Phase I study protocol. After that, only we had started the Phase I study. So the study, what we have completed is very well applicable for EMA submission also for asking them for Phase III permission.

[Harsh Bhatia, analyst]

Okay. So your Phase I, which you have reported is very much in collaboration and the metrics which are required by the European authorities, then if everything is successful, then you will straightaway move to the Phase III part for both India emerging as well as European?

[Keshav Bhutada, executive]

Exactly. You're right.

[Harsh Bhatia, analyst]

Okay. And just on this earlier comment on the 2 NDA molecules. One, the breakthrough designation part where you have secured the prelaunch orders and the second molecule where the molecules under Phase III studies, could you help us give a little bit more color, let's say, on the breakthrough designation candidate of what could be the overall commercialization timeline? Since it is a breakthrough designation, I'm assuming that it will be a decent size market, but it may not be, let's say, $1 billion plus market to that extent. So anything for us to understand, particularly for the breakthrough designation product molecule.

[Keshav Bhutada, executive]

Yes, Harsh. See, currently, for both the molecules -- for the first molecule, which is in breakthrough designation, right? Our partner studies have been successful, and they are planning to file an NDA by end of this year. Currently, that is what they have given us a plan. And post which there will be having a approval, if everything goes well in the next financial year.

So I will be able to give you a right picture more on this in the quarters to come because as and when the program advances, right, that is when the -- usually, there are more chances of having a long-term arrangement, which you would have seen in case of Unicycive Therapeutics, right?

So there will be more advancements which will be happening in these, both the molecules in the quarters to come. So currently, I will not be able to tell you a clear picture how big it will be, how many billions, but I can tell you having a breakthrough designation with such a niche opportunity, it is surely a good opportunity for Shilpa as a group.

[Harsh Bhatia, analyst]

And the timeline for the second molecule will obviously succeed the timelines for the first molecule, which is in the breakthrough designation?

[Keshav Bhutada, executive]

Yes. The second molecule, it will all depend on the Phase III study outcome for our partners, for which we are surely expecting some results for that in the next financial year. So we will be able to give you more updates on that.

[Harsh Bhatia, analyst]

And sir, one last before I rejoin the queue, on liraglutide, you mentioned some comments yes, I missed that but you mentioned that the plant validation is complete. And for semaglutide, you mentioned the large scale development is finished. If you could give us some little bit more color on the general timeline, what could come next for both of these products? And when does the conversation with the client happen like in this year or in the financial year, would that supply start assuming everything else falls into place?

[Keshav Bhutada, executive]

With respect to first molecule, liraglutide, as already, we have now finished the plant validation. So now we will be promoting this molecule to various customers and we will have some customers seeded also in this financial year.

So for that molecule, I feel in the quarters to come, there are chances that we'll have initial sales happening. And also, we have developed our own formulation also for this product. which we are planning to, already the formulation development is completed, and we are planning to scale up our formulation in Q3 FY '25. And further, it will be filed in various rest of the world markets. So surely for this liraglutide, we will see in quarters to come a lot of traction in API as well as formulations.

And on the second molecule, semaglutide, currently, the lab scale development is completed. And once we finish the plant validation with drug master file, that is when the commercial picture will start coming in. So maybe for that, you can assume in next financial year, we'll have more picture on the commercial sales.

[Harsh Bhatia, analyst]

Let's say the liraglutide is more near to medium term without getting into semaglutide. Liraglutide opportunity for you in the initial, let's say, next 2, 3 years will be more of an emerging market and India market opportunity rather than the U.S., Europe market opportunity. Would that be the right way to look at it? Because this is a fairly complex product. So there are very few players have been able to develop their KPI. There are many formulation players, but API players are very [ foreign ], would that be the right picture?

[Keshav Bhutada, executive]

No, that is wrong because the API is developed for global market and our facility is already U.S. FDA already approved, EU approved, Japan approved, Brazil approved. So we have global accreditation, right? So I think many people will use our API also in their formulations launch for U.S. and Europe market also in quarters to come if we are promoting it properly.

[Harsh Bhatia, analyst]

And in terms of the competitive environment of liraglutide? So the competitive advantage of liraglutide is that the API players are [ foreign ] because the API complexity is very complex to that extent. And again, formulation players are very high because we can buy the API from a single supplier or the dual supplier.

[Keshav Bhutada, executive]

Exactly, Harsh, you're right.

[Operator]

The next question is from the line of Rahil Dasani from MAPL.

[Rahil Dasani, analyst]

In the last call, we said we would update on the Pemetrexed induction post one quarter of commercialization. So post launch, what has been our sales to Amneal and what [ offset have they feel ] for this product, if you can provide some numbers?

[Keshav Bhutada, executive]

Yes. post launch currently, Amneal has already sold more than 1,000 vials currently in U.S. market. And they are waiting for K code also, which is, again, very important for insurance reimbursement, okay, which is expected to come in this quarter. So post which, I feel there will be more sales happening in the quarters to come.

[Rahil Dasani, analyst]

Got it. And for Albumin, another player by the name of Albumedix, which was acquired by Sartorius is also into recombinant Albumin, and has been selling the product commercially for a long time and that too in all the grades. While we use [indiscernible] so did they use the Saccharomyces. So what is the difference in terms of yield and efficiency?

[Keshav Bhutada, executive]

See, I cannot comment on their yield and their process because that is confidential and not known to me. But what I can tell you is our process is highly competitive, and Albumedix is selling or Sartorius is currently selling this product only as excipient grade, okay? And they have been getting themselves qualified for many years.

So that is why currently, they have had good market share in the excipient grade itself. So what we are doing is we will be offering a combo, which will be excipient grade as well as therapeutic use. So for us, the market will be much wider than Albumedix.

[Rahil Dasani, analyst]

Okay. And are we planning to undersell them or go for a premium?

[Keshav Bhutada, executive]

I think that is too early for me to comment currently. Because as you know, Shilpa is more a B2B partner, right? So once we are entering into some arrangements in upcoming quarters or years to come, I think we'll be able to give you a much clearer picture.

[Rahil Dasani, analyst]

Got it. And for the excipient grade now that we have got the DMF, what sort of interest have you seen for our product, how many potential customers, that kind of things, stability test with our grade something around that?

[Keshav Bhutada, executive]

Yes. I think currently, it is at a very early stage. So I would prefer to answer this question maybe in upcoming quarters, if it is okay.

[Rahil Dasani, analyst]

Okay. And for the licensing part of the business, this quarter's licensing revenue growth, was it led by increased partnering contracts and thus the initial fees? Or more of the older contracts doing better milestones?

[Keshav Bhutada, executive]

Yes, it's a mix of both. See, as you know, I have informed in the previous quarterly calls also, we are a pure B2B company, and our focus has always been on developing complex portfolio. So we are -- if you see every quarter, we have signed existing deals. We have upcoming milestones also, and we have also had a new contract signed.

So from last 4 quarters, we have successfully signed in every quarter deals with new clients, which shows that our existing contracts are also giving us the revenue as well as new contracts. So currently, in this quarter, it's a mix of both. It's a ratio of maybe around 50-50.

[Rahil Dasani, analyst]

That's interesting. Got it. And just to quickly understand a few products in the pipeline. Dr. Clot seems to be a very innovative product. And according to our last quarter's presentation, we launched it in India. So what is the update for this product?

[Keshav Bhutada, executive]

See, currently, in Dr. Clot, we are -- because it is a product which is currently under prescription, we are trying to get the approval under OTC, then the market will expand drastically, which is a thing which is a very time-consuming process, which already we are trying.

So currently, I feel our focus is on getting that OTC. After that only we can have a good commercial market share. So currently, I feel with the mix of so much of portfolio and all, Dr. Clot, until we get a OTC permission, we will not have a big commercial business.

[Rahil Dasani, analyst]

Okay. And any timelines around that, when we expect the approval?

[Keshav Bhutada, executive]

No, I think so, it is purely government-driven and they have committee approval procedures, which we are also doing for the first time. So I think I will be able -- I'll surely give you a right picture whenever we have some update on that.

[Rahil Dasani, analyst]

Okay. And according to this quarter's Investor Presentation, I saw a new product by the name of SMLODF010. We haven't talked of this before. So what is this exactly? And what is the early launch advantage?

[Keshav Bhutada, executive]

Yes, that is a product which we have developed in our ODF division, where it is one very unique opportunity majorly in U.S. market where against the current formulation, which is of tablets and capsules, we have developed the ODF product, okay? And it is confidential. So what I can tell you currently is it is a good opportunity where our human clinical studies, we have successfully completed, okay? And we are planning to file this product in U.S. sometime in Q3/Q4 FY '25.

[Rahil Dasani, analyst]

Got it. So I guess we cannot provide the color, the commercial expectations. Okay. The next question is...

[Keshav Bhutada, executive]

But I'll probably gave you a picture, yes.

[Rahil Dasani, analyst]

Got it. And for polymers, the supplies to 2 big customers were to start this year, do we still stand on that?

[Keshav Bhutada, executive]

Yes. In polymer, majorly, as you know, we have -- in the previous quarters, we have already briefed. We are working with one U.S. customer where we have supplied them initial pilot quantities and now we are expecting the big launch orders in the upcoming quarters, okay? So that is the update with first U.S. client.

And in the Q1 FY '25, we could successfully secure one good order from a U.S. MNC client, which was an initial pilot order, but this is complex polymer. And if we are successfully delivering them, then this will be, again, a good long-term opportunity for us. So we will be able to give you more picture on the upcoming quarters once the successful delivery is done.

[Rahil Dasani, analyst]

Got it. And according to the previous con calls...

[Operator]

Sorry to interrupt, Rahil.

[Rahil Dasani, analyst]

Yes. Yes. It's just a continuation to that question. So we were previously guiding for INR 15 crores to INR 100 crores of target. So how much of that do we see from these 2 customers that we have talked about?

[Keshav Bhutada, executive]

No. See, what we have mentioned is in a mix of CDMO peptide polymer together, it will give us a decent top line and bottom line. That is what we have given an indication. So I will not be able to disclose on client specific, what will be the order value and how much it will be. But I can tell you, as a mix of these 3 combo segments, there is a good potential for us not only from top line, but also a very good bottom line.

[Rahil Dasani, analyst]

Got it. I guess -- but you are confusing it because in the previous con calls, we have said to get a INR 100 crores of target in the next 2 to 3 years from polymer segment alone.

[Keshav Bhutada, executive]

Yes, yes. From -- in 2 to 3 years, yes, that is what we have kept it as a target, and we are on it for sure.

[Rahil Dasani, analyst]

So that's what I'm just trying to understand. Are these 2 customers enough for that? Or will we need more customers to achieve that target?

[Alpesh Dalal, executive]

Rahil, I think as Keshav had mentioned earlier, these are early days to comment on some of these aspects. So you will have to -- we are talking about a 2 to 3 years' timeline. We'll need to wait and watch how it develops.

[Operator]

[Operator Instructions] The next question is from the line of Tushar from MKVentures.

[Tushar Bohra, analyst]

Sir, first, a quick understanding on Albumin. In the Albumin clinical trial, there is no efficacy data point, right? So Phase III is essentially just an extension of Phase I trial with more participants, right? Or are there any specific efficacy data points also that we are going to observe?

[Keshav Bhutada, executive]

No. Phase I is more like a pilot study where we have also evaluated efficacy. So Phase III will be more extrapolation on more number of subjects, and Phase III is more done on a patient-based strategy with specific indications. So that is the difference.

[Tushar Bohra, analyst]

Okay. And in terms of the excipient grade, now that we filed the DMF, what is the process in terms of when we approach clients? Can they already include the product in their dossiers? Or do we need to wait for the excipient grade approval before they can start including into their plants? How does this work?

[Keshav Bhutada, executive]

See, initially, what clients do is because we have drug master file ready, right, so it's more like a API selling where they will start taking the initial quantities and develop their formulation and then they also register our product with -- their product with our API, like Albumin API.

[Tushar Bohra, analyst]

And for the therapeutic grade, can you highlight if we are already in any kind of conversations with any of the global players because now that we have a visibility over the near term, are there any kind of conversations we are already engaging in or expect to engage shortly for business development?

[Keshav Bhutada, executive]

I think it's too early for me to comment, Tushar. So I will maybe update in the future quarters.

[Tushar Bohra, analyst]

Sure. Second, this quarter, the other income is on the higher side. In the past, management has highlighted that some of this other income is essentially operating income for us, but we do it through other income. Maybe if you can just clarify again how much of this INR 9 crores or INR 10 crores other income is actually operating income or business-rated income and how much of it is maybe interest income or otherwise?

[Alpesh Dalal, executive]

Yes. So Tushar, half of this income is interest related income, which is purely based on some FD that we had created out of the QIP proceeds. And the other half is more in the nature of other kind of incomes, including some write-backs that we may have in the business now because ideally, when the expense hits you, it is part of operating expenses. But when -- if there is some write-back that happens, that goes and sits in other income.

[Tushar Bohra, analyst]

Okay, sure. And the licensing income that we have booked for this quarter. Does it include a component from Unicycive already?

[Keshav Bhutada, executive]

Yes. There is a very initial milestone of Unicycive currently.

[Operator]

Sorry, Mr. Tushar.

[Tushar Bohra, analyst]

Yes. I'm just making a clarification on this and then come back.

[Operator]

Yes, please give others a fair chance to ask a question.

[Alpesh Dalal, executive]

Go ahead, Tushar. Finish your question.

[Tushar Bohra, analyst]

So this licensing income that we have booked, right? So we did about INR 150 crores licensing income last year. And is it fair to expect that as some of our programs start to come towards commercialization or late stage that we should be able to maintain or better the overall licensing component? Independent of whatever else we do at formulations, do we think the licensing income is sustainable and can further be strengthened this part of the business?

[Keshav Bhutada, executive]

Yes. Yes, Tushar, it is very sustainable, and you will observe that in quarters to come.

[Operator]

[Operator Instructions] The next question is from the line of Dheeresh from WhiteOak.

[Dheeresh Pathak, analyst]

Alpesh, in the presentation, in the revenue breakup, we have given API and formulation. So API is about INR 173 crores, formulation is another INR 104 crores. And then there is excluding other income, total revenues are INR 293 crores. So what we add up, there is still a gap of about INR 17 crores. So what explains between INR 293 crores and what we add up INR 104 crores and INR 172 crores, INR 276 crores. So that extra balancing INR 17 crores is what revenue?

[Alpesh Dalal, executive]

So Dheeresh, if you see, there is also biological piece that we have mentioned here, which is about INR 15.5 crores. If you refer to Slide 4.

[Dheeresh Pathak, analyst]

Maybe I missed it, sorry. Okay. Slide 4. So that is -- okay, that -- so basically you have 3 product segments, right?

[Keshav Bhutada, executive]

[indiscernible]

[Dheeresh Pathak, analyst]

Okay. So when we are now -- when we start having, let's say, Albumin revenues and biologics revenue, we are going to report like that. Okay. Understood.

And this Unicycive, when we are going to supply both API and formulation, right? In API, there is a CDMO segment. So we will show that in CDMO API in the revenue classification that you have. And when we supply formulation, we will show it in the geography breakup? How are you going to bifurcate or you just put everything in CDMO, which is an API?

[Alpesh Dalal, executive]

So first and foremost, Dheeresh, here, the API will be supplied by our API unit to our formulation unit and formulation unit will be supplying the final product to Unicycive, right?

Now obviously, currently, we have the licensing fee coming into it. But as we go along, the way it shapes up, the sales from API to formulation as in stand-alone API business would feature as a CDMO revenue. And likewise, it will come up in the geography in our formulation business.

[Dheeresh Pathak, analyst]

That will show up in the U.S. revenue in the formulation, right?

[Alpesh Dalal, executive]

Right.

[Dheeresh Pathak, analyst]

Okay. Understood. And one last question. How much is the CapEx requirement this year, next year? And how much...

[Alpesh Dalal, executive]

For the year, we have about INR 125 crores kind of CapEx requirements in total, about INR 50 crores for our Albumin project, about INR 50-odd crores for our maintenance CapEx and around INR 25-odd crores for our Tranexamic acid expansion. That's the full year numbers.

[Dheeresh Pathak, analyst]

Okay. And how much R&D capitalized?

[Alpesh Dalal, executive]

So in the Q1, we have done about cash -- from a cash flow perspective, we have done INR 58 crores because that also includes certain advances that we would have taken out.

[Dheeresh Pathak, analyst]

INR 58 crores total, how much expense and how much through the balance sheet?

[Alpesh Dalal, executive]

No, there's no expense in this one. This all balance sheet. Only I think some of them are part of CapEx, this thing, and that some of them are sitting there as advances for CapEx.

[Operator]

The next question is from the line of Ranvir Singh from Nuvama Wealth.

[T. Ranvir Singh, analyst]

Sir, my question related to the UDCA. So just wanted to understand how big this UDCA opportunity would be? And what I understand, the raw material has been very scarce. So what is -- I wanted to understand the whole business of the UDCA because they're, in fact, the sourcing of raw material and plus earlier, we used to have a joint venture where this was a key product. So after this launching this, is there any conflict with the [ Austral ] joint venture for this product?

[Keshav Bhutada, executive]

No. I think, see, UDCA as an opportunity, we are very bullish on the opportunity only because the market and applications for this product is very big, okay? And there is a worldwide, very big consumption and the major players in this product has been over the years, mainly Europe and China. So in the export market, we are hoping very positive. Having a CEP grade API with complete drug master file support. We will be growing in this product very well.

And answering your second question on the joint venture. The joint venture, what we had is already concluded, I think, in the year 20 -- maybe 2, 3 years back. So there is no implications of that.

[T. Ranvir Singh, analyst]

No. So I wanted to understand. I think the [ Austral ] joint venture you are still into this business. So is there any market competing, we are competing...

[Keshav Bhutada, executive]

It's not in the joint venture, so that is not there currently. It's already completely ended, the European supply with our JV client.

[Alpesh Dalal, executive]

And I think your question around -- see, we have developed our own independent process, independent of the process which was there in the joint venture. So there is no conflict with them on that front at all.

[T. Ranvir Singh, analyst]

Okay. Fine, fine. That clarifies it. And secondly, in CDMO business, I think that 2 molecules, what we are talking about currently where the prelaunched orders we have received. So just how big this could be? I think it would be difficult right now. But still, if you could give some numbers to understand just whether that is going to be very significant for overall financial perspective?

[Keshav Bhutada, executive]

No, I think, see, what I can brief you is what we are mainly focusing in our API business is to build more complex and long business so that once we are securing and once we are entering with the clients in their Phase III supplies, then it's a long-term business for us, okay?

So in the years to come, maybe with the announcement of Unicycive Therapeutics, which you already would have read, which is for CDMO supplies, where we have made a long-term agreement with the client. So I can tell you, we are planning to do similar such arrangements in the quarters to come, so that -- which will give us more assurance on the long-term business.

[T. Ranvir Singh, analyst]

Okay. And last one on taxes in front, what exactly -- what is the tax rate we are expecting for the whole year for FY '25?

[Alpesh Dalal, executive]

Yes. See, basically, typically, our tax rates are in the region of about 35-odd percent. For the quarter, it has been on a bit higher side, mainly on account of inter-company interest, which has been there, where the income is getting accrued in a higher tax company as compared to the expenditure getting booked in a lower tax company.

Some of that we are correcting right now where certain loans have been already converted into equity, which you would have read in one of our notes as well. And in certain cases, what also happens is that because some loans are given for pre-capitalization stage, the interest over there does not get hit to P&L. So there, the income is getting charged to P&L, but there is no expense related benefit coming into for that interest spend. So these have resulted to higher tax rate for the current quarter. But generally, we should be able to maintain it in the region of about 35%.

[Operator]

The next question is from the line of Yash Mehta from [indiscernible] Ventures.

[Unknown Analyst]

So I wanted to ask, can you throw some light on the EBITDA margin. This time they have expanded by...

[Keshav Bhutada, executive]

Sorry, can you be more louder? Now, we are not able to hear you, sorry.

[Unknown Analyst]

Okay. Can you throw some light on the EBITDA margins? They have expanded consistently this time? And can you guide on what kind of EBITDA margins do you aim to maintain in this financial year?

[Alpesh Dalal, executive]

Yes. See, the main reason for the EBITDA margin improvement is the mix that we have had. Some of these licensing income also helps in that because compared to the licensing income, the related costs are lower. Also, when we see decent growth has happened in the formulation business, which is a better margin business as compared to API.

So some of this business mix related aspects have contributed to improved margin. And we obviously, as we have been mentioning it since past few quarters, that we are very actively looking at more efficiency in our operations and also keeping our costs on the check. So this is a combination of all these efforts, which we are seeing in the improvement in the EBITDA. And we expect that the EBITDA should remain in a similar kind of range.

[Unknown Analyst]

Okay. All right. And any guidance on the revenue for FY '25?

[Alpesh Dalal, executive]

I don't think we would be in a position to provide any guidance per se, so that's something that is a policy we do not want to do.

[Operator]

The next question is from the line of [ Krisha ] from Molecule Ventures PMS.

[Unknown Analyst]

Sir, my first question is on the formulation side. So if we look at the breakup, the U.S. formulation segment has come down from INR 30 crores to INR 10 crores if we compare it on a quarterly basis. So could you please explain the reason behind this? Because as far as the data goes, the contribution from Pemetrexed induction was supposed to come from this quarter. So what caused this kind of performance in that segment? And then how much of that was contributed by Pemetrexed?

[Keshav Bhutada, executive]

Yes. See, there are 2 aspects here. In Pemetrexed for U.S. business, okay? We are having arrangement with our partner where we supply them at a floor price and then we have a profit share, okay? So whatever sales revenue you will see on the last quarter in the U.S., which was on the -- for onetime supply for the U.S. market, which we had done at a floor price, okay? And for which we will be expecting in quarters to come a profit share also, which you will see as part of licensing income. So you will be able to see that -- sorry, it will be in the U.S. sales income, which you will see in the upcoming quarters to come.

So it seems as I already mentioned, in Pemetrexed case, there are 2 codes, J-code and K-code. So J-code for the premium pricing already secured. So once K-code, which is a reimbursement code, which approval, which we are expecting in this quarter, once we receive that, then you will see a jump in the sales in the upcoming quarters.

[Unknown Analyst]

Sir, let's say, last quarter, INR 30 crores, in this quarter, INR 10 crores. So how much was contributed by Pemetrexed, if you can give the breakup?

[Keshav Bhutada, executive]

Yes. In the last quarter, Pemetrexed contributed as a total revenue of INR 20 crores.

[Unknown Analyst]

Okay. And in this quarter?

[Keshav Bhutada, executive]

This quarter, it has not given any contribution because the supplies were onetime, which was done in the fourth quarter.

[Alpesh Dalal, executive]

Yes, there were some of the quantities earlier, [ Krisha ].

[Unknown Analyst]

So you're saying the profit sharing sales income will start coming from next quarter?

[Alpesh Dalal, executive]

Yes. So partially, it has started coming in, but it takes time to -- for things to come in. So I think these are early days for a product launch, and we'll have to wait for it to take shape and develop.

[Unknown Analyst]

Okay. Okay. And sir, my next question is on debt. So in previous con call, you had mentioned that the prepayment option will be -- will get active in August. So has the time line changed? Or are we on track to repay or sort of prepay our debt in this month? And what amount will be prepaid in August? And if I'm not wrong, the entire amount will be long-term debt, correct?

[Alpesh Dalal, executive]

Yes. So basically, we are on track to prepay, as we had mentioned earlier. We have earmarked INR 300 crores out of the QIP raise that we had done. And that is something that we would prepay during this particular month. We are on track for it. And this obviously -- the prepayment is happening towards NCD, which is a long process.

[Unknown Analyst]

Correct. Okay. Got it. And sir, my next question is on the third biosimilar, which you have mentioned in this PPT, which is pembrolizumab. The market size that we have mentioned is huge, around $28 billion. So if you can provide a bit more details as to -- with respect to, let's say, the development of the biosimilar or the milestones that we are looking at in future regarding this product? Or when do we plan to launch it and other details like that?

[Keshav Bhutada, executive]

Yes. See on pembrolizumab, as it is a very important development in our pipeline. So in quarters to come, what you should observe is how the product is moving from large scale development to validation stage and then the clinical studies, okay?

So what is important for us is, as a pipeline, we have taken that all molecule already in grade, and we have finished initial upscale development already. So in quarters to come, we will be moving the product from lab to clinical studies.

[Unknown Analyst]

Okay. And apart from this, we have 2 biosimilars in the pipeline, if I'm not wrong?

[Alpesh Dalal, executive]

Ma'am, there are others waiting in the queue, please.

[Operator]

The next question is from the line of Neha Kharodia from Abakkus.

[Neha Kharodia, analyst]

Sir, first question was regarding the Albumin. So please correct my understanding if it's wrong. So for excipient grade, can we expect the launch in the FY '26? I understand that therapeutic grade launch can be a little later, maybe in FY '27, once we complete the clinical studies on that.

[Keshav Bhutada, executive]

Yes. See, in Albumin, in excipient grade, there is nothing like a launch because once we have drug master file, right, we will start feeding our samples or we'll start selling initial small quantities in various markets in the quarters to come, okay? So important is we will -- in the quarters to come, we will see how the traction is, how the market is taking volumes. So I'll be able to give you a right picture in upcoming quarters. So currently, I'm not in a position to give you a right picture.

[Neha Kharodia, analyst]

Okay, sir. And also other question was about this line item of loss from JV and associates, which has increased in this quarter versus year-on-year as well as quarter-on-quarter. So if you can maybe help us understand more details about that.

[Alpesh Dalal, executive]

Right. So see, basically, one of our associate company, we had a certain balance. Now in that case, there were certain losses that were reported in the earlier period, which when we received the financials, we had to take those into account, and that has been corrected during this particular quarter.

[Neha Kharodia, analyst]

Okay. And just last question on the tax rate, so as you explained that it will be 35% overall broadly in that range for FY '25? But FY '26 onwards, can we expect some moderation there or more normalization? Or it shall remain in that same range only?

[Alpesh Dalal, executive]

Neha, let's take one thing at a time, right? We'll talk about it in the coming periods.

[Operator]

The next question is from the line of Sanjay Kumar from ithought PMS.

[Sanjay Kumar, analyst]

First on Albumin, do we plan to out-license before Phase III itself? Or will it happen after Phase III? I just want to understand our strategy, given both efficacy and safety are established, Phase III is kind of [ greater than at least the buyer ], right?

[Alpesh Dalal, executive]

Some of these are strategical things which are fairly confidential from a corporate perspective. And we are at -- as Keshav had explained, that we are initiating our Phase III studies. So this is probably not the right time to have these kind of discussions from our corporate's perspective.

[Sanjay Kumar, analyst]

Okay. Just on, do we plan to start U.S.-specific trials for this?

[Keshav Bhutada, executive]

Yes.

[Sanjay Kumar, analyst]

Any timelines for that?

[Keshav Bhutada, executive]

Yes. Now since our Phase I study is completed, so same like Europe and U.S. also, we will be submitting this data. And once we have response from the agency, accordingly, the timelines will come in picture. So I think we'll have a more picture in maybe by Q3 FY '25.

[Sanjay Kumar, analyst]

Okay. Second on liraglutide, when can we start the commercial sales? Do we have any firm orders? Because one Indian company is launching this financial year, 2 more in FY '26, but all 3 have existing partners, I'm told. So our launch cannot be or will not be before FY '26, is this a right understanding?

[Keshav Bhutada, executive]

No, see, because we were waiting for the drug master file to be ready because that is very important for anyone to use our API, okay, which has been made ready just in the first quarter. So you will see in quarters to come, there will be sales for this product, which will slowly start ramping up also, okay?

And about the source qualification, see, because no one will wait for the launch and then start adding source, everyone in the development, once their filing is done, they will start adding additional sources for launch so that they are more competitive in the market. So there are possibilities where we will be starting to get qualified in source, in their formulation source of some of the clients.

[Sanjay Kumar, analyst]

Got it. And finally, on biologics, our [ 8KL ] mammalian facility is yet to be utilized. So we've added 1 U.S. client, we've added 2 more CDMO customers. Are these for -- except to that 2 more in Q2 FY '25, are these for mammalian facility, can you talk about the therapy or the indication for these 3 customers?

[Keshav Bhutada, executive]

Yes, since we are in under confidential agreement with this customer, so I will not be able to tell you about these things. But what I can tell you, we have a mix of mammalian micro build projects.

[Sanjay Kumar, analyst]

Okay. And the South Korean CDMO, the peptide molecule, once we start the GMP supplies, can utilize our [ 2KL ], the microbial facility at Dharwad fully just from this or we need more such molecules?

[Keshav Bhutada, executive]

No, we can utilize it.

[Operator]

As there are no further questions, I would now like to hand the conference over to Mr. Alpesh Dalal for closing comments.

[Alpesh Dalal, executive]

Yes. Thank you all. Thanks for your interest, continued interest in Shilpa Medicare. We continue to remain available to you for any further questions or queries that you may have, and we'll speak to you soon again. Thanks a lot for joining our call. Thank you, everybody.

[Operator]

On behalf of Shilpa Medicare, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.