Strides Pharma Science Ltd

NSE:STAR

Earnings Call Transcript 2022-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '22 Earnings Conference Call of Strides Pharma Science Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Abhishek Singhal. Thank you, and over to you, sir.

[Abhishek Singhal]

A very good afternoon, and thank you for joining us today for Strides earnings call for the second quarter and half year ended financial year 2022. Today, we have with us Arun, Founder and Non-Executive Chairman; Dr. Ananth, Managing Director and CEO; and Badree, Executive Director in Finance and Group CFO, to share the highlights of the business and financials for the quarter. I hope you have gone through our business release and the quarterly investor presentation, which have been uploaded on our website as well as the stock exchange website. The transcript for this call will be available in a week's time on the company's website.Please note that today's discussion may be forward-looking in nature and must be viewed in relation to the risks pertaining to our business. After the end of this call, in case you have any further questions, please feel free to reach out to the Investor Relations team. I now hand over the call to Arun to make the opening comments. Thank you.

[Arun Kumar Pillai, Founder & Non]

Thank you, Abhishek. Good evening, everybody, and thanks for joining. So while we pull back from a disastrous quarter, the last quarter, when we announced, we are still a few quarters away from a full recovery as you would have noticed from our commentary and from the numbers that we presented today.As a company, for those of you -- most of you who are following us know that we have been focused on very small volume and niche products in the U.S. And mainly, they are in the acute therapies. Unfortunately, for us, post-COVID, we are seeing a dramatic drop in demand for several of our products, especially in the U.S., which didn't result in a full recovery of our business in the U.S. as we were hoping.Additionally, while we have completed the Chestnut Ridge facility of Endo and the acquisitions of the ANDAs, we have in the last 3 or 4 months, seen significant price pressure in the U.S. markets, but more importantly, people -- other incumbents seeking larger shares of the wallet by being extremely aggressive on pricing and also because they probably would be sitting on significant inventory. We have seen in several of our line items, prescription numbers and consumption to have dropped between 30% to 35% in specific products, but also that has resulted in intense competition with the remaining players to take larger market shares. We believe that this has since normalized, and we do not see any more challenges on our pricings in the U.S. And while we are happy with these outcomes, we think it will take us several more quarters before we can bounce back our U.S. business to what we had forecasted in the last call to be in the range of $225 million to $250 million.This in spite of the new acquisitions of Endo, where the business, which will add approximately $50 million of revenues to us, was historically delivering upwards of $75 million, it has also taken an impact with lower market shares. The transaction continues to be significantly accretive for Strides, especially in these circumstances, because it adds approximately 150-odd ANDAs -- approved ANDAs and [ dominant ] ANDAs to our portfolio, taking our total combined approved ANDAs to about 275. Considering that we have launched only approximately 40 products in the U.S. and we now have the ability to classify on the market with significantly larger portfolio, and that would be our intent. We expect a lot of these products to be -- need to be moved to India to be cost-competitive, but also to be sure that we are able to take advantage of our higher capacities that we have in India, considering that there is a fair amount of under-recovery given the reduced demand for products in the U.S. All of this will take us 3 to 4 quarters before we accomplish CB30s and, in some cases, pre-approvals before we can get to our peak revenues. We, therefore, regretfully have to, which is very unlike us, to state that we will have to push our outlook for this year of the U.S., which is about $225 million to $250 million by a full year. And our focus would be then to launch and achieve this by launching several more products from the acquired portfolio and also increasing our portfolio of the Strides -- launches of the Strides products.We believe that the U.S. market will continue to be an important market for Strides and the headwinds that we see with our portfolio, in particular, is temporary. And we are confident that we will bounce back strongly, as always, in terms of the U.S. market. We have created several work streams at Strides to ensure that we not only focus on growth and profits and improved cash flows, but also significantly reduce our cost structure to support the business that we are currently seeing for ourselves.So the -- as you'll also notice that our other regulated markets have improved and we have achieved our second highest quarterly sales ever in this market. And this is because we believe that, in the other big markets, the COVID -- post-COVID impacts have been behind us, and we are benefiting from the fact that the markets are operating to near pre-COVID times, and we expect this business to continue to grow.Overall, the regulated market will continue to be the focus of the company. Our primary key focuses would be to quickly expand our sales in the U.S., improve our market share, but also be very persistent with our pricing strategy. And consequently, while we have let go of several contracts, we believe that the situation is temporary, and we will be able to bounce back and win back our market share in those products that we have lost.But wherever we have decided to retain market share, we continue to keep our market share pre-COVID days irrespective of the fact that this has resulted in smaller dollars. So with this, for a more larger commentary, I will pass on the -- I'll pass it on to Ananth. But before that, I would also like to give an update on Stelis and where we are with our vaccine program.So firstly, ESOP reported that we have completed in 180 days a state-of-art facility dedicated for viral vectors, which is now officially commissioned. This facility is now ready for GMP manufacturing. And on the Sputnik, as everybody knows, that we have 2 components. On the first component, we are now fairly confident of getting to large scale. We have got successful batches at scale. And during this quarter, as previously committed, our GMP batches would get into full-scale manufacturing. Consequently, given the time it takes for releases and third-party approvals, we expect invoicing for vaccines to commence from the next quarter.Sputnik Light, we have pivoted to Sputnik Light to be our first priority to sell as much as we can of the Light given the continued challenges the industry is facing or the partners of Sputnik are facing for commercial-scale production of the second component. So we have secured a contract to focus on Light from the RDIF. And we believe that will result in a good outcome for the group.We now have several batches where we have taken -- where we are confident that we will be able to consistently deliver the first component, which is Sputnik Light and should be able to commercialize this product as soon as the Government of India allows exports. We believe, given that the improved immunization programs in India, we believe Sputnik Light and other vaccine export permissions would be granted sooner than later. And as soon as we have more updates, we'll keep you posted.I'm also pleased to report that the CDMO business is on track and will break even as previously forecasted this year and has got a very strong order book for its future uplifts.So with this, I'll pass this on to Ananth, and I will be more than happy to answer any specific questions on the overall rebound strategy and on Stelis, while I'll leave the operational and the near-term strategy conversations to be had with Ananth. Thank you.

[R. Ananthanarayanan, CEO, MD & Director]

Thank you, Arun. Good afternoon to all of you. We have reported an operational break even in quarter 2 of this financial year, enabled by a bounce-back in the other regulated markets, which has grown by 27% quarter-on-quarter. We continue to face headwinds in our U.S. business during Q2 due to pricing pressures.Revenues from our regulated markets grew by 2% quarter-on-quarter to INR 5,327 million, while on a year-on-year basis, we had a degrowth of 17%, again, mainly contributed from the erosion in U.S. The consolidated revenues grew by 6% quarter-on-quarter to INR 7,360 million. While our gross margins improved by 630 basis points quarter-on-quarter, it dropped by 540 basis points on a year-on-year basis due to higher operating costs. Logistics cost continues to be high despite moving to sea shipments as sea freight rates witnessed significant jump during the quarter. Logistics costs during the quarter were up 20% quarter-on-quarter and 135% year-on-year. We've taken actions on getting long-term contracts and securing better rates and expect this cost to ease out in the second half of the year from the current levels. We've completed the strategic acquisition of Chestnut Ridge site in the U.S. along with the portfolio of approved products during end of October, which will enable us to accelerate new product launches. Let me take you through some specific business aspects of this segment. The U.S. business. Revenue from the U.S. for quarter 2 stood at $34 million, down 17% quarter-on-quarter and 38% year-on-year, representing 34% of consolidated revenues for the quarter. Continued price erosion in the portfolio, lack of new product launches and aggressive channel procurement during COVID has significantly impacted H1 revenues. Despite fall in prescriptions, we have been able to retain volume share on all our key products. Higher dependence on acute portfolio magnified price erosion as quarter 2 revenues dropped to $34 million, which is about 40% lower than our peak of USD 58 million, which we reported in quarter 4 of FY '21. While we are now witnessing a stable pricing environment, we expect prescriptions to recover over the next 2 to 3 quarters. With the acquisition of ANDAs at Chestnut Ridge, the combined portfolio now enables diversification with addition of chronic products as well as controlled substances. We will start realizing the full benefit of the Chestnut Ridge portfolio starting quarter 1 of FY '23.We have, since the closing, identified the first set of 20 products and actions underway to enable launches over the next 3 to 4 quarters. Consequently, as Arun mentioned earlier, we believe we will only be able to achieve our current year guided outlook of USD 225 million to 250 million in FY '23. With the acquisition, we now have a combined portfolio of 275 ANDAs spread across multiple dosage formats. The acquired portfolio has an addressable market of USD 4.7 billion. Strides currently has only 40 commercial products in the U.S. This portfolio -- the acquired portfolio immediately adds 20 commercial products. And with new products planned each quarter, we expect to expand the portfolio to 100-plus products over the next 2 years in the U.S. While there are near-term headwinds, we remain optimistic on the U.S. business in the long run.Other reg markets. Our other reg markets showed a bounce back with revenues of USD 38 million, up 27% quarter-on-quarter and 18% year-on-year. The other reg markets represented 38% of our consolidated revenues for this quarter. The bounce back was driven by improved prescription generation in our key frontends and a return to normalcy of supplies for our partner businesses.Our other reg market has now reached closer to the peak sales of USD 40 million that we had reported in the past during quarter 3 of FY '21 and will clearly continue its growth momentum. Our outlook for the other reg market remains robust given strong order book visibility. On the emerging markets, this business continued its growth momentum, and revenue stood at USD 28 million, up by 22% quarter-on-quarter and 32% year-on-year. This business represented 28% of our consolidated revenues for this quarter.The Africa business delivered a strong performance, led by healthy demand for key brands, and grew by 31% quarter-on-quarter and 10% year-on-year. Institutional business also reported a growth of 15% quarter-on-quarter, up 50% year-on-year, led by better offtake from the donor funding agencies. We continue to focus on becoming a cost leader in this space with efficient supply chain.We have not yet received any further indications from the FDA regarding inspection for our Pondi facility, and our status continues to remain the same. We also are focused on putting in a strong cost-improvement measures owing to the current scenario on the U.S. business and remain confident that all of those should result in improvement on the operating leverage as we move forward over the next few quarters.With this, I hand over to Badree for our financial highlights.

[Badree Komandur]

Good evening. Let me give you the financial highlights. The revenue at INR 7.36 billion, a growth of 6%. Gross margins grew by 20%. Gross margins, we improved the gross margins almost by 600 basis points. On a year-to-date basis, we are at 53%, so we hope to maintain it in a particular zone around this zone. Employee cost at INR 1.48 billion versus INR 1.61 billion in Q1. Operating costs of INR 2.49 billion versus INR 2.33 billion, mainly because of logistics cost increase. The net interest cost at INR 359 million versus INR 314 million. We expect to maintain in a similar range. Depreciation cost at INR 566 million versus INR 549 million. We also -- in the exception items, we had to take additional write-offs because of closing down of West Palm Beach facility to the tune of INR 252 million, plus the ForEx reinstatement on deferred consideration, which we have to receive from [ Aerotech ]. The ForEx rates have come back to the original levels. And our equity pickup for JVs and losses -- for losses is at INR 234 million. The net debt is at INR 16.2 billion, an increase of almost about INR 1.8 billion from June '21. With the acquisition of Endo, it will add another INR 1.8 billion, it will go up to INR 1.18 billion. And with the -- as we return to the growth in H2 and operating cash generation, we expect the debt levels to come down from Q3 onwards, over the next few quarters. With this, I'll hand it over back to Abhishek for the...

[Abhishek Singhal]

Stephen, can we start taking the questions, please?

[Operator]

[Operator Instructions] The first question is from the line of Alankar Garude from Macquarie.

[Alankar Garude, Analyst]

Arun, Ananth, we have seen the U.S. portfolio unraveling twice now in the past 3.5- and 4 years. I agree the reasons were different than versus now. But the acquired Endo portfolio is also largely oral solids, which could very well be susceptible to pricing pressure when things are tough. So my question is, over the longer run, are there any efforts to strengthen the quality of our U.S. portfolio?

[R. Ananthanarayanan, CEO, MD & Director]

So I think there is -- there are 2 elements. While yes, we do have a significant number on the oral solids and also a mix of several other dosage formats. The difference, though, is that this portfolio is diversified with a number of products on the chronic segment as compared to a significant presence of acute segment in our -- in the Strides portfolio. And on that, there is a significant benefit that we should have because having a wider portfolio with inclusion of chronic products will help ease out some of these pricing pressures, which we have otherwise seen. We also have specialized products other than that in other dosage formats. We also have controlled substances. So the combination should give us a much better opportunity to withstand some of the pressures that we currently witnessed.

[Alankar Garude, Analyst]

Ananth, sir, so basically, out of the 150-odd portfolio of products in Endo's portfolio, how many would be chronic and controlled substances? Any broad percentage?

[R. Ananthanarayanan, CEO, MD & Director]

So I would -- I think it is about 13 products which are in the controlled substances. In terms of the chronic product therapy, more than 60% are chronic products.

[Alankar Garude, Analyst]

Understood. My second question is, Arun, can you please provide some details on the CDMO business? You mentioned about a strong order book. Can you quantify it, if possible? And by when would you be expecting to realize it? And also, possibly, any update on the listing time lines of Stelis?

[Arun Kumar Pillai, Founder & Non]

So when we say that the strong outlook on CDMO is that, try and understand, Alankar, that the CDMO business has just started acquiring businesses. So we have a break even point of close to about $20-odd million of business. So that's the first year of operations. We have a strong funnel. We can't quantify a value as yet for this because these are -- they could start with very small value, but it depends upon certain regulatory outcomes for the partners. That's what it means, you tie them up for several years together. So we're quite happy with the build-out of that business.In terms of the listing, we are committed on the listing. At this time, the focus obviously is to get the Sputnik contract ahead and revisit this during the course of this financial year. But clearly, that intent of delisting the company has not shifted, and we stay committed to that process. But at this time, the company wants to get to a revenue base to an EBITDA positive number first and then get to the corporate actions related to that.

[Alankar Garude, Analyst]

Understood. So basically, first half of next fiscal would be a reasonable time line to look at?

[Arun Kumar Pillai, Founder & Non]

Yes, that would be the outer time line, yes.

[Alankar Garude, Analyst]

Fair enough. And one final question, if I may. When do we expect to get back to the FY '21 quarterly EBITDA mark of INR 150 crores?

[Arun Kumar Pillai, Founder & Non]

Well, see, at this time, Alankar, to be fair, we can't give you a forward-looking outlook on it. We think that the work that we are doing now in these quarters in terms of a combination of cost reduction and improved market shares for our several products and launches will determine that. But I don't think -- the company stays steadfast with his guidance that we've given you a rough idea of where we think we can get back with the U.S. market, which is still a key market, but we don't want to get into any specifics today.

[Operator]

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta, Founder]

Sir, first question is on the U.S. How do we see this problem? Because earlier, our thinking was that we had a differentiated product portfolio and we were in the right segments to be able to withstand the competitive pressure in a very commoditized industry as such. But now this challenge has happened, and it is sort of happening every quarter. So is it a temporary problem for us? Or do you think that we need to do a lot -- much more to be able to get to a situation where we were as early as a few quarters back? So that is question #1. How do -- how temporary or sustainable this problem seems to be given where we stand?Second question is on the plant which was divested. How much did we invest in that plant in gross and net block terms? And what is the realization against that?

[Arun Kumar Pillai, Founder & Non]

Well, I will give you the first answer to your question, I'll answer your first question. So what has really happened to our portfolio, which is niche and differentiated, was that we were operating in very small molecules with very small volumes, which generally did not get the attention of the bigger players given the large scale of business that they were running.That played out very well for us for at least 4 years, and it's done its job. What COVID did is that, that portfolio got severely impacted because most of it was acute in nature. Acute products typically are small volumes because the use of those molecules are for a short period of time, as you would appreciate.So when people are locked up and staying at home, the acute use was the most hit in the subsegment of the industry. So clearly, we are -- we think that the rebound is happening as countries reopen. We are seeing rebound happening.But in the U.S., because everybody was sitting on inventory, even if 1 or 2 players were operating that product, somebody was desperate to exit the inventory. And therefore, there was a big price drop. We -- as we explained, we think that business will normalize in the next 3 to 4 quarters. So we are very confident that the normalization will happen.In the meantime, what is also obvious that we do not -- we cannot speculate how long COVID is going to last and what are the after impacts of COVID would be. So it is now important for us to have an equal or even stronger approach for chronic care. The Endo acquisition gives us the ammunition that we don't have to file for such products because we already have it. And that will help us grow the business back to shape.However, to make some of those products competitive, we need to bring these products back to India. It's a regulatory process. It takes between 3 months and 6 months. We are actively working on it. And we believe that by -- in the next 12 months, we can add at least 20 new products, approved products, back into the marketplace. And consequent correction that we are anticipating in the market in terms of demand, increased prescriptions. And all of this what I said, we are very confident that this would be a feature for us for the next 2 to 3 quarters. But even in this 2 to 3 quarters, you will see Q-on-Q bounce back from where we are today. So that is what I have to tell you holistically on your question. I'll now ask Badree to respond to your second question.

[Badree Komandur]

So on the second question, the current book value is about INR 540 million, and we recorded about INR 100 million of profits.

[Sarvesh Gupta, Founder]

Understood, sir. Sir, one more question, if I may, is on the OpEx. You said that we are now trying to cut down some costs. Now obviously, I think what has come to light is also we have a lot of operating leverage in our business, and we have been negatively impacted. So what sort of saving measure are we undertaking? And of that, how much would be sustainable and how much would be temporary?

[R. Ananthanarayanan, CEO, MD & Director]

I'll answer that question. I think we are looking at a number of areas in terms of looking at our operating costs. As I said, I started off first with the logistics cost, which significantly went up. And although we moved from air to sea, the sea freights have gone up, and that certainly caused us a significant impact as well. We are now on that element done a longer-term contract securing with the containers and with the logistics providers there, and we expect to start seeing the impact of that coming in, in -- from H2 itself.In addition to that, we've got several other areas that we are looking at. We're looking at optimizations on our raw material and procurement, supply chain. We're looking at areas around manpower costs. We are looking at our manufacturing under-absorption and how do we better utilize and reduce the under-absorption as well as looking at opportunities coming through some of the products that we believe will have an opportunity to get into the market. So business growth, operating costs in terms of procurement, supply chain, manufacturing as well as logistics is a combination of all of those. And therefore, we believe those actions that we take will be sustainable and will continue going forward. So we are making structural shifts to ensure it is sustainable.

[Sarvesh Gupta, Founder]

All the best for the coming quarters.

[Operator]

[Operator Instructions] The next question is from the line of Deepan Sankaranarayanan from Trustline PMS.

[Deepan Shankar, Senior Analyst]

So firstly, wanted to understand, has the U.S. base business has reached its lowest level already or there is further downside possible before start recovering? And secondly, also wanted to understand, when do we expect the quarterly run rate of $58 million to come back in U.S. business without considering Endo portfolio?

[R. Ananthanarayanan, CEO, MD & Director]

So the -- in terms of the first part of your question, sorry, could you just repeat the first part of the question? I...

[Arun Kumar Pillai, Founder & Non]

Yes, downside.

[Deepan Shankar, Senior Analyst]

So the U.S. business is still it has...

[R. Ananthanarayanan, CEO, MD & Director]

Okay. On the price erosion. So the first part of your question is that, in terms of price erosion, we believe now the pricing seems to be stabilizing. And we have seen signs of that during the first month of this quarter. And obviously, we expect that the downside should not happen further in terms of erosion, and it should start stabilizing going forward. That's our anticipation based on what we have seen. So yes, we probably reached the bottom of what we think could have been the impact from the price erosion to our existing portfolio.As regards to your question on, when do we think we can come back? Again, as we said earlier in the commentary, we are working through multiple approaches on it, right? One is, as the prescriptions improve, we're obviously looking to gain market share back, although the pricing will be at the lower level than it was in the past before Q4 of 2021. Clearly, at that reduced level, it will stabilize, but the volumes should hopefully pick up in the next 2 to 3 quarters, and we will see benefits of that coming in as we continue to work and gain market share. That's number one. And number two, as we keep launching the products from the acquired portfolio, that will enable us. So our overall approach is that, over the next 2 to 3 quarters, we should start seeing the impact and the benefit coming in, and we'll start seeing from the next quarter onwards a bounce of quarter-on-quarter growth.

[Deepan Shankar, Senior Analyst]

Okay. Great to hear, sir. And lastly, has the pace of ANDA approvals started picking up and reaching pre-COVID levels for the industry, and when do we expect approval momentum to pick up for Strides?

[R. Ananthanarayanan, CEO, MD & Director]

So it's not yet started pre-COVID level. It's certainly low. We do anticipate as we get into the Q4 of this year and then into Q1 we should start seeing some impact of it positively coming out.

[Operator]

[Operator Instructions] The next question is from the line of Vibhor Tomar an individual investor. Please go ahead.

[Unknown Attendee]

I think one of my question was answered already. Second question I had with regards to the delisting of Stelis. So will it be demerger or via the IPO route?

[Arun Kumar Pillai, Founder & Non]

Well, we haven't yet decided what is the best route. We will ensure that whatever we do is in the best interest of the shareholders of Strides.

[Unknown Attendee]

Okay. So nothing has been decided as yet. Okay, okay. That's all from my side.

[Operator]

[Operator Instructions] The next question is from the line of Ankit Jain, an individual investor.

[Unknown Attendee]

I have 2 questions. First is basically how much contribution we have from Stelis as of now? And what is the plan of biosimilars we have in future?

[Arun Kumar Pillai, Founder & Non]

So currently, Stelis, Strides is a significant shareholder, and it does not book any revenues from Stelis. It's only an investor -- investment revenue. And consequently, it reports losses or profits as a line below EBITDA. And the biosims mainly, as part of today's presentation, our portfolio of the products are already mentioned, they are mainly in the diabetes space.

[Operator]

The next question is from the line of Nitin Agarwal from DAM Capital.

[Nitin Agarwal, Head of Research]

Ananth, on the -- in the light of the changes which have happened in the marketplace, what do you think is the normalized EBITDA margin potential of the business now? Once things normalize, as we go forward, say maybe a couple of years down the line?

[R. Ananthanarayanan, CEO, MD & Director]

As it normalizes and as we go forward down the line, we should be able to get back to our -- prior to the last quarter EBITDA, we should be able to get back.

[Arun Kumar Pillai, Founder & Non]

Late teens.

[Nitin Agarwal, Head of Research]

Okay. So that should still be -- I mean that normal -- I mean, that normalized EBITDA potential of the business still stays?

[R. Ananthanarayanan, CEO, MD & Director]

Yes, that's correct.

[Nitin Agarwal, Head of Research]

And secondly, Arun, on the Stelis business, the business already started. It's going to get break even this year. The other 2 pieces on the vaccines and on the biosimilars, how do you sort of see the revenue ramp-up in those 2 segments of the businesses?

[Arun Kumar Pillai, Founder & Non]

So our first GLP ANDA will be filed this year. It's an ANDA route, and we are on day 1. So we are very confident of being an important player in that. That will be filed within this financial year. And on insulin, we have completed successfully our Phase I clinicals, and we're now going back to take our Phase III approvals. And we will also be starting our trials in Europe for Glargine, which is our lead asset in the platform. So they're going on track.

[Nitin Agarwal, Head of Research]

And at what time frame do you see the biosimilars piece starting to make a contribution from a revenue perspective and EBITDA perspective?

[Arun Kumar Pillai, Founder & Non]

Well, in some cases, licensing income will start almost immediately. But otherwise, the revenues will start coming in, in about 2 years from now.

[Nitin Agarwal, Head of Research]

And last one on the institutional business. There has been a significant pressure on ARV pricing in recent couple of quarters, especially even for the players who are recently integrated on this business. So in this new sort of dynamic, where does that leave us from a growth in the ARV business perspective?

[Arun Kumar Pillai, Founder & Non]

So Nitin, we've always been a fringe player here. We continue to focus only on some specific therapies in the space. And I don't think that focus is going to change for us.

[Operator]

[Operator Instructions] The next question is from the line of Vibha Ravi from Informa.

[Vibha Ravi]

Okay. So one was just a clarification on what the biosim. So the contribution, meaningful contribution will start from 2 years from now, which means FY '24 onwards?

[Arun Kumar Pillai, Founder & Non]

That's right.

[Vibha Ravi]

Okay. Second, on ARV, there was a question there, but you said since Strides is a fringe player, its not been affected much by the price erosion there. Is that right?

[Arun Kumar Pillai, Founder & Non]

Not that we are not impacted by the price erosion. It's just that it is not such a large part of our business.

[Vibha Ravi]

Right. So what is the outlook there? Do you see the prices rising and the situation improving there? There was some talk about some inventory buildup in this segment.

[Arun Kumar Pillai, Founder & Non]

That some of our peers or the larger players are sitting on very significant inventory, which is quite normal. Because if we have to participate in large tenders, supply, the speed in which you can deliver is the primary reason why you get a contract. And if donor funding has shifted to COVID-related activities or there has been, in this case the renewal of the ARV tenders due this year, then typically, companies who tend to sit in a lot of inventory would be aggressive on the spot business in the marketplace. So yes, you're right. We are seeing price pressure there, too, in that space.

[Vibha Ravi]

Yes. So when do you see the situation improving? How many quarters down the line?

[Arun Kumar Pillai, Founder & Non]

We have no clue. Like I said, we are not into the commodity big, large volume products. We -- our business is -- if you look at it, is continuing to maintain its size, but our size is relatively very small in comparison to who you should be addressing these questions.

[Vibha Ravi]

Okay. Now next question on vaccine. So with antiviral pills coming in molnupiravir and Pfizer's product, et cetera, do you think there's a change in the outlook for vaccine uptake?

[Arun Kumar Pillai, Founder & Non]

I think universal coverage is still required in terms of the vaccine immunization programs. And as you can see, in many countries, even with vaccination, you have breakthrough -- breakthrough situations, especially in many countries. So we believe that the COVID vaccine will become like a flu vaccine where most often than not, you will be obliged to take a shot every year or a booster every year. So will they be funded by governments? The answer is no. But will there be a continuing demand? Yes, I believe that the, as more and more variants come to play and how quickly our platform or vaccines can migrate would play big roles in how these platforms are designed. So to answer your question specifically, we think that the therapeutics is more for people who get COVID. And therefore, by having these medications don't get to hospitals. So the whole idea is production of both vaccines and therapeutics will ensure that the hospitalization rates will come down dramatically, reducing the stress on the health care system. But vaccines is not going anywhere.

[Vibha Ravi]

Okay. Another reason I was asking this question is basically several private hospitals have been facing a buildup of inventory where they're not even able to sell the stocks they have. So given that kind of a situation, there's a reluctance also for the people who are remaining to get vaccinated to go for vaccination because the cases have been coming down. So if we're talking about a booster shot, if the government is not funding it, which will likely be the case, and do you still think that private consumption is going to be to that extent to sustain so many companies which have come in now with vaccine?

[Arun Kumar Pillai, Founder & Non]

Vibha, just for clarity, we do not make vaccines for the Indian market, and your questions are very relevant to the Indian market. To give a specific response to your question for India, given that the government is freely vaccinating in a much more organized manner, clearly, you can see population shifting to -- from -- to the government-sponsored programs. And you're right, vaccine hesitancy is across the world. It is not unique to India, and vaccination continue to grow. So all of this will happen, but there is still a very large population that needs to be vaccinated. Like even if you look at India, while we are stepping back, we only have 25% or 30% of people who are doubly vaccinated. Breakthroughs continue to emerge in India. But yes, the whole idea is that the disease profile has changed from everybody getting extremely worried to more getting used to the fact that you will get a coronavirus, but a vaccine or therapeutics will solve for it. So that's how I look at it. So the market will continue. We believe more than 1 billion, 1.5 billion people worldwide have not been vaccinated. There's still demand. And there would be reasons for many countries -- and especially if you're looking at a booster, it is now -- there's a lot of literature to say that if you have an mRNA vaccine, you're better off taking a viral vector vaccine as a booster and vice versa. So the mix and match theories will all add up, and I think the business will be relevant for players.

[Vibha Ravi]

Okay. Just one last question. So what are the volume commitments from RDIF for Sputnik and/or Sputnik Light? And has there been any change in that commitment?

[Arun Kumar Pillai, Founder & Non]

No, whatever we announced remains. And we have the opportunity to go up to 400 million doses of this vaccine between Light and V. But yes, at this time, our focus is Light.

[Operator]

Ladies and gentlemen, as there are no further questions in the queue. I now hand the conference over to the management for closing comments.

[R. Ananthanarayanan, CEO, MD & Director]

Thank you. Thank you very much for attending the call today. And we look forward to talking to all of you over the next quarter. Thank you.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Strides Pharma Science Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.