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Sun Pharmaceutical Industries Ltd
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Ladies and gentlemen, good day and welcome to Sun Pharma's Q1 FY '23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Nimish Desai. Thank you, and over to you, sir.
Thank you. Good evening, and a warm welcome to our first quarter FY '23 earnings call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q1 financials and the press release that was sent out earlier in the day. These are also available on our website.
We have with us Mr. Dilip Shanghvi, Managing Director; Mr. C. S. Muralidharan, CFO; Mr. Abhay Gandhi, CEO of North America; and Mr. Kirti Ganorkar, CEO of India Business. Today, the team will discuss performance highlights, update on strategies and respond to any questions that you may have. As is usual, for the ease of discussion, we will look at consolidated financials.
Just as a reminder, this call is being recorded, and the replay will be available for the next few days. The call transcript will also be put up on our website shortly.
The discussion today might include certain forward-looking statements, and this must be viewed in conjunction with the risk that our business faces. You are requested to ask your questions in the initial round. If you have more questions, you are requested to rejoin the queue. I also request all of you to kindly send me your questions that may remain unanswered today.
I will now hand over the call to Mr. Shanghvi.
Thank you, Nimish. Welcome, and thanks for joining us for this earnings call after the announcement of financial results for the first quarter of FY '23.
Let me discuss some of the key highlights. Consolidated sales for the quarter were at INR 106 billion, recording a growth of about 14% year-on-year on a like-to-like basis, excluding the contribution of COVID products from quarter 1 last year. The reported topline growth was 10% year-on-year. and 13% quarter-on-quarter. All our businesses witnessed good growth driven by a combination of robust growth of our specialty business and all-around growth across all markets.
Let me now update you on our global specialty business. For first quarter, our global specialty revenue was approximately USD 191 million across all markets, recording a growth of 29% year-on-year. ILUMYA, CEQUA and ODOMZO were the growth drivers, while Winlevi is also gradually ramping up. Specialty R&D accounted for approximately 21% of our total R&D spend for the quarter. Abhay will give you more details on the specialty business later.
I will now hand over the call to Murali for a discussion of our first quarter financial performance.
Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you.
Our Q1 financials are already with you. As usual, we will look at key consolidated financials. We recorded the highest ever quarterly revenues in Q1 with sales at INR 106 billion, up by 14% year-on-year, excluding the contribution of COVID products for Q1 last year. On a reported basis, sales are up 10%. Material cost as a percentage of sales was 27.2%, while staff cost stands at 19.5% of sales. Staff costs are higher over Q1 last year due to overall merit increase, full quarter consolidation of the Alchemee acquisition and expansion of the sales force in India.
Other expenditure stands at 28.6% of sales, higher than Q1 last year. The increase in other expenditure is attributed towards higher selling and promotion expenses and consolidation of the Alchemee business. As indicated in our past earnings call, the expenses are seeing an increasing trend across all the markets as we reach full stabilization.
ForEx gain for the quarter was INR 1,457 million compared to a gain of INR 799 million for Q1 last year. EBITDA for Q1 was at INR 28,844 million, including other operating revenues, up by 2% over Q1 last year, with EBITDA margins at 26.8%. The single-digit growth in reported EBITDA year-on-year is due to multiple factors like normalization of selling and promotional expenses, full quarter of consolidation of Alchemee acquisition, sales force expansion in India and absence of COVID product contribution in the current quarter.
Reported net profit for Q1 was at INR 20.6 billion, up 42.7% year-on-year compared to Q1 last year. Excluding the exceptional items of Q1 last year, the adjusted net profit was up by 4.1%. Reported EPS for the quarter was INR 8.60 per share.
Let me now discuss the key movements versus Q4 FY '22. Our consolidated sales higher by about 13% quarter-on-quarter at INR 106 billion. Staff costs have increased in absolute terms quarter-on-quarter on account of annual merit increases, expansion of sales force in India and full quarter consolidation of Alchemee. Other expenses are higher due to increase in selling, promotional and travel expenses as well as consolidation of Alchemee acquisition.
EBITDA for Q1 at INR 28,844 million was higher by 23% compared to Q4. EBITDA margin for Q1 was at 26.8% compared to 24.8% for Q4 of last year. Net profit for Q1 at INR 20.6 billion was higher than the adjusted net profit of Q4 by about 30%. As of June 30, 2022, net cash was USD 2 billion at a consolidated level and upped about USD 860 million at a ex-Taro level.
Let me now briefly discuss Taro's performance. Taro posted Q1 FY '23 sales of USD 156.7 million and net profit of USD 14 million. Taro's financials include the first full quarter of consolidation of the Alchemee acquisition.
I will now hand over to Mr. Kirti Ganorkar, who will share the performance of our India business.
Thank you, Murali.
Let me take you through the performance of our India business. For Q1, the sales of formulation in India were at INR 33,871 million, up by 13% on a like-to-like basis, excluding COVID product sales of Q1 last year. On a reported basis, the growth is 2.4% of Q1 last year. India formulation sales accounted for about 32% of total consolidated sales. There were no COVID product sales in Q1 of this year.
In terms of core business growth, we continue to replace good growth across therapies in chronic and the subchronic segment for the quarter. We have maintained the trend of the past few quarters of outperforming the average industry growth, which has led to increase in our overall market share.
As per AIOCD-AWACS June '22 MAT data, our market share has improved by about 0.5% over the last 1 year to 8.5%. As far as SMSRC report, we are #1 rank by prescription with 11 different doctor categories. The expansion of the field force in India is on track, and we have achieved about 90% of the targeted hiring. While we continue to increase our reach and access, we are also focused on continuously increasing our share across key therapies and improving overall productivity.
For Q1, we launched 22 new products in the Indian market. We also continue to remain the partner of choice for in-licensing of products given our strong #1 position in many therapy areas, including therapies for the treatment for COVID infection, coupled with our large distribution network.
I will now hand over the call to Abhay.
Thank you, Kirti.
I will briefly discuss the performance highlights of our U.S. businesses.
For Q1, our overall sales in the U.S. grew by about 11% over Q1 last year to USD 420 million. While all our businesses in U.S. have grown, the main driver of growth was the specialty business driven by ILUMYA, CEQUA, ODOMZO and Winlevi.
U.S. accounted for over 30% of consolidated sales for the quarter. Specialty sales have also grown compared to March '22 quarter, despite the seasonal decline in Levulan sales. While doctor units have been opened in the U.S. during the quarter, the situation is yet to fully normalize. Patient flow to doctors' clinics as well as frequency of doctor calls by our medical reps are both still below pre-COVID levels. Winlevi is gradually ramping up and more than 10,000 doctors have prescribed the product till date.
Let me now update you on our U.S. generics business. While the U.S. generics business continues to be competitive, the Sun's ex-Taro generics business has recorded growth both on Y-o-Y and quarter-on-quarter basis. This growth is driven by a combination of new launches, market share gains for existing products and better supply chain management. For Q1, we launched two new generic products in the U.S. market on ex-Taro basis.
I will now hand over the call to Mr. Shanghvi.
Thank you, Abhay.
I will briefly discuss the performance highlights of our other businesses as well as give you an update on our R&D initiatives.
Our sales in emerging markets were at USD 245 million for first quarter, up by around 12.6% year-on-year. There has been significant volatility in various emerging market currencies, which has impacted our reported growth. The underlying growth in constant currency terms was about 16%. The emerging markets accounted for about 18% of total sales for first quarter.
In emerging markets, we have presence in the branded generic space and it continues to perform well and we've maintained our strong positions in key markets. Formulation sales in Rest of the World markets, excluding U.S. and emerging markets, were USD 190 million in first quarter, up by around 3% over first quarter last year. Rest of the World markets accounted for approximately 14% of consolidated revenue.
API sales in the first quarter were INR 5,987 million, up by about 16% over first quarter last year. We continue to invest in building R&D pipeline for both the global generics and the specialty businesses. R&D efforts are ongoing for the U.S. emerging markets, Rest of the World markets and for India.
Consolidated R&D investments for first quarter were at INR 4,608 million compared to INR 5,926 million for first quarter last year. Lower R&D spending is a timing issue, and we expect it will gain momentum and be in line with our guidance in the rest of the quarters. Our current generic pipeline for the U.S. includes 89 ANDAs and 13 NDAs awaiting approval with the U.S. FDA. Our specialty R&D pipeline includes four molecules undergoing clinical trials.
ILUMYA is undergoing a Phase III trial for psoriatic arthritis, while SCD-044, an oral dermatology product, is in Phase II trials for psoriasis and atopic dermatitis. MM2 is also in Phase II trial for treatment of pain in osteoarthritis. Our GLP-1 agonist GL0034 is undergoing a Phase I trial for Type 2 diabetes.
With this, I would like to leave the floor open for questions. Thank you.
[Operator Instructions] The first question is from the line of Kunal Dhamesha from Macquarie Capital.
The first one on Taro, is there any one-off related to integration costs in the SG&A expense for quarter 1?
Taro, we cannot give information beyond whatever Taro has shared. So sorry, but I can't respond.
Okay. And second one on psoriatic arthritis. We were looking at some revised timelines on that because some centers where I think -- there were some issues, and we were looking at new centers. All those have been figured out, or is it still ongoing? Any timeline in terms of when the trial can get completed?
We have not given guidelines of the completion of the trial, but the -- what you call challenges in both Ukraine and Russia have contributed to potential delay.
But does it also affect our U.S. timeline for that product?
I mean the product is a multisensor global study. I mean, the trial, based on which then we will file in all the markets. So it will affect.
Okay. So to that extent, if you are not able to solve that or till the Russia-Ukraine thing, there's no basically normalize.
We have to make up for that in some other country.
Okay. So then there is some upside this core, basically R&D could even be lower in the coming quarters?
We are addressing the issue.
Next question is from the line of Prakash Agarwal from Axis Capital.
My question is on the cost, which is staff and SG&A, R&D. So both these places, there has been a double-digit growth both Y-o-Y and Q-on-Q. So is it a function of currency or inflation or increased promotions, both in India and U.S.? If you could just give some color? And is it here to stay?
So as far as the expenses is concerned, we already said that it will be inching up as the operations normalize across the markets. And with the increase in sales in India Valcyte business and also in our global revenues and normalized operations, these expenses increased to the current level. And there is no specific ForEx-rated component, including that.
But I mean only because of India? Or are there promotional which is...
This is across markets.
And if there could be any comment on the U.S. if you have increased your promotions with respect to your growing specialty portfolio?
This is very difficult to comment specifically if any market, how much increase happened towards SG&A.
Okay. So these are all base level cost increases, which are here to stay. There's no one-off as such.
No. There's no one-off.
Okay. Perfect. And I think Dilip mentioned about R&D is a timing issue, but all of last year also, we had lowered the guidance R&D. So just trying to think -- seeing this better. The trials are ongoing. In the past, you said as a color that recruitments have been delayed. But I think world in the last 6, 12 months is coming back -- already come back to normalcy. So if you could give more details on why we are seeing that kind of timing issue that would be very helpful.
No, I think we are saying that rest of the year, the R&D spend will make up. So if you see the percentage of the innovative R&D has come down significantly. So which is what we are expecting will go -- absolutely overall percentage of the innovative R&D in the total R&D cost will go up.
Okay. I missed the percentage, sir. Could you please help me with the percentage?
So we've indicated that innovative R&D is 21% of the total R&D spend.
For the quarter?
For the quarter, yes.
The next question is from the line of Damayanti Kerai from HSBC.
My question is on CEQUA. So post entry of generic for RESTASIS, have you seen any change in market dynamics for pricing or prescription pickup for the standard products, including your CEQUA brand?
Not really, Damayanti. If you see the market share, even post launch of the generic, we've been able to show an increase in market share. So we are able to navigate through this situation.
Okay. And anything on the pricing part or it's similar as compared to the generic entity?
So all segments of business put together, I don't see an impact -- a negative impact on the pricing.
Sure. Okay. And my second question is on Halol plant. What is the update there? And any timeline or any updates you have heard from the FDA?
We are awaiting the EIR, which means Establishment Inspection Report. Post which, we can then update. Otherwise, we continue to update FDA above the remediation for all the 483 that we have received.
Next question is from the line of Neha Manpuria from Bank of America.
Abhay, on Winlevi, if I were to look at the prescription data, there seems to be some sort of a stabilization after the initial momentum that we saw in the product. Has there been any change in the promotion that is leading to this? And what's your view on Winlevi contributing meaningfully in sort of increasing to the fatality sales that we are reporting, any sense there?
So I mean if I look at the data, I see quarter-on-quarter, we have grown by nearly 22%. So I don't know why you say that there have been slowdown.
No, I'm looking at it more in the, let's say, last 6, 9 weeks, probably.
I mean don't forget, these are also the summer months where derm products generally slow down a bit. So therefore, if you're looking at a 6, 8 weeks, 9 weeks kind of period, you are right. But I mean, I look at it on a quarter-on-quarter basis, even in a slow quarter, if we have grown by 22%, that's a reasonable number.
And there is no change in promotions in Winlevi since our launch, right?
When you say change, I mean, there's nothing which is authentic. Of course, we will keep looking at what is it that we learn about products as we promote and make improvements as we go along. So the change will always be there. But it's a change for the better is what we hope.
Okay. And in terms of contribution of Winlevi, when do you think you have adequate formulary recovery to start seeing Winlevi contribution? I know it's difficult to sort of tend that down. But in your view, what is your assessment based on your conversation with the formulary?
So product-wise, we don't give the split. But we have always been very positive and optimistic about Winlevi. And otherwise, you would not have had 10,000 doctors in some 7, 8 months prescribing the product. And we continue to invest on the product and with the hope that it will be an important contributor to the overall business.
Understood. My second question is on emerging markets business. Close to about 5, 6 quarters now, we've been seeing very strong double-digit growth in that business despite the FX volatility. Is there anything that you would like to highlight in that business? What's the strategy for growth, is this profitability going to put into market? Any color there, please?
[Operator Instructions]
Next question is from the line of Krish Mehta from Enam Holdings.
Congratulations on a great quarter. My question was on other income. If you could just provide some explanation on why the other income was really low this quarter. And how you see it going forward given the large cash balance that we have on our books?
So other income's definition is not really core to overall business. It comprises various moving parts, including fair valuation of U.S. price, certain factory income across multiple geographies, which do fluctuate from quarter-to-quarter. So I think in my overview comparison strictly on the quarter-to-quarter may not be correct.
I was actually looking at it over the last 16 quarters, and we've always tended to be above INR 100 crores. And given it was INR 2 crores, I was wondering if there's a one-off, if that's a trend.
No, there is no one-off.
[Operator Instructions] The next question is from the line of Sameer Baisiwala from Morgan Stanley.
My first question is on Pentasa. So good launch. Did this 1Q results capture full 3 months' impact, including launch inventory? Or was it less?
This captures the whole quarter.
You launched in the middle of May. So therefore I hope...
You're talking the approval period? We launched it in the month of May, actually. So it's 1.5-month sales roughly that we were able to capture.
And plus some launch inventory?
What do you exactly mean by launch inventory? We didn't stock up the distributors. If that's the question, did we like stock it up? No.
Okay. This is very useful. And the second question is on Winlevi. First is on the expansion of the deal to newer markets. So if you can just tell us how much regulatory work needs to be done here? And how meaningful can this be? I mean, just qualitatively, if you can.
No, I think, Sameer, regulatory work is different, countries are different. In some country, we just have to file the existing product with existing studies. In some countries, we have to do some kind of zone for stability study or those kind of things. Especially in Japan, I think we will have to run the Phase II, Phase III for sure.
Okay. So sir, it's fair to say that it'd be at least 1 year before the approval cycle begins in these new markets?
Minimum. Because many countries have approval cycle of 2 years.
Okay. Yes, fair enough. And just for the U.S. market for Winlevi, I mean, would it be fair to say that a large part of the prescriptions being generated, our end of co-pay scheme and a smaller portion has been getting reimbursed?
I mean you can say that. Do remember, co-pay also leads to a realization. So it's not exactly like free. But we are increasingly seeing that a lot of our prescriptions are actually going through the payer system even without contracting. So that's very useful because it shows that doctors are interested enough in the product to take the effort of raising the priority.
But including that also what's going directly through payers. So -- but still the larger part is co-pay and you say co-pay, of course, you get some money, but it's just barely about covers the cost and maybe a little bit margin?
You're putting words in my mouth, Sameer. But yes, I mean, I would -- okay, let me just say that if everything goes through the payer system, I would be the happiest person.
Okay. Fair enough. And on Levulan, when you see Abhay, the sales getting restored back to pre-COVID levels?
Very difficult question to answer because if I see in the U.S., Sameer, even today, the social distancing norms and I'm talking in clinic, not in the outside world, how many patients are taken up in a day and all that is much lower than what it used to be in the pre-COVID types. So to that extent, the throughput per doctor has definitely come down. Having said that, I mean, the number of doctors who are now doing PBT therapy has increased from what it used to be like a year or 2 years ago. So between the positive and the negative pull, what really translates as a growth is very difficult for me to estimate at the moment.
Next question is from the line of Surya Patra from PhillipCapital.
Yes. Sir, just first on the Alchemee, since it has been integrated and it has obviously had implication on the staff cost price, other expenses price and all that. And this quarter, we have seen kind of a meaningful underperformance at Taro end also. So just to understand a bit whether this is a kind of a profit-making company or it is a loss-making company or how -- what is the kind of profitability of its -- the portfolio that has been added. Some sense from that, if you can give, it would be helpful.
So this is Murali. I think we all -- what Taro has disclosed we'll be unable to formulate any further information on Alchemee acquisition.
Okay. Okay, fine. Second question is on the Revlimid, sir. So now are you in a position to get the launch timeline for this? And that is first. And secondly, on this, so do you think the competitive intensity could be higher than what it was earlier expected among the first wave of -- first wave launch place because what we are seeing that although it is a volume-limited kind of condition that is there for everybody, but in case of Teva, it seems a double-digit kind of a -- double-digit percentage of volume that they have done post-launch. So do you see the condition of a limited volume one is not so rigid and people can do more than what it is mentioned in the terms?
No, I think every company has their own different contract and agreement with the innovator. So once you're bound by a contract, you abide by it. So I think that's a simple answer to your question. We will abide by whatever we have committed in our contract. So I think that should answer the latter part of your question. As to the first part, I mean, internally, I'm clear when we would be likely to launch. But on our calls, we don't give product price to when exactly we are launching because that's also competitive information.
Okay, sir. Just last question on the sales force addition. So we had indicated around 10% kind of rise in the current financial year. So when you say that 90% of the targeted addition has been done, so that means the full cost impact of that has already been reflected in the numbers. Is that right?
That's correct.
Next question is from the line of Dhara Patwa from SMIFS Limited.
I have a question regarding ILUMYA. Since the Pfizer ongoing term psoriatic arthritis. So how does the pricing differ? Do we keep the same pricing as the current indication of psoriasis or the pricing differ for different indication?
I think pricing for every product is a function of appropriately choosing the price, which will allow you to get appropriate reimbursement as well as access in different formularies. So it's difficult to respond today because it's better to take those decisions closer to the market. And we have to remain competitive with whatever the pricing for IL-23 that indication would be at that point of time so that we can get a good extent.
So would it be fair to assume that whatever the competitors are offering, will it be more or less 10%, 20% type range?
I think that is how we have priced ILUMYA, for psoriasis also that it's in line with the competitive pricing for psoriasis. So we will continue with the same practice.
Okay. Okay, sir. Got it. And sir, I wanted the CapEx guiding for FY '23.
I mean we have not given any specific guidance but we have no major investments. However, in any case, some kind of we got anything minor upgradation. We would generally spend a few hundred crore rupees every year.
Next question is from the line of Nimish Mehta from Research Delta Advisors.
Just one question on Halol. Is it fair to assume that we have been able to shift all of the injectable approvals that were held up at Halol to other facilities or it's still work in progress. How do we look at it?
No, I think we've not responded to the issues specifically about Halol. We hope that we should get approval once we will get the -- some of the critical products on a safety basis, we may evaluate transfer to third party.
But as of now, we have not really shifted any products to other facilities. Is that fair?
Yes. Not yet.
Next question is from Harsh has from IDFC Asset Management.
I just had one particular question. So I just wanted to get your view on the sitagliptin genericization. What is the ground level understanding as of today? I mean I understand that it might be a little bit early to comment because the market formation is yet to happen, the transition is taking place. So just wanted to get your view, like what do you see as the upside to the overall transition. Any particular risk that we are seeing right now? And which particular molecules would be possibly more at risk in terms of liptins or would it be more towards [indiscernible]. So any thoughts on that transition?
I think it's a very broad question for sitagliptin marketing. So what I can say is the patent got just expire on July 5. So we are too early to the market. And as of today, as I understand that there are 25 companies which have launched the generic products. And the pricing is in the range of INR 9 to INR 10 for 50 milligrams. And the market dynamics is very competitive as everyone is trying to get market share out of what market share Sun has and Merck had. So we have about 33% market share. And our objective is even post better into expiry how do we protect our market share and grow over that, that's what we can say. The other question on how DPP4 like sitagliptin will impact other therapy areas is very difficult to say. Maybe after 1 or 2 quarters, we will have more clarity on how it is impacting the other therapies.
Next question is from the line of Naushad Chaudhary from Aditya Barla.
Just a clarification, sir, if I look at your specialty business, the quarterly run rate that has crossed our targeted annual rate of around $750 million, if I remember it correctly. So would you like to revise your target here and what we should expect in FY '24 and '25 from this piece of business?
On the onset, we want to clarify that we have not given any annual target or guidance on a global specialty sales. So I think it's important to recognize that as such we are not giving any guidance on any specific individual business.
Okay. So in terms of growth rate, should we expect this kind of momentum to be continued in this business?
No, I think you should factor everything that we've given within our guidance, it's a mixture of how we expect all our businesses to perform. That will include specialty, generic, all markets.
Okay. And lastly, in terms of our exceptional cost and provision, if I see last 4, 5 years, the quantum has been quite high versus in this quarter, I don't see there is much of that. So should we -- going forward, should we expect the magnitude of that should come down significantly?
So in terms of litigation, we have given express disclosures or annual report ongoing litigation and these matters will had decided as and when litigation come up for hearing and content on this point of time, we will not be able to comment any outcome of these litigations.
The next question is from the line of Neha Manpuria from Bank of America. [Operator Instructions]
Next question is from the line of Sameer Baisiwala from Morgan Stanley.
A question on India business. When you do go down to smaller cities and towns, any thoughts that you can share what is the limiting factor for you to drive growth? Is it the less health care infrastructure or doctors? So just your thoughts on that would be great.
Sameer, what is the question?
Sir, the question is since to drive India growth, we're trying to geographically expand, which I read as going into smaller towns and cities. So when you are doing that now at a larger scale, what do you think is the key limiting factor for you to expand your business? I hope I'm clear.
Actually, I don't understand the question. What is the limiting factor? We remain very positive about our India business to be able to continue to grow. The reason why I think we are expanding is that we are seeing that over time, as a result of the trickle down and also because in some of the specialty, we were not reaching out to 100% of the universe. There is a expansion, Dilip can explain.
No, I think what you are assuming, we are going into rural markets and smaller terms. That's not correct.
That's not correct.
So when we are saying we are expanding, it's not necessarily we're expanding into smaller towns and rural areas. There's a lot of expansion is happening in metros and Tier 1, Tier 2 cities.
Okay. No, that's fine. I will maybe take it offline. So -- and the other question is, is there any update on the biosimilars. I think you had mentioned a few quarters back that you would be commencing both on this.
No. We also said at that time, Sameer, that we are looking at products in the third wave of approvals in the sense that we want to be in time for the launch, along with patent expiries and products that are likely to be going off patent in the third wave. So that, I think, that we are pursuing.
Okay. Still early days. Okay. That's fine. And sir, I'm a little confused about the Taro's results and I know you're not taking any questions on that. But I'll just express what's going on in my mind. So and they don't do a call. So unfortunately, we can't ask anyone else there. So the small point here is that if I see pre-Alchemee and post-Alchemee full quarter impact, the sales has just grown about $15 million or something like that, and the cost has gone up just the SG&A about $30 million. So it's almost a big negative factor this one.
And second, my understanding was that in 2021 full year, Alchemee's total sales was more like $150 million, $170 million, so actually, on a quarter basis, it should be a much higher number to begin there. So I'm just wondering whether this Taro's result is a quarter as usual -- business as usual or is it something -- it's going to get better as we go forward?
No. I think, Sameer, you started the question in a way which I think you understand, that's difficult to share beyond whatever that we have shared. And I understand that the challenge that you have in terms of putting a certain kind of model. However, I think if you look at it in a positive way, then in spite of a loss of potential profit in Taro of almost $30 million, we've grown profitability. So even if -- so I think philosophically, we are looking at what in our business, there will be challenges in product or in some subset of business. How do we find way to make up for that challenging as a company overall in the business. And that's how we want to run the business on a long-term basis.
The next question is from the line of Kunal Dhamesha from Macquarie Capital.
This one is on Winlevi. So given Winlevi was already approved at the time of North America in licensing agreement, did that agreement included some form of initial inventories to be transferred to Sun Pharma?
Sorry, what is the question? Initial inventory?
Yes. So I mean, the upfront payment of $45 million in the agreement would have also included some kind of inventory because it was already approved product, and we were about to launch.
Whatever we have disclosed is disclosed. There is nothing on the inventory that I can specifically answer to. It was not a marketed product, that's where you are going. It was an abroad product, but not a marketed product.
Okay. So the supply would have only started just because...
Also you have to understand that the product came with Sun labor. So it theoretically cannot be part of the -- because we produced [indiscernible] after the agreement was signed in a certain transition period that we had agreed to. So there was no buying over or something of an existing inventory, if that's where you're going with discussion.
Next question is from the line of Prakash Agarwal from Axis Capital Limited.
My question is on the impact of the trade generics and private labels, which are in a way impacting the volume of the market. You see 3, 5 years, the volume has been really dismal. What is our sense and what is our strategy to have a volume growth? And do we see this impact increasing for the market as well?
Which market are you referring to?
IPM, branded generic. Clearly in terms of volume share, right?
You're talking of the generic-generic versus branded-generic, right? That's the question.
We have seen the IPM last 10-year growth, 5%, 6% has been volume growth 3% price and 3% new products. If you see the last 3, 5-year trend, ex-COVID also, the volume has come down to 2%, 3%. Is this due to -- I mean my sense is there is some impact from trade generics and private levels, which is leading some volume share. What is your view going ahead that this is going to continue and increase? And what is our strategy to come back?
My view, we are growing well, both by volume and value also. And the impact of this -- even if it's some impact, it will not be a meaningful impact. That's my sense, probably.
But can you -- being a market leader -- can you comment on the market volume impact also?
Sorry?
The question is, do you foresee this impact increasing for the market?
It's difficult to predict what will happen.
Also, parallelly we have to understand that excess is continuously increasing because affordability of drugs, financial capacity to pay is constantly increasing. So maybe a small part of that will go to this.
The percentage of that how much it will impact if it will.
Okay. Understood. And on the NPPA side also, we haven't seen price increase -- sorry, price control expansion for some time now, the last list was 2015, and then there were some small list coming in. Are you in discussion with the regulatory authority and what thought process we are using price increases. I mean we have taken -- everybody's taken price increase. But for the core portfolio, essential product list, what is your sense on the price rationalization, which might come?
No, no, you are talking of when NPPA will come, we are not aware of that.
Our next question is from the line of Alok Dalal from CLSA India.
Dilip, when do you expect ILUMYA approval in China and the African market?
I think we've shared with you the date on which we have filed the Chinese product because it needed to do some clinical studies and all of that. So -- but it's difficult to predict. There is a certain amount of process that we need to follow, hopefully, we should be able to close all these issues in 12 months. But I'm not predicting that we will launch the product in that time because regulatory issue is difficult to predict till we get the approval.
Okay. And on the African market?
Which African market? We haven't said anything about any African market.
Okay. I thought there is an out licensing for -- with [ IGMA ] as well, I mean, the partnership with IGMA.
That's mainly for GCC countries.
Okay. Understood. Also, on the specialty side, do you think the pipeline products are large enough now to help sustain the base? The question that I'm trying to ask is that the specialty business has become pretty large. And as years pass, some products will reach the maturity stage. So do you think the pipeline is good enough for you to continue that momentum going or in-licensing becomes a big part of that.
No, I think we've always said that filing our own new product, at the same time, looking at opportunities in organic both licensing as well as acquisition is something which will continue to help us expand our specialty business.
Okay. Because since the base has become very big, you will also need products that are large enough for you to sustain and grow on that base?
I mean that's a reasonable expectation.
The next question is from the line of Saion Mukherjee from Nomura.
I just have one question for Abhay on ILUMYA. Abhay, you mentioned, I think, a few calls back, COVID sort of had a negative impact. Now we are seeing the traction coming through. The product has been in the market for some time. There is enough data, formulary access, et cetera, has improved. So should we -- I mean how are you thinking about growth ILUMYA in the U.S.? Will there be a spurt in growth in the sense that we will see an acceleration or it would be a gradual steady rise in market share?
That's more expectation of how ILUMYA will grow is part of our total guidance. So I think I have nothing specific to add on the product really.
No, I wasn't asking for this year's guidance, like more from a 2, 3-year perspective.
So any product in chronic segment doesn't really see its purse as such. So I mean, therefore, I wouldn't want to classify and give you any kind of an answer, which you will suggest that. I think it's what you do each and every day with each and every doctor in the prescriptions, it gradually builds upon the product base. I think that's the nature and that's the beauty of the chronic segment, and we understand it pretty well.
As there are no further questions, I will now hand the conference over to Mr. Nimish Desai for closing comments.
So thank you, everybody, for taking time out and joining our call. If any of your questions have remained unanswered, do send them across. We will have them answered. Thank you, and have a good day.
Thank you very much. On behalf of Sun Pharma, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.