Sun Pharmaceutical Industries Ltd

NSE:SUNPHARMA

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Sun Pharmaceutical Industries Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nimish Desai, Head of Investor Relations. Thank you, and over to you, sir.

[Nimish Desai, executive]

Thank you. Good evening, and a warm welcome to our Fourth Quarter FY '21 Earnings Call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q4 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 ease of discussion, we will look at consolidated financials.

Just as a reminder, this call is being recorded and a replay will be available for the next few days. 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 risks that our business faces. You are requested to ask 2 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 in your questions that may remain unanswered today.

I will now hand over the call to Mr. Shanghvi.

[Dilip Shanghvi, executive]

Thank you, Nimish. Welcome, and thank you for joining us for this earnings call after the announcement of financial results for the fourth quarter and full year FY '22. I hope you and your family are doing well.

Let me discuss some of the key highlights. FY '22 was a good year for us with consolidated top line growing by about 15.6% to INR 384,264 million and an EBITDA growth of 23.6% and adjusted net profit growth of 29%. All geographies have done well and have recorded double-digit growth for the year.

For the FY '22 fourth quarter, consolidated revenues were INR 93,861 million, recording a growth of about 11% year-on-year, driven by strong performance across markets. Branded formulation revenues in India and emerging markets together now account for about 50% of our global consolidated revenues.

Let me now update you on our global specialty business. We've done well in the specialty business over the past few years. Global specialty revenues contribution has nearly doubled from about 7% in FY '18 to about 13% in FY '22. In FY '22, we've recorded a strong ramp-up in our specialty sales, which were up by 39% to reach USD 674 million.

We've seen a strong traction in global ILUMYA sales for the year, which were up by about 81% to USD 315 million. This figure does not include about $100 million of Ilumetri and market sales.

During the year, we added Winlevi to our portfolio which was commercialized in the U.S. in November '21. We continued our efforts to take on -- take our specialty portfolio global with ILUMYA launch and CEQUA also in Canada.

For Q4 '22, global specialty sales were $185 million, up by about 30% over last year. Specialty R&D accounted for approximately 20% 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 the financial performance.

[C. Muralidharan, executive]

Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you. Our full year and Q4 financials already reviewed. As usual, we will look at key consolidated financials. I'm happy to report that our top line for FY '22 has crossed the USD 5 billion mark, while the net profits have crossed USD 1 billion. The full year FY '22 sales were at INR 384,264 million, a growth of 15.6% over FY '21.

Staff cost stands at 19% of revenues, lower than last year. However, in absolute terms, the staff cost increased on account of annual merit increases. Other expenses are at 28% of revenues, marginally lower than last year. However, in absolute terms, the other expenses have increased on account of higher selling, distribution traveling expenses while in FY '21, these expenses were lower on account of pandemic-related restrictions across markets.

ForEx gain for the year of INR 1,540 million compared to INR 237 million FY '21.

EBITDA for the full year was at INR 101,697 million, a growth of 23.6% over the same period last year, with EBITDA margin of 26.5% compared to 24.8% year-on-year. EBITDA margins have expanded by about 170 bps to 26.5%, driven by operational efficiencies and cost management.

Margins have expanded despite input cost pressures on normalization of branding, promotional and travel expenses. Excluding the exceptional items on nonrecurring tax credit for both FY '21 and FY '22, the adjusted net profit for FY '22 was INR 76,671 million, up by about 29% year-on-year crossing the USD 1 billion mark. Reported net profit for FY '22 was at INR 32,727 million.

The company has repaid debt of about USD 355 million in current fiscal. Over the last 3 years, the company has repaid debt of about USD 1.38 billion. As of 31st March 2022, on ex-Taro level, net cash stands at USD 730 million. At the consolidated level, including Taro, the company has a net cash of about over USD 2 billion.

Our focus on improving return ratios yielding results with ROCE improving by about 288 bps to 16.4% compared to FY '21; return on invested capital by 306 bps to 21% and return on equity has improved by 256 bps to 15%.

Let me discuss the Q4 FY '22 performance. Q4 sales are at INR 93,861 million, up by 11% over Q4 last year. Material cost as a percent of revenues was 27.1%. Staff costs were up 12.4% year-on-year and stands at 20.1% of revenues. Other expenses were up 11.7% year-on-year and stands at 30.3% of revenues.

ForEx gain for the quarter was INR 1,610 million compared to a loss of INR 108 million for Q4 last year.

EBITDA for Q4 was at INR 22,797 million, up by 14.6% year-on-year, with resulting EBITDA margin at 24.3% compared to 23.5% for Q4 last year.

Excluding the impact of exceptional items and related deferred tax, the adjusted net profit for the quarter was INR 15,817 million, up by about 18% for adjusted net profit of Q4 last year. Reported net loss for Q4 was at INR 22,772 million, including the exceptional charge of INR 39,358 million. The adjusted EPS for the quarter was INR 6.60.

Let me now briefly discuss Taro's performance. Taro posted Q4 FY '22 revenues of USD 143 million and adjusted net profit of about USD 27.4 billion, lower by 3.4% and 11.6%, respectively, over Q4 FY '21. For the full year FY '22, revenues were at USD 561 million, up 2.3% year-on-year and adjusted net profit was at INR 126.4 million, lower by about 10.6%.

In February 2022, Taro acquired Alchemee, formerly The Proactive Company from Galderma. The acquisition includes Alchemee's business assets worldwide, including the proactive brand for acne treatment.

I'll now hand over to Mr. Kirti Ganorkar, who will share the performance of our India Business.

[Kirti Ganorkar, executive]

Thank you, Murali. Let me take you through the performance of our India Business. Our India formulation sales for the full year financial '22 were INR 127,593 million, recording a strong 23.4% growth over previous year. Even if we exclude the contribution of COVID products, the underlying business has performed well with about 20% growth over the previous year.

For Q4, formulation revenues in India were INR 30,956 million, recording a growth of about 16% over Q4 last year. Contribution from COVID product was negligible at about 1% of India sales for the quarter.

India business accounted for about 33% of consolidated revenues for Q4. 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 data, our market share has been gradually increasing over the past few quarters. For Q4, it was at 8.86% compared to 8.59% for Q3. On a MAT basis, as per AIOCD-AWACS data for March '22, our market share was 8.34%.

We have witnessed growth across most of our therapy areas. The growth was driven by a combination of factor like normalized market condition and improved patient flow to doctors' clinics, which led to higher growth in chronic and semichronic segments. New products are also contributed to the growth, and we are seeing good momentum in new products launched in the last 24 months.

For Q4, we launched 11 new products in the Indian market. Field force operation were near to normal in Q4 with almost all doctors' clinics operational. The productivity of the new field force continues to improve. Travel costs for medical representatives were clear to normal, while we continue to see some savings in terms of the cost of medical conferences. The field force expansion done in financial year '21 has made with a good success. And considering the current market conditions, we will be undertaking a further expansion of about 10% of our field force in the financial year '23, driven by twin objective of our brand focus and geographical expansions.

Sun Pharma is the largest pharmaceutical company in India. And as per SMSRC report, we are #1 ranked by prescription with 11 different doctor categories.

I will now hand over the call to Abhay.

[Abhay Gandhi, executive]

Thank you, Kirti. I will briefly discuss the performance highlights of our U.S. businesses. Our overall U.S. business grew by 12% to USD 1,526 million for the full year FY '22, driven mainly by the strong performance of our specialty business. Global ILUMYA sales coupled with Ilumetri end market sales are now nearing the $0.5 billion mark.

For Q4, our overall formulation revenues in the U.S. grew by about 5% over Q4 last year to about USD 389 million. The main driver of growth again was the specialty business, which grew 24% year-on-year. U.S. accounted for about 31% of consolidated revenues for the quarter. Q4 witnessed a large number of Omicron-related cases in the U.S. While doctors' clinics were open in the U.S. during the quarter, the patient flow to doctors clinic as well as frequency of doctor cost by our medical reps are both still below pre-COVID levels.

Our specialty revenues in U.S. have grown over Q4 last year, mainly driven by ILUMYA, CEQUA and ODOMZO. This is despite the decline in ABSORICA sales due to the entry of generics.

Winlevi continues to generate significant interest amongst dermatologic as a new treatment option for acne. Till date, over 9,000 doctors have prescribed Winlevi. Our established presence in the dermatology market will help in ramping up Winlevi going forward. We will not be able to share more details on Winlevi on this call.

Let me now update you on our U.S. generics business. While the U.S. generics business continues to be competitive, the Sun, ex-Taro generics business has grown for the full year FY '22. While we do experience price erosion, we have been able to counter it by a combination of new launches and better supply chain management.

In Q4, we launched 5 new generic products in the U.S. market. In terms of complex generics, we have commercialized generic amphotericin B in the U.S. market. We also recently launched generic mesalamine extended-release capsules in the U.S.

I will now hand over the call to Mr. Shanghvi.

[Dilip Shanghvi, executive]

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 branded formulation revenues in emerging markets were at about USD 905 million for the full year, up by about 16% year-on-year. For Q4, sales in emerging markets were about $206 million, up by 7% over Q4 last year. The underlying growth in constant currency terms was about 10% year-on-year for Q4. Emerging markets accounted for about 17% of total consolidated revenues for Q4.

Amongst the larger markets in local currency terms, Russia has grown by 43%, Romania by 18% and Brazil by 32%. As of now, we have not witnessed any major impact of the geopolitical issues on our operations in Russia. Our presence in Ukraine is very small.

For the full year, formulation revenues in Rest of the World market, excluding U.S. and emerging markets, were about $732 million, up by about 11% over last year. For Q4, Rest of the World sales were USD 178 million, up by about 7% over Q4 last year. Rest of the World market accounted for approximately 14% of consolidated Q4 revenues.

API revenues for Q4 were at INR 4,137 million, lower by around 5% over the Q4 last year. We continue to invest in building a R&D pipeline for both the global generics and the specialty businesses. R&D efforts are ongoing for the U.S. emerging markets, RoW markets and for India.

Consolidated R&D investment for Q4 were at INR 5,433 million compared to INR 5,571 million for Q4 last year. Our current generic pipeline for the U.S. market includes 93 ANDAs and 13 NDAs awaiting approval with the U.S. FDA.

Our specialty R&D pipeline includes 4 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 Phase I trial for Type 2 diabetes. The Board has proposed a final dividend of INR 3 per share for the year FY '22. This is in addition to the interim dividend of INR 7 per share paid in FY '22, taking the total dividend for FY '22 to INR 10 per share compared to INR 7.5 per share for FY '21.

Recently, our Halol factory underwent a CGMP inspection by the U.S. FDA. Post the completion of inspection, U.S. FDA issued 10 observations. We will be filing our response to the FDA on the corrective actions to be undertaken for addressing these observations within the stipulated time. We will not be able to disclose further information on Halol as of now.

And lastly, on the guidance for FY '23, we expect high single-digit to low double-digit consolidated top line growth for FY '23. All our businesses are positioned for growth. Ramp-up in our global specialty business is expected to continue. As indicated in our previous calls, overall expenses are inching up as markets across the world normalize. R&D investments is expected to be between 7% to 8% of sales next year.

With this, I would like to leave the floor open for questions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Tarang Agrawal from Old Bridge Capital.

[Tarang Agrawal, analyst]

Two questions from me. The first one, there was a settlement that was undertaken in this quarter and similarly, some settlements were undertaken in the previous year as well. How should we see this going forward? Is -- are there any further settlements that are anticipated? That's #1. Number two, is the specialty business as SBU now breaking even on a cash flow basis?

[Dilip Shanghvi, executive]

So all the ongoing litigations have been disclosed by the company in the annual report as well as has been disclosed by us in the past. So I think it will help you in understanding what are the potential. We believe that we have a strong case for all the residual cases. However, part of this depends finally on the way in which the litigation progresses. We feel reasonably comfortable that we should be able to do quite well in these litigations. What was the second question?

[Tarang Agrawal, analyst]

[ Specialty business breaking even on cash flow? ]

[Dilip Shanghvi, executive]

We don't give out the business-wise specific profitability numbers. But I think as you see, we've grown that business quite well and the business continues to grow well. So -- and I think that's important for that business to become an increasingly more important component of our overall business.

[Operator]

The next question is from the line of Neha Manpuria from Bank of America.

[Neha Manpuria, analyst]

My first question is on the specialty business. It seems to be a flat number quarter-on-quarter. And if I remember correctly, in the last quarter, you mentioned there's very little contribution from Winlevi. So if you could just give us some color in terms of despite the contribution, what's driving the flattish number?

[Abhay Gandhi, executive]

So 2 reasons. One is the period itself because, as you know, Jan and Feb are when the insurance reset, and that's always a little lower month for the total business. So that is 1 reason. Another is the declining sales of ABSORICA post launch of the generics. Overall, when I look at the prescription trends of the products, I'm reasonably comfortable with what I'm seeing.

[Neha Manpuria, analyst]

Abhay, but wouldn't ABSORICA pretty much be there in the December quarter? I mean, there could have been some erosion quarter-on-quarter, but wouldn't the ILUMYA ramp-up and Winlevi more than made up for it?

[Abhay Gandhi, executive]

So we have certain strategies in place to have a slower decline of ABSORICA. So therefore, post launch of generics, the decline of ABSORICA was not rapid, but it was gradual. So it took a couple of quarters for the product to reach where it is today.

[Neha Manpuria, analyst]

Understood. And in terms of Winlevi is -- are our promotions on the product still ongoing? And what's the feedback that you've got from doctors? Could this product be larger than ILUMYA products in the U.S?

[Abhay Gandhi, executive]

No I think larger than ILUMYA would be a stretch, Neha, to be very honest because of the different price points. In terms of number of prescriptions, it is anyway larger than ILUMYA even today. But the value of prescription will be very different from what you did for ILUMYA. So in dollar terms, the answer would be no.

But to give you a sense of how the product is performing in market, I mean acne, depending on what data sets you look at, approximately 15,000 doctors are regular users of acne products, all kinds whether it's brands or generics. And in 5 months, 9,000 have at least used the product launch. So that tells you something about the interest created by the product, the impact of proportion and the real need in the market for a new solution. Our hope is to capitalize on that and to make this into a meaningful product for the specialty business going forward.

[Neha Manpuria, analyst]

Kirti sir, on the India Business, we have announced another expansion. Will this allow us to continue the outperformance? And where are we adding this field force? Is there particular therapies that we're looking at adding the field force?

[Kirti Ganorkar, executive]

I think that should, means, as I said, we are doing 2 things, geographically, we are expanding. So this field force is added across a couple of BUs, certain BUs. And what we see -- our idea is to declutter our current portfolio. So there is a base for each of the business unit to promote the specific product to the doctors. And at the same time, cover the geographies, which has not been covered by us in the past. So that would help us. I think the objective of our India business is to grow faster than the market and gain a market share.

[Operator]

The next question is from the line of Damayanti Kerai from HSBC Securities and Capital Markets.

[Damayanti Kerai, analyst]

My question is regarding study of ILUMYA in psoriatic arthritis. So when you're likely to -- when you're likely expecting to finish the Phase III trial and file for the product?

[Dilip Shanghvi, executive]

Sure. I think the -- we are reassessing the study time line and study completion date. What you call COVID and subsequent disruption of the doctors attending their clinic and also now the -- some of the sites being in Russia as well as in Ukraine have disrupted the speed of recruitment. So we are recalibrating and also thinking through what is the best option for us to find replacement for sites that we are unable to support. So our objective would be to find a way to file the study at the U.S.

[Damayanti Kerai, analyst]

Okay. And a related question for ILUMYA will be, are you looking to start clinical trials and other indications or first, you will finish this and then might look at other indications?

[Dilip Shanghvi, executive]

I think we will, first, of course, do a much more comprehensive commercial assessment and the potential return on investment if we have to do any further development, because we don't have significant presence in any other therapy area. So we not only will have to spend significant amount of money for the studies, but also then create a field force and sustain cost for that expansion. So we have to, what you call, do this carefully.

[Damayanti Kerai, analyst]

Sure. And my last question is on the spend for specialty products, both in terms of marketing as well as any like R&D spend, which we might be incurring in near term. So maybe some update on how we should look at specialty spend in next 1 or 2 years?

[Dilip Shanghvi, executive]

Abhay, would you like to...

[Abhay Gandhi, executive]

So for the larger products, as I mentioned on the last call itself, ILUMYA or CEQUA, which we have been in market now for anywhere from 3 to 4 years, the spend is more or less optimized and we look at growing the business without necessarily increasing the cost base or the promotion in Spain.

On the other hand, if you look at the Winlevi, which is a product which is new to market, then I think we are going to be spending sufficiently to be able to optimize our asset there. So it's a combination of the 2 that I would look at when I run the business.

[Damayanti Kerai, analyst]

So very broadly, with like optimized costs for ILUMYA and CEQUA and spend going towards relatively new launches, should be on an upward trend, but on a more major basis, could we...

[Abhay Gandhi, executive]

Not really -- it will be upwards, but not very significant upward.

[Operator]

The next question is from the line of Kunal Dhamesha from Macquarie.

[Kunal Dhamesha, analyst]

First, on the R&D. So we are expecting at the midpoint of our guidance for a significant jump from 5.5 to roughly 7.5. So what would be the major driver of this 200 bps? I can understand, I mean, what would be the split between maybe specialty and generic for that 200 additional bps?

[Dilip Shanghvi, executive]

No, I think we expect the clinical trials to pick up in this year. After that we can complete or we can progress with the clinical strategies real and that essentially is the key reason for subdued spend last year. We significantly underspent over our guidance last year. And a key reason was underspent on account of cynical studies that could not recruit enough patients.

[Kunal Dhamesha, analyst]

So would it be fair to say that see as and when it comes, it will be more lumpy in nature?

[Dilip Shanghvi, executive]

What would you mean by lumpy...

[Kunal Dhamesha, analyst]

Yes, yes. So let's say, maybe until we are recalibrating our psoriatic arthritis Phase III, till we are not clear on our strategy, we will not execute it. So maybe in the next couple of quarters until we are calibrating it might be subdued. And then once we are in full quarter along the trial, it can....

[Dilip Shanghvi, executive]

One thing you should look at annual numbers rather than looking at quarter. So there will always be, what you call, a certain amount of lumpiness in the cleaning trial spend.

[Kunal Dhamesha, analyst]

Sure. And second question, just on the -- a logistic question on ILUMYA, I feel I'm missing something. So global ILUMYA sales, we have said it's roughly USD 315 million, which has grown at 81%. But as far as I remember, last year, global ILUMYA sale was roughly INR 143 million. So has that accounted the growth should be more than 100%. What am I missing here?

[C. Muralidharan, executive]

So the FY '22 number is the total revenue from customer contracts that includes product sales, quality and milestone, which was already disclosed in our Q2 FY '22 results.

[Kunal Dhamesha, analyst]

USD 315 million includes the milestone payments?

[C. Muralidharan, executive]

Royalty milestone, which we have disclosed in the Q2 FY '22 results.

[Kunal Dhamesha, analyst]

But still the growth number doesn't make sense right, I mean USD 143 million and USD 315, or is it 81% -- so 81% is without milestone payment is what you are trying to say?

[Nimish Desai, executive]

This is Nimish here. Let me explain. So when we exclude the royalty and milestone of ILUMYA in the USD 315 million number for FY '22, correspondingly for FY '21 also, those equivalent numbers have been included. So the base is also on a-like-to-like basis.

[Kunal Dhamesha, analyst]

So it would be USD 175 million?

[Nimish Desai, executive]

Sorry?

[Kunal Dhamesha, analyst]

It would be USD 175 million then if I have to manage the growth number for FY '21 numbers?

[Nimish Desai, executive]

Yes. Yes. So what we have given you as growth is a like-to-like comparison. Otherwise, it would have -- we would have ended up giving you something which is not comparable. So that's why we have given you the growth number.

[Operator]

The next question is from the line of Krish Mehta from Enam Holdings.

[Krish Mehta, analyst]

Congratulations on the specialty performance for the year. The first question I had was on note for subsection D where we've taken, I think, a INR 563.5 million charge in relation to restructuring of operations. So could you throw some light on which geographies we saw this restructuring? And if Russia has been a key part of this and whether this is going to be an exception that we might see in the future given the dynamic situation geopolitically?

[C. Muralidharan, executive]

So what we disclosed in 1 pager note in [indiscernible].

Is there any other follow-up on Mr. Mehta?

[Krish Mehta, analyst]

Yes. The follow-up for this is the second one is on the cash position of the company, given the net cash position we've built, how do you see the capital allocation going forward in terms of acquisitions or buybacks or like dividend payouts?

[Dilip Shanghvi, executive]

No, I don't think that we can -- I mean some of this, of course, we also don't know. But also, I think we don't forecast those numbers. We've kept the dividend payout at 30-plus of the profit.

[Operator]

The next question is from the line of Bino Pathiparampil from InCred Capital.

[Bino Pathiparampil, analyst]

A lot of questions answered. Just a couple of them. If I believe the proactive brand was acquired by Taro last quarter and it closed around somewhere in Feb. So is 1 month or 1.5 month of proactive revenues included in Taro top line?

[Dilip Shanghvi, executive]

We couldn't get it.

[Bino Pathiparampil, analyst]

Sorry. Sorry, I couldn't hear that.

[Dilip Shanghvi, executive]

No, we couldn't understand. What was the question?

[Bino Pathiparampil, analyst]

Taro acquired the proactive brand some time in last quarter and I believe that closed around some time in Feb. So what I would like to know is whether there is some revenues on proactive, which is included in Taro top line?

[Abhay Gandhi, executive]

As [indiscernible] Taro, the transfer is closed on end of Feb, so early 1 month...

[Operator]

So sorry to interrupt, your audio is not clearly audible. Maybe request you to speak closer to the device, please?

[Abhay Gandhi, executive]

Yes. So as we have said, the proactive Alchemee related acquisition gone onto the end of Feb, 1 month of revenue, but not very material is built in the quarter financials.

[Bino Pathiparampil, analyst]

Okay. And could you give some idea about generic Revlimid launch? Are you expecting to launch in the second wave, which is coming in soon?

[Abhay Gandhi, executive]

I couldn't understand the question again. What is it that you're trying to ask?

[Bino Pathiparampil, analyst]

Generic Revlimid launch in the U.S. So could you give some idea? Are you looking forward to launch it along with the others in the second wave of generic entry?

[Abhay Gandhi, executive]

So we have an agreement, and we haven't disclosed the terms of the agreement. And we will follow that like many other companies that have been different time line set for when we can launch. So it will be as per that. And once we launch, we will, of course, let you know.

[Bino Pathiparampil, analyst]

Okay. Great. But you won't be able to comment, whether it's this calendar year or financial year or anything like that?

[Abhay Gandhi, executive]

No, I think it is better that we don't because let us follow the process that has set out in the agreement that we have.

[Operator]

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, analyst]

A quick one on Winlevi. You got a very nice description support from doctors. Is it equally well supported on the insurance coverage side? And what happens to those prescriptions, which are not covered under plans?

[Abhay Gandhi, executive]

So Sameer, as you know, it's 5 months since launch. So as far as insurance support is concerned, it is work in progress. We have -- we are meeting with each one of them sequentially explaining the story using the key doctors to also explain why insurance companies should cover. So yes, it's work in progress.

To the other part of your question that what happens in the coverage is not there, unlike every specialty product when we launch to we have a co-pay program, which reduces the burden on the patient and that can get the doctors using the products frequently and get into the habit. And the number of prescriptions that we generate, which, as I said, looks nice, also becomes then a factor why insurers should try and cover a products. So it's a combination of all these and definitely work in progress and an agenda for the team on the ground.

[Sameer Baisiwala, analyst]

Yes. Thanks Abhay, very helpful. And second question is ILUMYA. Good showing with USD 315 million sales including Europe, USD 420-odd something. So where is ILUMYA, in your view, in its product life cycle -- do you think it can continue to grow well over next 2 to 4 or 5 years? Or how are you thinking about it?

[Abhay Gandhi, executive]

So in my head, it's still in the growth phase. That's the direct answer to your question. So we believe that there is still a lot more to be done for the product and a lot more headroom for the brand to do well.

[Sameer Baisiwala, analyst]

Okay. And just if I can ask about the Alchemee acquisition at Taro. If one reads about this product proactive, so it has had quite a history and the sales has been declining over the last 7, 8 years. And actually, it was declining even, say, 40% all the way to 2021. So is it possible for you to share your thinking what you want to do with this asset? What's the turnaround plan? What's the strategic thinking behind it?

[Abhay Gandhi, executive]

Sameer, we cannot share unless and until Taro shares with their shareholder. I mean, of course, the macro objective for all acquisition would be that it will help the business at both top line as well as bottom line and also help grow on a consistent basis.

[Operator]

Next question is from the line of Surya Patra from PhilipCapital.

[Surya Patra, analyst]

Sir, just on the cost front, I miss head the commentary...

[Operator]

Mr. Patra, sorry, but your audio is not clearly audible. So may we request you to move close to your mouthpiece.

[Surya Patra, analyst]

So just on the cost side, is it possible to have a sense, I possibly missed in the initial remarks, the sequential kind of cost impact what we have seen in the fourth quarter versus the previous quarter. What has led to this kind of incremental cost pressure impacting our margins? That is the first question.

And the related aspect is that, let's say, for FY '23, if we need to be concerned or cautious about certain cost items, then considering, let's say, 200 basis point kind of expansion in the R&D spend side or people cost, which could also be seen because back to back 2-year of field force expansion to the tune of around 10% and given the elevated otherwise challenging cost scenario of what we are witnessing for all the industry. So given these what were the reason for the kind of sequential impact? And what outlook that one should really have about cost for next year?

[C. Muralidharan, executive]

So in terms of the cost, what I want to share is that these are normal [indiscernible] operations have normalized, which we also shared in our earlier earnings call.

[Surya Patra, analyst]

Okay. Anything about next year, are you really -- I mean are you worried about the rising cost trend in the fourth year witnessing in all those cost line items? So anything that you think we can counter those easily to sustain the margin profile?

[Dilip Shanghvi, executive]

No. I think hopefully, we should be able to offset some of the cost increases with our ability to take a price increase in the marketplace. So we are not guiding for any significant change in the cost of growth at this point of time. If situation changes then it may happen. But as on today, that's the thinking.

[Surya Patra, analyst]

Sir. And sir, my second question is on the growth guidance of single -- high single-digit kind of growth for the full year. So in that, whether we have considered Revlimid launch as well as any imminent growth in that or it is the core existing planning business growth guidance that you have indicated?

[Dilip Shanghvi, executive]

No, I think it's -- after factoring all potential, what you call, price erosion as well as new product launches in the regulated market as well as in India, where we have to grow then we don't expect any significant amount of COVID sales. So to that extent, we expect India businesses to get adjusted for that growth. So it's factoring all of that.

[Surya Patra, analyst]

Just last 1 question, sir. On the domestic business front, so this 10% kind of expansion field force. Is it to counter the competition which is now becoming aggressive in the post-COVID period and the entire industry is talking about expansion of the reports or it is to focus more on the organic growth rather than the industry, which is now looking for more of M&A-led growth in the domestic market?

[Kirti Ganorkar, executive]

In my opinion, it's more like organic growth. So what we are looking at, as I said, earlier is we are expanding to geographies where will we had a limited presence or no presence. So it's nothing to -- like we are looking at competition and then expanding.

So wherever we are seeing growth opportunities in the territories where we are expanding. And second important point is also, we have a large product portfolio and -- which also we need to declutter. That's why we are expanding in terms of number of as well as in terms of number of business units, which are promoting products to the doctors. So it's more our strategy to grow in the future.

[Operator]

The next question is from the line of Deep Master from One Up Financial Consultant.

[Deep Master, analyst]

I just really had 1 question on the specialty business strategy over the medium term. So now that we've seen good initial signs of the business stabilizing and seeing signs of your initial success, how are you kind of thinking about the medium-term sort of growth formula in a sense, if I may call it that?

Your product portfolio will continue kind of growing at its own pace, but how should we think about new additions both from your internal pipeline as well as acquisitions? Is there a number that we could kind of expect say 1 or 2 every year? How could we think about it?

[Abhay Gandhi, executive]

If I look at it from a medium to long-term perspective, I think growth will be driven by a combination of organically growing the products that we have, whereas I feel that most of them are in growth phase, leaving us enough headroom to continue the growth trajectory.

And of course, keeping your eyes open for any opportunities to look at products and having the cash in the bank, which in the readout also we have mentioned, helps us to look at these assets very aggressively without, of course, overpaying for it. But we keep looking. Winlevi is an example. But I don't have a number in mind, whether it will be 1 or 2...

[Deep Master, analyst]

And in terms of a therapy focus, would it kind of -- would derma be top of the list and then sort of it followed by ophthalmology or how could we look at maybe your therapy focus or strategy for the portfolio?

[Abhay Gandhi, executive]

So without categorizing it as top of the list. I mean the 2 segments we want to grow our dermatology and ophthalmology clearly. And in related oncology areas too, which are derm-focused, we keep looking at ways to grow the business. So it's not one over the other. Idea is to try and grow both these franchises.

[Operator]

[Operator Instructions] The next question is from the line of Kunal Dhamesha from Macquarie.

[Kunal Dhamesha, analyst]

So just an overarching question on ILUMYA that what kind of insurance coverage progress we would have made over the, let's say, last 2 years from the perspective of whether we have been able to reduce the step therapy kind of provision or the number of lives that are covered by the insurance which are covering ILUMYA. A broad overview of how that has stand out would be helpful.

[Dilip Shanghvi, executive]

Right from the launch, whenever I have been on these calls, I have said that access was never a big constraint for ILUMYA. And year-on-year, I think we have either been able to maintain or slightly improve upon the access. So I think access is not really a big worry for me as far as ILUMYA is concerned. But how do you then use that access to continue to grow the brand is where I think the team and I will be focused on.

[Kunal Dhamesha, analyst]

So I mean, pardon me if I'm wrong, basically, when I see a lot of insurance formularies, I typically see ILUMYA being approved after a couple of step therapy. So do you see a lot...

[Abhay Gandhi, executive]

Are you looking at the pharmacy side of the formulary or are you looking at the medical side of the formulary?

[Kunal Dhamesha, analyst]

I would say -- when you get, let's say, extra claims under formulary or United Health basic formulary, those kind of things or...

[Abhay Gandhi, executive]

Look at the medical side of the formulary, this is a medical benefit product. I think there you will not find those barriers and constraints that you just spoke about.

[Operator]

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Nimish Desai for closing comments. Over to you, sir.

[Nimish Desai, executive]

Thank you, and thank you all of you for taking time out to join this call. If any of your questions have remained unanswered, do send them across, and we have them answered. Thank you, and have a good day.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Sun Pharmaceutical Industries Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.