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Suven Pharmaceuticals Ltd
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Ladies and gentlemen, good day and welcome to the Q4 and FY '22 Earnings Conference Call of Suven Pharmaceuticals Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.
Good day, everyone, and thank you for joining us on this call to discuss the Q4 and FY '22 earnings for Suven Pharmaceuticals. We have with us Mr. Venkat Jasti, the Managing Director; and Mr. Venkatraman Sunder, Vice President, Corporate Affairs; and Mr. Subba Rao, CFO.
Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's performance have been mailed to you earlier.
I now request Mr. Jasti to share his perspectives on the performance and outlook. Over to you, sir.
Thank you, Rishab, and good afternoon, everyone, who has tuned in for this update on the quarter 4 results and year-end results of Suven Pharmaceuticals Limited. I know everybody has the data, which is circulated to you guys and instead of rehashing the same numbers all over again, I think it's better you ask questions and I clarify them to the best of my knowledge.
So I would like you to start the question-and-answer session, Mr. Rishab.
[Operator Instructions] The first question is from the line of Ankush Agrawal from Surge Capital.
So firstly, now since we have completed this Casper Pharma's acquisition, could you talk a little bit about the opportunity over here, like, what is the end market size for the 6 filed products and what kind of visibility we have from the future pipeline that might come from the Rising Pharma's R&D?
See, at this time, yes, we have taken all of this as of April 22 and with all, this is a branding or capability. There are 2 ANDAs filed and waiting for the USFDA to come and inspect for us to do the sales activity. Meanwhile, we have -- I mean, other than that, we have other 15 products to be filed within the calendar year -- I mean not calendar, within the fiscal year ANDAs. So as of now, this is the update I can give you because more than that, there is nothing else, because we have not started the activity yet. Just taken the position update and waiting for the USFDA inspection to happen, then the things will start running.
Sir, did you mention 2 filed products from this facility?
What is it again?
Did you said that we had 2 filed ANDAs from this?
Yes, 2 already filed and waiting for the inspection actually, and the dossier evaluation by USFDA is under progress and waiting for the USFDA inspection and 15 more will be filed during the fiscal.
Sure. And this 15 products is from the Rising partnership and not the existing ANDA that you were doing separately?
No, no, no, this is all for the Rising partnership.
Right. Sir, just a clarification over here. I think last quarter you mentioned that this facility has 6 filed products. So why is this difference now from 6 to 2?
5 products are ready for filing, 2 are already filed under evaluation, 3 are under compilation and filing that's by end of June.
Okay. Secondly, sir, on CRAMS business growth, so we have had a very healthy growth this quarter. So just wanted some qualitative update on are we seeing a big part of this growth led by the COVID drug that was commercialized in the last quarter or you know that hasn't been that much of a contribution?
No, it's not the COVID-led growth. It is a -- the some of the activities are small quantities in COVID-led growth for this quarter, but otherwise it's overall activity. And in CRAMS, it is not a guaranteed stuff until it goes to the next level in the clinical trials, and it's very difficult for us to project anything in the future. As usual, we hope to maintain 10% to 15% growth, but there is always a possibility that some of molecules, which are in Phase II moves to Phase III or Phase III molecules moves into pre-launch quantities and suddenly the volumes can go up also. So as it is, this is good growth last year compared to the year before and we hope to maintain the same plus at around 10% to 15% growth as of now we except.
So what you're saying it was largely a broad-based growth and not a product-driven grown, right?
Not one-off, not one-off.
Right. So any qualitative update in terms of any change in pipeline on the Phase III and commercial?
No, not yet. Nothing in this quarter. Nothing this quarter.
Right, so 5 and 5 in Phase III?
Yes, 5 Phase III and the rest of them are all staying at 32-- I mean 35.
The next question is from the line of Rashmi Sancheti from Dolat Capital.
Yes. Sir, just a follow-up from the earlier participant, what I understand that there are 5 commercial products in the CRAMS business. Is it that the fifth molecule has started, I mean, it all started supplying from quarter 4 onwards, then are we not going to see a good ramp up in FY '23 and '24 when your guidance looks a little conservative?
We are always conservative, but not knowing what is going to happen in the market because this is all CRAMS model, not a generic where I can give some kind of a guidance. More than that in the COVID situation also, what is happening in situation when the COVID is receding and the growth is muted, so based on that I'm not having any visibility, I cannot tell how this is going to go after with this COVID. So that's why we have been conservative and maintaining that itself is a challenge in the CRAMS business model and we hope to maintain plus about 10% to 15% growth we expected on the broad-based activity.
Okay. And sir, on your total formulation and technical services, what I see the number, it's around INR 84 crores. Out of that INR 84 crores, how much is just formulation sales and your other technical services if you can give the breakup for the -- for FY '22?
I mean, technical sales is very meager, it will be less than 10%. The rest of them are all pharma sales and the profit share.
Sir, how much did you said? Sorry, I didn't get it.
Less than 10% is the technical sales.
10% is the technical sales.
Right.
And sir lastly on Suven gross margin, we are also seeing inflationary pressure on the raw material prices. So what is your outlook over there? Are the gross margins, what currently has been reported, are we going to sustain that or we are seeing that for the -- there will be some downward element to it or do you think that things are improving from here on?
I mean it is a status quo as far as improvement is concerned. I don't see any product -- rise in cost has come down since last time. But at the same time not also going up other than the deals with obvious things and [indiscernible]. But at the same time in our business, what you call, the margins is not depending on the product mix. Since we are not supplying the same materials day in day out everything is dependent. It is changes from quarter-on-quarter, month-on-month and year-on-year. But at the same time, we said last time and I will continue to keep that same number around 40% plus EBITDA margins and we will keep it. But surprises can happen in the positive side, but around 40% is what we hope to keep it as a guidance.
Okay. But that would be slightly lower than FY '22, right, if you're saying 40% EBITDA margin then?
But we never -- that -- it is only, we have performed doesn't mean that it will be the same, the product mix. So not knowing the product mix, I cannot comment. So that's why we are sticking to the 40%.
The next question is from the line of Yogansh Jeswani from Mittal Analytics.
Congratulations on a good set of numbers.
Mr. Jeswani, your audio is not very clear. May I request you to come in the handset mode and come closer to the phone?
Is it better now?
Yes.
Yes. Congratulations on a good set of numbers. Sir, on your Casper acquisition, could you share what is the outlook here? What is your plan going forward with this facility? What kind of product are you filing for ANDAs that you said, if you could throw some more light on what kind of products these are and what is the kind of revenue potential once these molecules come into production?
So, as far as products is concerned, we are not going to reveal it to you at this time until it is approved. Okay. So that's business things which we don't want to do it. It is a brand-new acquisition and a brand new project. It's not yet inspected by the FDA. As I said earlier, we have filed review by the FDA. And as expected this quarter, second quarter, hopefully the inspection and we have 15 more to be filed during the fiscal year. So this is the update I can give you, but not the products until it is approved.
Sure. Fair enough, sir. And sir, just another clarification on that part. I think in your disclosure to the exchange, you had mentioned that the Casper facility had started in 2016, right? So is it that in 2016 it started commercially or it started getting built in 2016? And if it has started in 2016, what was the business it was doing for the last 4, 5 years.
When you start a new greenfield business, the construction and the regulations and special economic zone, all those things takes time. And as I have said, they have constructed doing only the business of filing the exhibit batches and submission batches and waiting for the -- and submitted couple of ANDAs out of that and that's all. There is no revenues on that. The revenues will accrue only when the USFDA comes into the picture and then approval is taken place, then only the sale starts. So it is a brand new facility, completely validated and submitted the dossiers based on the early ANDAs, few submitted ANDAs, ready for 15 more ANDAs. Just waiting for the USFDA inspection so that the commercial activity can start.
Understood. That's helpful, sir. And sir, lastly a follow-up on the breakup that you shared about the 5 commercial products on 5 -- in Phase 2, you said right?
5 commercial.
5 and 5 in the which phase you said?
Phase III.
Phase III. Okay. And again, can you give the second level breakup in terms of how many of these are in these specialty chemicals and how many are in your -- the other one?
They are different. This is all pharma what I have talked, 77 in Phase I, 35 in Phase II, 5 in Phase III and 5 in commercial. In specialty chemicals, there are 3 products, plus 1 development product.
Okay. And in terms of pipelines, are we seeing post COVID companies again getting aggressive in terms of development? Are we seeing more interest there or is it still lower, how is the market seeming like?
It is starting the activities, we are getting started. Activity has not -- started now, not aggressive, but the activity has started.
[Operator Instructions] The next question is from the line of Pratik Kothari from Unique PMS.
Sir, just one question from my side. So until now we used to cater to innovators and through Casper acquisition, we are venturing into generic business. So sir, just your thought process because we were always vocal about not entering this scene. So your thought process, does it bring any change in the organization just why are we doing this?
You know even before the Casper acquisition, we had formulations since the last 7 years and we are not going after the blockbusters, we are going after those molecules, which are very small volume, very niche molecules, where not many people will come, which is a leverage at some time. The same thing will go in the Casper also. I mean, a little bit more number because it's a focused way. But we don't have any problem with our innovators, they are -- they fully know about it and some of them were even discussing in developing the dossiers for them in the preclinical stage if needed as a service.
So everybody is not -- there is no hesitation from the big pharma. See the thing is what we are doing in the big pharma, in the CRAMS side of the business is there is no IP related. These are all the intermediates and non-products. There's nothing we are copying or contradicting each other or anything like that. And this is with apprehension by the investors, but not the customers.
Okay, fair enough. And sir, last thing a couple of years back you had mentioned in the annual report that you wanted to go higher up the value chain from intermediates to APIs to maybe formulations. But just if you can qualitatively highlight how has -- how are we on this journey over last 2 years and then how do we see the future for this?
Actually, we started with 3 of our customers with forward integration, and they are inclined to do. As we said, that it will take 2 to 3 years before they can come on board for that kind of activity. But unfortunately, the COVID has stopped all the things. Not only that, regular visits also stopped. So we hope during this year, with this fourth stage don't come up, hopefully the -- second quarter, I mean, third quarter onwards, you will see the visitors coming in and the activity will start. Based on that, it will take couple of years before you can see any forward integration activity to take place.
Okay. Sir, just to understand, this 2, 3 customers of ours used to take any intermediates from us and they have shown some interest that we would want to forward integrate with you like?
Yes, not only for the existing products, but also for those lifestyle management, like that means if the big pharma has a product, which is expiring soon and they want to continue in the market. They want a partner who can do that rather than themselves doing that both API and the formulation itself, that's where the activity will come. And in terms of the intermediates if we are applying N minus 2 maybe N minus 1 and eventually the API itself. So these are some of the activities we are targeting. And only time will tell when actually they come and audit -- I mean they know the facility, but the team will be different and the strategy will be different. Okay. A couple of years, we had to wait before you see any result on that.
[Operator Instructions] The next question is from the line of Darshit Shah from Nirvana Capital.
Yes, sir. Congratulations on good set of numbers. Sir, my question pertains to the -- I mean, the cash and investments, which lies in our book, including the mutual fund, so that's roughly around INR 525 crores. And I understand we're spending INR 150-odd crores in Casper and [ INR 60 crore ] as dividends we're going to distribute. So is there any other plan to utilize this cash apart from the normal CapEx that we would be doing in Suven Pharma?
1/3 of it is only used for the normal CapEx at this time, but we have not thought of any other way to do -- I mean, we have not thought of anything on that.
Yes, because will be obviously generating another INR 350 crore, INR 400 crore kind of operating cash this year itself. So it's going to kind of pile up on the existing cash.
Yes, because we have cash I can't go into the market and acquire know. So the opportunity, which meets our requirement, I don't want to go into operations where I drag my margins down just for the sake of top line growth know. We will wait for the right opportunity and also, we'll see how to utilize the cash properly rather than just because we have -- I don't want to go on a shopping spree.
Sure. And sir, on the Rising sale where we got $41 million, so that's roughly INR 310 crores in our subsidiary. So, has that money being kind of back in our company or it's something is still lying with Suven Pharma Inc.
No, we have brought back the money. Very residual amount is there and a residual stake in Rising Holdings are there.
Okay. So all this other income basically whatever we have is through that dividends we have infused.
Yes.
The next question is from the line of Abdulkader Puranwala from Elara Capital.
Yes. Sir, just one clarification on the products, which are filed to the Casper side. Sir, in this, the margins would be identical as what your current formulation business would be?
Yes.
Okay. Okay. And secondly, sir, on the INR 600 crore CapEx plan, sir if you could share some details of where we are and how will CapEx budget for the next 2 years would look like?
Yes, it is a 3-year plan, and as I said last con call also, that just we started the activity, may need to start within the Suryapet facility and we'll be spending this money before the end of the year. And with respect to the other expansions and the movement of the R&D center has not started yet, because the mandate is not -- I mean, that is not important immediately it has to be there, but we have only apportioned that money and we are waiting for the other block to be started in Pashamylaram facility, maybe 3 to 4 months from now.
Okay. So could you just count us on the absolute number which you will spend in '23 and '24?
You said which year?
Sir, for the next fiscal, FY '23.
It will be around INR 250 crores at least to INR 300 crores maximum. INR 250 crores to max INR 300 crores max.
Okay. And sir, my just final question on the cash conversion cycle, the detailed days for the fiscal as -- for the fiscal FY '22 has increased slight a bit. So you see that getting normalized in FY '23? And if you could also highlight what led to this increase?
Yes, you are talking about the cash flows?
Yes, I'm talking about the receivable, the rise in…
Yes, receivables is -- it's -- why was it there, he's asking.
Yes, yes, but from the previous year, obviously, [indiscernible].
Yes, they will normalize within a month's time, usually. I mean, end of the quarter, end of the year it looks big numbers. But they are normal, and I had told you.
[indiscernible] sales, both specialty chemicals as well as commercial and then...
Yes, it's all based on the sales. And sometimes it goes in the last month, and it may come in the first week or second week of the…
[indiscernible] 60 days…
Yes, there is no difference other than when we have such -- I mean [indiscernible] product.
The next question is from the line of Saravanan from Unifi Capital.
Yes, can you hear me?
Yes, we can hear you.
Yes. I have 2 questions, one on the taxation. This year, is the tax high because of the dividends and what is the guidance for FY '23 tax rate?
Tax rate, it will be in a normal tax. See FY '23 is normal tax around 25%, that's what we expect. But this year is basically because the U.S. tax and Indian tax, and including the dividend tax there actually, all put together is higher. That's what it is.
Okay. Got it. And formulations from a yearly perspective FY '22, we saw moderate growth of 5%. So in the next 2 to 3 years, what are the strategies here because I think a year before we had expected formulations to be 1/3 of the revenues by FY '24 or '25. Are we on track to achieve it?
No, because it is taking time to get the inspections done and the filing also and when the numbers goes up and actually the volumes will go up and the profitability will go up. That's what we hope to achieve within 4 years' time, that's what we said. And it's not that is a guaranteed thing because it all depends on the product. Because when we choose a product, it may look guaranteed. But when we file, actually, it may be different. So we cannot tell. Right now, things are going a little bit slow, but now it's speeding up and hope the USFDA will give us the permissions as we file the number of ANDAs and that will give us the revenue growth.
But from a mid- to long-term perspective, your investments in formulations would continue, right, the filings and capacity, I mean anyway capacities you have acquired now?
Yes, as I said earlier, I mean in Casper itself we are filing 15 more during the financial year and other 5 to 7 more in the Suven Pharma FDA facility Pashamylaram. So it will be around 20 filings will happen during the '22, '23 and with timelines it takes for the approvals and then so all -- I mean, in the long run, yes it will come up.
And Casper USFDA inspection, are you expecting in the next 2 quarters, any indicative timelines?
Yes, it should be any time that's what we are expecting. Any time, but we are not that many, because nowadays they are just giving a week notice to come to us. But based on the 2 ANDAs that are pending, we hope to get that in the second quarter itself.
And front-end, you would always operate through partners in formulations, right? Or do we have plans to set up our own?
We are not going to have our own marketing department, no. We have various partners.
The next question is from the line of Ranvir Singh from Sunidhi Securities.
Congratulations for good numbers. Sir just on Casper acquisition, just wanted to check whether that consideration has already been paid to Casper?
Everything is paid. It is in our position as of 22nd of April.
So short-term investment that INR 300 crore additional is all related to that realization from Rising Pharma, that $44 million, that is sitting in short-term investment, right?
Yes.
Okay. So despite this -- the CapEx we have -- we will have this surplus cash and very good amount of cash going forward. So anything if you could give some color where we are going to invest it or do we have any plan for inorganic expansion or anything that sort of?
No, as of now nothing. We will be thinking about it. First, we want to handle everything [indiscernible] capitalization and CapEx plan for replacing it. And as I said earlier, if an opportunity comes, which meets our requirement, then certainly we'll go for inorganics, but right now nothing is in the cards.
Okay, fine. And the 2 products, which we have filed through Casper, that 2 product how critical this product is, because pre-approval inspection is pending. So just I wanted to understand if this is a critical product or just a simple product, it will be easy going for getting inspection and getting done.
No, they are regular products only. There is nothing like a simple product that attract the USFDA to come and inspect. These are the things which we have chosen, and this is through the Rising partnership. They have filed actually because we got this only 10 days ago, right. These are all filed by them at that time.
Okay. And the last one, in last call also, you indicated that 6 month, including this quarter and probably next quarter, you had a visibility of CDMO business coming in that's the kind of flow. Going forward, we do not have much visibility. So, because now we are already in the last quarter of this fiscal, can we give some qualitative indication what kind of things in second half of FY '23 is going to come, because what we believe that this 6-month has been very good. So whether this kind of thing will continue going forward.
No, in this CRAMS you cannot guarantee yourself because this all depends on the success of molecule at the clinical trials. So that's why we're giving you a ballpark figure of 10% to 15% growth. But things can happen and you can have 30% growth also with a particular molecule or particular quarter, but that I cannot give you right now because it's not anything where I can go put salespersons and keep on selling. It needs to generate, and it has to be a success at the clinical trial before they can place an order. So it's very difficult for us to give any guidance.
Okay. Fine. And then specialty chemicals, the one development, 1 product is in development at this stage. So how big -- how is the potential of this product?
Which one is that?
Specialty chemicals, one is in development.
Yes, one in the development, I mean, it takes time. I mean, it takes a year before you can see the or you call the, any kind of big commercialization. Even the third one, which we have sold last year, it will have a gap of about 18 to 24 months before you get the repeat business. So just because we have commercial quantity supplies, doesn't mean that it will be straight away coming in. They also have the field test to be done based on that one and all those stuff. So, right now things are going well, but the third -- fourth molecule which is a developmental one is likely to be some time in '23. We don't know yet the exact timelines on that.
But is it going to be a sizable one or…
No. I told last time itself, it's all INR 40 crores to INR 50 crores kind of thing, not like the one which you have that first compound which has a huge volume, not that.
The next question is from the line of Nikhil Jain from Galaxy International.
Sir, I just wanted to understand for the formulation business, the molecules, the 15 molecules that you're planning to file, are they also of the same kind, let's say, small molecule, generic with less competition or is there any different strategy?
Yes, these things which for the Casper, they are all derived by the Rising, because the Casper facility was Rising [indiscernible] and they have decided the molecules, and they are all novel molecules only. And whereas in Suven, we choose those molecules with less volume and less -- they have niche molecules. So it will be a mix of things that will be in the future.
Okay. So, these would be regular generic molecules, let's say, these 15 molecules that the filing would be done, it's -- those are the regular generic molecules.
Yes.
The next question is from the line of Neha Agarwal from SageOne Investment Managers.
Just one question on Casper again, given that you mentioned that this would largely be all generic, can we expect overall some margin dilution once numbers come from this particular asset?
Margin dilution?
Yes.
Yes, you know the generic, what is the margin, so the same margins I told I mean earlier also, the margins will be the same as whatever we are getting here in the pharma, I mean Suven also, it will be around 25 percentage points.
Around 25%. And in terms of overall potential from that particular asset, do we have any number in mind or…
Not yet, not yet. We are working on the numbers, because we just got it and we have to evaluate it and our concentration is now mainly with the filings and towards the inspection and we'll get into that thing in due course of time.
The next question is from the line of [ B.V. Vaidyanathan ], an individual investor.
I have been with Suven for the last nearly a decade. I think it was only a CDMO business. Then knowing [indiscernible] slowly you went into specialty and then the ANDA programs and formulations. Now I see Suven positioned itself, this is my reading, in the next phase of growth. It is actually now with the Casper acquisition now you've got a four-pronged strategy; its own ANDAs as well as now Casper Pharma's ANDAs. Now seeing the amount of workload, do you assume that we will be now looking forward to hive off and/or maybe branch off a particular CEO for a particular business model in due course?
No, we have every division has a Vice President will take care of it. My job is only strategy and coordination. I don't look after each -- any division for that matter. So we have people, you may call it, whatever it may be, but we have individual operated by -- each unit is operated by Vice President, who is capable of delivering goods.
This additional workload on Casper Pharma, would it entail additional employees to be employed or will build the current spend with Suven, will you be like dividing it between the 2 companies like the 2 plants?
I think we are doing that already. It's formulation division, the specialty chemicals division and the CRAMS division all the time. And I said, I'm not doing the work day to day and people are there each and everyone. This Casper acquisition, we got 150 people came along with it who are running the business. We took over the business, they are capable of running it and my job is to coordinate and strategize. That's all I do.
Okay. And last question, sir, on SUVN-3031, is it progressing as anticipated at least at the moment after the COVID thing has got over?
Yes, it started picking up, but now again, this fourth stage or fourth variant or whatever it is, it is a little bit slower, but much better than last year.
And the results will be like anticipated during this year-end and the actual results by next year before March?
Yes, yes, the result will be around March end -- I mean, the trial will be over by March end and the results will be in the second quarter.
The next question is from the line of Hussain Kagzi from Ambit Asset Management.
Am I audible?
Yes.
So, sir, my question was with regards to specialty chem, I believe you have given that you would like to grow 10% to 15% in this quarter in the CRAMS -- pharma CRAMS business. But what's the outlook on specialty chem? Because if I understand correctly, we do have a better visibility over there from the client side. And given that last quarter -- sorry last year FY '22 we had molecule being commercialized, so that's why we saw 50% growth. So from here on what's the visibility that you have in the near term in this business?
Yes, in specialty chemicals, there will not be much growth. As a matter of fact, your understanding is wrong also not -- the volume has not gone up because of the one launching which we have done. That's only a small part of it. But the old molecule, which will last out some of the patents in some countries, now they have a combination product they have done. They have increased the volumes because of that and the volume growth is mainly because of the original molecule, not because of the launch molecule. And the growth potential on that is not much because the one that is launched last year, they will not have any requirement for the next 12 to 18 months. So we can say it's the fact.
Understood. And just one clarification was that our employee expenses in this quarter did shoot up quite much compared to quarter-on-quarter and year-on-year. So this is -- is this attributed to the CapEx and we hired additional staff over there or is it the increments that we've given out?
It's -- yes, I mean it is a combination of additional staff and also additional increment due to combination.
Okay, okay, understood. So like as in -- since so I just wanted to understand that by the time our new CapEx comes online, we will have some incremental expenses on our below the gross profit line, is that fair to understand like because…
With incremental expenses, our incremental revenue also will happen know, without revenue, there is no expense, without expense, there is no revenue. So it will happen.
No, no, understood. I meant since by the time the facilities come online, so till that time, we have some drag.
Pre-operative expense is always there no, sir, because even though the facility will be up and running say suppose in January, I need to have people to do the validations and checking all those things in 3 to 4 month ahead of time, right. So all those pre-operative expense also will come to picture, but that will be offset by the revenues we're going to generate later part of the -- start of the operations. But I don't have it up right now.
The next question is from the line of Vedika Singh from Monarch Networth Capital.
It's Vineet Gala here from Monarch. Sir, just one question. You mentioned that margins that you do on the generic business, the formulations business will be at par with the current CRAMS business, so that would include a huge element of profit share, right?
No, no, you didn't hear me properly. I said, the current formulation margin, which is 25%, the same thing will be there for the generic business.
Okay. So 25% EBITDA margin is what we are assuming for U.S. chemical business, is that right?
The EBITDA margins on the formulations will be around 25% compared to 40% of the CRAMS side of the business.
Correct. So like overall most of our CapEx is triggered towards formulations, and as and when the profit pool from formulations keeps on increasing, won't that be margin dilutive over say like 4, 5 years?
What's that again? I can't hear you properly.
Overall, as we're investing significantly on the U.S. generic business and this business is going to contribute say like, 25% margin versus [ 45% ] margin on CDMO, over the next 4 to 5 years, won't our overall margin dilute from our current rate right now?
We are not investing on the foundations [indiscernible]. We invested only 20 million now.
No. But what he is saying is in 4 to 5 years' time, this is 25% and 40%, so the total mix will be less.
There is going to be dilution.
But as you know, you have to go by our track record and things are changing. Even in the CRAMs itself, it can come down right if the product mix decides that they are not value add. So we hope that it will not be that much of a dilution.
Okay. And also, sir, what will be the element of profit shares that we have because initially I mean we were indicating on a profit share basis, the [indiscernible]. So what would be that element beyond the 25% that we are guiding?
Whatever the value that is coming is a profit share and the sales both put together, right? So the margins will be based on the total put together, it will be 25%.
The next question is from the line of [ Shiva Kumar ], an individual investor.
Yes. So just want to know the status of the succession plan and is it the right forum to raise question about the Suven Life Sciences?
Yes.
Yes. So, sir, we have been into the research for the Alzheimer's for almost more than a decade, but not much breakthrough has been achieved. So just want to know as part of the research, are we also referring to the Indian medical system like Ayurveda or Siddha for a possible solution or we still -- or we go purely by western medical system?
We are going into the central nerve system disorders. There is a lot of target area. We're not deviating out of it. And from the beginning, we keep telling it is a 0 to 1. There is no guarantees in this business. And since 2002, '03, there is no new drug developed in the CNS arena, where we are working, it's not only us, it's the globally the same scenario. This is huge unmet medical need we are working. There is long lead capabilities we have. We are not going to Unani on Siddha, and we will continue to do this, but you have to be very careful that this is a 0 to 1. There is no in-between, either success or failure and it can take years, 2 decades, 3 decades, anything can happen. So this is the caution you had to take when you're investing into this kind of activity.
Okay, sir. And regarding my first question, what is the status of the succession plan? Hello? Hello? Hello?
We lost his line. So we'll move to the next question, which is from the line of Ranvir Singh from Sunidhi Securities.
Yes, sir. Just one more clarification I wanted. In this quarterly result, we see that the gross margin is very similar to your sequential previous quarter in Q3 or even Q2 also we had a similar level of margin. Although in that 3 quarters, the input costs for most of our chemicals and basic materials have gone up significantly. So I wanted to understand that, how we have been able to maintain this gross margin or is it built in our revenue contract with customers?
Sir, my question was related to gross margin. So for last 3 quarters, our gross margin has been in a similar level despite those 3 quarter the input cost has gone up significantly for most of basic chemicals and the imports. So how we have been able to maintain this? So is it any escalation clause or anything in our revenue agreement with the client?
No, not the escalation clause. As I have been telling all the time, these margins can differ from quarter to quarter or sometimes year to year also. These are all the product mix that is available. So what stage the molecules we are supplying, is it early stage, values will be less, margins will be less, and if they are at Phase III and Phase IV, and Phase II, Phase III and commercial quantities then the values will be more. So it's the product mix effect. And as I said, I mean, when the new products are there, when we know that product prices are going up, we will actually take those new prices into consideration and quote it.
But when once these are in the price -- I mean, the purchase order we cannot change it because it's the one-off kind of things, unlike regular product, which we sell day in day out, then we can have it, passing on the cost. So it has an effect on it still because of the products, which are high margin in this quarter or in this year, that's why you see good profit margin, not because of anything else, we have not passed on. But some of them we have told them when we're quoting, and they have accepted the prices.
But I think it's just a coincidence because in that last 3 quarters, we have 69.2, 69.5, 69.7, so that number, it looks very, very exactly similar. And so going forward also, can we expect this number?
No, I think that's a very difficult question.
We wish to have some kind of [indiscernible], but clearly don't know, based on product mix.
Based on the product mix, it can be better also, but it can also come down. And that's why we said EBITDA will be around 40%.
The next question is from the line of Ankush Agrawal from Surge Capital.
Yes. Can you just give us the numbers on the ANDA filings, total approved, commercial and all that?
We have filed about 17, 9 approved, 8 launched, but not all of the 8 are really active. That's why you don't see much growth in there. And we hope to file another 7 to 8 during this calendar year in the existing formulation facility. When it comes to the Casper, which is not yet commercialized, the 2 are already filed, waiting for the USFDA approval, 15 products are under development and dossier preparation, which will be filed before the end of the fiscal.
Okay. And lastly, sir, a qualitative comment on next 6 months visibility.
Which one, sir?
Any comment on the next 6 months visibility on the CRAMS business, which we typically get?
It's going in the similar run rate.
Similar run rate.
The next question is from the line of Nikhil Jain from Galaxy International.
Yes. Sir, just some follow-up questions. So I just wanted to understand if you are planning to offer the formulation development services also, are we building up an organization or planning for that as of now?
We started as a formulation development division only, then forward integrated it to the generic, I mean, ANDA preparations and leveraging the experience we have. So we don't need to create anymore. We have enough capacity and capability. Only whenever that comes in, we will take it up happily.
All right. Okay. And just for second question, so any plans or thoughts on biotechnology or oncology at this point of time for the CRAMS side?
No. This CRAMS side, there is no differentiation, only small molecule, not biotechnology.
But oncology may need some special facility right, so at this point of time, we don't have, right?
Oncology need not require technology, there is chemistry. So chemistry can be oncology also. We have also oncology products. We are not doing the final product, but we are doing intermediate for the oncology products already, that is always there.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you, everyone for tuning in for this quarter ended March 31st and also for the year ended March 31st results and during these challenging times with good growth and with good profit margins, and also a good product mix. And as I said, the visibility study is very less, but now we hope to achieve kind of 15% growth on a normal growth. If something happens positive that would be good for everyone. Hope things will stay the same and we get more opportunities to bid on the new projects and new activity will the start with the global pharma, which will increase the -- our bandwidth and also the effect over the molecules in the clinical trial, based on that, our revenues actually will grow. So with this, I thank each and every one and hope to catch up with you during August.
Thank you. On behalf of Suven Pharmaceuticals Limited, that concludes the conference call. Thank you for joining us. And you may now disconnect your lines.