Torrent Pharmaceuticals Ltd

NSE:TORNTPHARM

Earnings Call Analysis

Torrent Pharma Q2 FY'24 Earnings Highlights

Torrent Pharma's Q2 FY'24 reflected a strong performance with revenues soaring by 16% to INR 2,660 crores. The India business was notable, achieving an 18% growth in revenue to INR 1,444 crores, outperforming market growth. Chronic therapies and product launches were key growth drivers, including the Sitagliptin franchise expected to hit INR 100 crores in sales. Brazil and Germany reported robust growths of 23% and 21% respectively, with new product launches and expansion strategies in place. However, the US faced a 15% decline in revenue due to low-margin business losses and supply chain issues, albeit with recent positive oncology product launches. The company's leverage stood at 1.16x, with plans to reduce it below 1x by March '24.

Robust Quarter Performance with Strong Branded Business Growth

The company's performance this quarter was strong, with revenues reaching INR 2,660 crores, marking a 16% increase from the same period last year. There was notable growth across all major focus markets. The branded business, which made up 73% of total revenue, expanded by 18%. This growth is attributable to consistent progress in markets like Germany and improvements in operational effectiveness. Notably, the operating EBITDA margin grew to 31%, a 22% increase, signaling efficiency gains and profitability. The company expects to further reduce its leverage to below 1x by March 2024, from the current 1.16x.

India Business Outperformance Driven by Chronic Segment and New Launches

In India, the revenue grew by 18% reaching INR 1,444 crores. This growth outpaced the market, with the base business expanding by 12% compared to the market's 4%. The chronic therapies and consumer division were the growth engines, along with a revival in gastro demand and a strong performance by the new launches. One brand in particular, within the Sitagliptin market, is expected to reach a milestone of INR 100 crores in sales. The Curatio acquisition has also integrated well, showing a 14% higher EBITDA margin than pre-acquisition, with expectations of further margin improvements in the next 6 to 8 quarters through operating leverage.

Significant Growth in Brazil and Germany; U.S. Market Faces Decline

The Brazil market showed an impressive 23% growth in constant currency revenue, standing at BRL 149 million. Persistent growth outpaces the general market growth of 8%. The company also plans to launch more products within the CNS and cardio diabetes areas. The German market registered a 21% growth, appearing to benefit from recent tender wins and a strategy that includes expanding its sales force. However, in the U.S., there was a 15% decline in registered revenues amounting to INR 248 crores. This decrease was primarily due to the discontinuation of low-margin products and certain short-term supply issues, suggesting that the U.S. market is at a pivotal point awaiting future product launches to reignite growth.

Product Volume and Launch Analysis

The volume growth for the company is approximately 1% to 1.5%, with new product launches contributing 3.5% to 4%. The fresh product launches are assimilated under volume growth as they contribute from a baseline of zero, combining for an overall volume growth around 4%. This figure helps to understand the organic expansion of the company's product portfolio and its implications on revenue growth.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Torrent Pharma.

[Operator Instructions]

Please note that this conference is being recorded.

I now hand the conference over to Mr. Sudhir Menon, Chief Financial Officer and Executive Director, Finance. Thank you, and over to you, sir.

[Sudhir Menon, executive]

Thank you. Good evening to all of you, and welcome to the Second Quarter Earnings Call for FY '24. I'm pleased to share the details of our strong performance this quarter across all our focus markets. The branded business contributed to 73% of the overall revenue base this quarter and have grown by 18%. Germany with incremental tender wins over the last 3 quarters has helped in registering a constant currency, high single-digit growth. U.S., we continue to take measures to enhance the cost efficiency in the base business, while we await new product approvals to start flowing in the future quarters, and this should start adding positively to the overall performance of the company going forward.

During the year, we have discontinued low-margin products in the U.S. and streamlined our back-end processes, optimized resources in order to enhance the operational effectiveness. Further, we've capitalized the oral oncology facility this quarter in July and have commercialized one product in the U.S. In terms of key financial performance highlights for quarter 2, revenues were INR 2,660 crores, up by 16%, compared to the previous year same quarter. Operating EBITDA for the quarter is INR 825 crores. Operating EBITDA margin stands at 31%, registering a growth of 22%. Leverage is now at 1.16x, and we expect by March '24, it should be below 1x.

I would request Aman to present the performance of India business now.

[Aman Mehta, executive]

Thanks, Sudhir. India business revenue for the quarter at INR 1,444 crores grew by 18%. Excluding the acquired business of Curatio, the base business growth was 12% for the quarter against the market growth of 4% as per the AIS data set. Our market outperformance was led by continued double-digit growth in chronic therapies, revival in gastro demand, traction in the consumer division and new launch performance.

Our new launches in the chronic business continue to do well. Torrent is ranked #1 amongst the branded generic players in the Sitagliptin market, and we continue to gain market share. We expect to clock INR 100 crores sales on a MAT basis during the coming quarter for our Sitagliptin franchise, which would be our fastest INR 100 crore launch, mainly on account of field force expansion undertaken last year.

The Curatio portfolio continues to deliver robust performance with 17% growth for the quarter, led by the flagship brand, Tedibar. Tedibar continue its growth trajectory upwards of 25% on account of increased activation at pediatricians and more recently, digital media and e-commerce platforms.

On the acquisition integration front, we have completed 1 year since the acquisition of Curatio. EBITDA margins are now 14% higher than pre-acquisition levels, which is also 6% higher than the previous quarter due to enhanced focus on cost synergy execution.

We believe there is still significant headroom for margin improvement over the next 6 to 8 quarters, mainly through operating leverage. The Consumer Health division is progressing well, and our flagship brand, Shelcal-500 continues to see increasing sales traction to media and trade activation. The national media campaign for Shelcal-500 was initiated towards the end of Q2 and other brands such as Unienzyme, Tedibar, Ahaglow are now all active on digital media and e-commerce engagement.

At the end of the quarter, Torrent has 20 brands in the top 500 of the IPM, with 15 brands more than INR 100 crores sales as of max September 2023. We expect the India business to continue outperforming the market growth. Our focus during the rest of the year will be to continue improving our market share in our focused therapies, new launch performance and improving field force productivity of the expanded divisions and regions, while executing our Consumer Health national rollout.

I'll now hand over to Mr. Sanjay Gupta for the International business.

[Sanjay Gupta, executive]

Thank you, Aman. Let me start with the branded generics market of Brazil. In Q2, Brazil had a constant currency revenue of BRL 149 million as compared to BRL 121 million in Q2 of prior year, registering a 23% growth. Adjusted for Q1 cutover sales, Q2 growth would be at 13%. As per IQVIA of end of August, Torrent branded generic growth is 13% versus a branded generic market growth of 8%. IQVIA is showing that almost all of our products are growing much faster than the market.

We have added 26 reps in CNS segment during August '23, and this will bring the total number of Torrent reps in Brazil to 206 in CNS. This will expand our reach and it helps us in balancing our portfolio amongst the 2 teams. We've been launching 4 more products before the end of this financial year, 2 in CNS and 2 in cardio diabetes. Our Generics business in Brazil continues to show strong momentum.

Moving on to Germany. Our German business has registered a growth of 21% this quarter. Constant currency revenue was at EUR 30 million, up by 8%. During Q2, Torrent had good wins in tender, which will have a positive impact on sales starting in the Q4 timeframe. We also expect the impact of our sales force expansion from 8 to 16 to show in our OTC business by the end of this year.

In H1, we have launched 5 products, 3 from partners and 2 in-house. Going forward, Torrent's focus will include cost optimization to improve the competitiveness in the tender segment, launching new progress products and developing its OTC business. In the U.S., we registered revenues of INR 248 crores, down by 15%.

Constant currency revenue for the U.S. is at $30 million, down by 18%. Adjusted for one-off income in Q2 of the previous year, constant currency degrowth is at 16%. Degrowth was due to loss of low-margin business and some short-term supply issues. As Dahej facility has received the EIR and now we can launch new products from this facility.

As Sudhir mentioned, we recently launched our first oncology product from a new oral onco facility at Bileshwarpura, as well as a niche Derma CGT product from our derma plant at Pithampur. Customer response has been positive for both these launches. To conclude, our focus will remain on deepening our presence in branded generic markets, while continuing to grow in Germany and returning to profitable growth in the U.S.

Operator, we can open the call to questions now, please.

[Operator]

[Operator Instructions]

The first question is from the line of Damayanti Kerai from HSBC.

[Damayanti Kerai, analyst]

Sir, my first question is on India business. So while you maintain your outperformance against the market, what we have seen is that the volume trends have been very muted. So what are your thoughts on that? Like how it will dictate the market growth ahead and your growth accordingly? And if you can also split your second quarter India growth into volume, price and new launches?

[Aman Mehta, executive]

Yes. We think that while external data reflects market growth to be 4% in the case of AIOCDs and I believe, 7% in IQVIA. It's somewhere in the middle, maybe even on the higher range, if you take 7%. Our views at market growth is actually around 7% to 8% because otherwise, we would not be able to be at 12% kind of a growth. So our delta has generally been in that range.

So maybe we'll give it a few months or quarters for the market reflection to normalize the various kind of adjustments and normalizations that have been happening. So I would wait another quarter or so to just see the market reflection. In terms of our growth breakup. So as mentioned, our reported growth is 18%, but the base business growth is 12%. So out of that 12%, roughly 7% is coming from price and rest is from volume in new products.

[Damayanti Kerai, analyst]

If you can specify volume contribution also, I guess that will give us some better insight?

[Aman Mehta, executive]

So volume would be about 1%, 1.5%. New products is about 3.5% to 4%, but new products is practically counted as volume because it's from a 0 base. So we would count -- in the first year, new product stays pretty much and volume to be seen in the same basket. So combined, let's say, volume growth is about 4%.

[Damayanti Kerai, analyst]

Okay. Sir according to you, say, like there has been no -- like you mentioned market should see normalizing trends a few quarters from now. Sir according to you, do you think this volume -- muted volume trends which we're seeing that's not structural in nature, right? It's just maybe some temporary adjustment or some...

[Aman Mehta, executive]

That's correct. That's what we believe.

[Damayanti Kerai, analyst]

Okay. And my second question is on Brazil. So it includes the spillover impact, right, as you mentioned in your opening commentary? Yes. So can you specify the total number of reps you mentioned for CNS, but if you can specify a total number in the market?

[Sanjay Gupta, executive]

Yes. So I've mentioned the CNS -- you can add the cardio diabetes field force of 113 people to that.

[Damayanti Kerai, analyst]

So 206 for CNS and 113 for cardio segment.

[Sanjay Gupta, executive]

Correct.

[Damayanti Kerai, analyst]

Okay. Yes. So very broadly, if you can also talk a bit about your expectations for the Brazil market outlook, like you have added sales force and then you have been picking up well on generics also, your core segment is doing well. So how should we see this segment?

[Sanjay Gupta, executive]

Essentially, Brazil, our primary sales vary from quarter-to-quarter. So I would suggest that we look at a trend over 2 or 3 quarters to get a feel for how the business is performing. So let me give you figures from IQVIA for last fiscal year and then 2 quarters and you can get an idea. So for fiscal year ending March '22, the total market was growing at 14.5% and then Torrent was growing at 22.7%, so about 8 percentage points higher.

For Q1, the market was at 12.8% and as per IQVIA, we were at 19.7%. And currently, this quarter, market is at 10%, and we are at 17.8%. So over a long term, Brazil market is a double-digit market, last 6, 7, 8 quarters being a double-digit market. And the delta that we've been maintaining, while for the full fiscal year and the last 2 quarters is in the 7% to 8% range. I think I've seen it in the 5% range in earlier. So I consider 5% and above to be a very healthy level of growth above the market. And I would expect that to continue.

[Damayanti Kerai, analyst]

Okay. So you're broadly done with your sales force addition in Brazil and maybe it's now launches and then better penetration, which can help you sustaining this kind of strong outperformance against the market here.

[Sanjay Gupta, executive]

Damayanti, it's a little bit like it's a cycle, right? So we added sales force and we add portfolio, then 2, 3 years down the line, we might add more sales reps. So it's a virtuous cycle.

[Operator]

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

[Neha Manpuria, analyst]

Sudhir on the 75% gross margin, is this a reflection of the portfolio optimization that we have done in the U.S., and therefore, we should assume that these are sustainable gross margins? Or is there any one-off impact in that we need to consider?

[Sudhir Menon, executive]

No, there's no one-off impact, Neha. If you remember last quarter, I think there was the same question, which was asked, whether 75%, which we registered in quarter 1 could be sustainable in quarter 2. And I said, yes, and part of it is the cost efficiencies, which we've tried bringing as far as the U.S. business is concerned, which is panning out positively. So I think this should remain...

[Neha Manpuria, analyst]

And do you think there's more headroom for expansion from here based on what we're doing in the U.S. and the new launches in Brazil and stuff like that?

[Sudhir Menon, executive]

No, I wouldn't take that for the next 2 quarters, Neha. I would remain at where we are.

[Neha Manpuria, analyst]

Understood. And second question on capital allocation. There's a fair bit of -- Torrent has been in the news a fair bit in the last few months. I know you -- obviously, one comment on the news, but just wanted to understand our M&A priorities, what are the focus areas that we're looking at? And what's our comfort when it comes to leverage?

[Sudhir Menon, executive]

No. So Neha, I think as a policy, we do not comment on any speculative news with respect to any acquisition, I would say. And we would maintain at that -- at this point.

[Neha Manpuria, analyst]

Yes. Fair enough, Sudhir, I'm not asking you to comment on the news. My question is when we're looking at assets, now that Curatio is integrated, is ramping up well, growth in the base business is good, leverage will be less than 1x. So when we're thinking about capital allocation or M&A, what's our comfort leverage that we are okay to take on our books? And second, how should I look at priorities? Would this be the U.S. market, the Brazil market? Or would we focus on the deals that you have done in the past?

[Sudhir Menon, executive]

Absolutely. I think all the past deals we've done more in India, right? I mean one of the international geographies, we've really done any acquisition for whatever reason it is. Having said that, let's say, if I think of capital allocation in India at INR 100 possibly, if I look at Brazil or some of the other markets, it would not be 100, it will be substantially lower, right? I mean because India is something which we understand properly, and we have a track record of successfully integrating most of the acquisitions, which we've done. So we are more comfortable doing it around India, I would say. That's point number one.

I think point number 2 on what kind of debt on leverage, we would be comfortable at. It all depends upon what kind of cash flows are generated by the company, which we are acquiring, right? I mean, both put together, what is the comfort, which we have in terms of the cash flow generation and the cash flow being used for meeting the financial obligations, which are there, still maintaining whatever capital is required for the growth, which is required in the business, right? I mean that's the way to look it.

But having said so, I think if you look at the past acquisitions, for example, Unichem, at that point, I think we've gone -- at that point, at the time of acquisitions, we were at around 3x of net debt to EBITDA which came down substantially over the 2 years' time.

That's the trend which we believe any branded business acquisition would deliver. And therefore, I would say if at all some acquisition is happening, and we need to look at what we are comfortable at. What I would say is that the starting of 3x is something which should be comforting provided that over the next 2 years, the leverage is coming down substantially, maybe to 1.5x, 2x.

[Operator]

The next question is from the line of Abdul Puranwala from ICICI Securities.

[Abdulkader Puranwala, analyst]

Just on the U.S. front, this quarterly run rate of $30 million. So would it be possible to quantify the Q-on-Q decline in terms of what was one-off impact and the impact of you guys exiting in certain low-margin products?

[Sanjay Gupta, executive]

So actually, I will prefer not to disclose the exact details. But generally speaking, we have single-digit price erosion every -- and then we also launched some volumes due to some contracts being lost and some supply-related issues. So going forward, sales should be in the $30 million to $35 million range, but I cannot guide you further than that.

[Abdulkader Puranwala, analyst]

Sure, sir. And secondly, on India. So sir, if you could share the outlook of the market first and how Torrent will be able to grow because if we see Q2, the market itself has grown 4% organic, the base business growth of 12%. We have significantly outperformed the market. So if you could just share your thoughts on how the market growth is going to pan out for fiscal '24 or '25, if you could throw some light there.

[Aman Mehta, executive]

Yes. So we mentioned earlier that we believe the real market growth would be closer to around 7% or 8% this quarter. This would be sequentially higher than the previous quarter because some of the acute therapies seem to have increase in contribution, particularly in our case, for subchronic, there's been a revival in the gastro market. So from Q1 to Q2, there has been an improvement in the market growth.

So if we assume that the current market growth is around 7% to 8%, we believe the rest of the year should remain at this level and our delta with the market growth should remain similar. And we don't really see anything different happening in the next year or 2 years. We believe this should -- I mean 2 years is a long time to really comment on right now, but we structurally don't think anything different should be happening. This level of growth should be maintained.

[Abdulkader Puranwala, analyst]

And a final question, if I may. So on the trade generic business, what you had set up quarters ago. So how has been the traction there? Because the 1% to volume growth, which you mentioned, I mean, does that include the trade generic revenues as well? And this number what you have reported and going ahead on the acute side, how do we see some traction building up in this particular segment?

[Aman Mehta, executive]

No. Our volume growth that I mentioned was without trade generics. We don't count the trade generics as part of volume growth in our overall prescription business. Generics stand-alone has grown somewhere between 20% to 25% this quarter for us, and we've consistently been adding new SKUs here. So I believe we now have about 75 to 80 SKUs. So both are continuing their own growth trajectory. Obviously, generics at a lower base will be growing slightly faster for the next couple of quarters. And then once we reach a certain level of base, it should be at high teens growth is what we believe.

[Operator]

[Operator Instructions]

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

[Shyam Srinivasan, analyst]

Just going back again to the capital allocation point. How do you look at the valuation for some of the assets that are in the market, which you may be evaluating, may not be evaluating our valuations at this point of time stretched? From 12 months forward kind of basis. So does it mean are you reworking some of your payback metrics upwards to say, okay, if it takes another year or 2? Because historically, you see Torrent has been very disciplined about when EPS accretion needs to come from some of its M&A, right? That is one.

And point number 2 is the size of the deal, right? So historically, we have done small deals. Is there a change in philosophy now that there are available opportunities that the board, management are actually thinking for, what kind of assets you will likely go after?

[Sudhir Menon, executive]

So I think, Shyam, I think the comment on valuation on other companies would be quite general, I would say, because there would be some positives or negatives playing out for them. And that's how the market looks at the valuation for each and every company. It's very difficult to comment on how the valuations are looking at this point in time. That's point number one. Point number two, I think at this point, whether thinking has changed in terms of aspiration on the acquisition ticket size, I think we are not in a position to comment at this point in time, I would say.

[Shyam Srinivasan, analyst]

Just trying to see your comments on -- just trying to comment on your net debt to EBITDA, where you said organically, as we stand today, we will go to lesser onetime net debt to EBITDA. And maybe historically, in the past, we have gone up to 3x. So does it mean a change in attack that we are open, there is debt -- the equity forms available. And just want to tying up investor feedback because I sometimes miss that, do we want to be a top 5 company, top 10 companies that is our ambition?

Sorry, India is already top 10 -- top 5. And is that an ambition to India? Or is it like -- we want to kind of systems, how they are and we continue to outperform basic markets. What would be the more dominant industry at this point in time?

[Sudhir Menon, executive]

Shyam, I think that's what I answered on the previous question, right? I mean what we would be comfortable with in terms of the leverage and based on the cash flows, which would be generated both on the existing business as well as the acquired business. 3x is something which, as I said, to start with, could be comfortable, provided it goes down substantially to maybe 1.5 or near to 2x, if I can put it that way. I think other than that, I don't think there's any comment to be made at this point.

[Shyam Srinivasan, analyst]

Got it. My last question is just on the digital objectives that you outlined at the start of the call. I know this has been catered earlier. But you seem to be showing some amount of traction now. So can you just elaborate on some qualitative comment around the digital marketing, what are some of the early successes that we have seen in terms of the brand and what can we expect going forward?

[Aman Mehta, executive]

Yes. So the larger allocation has been on Shelcal, and that's actually more on traditional media and not digital. Digital is a small part of Shelcal's campaign right now. We have initiated digital more on other on pilot basis like Tedibar, Unienzyme and Ahaglow because they're a slightly different category compared to Shelcal. So we want to kind of play a wait and watch game every quarter. The early success or initial signs of positive success in Shelcal drove us to kind of go national for the campaign here, which is what has started.

And we are seeing that in the media markets where we are present with both distribution, enhanced distribution and media visibility, we are seeing significantly higher growth compared to the non-media markets. And I think pre-consumerization of Shelcal and now almost 3 quarters later, we are seeing a very meaningful uptick in the sales of Shelcal-500 and the rest of the brands, Shelcal XT and Shelcal HD continue their growth trajectory in the prescription segment, which is focused on gynecologists, physicians, orthos.

So that's the broad segmenting that we've done. And as we see more kind of successful failures in Tedibar and other brands, we'll scale up or scale down their campaigns accordingly. But we do believe that each of the brands that we have selected have ample potential to grow on each of these Rx plus digital traditional media.

[Shyam Srinivasan, analyst]

Is there any investment for the -- or just we suppose this traditional push as well as with digital or this is just part of your overall SG&A?

[Aman Mehta, executive]

So there has been an increase in SG&A and particularly in marketing spend, advertising spend plus field force which is already reflected in this quarter. It was kind of initiated almost 2 quarters, 3 quarters ago, and now that cost is fully built in. So in this financial year, there is a higher increase in our cost base compared to last year, which is more of a onetime exercise.

So we believe that the field force expansion in Rx, which is a prescription business plus consumer. Require that initial investment, which is now stabilized. And next year onwards, there won't be any additional increase in costs from here. So all -- this is now the cost that we will be operating at.

[Operator]

The next question is from the line of Saion Mukherjee from Nomura.

[Saion Mukherjee, analyst]

Aman, just wanted to reconfirm your view on India here. So you mentioned you think 7% to 8% growth that IQVIA is showing looks credible. And you mentioned that's the kind of growth you expect going forward. Actually, this appears to be a slowdown because historically, we have seen growth rates somewhere closer to 10%.

Now this seems to be structural in nature, given we see many companies launching trade generic. We are seeing [indiscernible] volumes picking up and some pharmacies launching generic medicines and pushing private labels. Don't you think these are structural changes, which are happening in the industry, which is dragging down the overall growth.

[Aman Mehta, executive]

So this has been there for quite some time. It's not a very recent development of phenomenon. I think the trade generics and [indiscernible] I mean, substitution risk or threat has always been around for almost several 4 to 5 years now. And we've always maintained our belief that some part of the market will remain generic. Some part of the market will remain branded. So if there is an increased substitution level or increased penetration of generics, we can't really comment any specific numbers, but maybe, let's say, if we attribute 0.5% of IPM growth could be slowed down because of that. But it's not anything beyond that.

So in our view, the risk of trade generics cannibalizing branded generics is overestimated right now. In terms of reflection in growth. So again, we mentioned earlier, but there are several factors right now. One, predominantly being that almost half of the IPM is acute contribution. And that market, based on various reasons where the seasonality and all has somehow not picked up this year.

Rest of the market is on track, especially our contribution -- high contribution therapies, which are chronic. So we do believe that market should normalize in the next coming quarters. If right now, at this 7%, 8% level could be slightly higher from here. But there is no real kind of structural threat that is causing this in our view.

[Saion Mukherjee, analyst]

Okay. And my second question is on the U.S. market. We have seen a sequential drop in sales. So this rationalization was this something specific for this quarter? And also, you mentioned about onco launch. What kind of cost would have hit our P&L because of this facility commissioning if you can give some numbers around that.

[Sudhir Menon, executive]

So Saion, we capitalized in the month of July. So all the costs pertaining to manufacturing is already captured as part of the gross margin, I would say, or the EBITDA margin. So nothing incremental month on month going forward from here. Sanjay, you want to comment on the launch, which we've done.

[Sanjay Gupta, executive]

No, it's gone well. I mean, we would have double-digit market share. And it's a product called [ Proferrin ]. So we were the [indiscernible]. So -- but it's a good start to our oncology franchise, and we've captured already in the first 3 months double-digit market share. And let's see how it goes.

[Sudhir Menon, executive]

And Saion, the capitalization of oral oncology plant happened around 2nd of July. So from that perspective, the quarter captures all the costs.

[Saion Mukherjee, analyst]

Yes. Sir I was looking at the quantum, if you can quantify?

[Sudhir Menon, executive]

I don't think it's very significant to be quantified, Saion.

[Saion Mukherjee, analyst]

Okay. And on the U.S., actually, I was looking at the sequential fall, and I was wondering if any specific thing happened this quarter. And you mentioned like $30 million, $35 million run rate going forward. So how should we sort of think slightly longer term when you look at FY '25 with new products coming, what should we sort of expect from the U.S.? Because I remember last call, you mentioned U.S. can go back to $200-plus million on an annualized basis, if you can comment on how should we think about U.S. from a slightly longer-term perspective?

[Sanjay Gupta, executive]

Yes. Longer term, I think that's correct. I think we're just waiting for 2 things. One is for new molecules, new products to get approved from Dahej. So our pipeline has 2 types of products, right? One which were already gone generic, so we would be late entrant and one where we would be more generic on day one. So it's a mix of both. So I am waiting for some approvals to come from Dahej.

But also we have a significant number of filings from Indrad. So I'm waiting for Indrad plant clearance also to be able to launch that. And as you know, Indrad, we've completed all the formalities we're just waiting for inspection. And so I don't know, it's a function of approval as to when we start to get a positive sales momentum, in the meantime, we're going to do as best as we can to maintain a base business that is reasonably profitable.

[Saion Mukherjee, analyst]

And is there any change in dynamics in terms of price erosion in the recent past, anything you would like to sort of comment how you see the market dynamics?

[Sanjay Gupta, executive]

Saion what happens is when all the companies say there's no price erosion, the customers come back and they start price erosion in the subsequent quarters. So I prefer not commenting upon price erosion. But I would say that generally, the trends are pretty much what they were.

[Saion Mukherjee, analyst]

Okay. So year-on-year, like mid- to high single digits, is that right approach?

[Sanjay Gupta, executive]

Generally, mid-single to high single, sometimes depending on the individual product situation it could be lower or higher. But I think -- I've noticed customers are very sensitive to supply issues. So as a lot of players have discontinued products, then suddenly pricing becomes less important than supply continue to.

[Saion Mukherjee, analyst]

Yes, I mean, I was thinking more at an aggregate level. I mean that dynamic has been playing out for some time. So I was wondering if anything has changed because mid-single to high single seems to be pretty much sort of a normal erosion right?

[Sanjay Gupta, executive]

Right.

[Operator]

[Operator Instructions]

The next question is from Madhav Marda from Fidelity International.

[Madhav Marda, analyst]

So just wanted to get your thoughts on recently when the government tried to push the policy of getting doctors to write generic names on prescriptions. I understand there's a challenge with quality of -- for testing drugs in India. But in case that sort of get built up in the country and there are some initiatives from the government side, to ensure better quality listing?

And then they kind of say generic medicine fundamentally, is that something wrong that doctors write generic names? Or do you think branded generic is like the way to go longer term for the country? Because when we look at like developed markets, basically, as the country goes through its growth cycle generally it's generics, which gets written. So just trying to get your thoughts on that.

[Aman Mehta, executive]

So quality is one part of it. And obviously, I mean, there's NMC guidelines, which govern different set of stakeholders, there's quality guidelines through DCGI. So there's a lot of different factors at play. But in our view, branded generics would remain even in that kind of a hybrid system. And many developed markets also have a branded generic market that continues to exist. So it's not that all developed markets only run on generics. So various factors could be at play. But in at least our view, the next couple of years, I mean, as evolution in framework and legal framework comes about in India, this basic framework should not change.

[Operator]

That was the last question in queue. I would now like to hand the conference back to Mr. Sanjay Gupta, Executive Director of International business for closing comments.

[Sanjay Gupta, executive]

So I would like to reiterate that our continued -- our focus will continue to remain in deepening our presence in branded generic markets to maintain growth in Germany and also to turn around the U.S. business as we get our plans to put to the system. Thank you for your participation today, and this will be the end of our call. Thank you.

[Operator]

Thank you very much. On behalf of Torrent Pharma, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.