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Zydus Lifesciences Ltd
Earnings Call Analysis
Q2-2024 Analysis
Zydus Lifesciences Ltd
The company observed a healthy 9% increase in overall revenues, attaining a consolidated revenue of INR 43.7 billion. Remarkably, the profitability surged with EBITDA growing by 41%, resulting in an impressive quarter with an INR 11.5 billion EBITDA. Operating profitability also improved significantly, with EBITDA margins escalating to 26.2% from the previous year - an enhancement of 580 basis points. Net profit experienced remarkable growth, jumping 53% year-on-year to INR 8 billion.
Within India, the Formulations and Consumer Wellness segment, accounting for 42% of total revenues, displayed a solid 5% year-on-year growth. Despite delays in the acute season, the Branded Formulations business saw significant expansion in the single high digits, driven by increased volumes and new product launches. Moreover, the company has secured its market leadership in nephrology and remains the fastest-growing firm in oncology, while its Consumer Wellness recorded a 3% increase in revenues. The International Markets business, representing emerging markets and Europe formulations, kept pace with robust growth rates, increasing revenues by 17% year-on-year.
The company's globally-compliant manufacturing facilities and resilient supply chain constitute the core of its international operations. With a commitment to maintaining high-quality standards, the business is positioned to ensure continuous supply to its global customer base. Furthermore, successful operations have been acknowledged with an Establishment Inspection Report from the U.S. FDA for the Oral Solid Dosage facilities, reflecting the company's robust compliance record.
The company's financial position has substantially strengthened, with the net cash position escalating to INR 16.4 billion as at the end of September 2023, up from INR 5.5 billion at the end of March 2023.
A focus on long-term growth has led to the acquisition of the U.K-based LiqMeds Group, enhancing the company's specialization in novel oral liquids and expanding the specialty portfolio with several first-to-file and first-to-market products. This move is poised to address the unmet medical needs globally with a differentiated product platform.
On the New Chemical Entity (NCE) front, the company began a Phase II clinical trial for ZYIL1, an NLRP3 inflammasomes inhibitor aimed at treating amyotrophic lateral sclerosis (ALS), a rare and fatal neurodegenerative disease. In addition, the U.S. FDA granted orphan drug designation for CAPS treatment with ZYIL1. Another notable development is the initiation of a Phase I clinical trial for a novel PCSK9 inhibitor, potentially aiding patients with dyslipidemia. The company's pipeline also continues to progress with the completion of clinical trials for a monoclonal antibody and regulatory approvals to start a Phase III trial for another product.
The introduction of new drug NDAs, ZITUVIO and ZITUVIMET, has solidified the company's presence in managing metabolic disorders. An additional ANDA for Sitagliptin and Metformin ER tablets was also filed in the U.S., targeting a significantly established franchise in the metabolic management space.
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[Audio Gap]
For today's call we have Dr. Sharvil Patel Managing Director; Mr. Nitin Parekh, Chief Financial Officer; Mr. Arvind Bothra, Senior Vice President, Investor Relations; and Mr. Alok Garg Senior Vice President from the Managing Director's office. Now let me give you a broad overview of the developments during the quarter.
In terms of overall revenues, we registered stable growth of 9% during the quarter. Our Branded Formulations business in India grew in a single high digit after adjusting for impact of NLEM and partly affected by delay in the acute season. The U.S. Formulations business performed on expected lines, driven by a stable base business and supported by new introductions. Our Emerging Markets and Europe Formulations businesses continued growth momentum and delivered double-digit growth.
Our network of regulatory-compliant manufacturing facilities and a resilient supply chain serves as the backbone of our globally -- global business. We remain committed to extend our robust compliance record by maintaining the highest standards of quality and, in turn, ensure uninterrupted supply to customers across the globe. Various digitalization initiatives undertaken across different functions have significantly enhanced the efficiency of operations and continue to deliver greater value to all the stakeholders.
With that, let me take you through the financial numbers for the quarter gone by. We registered consolidated revenues of INR 43.7 billion, up 9% on a year-on-year basis. EBITDA for the quarter was INR 11.5 billion, with a growth of 41% on a year-on-year basis. Operating profitability remained robust as we registered an EBITDA margin of 26.2% during the quarter, which is an improvement of 580 basis points on a year-on-year basis. Net profit for the quarter stood at INR 8 billion, up 53% year-on-year. Our balance sheet continued to strengthen with a net cash position of INR 16.4 billion as at 30th September 2023, as against the net cash of INR 5.5 billion as at 31st March 2023.
Now let me take you through the operating highlights for the second quarter of FY '24 for our key business segments. Our India geography, which comprises our Formulations and Consumer Wellness business accounted for 42% of the total revenues during the quarter and grew 5% year-on-year. As mentioned earlier, despite delay in the acute season onset, our Branded Formulations business in India grew in a single high digit, primarily driven by volume expansion and new launches.
We gained rank and improved our market share in the antidiabetic and respiratory therapies on the back of continued efforts to strengthen our presence in focused therapies. On the super speciality front, we retained leadership position in the nephrology segment, while in the oncology space, we remained the fastest-growing company. Our Consumer Wellness business recorded revenues of INR 4.4 billion, up 3% on a year-on-year basis. The Personal Care segment, which comprises of Nycil and the EverYuth brands registered robust growth during the quarter, driven by a favorable season in many parts of the country. Gross margins continued to recover on account of moderating input prices and calibrated price increases taken earlier.
Now let me take you through the performance of our U.S. formulations business. The business posted revenues of INR 18.7 billion, up 9% year-on-year. On a sequential basis, though, the business degrew by 24% on account of reduction in revenues of the limited competition products, which is in line with our expectations. We launched 8 new products during the quarter. New launches for the quarter include Indomethacin suppository, which was granted 180 days of competitive generic therapy exclusivity; and Plerixafor injection, which was a day 1 launch. During the quarter, we filed 4 additional ANDAs and received 9 new product approvals.
Our International Markets business, which comprises of emerging markets and Europe formulations business continued to deliver healthy growth with all major markets contributing to the growth during the quarter. The business posted revenues of INR 4.5 billion, up 17% year-on-year. On the operations front, we received an Establishment Inspection Report from the U.S. FDA for the inspections of our Oral Solid Dosage facility 1 and facility 2 located in the Ahmedabad SEZ and Biologics fill-finish facility located at the Zydus Biotech Park in Changodar.
This concludes the business review. I would now request Dr. Sharvil Patel to take you through the key drivers as well as initiatives in our innovation programs.
Thank you, Dr. Nayak. Good evening, ladies and gentlemen. It is a pleasure to have you all on the today. We remain focused on building long-term growth drivers and augmenting the innovation efforts in our focused geographies to enhance stakeholder value over time. On India formulations front, we continue to work towards strengthening our position across the focus therapies through multiple initiatives. Portfolio of our innovation brands continue to display strong volume traction over the last several quarters, and helped patients to satisfy the unmet health care needs.
We continue to evaluate multiple partnership opportunities and develop novel solutions, keeping in mind the unmet health care needs and patient convenience. The U.S. formulations business continued to display robust momentum. Comprehensive product offerings, key new launches, strong some relationships and agility in operations have ensured sustained growth of our U.S. business and also going forward.
On the inorganic front, recently, we announced our agreement to acquire U.K.-headquartered LiqMeds Group of companies, which has unique capabilities in delivering novel oral liquids. The acquired entity has a good pipeline of products, which comprises of many 505(b(2) and first-to-file and first-to-market products. The acquisition is line with the strategy to expand the presence in the speciality space and offer novel solutions to satisfy the unmet medical needs of patients globally through a differentiated and niche product platform, liquid dosage forms.
This is also a -- there's also a large population globally who suffer from difficulties in swallowing due to different diseases. Liquid orals would help such patients and, in turn, bring greater ease of convenience and better therapy compliance. Overall, we expect our U.S. business to continue its upwards journey going forward on the back of our robust product pipeline across the generics and speciality space.
With this, let me talk about some of the other material developments on the innovation effort. On the NCE front, we initiated a Phase II clinical trial of ZYIL1 on novel oral NLRP3 inflammasomes inhibitor in patients with amyotrophic lateral sclerosis, which is a drug -- a disease called ALS. ALS is a rare progressive and fatal neurodegenerative disease with an average life expectancy of 3 to 5 years from the time of symptoms onset. We have already established a proof of concept of ZYIL1 in a Phase II trial in CAPS patients and publish the data in clinical pharmacology and drug development.
The U.S. FDA has granted an orphan drug designation to the molecule to treat patients with CAPS, a rare autoinflammatory disease. We also received approval from CDSCO to initiate a Phase I clinical trial for our novel PCSK9 inhibitor. The study will evaluate the safety and tolerability of this candidate, which will be administered subcutaneously in healthy human volunteers. Dyslipidemia patients with high LDL cholesterol are at a high risk of atherosclerotic cardiovascular disease events such as heart and track and stroke. This PCSK9 inhibitor will regulate the level of LDL receptors, which are responsible for the uptake and clearance of cholesterol from the blood.
On the biotech R&D space, our pipeline continues to advance well in line with our expectations with the completion of clinical trials for one of the Monoclonal antibodies and also patient recruitment for another Monoclonal antibody. We have also received regulatory approval to initiate a Phase III clinical trial for one more product during the quarter.
On the speciality [indiscernible] biotech development front, Recently, we received the final approvals from the USFDA for 2 new drug NDAs, Sitagliptin under the brand name, ZITUVIO, and Sitagliptin and Metformin IR tablets under the brand name ZITUVIMET in the area of metabolic disorder management. We also filed 1 more ANDA, which is Sitagliptin and Metformin ER tablet in the area of metabolic disorder management to complete the franchise of Sitagliptin combinations during the quarter.
Thank you. And now we can move towards the Q&A session. Over to the coordinator for the Q&A.
[Operator Instructions] The first question is from Kunal Dhamesha.
So the first one on the Sitagliptin franchise that we are trying to build on 505(b)(2) side. How do you see the addressable market? Is there any niche segment that we are targeting there, obviously, because the innovator has been there for quite some time? And secondly, would it require any incremental front-end investment from us? And what could our pricing strategy there? That would be first question.
So the Sitagliptin franchise, obviously, is a large established franchise in the U.S. market. Most of the prescriptions are run through either commercial or medical segment and they are mostly filed by the retail segment. So our strategy will be to go into the retail segment and see how do we get access through different PBM contracts going forward. And I think we'll have to slowly work on building the awareness for the product and also find the right ways to create the right contracts and look at taking market share. So I think it is going to be a slow process to build up this franchise as it is not a substitutable or interchangeable product. But the good thing for us is that we will be alone in the market for some period of time, which will allow us to create a good brand over the period of next 2, 2.5 years.
Sure, sir. And in terms of pricing, would we have any idea or we are still in the deciding phase?
So this is not a generic substitution. So pricing is going to be PBM contracts. So it's Difficult to give you an idea today until we launch and go through those phases.
Sure. And in terms of front-end marketing, do we require marketing presence? Or can you say...
Our current strategy is that we will go through our, as I said, through contracts and listing and awareness area. So I don't think we are talking about a front-end team yet.
Okay. Okay. Okay. And secondly, sir, if I look at the other expenses this quarter, they have been quite substantially down on a sequential basis. So any particular reason for it? How should we think from the future quarter perspective?
So other expenses include R&D expenses as well as expenses related to Zydus wellness Limited, we have seasonality involved. Also certain professional legal expenses, they are not uniform across all the quarters. So if you take out the R&D part, I think INR 850 crores to INR 900 crores will be the base depending on the Zydus wellness promotional spent.
Okay. But R&D has also increased on a sequential basis, right?
R&D should not be viewed on a sequential basis, it should be viewed on an annual basis because it all depends on the projects, filing, registration other expenses. On an annual basis, we have guided for 7% to 8%, which takes further guidance.
The next question is from Saion Mukherjee.
Hello. Am I audible?
Yes.
Okay. Sorry. So yes, I was asking about the acquisition that you did for the liquid dosage firm in U.K. So firstly, if you can just take us through medium-term outlook for this acquisition, because the revenue base is quite low at this point and we paid almost GBP 60 million. So if you can give us some color on the pipeline and how should we think about revenues improving? And if you can talk about profitability.
And the other question I would have is in the speciality innovation space, how are you looking at M&A opportunities at this point in time? And anything that you can share in terms of activities, spaces that would interest you or you are currently looking at?
Yes. So on the first point, point on the LiqMeds acquisition, so this is a specialized delivery business which develops difficult-to-do liquid products from products that are not available today. So most of the products are in the nature, when you talk about U.S. regulations, then the 505(b(2). And many of our -- of them, as I said, first to launch or first to file for those markets.
These -- they meet an unmet need for people who need to have a dose adjustment or have dysphagia. The good part of this business is that they've already had important licensing arrangement with the large speciality companies, both in U.K. as well as U.S. So they work with Rosemont in U.K. and 3 speciality companies in U.S. who specialize in selling these type of products.
So I think from that point of view, there's already a model which is accepted. We have a good relationship and partnership with the companies. They have a very large pipeline, which is partly licensed and still under development, which will in future also be available for launching as well as licensing out. So we see this business as obviously a niche business, a good business, which will have a technological differentiation. Will be built on the speciality footprint in the U.S. mostly and also in many other markets in terms of creating access for it.
And our -- obviously, it's just the first 12, 15 months of launch, so it's just beginning of the company in terms of launch. So the scaling up will happen over the next 3 years. And we expect, because of the nature of the business and which is to do with mostly the manufacturing, development and licensing it, would have a significantly high profitability like speciality companies do.
So Saion, also, the nature of the business as of now is that, currently, they don't have their front end, as Sharvil mentioned, about certain customers and contracts. So the top line is not important. The stream of income is 3 parts. One is whatever manufacturing includes the sale the profit that they make on that, a large part of income in terms of profit selling as well as certain milestone-based income based on sales. So these are going to come in time to come. So whatever the number of revenue that you're looking at is actually misnomer, and that should not be given so much of importance.
Okay. Okay. And on the landscape for speciality, how are you sort of thinking?
So yes, on that front, as I said, we are our keen interest is to continue to look at ultra rare diseases and orphan diseases in the U.S. We have our currently 2 products in NULIBRY, which is commercialized; and ZITUVIO, which is delayed, but we still believe we have sufficient room to build this rare disease portfolio. We're looking to do further acquisitions in this ultrarare portfolio. And we have some good leads. So we continue to hope we will be able to exercise more options of acquisition for late-stage products or ready to commercialize products in the U.S.
So that will be one important aspect of what we will do on the speciality front in the U.S. on the rare disease front in the U.S. And that's our current expectation of what we would hope to build out for, which is buying niche small assets and which are sticky and commercialize them with small commercial infrastructure, both in U.S. and also take them to Europe then.
Okay. And Dr. Sharvil, I mean, do you have like a 3-, 5-year plan on this? Like how many assets you would typically like to have? You already have a couple of them, which you have acquired, anything that will be from our own pipeline. So how should we think about -- and what is the medium-term vision here, like when you look at this acquisition, how many products -- I mean, how should we think about this particular business, let's say, from a 5-year perspective?
So I think -- yes, so I think we are looking to at least add 2 to 3 more products to the portfolio. We have at least 2 under our own development, which are organic, and we look to -- continue to look for 2 or 3 more assets on the M&A front, as I said, which are late stage or near to commercial approval. So that's what our hypothesis is. I would say the next 3 years, our target should be that if we can achieve, aspirationally, $100 million of revenue on that part of the business.
The next question is from [indiscernible] ?
Is there any IP-related issue around this ZITUVIO, because there is still a drug substance patent around the salt, which is there?
We don't have an issue around launch. We are clear for launch.
Okay. Second, we had in the last quarter, you mentioned that revenue would come down significantly from Q1 to Q2. So is it just that it has come down? Or is it kind of insignificant in Q2?
There's no other element still sale in Q2.
Okay. And on Asacol HD, anything, any further color from the last call? Are you still expecting a competition in this year, in this financial year?
Yes. We have built for that, assuming competition. But we are not aware of it, but we have built for competition.
Understood, understood. And finally, just on more product, Mirabegron, where you have an FTF share. One of your competitors have said that they may be looking at the launch this financial year. Is there any color from your side that you can give?
Yes. We are evaluating that product. So it is an important product, but I think it's too early for us to make any comments on that here.
The next question is from Surya.
The first question was the sequential decline on the U.S. business. You mentioned that there is no REVLIMID sales in this quarter, right, sir?
Yes.
So practically, about REVLIMID, you had a kind of a thought versus that whatever REVLIMID revenue that you will be making, it would be distributed throughout the quarter in the year, evenly distributed. Having...
We have never said REVLIMID will be evenly distributed. We always said it is quarter 4 and quarter 1 of the calendar year -- financial years.
Okay. Until FY '26, that is how it should be, sir?
Yes.
Okay. Quarter 4 and quarter 1.
That is our current thinking.
Okay. Sir, since we have completed the first year of REVLIMID and it is a volume limited one. So now in the first year, what is the kind of volume that we would have? Is it fair to believe it is more than 6%?
We are not giving volume. It's a settlement agreement that exists. So we're not giving that kind of guidelines. But it is -- as I said, it is a very important aspect of our yearly revenue. And with the increasing market share that we get, we will see an uptick in revenue for REVLIMID every -- at least for the next calendar year.
Okay. And the related question, sir, although the REVLIMID number is not there, which was in the previous quarter, almost like $70 million plus or something like that. Despite that kind of revenue stream not there, which is such a high-margin business, your gross margin in this current quarter without REVLIMID almost maintained the same number what you had achieved in the previous quarter. So what is supporting this kind of number and how sustainable the base business achieving this kind of gross margin?
So it's a mix of our base business and new product launches and overall product mix, with lesser realization from Consumer Health in this quarter because of their seasonality. I think all of that has led to a good -- I mean, a decent GC margin. But Nitin...
Input cost reduction is also especially in Zydus Wellness. And they've also taken selling price increase in Zydus Wellness. Plus the new products that are launched in the quarter in U.S., they are at better margins. So it's a business mix and product mix, both helping us as well as cost reduction.
But don't you think, sir, this REVLIMID is such a significantly incidental gross margin product. So that means if a to believe, sir, once we again see the REVLIMID number which will be, again, elevated versus last year. Then the gross margin profile will really be meaningfully better than the current number [indiscernible].
So if we do not see Asacol competition, then what your hypothesis is right, but we are building for Asacol price erosion. So then we will have to see how much we can compensate?
Okay. Okay. My second question is on the LiqMeds. Sir, is it a loss-making business? Or it is something on the -- in the works of turning around something like that?
It's not a loss-making business.
We already clarified that it is EPS accretive from beginning. [indiscernible].
Okay. Because some where, I have seen the reporting which was showing that the net worth is negative yet.
That -- we'll check the number. Maybe because of carryforward past losses, because they are spending and developing the products initially. So there are spend and the income is back end in terms of item.
Okay. Okay.
As I said, this company is going to -- the business case for is development for partners and licensing, and they have a cost plus, profit share plus, milestone-based events were on margins. And these are speciality products, so the margins are very high. So this will be a sufficiently very high profitable business. Not a sales top line business, but a very profitable business going forward. And this will also help our builder speciality play in the U.S., maybe not always directly but through partners also.
Okay. So that means with this integration, this base, we're not going to work for customers anymore. It is the captive service offering kind of thing. That is the right understanding, sir?
No, no, we are partnering because we don't have capability to sell ourselves, and we are not present everywhere. So it will be mostly the current business model only. And also, we will use these products to file in our developing markets and other markets where these are important products also. So those we will do it ourselves. But currently, a lot of the current projections of revenue that we have made are mostly through licensing.
These are already contracted.
Which are already contracted out.
Okay. Okay. Yes. And just last one question, sir, on the R&D side. whether you have mentioned the $100 million kind of spend that you're targeting for the speciality initiatives...
I'm sorry. Revenue, not spend.
$100 million revenue...
Somebody had asked the question that midterm 3 to 5 years, what do you the scale-up, so we said for the rare disease portfolio. Our aspiration is that over the next 3 years or 3 to 5 years, we built a $100 million revenue.
Okay. Okay. So this is -- yes, this is one. So in fact, sir, on the R&D side, so whatever the spend that we are making is that -- how much of that is for speciality currently? And what is the kind of ultimate game plan here, sir, in terms of investment, creating capacity, capability? And what time frame that you are targeting to really build a kind of sizable portfolio and a meaningful base over the next 5 years, let's say?
So today, of our R&D spend, about 50% to 55% of our spend is on our generics portfolio, which is also differentiated and complex. And the remaining 45% is what we spend on our NCEs and biologics and vaccines. And so I would say, over a period of time, the generic portfolio will not grow, and the growth will be seen in the NCE Biologics as we add more development programs for global development. So I would say the mix would change from a higher base on the speciality versus the generics on the R&D efforts.
Okay. Okay. And until the time, our R&D spend, it will be streamlined like this currently 8%, 7%, 8% outlook?
Yes, we are seeing around 7% to 8%. And overall period of next 3 years, we'll look at around 8% on revenue.
The next question is from [Akshat Gupta].
Yes, I see there has been a reduction in the business of U.S. formulations?
Sorry?
And after analyzing the quarter-on-quarter numbers, we see there's a 24% decrease in business of U.S. formulations.
Yes, because we don't have REVLIMID sales this quarter.
And sir, what about the margins?
It's already reported. The margins -- gross margins are 66-plus percent.
On the quarter-on-quarter margins have been rising, sir?
That's because of REVLIMID. The last quarter was there versus this quarter.
The next question is from Kunal Dhamesha.
So on the asset call, while we are building in one competitor, now that our product has become reference product. Have we seen any more Para III filer for that, which would come in future, not just in this year, but probably in future?
So there are people who have -- who continue to work on it. So I don't think there's anything left. But as I said, we have assumed one competitor and potentially another competitor in the end of the next calendar year. So we have to assume the worst. But so far, we have no idea when we will see competition.
Yes, sure. And can you provide an update on Saroglitazar trials for PBC and NASH for the developed markets?
Yes. So on PBC, on -- for Saroglitazar, we hope to complete all our recruitment this financial year for the recruitment of the trial, and so we are on track to do that. And then obviously, subsequently follow-up and filing. And for NASH, Phase IIb is still ongoing. It's a longer Phase IIb. So that is still some time away. So we still need to recruit another 130 to 150 patients.
Sure. Sir, would there be any change in strategy from NAFLD on NASH perspective given the weight loss drugs gaining momentum, because my belief is NAFLD and NASH are directly linked to the higher weight, et cetera?
So again, for our current focus on commercialization and plan is for arts not in Saroglitazar in PBC, not in NASH. NASH is still a long way out for us in terms of the developed market strategy. And I mean we have to see how the therapies do get developed, yes, these products are also important. But maybe in the future, there will be a need for not only this but combinations.
So I don't think a single drug or a single molecule exists to solve for a particular indication, like NASH and NAFL, which is very complicated with multiple issues. So I would say there is still enough opportunity for that segment, but we are still far away from any commercialization capability for NASH in the medium to long term.
Sure. And the $100 million target that we have given for speciality, would that include kind of PBC approval for saro?
No, the $100 million aspiration that we have set for our rare disease business is not to do with Saro.
Okay. So it's over and above whatever we do on Saro?
Yes. Saro is a rare orphan disease platform, which is a different business unit that we are targeting.
Okay. Perfect. And sir, given there is -- while you have suggested that Q4, Q1 is where REVLIMID would be, but would you be comfortable giving us some direction as to where could we see our U.S. revenue for the next couple of quarters? We have said that it will grow, but we know what that growth could look like based on the products that we have in portfolio?
So as I had said, for this financial year, we do expect a double-digit growth for the U.S. And as we have new launches, significant import on new launches as well as the limited competition products that we hope to continue on, we would -- our expectation is to continue to grow the U.S. generics business.
And overall, within U.S., have you seen any improvement in price erosion, the competitive dynamics because the shortage environment continues there?
No, I think it's similar. So I don't see any drastic change in the market.
Okay. So what is -- what would be your price erosion for this quarter?
We don't give price erosion for the quarter. But overall, we are expecting mid-single-digit price erosion.
Mid-single digist. Because historically, we have said like almost 1.5% to 2% sequential price erosion, which kind of adds to high single-digit price erosion, which...
Yes. So I think that's our best estimate, right? And it will all depend on the portfolio. When we see competition on Asacol and others, then obviously depending on that, the more. But on a normalized basis, we are seeing mid- to high single digit, depending on the portfolio.
[Operator Instructions] The next question is from Vishal Manchanda.
Did you book any -- did we get any benefit from PLI incentives during the quarter?
Yes.
Yes, in the quarter, we have INR 40 crores accrued in this quarter for PLI scheme.
So was this booked as part of other operating income?
Yes.
Okay. And second, on LiqMeds acquisition, can you share how many products have been commercialized so far?
So there are 16 products that are approved in the U.K., all are not commercialized yet. And there are 5, 505(b)(2) products approved in the U.S., which are getting commercialized. Some are commercialized, some are to be commercialized. And they have multiple products filed and to be filed.
And any guidance in terms of any approvals we can expect in the next, say, 2 years from LiqMeds?
I don't think we'll be able to give that right now. But as I said, currently, in the next 3 years, planning wise, most of the products are developed or filed. So the visibility is much clearer for over the next 2 to 3 years. But the future pipeline, we'll get back to you on that. But there is a very large pipeline. So the main is how do we prioritize and file these products.
Among the products, which are commercialized. So these are early stages of launch, and so they can ramp up...
Yes, these are early stages of launch and these are all speciality products. So these are not generic substitution products.
Okay. Okay. And just one final. You talked about a launch around REMS, a few REMS product that you were expected to launch. So any guidance there? Can we expect this in the next 2 quarters?
I think we are about to launch or launched one already, and the second will launch in the last quarter or the first quarter of next year.
Which is the one you've already launched?
Isotretinoin.
The next question is from Nitin Agarwal.
Now on the -- in the U.S. business, when we look at the sequential earnings decline is entirely attributable to REVLIMID other parts of the business, which also contributed to the decline?
No. The large decline is because of REVLIMID, but new products and base business, we actually improved from the base of REVLIMID.
Because the question I ask is, we have almost a $7 million delta on a Q-o-Q basis. So I'm suggesting that REVLIMID was higher than $70 million on in the Q-o-Q basis, is that a right influence to me?
Yes.
And if you look at, for example, the last year, we had about $250 million of business. Obviously, there was none of these [indiscernible] and all in the pace. We've had a reasonable number of new launches coming through over the years over the last few quarters, we still are kind of around the same level, right, to $215 million becoming $225 million in the current quarter. So how can one look at this progression of this business, ex the contribution from the likes of REVLIMID?
So as I said, overall, we believe that we are strongly -- I mean, this year, FY '24, we'll see a double-digit growth for our U.S. business, and that will be our endeavor that with new launches, we continue to do that. The only point is it's wrong for us to remove REVLIMID. REVLIMID is not a 1-year phenomenon. It's already been there for almost 2 calendar -- 2 years and it will continue at least for the next 2 years. So this is inclusion of REVLIMID, which will continue every year.
Secondly...
Hello? I think we lost.
No, I can...
Yes, we got back. Yes.
So I'm saying and on the India part of the business, do we have no visibility of maybe an in-line market or a high comfortable market curve in line to our above-market growth on a going forward basis from year on?
Yes. We will grow in line with market. And we will now -- I think with the better -- I mean better growth in October for the market, we hope to have a better -- much better growth in the coming quarter also.
And last, you can squeeze in one. When are you looking to launch these products?
Next financial year.
And do you have in your experience any sort of price experiences where 505(B)(2) launches like these have happened and the companies who have done that have been reasonably successful in their -- what success they've had in such launches in the past?
So it has been -- I won't say there have been any meaningful big successes on oral 505(b)(2). So it's something new for all of us. So -- our the industry also. But we are hopeful that we should aspire for 8% to 10% market share to begin with.
[Operator Instructions] the next question is from [indiscernible].
From your press release, I can see that there are 2 biotech products in which -- in one of which you have completed a trial and for which you have finished recruitment. Are these Phase III trials?
Yes, these are Phase III trials, one we have finished and filed and 1 we have just finished recruitment hope to file in the next last quarter.
Okay. And I assume these are in India. And in that case, are more kind of like biosimilars? Or is it a completely new bio products?
Yes. So these are biosimilars, and these are -- when I said the clinical trials, these were done in India for Indian market and developing countries.
The next question is from Damayanti Kerai.
So my question is on India business. So you mentioned you would like your India business to now grow at least in line with the market. So if you can talk about the key growth drivers for India from here on. And also, what is your expectation for Desidustat, which seems like an interesting product in your portfolio?
So we continue to reiterate that we will grow in line with the market. The strategy is going to be driven by our growth booster brands that we have, which will drive a large part of the growth for the company and which also includes the innovative products like Lipaglyn, Bilypsa, Oxemia, which is Desidustat, and Ujvira and also adding a few more products in the coming year in terms of differentiation like Dydrogesterone and others.
So those -- the innovative products will add a significant uptick to our overall growth story while we continue to maintain and grow on our base business also. I would say near term, as I already reiterated with the improvement in market in the segment in October and going forward, we would see a better uptick on growth for the India business. And with a larger base being built on these innovative products, we will also see better than market growth over a period of time.
Okay. And in terms of sales team, like are you like, okay, with the current team strength or you plan to add on more to improve reach and penetration, et cetera?
So in next financial year, we are adding -- increasing our footprint. It will not be in a drastic manner but in a measured manner, we will -- we would add field force -- feet on street in the coming financial year.
How many MRs right now in your team?
6,500.
Okay. My second question is on the U.S. business. So like you have seen a good pickup in approvals, launches, et cetera. So in your current U.S. portfolio, if you can mention like how much sales is contributed by, say, non-oral solid from differentiated products, which will be the key drivers going ahead also?
So U.S. business of generics is a basket business which has oral solids, topical products like injectables and complex products like suppository as well as transdermal patches. So I don't think we have any segment way of doing this business. It's a portfolio business that we build. And that is how the generic market also functions. So I don't think we can give dosage-wise breakup. But as I said, it constitutes the business is considered of all of these dosage forms.
Okay. And all going ahead also, it depends on the nature of the product rather than dosage, which will determine its...
So there will be always a mix of all of these, which I mentioned to you.
The next question is from Charu Agarwal.
Sir, I wanted to understand more about the marketing agreements for the India business for the innovative products that you have recently signed. So what would be the rationale for these given that it is already a strong [indiscernible] presence?
So I think first, starting for Saroglitazar, I think it is to create a larger access we have a certain reach and capability and capacity to reach a certain number of patients. And with the indication coming through for NASH and NAFLD for saro, the only drug to be approved for, they do see that potentially adding more patients, more -- we're creating awareness for more physicians is a need for us. And from that point of view, we did go through an old process of identifying the key partners. And so far, we have been able to have 2 for [indiscernible] Desidustat and one for Saroglitazar. We hope to add one more partner very soon?
And sir, what would be the agreement like in terms of profit share or would it be a fixed fee? How would it be like?
It's a typical out-licensing agreement like others that exist in India.
Okay. And sir, my next question on OpEx. You did mention that the cost could moderate over the next quarter, but could you throw more light on the nature of these expenses?
No, we only talked about other expenses on a quarterly basis, what is the base. So we said that excluding R&D spend, the quarterly base will be INR 850 crores to INR 900 crores.
Okay. And sir, what were the higher -- what were the lower expenses due to Q-o-Q?
Savings, because of higher input costs last year versus this year. And product mix also as I said.
So I think you're asking about other expenses reduction. And as I said, other expenses, they are affected by 2 major factors. One is R&D spend, which is not uniform across the quarters. Other is Zydus Wellness spend, which is a seasonality in nature. If you remove these 2, which are going to be different for different quarters, the normal base will be INR 850 to INR 900 crores. And that variability is also because of legal and professional spend and other spend. Some spend, which are related to sales or production, so which again vary from quarter-to-quarter. So that range gives you ballpark number.
The next question is from Karan Agarwal.
Three questions for me. One, this is with reference onboarding Mr. Patel in North America, what really drove this decision? And considering that you've been in the market for almost 2 decades now, things likely to change with him coming on board.
So our U.S. -- as I said, we have 2 important geographies that we said we have a strong focus on. Now obviously, over the last 15 years, we have built a good U.S. generics business. But as you -- as we move forward, we have intention to build a rare disease portfolio. We hope to build the Saroglitazar and build us an orphan speciality business in the U.S. We have an animal health business. We have Viona Pharmaceuticals.
We hope to explore Canada and enter that market. So looking at all of that, I think there was a need to consolidate how we run the operations in the U.S., and we have been looking for somebody to come in and look after all as a consolidated North American business. So that was the main reason for us to do that, that we are able to harmonize, consolidate this business.
So Puneet brings both the understanding from the customer side, which is important, but also brings in is the understanding of a speciality business in his earlier efforts that he has put, both at CVS and his earlier on. So I think that was the main reason for us to see that how do we continue to build our generics platform, but also all these other new platforms, consolidate the leadership in the U.S.
Okay. Second, my sense is there was some REVLIMID in the base quarter of the previous financial year. So would it be safe to presume that the U.S. business must have grown almost 15% to 18% on a constant currency basis?
Definitely.
Okay. And last, how many launches could we see in U.S. over the next year or say, next 4 quarters?
Next, how many quarters?
But the next 1 year, from today or next half year until March 2024.
So we hope to launch anywhere between 30 to 40 products every year. So it varies. But at least 30 is something that we would continue to launch in the next 12 months also.
The next question is from Saion Mukherjee.
Yes. Just I wanted from the -- in the U.S. generics, you mentioned 30 to 40 products, but is it possible to give some granular -- like what kind of products we should sort of look forward to over the next 3 years? And just one specific one. You have approval for a transdermal, I think, a few months back. I wanted to confirm whether that's launched or when is it going to be launched?
We are launching 2 transdermals. And potentially, by the end of this year, [indiscernible], we would have 2 commercial transdermal products beyond the [indiscernible] segment that is already launch. And going forward, we have obviously plans to launch 2 more on the transdermal franchise. We also have some important launches coming, both where we believe we will be exclusive going forward. And both -- I think almost '25, '26, '27, we do believe we have one exclusive product to launch every year. That is what our current belief is. But obviously, it has to pan out in terms of both IP and litigation and other areas.
But we do have a sufficiently exciting basket of products to be launched. In the near term, also, we do have 6 to 10 products which are in the 8 million to 10 million plus range kind of value. So it is a good basket of products that are there scheduled for launch and some of them being very important as well.
Okay. And sir, any comments you have on the GLP-1 portfolio, which you have filed. Anything you would like to share? Is that an opportunity you see over the next couple of years?
I would say not in the immediate future, but this is definitely a very important opportunity. And we believe that we are also amongst the few companies who have a good position on this. So it will be an exciting launch, obviously, beginning with India and emerging markets, but then moving into the developed markets. But I don't think it's a short-term opportunity.
Okay. And in India, sir, when would these opportunities play out for you?
I think the patent -- post patent, I think it's '26 is when the patents go off, I think, in India and some other markets. I'll get back to you, Saion, on that.
The next question is from Kunal Dhamesha.
Just one clarity, sir. I believe that we had another product called Generic Trokendi XR as well as a good contributor in quarter 1, which would have also come down and would have been -- so then the INR 70 million decline cannot be given to REVLIMID, right? There will be some token because it was...
It was in quarter 4 bigger, because that was a month. Then quarter 1, there was compression already.
Okay. So then -- so then REVLIMID decline would be less than INR 70 million.
So almost -- no 100%, 90% plus decline is related to REVLIMID only.
The next question is from Surya Patra.
Yes. Sir, just a query on the Mylab acquisition. So what is the thought purpose there and where it fits to our overall growth strategy?
So we haven't acquired any majority stake in Mylab. We have taken a 6.5% equity stake.
Correct. Correct. But what is it going ahead there?
I think one strong belief as a company and as a product that we said that beyond being a pharmaceutical company, how do we bring better solutions for patients beyond the pill. One area which is an interest for us is at home testing and point-of-care devices. And I think Mylab is pioneering in that area in both of these areas and completely homegrown, and which also bring efficiencies and cost efficiencies.
So we believe we will find an important area to work on creating access for these types of PCR, point-of-care devices, which can revolutionize the way molecular diagnostics and advanced diagnostics happens for many of not only the current conditions and issues, but future diseases as well. So that's where our focus is going to be, and that is why we have partnered with them to bring these kind of portfolio to the physicians and the patients.
Okay. Okay. But don't you think that is a kind of a relatively generic in terms of the earning potential in terms of the competitive landscape that is there in the market? And whether it is targeted for the domestic market or you are thinking taking to the other market as well?
No, it's for domestic and it is not at all generic. The large diagnostic testing places are generic in nature. These are molecular diagnostic tests, which are highly specific and sensitive and in real time and -- where you can do at home or point of care at a clinic. So this has not been done in India yet. So there's nothing generic about it.
Okay. Sure. My second question is on the -- sir, how big is the injectable portfolio? We have certainly seen some -- a couple of few approvals from the injectable front targeted for U.S. market. Right now, at what level that we are and how important this segment could be for U.S. business going ahead?
So the injectables segment is a very important part of our overall generic strategy. And it will continue to be critical over the next -- for us to grow in the U.S. But it is just one part of our overall product mix that we do. So I would say, obviously, it is growing and it's small, but the most important part is that we have franchise that is in injectable, complex orals, suppositories, transdermals, topicals, so the whole franchise is going to be important.
Okay. Other than the oral solids, then including indicatives, what is the pipeline it would be still looking are for you?
So as I said, the pipeline constitutes of orals, injectables, inhalations, transdermals, topicals and some suppositories.
I mean, sir, in terms of number pipeline, can you say?
We have more than 100 products that we need to file.
The next question is from Kunal Dhamesha. Next question is from Tarang Agarwal.
Just one quick question. How are you looking at the Zydus Wellness business purely from where it stands today? I mean on a consolidated entity level, it's a fair big drag on the return metrics. So just wanted to get your sense in terms of how you're looking at this business.
So I think from our India strategy point of view, Zydus Wellness is a very integral part of our strategy and future profits and growth. And I would say, obviously, in the last 2 to 3 quarters, we have had issues on margins because of cost escalation that has happened.
But I think as you see in the last quarter, that has corrected and those margins are back to the original gross margin that it had. So one of the problem gets solved in terms of margin profile. And it's been a tepid quarter because of low demand, as you can see for most of the FMCG.
But going forward, we -- it will be -- it is a business that will drive double-digit revenue growth. And with improvement in margins also profit growth. So for us, it's a very integral part of what we plan to do in terms of the overall India business point.
I now hand the conference over to Dr. Nayak for closing remarks.
Thank you very much, and we look forward to interacting with you again in the month of February and we declare the next quarter results. And wish all of you very good evening and wish you a very happy Diwali and a prosperous new year. Good night.
Thank you. On behalf of Zydus Life Sciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar.