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Edited Transcript of CADILAHC.NSE earnings conference call or presentation 13-Nov-19 12:30pm GMT

Q2 2020 Cadila Healthcare Ltd Earnings Call

Ahmedabad Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Cadila Healthcare Ltd earnings conference call or presentation Wednesday, November 13, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ganesh Narayan Nayak

Cadila Healthcare Limited - COO & Executive Director

* Nitin D. Parekh

Cadila Healthcare Limited - CFO

* Sharvil Pankajbhai Patel

Cadila Healthcare Limited - MD & Director

* Vishal Gor

Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila

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Conference Call Participants

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* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Damayanti Kerai

HSBC, Research Division - Analyst, Healthcare and Hospitals

* Hari Belawat;Techfin Consultants Singapore;CEO & Director

* Kunal Dhamesha

SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals

* Kunal Mehta

Vallum Capital Advisors - Research Analyst

* Neha Manpuria

JP Morgan Chase & Co, Research Division - Analyst

* Nitin Agarwal

IDFC Securities Limited, Research Division - Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Saion Mukherjee

Nomura Securities Co. Ltd., Research Division - Head of India Equity Research

* Sayantan Maji

Crédit Suisse AG, Research Division - Research Analyst

* Surya Narayan Patra

PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Q2 FY '20 Post Results Conference Call of Cadila Healthcare Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Ganesh Nayak, COO and Executive Director of Cadila Healthcare Limited. Thank you, and over to you, sir.

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Ganesh Narayan Nayak, Cadila Healthcare Limited - COO & Executive Director [2]

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Good evening, ladies and gentlemen. It's my pleasure to take you through the performance and results of the second quarter of FY '20. We have with us Dr. Sharvil Patel, Managing Director; Mr. Nitin Parekh, CFO; Mr. Harish Sadana, Chief Strategy Officer; and Vishal Gor, Senior Vice President, Corporate Finance.

During the second quarter, on a consolidated basis, our revenues grew by 14% year-on-year to INR 33.7 billion. We posted an EBITDA of INR 6.2 billion, with a margin of 18.6%. Financials of Q2 FY '20 include a one-time charge of INR 2.68 billion in the form of impairment of levorphanol intangibles on account of an entry of a new generic competitor.

Adjusted for this, our PAT for the quarter was INR 3.19 billion, up 5% compared to the preceding quarter. The sequential improvement in the profit during the quarter was despite the fact that the preceding quarter had a positive impact of seasonality in our consumer wellness business.

Our India geography, combining -- comprising of human health, consumer wellness and Animal health, has grown by 24% on a Y-on-Y basis, registering a revenue of INR 14.3 billion. Contribution of the India geography in the overall business was 44%.

The U.S. geography comprising of generics and specialty portfolio registered a revenue of INR 14.5 billion. At 45% of the total business, the U.S. geography posted a healthy growth of 10% year-on-year. Our rest of the world business, comprising of multiple emerging markets, grew at 8% during the quarter.

Now let me give you an overview of the initiatives and outcomes for each of our business lines. Coming to the human health business in the India geography, as shared with you in the quarter 1 earnings call, we have restructured our human health business, bifurcating it into a mass and a specialty business, so as to drive our efforts in a focused manner.

In case of the mass cluster, the focus will be to improve penetration by expanding reach. And in the specialty cluster, the focus will be on intensified engagement with the key opinion leaders.

In addition, we have started revamping our sales operating systems -- system in the remaining 10 regions during the quarter, which is likely to be over by the third quarter of the current financial year. Already revamped regions have started to stabilize, and we are seeing improvement in our sales efforts.

In this quarter, we have posted a revenue of INR 9.8 billion, with a robust year-on-year growth of 10.4%, vis-à-vis our year-on-year growth of 6% registered during Q1 of FY '20.

While the overall India business grew at 10.4%, the branded portfolio, which excludes generic business and the discontinued brands, grew at a faster pace of 11.5% during the quarter. As for the [latest] data, the business grew by 13.7% during the quarter, outperforming the overall Indian pharmaceutical market growth of 11.5%.

In terms of the therapeutic performance, our gynaec, derma and hormone portfolio continued to grow better than the market during the quarter. Specifically on gynaec portfolio grew by 11.5% versus the market growth of 6.5%; derma registered a growth of 11.7% vis-à-vis the market growth of 8.2%; while the growth in the hormones portfolio was 13.5% as against the market growth of 11.6%.

Maintaining their growth momentum, our pillar brands having annual sales in excess of INR 500 million each, have grown by 12% during the quarter. Some of these brands have outperformed the market by registering growth in excess of 15%. Further, brands having annual sales between INR 250 million and INR 500 million have also witnessed a significant improvement in their growth rates by registering a growth of over 20% during the quarter.

On the consumer wellness front, Zydus Wellness posted sales of INR 3.1 billion during the quarter, up 135% on a year-on-year basis. While analyzing the sequential growth, the element of seasonality in the acquired portfolio of Heinz particularly in Nycil and Glucon D needs to be considered. During the quarter, we continued our thrust on marketing initiatives to grow the categories and increase market share of our brands.

On synergies, actions have been initiated on multiple fronts, including integration of our channel partners, supply chain and the procurement processes. We will start to see the impact of these actions on both revenue and the cost fronts in the coming quarters. In spite of recovering from a drought like situation, challenges for the animal health industry continue, primarily due to increase in feed costs for livestock, which is further aggravated by the liquidity crunch in the system.

As a result, the business remained flattish on a year-on-year basis, with a sales of INR 1.35 billion. However, on a quarter-on-quarter basis, the business grew by 12%.

Now let me talk to you about the next big geography, which is the U.S. As mentioned earlier, the overall business grew by 10% on a year-on-year basis. While the growth of the entire business was 10%, our U.S.-based generics business, excluding the specialty portfolio of Sentynl and the one-time AG opportunity of the testosterone gel, grew by 22% on a year-on-year basis.

On a quarter-on-quarter basis, the overall business grew by 6%. The Sentynl portfolio and the AG of testosterone gel saw sequential decline during the quarter.

Excluding both of them, our base generic business grew by 11% on a quarter-on-quarter basis on the back of market share gain in the existing products and new product introductions.

We launched 7 new products in the U.S. during the quarter. We filed 8 additional ANDAs with the U.S. FDA and received approvals for 6 new products.

As mentioned in the last call, we expect our base generics business, excluding specialty and the testosterone gel AG to grow at a high-single digit in FY '20 on the back of 15-plus launches during the remaining 2 quarters of this year.

Our biologics and vaccines portfolio, which presently gets clubbed in India and other geographies, recorded a sale of INR 892 million in the current quarter as against INR 729 million recorded in the previous quarter.

On the operations and compliance front, recently, the USFDA issued a warning letter relating to our Moraiya formulation facility. The warning letter does not affect our existing business in the U.S. We will continue to take all necessary steps to ensure that the USFDA is fully satisfied with our remediation efforts.

We are confident of responding to the USFDA to address the observations. In our assessment, we shall be ready for the reinspection by the end of June 2020.

As shared with you earlier, we have already initiated site transfers of all the injectable products from Moraiya to our Liva facility, and we expect the same to be over by the end of FY '20.

Well known to you, our other facilities have maintained their successful track record of sustained compliance. During the quarter, our oral solid dosage formulations manufacturing facility located in Baddi and our API manufacturing facility at Ankleshwar completed USFDA inspections without any observations.

Further, in the month of October 2019, that's last month, our API manufacturing facility at Dabhasa also completed the USFDA inspection without any observation. Now this concludes the business review.

I will now request Dr. Sharvil Patel to take you through the progress and initiatives in our innovation program.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [3]

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Good evening. The quarter gone by was an encouraging one from the perspective of our initiatives on the (inaudible).

Our lead [MC] molecule, Saroglitazar Magnesium, successfully completed Phase II clinical trials in the U.S. in patients with NAFLD and NASH. Further, we also consolidated our position in the anti-rabies space, where our new biological entity, RabiMabs, which is now branded as Twinrab, got the marketing authorization in India and a rabies vaccine branded as VaxiRab received a WHO GMP certificate, opening access to the global market.

Coming back to our ALT research, recently, in the month of October 2019, we successfully completed evidence for Phase II clinical trial of Saroglitazar Magnesium in patients with NAFLD and NASH as the molecule achieved the primary efficacy end point. A statistically significant 44 plus percent reduction in ALT was observing patients treated with Saroglitazar Magnesium. The evidence for NASH trial was random -- was a randomized, double-blinded, placebo-controlled study that enrolled 106 patients with NAFLD, including NASH, across 20 clinical sites in the United States of America.

Yesterday, we also made presentations of this clinical trial results in NASH/NAFLD at the Annual Meeting of the American Association for the Study of Liver Diseases, the AASLD at Boston. This has been selected as one of the best and one of the best top NASH/NAFLD debriefs given at the AASLD at the end of the conference.

We also initiated patient enrollment for the EVIDENCES VII Phase II clinical trial for the evaluation of the effect of Saroglitazar Magnesium in the treatment of NAFLD in women with polycystic ovary syndrome, PCOS, during the quarter. The patients have been recruited across multiple clinical sites in the U.S. and in Mexico.

On the biologics front, we completed preclinical toxicity studies for one biosimilar and received regulatory permission to initiate a second preclinical toxicity study for 1 more biosimilar during the quarter. We continue to file the doses of different biosimilar products with the regulatory authorities of different emerging market countries.

Talking about vaccines, we have received the market authorization in India from the Drug Controller General for measles and rubella vaccine during the quarter. We have also completed a Phase II, Phase III clinical trial for pentavalent vaccine and also received regulatory approval to initiate a Phase I clinical trial for a recombinant hepatitis E vaccine.

Further, we also received a regulatory permission to initiate Phase IV clinical trial of our rabies vaccine (inaudible) to evaluate the long-term immunogenicity and safety of the product.

On our initiatives on the 505(b)(2) development and on in-licensing opportunities, as informed you earlier, we have developed a portfolio of 505(b)(2) products with several products under different stages of development, with a focus on neurology, pain management, dermatology and orphan diseases.

During the quarter, we submitted a pre-IND request for one of our products. Our aim is to submit one NDA every year post-2020, with a focus on meeting government medical needs and answer patient needs and offering better treatment options to physicians. In the area of in-licensing, we obtained exclusive marketing rights for an AND in the oral oncology space during the quarter. Thank you.

And now we will start with the Q&A session. Over to the coordinator for the Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Saion Mukherjee from Nomura.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [2]

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Sir, you mentioned about strong growth in U.S. base, 11% Q-o-Q. Can you give some more color? I'm just wondering how sustainable is that? Is it certain opportunities on pricing? If you could give some color, so we can figure out how to think about the quarters ahead?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [3]

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So the quarter has had a -- we have had market share gains across the large portfolio of these products. So it's not a one-off with 1 or 2 products, but multiple products, also some of the new launches that have happened during the last 6 months have scaled up in terms of market share.

So I would say it's an all-around growth. Obviously, patents have been an important one, but of the fact that we only have (inaudible) and not multiple patents. So it's coming out of only 1 patent.

But I think other products also have that -- these products has had a good growth during the quarter.

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Ganesh Narayan Nayak, Cadila Healthcare Limited - COO & Executive Director [4]

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See the recent thing, Saion, is that -- we have -- the price erosion over the previous quarter has only been about 1.8% on our portfolio. And the new products have contributed a little more than 1%. And plus, as Sharvil bhai mentioned, we have had a very good volume expansion on our existing products.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [5]

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Okay. Okay. That's good. Okay. So secondly, I just wanted to get some clarity on your other expenses. Now this has come down sequentially, but you mentioned last time, there's INR 70 crores of one-time expense. Given that there has been a substantial fall in the wellness expenses, given the seasonality, this number looks quite high. So is this the number we should look forward? Or there is one -- some exceptional items that you would like to call out.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [6]

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It's at the level [about INR 12 crores] of one-off expenses again in this quarter. And also, as you mentioned, because of Heinz business, we had higher expenditure in the last quarter. So -- and because of Heinz portfolio or [overall their experimental] portfolio, this kind of quarter-on-quarter aberration in the other expenses will be seen because as we have shared with you earlier, January, March quarter, again, is usually very high for that business. And accordingly, only expenses will also be recognized. So a normalized other expenditure is something which we'd have seen ex Zydus Wellness business.

I can share more details about you -- about that maybe off-line after working out the exact number like excluding...

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [7]

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No, no, Vishal, just one thing. You have seen around INR 27 crores decline. You already had like INR 70 crores of base some exceptional last year -- last quarter. Almost INR 80 crores decline is there in wellness. So instead of INR 150 crores, we have seen INR 27 crores. So there seems to be a -- base expenses have risen, it appears. So I'm wondering, that looks very high, actually, more than INR 100 crores (inaudible)

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [8]

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Yes, but July-September quarter in the quarter -- I mean, it's a season for our all India business also (inaudible) business. So generally, in that quarter, we see higher expenditure in the India business, mainly marketing and promotion, plus U.S. business has grown, and that also gives rise to the -- these demonstrated -- other distribution-related cost, which is -- it is clubbed under in our expenses. So otherwise, it is more or less in line with what we had in last quarter, excluding (inaudible) business.

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Operator [9]

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The next question is from the line of Hari Belawat from Techfin Consultants.

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Hari Belawat;Techfin Consultants Singapore;CEO & Director, [10]

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Sir, this is regarding this exceptional item of INR 268 crores. You had mentioned that some intangibles because of the entry of new competitor for levorphanol in U.S. So what does it mean? New competitor means levorphanol will be totally out from the market? One. Second thing is intangible losses, impairment of charges, does it really mean that in the books, you have provided losses of INR 268 crores in this financial year?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [11]

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Levorphanol, the sales of levorphanol has come down because of the entry of the generic competition, but it doesn't mean that we are not going to continue business on levorphanol. But from a very high base of close to 100 million, it's come down. So that is why we have provided for the one-time impairment charges here. The more details, I think Nitin...

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [12]

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The impairment charge as for provisions of Indian accounting standards, and that is to be provided in the books of accounts. The intangibles are to be tested for impairment rather than being amortized.

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Hari Belawat;Techfin Consultants Singapore;CEO & Director, [13]

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One second thing is it looks like big (inaudible) impairment is shown. There is no comment on this Deloitte I mean, from you chartered accountant. I don't know it is -- so basically, you feel it should be -- it is required, I mean, justification of this year's INR 268 crores fairly good.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [14]

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The auditors have audited the books of accounts, and this impairment is done in our overseas subsidiary. And overseas subsidiaries have gone to the value of some of report of independent value based on which they have given clear audit report also. It's a standard requirement.

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Hari Belawat;Techfin Consultants Singapore;CEO & Director, [15]

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Okay. So that means in the year-end, it will be indicated as losses of INR 268 crores. Finally, is it that?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [16]

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Yes, on this particular account, yes.

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Operator [17]

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The next question is from the line of Kunal Dhamesha from SBI Captial.

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Kunal Dhamesha, SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals [18]

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So first a little clarity on how much injectables revenue are being generated from the Moraiya plant?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [19]

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Currently none.

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Kunal Dhamesha, SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals [20]

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Currently none. So...

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [21]

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(inaudible)

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Kunal Dhamesha, SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals [22]

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In quarter 2, we do not have any?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [23]

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No. We don't have any. We stopped commercializing any product from Moraiya.

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Kunal Dhamesha, SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals [24]

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Okay, okay, okay. And secondly, on levorphanol, do we -- still carry any intangibles on our balance sheet for levorphanol?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [25]

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Yes, yes, yes. About $27 million.

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Kunal Dhamesha, SBICAP Securities Ltd., Research Division - Analyst of Pharmaceuticals [26]

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$27 million. And the players that you have mentioned, it means it will become a 3-player market right?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [27]

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Two players. [In '20 starts] one more player.

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Operator [28]

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The next question is from the line of Neha Manpuria from JPMorgan.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [29]

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If I were to look at our gross margins on a quarter-on-quarter basis, given the Zydus Wellness have come off because of seasonality, what is the reason for such a sharp increase, even if I adjusted for the INR 5 million we've got, there seems to be a pretty strong increase in gross margins.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [30]

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So Neha, there is mainly because of India business coming back, and the proportion of Zydus Wellness business has also come down. And then, in the U.S. business, also, you have seen that sequentially, there has been an improvement, both in the actual sales value as well as the margins.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [31]

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The U.S. improvement was 6% quarter-on-quarter, right, base business?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [32]

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Yes.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [33]

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7.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [34]

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Yes.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [35]

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Okay. Okay. So it's more because of the India and the U.S. business?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [36]

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Yes.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [37]

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Okay. Okay. The second question on our Moraiya facility. Given that you're now expecting to complete remediation by June and the exhaustive comments from the FDA in the warning letter, could there be any remediation charge associated -- -- remediation -- additional remediation cost associated with the work that we need to do?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [38]

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So we have -- we are working with external consultants for the remediations. There will be some charge associated with this. But it will not be very, very significant because it is for review of documentation and review of batch records. So there is going to be a charge, but it not to be very significant, but more we can tell you in the coming quarter.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [39]

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And a related question, since we are transferring the injectable products to Liva, when was Liva expected last?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [40]

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Liva was inspected more than a year ago. It has got an EIR, and we got recently another -- we already have 1 product approved, and we got a new product approval very recently, we had also notified in the last 2 weeks. August 18 is the last inspection of Liva, and we received the EIR also recently.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [41]

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And we, obviously, informed the -- we have already filed for the site transfers with the FDA for the injectable products?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [42]

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Yes. We have started -- that is already in progress. (inaudible) was the first one, which we got approval also.

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Operator [43]

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The next question is from the line of Kunal Mehta from Vallum Capital.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [44]

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I wanted to understand our progress on our transdermal filings. So you've mentioned in the past that this year we would not see any approval in transdermal. Is there any indication you're getting from the FDA with respect to your files moving forward? Can you just mention how many filings we have -- doses we have filed also indeed for transdermals?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [45]

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So we are -- in FY '21, we expect with the proper resolution of Moraiya and all of that, we expect 5 approvals in FY '21 from transdermals. And we have filed 1 product -- we will be filing 1 more product by December.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [46]

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Okay. And sir, the -- we have bought the 15% equity in this transdermal venture with Zydus Technologies. So can you just mention who was the -- who held this equity 15% prior to us buying it out?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [47]

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15% equity was held by [Technocret NLI], Dr. Sharad Govil in his individual capacity and in the new office company.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [48]

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Okay, sir. Okay. And the second question I have is on the concentration of Lialda and Asacol HD, so can you mention, based on this first 6 months, what is the concentration of these 2 products to the U.S. business?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [49]

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I said that we have always stated that Asacol remains a single source product right now and which is of significant value. But other than that, all products are -- we don't give any other specialty products, but Lialda, as we had even called in the last call, is not a significant part of the overall revenue now.

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Operator [50]

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The next question is from the line of Aditya Khemka from DSP Mutual Fund.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [51]

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Sir, just adding on the previous participant's question, so one of the subsidiaries, I believe Zydus Technologies Limited, Sharad Govil had 15% stake and that is, obviously a bank from him. But there are 2 subsidiaries we are buying, right? So the second subsidiary, who is the 15% holder?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [52]

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15% of the holding is Zydus Noveltech, which also is being bought by Cadila Healthcare Limited.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [53]

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So that Noveltech will be 15% shareholder, from whom we are buying it?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [54]

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In present with this guidance, Dr. Sharad Govil and his entity.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [55]

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Okay. Got it. And sir, if I just look at your consolidated accounts and your stand-alone account, your stand-alone net profit for the quarter was actually somewhere in the region of INR 600 crores. And even if you adjust for the impairment charge, the net profit in the consolidated is INR 300 crores. So just trying to understand this, what causes these INR 300 crores losses in that subsidiary? I mean, I understand some of the export profits should be recognized in standard-alone because you manufacture in stand-alone entity and sell it to the subsidiary and then the subsidiary has losses. Would that be the right way to come about it?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [56]

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Aditya, the real reason is that…

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [57]

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Impairment losses.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [58]

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No, no, no. The real reason is that this is the quarter in which all our subsidiaries declared dividends. And in turn, we also declared the dividend for the shareholders. So the dividend, which is declared by all of our subsidiaries, gets reported as income in the stand-alone entity, but that doesn't get any weighted in the consolidated results. So they're just number. And this happens every year in the second quarter. You can say that for last, maybe 10 years.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [59]

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So income line item, is it? And stand-alone? This would reflect in the other incomes line items, just in the stand-alone accounts?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [60]

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Yes, yes.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [61]

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And how much of the other income stand-alone, if you could just -- how much stand-alone accounts this quarter?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [62]

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Vishal can quickly get that.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [63]

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Aditya, the other income for the quarter, which was reported in the stand-alone numbers, was INR 408 crores.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [64]

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Got it. That explains it. Just one last question on the U.S. business. So how many products did you launch in the first half all put together? And how many do you expect to launch in the second half?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [65]

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Well, I think it will -- 15.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [66]

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15 plus.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [67]

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15 products.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [68]

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15 is what you expect to launch in the second half?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [69]

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Yes.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [70]

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Yes.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [71]

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We expect another 15 product approvals through the remainder of FY '20 and launch a similar number of products.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [72]

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He is asking first half.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [73]

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We'll have annually about 30, 31 launches.

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Operator [74]

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The next question is from the line of Surya Patra from PhillipCapital.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [75]

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Just in the opening remarks you mentioned something like for the like-for-like growth in the U.S. entities...

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Operator [76]

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Excuse me, this is the operator. I'm sorry to interrupt you. Sir, your voice is breaking.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [77]

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Hello?

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Operator [78]

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Sir, may we request to use your handset, please. Your voice is

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [79]

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Yes, yes. I'm doing that. So is it okay?

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Operator [80]

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Yes.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [81]

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So just one clarification. In the opening remarks, possibly, you mentioned something like the like-for-like growth in the generic business excluding the one-offs and the AG business is 22%. Is that right, sir?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [82]

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Yes, correct.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [83]

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That is correct.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [84]

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And what is this -- right from that 22% kind of growth that is coming? In one hand, we are seeing any way of -- price -- pricing -- price correction or price erosion. So that is the volume growth is that significant? Or what is really driving that? And how sustainable will the momentum be for this?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [85]

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So see the price -- first of all, there has not been a significant price erosion, as happened in the earlier years. So that is one positive. Also, there is a lot of shortage in the U.S. market. So we do get a lot of opportunities today. In the U.S. market, if you have good inventories and good supply position and a good portfolio, there are multiple opportunities that do come up for -- so we have had a good growth on overall base business. And we have gained share in a multiple number of products. There's been a growth of volume and value growth.

And we launched many new products in the last 24 months, and many of them have scaled up so the value of that is getting reflected now.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [86]

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Okay. So that means even -- that means your base business possibly in the first half would have delivered a strong positive growth?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [87]

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Yes. Excluding this one-off, the base business is doing well.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [88]

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Okay. Can you just say some numbers to that? What is the kind of base business growth?

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [89]

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We already told the base business growth of 22% for this quarter.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [90]

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Okay. No, I'm asking for the first half?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [91]

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Vishal will share off-line, but I don't have first quarter right now.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [92]

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Okay. Fine. And secondly, on the domestic formulation business, now in this quarter, we had, obviously, delivered better than the sequentially from the last quarter. So going ahead, what is the kind of outlook that you are trying to provide there? And do you still see the challenges of the trade generic issues?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [93]

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So trade generic business is challenged. There is still not any -- we have had no growth on our trade generics business, to some extent, a small de-growth. So there is a still challenge on the trade generics business. The branded generics business has done well this quarter, exceptionally well compared to the market. But we are not seeing a very big revival in the market yet. So our plan always is that is we would go a little bit better than the market. And if we assume -- but currently, the market is tepid and is not very strong. So our assumption is that if the markets are growing at 10% to 12%, we will be growing 12-plus percent on an annual basis, depending on the market growth.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [94]

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Okay. And what kind of synergies that you have started seeing from the Heinz acquisition side, when did -- or whether you have already started seeing something?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [95]

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There are no synergies -- significant synergies yet. In this calendar year, we would have about INR 10 crores synergy impact benefit. Next year, we are expecting a INR 25-plus crores benefit, but the most critical synergy that will come through is now which we are doing, which is consolidation of the sales team and distribution, which will lead to our increase in direct distribution.

So in the next year, we are looking to double our direct distribution from our current scale. So that will be the biggest synergy in terms of value extraction. Followed by that, as I said, there are the cost synergies, which I spoke of. And third is that we will be also -- the distribution and logistics part of it also is going to be synergized which will help in terms of ease of operations.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [96]

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But do you see any product introductions, any initiatives post-acquisition and integration?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [97]

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We will have -- as and when we have product -- new product launches, we will apprise you of it. Currently, for this quarter, we don't have any new introductions for that.

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Operator [98]

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The next question is from the line of Nitin Agarwal from IDFC.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [99]

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Sir, on the seasonality in the Heinz portfolio, you mentioned that Q1 is, obviously, the biggest quarter, especially for Nycil and Glucon D. How should we look at our revenue sort of trending for the next 2 quarters versus the Q2 number?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [100]

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So for the acquired business, it's the 70-30 split, if you take the calendar year. So Jan-June, it's 70% of revenue in terms of the overall revenue. And the season picking -- falling off from summer, we have Glucon D and Nycil which slow down. And Complan is a major driver from the acquired business point of view. The profitability is also very different. The same way -- majority of the profit is driven in the first 6 months and then very little to negligible profits because we are building up for inventories for the coming season.

Our endeavor is that going forward with the combined entity now, the skew is about 60-40 in terms of overall business. And going forward, we are planning next year to make sure that we are prepared for a second summer as a strategy. And if we are able to do some of those important initiatives then we'll be able to balance out the quarters -- on a quarter-on-quarter basis. But currently, for the next -- for this year and maybe for the next year, there will be a skew to the business.

But the good part is the business is on track to deliver its numbers as it has done so, so far.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [101]

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Okay. That's perfect. Sir, I think probably mentioned, how many transdermal filings have you made so far?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [102]

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So far? 8 -- 1 minute, give me 1 minute, I will tell you. 5.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [103]

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And you -- sir, you've already got 1 approval and expect 5 more approvals next year?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [104]

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Sorry, just give me 1 minute. So let me correct myself first. We have 9 filings, and we are expecting 5 approvals in FY '21.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [105]

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Okay, sir. And lastly, basically on a housekeeping question, can you just help us with the gross net debt numbers and the CapEx for this year?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [106]

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Gross, what -- sorry?

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [107]

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The net debt number

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [108]

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Gross, net. Net debt.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [109]

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Yes. So gross debt around September was INR 7,883 crores. There was a cash of about INR 1,200 crores. So net debt was INR 6,687 crores, which is less by about INR 300 crores as compared to what it was in March. And net debt-to-EBITDA result as of now is 2.31.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [110]

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And sir, what kind of CapEx are you looking at for this year?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [111]

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About [INR 1,907 crores].

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [112]

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And sir, if you see -- in most of the peers that you're seeing -- you're seeing a fairly sharp moderation in the CapEx intensity. Do we see a similar thing happening for us also?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [113]

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We are -- depending on our growth projections, we are trying to see that whether we can be around INR 700 crores to INR 800 crores mark. I mean, INR 800 crores CapEx going forward.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [114]

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Okay, sir. And so lastly, for last one. Any update on the Windlas acquisition? Have we started utilizing their assets?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [115]

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Not yet. We're still filing.

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Operator [116]

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The next question is from the line of Prakash Agarwal from Axis Capital.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [117]

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Sir, just on this net debt reduction. If I can see the cash flow statement, it talks about the payment of INR 200 crores and current borrowings of another INR 123 crores. So net-net, it is about INR 70-odd crores net repayment. Could you just double check this number? This INR 300 crores in 1H, we have repaid net debt.

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [118]

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Net debt is -- what we're looking at is gross net reduction, while what I said is net debt. So net debt is after the cash balance.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [119]

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(inaudible) September as compared to March.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [120]

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Okay. So net debt reduction in the last 6 months has been INR 300 crores. And what is the expectations for the remaining of the year?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [121]

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About INR 300 crores to INR 400 crores reduction by March 2020.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [122]

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Another INR 300 crores to INR 400 crores. Perfect. Great. And secondly, on Moraiya. So whatever our next steps in terms of -- I'm sure we already applied to the FDA, but what is our current understanding in terms of the remediation measures and in terms of calling them for reinspection?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [123]

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So the remediation measures, there are 2 intended measures. One is on the injectables front. We have closed the manufacturing of -- dismantling the manufacturing of injectables in Moraiya and have been transferring these products to Liva. So that's the mitigation plan for that, and we are doing all the batches -- I mean, we have -- so that is the major part of that part. And on the other side, we have now working with external experts and SMEs as well as consultants to form the -- whatever the expectations of the FDA in terms of their -- we're trying to respond to them on the cleaning validation protocols on all batches -- analysis of all batches and the data that we are providing to them. So there's a robust work going on between the teams, using external consultants to verify because we had expected to verify some of this to third party. So that's the work that we are doing right now, and we feel that we should be able to complete this work and expect the FDA -- and request the FDA post the April, June quarter for reinspection.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [124]

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Thank you for that information. And in terms of key assets, sir, last time, we've spoken about Doxil and (inaudible), any update there -- we're expecting these products?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [125]

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No. So I think most of -- I mean, we have responded to most of the queries when it comes to the Doxil part, so we're just waiting -- unless we have further requests, we are waiting for approval and planning for that, and we have taken production back just to make sure we can produce effectively.

On the other product -- which is other product you said? (inaudible)

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [126]

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It is generic of --

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [127]

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Do you know the generic INN name?

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [128]

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Yes, 1 second.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [129]

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(inaudible) I think that as well.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [130]

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Okay. And lastly, on India, so the rate show, just trying to understand, it's a function of the acute business having a very good season or the last time we said that we are undergoing the restructuring of CVS, Gastro, is that largely done? And we are starting to see some fruits? Or we are yet to see some benefit from that also going forward?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [131]

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So the -- so one is our cardio (inaudible) franchise has started to do better than market, but it's still growing at very healthy rates. The -- as I said, certain therapies like women's health, where we are the largest player, we are doing very well there. And even in the areas of dermatology where we have gained better share. But even in the other areas of pain and some of the other indications, we have actually been doing as per market a little bit around the market growth.

So I think it's an all-around growth, and also -- so it's not driven around only a few franchise or (inaudible) sector or any of that, but it's across-the-board growth. Some part of it is the benefit of the effort that we had done on sales force integration that we did on effectiveness.

But I think, still, we have done a major strategical change as well as the way spoken last time that we have changed the business initially to 2 clusters of mass and specialty, and that just we got done recently. So this is the last part of the integration that had just happened in this October quarter.

And hopefully, from the next year onward, we will see better gains because of our strategy alignment that has happened here.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [132]

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Perfect. Great. Are you splitting mass and specialty in the India business? What is the kind of percentage in each?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [133]

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Yes. 55, 45.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [134]

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55 being...

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [135]

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Mass and 45 being specialty

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Operator [136]

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(Operator Instructions) The next question is from the line of Sayantan Maji from Crédit Suisse.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [137]

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Hello?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [138]

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Yes.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [139]

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My question was on this Zydus Technologies, 15% stake. So the price actually paid to 15% partner, was this predetermined price or the valued at now based on the potential of all the 9 filings that you've done?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [140]

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It's a negotiated price and it is significantly less than the value of some that we -- called them.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [141]

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So the partner agreed for such a low price? I know there is a significant deadline there, but we're paying $0.2 million for 15% stake there?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [142]

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Yes. See we you have to understand that one is the deadline there. And the other is that the plans have got delayed over a period of time. So the partner also understands the nature of the business there.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [143]

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Okay. And one question was on this India business. What's the sales force number right now? What's the productivity we are running at right?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [144]

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I don't have it on me right now, exact numbers. I can request Vishal to provide back to you.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [145]

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Sure. One question was on the balance sheet. The receivable days for us improved significantly in September '19. Was it that March '19 base versus one-off? Or what has helped receivable days to come down?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [146]

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So remember, during the December quarter and March quarter, we had a business of this AG. And receivables, which were there in March, we have collected.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [147]

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Okay. So the March number was just -- okay.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [148]

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Yes. It was higher because of the high rank.

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Sayantan Maji, Crédit Suisse AG, Research Division - Research Analyst [149]

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Understood. And (inaudible) proceeds $5 million, this including other operating income?

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [150]

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Yes.

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Operator [151]

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The next question is from the line of Kunal Mehta from Vallum Capital.

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Kunal Mehta, Vallum Capital Advisors - Research Analyst [152]

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Sir, I just wanted to understand the rationale behind the CapEx of INR 1,000 crores, which we are doing in this year. So if I'm not wrong, we have already been through a round of CapEx in the last 2 years, whereby we have expanded our capacity across our plants. So just -- can you just throw some light on which areas is this CapEx going to be?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [153]

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So large part of the CapEx is driven towards the injectable sites. We have 3 injectable sites where we have upgraded lines. Then we have a traditional (inaudible) facility in SEZ. And we have a new facility that has also been built up in SEZ. So most of those compose of the majority of CapEx. And then there are also maintenance CapEx that happen across all the other sites.

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Operator [154]

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

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [155]

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Sir, just on CapEx, this kind of split it between maintenance and expansion CapEx. And what would be the CapEx next year or year after? I'm just wondering like where it would stabilize on CapEx?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [156]

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So as I said, our endeavor is to be between INR 700 million to INR 800 crores on a ongoing basis -- sustainable basis.

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Nitin D. Parekh, Cadila Healthcare Limited - CFO [157]

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Maintenance will be about INR 50 crores to INR 75 crores depending on specific plant and aging of the machines.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [158]

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Okay. And second question on saroglitazar, what is the way forward given all the data that you have seen, you plan to license out, are you in discussion? How do we monetize this now?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [159]

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So our next step is after -- we have had a very successful Phase II. So we will be planning for a Phase III and preparing ourselves in terms of what we would need to do for Phase III clinical trial.

At the same time, we are -- we have been approached by part -- by companies to partner, and we are also going to be looking at as a partnering approach. So we see both -- all options open, whether we are able to move the program on our own or whether we can find a partner who -- whom we can align with, then we would go to the partner as well.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [160]

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Okay. Sir, do you have any approximate time line for the commencement of Phase III trials?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [161]

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Not yet. I won't be -- we have just represent data. It's very early for me to tell you what we see right now.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [162]

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Okay. And just one 1 on Saroglitazar. So how is the product doing in India? I mean, which indications you're marketing it for? Is it still growing? Or has that kind of got stagnated now?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [163]

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It is growing at a healthy growth rate. It -- we have 1 million patients on the product. We have currently been selling it on a very limited indication of people suffering from diabetes and high triglycerides. Now we have -- we will soon be getting an approval for our -- one of our major indications, which is for type 2 diabetes management, which will significantly expand the scope of the opportunity.

And we have also filed -- or filing for our Phase III -- filed for a Phase III NASH data in India. So we should be also -- and we had a successful trial, so we should get an approval for NASH and NAFLD. And with 3 indications we can significantly scale up this business in the coming 2 years.

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Saion Mukherjee, Nomura Securities Co. Ltd., Research Division - Head of India Equity Research [164]

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Okay. Sir, this 1 million patient that you mentioned for that -- what would be the penetration of the target segment?

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Ganesh Narayan Nayak, Cadila Healthcare Limited - COO & Executive Director [165]

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Today, we have endocrinologists, cardiologists and physicians prescribing this. So we have about 8,000 -- between 8,000, and 8,500 of these 3 specialists prescribing this product. And as Sharvil bhai mentioned, right now, it is for diabetes and dyslipidemia. And very soon, we should be getting a approval for just type 2 diabetes.

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [166]

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See today, the chronicity of the medicine prescription is not there. With that new indications, the chronicity will come in, which will allow us to significantly scale up the value of the business. We have a lot of prescriptions. We have a lot of patients, but we need chronicity of prescription, which will come in through the new indications.

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Operator [167]

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

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [168]

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Two questions. Sir, Europe though it's a small part of our overall business. We are seeing continuous decline on the sales reported. So are we reducing focus on that geography? Or what is happening on the European part?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [169]

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So Europe, there are 2 issues. One is, obviously, we have -- market is a little challenged in terms of the generic business. We have had some supply disruptions in that market, which has further aggravated the problem, which we have -- which we will be resolving by this quarter. So I think -- I mean, it's a business that we need to -- we have been looking at and we have been looking to see how do we improve our portfolio in these markets to improve our growth as well as profitability, and the work is on, but it will need a couple of years to turn it around.

We are also looking at some strategic options as well. And if some of those work out, we will apprise the offer.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [170]

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Sure. And second on alliances' revenues, which you have reported 15 million compared to 242 million last year. So again, what has led to that kind of decline?

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [171]

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Well, could you repeat the last -- what which revenue?

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [172]

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The sales breakup number which you have given in your press release, the revenues which we get from alliances, it's reported 15 million...

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [173]

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Yes. So Vishal?

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Vishal Gor, Cadila Healthcare Limited - Vice President of Corporate Finance at Zydus Cadila [174]

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So basically, one of the businesses which we have is to supply to one of our partners, and there has been injectables from Moraiya. And as Dr. Sharvil Patel mentioned, we have stopped manufacturing injectables. We have no supply made to that partner, which has resulted to this decline.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [175]

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So this is just a supply disruption to one partner which has...

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [176]

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Yes. We have stopped injectables and that's led to the loss of business.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [177]

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Okay. So still the time Moraiya comes back on track, it will remain in similar…

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Sharvil Pankajbhai Patel, Cadila Healthcare Limited - MD & Director [178]

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We have in fact -- we're transferring these molecules to Liva, and we will finish the site transfer process by FY '20. So -- and in the coming few years, this revenue will be -- I mean, Moraiya will not be responsible for injectables revenue.

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Operator [179]

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Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ganesh Nayak for closing comments.

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Ganesh Narayan Nayak, Cadila Healthcare Limited - COO & Executive Director [180]

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Thank you very much, and look forward to interacting with you again in the month of February 2020. Have a good night.

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Operator [181]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Cadila Healthcare Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.