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Edited Transcript of LUPIN.NSE earnings conference call or presentation 8-Aug-19 6:30am GMT

Q1 2020 Lupin Ltd Earnings Call

Mumbai Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Lupin Ltd earnings conference call or presentation Thursday, August 8, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alok Sonig

Lupin Limited - CEO of US Generics & Global Head of Generics R&D & Biosimilars

* Kamal Kishore Sharma

Lupin Limited - Vice Chairman & Advisor

* Nilesh Deshbandhu Gupta

Lupin Limited - MD & Executive Director

* Rajeev Sibal

Lupin Limited - President of India Region Formulations

* Rajiv Pillai

Lupin Limited - Head of Business Finance

* Vinita D. Gupta

Lupin Limited - CEO & Executive Director

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Conference Call Participants

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* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Arjuma Begum;Course

* Chirag Dagli

HDFC Asset Management Company Limited - Senior Equity Analyst

* Damayanti Kerai

HSBC, Research Division - Analyst, Healthcare and Hospitals

* Hari Belawat;Techfin

* Neha Manpuria

JP Morgan Chase & Co, Research Division - Analyst

* Nikhil Mathur

AMBIT Capital Private Limited, Research Division - Associate of Small Caps

* Nitin Agarwal

IDFC Securities Limited, Research Division - Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Rahul Sharma

KARVY Stock Broking Limited, Research Division - Analyst

* Sameer Baisiwala

Morgan Stanley, Research Division - Executive Director

* Shyam Srinivasan

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Subhankar Ojha

SKS Capital & Research Private Limited - Senior Analyst of Equity Research

* Surya Narayan Patra

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

* Tushar Manudhane

Motilal Oswal Securities Limited, Research Division - Research 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 Lupin Limited Quarter 1 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Lupin Management. Thank you, and over to you, sir.

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Kamal Kishore Sharma, Lupin Limited - Vice Chairman & Advisor [2]

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Hello. This is Kamal Sharma. It's a pleasure to welcome you to this call. I have with me Vinita, Nilesh, Rajeev Sibal, Naresh, Rajiv Pillai, Arvind, and Sunil Makharia, who would help us walk through the questions that you would have. And you would see that we've had a good quarter. I think the corresponding sales have increased by 15% (sic) [15.4%]. The sequential sales are like flat about 0.7% increase. Profit has increased by 49%. And even sequential profit went up by 5.5%. EBITDA was up by 31% on a sequential basis, slightly low. You will get to know the reasons. I don't want to take away the thunder. But with those opening words, I would like to hand it over to Rajiv Pillai to walk you through the numbers. And then we'll open the floor for questions and answers. Thank you. Rajiv?

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Rajiv Pillai, Lupin Limited - Head of Business Finance [3]

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Thank you, Mr. Sharma. Good afternoon, friends. I am pleased to share the results, which were uploaded yesterday on the website [for B&P].

Sales for the quarter 1 FY '20 were INR 4,356 crores (sic) [INR 43,558 million,] which represents a 15% (sic) [15.4%] growth year-over-year. (inaudible) which sequentially, it has been a little flat. This growth has been secular across most of our geographies, led by the U.S. and followed by India. U.S. showed around 30% growth. And India, again, delivered strong growth once again at 12%. All other geographies also contributed very well.

As far as gross margins go, gross margins also showed an improvement compared to the previous year at 64.4% and was 61.7% in the previous year. I attribute this to better business mix, better sales in the U.S. and better product mix.

EBITDA for the quarter stood at 21.4% compared to 18.8% in the previous year, which is again, a meaningful improvement that we have talked about in the past.

R&D stood at 8.7% to sales. And like we've spoken in the previous quarter, our commitment is to keep this below 10%. And we expect to [move probably some] (inaudible) but this [is the end result.] FX did not have a meaningful contribution as far as the volatility is concerned, with the underlying risk this quarter alone. Employee benefits, we see that the Y-o-Y increase of 7%, largely on account of annual increments. Other manufacturing expenses, you will see sequentially, there is a number which is a lower number. But I would attribute that to the increased living expenses. And otherwise, it would be flattish around this number. And ETR for the current quarter is tending around 30% -- 43% for the quarter. Like we've said in the past, we were targeting around 40% annually. That's all from my side.

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Kamal Kishore Sharma, Lupin Limited - Vice Chairman & Advisor [4]

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We're happy doing questions now.

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Questions and Answers

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Operator [1]

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Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) The first 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 [2]

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If you could help us, update on the regulatory front, and our expectation in terms of the [mid-closure of remediation] and approval of facilities of Goa and [in those please]?

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Unidentified Company Representative, [3]

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Sure. Prakash. As we've talked before, we built this compliance sustainability plan through which we've been updating the FDA on a regular basis for -- on our OAI sites, actually. But specifically for Goa and Pithampur, we've been sending in regular updates, and I think we've made significant progress with the FDA. We basically feel that the one big issue that we still need more work on is the area of OOS investigations. And again, we have a very solid plan around them. The plan is to open this for the next few months and in about 6 months to be ready for any inspection for the 2 sites.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [4]

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Okay. And you expect them to happen simultaneously? Or...

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Unidentified Company Representative, [5]

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Well, we'll see. I think it's a little premature for that -- to see how we open up these sites for the inspection.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [6]

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Okay. Perfect. And second question, actually, on the other expenses, I think Rajiv mentioned, there has been some phasing out. And if you could help us understand what's the ForEx impact here? Is there a ForEx loss sitting? And if there's any Ind AS impact sitting there?

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Rajiv Pillai, Lupin Limited - Head of Business Finance [7]

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Right. So like I said earlier, the FX impact is not very meaningful. It's fairly low. Ind AS, yes, Ind AS 106 we are compliant with. And there is -- I think, on the EBITDA line, the impact is around 0.9%.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [8]

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Okay. And the corresponding impact has been captured in the depreciation line? Is it just by 22% Y-o-Y and 13% Q-on-Q?

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Unidentified Company Representative, [9]

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That is right.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [10]

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Okay. I suppose that would be a similar 0.9% impact, just to clarify?

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Rajiv Pillai, Lupin Limited - Head of Business Finance [11]

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Yes. Yes.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [12]

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Okay. And lastly, on the U.S., you earlier talked about $850-plus million in the U.S. with about 20-plus launches. Are we on track with that?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [13]

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Yes, because we feel good about the 20-plus launches. I mean this quarter, we launched 5 products, including interesting ones like Budesonide as well as the Testosterone Gel. So we feel pretty good about the 20-plus launches. As we look at growth of the U.S. business, on the one hand, the base business has stabilized. The team has worked hard to stabilize it at that $180 million-plus and as well as being a (inaudible) a very good goal, a significant impact in Q1, but has now come down. As we look at Q2 and the rest of the fiscal year, levothyroxine is a big driver of growth of the U.S. business. And also we have, in Q2, actually September, we launch our injectables portfolio in the U.S. We've not really materially participated in the injectables segment so far. Have a first launch of Fosaprepitant and a couple of other injectable products around it. So I'm looking forward to delivering growth in the U.S. market.

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Operator [14]

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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 [15]

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Ma'am, if you can just indicate for the quarter, what is the branded revenue growth in the U.S.? And again, on the US growth of (inaudible) and Ranexa. You already mentioned, okay, the initial portfolio that could be launched in the Q2 in U.S. So what is the kind of out -- growth outlook that you are building, whether you're still [delivering], there is a double-digit kind of growth in the U.S. portfolio [over it]?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [16]

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So the branded revenue grew in Q1 versus Q4 last fiscal. It grew roughly 40% quarter-on-quarter. And majority of the focus on the brand side of the business is right now is SOLOSEC. So let us look at first day on the script level grew 20 -- just over 20%. Now, and as I mentioned, as far as growth outlook for the first fiscal year, we've had a strong start in Q1 with Ranexa. We have had a small amount of levothyroxine in the quarter. Levothyroxine ramped up significantly over the years. We should have some growth in Q2 but more so in Q3 and Q4 as our capacity ramps up and gives us the ability to take on all of the customers that we have targeted. So that will certainly be a significant growth driver. And then the injectables portfolio that I mentioned, we will launch at the end of this quarter. So it should really contribute pretty well in the second half of the year. We feel pretty good about -- not double digits, but at least single digits as it is percentage growth for the fiscal year.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [17]

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Is it possible to say something -- more color on the injectable portfolio that you're indicating for the second quarter launch?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [18]

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Yes. The anchor product is Fosaprepitant. That goes [on site] in September, that's a day 1 launch. And around it, we are launching other smaller products like Doxercalciferol and decitabine and azacitidine oncology products. So really pleased to be able to get into the injectable market with these products.

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [19]

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Okay. And about the Indian -- India Formulation business, in the -- see, we have definitely delivered a kind of -- only a 10% kind of growth for the quarter. But in the light of the (inaudible) and that is taking off and even the online pharmacies playing an important role now in the domestic side. So what impact that you are witnessing for the overall domestic formulation trend and particularly for Lupin going ahead?

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Rajeev Sibal, Lupin Limited - President of India Region Formulations [20]

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So if you look at India business this quarter, actually, our branded business has grown by 12.3%. So if you look at even the drivers of this growth, we are pretty strong on volume growth. Because our volume growth has been 4.7%. Again, the industry volume growth of 1.7%. So I am very sure, yes, what you have stated (inaudible) and e-pharmacies, obviously, they are picking up. But right now, their penetration is small. I don't think that we have been impacted to that extent. And looking at our product portfolio, looking at our investment (inaudible) strategies and as far as products are concerned, I'm pretty sure that even in coming quarters also, [European] and India business will continue to grow at the pace of what it is today

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Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [21]

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Okay. But by any chance, you see some pricing pressure or something like that, sir?

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Rajeev Sibal, Lupin Limited - President of India Region Formulations [22]

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So obviously e-pharmacies, right now, as I said, penetration is very, very small. But if, once it becomes bigger -- once the new law comes as far as pharmacy is concerned, once the penetration goes up, obviously, there's going to be some pricing pressure. But right now, I don't think any pricing pressure has been seen [to the benefit].

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Operator [23]

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The next question is from the line of Arjuma Begum from Course 5.

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Arjuma Begum;Course, [24]

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I have few questions. First on generic Brovana. In the annual investor meeting, which took place in May 2019, it was announced that the (inaudible) Brovana has been filed. So are you [under] in any second [litigation] phase with this in a bigger company? Or is your filing accepted? And did you get any TAD for the thing?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [25]

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So we had filed and our filing has been accepted. I don't believe that we are involved in any litigation right now. And I don't recall the TAD off the top of my head, but that should be potentially a near-term opportunity if some of the other players that are ahead of us open the market for the product.

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Arjuma Begum;Course, [26]

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Okay. And second, on the (inaudible). Do you have any update on (inaudible) litigation process, when you expect it to be resolved? And do we have any TAD for the same?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [27]

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So it's pretty early from a litigation standpoint. We filed the product May last year and have obviously certified and started the litigation, but it's still early from a litigation standpoint. And our target date, I believe, is November next year, November '20.

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Arjuma Begum;Course, [28]

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And the last question is about generic Advair. The deal was made with Celon in Feb 2015. How the product is progressing in the pipeline? And when can expect to launch in the market?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [29]

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So we are late in generic Advair, as we have mentioned also in the past quarters. We continue to work with Celon to develop the product, simultaneously track the market very closely to make sure that the market opportunity still remains attractive for us to continue investment. We are still at the PK level haven't gone past a successful PK. So once we pass that stage gate, at that point in time, we will determine what the exact time line is to develop and launch the product.

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Arjuma Begum;Course, [30]

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Okay. And lastly, I have one more question. For (inaudible) 2 products like Advair and Symbicort are available in the U.S. market as Mylan has already a generic as well. So do you still see Advair as an opportunity? Or would you like to develop generic Symbicort?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [31]

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We'll also be developing Symbicort as well. And so far, as we look at the market evolution to the launch of generic Advair, we haven't seen a material switch from Advair into other molecules. So we still see other products like Symbicort as very attractive opportunities and distinct from Advair.

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Operator [32]

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

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [33]

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Ma'am, on SOLOSEC, we indicated we're now taking certain specific actions to try to push the penetration or increase prescription growth in the quarter. Have -- why you indicated 20%? Is it now tracking in line with what we had expected? Or do you think it requires more work to achieve what we had thought about for full effect for the full year?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [34]

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Neha, I think I could say that it's now on track. We are pleased that we are making progress quarter after quarter, we have growth spurts. So obviously, we are in the right path, but we need to accelerate growth. So there is a continued effort to drive tactics from a sales force standpoint, from a targeting standpoint, direct-to-patient standpoint to drive a higher level of growth. I'd say it's progress, but more to come.

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

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Do you think incremental action would be required from our end? Or just that the initiatives that we've taken could take time?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [36]

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Actually, we have -- in the last couple of months, really optimized our tactics quite a bit. Given the 1-year experience with the product, we have -- we took a look at -- we took a step back and took a look at our targets and had the opportunity to refine our targets around the strong managed care coverage, so that we could actually leverage our managed care coverage better. We have recently added also on the direct-to-patient side, on the digital or digital direct-to-patient strategy. We have SOLOSEC on Facebook that just went live in the last 2 weeks. We have a voucher program that we put in place for physicians, especially high-volume physicians, that have not put in for the product, to encourage trial. So there are a lot of efforts ongoing actually that the -- our team has put in place in the last 2 months, I would say. And the results of those are yet to be seen.

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

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Fair enough. In terms of the Women's health portfolio, right? I am assuming we will have to add assets to eventually look at breakeven for the branded business. And are we evaluating assets? Is there anything interesting available in the market on the Women's health side to augment that portfolio? Because with SOLOSEC, it will -- longer term, would Women's health focus make sense?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [38]

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There is certainly intent to add to our Women's health portfolio. And are actively looking at opportunities, opportunities to partner, co-promote or acquire products. And there are a few on the table that we are looking at right now. So it will take a minute to really build our Women's health portfolio. Hopefully, later this year, we will be able to bring at least one opportunity to expand our portfolio and offset some of the commercial expenditure.

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

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Understood. And one last question, if I may. Levo, you mentioned the quarter-on-quarter contribution was a little bit. With the approval for the other 2 RLDs pending, is the second half ramp up dependent on approval of those 2? Or you think, even with the existing approval, we can see ramp up in Levo?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [40]

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So we will definitely see ramp-up. Ramp-up also based on a capacity ramp-up. And we are going about it very strategically. We want to be able to meet the commitments that we give to our customers. The majority of commitments that we have made are pretty large volume customers, as you can imagine. Some of our partners are waiting for all 3 RLDs, you know for priority advice on them to all 3 RLDs which should happen in Q3. We expect it to happen in Q3.

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Unidentified Company Representative, [41]

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Yes. And if I can just add, we are maximizing our production, where we're running to capacity. And we feel that we need to enhance those volumes so that we can take good price at market share as well.

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Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [42]

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And that is likely to happen in the second half?

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Unidentified Company Representative, [43]

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Yes.

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Operator [44]

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

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Hari Belawat;Techfin, [45]

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This is regarding recall of certain medicines, I think 12,000 cartons were recalled, Fayosim medicine in the U.S. That was month of April or so. What is the legal and financial implication of such a recall?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [46]

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Financially, obviously, it costs us to do the recall. We have to offset our sales if it's a product sold to the channel partner. And there is a cost of the recall to the trade that we have to bear. But from a legal and compliance standpoint, it's a very strong position. A more conservative position, so that we don't have any risk or any exposure, especially from a patient standpoint.

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Hari Belawat;Techfin, [47]

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(inaudible) which are right now having certain problems. At what stage do we know if it has gone to pharmacy and then you get it back? And how is the process happening there?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [48]

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We track the product through its life, whether there's a time of stability studies. Depending on what we learn over time about a product and the batches that is assembled that we retain, we determine if there's any risk from a patient perspective, which requires us to take a position and recall the product.

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Hari Belawat;Techfin, [49]

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Okay. Has there been any other case other than this, which I just recall?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [50]

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There have been unfortunately multiple recalls over the last many years -- not only for ourselves, also for the rest of the industry. And it's just a part of the pharmaceutical process. I mean you learn about the product as you get experience with it. As you learn more about it, you get wiser and can revise and take actions necessary to ensure patient safety.

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Operator [51]

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The next question comes from the line of Subhankar Ojha from SKS Capital.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [52]

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So how is Lupin benefiting from the sum of the generic product basket restructuring that has happened in U.S.? And how much percentage of our U.S. generic will fall in that category?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [53]

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So we have proactively built share on our baseline products as some of our peer competitors have exhibit portfolios. I won't be able to give you exact percentage of our base business. But it's fair to say that the fact that our team has been able to build up a strong base of that $180-million-plus level, it's been both a combination of our solid foundation and then opportunistically gaining share wherever it made sense when others exited.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [54]

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Okay. But do you think the other players may come in and fill in that space? Or you have a good opportunity there?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [55]

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So we believe that there is a level of rationality that has fed into the U.S. generic market. On the one hand, we see that the customer consolidation for the most part is behind us. We've seen a number of companies exit portfolios like Mylan, Teva, Sandoz of course, (inaudible). And we've seen a smaller number of ANDAs being filed. So companies are being more judicious with their pipeline, a lot of pipeline rationalization. We've also seen in hyper-competitive products, you don't see every company launching a product. So companies are getting very judicious about product launches, product filings, investments in products, which makes for a better, healthier environment for the generic industry.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [56]

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Okay. And secondly, what is the status of our GAVIS portfolio? I mean when do we plan to utilize that portfolio to its true potential?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [57]

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So we are leveraging the potential as we speak. I mean the business has grown over the past year and through this fiscal year as well, quarter-on-quarter, we expect to grow our share of our products out of the Somerset facility. We also have a number of good filings, multiple [first-to-files] that we made over the last 2 years at the site. And I'm hoping that we will be able to clear the OAI at the site soon, hopefully this fiscal year so that we can leverage those opportunities next year onwards.

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Subhankar Ojha, SKS Capital & Research Private Limited - Senior Analyst of Equity Research [58]

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Okay. And lastly, if I may. So when do you plan to launch this (inaudible) that you have -- Tiotropium?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [59]

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So Tiotropium is a 2023 launch.

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Operator [60]

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

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [61]

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Vinita, any updates on the ProAir launches for this year, are you looking at an approval in second half?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [62]

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Yes. So listen, we are looking to get feedback from the FDA. And, so the review of the application at the FDA has taken longer than anticipated. Our goal date was moved by a few months. We are hoping to get some feedback from the agency soon, in the next couple of weeks, and then we'll be able to determine how soon we should be able to launch the product.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [63]

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And this delay, I mean do you see it changing fundamentally the fact that authorized generics are already in -- and the fact that the generic approvals get delayed, does it make the job a little difficult for us to sell -- for anyone of the generics to, whenever they get launched, to claw back market share?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [64]

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We don't think so. We think the market opportunity remains pretty attractive. If you look at the relative pricing of the authorized generics, it's roughly at the same level as a discounted brand. If you look at the share of the 3 brands and their authorized generics, it's relatively the same as it was prior to the launch of AG. So as we look at pricing at present as well as the market opportunity, it still remains very attractive.

So we hope that we can launch the product in the second half. It looks like Q3 will be tough at this point, given that we're already (inaudible) and waiting for feedback from the agency. We have materials ready to start manufacturing product, but don't want to lose dating. So we think that at this point in time, it will likely be a Q4 launch. And even though the launch gets delayed by a quarter or so, we still think it should be fairly attractive.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [65]

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Okay. So I just want to confirm 2 things that you mentioned earlier in the call. You said our base business stabilized around $180-odd-million now, right? Is that the right -- I got it right?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [66]

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Yes.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [67]

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So Ranexa still was the largest component of this quarter for us? It was lower than last quarter, but still, it's a reasonable component of -- for this quarter's numbers, in the year.

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [68]

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That's right.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [69]

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Okay. And secondly, on the branded business, outside of SOLOSEC, is there anything much to really look forward in the branded part of the portfolio? Or are focusing entirely on SOLOSEC now?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [70]

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The focus is very much on SOLOSEC. The other products, Antara and (inaudible) has gone generic, both the capsule as well as the suspension. So Antara has come up here top line and bottom line, that offset some of our spend. The majority of the focus is on building SOLOSEC.

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Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [71]

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And lastly, just alluding to earlier, one of the earlier questions. What kind of volume expanse -- do you still see meaningful volume expansion opportunities for our vaccine portfolio -- or -- given that we have pretty large market shares in a fraction of our market products?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [72]

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No, there's a good number of products where we are market leader and we have a top 3 position, but there is the product portfolio where we are not. So the team is certainly working very hard to look at every product and try to determine if we have an opportunity, in a profitable way, to gain share to be the top 3. So there certainly is an opportunity. And we think that with the kind of consolidation that is taking place in the U.S. -- you saw the recent Mylan transactions, and I'm sure there's more to come. There may be opportunities that come to [players like us].

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Operator [73]

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Our next question is from the line of the Tushar Manudhane from Motilal Oswal Securities.

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Tushar Manudhane, Motilal Oswal Securities Limited, Research Division - Research Analyst [74]

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Just on the levothyroxine for the other RLDs. So in terms of queries, where do we stand?

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Unidentified Company Representative, [75]

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So we have no pending queries. And likely -- and by Q3, we should have approval for the other RLDs.

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Operator [76]

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The next question is from the line of Chirag Dagli from HDFC Mutual Fund.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [77]

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Can you quantify the U.S. brand sales for the first quarter?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [78]

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It's around $5 million.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [79]

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$5 million. All right. And currently, there is definitely a -- definitely a cost mismatch in terms of what you're investing in this facility. Is there a number that you want to share with us of what sort of EBITDA hurt is this effort causing us?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [80]

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I don't think we want to share a product-specific investment number. But it's fair to say that this is a long-term investment for us. We believe in the potential of SOLOSEC as well as the Women's health business. And we have a long runway with SOLOSEC over the next 8 years, plus we have our life cycle management in place. So while we want to get to breakeven as soon as possible, our effort is to ensure that we build the product in a way that it sticks long term. We build long-term loyalty with physicians as well as patients.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [81]

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The digital strategy does not increase the costs meaningfully, right?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [82]

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Not materially. It does not [deviate beside or anything that can be]. It's really a direct-to-patient through social media, through bloggers, through like I said, Facebook page that we have now in place. And for this condition, a lot of them intend to go to resources like this as opposed to talking to their physicians. So we will want to encourage patients -- women to get awareness about the condition and go to the physician and ask for SOLOSEC. That's the goal with that digital strategy.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [83]

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Right. And the second question I had was on the -- on these products that you have, some of the larger players of leading market shares. So what happens to the prices of these products based on whatever you've seen over the past 1 year? What has happened to prices of some of these products which have gone into either rebidding or people have withdrawn products?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [84]

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Well, so there's always an opportunity to reset pricing when anybody exits the marketplace. So from our standpoint, if it made sense, if it was profitable, we would add share. If not, we will not enter a product. But we've seen more opportunities there. Pricing has been more rational after companies have exited, that has allowed us to gain share on a profitable basis.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [85]

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More rational means there is naturally an increase in the existing price?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [86]

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That's right.

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Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [87]

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Can you quantify just a ballpark, sort of broad range?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [88]

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It's hard to quantify.

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Operator [89]

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

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [90]

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We have a couple of clarifications. One, on Spiriva, you said 2023 launch -- is it fiscal? Or a calendar? And I'm asking because I thought that [P patent] expires in 2022.

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [91]

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Yes, well it's around that, it's around [the P patent] Sameer.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [92]

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Okay. Got it. Second question on [Zavitrol]. Now my guess is 3 of the generics have taken 35%, 40% market share. Does -- is that also remains addressable market for you? Or is it a balanced branding that you would be going after?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [93]

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No, the entire market branded as well as authorized generic is available to us.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [94]

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Okay. Great. And on Levo, what's the current capacity utilization that you are having?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [95]

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100%.

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Unidentified Company Representative, [96]

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Yes we're running at 100%, but we're expanding the capacity as well. In fact, we're adding an extra plant. So we'll have a very significant ramp up.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [97]

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Okay. But if I see a prescription share that my guess is still under 5%.

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [98]

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That's right. So we are ramping it up very strategically, Sameer, because each of our customers is 10 plus percentage points, right? So as we ramp up capacity, we are giving them our solid commitment. So we expect to really be at that 20% at the end of the fiscal year from a capacity and ability to take share.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [99]

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That's great. And when does the new facility actually start commercial production?

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Unidentified Company Representative, [100]

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So hard to comment on this area, it moves a little bit. But basically, Q4 is when we'll have some very good set of capacities online.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [101]

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Okay. Perfect. And any update on Etanercept for Europe?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [102]

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Yes. So Europe, actually, we got credit from the EMA, they wanted to do some additional inspections around the PK study, and we have scheduled that for later this calendar year. So we expect approval of the product really end of this fiscal year, probably first quarter next fiscal year. So our plan in the current year, Sameer, is to really maximize Japan. Our partner Yoshindo has already launched and Nichi-Iko is building large quantities, so we're working to them to get them ready to launch the product in November. And then end of Q4 start of Q1 -- Q1 '20 -- '21 is when we would expect to launch in Europe.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [103]

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Okay. That's -- with your permission. And last question on SOLOSEC. Now we -- I think we have a couple of points, you had earlier mentioned that it was not widely available in pharmacy. So a, has that been fixed? And b, what is really the key bottleneck over here? Why do you need to go to patient directly? When patient comes to the physician, are they not happy prescribing this product and is reimbursement a bottleneck there?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [104]

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So actually, the population -- the number of women that get bacterial vaginosis is 20 million plus. And the number of prescriptions that are dispensed for bacterial vaginosis is 6 million. So there's a huge gap in the market that has been -- of patients that have been treated. Therefore, the reason to really educate patients, educate them and to -- on the condition and the fact that there is a drug available that is easy to use, it's one dose treatment to draw them to the doctor's office. We find that a number of patients tend to ignore it, that's why you have this gap between 6 million and 20 million. And while our sales force is focused around the physicians and around the 6 million current prescriptions that we are working to switch share from, we also want to be able to build a variance in the rest of the market to be able to expand the market.

Yes. In terms of the other challenges that you mentioned, like pharmacy. So pharmacy availability is less of a challenge. But to ensure that the pharmacy adjudicates the script in the right manager to ensure that we leverage our strong managed care coverage and then apply the copay card effectively, is something that they're still learning to do. So there is an intensified focus actually around pharmacies as well, in addition to the physicians, to ensure that the pharmacies dispense the product after taking into consideration a patient's managed care coverage plus then giving them the benefit of the coupon.

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Operator [105]

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The next question is from the line of Rahul Sharma from KARVY Stock Broking.

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Rahul Sharma, KARVY Stock Broking Limited, Research Division - Analyst [106]

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Just want you to please take us through, as Ranexa is probably on the way down. What are the opportunities in FY '20 and '21 will be able to basically fill the gap apart from Etanercept and -- on generic space?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [107]

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Yes. So as I mentioned earlier, levothyroxine is a big opportunity for us. There's opportunity for this fiscal year, but also for the next few years. Just given the complexity of the product and the supply chain, we believe that we should be in a very strong position to benefit especially on the generic side of the business in the next couple of years with levothyroxine. Other than levothyroxine, certainly albuterol depending on the approval time line, hopefully, second half of this fiscal year as well as into next fiscal year should be a strong contributor. Our injectable portfolio, starting with Fosaprepitant that we launched this quarter, we expect to build that up in the next couple of years. I mean the material product sales will come when our depot injectables, our peptides, our iron products out of Netherlands and India come online. But at least in the near term, this will allow us to gain from the hospital channel, which we have not accessed so far. So those are a few.

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Unidentified Company Representative, [108]

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And then we obviously have the 20-odd products that we still launch every year and internal demand's a few million.

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Rahul Sharma, KARVY Stock Broking Limited, Research Division - Analyst [109]

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The injectable portfolio will be launched starting from when?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [110]

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September. This quarter.

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Rahul Sharma, KARVY Stock Broking Limited, Research Division - Analyst [111]

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And which are the key products which you mentioned apart from depot injectable? Can you...

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [112]

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No. For this quarter, it will be Fosaprepitant.

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Operator [113]

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The next question is from the line of Nikhil Mathur from AMBIT Capital.

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Nikhil Mathur, AMBIT Capital Private Limited, Research Division - Associate of Small Caps [114]

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I have a question around the margins -- EBITDA margins in 1Q. Now if I look quarter-on-quarter, the employee cost has been flat, and the other expenses are down quarter-on-quarter. So is cost control a really big focus area for Lupin in FY '20 and if yes, what kind of levers that can help you to control your CAGR costs in second half FY '20?

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Unidentified Company Representative, [115]

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I think first of all cost control is a big lever, but I don't think that much has contributed to the Q1 number. I think there's a little bit Q1, but I think Q2, importantly, Q3, Q4 is when we get good consumer cost saving, then the following year we will get even more.

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Nikhil Mathur, AMBIT Capital Private Limited, Research Division - Associate of Small Caps [116]

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Okay. Okay. And second question would be on SOLOSEC. I understand that there's a bit of strategy around promoting SOLOSEC in the U.S. But on the sales force that (inaudible) in the U.S. Do you need to add more sales force that supports the products in the market?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [117]

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So once we get to our optimal share with the existing sales force, certainly we'll consider adding to our sales force. There is a potential, definitely, we have additional targets that would still make sense after we gained traction with existing sales force.

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Operator [118]

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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 [119]

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My first question is, can you share your growth outlook for your India formulation business as well as the overall industry also? [As per you] if you look at like recent weak volume in the market, how do you see your portfolio to grow here?

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Rajeev Sibal, Lupin Limited - President of India Region Formulations [120]

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So as far as the India business is concerned, as we said earlier that the first quarter, we had grown at 12.3%, and therein the volume growth was 4.7% as compared to [IP] and volume growth of 1.7%, and we continue to see similar performance even in the coming quarters. So that is -- because we are very strong as far as our portfolio is concerned, our portfolio basically is in chronic disease portfolio. The 50% of our business comes from chronic portfolio. Then if you look at the industry, the IP contribution to chronic is only 25%, whereas Lupin's chronic contribution is 50%. So since we are very, very strong as far as our portfolio is concerned, we are very sure that we will continue to perform at the rate we have performed in the first quarter in the next 3 quarters also.

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Alok Sonig, Lupin Limited - CEO of US Generics & Global Head of Generics R&D & Biosimilars [121]

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And if I can just add, there are 2 or 3 areas, which are very big areas for us. TB is where we started, but then (inaudible) is a very bright area, cardiovascular, and (inaudible) and we still believe that there is room to grow. There's market share to be gained in each of these 3 as well. We have created 3 new divisions in the last 6 months. So there is a lot more to come. We are very bullish for India.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [122]

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Okay. Sure. Next, moving on to some of the smaller markets, though they might not be very significant to your portfolio, but if I look at the markets of South Africa and all, they have seen a significant drop in sales quarter-on-quarter, not (inaudible) also. So can you just update what is happening there? And how do you see this part of the business moving ahead?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [123]

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So South Africa is actually not too small, I mean it's the fourth largest market for us, so it's significant. So the first quarter, definitely had a dip, but that was more to do with phasing. We had significant sales in Q4 last fiscal. And that was primarily due to the price increase that took place in April because of it's a trade part. There was a 3.5% plus price increase that we saw after a long time in South Africa because of which there was a big trade buy in March. And that is why Q1 was short. But when we look at the secondary sales within South Africa, our sales are between 6.5% to 8% right now. We had a couple of products where we had product discontinuations as well due to supply issues. But if you put them aside, our secondary sales were at 8% growth. So we feel pretty strong about growth prospects in South Africa. The current fiscal year certainly will be a good growth year for us in South Africa. The Middle East on the other hand was insignificant for us. It was a very small part of our revenues, a couple of crores. And we saw certain risk exposure from a payment perspective in the region, and didn't think it was worth it, so decided to wind it down. We have a presence across many very strong geographies right now and decided to focus on our key geographies as opposed to just spreading ourselves everywhere.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [124]

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Sure. Last question on the Japan, you mentioned we have seen good traction in [Brin] launch. So apart from that, how is the other part of the business doing there?

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Unidentified Company Representative, [125]

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And well we've just launched. So I think it's still early days, as far as that is concerned, I think it'll be more build in Q3 and Q4. And I think it's the first-level demand, the second largest market in the world. But it is going through significant pricing pressures. There is a price adjustment that will happen in October. There is another one that will happen in April, and then it's going to be an annual event thereafter. So there are definitely pricing pressures. But I think that's when the play for integrated generic company comes in. So we are increasingly doing more research out of India, manufacturing out of India and supplying to the market. We need to do a lot more of that, we need to -- we've moved from line -- from #6 to #5. So we actually have a significant position in Japan. So I think the volume growth has happened. The value growth will be muted as far as Japan is concerned, but we need to bring cost efficiencies and operational excellence into the structure, which is something that we worked on. So last year, we realigned some of the sales force, we have done other measures as well. So I think there's an efficiency play in Japan. There's obviously a specialty play as well. So we have Bipresso that is picking -- still very small, but picking up significantly. Speed things up in the last year. So good increase there as well. But I think all of this together, it's -- Japan's about 14% of our sales, so it's a significant portion. We have to make sure that we are successful there. So I think with all these measures that we have because with more of a pipeline from India, with more of a differentiated pipeline, with cost efficiencies, that's the play that we're going to have in Japan.

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Damayanti Kerai, HSBC, Research Division - Analyst, Healthcare and Hospitals [126]

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Sure, but the pricing environment remains very challenging there, right? And we haven't seen any improvement happening.

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Unidentified Company Representative, [127]

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So no. I don't think there's going to be a change on that count. And then I think it's a structural change, they used to do price cut every 2 years, they're going to bring it down to once a year. But obviously, the extent of the annual price cut will come down. But definitely, the pricing pressure will remain.

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Operator [128]

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

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Shyam Srinivasan, Goldman Sachs Group Inc., Research Division - Equity Analyst [129]

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Just 2 quick ones. One, this quarter, again, we saw R&D come in much lower than 4Q and Q3 -- with 3Q as well. So what are we doing here? I know we have signaled our intent to keep this under control. But do you think at some point of time this will start ramping up again, or do you think the high investment phase in R&D is behind us?

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Nilesh Deshbandhu Gupta, Lupin Limited - MD & Executive Director [130]

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So we've already talked about the outlook for the year as far as R&D. It's going to be a very similar number to the number that we did for last year. There's I think incentive to doing it at this point in time. So I don't think we're giving up on opportunities. We've already optimized, we've resized the R&D team. We're focused much more on injectables than on the complex products. So I think the incentives are panning out at this point in time. The next year, [even though] we'll see a little bit more investment going on the specialty side. And some of it comes out of areas like drug discovery, I think the generic part is pretty well set. The biosimilar part is pretty well set. There is a little bit of increase that we should do over time on the specialty. We've started the first few products. Some of them will move into clinic next year. So we have to provide for that as well. But I think all of this together for this year, pretty much the same number as last year for next year, probably a slight increase, but still well within 10% of sales.

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Shyam Srinivasan, Goldman Sachs Group Inc., Research Division - Equity Analyst [131]

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And my second question is on the, just the U.S. market. And just from an industry perspective, what are we seeing in terms of price erosion, your kind of discussions with the supply chain. If you can share some color, that'll be very helpful.

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [132]

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Yes, it's been fairly stable over the last few quarters, last 3 or 4 quarters have been fairly stable. And with the kind of consolidation that you're still seeing on the manufacturing front, you look at Mylan, Upjohn for example, and probably more to come. And that is a positive from a supply standpoint. So we expect it to continue to be stable. The price erosions, before we had the significant pressures of -- for the last few years was in the single digits -- mid-single digits, and that's where it's at right now.

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Shyam Srinivasan, Goldman Sachs Group Inc., Research Division - Equity Analyst [133]

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Got it. Last question is on the CapEx. What's the guidance for this year, we've done about INR 120 crores. I'm just wondering the guidance for this year?

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Nilesh Deshbandhu Gupta, Lupin Limited - MD & Executive Director [134]

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It's about INR 600 crores, INR 700 crores. It's, obviously we're in that cycle where capital expenditure is limited and primarily for new areas. So we have a new emission plant that is coming up. We have a biosimilar expansion that is going well as well. So those are some of the investments.

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Operator [135]

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The next question is from the line of [Shravanthi Bi] from Infiniti Research.

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Unidentified Analyst, [136]

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Regarding [adjuvant] Brovana. As it is a first (inaudible) like to continue product for you, was it difficult to develop this product, and which month actually (inaudible) responsible for this product?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [137]

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So it was actually developed by an inhalation team led out of Florida and its contract manufactured in the U.S.

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Unidentified Analyst, [138]

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Okay. And one more thing. On generic Brovana, this will be the first company to file for generic Brovana?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [139]

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No, there are other companies that have filed generic Brovana as well.

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Operator [140]

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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 [141]

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Actually, I have 3 questions. So the India business growth numbers that you gave out 12.3%. That's the secondary audit on growth. Correct?

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Unidentified Company Representative, [142]

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So the difference between 12.3% and 9.8%, which you see unit results are concerned is because of our generic business, which contributes only 5% to our business. And because of that, there, we have some challenges of growth because the market is predominantly acute business. And in rural areas there -- that business has been grown by 8%. Otherwise, our main prescription business has grown by 12.3%.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [143]

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Understood. Can you elaborate a bit on this piece because what we're seeing is in the straight generic business, almost all your peers are reporting similar discussions, be it Cipla, be it Alkem, et cetera. What really is happening in that space? And why is the business getting disrupted all of a sudden?

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Unidentified Company Representative, [144]

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So I think that if you look at overall market of the acute business also is low in the first quarter because of the seasonal changes and that's where the generic is building acute business and it is in those towns -- we're normally very [committed and representative there]. That's how this model has been built up. So the first quarter has been impacted because of that. I'm sure, in this quarter, we should be able to stabilize as far as that part of business also is concerned.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [145]

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Okay. Could you also elaborate on the potential impact that you are seeing from some of the initiatives like the Jan Aushadhi or online pharmacies, how are they impacting your business growth?

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Unidentified Company Representative, [146]

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So I think I have said earlier also that yes, Jan Aushadhi which has now almost [1,000] stores as far as our R&D is concerned, and e-pharmacy, there the penetration is very, very low. Right now, we don't see much impact. But yes, in future, once the penetration goes up we will surely have price erosion because then there will be -- in this case, we will be able to do a little bargain in the pricing as far as products are concerned. So right now, if you look at in the next 1, 1.5 years, I don't see much impact as far as that e-pharmacy or online pharmacy is concerned.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [147]

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All right. Also, on the U.S. side, Vinita, so as you alluded to the fact that the pricing is somewhat stabilizing given the -- in some products that we see have been withdrawn by some of the incumbents. Can you help me understand, are there 2 ways of dealing with this, where, in one case, you just take the one-off supply from where the competitors are on top line, and we supply that at a much higher price point? And the second, you're doing it as you sustainably gain that share. But then in that case, you don't get as higher price point. Are there 2 strategies here? And if yes, there are 2 strategies, which is the one that we have chosen for?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [148]

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So we always go for the long term. That's what our partners' customers usually want to go for as well. I mean they don't want to be switching supply, especially for large volume products over and over again. There's a [new business] with administrative costs their end and with the pharmacies. So while the one-off, you can really get a good upside, that is -- typically, we would do that only in situations where we don't have the capacity to dedicate long-term for their additional share gain. At that point in time, yes, strategically, we will leverage the opportunity and maximize. But otherwise, we typically try to build for the long term.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [149]

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Okay. Okay. And on the SOLOSEC comment as -- in terms of the year already at a $5 million range for the branded business. And so could you just help us in terms of guidance on when do you expect SOLOSEC to break even as a (inaudible), including front end infrastructure as well?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [150]

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So we hope within the next 2 years, that we can break even. Our expectation from the standpoint of peak share revenue has not changed. We still believe that 15% share of that market is feasible, is doable. It's taking us a little bit longer. But in the next couple of years break even and hopefully, offset some of that near-term spend with an additional product and get to peak share in the next 4 to 5 years.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [151]

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All right. One last question, if I may. So you also participate in some of the tender businesses in emerging markets, Africa, et cetera. Could you help me understand how the funding environment there has been? Has it improved versus earlier? Or has it been more or less similar?

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Unidentified Company Representative, [152]

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Yes, I think the funding has been improved. And especially in the area of TB, there has been a conference in the United Nations, where all the countries have said that in the next 4, 5 years, they want to eradicate the TB from the entire world. As far as the funding is concerned, it has increased, and there has been a lot of increase in the funding by the (inaudible) government -- sorry, the different governments in the world.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [153]

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So would it be fair to say that given the improvement in funding and the aim to eradicate TB in the next few years, so has the pricing for your products also improved?

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Unidentified Company Representative, [154]

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Well, I think the pricing in this end of the business is very competitive, as you are aware, and there has been an issue of supplies also. So pricing is not as effective as in the normal [tier of] business, but we are having a [batoned] integration for TB, et cetera, and we have been here for a long time. So we continue in this business.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [155]

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Okay. Sorry, one -- I have one last one for you, Vinita. How much of our portfolio in the U.S. in terms of revenue, if you can, comes from [playing] when you have oral solids?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [156]

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In fact we're integrated in so many of our products, none of them (inaudible) is what I would say. It's hard to really put a percentage on it. I'd say there is still a good part of our portfolio where we are market leaders. And I'd say, as opposed to the commoditized or not commoditized from our perspective, products where we have significant share, we have efficiencies and advantage from a cost perspective that makes us a good long term player.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [157]

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No, I get that. So maybe it's more than 60% of your portfolio would you say, would be oral solids including Fortamet, Glumetza and the like?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [158]

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Yes, I would say so.

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Unidentified Company Representative, [159]

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Yes, including the extended-release products.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [160]

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Yes, including extended release, okay. More than 60%.

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Kamal Kishore Sharma, Lupin Limited - Vice Chairman & Advisor [161]

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Can we have the last question, please.

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Operator [162]

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The next question from the line of [Aman Karnani] from Unifi Capital.

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Unidentified Analyst, [163]

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Just wanted to understand with respect to the FDA or basically what is the current situation? And how long do you think we'll be able to resolve the issue?

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Unidentified Company Representative, [164]

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So we talked about this earlier of course, but I think we feel good about where we are now. I think we've made significant progress in FDA. We've been engaging with FDA as well. We've made significant progress in terms of addressing concerns that they would have. We -- I think by the end of the calendar year, should be able to offer 1 or 2 of these facilities for early inspection, and we'll see when FDA comes around for that but I think if things improve then hopefully, by the end of the fiscal, we should be able to turn 1 or 2 of these facilities around.

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Unidentified Analyst, [165]

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So sir, any comments on the U.S. growth that's happening and what the current data, how long that will -- in the U.S. market it will get [timely] resolved. And any financial implications that you would have provision for?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [166]

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It's very early to comment on it. I was just the last couple of months. So we are in the early stages of doing our own internal research, and will expect it to probably play out over the next couple of years. It's very early to comment on it. Maybe from our standpoint, we stand in a very good position based on the internal work we have done, but we'll determine over the next quarters. And obviously defend our position vigorously.

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Unidentified Analyst, [167]

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Sure. And sir, lastly wanted to understand with respect to U.S. markets, why in the last few months, pricing has stabilized and there isn't much erosion. But is there -- are there any structural changes which the U.S. government can undertake, which can further lead to price erosion, like for example, for the last few years, they have been speeding up U.S. ANDA approvals, and hence it's had a big price erosion, right from the date the growth generic. So any other [taxable] features of the U.S. market, which if they were to change that impact us negatively?

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Vinita D. Gupta, Lupin Limited - CEO & Executive Director [168]

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I think we've gone through our fair share of structural change in the U.S. over the last many years. And as a result of which, you've seen a number of generic companies exit. I'd say any additional structural changes that the U.S. might make from a pricing standpoint probably will be a positive for the generic side of the business, meaning more conversion of the market into generics. Where there's more pressure, I would say, on high-priced brands in the U.S. at this point, where there is (inaudible) intervention through additional price rebasing or intense marking price to other markets that could be more on the brand front.

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Kamal Kishore Sharma, Lupin Limited - Vice Chairman & Advisor [169]

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Okay. Thank you very much for your participation, and we now look forward to seeing you again in the next quarter conference. Wish you all the best.

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Operator [170]

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Thank you. Ladies and gentlemen, on behalf of Lupin Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.