U.S. Markets closed

Edited Transcript of NATCOPHARM.NSE earnings conference call or presentation 13-Nov-19 5:30am GMT

Q2 2020 Natco Pharma Ltd Earnings Call

Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Natco Pharma Ltd earnings conference call or presentation Wednesday, November 13, 2019 at 5:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Rajeev Nannapaneni

NATCO Pharma Limited - Vice Chairman & CEO

* Rajesh Chebiyam

NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications

================================================================================

Conference Call Participants

================================================================================

* Anmol Ganjoo

JM Financial Institutional Securities Limited, Research Division - Director

* Anuj Momaya

Valuequest Investment Advisors Private Limited - Analyst

* Charulata Gaidhani

Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst

* Deepak Malik

Edelweiss Securities Ltd., Research Division - Analyst

* Gagan Thareja;Kotak Investments;Analyst

* Kunal Mehta

Vallum Capital Advisors - Research Analyst

* Kunal Randeria

Antique Stockbroking Ltd., Research Division - Research Analyst

* Nitin Agarwal

IDFC Securities Limited, Research Division - Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Srihari Chintalapudy

PCS Securities Ltd., Research Division - Equity Fundamental Analyst

* Vishal Manchanda

Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, good day and welcome to the NATCO Pharma Limited Q2 FY '20 Earnings Conference Call hosted by Edelweiss Securities Ltd.

(Operator Instructions) I now hand the conference over to Mr. Deepak Malik of Edelweiss. Thank you, and over to you, sir.

--------------------------------------------------------------------------------

Deepak Malik, Edelweiss Securities Ltd., Research Division - Analyst [2]

--------------------------------------------------------------------------------

Thank you. And good evening and good morning, everyone. On behalf of Edelweiss, I welcome you all for NATCO Pharma's Second Quarter FY '20 Earnings Call. Today we have with us the senior management of the company represented by Mr. Rajeev Nannapaneni, Vice Chairman and CEO; and Mr. Rajesh Chebiyam, Vice President, Acquisitions, Institutional Equity Investor Management and Corporate Communications. I would like to hand over the conference to Mr. Rajesh for the opening remarks. Over to you, Rajesh.

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [3]

--------------------------------------------------------------------------------

Sure. Deepak, thank you very much. As always. Welcome, everyone, to NATCO's conference call discussing our earnings for the second quarter of FY '20, which ended September 30, 2019.

As a disclaimer, we may be making certain forward-looking statements, which are predictions, projections or statements about future events. Because forward-looking statements involve risks and uncertainties, actual future results may differ materially from those expressed or implied.

Let me also state that the material of the call, with the exception of participant questions, is the property of NATCO and cannot be recorded or rebroadcast without NATCO's expressed written permission.

On the results, NATCO recorded consolidated total revenue of INR 518.9 crores for the second quarter, which ended September 30, 2019, as against INR 583.5 crores for the same period last year. The net profit for the period on a consolidated basis was INR 117.7 crores as against INR 181.6 crores for the same period last year. The decline in revenues and profits compared to the same period last year is primarily due to the unexpected drop in oseltamivir sales in the U.S. and hepatitis C sales in India.

The Board of Directors has recommended a second interim dividend of INR 1 per equity share for this quarter.

We'll take questions. And the split in terms of segment has already been communicated to the exchanges. So any questions on that, we'll take it.

Deepak, let's open up for questions.

--------------------------------------------------------------------------------

Deepak Malik, Edelweiss Securities Ltd., Research Division - Analyst [4]

--------------------------------------------------------------------------------

Okay.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question from the line of Shashank Krishnakumar from JM Financial.

--------------------------------------------------------------------------------

Anmol Ganjoo, JM Financial Institutional Securities Limited, Research Division - Director [2]

--------------------------------------------------------------------------------

This is Anmol. So domestic, we've seen a second consecutive quarter of decline. Would you like to call out the factors that are responsible? Also in terms of hep C contributing, we saw that number decline from 42 crores to 31 crores on a sequential basis last quarter. What is that number like now? And since the performance is pretty much against the [announced plans] in terms of what other companies are executing, would you also kind of want to highlight how the full year should look like, especially in terms of the domestic performance?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [3]

--------------------------------------------------------------------------------

First, we'll do the split of the divisions. So Rajesh, can you ...

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [4]

--------------------------------------------------------------------------------

Yes. So Anmol, let me just give you the specific split for the quarter. All right. So API, we have said 68 crores for Q2, and 55 crores of that is exports, remaining is domestic.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [5]

--------------------------------------------------------------------------------

Domestic (inaudible)

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [6]

--------------------------------------------------------------------------------

On the formulation oncology, that's 68 crores. And the non-onco brand pharma is about 34 crores. Formulation CnD is about 5 crores. And the third-party was roughly around 15 crores. So that's the broad split on the...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [7]

--------------------------------------------------------------------------------

In terms of declines, you see we have spoken about hep C. I think, in the past year, we have spoken as well. Like, hep C is a complete cure. So we are seeing a decline of hep sale Q-on-Q. And I think that's, I suppose,[needs] a [description] . I think the only difference, I think an [unanticipated part] will be onco decline. I think onco and the cardio decline, I think cardio sales, we had larger sale in the previous quarter because we had some stocking qualities [of too] few brands that we have done. And that's the reason why the sale was higher in the earlier quarters, slightly lower this quarter.

(inaudible) we will start with the cardio. I think we had very good launches in the last few months. We launched apixaban. We're the first generic. We launched (inaudible) we're the first generic. We got injunction on it, where we got to keep those profits which is already there in the market. And I think post-December, I think it opens up for everyone. And we launched regorafenib, which is the [non-proprietary way] we look for a generic. And we launched ticagrelor after that Delhi High Court on [declared our victory].

So we had good launches. I think if you look at a long-term view, I think we're very positive overall with cardio and (inaudible) the business. So the disappointment is, to be honest, is the sale drop in the onco business. I think we had a couple of pressures on a couple of brands, on some of our heavy brands. So I think that's the reason why we see a decline. But I think [that] we will get traction over due course because we have some very good launches lined up in the next few quarters.

--------------------------------------------------------------------------------

Anmol Ganjoo, JM Financial Institutional Securities Limited, Research Division - Director [8]

--------------------------------------------------------------------------------

That's helpful. But I think what would help, Rajeev, is that if you could just call out the corresponding number, the 31 crores for hep C the last quarter. And also with respect to oncology getting sorted out over subsequent quarters, does this mean this was a one-quarter phenomenon? Or it kind of drags what we were expecting for the full year? And in terms of how does that impact the guidance that we had for the full year? So I think any outlining of that could be helpful.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [9]

--------------------------------------------------------------------------------

Yes, we'll talk about guidance in a few minutes. But I think what we'll do is split -- hep C has been flat, Anmol. [I mean] from Q1 to Q2, it's been stable. Compared to last year, yes, it's a decline, but we have said it because it's a complete treatment [it's going to] decline. But sequentially, it's been flat.

--------------------------------------------------------------------------------

Anmol Ganjoo, JM Financial Institutional Securities Limited, Research Division - Director [10]

--------------------------------------------------------------------------------

So 30 crores...

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [11]

--------------------------------------------------------------------------------

Of course, (inaudible) declined sequentially. If you compare Q1 to Q2, is roughly about 10 crores decline, which I think, as Rajeev already explained, there is some pressure on just a few products. But ...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [12]

--------------------------------------------------------------------------------

We cannot return new launches.

And the last question you had was on the guidance for the year, is there any impact on the guidance of the year. I think overall there are 2 -- in addition to the launches that we have in the domestic, which would, I think this is on onco, we have a few interesting launches lined up. I think one is the what I call first one, which would be critical in the next year, I think in the next few months would be the agro product that we have filed, which we publicly disclosed. And then the lenalidomide litigation in Canada. I think these are 2 big ticket items. And so -- and I'll give an update on both.

So I think we have reviewed where we are on the agro product (inaudible) they re-filed the product and there's pending litigation. And if everything goes well, we will speak about the launch. Obviously [we are conducting a] legal case right now, so we'll speak about that later. So this is obviously very important for our earnings growth.

And another one is obviously the lenalidomide. So lenalidomide, we have a filing in Canada, and so we're going to trial next quarter on this product. And so that also would be very critical for us. Okay?

--------------------------------------------------------------------------------

Anmol Ganjoo, JM Financial Institutional Securities Limited, Research Division - Director [13]

--------------------------------------------------------------------------------

Yes. Just my last question before I get back into the queue. So the agro launch is not an F '20 event, right? Even the best case litigation outcome, we don't see it to be an F '20 event. And...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [14]

--------------------------------------------------------------------------------

I want -- it will happen soon. I mean I don't want to get in [detail] and all because we have a legal case and one (inaudible). It will impact near term. That is all I am going to say.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

We have next question from the line of Prakash Agarwal from Axis Capital.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [16]

--------------------------------------------------------------------------------

I have 2 questions. First one on Revlimid. What's the status? Given the fact we mentioned earlier that we're looking for an approval by end of this calendar year. Given there are only some labeling issues, is there an update there?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [17]

--------------------------------------------------------------------------------

Yes, sure. [You're not talking about the U.S.A.] So Revlimid, we have a goal date in this financial year, in the next quarter. And we believe we have only some minor queries. We've answered all of them. And our inspections are all (inaudible). So I think we're in good shape. We should get an approval hopefully in the next quarter based on the goal date that was given by the FDA, assuming we won't have any further queries.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [18]

--------------------------------------------------------------------------------

So there are no pending queries on the molecule front is what I understand?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [19]

--------------------------------------------------------------------------------

Nothing is pending.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [20]

--------------------------------------------------------------------------------

Okay. And goal date you are saying is Q4.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [21]

--------------------------------------------------------------------------------

Q4 of this -- yes, financial year. Correct. Yes.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [22]

--------------------------------------------------------------------------------

Okay, perfect. And sir, if you could just explain the gross margin movement also. I understand India business is down. Was there any lumpy drop-down in any pricing of sales products in the U.S. or somewhere? And how to understand the gross margin for this quarter and going ahead?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [23]

--------------------------------------------------------------------------------

I'll tell you what happened. So basically there are 2 issues here. We had some stock in quantity for the flu season this quarter. So I think we had about, I think about 20, 25 crores API sales and about 30 crores of what we call formulation sale where we both sold on cost plus basis, which will be reflected in the profit share that we're going to get in the subsequent quarters depending on how the market behaves in Europe in the next 2 quarters. I think the sale includes some portion of stocking quantities for that coming through [seasons]. That's the reason why the gross margin looks like there's a shrinkage. But it's only because the way we do our flu billing is that we [bill it] at cost plus, and then and we wait for the profit share to happen. So if we get good profit share, then obviously you'll see the gross margin return back to normal, to get normalized.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [24]

--------------------------------------------------------------------------------

Adjusted for that, it is around 80%, 85%, which is overall run rate. Is that correct, I understand?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [25]

--------------------------------------------------------------------------------

Adjusted when you remove those sale? Yes, I think your EBITDA margin drop will not seem as much as it looks like, yes.

--------------------------------------------------------------------------------

Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [26]

--------------------------------------------------------------------------------

So we should not read much into any drop-down in Copaxone or Doxil is what I wanted to understand.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [27]

--------------------------------------------------------------------------------

There is no impact on Doxil and Copaxone. It's fairly steady state. Those 2 are doing extremely well, and they're fairly steady state. What you've seen this quarter decline is 2, 3 reasons. [As Anmol already said], one the domestic sale has been weak. That's one reason why we have a lower margin. And second is, as I said, we did stocking quantity of the flu business, and [not] booking profit share of the flu business. So that's the reason why it looks -- because basically we will [include] on the raw material costs, and the profit share comes separately. So I think that's the reason why we see this.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

We have next question from the line of Anuj Momaya from Valuequest.

--------------------------------------------------------------------------------

Anuj Momaya, Valuequest Investment Advisors Private Limited - Analyst [29]

--------------------------------------------------------------------------------

Yes, so I'm trying to understand your execution strategy for the agro business. You just announced the product name, but can you also give the distribution strategy that you're going to adopt for that?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [30]

--------------------------------------------------------------------------------

I think we are looking at 2 options. I think the distribution business for agro, I think what we want to do, we want to set up our own front end. We have already set it up right now. And we have a few more molecules in our pipeline, and I think we are very bullish about this pipeline. So I think the idea is primarily that we want to do it ourselves.

--------------------------------------------------------------------------------

Anuj Momaya, Valuequest Investment Advisors Private Limited - Analyst [31]

--------------------------------------------------------------------------------

Okay. So when you said own front end, (inaudible) a partnership deal with the domestic market? Is that what you are thinking?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [32]

--------------------------------------------------------------------------------

I think it's too premature. Nothing -- I don't want to [give really you a sense,] but I think primarily it will be driven by our own [branding] .

--------------------------------------------------------------------------------

Anuj Momaya, Valuequest Investment Advisors Private Limited - Analyst [33]

--------------------------------------------------------------------------------

Okay. Selling for BRILINTA, you have launched wider product back in new market. So how is the response to it been? And how has the existing player have responded to our launch?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [34]

--------------------------------------------------------------------------------

I think very early that we launched it, to be honest with you, about a week ago. I think we are the most competitive (inaudible). And we're looking good. I think we're happy with the launches. And I said domestic launches, we've done a lot of domestic launches. They're very bullish. I think, over a period of time, you'll see the benefit of it. Yes.

--------------------------------------------------------------------------------

Anuj Momaya, Valuequest Investment Advisors Private Limited - Analyst [35]

--------------------------------------------------------------------------------

How many we have launched? Or [are there] other generic [players]

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [36]

--------------------------------------------------------------------------------

(inaudible) I think I don't recall the exact number. I think I've seen about 5 or 6 generics already.

--------------------------------------------------------------------------------

Anuj Momaya, Valuequest Investment Advisors Private Limited - Analyst [37]

--------------------------------------------------------------------------------

Okay, 5 or 6 generics already.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

We have next question from the line of Nitin Agarwal from IDFC Securities.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [39]

--------------------------------------------------------------------------------

Rajeev, would you -- are you still holding on to the FY '20 revenue impact guidance that you've given out at the earlier start of the year?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [40]

--------------------------------------------------------------------------------

It all depends on -- I think we have multiple launches lined up. I think we spoke about those 2 big launches. I think those will be critical in [meeting those balances.]

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [41]

--------------------------------------------------------------------------------

Do you mean that the Revlimid launch in Canada and the agrochemical launch?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [42]

--------------------------------------------------------------------------------

Yes. I think these are among what we have launched. But these are 2 large-ticket items which are very critical. I think it's all subject to patent case outcome. There are -- these will be driving the earnings growth clearly.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [43]

--------------------------------------------------------------------------------

And can you help us understand the Revlimid opportunity in Canada a little bit better?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [44]

--------------------------------------------------------------------------------

Yes, sure. I think -- let me tell you. I think the size of the market right now, I think we don't have data because it's not available. But typically, it's about 5% to 10% of the U.S. market size, typically depending on -- typically on most molecules of that size. That is a fairly sizable product.

So now what is happening is Canada we want to trial next quarter, okay. So there are multiple outcomes. I mean again, all options are open. So either we settle and we're going to launch it and/or we go to trial and launch within -- and we go to trial and win and launch after that. So that's probably -- we will see what will happen, but I mean, obviously, those are the 2 possible outcomes in that particular case.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [45]

--------------------------------------------------------------------------------

And sir, Dr. Reddy's already settled on the product. Does that change anything for us on that opportunity? How does that impact the opportunity for us?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [46]

--------------------------------------------------------------------------------

It doesn't impact our opportunity. I think it, in fact, I think we're in a good position because really from what I understand ours and Apotex are the only analyticals which are pending. And our trial date is in this next quarter, and Apotex trial date is in the later part of the year. So I think it presents a very interesting opportunity. But as I said, everything's under litigation, so I think it's very premature to say what we're going to do. But I believe it's a very interesting opportunity.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

We have next question from the line of Charulata Gaidhani from Dalal & Broacha.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [48]

--------------------------------------------------------------------------------

Yes, my question pertains to the profit sharing income. You mentioned that the current U.S. revenue does not include profit sharing from Tamiflu. So...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [49]

--------------------------------------------------------------------------------

That's correct. Yes.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [50]

--------------------------------------------------------------------------------

But generally, it is a Q4 product, right?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [51]

--------------------------------------------------------------------------------

Q3, Q4 product, that's correct. Yes.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [52]

--------------------------------------------------------------------------------

Yes. So then the profit sharing would have come in Q1?

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [53]

--------------------------------------------------------------------------------

Oseltamivir has declined in the profit sharing number.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [54]

--------------------------------------------------------------------------------

I could -- I didn't understand your question. Could you say that again?

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [55]

--------------------------------------------------------------------------------

Okay. I was anticipating that the profit share would have come in by Q2, by Q1 and...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [56]

--------------------------------------------------------------------------------

No, we don't have any profit share on Oseltamivir for this year in Q2. We don't have. We are anticipating Q3 and Q4 depending on the flu season and the pricing situation.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [57]

--------------------------------------------------------------------------------

Okay, okay. And how much -- like on constant currency basis, you have a 4% growth in this. So how much could it amount to?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [58]

--------------------------------------------------------------------------------

You mean how much we'll make in the flu products, you're saying?

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [59]

--------------------------------------------------------------------------------

Yes, yes.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [60]

--------------------------------------------------------------------------------

I -- we believe it's premature to answer that question. We'll see how the quarter goes, I think. All of the dynamics are there. The intensity of the flu season is also very difficult to predict and the other competitors. We'll speak about it, I think, once the quarter ends. It's very premature to say anything about that right now.

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [61]

--------------------------------------------------------------------------------

Just to add one more thing, Charulata, on this. So what we had said earlier is, in Q2, we had stocking quantities of Oseltamivir that we pushed into the market. We've also said that this year is a competitive landscape. The profit sharing numbers is not expected to be as high. So even in Q3, Q4 we get, it will not be as much as what we have seen in the prior years.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [62]

--------------------------------------------------------------------------------

Right, right. Yes. And my second question about the cardio and [diabetes] , the growth in India. What is the main reason for that?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [63]

--------------------------------------------------------------------------------

It's just that we had a good stocking quantity in the June quarter. And I think now we are trying to sell through the stock. That's the only real difference. I think there won't be growth in that particular section.

--------------------------------------------------------------------------------

Charulata Gaidhani, Dalal & Broacha Stock Broking Pvt Ltd., Research Division - Analyst [64]

--------------------------------------------------------------------------------

For the subsequent quarters also, you would anticipate the current lines or...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [65]

--------------------------------------------------------------------------------

I think so. I think if you take a more long-term perspective, yes, I think it will level off. I think you will see -- you'll see consistent [it is just that we are] stocking all these new products. I think you see [a lot.] So basically what happens is when you launch a new brand, you have to stock at multiple distributors. And then it takes a while for the stock to build, and it's starting from a low base. So I think that's probably the reason why you see a lot of up and down in the numbers. But otherwise, we see the other segments, I think they're fairly stable.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

We have next question from the line of Kunal Randeria from Antique Stockbroking.

--------------------------------------------------------------------------------

Kunal Randeria, Antique Stockbroking Ltd., Research Division - Research Analyst [67]

--------------------------------------------------------------------------------

Rajeev, in Copaxone, I believe that Sandoz has gone for a sharp price cutting in their list prices, now 20% or so below Mylan. So while I understand the net price difference may not be as much, does it mean that you have to match the prices that Sandoz is offering to your customers also?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [68]

--------------------------------------------------------------------------------

I think the revenues from them have been fairly stable. I think we have got more market share. So I think things have been fairly stable for us. I think that's what we have seen from what -- from what we have seen, from what we have heard from Mylan.

--------------------------------------------------------------------------------

Kunal Randeria, Antique Stockbroking Ltd., Research Division - Research Analyst [69]

--------------------------------------------------------------------------------

But going forward, do you think you'll have to sort of cut your prices more?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [70]

--------------------------------------------------------------------------------

I don't have -- I can't answer that question. I think it's just better to target [it at] Mylan. I think I can only answer about the revenue that we're getting from Mylan as our share, I think, being fairly stable.

--------------------------------------------------------------------------------

Kunal Randeria, Antique Stockbroking Ltd., Research Division - Research Analyst [71]

--------------------------------------------------------------------------------

Right. And secondly, in Doxil, do we expect competition to come in FY '20?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [72]

--------------------------------------------------------------------------------

Honestly, I don't know. I have no idea. I think for both [have critical price] . We just [go with] what is there in the public domain [of] other people's filing. But I'm not -- I mean Doxil, I heard, I think (inaudible) has filed. And I think Copaxone (inaudible) filings are there. I heard about it, but again, I'm not -- I can't make a judgment. I think at the end of the year, I think we get more clarity on where we are.

--------------------------------------------------------------------------------

Kunal Randeria, Antique Stockbroking Ltd., Research Division - Research Analyst [73]

--------------------------------------------------------------------------------

Sure, sure. And lastly, can you share your net cash position?

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [74]

--------------------------------------------------------------------------------

Our cash total in the company is about [1,000]. Give me one moment. It is INR 1,039 crores. And our debt is about INR 299 crores, of which about INR 78 crores is all in discounting, and [the activities attributed to] short-term working capital [model] .

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

Your next question from the line of Kunal Mehta from Vallum Capital.

--------------------------------------------------------------------------------

Kunal Mehta, Vallum Capital Advisors - Research Analyst [76]

--------------------------------------------------------------------------------

Just the first question is that now regarding the recent deals of BMS and Celgene, so with BMS paying around $74 billion and Celgene -- for Celgene, half of which is in cash. So you think really [that deal underrides] the fact that at least DRL will not precede us in launching the Revlimid in the U.S. market?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [77]

--------------------------------------------------------------------------------

Kunal I am sorry but I didn't catch your question. So what was the other that you said? I'm sorry.

--------------------------------------------------------------------------------

Kunal Mehta, Vallum Capital Advisors - Research Analyst [78]

--------------------------------------------------------------------------------

You said (inaudible) underlying business deal will not [underride] the fact that at least we would be the first -- first launch -- first commercial launch generic for Revlimid in the U.S. market, and DRL would at least follow us or maybe have a different network. But it will not precede us in Revlimid. Does it underride that because Celgene -- BMS paid a huge upfront premium for Celgene?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [79]

--------------------------------------------------------------------------------

I [have no idea to] assume what DRL will do, I have no idea, my friend. So I can't answer that question. But what I can answer for sure is that our launch date that we had in March 2022 stays, and that if BMS-Celgene merger itself doesn't affect the date, correct.

--------------------------------------------------------------------------------

Kunal Mehta, Vallum Capital Advisors - Research Analyst [80]

--------------------------------------------------------------------------------

Okay, okay. And any indication you would like to give us on the emerging market business, Doxil, in Canada? Do we stick with our guidance of at least trying to build somewhere around [150, 100] crores business in this year?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [81]

--------------------------------------------------------------------------------

I think the businesses are doing well. I mean Canada last quarter was about 25 crores, and Brazil did about a little less than 10 crores. So we're doing almost 35 crores in our foreign [subs] per quarter. So that's doing well.

Brazil -- Canada is profitable. Brazil is operationally breaking even if you remove the R&D expenditure. And I think Brazil at the end of the year should actually break even if you include even R&D expenditure. And we have very good launches lined up in Brazil.

In Canada, the big launch, I already spoke about, obviously subject to legal (inaudible) launch. So I think our guidance that emerging markets and India should increase in the next 2, 3 years still remains, absolutely.

--------------------------------------------------------------------------------

Operator [82]

--------------------------------------------------------------------------------

We have next question from the line of [Kishan Kartik] from [Sable Tree Capital].

--------------------------------------------------------------------------------

Unidentified Analyst, [83]

--------------------------------------------------------------------------------

Rajeev, just a very strategic question on just related to this quarter this year. But essentially we seem to have 2 category of products in my mind. The category 1 is the difficult to manufacture, difficult to sell, difficult to distribute products like Copaxone and Doxil. And the second category product is Tamiflu and hep C, which are -- where we make a lot of money for a limited period of time and then a lot of competition comes in. So there's distinctly 2 set of products that I can [see] .

So as part of the next 5-year journey, right, where we have kind of have the molecule like (inaudible) like Revlimid, sorafenib, Imbruvica, (inaudible), lapatinib (inaudible) particularly those products that you've kind of revealed in Q1. What proportion of these products do you think are the category 1 like Copaxone and Doxil? And what category is -- what kind of product or category which is like Tamiflu is where we make a lot of money? I think Imbruvica falls in that category. But I -- we look to you kind of to understand what proportion of future portfolio is in the category 1 as with Copaxone and Doxil? And what proportion of products is in the category 2, please.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [84]

--------------------------------------------------------------------------------

I think we strive for both. I think the idea here is we try to strive for both. And I think we have a very distinct model. I think that, one, the distinctness of the model is, I do not do commodities under any circumstance. We don't touch commodities, where I believe there's only [7, 8, 12]. I do not believe in scale. I do not believe that you can compete because the value that we generate for doing a scale product is not attractive to us.

So I think the challenge in our business is we like to do complex, but complex stuff takes time and we like to do litigious stuff. And litigious stuff also, the challenge with litigious stuff is you get huge upfront onetime money, then eventually other competitors catch on. So then what it does is it creates uncertainty in the launch date. So that's the challenge. So that's [not what do] in the company.

In terms of the mix, I would say, I mean, 30% of filings [are] related to complex. We do 70% [small] filings, which are difficult to do or interesting ones to start and try to do in the first year. I think that broadly is going to give the ratio.

--------------------------------------------------------------------------------

Unidentified Analyst, [85]

--------------------------------------------------------------------------------

Got it. Got it. Got it. Got it. Great.

And the second question on a couple of [tough] questions on Revlimid. Celgene is doing a lot of label expansion, multiple label or [symptom, uses] being expanded from a label expansion perspective on Celgene. So would our launch kind of -- is it restricted in some format? Or if Celgene expands its opportunity by making the label expansion, would we also be a part of it? Or can you also target this market? And the second question obviously Europe launch, also.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [86]

--------------------------------------------------------------------------------

[I understand in the] U.S., yes. I think the label expansion doesn't delay our launch. No, it doesn't. It won't restrict us.

--------------------------------------------------------------------------------

Unidentified Analyst, [87]

--------------------------------------------------------------------------------

(inaudible) from selling for those symptoms as well.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [88]

--------------------------------------------------------------------------------

From what I understand, yes. I think that's -- that's what I understand, yes. That's correct.

--------------------------------------------------------------------------------

Unidentified Analyst, [89]

--------------------------------------------------------------------------------

Perfect. And my last question (inaudible) versus Europe launch, any kind of indication? Or you don't want to speak about it right now? Do we have -- we don't want to target Europe at all.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [90]

--------------------------------------------------------------------------------

I have an approval in Europe, but I have no expectation in Europe. I think -- I don't think there's much money to be made in Europe (inaudible). That's my personal view. We are only -- remember, we are only bullish on U.S. and Canada.

--------------------------------------------------------------------------------

Operator [91]

--------------------------------------------------------------------------------

We have next question from the line of [Sateek Mantri] from [Samson BG].

--------------------------------------------------------------------------------

Unidentified Analyst, [92]

--------------------------------------------------------------------------------

I have one question that -- last call, you said that the profits would double in next 3 to 5 years. [In just all] those despite short-term ups and downs in (inaudible), that your profits would double.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [93]

--------------------------------------------------------------------------------

I think I always -- well, long term, it has always been that we are very bullish on our pipeline. We always share our pipeline very openly, and I think we're very bullish about our future. I think even in the near term, I'm very bullish. But I think what our point is, again, I keep getting asked the [10%]. I'll answer it again. So the issue here is our company as a strategy is a product-driven company. We have an interesting pipeline. We always come up with something interesting every 2 -- every year, we come up with 2, 3 interesting ideas. And if these ideas get regulatory approval and patent [approved] you get the upside.

And if there's delay in any of these things, [then] obviously there'll be some. The growth in the earnings would not be there. But that's always been the strategy of the company, and I think we never changed that. And I think looking at the pipeline that we have, we're still bullish, yes, absolutely.

--------------------------------------------------------------------------------

Unidentified Analyst, [94]

--------------------------------------------------------------------------------

So from 100 million (inaudible) this year, they say about 650 crores, which you said about 100 crores (inaudible) 3- to 5-year view?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [95]

--------------------------------------------------------------------------------

Absolutely. I think, again, subject to the launches in the pipeline we have, yes, absolutely. Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [96]

--------------------------------------------------------------------------------

I understand that. Second, [the investor call] , recent call, you have said that Copaxone sales have been falling significantly, if you noticed that. And what is your agreement? I mean, of course, Mylan has a strong -- so even Mylan has been saying on its call. So what is your view on Copaxone? And how is there -- going forward, this quarter maybe good, but going forward, how do you see Copaxone for you because the Mylan data has given the figure of about 270 million for themselves. So if you could just shed more light going forward and in this quarter you have your investment break for you.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [97]

--------------------------------------------------------------------------------

I think Copaxone has been good for us. I think our earnings are stable. There's good market share. They're doing about 30%, 35% from what I've heard. I think for now, so far, so good. I think it's been stable. The earnings of Copaxone are stable on the balance sheet. We're not seeing much change.

--------------------------------------------------------------------------------

Unidentified Analyst, [98]

--------------------------------------------------------------------------------

Okay. And sir, do you see any product, any (inaudible) that all the generic companies, most of the Indian domain companies having reported sales (inaudible) on the new products, just taking away their loss in the old products? Do you see that happening for you? Or you don't see anything like that in the next few quarters?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [99]

--------------------------------------------------------------------------------

Our portfolio is not like that. I think our portfolio doesn't have -- we don't get that benefit of rationalization because we don't have such a large portfolio. Our portfolio's still (inaudible) limited. So I think this rationalization benefit and all relatively has less impact on our portfolio.

--------------------------------------------------------------------------------

Unidentified Analyst, [100]

--------------------------------------------------------------------------------

Yes. And then last question on revenue [number] . Generally, to date, if you add all these, [I see] level of price falls. But if you see the same, most of the big -- the major Indian pharma and the global pharma, even if you were to follow the price falls, they're like 17%, 16%. And then you can see the sales of about 6 billion in Revlimid. Do you see an improvement in all onco product? Do you see a significant fall on day 1? Or do you see that it won't be that bad? It would be like about the same or somewhat slow fall? What is your view on this? Can you just sort of enlighten how big is the market going to be and how it would turn out? (inaudible), I understand, (inaudible).

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [101]

--------------------------------------------------------------------------------

You are asking a lot of difficult questions. You see, a lot of price erosion is driven by market formation. And what market formation have in 2022, if we would have limited competition or a higher amount of competition, it's all very difficult to speculate and you have to play out different scenarios. I think we will be very (inaudible)...

--------------------------------------------------------------------------------

Unidentified Analyst, [102]

--------------------------------------------------------------------------------

And what is the size?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [103]

--------------------------------------------------------------------------------

I'm sorry?

--------------------------------------------------------------------------------

Unidentified Analyst, [104]

--------------------------------------------------------------------------------

What is the size of the U.S. market? What is the size of the U.S. market?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [105]

--------------------------------------------------------------------------------

The exact number? I think per quarter, it's about 1.2 billion, 1.3 billion a quarter, I think, if I recall it right. [I can't make comparison] in that region, I think.

--------------------------------------------------------------------------------

Unidentified Analyst, [106]

--------------------------------------------------------------------------------

Yes, you're right. Yes, it's about 4.5 billion to 5 billion, in that range. That's true.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [107]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [108]

--------------------------------------------------------------------------------

So what is your feeling? Or would that be a 30% to 50%? Or are there more significant? What are the things you're seeing very significant?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [109]

--------------------------------------------------------------------------------

You're asking for an event that will happen 2 years from now. I would not want to speculate at this time. I think it's too early to say.

--------------------------------------------------------------------------------

Unidentified Analyst, [110]

--------------------------------------------------------------------------------

And then last question is -- and last question is China. Your products, onco products, are like very wanted in China. Would you now tie up officially and do something very significant in China? Because your onco products are -- do have a place in pleasing the countries like China. And now with China, with Teva and Sun Pharma, these companies having done that, would you also go and file your products in China?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [111]

--------------------------------------------------------------------------------

Yes, yes, absolutely. I mean we have about 8 or 10 filings that we target in China. So far, we filed about 3 in China. So I think we're on track.

--------------------------------------------------------------------------------

Unidentified Analyst, [112]

--------------------------------------------------------------------------------

But can it be as big as India?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [113]

--------------------------------------------------------------------------------

I'm sorry, say that again?

--------------------------------------------------------------------------------

Unidentified Analyst, [114]

--------------------------------------------------------------------------------

In your onco products, which is about INR 70 crores a quarter, can it be as big as in China because (inaudible) would be nice as well.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [115]

--------------------------------------------------------------------------------

I think, overall, let me speak to our Chinese strategy. We have about 7 to 8 products which we are trying to file in China. And about 3, we've already filed. We're doing bio study and takes time in China to do. In terms of Chinese opportunity, I think it's a great volume product. But the price erosion has been pretty bad, I think once they started the auction system. I think what I've seen, I think what I understand, it's been very competitive. It is not as big as it's made out to be. I think it's fairly competitive business. But having said that, it's still a very good market because of the volume and the size.

--------------------------------------------------------------------------------

Operator [116]

--------------------------------------------------------------------------------

We have next question from the line of Prakash Agarwal from Axis Capital.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes, a quick one again. On the oncology side, you mentioned it's gone down from 80 to 68, right?

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [118]

--------------------------------------------------------------------------------

It's gone down from about 80 to 68, that's right.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [119]

--------------------------------------------------------------------------------

That's right

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

And the earlier number, which we were talking was about 90-plus -- [9,200] -plus. So I was looking at my last quarter notes where we mentioned that there is onetime inventory [existing] and this quarter again. So is it related to the oncology price cuts that we see, there's a reset happening, and we can see it in the next 2 quarters? Or this is the last quarter and we should see a bump up from here on?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [121]

--------------------------------------------------------------------------------

I think, Prakash, I think we have seen some pricing pressure because of the price cuts, but it's not the only reason. We're seeing competition on one or two bigger brands that we have had. But I feel that we can make it up because of the pipeline that we have. We can break it up, but I think I don't see a challenge in that. But it's only a temporary phenomenon. I don't think it will -- we should be able to make it up.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Okay. And this should take a couple of quarters? Or it should be like from a...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [123]

--------------------------------------------------------------------------------

I think you'll see the difference in December quarter. It will not take a couple of quarters. Next quarter itself, you will see a difference. It should...

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Within the launches in oncology you mentioned, not from the whole India franchise, right?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [125]

--------------------------------------------------------------------------------

Yes, which is the oncology launches in India, India franchise.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. Okay, okay. And that was the other reason why you said that the gross margin. So given that there are 2 one-offs, the gross margins should come back from 3Q itself, just one clarification.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [127]

--------------------------------------------------------------------------------

Yes, absolutely. Yes, absolutely.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes, that helps.

--------------------------------------------------------------------------------

Operator [129]

--------------------------------------------------------------------------------

We have the next question from the line of Nitin Agarwal from IDFC Securities.

We have next question from the line of Srihari from [CCS] (sic) [PCS] Securities.

--------------------------------------------------------------------------------

Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [130]

--------------------------------------------------------------------------------

Yes, this is Srihari from PCS Securities. We have a couple of questions. In particular, firstly, regarding the profit share, I mean can you please give a qualitative look, how it has moved quarterly -- on a quarterly basis? And secondly for CTPR enterprise discounting expected to be as it is for the oncology launches. And what is the kind of market share you will be targeting down the line?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [131]

--------------------------------------------------------------------------------

Okay. I'll start with the agro product. I think agro, we just filed the product, and we just started litigation, so it'd be premature to talk about that. The price increase, price trends and all, I think, it's really just [too early]. I think it's too premature to talk about that. But I think we're trying to do something very interesting in agro. A lot of people don't do [back-end] challenges in agro as you are aware. I think what we're trying to do is do -- I think we have a very unique strategy. I think we're trying to come -- do patent litigation, try to launch something interesting in the first wave, try to be the first sales product to launch. I think that's the interesting part about agro.

Your question on the profit share, sequentially, I think

minimal. Rajesh is having a look at it.

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [132]

--------------------------------------------------------------------------------

(inaudible)

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [133]

--------------------------------------------------------------------------------

I think it's been fairly stable from what I understand. Listen, I'm just looking it up. Give me a minute.

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [134]

--------------------------------------------------------------------------------

[1 32, 1 45.]

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [135]

--------------------------------------------------------------------------------

I think in terms of the profit share, I think it's been fairly stable. The only -- if you want a split of the products, we're not doing that, per se. I think -- is that the question?

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [136]

--------------------------------------------------------------------------------

You wanted a broader numbers, Srihari, on the profit sharing? We can take this off-line.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [137]

--------------------------------------------------------------------------------

I think we can discuss this off-line. I think it's broadly stable. That's my understanding.

--------------------------------------------------------------------------------

Srihari Chintalapudy, PCS Securities Ltd., Research Division - Equity Fundamental Analyst [138]

--------------------------------------------------------------------------------

Yes. I mean just to take the price discounting thing further. I mean in the case of oncology, there is some kind of a compulsion to price it very aggressively. Does that kind of compulsion existed on the agrochem space? That's what I wanted to know.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [139]

--------------------------------------------------------------------------------

I won't answer that question right now. I think once we're close to the launch, we'll have a discussion on that, but not at this time.

--------------------------------------------------------------------------------

Operator [140]

--------------------------------------------------------------------------------

So we have next question from the line of Vishal Manchanda from Nirmal Bang.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [141]

--------------------------------------------------------------------------------

You just spoke about the China filings. Could you share whether these are injectables or oral products?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [142]

--------------------------------------------------------------------------------

Most of them are orals. We have 1 or 2 injectables, but most of them are orals.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [143]

--------------------------------------------------------------------------------

Okay. And so you have completed the bio studies in China for these products?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [144]

--------------------------------------------------------------------------------

Yes, we are done. Yes. So one study has been completed for one particular product, which we have filed, which we're filing now. And one we've done the review, now we're doing the bio studies. So in China earlier, the rule was you have to do a review first then do bio study. Now they're okay with doing a bio study then filing. So we are in the [2 regimes] there.

Yes, the problem in China is the bio studies are very expensive. They are 10x more expensive and more -- than in India. And it takes almost 8, 9 months to complete a bio study in China, including the pharma study (inaudible). So there's a few entry barriers to doing bio studies China. However, as I said, it's an interesting market, and we'll see how it plays out. I think we are targeting second filing.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [145]

--------------------------------------------------------------------------------

[In event] on one of the products, and the other is close to completion?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [146]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [147]

--------------------------------------------------------------------------------

And so can we expect an approval, say in the next 12 months, for China most likely?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [148]

--------------------------------------------------------------------------------

Hopefully, yes. I think maybe not this financial year, definitely next financial year.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [149]

--------------------------------------------------------------------------------

Okay. And going to your onco decline in India, would this be largely attributed to price changes?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [150]

--------------------------------------------------------------------------------

There's 2 reasons. One reason is that -- one reason is that the government has reduced the market of these products. So that is one pressure. The bigger reason is the one I just talked to was the top brand which we have has faced particularly higher pricing pressure. So that's the reason why we had a decline. But I think what I still believe is that we can make it up with the new launches that we have.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [151]

--------------------------------------------------------------------------------

So these -- among the new launches, one is [very large], as you said. So would you need to promote? So are you promoting it after the preliminary [inventory] has come?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [152]

--------------------------------------------------------------------------------

I think we need to keep the stock there in the market. And we will be able to launch with more stock towards December.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [153]

--------------------------------------------------------------------------------

But will that sell without promotion? It's going to be...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [154]

--------------------------------------------------------------------------------

I don't want to answer that question. For a legality, I don't want to speak further on this product. I think I've answered already the question.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [155]

--------------------------------------------------------------------------------

Okay. And the other 2 launched recently is (inaudible) lot, right, among industry leaders and different (inaudible).

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [156]

--------------------------------------------------------------------------------

(inaudible)

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [157]

--------------------------------------------------------------------------------

And there is no other intent to launch, apart from the launches you did the previous quarter.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [158]

--------------------------------------------------------------------------------

And for previous quarters, that's correct. These are the major launches at that time. Yes, that's correct.

And then we offered one more onco product. I think we did a product called eribulin. So it was again (inaudible). That also was there.

--------------------------------------------------------------------------------

Vishal Manchanda, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [159]

--------------------------------------------------------------------------------

Pardon. What is the name?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [160]

--------------------------------------------------------------------------------

eribulin, E-R-I-B-U-L-I-N.

--------------------------------------------------------------------------------

Operator [161]

--------------------------------------------------------------------------------

So we have next question from the line of [Rahul Pitchar] from Multi-Act.

--------------------------------------------------------------------------------

Unidentified Analyst, [162]

--------------------------------------------------------------------------------

Yes. Sir, my question is on our Revlimid settlement. So in accordance with the settlement, what you have guided is that in the first year, we'll be allowed to sell some mid-single-digit percentages, which will go up to 1/3 in the last year. That is FY '26. So am I correct on that?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [163]

--------------------------------------------------------------------------------

That's correct, yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [164]

--------------------------------------------------------------------------------

And also in continuation, there was earlier in the year another settlement with Alvogen. So the extract from that settlement, which is available on Celgene's website, my understanding from reading that is that in the last year, in FY '26, the volume you made for Alvogen goes up to a single-digit percentage only, which [against us] being 33%, it's single digit for Alvogen. So is my understanding correct?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [165]

--------------------------------------------------------------------------------

On Alvogen settlement, you said?

--------------------------------------------------------------------------------

Unidentified Analyst, [166]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [167]

--------------------------------------------------------------------------------

I see. Alvogen settlement is there. I think what I can tell you, [Rahul], I think from what I read and from the development of settlement -- our settlement is superior to Alvogen's settlement. And so I think we're in good shape. And what is the question that you're trying to target? I mean...

--------------------------------------------------------------------------------

Unidentified Analyst, [168]

--------------------------------------------------------------------------------

I just read that statement from the extract which is available on their website. So is that -- although the agreed-upon percentages are confidential, they increase gradually each period to no more than a single-digit percentage in the final volume-limited period. So basically does this imply that Alvogen is allowed to sell only a single-digit percentage of volume share up to the last year before which the product goes off-patent? That is my question.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [169]

--------------------------------------------------------------------------------

Okay. I'll answer your question. I'm not privy to what Alvogen has signed. Okay. So that's the first question. So I have no idea.

What I can clearly say is our deal is superior to Alvogen's deal. And I think that's the sense I have. But beyond that, I don't think I can answer your question.

--------------------------------------------------------------------------------

Operator [170]

--------------------------------------------------------------------------------

So we have next question from the line of Gagan Thareja from Kotak Investments.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [171]

--------------------------------------------------------------------------------

So first question is around the agrochemical product that you intend to launch post litigation. If you could give us some idea of even what's the addressable market there? Is it a [9s -- 9c or a 9d] filing? Do you get some exclusivity, marketing exclusivity, obviously subject to litigation going in your favor?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [172]

--------------------------------------------------------------------------------

See, the size is there in the press release. I think the size of that product is about 300 crores. That's the last reported size. And in terms of strategy and market share and revenues and what it is, I think it's just premature to answer. I think we have already made it elaborately clear in the press release that we are targeting this filing, and it's all subjected to, as I said, patent litigation. So I think we'll speak about it once things are more clear. At this time, it is premature to talk about that.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [173]

--------------------------------------------------------------------------------

I'm not looking for your launch strategy. What I'm sort of trying to understand is do you get to the market in exclusivity period, if at all, you manage to launch post litigation? Or does your litigation pave the way for other filers? And filing end up...

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [174]

--------------------------------------------------------------------------------

I don't want to answer that question. It's too premature to talk about that at this time. I think once we have clarity, then I think we'll speak. At this time, I don't want to answer that question.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [175]

--------------------------------------------------------------------------------

Okay. Second question is around Eliquis, are you being injuncted there?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [176]

--------------------------------------------------------------------------------

No, we're not being injuncted. We're not being injuncted.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [177]

--------------------------------------------------------------------------------

Okay. You're not being injuncted on Eliquis. So you can continue to supply into the market?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [178]

--------------------------------------------------------------------------------

That's right.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [179]

--------------------------------------------------------------------------------

And last question is around the nature of change in the domestic business because now you're doing a host of filings which are litigious in nature. You're getting injuncted and then sometimes the case goes in your favor, and it also paves the way for most of other generic filers. So it inherently brings volatility to the sales profile of the domestic sales that you have. How should we therefore -- because now it becomes a little more difficult for us to sort of get a line of sight on the trend line growth because quarter to quarter will actually be fairly high, both on sales growth and on margins. If you could give us some sort of an indication around this of what trend line growth should be, irrespective of quarterly volatility.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [180]

--------------------------------------------------------------------------------

I think my point is that -- okay, the fact that we go after these patents, it creates volatility in this environment [and I know it does that, but it creates a brand you see. So what I always believe is if we go [aggressive] and do patent litigation, you'll end up being in [there the] first day of launch by default. And because you're in the first day of launch, you end up getting very good market share. And this has always been the strategy of the company, whatever we build in NATCO has all been driven by having either a very interesting product and technology or through our aggressive patent litigation. But that's a risk you run. I mean we say you're not able to judge us on a Q-on-Q basis. Yes, I mean it is difficult. I'm not saying it is not. But if you take a more long-term view, if you take a view like a 2- to 3-year view, I'll give you an example. For example, we launched apixaban or ticagrelor, and there is a lot of volatility in the earnings. But you see yourself 3 years down the line, we'll have -- we'll be the top 3 brands in these [ASD] products, for example. So that's the benefit that we get as a company, isn't it? Because we say what we did, which is a structure, we're ending up with a brand. But in this segment, you're the top 3 brand. In that segment, you're the top 3 brand.

It plays for more of a long-term benefit. In the near term, it looks messy. But I think in the long term, you will see the value. So at the end of the day, it's the [quarter effect] that is judged, if I'm really honest.

3 years down the line for this x-generic, what your market share is 3 years down the line? How much money are you making? On this y-generic, what are you making?

And in the list of the product, we're able to get very good market share, have very good brand. All these products, I think that will last you forever. I mean like you just mentioned, Eliquis. At end of the day, we have the brand, we are there in the market. And I think that's what matters at the end of the day. And that's what is very important in this business.

And it lets you do something that is very difficult to grow. I mean, see, you should look at -- NATCO is different from other people. See, the other people have INR 3,000 crores, INR 4,000 crores, large portfolios which are spread upon multiple therapies with -- which where they can grow. They have 8%, 10% growth based on the markets. NATCO opportunity is very limited, limited only to 2 segments. And any volatility that happened, it affects our growth.

So that's -- and we are trying to broad-based that segment. I think we're not denying the fact that we're highly confident, but what we're trying to do is we're trying to broad-based. And the broad-based, it cannot happen overnight. It only happened organically. If we want it to happen, we need to do new launches or we have to acquire something. So we're not acquiring anyone, as you see. So that's the only way we can do it.

--------------------------------------------------------------------------------

Gagan Thareja;Kotak Investments;Analyst, [181]

--------------------------------------------------------------------------------

Finally, one on Revlimid revenue, there are a host of possible outcomes. Probabilistically speaking -- only probabilistically speaking, I emphasize that. Is it reasonable to infer that the favorable or the likely outcomes will be you being able to generate significant cash flow and a consistent cash flow in the limit for at least a 3- to 5-year time frame? Is it reasonable assumption?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [182]

--------------------------------------------------------------------------------

I can't answer that question. I think you're asking me something which I cannot answer. What I can say is, I think, what I can tell you for sure is that we have a first day of launch, and we can -- and we have an impending approval. And we will gain whatever a first-[wave] guy, whatever benefit we've been getting -- we can get -- we can get. Regarding the long-term value, that only time will tell, it all depends on how the second and the third and the fourth generic play out. But honestly, I can't answer that question. How long it lasts and all, it would be very difficult to judge.

--------------------------------------------------------------------------------

Operator [183]

--------------------------------------------------------------------------------

So we have next question from the line of Nitin Agarwal from IDFC Securities.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [184]

--------------------------------------------------------------------------------

I just wanted to quickly ask on Doxil, any clarity on the EU launches?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [185]

--------------------------------------------------------------------------------

I think -- I don't have clarity at this time. I think we're still working on the trial. I don't think we have clarity at the launch. I think we're still working on the planning. We don't have any clarity on that launch yet.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [186]

--------------------------------------------------------------------------------

We haven't filed the product yet?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [187]

--------------------------------------------------------------------------------

We filed it. And I think we don't have clarity on the -- what is the launch date. I think we are not able to tell. I'll come back to you on that. We don't have clarity on the launch.

--------------------------------------------------------------------------------

Nitin Agarwal, IDFC Securities Limited, Research Division - Analyst [188]

--------------------------------------------------------------------------------

Okay. And secondly, I know you talked about the Tamiflu stocking during the quarter. But given the way the market has become competitive in the last season, how should we look at this market this year?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [189]

--------------------------------------------------------------------------------

Again, Nitin, it's a very tricky market. So we have to see how it actually plays out and should see the intensity of the flu season, who supplies, who doesn't supply, These are all very tricky questions. So let's wait. But it is not as Rajesh said a few minutes ago, it's not going to be like what it was in the past where we made extraordinary amounts of profit. That's sort of numbers will not be possible, but it will be more modest numbers. But the extent of modesty, it will be all depending on how it plays out. Let's wait for the quarter. I don't want to say it. But keep your expectation low. Don't keep very high expectations. Clearly, I think that's -- I mean it should be reasonable to assume.

--------------------------------------------------------------------------------

Operator [190]

--------------------------------------------------------------------------------

So we have next question from the line of Kunal Mehta from Vallum Capital.

--------------------------------------------------------------------------------

Kunal Mehta, Vallum Capital Advisors - Research Analyst [191]

--------------------------------------------------------------------------------

This is a single question. The accounting on the agrochemical launch for the earnings growth, what is --

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [192]

--------------------------------------------------------------------------------

I don't want to tell you. See again, you are asking to reveal our strategy, which I'm not going to reveal.

--------------------------------------------------------------------------------

Kunal Mehta, Vallum Capital Advisors - Research Analyst [193]

--------------------------------------------------------------------------------

I just have a different question. Just regarding both of the time period which we have observed in other companies who pursued the similar strategy of going off the patented [molecules] , it has taken them at least, I would say, 2 years to get through the litigation process. So do you think if -- in our case, this would be the same time line which we should look at -- for this molecule?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [194]

--------------------------------------------------------------------------------

I can't answer that question. Typically, I'll tell you. I will not answer that. We are probably the most aggressive litigators. So I can tell you my working experience. I can't speak about other people that you're talking about. You -- [I'm not as particular in this particular product generally in] more other products. Either you get injuncted and it takes about 9 months to 12 months or 15 months to resolve. Or you don't get injuncted and then you get to launch. So either of the outcomes happen. It depends on the molecules. Sometimes we get injuncted, sometimes we don't. So I mean on different molecules, I have different experiences. So I will not -- we -- just because we have litigation, doesn't mean you'll get injunction. Just because you have injunction, it doesn't mean that will take -- a launch will [not] result -- so it's all -- it's a molecule to molecule. It has its own story.

--------------------------------------------------------------------------------

Operator [195]

--------------------------------------------------------------------------------

So we have next question from the line of [Keiran Kartik from Stable 3 Capital].

--------------------------------------------------------------------------------

Unidentified Analyst, [196]

--------------------------------------------------------------------------------

Sure. I think just one last question on FY '20. So FY '20, we're looking somewhere, I mean depending on how [difficult] we are looking, anywhere between INR 500 crores -- INR 500 crores to INR 550 crores [growth] . So the thing that we -- that don't move the needle in FY '21 is agrochem and Revlimid Canada? Or do you have anything else that will move the needle from INR 500 crores back to, let's say, INR 700 crores in the quartile.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [197]

--------------------------------------------------------------------------------

So it's like this -- again, you're asking me specifically what will happen on these 2 products. It's the multiple outcomes that are possible on these products. So it's very difficult to judge what the near-term impact on the earnings are, will it be in '20 or '21. So there are multiple scenarios. You could, one, win the trial and launch, then obviously, we go to FY '21. If you factor this, then the outcome will be different. And on the other one, the [that we're on track to all], that again, there's so many unknowns. So it's very hard to judge. All I can say is very -- I think the best way to answer both these questions that you've asked is both these products are important for our earnings, and they'll play out in the near term. I think that's the best way I can answer that. I think beyond that, I don't think I can answer that question.

--------------------------------------------------------------------------------

Unidentified Analyst, [198]

--------------------------------------------------------------------------------

No. Absolutely, Rajeev. I'm saying, let's say, (inaudible) agro and Revlimid Canada, is there any other aspect that you think is going to move the needle of pipeline? That was basically the question. [Are there any vertical in the results]?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [199]

--------------------------------------------------------------------------------

Yes, I think we have some smaller products, but publicly spoken, I think these 2 are critical products. Yes. That's the best way to answer that question. These 2 are important products. Okay, in the near term.

--------------------------------------------------------------------------------

Operator [200]

--------------------------------------------------------------------------------

We have a next question from the line [Ashi Sharafi] from Lucky Investments.

--------------------------------------------------------------------------------

Unidentified Analyst, [201]

--------------------------------------------------------------------------------

Just wanted to clarify on the impact on the gross margin on account of the Tamiflu inventory, which is like the gross margins are [down] close to 700-plus basis points Y-o-Y and down like 900 basis points quarter-on-quarter. How much is the Tamiflu inventory are built up are contributing to this?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [202]

--------------------------------------------------------------------------------

I think told before a lot (inaudible) [questions]

--------------------------------------------------------------------------------

Unidentified Analyst, [203]

--------------------------------------------------------------------------------

I'm sorry.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [204]

--------------------------------------------------------------------------------

I said that we build [about INR 30 crores] of Formulations stock, and we build about INR 25 crores of API stock. That portion has relatively lower margins. So if we remove that, then I think that explains where we are. So what we've said is the significant portion has -- was contributed because of that, the stocking, yes.

--------------------------------------------------------------------------------

Unidentified Analyst, [205]

--------------------------------------------------------------------------------

Understood. And just the Tamiflu buildup that happened in the second quarter, this can impact -- is that a one-off? Or does that happen again, I mean, in anticipation of the season?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [206]

--------------------------------------------------------------------------------

Yes, if there's more inventory, yes. I think if we don't have inventory, yes, we build up -- for this quarter, we built up inventory for the coming flu season, that's the fact.

--------------------------------------------------------------------------------

Unidentified Analyst, [207]

--------------------------------------------------------------------------------

No, the question is basically [what is inventory build up happening last year as well in anticipation of a strong season for the third quarter.]

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [208]

--------------------------------------------------------------------------------

I think we had some lag because we had some stock from the previous season [so it's just basing on] the product. So it all depends on how much stock you had.

--------------------------------------------------------------------------------

Rajesh Chebiyam, NATCO Pharma Limited - VP of Acquisitions, Institutional Investor Management & Corporate Communications [209]

--------------------------------------------------------------------------------

So it also gets absorbed when you have also profit

sharing numbers also coming, right. Historically, you look at it every time you had a stock up, there have been some ups and downs in terms of gross margin.

It happened in the past as well. I think if you go back in our history, I think that's happened in the past as well.

--------------------------------------------------------------------------------

Unidentified Analyst, [210]

--------------------------------------------------------------------------------

Right. And also secondly on the bendamustine side, is there no sales that we have booked anything in this quarter? Or is -- what is the distribution like or buildup?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [211]

--------------------------------------------------------------------------------

I think we'll build some stocks before we go and send it. We're going to keep the stocks that we had. And I think we can only build further stocks starting from December. I think -- that's my understanding.

--------------------------------------------------------------------------------

Unidentified Analyst, [212]

--------------------------------------------------------------------------------

So the stock getting built up, as in we are now going to distribute them and we book the sales? Or is this sitting as inventory on the books?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [213]

--------------------------------------------------------------------------------

The stocks before inventory has already been booked as sales. That's correct. That's correct.

--------------------------------------------------------------------------------

Unidentified Analyst, [214]

--------------------------------------------------------------------------------

So how much would that be, approximately?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [215]

--------------------------------------------------------------------------------

I don't want to get into the details of the product splits, [but strategically it's correct]?

--------------------------------------------------------------------------------

Unidentified Analyst, [216]

--------------------------------------------------------------------------------

Right. And how do you see the Formulations space for December, Rajeev?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [217]

--------------------------------------------------------------------------------

It will be pretty bad. I'm expecting more or less [50 brands] is what I understand (inaudible) [very, very confident].

--------------------------------------------------------------------------------

Unidentified Analyst, [218]

--------------------------------------------------------------------------------

So in a way, that's a first-mover advantage that we want you to tap into by announcing the event early. Is that advantage that are going to come to us because of the enlarged inventory? Is that a fair assumption?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [219]

--------------------------------------------------------------------------------

That's exactly what I was trying to explain. I think first-mover advantage is the most fundamental thing in brand building. And that's the only reason we'll -- at least for a company like us, that's what I believe. [I said to you unless you are earlier], it doesn't matter. If you launch like #25 brand, it makes no difference. I think it just gets drawn out because there's so many people who are promoting this, [what is the difference when you are or us, any of the 25, 30 companies are coming to adopt this change]. First-mover is -- I think that's the only strategy that works.

--------------------------------------------------------------------------------

Unidentified Analyst, [220]

--------------------------------------------------------------------------------

Sure. So the impact on the domestic business for the full year next year, that was around 27% Y-o-Y [this quarter]. And the (inaudible) how will it pan out for the -- post the launch of (inaudible)?

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [221]

--------------------------------------------------------------------------------

I think it gets better. You'll see the numbers. I think December, that will be more stable. I think things will pick up. These are -- our business, as I said, is highly concentrated. So when an event happens, it really shows on the numbers. But I think as we broad-based our portfolio, there is a larger portfolio for multiple segments, I think this sort of volatility will [calm] down.

--------------------------------------------------------------------------------

Unidentified Analyst, [222]

--------------------------------------------------------------------------------

I will put in one more question on the oncology business in India. How is that space doing, considering we have a complicated scenario in the pricing [a bit] ? Because I think oncology, with what all is happening, was growing in the [10% to 13%]. Is there sudden change in that piece? Because we're seeing a sharp decline there.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [223]

--------------------------------------------------------------------------------

See, oncology piece is fairly stable, but you are [not] wrong, my friend. I think oncology, we never -- we are not doing bio generics. See that -- also we are not covering all oncology segments, we're only doing the chemistry segments. In that way, our pipeline is limited. But however, I think our pipeline going forward, it's fairly aggressive. We have a lot of good launches. I mentioned the launches that we've done in the last few months. So I think that the pipeline in terms of future outlook I think it is still very positive. And I think you just have to look at it in terms of a long-term view I think that's -- one last question.

--------------------------------------------------------------------------------

Operator [224]

--------------------------------------------------------------------------------

Sir, that was the last question. I would like to hand the conference over to you for any closing comments. Sir, over to you.

--------------------------------------------------------------------------------

Rajeev Nannapaneni, NATCO Pharma Limited - Vice Chairman & CEO [225]

--------------------------------------------------------------------------------

Yes. Thank you very much, again. Great questions. We will publish the transcript as well as in the website, and feel free to reach out to us. Well, thank you, and have a good day.

--------------------------------------------------------------------------------

Operator [226]

--------------------------------------------------------------------------------

Thank you very much, sir. Thank you. So ladies and gentlemen, on behalf of Edelweiss Securities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.