U.S. Markets close in 2 hrs 24 mins
  • S&P 500

    3,691.10
    +24.38 (+0.66%)
     
  • Dow 30

    30,156.12
    +186.60 (+0.62%)
     
  • Nasdaq

    12,451.48
    +74.29 (+0.60%)
     
  • Russell 2000

    1,881.46
    +32.76 (+1.77%)
     
  • Crude Oil

    46.26
    +0.62 (+1.36%)
     
  • Gold

    1,839.30
    -1.80 (-0.10%)
     
  • Silver

    24.27
    +0.13 (+0.55%)
     
  • EUR/USD

    1.2155
    +0.0006 (+0.0486%)
     
  • 10-Yr Bond

    0.9690
    +0.0490 (+5.33%)
     
  • Vix

    20.86
    -0.42 (-1.97%)
     
  • GBP/USD

    1.3487
    +0.0035 (+0.2576%)
     
  • USD/JPY

    104.0840
    +0.2240 (+0.2157%)
     
  • BTC-USD

    19,008.33
    -249.25 (-1.29%)
     
  • CMC Crypto 200

    372.45
    -6.79 (-1.79%)
     
  • FTSE 100

    6,550.23
    +59.96 (+0.92%)
     
  • Nikkei 225

    26,751.24
    -58.13 (-0.22%)
     

Edited Transcript of SUNPHARMA.NSE earnings conference call or presentation 6-Feb-20 1:00pm GMT

·51 min read

Q3 2020 Sun Pharmaceutical Industries Ltd Earnings Call Mumbai Jun 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Sun Pharmaceutical Industries Ltd earnings conference call or presentation Thursday, February 6, 2020 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Abhay Gandhi Sun Pharmaceutical Industries Limited - CEO of North America Business * C. S. Muralidharan Sun Pharmaceutical Industries Limited - CFO * Dilip Shantilal Shanghvi Sun Pharmaceutical Industries Limited - MD & Executive Director * Kirti Wardhaman Ganorkar Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team * Nimish Desai Sun Pharmaceutical Industries Limited - Head of IR ================================================================================ Conference Call Participants ================================================================================ * Alok Dalal CLSA Limited, Research Division - Research Analyst * Anubhav Aggarwal Crédit Suisse AG, Research Division - Associate * Chirag Dagli HDFC Asset Management Company Limited - Senior Equity Analyst * Hari Belawat Techfin Consultants Pvt Ltd - CEO and Director of Techfin Consultants Singapore * Krish Mehta;Enam Holdings;Analyst * Naveen Baid Aditya Birla Money Limited, Research Division - Senior Analyst * Neha Manpuria JP Morgan Chase & Co, Research Division - Analyst * Prakash Agarwal Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals * Sameer Baisiwala Morgan Stanley, Research Division - Executive Director * Satish Bhatt Anvil Share and Stock Broking Private Limited, Research Division - Research Strategist * Surya Narayan Patra PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, good day, and welcome to the Sun Pharmaceuticals Industries Limited Q3 FY '20 Earnings Conference Call. (Operator Instructions) I now hand the conference over to Mr. Nimish Desai. Thank you. And over to you, sir. -------------------------------------------------------------------------------- Nimish Desai, Sun Pharmaceutical Industries Limited - Head of IR [2] -------------------------------------------------------------------------------- Thank you. Good evening, and a warm welcome to our third quarter FY '20 earnings call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q3 financials and the press release that was sent out earlier in the day. These are also available on our website. We have with us Mr. Dilip Shanghvi, Managing Director; Mr. Abhay Gandhi, CEO, North America; Mr. C. S. Muralidharan, CFO; and Mr. Kirti Ganorkar, Head of India business. Today, the team will discuss performance highlights, update on strategies and respond to any questions that you may have. As is usual, for the ease of discussion, we look at consolidated financials. Just as a reminder, this call is being recorded, and a replay will be available for the next 2 days. Call transcript will also be put up on our website shortly. The discussion today might include certain forward-looking statements, and this must be viewed in conjunction with the risks that our business faces. You are requested to ask 2 questions in the initial round. If you have more questions, you are requested to rejoin the queue. A request also -- I also request all of you to kindly send in your questions that may remain unanswered today. I will now hand over the call to Mr. Shanghvi. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [3] -------------------------------------------------------------------------------- Nimish, thank you. Welcome, and thank you for joining us for this earnings call after the announcement of our financial results for the third quarter of FY '20. Let me discuss some of the key highlights. Consolidated sales for the quarter were at INR 8,039 crore, a growth of 5% over Q3 last year, while the 9-month sales were at INR 24,247 crore, recording a growth of 12%. Key growth drivers include India, our global specialty business, and coupled with growth in our Rest of the World business and API business. While we are doing well in most of the geographies, the U.S. generic market continues to be competitive and challenging. We are focused on controlling our costs and improving efficiencies in all parts of our business, while simultaneously increasing our investments in our specialty business. During the quarter, we continued our efforts to enhance our specialty portfolio in new markets by entering into a licensing agreement with AstraZeneca in China for some of our novel oncology products. We are witnessing a gradual traction in our global specialty revenues. In Q3, our global specialty revenues were approximately USD 118 million across all markets, while specialty R&D accounted for about 24% of total R&D spend for the quarter. Abhay will discuss more details on our specialty business later. On Halol, we have filed a response to the FDA detailing our steps to resolve the 8 observations issued by the U.S. FDA in December 2019 inspection. We are committed to addressing these observations promptly. As of now, there is no further update that we can share. I will now hand over the call to Mr. Murali for a discussion of the financial performance. -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [4] -------------------------------------------------------------------------------- Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you. Our Q3 financials are already with you. As usual, we will look at key consolidated financials. Overall, Q3 sales are at INR 8,039 crores up by 5% over Q3 last year. On the expenses side, the year-on-year increase in staff cost is mainly driven by annual inflation and addition of the falloff of our business in Japan. Other expenses are up 23% over Q3 last year, mainly due to higher marketing spend for the specialty business in U.S., consolidation of Pola Pharma as well as increase in R&D spend. Gross margins have improved year-on-year from 71.4% to 72.1% due to better product mix. EBITDA for Q3 was at INR 1,725 crores with EBITDA margin at 21.5%. Net profit for the Q3 was at INR 914 crores, down 26% year-on-year, mainly due to other expenses, a significant year-on-year reduction in ForEx gains and higher taxes, having a combined negative impact of almost INR 700 crores. EPS for the quarter was at INR 3.81. Let me now discuss the key movements versus Q2 of this year. EBITDA improved by 7% sequentially despite increase in other expenses (technical difficulty) September quarter on account of higher marketing spend and R&D expenses. This was achieved due to sustained focus on overall cost control. The net profit is down by 14%, mainly due to higher depreciation and amortization, low (technical difficulty) and other income, coupled with higher taxes. Our focus on operational efficiencies have helped us repay approximately USD 500 million of debt year-to-date until December 2019, thereby, net debt, ex Taro, now stands at USD 410 million. Now we will discuss the 9 months performance. Net sales were at INR 24,247 crores, a growth of 12% over 9 months last year. Material cost as a percentage of the net sales was 28.6%, which was higher (technical difficulty) period last year due to higher costs for Taro and overall product mix. The staff cost for the 9 months was up by 7% due to annual inflation and addition of Pola Pharma staff cost. Other expenses were up nearly 23% over 9 months last year, mainly due to the significant marketing spend for the specialty business and consolidation of Pola Pharma and increase in R&D spend. As a result of the above, EBITDA was at INR 5,221 crores, a growth of 4% over the 9 months period last year, with resulting EBITDA margin of 21.5%. Net profit for the 9 months was at INR 3,365 crores, up 4% after adjusting for the exceptional items incurred in the 9-month period last year. At today's Board meeting, the Board of Directors have declared an interim dividend of INR 3 per share. Let me now briefly discuss Taro's performance. Taro posted Q3 FY '20 sales of USD 148 million, down 16% over Q3 last year. For the 9 months, sales were USD 470 million, down 4% over 9 month last year. Taro's net profit for Q3 was USD 68 million while for the 9-month period it reported a net profit of USD 190 million. I will now hand over to Mr. Kirti Ganorkar, who will share (technical difficulty) of our India business. -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [5] -------------------------------------------------------------------------------- Thank you, Murali. Let me take you through the performance of our India business. For Q3, the sales of branded formulation in India were INR 2,517 crore, a growth of 13% over Q3 last year and accounting for approximately 31% of total sales. We continue to focus on maintaining our strong brand equity with the doctors and patients. The Indian formulation market offers a good long-term potential given the favorable macroeconomic drivers of pharmaceutical consumptions. As a part of our growth strategy, we have initiated an expansion of our field force by about 10%. The main objectives behind this expansion includes further widening of our strong customer reach, deep penetration of our products and ensure greater focus on all relevant brands. This additional field force will be onboarded by -- fully by Q1 FY 2021 with their contribution expected in subsequent quarters. We continue to remain the partner of choice for in-licensing, given our strong #1 position in many therapy areas. Some of the in-licensed products are performing well and have delivered better growth than our original expectation. One of the example is Oxra, a brand of dapagliflozin, which features in top 300 brands in IPM. This brand was launched in August 2016. And in August 2019, it is featuring amongst the top 300 brands of IPM. I will now hand over call to Abhay. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [6] -------------------------------------------------------------------------------- Thank you, Kirti. I will briefly discuss the performance highlights of our U.S. businesses. For Q3, our overall sales in the U.S. were at USD 350 million, accounting for approximately 31% of overall sales. The U.S. generics business continues to be competitive, and we continue to launch new product in every quarter to increase our product offering in the market. Let me now update you on developments in our specialty business. Our specialty revenues in U.S. have grown over September quarter, with the growth mainly driven by higher seasonal sales for Levulan and ABSORICA, improving sales of ILUMYA and ODOMZO coupled with contribution from the CEQUA launch. As you all know, we commercialized CEQUA in Q3, and I'm happy to inform you that the launch has been well received. For ILUMYA, we continue to add patients and increase doctor coverage and are positive on ILUMYA's prospects for the next year. We have also recently announced the launch of ABSORICA LD which gives the benefit of higher absorption despite about 20% reduction in the dosage strength. Although we continue to invest in branding and promotion of these specialty products, we believe that our ability to absorb these costs will improve in the coming year as our specialty revenues ramp up. I will now hand over the call to Mr. Shanghvi. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [7] -------------------------------------------------------------------------------- Thank you, Abhay. I will briefly discuss the performance highlights of our other businesses as well as give you an update on our R&D initiatives. Our sales in emerging markets were at USD 195 million for Q3, down by around 4% year-on-year and accounting for 17% of total sales. The decline is driven by the reduction in tender revenues in our South Africa business. Excluding the impact of these tender sales, we've recorded a double-digit growth of about 15% in our overall emerging market portfolio. Key markets, which contributed to the growth, were Russia, Brazil, Romania, Bangladesh and Thailand. Formulation sales in Rest of the World markets, excluding U.S. and emerging markets, were USD 155 million in Q3, a growth of 24% over last year. This growth was mainly driven by the consolidation of Pola Pharma acquisition in Japan. ROW markets accounted for approximately 14% of Q3 revenues. Our API sales for Q3 were INR 503 crores, up by 18% over Q3 last year. We continue to invest in R&D for enhancing our pipeline. Consolidated R&D investments for Q3 is INR 527 crores accounting for 6.6% of sales. Our current generic pipeline for the U.S. market includes 94 ANDAs and 4 NDAs awaiting approval with the U.S. FDA. During the quarter, we have withdrawn some unviable ANDAs. Our overall R&D spend for the first 9 month was INR 1,437 crore at 6% of revenues. This R&D spending enables development of future product pipeline, including specialty and differentiated products. At the start of this year, we had guided for R&D spending of 8% to 9% of sales. Given the spending in the first 9 months, we expect to end the year at a lower number. However, we expect higher R&D spend next year for the clinical trial expenses related to new indications for ILUMYA. With this, I would like to leave the floor open for questions. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question is from the line of Prakash Agarwal from Axis Capital. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [2] -------------------------------------------------------------------------------- Sir, on the global specialty sales, you gave a number. Can we have the number, please? Or I don't know if I missed that. -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [3] -------------------------------------------------------------------------------- I think... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [4] -------------------------------------------------------------------------------- USD 118 million. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [5] -------------------------------------------------------------------------------- Okay. And this Q-on-Q increase is largely a function of the new launch CEQUA or we have seen improvement in, as you mentioned, that ABSORICA, largely and CEQUA largely or we have seen improvement in ILUMYA also? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [6] -------------------------------------------------------------------------------- Like I said in my readout, I think it's a combination of the seasonal impact on Levulan and ABSORICA, the improvement in sales in ILUMYA and ODOMZO also and the small sales that we got in CEQUA because we got only partial quarter for the CEQUA launch. It's a combination of all the product. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [7] -------------------------------------------------------------------------------- All the 3. But Q-on-Q ILUMYA would have improved is what I'm trying to understand. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [8] -------------------------------------------------------------------------------- There is an improvement, yes. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [9] -------------------------------------------------------------------------------- Perfect. And second question is, sir, on -- so again U.S. So if we remove the specialty piece and the Taro piece, how would generics would have grown and what's the outlook there? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [10] -------------------------------------------------------------------------------- So I think there is a nominal degrowth in the generic business, if I look at it holistically. But then we have been able to offset a lot of that by introduction of 3 new products in the quarter. Febuxostat was one of the major launches we had. And also making use of some of the onetime opportunities that were there in the market. So overall, I think we have been consistently maintaining on our call that the generic environment remains competitive, and the competition is highly product-specific and the pressures are highly product specific. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [11] -------------------------------------------------------------------------------- Okay. Okay. And this increase in the branded and India would have been really the contributors for gross margin expansion. Would that understanding be correct? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [12] -------------------------------------------------------------------------------- So Murali, maybe you can... -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [13] -------------------------------------------------------------------------------- Yes, yes, yes. -------------------------------------------------------------------------------- Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [14] -------------------------------------------------------------------------------- Hello? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [15] -------------------------------------------------------------------------------- Yes. Yes. The expansion gross margin is on account of the robust India business and other business especially (technical difficulty) overall business' growth. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- The next question is from the line of Neha Manpuria from JPMorgan. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [17] -------------------------------------------------------------------------------- My first question is on CEQUA. We've heard commentary from one of our peers in the dry eye market about changing their promotion strategy. What is our view on how we approach the product given the peer mentioned that it is more like a consumer product? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [18] -------------------------------------------------------------------------------- I haven't heard that commentary that you are referring to. So I really don't know what you're saying. So to the question whether it is to be treated like a consumer product, I don't think so because there are OTC alternatives available. And sometimes, patients self-medicate. And when that doesn't work, when they go to an ophthalmologist, then they use a branded product. And I think that is done with a lot of education to the patient on how long does it take for the drug to show effect. So I don't think we are taking a kind of a sense that it is a sort of a consumer product. And that's the kind of a treatment we should give in promotion. I think our promotion is more scientific to the doctors with all the elements that are involved in HCP promotion. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [19] -------------------------------------------------------------------------------- Abhay, I think what she is possibly referring is that both the dry eye product today have direct promotion to consumers through DTC. So to that extent, it is a publicly promoted product. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [20] -------------------------------------------------------------------------------- That's right, sir. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [21] -------------------------------------------------------------------------------- Is that what you mean, because -- -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [22] -------------------------------------------------------------------------------- Yes, sir. Is that a similar strategy... -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [23] -------------------------------------------------------------------------------- No. That is there for many other categories. And not all categories, which are on, say, for example, DTC promotion have sort of OTC substitutes. So as I said, I mean, in the absence of clearly understanding what is the commentary that you are referring to my answer may be incomplete. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [24] -------------------------------------------------------------------------------- But do we plan a DTC campaign for CEQUA at this point or we haven't decided on that? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [25] -------------------------------------------------------------------------------- We are evaluating. You have like a 6-month window post-launch of the product before you can even initiate the DTC promotions. So we still have that window, and we are evaluating. We will have to do some sort of DTC promotion clearly because there is -- you will have to reach out to patients who are using other alternatives. In what shape, form and what kind of an investment will depend on what we assume and what we project will be the size of the product and the investment required for us to reach our fair share of the market. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [26] -------------------------------------------------------------------------------- Okay. Understood. Sir, currently -- I know it's a very short time frame... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [27] -------------------------------------------------------------------------------- Abhay, I think what she's trying to understand is that, do they have to factor a significant additional marketing spend... -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [28] -------------------------------------------------------------------------------- Not a very -- clearly not a very significant market spend will need to be factored on CEQUA. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [29] -------------------------------------------------------------------------------- Understood. Sir, second, I know it's a very short time frame, but the patients that you're seeing coming -- or the likelihood of patients that you'll see coming on CEQUA, would these be patients which are there on existing treatment or do you see probably new patient coming in? Or there is a large patient pool, which does not take any prescription product for dry eye? Would that be the target? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [30] -------------------------------------------------------------------------------- There is no data, which can help me accurately segregate that. So whatever I'll say is based on observation and experience from speaking to doctors, both personally as well as by my team members. Our initial prescriptions had a lot of warehouse patients, and these are essentially patients who had failed existing therapy. We also got some new patients, but exactly to say what proportion would be, as I said, speculation. But clearly, a lot of warehouse patients were quickly put onto the drug who had failed existing therapies. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [31] -------------------------------------------------------------------------------- Okay. Understood. And one more question, if I may. On the R&D trajectory, given we are tracking much below the 8% to 9%, is it fair to assume that next year's guidance would be -- I mean, you said higher than FY '20, but closer to 8% and 9%? And would all of the incremental be for ILUMYA? Or are there any other products that would be included in this incremental amount? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [32] -------------------------------------------------------------------------------- I think we will share with you at the end of this year in the -- what you call last quarter investor call where we'll give both top line and overall investment in R&D. But I'm not expecting it to exceed 9% next year. -------------------------------------------------------------------------------- Neha Manpuria, JP Morgan Chase & Co, Research Division - Analyst [33] -------------------------------------------------------------------------------- And would all of the incremental spend be for ILUMYA, sir, or new indications on ILUMYA? Or I think we mentioned 1 more product going to trial next year. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [34] -------------------------------------------------------------------------------- We'll have many other products also on which we will be spending money. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- The next question is from the line of Chirag Dagli from HDFC Asset Management. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [36] -------------------------------------------------------------------------------- Sir, what percentage of our ILUMYA prescriptions are in the early access program right now? I mean, a ballpark number would do. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [37] -------------------------------------------------------------------------------- I mean, clearly, I will not share that. But that's always -- there are every day patients who will go into the early access program, and every day there will be patients going out of the early access program. So that -- and it's part of strategy that we want that patients to get on to the early access program when there is a delay in getting the insurance -- commercial insurance coverage. And then we work with the payer to try and see that they move out of the EAP program and become a paid patient. So it's a part of strategy. And every single day, you'll have patients coming in and patients moving out. Conversion has been almost industry standard conversion. So we are comfortable with that. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [38] -------------------------------------------------------------------------------- Is this proportion coming down, sir, of the new prescriptions that you're adding, more are coming into the non-EAP? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [39] -------------------------------------------------------------------------------- No. As I said, making sure that we don't lose the patient and if there's not immediate coverage possible to put the patient on EAP is a strategy. So I don't think we are doing anything to try and reduce the number or increase the number. I mean, it's -- if you get commercial coverage immediately, that's how the patient then gets on to the drug. If they do not, we try and put the patient on EAP and then work for coverage. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [40] -------------------------------------------------------------------------------- Okay. And just on the indications that you mentioned. Do we have a clarity? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [41] -------------------------------------------------------------------------------- Chirag, the right metrics, I think, for people to measure is what percentage of the early access program get ultimately converted into paid patient. To track whether new patients are getting into early access program or not, I don't think we'll give you any metrics, which can assess the quality and the health of business. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [42] -------------------------------------------------------------------------------- Fair point. Sir, would you be willing to share that number with us? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [43] -------------------------------------------------------------------------------- But that's a dynamic number because it keeps on changing. What Abhay said -- and I think you should understand his answer. What he said is that our number is in line with the industry's experience. Correct not, Abhay? That's what you said. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [44] -------------------------------------------------------------------------------- That's what I said. I mean, our conversion rate is as per the industry norms and standards, and we would be as good as the best-in-class there, which I think gives us comfort that as a strategy this is something we wish to continue to do and help the patients get on to ILUMYA faster. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [45] -------------------------------------------------------------------------------- Okay. Sir, that is helpful. And sir, do we have clarity on which indications we are going to do -- additional indications for ILUMYA? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [46] -------------------------------------------------------------------------------- I mean, what we actually shared is that our Phase II make the top line from the psoriatic arthritis. And that's what we are going with what you call for Phase III for. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [47] -------------------------------------------------------------------------------- And it is unlikely, Mr. Shanghvi, that you do 2 indications at 1 shot, right? In any -- simultaneously? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [48] -------------------------------------------------------------------------------- Not at this point, no. I mean, we are not currently looking at 2 Phase IIIs at the same time. We may do one earlier phase program for a new indication. Because we have to first -- for all other indications, we have to do first a Phase II or even a dose-finding study before we can do a Phase III. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [49] -------------------------------------------------------------------------------- Understood. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [50] -------------------------------------------------------------------------------- So we are not ruling out any other indication development. We might develop other indication. But that will not be a Phase III. -------------------------------------------------------------------------------- Operator [51] -------------------------------------------------------------------------------- The next question is from the line of Sameer Baisiwala from Morgan Stanley. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [52] -------------------------------------------------------------------------------- Murali, sir, a couple of clarifications. You mentioned some INR 700 crore figure below EBITDA line, if I heard you correct. Can you just clarify on that? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [53] -------------------------------------------------------------------------------- So Sameer, I think it is not below EBITDA line. What I said is combined impact of about INR 700 crores I said. It is not below EBITDA line. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [54] -------------------------------------------------------------------------------- Okay. Maybe I got it wrong. So INR 700 crore is impact because of what? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [55] -------------------------------------------------------------------------------- We have said higher marketing spend and R&D put together. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [56] -------------------------------------------------------------------------------- There is a statement which you read out. Why don't you read the full statement? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [57] -------------------------------------------------------------------------------- So Sameer, what I said was that the net profit for Q3 was at INR 914 crores, down 26% year-on-year, mainly due to higher other expenses, a significant year-on-year reduction in ForEx gains, higher taxes, having a (technical difficulty) So FX number anyway you have, Sameer, with you. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [58] -------------------------------------------------------------------------------- Okay. That's fine. I'll take it offline, I guess. And Murali, you said -- the other question I want you clarify. You also mentioned about $500 million net debt reduction ex Taro. This is talking about 9-month period or? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [59] -------------------------------------------------------------------------------- Year-to-date December I said, for the 9-month. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [60] -------------------------------------------------------------------------------- Year-to-date for the financial year -- 9 months. Okay. -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [61] -------------------------------------------------------------------------------- Correct, correct. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [62] -------------------------------------------------------------------------------- Okay. And where does this number, the balance $410 million, go over next few quarters? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [63] -------------------------------------------------------------------------------- I mean objective would be to go to zero. I mean, if we don't do an acquisition, that will go to zero. If we do acquisition, then that will change. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [64] -------------------------------------------------------------------------------- Okay. No. Fair enough, sir. And... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [65] -------------------------------------------------------------------------------- Actually we want to go back to a situation where we were cash surplus. So... -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [66] -------------------------------------------------------------------------------- Okay. Fair enough. And sir, SEBI forensic audit work that was going on? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [67] -------------------------------------------------------------------------------- Yes. Sameer, compared to our last update, there's no further development at this point of time, which we have to share at this point of time. We don't have any update from the regulator. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [68] -------------------------------------------------------------------------------- I mean, we've responded to all the questions. -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [69] -------------------------------------------------------------------------------- All the queries have been responded. Compared to the last update, Mr. Shanghvi, I'm saying we don't have any further update. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [70] -------------------------------------------------------------------------------- Yes. And our assessment is that there's nothing that we've shared that is a concern for us. -------------------------------------------------------------------------------- Operator [71] -------------------------------------------------------------------------------- The next question is from the line of Surya Patra from PhillipCapital. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [72] -------------------------------------------------------------------------------- Yes. Sir, 2 things. One is that on the field force expansion and what you have mentioned for the domestic formulation business. So is it that, okay, our focus that -- or we are thinking that, okay, with the flattish kind of a U.S. performance, are we trying to focus more on the market where the growth could be relatively better? Hence, the efforts for the domestic business is that we are expanding. And if you can also say that… -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [73] -------------------------------------------------------------------------------- I don't think there is any linkage between the 2 there. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [74] -------------------------------------------------------------------------------- No. I think we look at all markets -- Kirti will tell you. But all markets we look at separately for desire to make up for not growing in one market with a higher growth in another market. We want each business to find a way to grow. And if you see that is why we share all the different numbers with you. Our objective would be to see that each business is growing. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [75] -------------------------------------------------------------------------------- Yes, sir. So the part question relating to the earlier one is the ROW and the emerging market, which is now 30% of that -- put together 30% of the total revenue mix. So any thought process? How should one really look at there moving ahead? Any direction that would be useful. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [76] -------------------------------------------------------------------------------- So I gave some details about what you call underlying growth in the emerging market, which is at around 15%, because of reduced tender sales in South Africa because, philosophically, we are not looking at focusing on growing by becoming a bigger tender company. And the other markets, I think, we have ability to add growth to that business, may not be in double digit, but in single digit. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [77] -------------------------------------------------------------------------------- Okay. And second question is on the amortization. This quarter any specific number that is one-off of nature is there in this quarter, sir? And if you also can share some idea about your CapEx plan for the current year and next? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [78] -------------------------------------------------------------------------------- So as for the depreciation concerned, the company has got total overall asset base of about INR 15,000 crores. And we recognize that depreciation is driven by a number of factors, which includes the timing of the capitalization, utilization of assets, wear and tear and obviously other factor. So there's nothing specific we can follow in line of the current Q3. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [79] -------------------------------------------------------------------------------- Okay. And CapEx indication, sir? What would be YTD? And what is the likelihood that you'll be doing for the next year, 12-month period? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [80] -------------------------------------------------------------------------------- Normally, we -- I give guidance about CapEx. I don't remember whether we've given guidance this year, but it is in line with whatever guidance we would have shared at the beginning of the year. -------------------------------------------------------------------------------- Operator [81] -------------------------------------------------------------------------------- The next question is from the line of Anubhav Aggarwal from Crédit Suisse. -------------------------------------------------------------------------------- Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [82] -------------------------------------------------------------------------------- One clarity on this global specialty sales. Abhay mentioned that it's sequential increases across products. Would you just, without giving numbers, just like to qualitatively mention, which was the largest contributor in this delta sales in the quarter? Which product was the largest contributor? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [83] -------------------------------------------------------------------------------- I think because of the seasonal impact, Anubhav, I think the incremental increase in Levulan and ABSORICA would be the highest. -------------------------------------------------------------------------------- Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [84] -------------------------------------------------------------------------------- And Abhay, one question on the ILUMYA. The intensity of investment for us. Now what I mean by intensity of investment is our rep team there in DTC campaign, if you look across last 1 year or let's say especially over last 2 quarters, would you say our intensity of investment is same, has gone up, gone down? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [85] -------------------------------------------------------------------------------- You're talking about in the current financial year? -------------------------------------------------------------------------------- Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [86] -------------------------------------------------------------------------------- Yes. Let's say over last 2 quarter. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [87] -------------------------------------------------------------------------------- No. I think the investment that we had planned for the year is spread across the 4 quarters in a certain way that we thought would be helpful for business. For example, the DTC campaign peaks up in 2 quarters, which are the months where patients are most likely to reach out to the doctors, for example. So we haven't changed our investment plan for the year at all. We have stayed true to the course that we had set for ourselves. And for the current financial year, we will invest as per plan. -------------------------------------------------------------------------------- Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [88] -------------------------------------------------------------------------------- That's helpful. I just had one more question on India business, if I can ask, on the field force expansion. So effectively, are we -- basically by expanding sales force by 10% roughly, would that doctor reach increase by a similar number? And largely, we're targeting these doctors in Tier 1 areas or going beyond Tier 1 areas? -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [89] -------------------------------------------------------------------------------- As I said, we are targeting doctors in Tier 1 areas, and this will help us on a couple of things, as I told you decluttering our portfolio. And this will also create a space for launching new products and an increase in call frequency with some of the important customers here. -------------------------------------------------------------------------------- Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [90] -------------------------------------------------------------------------------- So will it lead to higher productivity with this incremental sales would -- let's say, 2 years from after, let's say, FY '23, just as an example, would this field force be closer to productivity of our average field force today? -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [91] -------------------------------------------------------------------------------- See usually, our experience is that whenever we have expanded in the past also, I think the earlier productivity come back at the end of third year or the beginning of fourth year. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [92] -------------------------------------------------------------------------------- What I think you're saying, Kirti, is that the new territories, which are created, they reach your national average in third year. -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [93] -------------------------------------------------------------------------------- Third year. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [94] -------------------------------------------------------------------------------- But because of this expansion, you will possibly, in any case at the end of this year also you will -- overall productivity will still be higher than this year's productivity. -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [95] -------------------------------------------------------------------------------- Overall will be higher, but PMPM of the territory... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [96] -------------------------------------------------------------------------------- Of the territory, which are being created. They will be at a lower level than the national average. -------------------------------------------------------------------------------- Operator [97] -------------------------------------------------------------------------------- The next question is from the line of Amish Sanghvi from Anvil Share and Stock Broking. -------------------------------------------------------------------------------- Satish Bhatt, Anvil Share and Stock Broking Private Limited, Research Division - Research Strategist [98] -------------------------------------------------------------------------------- I'm Satish Bhatt here. Sir, this question is to Mr. Abhay. Abhay, we have been in the market for really over last 1 year. And I just wanted to know what type of investments we may have to require to get 3 or 4x or 5x of prescription, what we are generating on a quarterly basis? Because that will be the key success for our product. If you can throw some light, how has been the first year of launch? And what differentiating strategy we are going to adopt to make -- get prescriptions which are at least far superior than what you're getting as of now? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [99] -------------------------------------------------------------------------------- Very disconcertingly Mr. Shanghvi asked me the same question yesterday morning. So I don't know how to answer that because you're asking me what is going to be my strategy. And on a call, which is heard by everybody, how do you expect me to elucidate on strategy for next year. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [100] -------------------------------------------------------------------------------- I think, Abhay, one logical explanation, which I think is easier for you to share, is that most of the psoriasis patient are chronic patients. So you keep on adding to the base of your patients. And since if you look at the durability of our response then our durability of response has been very, very good. And we've published those... -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [101] -------------------------------------------------------------------------------- What you are saying is what we've also been saying consistently on all our calls. The question is very specific. How do we increase prescriptions by 5x or 4x? That is something which is difficult. I mean, we have given the broad contours of our strategy, not only on today's call, but earlier calls also. But the question is very specific on what strategy to do a 4x, 5x. That is difficult for me to answer. -------------------------------------------------------------------------------- Operator [102] -------------------------------------------------------------------------------- The next question is from the line of Naveen Baid from Aditya Birla Money. -------------------------------------------------------------------------------- Naveen Baid, Aditya Birla Money Limited, Research Division - Senior Analyst [103] -------------------------------------------------------------------------------- Sir, my question pertains more to the current outbreak that we have seen in China with regards to coronavirus. How -- what portion of a raw material is sourced from China? And what kind of disruption can it cause, if this were to last, say, beyond, say, 3 to 4 weeks? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [104] -------------------------------------------------------------------------------- So if I look at our different businesses, then our dependence on China for intermediate in our API business is possibly the highest because we buy a large number of intermediates from China. In our formulation business, our dependence on China would be relatively lower. But to some extent, many of the raw materials, which we may be buying in India, may have dependence on the Chinese intermediate. So we think we are buying from India, but there is a China link. So difficult to give you a correct response. But our sense is that the geography in which majority of the pharma manufacturing units are located is physically different from the, what you call, centers from which coronavirus has a bigger challenge. So hopefully, we will not have any significant impact. But I think we have to -- we know very little today. We are not getting any reliable and dependable information. So I don't want to respond. But we carry some significant inventory for most of the raw material as well as intermediates that we consume. -------------------------------------------------------------------------------- Operator [105] -------------------------------------------------------------------------------- The next question is from the line of Hari Belawat from Techfin Consultants. -------------------------------------------------------------------------------- Hari Belawat, Techfin Consultants Pvt Ltd - CEO and Director of Techfin Consultants Singapore [106] -------------------------------------------------------------------------------- Good evening, sir. This is regarding the U.S. FDA observation on the Halol facility. Total exports to U.S. is around 31% by the company. How much is from Halol? And any -- these observations, are they affecting export to U.S. from this unit? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [107] -------------------------------------------------------------------------------- So first of all, everything that we sell in U.S. is not exported from India. It's exported from many other geographies, including could be produced in the U.S. itself. And for Halol -- for the U.S., we have 3 factories, which are approved and which are supplying significant value and volume to U.S. So we haven't shared the size of the dependence on the Halol facility. But I think in the past we had when we had a warning letter. So I think after that, it would have only gone down and not gone up. -------------------------------------------------------------------------------- Hari Belawat, Techfin Consultants Pvt Ltd - CEO and Director of Techfin Consultants Singapore [108] -------------------------------------------------------------------------------- Okay. One more just connected question. This China -- this coronavirus is affecting APIs. But of late, it is reported that it is affecting even the finished goods prices in India also like some prices are given today have gone up. Is it the fact? And is it the outcome of this activity? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [109] -------------------------------------------------------------------------------- Kirti, maybe you can tell about India business. -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [110] -------------------------------------------------------------------------------- Where you've observed this? Can you give example? -------------------------------------------------------------------------------- Hari Belawat, Techfin Consultants Pvt Ltd - CEO and Director of Techfin Consultants Singapore [111] -------------------------------------------------------------------------------- This is given in even Economic Times today itself that paracetamol price have gone up and some more... -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [112] -------------------------------------------------------------------------------- The formulation prices are not affected, as I know, like, yes. You are talking of maybe more of a API [perspective]. -------------------------------------------------------------------------------- Hari Belawat, Techfin Consultants Pvt Ltd - CEO and Director of Techfin Consultants Singapore [113] -------------------------------------------------------------------------------- Okay. Azithromycin it is mentioned that prices have gone up almost double the price from the earlier due to this China effect. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [114] -------------------------------------------------------------------------------- So there are many raw materials, which are dependent on China almost 100%. So azithromycin would have maybe 80%, 90% dependence on China. So like that penicillins, cephalosporins, all of them will have significant dependence on China. So -- but it's difficult for me to respond that, because I don't think that current -- this 80% price increase is justified. It's only speculative buying, which would have raised prices. -------------------------------------------------------------------------------- Operator [115] -------------------------------------------------------------------------------- The next question is from the line of Alok Dalal from CLSA. -------------------------------------------------------------------------------- Alok Dalal, CLSA Limited, Research Division - Research Analyst [116] -------------------------------------------------------------------------------- One question on U.S. generic approvals. So Dilip bhai, Sun Pharma has not been receiving generic approvals, meaningful ones. What do you think is holding this back? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [117] -------------------------------------------------------------------------------- So I think it's product-specific response, but the regulatory expectations, especially for complex products, are far more and constantly evolving compared to simple products. And currently what we are focusing on are mainly complex products. So that's possibly holding up the approvals. -------------------------------------------------------------------------------- Alok Dalal, CLSA Limited, Research Division - Research Analyst [118] -------------------------------------------------------------------------------- But sir, it's been some time now that no meaningful approval, even in the injectable space as well, certain high entry barrier products, which company had spoken about earlier, have come through. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [119] -------------------------------------------------------------------------------- My -- I don't know. Normally, we generally don't give advance... -------------------------------------------------------------------------------- Alok Dalal, CLSA Limited, Research Division - Research Analyst [120] -------------------------------------------------------------------------------- No. As in the, let's say, the category of products. So that is what I was talking about. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [121] -------------------------------------------------------------------------------- I expect that higher entry barrier of complex products also have complex regulatory expectations. And that's possibly and also now because of the GDUFA and PDUFA, I think, the response time and all that are determined by the type of query and all of that. So I mean, we also continue to constantly internally review as to how do we respond so that we can add to the products that we can offer to the customers. -------------------------------------------------------------------------------- Alok Dalal, CLSA Limited, Research Division - Research Analyst [122] -------------------------------------------------------------------------------- Okay. So do you see this trend changing in the medium term? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [123] -------------------------------------------------------------------------------- I mean, we would like it to. -------------------------------------------------------------------------------- Alok Dalal, CLSA Limited, Research Division - Research Analyst [124] -------------------------------------------------------------------------------- As in your -- let's say, your communication with FDA, does it suggest that you are closer than before with these launches or approvals? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [125] -------------------------------------------------------------------------------- I am sure that we are moving and making progress on individual product, but difficult for me to respond. I mean, in a way, in which we can give you a committed -- and also, if you see our approach always will be that all the variabilities we will factor in, while we give projection for our annual growth for next year. -------------------------------------------------------------------------------- Operator [126] -------------------------------------------------------------------------------- The next question is from the line of Krish Mehta from Enam Holdings. -------------------------------------------------------------------------------- Krish Mehta;Enam Holdings;Analyst, [127] -------------------------------------------------------------------------------- I just had a quick question on the footnote in the consolidated statements on footnote #4 where we talk about the settlement agreement with Apotex and Modafinil. Is it possible to disclose the number on -- or a ballpark of how much the settlement agreement was with the last plaintiff, which has been grouped in other expenses? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [128] -------------------------------------------------------------------------------- This is not a material amount. That's the reason why it's been grouped. -------------------------------------------------------------------------------- Operator [129] -------------------------------------------------------------------------------- The next question is from the line of Sameer Baisiwala from Morgan Stanley. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [130] -------------------------------------------------------------------------------- Sir, Abhay, what do you need to do to convert ABSORICA scrips to the new form? And who are the key decision-makers over here? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [131] -------------------------------------------------------------------------------- Sorry. Sameer, can you repeat the first part of your question? -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [132] -------------------------------------------------------------------------------- Yes. What do you need to do to convert ABSORICA prescriptions to ABSORICA LD, the new form, and who would be the key decision-makers here? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [133] -------------------------------------------------------------------------------- So I think the advantages of the product we have already been -- we have already started discussing with the doctors prelaunch and looking at how they would respond to it. And I think the fact that we are able to give a bioequivalent product to 40 milligrams with a lower dose clearly has traction with the doctors. Decision-maker will not only be, in this case, the doctor, but the fact that our product is not a substitutable product will also be important because then the substitution at the retail level will reduce significantly or hopefully. And that's the message that we are also communicating at the retail level that the product is not substitutable and, therefore, the doctor's prescription should be honored. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [134] -------------------------------------------------------------------------------- Okay. And in terms of formulary coverage, I mean, do you get it right at word go or will it take next few months to get this fully covered? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [135] -------------------------------------------------------------------------------- We can only have conversations prelaunch. And we have had these conversations, but the actual formulary coverage starts after you actually launch the product. But with the positive contribution of ABSORICA to a lot of these formularies, I think, we will be able to get a good coverage is what I think as a going-in assumption. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [136] -------------------------------------------------------------------------------- Okay. No, the reason why I ask is, it may be a race against time because if the generic is going to come by December... -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [137] -------------------------------------------------------------------------------- Which is true. I mean, yes -- which is true. I think I agree with you. We have a short window in which to try and make sure that the LD launch is successful. I agree with you on that. And therefore, that sense of urgency on all fronts within the organization is clearly there. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [138] -------------------------------------------------------------------------------- Okay. Great. And Dilip bhai, you mentioned for ILUMYA that the conversion from EAP to pay or reimbursement is what is critical. But I thought that for -- or the volume of new patients or volume of patients into EAP is equally important because how -- what will it convert into... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [139] -------------------------------------------------------------------------------- Of course, of course. No, no, I agree totally with you, Sameer. I mean, getting new prescription is the most important issue. So that -- but I think the question that was being asked was more about, I think -- Abhay, what was the question? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [140] -------------------------------------------------------------------------------- But obvious the EAP -- I mean the question was I think more on the line of is the proportion of EAP reducing paid prescription at the right at the first instance. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [141] -------------------------------------------------------------------------------- That was not a material issue. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [142] -------------------------------------------------------------------------------- Yes. But totally agree with you, Sameer, the way you are asking the question now that getting new prescriptions, I think, is priority one. Then going through the system and see whether it is a paid prescription or an EAP is then the next step. And then for those who are on EAP to try and quickly get them off EAP and become a paid patient becomes a third step. And at each step there are interventions that are required by the organization to make sure that the numbers are as we projected. And they are in tune with what the industry best practices are. I hope, I think with the sequence that I have now explained, you have clarity on what is it that we are focused on as a company. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [143] -------------------------------------------------------------------------------- Yes, absolutely. This is very helpful. And one final question, Kirti, to you maybe. What are your thoughts on e-pharmacies? What kind of impact can this have on our domestic business? And are we going to be suppliers to these? Or are these like more like a competition? -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [144] -------------------------------------------------------------------------------- Clearly, we are the supplier to e-pharmacies. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [145] -------------------------------------------------------------------------------- Not directly, but they buy from us. -------------------------------------------------------------------------------- Kirti Wardhaman Ganorkar, Sun Pharmaceutical Industries Limited - Executive VP & Head of Global Business Development Team [146] -------------------------------------------------------------------------------- They buy from the stockist. Today it's a small business, but it's growing. Day-by-day it's becoming -- increasingly becoming bigger. -------------------------------------------------------------------------------- Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [147] -------------------------------------------------------------------------------- Okay. They can't substitute Sun Pharma product on a prescription to something else? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [148] -------------------------------------------------------------------------------- Not legally. -------------------------------------------------------------------------------- Operator [149] -------------------------------------------------------------------------------- The next question is from the line of Surya Patra from PhillipCapital. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [150] -------------------------------------------------------------------------------- Sir, just on the spending front on the specialty portfolio on the U.S. So see, what was the kind of a spike that we have already witnessed compared to, of course, last year, it is higher? But whether this is -- we are near to the kind of a peak so far as spending is concerned? Or there could be a kind of sequential improvement also on the absolute number front? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [151] -------------------------------------------------------------------------------- I think you are slightly ahead of our internal budget discussion. So this is what I think Abhay was referring to when he referred to about how do we increase the number of prescriptions. I think these are all issues that we are discussing, difficult to respond. We will do whatever is in the long-term best interest of the company. -------------------------------------------------------------------------------- Surya Narayan Patra, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Pharma Analyst [152] -------------------------------------------------------------------------------- Sure, sir. And just last one clarification on the taxation front. This quarter, obviously, it is elevated. Any specific reason? And we have in any way indicating that we should be moving ahead in terms of a percentage rate. So any clarity there? -------------------------------------------------------------------------------- C. S. Muralidharan, Sun Pharmaceutical Industries Limited - CFO [153] -------------------------------------------------------------------------------- So we have mentioned also earlier calls that the ETR has to be seen on a yearly basis to give a better picture overall. Being a global company, there are fluctuations on entities tax rates across key entities. So overall our current year-to-date ETR is about 16%, which is a 2% increase over last year. But we have been guiding that the ETR will gradually slowly inch up. -------------------------------------------------------------------------------- Operator [154] -------------------------------------------------------------------------------- The next question is from the line of Chirag Dagli from HDFC AMC. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [155] -------------------------------------------------------------------------------- Sir, your European partner for ILUMYA has indicated a 900 patient cumulatively and that too in a restricted few countries kind of a launch. Just conceptually and longer term, do you see U.S. as a much larger volume market for us? Or do you think given that the partner is a leader in dermatology. He is doing a -- he will do more volumes than us. -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [156] -------------------------------------------------------------------------------- Actually, I think 2 issues we have to keep in mind. One is that the reimbursement mechanism in Europe is very different from reimbursement mechanism in the U.S. and what the success of the product in both Australia as well as in Europe reflects the intrinsic strength of the product that we have and its ability to deliver the benefits to the patient. And that's what is reflected even while competing with the -- all the other products, which are in the market. I think the U.S. part maybe Abhay can respond. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [157] -------------------------------------------------------------------------------- First and foremost, I mean, I think the asset that we have at hand, ILUMYA, to be successful globally across all geographies, I think, is very important from both a patient perspective as well as from a company perspective. Having said that, each market has different peculiarities, which makes it interesting. And also the strength of the company. You're right. I mean, the partner that we have in Europe is a far stronger company in derm than some would be in the U.S. I mean, we are like just starting up in the last few years. But the idea is to find ways to grow in each geography. So like Mr. Shanghvi said in context to an earlier question, not on ILUMYA, I think we have to try and find ways to succeed in each and every geography that we operate in, looking at the operating scenario, not as a handicap, but a challenge to find ways to do better and keep improving. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [158] -------------------------------------------------------------------------------- Sir, this long-term data that we published, it doesn't seem to be helping the prescription numbers. Is it too soon to expect improvement? Or I mean, what is the messaging that is going to the community now that we have this long-term durability data? Hello? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [159] -------------------------------------------------------------------------------- Yes. Abhay? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [160] -------------------------------------------------------------------------------- The long-term durability data is being talked about with the doctors, not by every segment of the field force, which touches a doctor, but by the MSLs, by the medical team. And of course, we get a lot of podium time on -- and poster presentations on the subject at different conferences. Now in a competitive environment of 9 products, we are not the only people publishing data on our product. You get data coming in on other products as well in different subsets of patients. So even in terms of dissemination of data it is a competitive environment. We are not in a stand-alone situation that we have data and we have everybody's eyes and ears only on us. The share of voice, even when it comes to sharing of data, I think, is important, factor to keep in mind. So in that competitive environment, how do we maximize, I think, is a fair question, and that is something we will keep on thinking of ways to do better. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [161] -------------------------------------------------------------------------------- So this materially doesn't change much is what is the message that you want to try and give, sir? -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [162] -------------------------------------------------------------------------------- I didn't say that at all. I mean, it is not the only [Pennantia] where you can get a 5x from where you are. It's an important factor, and we have to try and see that we maximize the return out of this data that we have. -------------------------------------------------------------------------------- Chirag Dagli, HDFC Asset Management Company Limited - Senior Equity Analyst [163] -------------------------------------------------------------------------------- And when do we see, sir, improvement, if at all? -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [164] -------------------------------------------------------------------------------- I think, Abhay, you also need to clarify that as long as it doesn't go into label, it is not something which a medical rep will be able to talk to the doctor. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [165] -------------------------------------------------------------------------------- Which is what I mentioned that all parts of... -------------------------------------------------------------------------------- Dilip Shantilal Shanghvi, Sun Pharmaceutical Industries Limited - MD & Executive Director [166] -------------------------------------------------------------------------------- I think the way you said is that some subset of your marketing -- yes, correct. -------------------------------------------------------------------------------- Abhay Gandhi, Sun Pharmaceutical Industries Limited - CEO of North America Business [167] -------------------------------------------------------------------------------- And the reason being it is not on the label. So when I said that the field force cannot but MSLs and medical doctors can, I mean, by inference, yes, I did mean that it is not on the label. -------------------------------------------------------------------------------- Operator [168] -------------------------------------------------------------------------------- Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Nimish Desai for closing comments. -------------------------------------------------------------------------------- Nimish Desai, Sun Pharmaceutical Industries Limited - Head of IR [169] -------------------------------------------------------------------------------- So thank you, everybody, for being on the call. If any of your questions have remained unanswered, do send them across, and we'll try to get them answered. Thank you, and have a good day. -------------------------------------------------------------------------------- Operator [170] -------------------------------------------------------------------------------- Thank you very much, sir. Ladies and gentlemen, on behalf of Sun Pharmaceutical Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.