Welcome to Lupin Limited Q3 FY23 earnings conference call. Please note that all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the opening remarks. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you. Thank you. Good afternoon, friends. I'm very pleased to welcome you to our Q3 earnings call. I have with me our Managing Director, Nilesh, as well as our CFO, Ramesh. As you would have noted, we have continued to build on our momentum in Q3, both on revenues and in particular on margins. I'm very pleased that in Q3 our U.S. business performed well, India business growth improved, and API business rebounded as well. On the margin front, we saw the benefit of NPLs in the U.S., seasonal product upside as well, and continued savings from our optimization measures. We are focused on sustaining this positive momentum, in particular as material new product launches start and our recent investment in our sales force expansion in India starts yielding results. I will let Ramesh talk through the performance in deeper detail. I would like to share some of the business highlights, though. In the U.S., we have continued to evolve our business with optimization of oral solids, driving growth of complex generics, respiratory franchise in particular, and executing on our new product launches. During the quarter, our inline business was almost flat with slight decline due to exit from low-margin products, offset almost completely by seasonal products. New product launches in the year contributed well in the quarter with Suprep ramping up, performance generic successful launch, and Pennsaid authorized generic launch. Our respiratory franchise strengthened with Albuterol continued strong performance, addition of Brovana and Xopenex brands, as well as generic performance launch. As we look at the quarters ahead, we expect new product launches like Spiriva, diazepam gel, Nascobal nasal spray, and darunavir, all products where we have either exclusivity or first to market position, will drive growth of our U.S. business in a profitable manner. On Spiriva, we continue to make progress and have received priority review from the FDA for a target action date in April without inspection or July with inspection. In the meantime, we are getting ready with launch preparedness. We continue to see tiotropium as a substantial opportunity for fiscal year 2024, with a significant runway given the competitive dynamics. Products like diazepam gel and Nascobal, we now hope to see approval soon given the recent successful Somerset audit. Our U.S. generics business has come a long way in calendar year 2022. Still a long way to go, however, with the new product launches coming in, continued optimization efforts, focused efforts on building our niche inhalation as well as injectables pipeline, we are optimistic that we will grow our U.S. business in the next couple of years. Switching to India, the largest part of our business, while our growth in the quarter and first half has been below market, this is primarily due to loss of Sydnes from our cardiovascular portfolio and genericization in the diabetes segment in the gliptins. For the diabetes portfolio, our growth in Q3 was in line with market, with therapeutic areas like cardiac, GI, respiratory, all delivering double-digit growth. Our gynecology and GI have actually been the fastest growth therapeutic areas for us. This quarter, we have added close to 1,000 reps, created 6 new divisions to expand our reach and share of voice. We expect our investments to get us to above-market growth in the quarters ahead. We are committed to growing our India business to double-digit growth in the quarters ahead. Other than India and the U.S., our API business recovered with a growth in cephalosporins. Other countries like U.K. on the back of Foster generic and Germany due to NaMuscla grew well as well quarter-over-quarter. On the margin front, we expect continued improvement, in particular as we execute on new product launches and our recent investment in the sales force in India starts yielding results. Likewise, we continue to focus on cost optimization efforts. While we have been successful in optimizing our manpower cost, we have been very disciplined in getting out of low-margin products that have not allowed us to optimize our idle cost. Nevertheless, we are confident with the efforts that we have underway, we should be able to move the needle on this front in the quarters to come as well. On the compliance front, we have made progress with positive outcomes on sites like Ankleshwar, Nagpur Injectables, and Somerset. We've also made substantial progress on our remediation efforts in Tarapur and Mandideep. The recent approval of our Nagpur Injectables facility will enable us to start building our organic injectables portfolio in full earnest. Overall, we are moving in the right direction. We expect the pace to get better as we execute on our material new product launches in the quarters ahead. With this, I will hand it over to Ramesh for a deeper analysis of our performance. Thank you, Vinita, and good afternoon, friends. Sales for the current quarter were INR 4,244 crores as compared to INR 4,091 crores in Q2 FY23, a growth of 3.7%. On a year-on-year basis, the growth was 3.88%, while the previous sales was INR 4,087 crores. The U.S. business. In the quarter, the U.S. business registered 11.2% growth in local currency terms on quarter-on-quarter basis with the new product launches in the U.S. generic business and brands acquired from Sunovion. On a year-on-year basis, revenue declined by 12.3% in local terms with price erosion in top brands like Brovana, Albuterol and Famotidine. We launched four new products, Perforomist, Banzel, Rufinamide and Valproate ER tablets in Q3 FY23, bringing the total NPLs to eight for the year. NPLs contributed $20 million in Q3 revenue. India region. India Branded Formulations business declined by 3.4% in Q3 versus Q2, whilst on year-on-year basis, sales grew by 2.6%. The overall market growth during Q3 was 10%, whilst Lupin grew by 7.5%. Loss of exclusivity and genericization in the anti-diabetes portfolio has impacted growth rate of Lupin as patented portfolio held by Lupin in the anti-diabetes is close to 55% of the anti-diabetes portfolio. As you know, we, our top three TAs are cardiovascular, diabetes and respiratory. Apart from that, gynecology and GI, we are also doing very well, and they are growing, you know, in the case of gynecology by 19.7% and GI by 16.1%. API business sales grew by 12.7% quarter-on-quarter as core cephalosporins API sales recovered during the quarter. Year-on-year basis sales growth was 9.8%. On the EMEA front, revenue growth of 11.1% year-on-year basis, while strong performance of Luforbec in U.K. and NaMuscla in Germany has registered. Sales for growth markets grew by 23.5% vis-a-vis Q3 FY22, and declined by 5.9% vis-a-vis the previous quarter. Gross margins. Q3 FY23 gross margins are 59.8% as compared to 58.1% in the previous quarter. This is mainly due to U.S. margin improvement, better product mix and reduction in freight rates. Compared to Q3 FY23 gross margins, the slight margin is due to reduction in write-offs, freight, offsetting the impact of price erosion in the U.S. market and of course, inflationary pressures on the cost front. On the employee benefit front, FY23 Q3 FY23 was INR 764 crores vis-a-vis INR 771 crores in the previous quarter. There's a marginal decline on quarter-on-quarter basis because of channel stocking payments made in the last quarter. We had highlighted this in our last earnings call as well. On an ongoing basis, we expect employee cost to be in the range of 18.5%-19% of sales as we build our sales force in India. Vinita just spoke about that. A lot of people have been asking me about our manufacturing other expenses spend. I also rush to say that there is indeed a one-time expenditure base increase by about INR 40 crores, which will potentially come down next quarter. It also perhaps in some ways be offset by perhaps an R&D increase next quarter. EBITDA margins. Operating EBITDA, excluding effects and other income, is 12.2%, in Q3, a quarter-on-quarter growth by 160 basis points because of higher sales, gross margins and cost control. Normalized ETR is expected to be 35% as a few subsidiaries like LLI, LOI, Digistat and Healthcare continue to have losses. On the balance sheet front, there has been a lot of optimization that we've been working on and working capital operating days below by five working days. With this, may I have the pleasure of opening this floor for discussion. I don't think the organizer can hear us. Can you hear us? Yes. Thank you very much. Yeah. We will now begin the question and answer session. Anyone who wishes to speak, to ask a question may raise your hand from the Participant tab on your screen. Participants are required to use headphone earphones while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Prakash. Yeah. Hi. Am I audible? Yes, Prakash. Yeah. Hi. Good afternoon. Just wanted to check on the U.S. run rate. We had fairly good launches, where we have couple of one AG and, you know, decent launches, and we also acquired, you know, the two decent sized products. Just wanted to understand. The season of, season was also good. I think, you know, the flu season was good. Other companies have reported market share gains. Would you were you satisfied with the U.S. performance, or we missed some contracts? How do you think about it as a base business now? No, we were satisfied with the performance, Prakash. On the one hand, we should never be satisfied with the performance, but it's come a long way in the last couple of quarters. You know, in the business, both the base business, the in-line business as well as new product launches have contributed very nicely this quarter. I'd say that, you know, the impact of the flu season products, that obviously as the flu season recedes, which has already started, one will, you know, see some decline on that front. The team continues to work on this now, the $170+ million run rate, you know, with the current products, you know, until we can get, you know, additional new product launches like tiotropium and the like. Okay. I mean, it's a full quarter benefits of these launches as well as the acquired assets, is what I was trying to understand. You are saying that, yes, it had full quarter benefits. I won't say it's full quarter benefits. Mm-hmm. I mean, we had, the brands only for, you know, a couple of weeks in, the quarter. Mm-hmm. Also, yeah, we had two months rather, the brand, you know, Rubonex and Rubana. Performance, we had some upside opportunity that we were able to capitalize on because of supply issues of some of our competitors. I'd say, you'll, you know, we'll see an increase from the brand products, but we'll probably see a normalization on performance. Okay. Got it. Fair enough. Secondly, on Spiriva. What I heard was, April, the target is moved a bit to April, which is with inspection, in June without inspection. If you could just give more color, what does it mean? That date is like, what kind, color of the query that has come in. Without inspection means that if they don't come by June, it would deem to be approved, or how should we think about that? It's actually the other way around, Prakash. It's April without inspection and July w ith inspection. If the FDA decides that they wanna come and inspect, then it'll the tab date will be July. If they decide that they don't wanna inspect, you know, which is very hard for us to predict the agency is gonna inspect or not, then it's going to likely be April. We are hopeful that, you know, we can expedite it as much as possible, you know, just given that our back and forth with the agency. Majority of the disciplines have been closed. You know, CMC, the PGE and disciplines have been closed. I believe that, you know, quality is still pending, and that's why I say it's either April or July. Okay. Okay. Lastly, on the cost side, I think Ramesh did mention that there is a INR 40 crore one-off, but even if I strip that off, that cost is fairly high, even that. I understand there's a 1,000 people have been added, so incrementally, SG&A, traveling, marketing will increase from here. First is, why the, you know, the jump? I mean, apart from normal inflation, is there anything else that has, you know, increased, or is it maybe Forex as well? How do we see this number moving going ahead? You know, there is of course a slight impact because of Forex, because there is a rupee depreciation and it will translate expenses outside the country. It does happen that way. A large chunk of it is actually coming in because of the fact that we have had higher travel. I also told you in Q2, there was a shift, in fact, payroll expenses which were shifted back here, to the extent it has kind of normalized out here. There's been a higher component in terms of litigation spends and the like as well. All of this has actually contributed. Whilst your question actually comes in from the fact that what did we do on the, on the optimization plan. I'd actually tell you that we have been doing a lot of work on that, you know. To be honest, a lot of it actually happens at the gross margins line itself, and that is in terms of route system synthesis or spend under development and the like, and apart from that. This has also been, in some ways, eroded by higher inflation out there. Apart from that, there were inefficiencies across various lines. At the start of the year, we spoke about, in fact, trying to address the manpower situation at the factory level. We have been pretty successful there, and it's captured in some ways the staff cost itself. There are other lines where we have been extremely successful, but there are parts which we couldn't do much because the fact that volumes did drop. We had to take, you know, write-offs in terms of, you know, inventories that we had, and plus of course, issues that we had on the impurities front itself. Whilst, you know, the initiatives are still on, there have been mixed results, but we'll certainly see a lot more of this bearing fruit in the quarters to come. Our EBITDA margin guidance of ex-Zydus 16%-18% with cost increasing and with Spiriva moving out to next quarter changes, right? In a sense, yes. If you are talking about specifically Q4, it would be in the same line, the same range as the current quarter. Once we actually have the top line moving, which will potentially happen once we have Spiriva coming in, and of course, you've got darunavir and others, you could expect, in fact, you know, that to obviously impact the bottom line as well. We'll continue to work on the cost lines as well, but I think we are really, you know, banking on the top line to shift to actually, to see a, you know, a real shift in the, on the EBITDA front. Okay, lovely. Thank you and all the best. Thank you very much. The next question is from Saion Mukherjee. Yeah, hi. Sir, just to carry forward the question, I mean, you are banking on top line to deliver the margins. You know, it's a handful of product. You have Spiriva. In case that gets further delayed, what's your outlook on margin in that case? In that context, you know, it is important to understand, you know, in some granular detail, what's the kind of, you know, cost control initiatives that the company intends to take. Because, you know, banking on U.S. revenues, and that too is a handful of products, you know, there can be potential risks to that, because the margins are very low at this point. Yeah. I also recognize that. We also recognize that in lots of ways, you know, Saion. If the top line doesn't move, then potentially we still have to work on various initiatives on the cost front. There are several things which we still can. You know, for example, you know, there is an element of FTF still coming in because of the fact that, you know, if there are impurities and we are not able to supply, that's actually impacting in some ways the bottom line itself. There were write-offs that we have taken during the course of this year. Those are lines that we still can work on, apart from in fact the footprint that we would reduce in case, you know, there is, you know, a further volume drop. We would... It has to be in some ways an iterative process. We need to kind of weigh the pros and cons of potentially, you know, when would the top lines start moving, and then potentially work on, you know, on other items as well. Specifically when it comes to India region, yes, we are gonna add more people, but we're also working on productivity. Whilst, you know, there is going to be an increase in overall expenses, we also believe that there is gonna be commensurate increase on the top line. There would be, you know. At the very least, what I do expect is that if Spiriva and other products are gonna get delayed, the expense lines will certainly, you know, will go down that path in terms of reducing. That could, of course, shift the EBITDA margin, the EBITDA line in some way. Not till that the top line can really move it, but there will certainly a perceptible increase because of the reduction on the expense front itself. Would you like to talk about material rates as well? Yeah. If you talk about, you know, there has been an increase in cost of production because of that, you know, which is really impacting in some ways the gross margin line. Better sales mix, and of course, you know, reduction in terms of other, you know, the air freight and others, we're actually brought in some benefit there, that's reflected in the gross margin increase this time around. Yeah. You know, Ramesh, You used to talk about, you know, I think INR 500 crores of savings. You know, I mean, there was a number which you talked about earlier. Yes. I mean, is that number still valid, and how much have we already achieved, and how much is left? I mean, if you can give some color as to, you know, how much more just from a cost perspective one can expect. The INR 600 crores were really could be broken down into six or seven buckets, so to speak. We achieved a lot of success in at least three or four of them, whilst two others we were kind of stymied because the fact that the volumes dropped and there was write-offs and the like. Overall, I would say that it's mixed results. At least about 50%-60% has been achieved. But where we have not achieved would also significantly alter the balance. You know, still working on those. It's not as if it will never get achieved. It will get achieved, it's only a question of time, and that would actually, you know, kind of round up the full complement. Okay. just one last question. just a clarification on, you know, the new product contribution, $20 million, I think you mentioned. This includes the acquired brands. Also if you can, you know, indicate what's the, you know, exposure to the U.S. market from the Mandideep facility in terms of revenues? The largest part of it is Suprep, Perforomist, Sensate, and two months worth of the brands. The exposure to, from Mandideep. U.S. revenues is, I know it's up 10%. I'm not sure if it's up 5%. Yeah. What we really are looking at is only suspensions out there, you know, in terms of NP products out there. Mm-hmm. Okay. Thank you. Thank you very much. The next question is from Damayanti Kerai. Hi. Am I audible? Yes. Okay, great. Thanks, thanks for the opportunity. Coming back to cost, first few clarifications. You added 1,000 people in your India sales team. When did this addition happen? Because sequentially we haven't seen much change in the staff cost. You're planning to add on more people. How many potentially could come in? When do you expect these new people to start contributing meaningfully? What we understand is it takes around one and a half to two years. Are you expecting a similar time timeframe? We started adding from November. In this quarter we will complete the addition. A large part of that is really in this quarter that we're adding. We're creating six new divisions out of that. Part of this is just the fact that we are under indexed in India as far as our sales force is concerned. You'll see we'll see some impact this quarter. As you know, we've also been growing below the industry average in the last few quarters, and that is changing. I already see that minus team licensed portfolio, we're already at market growth rate. Even after adding this these people, we will see further acceleration of our growth. You'll see, you know. My expectation is that from the second quarter, we will be growing overall at rate faster than the market. Nilesh, how many people are left to be added? 1,000 are done, right? No, that was the entire number. The entire number is largely done. Okay. Impact of that is not getting reflected in staff costs, right? What we have seen is mostly similar. Yeah. I think there was some small number which was added in in this past quarter. In Q4 is where you'll see some impact of this staff cost tradition. That also is staggered through the through the quarter. Then it gets baked into the numbers from Q1 onwards. Okay. Q1 onwards. Second, Ramesh, you mentioned Q4. Sorry, Q3 number obviously had one-off. You are saying, if we move to Q4, that one-off might come down. You are saying R&D will catch up because Q3 was bit less. Should we assume broadly similar other operating expense cost to continue? Yes. I think the it will be more or less the same range. It'll come down a little bit. It'll come down a little bit in terms of SG&A expense that we can control, but broadly around this. So all- Employee costs go up a level, but that's on a, in a different, on a different line. If I just look at the cost, and that we wait for Spiriva and other key approvals to come in, when we should be seeing, I'll say, notable benefits coming from all the efforts which you have been doing on the cost front for last several years? That's exactly what I was trying to explain. We were stymied for because of reasons beyond our control, which is really about in some ways, you know, the volumes dropping and because of write-offs and the like. Those buckets we would be addressing, so these are not gonna continue forever. These were, you know, systemic issues that we kind of faced, which we have addressed. Those will get corrected. If you're talking about the total quantum of INR 600 plus benefit flowing in, it could have flowed into the, into the P&L, by the time we are through with this. Ramesh, just more specifically, I think Q2 onwards we would see improvement in performance. We have darunavir, we have some of this optimization that would kick in as well. That's what we see. Obviously, tiotropium will only further improve that picture. Yeah. Okay. My last question is on India bit. Diabetic portfolio, obviously we have seen genericization. With more sales people coming on board, which segments you are focusing which can really help you to outpace the market growth in coming few quarters? Our big therapy areas are diabetes, cardiovascular and respiratory. These are the three areas that would grow as well. You know, while it's a point of time, the diabetes market is also bouncing back. In addition, you know, areas like GI, areas like women's health are growing strong double-digit as well. These are areas that we would accelerate as well. Just I think it's like diabetes, are we relying more on, say, improved penetration? Maybe like there are some new launches lined up, but are you relying more on volume penetration to pick up pace? The market is inherently there. You know, unfortunately India is the diabetes capital of the world. You know, I think the market potential is always there. Value-wise, it is vitiated at this point of time because of the genericization of multiple products in the diabetes portfolio for the market itself, right? It's the only segment that is really growing at best a single digit kind of thing in the Indian market. If it's gonna bounce back for the market, it's gonna bounce back for us as well. Okay. Thank you. I'll get back in the queue. Thank you very much. The next question is from Surya Patra. I think you're on mute, Surya. Oh, yeah. Sorry. Thank you. Thanks for this opportunity, sir. My first question is on the kind of a potential profitability that we can achieve over next one to two -year period. Practically, having seen the pricing pressure in one of the key complex products, what we have been waiting for, let's say Albuterol, and other respiratory products. Now, our focus has been obviously on the complex generics, and we have been spending a lot. We are also on visualizing that or seeing that the kind of a pricing pressure as well as competition with the complex products are also witnessing. Considering that, are you confident enough to achieve what you have been trying to fetch from the complex portfolio going ahead? We've already started seeing the benefit of the complex products, just a couple of products like Albuterol, what, how much they benefit, you know, from us from a profitability standpoint. We, you know, we can't wait for our portfolio to be rolled out completely. I mean, when Spiriva gets approved, the potential of Spiriva is substantial, both on top line and as well as bottom line. You know, we will execute on these opportunities. Meanwhile, you know, until they get delayed, you know, one feels uncertain about them. The fact is our team is working, you know, 100% to get these products approved and launched. As we look at launching these products, that will really help us grow the top line as well as the margin profile. We feel confident of getting to that, in the next couple of years to 17%-18%, you know, EBITDA level. Okay. Whether you are happy to achieve whatever the profitability that you have achieved in case of Albuterol now? That is a concern that, okay, that was their key product, and we have been targeting certain level of market share there. We achieved everything, that has not influenced anything at all to our overall profitability. There has been incremental competition, incremental challenges to the business generally that has come up. Still, given the scenario, whether we should see a kind of, or whether the kind of profitability that we are trying to achieve, will that justify the kind of in-money that we have been spending on the complex portfolio? I would say that actually Albuterol offset a lot of challenges of the oral solid portfolio and the erosion that we saw in the oral solid portfolio. As we look out the next two years, we're expecting that Albuterol will have some price pressure, price erosion, and that we are factoring in new products that we bring into the market that will help us bolster the top line and bottom line. Okay. My second question is on the, let's say, Spiriva. See, obviously, it is delayed a bit, that is fine. In the, in the meanwhile, have you understood anything about the potential competition in that product and why? We don't believe, I mean, as of yet, no one has really finished a clinical trial. We believe that one company has started working on a trial. They're just starting a PD study. You know, from anyone who's starting a PDC study right now, if I look at our timeline, they're gonna be three years away at least a product to market. Okay. Till the time that we will be having a kind of exclusivity situation in Spiriva, whether that will have some kind of advantage in terms of grabbing market share for other product, other respiratory product as well, or there is no contentious benefit that we should see? Well, I wouldn't. I mean, you know, we are strengthening our respiratory portfolio. Overall our position on the respiratory and our offering from a customer standpoint goes up. That's, you know, that would really be an upside to see how we can bundle them if we can at all. I mean, to us, it's just a standalone, a very lucrative opportunity. Sure. Just last one question about the numbers, basically. Whether any debt number that has been added during the quarter because the finance cost looks slightly elevated this quarter. That is one. Could you also clear what was the flu contribution this quarter? This, I mean, so sequential up move in the U.S. sales, what we have witnessed, how much was that driven by flu? Firstly, on the debt front, yes, you know, we had a couple of acquisitions, you know. The brands that we bought in America, we also bought brands in Brazil, that's actually, you know, come on to the scene. There's of course, you know, the normal capital expenditure that we continue, which would have come through in previous quarters also. These have actually, you know, in some ways taken up the overall debt position. Though there has been a reduction on the working capital front, this is, you know, it's the M&A front which has really cost us to take on some debt. What is the gross debt, sir? It comes to about total about INR 3,400 crore. Okay. That's net debt actually. Okay, this is the net debt. Gross, are you sharing? Well, it's a small it's about thousand, INR 4,600 crores. Okay. Thank you, sir. Anything on that, the flu contribution, can you? What contribution? Flu season contribution for the quarter, ma'am? Oh. Sequential. It's low single digit. Couple of million dollars. Sure. Yeah. Thank you, ma'am. Thank you. P&G prices have been ruling at a higher, and because of that, to that extent, our ability to kind of, you know, we didn't actually want to sell at a loss in America also because, prices are what they are. We have been focusing on only products that are profitable. He was just talking about the increase. Yeah. I was talking about the sequential revenue increase, which you answered that it is single digit kind of million-dollar revenue. Yeah. Yeah. Thank you. Thank you very much. The next question is from Neha Manpuria. Yeah, thanks for taking my question. Nilesh, my first question is on the India business. I think you mentioned we should get back to double-digit growth, you know, from Q2 onwards. At that point, most of the, you know, Sigmus impact and also the diabetes impact will be behind us, and we expect the MR to start contributing to productivity. That assumption is right? We should start seeing our performance versus industry from second quarter. Yes. I actually did not even talk about the NLEM impact that we are seeing, you know, a little bit in the, in the end of Q3, and then we'll obviously have it in Q4. Obviously a good portion of that we would expect to reverse in Q1. If I were to look at, you know, the business in a little more, you know, two to three-year perspective, do you think we need any investments, organic and, you know, inorganic to sort of bolster our position further, you know, in India? I think we're, you know, we're doubling down on India, right? You know, adding 1,000 representatives. We are cognizant of what that means in terms of employee expense, in terms of selling promotion and the like. We see this as an opportunity to grow in India. Obviously in the COVID period, we held back from adding people and the like. Again, and you know, what we're doing is no different from the, you know, other industry leaders where, you know, clearly there is a renewed focus on India, and it certainly is part of our plan as well. I think we're already committed to doing whatever is required from a people perspective, an expense perspective, an R&D perspective to get to the business. I would love to, you know, hold in inorganic moves in this as well. We did some smaller stuff, including, you know, buying the licensed product, Nondero, including the Anglo French portfolio which is actually performing very well. You know, I think acquisitions are gonna be few and far between because, you know, especially the somewhat bigger ones, as you've seen, it gets to multiples where you really can't justify. You know, we would seek value and that would make it difficult from an inorganic perspective, but we are looking at everything that comes our way and, you know, for our own part, digging out opportunities that we could chase as well. Understood. You know, given that we are doubling down on India and, you know, most of the competition is increasing field force as G&A, how do I put that in context with the fact that we want to look at cost optimization further? You know, that would indicate that our costs are probably optimization, whatever might come through, might be more than offset by the fact that we need to continue to invest to grow in India, which does make margin expansion without Spiriva nearly impossible. Is that, you know, the right conclusion? Maybe, I guess, Ramesh, you can add. I think first of all there are some period effects. Yes, we are adding people. Yes, there will be certain costs that are associated with that, and we will not get a return, obviously, the very day that we add those people. I think the cost optimization measures are largely driven from the optimization that we saw overall from a generic footprint perspective. A lot of the stuff that we've done optimizing the R&D spend, you know, optimizing the manpower footprint. You know, 16% reduction in our workforce, in our manufacturing plants. Optimizing the R&D workforce and the like. A lot of that has gone in the direction that the generic market is changing. We will obviously play in oral solids and the like as well, but clearly the focus is to be a specialized generic player focusing on inhalation, injectables, and select oral solids. I think that. You know, to me, those optimizations run in parallel. There are still obviously other. You know, there are five or six key growth drivers and, you know, big business areas within Lupin, and, you know, some of them will take investments at certain point of time, the others will get optimized. Net-net, obviously we're all working to build a high-growth organization which grows at strong double digits and obviously with EBITDA far better than what we have right now. We are very cognizant of the fact that we are under indexed. I think these investments are being made in light of everything else that is happening, but obviously with the view that in the next few quarters we should be getting to much more solid numbers. Yeah. Just to add to that, you know, give further color, you know, there's a base beyond which it is impossible to go on quite a few buckets, you know, into that section. Mm-hmm. Perhaps in some buckets it's not possible to kind of optimize further. I also identified a great deal of optimization is still possible. You know, this is essentially in terms of, you know, the footprint reduction in some ways. Potentially you could also look at, you know, the item associated with that. Third bucket would potentially be on the reduction on the inventory write-offs that we have seen so far. Those buckets will certainly contribute in some ways to further efficiencies, and that will certainly move the needle. We are also speaking the same breadth of, in fact, a two to three -year horizon. When we get to that point, we are talking about quite a few products coming through. You know, Spiriva certainly, if... You know, in our opinion, should certainly come through with great deal of confidence we are saying this in the first half of the current year itself. We are also lining up, in fact, for products for the future. We're working on, in fact, the injectables portfolio. We're working on the entire respiratory range. There's every conceivable product which is worthwhile looking at, we are looking at out there. We are pivoting a lot more towards a lot more complex ones, you know. To that extent, you know, there's a lot more stickiness associated with that, you know, realizations associated with that, which is perhaps not difficult to see in the OSB portfolio, you know, at least in recent times. I think, whilst there is further optimization possible on the cost front, there's a lot more possibilities on the top line, and that has, you know, and EBITDA is ultimately going to be, you know, the difference between the two. Of course, the R&D expense. R&D expense, to our mind, whilst we pivot to, in fact, the, you know, the more complex ones, as a percentage of sales, it will certainly keep going down only. I, differ with you, and I would say that EBITDA margins in the next two to three years will certainly be much higher than what it is today. 12 is the absolute nadir from my perspective, and 18%-20% over the next two to three years is from my perspective, a certainty. Understood. A last question, if I may. Vinita, you mentioned about the Nagpur facility clearance, you know, helping unfold our injectable pipeline. Could you give us some color on, you know, the number of launches or the opportunity size that we're looking in injectables, you know, next year or the year after? You know, any color would be helpful. Yeah. You know, now that we've got the approval, I mean, we're also accelerating our portfolio, looking at some of the contract manufactured products that we can bring in-house where we haven't had the right cost and supply position. I think in FY24, we potentially can bring four to five products into the market. You know, we have couple of filings that are pending, Glucagon, Dilantin, Somatostatin, as well as, you know, other products that we are, you know, we manufacture outside that we can bring in-house in Nagpur, you know, at the right cost structure. I mean, 45 products in the next fiscal year. We'll try to accelerate that and, you know, a larger number in the year after. Thank you, Vinita. Thank you very much. The next question is from Niteen Dharmawat. Thank you for the opportunity. Am I audible? Yes. See, I see that we are continuously, you know, changing our strategy. I see that wherever there is a momentum we go over there. We started somewhere in pathology, now we are hiring 1,000 people for India business. Earlier for Japan, we made acquisitions in U.S.A. and things are not working and that's why we are making too many changes. Is that the case? Are we making too many changes with our strategy? Actually, we are not making any changes on our strategy. I mean, we've been very focused on building our core business, you know, which is, one, India. Two, you know, our U.S. complex generic business. Three, you know, anywhere we can get operating leverage like other developed markets with our generic portfolio, the investments that we made in the pipeline and in our manufacturing facilities. Four, you know, the other emerging markets which pretty much are self-sufficient in terms of their, you know, P&L as well as the cash flow requirements. I mean, the only change in strategy that has happened over the last couple of years, I'd say is a sharper focus on complex generics, more specialist generic portfolio versus a broad generic portfolio. The entry into Japan, 12 years ago, and the exit were very well-crafted strategy, so to speak. There was nothing tactical about it at all. I would not agree that, you know. Our entry into, in fact, complex generics, injectables, biosimilars, inhalation space are all very well crafted. To that extent, we've been very consistent in actually going down the path of further spends on those. There's been no change whatsoever. I understand. Can you give some guidance for the current financial year and the next financial year for top line as well as for EBITDA margins? EBITDA margin, you know, if you talk about the current, you know, the next quarter, potentially it will be around the same lines as the current quarter. I've also indicated that things will get progressively better because we're working on several things on the cost front. On the top line front, you know, we keep reiterating the fact that there will be products coming in. Things will only get better. I see. For the next financial year? You know, our ideal target would be to get to the, you know, to the core of 20% that the competition is looking at. Whether we get there in the Q4 of next year or in FY24/25, you know, it's general, the overall direction is there. The target is that. There's no reason why we should not get there because all the initiatives are in place and we are, you know, going down the path of our strategy, without, you know, retracing any of those. You know, the top line also we are looking at double-digit growth. Yes. Across markets really. Got it. I know there are too many misses that has happened, so even if you achieve something, I'll be happy about it. All the best to you. Thank you very much. The next question is from Sameer Baisiwala. Hi. Good evening, everyone. Vinita, if I'm not wrong, FDA had already inspected the site for Spiriva, isn't it? Why should there be a need to do it again? No, they have. I don't know if there's a need to do it again, Sameer. It all depends on the agency though. Standard language actually. Yeah. Yeah. Yeah. It's been inspected before. Okay. They have given you two dates, that means they are thinking about it. Yeah. We don't know. They always give you, yeah, two dates. Yeah. You know, it's very standard language from the agency now on any product. You know, that's why we can't say for certain that it's gonna be April only. Okay, got it. Vinita, what transpired in November tad date? In a sense, I thought that, you know, there was a good chance that they might have approved then itself. No. We got a priority review at, in November when, you know, we had reported. At that point in time, we got, you know, we were expecting, an approval by close to eligible, launch date, which would be very close to April, actually. Okay. Got it. Got it. Second question, Vinita. Are you seeing the competitive intensity in the U.S. for OSDs going up, or is it much the same? For the three, four products that you mentioned that you saw some price erosion, were they new entrants which were bidding lower, or even without new entrants, you are seeing prices roll down? We have seen some, you know, rationalization on, and a little bit of reprieve on the price erosion front because there's been a lot of erosion, and companies have started to get out of products, like we've gotten out of a couple of products, which really, you know, worry our customers. There have been also supply disruptions with a lot of challenges that companies have had in some years. Some are due to the margin pressure, but otherwise the GMP related issues. We've seen, you know, a degree of, you know, getting back to, you know, single-digit, high single-digit erosion, price erosion at this point. We hope that, you know, we'll see that continue in the this calendar year. Vinita, if I may ask, you know, how profitable is your U.S. business as it stands today? If you can just talk about it, because is that what is taking the, you know, taking the entire company average, way below? How sustainable is it to do business in this manner for a company which probably is the lowest cost producer, you know, in that sense? I'd say that the U.S. business EBITDA is below the company EBITDA right now. I can tell you that when we look at the last full year, I mean, Q3 was probably the quarter where the U.S. business did the best from an EBITDA perspective. Given all the efforts on the cost optimization front, R&D optimization, you know, stabilizing the base as well as executing on the new product launches, we've been able to get Q3 to a much better level than it was in Q2 and Q1, and we continue to build upon it. You know, and two years ago, the U.S. generic business was above the company average EBITDA. You know, as we look at the next, you know, the subject of Spiriva happening and some of the other product launches which are certain, like darunavir is certain, and the like, we expect the U.S. EBITDA again from fiscal year 2024 to be above the company's average level of EBITDA. Okay. That's great. Otherwise we'll continue to optimize it. You know, you recognize, Sameer, as well as I do, you know, it was a feast for quite some time. There's been a bit of a famine out there in the last two to three years. It's not as though this party will never begin again. It'll, you know. Once we get the products in place, things should be much better. Yeah, sure. Ramesh, my worry is, excluding Albuterol, is it a bit in the red kind of a business? It's not about Lupin, it's just about, you know, is this a sustainable business model in general for generics to be supplying at the pricing that it is, you know, given the consolidated buying in the U.S. You also know this, you know, so the entire business is kind of pivoting away from OSD into more complex ones. You know, the more commoditized products is where there's intensive competition, and one doesn't really make too much of money as money is out there. To that extent, companies should have focused on moving out of OST, and that's exactly what we are trying to do also. Okay, great. One final question from my side, if I may. It's on Suprep. Vinita, two parts. One is how has the pricing been? A typical exclusivity type pricing, 40% erosion? Second, post 180 days, how do you see the competition coming up? It's been a two-player market, the authorized generic. The brand launched an authorized generic and us. It's been a very nice opportunity from a margin perspective. Price erosion, even in a two-player market is, you know, 60% or so. It's been that kind of price erosion. However, the runway that we see is looking better beyond the 180 days because we believe that the other players, you know, have supply issues on the API that really is impacting the product approval and launch. Okay, great. Thank you so much. Thank you very much. The next question is from Bino Pathiparampil. Hi. good afternoon and good morning. Vinita, just a couple of specific questions on products. Darunavir you just mentioned, so we are set for launch of 600 and 800 in Q1, right? That's right. Okay. Are we going to follow that up with the other strengths after six months or so? I believe so. I mean, the material opportunity, the larger opportunity we see is with the exclusive strength that we have in the majority of our, revenues that we see the upside is for the exclusive strength. Got it. What's the update on Pegfilgrastim in the U.S.? I believe you are looking forward to a, approval near term. Yeah. We responded to the agency, you know, on the queries that they had, just in the last couple of weeks. We believe that we've been able to satisfy, you know, from our perspective, all of the questions that they have. Fingers crossed that we get that approval in the next couple of months. Next couple of months. Okay. Understood. Any further update on Dulera? I believe there also you had some queries to which you responded. Yeah. On Dulera, we have received a CRL from the agency, and we need to do some additional work on the product. That is ongoing. You know, we'll have to respond to the CRL, which we haven't responded as of yet. Understood. Yeah. Perfect. Thank you very much. Thank you. The next question is from Shyam Srinivasan. Good evening, thank you for taking my question. Just the first one is a data point on the India business. What's the current field force like? You talked about the 1,000 people, but where were they, where were we at, say, March end and now? What's the absolute number? At the end of this, we will be at 7,100 reps and 9,300 as the total sales force. Got it. Thanks. Thanks, Nilesh. When we track the progress, and you've guided to, you know, quarter two next year, where you'll start growing, faster than the market. What are some of the monitorables, maybe PCPM, if you could, you know, or doctor coverage? If you could guide us to some of the things that we need to be watching out for. I think you should just be watching out for the total number where we report. You know, I think there's too much granularity. Our PCPM is actually pretty good. Our overall PCPM is INR 8.6 lakhs per representative PCPM. So it's actually a pretty good number overall. You know, there's a spread, so in an acute business it's gonna be lower. It's higher in more chronic high-end business. I wouldn't try to watch out for those things. You know, the divisions that we are adding are in the big areas. There is, you know, there are, you know, there's a metabolic division, there's another respiratory division. You know, I think all of it will reflect in the total numbers and the, and the therapy-wise numbers. Good. Got it, Nilesh. Helpful. My second question is just on regulatory compliance and just maybe you can, Nilesh, you can answer it from an industry perspective as well, right? When participants ask what is the contribution from Mandideep, why is that question being asked? Is it because people worry that every OAI is now equivalent to an import alert? Just, you know, this is surprising, after so many years of having to work with the FDA. How should we think about the dynamic and what are you hearing when you interact with inspectors, quality people? What are some of the feedback that you're picking up? I appreciate you asking this question. You know, from the industry perspective, I think there is an over heightened sensitivity to every 43 that there is. You know, obviously if there are, you know, excessive number of 43s or, you know, obviously other regulatory action, that is of concern. There's no question about that. From an industry perspective, you know, we've obviously had a few, you know, examples where, you know, quality is somewhat pretty bad in other markets and the like. Unfortunately, I think that paints the industry in a bad light. We're coming out from, you know, we had, I believe about 60 odd inspections in India in 2022 versus the normal 200 +. Obviously we are getting into a period where there will be, you know, more FDA inspections. With the number of facilities that we have as an industry, there will be, you know, obviously some portion of negative outcomes that will come out as well. I, you know, I would only, you know, we had five observations in Nagpur. Everybody gave us a hard time. You know, we got the approval thereafter, right? I think the nature of the observations is important, and not just the nature, but not just the numbers. I think it's important to get a little bit deeper into this, which is, you know, I think you guys do a great job of that. You know, as far as we're concerned, I think, you know, we've had some wins and some misses. You know, Ankleshwar was a win. Nagpur was a win. Somerset was a very nice win, even with the follow-on inspection. Mandideep, clearly we were not at the right level. You know, we're taking the right steps to, for it to not blow up further than what it is, but it's not acceptable. Tarapur is not acceptable as well. There is a clear remediation plan on this. We do believe that we will get them to the right spot. You know, we're not just gonna leave them there, just because the contribution may be below a certain level. Whatever we supply, every product that we supply has to be of the right quality. People don't have to look at where the product was made. We're committed to this. I think, you know, I think the industry is committed to it in a broader sense as well. Certainly the scrutiny on the industry is gonna be there. We have to be up to snuff. Got it. Thanks for those. It's past time, but we can extend this by another five minutes. Last three questions, please. Thank you. Thank you so much. Thank you. Thank you. The next question is from Nitin Agarwal. One second here. Sorry, can you hear me? We can't hear you, Nitin. Can we move on to the next question in that case? Yeah, sure. The next question is from Madhav M. Go ahead. Hello, am I audible? Yes. Yeah. My only question was the, you said that the R&D expense as a percent of sales should come down as t he revenue base goes up. Could you give us a sense? I think we should be about 8% or so for this year, what does FY24/25 look like as a percent of sales, if you could give us some sense? Yeah. This year it's gonna be about 8%, but, you know, in the subsequent years it will certainly come down by 1% or 2%, for sure. Percentage or 2%. Okay, could be in the 6% or 7%- 2 percentage points lower to. Yeah, I would say over time. Got it. Okay, perfect. Thank you so much. Thank you very much. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Right. Hopefully, we've been able to answer all your questions. We hear all your concerns on the margin front. you know, it was not too long ago, couple of quarters ago, that we were in a single-digit margin. The fact that we've been able to pull the business back up to double-digit in Q2 and then further improve it in Q3, I mean, we will continue to work on this front, you know, to ensure that we continue to grow our business in a profitable manner. We certainly don't feel we are even close to our potential as an organization, but we're moving in the right direction, and we'll ensure that we can get to our true potential. you know, it might take us a couple quarters longer, just given the delays in product approvals, but we will get there. Thank you. Thank you very much. On behalf of Lupin Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar.