Ladies and gentlemen, good day, and welcome to Alkem Laboratories Q1 FY25 earnings call, hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines are in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the Conference Call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Tushar Manudhane from Motilal Oswal. Thank you, and over to you, sir. Thanks, Shubhank. Good evening, and a warm welcome for 1Q FY25 earnings call for Alkem Laboratories. So on the management side, we have Dr. Vikas Gupta, CEO; Mr. Nitin Agrawal, CFO; and Ms. Purvi Shah, Head of Investor Relations. Over to you, Vikas, sir, for the opening remarks. Thank you, Tushar. So good evening, everyone. Earlier in the day, we've released our financial results, press release, and investor presentation, which are also posted on our website. We hope you all had the opportunity to review it. Before we proceed with this call, we'd like to remind everyone that this is being recorded and the call transcript will be available on our website. We'd also like to add that today's discussion may include certain forward-looking statements, which must be read in conjunction with the risks that our business faces. After the end of the call, if any of your queries remain unanswered, please feel free to contact us. I now request Dr. Vikas Gupta to discuss the quarter's highlight and future strategy. Thank you, and over to you. Thank you, Purvi. Good evening, everyone. We really appreciate your presence for today's first quarter FY 25 earnings call. I'll start by presenting an overview of the operational and financial achievements for the first quarter, and after this, we will be happy to answer your questions and engage in a discussion. We are happy that our efforts to improve the profitability have started paying off, and we have seen a marked increase in margins during the quarter. We are committed to maximizing our EBITDA margin by carefully managing our product mix, controlling costs, and taking advantage of the favorable raw material pricing environment. The domestic business is our stronghold, and we expect to build on it by furthering the growth of our large brands and bridging the portfolio gaps. Simultaneously, we are also focusing on growing our business in emerging markets. During the quarter, one of the important developments was the successful resolution of USFDA's Form 483 at our Baddi facility. At Alkem, we remain steadfast to prioritizing quality and regulatory compliance. Just to give you a few highlights of first quarter, this has set a good beginning for the whole financial year in terms of profitability improvement for the company. We are pleased to announce the successful resolution of all the observations that we had received from Baddi facility. This exemplifies our unwavering commitment to adherence and regulatory compliance. Our EBITDA margin improved by 700 basis points as compared to last year Q1, so from 13.1%, we have improved it to 20.1% for the quarter. Net profit after minority interest for the quarter stood at INR 545 crore. According to IQVIA, we have registered a growth of 8.4% YOY compared to the IPM growth, which grew at 8.7%, so we are more or less in line with the market growth. The output from the IPM in six therapies, which is anti-diabetic, neuro and CNS market, the GI market, dermatology, and PBMN therapy, and our ranking has improved in neuro and respiratory therapies. We aim to sustain and carry forward the momentum in the coming quarters for this financial year. Thank you for your patience in listening, and the house is open, you know, for any questions. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Dhamesha from Macquarie. Please go ahead. Hi. Good evening. Thank you for the opportunity, and congratulations on a good set of numbers. One question on this product called Mira Background. I believe we have a tentative approval for this product. So, should we be keen as a near-term opportunity for us? So, Kunal, thanks, thanks for your, compliments. And, you know, on Mira Background, as I had spoken on the last, call as well, one or two companies have launched it and they are under litigation. Whereas we have, we are bound by the settlement agreement that we have with the innovator. So unless, you know, the final outcome of all the litigations on the patent, you know, are clear, you know, we would not be, because we are bound by the settlement agreement, you know, I don't see it getting launched, you know, in an, before the agreement date and which would be somewhere, I would say 2026 or 2027, you know, somewhere around that time. And in this quarter. ... you know, and we had given a full year guidance or a medium-term guidance that every year, we'll improve it by 100 to 250 basis points. So where do we stand? Is there a meaningful change in the way we look at profitability now for our business? And, and what has led to this meaningful improvement, what has driven this meaningful improvement for us in this quarter? Yeah. So I will, I will begin by picking up the last part of your question. You know, the reasons for this improved profitability, one is a good product mix. Second is, you know, improvement in the API pricing. So these are, and of course, strong cost control initiatives, you know, that have been running for various quarters within the organization. So I would say these are the reasons for this significant improvement that we have seen. As far as the overall profitability numbers, you know, I've always maintained that, we'll continuously be improving it on an annualized basis. Of course, you know, for the yearly guidance that we have given in the past, you know, that remains the same, which should be somewhere around a similar number, you know, overall number that we had in the previous year as well, around 18% is what you know, we have clocked. Because as I mentioned, that though operationally, you know, we would be improving it by, say, 100 basis points year-on-year, but we are making investments into our new business opportunities, and that would, you know, say, require some investments in the future growth opportunities. Because of that, you know, our guidance has been close to 13%, and we maintain the same for the year, for the rest of, I mean, for the balanced part of the year as well. On an annualized basis, we will be pretty much in line with the guidance that we have put together. But, sir, one last thing from my side. Sure. You know, in terms of the forex gain or losses, can you highlight that number for this quarter, and where is it baked into our numbers? So, you know, we never give very, you know, granular breakup, but this is mostly from Chile this year, in this quarter, you know, that we have had it to the tune of- Fifteen crores. INR 15 crore, you know, as forex gain. So- That is reported as part of other income. Yeah. So that is not part of. So that features in the other operating income rather than, sorry, other income, and not in EBITDA. Sure, sir. Thank you for that, and all the best. Thank you. Thank you. The next question is from the line of Vino from Elara Capital. Please go ahead. Hi, good afternoon. Just following up on the previous question on margin. For the full year, I just heard your answer to the earlier question. Does it mean for the full year, with the margin you are expecting similar to last year's 18% or 100 basis points improvement on top of that, which makes it 19%? So what I said is that operationally, you know, we would be improving it, but because we have new investments to make in the newer growth opportunities, you know, and large part of and some part of it will also, you know, be on the CapEx side, so which will dilute our EBITDA, you know, by, say, another 1%. So net-net, what we could arrive at would, should be somewhere around 18. But of course, if the API environment gets, you know, even more favorable, then, you know, we may look at some upside, but at, as is basis, you know, currently, we are maintaining our guidance around 18. Understood. Second, you mentioned that there was a favorable API pricing environment. Do you mind calling out a couple of APIs where there have been significant pricing reduction, which has helped you? Yeah. We, we had, say, for example, dapagliflozin, we had sitagliptin. You know, these are now substantial value products for us, and we saw significant reduction in some of these, you know, molecules on the API pricing, and we expect them to, you know, stay there, so, you know, for the, for the balanced part of the year. Even on the, on the paracetamol, you know, side, we saw some softening. Of course, not as significant as we saw on the other two, but I think these are some of the, you know, products that I would like to call out. Understood. And finally, any change or reduction in pen G prices that is happening also then? Pen G, you know, even we are eagerly watching like all this, I would say. We are yet to see any impact of Pen G pricing, so to say, you know. In fact, in the recent times, I am seeing that Pen G prices are even seeing a marginal increase. So unless we see the large Indian player coming up in market with the offerings, I don't think we are seeing softening in the China suppliers on the Pen G. Got it. Thank you very much. Yeah. Thank you. Before we take the next question, we would like to remind participants that you may press, and one to ask a question. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Thanks so much for taking my question. My first question is on the gross margin. Since you mentioned the API price environment and product mix, while the product mix can change quarter-on-quarter, just wanted to get a sense on, you know, how much of this gross margin improvement that we've seen is sticky. Meaning, you know, that assuming that API pricing remains where it is, you don't see any further improvement in that. You know, how much of this could sustain even if the product mix becomes inferior over the rest of the quarter? ... So I see the API pricing, you know, remaining more or less stable now. So I'm not foreseeing any significant change on the API environment. But as far as the product mix is concerned, you know, of course, in the Q2 and Q3, you know, we see our, you know, anti-infective portfolio, which sort of changes the product mix. So in terms of the product mix change might impact margins, you know, for two quarters, you know, it by say 2%. You know, that's the kind of estimate that we have and that we may see. But on the API pricing, I see it quite stable. In fact, you know, if this PenG thing works to our favor in the coming quarters, we may see, you know, an improvement over there. Otherwise, at as is basis, you know, this is what our sense is. Okay. You know, so just to clarify, sir, so last year we saw about 61% margin in the entire year. So given the benefit of API pricing, that, what we have reported in the quarter, that should... is already benefiting us by 100-150 basis points. Is that a right assessment? So, you're right, that last year our gross margin was 61%. This year, considering the changing product mix and our better margin in U.S. market and also the further reduction in API, we see it into further improvement of around, say, 150 basis points in our gross margin for the full year. Definitely, quarter one was better because of, again, the product mix. The domestic contribution was higher as compared to international. Okay, that's helpful, sir. My second question on the investments in the future growth opportunities that you've talked about, the 100 basis points. If you could highlight, you know, what these opportunities are, you know, is this the CDMO business that we talked about? So where essentially are we investing this? You know, how long do you think this investment continues, and when do we start seeing revenue from these opportunities? So as we discussed in our last call also, we are investing in our Enzene US entity. This is going to be mainly for the CDMO business. The total investment is around between INR 400 crore-INR 450 crore. And as we also highlighted in last analyst call, that since it will take some time for this business to actually break even. So this year there may be some amount of losses which business will incur and maybe in say first few quarters of next year also. But we are very hopeful that we want to build this business and maybe from FY 26, 18 we'll see a positive result from this. But this year there will be some impact because of this. Understood. Okay. FY 26 is when you will break even on it? Yes. Understood. My last question is on the India business. I know I've asked this before also. Some of our larger therapies, you know, pain and anti-infective, we seem to be growing slower than the market. These are fairly large therapies for Alkem. I know we're doing very well in the other parts, other therapies, but anything that you can highlight on what we are trying to do to, you know, address the lower growth in this segment versus the underlying market? So for the past, you know, few quarters, we had seen some market also sluggishness as far as, you know, these therapies were concerned. I'm hopeful, and I'm seeing a trend as well in the previous quarter also; it was better than the previous quarters before. And now, I am expecting that from Q2 to Q3, you know, we should start getting decent growth on our large portfolio, and that is why, you know, we are bullish about our overall domestic, you know, performance. So it's a... I think it's a good progress that we are making, you know, month-on-month, quarter-on-quarter. And we should see even these large therapies, you know, beginning to contribute, you know, to our overall growth. Implying that these will grow in line with the underlying market, would that be fair to assume? These are our leadership positions in many of these segments. Yeah. You know, at least, we will be in line with the market growth, as far as these therapies are concerned. Yeah. Sorry, sir, I must have missed this, but what's the growth guidance that we've given for the India business? Have you mentioned that? I joined the call a little late. We've always maintained in line with the market, you know- Yeah ... is what will be our growth, and which should mean that, you know, I'm expecting the market to grow somewhere between 8%-10% and should be similar, you know, for us as well. All right. Thank you so much. Yeah. Thank you. The next question is from the line of Viral Shah from Motilal Oswal. Please go ahead. Hi, good evening. Thank you for the opportunity. So my first question is on price volume. If you could let me know regarding the price volume and new launches growth in domestic formulation segment. So in domestic, you know, we have had a volume growth of close to around 1.5%. We have the new launches have contributed to around 2.5% and, you know, balances are, I would say, price growth, which is again close to 2.5%. Okay. Can you also let me know regarding the price erosion in base business for U.S. generic? So, like I've always maintained, U.S. generic, you know, is seeing a single digit price erosion. That trend continues, even for this quarter. So we are seeing, you know, that kind of price erosion, in our U.S. businesses. ... Okay. Regarding Pen G, so apart from Pen G, how do you see the lower RM cost then affecting the outcome? So there are certain other APIs also, which, you know, I see that even going forward, we could see some softening, but, I mean, this is something, you know, which is difficult to predict. So some of the API prices, the molecules that I called out on the previous question, we have seen definite reduction, and that should start, you know, that has started showing the impact, you know, in our numbers as well. So I would, I would, you know, say that that is more sustainable. But I'm quite hopeful that in the coming quarters, we should see, you know, a few more products where, the API pricing environment should get more favorable. But I'll be able to give specifics only when they start, you know, giving us the real benefit. Okay. Okay. And, regarding the employee cost, there was a INR 1 billion increase in employee cost, sequentially. So, if you could let me know the sustainable rate which you can consider for that. So, I think that is largely the, you know, inflation-related increments, you know, that we have generally for our employees. So, you know, it is pretty much in line with what we had anticipated or budgeted for the year. So it is, there is nothing, you know, abnormal that has come in as far as manpower increase. Okay. And if I could put in one more last question. The R&D expense, it was lower for the quarter, so how do you think for FY 25 on an absolute basis it would be, as a kind of fee? The first quarter is always within the range of 4.1%, because, you know, most of our filings are loaded towards Q3 and Q4. So, the annual spend, you know, will be within the range of 4.5%-5%, and in terms of absolute. So, we will continue to keep it under, you know, that percentage. So that is what we have been always maintaining. Okay, thank you so much. That's it from my side. Thank you. The next question is from the line of Bharat Shelley from Equarius. Please go ahead. Yeah, hi. Thanks for the opportunity. We just wanted to understand on the margin guidance again. In the last quarter, when you mentioned that you will be maintaining 18% margin, at that time, we were estimating that our gross margin will remain more or less likely set around 61. Now, considering we are increasing our guide, gross margin guidance to 2.5, yet our EBITDA margin guidance more or less remains same. Is there anything which I am missing out? So, if you look at our, say, last year, results, the quarter one gross margin was lower compared to the other three quarters. Actually, the API prices impact we started seeing from quarter three and quarter four, and also it's a unique product mix. So if you look at quarter four margin of last year or quarter three margin of last year, it was better than quarter one. And, this, say, improvement in gross margin will continue, or has continued in quarter one, and that is why we think, we have shared that our overall guidance for the year will be 62.5. So last year was- Right. Lower margin, gross margin of quarter one. Right. So in the first quarter, when we had guided for 18% EBITDA margin, at that time, we were estimating our gross margin to be around 61. Now, since our gross margin guidance has increased by 150 basis points, yet our EBITDA margin guidance more or less remains same. So I'm just asking why that benefit is not going to EBITDA? Is there any incremental cost which you are facing? Sorry to interrupt, in our last call also, we have shared that our gross margin for the full year will be in the range of 62%-64%. Okay. And on Miltefosine, actually, I thought that considering two players have already launched a drug that would have triggered a settlement. Isn't that, I- Yeah. So, what I'm asking is, there are two years we have launched Miltefosine. Isn't that going to trigger our settlement? No, no, no. So like I told you, they are also under litigation, and we are bound by our settlement agreement, which clearly mentions that, you know, we can launch it only when, after the final outcome of, you know, all the patent laws, patent infringement that has, you know, so we will be launching it only after that. So there is a at-risk launch. I think both the players are under, you know, litigation with the innovator. So we will be waiting for, you know, the final outcome of the litigation. Deepak sir, in case, let's see, let's say, if those benefits win that case, will it trigger our launch? See, I will just wait for all the litigations, you know, related to any patent for Mina Bakron to get over, and it's only after that, you know, we will be getting into the market. There are various litigations, I think, that are going on for different patents with regards to Mina Bakron. So once, you know, we are bound by the settlement agreement in a manner that once all the litigations are over, we enter the market. So that's when we will enter. Okay, that's helpful. And on, again, on the domestic business, are we- Mr. Bharat, we request you to get back to the question queue for any follow-up questions... The next question is a follow-up question from the line of Kunal Dhamesha from Macquarie. Please go ahead. Hi, thank you for the opportunity, sir. In terms of U.S. outlook for FY 25, in terms of product launches and your growth expectation, if you could provide some color here. So, you know, in terms of our U.S. growth, I've always maintained, we are looking at a single digit growth, you know, from the first market. In terms of the new launches, we launched, in generic Supretend in Q1. In Q2, you know, we've just introduced, Dabigatran, and amongst the significant ones, I think that is, that should be the one which we are pretty hopeful, which should start, you know, showing impact on revenue in Q3 and Q4. So that's about the new launches. With regards to the filing, I look forward to around 8-10 filings that we would do, you know, in the current, financial year. But a large part of it will come in Q3 and Q4. You know, so that's how, I think, our overall, filings for the U.S. will be. That, because of that, are we expecting our R&D expense to basically reach up to 4.5%-5% versus 4.1% in this quarter because- Yeah, because, you know, it's the phasing of the spend is like that. Because, year-end, we will end it between 4.5%. Sure. And then one on the R- ROW business, or the other international market business, which has just seen a, you know, a top line growth of 2% year-on-year. So is there any particular geography wherein we have seen some issues? Or, how should we, look at from an FY 25 perspective, for this business? No, so 2.2% is not from the ROW. In fact, the ROW markets, the emerging markets and Europe, some of the European markets, we are seeing very good growth, you know, above even 60% kind of growth. But their base is right now not so high. But we want to develop those markets for future because these are the markets where we get much better profitability, you know, as compared to the US market. So ROC is very good, you know, from those markets as compared to the US market. And that's what we are working on building, you know, top line from some of the non-US markets, so especially the emerging markets and some of the European markets. So I think that's what we are now focusing on in terms of our international business, and we will continue that focus, you know, very strongly. Just to add, I think you are talking about the non-US business, where there was a growth of- Yes. So in, under our non-U.S. business, Australia and India are the two major contributors. And this year we faced some supply chain issues in Australia, and that is why the quarter growth for Australia was lower. So that will be factor the overall growth of the non-U.S. markets. But all the supply chain issues are being cleared, so we are very confident that our growth will come back in the coming quarters. Sir, this Australia issue, is it lost sales or deferred sales? How should we look at it? No, it is, it is just for this quarter, we were not able to supply the particular product, you know, because of our supply chain issues. And now we have resolved those issues. So in the coming quarters, you know, we will recover, some part, I mean, large part of that sales. Sure, sir. And, in terms of the, penicillin G, or the, let's say, our anti-infective portfolio, are we a direct buyer from Chinese player, or are we more like, you know, buying APIs from some of the Indian player who converts penicillin G API into, you know, amoxicillin, cloxacillin? Yeah. Are you talking about the pen G? Yeah, Pen G. Yeah, Peng. Yeah, yeah. You're talking about Chile or you're talking about domestic market? No, domestic market, sir. Anti-infective is a big therapy for us, right? Yeah. And, you know, what Most of our procurement is indirect, you know, so we don't get into, you know, component buying. But, you know, we keep a view on various components of pricing, you know, and the various KSMs, you know, that are there. Mm. That's why I said so far, we haven't seen the impact of softening of these prices, you know, from the suppliers. As long as, you know, as soon as the change in the KSM or intermediate prices happen, you expect to get benefited from that. Is it correct understanding? Yeah, that's how it flows, because if our suppliers are getting some benefit, you know, then, you know, that gets passed on, you know, to us. So I think that's how the market works. Sure, sir. Last one from my side with the permission. Current medical representative count for the India business, including and excluding first line manager? Our 12,700 is what our, you know, count is. The managers would be over and above. Roughly 10% is what we should assume? I think, you know, you can send a query, and we can give, share the, you know, right numbers with you. But I think generally it's in line with the industry. Sure, sir. Thank you and all the best. Thank you. Thank you. The next question is from the line of Madhav from Fidelity. Please go ahead. Hi, good evening. Just had one question on the international business except US. I think you explained why the growth is a bit soft in Q1, but last three years, I mean, the business has grown at 20-25% CAGR. If you look at the next two or three years, given that we had a bit of a higher base now versus what we had before, so any sense to how, at what pace can this part of the business grow? I maintain the non-US business, we will see mid-teens kind of, you know, growth even in the coming years, and that is what we are focusing on. We will see that coming over a period of next two to three years. Is the mix of entering new countries and expanding in the existing markets. It's a mix of both. Yes. How we should look at it? It's a mix of both. Got it. Got it. In terms of the margin pecking order, this would be a similar margin business to India or higher or lower than India? Some markets are similar to India, but some markets are lower. But at a blended level, you would see it mean, it is not as high as India, but in terms of, you know, it's not as low as U.S. So that's all I would say. I mean, it is, it's shade lesser than India, but it's not as low as U.S. Okay. Got it. Yeah. Okay, thank you. Yeah. Thank you. The next question is from the line of Saurabh Kapadia from Sundaram Mutual Funds. Please go ahead. Yeah, hi. The question on the, you know, what was the growth for trade generics in this quarter? What is it? See, we don't share the segment-wise growth, but I've always maintained that, you know, it's a substantial scale business. It grows in line with whatever we see on the ARC side. So more or less, generally, you know, we are seeing similar kind of growths on both the sides, but we not have segment-level growth data. Okay. In terms of the additional cost you mentioned because of the new initiative, can you quantify what could be the cost, and will it be starting from Q2 or it will be more back ended? So mostly it will be starting from Q3 onwards. And we are not quantifying, clarifying it, but the impact on EBITDA will be around, say, 0.5 PPT point in the current year for say, quarter three and quarter four. Okay, thank you. Thank you. A reminder to the participants that you may press star and one to ask a question. The next question is on the line of Gagan Kharija from Axis Investment Managers. Please go ahead. Yes, please. Hi, am I audible? No, Gagan sir, your voice is breaking. Hello? Yes, Gagan sir. Yeah. So my first question is around the tax rate. I think for the full year, the guidance last given was 13%-15%. 1Q has been 11%. Should we assume that going forward in the next three quarters, tax rate will be 15%+? It will be in a range of 11%-13% for the full year. Okay, 11%-13%. So you're reducing the tax rate then? Yes. Secondly, I mean, are you making any provisions relating to the tax demand notice that you have received? So, we have not still received any demands, so just to give the status of the survey which happened. So Income Tax Department asked us to refile the return, and we have already refiled the return for last six years. Now, they will start the assessment, and once the assessment will get completed, then we will come to know about the result. So till date, we have not received against the survey which has happened in the month, in last week. Okay. Right. And, on the U.S. business, have you launched Suprac? Yes, we have. When was this done, sir? And what- In Q1. Q1. We just launched. Okay. So between Suprac and Dabigatran, do you see U.S. business, you know, managing to do a high single digit sort of growth this year, despite, you know, the Q1 not being strong? See, on Dabigatran, because it just introduced, we will start recognizing significant revenue only by Q3 end or Q4. Right? So from the financial year perspective, you know, the contribution that will be there to the top line will not be so significant that it offsets the value erosion, price erosion that we have on the balance portfolio, and that's why our guidance is going to be like that. Okay. And so final one, on the domestic sales, can you give some idea of how the acute part and the chronic part of your India business has grown for the first quarter? And I noticed that on the cardio, you are still sort of growing below IPM. Any explanations there as well? No. So Gagan, cardio has never been, you know, a very strong play for us. Our play has largely been on the antidiabetic side, and that's where we have large brands. So that is where, you know, we have the antidiabetic in chronic, like I mentioned, in Derma, CNS, in antidiabetic, you know, we are really outperforming the market. So there our growths have been pretty strong. So I think that's on the overall growth. And some of the other segments, you know, there, where we have seen very high market kind of performances is the GI portfolio, which is our largest portfolio, and the VMN portfolio, you know, which is our nutrition portfolio. So I think these are the segments which are really driving, you know, the overall growth for domestic. If I were to split your overall domestic sales, would it be fair to assume an 85-15 split between acute/chronic? No, chronic is increasing and somewhere close to 17%-20% is what we have, you know, chronic. Yeah. It could be growing well ahead of the covered market, because usually covered markets- Because I mentioned, you know, these segments where we are really, you know, going strong and going faster than market, so I called out those. Okay. On the non-NMBM portfolio, what kind of price increases would you have been able to take this year? On non-NMBM portfolio, we are allowed to take a price increase of 10%, but we realize, you know, because of the inventory, et cetera, and the market-driven, you know, pricing pressures, generally we get 5%-6%, you know, increase on the annualized basis. Okay. Thank you, sir. Thanks for taking my question. Yeah. Thank you. The next question is from the line of Dhantri from J.P. Morgan. Please go ahead. Yeah, hi. Sorry if you have answered this before, but just on the other expenses, excluding R&D, what had led to decline in the expense in the first quarter? So, as we talked that in the opening statement, that we have taken various initiatives in terms of cost savings. And, if you look at, say, the service level penalties which we incurred last year in the same quarter, that was significantly higher as compared to what we have incurred in this year. And just to say, our presence in Delhi and Mumbai has also significantly increased, in terms of degree and service level penalty. And we also expect that in going further in coming quarters also, there will be a reduction for the expense, service level penalty. Other than that, last year we incurred some Forex losses. So, if when we incur a Forex loss, we report it under other expense, while if there's a Forex gain, we report it in the other income. So this year there was a gain in the Forex, so we have reported it in the other income. But last year since it was a loss, it was reported in the other expense. And this has actually, these items have led to improvement in, say, as a percentage of sales, we are seeing other expense. Okay. So the way I understood is that this appears more to be a sustainable number. Obviously, you know, from second half of the year, you will see increase related to our investments, and, you know, cost increase on account of that. But barring that, this number looks more sustainable. So see, going forward, and as Raj also shared, that quarter one, generally the R&D expense is lower and we do most of our filings in quarter three and quarter four. R&D expense in our quarterly result is reported in the other expense. So, as a percentage of this, it's very difficult to compute and share with you maybe separately, that what will be the percentage going forward. But if you look at one-off items, so other than, say, R&D, we don't see that there are many other major items. But definitely it's very difficult to predict all the one-offs. But I think in absolute terms, it will increase by 30%-50% than we got as of Q1, and it will be in the close variants. Understood. Thank you so much. Thank you. The next question is from the line of Yash Khanna from ICICI. Please go ahead. Yeah, hi. And congratulations on a good set of numbers. I was going through the annual report, and I was reading the MD's message, where he mentioned that, you know, Alkem set to enter the medical device space and the OTC category, which will be significant business drivers going forward. And you guys are also exploring some inorganic opportunities in this space. So if you can highlight a little bit more on this. All my other questions have been answered. Thank you. Hi. Thank you, Yash. So, I think I will once again reiterate that these are going to be key growth drivers. But as we mentioned earlier as well, that we are taking, you know, steps to build this business. So when they will become meaningful, you know, it's still a while. And, you know, we will keep you posted, whenever we have, specific details, you know, to share, you know, in this regard. But yeah, these are really a plan, a part of plan. And in the coming quarters, you know, we are setting up to launch these businesses. And, you know, right now we're just, you know, working on getting these products to market. So we'll give you specific updates whenever we have to, you know, we have more specific details to share. Sure, sir. Got it. And just one more. Can we assume that the cash pile that we have, the capital allocation can be more towards these categories versus you know more towards buying out brand or something? I wouldn't say that. As part of our plan, we are looking at every opportunity, you know, that comes on the table. I've said it in the past, we are open to and we are actually looking forward to, you know, any acquisition that we can do that can add value, you know, to the to our overall scheme of things, you know, and which are more strategic in nature. So, you know, we have today a decent cash reserve, so I would say, and which is, I think, you know, and whenever any opportunity comes our way, you know, we can figure out the routes to funding, you know, to get those, to embark on those opportunities. At this stage, you know, there's nothing more that I can share, but I can just tell you that there is a very strong intent to, you know, look at inorganic options as well. Sure, sir. Got it, and best of luck for the future. Thank you. Thank you. Just to add on other expenses, like, I think to the previous question I answered that there will be an increase of INR 50 crore for the R&D expense on top of quarter one, but as we also discussed, that there are other initiatives, growth initiatives which we have taken. So for those initiatives also, there will be another INR 50 crore-INR 60 crore increase over quarter one. So all together, other expenses may increase between INR 100 crore-INR 110 crore on the base of quarter one for the balance three quarters. Thank you very much, sir. The next question is on the line of Kushal Manubhai from Motilal Oswal. Please go ahead. Hello, Kushal sir? Yeah. Am I audible? Yes, sir. Please go ahead. So just, on the in-house trend, which has been largely stable, but as a part of cost optimization exercise, are we going to see the reduction in number of MRs as well by the end of FY25? No, no, no. So MR is, you will see increase in productivity. That is our focus, rather than reducing, you know, people. I think there are effects and, you know, we are seeing strong traction in our, you know, performance because of our feet on ground. So there is no such plan, but there will be a definite increase in productivity. Understood. There is potential increase that we have, you know, as part of the plan in the numbers, but we will, we will see a improvement in productivity. Understood. If you could share the OpEx related to Enzeme Biosciences? Sorry, OpEx related to Enzeme Biosciences? Yes. In quarter one, there was an expense of around INR 90 crore as OpEx from including the depreciation. 90 crore including depreciation? And how do you see this planning for full year 5? It will increase a bit. As we discussed that, we are also building our U.S. plant, so some amount of expenses in that plant will be operational by end of FY 2025. So definitely there will be some operating expenses. So there will be, against the first quarter, the balance quarter, there may be increase of 20%-25%. Sorry, INR 25 crore per quarter, right? That for the remaining year also. Yes, yes. Understood, sir. Thank you. When I said that the other expenses will increase, so I think that is already covered, this part is already covered. So that is to do with, apart from Enzene Biosciences, are there any other deals you would like to call out for increasing, let's say, OpEx, which will, you know, keep the EBITDA margin at the earlier values? We have also entered into medical devices. We have signed an agreement with a company in the U.S. So there we will get the technology for hip and knee replacement, and we are getting into these products, and definitely it will take some time to break even. This business will also actually impact the EBITDA margin in the current year. So this is just on this, medical devices, this would be more as a hospital, you know, as in B2B products, or this would be more like an OTC product? So these are mainly, currently, the agreement that we have signed. We will get technology for hip and knee replacement. So we'll be dealing with two distributors. We will be promoting these products to hospitals, and hospitals will actually purchase from the distributors. Understood, sir. Thanks. Thank you. Thank you. Thank you. A reminder to the participants that you may press star and one to ask a question. The next question is a follow-up question from the line of Kunal Dameja from Macquarie. Please go ahead. Hi, sir. Thank you for the opportunity. One on the EBITDA margin guidance. I think I'm a little bit confused here. But you know, so the gross margins are expected to improve by around 100-150 basis points year-on-year. And then, at some point we said there'll be 100 basis point incremental spend on the new initiatives. And then at some point we said 50 basis point incremental spend in quarter three and quarter four. So yeah, I think I'm misunderstanding something, but how much is the new initiative spend that will kind of, you know, offset gross margin room for us? And then the cost efficiency initiative should also kick in, right? So yeah, how should we think about it? So, as, as we said, that the gross margin for the full year is in the range of 62%-62.5%. Also I said that for quarter one, the other expenses will increase by, say, INR 100 crore every quarter, mainly because of incremental R&D expense. Because quarter one, generally, our R&D expense is lower as compared to other quarters, and also because of investment in our biosimilar and medical devices business. Other expenses from on top of quarter one, it will increase by around INR 100 crore-INR 210 crore every quarter. That will include everything, right, R&D, new initiatives, everything, INR 110 and- This is what we are expecting. The final number will come only after the actual results are published, but this is what we have estimated. Sure, sir. One more question on the, you know, seasonality. Since we still have good amount of acute exposure, and we are roughly one month into quarter two, so how is the acute seasonality playing out for you this year? The IQVIA number, you know, is yet to come out for the month of July. We are also equally waiting, but I can just... You know, it will be too early, but it's much better than, you know, what it was last year. Sure. Sure. Thank you. The next question is a follow from the line of Yash Khanna from ROTH. Please go ahead. Yeah. Hi, sir. Thank you for the follow-up. So you mentioned about improving productivity of the MR. So if you can tell us what is the consolidated console productivity, and then break it up in acute and chronic, and also, what sort of a productivity improvement are we targeting going forward? So now our consolidated productivity is around INR 5 lakh. Okay, and you know, whatever, we are not looking at any significant addition, you know, to the numbers that we have. And we have a, you know, top line growth aspiration of close to 8%-10%. So you can see, you know, that will be largely the productivity growth. Sure. So if you can break it up of chronic and acute. Segment level, you know, we've not, but since acute is higher, you can, you know, consider, say, 10-20% higher productivity for acute. And chronic, chronic is not very low now, so I would say it's, it's catching up, but, you know, maybe 5-10% lesser than our consolidated level. Right. Got it. Thanks for this, sir. And good luck. Thank you. Thank you. Participants who wish to ask questions, may please press star and one at this time. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you. We'd like to thank everyone for participating in today's call and making this a meaningful discussion. If any of your queries still remain unanswered, please feel free to get in touch with us. Have a great weekend ahead. Thank you. Thank you. Thank you, everyone. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.