Welcome to Aurobindo Pharma Q3 FY 2024 Earnings 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 for opening remarks. Thank you, and over to you, sir. Thank you, Mandeep. Good morning, and a warm welcome to our third quarter FY 2024 Earnings Call. I am Srinivas Dandu from the investor relations team. We hope you have received Q3 FY 2024 financials and the press release that was sent out on Saturday. These are also available on our website. I would now like to introduce my senior management team on the call with us today, represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines, and Peptide Businesses, and Director, Aurobindo Pharma Limited, Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialties Limited, Mr. Swami Iyer, CEO, Aurobindo Pharma USA, Mr. V. Muralidharan, President, Europe Formulations Business, and Mr. S. Subramanian, CFO. We will begin the call with the summary highlights from the management, followed by an interactive Q&A session. Please note that some of the matters we will discuss today are forward-looking, including and without limitations, statements relating to the implementation of strategic actions and other affirmations on our future business, business development, and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties, and other important factors may cause actual developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect in future events or circumstances. With that, I will hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir. Thank you, Srinivas. Good morning, and a warm welcome to our Q3 FY 2024 earnings call. It has been yet another quarter with the highest ever sales. The sales growth was seen across multiple markets and businesses. This is further augmented by the highest ever EBITDA. Now, let me take you through the details of the results for the third quarter of FY 2024 declared by the company. For Q3, the company registered a revenue of INR 7,352 crore, with an increase of 14.7% year-on-year. EBITDA margin for the quarter was at 21.8%, against 19.4% for the last quarter. The net profit increased by 19.6% year-on-year and by 23.7% quarter-on-quarter to INR 936 crore. The revenue of INR 7,352 crore was impacted by EUR 21 crore. Otherwise, the revenue would have been INR 7,473 crore, and EBITDA would have been INR 7,732 crore, i.e., 33% margin. In terms of the general formulation business excluding... and contributed around 85% of the business. API business contributed around 13.9% during a growth 7.1% year-on-year. The growth is mainly driven by higher volumes on account of improved asset utilization and debottleneck. Ultimately, the quarter most of the business- Subbu, sir, your voice is not audible. Yeah. On, albeit, the quarter-on-quarter decline of net rate on account of business mix actually impact. We consider the EBITDA margin for the last quarter. For the quarter, the revenue from formulations business increased by 28.9% year-on-year to INR 3,756 crore. On a constant currency basis, US revenue increased by 27.1% year-on-year to $451 million. The growth was mainly driven by volume gains, stable demand, and new product launches. Our wide range approved basket has helped us optimally manage the price erosion, which remained limited. We have received final approval for 16 ANDAs and launched 21 products in Q3 FY 2024. We have filed seven ANDAs during the quarter. Revenue from oral generic products in USA has increased by 22.4% year-on-year to $278.287 million in Q3 FY 2024. Revenue from injectable and specialty business increased by 58% year-on-year to $112 million. The year-on-year growth was driven by new product launches. The total injectable and specialty slate globally increased by 46.8% and stood at $150 million. We have a total 216 injectable and specialty ANDA filings as on 31st December 2023, out of which 164 have received final approval, and the remaining 52 are under review or have tentative approval. The company on 31st of December 2023, has 820 NDAs filed with the U.S. FDA on a cumulative basis, out of which 641 have final approval and 31 have tentative approval, including six NDAs, which are tentatively approved under PEPFAR, and the remaining 148 NDAs are under review. For the quarter, U.S. formulation clocked a revenue of rupees, I mean, INR 1,728 crores, an increase of 1.6% year-on-year growth. In constant currency term, the Europe revenue was EUR 193 million, against EUR 203 million of last year. The revenue was impacted by clawback effects. For the quarter, growth market revenue was 25.6% year-on-year to INR 626.27 crore. In U.S. dollar terms, the revenue grew to $75 million in Q3 FY 2024 from $61 million in previous year Q3. For the quarter, ARV business revenue declined by 28.6% year-on-year to INR 179 crore or $22 million. The drop in the revenue in this quarter is mainly due to sales deferment to Q4 in compliance with Ind AS 115. During the quarter, the revenue costs have improved, further aiding our gross contribution, stood at INR 4,201 crore. Gross margin for the quarter was higher at 57.1% against 55.2% of last quarter, mainly due to low raw material cost and favorable business product mix. R&D expenditures stood at INR 398 crore during the quarter, which is 5.4% of the revenue. During the current quarter, R&D expenditure was higher on account of the clinical trial expenses for multiple projects. Capital utilization has gone up well in this quarter during the operations driving the operating leverage. Consequently, EBITDA improved to INR 1,601 crore, reflecting a margin of 21.8%. Net CapEx for the quarter was $103 million, which mainly includes approximately $37 million towards PLI project. The cumulative CapEx for the Penicillin G project till date, till December, amounts to approximately $230 million. The average USD INR exchange rate is 83.24 against 82.68. The business had a net cash outflow of $7 million during the quarter before the PLI investments and investments in new markets. As a result, the net cash position, including investments at the end of December 2023, was $49 million. The gross debt is $815 million. Subsequent events. US FDA inspections. Further to our intimation regarding the US FDA inspection of Eugia Unit III, dated February 2, we would like to provide the following updates. On February 2, FDA completed an on-site inspection of Unit III and issued a Form 483 with nine observations. We will submit a comprehensive written response by FDA's deadline of February 26. By way of abundant caution, the company temporarily paused manufacturing and distribution activities at the Unit III site. We have taken these aggressive measures because we believe it is the most responsible and appropriate course of action until we conduct investigation and assessment to give FDA assurance that we are addressing its observations. We are continuing to distribute terminally sterilized and ophthalmic products manufactured at Unit Three that we have already shipped to U.S. We are working closely with FDA Drug Shortage staff, and we have retained third-party experts to assist us in conducting investigation, assessments, and restart activities. With the progress we have achieved today, we anticipate resuming production on our non-aseptic lines around the end of the month, with a phased return to service on aseptic lines. Also, available stocks are being retested and progressive release of tested stock start from the second fortnight of February 2024. We will continuously work with the US FDA, and we will work tirelessly to achieve and sustain compliance with the FDA requirements and expectations. My colleague will give further details on this in the Q&A. Outlook. Our financial performance in Q3 was driven by operational cost efficiency, with continued focus on developing strong pipeline and driving commercialization of key projects. Combined with personal business, we are confident of growing the growth trajectory across the top line and bottom line. Some of the key highlights for the forthcoming quarters are summarized below. In Q3, at an overall level, US continued to have neutral price erosion. Also, raw material costs continued to show reducing trend in Q3. We remain optimistic in Q4 in terms of the margins. While the growth in oral solids is expected to be strong, and we see positive signals in our OTC portfolio and steady continuity in branded oncology injectable business. My colleague, Swami, will discuss about it when addressing the Q&A. We are confident of achieving 20% EBITDA margin target, set internally for the year, as mentioned in the previous quarter. Our new pro- pipeline of approvals will include high-margin, new-generation product categories, biosimilars and peptides, et cetera. We have the following under commissioning. The China plant is fully installed, and we have received cGMP approval. It is expected to start revenue generation from Q1, Q2 FY 2025. The Lyfius plant for Penicillin G and the six API plant are under installation. The trials are underway. Operations are expected to start from Q1 FY 2025. The Vizag injectable plant is expected to commercial in Q1, Q2 FY 2025 growth markets.... It is expected to start generating revenue for US and Europe by FY 2026. Further, we are conducting clinical trial studies for our biosimilar products, and the plant is expected to commission by FY 2025 or early FY 2026. Considering the current market condition, EBITDA margins are expected to improve Penicillin G plant commercialization and stabilization of the manufacturing process. The expected margin improvement will be without considering the margin from biosimilar. Apart from that, we will be incurring CapEx for the CMO business in bio, biosimilar. My colleague, Mr. Satakarni, will provide more insights on the entire biosimilar and the other port-complex generic portfolio on this. This is all from my end. I take this opportunity to introduce Mr. V. Muralidharan, President, European Operations. He has been taking charge of Europe for the last 22 years and was instrumental in many M&A transactions in Europe. Welcome, Murali, for the earnings call. Now, my colleagues will give more clarity on any specific aspects in our Q&A session. We are happy to take your questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may raise your hand from the Participant tab on your screen. Participants are requested to use headphones or earphones while asking your questions. The first question is from Kunal Dhamesha. Hi, good morning, and thank you for the opportunity. Am I audible? Yes, we can hear you. Sure. Sure. So the first one on the plant inspection, the Eugia Unit III plant inspection, I think I missed some of the comments. So as of now, we have shut down the majority of production, is the way to understand it, and then within that, the non-aseptic lines are expected to come back in February, and then aseptic lines by the, I didn't get the deadline there. But if you could provide some, you know, some color as to how many lines are aseptic lines and how many are non-aseptic lines, and also, you know, qualitatively, if you can direct at the contribution to revenue, et cetera, would be helpful. Yeah, your understanding is right. In fact, the non-aseptic lines will start off sometime in next few weeks, and aseptic lines will take a month or two, and we expect, the entire production to get streamlined by end of this financial year. We expect that because of the stoppage, it can have an impact of around $20 million in Q4 of this financial year. Okay, and when you say streamlined by the end of the financial year, is FY 24 or FY 25 we are talking? I'm talking about FY 2024. FY 2024. Okay, sure. And then, you know, the second question on the, on the EBITDA margin, which you guided for 20% for this year, and then, we have also said that Pen G plant at current prices, et cetera, could help us improve that. Beyond that, what other levers do you see for the next year, for the EBITDA margin improvement on a year-on-year basis? See, at this stage, Kunal, we are talking about achieving 20% for the year. Already we are 19.4%, and by end of this with this quarter, we will touch upon 20%, that we are confident. Apart from Penicillin G, at this stage, we are not saying anything at this stage. Probably next quarter we will be able to talk about it. Sure. And just last one again on the Eugia Unit III. You know, let's say we'll have some, you know. Do we have a lot of earnings concentration coming out of this plant, you know, like, few of the products, making up for a lot of our revenue? If yes, can you guide us to top five products from the plant, what could be the earning, revenue contribution? See, in general, this particular plant is important to us, and obviously now, we are a bit more distributed in terms of plant, plant concentration, with Eugia Unit I also contributing significantly. But for Eugia business, this plant contributes around 40% of revenue. And I, in fact, there are multiple products where we are market leaders in the U.S., and that's where, like, we are focusing in terms of how fast we can resolve and restart manufacturing. Sure. Thank you. I have more questions. I'll join back then. Thank you. The next question is from Neha Manpuria. Yeah, thanks for taking my question. Just an extension on Eugia Unit III. You know, if I remember a few years back when we had shut down the bag line, it took us a very long time. I'm not even sure if we are back to the impact that we had seen at that point due to the shutdown. Now, when we shut down the, you know, facility for an extended period of time, for the next two, three months, and the revenue loss that you're mentioning, what is the confidence of recovering, you know, the $20-odd million numbers, particularly since we are not going to see new approvals till the time we clear this facility also? In fact, this, Neha, thanks for asking this question, because, see, the bag line issues might be different from the current observations. What we feel is the current observations are more to do with aseptic processing practices, some documentation gaps. And so we are confident that we are working with the most reputed consultants to ensure that we put the strongest response possible and also resolve the issues. That's where, like, we feel that non-aseptic and aseptic, we are separating it out and ensuring that we start in a phased way, both the things. And our assessment at this point of time is this is going to take one to months, and we will be back to in full flow from April. That is our current assessment, Neha. And- No, I- Yeah, go ahead. Sorry. I understand that, but my point is that the $20 million impact that you've mentioned, right? So there is obviously risk of market share loss in some of the larger products from this facility. You know, what gives you the confidence of us being able to get back market share if we lose that in the next, you know... Is that a scenario that we're penciling in at this point? At this point of time, what we are, we do have stocks to cover up for the next 60-90 days, and we feel in some of the big products, we have enough coverages to take care of the market share. But if we lose, we will also gain, because these markets always give opportunities in terms of when you have 100 products, you lose in one and you gain in one. So in general, once we are back on to the full flow of production, we are expected to continue the similar run rate. There might be a $5 million-$10 million gap in a quarterly level, but we are confident. Understood. And, you know, based on the data that you have given on the pipeline, it seems like bulk of our injectable pipeline is from, this unit. But just want to understand, you know, the approval pipeline in the next two years. How much of that, you know, pending 35-40 ANDAs is from, you know, is likely that we were building in for, let's say, 2025, 2026? See, in 2025, 2026, anyway, we were not expecting any major approvals from this plant. And as you know, we are putting most of our new products into the Vizag plant, because as a part of our de-risking strategy, we were always tech transferring and filing new products from a new plant, because we also felt that we have put too many eggs in one plant. So we are just redistributing, and that's been going on for last one and a half years. And from a 2025, 2026 perspective, we were not expecting any major approval from this plant. Okay. And sorry, sorry to hop up on this, Yugandhar. So where is our FY 2025, 2026 growth going to come from for the Eugia business, other than Revlimid, of course? From an injectable pipeline, where would that growth come from? No, what we feel is, that... Yeah, you said it right. It's mainly going to come from the Revlimid, but we were expecting around $30 million-$40 million of new products revenue coming from balance of the plants, because, as you know, we have total five plants- Yeah. Four commercial and one Vizag new plant. So we were expecting 50% of the new product revenue coming from the balance plant, and 50% new products revenue coming from this plant, which is out of the INR 40 million. Okay, so- Got it. Okay. Thank you so much. Thank you. The next question is from Shyam Srinivasan. Yeah, good morning, and thank you for taking my question. Just on the disclosures of the US business, right? I think last quarter, specialty and injectable were around $90-$91 million, and now it's showing $112. I presume, you know, is the majority of this coming from the, Revlimid launch, in the quarter? Sam, frankly, like, I'm not at liberty to disclose as per our settlement terms with the innovator, on in terms of Len number, it sells separately. But in general, yes, what you're saying is most of it is coming from Len. Got it. And, the INR 20 million, Yugandhar, that you are calling out, so we should assume, that on the whatever the injectable part of the business, that's where the INR 20 million goes away in quarter four, correct, right? That's right. Got it. Understood. The second question for me is on the cash flow generation. So we had about INR 1,600 crores of EBITDA, but when I look at the slide 14, cash flow from business after working capital and others, it's about $45 million. So is there an adverse conversion cycle this quarter? Maybe nine month numbers could be different. So if you could help us there. Yeah, Shyam, this quarter we have made some of the creditor payments have been due across the group, and we have nearly paid nearly around $75 million in terms of increased creditor over and above the gross current assets. Subbu sir, your voice is low. Can you please repeat? Sorry, can you please repeat? So in terms of the creditors, right, during the quarter- Mm-hmm. Our creditor payment is more than by the gross current asset generated, right, to the extent of INR 75 million. That is the reason why the drop in the cash flow vis-à-vis the cash flow. Understood. Okay, so this is just a quarterly phenomenon, you're saying. So maybe- It's a quarterly phenomenon, and the next quarter onwards, because now the creditors have come down less, and next quarter, we will- if we sustain that, additional $75 million will get generated as part of the normal process. Got it. My last question is just, I think there's a slide on the biosimilar. So Dr. Satakarni, if you could kind of walk us through the update, for that, on the biosimilar side. Thank you. Yes, Shyam, good morning. On the biosimilars. We have a approval for trastuzumab, which is our anti-HER2 breast cancer drug in India. We have a SEC recommendation for marketing authorization. We are closing down on the final nitty-gritties before we receive a marketing authorization to market in India. That's the first approval from CuraTeQ Biologics in the biosimilars business. With respect to the other programs, we have three filings done with European Medicines Agency, including trastuzumab. A spate of other filings with trastuzumab will also likely to follow in emerging markets, including that of the U.S., in the next quarter. That's an important update. Likely we have a couple of other filings made with MHRA and Health Canada. So I expect the programs that are filed with these regulatory agencies to go through the review process and materialize in the next financial year. With respect to the ongoing clinical trials, we have two programs, two, one in ophthalmology and one in oncology. Two clinical trials happening globally. Both of them are progressing reasonably well. As updated in the last quarter, we also have initiated a Phase III clinical trial of omalizumab biosimilar in Europe across multiple countries and sites there. As you know, omalizumab references Xolair, which is an injectable drug that targets and blocks immunoglobulin E. The product is approved for the treatment of adults and children with moderate to severe asthma and chronic spontaneous urticaria. The drug had worldwide sales, I believe, of around $4.3 billion in 2023. So our biosimilar version of this product is already in Phase III clinical trials, and we hope to complete the recruitment by October 2024, and submit it to both Europe and U.S. in the Q2 or Q3 of the next financial year. It's an important drug for us, so hopefully we will be able to complete the clinical trials on time. Our second immunology biosimilar also has received a green light from the European Agency for conducting a Phase III clinical study in osteoporosis patients. The study has actually begun this month. The study is being conducted across the European region in multiple sites, and the first patient was dosed in January, not this month, in January. We hope to complete the recruitment of all, 450+ subjects, in our osteoporosis trial, inside Q2 of this year, and hope to advance the product to filings in the second half of next year. So the reason why I bring this up is, you can see from the wave one of products, which was essentially, having an oncology focus, to, a gradual and enhanced shift into the immunology segment with these two key products, with a current market opportunity of around $12.5 billion, making a shift into the immunology segment, in what we aspire to achieve. Especially with the Xolair, the competition is very limited, and, we also expect that there will be additional indications, with Xolair in treating accidental food allergies. And hopefully, we believe this will have a longer product cycle. And even after biosimilars introduction, I expect the product to have a longer product cycle with newer indications in accidental food allergies being approved. And hence we are reasonably excited and are aspirational about this product. So that's about the guidance on the seven biosimilars, three of them which concluded the trials and are in the filing phases, have already been filed with certain agencies, and four of them in global Phase III trials. There is another immunology product that we are only developing for emerging markets and India, which we will complete the clinical trial in May this year, and I expect it to be filed with DCGI first and the other emerging markets by June, July this year. So, Shyam, does that answer your question? Yeah. Yeah, yeah, that's helpful, Dr. Satakarni Makkapati. Just one follow-up is on the opening remarks from Subbu on the CMO with MSD. So if you could give an update on that as well. Thank you. Yes. I, I think in the last quarter, I mentioned, that we have entered into a limited letter of intent with MSD Singapore entity, enabling us to become a contract manufacturing provider to MSD for one of their products. Under the terms of the agreement, Theron Biologics, which is a wholly owned subsidiary of Aurobindo Pharma, will deliver cGMP batches of drug substances as well as drug product for supplies to MSD entity. We hope to start supplying from 2027, 2028. To this effect, we are continuing to deliberate and engage with MSD entity on the terms of the definitive agreement, which I have stated in the last earnings call, that we endeavor to close by the 31st of March, 2024. So far, we are progressing in the right direction, and I believe we will be able to close the definitive agreement during this period. If there are any changes or extensions that I would take, in terms of negotiating and closing and winding down this definitive agreement, I will provide an update, in the next earnings call. But in a nutshell, it's progressing well, and we hope to close the definitive agreement pretty soon. Got it. Thank you. Thank you, and all the best. Thank you. Thank you. The next question is from Damayanti Kerai. Hello. Hi, am I audible? Yes. Yes. Okay. Thank you. Good morning, all. My first question is again, coming back to Eugia Unit III. So, as we discussed, like, you have been putting a lot of effort to bring the plant back to full production, but just want to understand, say, in case it takes longer, so, do you have any backup plans for shifting some of the key products to other facilities? And if yes, then which will be key facilities where you'll be transferring your product, apart from the new ones, which you said are filed from the Vizag unit? Damayanti, in fact, the Vizag is built as a backup to Eugia Unit III. So in case if that situation arises, we will try and transfer some of the key products to Vizag lab. Just want to understand, are these injectable plants fungible in nature, or like you, you have to have different lines dedicated for some particular products? No, we do have enough lines in Vizag. We have a footprint of seven lines, and as I've been saying in the past, Vizag will act as a backup to Eugia Unit III, also file new products from there. To some extent it is fungible, because most of the lines, what we planned was based on the directional. Okay, but just want to understand, you said, this Vizag plant will be ready for developed market, some quarters down the line. So I just want to understand from immediate perspective, say, like, say, in next three to six months, if you want to transfer some products, can you do that to Vizag or, it's, like, not possible? Damayanti, Damayanti, it is a Vizag plant. We already filed two products to U.S. from that plant, and we do expect inspection to happen anytime in next few quarters. And obviously, like normally, every tech transfer takes time and takes time to get approvals from the new plants. But at this point of time, I think we are speculating too much. I would prefer to, I think you need to give us time to respond to Eugia Unit III observations, then we will see how it goes. Sure, sir. That's helpful. My second question is on Revlimid. Obviously, you won't be commenting on the numbers, et cetera, but just want to understand from sales contribution perspective, will it be distributed across quarter, or you have some, like, some phase where you'll be supplying most in a year, and then in some quarters we won't be seeing much contribution coming in? Our endeavor is just to definitely, like, make it a quarterly run rate. But sometimes what happens is, depending on the pricing and customer requests, we might end up billing a bit more in that particular quarter. But in general, it'll be a distributed revenue across quarters. In case if in one quarter it is more, that'll get knocked down in the next quarter. But our endeavor is just to space out every quarter. That is what we are planning to do. See, in general, Eugia, we were doing around $100 million per quarter last year. This year, first two quarters, we were doing around $120-$130. And then, like, now we are reaching a run rate of 150-odd million plus. Our endeavor is just that in next few quarters, we continue to maintain the run rate of $150 million plus. Sure. And my last question is, due to this, adverse geopolitical situations, Red Sea, situation, et cetera, are you seeing any, notable pickup in your logistic costs, et cetera? Like, in near term, should we expect operating costs will go up from current levels? See, Damayanti, see, the logistics cost as a percentage of the sales, total sales, is very, very low, and at this point of time, we see a decrease in the EBITDA margin to the tune of around 0.1%-0.2% at this point, particular point of time. So it is not very significant at this point. Okay. As of now, as you said, it's very, minuscule and, no impact as such. Yes. Okay. Okay, sir. Thank you. I'll get back in queue. Thank you. The next question is from Tushar Manu- ... Am I audible? Yes. Fine. Thanks for the opportunity. Sir, first on this PLI scheme project, just would like to understand the pricing of Pen G, maybe pre-COVID, and what could be the profitability if the price goes below $20 per kg? Tushar, as I said, no, last quarter also, let us not speculate at this particular point of time. Our first objective is to complete the trial batches, start the business in the month of, in the first quarter. And the second challenge we will be doing is, how fast we are ramping it up. We think we should be able to ramp it up between Q1, Q2. And, once the full ramp-up happens, only the pricing issue will come, really, because till that time, the pricing issue will not come, so we don't need to worry about it for the next two quarters, in my view. The current price will continue, in my view. But just, just from a sensitivity perspective, let's say, you know, three quarters down the line when we start the external sales, so at that point of time, you know, if, if at all you can elaborate, what happens if the price goes below $20? Sensitive, modeling is your prerogative, you know, how can I suggest that? Okay. Okay. Just one clarification, revenue made is from Unit Four, right? As in Eugia Unit III. It's Eugia Unit I, which got audited in the month of July 2023, and we received zero observations and II classification for that facility. Fair point. point. Thank you, sir. And lastly, for FY 2025, given the circumstances, for the Eugia, if you could call out, what could be the, you know, the sales guidance to think about? Okay, Tushar, I just mentioned it, that we, in fact, this quarter, which is the quarter three, we achieved $150 million of revenue for the quarter, and we expect to continue the similar run rate in going forward into the next quarters. But quarter four might have slight impact. As I mentioned, it can have an impact of $20 million, but we will see how we can cover up that gap. Thank you, sir. Thank you for addressing my questions. Thank you. The next question is from- Hello. Am I audible? Yes. Hello? Yeah. Okay. All my questions mostly answered. Just one update on this product, Ryzneuta, which you in-licensed from Evive. Have you launched it in the U.S.? And what are your targets like? Sorry, we couldn't hear. Which product? This filgrastim product, Ryzneuta, which you in-licensed recently from, Okay. Yeah, Yeah, I'll take that question. Yeah. Yeah, I understand. Yeah. So this product, we are likely to launch in the second half of second quarter of this coming fiscal or second half of this calendar year. Given that it's a BLA, would you need a sales force and all, or how do you plan to sell it? And do you have any market share targets? Yeah, we have, we have market share. We have obviously budgeted for what we are going to sell. At this point, I don't think we'll be able to share that kind of sensitive information. But, we believe there, there is a seven player market, but we believe that, we would also be one player, and, we obviously it is going to be profitable for us. It's... we hope to achieve a decent amount of sale, but, it's too early to tell you about it. But you are going to set up a sales force for this? You know, we already have sales force, and then, wherever it's required, we'll augment. I don't believe we are having any major ramp-up for it. Okay. Got it. Thank you. Thank you. The next question is from Surya Pa- Hello. Yeah, thanks for this opportunity, sir. My first question is on the same question on the previous question, basically, the in-licensed molecule. So, you indicated that second half of the current calendar year, that you would be launching, but which are the market that you are initially talking about, sir? And, do you see this as a kind of exact alternate of pegfilgrastim? That, that is something I can't comment. It's- We think that it is equivalent. It's a non-biosimilar product. So initially we'll be launching in the U.S. We have plans to launch eventually in other markets. Starting with U.S., or it is, other than U.S. market? So it's the product is already existing in China, but we would be launching. That That we are not marketing it China, but we would be launching it first in the U.S. Okay. Okay. And if you just add to its regulatory progress and the process there, sir, about that molecule? ... You know, we can, we are confident of launching this product. FDA had done the inspection in June 2023. We already received the FDA approval for it on 16th November, I think, last year. And then our potential launch is 2024. The product is under manufacture, and we hope to, through CMO, we hope to launch in July 2024. We do not see any other hurdles at this point of time. Okay. Okay. So considering the potential of the, or size of the Pegfilgrastim, this could be one of the largest product opportunity for near term. Is that safe? That's something I'm not saying, because there are, like I said, there are seven biosimilar companies in the U.S., and this is a new product. We will have a very conservative estimate of what we are going to do. Okay. But, we think that, economically, it's a good product for us. Okay. Sir, just a second clarification about the U.S. plant disposal, injectable plant. So while we have been of the view that there is larger significant demand in the injectable side, and we have a wider pipeline, and that's why we had created two facility, one in U.S., one in Vizag. So U.S. one was supposed to cater to the U.S. increasing demand, while the other one for Europe and emerging market. So now, just before this thing, so the disposal, what is the kind of thought process here? I think Yugandhar should be answering this question. Yugandhar, would you like to take this? Yeah, yeah. I'll take it. Now, in fact, Surya, like, it is sometimes what happens is, initially we thought Vizag will cater to emerging markets and Europe, but subsequently, two years back itself, we changed that strategy of Vizag will also be back up to Eugia Unit III and file new products from Vizag. So with the Vizag coming up and multiple lines being planned in Vizag, what we felt is, US plant was becoming non-strategic, and the capacities available were not sufficient to take care of the market share requirements of US business. So it is a strategic decision that we will take out US plant and focus on our all India plants. But at the same time, the US plant will act as a contract manufacturer for us, if needed, with all the four products, with in fact, two products we filed from that facility, two more products we are planning to file from that facility. And in case if there is a future need, the contract manufacturing option is available. Okay. Okay. My third question is on the European business front. In fact, see, we have been saying that the European business has obviously seen margin profile beyond 15% since last couple of quarter. So, given the kind of shortage situation, improved pricing scenario for generics even in Europe, so what is the kind of margin profile of that business currently? That is one. And second question relating to Europe is that, the European Union recently has come out with a large basket of product, more than 200, which are critical for their requirement, and that is- and they are expecting to create a kind of safety inventory, and that's why the procurement is likely to start starting this January. If I see that presence of Indian players in Europe, then obviously Aurobindo is the largest. So what would be our scope in that, and what benefit that you anticipate there? Yeah, I would request Murali to talk about the second point, so that I can talk about the margin profile after that, okay? Okay. So, Surya and all, happy to be part of this call. So coming to your question on the safety inventory advocated by EMA, yes, we are analyzing or we have analyzed that list. We are also taking care to ramp up the inventory part, APIs and components, to supply in sufficient quantities into Europe. And other than this, also all the regulators or several regulators in European, our footprint countries, do ask for certain safety net, and we are working on it. Is it a sizable opportunity, sir, since it is a 300, I mean, it's a 210 to 20-odd product basket? Yeah, it is almost 30% of the list, or in the Aurobindo list of products, so it is a sizable opportunity. Okay. Yeah. Yeah. So Surya, in terms of the margin, we never given the margin profile of Europe, right? But having said that, we were earlier around 10%-11%, and certainly we moved up by 2-3 percentage points already. And with the growth we have been targeting, with the way cost structures have been looked at it, certainly we will make an attempt to touch upon the 15%+. Okay. Okay. And just lastly, any update on the pneumococcal vaccine supply opportunity, sir? ... Yes, Satakarni Makkapati here. On the pneumococcal vaccine, I had given an update, I think two earnings calls ago, that we received a SEC recommendation, based on a 3+0 dosing regimen trial that we concluded in about 1,100 infants. So we did not meet the timelines of the immunization tender, so we were not, I was not keen because we still had the manufacturing license to obtain and all. So naturally we couldn't become part of the immunization tender that was floated, the national tender. That time has passed. Now, during this period, we have conducted a 2+1 dosing regimen trial, which means the infants are given two doses, followed by a booster dose six to nine months later. Now, that trial was completed, and, we submitted the findings of the trial to the SEC committee, only last month. In the private and retail market, we don't have any presence there, which is an area that I would not like to enter at this point of time, because we wanted to generate more data, to take the product, to the WHO markets in 2026. It is the immunization tender that probably is of interest to us, but we have passed that last year, and I will keep you posted in case, there is a strategic shift in what I think, for the next tender cycle. At this point of time, in the next two to three quarters, I don't see us putting this product out in the market. Okay. Sure, sir. Yeah. Thank you. Wish you all the best. Thank you. Pandit, you are on mute. The next question is from Smit. Hello, am I audible? Yes. Thank you for the opportunity. My question is on US generics. How was the pricing environment in Q3 for injectable products? It was a lower single digit price erosion. Is it Q on Q or YOY? It's Q on Q. Okay. Thank you. Thank you. The next question is from Kiran Shah. Hi, Kiren, you are on mute. Okay, we move on to the next question. The next question is from Tarang Agarwal. Hi. Good morning. Am I audible? Yeah, Tarang. Right. Okay, couple of questions, starting on Europe. You know, if I were to adjust for the tax clawback, you're at about 206 million EUR. How should we look at this business going forward here? Is this 200 million EUR the new base for this business? Number one, and number two, in your response to an earlier participant, you commented you gave a metric, you know, you said 30% of those 200-odd products. If you could elaborate in terms of what that 30% was. Murali? Yeah, yeah, Tarang. So when I say 30%, in the list of INNs, that have been identified as potential shortage items and the, that, the manufacturers have to potentially ramp up the inventory. And also, we know the, in terms of the number, this much will come. It's not based on value or other quantifications at this moment, but again, we have communicated to our country teams to very closely look at these products and, do the needful on the demand forecasting and purchase orders, and similarly, India team are also aware of it. So I hope this answers your first question. And, relating to the, clawback, Subbu, would you like to comment or can I continue to? No, no, he's talking about whether this is going to be the new base against the 206 of adjusted revenue for the quarter. What is the- Tarang. Murali? Yeah. Tarang's question was also where are we looking at this $200 million plus, Yeah. I hope I'm audible. Tarang's question was also whether are we going to clock this $ 200 million plus Q on Q. And, Tarang, yes, we will be doing that for sure. The, that is the objective and of course, the, in this quarter, because of the almost close to EUR 14 million clawback, it slightly impacted, our Q3 revenues. Sure. Thank you. On the ROW markets, you know, if you could elaborate into... I mean, there's been a solid growth, about 25% odd in INR terms in this business. Any specific markets which are driving them? Is it one-off or, you know, the INR 600-625 crore quarterly run rate is something that we should work with moving on? ... Yeah, current ROW market as per us is comprised of growth market. We call it growth market, comprised of multiple countries, like including Canada, Brazil, South Africa and China, and many markets. All right? And we have been growing in all the markets, at least $1 million, $2 million, like that. We have been growing, and it is expected to continue. Especially China was not a player in the past, and now they started contributing something which we said, no, we'll be doing single digit. Now we are talking about moving to at least $10 million-$20 million in a year time. And once the plant is commercialized, say in Q2, it can go up only, right? So this is where we are on the growth markets. Got it. Got it. And my last question on the US. Mr. Swami, if you could give us a sense on the outlook for the oral solids business, do things remain where they were, say, in Q2? Or are you seeing an improvement in outlook or deterioration in outlook? Yeah, we expect the strong momentum to continue, underpinned by new product launches and surging volumes. You know, we have taken a strategic decision to adopt a volume-based plan to enhance our footprint. While the growth in oral solids is expected to be strong, we also see some positive signals in our OTC portfolio and a steady continuity in the branded oncology injectable business. Overall, we are looking at decent growth going forward. Okay. Thank you. All the best. Thank you. Thank you. you. The next question is from Kunal Dhamesha. Thank you. Thank you for the opportunity again. Just one on the Eugia Unit III, since we have now added a third-party consultant, et cetera. You know, any view on the remediation cost we could have for the next year? And, you know, more related to Eugia Unit III again, so we are expecting this probably $20 million impact on revenue. But will there be any non-supply penalty since we are basically one of the biggest supplier to the U.S. market? So have you kind of factored in that as well? Yeah. We expect $2 million-$3 million in the coming few months with respect to the third-party consultants working with us. And we did evaluate the terms of what can be the penalties part of it. At this point of time, the way like we think, it might not be significant, but in case if anything changes, we, I'll let you know. Sure. Sure. And just on this, clawback tax on Europe, this EUR 13.5 million, would have, you know, the complete amount would have impacted our EBITDA negatively, is the way to think about it? Yes. Yes, you are right. Okay. Okay, perfect. Thank you, and all the best. Thank you. The next question is from Nitin Agarwal. Can you hear me? Nitin? Hello. Can you hear me? Yeah. So, so my question is two things. One is, A, one on the biosimilar business. Mr. Satakarni has given us a sense on the pipeline, but if you can give us some, some more color on, you know, how should we see the commercialization part of, of the biosimilar, business over the next, say, next, three to, three to four years? And sort of big geographies, do you anticipate, where, where the revenues, commercialization will start earlier? And what kind of salience can this business really have in the overall scheme of things, say, three to five years down the line for us? Nitin, that's a good question. So with the Trastuzumab SEC recommendation this year, we would hope to commercialize Trastuzumab in the Indian market in the next quarter or two. That's the start of commercialization phase for this breast cancer drug. Now, with the three filings in regulated markets across Europe, Canada, MHRA, we expect these three filings to translate into regulatory approvals also towards the end of next fiscal year. Which means that we would also begin the commercialization phase of these products in the next four to five quarters time. Now, with four more products in clinical trials, especially the big ones, which is the Xolair biosimilar with limited competition, and the second immunology asset that recently advanced to Phase III clinical trial, which is a Prolia biosimilar, Denosumab. Both of them will be filed in 2025 in Europe and other regulated markets, including the U.S., which provides us an opportunity to get into commercial phase in the following year, which is the calendar year, 2026. So while I'm not a great fan of giving projections to what could be the size of the business with seven products, out of which, three of them probably get to approvals in the U.S. before 2026, and at least three to four of them in Europe. And the filings with emerging markets are going to happen with Trastuzumab and other programs. I see 2026 as an inflection point for this business. For the hard yards that have been put in and the investment prudence that we have followed in shepherding these products through nuanced clinical trials over the last three to four years. I see 2026 should be the year from where a significant chunk of commercial opportunity or commercial revenues will start to come in. Now, with Xolair, I expect by 2028 we would be around $120 million-$180 million, provided we will be able to get approvals both in U.S. and Europe, and another $20 million from the rest of the world. So this is one product that I can give guidance about because there is limited competition. The other products, we are entering into a market which is already slightly formed. So we know where we are getting in there. We really need to test the market. But the guidance after five years for Xolair would be anywhere between $120 million-$180 million. $120 million in the worst case and $180 million in the best case scenario, with another $20 million coming out from, coming out from the rest of the world markets. The most important thing to underscore here, Nitin, is the, the margin base that will increase with the introduction of biosimilars in the regulated markets. So that's something which we are, excited about, four to five years from now, and see how these, how our efforts in investing as a company into differentiated portfolio, of which biosimilars is significant, will translate into, into, into benefits and, and increased margins for Aurobindo as a whole. Does that answer your question? Well, that's very helpful. If I can just probably push one point or, or referring to, taking reference from what you mentioned earlier. Yeah. As you mentioned, barring Xolair, you know, most of the other products we are probably gonna be entering late after market formation. I mean, given the way dynamics in biosimilars have played out in Europe and the U.S., I mean, what is your assessment in terms of what is our capability? What is our right to win, you know, in some, in most of these products, you know, going forward? So that's an interesting perspective. Now, in the first wave of products where we are already entering a formed market, a formed market is, is in a sense where biosimilars have already formed the market. There is a price erosion that has already happened. For example, if you look at a Trastuzumab, I don't think it is going to erode further. In fact, the market started to pick up now because the outreach and availability of this biosimilar for multiple other patients, or the patient base is increasing. So when you enter a formed market, you make, you make educated decisions. You say, "Okay, you have a price erosion of around 85% or 80% already in certain markets. So do I have the cost of goods to enter and still make an 80-85% gross margin?" So only when we think we can enter a market which is already formed, and if there is a further price erosion of 20-30%, still we can make around 80%-84% gross margin, only then we are entering into those markets and entering into those products and developing those products. So we are sure, while we are slightly late in certain products, with Denosumab we will not be very late. With Denosumab, we will be in the first and second wave of launches with Denosumab. With the first wave of products, it is a very strategic decision that we will enter into a low risk, an already formed market, a low risk both in terms of the market as well as in terms of the IP risks, and we will test our results. So, for example, in Europe, with so much price erosion we see with these products, I can safely tell you with the cost of goods that I am having, I will still have an 85% margin base, gross margin. Right. And, sir, you know, fair to assume that across all of these markets, we would be leveraging our existing field forces to push these products? We would not be requiring additional SG&A investments, any meaningful way? That's wishful thinking. That's wishful thinking. For example, in Europe, we already have a field force, and we will continue to engage with them, and we will utilize that workforce. In U.S., Acrotech will become the arm for biosimilars commercialization. As you know, as Swami has alluded to before, where there is a requirement, we already have a certain base there, but where there is a requirement, we are augmenting our field force depending on the nature of the products that we are going to launch. And to answer one of your colleague's question before on the pegfilgrastim that we are going to launch in U.S. So there is already going to be a field force in the oncology segment there when we put out products also in that market. So we'll be using the same field force, plus augment it, because the nature of biosimilars marketing is slightly different and still requires some sort of marketing. So it will not be a ground-up building or constructing a field force there, or nurturing a field force there. We will leverage on what we have, plus augment it with the skills that are required to take these products to their commercial success. ... Got it. Thank you, very useful. If I can squeeze in probably one more. Sir, on the Chinese plant, which you're talking about getting commissioned by Q2, sir, what is the strategy for this plant? This is- Is this gonna be largely for Chinese consumption, or are we looking it as a base for other reg markets? I mean, and if you can just probably just highlight the thought process behind this Chinese manufacturing assets. Yeah, Nitin, what we are trying to do is, this is originally we are planning to do it for Europe and China. Europe, we'll be launching it. We'll act as a, I mean, product supply for Europe immediately. I think the Chinese approval, the approval from the Chinese regulators may take, Q2 or Q3 of this next fiscal year, then we will be supplying to China also. At this particular point of time, we are not saying U.S. U.S. will take at least, one to one and a half years because the inspection to be triggered and approval to come, et cetera. But as a whole, we'll be using that plant to supply all the markets. This is orals plant, or there are other lines also beyond the orals? This is only oral plant, OSD. Okay. Okay, and if I can take one last one. On the inhaler, sir, you know, we had some products in the pipeline. Any color on their commercialization or schedules? Swami? Yeah. So you're talking about the BFS products, or you're talking about the, DPI, MDI kind of products? So the DPI, MDI products, and if the other one also, if you can touch upon. So, you know, the DPI, MDI, we have a product that's under development. We have a query on it, and then our team is responding to it. That would take some time, and I think there are some legal issues, too, in launching that product. So that's definitely going to take some time. As far as the BFS is concerned, Subbu mentioned in his starting remarks, saying that one of our joint ventures is going to start manufacturing. So we hope to have some news in the early part of fiscal 2025 on the manufacturing and commercial sale of some of the BFS products. Okay, sir. Thank you so much. Thank you. The last question is from Jigar Valia. Hello. Hi, thank you for the opportunity. My first question is, for the product approvals, seven we have received from the injectable side, how many would be from Eugia Unit III? Most of it is from Eugia III, and except one product, most of it is from Eugia III. Got it. Second question: your perspective around the generic prices in the U.S. market, particularly in the current, around the current times? We expect that, at least, on the specialties and injectable side, we expect a low single digit, going forward into the next quarters. Got it. Broadly, is there any concerns, particularly from the U.S. market from, with regards to, China sourcing imports or generally China origins? I think I don't see much of an impact, but, Swami can comment on it. Yeah, yeah. Subbu, would you like to comment on that? Yeah, I will do that, and then Swami will supplement it. I mean, recently there was a report released, and we have gone through the report, and first of all, we'd like to state upfront, no, that we only buy from the U.S. approved or acceptable vendors who has been with us for a long time, right? And we are not aware of the basic source of the report because we are seeing certain discrepancies, actually. First of all, the first point I'd like to say is, first of all, the report talks about we have been selling Valsartan. We are not selling Valsartan in the last four to five years years. In fact, the other way, one of the suppliers mentioned in the report is supplying that, and he is having, he is having a market of around $1.5 billion, actually. So we are not clear about what is the source, and we also tried to find out is there a sanction list of the suppliers or is there any this one, we are not able to find out. Having said that, no, even if you really see the procurement from the suppliers in the list, from the list, right, given in the report, it is very, very, very insignificant. It is less than, it's a low single digit type, right? So we are not seeing any concern, et cetera, from procurement of material from China or any other thing. One of the product is also, which once we get into Pen G also, no, that percentage may also come down. So we want to assure all our stakeholders that, we are fully committed to upholding the highest standards on what we do, including the procurement, quality, everything. Okay? Great. Thank you very much, sir. Thank you, and best wishes for the everyone. Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing remarks. Thank you all for joining us on the call today. We apologize for the mic and line related issues at the beginning of the call. If you have any of your questions unanswered, please feel free to keep in touch with the investor relations team. The transcript of this call will be uploaded on our website, www.aurobindo.com, in due course. Thank you, and have a great day. On behalf of Aurobindo Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your line and exit the webinar.