Ladies and gentlemen, good day, and welcome to the Marksans Pharma Q2 FY24 earnings conference call, hosted by Elara Securities Private Limited. As a reminder, all participant lines will be in a 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 Dr. Bino Pathiparampil from Elara Securities Private Limited. Thank you, and over to you, sir. Thank you, Siva. A very good afternoon to all of you. On behalf of Elara Securities, I, Dr. Bino Pathiparampil, welcome you to the quarter two FY 2024 earnings call of Marksans Pharma. We have on the call, from Marksans Pharma, Mr. Mark Saldanha, Chairman and Managing Director, and Mr. Jitendra Sharma, Chief Financial Officer. We will start with the opening remarks from the management. After that, we will have a Q&A session. Over to you, Mr. Saldanha. Thank you, Dr. Bino. Welcome, everyone, and thank you for joining us in our Q2 and H1 FY 2024 earnings conference call. We appreciate your continuous interest and support for the company. We've had another strong quarter with our revenues expanding by nearly 17% year-on-year, and EBITDA and PAT expanding around 40% year-on-year. This is attributed to market share expansion, along with our existing customers and some new product launches. The improved margins in the quarter resulted from the focus on cost efficiencies and reduction in raw material and freight costs. We recently received three product approvals from USFDA and market authorization from U.K. MHRA in the pain segment, cough and cold segment, and digestion. Our continued focus remains on strengthening our product pipeline and creating a complete offering in our four key therapeutic segments, that is pain, cough and cold, gastro, and anti-allergy. On the compliance front, the USFDA inspection, which was conducted in October 2023 for our wholly-owned subsidiary, Time-Cap Laboratories, was completed with EIR status. Moving on to our operational environment, we saw improved demand and volume growth across all our key markets, and the pricing pressure has normalized for our RX products in the U.S. We witnessed a reduction in rates of few raw materials and freight rates compared to the last year, resulting in improved margin in the quarter. An update on the newly acquired Teva manufacturing unit in Goa. We are presently on track with the expansion capacity and integration of the manufacturing unit. A recent audit from the German health authorities was successfully completed with no major observation. We expect our revenue contribution from this unit to increase quarter on quarter. Building on our momentum, we are optimistic about driving growth through our base business and strategic initiatives, which will maximize shareholder value. With this, I'd like to turn it over to Jitendra, who will update you on the financials, and then we can start with our Q&A. Thank you, sir. For Q2 of FY 2024, our operating revenue was at INR 531 crores, an increase of 17.4% compared with INR 452 crores in the same quarter of last year. The U.S. and North America was at INR 232.6 crores, representing a 15.8% increase year-on-year basis. U.K. and E.U. formulation markets grew by 20.6% year-on-year basis to INR 238 crores. This was on account of new launches and incremental market share. Australia and New Zealand formulation market recorded revenue of INR 48.4 crores, an increase of 10.3% on year-on-year basis. The rest of world recorded sales of INR 27.3 crore in the Q2 of FY 2024. Gross profit was at INR 288 crores, up 21.4% year-on-year basis. Gross margin increased by 174 basis points, from 50.7% - 2.4% in Q2 of current year. EBITDA for the quarter was at INR 113.9 crores, an increase of 41.9% year-on-year basis, and an increase of 11.7% on quarter-on-quarter basis. EBITDA margin for the quarter was 21.4%. Improvement in EBITDA margin was led by cost optimization initiatives and the reduction of freight expenses compared to last year's same quarter. Profit after tax was at INR 83.9 crores, compared to INR 60.1 crore in Q2 of FY 2023, a growth of 39.5%. EPS for the quarter was INR 1.84. Talking about half year financial performance, for the H1 of FY 2024, our operating revenue was at INR 1,031 crore, an increase of 16.4% compared with INR 886 crore in the same period last year. The U.S. and North America was at INR 450 crore, representing a 14.1% increase year-on-year. U.K. and E.U. formulation market grew by 22.6% on YOY basis to INR 459 crore. Australia and New Zealand formulation market recorded revenue of INR 107 crore, an increase of 10.9%. The rest of the world recorded sales of INR 49.5 crore in the Q2 of FY 2024. Gross profit for the first half of the year was at INR 535 crore, up 19.5%. Gross margin increased by 137 basis points from 50.5% - 52% in H1 of FY 2024. EBITDA for this period was at INR 215.9 crores, an increase of 31% year-on-year. EBITDA margins stood at 30.9%. Profit after tax was at INR 154.3 crores compared to INR 120.3 crores in H1 of FY 2023, a growth of 28.3%. Growth is attributed to improved performance. However, there is an increase in tax rate in U.K. from 19% to obviously 25% in the current year. EPS for the H1 of FY 2024 was at INR 3.4 per share. In H1 of FY 2024, the cash from operations is at INR 90.6 crores, and the free cash flow is at -INR 29.3 crores. This is on account of higher CapEx in the quarter. The CapEx incurred during the period was INR 119.9 crores. The investment is in line with our plan for expanding the acquired manufacturing unit from Teva Pharma in Goa, and we spent INR 16.89 crores in the R&D, which amounts to 1.6% of the sales. We continue to remain debt-free and had a total of INR 661 crore of cash as of 31 December 2023. With this, I would like to open the floor to question- and- answer. Thank you very much. Thank you very much, sir. Ladies and gentlemen, we will now begin with 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 only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. Okay, the first question from the line of Sudhir Bheda from Bheda Family Office. Please go ahead, sir. Yeah. Good afternoon, sir, and hearty congratulations on the super performance in Q2 as well as H1. Thank you. I have a couple of questions. Right, the EBITDA margin is up at 21.4%, led by increase in the gross profit margin to 52.4%. So this kind of a hedge of raw material continues to remain soft and freight rates are also soft. So this kind of margin we are able to do in the Q... I mean, H2 as well? We are hoping for that. Obviously, we continue to work towards that, and we are hoping that this trend continues. Great. S o my second question is, now I believe that, Teva facility is now completely integrated, and now the revenue can flow from, that facility. So I think, do you expect that growth rate to be higher in H2 as well, because of, Teva facility coming into operation? Yeah. So the Teva facility is in operation, but the integration is still going on. We have invested only, we've invested a decent amount, and we have to continue investing to ensure we upgrade the facility in terms of capacity. Like I mentioned, yeah, in my introduction that we do expect growth on a quarter-on-quarter basis, where Teva is concerned, but you will see the full potential of revenue generation only somewhere in 2024 onwards. Can you throw some light on the first three, the new product launches and the demand scenario in U.K. and U.S.? If you can throw color on that, these two aspects? Well, for new product launches, obviously, we are into segments, different segments, so there are a lot of new products that are... As and when a product does get approved, like we've received Esomeprazole approvals or we've received Cyanocobalamin and few other approvals. So you know, we basically, we launch it in the respective markets, and we basically take market share through our distribution channels that are already existing. So it increases the product portfolio and obviously increases our revenue and penetration in the market. So we do see, with the product approvals coming in, our revenue generation happening on those segments in respective markets. Demand scenario for India, U.S. and Europe. In Europe, you know, recessionary kind of trend going on there, so. Did you say demand scenario? Y eah, in U.S. and Europe market. So we do see our growth diversifying in U.S. and in Europe. We do believe this trend will continue for the coming year also. We are quite optimistic on both these markets. Great. Great. Thank you, sir, and again, hearty congratulations on set of numbers. All the best. Thank you. Thank you. We take the next question from the line of Sriram, an individual investor. Please go ahead, sir. Yeah, thanks for the opportunity. So just to understand, can we expect a buyback FY24? We have to yet, you know, work on that. But, we are like in the last conferences, based on free cash flow determination, we will basically be splitting it, difference. Okay, great. Another thing I would like to know is, how is the competition scenario in U.K. and U.S. market for PC products? Well, it's crowded and tough as always. That's the nature of the beast, so it is not simple. Just that, we whatever we do, we excel at it, and we we basically work hard towards, you know, getting market share penetration into that segment a nd we've got a bit of a longer history where that product portfolio or segments are concerned. Great. Thank you, sir, and wish you all the best. Thank you very much. Thank you, sir. We take the next question from the line of Ishita Jain from Ashika Stock Broking. Please go ahead. Hi, congrats on a good quarter. My first question is, for our backward integration plans and subsequent DMF filings, can you talk about, you know, which products, for which products is backward integration a priority? Which are the raw materials that are more sensitive or strategically more important for us to backward integrate? So we've taken. Obviously, our wish list is quite large, but we have basically selected one item on each category. So we've picked up one item in pain, and we are working on Ibuprofen. Then we are in anti-allergy, we have picked up another product, and in digestion, we picked up a product. So there are three categories that we are targeting so that we have a signal product in every category, and then we can expand our product portfolio from there on. Okay, thank you, sir. Second question, so we are expecting U.S. to be, a major growth driver going forward, especially when, operating leverage is same. Can you comment on what is the timeline on this, and how many more launches are we expecting in the U.S. this year? F inally, from a geography mix standpoint, what is the percentage of our revenue that you think is going to be U.S., say, by end of FY 25? I think U.S. will be... I mean, it's a very close call because both the markets are very strong. So, I think the U.S. will be very close to 48%, maybe, and you know, between 45%-48% by FY 2025. U.K. will be around, pretty much around the same, 40% or 42%, 45%. Got it. If I could just squeeze in one more. So cash on books by the approximately INR 700 crore. Can you comment on our capital allocation strategy going forward? I know it's mentioned in the investor presentation. I just want to know what kind of, you know, organic growth opportunities are we looking for from a product or a geography perspective? Well, obviously, the first part of the capital deployment is to expand the capacity in the newly acquired plant, which was completed only in April this year. So we are still working exhaustively and at a very rapid pace to scale up that capabilities to meet with our demand. So, I do see a decent amount of CapEx going there a nd obviously, when we have M&As that we are planning in different geographies, Europe being one of that, our plan is to expand our geographies. It's always been there. We have been in dialogue, but nothing concrete or nothing to put pen to paper or discuss about. But there are... We are exploring M&As in Europe, basically. Got it. Thank you so much. I have more questions, but I'll get back in the queue. All right. Thank you. Thank you. Before we take the next question, a reminder to all the participants, anyone who wishes to get into the question queue, may press star and one on their touch-tone phone. We take the next question from the line of Nitin from DAM Capital. Please go ahead, sir. Hi, thanks for taking my question. My couple questions, in the U.S., how many ANDAs do we file per year now on an ongoing basis? W hat are your plans? Do you plan to increase this number? S imilarly, the filings for U.K. as well. So in U.S., we are averaging or we are targeting very close to 5 ANDAs. So you can say between 4-5 a nd in Europe, we are talking of nearly 20 authorizations, around 20, you can say. 15-20. Sorry, so you are basically saying that you are going to triple the rate of filings in a year's time? Yeah, total filings, I mean, we have a big product portfolio in Europe, in U.K. So it is quite an exhaustive, it's many market authorizations we have. So it will not be tripling, but we are looking at... Definitely, we have already been working on, you know, 60, 70-odd products. So we are planning to file very close to maybe, like I said, 20-odd products year on year. Sorry, I didn't quite understand. In the U.S., you are filing five ANDAs in a year? Yes. Will that run rate increase going forward to 16, 20, or you are still- No, no. No, no. U.S. will be five only every year. I was talking of Europe. Okay, great. Second question, our own brands in these markets, roughly, what sort of revenue would that be contributing in each of these markets in the U.S. and U.K.? So we are not into brands, we are into generic formulations. But I mean, we have segments that we talk about. Obviously, we have the pain segment, which is still the largest for us. Then we have the digestive and cough and cold, which contributes. Then we have a substantial amount of. I mean, we have about 30% odd on our prescription-related, you know, prescription related segments that we pursue a nd we do have certain brands, small, we have brands in Australia, we have brands in our Dubai market, in Dubai regions an d obviously, we are very active in the Amazon segment also. Understood. So for housekeeping questions, for the first half, you have given a CapEx figure of INR 120 crore. Does that include the payment given to Teva for the facility? Yes, it does. Okay. I've seen a jump in depreciation this quarter. Is that related to the Teva facility, and does it fully capture the impact? Yeah. Hi, Nitin, this is Jitendra here. Yes, the depreciation for the quarter includes the Teva facility depreciation. So we started depreciating it from this quarter onwards. Okay, great. I'll join back with you. Thank you very much. Thank you, sir. We'll take the next question from the line of Viraj Mahadevia, an individual investor. Please go ahead, sir. Hi, Mark, Jitendra. Congratulations, good encouraging results. Mark, you mentioned briefly ago that you were looking at three molecules across different therapeutic areas for potential backward integration. Yes. These three molecules represent what percentage of your overall revenue, of your total revenue, that you're looking to backward integrate? About very close to 30%. Okay. When is the impact of that backward integration likely to kick through in terms of lower raw material benefits as a result of these agreements? Maybe mid of, maybe mid or latter part of 2024. Calendar year? Yeah. Okay. Okay. Perfect. Thank you. That's all. All the very best. Thank you. Thank you, sir. We take the next question from the line of Midhin, an individual investor. Please go ahead, sir. Hi, Mark. Congratulations on this set of numbers and thanks for the opportunity. So, Mark, considering the additional CapEx which we are doing for the new facility and for the backward integration, how much additional CapEx do you see we are going to make an investment in the next six months? We are looking between INR 80-INR 100 crore. Okay. So is that for any future growth, and is that the full capacity for the Teva, or we can still add few more plants and make few more investment at the same facility? No, obviously we can make some more investments, but this is the initial onset that we had planned. Like I mentioned, between INR 2 -INR 200 crores was going to go into facility, including the acquisition costs. So that's pretty much what we are planning to do. T hen obviously, maybe after a year and a half, we may have to invest more to increase our capacity further on. Okay. I think in the past, concall, you referred to filing in Europe and spending more on the filing of ANDAs and the percentage of R&D going to increase. Do you see it's going to be a significant jump, or it's going to be a gradual increase? It is going to be gradual increase, but there will be an increase for sure. Okay. The last question from my side: I think most of the do you see most of the savings from the raw material costs are there now? So then future growth will be driven by more R&D leverage and product portfolio. Would that be a safe assumption? Yeah, t hat's fair enough to say. Okay. Thanks a lot. Thank you. Thank you sure. Before we take the next question, a reminder to all the participants, if you wish to join the question queue, you may press star and one. We take the next question from the line of Prerit Chaudhary from Green Portfolio. Please go ahead, sir. Hello. Yeah, congratulations for good set of numbers. I just had two questions. First one is, we are trying to file DMF for backward integration on September. Any updates on that you can provide? We are still working towards that. Okay. All right, so any tentative dates and mean by when month we can file those, DMF? I think hopefully we are optimistic by the end of this financial year. Okay. Okay, great. My last question is that what would be the total expense number for our Teva Goa facility for this quarter? You are talking of the expense? Yeah. Expense amount for the whole Teva Pharma facility for this quarter. Around INR 10 crore. Okay. Okay, great. Thank you. That's it from my side. All right. Thank you, sir. The next question is from the line of Ishita Jain from Ashika Stock Broking. Please go ahead. Thank you. Thank you so much for the opportunity once again. So, given the product mix, we must have not faced very high price erosion in the U.S. Can you quantify the price erosion, if any? It's difficult to quantify exactly, b ut obviously, we are not immune to price erosion. There's always some price erosion happening because when raw material prices come down, so do finished products come down. So we are not immune to it, but definitely we didn't suffer as compared to the prescription segments. But there was some price erosion, but not dramatic. Do you think that we will be able to cushion this even further with backward integration, at least for the molecules we are considering backward integration? Yeah, I mean, obviously, we do, we do believe in that, and we do believe it will basically strengthen our sourcing capabilities and reliability of ensuring materials available on key molecules. So, that was the objective more than anything else that, because when prices go up or when circumstances happen in the market, you know, manifests just increases situation. That's the reason why we wanted to backward integrate ourselves. Perfect. Makes sense. So Teva plant breakeven first quarter 2025, is the timeline still intact? Oh, definitely. Fantastic. Last question, if I may. So, R&D spend on a consolidated level was 0.6%. Do you have any guidance for R&D spend, say, for FY 2025, FY 2026? About 2%. May go slightly higher, but, conservatively 2%. Great. Thank you so much, and all the best. Thank you. Thank you. Ladies and gentlemen, a reminder, if you wish to ask a question, you may press star and one on your touchtone telephone. Anyone who wishes to ask a question, may press star and one. The next question is from the line of Mulin, an individual investor. Please go ahead, sir. Yeah. Thanks for the opportunity again, Mark. I think there are confluence of all these good tailwinds that are coming together. Between these, do you see any risk that you should be, you know, which might be, considering the geopolitical situation and all? Geopolitical situation, I mean, there's not much control we have out there. Geopolitical is something which I think globally is always a risk from the global scenario. The overall countries and industries that will have pretty much a proportional impact if things go south. But I think pharma industry basically is quite immune, because at the end of the day, people still need medications a nd we are optimistic that whatever geopolitical scenarios do arise, you know, we'll probably be the least impacted of that. Okay. That's it from my side. Thank you. Thank you, sir. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead, sir. Hi, Mark. Two questions. One is, can you just quickly recap the for U.S.A product...? We are right now standing at very close to 70 to 30, 70 and 30. USA is 70 and RX is about 30. In the U.S.? U.S. it may be, I'm talking of globally. U.S. it may be slightly more, slightly more, maybe 78. Yeah. U.K. would be similar, about 77? Yeah. I mean, U.K., the RX portfolio is slightly larger, so that's why the average comes down to 70-30. Okay. Do you see this proportion sort of changing over the next three years? I think that will be pretty much standard, maybe 5% here and there. OTC may be 75%, RX maybe 25%. Lastly, you know, with the Teva plant capacity available for us, I mean, what, what degrees of freedom does it give you from a planning perspective? I mean, can you—do you think you're pushing more volume in the same geographies, or you looking to go out to more geographies? What are you thinking about it? So basically, we are looking at the same geographies and pushing more volumes and products because of new product launches into similar geographies that we already existing. So obviously, that, I mean, we are talking of nearly looking at potentially doubling our supplies into the geographies that we already exist in. Thereby, you know, that's where the growth is going to be generated b ecause while the front end we have a strong order book status, we need to ensure infrastructure supports those initiatives and fuels the growth out there. So we do see Teva giving us equivalent amount of revenue, like our existing early old plant. So and that's where we are investing all this CapEx out there. It will also help us and assist us in any new geographies we basically venture into. Just last one. You know, in terms of the current OTC supplying out to U.S. and U.K., I mean, how much is given project capacity from Teva? I mean, are there opportunities for you to significantly higher than you already have, and what drives up? Yeah, that is, that's pretty much it, right? So we will be able to get more market share. We'll be able to service more market share, because we have additional capacity and we are a reliable supplier. So we already have penetration, we already have distribution, and all we need to do is expand the product portfolio and also expand our products within the same client base. T hat can happen with additional capacity. Sorry, just for that, but over the last year or so, you've had situations where you have capacity or provide capacity? Well, it wasn't that. Listen, so basically, we could foresee that, okay, our existing plant is reaching to the maximum, and we need more facility to service increasing demand. Our order book status pretty much for next year, as a decent amount of that will be basically coming out from the new facility. So, we could foresee that, you know, after a certain amount, you know, we would need additional capacity to service increased demand and growth. So that's where the Teva facility comes into play. Lastly on this one, I know when you're taking higher market share or higher volumes, so in your current products, so is it more about, is it just you-- is the market growing that you are participating in or is it market share? If you're taking market share, what are the kind of players you taking market share from? So obviously, I don't think the market is growing to the tune of our growth, but, we are taking market share. A gain, product portfolio, new products, added to the portfolio helps us to, also add to the, to the market of our market share and our revenue a nd when you talk of, you know, taking, market share from, competitors or from, lead companies, you're looking like Perrigo and, you know, PLD and, various other companies that are existing already there. Thank you so much. Thank you. Thank you, sir. Ladies and gentlemen, a reminder to all the participants who wish to join the question queue may press star and one. Great. Participants, if you wish to ask a question, you may press star and one on your touchtone phone. We take the next question from the line of Hiral Nandu from Kalpvruksh Capital. Please go ahead, sir. Congratulations for Mark and Jitendra for the good set of numbers. Just one question on the brand thing. I just, if I heard something, and correct me if I got it wrong. I just wanted to understand how we are planning to expand our own brand in the various geographies. I heard that we have presence in Australia and Dubai, I think, on the branded side. What about other geographies? Presently, obviously, we have a few markets that branding business can... Those markets are more branded than generics. Looking at India, for example, so that is a huge possibility. Then, you know, we are looking at certain markets in Europe, which basically encourages branding, and we are looking at, you know, certain other, like, you know, even in U.S., you have, you know, looking at Amazon's or the e-retail type of, you know, opportunities that exist. But I would, I would say in branded business the markets that we are presently in, when you talk of U.S. or when you talk of U.K. or Europe, they are more generic driven, and our focus is there. We may explore brands, but they are relatively very small in terms of revenue contribution. T he big markets are obviously India, and we would explore M&As as and when we get an opportunity for that. So margin profile will certainly be higher in the branded products, right? Even the generic brand will give a similar margin? Well, you know, we always look at expanding our margins, and we are always working towards that. The branded business does give definitely lucrative bottom lines, b ut that is once it reaches a certain level of revenue and optimization. Till then, you have to invest a lot of money into marketing and sales and everything. So it's, you know, it's a chicken and egg situation. It's not like from day one, branded business gives you business bottom line. It's actually a lot of investments go into branding. Correct. As you rightly said, even the M&A could help it to cut down that cost and the timelines, which might help. Yes, definitely. Perfect. Thank you. All the best. Thank you. Thank you. Thank you, sir. A reminder to all the participants, if you have a question, you may press star and one. As there are no further questions, I would now like to hand the conference over to the management for closing comments. I'd like to take this opportunity to wish everyone on the call and all our shareholders a very happy Diwali, and have a great year ahead, and be safe. Thank you. Thank you. Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.