Ladies and gentlemen, good day and welcome to the NATCO Pharma Q4 FY2022 conference call hosted by Edelweiss Securities Limited. As a reminder, all participant lines will be 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 touch-tone phone. I now hand the conference over to Mr. Kunal Randeria from Edelweiss Securities Limited. Thank you, and over to you, sir. Thank you, Diksha, and good morning, everyone. On behalf of Edelweiss Securities, I welcome you all for NATCO Pharma's Q4 FY2022 earnings call. With us, we have NATCO Pharma senior management represented by Mr. Rajeev Nannapaneni, Director and Chief Executive Officer, and Mr. Rajesh Chebiyam, Executive Vice President, Crop Health Sciences. Over to you, Rajesh, for opening remarks. Right. Thank you, Kunal. Good morning and welcome everyone to NATCO's conference call discussing our earnings results for the fourth quarter of FY20 22 and for the full year, which ended March 31, 2022. During this call, we may be making certain forward-looking statements or statements about future events. Anything said on this call which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I'd like to state that the material of the call, except for the participant questions, is the property of NATCO, cannot be recorded or rebroadcast without NATCO's express written permission. We'll begin the call with the results highlight and then followed by an interactive Q&A session. We hope you received the financials in the press release that was sent out earlier. They're also available on our website. Briefly, NATCO has recorded consolidated total revenue of INR 2,043.8 crore for the year ended March 31, 2022, as against INR 2,155.7 crore for the last year. The net profit for the period on a consolidated basis was INR 170 crore as against INR 442 crore last year. The reduction in the profit was primarily due to inventory value write-off and provision of receivables related to COVID products, with inventory value write-off of approximately INR 232 crore and provision of INR 46 crore towards expected credit loss. Export business performed well during the quarter, driven by lenalidomide sales and profits. For the fourth quarter, which ended March 31, 2022, the company recorded a net revenue of INR 610.6 crore on a consolidated basis as against INR 359.7 crore during Q4 of last year. There was a loss for the fourth quarter period on a consolidated basis of INR 50.5 crore, again, primarily due to the inventory value write-off and provision of estimated credit losses, as against a profit in the prior year of INR 53 crore for the same quarter. Company is confident of strong business growth during the upcoming year, led by export business of lenalidomide and growth in other business segments. The revenue split has already been shared. Now we will open up for the Q&A session and take the questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question will press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you will press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we wait for a moment while the question queue assembles. We take the first question from the line of Mr. Amey Chalke from Haitong Securities. Please go ahead, sir. Yes. Thank you so much for giving me opportunity. I have two questions. First is on Revlimid. Would it be possible for you to share how much months of sales have been recognized for Revlimid in Q2? And also, after launching these products, what is your sense now on the pricing, price erosion side? Like, compared to the open market where there is no market share gap, if you compare with that, the price erosion is on the higher side or it is on lower side, if you can comment on that. And also the last on the Revlimid, when do you expect to launch the remaining two strengths of Revlimid where we don't have it still? I think, in terms of Revlimid pricing, Amit, I've had a conversation with Teva on this. I think Teva doesn't want to reveal the pricing strategy, so I will not give any comment on the pricing. Okay. The second question is on the amount of stock that we have sold. I think majority of the stock has not been sold. The exact percentage I'm not able to recall it off the top of my head, but I think most of the stock will be sold in the next financial year. It's only one month of launch, so I think I would say about 75%-80%, 70%-75% of stock will be sold in the financial year 2023, I think. That's, I think, our estimation. Okay. Yeah. When do you expect to launch the remaining two strengths? The two strengths will be. I think my understanding is, again, I stand to be corrected. I think my understanding is, that Dr. Reddy's has first to file because we're going with what's there in the public domain. I think after Dr. Reddy's launch, whenever that happens. The last question on the India business, or the remaining core business which we have, which has been substantially eroded over the last one or two years. What has been the key issue? Have our oncology treatments where we used to have product portfolio, if treatment shifted from those product lines to the newer product lines, or have we lost market share in these products? I think, as you know, our focus, our oncology obviously represents significant part of our revenue. I think growth in oncology has not been coming, because of our high base and, price erosion that we have seen in that portfolio. Again, we are not spread out in multiple segments. I think we are spread out a little bit in gastro and, a little bit in, cardio. Those segments have done well with specialists. So we've done reasonably well with specialists. This quarter, you've seen a higher decline, partly because we've taken a sale reversal on some of the COVID products. I think the bet that we made on COVID has not worked. I think if you look at the money that we have made over the last two years and look at the write-off more or less, I think on a net basis, we've not really made any money. Yeah, I think it's been a disaster, but it is what it is. I think it's a business bet that we have made and it hasn't worked. The domestic itself, my sense is, I think if you remove the reversals and all that stuff, I think it's about INR 400 crore business, I think, give or take. I think that's how the base business is at. It's stable. I will not say it's growing or de-growing. I think these are one-time entries that we had to make. What do I see for the future? I think our base business will grow. I think at this time I think our target is about 10%-12% is what we're gonna grow in the next year. I think that's our expectation. The limitation that we have in domestic is obviously you know we don't have coverage outside the core specialty areas. So recently we started a division to cover the general physicians and all but that will take some time to update the update to happen. Or two I think as I said you know we had to look at an acquisition. So we're looking at that as well. But I think we have to find something. At this time we don't have it. Yeah. Thanks. Sure. Thank you so much. Yeah. Okay. Thank you. We take the next question from the line of Mr. Ahmed M. from Unifi Capital. Please go ahead. Thank you for the opportunity. My question was regarding the inventory write-off. You try to assume that whatever write-off you needed to take has been done in Q4, and there won't be anything remaining for next financial year? Okay. Ahmed, whatever write-off that is there, we have taken, I think, we've taken for a slow-moving inventory and COVID primarily. I think COVID being the majority of it, but I think more or less we made the assessment of the stock, and we've done it. The only inventory, I'll not use the word risk, but okay, I think I'll use the word risk, is on the agro inventory. We have an agro inventory, and you know, supplier commitments and about INR 85 crore in that region. As you know, we've been sued on the process patent. I think that was completely unexpected. You know, we have to deal with it. We believe that we are not infringing. If the next date of hearing is in July and the patent expires in August, the compound, so it's when we're looking to launch products. If everything goes well with the court case and we get clarity on it, I think we can liquidate our stock. Also because of the process patent litigation, it actually interestingly presents a very interesting opportunity because there aren't too many people who are aggressively pursuing it. I think if we win this case and get clarity on it, I think we'll have an exclusive or a semi-exclusive situation, which actually will bode well for our shareholders. Again, we need to have clarity on where we are. I think that's the risk that you're running on the inventory over and above what is already stated to answer your question. Okay. Got it. Now, just a question on the Copaxone. There is some erosion, which is visible. Are we holding on to our market share? A ny qualitative comments on Copaxone? How does it look? Our Copaxone market share is doing well, my friend. Top of mind, I don't remember what the number is. I think we're doing 40%-50% is what I recollect. Top of mind, I don't recollect. We've been stable, and we're doing well. Overall, as you know, there has been some of the market has moved to the orals. I mean, dimethyl fumarate and other orals are there. I think there's a general reduction in the slight reduction in the market size. Overall, as for the generic world, on the generic, I think we're doing extremely well in that product. Okay. Just last question on the Revlimid. There will be two components, right? One, the inventory will transfer from our balance sheet to Teva's balance sheet, and second will be the profit share that will be accrued to us. In the current quarter, is the entire inventory which we are supposed to sell to Teva at cost or whatever pricing, is it accrued on our P&L? Yes. Basically, we have already given them the stock in the December quarter. It's all that is already done. What we have accrued in this quarter is only the profit share. Okay. Is it possible to share the amount? Teva doesn't want us to share. I think, Teva is very particular that they don't want us to discuss anything about the pricing strategy and the profit share amounts. Got it. Thank you so much. Thanks. That's strategic reasons, yeah. Okay. Thank you. Next question, please. Thank you. We take the next question from the line of Mr. Viraj Kacharia from Securities Investment Management. Please go ahead. Yeah. Hi. Just two, three questions. You know, you said the normalized sales in domestic business is around INR 400 crores. The normalized sales in the rest of the business, how much would that be? You know, related question is, you know, we used to want a kind of quite healthy operating margin in the domestic business, you know, say upwards of 20% to 25%. How is that moved given the kind of price erosion, you know, competition which you've seen in the domestic business in last 1-2 years? That is one. Second is on the CTPRs. You know, Innovator has tied up with an Indian company and for contract manufacturing in Delhi. They are looking at this as more of a $4 billion-$5 billion opportunity. For us, you know, if there is a kind of a positive ruling, how are we looking to play this? Any update on the mix status on our play we can get? Third is, for the Revlimid part, if you can reiterate. One second. I'll try to answer. You're asking me so many, I'm losing track. Let me answer two questions at a time. Let me start with your CTPR question. What other people are doing in contract manufacturing and all, I think, you know, they're probably part of the global supply chain for the Innovator, and that's why they're getting upside. That's not my business. Yeah. Our business is to challenge patents and to give an affordable product. I think that's what we're looking at. The opportunity, as I articulated earlier, is there, and I think it's a very interesting opportunity because of the litigation and the patent landmine that is there. You know, if you're able to clear the way, I think it's a very interesting opportunity. I'm very excited about the opportunity and subject to how the court case goes, I think we can give clarity on how we're gonna do with that product. That answers your first question. The second, what was the very early question that you asked? If I can refresh, about the base, Revlimid or you asked about the base business, right? What did you ask? From the base business ex of domestic, you know, what is the normalized margin? In terms of margin structure in the domestic business, how would that have- See, my margins are always good. I mean, if you look at our, rep yield, you know, we have, almost INR 8 lakh to INR 10 lakh yield per man. I think if you look at, we have one of the best in the industry. This is after hiring, actually our yield is even much higher. It's like, you know, almost INR 15 lakh to INR 17 lakh because we hired a me-too division where we started, you know, covering GPs. That's the reason why the yield per man has reduced. In terms of margins and all, I think it's a very stable, good business. I think the challenge with our NATCO's business has been that it has not grown and been stuck. I think we had a COVID pop, which increased the domestic that we touched nearly INR 500 this year. If you remove the COVID products, I think as I said, it's around INR 400 or in that region. Okay. That's the answer on the base business of domestic. Anything else you wanted to ask me? I'm sorry. Yeah, the base business ex of domestic, you know, what is the normalized margin? I think again, I don't want to give away too much on Revlimid. I think I'm trying to avoid that question. I think you look at the business this way. I think, if there was no Revlimid, for example, would have been about INR 50-60 crores. Whatever we're getting additional Revlimid is what we're getting. You have to remove maybe if you're doing some extra R&D, then we can remove that out of the EBITDA. That's how we should think of it. I think our core business does about little less than INR 300 crores, I would say. Then everything we get on the top is from there. Remove if you do some extra R&D or, you know, do some extra R&D spend because of the cash flow that is there. That's how you want to think of it. Yeah. Last, if I can squeeze in. If you can, on Revlimid, if you can reiterate what is the profit share? Is it like 30% or 1/3 or more? It's one-third. I said, I think 30% if I remember. Yeah, 30% is what. Thank you. Thanks. Next question, please. Thank you. We take the next question from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead. Yeah. Thank you for the opportunity. Just on the Revlimid, why would it be the case that, the inventory, would not be moving, you know, very fast? Because it is, the REMS program is of Innovator, and, he has been able to control the generic movement. Is that the way to understand? Is your question why we didn't sell more than what we sold? Is that the question? Yeah, yeah. Why we didn't sell, you know, the entire, you know? We will sell, I think. I think we're gonna sell a good portion in Q1 of this year. There'll be some portion in Q2 and Q3 as well. It's just that, you know, you just launched it, and then we had to set up the REMS because they're a new product and it takes a little bit of time. We only had one month of launch, so it just takes. They sold through some, but I think majority of it will sell through in the next financial year. I'm not concerned about it. We'll. I think we're very comfortable that we're able to liquidate the stock. In that case, let's say if the second round of generic entry happens, will we have to take the shelf stock adjustment in that case? Not that I'm aware of. I think we'll sell through the stock before the other generics will come in. I'm not worried about that. I don't see a challenge on that. In fact, when the second round of generics come in, we'll also get a higher share than what we have. We'll have a higher quantity, so we'll also do well. I think it's a staggered entry for everyone. I think this will hold on for some time. I'm very confident that this will be recurring and it will be stable revenue that we'll get in the next few years. The REMS part you said, is by setting up its own or we are using the Innovator's REMS program? I think we're using the Innovator's REMS, but it's just that setting up the reimbursement and all, there's some logistical issues at the launch time. I think we have done well, I think. I'm not worried about us selling the stock. I think we're very comfortable we're able to liquidate the stock. Sure. Thank you. Thanks. Thank you. We take the next question from the line of Nitin Agarwal from DAM Capital. Please go ahead. Hi, thanks for taking my question. Rajeev, two things. One is on Revlimid, you know, because you obviously get an annual allocation of your volumes. So, is it fair to assume that, you know, for us, the recognition is gonna be evenly spaced out through the quarters for the year or there is gonna be some lumpiness in the way we recognize revenues through the year? I think I can't speak about future pointers. I only speak about what I feel will happen in the next few weeks. I think we've recognized some portion. I think we've recognized a good portion in Q1 of 2023, and then we'll taper off a little bit in Q2 and Q3. Again, Q4, I think we'll get the new allocation, so I think it'll again, the earnings will bump up in Q4. This is what my estimation is. Again, we'll see how it plays out at all, and I think we need to speak to Teva and sort of understand what will happen. But if you want to make you know an expectation, I think that's what I feel will happen. We'll see how it plays out, I think. The new allocations happen in February month, every year. I mean, till the fourth time- Annual increase. Every annual, I think is my understanding. I think, that's what our understanding, yes. Secondly, outside of Revlimid, what are your own sort of focus areas for the business for the next two years? I think, I mean, I look at the positives. I think all the subs are doing very well. I think Brazil has turned profitable. Canada is doing extremely well. I think we've got a very good market share in Canada Revlimid. I think I would say IMS numbers are not out, but I think what my sales people are saying, I think we've got almost 40%-50% market share in Canada. We've done extremely well in Canada. All of that is reflecting in the numbers. The domestic is stable. I think in terms of, I mean, for us to do well in our base business, I think there are two, three things we need to happen. I think one is our domestic has to improve, and I think we have to look at doing couple of strategic initiatives. Two, our agro clarity has to come, which hopefully we'll get the clarity in the next two months, because the offer is the impending launch subject to the court clearance. I think that is probably the two, I would say, immediate term, you know, things to look forward to. Overall, I think our objective is to build a broad-based, multi-country, generic business. I think we're present right now in Brazil, Canada, India, and U.S. U.S. also we have a front end now. These four markets will be the core drivers of our earnings. I think in the smaller countries, we are present in Philippines and Singapore. Overall, I think we're very excited and we had some very good filings this year. I can just articulate what filings we've had. We have three FTFs this year. One of them is semaglutide, and another one is acalabrutinib. Both are, you know, have multiple patents, so that's on those two products. We have another filing, I think, for a product called olaparib. It looks like we are the only FTF. I think we are looking good, and I think our idea is that, you know, we're able to build a pipeline, you know, which can, you know, sustain over the next 7-10 years. I think we are fairly set. Okay. Thank you. Bye. Thank you. We take the next question from the line of Rahul Veera from Abakkus. Please go ahead. Hi, sir. I just want to know what is this INR 46 crore of ECL losses that we have booked this year? I think out of INR 46 crore, we have done general, you know, business credit loss provision you were making. We had one particular receivable to the government, one of the state governments, that we did COVID supplies which have not come. Almost one year was approaching, I think, and then we made a decision that we should make a provision against that. We're hoping that we'll be able to recover the money, but as you know, prudent accounting, I think we've made a provision against that receipt. Sure. Sure. Fair point, sir. Thank you. Okay. Bye. Thank you. We take the next question from the line of Ankush Agarwal from Surge Capital. Please go ahead. Yeah. Hi, Rajeev. Firstly, you know, based on some of the comments that you made on the Revlimid, just wanted some clarification. What you said that, you know, we transferred our quantity to KY in December quarter, and whatever we got in Q4 is just a profit share, right? And that would continue in Q1, Q2, and Q3. Then again, in Q4, we will get another higher allocation based on whatever is there, and same cycle would repeat over the year. Is that the right understanding? That's correct, yes. Right. In Q1, you mentioned the comment that about 70%-80% is still left to be sold, right? Last year sold is around 20%-30% what we have bought. Actually, about that. I think that's fine. Yes. Okay. Great. What I'm thinking is the primary is just the profit share. Right. Got it. Secondly, Sorry? Yeah, go ahead. Go ahead. Yeah. Rajeev, again, now based on this, we'll probably get a lot of cash flows from this Revlimid opportunity over the years. Would it be a fair understanding that the large part of this cash flow would be used to build a base business or you'll try to, you know, try to capture some other bigger opportunity that you might have in mind? I think in the near term, I think the way we're looking at this is we're getting good amount of money. I think that way cash flow-wise, we're extremely comfortable. I think I'm very happy the way things are going. Right now, I think we're doing the low-hanging fruit, which is spending on R&D. So I think our expenses will increase slightly because with the buffer, the cash flow that we have had, we are investing in more interesting R&D ideas, more bold ideas. See, my friend, you know that this is gonna be there for the next few years, and I think we have something like. See, there are the smaller ones, which are like INR 5 million, INR 10 million type of opportunities, and then you have the INR 100 million, INR 200 million type of opportunities. The idea here is that you build about, you know, I think a few months ago I spoke about, you know, three plus two plus. Those are like, you know, obviously smaller opportunities. You need to build that big one big jackpot. I think going forward in the next 10 years, I think at least I have visibility for 5-6 years where we have these big jackpots. We need to fill. At least I want to pull off another 2-3 Revlimids, if, you know, all goes well. I think that's where we want to spend our money on in the near term. We'll take it from there. Regarding the acquisition, we're looking, and I think. My sense is, again, I subject myself to, again, we looked at what deals are available. We're looking at both domestic and export, and I think we're very clear that we wanna do one large acquisition. I think that's, you know, which will strengthen the base business. I think that's what we're looking at and plays into the strategic interest of the company. What that acquisition is, when we'll do it, I don't know. I think we don't have clarity. I think we have the money, so I think we can always do it. I think we just have to find the right asset. I think we have time. I think actually three months we'll have the time for that. Yeah? Yeah. Basically what you're saying is, you know, the base business will be based primarily on the inorganic acquisition and not organic. Organic, we are doing what we can do with the organic. Yeah, on the smaller front, whatever you are doing, like in terms of agro and all that stuff. The larger. For example, we have acquired Dash Pharmaceuticals as well sometime back. Yeah. Right? I think these are all the most obvious ones, right? Because we do a lot of work in the US, and it makes sense to just buy the front end in the US because, you know, then we can, you know, plug in and launch our own product. See, the key, you need to understand overall generic business today. I think if you look at most generic businesses are not growing, it's extremely competitive, right? Right. The only way you can do something disruptive is you need to buy it. Otherwise, you're not gonna get growth. This is the elephant in the room. My sense is that we'll find something. I think that's what we're looking at. To answer your question specifically on what do you want to do with the cash, I will say two things. One is spend on R&D. Two is, you know, look for an acquisition. Understood. Thank you. 100% agree for the question. Thank you. Thank you. Thank you. We take the next question from the line of Sandeep from East Lane Capital. Please go ahead. Yeah. Hi, Rajeev. A couple of questions. First is if you could just talk broadly on the Revlimid market formation. There are ten players, but each one has a staggered entry. This opportunity should be with you till FY2025, FY2026. Would that be a correct understanding? Related to that is the range of outcomes, because if the price discounting can be various outcomes, can the range of outcome of cash flow for you over these three and a half years be very wide depending on the discounts? Just broadly, if you can just put the framework for us. I think that's my understanding, Sandeep. I think everybody's coming in a staggered way, and I think there should be a meaningful amount of money that we're gonna make over the next 3-4 years, depending on how people line up. I think that's my understanding. I think that's absolutely correct. The erosion and all is hard to speculate. I think it will be very premature to talk about how market will form over the next few years. I think we just have to see. My sense is, instinctual sense is that I think we should do well in the next few years, I think. That's all I can say at this time. The reason I asked is that if there is limited entry for everybody, what's the incentive to discount massively and kill the whole market? You can't get more volumes. I think we'll all make meaningful money. I think, you know, that's the best way I can answer that question. Understood. The second question is on Copaxone. What is this latest process patent issue which has arisen on Mylan and yourself? How damaging could it be or what is exactly going on? I think Momenta sued us. I think it's very premature to say anything at this time. We believe it's a very frivolous lawsuit. Anyway, it's a legal matter. It would be unfair for me to say anything or characterize it. W e believe it's a frivolous case. I think, as you know, we've been in the market for more than 5-6 years. I think the patents that we've been sued for are, if I recollect, 2009 or 2010. But you know, as you're aware, we've been making glatiramer for much before that. Our licensing deal with Mylan was also much before that. It's all in public domain, is what I'm saying. I believe it's frivolous. Anyway, I think we have to deal with what we have to deal with. I think we'll see how it goes, yeah. Lastly, if you could just comment on Afinitor. How big an opportunity can that be already in the market? Or how to think about that opportunity for NATCO? Afinitor is doing very well for us, Sandeep. I think I'm very happy with how Afinitor is doing. I think Afinitor is what is driving our export based on our base business. In our business, I think Afinitor probably represents almost 30% of our sales. I think it's doing extremely well, and we're very happy with how things are. I think you know, we have a generic in U.S., we have a generic in Belgium. We're the sole generic in Belgium so far, which is a very good situation to be. And U.S. also, I think we're doing well. We have a reasonable market share, and we're expecting approval in Canada on this product. We've done very well on this product. We will make it known. I think we're very happy with how things are. Very well. Thank you so much, Rajeev. Yeah, thanks. Thanks. Thank you. We take the next question from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Hi, Rajeev. Just to circle back to the earlier participant's question. Given that glatiramer has been in the market for the time that it's been, what possible outcome would you believe that the plaintiff is, you know, looking at to come up with a suit at this point of time? I mean, just a little confused when this came up. I know. Even, I'm also confused. I don't want to speculate, Tarang. I don't know. I think we'll stick to what we have said earlier. We believe it's frivolous, and I think, and anyway, we are to deal with it, so we'll deal with it. Got it. Generally, I mean, the way this business is formed, what I understand is, the legal intricacies, the outcome of it is actually with the marketing partner, and in a lot of ways you are hedged. Would that be the right way to look at this as well? At this time it's premature to talk about it. Obviously, Mylan will handle, or Viatris will handle the legal aspect of it. I think, I don't want to speculate this time. I think. Okay. As things progress, I think we'll give you more clarity on where the answer. Sure. Just coming on to Dash, I mean, what kind of investments are you looking at to build this business or to carry it on from where you've picked it up from? Typically, it does seem like it is a generic front end now. This business would generally not require any field force. Really, what is the value that this front end gets? Because one would understand having a front end where you know you have to go out and you know meet prescribers and get prescriptions. Just wanted to understand the value of this and the kind of investments that this would entail. Sure. I think we have the Para IV pipeline. All the Para IV pipeline that NATCO is making will be sold through Dash. I think that's what we're trying to do. That investment is ongoing, and that investment is reflected in the NATCO's P&L and balance sheet. Okay. Regarding that, I think at this time we bought it, and I think operationally we're losing money. That's the major stuff, that we're losing money. I think in the quarter, I think we lost, this March quarter, I think we lost, what, INR 5 core-INR 6 crores. I think that's the belief that we're having on the setup. The idea is that I think we're gonna have some launches from our India pipeline, that we're looking to launch. Hopefully in the next one year in that scale, we'll be able to break even. See, at a strategic level, I think U.S. is going through a very hard time. It's a very hard time. Nobody's making money in Europe. The idea now is just to keep them on, you know, take this business from, let's say, we acquired this for $17 million-$18 million business. Take this business to about $30-$35 million, keep it stable, and wait for one of our, you know, jackpots to come and then, you know, and launch those jackpots through this entity. I think that's what we're looking at. Don't take a one-year view on this business. I think we have taken a 7-year to 8-year view on this business. A lot of the Para IVs that we have, and they'll all come to fruition in the next six, seven years. Here we get to keep 100% of the economics, and that's, I think that's the value proposition of the asset. In the near term, it's not gonna grow dramatically. I think we just want to set the house in order and make sure that we're not losing money, and then get NATCO name out in the market and have a reasonable basket so we have a relationship with the doctors. As you said, it doesn't require so much expense in terms of marketing. I think it's a straightforward setup. Yeah. That's the good thing. Yeah. Thank you. Thank you. Thank you. We take the next question from the line of Nikhil Upadhyay from Securities Investment Management. Please go ahead. Yeah. Hi. Good afternoon. Thanks for the opportunity. Sorry, good morning. Three questions. One is, just to understand this profit sharing which we have booked, that would only be booked when there is actual sales which we have done, right? That's correct, yeah. Absolutely correct, yeah. Okay. In this, there is no product sale this quarter. This quarter revenue is INR 465 crore, there is no product sale. It's completely only profit share from Revlimid. Yeah, that's correct, yeah. Okay. Secondly, on Revlimid Canada, I think you've given a good idea now, and we've been in the market for now like almost 4-5 months. How are you looking at this opportunity in terms of sustainability, and can it be materially different from what we had anticipated? Continuing on Revlimid, on Revlimid Australia, we were looking at an opportunity and I think we had filed for a settlement there as well. But what I understand that settlement was turned down. Are you still looking at Revlimid Australia launch or how is that status there? We'll start with Canada. I think Canada is our own front end, and we're doing extremely well. As I said, we have very good market share, and that is helping, contributing to our consolidated. It's one of the most profitable stocks that we have. Regarding Australia, I think, you know, we are working with our partner, Juno, so we don't have direct presence in Australia, so they're handling the regulatory aspect of things. So we have approved for both pomalidomide and lenalidomide in Australia, so we're looking to launch. Regarding the settlement and all, I think it's too premature to say anything. We are working on it. I think we'll give you clarity once we have clarity on this. Okay. Just one thing, Rajeev. This profit share, whatever calculations I put in my model, I think this profit share looks too high. If you consider a 30% share, what I get is, even the regular export business has grown sequentially. Would that be a right conclusion that sequentially adjusting for that INR 100 crore, which we got in Q3, if I adjust and look at the numbers, it looks like the regular business of Afinitor, Copaxone and all has actually grown. Would that be right? Those businesses have also grown. Yes, absolutely. I think, as I said, Again, we don't want to give up too much strategy, and I think, you know, you can make your own conclusions. I can't answer the question directly the way you would want. But I think the base business does about, you know, in that INR 50 crore-INR 60 crore PAT range, and everything else on the top is what you're getting from here. I think we're recognizing revenue based on how things go. I think, yeah, I think that's how you want to look at it. Sure. Thanks. I'll come back. Thank you. Thanks. Next caller, please. Thank you. We take the next question from the line of Sameer Shah from ValueQuest. Please go ahead. Yeah, good morning. Just one question. What composes this trade receivables as well as inventory? Still, it seems to be a little high. I think it is high, and I think what we have decided is, see, my personal view is this. I think we looked at our inventory. I think a lot of it was COVID, and we had other non-moving inventory. I think the board's point was just take the write-off and just go forward. I think there's no point carrying and hanging on to these things. I think that's why we took a call of writing everything off. I took a very conservative view. Again, I'm not saying that, you know, all of the stock will be. It's not really zero. I mean, you can always, if you sell some of it, you can always write it back. I just thought it's better just to remove the hangover of the COVID inventory and then just go forward. I think we have also ascertained that this is a risk that we have, and then we just removed it. I think [inaudible] then asked me about what other risks we have, and then we also articulated that we have risk. Going into next year, I only want to carry the agro risk. I don't want to carry anything else in the inventory. I think that's where to bring clarity for the investors. I think we probably just clean it up and just go forward. My question is this, the inventory, say, last year was INR 800 crore. It's still INR 760 crore. Receivables have gone up from INR 400 crore to INR 600 crore. In fact, you know, even after writing off, the number, absolute number is still very high on the balance sheet. I think, basically two things. The cash flow has come through, okay? We've no, as you know, most of the receivable has been, a good portion of it has already come through. There's no issue there. In terms of inventory and all, what we have done, with ours is a very unique business. If all the inventory that you see, I think remove the agro portion where we're not having much revenue. Then the inventory is fairly normal. Also if you look at our business, it's a very niche, you know, limited business. We are the only one who will say very clearly, I mean, I can say this, I have no issues dealing with, you know, the future 12 months. I have no issues in terms of inventory costs. I have no issue in terms of logistics. We keep all our key products, we keep 8-12 months of inventory. Post-COVID, that we have done. I think we're able to service the demand on a lot of our products very comfortably because we have planned everything 8-12 months ahead. The margin that we make is much higher. I think that's what we have done. I think probably I'll be the only one who's gonna give a guidance saying that I'm not worried about, you know, what's gonna happen in the next 12 months in terms of, you know, supply chain challenges or China port issues and all. I think we have covered everything. I think that way, that's why we have the buffer in all our products. I think we have always planned ahead. The reason we do that also is because of the return that we make, because we don't make 20%-30% return. I think whether we end up with 10%-20% return is again, it's a market formation thing. When we target, we target the jackpot. I think that's the reason why our inventory is always little high. Again, we are also trying to be more prudent and try to bring down the inventory position, I think, so that we have, you know, we are more in line with industry. Definitely a little bit higher than what the industry. All right. In the next 12 months, what investments are planned, either people or CapEx or anything, any kind of- CapEx and all is not required here. We are very comfortable. I think we have built enough capacity, and we have a lot of capacity for domestic. We have a lot of capacity for in our regulated market. We have two plants for U.S. So that way we are not. There's no dearth of capacity. I think what we want to invest, as I said earlier, was little bit in R&D just to enhance the pipeline because we're having extra cash and then look for an acquisition. Otherwise, yeah, nothing else. Sure. Thank you. Thank you so much. Thank you. We take the next question from the line of Danesh Mistry from Investor First Advisors. Please go ahead. Hello. Good afternoon, and thank you for the call. I had just two questions. The first is that, Rajeev, you talked about some time ago that are we looking in the domestic business growing at 10%-12%. Is that essentially, do you feel that the pricing pressure is done in the domestic onco piece, and now from here on, some of it will be also driven by our gastro and cardio business? That's question number one. Question number two is that on the agri-chem piece, you mentioned that the roll-off of the patent is in July. I understand that is a court case, but if the patent's rolling off from a very common man kind of perspective, do we still need to wait for a court order to go ahead and launch with our product? That's it from my end. Thank you. Okay. Let me answer your question on CTPR. I think, I tell you what, just to give you a perspective, basically what has happened is we got sued for the compound patent. We have argued that the compound patent is not valid. We couldn't, you know, win that decision. Essentially what the court said was that you can't launch the product till August of 2022. That was what the decision was. We should also understand CTPR has multiple patents and among the multiple patents, there's another particular patent which expires in 2025. Okay? We are process innovators, being aware, and our process patent has been in public domain all these years. If I remember correctly, I think our process patent has been in the public domain for the last three years. It's been published. We find it very surprising that he's, you know, litigating us, you know, exactly two months before launch on the process patent. Obviously I think it is possible later. I think, again, I don't wanna judge why he's doing it, but I think it's unfair. Our process patent has been around all along. He's aware of the fact that we wanna launch this product in 2022. I think he's been aware of it for three years. I mean, we've been crying hoarse every day saying that we wanna launch this product, so he's aware of it. We'll see, I think, and we also believe that our process patent is non-infringing. Again, the court has to adjudicate. Let's wait. I think the next date of hearing is in July. Let's see how it plays out. I think, once we get clarity in the court decision, I think we can, you know, look at it. As I said a few minutes ago, you know, it's still an opportunity, right? I mean, if you're able to clear the way, I would believe we'll be the first wave. You know, everybody assumed that there'll be multiple generics in August. Now, because of the amount of litigation that, you know, I can see him doing, it's very clear that there'll be only limited competition, and we are probably one of the most well-funded litigator in trying to clear the way. I think it's a very interesting opportunity. I think once we get clarity, I think you'll see that it will be a very interesting opportunity. Not far away, we'll hear some battles pan out in the next two months. This is what we do, you know. We look for jackpot opportunities and go after them. There's gonna be uncertainty always. I mean, I never will shy away from saying that, but this is what we do. When we deliver, we deliver big. I think that's how we look at it. Yeah. Understood. Okay. The domestic one, the domestic piece? Domestic piece, I think, when I said INR 400 crore, I'm talking about the base domestic. Yes. For human formulation. I'm not talking about agro. I think we're not mixing them up. Agro is- Yes. Just for dividend. Yeah. Okay. Thank you. Next question, please. Yeah. Thank you. We take the next question from the line of Mr. Rajat B. from I. Please go ahead. Hi. Thanks for the opportunity. Sir, you mentioned that our base business, that is INR 50 crore-INR 60 crore. If we look at our annual PBT this year, adjusting for the write-offs, we did somewhere around INR 500 crore. I'm little confused what is the base business profits here in that. I've answered your question, my friend. I already answered that question. I think I- No, I think I did not understand, out of these INR 500 crores of PBT in this year, how much is the base business? INR 50 crore? I already answered your question. I said INR 50 crore-INR 60 crore is the base business per quarter. I think that's what you need to look at. Per quarter is what you are saying. Understood. Sir, second question is around Revlimid. Have we been able to take the maximum permissible market share in the one month of sales that we did? No, I've answered that question, too. I think we have started off. I think most of the stock will be sold in this financial year. Okay. Basically, whatever volume limits that we have to operate in on an annual basis, it can happen that, you know, in some of the quarters we can sell less volumes, and in some of the quarters we can sell more, so that on an annual basis it comes to that limit that we have. Absolutely correct. Yeah. Absolutely correct. I think what I said, I think one of the gentlemen asked, I forget who asked. I think a good quantity will be sold in Q1, and there'll be some quantity in Q2 and Q3. Again, Q4 will be better. Okay. Okay. Right. Okay, sir. Thank you. Thank you. Next question, please. Thank you. We take the next question from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thanks. Two questions again. Rajeev, just two clarifications. One is, A, on the first product that you've done in line with your own front-ending strategy, are all of these now on your own, hundred percent your own or they, these are again partnered out? Ladies and gentlemen, please stay connected. Lines for the management is down. We're connecting back. Hello, Rajeev here. Connected. Go ahead. Nitin Agarwal is in queue. Yeah. Yeah, Nitin, go ahead with your question. I'm sorry. Yeah, we got dropped off here. Yeah, I was just saying, you know, on the three products that you filed this year, these are again partnered out, or now in this case, you've chosen to keep them on your own, for your own front end. Of the three that I said, one was semaglutide. Semaglutide we have partnered out, and the other two, acalabrutinib and ibrutinib, we kept for ourselves. Okay. Secondly, on the India business, so for now our bulk of our sales are essentially coming from oncology. How are the other? I mean, has there been any positive movement on the cardiac diabetes piece this year? What opportunity do you see next year for them? I think we're doing well, because I think we had a very good brand of apixaban, so I think we've done well because, you know, apixaban is doing extremely well. I think we have a run rate of about INR 2.5 crore-INR 3 crore a quarter on that brand, on the secondary. The brand has done well. This is probably one of the bigger achievements. This is a generic version of Eliquis. This has been one. We have some new ideas. I think we are launching some more products in the next. I believe it will be a stable, good business. Again, I also said that, you know, we need to expand our portfolio. I think we don't have that benefit of doing a large multi-portfolio, diversified portfolio like our other bigger peers. I think we're working on it. I think, as I said, we're looking at an acquisition and also organically taking more things to grow. We are positive that this business will do well. Last thing on the agricultural business. After CTPR, do you have a filing portfolio there, in the business? Yes, we have very interesting products. I think we'll file them in the next 12 months. They're all very interesting. CTPR is always the biggest one, but they're all very smart, interesting filings. Some of them are interesting technologies, and some of them are interesting patent challenges. We will articulate as and when we file. I don't want to reveal the pipeline, but definitely you'll hear about it in the next 12 months. Yeah. This would be what? Again, to start with an India-focused play, or would you be looking at doing, overseas businesses also on the agricultural piece? I think as of now, we're focusing on India. I think that's where the real opportunity is. I think we are taking the B2C approach. We want to go to consumer directly, and I think that's where the real value is. Okay. Thank you. Thank you. Thanks. Next person, please. Thank you. We take the next question from the line of Kartik Mehta. Please go ahead. Hello. Yeah, hi. I just had two questions here. One is ex-Revlimid in the US. In the event that COVID wave is just not there, is there any outlook on your existing products or the products that you'll get approved this year? Second question is there any element of higher or non-recurring element in the other expenses after the inventory also because on a YOY it’s almost doubled? Thank you. Yeah, sure. I think to answer that question, I'll start with the expenses. I think what we have done is there's INR 100 crore has become INR 200 crore, and I think about INR 40 crore is the ECL provision, but INR 50 crore, INR 60 crore is additional R&D that we have done. I think with the surplus that we are having, we are spending on R&D. I think that's the reason why it's been. I think depending on which product we're doing, you're going to see a little bit of extra R&D spending than normal that we're doing because of the surplus that we have. First question that we have is what else we have this year. I think we have few other launches. We have another smaller product for which we're gonna get money today, we're gonna launch soon. We'll announce shortly. We have another big launch coming up. I mean, we were also gonna add to- You're talking about FY2023 or is it? In this financial year. That's correct, yes. Yeah. Just on this R&D, what should we look at normalized R&D? I mean, while there is an accelerated effort as you get more revenues from Revlimid, but as a ballpark number, will it be 4x what you did here? Because see, that number on a quarter-on-quarter basis would be in a way an outcome in the way in which you feel that you know you want to accelerate any of the existing process. Can you help us on that? I think there will be an increase. How much an increase and all and which quarter it will reflect how and all depends on when the expenditure will kick in. There'll definitely be an increase. Asking how much an increase is, I don't have an answer right now, Kartik. I think, let me come prepared with an answer. Broadly, this will be. How much more and all, because you're asking me, I'm not prepared for that answer. I'll come prepared next time and answer that question. Yeah. No. Broadly, will that expense be into product filings or will it be, I mean, is it a mix of product filing and litigation, or is it for India anything? Extra expenses will be characterized in three categories, Kartik. It will be, one, in bioequivalence studies or clinical studies. Okay. Two, in what you call our clinical studies. Second thing is litigation expenses. Three is raw material expense, which was of the exhibit batch write-off. Essentially, those three is what drives the R&D. Our exhibit batch write-off will be reflected in consumption. Legal and what you call clinical and bioequivalence expenses will be reflected in R&D expense, and R&D expense will be reflected in other expenses. I think that's how it works. Lastly, this will be for products which will come at least after 3-4 years, right? Is it fair to assume? See, as I said, you know, earlier, I think you need to build the next pipeline, no? In addition to ibrutinib development and Copaxone, you need another 3, 4 jackpots, I think. Unless you spend meaningful amount of money, you'll not get. You won't get by doing INR 5 crore, INR 10 crore. You have to spend sometimes, like semaglutide, you know, we had to spend more than INR 100 crore to get an outcome on that. See, the thing is, again, there we played a little conservatively by out-licensing that product. The really good ones, you need to spend big money. I think it doesn't come cheap. Again, you know, big money also means big returns as well. Not all the time, sometimes so. Unless you gamble and spend that sort of money, you're not gonna get anything meaningful. Okay. Thank you. Bye. Thank you. This will be my last question, yeah? Thanks. Sure. We'll take the last question from the line of Mr. Ravi [Purvai]. Go ahead. Yeah, hi. Thanks for taking my question. Most of the questions have been answered. Just one doubt that I had, Rajeev. I think you had mentioned about base business profits being, you know, INR 50 crore-INR 60 crore. Are you referring to base business both India as well as the overseas-based business, not excluding, and not including Revlimid? I'm excluding, or when I say base business, I'm including the subsidiaries and in India. Yeah. Subsidiary meaning so both overseas subsidiaries as well as India, both domestic as well as India export business, right? Exactly. That's correct. Just, you know, I think, you know, we've mentioned and during the call that, you know, a lot of our newer products have been very successful, and we are quite happy with their performance like Afinitor and all. If I look at our performance, let's say three years back or four years back, right? In a sense, is there a case to kind of understand that, a large part of the profits, of the, you know, previous, you know, few years of the products which are still kind of continuing to contribute on revenues, be it Tamiflu or Copaxone or, the, you know, domestic onco. The profit margins of those businesses have dramatically reduced over the last two years, in the sense that, you know, I mean, will it be fair to assume that the profit margins have halved in those businesses for us? They're kind of in a sense commoditized, to a large extent, and it is the Afinitor or, you know, let's say now Revlimid and Revlimid Canada, which is kind of, you know, replacing that lost profit in a sense. You need to understand how generic business works. I think if you look at the export generic business, it's everything that you do will keep reducing every year by 10%, 15%, 20%. What, let's say what we made in 2017, 2018, if you were to look at the numbers today, there'll be a 50% collapse in that business. Mm-hmm. Essentially it's a treadmill, no? You need to keep coming and launching new products and replacing what you're losing on your base business. That's the nature of these. I mean, there's no other way of looking at this. I think you just have to keep coming up with a new idea. I think if you look at the last 6, 7 years, we always had one special idea which always took the earnings. I mean, Tamiflu took care of earnings for almost 3, 4 years. You know, Copaxone, you know, has been consistent and continues to be consistent. Then we had Hep C, which did extremely well for a few years. You need to keep coming up with something new every year. I think, luckily, you know, we always come up with something every year, which kind of keeps the earnings up. That's how you have to look at this business. If you take our track record for last 7-8 years, every year we're able to deliver something or the other, which allows us to keep our, you know, EBITDA at a reasonable number. That's how this business is. We just have every year you have to keep delivering something. Something good happens, it, you know, takes care of earnings for 2-3 years. Again, we need to come up with the next big idea. I think you look at it this way, you know, like earlier our subs were zero. Now subs represent almost INR 80 crore-INR 100 crore of revenue per quarter. We have actually replaced, you know, INR 400 crore of sales that we have lost in our base business with the subs, you know. Not at the same level of profitability, because the profitability earlier was on a lower expense base that we had. Now expenses have gone up, you know, and, you know, portfolio is far more competitive than what it is. That's what it is. I mean, you just have to keep coming up with something new and then hope that it works. I think that's. Would you say domestic business has also gone through a similar path this, like, this time around? I mean, the base profitability of the domestic business kind of got cut in half in the last two years. I think our portfolio is very unique. I mean, I have lost profitability. Generally in the industry now, you know, things have been more stable. I think I have to admit that, you know, because of the nature of our concentrated portfolio, we have lost. Overall, it's been a fairly stable earnings again. Domestic is always stable. I think there's no doubt in that. Just because we don't have a large portfolio, we're not seeing the impact of that on our balance sheet. Still domestic represents only 25% of our sales. Yeah. It's not like for some of our peers, you know, it represents a larger, you know, share and more of their EBITDA compared to my EBITDA. Challenge with domestic is, it's building it is very difficult. You know, once you build it's a reasonable annuity. What overall if you see the base portfolio doesn't. Again, it doesn't grow dramatically. You need to understand, when somebody says it grows around 10% or 15%, half of it is coming from a base portfolio growth and half of it is coming from new launches. Mm-hmm. What we are able to do is new launches. What we're not able to do is get a growth from the base business because our base is very small. I mean, that's the difference between, let's say, us and everyone else. Mm-hmm. How do you fix it? I mean, the elephant in the room is you have to buy something else. Again, when you're trying to buy a business which grows only at 5%-6%, how much extra you need to pay, right? I mean, that's a question that we're always trying to, you know, answer. I think hopefully we're able to find an answer to that question. Okay. Okay, thanks, Rajeev. Good luck. Thank you. Thank you, everyone. Thank you so much for your questions. Okay. You're welcome. Thanks. Thank you. This was the last question. Over to the management for their closing comments. Thank you all again. The questions related to this call will be available, you know, after we consolidate all the aspects. Feel free to reach out to us anything specific to the call. Thank you all. Have a good day. Bye. Thank you. On behalf of Edelweiss Securities, this concludes this conference. Thank you for joining us and you may now disconnect your lines.