Ladies and gentlemen, good day, welcome to the NATCO Pharma Limited's Q1 FY 2024 earnings conference call, hosted by Nuvama Wealth Management. As a reminder, all participant lines will be in the listen only mode, 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. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Kunal Randeria from Nuvama Wealth Management. Thank you, over to you, sir. Thank you, Carol. Good morning, everyone. On behalf of Nuvama Group, I welcome you all for NATCO Pharma's Q1 FY 2024 earnings call. With us, we have NATCO Pharma's senior management team, 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. Yeah. Thank you, Kunal. Good morning, and welcome everyone to NATCO's conference call, discussing our earnings results for the first quarter of FY 2024, which ended June 30th, 2023. During the 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 viewed 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 and cannot be recorded or rebroadcast without NATCO's express written permission. We'll begin with the results highlight followed by an interactive Q&A session. We hope you received our financials and press release, which was sent yesterday. These are also available on our website. For the quarter, NATCO had recorded consolidated total revenue of INR 1,160 crore for the first quarter, which ended June 30th, 2023, as against INR 918.9 crore for the same period last year, reflecting a growth of roughly 26%. The net profit for the period on a consolidated basis was INR 420.3 crore, as against INR 320.4 crore, same period last year, showing a growth of 31.2%. The company had made a provision of INR 51 crore during the quarter towards pending patent infringement litigation cases for its products in India. As a disclaimer, this is without admission of either the liability for infringement or validity of such patents. Company also incurred a one-time special incentive to employees of INR 17 crore. For these one-time expenses, the profits would have been higher for the quarter. Major drivers for the business during the quarter were from formulation exports. We had a strong growth in domestic business of both pharma and agro. We continue to see very steady sales from the subsidiaries. We'll pause here. We'll take your questions. Thank you, all. Thank you very much. Ladies and gentlemen, we will now begin the question-and -answer session. Anyone who wishes to ask a question may press star, then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Koushik Mohan from Ashika Stock Broking. Please go ahead. Hi, sir. Congratulations for the good set of numbers. Sir, my question is basically on the margin front. Are we able to sustain these margins, or, is this a cyclical in nature because of the residual or product that we have it currently? I think we'll have a good quarter, I think, coming Q2 as well. I think, we should probably have a similar quarter. I think by Q3, I think, it'll slow down a bit. Things will pick up in Q4. Okay. How about the margin? Will it be in the same control, like our operating margins are currently around 45.6% plus. How about this margin? I think so. I think so. I think, as I said, no, the Q1 and Q2 will... I think Q2 also will, you know, I mean, I can't exactly, you know, estimate exact numbers until the quarter ends, but I think our sense is that we'll have a similar quarter like Q1, and Q3 it'll, you know, I think we'll be done, it'll taper off, and I think Q4, things will pick up. Got it. Thanks for that, sir. I'll get back in the queue. Thank you. Next question, please. Thank you. The next question is from the line of Yash Tanna from iThought PMS. Good morning, and congratulations on the good set of numbers, team. My first question is, what contributed to the good recovery in the domestic business for the quarter, and is this a new base for us? I think oncology is doing very well, and I think that's the good news. We had one one-time order, so that also has brought about a good jump on the sales. It's partially driven by growth and partially driven by a one-time order. How big was this one-time order, sir? I, I, top of my head, I can't recollect. I think it's a, there's a split between the both. I can't recollect the number. All right. On agro side, it seems a little bit tepid. What is the reason for that? What do we expect for the full year going forward? Well, I think the season just started. I, I would say, we have gone from INR 1 crore to INR 45 crores, I think. I don't think that's tepid. It's a fairly good run. We had, we practically had no sale in that division, so I think, it's the first time we actually. The first June quarter, we had that type of sale. I, I would characterize it as a good start, and, even Q2, I, my expectation is that we should do better than what we did in Q1. I think we're on target to do that INR 150-200 crores revenue in the, the agro division. One fifty to two hundred crores? Yeah, yeah. For the annual, for the annual year, yeah. I think both the Chlorantraniliprole and Chlorantraniliprole combinations are doing extremely well, and we're very happy with the feedback that we're getting. We're running ads in Andhra Pradesh and Telangana as of now. Also we intend to run, you know, Marathi ads for the state of Maharashtra in the next one month for our agro products. I think we're doing well, and we're very excited how things are going. Right. Sir, just one more question, if I may. This is a little bit broad question: What do we think is our next big bet post Revlimid in the pipeline, right? If we see Revlimid is playing out for us. Currently, we are doing about INR 300 crore of base profit, plus Revlimid profit. Post 2026, how do we sort of compensate for Revlimid profit? That's my question. I, I mean, we are obviously thinking beyond Revlimid. I think we have quite a few products. I think it's there in the investor presentation. Now that you brought this up, I'll, I'll lay out the big ones. Number one, I think semaglutide, we have a good filing on one particular strength. We are, we believe we are sole FDF. We have a partnership with Mylan on that. We have a filing called olaparib, which we have a joint venture with Alembic, where we are sole FDF. It's an oncology breast cancer product, and other indications as well. That's a very good product. We have the new one that we filed recently called edacabenatone. It's not so big right now. It's about $40 million, $38 million-$40 million, if I recall properly. But if the product grows into, let's say, $100 million-$150 million or $200 million over the next few years, you know, there's a huge opportunity that there we are sole FDF. Hopefully, we are sole FDF and, what do you call it? And 100% of the profit is with us, because this is done through our own sub, and where we, we are upfront, upfronting the litigation. Then we have. These are the really big ones, and then we have Ibru cover, of course. There's, we have lost the appeal, so we need to see where we can go from there. Then we have mid-level, smaller ones. We have Kyprolis and Pralia, where we have one strength, Kyprolis, and Pralia. It's a smaller product, but they're like $30 million, $40 million, $100 million type of products. There we have, you know, First to File. We have enough pipeline, my friend. I think I named quite a few ideas. I think if you pull up another five, six ideas, I think you'll see some consistency going into the next decade. I think that's what we are spending our money on, and I think that's what we're focusing on. Right, sir. Thank you, and best of luck. Thank you. Thank you. Before we take the next question, I'd like to remind all participants, if you wish to ask a question, please press star then one on your touchtone telephone. The next question is from the line of N.K. Arora, an individual investor. Please go ahead. Good morning, sir. Yeah, yeah, sir. Tell me. Sir, first thing I want to know, till 30th of June, what% of Revlimid has been sold? I think for competitive reasons, I'm not answering that question. I think we'll have one more good quarter, like, similar to this quarter, and I think that will taper off. I think that's, I think that's the best way I can answer that question. Okay, sir. Secondly, sir, now that we are already, 4.5 months into the year, can we have a ballpark figure or range of the annual profits this year will have? Good question. It all depends on, you know, multiple factors. I think I go past INR 1,000 crore comfortably. I think that's the feeling I get. How much more will go to INR 1,100 crore or INR 1,200 crore, it all depends on how the year ends. I think conservatively, I want to say we'll go past INR 1,000 crore. How much more than INR 1,000 crore? I think it all depends on, you know, how the market plays out. That's a little difficult to guess. I think in that range, I think is what I feel. I think INR 1,000 crore-INR 1,200 crore range is what my expectation is, depending on how things go for... Now, I'm talking about profit after tax. Thank you so much. Thank you. Thank you. Next question, please. Thank you. Before we take the next question, I'd like to remind participants, if you wish to ask a question, please press star then one on your touchtone telephone. Next question is from the line of Husain Bharucha from Carnelian Asset Management. Please go ahead. Sir, I just wanted to understand, on the agrochemical front, how do you think that the agrochemical will shape up? Chlorantraniliprole is one of the products which we have been able to capitalize on. How are you planning to grow this piece? You said you have identified 5, 6 products in this piece. How big those can be, and how big the agrochemical piece can be in the overall scheme of things can be in the times to come? Yes. Uh- That was my first question. Yeah, sure. Let me answer that question. I think we have started off well. I, I'm very happy how we've started off. I think we're expecting about INR 150-200 crore this year, and I think we have pipeline for next year as well. We also see organic growth in Chlorantraniliprole in India, and also we are doing registrations in outside India as well. We have filed this in Brazil, we're filing it in U.S., we're doing other markets as well. We are filing our agro portfolio outside India. The export business might take 2-3 years from now. Overall, I think my expectation is this business should grow to around INR 400-500 crore in the next 3-4 years. That's our expectation. It'll be a good, you know, solid business, and contributing solidly for our both bottom line and top line. any, so just to just to add a follow-up question, so what will be the EBITDA margins that you expect from this side of the piece, this side of the piece to be? Will be EBITDA accretive, and how, what will be the range, EBITDA range from this agrochemicals space? I think it'll be close to our base business. I think it should do well, and I think it will be sort of similar to our pharma business as well. We're doing branded, we're going directly to customer. We do third party, but most of our sale, 90% of our sale comes from direct customer interaction, and I think we are focusing on niches and the high value products. Again, see, what margin you'll have in the future, only time will tell. I mean, I can't really answer a question like that. I think our expectation is that it should be a good margin, similar to our pharma business. I mean, that's our expectation based on certain assumptions we have made on our pipeline and our price approach. Got it. Got it. Okay. So, uh, uh, And Just one question. On your cardio and gastro, you plan to expand on the cardio and gastro front, how that space, that piece shaping up? You, you had also planned an acquisition which for around INR 1,000 crore, how is the acquisition, how is that shaping up? Are you in talks with someone? Can you give some light on that? We're looking at acquisitions both in India and outside India to expand our business. I think, we have recently announced in UK, we're buying a company, so we are doing an asset purchase of this company so that we can front-end in UK. We're always looking at transactions, you know, we have good amount of cash in our balance sheet, you know, we don't have much debt. I think, you know, I think we'll do it when the time is right. I mean, to say, we look at opportunities all the time. We are, you know, we're looking at different things. Hopefully, we'll succeed at something. Yeah. Thank you. Next caller, please. Sir, on the cardio and gastro front, if you can give some color as to what type of products and how are you scaling it up, sir, if you can give some guidance? The business is doing well. They're all growing around 10%-15%. I think, both the divisions are doing well. We have good pipeline. I think we're going at the market pace. Yeah. Got it, sir. Got it. That was my Thank you. The next question is from the line of Sapna Jhawar from Kotak Life Insurance. Please go ahead. Yeah. Hi, good morning. Rajeev, can you hear me? Ma'am, I'm so sorry to interrupt. May I please request you to speak a bit louder, as your audio is not audible? Sure, just give me a minute. Hi, is this better? Go ahead, Sapna. Please go ahead. Yeah, sure. Rajeev, just wanted to understand, you know, more on the capital allocation perspective. You did mention about some acquisitions in India as well as UK. Front-ending UK, we also acquired DASH sometime back, front-ending, trying to front-end US, I presume. I mean, is model changing, you know, where we now would want to go front-ending in every market versus the partnership that you were following earlier? If you could just, you know, share some details around that. Absolutely correct. Absolutely. I think we spoke about this in the past call, so I'll just repeat that again. I think the business is getting more competitive, and I think a lot of markets we want-- at least the big markets, we want to go front-end directly ourselves. I think that's what we're evolving. However, for complex generics, which require a substantial amount of R&D, we're still doing alliances. For some products which are not that complicated or which are where we feel we can spend the money, we are also going directly. Like few minutes ago, I spoke about Adaptic that, that we filed. There, we don't have a partner, and we have kept, you know, we're keeping 100% of the economics. I think, you know, it's a case-to-case basis, but broadly, yes, I think we're going direct. Yes, that's correct. You're absolutely right. If, if I were to, you know, understand a couple of years back, you were of the view that you were probably on, you know, even a deterioration phase specifically for generics, and going front-end in that market would actually not be really beneficial. Is there a change in our view, or is the market changing structurally there? It's never that. I think, see, the business is always difficult. I, I never thought, you know, you just had to find the sweet spot and the right product to do. I never said I think we'll not do it. I think it's a question of, you know, your... The problem is when you do front-end is you need to burn money, right? I mean, see, what happens when you do a front-end? You got to burn money before the subsidiary is stabilized. Two, earlier people would, you know, fund you for your legal and your partnership, that you had to spend, so there's more expense on your balance sheet. That sort of stuff, but obviously you make more money when the launch happens. I think we have the, you know, we have the comfort now to do these things, because I'm willing to let, you know, lose that money to build that business. I think that's, I mean, it just gives me more comfort because we're more comfortable now compared to, let's say, a few years ago. That's you evolve with your, you know, your situation, right? I think, I think. Sure. Yeah. All right. Sure. Just, you know, one last bit of the same question now. I'm just trying to understand with the substantial amount of cash that we have, a certain portion would go into acquisitions, building the front ends. Would we also be extending our domestic franchise or, you know, apart, I mean, the one where we diversified from onco to cardio diabetes, do we intend to acquire anything here and expand this franchise? Will it completely go into agro, or will it be an export-oriented, focus in terms of capital allocation? Good question. I think what we have done is we did a buyback, so we spent, I think, INR 210 crore, plus, the tax. I think it's about INR 250 crore on buyback. We- Mm-hmm. we are giving now INR 125 crore dividends. I think this is what we have done in the near term. In spite of the buyback and the dividend that we gave, we're still sitting on about little less than INR 1,400 crore of cash and cash equivalents and shares. I think this cash, this is as of July 31st, is the cutoff, if you take that as a. Mm-hmm as of July 31st. We, we'll see. I mean, you know, we have... We always look at all opportunities. I mean, we have, we've been giving money back, at the same time, trying to prudently spend money on, you know, acquisitions where we have gaps, and spending money on R&D, just expensive money on R&D. Using that, you know, the cash flow to, you know, spend on more complex generics and more products. I think that's what we're doing. I, to talk with your question, will we do a big acquisition? We're looking, honestly, I'm looking. I would not, I mean, I don't want to do anything in a hurry. I think, you know- Mm-hmm. we have, do the right one, I think. I'm being conservative. Yeah, I might be conservative, but, you know, but, you know, what's the hurry, right? I mean, you do it when you think the valuation is right. I think what we're doing now in terms of building value, I think is, you know, good enough. I think acquisition also is important, but, you know, we'll do it when... With a, that's a larger capital allocation. I think I, I, I want to do it when I'm comfortable. Yes, more conservative is good. Thank you so much, Ajit. Thank you. Next caller, please. Thank you. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead. Yes, thanks for the opportunity. Rajeev, how are we looking at the U.S. market? Do you see any benefits coming to us from the Do you see any opportunities for the for us? Cyndrella, I, I, I must apologize. Uh. I didn't understand anything I said. Very, very, a lot of static. Can you repeat that question one more time, please? Sir, this is a chorus call operator. I'm so sorry to interrupt. Ma'am, I would request you to please use the handset mode while speaking. Yeah, I'm sorry. Is this audible now? Yes. Yes, ma'am. Thank you. Please proceed. Yeah. Sorry, I'm repeating my question. I'm asking, Ajit, is there any shortages or opportunity in the U.S. market coming to our basket? Do you see many companies have moved out of the market? Any scenario emerging for us from a U.S. perspective right now? Do you envisage or overcoming 3, 3 quarters, do you see anything coming our way from these kind of shortages scenarios? I think your question is whether do we see any opportunities in the shortages in the U.S. at this time? Honestly, Cyndrella, I mean, we see sometimes for like a short period of time, and it goes away very quickly. You can't build a business model on shortages. I, I don't think, I, I... My, again, I'm telling you a slightly contrarian view than what people would normally say. You will get some opportunities here and there. We got not many. Honestly, we don't have too many of those opportunities. Sometimes we get, but not really. The pricing is competitive in a multi-source environment. The real value, again, I'll, I'll repeat that again. I've said this many times over many years. The real value is always doing the niches and the hard-to-do generics, where there's limited amount of competition. That's where the real money is. Everything else is, you know, you know, you know, is not as sustainable as what a niche and a complex generic. Between the two. Sure, helpful. Thank you. On the domestic piece, organically, are you seeing or planning any products, or are there some products, which will come over the years that we see in terms of filing, organically, not some inorganic opportunity? I, Cyndrella, I didn't understand what you said. I'm so sorry. I, I, if I paraphrase what you said, you're saying... I, I didn't understand you, honestly. I, I don't want to paraphrase you. I, could you say that again or, I'm sorry, I apologize again? You know, I'm asking from an organic perspective, are we looking for some products from our organic basket in domestic markets? I think we have good If I understand you correctly, I think, we have a good pipeline in our organic growth, and I think we're launching about 15, 20 brands. I think we're doing well. We have a lot of, couple of very first-time generics in India, especially oncology pipeline has done very well. I think we're bullish, and I think we'll grow at, at the industry rate. Yeah. Thank you. Next caller, please. Thank you. The next question is from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead. ... Yeah. Hi, sir. Thank you for the opportunity. First on the India front. On the India, I mean, you know, what's the outlook there? I mean, how much of this run rate, what we have seen in this quarter, is sustainable, and what are the kind of launches you planned for the remainder of FY 2024? I think, I said I think that some of the growth is captured by a one-time, and there's a general growth. I think I always said that the growth is around 10%-15%. I think that's the guidance I would like to give over the base business last year. In terms of pipeline, I think, oncology is doing very well for us. I think that's a segment that we've always done well, and we're doing well. We continue to do well. The other segments also are improving, and we have good pipeline of products. About 10-15 products have we planned, and I think, that business should do well. Sure, sir. Sir, secondly, on your profit guidance, what you gave almost INR 1,000-INR 1,200 crore for this fiscal. If I try to sync this with the, you know, your earlier commentary, which said that Revlimid for Q2 would be a little better, and then you expect a pickup in Q4. Ideally, you know, with the kind of run rate you have already achieved, and there were certain one-offs in this quarter as well. I mean, there seems to be a bit of a conservatism in your numbers. Am I, you know, missing something over here, or the guidance is a bit of a conservative here? You know, there's so many uncertainties in life, right? He's asking me to predict something that will happen six months from today. Which is very difficult to do. What I can... I know, I'm also human, right? I can, I can tell you, there are a lot of, you know, multiple factors at play. You know, I, I stand by what I said, you know. I, I mean, there are a lot of things that could happen. You know, you can't. You can only make a guesstimate of what it is. I'm, I'm only trying to make an estimate based on what I know, right? But again, there's still in this financial year, there's still, you know, another eight months left, right? You know, it's tough to judge, but I, I, I pretty much stand by what I said. I... You know, you can't really predict the future, literally. Yeah, so. All right, sir. Wish you all the best. Thank you. Thank you. Thank you. The next question is from the line of Nikhil Jain from Galaxy International. Please go ahead. Yeah, thank you for the opportunity. I have a couple of questions. First, I just wanted to understand, if you can give a little bit of perspective on the Revlimid pricing scenario in the market and competitive intensity. Is it the same? Has it changed? Anything changed in the market, or is it like going the way it was going last quarter and earlier? I think we're doing well, my friend. I mean, generally, I don't speak much, so much details because of competitive reasons. I think the product is doing well, I think, and overall, our business is doing well. We're happy where we are, and I think all our, you know, domestic has done well. Our first time, our agro has been profitable. So I think we were losing money earlier, so I think now we're making money. That's been a reasonably good swing. Our subs, I think we're investing in our subs, and the subs have also been stable earnings this year, this quarter. I think overall, I think the sector is doing well, and I think all our businesses are doing well. I think our U.S. front end is the only business we're losing money at this time. I think hopefully we'll be able to fix that in the next few quarters. Thank you. Okay. Yeah, second one was on Nonsu. Have you already launched the product, and how do you see that distributing? Yeah. It's an FTR, but it's a shared FTR. It is there in our investor presentation. I think litigation is still ongoing. I, top of my head, I don't know where we stand on the litigation. I think there are two separate litigation. One litigation got done. There's another litigation for which a trial date has not been set. No, there is no clarity on the launch at this time. I... It's too premature. The approval that we received, so that is, irrespective, right? The litigation is what will drive the launch. Litigation is different, approval is different. What we did is we got the approval. The litigation is still not resolved. Right. Okay. Fair enough. Thank you. Third question was... Yeah, just, last one. On the domestic side, let's say two years down the line, three years down the line, do we, let's say, kind of give a guesstimate of where we would be in terms of the top line on that particular business? You mean domestically? Yeah. I think our stated goal is about to grow around at the industry rate, about 10%-15%. I think, we believe, I think we can achieve that, yeah. If we get an acquisition, obviously, we'll get a, you know, a little more bump. Yeah, I think that's the expectation. Thank you. Next caller. Thank you. The next question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Hi, Rajeev and team. Good morning, and thank you for your time. 3 questions from me. On crop protection, right, is your current strategy revolving around Chlorantraniliprole and combinations only, or there's something on top of that? How much of that business, do you anticipate to sell through your own channel? I mean, a percentage would help. The second, you know, what's the cash on books on 30th June? Purely from a capital allocation standpoint, would you be willing to lever your balance sheet to drive inorganic growth? The third- Don't ask so many questions. Let me answer the first two, then I'll come to that. Okay, let's start with the agro. Rajesh, you want to answer the agro questions? Yeah, Tarang, see, as of now, our business is predominantly built on Chlorantraniliprole and all the combination products. We have about 10 products in pipeline, actually, on commercial mode right now, and half of them are Chlorantraniliprole related. Okay? Majority of the business is through our own branding and channels. Roughly around 10%, we are going through P2P, okay? We have interesting things in the pipeline. Next financial year, we expect, at least, you know, somewhere between 5-10 launches, which we have, you know... These are unique, different, differential products. To answer your question on cash, I don't have the number for June 30th. I think we have the number for July 31st. So, we have about INR 1,386 crore in cash, including cash and shares, and we have a debt of about INR 104 crore. That's all that we have. Mostly, foreign discounted. That's it. I think I've, I've answered all your questions? Will you be willing to lever your balance sheet, Rajeev, to drive inorganic growth? Inorganic, you said? Yes. Will I lever? Lever mean, borrow, you're saying? Yes. No, I won't lever. To answer your question. The reason is I'm conservative. I think we take a lot of long-term bets. I, I never a big fan of borrowing a large amount of money to do an acquisition. I think we'll do it with the cash flow we have, and I think we have a strong enough balance sheet. If the right opportunity comes, I'll never say never, but I think you put me on the spot and say, ask, ask me this question, I'll say no. Okay. Just the last question. How is the base business for exports done ex Revlimid? I mean, if you were to strip out Revlimid from now in the base, how is that business done? I think we're doing well. I think, you know, the agro, for example, as you know, earlier, was losing about INR 10-12 crore a quarter. I think this quarter has turned profitable, so that's good. The subs are doing about INR 130 crore of sales, INR 129 point something, so that has done well. Primarily driven by Canada and, and, and Canada and Brazil. I think those have been the star performers among the subs. And I think the domestic has been stable. The API has been stable. I think... Overall, I think we are happy where we are, I think we are trying to build a pipeline which will, with the money that we have, using the cash that we have, strengthening our filings in all these markets and expanding our geographical, you know, spread. We are thinking about 8, 10 markets we have to be in front end. I think right now, we are front end in India, U.S., Canada, and Brazil. I want to add another 4 to 5 countries. I think, Colombia, we're setting it up. U.K., we're setting it up now. Indonesia, we've already spoken. Maybe another 1 or 2 countries we'll probably do. That will cover the 10 major countries in the world, you know. If you are present, I think you'll cover most of your pharmaceutical business, I think that's the strategy. Super. Thanks, Rajeev, and glad to see all your bets paying off. Thank you. Yeah, thanks. Thanks. Thank you. Next, next call, next caller, please. Thank you. The next question is from the line of Bharat Celly from Equirus Securities. Please go ahead. Yeah, hi. Thanks for the opportunity. Rajeev, last quarter, you were mentioning that we have done almost like 25% of the volumes, which were we assigned for the Revlimid. How it has been for this quarter? Have we done almost like 50%, 60% overall? I didn't want to answer that question, Bharat, it's for competitive reasons. I think I've answered that question, indirectly. I think we are expecting a good quarter, we had a good quarter. I think we'd expect to have a equally good quarter in Q2. We'll taper off in Q3. I think that's, that's a reasonable answer at this time. Sure, sure, sure. Just wanted to get some sense on how do you see the pricing environment? Let's say, probably next year could also be good, but entering the 3rd year, FY 20 25, do you see the price erosions to be material in this product, considering that the competition landscape will be going up? I, I don't know, Bharat. Honestly, I have no idea. I think it's the same question I think indirectly the other person asked me: What are your earnings gonna be? It's, it's tough to judge. I think you take it by the quarter and see how things go. I think I mean, generics is the way it is. I mean, it's a very competitive business. There's always pricing pressure. Right. I don't think I can answer that question. Yes. Right. and the last one from my end. actually, you have even mentioned right now. what we have been hearing- Sorry, say that again, Bharat. Mr. Bharat Celly, we are unable to hear you. Yeah. Am I audible now? Yeah, yeah, please, please go ahead. Yeah. Actually, we have been hearing from your, some of the peers as well, that the overall pricing environment in the U.S. is actually changing, and we are seeing some of the price cooling off. How do you see the overall U.S. market behaving like? Have you seen any green shoots there, and are you seeing some structural changes right there? I have a different view. I think it's a very competitive business. I think structurally, what has happened is the, the distributors have a lot of hold on the companies, and in a multi-source environment, even if there are, you know, shortages once in a while, you won't get that sort of advantage. You might get business, but you don't get great pricing, honestly. You don't. You can't build a business model on a in a multi-source generic. You can't. I think you need to have a mix of doing complex generics, and niches, and Para IVs, and mix it up with a multi-source generic. You need to have both, of course, because you need a basic basket. End of the day, basket also doesn't matter after a point, because end of the day, they only care about the price. I think that's how Western markets are. I, I think, again, I, I said this at the beginning of the call. I think if you believe $100 is the amount of profit pool that's there in the next 10 years, I think $60, $70 will come from the niches and the complex generics. $30-$35 will come from, you know, from the more multi-source generic. You need to be present in both, and the same time, you need to know where you're putting your money. Have you seen any of the distributors getting a bit on the back foot to give better pricing, considering they are trying to ensure on the supply side? Personally, I'm not that, you know, you know, I will not characterize that, you know, that there's a dramatic change in the behavior. Maybe sometimes you'll see one product here and there, but that's not enough to say that there's a change. No, not, not enough to say a change. No. I will not say that. I, I don't believe that, because it's structurally difficult. See, if you understand the business, my friend, I think you see who are we competing with? We're competing with fellow Indian companies, right? You look at the balance sheets of other Indian companies, all of them have healthy balance sheets. We're not like the Western generic companies, we leave out with the exception of Sandoz. You know, all of them are, you know, heavily leveraged and either not interested in generics or, you know, are doing minimal work in generics. Just because they have a legacy business, you know, they have this basket in their cell. You're competing with the type of side, that type of, competitors who don't mind selling things at low margin just because they make money in other businesses as you do, so. All family-owned businesses, so everybody looks at long term. It's very difficult to compete. Honestly, I, I think it's, it's, it's a very competitive business, and I think you need, you need to have. You cannot just do a basket and make money. I think, you can't look at the world like that. That's helpful. Thanks a lot. Thank you. Before we take the next question, I'd like to remind all participants to please limit your question to 2 per participants only. You may rejoin the question queue if you have a follow-up. The next question is from the line of Prashant Nair, from Ambit Capital. Please go ahead. Yeah, good morning. A couple of questions. Firstly, on semaglutide, could you give a sense of what the market size is for the 8 milligram version? I think its strength is doing well. I don't have the number, my friend, honestly, top of my head, I have the number. I'll come better prepared next time. I don't have the number. I'll have to look up the IMS and come back here. At this time, I don't have it. Yeah, sure. No problem. Second, I missed your reply earlier on the M&A question. If you could just, you know, give a sense of what are your key priority areas to plug from an M&A perspective, if you have to rank them, say, the top 3 areas which you would like to plug? I mean, there are... What are the gaps in our business, right? I mean, let's answer that question. The gaps are probably, I mean, we're not present in the ROW markets, the key ROW markets. I think we have a front end or a large front end in any of the key ROW markets that we want. Domestic market, obviously, is a big gap that we have, because we're not present in all the therapies. And operating in multiple countries, I said about 8-10 countries we need to operate so that you get scale in this business. Whatever you spend on R&D, you get a better bang for your buck. I think these are probably the three areas that you want to focus on. Setting up more subs in key markets, filling a gap in a market where you're not present, in, in, you know, at, at a international level, and three, maybe a gap in the domestic. I think these are three areas you want to focus on. Okay? Just one follow-up question on, on, on the India part. So when you're looking at assets in India, are you primarily looking at brands, or are you looking at, you know, say, brands along with manufacturing and sales force? So how, how do you think about that? Brands is what we're looking for, I think in segments that we're not present. All right. Thanks. We have a reasonable amount of manufacturing in asset. I'm not saying we have every possible therapeutic area, but I think we have a reasonable amount of footprint in manufacturing. I mean obviously there are gaps in our manufacturing too in terms of certain therapy. Like for example, we're not there in antibiotics. You know, I'm just giving you an example, or we're not there in PNMs, for example. Having said that, I think, you know, domestic itself is not a manufacturing play, more of a brand play. Manufacturing, even if you don't have, you can always get a CMO to do it for you, because the ecosystem for the domestic manufacturing is quite good. That's not the challenge. I think the biggest challenge is possibly the branding business is where the real value is, you know. Sure. Thank, thanks, Rajeev. Thanks a lot. Thank you. Thank you. The next question is from the line of Harsh Bhatia from Bandhan AMC. Please go ahead. Yeah. Hi, Rajeev. Good morning. Just 2 questions from my side, purely on the domestic side. One, at the macro level, if you're talking about 10%-15% organic growth, how should we look at the split between price, volume, and new launches? That's the simple, first question. On the second aspect, purely from the domestic oncology business, if you could give us some incremental flavor for the last 5, 6 quarters, because there is certain aspect of the market itself shrinking, there is certain aspect of us losing out on some market share in certain products. How are you thinking about these 2 things, right? Because going forward, again, the growth element has to be driven by the market as also growing, and we also taking back incremental market share. Maybe, a little bit of your thoughts on this. I, I don't know if I can answer your question at the level of detail you're asking me, but I think I'll tell you what I'm thinking about at a, at a high level. I mean, if you wanna get growth, I mean, you need to have good launches. Launches will obviously contribute to, you know, 50% of your growth. You need to have good launches. That's probably 50% of profit. 2, gaining share on molecules, sometimes you do, sometimes you don't. It depends on the molecule and the intensity of the competition. Overall, if you see, I mean, our portfolio is not the type that you can take price increases on. I mean, it's not like a steady state, diabetes, cardio type of portfolio. Like, we don't raise our market price so much. For most of our portfolio, we, we never raise the market price, because it's a very price sensitive for our portfolio. I think that's how I like to look at it. I think, I think what really matters is... See, the another challenge, and you see this in the data that you hear, is that the volume increase is low in the market. It's a lot of the of the older products. It's a lot of it is coming from price increases. If you want growth, I think the formula for that is, you did have very good new launches, and your core business has to be growing. Some business will not grow, but overall, I think mixing up with some core business, like your cardio, diabetic, where there's, you know, a better uptake because you're an upstart, and then maybe, you know, some new launches which will drive growth, I think. That's how we'll look at it. Given that the price increases are not there in this area of the business, the oncology part of it, it would be fair to say that the prices are not revised downwards as well, like in a general scenario, except excluding the COVID period? Could you rephrase that question? I, I didn't understand what you said. Could you say that one more time, please? No worry. Yeah, sure. To clarify what you were saying is that, that we don't take any price increase on the portfolio. Would, would it be fair to also say that the price revision, downward price revision, would also be completely absent? Like, there is no price reduction that usually takes place in the oncology domestic portfolio? A price erosion means what happens is there tend to be very high discounts, so there's always pricing pressure. Depends on the product. To answer your question, yes, there's always pricing pressure. The price increase portfolio that happens, generally happens in the more, you know, retail-driven products, you know, which are sold at the, you know, your neighborhood pharmacy. It doesn't happen with the hospital type of products, because you're competing with other, you know, companies which are also bidding in tenders. It's not a strict comparison. You can't compare. It's apples and oranges. It's not a literal comparison. It's a completely different business. Does that make sense? Does that answer your question? Sure. Okay. Thank you, Rajeev. Thank you. All right. Thanks. Thank you. The next question is from the line of Keshav Mishra, an individual investor. Please go ahead. Yeah, thank you, sir, for the opportunity. My question is just on the NRC, NRC 2694 trial, which is due February 2024. Just wanted to understand, sir, what that drug is, and if everything goes well, are we looking for, you know, partnership, some kind of partnership for phase III trials? Going forward, I mean, is NATCO Pharma, you know, to allocate some capital on building NCE pipeline as well? Thank you. I think we have a, a, a reasonable pipe, set of NCE pipeline. I think this particular one, we got USFDA clearance to do a trial there. We're doing it on patients in the US as we speak. At this time, it's premature, my friend. I don't want to say anything at this time. I think, once we get some data, I think we'll talk about it. Yes, I think, we are, we are doing it in our core, strength, which is oncology. At this time- Sure. improvement, my friend, I don't, I don't want to say anything. Yeah? Yeah, I agree, I agree, sir. Sir, on the, on the longer term strategy, right? I mean, would there be, do you have some plans of, you know, capital allocation on NCE side as well? We're doing a little bit of capital allocation. That's correct. It's already- Okay. It's already done. I think two six nine four is funded by the balance sheet. Generally, we don't talk about things where we don't reach a certain stage of progression. I mean, that's where we, then we can give a, you know, some sort of perspective on where it's going. I, I think once you make some progress, I think we'll come back to you. I think where we make significant progress, we'll come back to you. I think it's too early to comment at this time. Okay? Okay. Thank you, sir. Thank you, sir. Next caller, please. Thank you. The next question is from the line of Karan Mehta from Nirmal Bang Securities Please go ahead. Thank you for the opportunity. I just have one question. Can you provide the breakup of market share for CTPR between us, FMC, and Best Agro? The market is still evolving, Karan, at this time. I don't have the answer to that question. I. Maybe after the season ends, I'll tell you, because it's the first true season we have launched. At this time, it's premature. I don't have an answer to that question. Okay. Can we comment on our share on for Chlorantraniliprole? I mean, good question. I we are expecting about 10%-15% market share. I think that's our internal target internally. I think, again, you don't want to throw a number that you can't, you know, hold up. Let me see how the season ends, and I think, we probably need to, you know, see some data, market data, and I'll come back to you. I think that's the targeted market share, I think. Just want to add one more thing, Karan. Yeah. That's absolutely what Rajeev just mentioned. We have to go through the season before we realize where we end up. Overall- ... our brand and product reception has been very good. In fact, after FMC, you know, the, the big name which hovers around is NATCO's brand. Let's see. All our CTPR products are doing fairly well. We have the individual as well as the combination products. In a way, the combination products, we have less competition as well, so those are doing quite well. Okay. Okay? Thank you. Yeah, yeah, that was helpful. Thanks a lot. Thank you. The next question is from the line of Vishal, an individual investor. Please go ahead. Hello, Rajesh? Yes. Am I audible? Yeah, yeah. Please go ahead. Do we have any impact of the ongoing overpricing policy of the Indian government on the domestic front? Could you clarify your question, Vishal, like a DPCO case against us? Is that what you're trying to say? The, on the domestic front, there is, some on, overpricing policy of the Indian government, for which there are a lot of litigations pending. Do we have any such effect on our balance sheet? No, my friend. We don't have any claims from DPCO in our balance sheet at this time. We don't have any claims. Okay, thank you. Okay. Thank you. The next question is from the line of Yash Tanna from iThought PMS. Please go ahead. Yash, please go ahead. Hello. Yes. Hello, am I audible? Yeah, please go ahead. Yeah. My question relating to our press release on 26th July, we filed an ANDA for the brand, Palforzia. This product, I believe, J&J, in their recent conference call, they mentioned that this product could be more than a $1 billion opportunity for them based on some new indication that they have received. How, how are we thinking about this product, and where are we in terms of approval or launch timelines or something like that? It's very early stage. I think, I will not put any numbers to it because I, I don't have the answer to that. The last number I seen was about $40 million, but I think it's, it's a good product. As I was saying, I think a few minutes ago when the, somebody asked me, I, I don't recall the name who asked me, but if this product grows well, you know, we have a sole FTF on this, so I think that's a good position to be. At this stage, we just filed the product, so the review is ongoing, and the litigation is also very at, very early stage. Very early to comment. Right. All right. Thank you. The next question is from the line of Devang Shah from iWealth Management. Please go ahead. Hello. Am I audible? Yeah, please. Yeah, please go ahead. Yeah. Yeah. Just one clarification. When you say that the quarter two and quarter one would be two similar quarters, do you mean that in terms of the same EBITDA margins or, and sales as well? I think that's our expectation. Let me see how the quarter ends, but I think our expectation is that we should, we should have a good Q2 as well. Okay. Just wanted to know regarding your capacity utilization. Say that one more time, my friend. Repeat, please. Sir, just wanted to know regarding your capacity utilization. Capacity. Capacity utilization in the company, you're saying, as in all? Yeah, correct. Yes, sir. Typically, we run around, like, 60%, typically 60%-65%, because our portfolio is very niche. I think I don't do too many commodity products, so, so on that reason. Sure, sir. Yes, that's all. Thank you. Thank you. The next question is from the line of Roshik Oza from Nine Research. Please go ahead. Thanks. I just wanted to know if you have provided INR 51 crore for any potential litigations, you know, does it meet any of your required, you know, amount, or will there be any further provisions made on similar to this in the next few quarters, one? Two is, in the last 2 quarters, we had little one-offs. This quarter also, we had some INR 17 crore incentive. Is there any one-offs likely to come in the next 1 or 2 quarters? INR 17 crore incentive is obviously linked with the success of the company. I mean, you know, obviously you, you have to reward your employees. I, we just stated, you know, what we have done. Regarding the patent litigation, I think this is something that's been there for a long time. I think, you know, we know that the launch at risk can be very aggressive litigator. I think, a lot of times we have won our cases. Some cases are still unresolved. I think what we did is we looked at the whole portfolio that we launched at risk, and we made an assessment that, you know, if, you know, if we were to settle or, you know, we were to lose a case or, you know, something were to happen, what could be the financial risk? All these issues are very difficult to judge because each case has its own merits, and it's over multiple products. I think after much analysis, I think we, I think we, we sat with our audit, and I think we came up with a number that, INR 51 crore should cover, I think, most of the liability. I mean, will it cover or are we exceeding the liability? Will we exceed that number? Probably not. I think it probably addresses most of the liability. I think that's our sense. Again, see, we are, we're making an estimation about something that we don't know anything about, right? You're asking me to make a, make an estimation about, you know, 8 or 10 lawsuits that we have, you know, where we are running at risk. It's very difficult to judge. I think, I think it's fair, we use a fairly reasonable mathematical model. I think, to answer your question, I think it covers most of the risk, I think, if, if that's your concern. Thank you, sir. Okay, bye. Thank you very much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Thank you. Over to you all. All right, thank you all. Again, very good set of questions. We will have all of these also uploaded in the website once we have the transcripts. Thank you all, have a great day. Thank you. On behalf of Natco Pharma Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.