Ladies and gentlemen, good day, and welcome to Cadila Healthcare Limited Q3 FY 2022 post-results Conference Call. 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 for an operator by pressing star then zero on your touchtone phone. Please note that this Conference is being recorded. I now hand the conference over to Mr. Ganesh Nayak, Executive Director at Cadila Healthcare Limited. Thank you, and over to you, sir. Thank you. Good evening, ladies and gentlemen. Welcome to our post-results teleconference for the quarter ended December 31st, 2021. I do wish that you and your families are keeping safe and well. For today's call, we have with us Dr. Sharvil Patel, Managing Director, Mr. Nitin Parekh, Chief Financial Officer, Mr. Vishal Gor, Senior Vice President, Corporate Finance, and Alok Garg, Senior Vice President from the Managing Director's Office. I'm sure you would have gone through the quarterly results investors presentation which we have posted on our website and filed with the stock exchanges. The quarter gone by was yet another quarter of robust performance for our human health formulations business in India. The branded generics portfolio delivered a strong double-digit growth during the quarter. In fact, this is the fourth consecutive quarter of strong growth for our branded formulations business in India. With the reduced need of COVID-related medicines in India during the quarter, COVID-related opportunistic portfolio recorded a decline in the revenues during the quarter, both on a sequential and on a year-on-year basis. The consumer wellness business maintained its leadership positions in five out of the seven brands in their respective categories. Overall, the India geography, which contributed 41% to the consolidated revenues during the quarter, posted a growth of 12% on a year-on-year basis, excluding sales of COVID-related products, generics portfolio and divested products. Contribution of the India geography in consolidated revenues has gone up to 41.8% during the April-December 2021 period, from 37% during the April-December 2020 period. With that, let me quickly run you through the financial numbers for the quarter gone by. During the quarter, we posted a consolidated revenue of INR 36.55 billion, up 1% year-on-year. Excluding the COVID-related revenues, growth was 5% on a year-on-year basis. Consolidated EBITDA for the quarter was INR 7.5 billion, and the EBITDA margins were at 20.6% vis-a-vis 21.1% recorded during the corresponding quarter of the previous financial year. Despite reduction in the mesalamine revenue in the U.S. and decline in the COVID-related revenues during the quarter, various cost optimization and efficiency enhancement initiatives helped us contain the EBITDA margin decline by only 50 basis points. Consolidated PAT for the quarter stood at INR 5 billion with a flat growth on a year-on-year basis. This is after adjusting profits from discontinued operations in Q3 FY 2021. Now let me run you through the operating highlights for the Q3 of FY 2022 for each of our business lines. Starting with our human health business in the India geography, the human health formulations business recorded sales of INR 10.8 billion during Q3 FY 2022. Excluding sales of COVID-related products, generics portfolio and divested products, the branded business growth was 17% on a year-on-year basis. The growth was driven by volume expansion in the existing products and key new product launches made over the last 12 months and improved realizations. We gained market share in our core therapeutic therapies of the anti-diabetic, cardiovascular, gynecology, and anti-infective therapeutic areas during the quarter on a year-on-year basis. During the quarter, Lipaglyn catapulted to among the top 100 brands and was ranked 92nd in the Indian pharma market. This is a jump of 183 ranks, that is from 275 to 92 during the current quarter. On the super specialty front, we continue to retain our leadership position in the nephrology segment. In the oncology space, we are the fastest growing company in India. Consumer wellness business posted revenues of INR 3.8 billion with a growth of 2% during the quarter. Lower growth in sales is largely due to two reasons. Firstly, due to the high base during the previous year comparable period, which was accentuated by a slowdown in rural growth. Secondly, as we are implementing a continuous replenishment process internally as part of the integrated business planning tool, we have reduced inventory both internally as well as in the trade channels. This would help us operate with leaner inventory and better availability of fresh stocks with the consumers. To counter commodity inflation, the price hike taken in key brands towards the end of Q2 FY 2022 helped in protecting the gross margins during the quarter. Now, let me take you through the performance of our U.S. formulations business. The U.S. geography comprising of generics and specialty portfolio posted sales of INR 15 billion during the quarter. The business managed a flat growth despite continued pricing pressure in the market and decline in sales of mesalamine products. We gained volumes in other existing and new products. We received nine new product approvals, including five tentative approvals, and launched three new products during the quarter. New approvals and launches for the quarter included naratriptan injection, for which we are granted 180 days of exclusivity. This product was launched immediately upon approval. We filed 12 ANDAs during the quarter, and amongst them is a first drug device combination product on NCE minus one date. Apart from this, two products are single source products and two others are limited competition products. We intend to prioritize products where we plan to gain volumes and also maintain safety stock of products where we foresee some opportunities to open up in the market. At consolidated level, the emerging markets business posted sales of INR 2.9 billion, down 1% on a year-on-year basis. Excluding the COVID-related portfolio, the business posted a growth of 7% during the quarter. Due to its presence in diverse geographies, the business managed to overcome challenges emerging out of political and economic uncertainty in some of its markets, as these were offset by strong growth in some other markets. As shared on previous occasions, we continue to work on various efficiency enhancement initiatives to improve operating margins. To reiterate, the zero-based budgeting approach will lead to margin improvement during the current calendar year. Advanced digital and analytics tools being implemented in manufacturing operations is likely to enhance compliance and efficiency through simplification. Both these initiatives put together are expected to improve our overall operating margins by 80 to 100 basis points. It was a priority that our employees feel safe and supported during COVID. In addition to implementing work from home, we provided teleconsultation and telemedicine facilities so that all our employees, irrespective of their location, could benefit. For employees attending office and at our manufacturing sites, strict protocols were followed for regular sanitization of the premises and limiting human to human interaction. We also provided special compensation to families of employees who unfortunately succumbed to the pandemic. I'm pleased to inform you that our group has been selected as the best pharma company to work for in the large company category for the year 2021 at the Employee Choice Awards by AmbitionBox. Our CSR initiative at Dahod bagged the Gold Award at the CSR Times Award during the quarter. Our Zydus Medical College and Hospital, Dahod won the Gold Award in the corporate healthcare sector at the CSR Times Award. This was in recognition of the various initiatives and the healthcare support programs carried out in the rural area of Dahod. The criteria for the awards were impact, reach, and sustainability. The award saw participation from across industries, and 138 corporates participated in this. This concludes the business review. I will now request Dr. Sharvil Patel to take you through the progress and initiatives in our innovation program. Thank you. Thank you, Dr. Nayak, and good evening, everyone. As you know, post the receipt of our emergency use approval from the DCGI for our COVID-19 vaccine, ZyCoV-D, during the previous quarter, we have received an order from the Government of India to supply 1 crore doses of the vaccine. As informed by us yesterday, we have already started the supplies of the vaccine to the Government of India against their order. As you're also aware, we have entered into an agreement with Shilpa Medicare Limited for production and supply of drug substance of ZyCoV-D from their manufacturing facility. Supply of commercial batches of drug substance from their facility shall begin from the current month, which will help us improve our demand supply. I'm happy to inform that The Lancet has accepted our submission of interim analysis of the phase III clinical trial results for ZyCoV-D vaccine publication, which is the largest clinical study done on Indian patients. On the global front, we entered into a manufacturing license and technology transfer agreement for the vaccine with EnzyChem Lifesciences of South Korea. The partnership will lead to manufacture of over 80 million doses of the DNA vaccine in the year 2022. These doses will be supplied in South Korea and number of countries in Latin America and Asia. We have also made good progress on the research and development front. We have initiated a global pivotal Phase II(b)/3 adaptive trial, which is the EPICS-III trial of Saroglitazar Magnesium to evaluate its efficacy and safety in patients with primary biliary cholangitis, which is PBC for the U.S. market. The trial will be conducted on 192 subjects over a period of 52 weeks. The results of the Phase II(a) EPICS trial, which were published in the Journal of Hepatology, a strong peer-reviewed journal, has demonstrated that the molecule holds immense potential based on its safety and efficacy profile. Just to refresh your memory also, Saroglitazar has also been given an orphan drug designation and a fast track designation by the U.S. FDA for the indication of PBC. From the month of October, we have also initiated enrollment for patients for the EVIDENCES-X, another global pivotal Phase II(b) trial for Saroglitazar Magnesium to evaluate the efficacy and safety of the molecule in subjects with non-alcoholic steatohepatitis, which is NASH, and the fibrosis indication. Two clinical trials are underway in the U.S., one for NASH and one for PBC. Study of Saroglitazar Magnesium for PTMS, which is post-transplant metabolic syndrome in the U.S., reached the targeted number of patients, 15. We shall now be approaching the U.S. FDA for a possible unmet medical need indication post the transplant NAFLD. We have also completed the study for Saroglitazar Magnesium with respect to hepatic impairment. We shall soon be submitting these results to the U.S. FDA. Coming to other new molecules in our NCE pipeline. We are extremely pleased that we were able to submit the new NDA, the new drug application, to the Drugs Controller General of India for Desidustat, which is an oral small molecule hypoxia-inducible factor prolyl hydrolase, which is the HIF-PH inhibitor for treatment of anemia in patients with chronic CKD, which is kidney disease, both on dialysis and not on dialysis. This molecule will further consolidate our leadership position in the Indian nephrology market. As per the study conducted by The Lancet in 2020, 114 million people in India, another 132 million people in China, 38 million people in the United States, another 21 million in Japan, 41 million in Western Europe are estimated to be living with this chronic CKD illness. This underscores its strong global potential and as you know, we have already partnered for this drug clinical trial in China as well. For our novel anti-malarial compound, ZY-19489, which is developed together with the Medicines for Malaria Venture, we have received an orphan drug designation from the U.S. FDA during the quarter. This is active against all clinical strains of Plasmodium falciparum and Plasmodium vivax, including all the drug-resistant strains. The phase I study of the molecule has demonstrated a long half-life and a potential for a single-dose cure for malaria. This molecule is a potential single-dose radical cure for malaria for the developing countries, where majority of the malaria cases and deaths are recorded. We are very excited with the progress of this molecule, which has now entered phase II. With respect to another molecule, ZYIL1, which is a novel oral NLRP3 inflammasome inhibitor, we have received a regulatory permission to initiate phase II(a) clinical trials in patients with cryopyrin-associated periodic syndrome, which is CAPS in Australia. CAPS is a rare lifelong autoinflammatory condition caused by the NLRP3-activating mutations and is classified under the orphan diseases. This molecule has been found to be safe and well-tolerated in our phase I trial, and as I said, we'll enter now the phase II clinical trial. On the biosimilars front, we have successfully completed phase III clinical trials for one monoclonal antibody and have received permission from the DCGI to initiate a clinical trial for one more monoclonal therapy in the field of cancer during the quarter. With respect to molecules in early stage of development, we have also submitted applications to the RCGM to conduct preclinical trials for one more biosimilar and biologics. On the novel biologics front, for our current lead NBE program, a humanized monoclonal antibody designed to downregulate the alternative complement pathway, we have completed a critical non-human primate PK/PD study and established the molecule as significantly good PK/PD and safety profile. With this, we shall be starting our animal tox study soon and potentially see this as an important molecule again in the orphan and rare diseases side. On the 505(b)(2) initiatives, as you know, in the month of October, our wholly-owned subsidiary, Sentynl Therapeutics and its licensing partner, Cyprium Therapeutics, announced positive results from an efficacy and safety analysis of data from two completed pivotal studies in patients with Menkes disease treated with our CUTX-101, a copper histidinate product, making further progress towards the filing. An initial module of the NDA of CUTX-101 was filed with the U.S. FDA during the quarter. This is a rolling submission, and we are likely to see an approval by end of this calendar year. Menkes is again an orphan drug indication. Coming to the pipeline of other 505(b)(2) products, we have received a clearance from the U.S. FDA for one of our new IND applications, which was filed for pain management program. The NDA for this product is expected to be filed by the end of the current financial year. We concluded a pre-NDA meeting with FDA for two more products in the area of metabolic disorder and also submitted a pre-NDA request for one more product in the orphan drug space. It is our endeavor that we continue to grow our existing base in India and other markets. We efficiently and add more new generic products and leverage a strong R&D infrastructure to create novel assets that will make us future-ready. Thank you. Now we move over to the Q&A session. Thank you very much, sir. Ladies and gentlemen, we will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we would request you to please limit your questions to two per participant. Time permitting, you may return to the queue for your follow-up questions. We will wait for a moment while the question queue assembles. The first question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead. Thanks for the opportunity. Just on the vaccine front, the order with respect to the Government of India, will that get completely manufactured in Q4 itself, or it'll flow through in Q1 of FY 2025 in the future? It will flow through in the Q1 as well. Okay. Secondly, on this, tie-up with EnzyChem Lifesciences. What are the steps here in terms of the getting the regulatory approval from those countries and then subsequent commercial manufacturing? That is first. How will the pricing play out? Currently, we are going to help them with the tech transfer of the technology. They already have capabilities to produce recombinant DNA kind of product. We will be transferring the technology. Once they have scaled up the technology and they will be able to use our clinical phase III data from India and work with the Korean regulators for getting an approval, is our current understanding. They may be required to do some post-marketing data as well or a bridging study. It's still a little early to say all of this, but the primary responsibility for moving the work ahead is from them. Considering these milestones, still, 80 million doses in 2022 looks reasonable, does it? That is their current estimate that they have been able to give us. Got it. All right, thanks. That's it from me. Thank you. Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Yeah, thank you for taking my question. The first question is on the U.S. business. The flat number quarter-over-quarter, is it fair to assume that this included, you know, the seasonal uptick that we usually see because of flu in the U.S.? You know, just on this one, if you could highlight what the base business erosion was, you know, due to Asacol and without Asacol. Two points. One is we have no seasonal business. This year the flu season has not been there in the U.S., and we didn't have any new business on Oseltamivir treatment. There is no seasonal business which was there earlier but not there this year. Also, with respect to the loss in share on mesalamine, it's on Lialda. Asacol is still without any competition in the U.S. You had indicated some loss in volume in Asacol, so that's stabilized, right? You're not seeing any further. Yes, that has now stabilized because this started almost in Q3 of last financial year, so. Okay. What was the base business erosion, sir, then in that case, the price pressure that you've mentioned? I don't have it exactly right now, but the base price erosion is around a single digit right now. This is excluding Lialda Yeah. has had a higher erosion, but on the base business, it's a low single digit. Understood. My second question is, I think in your opening remark, you made a comment about improving margins by about 80 to 100 basis points. You know, I missed what would drive these improvements? If you could give some color on that, please. We have three or four initiatives every year, and these are part of the programs that we run. One is something for manufacturing, which is both on the supply side as well as on the manufacturing side, where we run a program known as PRISM and SLIM. This year we had run a program for zero-based budgeting for our whole India end-to-end business, and we have seen a significant savings created out of that. We are also running productivity-based initiatives across the organization and two more programs on different quality parameters. Putting all of that together, we have been consistently delivering anywhere between INR 150 crores to 200 crores of savings. That continues because the programs get extended and new programs are getting added. Understood. Thank you so much. Thank you. Next question is from the line of Anubhav Aggarwal from Credit Suisse. Please go ahead. Yeah. Hi, good evening. Sir, a clarity on this vaccine. Is Shilpa, the drug substance that they're manufacturing, being used for supplying the 10 million vaccines to the government or that's separate? No, that is still not started. Shilpa is gonna take their commercial batches this month, go through that audit and hope to clear that audit, so their doses are still not available. Okay. You mentioned that this 10 million effectively will be supplied between the current quarter and the next quarter. All 10 million will be done across these two quarters? Yes. Where is the bulk of these vaccines used by the government? Are they being used for the 15 to 18? Government has given us allocated centers. As and when the supplies start, you know, we are making sure that we have enough. As a person is vaccinated, we are protecting the second and third dose. Looking at all of that, there's a whole supply chain planning done with the government and the centers designated. One by one we are rolling out in all of these centers. These are all across India. This is for the adult vaccination. This still not being used for 15 to 18 years group, adolescent? My current best estimate on this is that adults obviously we are cleared. We have an approval from DCGI for children. Our NTAGI meeting has finished for the 12 to 18 also. I believe that once we start the supplies, we will be seeing a launch in that age group as well very soon. Okay. Do you want to talk about your status of two-dose vaccine? Is the trial over for that? Sorry, status of? Two-dose vaccine. Yeah. The two-dose vaccine enrollment is completed. Day 56 has also been completed. We believe by end of this month we will have all the data to file with the regulators. This is phase III trial which will be done for this? Yes. phase III trial done from ages of 12 and above. Okay. Just last question on the vaccine front is on this South Korean partner. Let's say all goes well and they start supplying as well. Would you get a royalty on the sales, which is like typically MSCs charge about high single digits? Yeah. We do have a profit share agreement with them. Will that be standard, like what we have seen normally about high single digit or thereabout? Is that a standard number? I can't divulge overall, but I think it's a good profitable business model that has been agreed upon between the two partners. Okay. It will all depend on pricing, and, depending on the pricing, you get to know that, right? It's very difficult to answer that right now. Sure. Just one clarity on the numbers. The personnel cost, if I see it ex Wellness numbers, the personnel cost declined INR 50 crore quarter-on-quarter. That's quite a substantial drop. We have lesser number of people here or the provisioning was restarted, resulted in one-off decline? In the last one year plus, you know, we have been working on multiple initiatives on productivity improvement, whether it was India business starting with zero-based budgeting. Then our manufacturing side, we are running a program called WISE, which is again improving productivity. We have also rationalized our footprint in terms of manufacturing assets and all of that is leading to reduction in people and reduction in cost as well. Beyond that, I think if Nitin Bhai or somebody would like to add anything. Yeah, sir. Also because of, you know, our facilities of Nesher and Ankleshwar which are now not in operation, so that manpower cost is also reduction because of that. That resulted in no hit to the revenues. You could transfer everything and that resulted in all cost savings. Yes. There are very few people now. Other people have been, you know, retrenched. Obviously there are no revenues also from those sites and attendant costs are also not there. Okay. Thank you, guys. Thank you very much. Next question is from the line of Dalmit Singh from Sunidhi Securities. Please go ahead. Yeah, thanks for taking my question. Sir, on ZyCoV-D vaccine, just wanted a clarity on pricing. We have a pricing for government. For private hospital or private suppliers, can you indicate any pricing you have in your mind? Currently, I don't think we can give the, that. I think once we are able to get clearance to launch in the private market, we will immediately apprise you of the pricing. Suffice it to say that the pricing in the private market will definitely be higher than the current government pricing. We still believe we'll be more competitive than the current players. Okay. Initially supply would be from your own manufacturing site or Shilpa would also be contributing from next quarter? It will be our own manufacturing site, and the other site is Shilpa, which will also start contributing. Okay. For a global market, getting it registered in different countries, is the responsibility of your partner or you? You need to have to get approval? Majority of the places where we are partnering, the responsibility is of the partner. We will obviously supply the data, the clinical data and also the peer reviewed journals data, which we said we already submitted, you know, in the final stages of publishing in The Lancet also this data. If everything goes well, that data also will be supported. Just a last one on Desidustat. What's the progress? We have submitted with the DCGI. Any timeline when we can see it coming to the market in India? We are estimating a launch in April this year. It's very imminent. I mean, we expect everything's on track, we should see a launch in April. This will definitely be one of the, I would say, one of the largest launches in Zydus in the current year, I would say, in the current years. Okay. Apart from this, any other meaningful product launches in India from biosimilar side in the city? Last year we had launched the Ujvira, which is Kadcyla. I would be happy to note that we have, I would say, by this quarter, crossed the number of prescriptions even by the nearest competitor, which is a brand, and it has been one of the very good launches. I think the next would be scaling up. It's not a new product, but with the enhanced indication for Saroglitazar, the Lipaglyn and Bilypsa should see significant momentum in the current year. Desidustat definitely will be a potentially large launch for this year. We also have some products where we are seeing patents off, products going off patent, so we will be day one launches. We are also looking forward to an important launch in the iron area. Also one critical vaccine, which is Varicella. There are some important launches planned during the year, and those are some of the ones which I mentioned to you also. Okay. Thanks a lot. I have more question. I'll remain in queue. Thank you. Thank you. Thank you. Next question is from the line of Sameer Baisiwale from Morgan Stanley. Please go ahead. Thank you very much, and good evening, everyone. Sharvilbhai, what's the visibility of ZyCoV-D vaccine, you know, order from the government beyond 1 crore? Currently, our last discussion was the government wanted us to initiate the supply. Once we meet a steady base of supply, they did speak to us about further opportunities to add to the vaccine. We believe that this vaccine, there are still a significantly large population of people who in the 12 to 18 years who are not vaccinated, that definitely is the one opportunity. The second is people are looking I mean we are already seeing those I mean booster doses and other applications beyond the single two doses that people may have taken. Those would be potential opportunities. Currently those are the three opportunities that we are seeing. The government has spoken that once we comfortably resume our supplies, then we will talk about further discussions on further business. Currently our order is limited to 1 crore. Okay. The fact that government has reduced their vaccine budget by one-seventh for next year from INR 35,000 crore to INR 5,000 crore, if I'm not wrong, does that mean that, you know, the opportunity size is shrinking significantly as you go into next fiscal? I think to some extent, definitely there is uncertainty on what would be the opportunity size. Definitely it would be much lower than the earlier years because the majority of the population, at least in the adult side, is vaccinated. Having said so, at the capacities that we are talking about, which is about producing close to 1 crore doses a month, I think there is still sufficient opportunity to at least do a, you know, I mean, we believe on the worst case scenario, 3 to 5 crore doses business, and that itself is still a significant amount of value and revenue for us. Assuming even a small 2 Crore to 3 crore, 3 crore to 5 crore doses business is still very, very significant. Okay. Sharvilbhai, the order that you're supplying now, 1 crore, is it from your new, scaled up facility or the smaller one? The smaller is very little and the scaled up facility has just started. Okay. That's commissioned. You're supplying from there. Yeah. That's already commissioned. Yeah. Okay, excellent. Sharvilbhai, question on the U.S. business. You know, what's your thought on Asacol HD competitor, you know? When do you think what's your best guess how the market can unfold over the next three or four quarters? Did you ask about Asacol? Yes. Yeah. Our best estimate is, conservative estimate is that we could see competition maybe in the July quarter onwards. There are two possibilities. One is we see an early preponement to April, it seems unlikely, but it's always possible. There is also a scenario that we believe could happen where we could see nobody till end of the current calendar year. Okay. That's very good to hear. For Lialda, Sharvilbhai, how much more room is there? You know, what's causing this pressure? Is it the incumbents competing for market share? I don't think there was a new entrant there. Yeah. It is one incumbent who was competing for market share, and they crashed the prices, so obviously we had to match. Okay. One final on the U.S. business. You know, keeping Asacol out, what's your outlook for fiscal 2023? FY 2023, I think our best estimate right now is, assuming we believe we will be probably at par growth, so maybe just 1% or 2% or maybe less than 5% growth for the FY 2023. That's our current estimate. This is assuming that we don't see any one-time or big opportunities or one-time buys and all. We have assumed a 6% to 7% price erosion to the base business, assuming some competition later in the year on Asacol. Okay. You have also included Revlimid upside on this? Partial. Okay. Thank you very much. That's all from my Revlimid we are still not sure what will be the pricing. Depending on that, once we launch it, we can give better flavor on that. Okay, Sharvil. Yeah. Thank you so much. Yeah. Thank you. Next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead. Yeah. Thanks for the opportunity. Good evening to all. My question is on gross margins. How do we see this gross margin shaping up for the next 12, 24 months? You have said that, you know, near term, U.S. is flattish. India, we are on a high base of, you know, some of the COVID products. How do we see the next 12 months? In the past you have said that, end of fiscal 2023, early fiscal 2024, you expect complex injectables, et cetera. If you could just help us understand the next 12, 24 months, that would be great in terms of gross margins and EBITDA margin trajectory. I think on the gross margin side, we would continue to see some pressure in the U.S., on price erosion, which we believe will get compensated by a better geographical mix driven out of India business and consumer wellness. As I said, the India business delivered a 17% growth in the last quarter, which is one of the highest, and we are still seeing a very strong double-digit growth in this current financial year, coming financial year also, irrespective of Remdesivir. I think that will definitely improve. We have also seen margin improvement on our India formulations business, so that will further aid to the gross margins. I think the GC we will be able to. I think from this Q3 onwards, protect this, and we're in the similar range of around 62% to 63% growth contribution. Going forward, in FY 2024 we see a significant. We believe our estimates right now talk about a very big upscaling in the U.S. generics business for us because of some high-value launches that are planned for that. You know, our aspiration is that we cross $1 billion in revenue in the next financial year in the U.S., which is possible if everything goes well. That's what we are planning and working towards, which will then significantly see an improvement on the margins also in the coming years, in the FY 2024. That is very helpful. Secondly, on the R&D side, how should one think about it? I mean, your run rate was much higher in the past. It just seems to have come down a bit on an absolute basis. How do you expect, given that, you know, a lot of trials happening in U.S., then you have biosimilar trials which you kicked off, so various projects are ongoing. How do you see your R&D either in percentage of sales or absolute, if you could guide for the next two years? With our estimates, we still believe that our current guideline of around 8% of revenue will be our R&D expenses, what we are still committing to. That's because many of these expenses that you see, we have already been incurring them. We did a full phase II for two indications in the U.S. in the current spend. We have done trials on biosimilars, and we continue to add more biosimilars. I think we are looking at around an 8% average R&D spend to sales over the next three years. Okay, perfect. Lastly, on the CapEx side, what are the plans, or what are the new CapEx plans? We did, you know, fairly well in terms of diversification post Moraiya. We added SEZ and a couple of others. Do they require to expand or you are looking at new sites? What is the CapEx plan for the next two years? For the next two years, we have two areas that we are investing behind when it comes to CapEx. One is we are expanding our MR vaccine for WHO pre-qualification to supply to the WHO markets in 2023, 2024, which will be a very large volume opportunity. We are also potentially expanding for our quadrivalent flu vaccine. We are the only Indian company and one of the three or four in the world who has the quadrivalent flu vaccine, so we are looking to see the expansion there. We will be having a new SEZ, a new site for U.S. formulation, which we are benchmarking to have the current lowest benchmark cost that we are planning for across all our sites. That will definitely come up over the next two and a half years. Potentially, one more additionally, debottlenecking for our SEZ site. Those are the current plans on for the capital investments. Okay, perfect. Thank you and all the best. Thank you. Next question is from the line of Keshav Mishra, Retail Investor. Please go ahead. Yeah, thank you. Sir, my question is for the Desidustat. Now that we are getting ready for launch, if you can give a flavor of the market size we'll be competing in India. I don't have the exact market size, but we in terms of patient, we are almost targeting a 30% to 35% conversion of new patients and existing patients not on dialysis and dialysis. Which is a substantial conversion that we are building towards. We believe that this molecule has the potential to be a 200+ crore, 250+ crore franchise for the company over the next three years. It is a significantly large opportunity. Right. Sir, if such a similar molecule in U.S., I think, I mean, got some observations from FDA. Are we looking to kind of do some kind of partnership and launch in some years, maybe in U.S. market as well? I understand we have a partnership in China. Are we looking for a similar partnership there? On Desidustat, our current thinking is that we have seen China and India definitely are one of the two largest markets, so that's definitely one of the potentials and obviously which will include a lot of South Asian countries being covered. The second in the U.S., we are looking at one or two new indications for this molecule, for which are again unmet needs and also. As I said, our strategy has always been to look at rare and orphan diseases, where we can build something. That is something that is in current evaluation in U.S. in terms of clinical programs. We have already spoken about phase I for patients who are on chemotherapy and are anemic, and this drug is potentially a good effect there, and we have started a clinical trial on that in the U.S. There are gonna be. This is molecule something that we're evaluating for the U.S. More details whether we can see an active program in more than one indication also, I can only talk about it maybe in two quarters from now. Definitely we are looking at the developed markets also for Desidustat. Okay. Sir, one last question on Moraiya plant. I mean, now that we have physical inspection started, any timelines for reevaluation by the FDA for audit? Is there any plan for next? One point just to correct. Foreign inspections have not started. The FDA has communicated in there publicly that they have not starting foreign inspections until February eighth, and that's when they'll give the latest update. One is they have not started. If once they start, we believe that we could see an inspection happen for Moraiya and, you know, originally we were expecting a January, February, March inspection. We still believe it is possible to happen in February or March. But again, it's still a little too early to say, but we are prepared for it and we are awaiting, and FDA has acknowledged that they will plan for an audit once the opening happens. When that would happen is still unknown and we cannot predict that. Okay. Thank you, sir. That's it from my side. Thank you. Thank you. Next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead. Yes. One question, the gross margin this quarter, if I exclude the wellness contribution because wellness gross margins have been weak, but excluding Zydus Wellness, the gross margin seems to have declined 180 basis points quarter-on-quarter. Just trying to understand, is that weakness largely coming from any particular geographies or this was largely driven by raw material mix. What were the dominant factors? Because it's a very steep decline. Yes. I think Vishal can answer. My immediate answer would be it's because of U.S. It's largely because of U.S. business. That is because of mesalamine Lialda reduction. Some cost inflation, but largely because of U.S. business price erosion. Just trying to understand, our sales are flattish. Lialda is not that profitable for us anymore, right? It's not like we are earning margins equal to Asacol over there. It's a very steep decline. Almost 180 basis points on the total business. I'm One, two points I would like to correct before they add. One is Lialda is definitely not as profitable as Asacol, but definitely very profitable. I think while the second point of what you say is right, that it's not as profitable as Asacol, but it's still very profitable. That is when you see an impact on that is one of the impacts. Overall, there have been pricing challenges in the U.S. and commodity inflation that has happened. That's led to the gross margin fall. If I have missed anything, maybe Vishal or Nitin Parekh can add something. No, that's all. Okay. Second question is on the vaccine front. How are you thinking about the export market? If you want to export at a certain point of time, do you need an approval from WHO or do you need an approval from some central agency to export or you can whenever you feel that your capacity is now fully ramped up and the Government of India allows, I think there is no more control on export now. When can we see ZyCoV-D being starting to export out? Still there is control on export. You have to take permission from the government to export what quantities and how much and when. The second part is, for currently the scale that we produce at which we are hoping to achieve is one crore per month, over a period of next three, four months. I don't think that would be sufficient enough that we'll be able to export a lot. There will be enough sufficient only for India right now. Having said so, if we have the opportunity to export today, we have already a request from many countries, where they would not require a WHO prequalification and an Indian approval will be enough. We are obviously not gonna export till we complete our obligations in India and potentially the private market of India. Okay. Anubhav, just one point of clarification. Excluding Zydus Wellness, numbers on Q on Q basis, the reduction in gross margin is only 0.5%. Oh, no, sir. Excluding Nithin, I exclude the other operating income, so I was excluding other operating income and then talking about gross margin difference. Yeah. We do that. We have those data. We can furnish the data to you. It was 64.2% in September quarter, and now it is 63.7% in December quarter. It's 0.5% reduction after we exclude Zydus Wellness numbers. We also don't include other operating. Yes, I can. I'll get in touch. Somehow Q2 my sheet shows 65.5%. So I'll get in touch with you. Thank you. Okay. Thank you. Next question is from the line of Vishal Manchanda from Nirmal Bang. Please go ahead. Thanks for the opportunity. Could you share an update on biosimilar filings and approvals in emerging markets? On the biosimilar side, we are looking forward. As I said, we did get approvals in Russia for Peg-GCSF, and we have started supplies for that. Our critical big approval we are expecting very soon is in Latin America for at least one and maybe two molecules in this next three months. Once that happens, we can participate in large Latin American market, government or contracts as well as institutional contracts. That will be significant in terms of our expansion in the emerging markets. Besides that, we have a partnership in South Asia for one or two biosimilars of ours. We are also seeing that post-approval in one of the Latin America, Colombia will activate, and we can see approvals coming through in Colombia, which will again add to the business that we're trying to build for. Those are the immediate plans on the emerging markets front, where we can see at least four biosimilars coming for approval in different markets. In India, we are still on a good track record. We believe now that we are the largest company by revenue on biologics in India and specific to biosimilars. I think that traction will continue with more filings and more launches coming up. How many biosimilars do we have in India as of now? We have 12. 12. Do we have enough capacities to execute launches in emerging markets? Yes. Currently, for the next two years to maybe up to three, we have enough capacity. As we see scale-up happening, we may need to add more capacity in the next, you know, for FY 2025 and beyond. Okay. Can we see an acceleration in emerging market growth on approval of these biosimilars? Definitely. Our current business plan for export relies on some of these approvals which we have started to see. Once we have seen that, we can definitely see, you know, immediately starting, you know, from a very low base to starting a $30 million to $40 million revenue business. Okay. Just one final one on vaccine. Can you give some color on what it takes to get that WHO prequalification? From our perspective, I think the phase III trial, once it's reported and published, that's one part of the exercise which will be done, and we said we have published with a large number of patient population. The second is our new facility will need to go through some capacity and production and continuous production and show some history of number of batches made and all of that, both in drug substance and drug products. Once we are comfortable in doing so, then we will go ahead for WHO prequalification. The entire process can take two to three years. No. WHO, I mean, at least in the vaccine side, we believe it is possible to do it in six months. The phase III trials and batch The phase III trials are. They are completed. Are already done. Yeah. Cool. They have already been submitted for publication in Lancet. Okay. Thank you. That's all from my side. Thank you. Thank you. Next question is a follow-up from Dalmit Singh from Sunidhi Securities. Please go ahead. Thanks for the follow-up. Just on biosimilars, the 12 biosimilars we currently have in India. What would be the contribution of biosimilars in Indian business? Currently it's, I think annualized is about INR 600 crores, if I'm not wrong. Vishal? Annualized will be roughly, all put together will be about INR 350 crore to INR 400 crore. Sorry, it's INR 650 crore you say? Hello? Hello? It seems we lost the line for Dr. Sharvil Patel. I request you all to please stay connected while we reconnect. Sir, Nitin, would you like to take the question while we reconnect? Yeah. Am I audible now? Yeah, pretty good. Dr. Patel is now reconnected. Sir, you may proceed. Hello? Hello. Yeah. Hello. Can you see? I think I got disconnected. I assume you had asked for what is the revenue on biosimilars in India. It's about INR 600 crores right now, annualized. What would be the export revenue for of biosimilars? I don't have that, but it's not very substantial right now because we just started off in a few countries. I don't have it offhand with me, but it's not substantial. Okay. Secondly, on malarial products. We had our contract designation. What process remains to get it roll out, and when we can expect As I said, it's a very good opportunity. It's a single dose, so one pill. We have seen very good data currently in phase I. It will go through the phase II, phase III trial now. If we see equally good data in phase II, then this program will definitely move into the phase III and move forward. Because we believe this targets the resistant strains of malaria, falciparum and vivax and others, I think it will be a tremendously good opportunity. I think all we can say right now is it looks very promising. But as we get more clinical data completed, the trials will be very fast because they are only single-dose trials. Once we have that data, we can share more in terms of the progress of the molecule. Okay. Being an orphan drug, can we expect it getting, you know, the trials to be completed in next two years? Yes. I think it is an opportunity for a tropical disease voucher also in the U.S. We are evaluating all options. Okay, fine. Of that 505(b)(2) pipeline, we have some, you know, progress on the product. Testing 1986730334. Sorry. Yes. On the 505(b)(2) you were asking. Hello? Yeah. I see you lost the line for the participant, sir. We'll move on to our next question, which is from the line of Saion Mukherjee from Nomura. Please go ahead. Yeah. Thanks for taking my question. Sir, there's a few questions on this Saroglitazar. If you can just elaborate on what kind of traction you are seeing in India. I mean, I think you mentioned INR 250 crore or so as the kind of expectations you have. With now expanded indications, what kind of expectation you have on that product? Also, on the export market, any thoughts there? You're talking about Saroglitazar? Yeah. Yes. Yes, sir. Yeah. Let me give you an overall perspective on Saro. Saro, we have launched in India under two indications, one for dyslipidemia and one for NASH. The molecules are tracking very well right now, and as I said, the opportunity is very, very big. It's a new market where diagnostics and other things are important. We have started a very large venture on FibroScan usage across all centers to be able to diagnose this effectively. We believe that this will definitely be in the top five molecules of the organization, this and Desidustat. Both of these combined definitely have the potential to be upwards of INR 500 + 600 crores in revenue over the next three to four years. Significant opportunity is there. With respect to the developed markets, I think we are. From our current estimate, we believe for PBC we would file by calendar year 2024 and potentially see a launch in early 2025. That is what we are building towards. We are also interestingly working to make sure that our label claim is very good. Beyond the current label claims that are available or what people are looking at, which is obviously improvement in PBC parameters. We are also looking to see how do we improve for people who have gone through the organ transplant and see how it is affecting them, people who have been cirrhotic and how it is affecting them in subpopulations. If we see all of that data, and if we get that good quality data, this is potentially a treatment that could be best in class in PBC. That's what we are aiming for. As I said, the trials have started, which is an adaptive phase II(b)/III trial. On NASH, the trials have also started on phase II(b). Again, we will be looking at fibrosis score improvement, which is an important marker beyond just NASH score improvement. Those are the critical areas that are being looked at for Saro. Saro has also got an orphan designation in Europe also now. I think potentially we are building towards a launch for 2025 calendar year for Saro in U.S. in PBC and at 2027 end the launch for NASH potentially in the U.S. Sir, actually, I was also looking for other markets, other emerging markets. Any potential there you see for this molecule? There is a lot of potential, but I think we are gonna focus currently on U.S. Post that, Europe, and then we will look at other countries. Okay. Sir, this extra additional label that you'd mentioned about a better label on PBC, how much of an advantage it gives you over other drugs? I mean, in terms of timeline, I understand there are a couple of you know, drugs under development. How are you in terms of timeline? When do you expect you know, this particular molecule to come vis-a-vis the other competing ones? We believe currently there is no treatment. We believe we could potentially be, on a conservative side, the third to come to market, or potentially the second. Between the second and third, in the market for this indication. The indication and label is all. I mean, everything depends on that. If we see an enhanced label, you can almost double our estimate. From our best estimate, we can almost double our estimate. It's a question of the potential and opportunity size to get the differentiated label with a higher barrier to overcome if we are successful. If the potential is that it could become one of the key molecules to drive the PBC program. That's what it is. But until we have that data or can confirm that, it's still very early to say that. Okay. Sir, just on Desidustat spread on China, what is the timeline there? The trials have started in China, that's the good part. I think we believe that the trials can also be wrapped up in the next 15 months. Okay. An approval in next two years is possible, you think? Yes. Okay. Sir, final one question, just clarification. You mentioned about $30 million to $40 million biosimilar business. This is based on the, you know, approvals in Latin America and other markets that you will get. This you are expecting for next fiscal, or is it over a period of time you are indicating? To be on the safe side, we think this can be in FY 2024. FY 2024. Okay. Okay, sir. Thank you, sir. Thank you. Thank you. Next question is a follow-up from Tushar Manudhane from Motilal Oswal. Please go ahead. Thanks, opportunity again. Just one clarification on this Revlimid. When this tentative will be converted to final? Or what is the key milestone there? Yeah. We are expecting this launch in this calendar year. Exact date we cannot give, but it is, it'll come up very soon for launch. Basically there's nothing from the Cadila end pending to convert. No, it is not being held up for any other reason. It is just the delayed launch. Understood. Thanks. Thanks a lot, Tushar. Thank you. Thank you very much. Welcome. Next question is from the line of Kunal Dhamesha from Emkay Global. Please go ahead. Thank you for the opportunity. First one on the clarification, that you mentioned the growth for us for the next year could be less than 5%. Is it for the U.S. market or for overall revenue? For U.S. Okay. Sure. India and other, we are expecting a double-digit growth. Okay. That would be excluding the COVID-related product base or? No, including. Including the COVID. I mean, including the. Not including the vaccine, but including the other COVID. Okay. Sure. Secondly, we said that. Actually the growth would be more if we exclude COVID, because COVID had a higher base than this. Right. Right. We are not quantifying the COVID contributions in the first nine months in India this one, over. I think we almost. The COVID portfolio was definitely significant within the last calendar year. As I said, the best estimate we can definitely give you is that with COVID high base also for the coming financial year, we can see a strong double-digit growth. Sure. That's great. In the U.S. we are aspiring to achieve $1 billion top line by FY 2024 with some high-value launches. Can you name a few? One I would believe would be Revlimid. But apart from that, you know, if you can, you know, provide some color on what are the other high-value launches. We believe that in this year we would be able to overcome, I mean, clear the Moraiya site also. We have two high potential launches in the U.S. in the coming year. If both of those things all go well, we are talking about launching 40+ ANDAs in the coming year. We can definitely see that we can aim for crossing, I mean, achieving a $1 billion revenue milestone for the U.S. Exact product I can't give you for competitive reasons. Okay. Sure. Thank you. That's it from my side. Thank you. Next question is from the line of Sameer Baisiwale from Morgan Stanley. Please go ahead. Hi. Thanks for the follow-up. I know it's getting late. Products like Nilotinib. Just wanted to hear your thoughts, you know, and how should we think about it. It's a small product. I mean, are the rebates high in this? And how does the pricing, you know, go down? Just if you can share your thoughts on this one. It's an exclusive product, therefore I'm asking. Yeah. I think it's the good part is it's an exclusive product with very limited competition. You know, it's not a very large opportunity in terms of market size, but in terms of where we are, it's definitely a you know, double-digit $10+ million opportunity for us, which will continue till the exclusivity, and then obviously as competition comes, it will fall off. That's I would say to do with Nilotinib. Such products also will get competition beyond one AT you think or? Yeah, I mean, we are assuming, I mean, for us to assume would be right thing to do rather than assume there's no competition. I'm assuming that there is competition. Obviously, with small volumes, these products do fall off. Okay, that's fine. Sharvil, one more, you know, on Revlimid. Let me try. Yeah. You know, I mean, it's not disclosed, but what could be your volume share to begin with? Just general qualitatively, is it like low single, mid-single or high single digit? If you can just help, give any color would be very helpful. I think after launch I will give you all the what we can, but currently it is not possible to do. You know the competitive landscape and the. Also there are multiple factors related to it. I think after launch it'll become much more clearer. Okay. No, that's fine. Thank you so much. Yeah. Thank you. Next question is from Anup Sahu from ICICI Securities. Please go ahead. Hello. Yeah, hi. Thanks for the opportunity. I heard that on the biosimilar side, you mentioned that we have currently the revenue annualized size of around INR 600 crore for India. Two quarters back, I remember that it was around INR 350 crore. In that context, looks like we have scaled up really quickly. Wanted to know, understand from you, like, what is the revenue size you're looking in the biosimilar portfolio in the coming year or maybe coming two years, both for India and other geographies? This year has been very good. Majority of the products have done exceedingly well and gained number one rank. Launch of Ujvira has been also significant, almost crossing INR 50 crore mark in the first year, and still scaling up significantly. We are seeing here molecules which are becoming INR 80 crore to INR 100 crore very fast. That's the first part of it, and we continue to hold good strong market shares there. Our overall biosimilar general growth plans are on a CAGR basis we can still see a 40% to 50% growth continuing. More importantly, I think in 2022 we may not have big launches now because we already have a couple of programs in clinic. In 2023 again we would in 2024 we would see very big launches in the oncology space, which would significantly add to the revenue. That's the current plan. This definitely, this business will definitely scale up and be one of the large INR 1,000-plus crore businesses for us. Exactly when will happen, I think it's best would be that if you give us a three-year window, we would see this business doubling for sure. Okay. That's quite helpful. Secondly, you mentioned for U.S., milestone, you're looking at this $1 billion. That is for coming fiscal, right? Fiscal 2023? Yeah. FY 2024. FY 2024. Okay. Okay. Which are those two high potential launches? Sorry, I missed that part. Sorry? You mentioned two high potential launches. I missed that part. Which are those two? High potential molecules, but we can't name those molecules. Okay. Sorry. Yeah. We first not mentioned. Okay. I think if everything falls in order, we get through a good audit with Moraiya and clearance, we have our transdermal franchise launch. We have one critical launch. If everything goes well and we're able to do that, if everything works well, we are closer to that $1 billion and stretching for that. Okay. Okay. That's great. Lastly, I mean, if you can just mention if you can share some views on your biosimilar launch on this antibody drug conjugate called Trastuzumab. So? Trastuzumab Emtansine or Ujvira is our brand, has done extremely well in the first year of launch. By this quarter, January, February, March, we believe we would have crossed the number of patients. Majority of the number of patients who are diagnosed will be on treatment on Ujvira now. We have even crossed the brand in our view. This is potentially one of the very good launches where in the first year only we have crossed, in terms of market share, in terms of number of patients ahead of the brand. Currently this for India only, right? This is only for India right now. This program has also been nominated for global development, and we do believe that in the next three months we would have a face-to-face with the FDA. If we see a good clinical development pipeline plan and agreeable with the FDA and EMA, then this program will immediately move into clinics for the U.S. Okay. That, that's quite helpful. Thanks a lot. Thank you very much. As there are no further questions, I now hand the conference over to Mr. Ganesh Nayak for closing comments. Over to you, sir. Thank you very much, and I look forward to interacting with you again in the month of May for the last quarter and the annual results. Thank you very much. Good night, and have a nice weekend. Thank you very much, members of management. Ladies and gentlemen, on behalf of Cadila Healthcare Limited, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines.