India 12% growth includes tirzepatide Yurpeak, Pfizer brand distribution and one small acquisition — what is the underlying organic growth rate excluding these?
On India, if you see the IQVIA data, we were at 15.4% on the Rx part of it. And within that, as per IQVIA, approximately INR80 crores was from Yurpeak, right. So, the balance is — so, I think that's what approximately, 1.5% is attributable there. The rest is on account of the business, some of it was licensed products, but good, healthy growth rate on all the rest of the base portfolio as well that we've been now seeing for three quarters. So, there's a momentum that's building up in terms of steadily delivering double-digit growth.
South Africa — even accounting for the presentation change, in constant currency the private market plus tender seems to have declined year-on-year. What is happening there?
Tender business has indeed declined for us. So that is one of the impact that is there. And on the private market, there has been a growth. And there is, of course, currency impact as well, which we had hedged. So, I think it's a multitude of impact that is sitting out there in South Africa. But private market has grown faster than the market out there. As I had highlighted in the speech as well, that we achieved almost 6.5% growth in the market in the secondaries outpacing the market growth of 5.7%.
Can you quantify the inventory write-off impact on gross margins and the war-cost inflation impact?
If you could assume about 1% to 2% of revenue in that kind of a range for the overall cost impact due to war. In case of the other question that you had, the inventory charge, etc. So, we have that for various reasons, either it is close to expiry or if we have ordered, but the demand has not taken off, or if there is any quality issues, so then we charge off that inventory, which is very typical in pharma. So, there has been a little higher than a normalized that we budget for, and that is why I called it out that there is a one-time, kind of, an inventory charge that is there. I'm not quantifying this.
How should we look at gross margin trajectory in the coming quarters and what is the right FY27 gross margin number to work with?
This is not a significant impact as it's been seen. And I think the significant impact still remains as the product mix, okay. So, if the product mix remains same, then you can expect this margin to continue. We are anyways looking at always ways and needs to improve the margin. As we go towards quarter three, typical, our recipe mix will increase, and that will help us with the margin even getting better from here. And just to add to that, also what we mentioned was that these new products that you're talking about come with healthy margins, right. So ultimately, what we are making up for in corresponding period last year, they all had high margins. So, it will get substituted as the new pipeline kicks in with good healthy high margins.
The $1 billion target requires ~$400 million addition from four new launches. Is Advair still a $100 million plus opportunity?
No. I think that one has three or four competitors now. So, that won't be $100 million. But we have across this portfolio, and also Ventolin also will ramp up. So, we see this opportunity across these five products, right. So Ventolin, the three respi and the one peptide. We also have a bunch of other smaller launches, so they will also contribute in a small way.
Lanreotide — any further development to highlight: Pharmathene remediation progress or alternate site transfer status?
Yes. So, we are following a two-pronged approach as we speak. One is Pharmathene has worked on a lot of remediation at their end as required by the U.S. FDA. So going back to the FDA at some point and asking them to allow resumption of Lanreotide to the U.S. is one part. The other part is enabling another site through tech transfer, which is also happening as we speak, right? And we are choosing a site in the U.S. to reduce the number of variables. So, both are running in parallel. I think timing is a little bit fluid because both have dependence on the regulatory approvals. So, as we get more certainty on this, we will guide towards it. But at this point, we're not including that as part of our Q4 projections.
Retaining EBITDA guidance of 18.5%-20% — if the new launches are delayed, what is the EBITDA margin without Lanreotide and new launches?
Our effort for the year is to focus on new launches and with the approvals coming through based on that, we have budgeted our internal estimates this 18.5% to 20% is based on a plan. Of course, if there is a change in the plan due to any reason, then there can be risk to this margin guidance, including that of new launches, what you said.
Chronic portfolio now at 60% — what is the medium-term target, say 65% in 2-3 years?
Yes. So strategically, we are growing respiratory. That's obviously one third of our total business. So and that has chronicity within itself. And then we are focusing a lot on diabetes, cardiology, urology, dermatology. I think these are the segments that we're specifically focusing on to drive that chronic percentage. So, in each of these, you are seeing in the last quarter, a market-leading growth. And as we continue that trajectory, we are gaining ranks as well. So, it will increase as a percentage of our total business.
EBITDA margin at 16.7% is below pre-Revlimid levels even though India is 50% of the business — is the US business loss-making after Revlimid? Where is Cipla bleeding on margins?
I think the best way to look at it is — first of all, this is not a steady-state margin profile, right? So, we should not be comparing it as a steady margin. The reason why it is low is multiple things, which we've been talking about. One, a lot of the operating expenses to launch these new products have already been committed, right? So those are being incurred, whether it is manpower, facility, everything. And the products are just coming through. Secondly, as we had mentioned, temporarily, there is some impact of war as well, which is sitting in the numbers. Now it's hard to predict how long and — this thing, but maybe a 1% to 2% is what we are absorbing there at this point in time, right? So, I think with these kind of things, right, this is more a transit phase for Cipla. And our expectation is with the new products, with facilities getting utilized with eventually the war situation will go away, and we are also working on a lot of cost optimization and productivity initiatives at our end. We will see a gradual improvement in the margins in the coming quarters, right? So sequentially, that's what we will drive.
When can Cipla reach 22-23% EBITDA margin — is FY28 or FY29 the right time frame?
I think right now, we would refrain from providing a guidance for next year. But I think direction for us is we recognize that the current margin level is below our steady state. So, we will improve it. And we've already mentioned 18.5% to 20% as the guidance for this year. So, you can expect improvements in the coming quarters.
How has the accounting change impacted growth rates — specifically the adjusted growth for India (12% reported) and South Africa (minus 5% reported in rupee terms)?
If you go through the note, Saion, you'll find the numbers mentioned out there for the previous Y-o-Y quarter as well. So, you'll be able to calculate the growth and the growth would be somewhere around 4% if you just adjust for the previous year number as well. Without breaking it down into the markets, there are primarily two only. But largely, it's on account of adjustment in South Africa.
You mentioned three respiratory launches including Advair and one peptide for the remainder of FY27. Last call you mentioned four peptide products — has there been a change? And do you still maintain the $1 billion exit run rate for FY27 US?
We are seeing three respiratory launches, which are significant in addition to the Ventolin approval that we've got and one peptide, which is large, right. There are others, which we've already launched like Liraglutide, we launched both the variants. That's doing well for us. So, there are other peptides and other products, which are in the approval queue, but we've been highlighting the three respi and the one peptide, which are more significant of the backlog. So, yes, and that is the approval of these will give us a line of sight towards that $1 billion exit rate.
Starting from $162 million Q1 US sales, can enough new product launches deliver the $1 billion exit run rate — that guidance remains unchanged?
Yes. I think, the way to look at it is growth from new products, because the base is not large enough to provide that kind of delta. But the new products are pretty large. So, basis the successful approval and launch of these and the scale-up of Ventolin in the coming quarters, we will be able to get that visibility.
The InvaGen New York facility just got one Form 483 observation — will that delay any of the upcoming US launches?
Only the smaller ones. That unit does solid oral. So those are not the biggest launches, not part of the three respi that we spoke about. Those have already been inspected.
When does Ventolin expect a full ramp-up in the US?
Yes. So that work is ongoing. We started supplying at the current scale, but I think that will go towards the end of the financial year. It's a mix, because one would start manufacturing at higher scale, but then sell it when all the approvals are in place.
South Africa tender loss — is this the first quarter of impact and should we expect continuing revenue dip for the next three quarters until this annualizes?
See, on tender, how you have to see it is that when we look at tenders. So, it needs to be accretive to our margins, then accordingly, we bid for these tenders. So, unfortunately, last year, we lost a tender, which has a supply plan that is impacting this year. So, in the coming quarters also, there will be that continuation of that impact that will come through. So, Yes, you will see continuing impact of tender in South Africa. But private market like I said, including OTC, is growing faster than the market.
US exit target of $1 billion means ~$250 million per quarter, $90 million more — implying products worth $360 million annualized. Are you confident the pipeline named can deliver that?
Yes, these are all very sizable opportunities. So, I think that's how we are looking at the buildup. This assumes the competitive position that exists today. So, obviously, that is one assumption. From what we see today, we see large opportunity on this. And, yes, I think we don't expect that competitive position to change in the next nine months.
Consumer wellness India growth appears muted at ~INR480 crores vs INR470 crores last year — why?
The last quarter had a very good growth in the consumer business. So, I think the base itself was fairly strong. And that's why on a Y-o-Y basis, you'll see a growth, which is not as high as typically what you would see in CHL in consumer business. In South Africa, there is impact of the presentation change that I talked about earlier. But adjusting for that, South Africa had a normal good growth in OTC.
InvaGen Unit 1 was inspected in February with two observations linked to Advair — are there follow-up queries, and are you broadly at the finishing line for Advair approval?
So, it is on track. On that kind of inspection, ultimately, you will see the approval, right? So, interim, there is not much to read into it. So, we are expecting approval to come on that, which should happen any time.
Yurpeak delivered ~INR80 crores in Q1 — how are you looking at the overall anti-obesity market given confusing signals from semaglutide generics?
Our bet has been fairly clear. We wanted to work with innovator product, which has dual mode of action to receptors. So, we've invested behind tirzepatide. Our understanding is that this is a high involvement therapy. It's not just a straightforward sale. If prescriber need to have a lot of connect guidance and the condition needs to be managed properly for the right outcomes, right. So, we are following that, plus we're expanding the distribution reach, and there's a lot of work that is happening to get the right benefits for the patients, right, and that is helping us grow. So, we have reached number two in the whole category. So after Mounjaro, in IQVIA, Yurpeak is the second largest brand. Generic is a different piece, because generics — this is not only a price-driven market, right, ultimately, the — for that matter, for any therapy, the patient cares more about outcomes. So, there is crowding also in that market. There may have been other issues. But for us, we see these different segments coexist, and we see good opportunity for us to keep growing as more patients get into the fold.
Net cash pile at INR9,494 crores (~US$1 billion) — what are the capital allocation priorities?
From what we had mentioned earlier in the last quarter, it remains the same where we've increased our capex, which is going towards organic growth. We are focusing a lot on R&D, biosimilar on organic side. We are looking at some very differentiated portfolio either to acquire or to in-license as well. In-license also requires sometimes upfront to be paid. So, there is some capital allocation going towards that. We continue to look at M&A opportunities both for U.S. for certain differentiated products, but also Europe to develop some of this deep market.
Ventolin and the peptide opportunity — what competition do you see and what market share can you achieve once these products are mature?
On Ventolin, right now, we have the CGT. So, we have exclusivity for six months. We are not aware of competition at this point in time. So, yes, so we will capture all the generic share till the point that competition comes in. And after that also, we would not expect it to be highly crowded, because of the complexity of this development itself. And similar case for the peptide as well, we have a very good chance of being the first and potentially being the only one.
The potential peptide launch — is it contingent on litigation or patent expiry, or is it simply pending FDA approval?
Not really. This is a highly complex product. So, the launch is mostly a function of overcoming all that complexity, not the other variable adjuvant. We can launch as soon as we get approval.
How many MRs does Cipla have in India and what is the field force expansion plan for the next 1-2 years?
At this point, we have approximately 12,000 people in the field force. And for this year, particularly, we are not looking at any significant manpower additions, because we've added in the last two years. So, we're looking at more productivity initiatives and wherever required, we will reorganize to work within the same manpower strategy.