I appreciate you are not taking questions on what is speculative out there, but for many of us that are new to Sun Pharma, I was just hoping that you could walk us through your M&A strategy and what you are hoping to target or achieve with the strategy. Are you looking at tuck-ins, are you looking to add biosimilars, are you looking to expand your geographic presence, and how important is North America in the strategy?
So, I think almost for all of those issues, we have indicated responses to the analysts on this call in the past. I think US continues to be an important part of our focus, specifically for the innovative medicines... and not only US, but we have interest in selling innovative medicines globally. For emerging markets, we are looking at what you call tuck -ins or smaller acquisitions, which we can look at integrating with our existing business to get scale in the emerging markets. And we have also consistently indicated that we want to remain disciplined about acquisition. Our focus is on finding a way to grow our business organically at a rate so that we continue to be an attractive investment opportunity for the shareholders. We would look at acquisition only if we think that it can help us in terms of strengthening our long-term strategy capability.
And then can you also talk us through the size of the types of acquisitions you are looking at?
So, I think we have indicated in the past that we need to be confident that whatever acquisition we make, we should be able to manage effectively without our diluting focus on our own growth. At the same point of time, I think we have also indicated that for acquisition, if it is necessary, we are comfortable in raising debt.
Secondly, R&D spend on the innovative portfolio both as a percentage of total R&D as well as absolute amount has been reducing for the past two, three quarters. If you could also explain that?
I think it is all linked with commencing clinical trials as we are commencing new clinical trial including the one for GL34. We should increase in the R&D spend and next quarter we will guide R&D next year. That will be our expected R&D spend for next year.
My first question is on gross margins. I just want to understand it better. In your opening remarks you mentioned better mix led to such strong gro ss margins. So , if you could just explain what are the key drivers to sustain such high gro ss margins? As we understand now Revlimid benefit is over for you. So if some additional color to explain the very strong growth margin performance? You think this level of margins will sustain or how do you see margins trending ahead?
Thanks for your question , Damayanti. As you know , we do not specifically guide on product margins. Having said that better mix of products both in terms of the branded products and our innovative medicines has given an uptick compared to the gross margin in the previous year. As I was just mentioning, we normally do not guide on margins. Our endeavor is to see how we sustain and really perform to our potential.
My first question is on the India business. Given the strong performance that we have seen and the upcoming launch of SEMA that you indicated, should we expect this growth rate to improve further as we look through the next few quarters, particularly as we add SEMA? And just a related question on that, would we need to add any more sales force or any plans to expand the sales force in India generally for SEMA or otherwise given the strong growth that we have seen?
I think, Neha, you will appreciate that it is very difficult for us to predict what will be the future growth and how we will grow. So, we will not comment on that. Coming to your question on GLP-1, yes, we will add some few field force for the launch of the product. And that is like the way we do the business in India.
My second is on the R&D spend for generics. If I were to strip out the specialty number that you mentioned, that seemed to have increased quite a bit. So, if you could give us some color in terms of incrementally where are we looking at spends, and since historically we have kept biosimilars outside any plan, instead of looking at biosimilars again, given the change in regulation?
Sure. No, I think we are giving some split between the generic and the specialty. But beyond that, within generic, where we spend the money is not something that we give at a granular level. We also recognize that we are not only talking to investors, but we are also talking potentially to competitors. So generally, we avoid sharing commercially sensitive information on this call.
And on biosimilars, has your view there changed in terms of looking at that opportunity overall?
I think last time also I indicated . So, we are evaluating, re -looking at, because we look at comprehensively including setting up manufacturing , investment, overall cost of development and the time for the investment to produce any kind of meaningful return. So, we are evaluating everything to take a decision.
Second, on Semaglutide, are you also planning for launches in some other emerging markets around the time you will launch in India?
No, what I said about the launch in India only, other markets we are not guiding what is our launch plan.
And lastly, any thoughts on new indications that you are pursuing for LEQSELVI or UNLOXCYT right now or is it too early?
We are in active discussions about LCM for both the products.
A question on your pending ANDAs and NDAs. So, you have 116 AND As pending and about 14 NDAs pending approval. Would you be able to share how many of these are from sites that are impacted by OAI?
So, we do not specifically disclose which ANDAs are filed from which site.
And if you could share some nature of the NDA filings that are pending approval in the sense whether these are ready to use injectables or sprinkle powders that you have been kind of trying to build over time? So, would majority of these would be kind of ready to use injectables and dysphagia -related products?
No, we have not given details about our NDA filings in terms of the nature.
Do you expect to see further decline in US generic sales in Q4? And if you could just share between UNLOXCYT and LEQSELVI, which one would scale up faster over the next two years, any sense there?
I mean, it is included in our overall guidance. We typically do not provide product-specific guidance.
The first one is on the CMS's proposal on the most favored nation pricing, the two models that they have put out. Can you share some color , What is the internal assessment? I believe right now it is open for the commentary.
Sure. Happy to do so. I think, as you know, there are three models. There is a voluntary model that exists today, which is called the generous model, which is directly related to Medicaid within the US , and then the other two are proposed. So they are very much in the notice and comment phase. We expect that notice and comment phase to end within this next month. So, it is pretty speculative at this point to know, whether they will stay intact as they are or how they will change. As you would expect, we are working on all possible alternatives to mitigate any impact.
Can you share how we can make the broader aspect as to how we can mitigate , what are the strategies we can employ there?
I think these are commercially sensitive information. It is difficult for us to share this information on a public call. If you see, none of the pharma companies have given any details about any agreement that they have signed with the government excepting which products are covered. So, I think you need to understand that there are things that we can share, and there are things that we will not be able to share.
Second one on the Cosibelimab, we just suggested that we might be in active discussion for a new indication. So, would this indication be within the therapy areas that we are focusing or we are willing to go beyond our key therapy areas at this moment given the data especially on the immune-mediated adverse events is quite strong compared to the competitors?
So, I think once we decide, we will share both the information that we can share. As we have said, we are evaluating. So, while we evaluate, there are advantages of staying within the therapy area that we are present in. There are advantages of looking at the other areas that we are not present in. So , we have to do a commercial risk-benefit and time-to-market analysis.
I wanted to know regarding GLP-1, do you have a fill-and-finish capacity, and if it is our own capacity or through a partnerships capacity?
I think I talked about launch in India, but we will not comment specifically on capacity and whether it is in-house or it is outsourced from a third-party.
And you guys do not have any timelines or any intention outside India market, any emerging markets, or only India market will be added as of now?
As I said earlier, my comment was only on India market. Outside India market, we are not going to disclose what is our plan here.
Okay. Subsequently, is 25% expected to be a number to assume for the '27-28?
I think it would be sort of in the range we guess.
Just a second question is on India. So, do we also plan to launch Sema tablets post-March? Just wanted to check that.
No, right now, as I said earlier, we have approval for a Semaglutide injection. Yes. So, we would not be able to comment on the Semaglutide tablet at this moment.
On the Philogen drug Fibromun, can you guide if there is a possibility for the drug to get an accelerated approval? In the US. Soft tissue sarcoma.
So, my understanding is that they do not have a priority review classification. I can find out. If I respond, I will respond without having adequate information. So, maybe share the specific question with Abhishek and we will get back to you with specific information. Because this is a product that Philogen is responsible for development as well as for filing.
The question again is related to your M& A strategy. Just want to understand in case if you find a suitable M&A target, what kind of the debt you are comfortable with, so, are you able to leverage the balance sheet, let us say 3x of EBITDA?
No, I think I said that we are comfortable with raising debt. Now, it all depends on the targets, cash flow profile, our confidence that we can repay. Why we want to go into an area where we have no specific information, I have to really watch.
And just one more question on this globe model, Rick? Although you are not commenting on your strategy, but just if I look at the model itself, is there any possibility or how do you think about the possibility of this let us say, getting implemented, is it practical or can it get delayed or may not be implemented at all, how do you think about this?
I think that is pretty speculative. I think we need to wait until the notice and comment period is over and then react. Hard to tell at this stage.
Understood. And are you also working with any kind of deal with the Trump administration? Are you also working with any kind of deal with Trump administration, like some of the other big pharma companies have entered with?
We are regularly in the conversations with the US government on any number of topics.
Sure. And can you talk or give some direction on the pricing side, I mean, do we want to be very competitive or how are we going to be on the pricing side, any color there?
Sure. Pricing, we cannot comment. But I already told you like when the generic comes, it improves the access.
So first question is with generic Semaglutide. I believe we have filed the product in Canada through Taro. So just wanted to understand what is the status there? And have you heard anything back from the regulator for the filing?
No, I think I clarified this the second, third or fourth time is like right now in this call, we are discussing Semaglutide only for India.
Sir, on the innovative medicine s sales, ex of milestone payment, the growth has been a bit soft compared to the earlier quarters. If you could elaborate on that?
Yes, I will answer your question. As we have called out in our Q3 FY25, certain one-time sales to our partner and that has given Q3 FY25 high base and that is one reason for the growth looking lower in H1. However, specialty should continue to do well. It is difficult for us to comment quarter -to-quarter. My view is always you look at the business on annualized basis rather than looking at quarter-to-quarter basis.
And lastly, if I may, US sales ex of Revlimid has the portfolio growth or it has still been stable, if you could just throw some light on that? So, is this to do with price erosion or the lack of launches, if you could also explain that? So how do you see this improving going forward?
Ex-Lenalidomide, the generics business is slightly down in the US. It is really due to specific competition for certain products. I think overall for the US, we see the innovative medicines continuing to grow and the generic business will start to recover once we are in manufacturing compliance for a number of our sites in order to launch new products.
My second question is on spend on the new launches where you indicated incremental spend of 100 million or so. So, in terms of spend how much of that is already covered and how much is yet to come and where are the major spend happening?
I am happy to address that. So, the spend is really occurring on the LEQSELVI, UNLOXCYT launches, was fairly evenly split. We do see that spend is increasing now in the latter part of the fiscal year particularly as we have just launched UNLOXCYT. We do expect this to be kind of part of our core expenses though going forward.
UNLOXCYT is a very recent launch, but any color on how you are proceeding with your decision with the insurance partners, etc., and when you expect those deals to sign, like when you have the healthcare partners onboarded?
Sure. So, we are having active discussions with the physicians as you would expect given we are just a few weeks outside of launch. From a distribution perspective, the distribution network is in place. As I had shared, those agreements are in place , the product has been stocked as well as the agreements with the downstream customers. The other important discussions are with health systems. As this is an oncology product, a lot of the prescriptions will come from health systems. So , we have been in active discussions with health systems since before launch. We have been in touch with the top 50 cancer centers within the U.S., and all of those discussions have been progressing positively. So, for the first few weeks, very pleased with what we have seen so far. The message is resonating in terms of the balance that this product provides in terms of efficacy and safety. It is something that the clinicians have been looking for. And again, within the health systems, the discussions from a formulary perspective have been progressing positively.
And sorry, if I may squeeze one last question on UNLOXCYT. How are we thinking about positioning this product versus at the end, would it be the warehousing patients that we would look at first or the new patients that are coming?
I think the position of UNLOXCYT in the market is very clear and very crisp. What it really offers is balance between efficacy and tolerability. So UNLOXCYT works three ways. It restores adaptive immunity, which is by binding to the PD-L1. It engages the innate immune system based on its active FC domain that activates natural killer cells. And unlike the existing product, it preserves PD -L2 signaling. And the reason that is important is that is the pathway through which immune-mediated adverse events are typically anticipated. So that is really the positioning of UNLOXCYT in the marketplace. And as I said, that has been resonating with, with clinicians. We would mostly anticipate new patients.
The first question is sort of a follow -up from earlier questions. I just wanted to know if there is any Lenalidomide contribution at all in Q3 or was it completely over in Q2?
Quiet, quite small in Q3, but there was a negligible contribution.
And finally, a question on GL0034. I believe it is in Phase-II in diabetes. When can we expect some sort of data there?
We are publishing phase-2a data in the certain scientific conferences, both for diabetes as well as for NASH over the next few months. But the current phase-2b study which has started, that should possibly get over within maybe 12-to-18 months.
Just the questions on US again regarding the two products, first LEQSELVI. My understanding is the product requires a genetic testing before you put the patient on. Can you talk about that? Is not that a significant deterrent?
Yes. Well, first, I think it is important to point out for all the JAK inhibitors, there is a whole battery of testing that needs to take place. So that is similar across all the products. LEQSELVI is a bit unique in that we do have a specific testing for how the drug is metabolized. What is interesting about that is a lot of drugs are metabolized through that system. So , it is good for patients to understand that. So, there is some benefits of knowing that as part of the testing process. But you are correct. That is one of the steps associated with starting patients on LEQSELVI.
And can I ask, Richard, are there enough centers who are doing this testing? And if you can also throw who is covering the cost of the test -- is it the patient or is it the insurance company?
We are actually covering the cost of the test. So, we are working with the leading providers. There are several big providers of testing within the United States, and we are working with them to provide the test, and we do so free of charge to the patient.
And just while we are on this market, I mean, RINVOQ, of course, is being talked about as a new entrant potentially soon. I mean, I was looking at the data. Data of RI NVOQ is pretty solid. And its dosing is also better than LEQSELVI. So how do you see that competition coming in this market? And of course, there are a whole set of new drugs also probably being targeted in Alopecia.
I do not know if I would agree with the comment about the dosing being better. I think what I would say is, first of all, this remains a category where there is opportunity for more diagnosis. So the more products that are available is a good thing because it is getting patients choices and it is going to allow the market to continue to grow. Particularly , this severe market where it can be challenging for physicians to differentiate those patients. So having additional competition is a good thing , because it will help with that education. The other thing we know, and we are seeing with LEQSELVI as well is just because the patient tries one inhibitor, that does not mean they are not going to respond to others. In fact, that is exactly what we are hearing from clinicians. We are having patients that are starting LEQSELVI that have actually failed the two other approved JAK inhibitors and actually are now responding on LEQSELVI.
Understood. And second question was on UNLOXCYT. I heard your comment earlier that this primary market is basically new patients. So, I mean, you are not really targeting patients who have failed Keytruda or Libtayo, is that correct? But would not that market be smaller like given the advanced carcinoma patients would be difficult to find?
Well, there could be patients that are having trouble tolerating Keytruda and Liptayo that could move to UNLOXCYT. But in general, our assumption has been and our strategy has been more focused on new patients. Yes. I mean, it is smaller than the overall population, but there is a meaningful population of patients that start immunotherapy where they need to go on one of these therapies.
Just on continuing on innovative sales, so while you highlighted high base in the sa me quarter last year, is there any mix of milestone as well any certain sort of one -off which would sort of come from a higher base in this quarter as well?
No, there was no one-off in this quarter apart from milestone, Tushar.
Sure. And secondly, more on the overall performance of FY23 to '25, there has been almost 13% to 14% CAGR in EBITDA as well as earnings, even if I adjust for the milestones income. However, FY26, nine months has been sort of subdued. So, if you could just throw some light, while this nine months R&D spend also has been relatively lesser given the clinical programs at various stages, while not taking a numerical guidance from your side, but directionally if you could help us understand?
I think our margins during this year and quarter has also been good. Factoring in the two new launches and the related expenditure that we have guided on. So, I think on a normal ongoing basis, the margins are at comparable basis. Yes. So, that is at EBITDA level. PAT , we have indicated in the past as well. Our ETR has moved up from around 13% to 15% to currently about 25% and that is the reason why you would see that the PAT improvement may not be commensurate with the margin improvement.
My first one was on the launch of an auto -injector Ilum ya in Canada. So, I wanted to get your thoughts to possibly move beyond the usual physician -administer setting. So, do we also have plans to do this in the US? So, I just want to understand that. And just a related question, for Psoriatic Arthritis, is it reasonable to expect a launch towards the FY27?
So, we have launched a pen for Ilumya in Canada and as in other markets, the product is self-administered there. It is a different situation within the US. We are currently pleased with the HCA administration model and that is our current intention. As it relates to Psoriatic Arthritis, we would expect typical FDA review times because we did submit the application this past quarter.
Our emerging markets growth is quite buoyant in this quarter. So, I hear that it was led by both generics as well as innovative products. But can we elaborate more on this and give us some direction, like going forward how should we look at this region?
So, all our major geographies in emerging markets are doing well in local currency terms. And our constant currency growth for the emerging markets business is 13%. While there was a currency tailwind, both generics and innovative businesses have done well , and we do not guide on revenue growth for specific businesses.
My second question is a little open-ended and it is on the India business GLP opportunity. So, given that the market is going to be very crowded, so what are our thoughts, I mean, how excited are we to be in this competitive market?
We are very excited to launch the product on the patent expiry , yes. And I think when the generic product for SEMA is launched, it would also improve the access and the market will expand. Exactly in terms of number of patients or value, we cannot comment on it at this moment , but we are all very excited to launch Semaglutide equivalent generics in India on patent expiry.