Emcure Pharmaceuticals Limited (EMCURE) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the M.C.O. Pharmaceuticals Limited Q2 and FI27 earning conference call. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I invite the conference over to Mr. Saurabh Paliwal, Head of Investor Relations. Thank you and over to you.

Thank you, Dhanesh. Good afternoon, everyone. I welcome you to MPO's Q2F527 earnings conference call. Thank you for joining us today. Today on the call with me are Mr. Satish Mehta, our Chairman, Managing Director and CEO, Mr. Samit Mehta, full-time Director and Chief Operating Officer, Mr. Taj Hek, Chief Financial Officer, Mr. Vic Thapar, President, Corporate Development Strategy and Finance, and Mr. Piyush Nahar, Executive Vice President, Corporate Development Strategy. The quarterly financial results were published earlier today. They are available on the NAC and BAC and also on our website. We will begin today's call with brief opening remarks from management, followed by a Q&A special. I would like to remind everyone that the safe harbor provisions detailed in the results presentation and the press release released earlier today apply to this conference call. Please note that this call is being recorded and both the call audio and the transcript will be made available on our website in due course. With that, I will now hand the call over to Mr. Mehta to begin with his opening remarks.

Over to you, sir. Thank you, sir. Good afternoon to all of you and really appreciate and thank each and every one of you for joining us. We appreciate your continued interest and support. Before I start talking about our performance, I would like to wish each and every one of you a very happy and prosperous Diwali and New Year to you and all your dear and dear ones. Thank you once again. I am pleased to report another strong call for MQR with broader growth in revenue, profitability, and earnings. Our team's determination to rise to challenges underpins this performance. The resilience shown by each and every Empyrean, especially in the current geopolitical situation, is extremely praiseworthy and I very much appreciate the efforts of each and every team member of Empyre. We at Empyre remain focused on achieving our goals and delivering sustained progress for all of our stakeholders. Now let me focus on financial performance for the current quarter. Revenue grew by 24% year-on-year to INR 2820 crores, supported by growth across all geographies, and it has increased 9% sequentially. Profitability outburst revenue growth. EBITDA rose 31% to INR 575 crores. And the EBITDA margins expanded by about 100 basis points to 20.4%, 20.4%, 20.4% driven by productivity gains and operating leverage. Profit after tax increased 29% to INR 325 crores. With that, you know, let me turn. To our business performance, I would now first focus on the domestic market, that is India, which is very close to my heart as I have been telling in all the calls. In India, our business grew by 12% year on year to INR 1155 crores, 1155 crores in Q2. It was also second consecutive quarter of double digit growth with growth improving from 10% in Q1. Organic growth for the quarter was 10% versus 6% that we had seen in quarter 1. We expect to build upon this improvement in the second half of the current fiscal year. Women's Health, Cardiometabolic, and CNS portfolios were the primary growth drivers during the quarter. Zovendor's performance improved sequentially with key brands doing good traction. Beyond prescription medicines, our consumer health business is also gaining traction with brands such as Bitter Drops and Calac Building Scale. Over time, we see this becoming an additional growth engine. We remain focused on making our big brands bigger, improving our fuel force productivity, and building skill in chronic and specialty therapies. On 12 October, our board approved the amalgamation of Zoventus Healthcare and M-Cure Biopharmaceuticals, both only owned subsidiaries into M-Cure. This corporate action is part of our one M-Cure vision and continued efforts to simplify the group holding structure, Zoventus brand and teams. Remain an integral part of our India business. The scheme will allow for synergies in our back-end operations and corporate functions, and is subject to necessary approvals, including that of NCLT. After having spoken about our domestic business, now let me focus on our international business. Our international business delivered another strong quarter, complementing our performance in India. Revenue in the international market grew by 34.5% year-on-year to INR 1665 crore and accounted for 59% of our total revenue. Continued expansion of our base business and contribution from new launches obviously grew its performance. As far as Europe is concerned, Europe for us grew by 36% to INR 604 crores, 674 crores, supported by strong delivery across both UK and continental Europe. Growth was broad-based, led by our best portfolio, new launches, and continued scale-up of liposomal amphitorescent B. Business momentum is expected to continue in second half as well. As far as Canada is concerned, Canada grew by 24% to INR 431 crores, driven by continued growth in our base business, continued growth in our base business and recent launches. We expect further launches in the second half when we continue to build a very strong pipeline for Canadian market. After having spoken about Europe and Canada, let me now focus on rest of world, we call it as emerging markets. The rest of business grew by 41% to INR 630 crores. The ARV business continued with strong performance, while non-ARV growth accelerated by support of new launches and expansion of portfolio in key markets in Latin America. CIS, Asia, and Africa. We are very bullish about the emerging markets. We are dealing in a lot of countries as well as the continents that I mentioned. And we do expect our rest of world business to continue to grow over the year, to grow over the year. And that is going to be backed by science, technology, innovation, about which, you know, I have been speaking in all the investor calls. So we will be having a good pipeline as well as the Emerging markets are concerned. Having spoken about Europe, Canada, and the rest of the world, now let me focus on R&D and pipeline. R&D investments during the quarter where INR 111 crores are about 4% of revenue from operations. These investments will step up in the second half as per plan. During the quarter, during the quarter, we received over 20 product approvals, including liposomal amphotericin B in Brazil, Mexico, and Devasu Juma for wet AMD, wet age-related macular degeneration in India. We also received a positive recommendation from India's Subject Expert Committee for Langa Kapavir Injection for As part of bringing Lana Kapavir to patients in rest of the world markets, we filed our dossier with WHO and USFDA and look forward to progressing the reviews over the next few quarters. These approves our filings, strengthen our launch pipeline and also give us visibility, On sustained growth across markets. Now, let me focus on outlook as far as the balance part of the year is concerned. In summary, Q2 delivers strong broad-based growth and profitable growth. The strength and resilience of incurred business as I mentioned some time back are evident in our first half. F20, FY27 performance. The foundation gives us confidence that the momentum will continue in the second half of FY27 and to raise our full year FY27 revenue growth outlook. We now expect revenue growth to exceed 20% compared to mid-teens. I repeat, we now expect revenue growth to exceed 20% compared with mid-teens that we indicated earlier. EBITDA margin improvement for the year is now expected to be upper end of our guidance range of 75 to 100 basis points. Let me repeat, EBITDA margin improvement for the full year is now expected to be near the upper end of our guidance range of 75 to 100 basis points. Our first half, twenty-seven performance, also reinforces our confidence in our achieving five-year goals that we have defined for ourselves and creating long-term value, and creating long-term value. Before I close, I would like to thank all our employees, partners, and shareholders for their continued unstinted support to all of us. With that, I will now request Taj, our CFO, to review the financials before we open the floor to questions. Thank you very much once again. Over to you, Taj.

Thank you, Satish Bhai. Good afternoon, everyone. I will take you through our financial performance for the second quarter and first half of FY27. All comparisons are year-on-year unless stated otherwise. All the numbers are in INR. Revenue from operations for Q2 was 2,820 crores, up 24.3% year-on-year and 9.3% sequentially. India grew 12% to 1,155 crores. And our international business grew 34.5% to 1,665 crores, accounting for 59% of our consolidated revenues. Europe and UK grew 36% to 604 crores. Canada grew 24% to 431 crores. Rest of the world grew 41% to 630 crores. On the profitability, gross margins for the quarter was 59.5%. Our QoQ gross margin improved by about 110 basis points, driven by business and product mix. Employee costs were 435 crores, up 13%. Other expenses were 669 crores, up 20%, timely on account of higher sales and higher R&D expenditure. R&D spend was 4% of revenue. As a result, EBITDA excluding other income was 575 crores, up 31%. EBITDA margins expanded by about 100 basis points by Y and about 70 basis points sequentially to 20.4%. Other income was 16 crores compared to 39 crores last year primarily on account of lower foreign exchange gains. Depreciation and amortization was 110 crores in line with Q1. Finance cost was 36 crores, reflecting the increase in borrowings. The increased borrowings were to fund acquisition-related payouts. Profit before tax was 446 crores, up 31%. The effective tax rate was 27%. Profit after tax was 325 crores, up 29%, with a pat margin of 11.5% and improvement of 45 basis points. For the first half of FMI-27... Revenue was 5401 crores, up 23.6%. Rebidda was 1083 crores, up 28.6%, with a margin of 20%, and expansion of about 80 basis points. Profit after tax was 618 crores, up 33%, with a pat margin of 11.4%, and expansion of 75 basis points. Coming to the net debt, net debt as of September stood at 1,317 crores, an increase of 263 crores over March 26th. During the first half, we also made acquisition-related payouts of 551 crores. These primarily include the final payout for Canada acquisition, the acquisition of minority stake in Genova, and payments worth the UK product portfolio. We remain committed to our objective of becoming net cash by the end of FY28. With that, I request the moderator to open the line for questions.

Thank you so much, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please use the raise hand feature available on the dashboard. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A first question comes from the line of Tushar Manudhani. Please go ahead.

Thanks for the opportunity and congratulations on the good set of members. Sir, just on empathy, how much would that be now contributing in the Europe segment as well?

So, thanks, Sushar. So, we don't break out by product, but as I think Saripha had mentioned in his readout, Ampo is one of the growth drivers. It's a key growth driver for Europe growth, but it's not the only one. So, we are seeing growth even in our base portfolio out there.

Okay. Any other product which would be, which is worth calling out, if not in the base business, but maybe over next 12 months, which would also contribute like Ampotation? For Europe and for the other geographies.

Thank you, sir. This is Tamit. The other product that we think will contribute significantly in Europe is Triprostilin.

Okay. Could you elaborate on market size, competitive factors?

I think there's limited competition. I won't have the exact number of players there, but we see this as an attractive market. Probably not a very large volume product, but in terms of value as well as margin, it's a very strong product for us.

And lastly, with respect to the increased guidance of 20%, if you could give little further details in terms of which geography, you know, the growth prospects is got further better compared to earlier guidance.

So, I think if you look at it, there's two factors, right? One, domestic, we have seen good traction out. I think it's going in line with what we have been talking about, and we see further acceleration in 2x versus the numbers we have. I think a big part is also the international, especially the ROW and Europe, which are scaling up much better. So, I think some of the product approvals that you were expecting have come through, they are ramping up. So, that gives us good confidence.

And I think even on the ARV side of the rest of world business, we've seen a strong order book, so we're confident of obviously some of the revenue recognition related to that in the second half of the year continuing as well.

Got it. That's it, Thomas.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Reminder to all the participants, if you wish to ask a question, you may please use the feature of Ray's hand. Thank you. Our next question comes from the line of Alankar Garude. Please go ahead.

Hi, thank you for the opportunity and congrats to the team on pretty good performance as well as the increase in the guidance. So first question on domestic growth, you have spoken about Juventus performance improving sequentially. There's also been an increase in the YOY organic growth if you compare it with the first. How long do you think will it take for Zuventa's growth and our overall organic domestic growth to be, say, at par with the market growth? Will it take one quarters, two quarters, more than that? Any color on that would be helpful.

I think, hi, this is Vic here. So what we've been seeing, even with Zventis, is obviously for the last couple of quarters, we've seen, you know, a robust growth and stabilization within the team and the operation. If you look at some of the exits and some of the attrition that happened in Zeventus, that was predominantly in the second half of last year. So vis-a-vis that, I think given where we stand, we expect half two of this year to obviously be strong relative to the prior year. So we think that that growth and acceleration for Zeventus certainly will continue half two of this year versus half two of the prior year.

And broadly, by the end of this year, can we expect the growth to be more or less in line with the IPM growth?

Yes.

Okay, perfect. The second question is, can you talk a bit about Povistra? How is the traction there? Is the market shaping up more or less in line with your expectations in terms of your strategies and even the innovator? I mean, is there any change in the approach? Do you feel that is required to drive growth further? Any color there would be helpful.

Malankar is Satish Mehta. So, Povistra is getting traction month after month. And as well as EPI is concerned, in the last month, you know, we were the number four brand, I believe. As well as we are concerned, based on the numbers that we had for the month of October, we should probably improve our rank at least by one. The other thing that is happening, you know, that the story of our DNA and this being a biologic that seems to be resonating with the medical profession. And as far as this obesity market is concerned, we are shaping that market along with Novo Nordisk Grow and we are also fortunate to get a lot of data, you know, from Novo Nordisk. So to that extent, it's a great investment, you know, which MQR has made because this market is only going to grow, but at the same time, it requires, you know, patience and understanding of the market. It's not really going to happen in a day, but we obviously see ourselves as a long-term player in this particular market and things are happening in the right direction. It's not in our earth shattering the way it was felt some time back, but we are right there, we are doing a great job, and we are getting traction day after day.

Understood. The second set of questions is on the international business. Now, international, for example, in this quarter is almost 59% of sales. Now, given that you don't have a U.S. business per se, a B2C business, I mean, just to help understand and get some color on the international business, broadly, what would be the contribution of, say, the top? Three or top five molecules to overall sales within international.

Actually, quite well spread out, because of the international markets, you know, when you look at individual segments like Europe, Canada, or ROW, they're all contributing mid-teens plus. And then within each of those markets, there's hardly any product concentration. In fact, you know, Canada and the rest of the world are quite broadly spread out, and Europe is also, despite having lipoample in there, is a fairly well-spread portfolio as well. So we really don't have a large product concentration in that context of that 59% of the business. But in terms of the kind of products, obviously, as we've been highlighting, it's really led by a number of complex injectables that are, you know, having good traction across markets.

Understood. So would it be fair, Vik, to say that even something like an Amphotericin B would be less than, say, 10% of our international sales?

For sure, and in fact, as we've been highlighting and we continue to get approvals in some of the key ROW markets, and we've yet to even commercialize the product in a number of those markets. So I think to that extent, the contribution from the ROW markets may go up over time. In Europe, we anticipate at some point, obviously, we will face some competition. So we're fairly well-placed in terms of our in-house capacities, being able to cater to what we think is going to be the overall demand between Europe, Canada, and the emerging markets for that product. But even despite that, I think there won't be over-dependence per se on that product.

As I am as Vic, I completely echo what you are saying. As of now, you know, Alankar, we are not saying anything in the Canadian market. And as far as the emerging markets are considered, we have just started getting approvals. As I mentioned in my address, we just got approval in Brazil and Colombia and maybe, you know, Mexico is around the corner. So, it is just Europe, you know, which is contributing. So, to that extent, whatever performance rule that we have had in the second quarter, yes, I put in the scenario, but at the same time, I mean, one thing I would like to make it very broad-based.

And that's very helpful. And final question before I come back into the queue, what would be the constant currency growth in this quarter?

I think on the international business, about 10% has been the currency impact to the top line. So constant currency, I think, was 18.

Yes, so 10% on the international. So constant currency growth international is about 24%. Overall, it's 18.5.

Understood. That's it from my side. Thank you and all the best. Thank you.

Ladies and gentlemen, anyone who wishes to ask a question can use these hand feature on the dashboard. Thank you.

Request the participants to please use the Zoom audio to ask the question. We will not be taking questions over chat.

Thank you. Request all the participants, please use the raise hand feature available on your dashboard. Thank you. Our next question comes from the line of Nithin Chen. Please go ahead. Nitin Jan, please introduce yourself, your company name, and proceed with the question. Mr. Nikin Chen, please go ahead and introduce yourself. Yes, Mr. Jain, we can hear you now. Please introduce yourself and proceed ahead with the question.

Yeah, good afternoon. This is Nitin Jain from Fair Value Equity Advisory. Congratulations to the management on a great set and the guidance raise. Not really looking for an exact number, but will the management be able to guide on how they see FY28 shaping up? Do you think you will be able to replicate this year's numbers next year too? Thank you. That's all from me.

Yeah, so this is Vic. I'll take a stab. So while we're not putting out any specific guidance for 28 just yet, at the same time, obviously, management feels very good about the business and bullish heading into half two. And so we certainly hope that some of the momentum that's carrying over into half two will continue to build on for FY28. I think previously we've sort of guided what we think each of the different verticals are capable of growing at, you know, on a midterm basis, and I think management continues to stay confident in that sort of assumption.

Right, and do you think this will be driven more by international or will domestic also rebound?

So I think on domestic, what we've highlighted is if you see our last couple of quarters, the growth, including the organic growth specifically, has been accelerating. And I think on the Zventus piece, I already talked about half two being, you know, strong relative to where we were in half two of last year. So we definitely see ourselves growing in line or slightly above industry on an organic basis. And then, of course, we continue to look for, you know, in licensing opportunities as well. So overall, we feel good about the domestic business.

That's all for me. Thank you. And congratulations once again.

Thank you so much. Our next question comes from the line of Bansi Desai. Please introduce yourself and proceed with the question.

Yeah, hi, this is Bansi from JP Morgan. So, my first question is on the domestic growth. So, you alluded, you know, we should come back to industry growth, you know, shortly. So, question is, what is going to drive that and in what timeframe should we expect MQR to beat the industry growth?

So, thanks. I think, Bansi, what we are seeing is, as we have mentioned, right, the base business ex-Zuventus continues to do very well. So, we are seeing quarter-on-quarter improvement. So, as we head into 2x, we think we will be more in line with the industry. For the full year, I think we should probably end up closer to low-teens growth overall. So, I think the exit of FY27, we should be at or above industry growth.

And Juventus would be what in terms of number, first half?

Juventus is roughly about 25% of our revenues overall.

No, in terms of growth.

We don't break it out by Juventus, you know, by existing, but I think what we're talking about, sequentially from 4Q, we have seen a significant improvement in Juventus.

Okay, but then it means that it remains substantially below the acute category or IPM category, because I'm assuming that chronic, you know, continues to do well for us.

Yeah, that will be a fair reflection, but we're not thinking about exact numbers, but I said, our ex-juvantages is growing faster than industry.

Okay, and what will bridge that? Is it volume growth in Zoventus, you know, that will help us get there? Or is it going to be combination of new launches, volume growth in your view?

This is Satish Vata. I mean, basically, as I mentioned some time back, you know, that as well as Zoventus is concerned, we had massive exodus last year. So, basically, there are three things that I keep on saying. Stability, consolidation, and acceleration. So as well as Juventus is concerned, it took us some time, you know, to get back the stability and new faces. So consolidation was very important. I believe these two things are behind us. And now, you know, we are in the process of accelerating the business. So I will essentially stick to what P.U. Shalvik mentioned. I think it has taken time. It's not easy as the pharma industry brand building. But at the same time, every reason to believe, you know, that the worst is behind us and we are on the right track.

Understood, sir. And just secondly, you know, the question is around profitability across our businesses. So without quantifying, if you could help us understand the hierarchy of profitability, where does India sit in the overall mix? From our past conversation, I do recall that, you know, businesses like Canada, etc. are extremely profitable for us. And now we also have complex launches in, you know, markets like Europe as well. So, if you have to, you know, just provide us a hierarchy, it would be helpful.

Yeah, so I'll take a step of that. I think India continues to be, obviously, our number one vertical in terms of profitability. Having said that, we've always highlighted that a component of the India business also includes the in-licensing relationships we have with some of our multinational partners. That piece of the business, obviously, is at a lower standalone margin profile. So on a blended basis, then, obviously, you have to look at India in that context. On the international side, I think Europe and Canada continue to be very strong, profitable business, as is the ROW, non-ARB component. On the ARB side, obviously, the margin profile is, I would say, lower than the overall corporate margins. Having said that, on the R&D front, we've always been guiding to 4% or 5% overall spend on revenues. That is probably tilted more towards a bigger component of R&D spend being on the international pieces of the business. So post-R&D, obviously, that also plays into the overall profitability of those businesses, especially as we continue to invest on a number of these more complex opportunities for those markets.

That's helpful, Vik. And also, even from an ROW standpoint, while ARV margins probably would be lower, as you highlighted, but growth has been pretty solid this year. So, given these are tender businesses, what kind of visibility do we have if we have to think slightly medium term for tender business, particularly in ROW?

Yeah. So I think, at least from what we've been seeing, the traction continues to be strong. Also, as you know, we're one of the few players that have the opportunity on Lenacapavir, where we've also filed our product. And so I think in the medium term, Lenacapavir will be an important part of the ARV portfolio. And we believe that that will come and be margin accretive to where we stand on the portfolio today. So overall, we feel good about the ARV segment continuing to show strength over the next short to medium term.

Alright, that's helpful.

Thank you so much. Our next question comes from the line of Forum, Parekh. Please introduce yourself and proceed ahead with the question.

Yeah, thank you for the opportunity. My first question is on the Europe market. So, on the amphotericin B, if you can just give us some color, have we penetrated in all the geographies, or are there any incremental geographies to be penetrated?

Yeah, there are a few geographies, we've just got approval, so we have just penetrated 50% of the market, and the few geographies are still pending.

Give us some count of this 50%, you know, of the penetration, like how many geographies and what's the count?

About 20 countries probably where we are still to get into.

Sure. And my second question is on the ROW side. So, if you can give us the breakup between ARV and non-ARV, as last quarter, the ARV pi was around 67%. So, are we still in the same trajectory now?

So, you share. So, this quarter will be roughly about 50%, half-ass.

Okay, and may I ask, we have got approval for amphitheaterism B in the non-ARB side, so in a couple of markets. So, by when can we launch in those markets?

I think for a lot of the markets, the batches are already under production, especially the ones which we've got approval recently. So, across the next half, at least a couple of markets we should be launching in market.

Okay, and my third question is on the R&D side. In our opening remarks, we mentioned that the R&D cost will go up in the second half, while I also hear that, you know, R&D contribution would be around 4% to 5%. So, the increased R&D would be in the same bandwidth, or how should we look at it?

Yes, I think, you know, the first half, R&D was at 4%, and we've guided for a total year of anywhere between 4% to 5%, so it will continue to remain within that bracket itself.

Sure. Those were my questions. Thank you.

Thank you. Our next question comes from the line of Dr. Karthik Bani. Please introduce yourself and proceed ahead with the question. Dr. Karthik Bani, please unmute yourself and speak. Thank you.

Can you hear me?

Yes, we can hear you.

Yeah, thank you for the opportunity and congratulations on a good set of numbers. This is Dr. Karthik Bani from Bajaj Life. I missed the name of the molecule, the second molecule that you mentioned apart from the liposomal amfotericin B. If you can spell it out.

You're talking about the Europe opportunity. Separatinil.

Sorry, come again.

Teprostenil, T-R-E-P, R-O-S, T-N-I-L.

Okay, thank you. And second question is on the amphotericin manufacturing sites. How many sites do we have at this point in time? When was the last inspection? When is the next inspection planned? And do we have any diversification of the manufacturing of that?

So, very good question. So, we've already diversified. We have two different manufacturing sites, and each one is broken out by the market it caters to. And depending on the market, most of the regulatory agency audits are very recent, and they have all been closed as well. So, we expect that at least in the next 18 to 24 months, we should have, you know, the facilities being able to cater without any restriction.

One more thing I would like to add, important country like UK, it has approval in both the sides. And we are also, Europe, which is another important market for us, so it will also have approval in due course of time on both the sides. So to that extent, we are, in terms of risk management phase, we will cover.

Okay, thank you very much. That's it from my side.

Thank you. Our next question comes from the line of Alankar Karude. Please proceed with the question.

Yeah, thank you for the opportunity again. Satish Bhai, we have seen IPM growth picking up quite well over the last three, four quarters. What factors do you think are contributing to this increase? Have you seen any changes in the end market and do you think that this is sustainable?

Yeah, I think I'll let others also chime in. You're absolutely right. We've obviously seen a very robust growth for the entire industry with a number of peers also putting up good numbers. You know, my own take on this is it's a couple of two, three key factors that are contributing to it. One is obviously overall access to healthcare and also the awareness that is causing this sort of site uptick in volumes. Secondly, all said and done, you know, there was this sort of push of generic-generic, but I believe that we're seeing that, you know, the demand for quality branded generics, you know, continues to be strong. And finally, to some extent, possibly because of the whole GLP-1 category and a lot of noise around that, there's also possibly additional diagnostics that are happening that are possibly feeding into that as well. So overall, I think there's a number of contributing factors where perhaps a year ago, the volume seemed a little bit more unique in terms of the growth for the industry, seemed to be much more robust this time.

I'll give you some colour, you've made a very interesting point, because what really happens, and as far as your... Obesity market is concerned. The Monjiro is a brand of almost 13-14 minute crores. So they do more than 110 crores per month. And I think, you know, if you put all the brands, you know, all semaglutin together, they should be contributing around 50-60 crores. So if you add this 150 crores, you know, to a market of, say, 25,000 crores, you know, which is the current size of the market, I mean, at least 4 or 5 percent for sure is being contributed by? So that's also one of the reasons why we are seeing an uptake. I mean, one has to study, but just trying to tell you what's going on. And the other thing that I have seen, Alankar, in my 30 years of association with the domestic market, you know, once the economic growth picks up, you know, normally, I have seen the growth of the pharma industry is one and a half times, you know, that of the economic growth, you know, that we have. So, if you are growing at 8%, 12% is granted. It is going to happen, 11%, 12%. And add to that, you know, the new product launches and the new concept, you know, obesity, which has come. That's how, you know, you are showing by-and-large, you know, industry showing 14-15% by the way of growth. And it's a very, what I would say, qualitative assessment. One has to do a little deep dive and go into the numbers and see how sustainable it is.

Understood. No, very interesting points. I think most of the reasons that you outlined seem to suggest that this could possibly continue, maybe not to the same extent. If you look at FI 28 as well, would that be a fair assessment?

I don't know. I mean, it's very difficult to say because the other thing that happens, you know, how the geopolitical situation plays out, you wouldn't know. Suppose tomorrow, you know, the Iran war, the oil prices hit, you know, $120, $130 per barrel, the situation will turn. I mean, much less growth. So it is very, very difficult to say in which direction it will go. As of today, it looks good, but at the same time, one wouldn't like to hazard a guess about future. One has to, I mean, I'm always inclined to look quarter by quarter. And let's move on and then we'll see what happens.

Understood. That actually brings me to the second question. We have not really seen any impact of higher raw material cost as far as this quarter is concerned. Of course, there are other factors which are driving the gross margins as well. But would you like to highlight where are you in terms of any raw material impact? I mean, if you can talk about the second quarter and also if you can highlight about the second half, is the situation relatively comfortable?

I think, I mean, for us, definitely there has been some amount of impact on account of the input or raw material costs. I also think that, you know, freight costs and insurance costs, as well as the transit times have increased across the board, right? So I think on the one hand, we've benefited from some favorable currency impact. On the other side, I think some of these costs are wiping out a big chunk, if not most of those gains. So that's why I think overall our gross margin impact has been relatively muted, but certainly we have been seeing in many cases some rising input costs.

Got it. Another question, what was the share of ARV in this quarter compared to 65% in the first quarter?

Roughly half of the ROW sales was ARV.

Got it. So, broadly, Piyush, would you like to maintain earlier number of 50-55% ARV contribution in FI27?

Yeah, we'll end up there.

Okay, fair enough. And final question, when do you expect to start supplies of semaglutide in Quebec for your partner, Dr. Reddy's?

I think we are waiting for the supplies. So, depending on when we get the supplies, we'll be ready to launch. I think Reddy's has talked about sometime in November, but we'll direct to do that.

Understood. All right, that's it from my side. Thank you. Thank you so much.

Ladies and gentlemen, anyone who wish to ask a question? You can use the feature of raise hand in your dashboard. Thank you. A reminder to all the participants, if you wish to ask a question, you may please use the ease-hand option on your dashboard. Thank you. Next question comes from the line of... Dushar Manudhani, please introduce yourselves and you can proceed with the question.

Thanks for the opportunity. Again, this is Sharman. So, just from the OPEC side, if you could share anything meaningful that would come up, either in terms of capacity or in terms of marketing side, which will lead to higher other expenses compared to revenue growth?

No, nothing on that side, right?

So, Prashant, I think what we have always talked about is a lot of the margin improvement that you will see is going to come from operating leverage. So, you will see our SG&A growth be slower than the revenue growth.

Got it. And with the significant improvement in the domestic formulation growth, we just need to refresh in terms of the number of MRs and the MR count which you intend to take for your next project.

So I think the MR count remains similar about 4100 or 4100 to 4200. We are not looking to add right now any new MRs in the near term.

And this concept, strategically, has there been any change on the, what do I say, incentive scheme, which is sort of, with the same MR team, we are able to sort of improve the growth reasonably well, in line with industry, and we need that we can grow better than the industry, if you can throw some light on that aspect.

There's been no change on the incentives that we have made, right? I think what we have all been talking about for the last two, three quarters, right, the focus is a lot more on execution in terms of are we reaching out to the right doctors, how are we engaging with the doctors, a lot of scientific promotion, and that is what is driving us. So, if you look at even some of our top brands, I think for us, the differentiators, a lot of our top brands are where you have something different, innovative talk about. So, if you take a Oroporex T, where the whole anemia franchise, or even a chiral molecules like Asomax and Metpure and all, those are seeing good growth out there for us.

Yeah, and I think, you know, what I would just say is, you know, from time to time, we keep tweaking the incentive cream marginally to try and see that a greater percent or… Overall population of the MRs are qualifying. So I think with the right incentive structure and, you know, focus that you talked about, we feel confident that without significantly increasing our MR headcount, we can indeed continue to grow. In fact, we've seen, even in the current quarter, an uptick in the productivity per rep compared to the prior quarter.

And lastly, the brand specific. We do get to understand from certain data, like IQ, but if you could throw some more color on the hospital side within domestic formulation, how much does that contribute and what has been the growth in that particular situation.

I won't have the offhand numbers, offhand on hospital side, but it's going to be in single digits somewhere. It's not going to be very large.

I mean, just to chime in, as far as we are concerned, our focus is more on generating prescriptions in the trade, you know, meeting the doctors. And as far as hospitals are concerned, typically, you know, most of the products are injectables. And to that extent, you know, we are very well placed because our all solid dosage formulations are doing exceedingly well. Like Oro, Forex, PAUSE, Midpure that you just mentioned.

Got it. That's it. That's it from us. Thank you.

Thank you. Our next question comes from the line of Alok Dalal. Please introduce yourself and you can proceed ahead with the question.

Yes, good afternoon. Thank you for taking my questions. A few quick ones. Any update on your filing for semaglutide in Canada?

I mean, they are just fiscal, so probably in the next few months.

Next few months, okay. And Piyush, what is the contribution of in-licensed products to India sales today?

It's about your high T somewhere.

Hi, TeamSage. Okay, and similar number, if you can give for biosimilars for India and overseas?

Biosimilars? 10%. India, I think overall India will be about 10% or. And internet will be lower than that. Because internet will be only selling in the emerging markets.

Okay, okay, that's it for my time. Thank you.

Thank you. Next question comes from the line of Forum Parikh. Please go ahead.

Hi, thank you for the opportunity again. My question is on the domestic side. If you can help us give the OTC contribution to the domestic sales?

It's still scaling up, so we won't want to break it out right now. I think once it reaches a meaningful time, that's when we'll probably talk about it separately.

We are obviously seeing green shoots, and the response is very good, but early days.

Yeah, but would it be fair to assume that it would be in a mid-single digit, or would it be lower than that?

I don't think we want to break that out right now.

Sure, no problem. And my second question is on the international front. So, for both Europe and Canada, if you can help us give the split between organic and inorganic sales.

Europe and Canada both are organic. There is nothing inorganic right now.

Okay, so the base portfolio would be contributing how much percentage?

The whole right, so the growth is largely driven by base plus new launches. Because we haven't had any acquisitions out there in Europe and Canada, so there is one small cutiement but that's a quite small scale. There's been nothing in the last 12 months.

I mean, Europe, yeah. The bank's acquisition happened longer than a year and a half ago, and a very tiny acquisition of Q2Med in Canada. But by and large, it's the base business that's growing.

Sure. And if you would help us, give us, you know, the contribution from new product launches, would it be fair to assume around 10% for both the geographies?

We haven't broken that out, but yeah, a big part of the growth is going to come from new launches.

Sure, that's helpful. Thank you.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, please use this hand feature on your dashboard. Thank you. Ladies and gentlemen, as there are no questions from the participant, I would now like to hand the conference over to Mr. Saur of Pali World for closing comments. Thank you. I know what to use.

Thank you, everyone, for joining us today. If you have any further questions or queries, that you know answers to please feel free to get interested. With that, we close the conference call for this quarter. I wish you all a very happy Diwali and a great evening. Goodbye.

Thank you so much, sir. Ladies and gentlemen, on behalf of Amcure Pharmaceuticals Limited, that concludes this conference. Thank you for joining us and you will now disconnect your lines.