MANKIND — earnings call

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Prepared remarks

MANAGING DIRECTOR · MR. SHEETAL ARORA – CHIEF EXECUTIVE OFFICER

MR. SHEETAL ARORA – CHIEF EXECUTIVE OFFICER

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

MARKETING · MR. ARJUN JUNEJA – CHIEF OPERATING OFFICER

MR. ARJUN JUNEJA – CHIEF OPERATING OFFICER MR. ASHUTOSH DHAWAN – GROUP CHIEF FINANCIAL OFFICER MR. PRAKASH AGARWAL – PRESIDENT STRATEGY MR. ABHISHEK AGARWAL – HEAD INVESTOR

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J'~_p~ Mankind Pharma limited May 21, 2025

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Mankind Pharma Limited Q4 and FY '25

Ashutosh sir?

Prakash Agarwal

Yes we can start the Q&A, please.

Moderator · Conference Operator

We have our first question from the line of Kunal Dhamesha from Macquarie.

Kunal Dhamesha

One for Rajeev ji.

On the BSV portfolio, now that we have this portfolio for close to 6 months now, how has the performance been especially in Q4?

Let's say, on a year-on-year basis, if we look at the revenue for BSV, how has that progressed?

And what is the outlook there on the BSV business, while our domestic revenue growth guidance is 1.2x IPM.

But specifically on the BSV portfolio, how is the outlook there?

And what is the synergies that we are expecting?

Earlier, we had guided for INR50 crores to INR100 crores in 12 to 24 months.

So when should we start seeing that?

And the integration cost, is it just for this quarter?

Or do we expect that to continue?

Rajeev Juneja

Thank you, Kunal.

In the month of October, we took this organization.

And naturally, when you take such an organization, it takes time to really settle in, bringing the leadership, whatever changes one is supposed to bring.

I mean that we have done it.

And if you just look at the BSV, it is a fantastic kind of organization, and we were just looking for an organization which has high-entry barrier products that we have acquired.

Going forward, next year, we expect the growth would be in the range of 18% to 20% is kind of the growth we expect.

And what was the other question from your side?

Kunal Dhamesha

Yes.

So on the synergy side, we had said that it would be INR50 crores to INR100 crores in 12 to 24 months.

So how are we tracking on that target?

And what should we expect in FY '26 on that?

Rajeev Juneja

We said that the synergy will take 12 to 24 months, that is how we basically have taken.

When we acquired BSV, it came to us with TTK products - prescription brands, which we have integrated in Mankind because for that, Delhi Mankind is an appropriate company.

On the second side, actual BSV, is super-specialty, very high-entry barrier products, that is over there.

So whatever corrections we were supposed to make, we have made, and whatever changes we wanted to bring in like TTK brand, that particular division, we have done that.

Optimization, commercial excellence, whatever changes we wanted to bring, we just wanted to close everything in the month of March before the next year starts. - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025 So now onwards, things will be better in next 12 months' time to 18 months' time, you'll see the synergy.

We promise that would definitely happen.

Prakash Agarwal

Yes, if I can add just some data points, like, for example, what Rajeev ji said that the TTK Rx business shifted to Mankind operating model.

So, the small business was run into three divisions.

Now we have converted into one division.

It had more than 600 people.

So as on March '25, it had 440 and as we speak, there's another optimization that has happened.

And there's also a lot of emphasis on portfolio optimization.

So some tail brands, we have kept some focus brands.

This is as far as TTK Rx business is concerned.

On the WH specialty business in domestic side, we have strengthened leadership.

The India head has come from one of the top companies in the India pharma space.

There, the focus is largely on improving the operational efficiency.

We believe there's a lot of juice left in terms of improving doctor connectivity, institutional penetration, improving MR productivity.

So that process is on, and we will soon see some recovery in that space.

Rajeev Juneja

In the month of April only, I mean, we are finding very good traction in BSVs TTK brand because certain brands are so iconic, the moment some kind of a connection was there with the customer, doctors, immediately, the response started coming.

Ossopan and Lactare, I mean these are certain brands, they basically were there in the market and some kind of a push was required, and we gave that.

And the first month or I'll say 2-3 month response is fantastic.

Ashutosh Dhawan

And just to reflect on your last question.

Kunal, so your question was with regard to the integration costs.

So Q3 was driven by the acquisition cost.

Q4 has been integration cost basically to bring in effect the change of control, which has taken place and certain consultant cost, which has been there, all put together has been INR25 crore or so, which we have called out.

And once we will start the legal integration process, then there will be certain regulatory costs, which will be associated with that.

Kunal Dhamesha

And the second question on the EBITDA margin guidance of 25% to 26%, which seems more or less kind of flat if I look at the adjusted EBITDA margin of 25.9%, right?

So wouldn't there be - let's say, BSV grows at 18%, 20% at low end, our domestic business also grows at 1.2x.

Shouldn't there be more operating leverage, there will be synergies from this because we already started optimizing the manpower cost at TTK or BSV, right?

So yes, what are the drags?

One is, I think, R&D expense, which we are expecting at midpoint, 50 basis points higher.

But anything else on the drag side that I'm missing?

Rajeev Juneja

We mentioned in the last call as well that in last couple of quarters, we have done a lot of reforms in Mankind.

Once upon a time, Mankind was a kind of a company which was bottom-up.

Everything was bottom-up.

Nothing was top-down.

So different divisions were working as per their best practices.

There comes a time after few learnings, we brought a lot of new leadership at the head office level, so that the policy should be uniform, all 28 divisions should work in one direction, there should be a proper synergy because in the absence of synergy, a lot of wastage happens. - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025 And we mentioned in the last call as well, the kind of steps we have taken.

Very less companies are there in India who can really have such a courage to take actions.

A lot of, I'll say, commercial excellence, a lot of changes.

A lot of improvements, a lot of trainings, lot of replacements.

Every sort of thing has been done in the last 1 year time and we tried to do everything before March, last year March, so that this year should start with flying colors.

Flying colors in the sense that on one side, the actual results, which we hope, which we expect in Mankind would come slowly and gradually, I mean, after this first quarter.

We feel that whatever replacement we brought, after changing a lot of people, will start giving us right kind of synergy and right kind of response second quarter onwards.

But as a whole, whatever we are saying right now that at the end of the year, whatever projections we have given, we'll be meeting those.

But yes, we have really worked hard to make Mankind strong foundation, because it really happens in every organization, organizations keeps growing and then comes a plateau.

And if you are courageous enough to really see that what are the drags?

Can you replace them?

Can you change them?

There are two ways.

One, basically is what?

Do it slowly and gradually.

And the second basically is what?

Once you find out that something is wrong, something is not right.

Instead of doing it next year and next to next year and dividing that into many, many parts, we thought of doing everything in one go.

And we feel that everything has been done last year.

Now things will be better, much better.

Moderator · Conference Operator

We have our next question from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Tushar Manudhane

Sir, just to start with, if you could share BSV sales for the quarter, domestic as well as exports?

Prakash Agarwal

So we have not called out specifically.

I think Sheetal ji gave the organic numbers, you can call out the same.

What I can add is that mandate brands, which is our key focus area.

So the domestic mandate brands for the year have grown at 10% plus and international specialty mandate brands have grown at 18% plus for the year.

IVF as a category for the quarter has grown at 20% and for the year has grown at 26%.

I think this is the broad color we are giving, and the numbers you can calculate by just doing the organic numbers.

Tushar Manudhane

Got it.

Sir, secondly, while the chronic, we are greatly positioned to grow 1.2x.

But given that we still have considerable portion of acute therapies as well.

So how to think about the overall portfolio growth?

So ex-BSV, the prescription business?

Prakash Agarwal

So chronic currently, I mean, if you see continues to grow 1.2x to 1.3x, which is largely the cardiac and anti-diabetes.

Our core five focus area apart from cardiac and diabetes is gastro, gynae and anti-infective.

And we also hope to improve on the respiratory as well as derma and vitamins.

Tushar Manudhane

Yes.

So how to think on the growth front, if we sum up across the therapies for the acute side? - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025

Prakash Agarwal

So acute side with the kind of restructuring initiatives that we have taken.

So in the last 2 quarters, we have seen some corrections.

And it is largely in the acute side, which has also impacted some of the acute segments.

And we expect the growth to start from Q2 as Rajeev ji mentioned.

Sudipta Roy

Just to add to what you said.

I think if you see in acute growth in quarter 4, we had to consider the regulatory impact of Unwanted-72 in acute portfolio.

If you consider that, we are at par with the market.

And going forward, as you rightly said, that we are expecting the acute portfolio will also grow at the same pace what market will grow.

And chronic, as usual, like we will be stronger in chronic.

And some of the portfolio, what we said strategically we are focusing on, especially gynae, you have seen that post BSV, we have strengthened our gynae portfolio and there is a significant jump in market share overall.

And gastro, of course, it has been a major focus for us.

And going forward, also, it will be a major strength, along with our cardio and diabetic segment.

Tushar Manudhane

Got you, sir.

Just one more, if I may.

The consumer healthcare recovered considerably in FY '25 with almost 15% growth.

How to think about whether this is the kind of sustainable growth in consumer healthcare?

Or there is still some more steam left as far as growth is concerned in this segment?

Rajeev Juneja

We feel that this is not basically flash in the pan.

This kind of growth will always be there.

We are very bullish about our consumer healthcare business.

And whatever brands particularly we have launched in last couple of, I'd say, quarters are also getting good traction.

We mentioned you the name of Nimulid.

We mentioned to you that this -- Ova News and our Gas-o-fast is doing fantastic, very, very good.

And where we were weak in the past?

We were weak in e-commerce.

We were weak in modern trade.

Even there, I mean, lot of good performance is happening.

We feel that this year, next year and going forward, our consumer business would be fantastic.

Moderator · Conference Operator

We have our next question from line of Neha Manpuria from Bank of America.

Neha Manpuria

First question on BSV.

While I understand we are not giving specific BSV numbers.

I think at the time of the acquisition, we had mentioned about the scope of margin expansion to 30% and higher on BSV over the next 2 years.

Based on your -- what you've seen so far and the reforms that you have put out in BSV, the changes you have brought forward, is there still visibility on getting to improving margins within the BSV portfolio?

And specifically on BSV on international, I think if I were to calculate the numbers, there's been moderation in international.

So if I were to think about the 18%, 20% growth, how much of that would be domestic versus international, given what's happened in fiscal '25?

Prakash Agarwal

Yes.

Thank you for your question, Neha.

So international growth has been very strong, upwards of 20%.

We are not giving specific numbers.

Domestic has been a bit muted because of some of the corrective actions we had to take, especially in the TTK Rx business, which has seen a sharp drop, which is from April onwards, as Rajeev ji mentioned, the growth has started.

So we are - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025 positive on that.

On the WH specialty also, while mandate brands have grown, but some impact is there on the tail brands.

That's why the growth is a bit muted.

As for the margins growth, we remain very positive.

Current margins are in the region of 26% to 27%.

And we remain committed to improve the margin profile by 50 to 100 basis points every year.

30% probably will reach by fiscal '30, for sure, because it needs some R&D investments also.

As the portfolio and the pipeline, there are a lot of very good opportunities.

So that would require some investment.

So that's why there will be a bridge from '26, '27 to '30.

But we are very positive.

Thank you.

Neha Manpuria

Understood.

And the R&D investment, if I were to think about it from a consolidated perspective.

Is the current quarter run rate something that I should build the increase upon?

If you can give some guidance on what the total R&D spend would be?

Prakash Agarwal

Yes.

So guidance is 2.5 to 3, you can take an average of the two.

Neha Manpuria

Okay.

So okay, not too much.

Got it.

In the existing Mankind domestic business, we've mentioned that growth would come back from second quarter onwards.

Is there any risk that you see in terms of the MR that you've added or that you've refreshed not being able to ramp up?

Is there any plan to again add more MRs as we think about the next year to grow -- to deliver that higher-than-market growth?

Just some color there.

Rajeev Juneja

Neha, there's always some kind of risk in everything you do actually.

So we are not talking about increasing the medical reps and managers.

What we have done in the last couple of quarters, we have replaced medical reps, managers, field force as a whole, a good quantity of that.

Wherever we found that inefficiencies were there, right practices were not there.

And whatever I'll say, right things were not there, we were really blunt and straightforward in making correction immediately as Mankind has always been very, very fast and executing things.

One way that you look at your balance sheet, you look at your other things.

On the second side, we have always believed that if inside things are right, foundation is strong, things will move very fast.

In my own career, I've seen in the last couple of years or many, many years that sometimes in the greed of growth and profits, right culture evaporates.

So we are not that kind of a company.

Whatever actions we were supposed to take, we have taken those drastic actions.

These were not simple actions.

These were drastic actions and we're done and dusted.

And now when I say that these new medical reps and new managers have come, they will take some time.

They have taken some time.

It's not that everything has happened in March or everything happened in December.

Everything happened gradually, and we decided that by the end of March, we'll close down everything, and we have done that.

So that's one reason we are saying that maybe first quarter onwards.

As we mentioned that whatever growth we have projected, whatever numbers we have given, that will be done.

We are very sure about that. - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025

Neha Manpuria

Understood.

And so the MR count still remains at about the 16,500 level that it was in the last quarter?

Moderator · Conference Operator

We have our next question from the line of Chintan Sheth from Girik Capital.

Chintan Sheth

Sir, I was asking on the other opex, which came up significantly higher around 26% of sales.

You mentioned a couple of pointers around the investments on the new launches plus R&D expense as well as the integration costs.

How should one look at other opex going forward as a run rate basis?

That's one.

And second is on the debt side, we did mention that we are targeting some repayments and all.

How should we look at FY '26 repayments given that the cash flows continue to be very strong for us?

Ashutosh Dhawan

Sure.

So let me start with the latter one.

With regard to the debt portion.

What we are targeting is that by end of FY '26, we should have the EBITDA to debt ratio of close to 1.1x, anywhere between 1 - 1.2x of the EBITDA.

So that's the guidance on which we are working.

And as we highlighted earlier, that by FY '28, the target is to retire the complete acquisition-related debt.

And with regard to the other expenses, this is in this quarter, there has been a bulge on the other expenses.

And for the next year, we have maintained the guidance of 25% to 26%.

So from there, you can draw that.

That applies to all the expenses, not only to the other expenses.

Chintan Sheth

Okay.

And on the acute side, we did some restructuring.

We are now done and dusted with that.

How should one look at acute growing from here on, given the base for this year has been a little bit softer due to the internal restructuring?

Should we expect -- we mentioned 1.2x the IPM is our target for growth next year.

Specifically for acute, if you can highlight it and what are we doing over there to tie the group.

Sudipta Roy

Hi, Chintan, I think we have spoken about this before.

So acute has been a little soft in quarter 4 for most of the acute giants or acute-heavy companies.

We are also no exception to this.

But yes, there are certain impacts of regulatory phenomenon, which was there in unwanted-72, which - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025 I have spoken already.

But in the future, as I said, we have been focusing on gastro, gynae, which has been our major forte in acute and anti-infectives as well.

And what we are expecting is we would be at par with acute if we talk about annual growth.

So I think what I have already spoken about that a lot of restructuring has happened from different parts and at different levels from field to HO, and those impacts should be visible in acute as well.

Chintan Sheth

Got it.

And any guidance on -- sorry, on exports, any guidance?

Prakash Agarwal

So for Mankind exports, we're expecting single digit growth.

And from the BSV side, we continue to maintain that the growth for the overall BSV, I think guidance given is 18% to 20%.

International growth will be higher than 20%.

Ashutosh Dhawan

So on an overall sales mix standpoint, so exports will be less than 15% of the overall sales in the next year.

So 85% plus will be domestic, export will be less than 15%.

Moderator · Conference Operator

We have our next question from the line of Rahul Jeewani from IIFL.

Rahul Jeewani

Just a clarification on this 1.2x the IPM growth that you mean for the prescription business, excluding the consumer healthcare portfolio.

Prakash Agarwal

Yes, correct.

Yes, Rahul.

Rahul Jeewani

And this growth bounce back, which you are expecting from quarter 2, so are you seeing fundamentally things improving in the acute segment or this growth bounce back from 2Q would largely be a function of the fact that the restructuring of our mass market business would be in the base quarter of last year and that restructuring in the base would then help us to drive improved growth from 2Q?

Prakash Agarwal

Rahul, just giving some color on the last year performance, which is fiscal '25.

If you see quarter 4, we have grown 10% in the domestic business without OTC, which is already 1.2 to 1.3x the secondary growth by IQVIA.

And for the full year, we have grown at 9% primary versus IQVIA growth 8% - 8.5%.

So we are already outperforming.

And what we are saying is, from Q2, the growth will be even higher.

So 1.2x there, I mean, if the market is growing at 10%, we're expecting growth our growth to be around 12% plus.

So that should not be a tall task, right, especially when we've taken so much of initiatives.

And this year also, we have outperformed IPM.

And what I think -- what Sudipta said was -- if we add back some of the regulatory headwinds, there's another 50 bps that we need to add back.

So the year performance is already 1.2x, and we expect that to continue at 1.2x.

Rahul Jeewani

Okay.

So the organic growth which you called out was for the prescription business, excluding the consumer healthcare portfolio.

Prakash Agarwal

Yes, Rahul.

Thank you.

Moderator · Conference Operator

We have our next question from the line of Sidharth Negandhi from CWC. - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

On basis of the revenue guidance on the domestic business, the exports business and the consumer healthcare business, considering the consumer healthcare business is likely to grow fastest, will that be a drag on margins?

Or are the EBITDA margins of the consumer healthcare business in line with the domestic business?

And similarly, on the gross margins, how do you see that playing out, considering the consumer healthcare business is going to grow fastest?

Ashutosh Dhawan

So for the consumer business, we have those EBITDA margins, they are part of the investor pack.

So they are in high teens, close to 20%.

And overall company margin is in the range of 25% to 26%.

So that's the guidance we have given.

So the consumer business margin currently is at a lower rate as compared to the company average.

But it is a matter of scale.

Once the business gets scaled up, then definitely, it is going to inch up to the company average in the near future.

Abhishek Agarwal

And size of the business of this is around 7%.

So it's not going to contribute or significantly, you can say, dilute the overall margins.

Ashutosh Dhawan

And moreover, as Sheetal ji has highlighted, we are maintaining the same guidance, 25% to 26% for the EBITDA margin on an overall basis.

The second question was on gross margin?

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

Yes.

Ashutosh Dhawan

Gross margin, it is also in proportion to the EBITDA margins for the consumer business.

So gross margin is comparable to the acute gross margin, you can say.

Lower than the chronic, but comparable to the acute margins.

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

Yes.

Sir, on the acute piece, just want to understand, considering the impact that trade generics seem to be having, especially on the acute side outside of the metros, what is our plan on launching our own trade generics or taking action to sort of prevent that growth of trade generics impacting our growth?

Rajeev Juneja

You see, this trade generic is there in the business for the last couple of years.

It is not only in smaller cities or bigger cities, in metros, everywhere trade generic is there.

The impact is already there.

I mean these kind of challenges are always there.

But please understand, whenever somebody buys a trade generic, the chemist gives him the medicine.

Patient does not get that medicine at economical prices.

It's like I mean earlier, people used to go to chemist without the prescription, doctor used to give our medicines.

Now, no more.

Just imagine hypothetically, if trade generic would not have been there, the growth of this pharma market would have been more than 16% - 17%.

The impact of trade generic, whatever you see the growth, it is keeping trade generic in mind.

Even in trade generic side, if you just look at the data, it has slowed down.

The growth has come down.

The kind of growth it was having in the past, it is no more now because ultimately, doctor's prescription really matters.

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

Clear, sir.

And on the pipeline, you mentioned about a clinical trial happening for an obesity drug in Mankind.

Any guidance on further launches in Mankind and separately in BSV? - Mankindl//JJ,,,.

J,,..,,;y,,$,§li Mankind Pharma limited May 21, 2025

Prakash Agarwal

No. So this is GPR119 you're talking about, anti-obesity drug?

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

Yes, that you already mentioned about the fact that it has entered Phase II trial.

But any other notable inclusions in that pipeline, both from an erstwhile BSV and Mankind side?

Prakash Agarwal

So in the investor deck, if you go through, we have given one BSV at a glance.

There we have given some color on the pipeline, which is on the biosimilar products as well as some of the innovator products, which is in the AMR space and anti-thymocyte space.

AND WHOLE-TIME DIRECTOR · MR. SUDIPTA ROY – SENIOR PRESIDENT, SALES AND

Got it.

And on the Mankind side, any more drugs in the pipeline, innovator drugs?

Prakash Agarwal

So this is what we can talk about at the moment, GPR.

There could be a couple, but it would be very initial stages.

I think we can call it off.

I think the time is up.

So decide.

Moderator · Conference Operator

Sure, sir.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Abhishek Agarwal

Thank you, for any further queries or clarification, request you to please write to us on [identifier removed].

Thank you, and have a nice day.

Moderator · Conference Operator

Thank you.

On behalf of Mankind Pharma Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines. - Mankindl//JJ,,,.

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