ZYDUSLIFE — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Thank you very much.

We will now begin question-answer session.

Anyone who wishes to ask questions may raise your hand from the participant tab on your screen.

Participants are requested to use headphone or earphone while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles.

First question is from Saion Mukherjee.

Saion Mukherjee

Yes, hi, am I audible?

Hi, Dr. Sharvil, first question is around the US momentum.

You've seen a good momentum here now.

Can you throw some light on some of the key assets on Revlimid, Topiramate capsule, Asacol HD and the likes and how should we think about 270 odd million dollars that you've achieved in this quarter?

How should we think about the quarterly run rate going forward?

Sharvil Patel

So yes, I think on the US front, as I said, obviously last year, we did continue to improve quarter-on-quarter.

Going forward also, we still are seeing a strong quarter one as we move into the new year.

And I think over the full financial year, we still expect growth on the current base.

Saion Mukherjee

Okay, on Topiramate particularly, how's the competition like in the market?

And is the number going to come down significantly in Q1 versus what you've recorded in Q4?

Sharvil Patel

Yes, so on Trokendi, we believe competition will enter, will be there in Q1 versus Q4. Having said so, in spite of that, I think we will see a good growth in quarter one.

Saion Mukherjee

Okay, and two questions one on, the second question on your, I see a significant increase in employee cost this quarter, if you can give some colour on that, and your expectation on R&D spend for next year.

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Sharvil Patel

First, may be Nitin bhai, you like to take it up.

Nitin Parekh

So, year-on-year increase in cost is because of impact of increments.

And also, if you consider actuarial valuation that we have done.

So, this time we had actuarial loss that we had to provide for and in the last year same quarter, we had actuarial gain.

That's the other factor, which is impacting the personnel cost.

Sharvil Patel

On the R&D, as we continue to say, we are likely to be around the 8% range.

And if we see better positive outcomes on more projects, maybe 8-8.5% but we are probably range bound around that 8% to sales going forward.

Saion Mukherjee

Okay, and I mean, you mean to say incremental investments will be largely on your innovation programs or on the generic side?

Sharvil Patel

I think more so the incremental growth will come from the innovation.

Moderator · Conference Operator

Thank you.

Next question is from Kunal Dhamesha.

Kunal Dhamesha

Hi.

Thank you for the opportunity and congratulations on a good set of numbers.

Just digging a little bit more on the US revenue, would you be able to kind of give the primary driver on a quarter- on-quarter jump out of $40 million in terms of whether it was majorly new product launches, or whether it was kind of existing product and above and also the price erosion scenario in this quarter?

Sharvil Patel

So, obviously the larger jump is always because of new products.

But as I said, the base business also did well.

But the majority of the growth is driven by new products and we have received rich number of approvals, and we are still expecting some good approvals in during the year with limited competition.

So, we are seeing a good value creation on the new products in this coming financial year.

Kunal Dhamesha

So, would you say that Revlimid was one of the major drivers of sequential jump?

Sharvil Patel

No no, it was an important driver for sure.

And Revlimid will continue in quarter one also.

Kunal Dhamesha

And secondly, on the impairment charge, like you have taken on Sentynl, I found that we had already done with that.

So, was there anything incremental which led us to take this impairment and 8 of 23 right now, let's say in the goodwill number on our balance sheet, is there anything left on that front?

Nitin Parekh

So, goodwill impairment of Sentynl refers to the legacy business that we had acquired of Sentynl in 2017.

So, now, we don't have any products in the market.

Gradually we started discontinuing certain products.

Now, there are no more products of legacy business and that is why we have provided.

While the assets which are, two assets that we acquired, they have nothing to do with this and in fact, the valuation of the total businesses was much higher than the goodwill impairment, but once we at a concept level thought that legacy business we are not continuing, we provided full amount of the goodwill of acquired business.

Kunal Dhamesha

Right now, there is nothing left about Sentynl.

Nitin Parekh

No, nothing left.

Kunal Dhamesha

So right now, whatever I see on consol balance sheet is more or less Heinz acquisition?

Nitin Parekh

Yes, there would be some goodwill due to internal merger also and Biochem acquisition earlier which is about Rs.

500 Crores.

But large part of the goodwill is related to Heinz acquisition.

Moderator · Conference Operator

The next question is from Bino.

Bino

Hi, good afternoon to all.

So hi, congrats for a great set of numbers.

A couple of questions around the US pipeline.

Sharvil bhai, in the last call, you had mentioned about one REMS product in the US this year.

Are we on track?

And will you be able to throw a bit more colour on it?

Sharvil Patel

Yes, so we did have a large REMS payment in the last quarter three.

And I think we are still planning for a quarter one.

We have two products.

Between quarter one and quarter two, launch is still expected for both the products.

Bino

Oh, and still it's not time to reveal the products, is it?

Sharvil Patel

It defy the principles of competition if we say things beforehand.

Bino

Okay.

Understood.

Asacol HD, competition always the kind of push out by at least six months.

So, it's the same this time as well?

Do you have any visibility or do we don't see anybody for next six months?

Sharvil Patel

Yes, so our best estimate is similar to what you just said.

But I think the good thing that we can see from the business is with the 9 of 23 current new products and the new products we are expecting to launch we are more than offsetting Asacol any future losses.

Bino

And on Saroglitazar, the PBC study Phase III study is that on going as per schedule? all timelines are intact?

Sharvil Patel

Mostly on track.

We may be one month delayed, but not anything major.

Moderator · Conference Operator

The next question is from Surya Patra.

Surya Patra

Yes.

Thanks for the opportunity and congrats for the great set of numbers.

So, the first question is on the US business.

So, is it possible to share let's say ex Revlimid what could be the US growth this year?

Sharvil Patel

No, I don't think we can do ex product because this is something, the US business is a composite business of all our products.

So, I don't think we are separating out new products.

The way the US business grows, is you try and protect your base and grow on new products.

So, I sometimes find it very difficult to answer this question that every time people want to remove products, and then the whole point of the US business is to launch new products.

So, I think this way of continuing to ask these questions is not good in the light of what a US business is.

And the other point I said on concern on Revlimid.

Revlimid continues to drive value in the last quarter, in the coming quarter and will continue to drive value in the next two years.

So, it's not a one-off product, which people seem to think.

Surya Patra

Yes, of course.

So, but now having seen ramp-up and progression at Revlimid front, is there any sense about what volume share that we might be getting, some sense if not the specific number.

Sharvil Patel

Sorry, can you repeat that question?

Surya Patra

So, having seen the ramp-up on the Revlimid prescription front for you and also in the business so far, so could you give some sense so what is the kind of volume share that you are expecting, let's say for, let's say progressively till ‘26 because up till now we have not been commenting anything on it.

Nitin Parekh

So directionally volumes are going to go up but we can't obviously give specific numbers that being a settlement.

Surya Patra

Okay.

So, my second question is on let's say, the kind of approval that what we have seen this year, that is a record number of course for US, but wanted to have a sense that see there are many 10 of 23 small values, small targeted value products that we have witnessed in the list.

So, these are like old filing which will pending because of the Moraiya facility issue and now getting released or it is the filing of recent past which are getting.

Sharvil Patel

It's a mix of both.

I think there's a lot of background noise where you're talking from so we are finding it difficult.

Surya Patra

Yes.

So, I was asking about the number of approvals what we have witnessed this quarter or so, or this year also full year.

So, whether these, I mean we planned and filed for this products having very low target value in US or?

Sharvil Patel

US, I think let me explain the strategy on US.

US, we are servicing key clients, key customers.

A representation of having a large product portfolio is very important for US generic business and that is always what we have believed in and we strongly believe that a completion or completeness of portfolio is critical.

So, from our point of view, it's important for us from servicing the small value products also depending on the market situation, because there is a need to service the patients and customers.

And of course, we are also, we also look and file the difficult to do products which have far larger opportunity, but from a strategy point of view, in US, we will be launching all types of products because one important aspect of what we do is to create access for these products.

So, we cannot, we have a plan to do that.

Surya Patra

Okay.

So, my next question is on the domestic business front.

So, now, it is quite clear that the at least during last one year period, we have witnessed our core business delivering much faster than the industry growth or the complex portfolio.

So, sure, progressively going ahead, how should we think and overall portfolio how should that be growing or performing versus the industry and whether we have seen improvement in the profitability in the domestic business and also if you can share the speciality portfolio’s contribution in terms of percentages or in terms of mix in the domestic competition business for FY23.

Sharvil Patel

Yes, we are putting efforts behind India formulations business to continue to drive market growth or at least better than market growth.

I think, so far in the last year, we have achieved most of the time better than market growth.

And in the medium term, we also want to aspire for building better than market growth, which will mean gain in market share.

It will be driven across the mass and chronic therapies.

So, I don't think the plan is to only try one specific type of therapy but we are present both in mass segment as well as in the chronic speciality segment.

So, all-in-all, I think on 11 of 23 the composite side that will deliver better, at least market growth and our aspirations to drive better than market growth.

Surya Patra

And improvement in profitability from the domestic base business, any sense on that?

Sharvil Patel

It's a good profitable business.

On a medium term to long term, it will drive better profitability, but we will continue to look at opportunities to continue to invest in this business also.

But yes, our effort is to drive profitability also.

Surya Patra

Okay.

Just last one small clarification, Sir.

WHO warning against artificial sweeteners.

So how should that have impact on our let's say key brand under the consumer business.

Sharvil Patel

Very early to give an answer to that.

This study is not a new study, but I think it doesn't say not to use the sugar substitute.

It has come up with some finding that we are studying, but I don't see an immediate impact but we will keep, will have a plan to counter that effort also.

Moderator · Conference Operator

The next question is from Prakash Agarwal.

Prakash Agarwal

Hi, good evening.

Am I audible?

Yes, congratulations on good set of numbers.

A couple of questions.

One is on trying to understand your comment on new launches and volumes for US growth, you mentioned is led by new launches and volumes.

So, when you say new volume or one-time buying opportunity, these are like short term, three months kind of opportunity, these are six-month kind of commitments or a year kind of commitments and what is the typical size when we talk about it?

Sharvil Patel

So, one time buy, by the very nature are not long term.

So, they are obviously for that month, not even for that quarter generally, but we continue to see those opportunities in that market.

It varies product to product.

So, it's not the same product all the time.

So, I don't think these are like contracted or assured businesses, but those opportunities do exist in the market.

As I say, on the overall guidance that I said, what we're trying to do is maintain and protect our base.

So that's been the effort and that's what's important and will also deliver better results in the coming quarter.

Prakash Agarwal

Yes, but these are sizable in terms of like $10 million- $20 million kind of opportunities or these are small one?

Sharvil Patel

They are sizable.

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Prakash Agarwal

Fair enough.

And when you say new launches, you mentioned you had 63 approvals which is record, but how much was converted into new launches and how much of those 63 are yet to be launched?

Sharvil Patel

We launched 32 and we are planning to launch 35 this year.

Prakash Agarwal

And in terms of you mentioned that fiscal ‘24 is also looking good despite good base, which we have achieved in fiscal ‘23.

So, you mentioned Revlimid and apart from these new launches and Trokendi still be a good product and there are two REMS, you mentioned right.

So, one is expected this quarter and the other one is next quarter.

Is that right understanding in terms of stacking the growth drivers?

Sharvil Patel

Trokendi has already faced competition versus quarter four.

Obviously it will come down.

But then we have launched the other Topiramate, which will add value and then we have going forward, some critical launches in the next three months.

So, we believe if we are successful in two out of the three also, it'll be good value.

Prakash Agarwal

So, on the US, we can still see high single digit growth despite a very strong performance in fiscal ‘23?

Sharvil Patel

Yes.

Prakash Agarwal

Okay.

And there you're factoring in Asacol or not really factoring in Asacol?

Nitin Parekh

So, even after factoring Asacol, we still will have a single digit growth.

Prakash Agarwal

Okay, lovely, that’s great.

And secondly, on guidance performance.

So last year, similar time, the guidance on R&D about 8%, we did around 7%.

This year also, we are guiding about 8%.

So, anything to read out there and what is the margin like, we could see better margin going forward or this with 8% R&D, 22 is a good margin to model?

Sharvil Patel

So, we are seeing maybe, in spite of building for 100 basis point increase in R&D, we are still building for at least another 100 basis point increase versus last year.

So, that we are still seeing.

So, we are seeing good improvement in margin going forward.

That's the current best estimate that we can give.

Many things have to work out and maybe we're being conservative, but hopefully that's what we will try and achieve even assuming some things go wrong.

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Nitin Parekh

So, assuming there is no competition, Prakash on Asacol HD, in spite of higher R&D by 50-100 basis point, we expect margins to go up by 50-100 basis point.

Prakash Agarwal

That is great.

Okay.

Thank you.

And lastly on India.

So, we've seen good growth, double digit growth coming in.

April was soft month.

I mean, you read as an aberration or you think, too early to call or what is the number?

Do you think industry and yourself will be double digit growth this year?

Sharvil Patel

See, it's difficult to, I think that'd be difficult to say I mean, whether we are in, it's obviously not going to, it will be, we hope it’s double digit, but it could be anywhere between 9% to 12%, it is very difficult to predict where the growth of the industry will be because we have seen volume growth being a challenge on the overall industry.

The other is also, we continue to have price challenges with NLEM and other things.

If you look at even our growth in the last quarter, it would have been at least two percentage points more, had we not have the NLEM impact so which, we hope to nullify going forward by doing the right product mix and other areas, but those challenges will remain.

So, I think it's difficult to predict.

But having said so, I think our focus on critical brands, the new launches, and more importantly, our differentiated portfolio driving strong momentum in the market, I think, in the medium term will allow us to outperform the market.

Prakash Agarwal

Okay.

Last one here, MR number, if you can share as of March?

Sharvil Patel

Field force 7000 plus.

Prakash Agarwal

So, this includes the managers or this is just the field force?

Nitin Parekh

Only field force.

Prakash Agarwal

Okay, and the full team Sir?

Sharvil Patel

Sorry, this includes managers.

Moderator · Conference Operator

Requesting everyone to limit themselves to two questions.

The next question is from Sameer Baisiwala.

Sameer Baisiwala

Hi, thank you very much.

And good evening, Sir.

A quick question on Vascepa, your thoughts about when do you plan to launch, are there any raw material availability issues and the market dynamics?

Sharvil Patel

So, Vascepa was a welcome approval for us.

We had predicted a little much later approval but got in the first cycle.

So, we are preparing for the launch.

I can't give the exact date but we are 14 of 23 working aggressively to launch the product.

On the supply side, I am confident we'll be able to get enough material which is the limiting factor in the market.

And we are, we believe, we will have hopefully enough material to get good share.

Sameer Baisiwala

Great.

And the second question is on the US launches.

So, can you talk about the transdermals?

Sharvil Patel

Sure, so transdermals as I said, we, after successfully clearing our Moraiya facility, we have been in preparation for launching the products.

We are planning for three launches.

And those will be staggered from the July quarter onwards.

So, in this financial year, we at least hope to do three launches from Moraiya.

Sameer Baisiwala

Okay, great.

So, Sharvil bhai, if I have to summarize the US calendar, you got two REMS, three trasndermals, Vascepa.

And I guess, all of them should be fairly meaningful, substantive.

Anything else that we are missing out?

Sharvil Patel

We do have at least another five programs which have high value.

So, if we're successful in three also, it should significantly be good.

Sameer Baisiwala

Okay, Sharvil, so this is quite a handful.

And you still expect just a single digit sort of a growth for US that's surprising?

Sharvil Patel

We have to also plan for the negative side which is competition to products, right?

So and the base is also quite decent.

So small erosion also is a meaningful erosion.

Sameer Baisiwala

Okay, great.

Now all the very best way for fiscal ’24.

Thank you so much.

Moderator · Conference Operator

The next question is from Kunal Randeria.

Kunal Randeria

Hi, good afternoon.

Sharvil bhai, if I understand correctly, you will maintain a generics R&D spend at around the current level of Rs.

1,300 crores and the incremental spend will be on NCEs, right?

Sharvil Patel

No, Rs.1, 300 crores?

Nitin Parekh

So, we've told the total in FY24 will be 8% to 8.5%.

And normally the additional amount would be more or less for innovation portfolio only, and not the generic portfolio.

Kunal Randeria

Sorry, so I was not asking just for ‘24.

But it's a slightly longer-term kind of question in the next two to three years because you will have a lot of NCE spends coming up.

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Sharvil Patel

So, there will be very little or no growth on the generic side because we have hit a base which is comfortable.

So, the most, as I said, the future delta of growth that comes on research with the growth in revenue is all going to be towards the NCE and NBE portfolio.

Kunal Randeria

Yes, sure.

And just one more, on the US side, what's the kind of price erosion that you are expecting?

How are the competitors behaving because we have seen some shortages going up?

We have seen some ANDA withdrawal by competitors.

So just to get your thoughts on how the market is evolving for FY24?

Sharvil Patel

We always build for a single digit.

I mean before we used to see very strong double-digit erosions.

But we are building for a single digit price erosion because that's what we expect to happen in FY24 in the best estimate.

Obviously in the last quarter, we haven't had any major erosion.

But knowing the portfolio and knowing competition, we on a conservative side, we should assume mid-single digit price erosion.

Kunal Randeria

Right.

And this price mid-single erosion is pretty much similar for all product forms, like oral solids or injectables or transdermals?

Sharvil Patel

No, if you are different, alone in the market, the erosions are significantly larger.

When I'm saying that I'm talking for the whole portfolio, otherwise, the erosions could be significant, depending on how much, how exclusive you are in the market.

Moderator · Conference Operator

The next question is from Cindrella.

Cindrella

Yes, thanks for the opportunity.

My question is on transdermal, you said that you will be launching most probably three products in the coming year, can you highlight the competition scenario that you expect in this?

And you have already highlighted that this will be meaningful launches for us?

What kind of duration do we expect them to be a two-year long opportunity?

How should we see it?

Sharvil Patel

So, it's difficult to predict how, what will be the competition.

There aren't many transdermal developments going on.

So, we at least believe that many of them have at least, I would say at least a two-year opportunity, but could be longer, but two years definitely.

Cindrella

Even for the REMS, two REMS product that we spoke about, even for them also, the similar scenario we can expect?

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Sharvil Patel

No, that is I can't predict for the REMS because REMS are not transdermal.

So those are two different technologies.

So, REMS, I don't, I would say when we launch, we will still have limited competition, but it will be difficult to say there will be no competition in the medium term to long term.

Cindrella

Right.

And when we look at pricing scenario in US, like not just for our portfolio, but overall industry, how do you see the US pricing today?

And if you can segregate it on based on products like orals and injectables?

Can you help us understand some colour, today how does it look?

Sharvil Patel

It's a very competitive market with a very consolidated buying.

So, there's no fundamental shift that has happened in the structure of how the US business is.

So, price erosion will continue to be there.

As I said, the only way to explain it is when the portfolios mature, the erosion there is not severe, but obviously, if for portfolios where there is limited competition, with competition, you would see more price erosion.

So, as I said, we estimate generally about single digit price erosion, it could be low single digit to high single digit, but that's the range that we are operating in.

Cindrella

And on the NCE side, what kind of investment do you expect over coming two to three years?

Because as you witness now, talking about the entire investment going be on the IP side or the NCE side.

So what is the plan over two to three years?

And what all geographies like apart from US, any other reg markets, what kind of, what is your thought process on it if you can share.

Sharvil Patel

So, the NCE developments are global developments.

So, they cater for the US and Europe.

As I said, we are, when we're talking about the investment, it is overall investment.

We're talking about 8% to 8.5% of spend, which will include generics and NCEs which would largely be for the clinical programs.

So, as the programs reach the clinical phase, the investments go up.

So, Saroglitazar is our largest current investment that is going on.

And then in the future, we have ZYIL1 and which is entering Phase II and phase III in the future.

A few more, but these are all orphan assets.

So, the investments are over a period of three to four years.

And they are I mean, from our estimate, in the current 8% to 8.5%, we can manage our R&D expenses with these two or three programs.

Cindrella

Yes, on the R&D side, I think we've been clear.

On any other kind of investment do you think like on ground, teams preparations, all those you will need to invest or you're planning to do it now or maybe later when we are closer to the phases that's where you will decide?

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Sharvil Patel

Generally, the investment starts one year before the launch and major, large investment six months before.

So, our current assumption is that we will commercialize in calendar year ‘26.

So, calendar year ‘25 will see major investments.

Cindrella

Okay, thank you so much and all the very best.

Moderator · Conference Operator

The next question is from Neha Manpuria.

Neha Manpuria

Yes, thanks for taking my question.

Sir, you mentioned high single digit growth for the US.

Just wanted to clarify, this growth would be on the base that we reported in the quarter, I'm assuming, is that fair to assume?

Sharvil Patel

Over FY23.

Nitin Parekh

We are talking of growth in FY24 over FY23.

Neha Manpuria

In that case, even if I were to take the higher end range, we are assuming that our quarterly run rate would probably come off from what we've seen in this quarter.

Sharvil Patel

I said not for the next quarter immediately, but going forward, we have to also assume competition so.

Neha Manpuria

But okay, but given that we have a fair bit of launch, the transdermal launches, Vascepa etc. Are we being too conservative on this number?

Sharvil Patel

You have to understand base price erosion is also there, and we have to assume for that also.

Neha Manpuria

Okay, understood.

My second question is on the injectable business.

Could you give us some colour in terms of how big it is, what we are targeting, how many launches do we have planned for that?

And what's the pipeline there?

Sharvil Patel

So, I don't have the break up like that.

But I think for us, when we talk about the US generics business, we talk about whether it's oral solid, topical, transdermal or injectable.

So, I think is a composite way of doing business.

Having said so, there are good amount of complex filings that have happened on injectables.

And we would, we hope to see at least one or two important launches this year, but many of the launches will be post ’25, ’26, where we will see highly complex products coming to market.

So, it's still a medium-term opportunity not a short term.

But currently it has a good base and there are shortages and other issues in the market.

So, the growth and momentum is very good, but it will become sizable probably post ‘25.

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Neha Manpuria

Understood.

Thank you, sir.

Moderator · Conference Operator

The next question is from Tarang Agarwal.

Tarang Agarwal

Hi, good evening and thank you for the opportunity.

Couple of questions.

Just a follow up from the previous participant.

Currently, how big would your injectable business be?

And what would it be in the previous year?

That's one.

And the second.

I mean, you're generating sizable cash now.

So, is there a possibility of you probably looking at growing your business inorganically?

If so, where could we see this getting deployed?

Sharvil Patel

So, I think today we are not giving the dosage wise breakup.

I think that is not something that in our guidance we are giving.

So, we continue to talk about the US generics business separately, and that's the best guidance we can give.

Having said so, I have explained that on the injectables front, the meaningful revenue in terms of the overall business will be post ‘25.

But the momentum and growth is very good.

With respect to the future investments, as I said, we have two important markets, India and US which we look at.

US from the specialty point of view, where we want to build our presence.

So that's one area which we look to find opportunities to invest in.

In India, we are continuing to look for brand acquisitions, if available.

So that's one area that we will look at.

And we have been seeing very strong progress on our developing markets business, including Europe.

So, we will and it's growing very well and it's becoming an important part of our business.

So, we hope, I would say on an opportunistic basis if we can find some opportunities to leverage our portfolio there.

Tarang Agarwal

Thank you.

Moderator · Conference Operator

The next question is from Nitin Agarwal.

Nitin Agarwal

Yes, I've seen that on the developing markets you just mentioned.

So, from a growth driver perspective, what would be the driver of this, what is the strategy for growth rather in this non-US markets for us?

I mean, it's largely going to be driven by biosimilars?

Are there other elements of growth also that you are focusing on?

Sharvil Patel

So, biosimilars will add over a period of time to the business.

But today, the business is strongly driven by branded business, branded generics business with areas focusing on cardio metabolic and CNS space.

And as I said, we have a focus market strategy where we have the deep penetration in certain markets in which we have identified and the others we do through distribution, but a majority of our focus is to deepen our presence 19 of 23 in the markets where we are very strong.

And those markets in spite of fluctuations in currency and other things have continued to deliver good growth and now are becoming profitable also.

So, we will continue to drive those.

And it's to do with mostly new product launches, but mostly in the, CNS and cardiometabolic space.

Nitin Agarwal

Secondly on the US market, this new business opportunities that you sort of referred to, have you seen increased incidence of these opportunities coming through in the last few months?

And how do you see this sort of as a consequence of what facility closures and all which have been happening because of FDA, recent FDA inspections, and do you see momentum in this part of the business increasing as we go along?

Sharvil Patel

So, the earlier question was related to where I would invest in the future and that was more to do with the speciality business which is not with the current businesses which are sort of generic.

So, generic business I think on our own we do have a very rich pipeline, we are filling up the gaps or finding opportunities through BD&L opportunities and really have been able to license very difficult and good products from the generic point of view and complex genetics point of view.

Beyond that, our effort will be to look at the speciality business and invest behind that and not in the current generics business.

Nitin Agarwal

And lastly, I think we mentioned earlier on the call that on Revlimid, the assumption is that the volumes will keep increasing.

So, philosophically is it fair to assume, how should we look at Revlimid as a business?

Revenue should be ‘23 numbers are like a peak number or number should actually increase to the next couple of years before they come off?

Sharvil Patel

Our current best estimate is with the volumes increasing, the numbers will go up at least for the next two years.

Nitin Agarwal

You mean ‘24 would be higher – ’24 would be higher than ‘23 and ‘25 Probably should be higher than ‘24.

Sharvil Patel

Yes.

And as I said, we do still expect quarter one sales of Revlimid also.

Nitin Agarwal

Thank you.

Moderator · Conference Operator

The next question is from Vishal.

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Vishal Manchanda

Hi, good evening.

Thanks for the opportunity.

So, on the two REMS as said that we are expecting to launch.

Are you going to launch them as an authorized generic or under our own ANDA?

Sharvil Patel

Own ANDA.

Vishal Manchanda

Okay.

And would you be able to share the indication of the two?

Sharvil Patel

No, we won't be able to do that.

When we launch, we will update everybody.

Vishal Manchanda

Right.

And a second one on the Menkes disease asset, any timelines for approval?

Sharvil Patel

They are in their rolling NDA stage.

So, it's difficult still to give a timeline.

I would be able to give better understanding maybe in two quarters, but not before that.

Vishal Manchanda

Okay.

On the vaccine front, do you expect to file any more vaccines for WHO pre-qualification this financial year?

Sharvil Patel

We have two vaccines, the TCV and the MR. So those two will be going for WHO pre-qualification.

Vishal Manchanda

And the one that you filed this quarter was for which indication?

Sharvil Patel

TCV.

Vishal Manchanda

Okay, and the two that you're going to file are for?

Sharvil Patel

So, one we already have, which is the rabies then TCV typhoid conjugate and measles rubella.

And then, we are also doing pre- qualification for some other products.

But slowly, we will add more products.

But these are the current plans.

Vishal Manchanda

Would you have a number as to how large the WHO market is for TCV?

Sharvil Patel

I can share it offline, but it's a very, very large market, but we can share it to you offline.

Vishal Manchanda

Got it.

And just on the Africa and Europe business, which grew sharply this quarter, can we expect that kind of a run rate to continue for the rest of the year?

Sharvil Patel

Yes, it will have a strong double-digit growth.

Vishal Manchanda

And any colour on what drove the strong growth this quarter?

Sharvil Patel

It’s a branded business, so it's quarter-on-quarter good performance, across the board.

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Vishal Manchanda

Okay, and it was across geographies, not any specific space.

Ganesh Nayak

Correct.

Vishal Manchanda

Okay, thank you.

Moderator · Conference Operator

The next question is from Naser Parekh.

Naser Parekh

Sorry, hi, am I audible?

Hi, thanks for taking the question.

My question is on oncology.

So, across both Indian and US formulations, what would be your share of oncology and how is that growth going?

Sharvil Patel

So, in India, we are now a leading oncology player.

Our aspiration is to be in the top three and one day achieve the number one rank, if possible.

So, that's what we are aspiring for with the kind of access of medicines we are creating, which are largely driven by biologics and also some small molecules.

So that's our aspirations.

We are amongst the top five or maybe third, but we hope to be in the top few with adding more products to the basket.

With related to beyond India, and US, US obviously, it's not a branded business, it’s a generic side.

So, we do have the three oncology sites, two injectables and one oral and we are using those sites to build for the US oncology business where we do have some day one launches planned.

I would see if we just look at the oncology business, and US generics point of view, it's maybe three years out when we will see significant revenue uptake.

Naser Parekh

In terms of capacity either in India or US, we've seen lot of people obviously putting up oncology plans for the last one or two years.

So just overall from a demand supply situation, how we are seeing the growth in that segment, what is your view, do you think that there has been increased capacity that we've built in which has built for the industry and in the next two, three years, that could create some kind of oversupply or there is just enough demand growth?

Sharvil Patel

I do.

To some extent, I do feel there is over capacity, but they seem to be regulated, approved, I mean, plants that are approved in the regulated markets.

So, I'm sure there is a little bit of excess demand, because the volumes are not very high in oncology.

So, I think it'll depend a lot on the product mix and what type of products one company has, which will drive value, not the volume.

Naser Parekh

Okay, got it.

Thank you so much.

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Moderator · Conference Operator

The next question is from Punit, and this is the second last question.

Punit

Yes, hi, thanks for taking my question.

So I have one question on specialty innovations initiatives.

So, in Saroglitazar PBC indication, there are two molecules that are ahead in terms of timelines.

And both are PPAR agonists.

So, by the time we launch, we'll be forth player in the entire PBC market and considering the rare nature of the market, how are you expecting the numbers to flow through?

Sharvil Patel

Yes, so on the PBC asset, our current business model assumes that we will be fourth or third.

So, I think there'll be one PPAR and two others, but we assume we will be, in the worst case will be the fourth, in a good case we can be the third.

And our business case is appropriate for that, I mean our investments are still very much appropriate for that scenario.

The market is as you said, it's an orphan indication.

But it is a sizable market, which is growing.

Punit

Understood.

And my second question was on the Phase II trial we completed for ZYIL1.

So, by when can we expect Phase II b/3 to commence?

Sharvil Patel

We're just finalizing that strategy.

So, if everything goes well, we'll start in a quarter or maximum, five to six months.

Moderator · Conference Operator

Thank you.

The last question is from Ishita Jain.

Ishita Jain

Hi, just a quick one, relating to what the previous participant asked on the products in the pipeline.

The NCE especially products like the NLRP3 inhibitor, are these partnered products or is Zydus doing it independently?

Sharvil Patel

We are doing it independently.

Ishita Jain

So, none of including Saroglitazar nothing is partnered.

Sharvil Patel

Yes, right now, all our development phase programs are done by Zydus individually.

Ishita Jain

Okay.

That's great, just as short follow up.

So, once we are like you mentioned that you will be, expenses will increase as we are closer to the launch date, will that also include expenses such as setting up dedicated field force once we are closer to approvals?

Sharvil Patel

Yes, I think in that earlier question, when they spoke about, I was speaking about the field force and commercial operations team, that we need to set up if we are seeing good data on Saroglitazar.

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Ishita Jain

Understood, got it.

And is this the same approach that is going to be used in the European market as well?

Or there are we going to out licence?

Sharvil Patel

There's a higher probability we will out license in Europe.

Ishita Jain

Perfect.

Thanks a lot.

All the best.

Moderator · Conference Operator

Thank you.

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

Ganesh Nayak

Thank you very much and have a good evening.

And look forward to interacting with you again in the month of August for the quarter one FY24 results.

Good night.

Moderator · Conference Operator

Thank you.

On behalf of Zydus Lifesciences Limited that concludes this conference.

Thank you for joining us and you may now disconnect and exit the webinar.

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