Alivus Life Sciences Limited (ALIVUS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Q3 FY '22 Earnings Conference Call of Glenmark Life Sciences. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Soumi Rao, General Manager, Corporate Communications. Thank you, and over to you, ma'am.

Good morning, everyone. Thank you for joining us early this morning. We welcome you all to the Q3 FY '22 Earnings Call of Glenmark Life Sciences Limited. Today, we have with us Dr. Yasir Rawjee, our MD and CEO; and Mr. Bhavesh Pujara, our CFO. As we begin the earnings call, here is the summary of our results. For the third quarter of FY '22, we registered revenue from operations of INR 5,225 million, recording a Y-o-Y growth of 4.5%. EBITDA for the quarter was at INR 1,496 million, a degrowth of 3.6% Y-o-Y. EBITDA margin for the quarter was at 28.6%. Profit after tax was at INR 1,037.1 million, registering a growth of 11.1% against the corresponding quarter of the previous financial year. For the first 9 months of the financial year, the revenues were at INR 16,091.6 million, growing at 13.5% Y-o-Y. EBITDA margin for the first 9 months stood at 30%. PAT for the period was INR 3,198.3 million, growing at 29.5% Y-o-Y. Coming to our business performance. Revenues from Generic API segment during the quarter increased by 0.9% Y-o-Y on high base of COVID products in the third quarter of last year. For the 9 months of FY '22, the revenues from operations in Generic API segment grew at 12%. Our CDMO revenues registered a Y-o-Y growth of 45.1% in Q3 FY '22, and 30.9% for the 9 months of FY '22. Our regulated markets accounted for 71.8% of net sales for 9 months of FY '22, growing at 28.3% Y-o-Y. During the quarter, revenues from regulated markets witnessed healthy growth, whereas revenues from the emerging markets were lower due to higher base of COVID product sales last year. Our capital expenditure during Q3 FY '22 was at INR 319.8 million. And for 9 months of FY '22, we incurred a CapEx of INR 786.8 million. Expansion work at our Dahej and Ankleshwar facilities is ongoing, and we plan to commence construction work at our newly acquired site at Solapur in the beginning of the next financial year. The R&D expenditure for the quarter was 2.9% of revenues from operations, and for 9 months of FY '22, it was at 2.7%. Amongst other business highlights, we filed 6 DMF/CEPs across major markets during the quarter. And as on 31st December 2021, cumulative filings stood at 418. Today, we have 4 complex iron compounds in our development pipeline. We also have 7 products in the oncology space. Now I would like to quickly read the disclaimer. Some of the information in the document, especially information with respect to our plans, strategies may contain certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties, which could cause actual outcomes and results to differ materially from these statements, depending upon economic conditions, government policies and other incidental factors. Such statements should not be regarded by recipients as a substitute for the exercise of their own judgment. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our actual results may differ materially from those expressed in, or implied by these forward-looking statements. With that, I invite Dr. Yasir Rawjee to say a few words before we open the floor for the Q&A session. Thank you.

Soumi, thanks very much. Good morning to everyone. Thank you for getting on the call. We are in the second month of the new year, but I'd like to wish all of you a happy new year. Hopefully, COVID will go away soon, right, and we'll all be leading more normal lives. Just to give you a sense in terms of how this quarter has gone. So obviously, from a number perspective, the growth has been in single digits, which is something that -- I mean, it's probably not expected from Glenmark Life Sciences, but then the macro environment has been such, and we've -- but we've done very well on the CDMO. CDMO has picked up very nicely. And it's a sort of trend we are hoping that will continue. Of course, on the generic side of the business, we had a base effect of Fabi last year. So if we take that away, then I mean we still -- generic business has grown at a good 10% or so. So just to give you a sense in terms of how the company is focused, like I do every time, I mean, we -- we want to look at the short-term priorities, the mid-term priorities and the long-term priorities. So as long as we execute on all of these, the company will continue to drive along a very, very safe and a good path, okay? Coming to the short-term priorities, I think we need to continue to work with our customers closely and make sure that we service them. They have, I think, bigger challenges than we have. So being a good supplier to our customers is certainly something that will go a long way. Coming to the mid-term priorities, again, our execution on filings on CIP projects is something that is going extremely well, and that continues to pay off in terms of our customer confidence and their ability to retain their market share. On the project side, which is a longer-term priority, we -- I would say that we kind of readjusted. So Dahej, which is our brownfield and the big expansion right now is going well. But owing to some COVID-related slowdowns, Dahej has slowed down by a couple of months. And as a result, what we were expecting to come online in Q4 will probably happen in Q1, and there will be a sort of cascading impact of that as well on the final completion of the project. The other thing that -- to note here is while Solapur is something that will continue to be a focus for the long term, we have made a bit of an adjustment in terms of accelerating the Ankleshwar project, okay? I had alluded to this last time in terms of backward integration that we are taking aggressively in Ankleshwar. So that's -- I believe that, that can pay us a lot more in terms of in the near term. And so we sort of change the focus a little bit in terms of the investment just to get the Ankleshwar projects going much sooner. And being an inspected site already, I mean, that gives us an advantage in terms of also not only on the backward integration, but also on helping us on the capacity, both on the intermediates as well as on the finished API. So these are the things that I'm sure will come up in more detail in the questions. So without much ado, we'll open the floor for questions. So Soumi?

[Operator Instructions] The first question is from the line of [ Kunal ], an investor.

I have one question regarding the CDMO project. So our fourth project, which is supposed to be commercialized in the Q4, that has been delayed to the Q3 FY '23. So any specific reason for this delay, sir?

Yes. So Kunal, there is a reason. Like we said, this fourth project is going to be filed -- is being filed in a whole bunch of markets. Now this obviously most of -- I mean COVID, with the Omicron and stuff, right, has come back, and there has been a slowdown at the customer end in terms of these filings. So if you recall, last time we had sort of sensed that Q4 may go to Q1, but given the fact that there have been COVID-related issues on the customer end, the filings have been delayed, and as a result, we don't expect commercialization to happen in Q4 or even in Q1.

Okay. Okay. Understood. And the next question is just if we can understand the status of this -- your new iron compounds and the oncology products. So I don't understand the status of these product. Is it still in development phase or the R&D is already completed, and we'll be commercializing it soon?

Okay. So let me take iron first. So we've got 4 projects, right? One has already been filed by the customer. And you know the process, right? There'll be queries. And then once queries are answered, then we can more or less predict when it will be commercial. But that process has begun already with the customers' filing. That's one. The 3 others remaining are at various stages in the development pipeline. We plan to validate the second line project sometime in April, May time frame. And the other 2 will be towards the end of this financial. One will at least be towards the end of this financial. The fourth one will probably come next year in terms of validating and then supplying to the customer. On onco, we have 7 projects, 3 of them are basically waiting for the Dahej project to be completed, which is planned in April. And once that comes on, we will again be able to supply exhibit quantities to our customers for these 3 APIs. The remaining 4 are in R&D at various stages in development.

Okay. Okay. Understood. And the last one from my side. Sir, our -- the EBITDA margin, if you see in the last couple of quarters, it's a little bit volatile. Like the quarter 4 last year, it was around 36%, and this present quarter, it is around 28.6%. So in future, you want to give any guidance and would it be stabilized at some range?

I think we'll hold, right? See, this whole reason for this dip in this quarter, right, has been largely on account of higher cost -- higher input costs, okay, whether they be related to materials or even related to energy costs, okay? I'll give you an idea. Gas prices that we were buying at INR 35 a unit just 4, 5 months ago are now INR 62, okay? So it's nearly doubled, I mean, the jump in gas prices. And so, I mean, with these kind of challenges on both, on operational cost as well as on material costs, the EBITDA has dipped. But the good news is that these things will ease off. So I'm not that worried that we'll continue to be there or go south or whatever. But I mean, let's see how it goes. But I think we've reached a point where price increases are not going to happen further. So we're at 28.5%, right? I would say that's the kind of -- it will be the bottom. I mean, for us, maybe we won't be below that, right? Bhavesh, do you want to add something?

No, I think that covered.

Yes.

Okay. Okay. And just one point. This last conference call, you mentioned that you would be accepting some...

Kunal, do you mind joining back in the queue?

Sure. Sure.

[Operator Instructions] The next question is from the line of Vikas Sharda from NTAsset.

Two questions. One is that -- how is the outlook looking for Q4 in terms of, say, margins or the growth outlook on the generic side? And is Fabi still playing a role in your revenues currently or in the base, say, Q4 of last year? That's one. And number two, I mean, when you look at, say -- I mean, the Q4 of last year, it had very high margins, so say 36% plus EBITDA margin. So I mean, is there some kind of seasonality in your margins or product-wise something that you can highlight?

Sure. So Vikas, Fabi is not going to be there. It wasn't there this quarter. It's not going to be there in Q4 as well, right? Coming to the margin outlook last year and then how it's going to play out this year. See, last year, we literally had a bolus, okay, of CDMO plus some high-margin generic APIs. So I mean, that's not a trick that is likely to repeat in Q4, okay? I think it was 36% last year -- last quarter 4, right? So I can assure you that it won't go there. But given the fact that -- like I just addressed in the last question on the margins, is that margins would be under a little bit of pressure because while on the cost side, especially on solvents, things are improving a little bit, we still have a way to go before they normalize to levels that were there about 6 to 9 months ago, more like a year ago, frankly. So it's -- I think margins will track similarly to what we've seen this quarter. Hopefully, we'll improve it a little bit because we do have some cost improvement initiatives that we'll get approvals for in this quarter.

Got it. And how is it likely to pan out say, in terms of revenue growth because, again, the base years are different? Or should one look at Q-o-Q basis?

I'm not sure I got that. What was that?

Quarter 4, what should be the revenue outlook?

Revenue outlook should be fine. I mean, I don't think on the revenue side, we have any challenge. It's more the margin.

The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just the first one on the outlook for API in general. Yasir, from an industry perspective, what are you seeing? We have seen mixed trends for Generic API this quarter in terms of inventory drawdowns by customers? Can you just give us what's happening there? What's also happening to API prices for you in terms of your output? And how is GLS navigating that space? Which are some of the areas which are growing faster versus slower?

Okay. So Shyam, look, on the outlook for the industry. I think we are pretty much in the same situation as most companies, okay? But there are some differences. So the kind of pricing pressures I would say pretty much across the board, right, that we are facing. On the demand side, again, I think because our Q3 was Q4 for most of our customers, right? There has been some destocking impact. And so demand did soften a little bit for us. Maybe it was a little more for others. But end of the day, we are in a very similar situation to our peers. As far as prices go, see, we are able to pass on some of the cost increases to some customers, okay? This is especially where the customers have got a relatively stable footprint in the front end. And they understand, okay? Some customers though are not able to sort of take that price increase. And so we've not been aggressively pushing price increases there. But again, the good news also is that many of our cost improvement projects, CIP, in short, right, have yielded good benefit because they came through and customers were happy with the prices. And at the same time, our margins were holding steady. So there's a mixed bag over there, Shyam, okay, in terms of how we are managing the prices. It can't be a sort of one approach for everyone and for every API. Your last question was on how we're managing in the short and the long term, right?

No, no. In terms of therapy areas, what is doing better, what is doing slower?

So Shyam, you would have seen, right, in the investor presentation that cardiovascular remains our top therapy area, although there was some pressure on sartans, okay? Like from the supply side, telmisartan was a bit of a challenge. You may have heard about those accidents that happened in China, okay? And as a result of which there was a shortage in a key input called benzimidazole, so that did have an impact. But overall, cardiovascular for us has done well, okay? The other good news is that CNS has also picked up quite nicely. On diabetes, the base is small. So we've had a bit of a shrinkage in the antidiabetics, but given the fact that we are going to have some product introductions in the next 2 quarters on a couple of diabetic APIs, we expect to bounce back on the diabetic segment as well. So these 4 segments that we are sort of working in are delivering pretty nicely. And our pipeline also follows that as well. So it's working well. I mean, there are other -- in the newer launches, we've got some new GI drug -- we've got a GI drug and so on. And so that -- this is also going to help in a big way. So overall, I think therapy areas are doing pretty well, and they'll continue to track the way we sort of built it out.

Yes. One thing I can just clarify, so when I back calculate CVS, the cardiovascular has declined this quarter, 13%. Is that the sartan issue you're talking about?

Yes, Shyam. I would say both the sartans that we work on, olme and telmi. So olme was a little bit demand -- there were demand issues there, mainly driven by the U.S. market, okay? And telmi has been more a result of a supply side issue where we were not able to get enough raw materials. And in certain cases, we took a fall on not taking because the margins would have gone into negative territory, so we figured we won't do it, right? So those 2 have had an impact on the cardiovascular.

Got it. Second question is, again, just broader. We have had success on...

Sir, may we request that you return to the question queue. The next question is from the line of Anish Moonka from JST Investments.

Sir. So we are effectively increasing our capacity by 90% by the end of FY '23. However, given the R&D work that we have done in the last few years and the higher complexity of the latest molecules that we are planning to tap, can we have a revenue growth which is much higher than 90% once the capacity reaches optimum utilization? Also, it would be helpful if you can talk about our R&D pipeline and the upcoming launches.

Okay. So Anish, on the -- in the API business, right, let's remember one thing, right? I mean, as soon as we need to build capacity and it takes time, right? But as soon as the capacity comes online, that's not going to translate into a business because what happens is if we -- because we can't sort of bring capacity online very quickly. It takes about 1 year, 1.5 years to sort of get things in order because there are many sort of -- it's basically the build, okay, that takes that time. On R&D, see, our focus is threefold, okay? So while we have the higher-end APIs like in iron complexes, right, we also have the regular -- focus on the regular sort of generic APIs, which has also -- which is also continuing at a pretty fast clip, okay? The other -- the third piece in R&D is the CIP, the cost improvement projects, right? So when I look at all of them together, right, in terms of what is going to deliver first, okay? It's the CIP projects that keep kicking in, in terms of giving us a better position on the base business. The second piece is the regular developments that we are doing for the newer APIs. And again, that has a sort of monetization or a launch time line from 2023 all the way to 2027, '28. So this is a sort of 5-year or a 6-year window that we track with these APIs. And then the third one, which is the more complex APIs, again, will depend on its time line in terms of when the patents expire. So hopefully, it will give you -- this gives you a sense in terms of how R&D is tracking along with the commercialization time line. Does that help you, Anish?

Yes. Sir, just to reiterate the first part. So with the capacity that is coming online, can we generate higher revenues from the same capacity once those complex molecules start coming in by FY '23 or FY '27?

So Ashish (sic) [ Anish ], if you refer to our investor presentation, a large part of the capacity addition by '23 is towards the backward integration. So that is towards supply chain security for some of the KSMs that we'll currently outsource. And also in the process, drive some margin improvement. So that's not a capacity addition towards the top line improvement, that's the capacity addition towards supply chain security and margin improvement or margin reduction.

Yes. Fair enough, sir. So my second question is, so a lot of our customers are talking about the increased pricing pressure they are seeing in the U.S. market, which will continue to be in the foreseeable future. How is it that we are able to consistently pass on the increased raw material pressures in this tough environment and maintain our gross margins?

Anish, it's not that we are able to pass on everywhere, okay? Only certain APIs with certain customers, we are able to do it because, one, is we have those fairly stable, healthy relationships with them, and they understand that they are under pressure. So margin has taken a hit. It's not that. The helpful thing this quarter was CDMO did much better, right? And CDMO margins are higher. So I think it was the mix of some price increases, CDMO business, that has helped us to keep the margins going. Plus, there was no Fabi. So normally, Fabi plays a drag on the margin. And so that has helped us, okay? All these factors put together. But pressure is there, okay, on margins. I don't want to -- I mean, like I said, we are not different from the industry. The industry is facing similar challenges across. We just happened to be a little fortunate in terms of our mix in terms of portfolio, that is giving us an advantage. And these 3 issues that I mentioned have helped us in the quarter.

[Operator Instructions] The next question is from the line of Nitin Agarwal from DAM Capital.

Yasir, on the business, given the dynamics which have been there in the macro environment this last couple of quarters, are you personally seeing any changes in the landscape in the -- any changes in the competitive position of players or the way customers are perceiving the suppliers? Are you seeing any changes in the environment?

Yes. Nitin, for sure, right, I think that customers are looking for stable supply, right? Because while they have challenges on the pricing side on the front end, right, it's good to have stable suppliers backing them up. So this view that we've always taken in GLS, right, is that let's not disturb the customers too much, okay? Because they have -- like I said earlier, they have bigger challenges than us. So this is helping us, okay? Customers -- the reliance that customers have on Glenmark Life Sciences for API, I would say, has probably gone up a few notches, and that will certainly help us to sustain those relationships in the longer term, right? Because we've not been aggressive at all with our customers. It's been a very sort of mutual understanding, dialogue-based kind of work that we are doing with them. So I believe that this will help us even with newer projects that we are seeding with the same customers, and these are big customers. You know we work with many of the big customers in the generic side. So just the fact that we are getting so many new projects also in terms of seeding and so on, that confidence is definitely coming into play.

Right. And if I would just take it forward, any meaningful changes that you've seen on the customer side also? Given the pressure that you said the customers are facing, is there a consolidation happening at that end in terms of market share? Are you getting higher volumes for similar products from the larger customer?

Yes. See, one good thing, again, for us, right, is our customers -- our top customers -- in fact, most of the customers have not lost market share. The only place where we had a challenge was on the olmesartan in the U.S., okay? That's the only place where we've seen that the customer has not been able to keep their footing in the market. And it's partly because of competition, but partly also because a strategic decision to sort of get out of the sartans. It's not, again, our inability to support them. It's more that it's a conscious call because sartans have had various issues, right, in the last 2, 3 years. And so they have taken a conscious call and step back saying, "Okay, you know what, we don't want to do this."

Right. And lastly, from the way you're looking at the industry, the way dynamics sort of playing out on various cost front, is it fair to say that Q3 or maybe H2 2022 pretty much should mark the bottom of this pressure cycle on margins and revenue growth for the industry?

I'm very hopeful because the big contributor, right, to this whole cost thing has been solvents. The other big contributor has been energy, okay? Now while there is -- and energy plays out not only on the operating side, but even on the more basic raw material side. So if you look at things like caustic, okay, caustic used to be like INR 22 and is now INR 70, okay? I mean -- and caustic is used in large quantities, right? The same thing goes for phosphorus, for iodine, for so many basic materials, right, that we don't directly use, but then our suppliers use. So on the solvent side, there is some stability now and things are beginning to go down. Except for a couple of solvents here and there, things are on the downward trend. On the energy side, also, hopefully, with the European situation and all that easing off, right, and the winter going away, I believe that we'll be in a better position with respect to energy prices. So your sort of prognosis on H2 being bottoming out is, I think, the right thing, and I'm very hopeful -- we are very hopeful that that's the way it's going to play out.

[Operator Instructions] The next question is from the line of Shyam Srinivasan from Goldman Sachs.

Just I was trying to ask this question earlier as well. Fabi is where we have had success. So if we were to look at the oral COVID antiviral space, there are newer molecules now that are there. Both Merck and Pfizer probably will be looking for additional API suppliers. So just your thoughts on that space? Are we -- have you developed these 2 key molecules? And is there something else that you're working on, on the antivirus?

Okay. So Shyam, on Molnu, right, we had developed the process and it was ready. But then there are 6 players already in the market. Many of them are backward integrated, right? And the demand has not been there at all. So while we have the API, we are not doing it commercially, right? On Paxlovid, the Pfizer molecule or other -- it's not a single molecule, it's a combo, right, with ritonavir. So on that, we have applied to MPP for a voluntary license. So we haven't heard yet from MPP. There was a query which came, which we answered about 3 weeks ago. So we expect that a decision on Paxlovid will come soon from MPP. This is Medicines Patent Pool, okay? And then we take it from there.

All right. Very helpful. Just in terms of just looking at CapEx, and you've actually talked about all the projects that are there. So are we comfortable to -- in terms of our internal accruals and the path forward there is no requirement for that. So just want to understand capital structure, capital allocation priorities for you?

Okay. See, the bulk of the capital will go for capacity, okay? I mentioned in the opening remarks that Solapur, while it's going to be a big site for us and is going to sort of help us for the future, right? If we slow down Solapur a little bit, it's not going to hurt us big time. In fact, it's not going to impact us at all. But given the pace of backward integration that we need to accelerate, we have taken a more aggressive position in terms of the buildup at Ankleshwar. So initially, we had planned 250 kiloliters, but we can take it to 400 kiloliters in Ankleshwar, okay? And that's what we are doing now, okay? So there's just been a bit of adjustment for us to take care of priorities that are more pressing now, especially on the BI side. Dahej is on track. The only thing is Dahej has experienced some COVID-related slowdown because, at the peak, we had 500 people working in our Dahej facility on the project, and we could not sustain that kind of manpower for the project when the COVID happened. So as a result of that, Dahej has been -- has slowed down a little bit, maybe by 1 quarter for -- 1 or 2 quarters -- 1 quarter for the first phase and then we'll see how the second phase goes, right, on that. So capital allocation, mainly for CapEx, we are doing something on R&D, okay, in order to bring in some newer technologies. I mentioned, flow chemistry earlier, right? There are a few more in terms of having more advanced systems for solvent recovery, okay? Membrane systems, especially. And there, we might make some investment on the improvement in solvent -- for solvent recovery. We are working on that as well. But that's not going to be very big. Apart from that, Bhavesh, nothing else, right?

Yes.

On the capital allocation? So that's it, Shyam. I mean nothing more than that, but it's capacity and the quality of capacity and what that capacity is going to be used for is where we are going to be focusing on.

Yes. So Dr. Yasir, I was extending the question? All led by internal accruals and you don't need external capital, external debt...

Yes, yes.

Yes, yes. I mean our cash position is pretty strong, I mean.

Perfect. Perfect. And last data point, Glenmark, how much is the parent contribution this quarter?

Yes. So it's 41% -- it's 41%.

Yes. Dr. Yasir, so this should gradually continue going down, right, fiscal '23, '24. Is that how we should look at it?

Yes, Shyam, I think you used the right word, and that's gradually, right? See, there is no artificial effort to reduce the GPL contribution simply because it's a good business, right? And we continue to sort of have -- I mean, this quarter, even without having Fabi, we had this because there are 4 new launches right, that we are working on overall plus 3 new product reintroductions. So that -- these kind of things will happen. So we expect it to go down, right, gradually. Right? FY '23 should see some. And then in the next 3, 4 years, we'll sort of -- it will taper off more. Now not because pharma is just reducing their take, but it's because the other growth is going to be more than what Glenmark Pharma's requirement is going to be. That's how it's going to naturally kind of taper off.

We'll move on to the next question. That is from the line of [ Ajit Kumar ], an investor.

Sorry. My question is already answered. So I'm good.

[Operator Instructions] The next question is from the line of [ Saurav B.] an investor.

Sir, I just had one question. On a long-term sustainable basis and next 4, 5 years, where are the margins where we see because I understand because of the raw material and solvent pricing pressure, the margin has come down to around 28%. Two years back also, it was in a similar range. So can we see the EBITDA margin around 25% to 27% on a long-term sustainable basis.

Saurav, can you repeat your question? I'm not sure I understood.

Okay. I'm asking about the EBITDA margins. In the medium term from last -- in the next 3 to 5 years, on a sustainable basis, can it be in the range of 25% to 27%?

Yes, yes. Comfortably.

Okay. Because I saw the drop this quarter. I understand it was because of the raw material and solvent pressure. But in the long run, it would be maintained, you're saying around 27% to 28%? Or it can be higher as well?

Yes. Because see, the thing is that, one, is we don't expect the market to go up and then not come down, right? I mean this whole thing on solvents plus raw materials driven by higher energy prices, right, and some shortages has created this situation. But it's not something that will -- it's not a new normal. I mean, I hope not, right? I mean, whatever indications we are getting basically says that things will come back. Now will they come back to similar levels? We don't know. But even if they come down, right, to a better level, it -- so our margins will be impacted positively there. But then we are not sitting and waiting, right, for that to happen. We -- like I said, we are investing on better solvent recovery systems, both on the R&D side as well as in the plants, right, to have better technology as well as more capacity in solvent recovery. So that, we are not going to sit, and we'll reduce our overall solvent dependence to a lesser level, okay, than what it is today. So we'll take that step. So we'll mitigate, that's one. The other thing is this whole backward integration that I just talked about earlier, right, in terms of reallocating CapEx more towards the backward integration that is happening at Ankleshwar. So we've already got 4 projects there in the pipeline that we are geared up to backward integrate. And then our target is 2025, API is backward integrated in the next 2 to 3 years. So once we backward integrate, then the margin profile should improve because we'll be basically capturing more value by going back.

Okay. Okay. Understood, sir. And just one more last question. Sir, when can we see some revenue generation of the oncology and iron products?

Yes. So see, iron, one product will be commercial as soon as the customer gets approval, they have filed. And oncology will take a little bit of time because we have paths. We are basically doing the validation batches for exhibit quantities for the -- for 3 of the projects for our customers. And that will happen in April when our onco block in Dahej is ready. But commercially, we'll see.

Okay. Okay. Got it. Sir, just if I can squeeze in one more. Sir, in...

Sorry to interrupt Mr. Saurav.

Okay, I'll get back in the queue.

The next question is from the line of Prateek Chaudhary from Saamarthya Capital.

Sir, on the solvent side, could you dwell a little more in detail as to whether it was just a one quarter phenomenon? Or was it continuing for maybe last several quarters? And like was it caused by the current -- the Chinese shutdown due to Olympics and the New Year? Or are there other reasons? And what's the trajectory going to be?

Okay. So on solvents, it's not this quarter, Prateek. We have had this problem now for the last 3 quarters. The only difference is that there was an inventory effect. So we had a better cost inventory in the earlier quarters, right? So that impact was a bit muted in the first, right -- in the first quarter and partly in the second quarter. But this quarter, we've got fully hit, okay, on the solvents. Now solvents is not completely China-driven, okay? Solvents is more of a universal kind of phenomenon. There are suppliers out of Europe. There are suppliers out of China, and there are suppliers out of India also. But given the kind -- and then there is -- for some solvents, there is a dependence on crude also, okay? So the more sort of hydrocarbon-based solvents like hexane, heptane, to some extent, toluene has got a hydrocarbon-related thing. Methanol is more gas related, okay? I mentioned to you, right, that methanol prices in an earlier discussion or maybe today that methanol prices last year used to be around INR 22 per liter. It went up to INR 45, okay? So double. Now it has come back to around INR 37 -- INR 36, INR 37, and it's kind of staying there, okay? So while things go up very fast, right, when it comes down, it doesn't come down at the same rate. Okay. So this is the dynamic around solvents, right? And then there is the -- so -- and then there are some solvents like THF, tetrahydrofuran, okay, it used to be about $1.8, right when in -- in better days about a year back. But then it has been climbing and climbing and climbing and now it's almost like $7 -- 7 -- between $7 and $8. So this has gone up 3x, 3.5x, okay, compared to what it used to be. That has not come down, by the way, THF. Now THF is driven more by supply shortages, partly out of China and partly out of Europe. Okay? So again, I mean, it makes a lot of sense for us to reduce our dependence on THF, which we are doing and also recover and recycle much more so that the overall dependence on these kind of solvents that go a little -- go really out of whack, right, is taken care of.

And what would be solvents as a percentage of the total raw material cost, rough estimate?

Rough is about 11%, 12%, Prateek, in our overall cost.

Okay. In your overall raw material cost, you mean?

Yes.

The next question is from the line of [ Abhishek Nagpal ], an investor.

So my question is on the customer data. So do you have the details in terms of the number of customers that have been added?

Sir, we are not able to hear you clearly. Your audio is sounding very muffled.

Is it okay now?

Slightly better, sir, please proceed.

Okay. So my question is on the number of customers. So do you have the availability of data in terms of how much additions in terms of numbers, the customers have been added this quarter and how many customers that had not given the orders this quarter?

I don't know the answer, but I can try and give you an idea in terms of how big the base is. So we have about -- okay, we are in about 65, 70 markets commercially. And easily, we would be having about 500 to 600 customers. So not every customer sort of places orders every quarter, okay? But to give you a more sort of qualitative answer, but hopefully, to give a sense, we are adding a lot more geographies, which are bringing in new customers, plus in existing geographies that we are pretty strong, we are adding new customers. So our LatAm market, Japan has been doing exceedingly well on account of the addition of new customers and new projects with existing customers. So hopefully, Abhishek, I can sort of -- but I don't have the exact number. And its not...

Yes. Got it. Got it. Sir, any budgeting numbers you have in terms of towards the marketing plans for adding up the new customers or to add up the new geographies?

Yes. So see, again, here, again, it's a kind of, I would say, a three-pronged approach, right? So new geographies, which will bring in new customers, obviously, right? Because these are all pharma companies, okay? Then additional projects within the existing customer base, okay? And then the CDMO expansion, okay? So these are the kind of on the customer side, the levers. And then the products that we are developing are for all markets, right? So we are not developing for a particular -- in very rare cases, we develop for a limited set of markets. But typically, we are developing across markets. So again, we can offer more to everyone, to all our customers.

The next question is from the line of [ Surya ], an investor.

Thanks for giving me this opportunity. Can you explain about CDMO expansion for long term? When can you treat...

Hello?

Am I audible?

Ladies and gentlemen, the lines of the management has got disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir. Mr. Surya may we request you to repeat your question for the benefit of the management team.

Can you explain a bit our CDMO expansion for long term when we reach up to 20 to 25 percentage of revenue scale?

See, 20% to 25% is a long shot, okay? Because I can tell you that by FY '26, we probably will be more like 15% of overall because see generic is also growing, right? Now the good thing in CDMO is that many times, you do get a lot of upside, okay? So today, we are at 3 plus 1, 3 commercial, 1 in the pipeline. But given the way things are going, I'm pretty confident that by FY '26, we'll end up having 7, 8, maybe even 10 projects, okay? And that should give us about 15% market, revenue contribution from CDMO. That's what we are taking, okay? But there could be upside. So 25% is a little bit -- it's on the higher side that what we have factored.

And my second question is what about our share price.

That depends on you guys. I don't control that, right? Company is doing well, right? Company is doing well. I mean you are seeing consistent performance, very strong fundamentals in terms of customers, products, profitability. So I can't comment on what happens to the share price. That will depend on how people perceive us.

And my last question, sir, about any USFDA inspection in near term?

See, we were inspected -- our Ankleshwar site was inspected in July of 2019. Okay. So this year in July, we'll be completing 3 years. And our -- and that was VAI. And then we had our Dahej side inspected in November of 2018, so that we have crossed 3 years. So we could expect an inspection. We are -- obviously, that's on our radar, right?

Sir, my last and final question, sir. When can we increase our revenue means double our revenue between 2, 3 years, is it possible?

I don't know. I mean we are already -- I don't think -- Mr. Surya, I think I will skip that, right?

And about any updates on new launches, sir, commercial?

New launches, yes, I told you, right. We are having 4 launches this year and 3 product introductions, reintroductions. So this is in the major markets. In the smaller markets, we've got a lot of new launches that are coming up, maybe almost 14 or 15 new launches, in total.

Thank you. Ladies and gentlemen, that was the last question. On behalf of Glenmark Life Sciences, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.