Caplin Point Laboratories Limited (524742) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Caplin Point Laboratories Q3 FY '22 Earnings Conference Call, hosted by Batlivala & Karani Securities India Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Alka Katiyar from Batlivala & Karani Securities India Pvt. Ltd. Thank you. And over to you, ma'am.

Thank you, and good afternoon, everyone. On behalf of B&K Securities, I would like to welcome you all for our 3Q FY 2022 Earnings Conference Call of Caplin Point Laboratories Limited. From the company today, we have with us the senior management team, including Mr. C.C. Paarthipan; the Chairman; Mr. Vivek Partheeban, the CFO (sic) [ COO ]; Mr. -- Dr. Sridhar Ganesan, the MD; Mr. D. Muralidharan, the CFO; and Mr. M. Sathya Narayanan, Deputy Chief Financial Officer. I would now like to hand over the call to the management for their initial comments. Thank you. And over to you, sir.

Thank you, Alka, and Rohit. Good afternoon, everyone. Welcome to our earnings call to discuss Q3 and 9 months for the financial year. Please note that a copy of our disclosures is available on the Investors section of our website and also the stock exchanges. Please do note that anything said on this call which reflects our outlook towards the future or what could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. With that, I would like to hand over the floor to our Chairman for his opening remarks.

Good afternoon, ladies and gentlemen, and welcome to our earnings call. You are aware that Caplin has been growing at a very healthy clip. Probably the best proof is that we generated a cash profit of INR 1,000 crore in the last 3 years and 9 months. And you are also aware that the sales is in the region of INR 1,000-plus crore. So this is something of a rarity in the midst of our peers. This clearly shows our business in LatAm, that is Latin America, is not a pedestrian prose. We, in fact, had to put up with many putdowns. However, at the end of the day, the results really speaks of what we have today. We went to LatAm in the early 2000, and I still remember when I met actually the same pharmacy owner who asked me what exactly your strategy and we told him, we would prefer to catch up to the bottom of the pyramid than the lower end of the pyramid. For which he said, if you try to catch up to the [ BOP ], you'll become part of the [ BOP ]. What I found out that if you become a success in any business, the moment you become success, most of the people will ridicule you. They will try to either copy you or they will become your customers. This is what has happened actually to us in Central America or Latin America. When others look at who we were, we looked at who are essentially the customers and we also designed a business model, which represents our estate velocity and the critical mass that we have today. It is needless to say that we have replaced the importers and created an end-to-end business model in the 6 countries. As you are aware, we not only manufacture our products, but also we distribute it to the last mile, thus eliminating the intermediaries, hence, create [ in an effort ] free cash flow for our company. Our future focus would be at the 6 major markets from the 6 smaller markets where the business model will be to replace the distributor wherever necessary. Let me again repeat: we have replaced the importers in the smaller geography and we will have planned to replace the distributors in the bigger geographies. The 6 bigger geographies are U.S.A., Mexico, Brazil, Europe, South Africa and CIS countries. Coming to U.S., I would like to give you some statistics, which would help you to understand although this is the #1 country in the world, this is also a country where there are people in the form of uninsured, 13%; underinsured, 18% to 21%; and 29% of adult Americans feeling the pain of the cost of the generics. That clearly shows that we have opportunity in the second and third tier market. Then Mexico. Coming to Mexico, it's a country, which is the backyard of U.S. and is also the adjacent country, Central America. The culture and the product portfolio, which I have seen in this part of the world is very similar to Central America. And there are 2 major markets, one in the form of institution and the other one in the form of private market. Most of Indian companies, they're participating in the 2 major trends there. And the rest of the business that they do is in the pharma brand marketing. We identified a niche place where we would like to actually replace or replicate the distributor, which would give us enough volumes in the years to come. The third market is Brazil. Brazil is the largest market in South America, and we already received the online approval for our facility. We are in the process of filing our dossier. This is one country where the entry barriers are quite high. And then the model to register in this country is something different from other countries. We have to have an importing laboratory to register your product. So we identified a consultant. We at the same time identified the company which has got this importing laboratory and they would complete our registration, hand it toward to us for a cost. Then Europe. You're aware that there are 2 sets of Europe. The major one are the 5 mainstream markets in the form of Western Europe and you also have Eastern Europe. We will do the business at a later date in the Western Europe after we complete our API and formulation so that the advantage will be when you start manufacturing from key starting materials, intermediates, API, underneath you have a front-end process. If you participate in a tender, you would become -- actually you'll have a level playing field like any other big company. At least the big companies' [ hedge ] may be higher. At that point, we will be in position to be competitive compared to the big boys also. And initially, the moment we complete 2025 products maybe 2 to 3 years from now, we would like to create warehousing model, which we have done in Central America in the Eastern European countries, which are smaller in size. Then coming to South America. You are aware the third largest population in South America is Indians. And 6, 7 years ago, when I went to this part of the world, I've been to [indiscernible], where I would see a lot of Indian doctors and chemists. And they, in fact, they told us, the doctors, in fact, whom I have met, they said they not only prescribe they also 50% to 60% of the products we dispense with. That clearly shows that the company, which can create your warehouse can actually supply not only to the pharmacies, distributors in partnership with the doctor. This is an opportunity to have. We will identify the company, and that company will do the registration. And this is also something similar to Brazil. Finally, they'll hand over the registration to us. And many companies -- in fact, 2 big companies have done the same model. Once they wanted to go for commissions, they transferred those registration in their name after paying the cost and then started their own business. We would also follow the same. And finally, CIS. We already appointed 2 senior executives for our business for CIS. CIS consists of 2 different markets: one, the larger markets are Russia, Ukraine and Kazakhstan; and the rest of the markets are something similar to Central America. So we will do stock and sale in the ROW market. And the 3 markets where the entry barriers are quite high we will start our registration. It may take 2 years. However, Russia is one country where there is still price erosion unlike most of the bigger geographies. So this also will be a good opportunity for us. The 2 guys who joined us have worked actually in a company from Delhi, and there, we'll bring -- they have been working in this part of the world for the last 15 to 16 years. Now the most important in the form of employees first. Keeping the concept in mind we are offering attractive use of, so the leaders and managers have already started training actually the people. And training and coaching will create better awareness and skill set for the second-level and third-level employees. That will also ensure the attitude towards work and skills to do the work. Whereas the ecosystem in Tamil Nadu has not been extraordinary, which is something similar to -- and Tamil Nadu is known for automobiles. However, we are creating an environment and rolling it actually for our industry. And attraction of employees by a way of actually not only giving what exactly they wanted, we also offered them [ Freedom, Respect ] and ESOP, which has made us actually to be a very unique player among the pharmaceuticals in Tamil Nadu. And it will not be out of place to mention today that we have become the #1 company in Tamil Nadu. This is a company, as you know, which is a turnaround story. By 2006, our INR 10 share was quoting at INR 0.95. It was NPA. And we turned it around today. INR 2 showing -- INR 2 share is quoting at somewhere INR 800, I believe. And coming to attrition, attrition rate is minimized actually after we started offering all this best of the best. However, when a pot is stirred, not all the ripples respect the brim. Few always embark on an independent journey and we do not worry about this 1 or 2 swallows. Finally, we also know the story of employer -- employee and employer is something similar to envelope and stamps. It seems envelope told the stamp, stick with me, we will go places. Yes, we are set to go places. As I told you before, it's a turnaround story. Number 2, the only company to reach the current level in Central America by selling plain vanilla generics. Three, sustainable cash flow to take care of all the projects, all the CapEx and OpEx, without any debt. Four, we're also expanding to 2 major areas in the form of onco tablets and injectables and the facility for our OSD to the regulated market. Five, when you look at companies of our size, which are into injectable business, you will see most of the companies doing only contract manufacturings. In the [ mid top dose ], ours is the only company, which has already got 12 ANDAs of our own and we are in the process of filing more and more dossiers. So 2 to 3 years from now, we will also achieve the critical mass in the form of creating more number of dose, maybe 40, 50 doses. And we will have our own front-end persons in the U.S. Further, if you look at outsourcing of formulation from China, probably we're the only company who outsource formulation from China and export directly to LatAm when most of the companies are importing API from China to India. Currently, we stand at 39th place among the top 100 Indian companies as per the TORREYA report. Our goal is to reach within 25 companies in the next 5 to 6 years. Finally, I invite our shareholders to come and to visit us to see the tangible developments [indiscernible]. Thank you. Thank you very much.

Thank you, Chairman. So from my side, I will give a very brief review on our Caplin Steriles, which is the regulated market arm of our company. So the last 9 month sales has overtaken the company 12-month sales of last year. This is -- which is a quite different achievement for us, especially considering the situation, which was a bit of a stop/start kind of an environment during the first 4, 5 months of the year. And also, the last 3, 4 months, we've been under shutdown in Line 1 because we are adding capabilities to manufacture 3 filled bags, 3 mixed bags in this facility. Continuing on with the similar kind of progress into the next quarter, we are likely to finish this year at close to 50% -- 45%, 50% increase over last year, which we feel is a respectable improvement over the last financial year. Actually, we did the treatment of capitalizing our R&D assets, we were actually achieving breakeven by this year itself. But since we follow a much more conservative policy of charging off the R&D expenses, our cash flow breakeven is going to move into next year. We are very confident that it will happen next year. In fact, we are right now sitting on close to INR 135 crore, INR 140 crore worth of orders from this entity alone through our partner. As Chairman explained, we have 12 ANDAs approved on our own and a further 6 approved through partners. So from Caplin Steriles, we have about 18 approvals and 15 of these have been launched and the other 3 would be launched by the next 2 quarters. More than 50% of our products have achieved higher than single-digit market share, close to doubling the -- early double digits or mid double-digits. And the rest of them, we continuously engage with our partners to see how to increase our market share for these products. The good news we have also is that the first ophthalmic product has been approved from this facility. And this has happened without an inspection of the ophthalmic section. So basically, the manufacturing, selling, testing, et cetera, of an ophthalmic product is very similar to an injectable in the sense that both of them are sterile processes. And we would assume that given the good track record of compliance and given the good audits that we've had in the past, we've been approved without an actual audit taking place. So this also opens the door for our own filings to happen and also the potential to take on some CMO projects as well in the ophthalmic area. The other good news is we have filed our first product in China through our partner. This is a product that's only been approved in the U.S., and we have filed in China. Even though it is through a partner, it will give us a lot of good learnings about what the latest requirements are in terms of dossier filing and product approval when it comes to the Chinese NMPA. So we will be watching that space closely. In addition to China, we've also filed 5 products in Canada and another 4 more coming soon. Three products will go onstream in Australia quite shortly. So all of the non-U.S. progress also is taking shape right now. When it comes to distribution, we have signed 2 new distribution agreement -- we are about to sign, I should say, 2 main distribution agreements in the U.S., which have most of the things that are important for us, such as nonexclusivity, a nominal license fee and also majority profit share. And this will predate our entry into the U.S. on our own -- with our own label sometime in 2023 when we have more products under our belt. When it comes to filings, we will be -- we already have about 6 products under stability. We are continuously making space for more product exhibit batches to happen. We are confident that, by end of the year, we will have -- end of this calendar year, we will have about 12 more products that we will file in the U.S., of which 5 are of ophthalmics and 2 fall into injectable category. So this would augment our growth by end of 2023 and beyond, which is when I think we will start to see the real progress from Caplin Steriles. We are also looking at what kind of a business model we should be attempting for when we launch our own label in the U.S. As Chairman said, while it would be of importance to cater to the creamy layer, that will not be our initial strategy. We will be looking at how best we can do a hybrid model of targeting the second and third layer of sales in -- third layer of buyers in the U.S. while also at the same time trying to focus on what we can do with the creamy layer as well. So which brings us to the last point. When it comes to all of these products that are getting approved, how best are we going to commercialize them? How quickly are we going to commercialize them is going to be important. So we have embarked on a mega expansion project in Phase 2 of our plan, where we have ordered 2 new state-of-the-art vial-filling lines from Bosch. Generally, they are known to be the best-in-class equipment. We are also -- we've also ordered a prefilled syringe line from Steriline in Italy and a lyophilizer from Tofflon. All of these are going to come through by second or third quarter of this financial year. And we expect Q2 of next financial year to be the time when we will be able to take commercial batches out of Phase 2. We will be basically tripling our capacity from where it is right now, and we feel this is going to sail through -- I mean, this is going to let us sail through to '25, '26 and beyond and also have enough room for us to take some meaningful contract manufacturing business as well. Finally, we are working on some very interesting concepts when it comes to new drug delivery systems. We are in discussions with a party in the U.K. where we can make that available, hopefully, by '25 and beyond. So the larger idea, the larger strategy on our entry into U.S. and other regulated markets remains very much intact. And we also are hoping to support that by getting into backward integration on the API as well, which will give us a real boost when it comes to consistent supply compliance and cost of the product. So we're happy to answer any questions. Thank you very much.

[Operator Instructions] The first question is from the line of Nikhil from Galaxy International.

And congratulations on a great set of results. I just have for a couple of strategic questions actually. The first one was that we are setting up our own API plant, right? So are we actually looking to sell the APIs to customers also? Or is it only for internal Caplin consumption?

Okay. Can I go ahead and answer or you want to add some more questions, Mr. Nikhil?

Sir, I would just add maybe another 1 or 2 questions then. So the second question was also, depending on the answer for the first, the thing is -- in injectables as I understand, the volume requirement for API is very, very small and we are saying that we will go and do the backward integration through the initial QSM. So will it be cost competitive and economic for us to go ahead and do that, right? Because the volumes are generally very, very small, right? So that is linked to the first question, sir.

Shall I -- is there anything else, Mr. Nikhil? Our idea for going for an API plan is for captive consumption. As you rightly said, it's not easy to create a plant at this stage and cater to the local market or export in a big way. But what will help us is to go for kilo labs mainly for our own injectables in U.S. and also for our -- the future plant, especially the one which we are creating for the oncology tablet and injectables. So we'll have 2 kilo labs mainly for the captive consumption.

Yes. Just to add, the second question. I think you were talking about the injectable API being small, which is very much true. So while this will be important for us to have a good cost position in the U.S., I think the more important aspect is continuity of supply. Today, most of the generic injectables, when it comes to pricing, I think there is not too much that separates anyone that is able to supply a product to the U.S. So what makes a differentiation factor for us would be the fact that we are able to continuously supply without any break. So for that, we need to have our own API where we can go bravely to a buyer and then we say that the next 3, 4 years I have my API secure. So more than cost, there is a continuity factor. And number three, our compliance will be in our hands, right? As you have seen in the past, we have had a very good track record of compliance at all our plants. And we want to make sure the same is extended from our API plant as well because, obviously, internal compliance issues from a third-party API manufacturer, your product also cannot be in the market, right? So there are multiple factors -- multiple benefits as to why backward integration could be beneficial for the company.

Yes. Sir, I understand that point. The only thing was that we are doing, let's say, around 45 injectable products for U.S. in our pipeline and already developed. And then if you look to kind of in-source all of those APIs, it would be a very complex affair. That's the whole thing. Maybe it ensures continuity of supply, but it would be very complex for the team to actually manage. So that's a -- it may have some challenges. Maybe one way could have been that you have a strategic partnership with a API supplier of repute. So that's the thought.

Mr. Nikhil, I would like to give you an answer and then I'll ask the COO also to add something. See, business is simply the toughest occupation for a first-generation entrepreneur. We started from 0 and then we have come to a stage where actually we are also considered as one among actually the top 100 players of the country. And now that we are in a position to attract actually the best of the best talent, although we agree with you, there are complexities involving any product which is technologically superior, we are sure that we'll be able to handle over a period of time. it's not that we are going to do everything at one time. However, I'll ask the COO also to answer to your questions, please.

Yes. Exactly. As Chairman was saying, we will not be going for backward integration on all products. In fact, if you see some of the very successful, especially injectable companies that also have some level of backward integration, you will see that around 30%, 40% of their API have backward integration -- sorry, formulation products have backward integration that [indiscernible] they buy from outside. Now obviously, there are some API that will require in hundreds of KGs and that's not something that we want to do on our own. There are products where the supply itself, a number of people are very small, there might be people that are already exclusively integrated with someone else. So there are multiple factors that go into our decision of choosing which API to do backward integration for. It might also be a cost. It might also be our position in the market where if we have, let's say, 15% right now and we want to make sure that we cement our position at that level, then backward integration will be important. So in a nutshell, we will not be going for all the products. We will definitely pick and choose which ones that we want to go backward for. And finally, the deciding factor also could be that if there are 15 people already that are supplying API for that product, we will not bother with it. We will take it from outside. And also, as Chairman was saying, I think it is important to look at it on a long-term basis especially given our expansion into the oncology space as well. So this place that we are looking for -- the place that we are evaluating right now, it also has a separate block, which could potentially be converted to do oncology APIs well. Of course, this we have to evaluate over a period of time, but initial signs look like it is possible to do oncology and general category API from that place.

And I would like to add one more, Mr. Nikhil. If you look at the success of actually, most of these oncology players, they all have APIs. We know that API presence is not easy for us to actually facilitate especially in the oncology front. That's also applicable to the injectables, too, because, as you know well, these 2 areas are very niche. We don't see many companies that are into injectables, especially general injectables and the oncology injectables in the U.S. market. We will see many people who are into OSD, not into the specialized areas, which means we have to have better control that alone can actually sustain as for other countries can supply for our own products, too.

The next question is from the line of Ashish Thavkar from MOAMC.

Yes. Sir, between ROW and the U.S. market, that is U.S. and non-U.S. market, which market are we focusing on? The reason why I'm asking this question is, typically, the non-U.S. markets generally have lower gross margins than the U.S. one.

Yes. So the focus here, as you know well, has been there for the ROW market, especially in the Latin American market, for the last 15, 16 years. So that has already created a stickiness factor. Even if we see a brand marketing, the representative has to go to the doctor regularly and remind him to prescribe. But if you are in a market for the last 10, 15 years and if you have created actually a good quality product with the best price, especially to the lower and the -- lower middle class and the bottom of the pyramid, you don't need any prescription. Your product becomes the prescription. And they bring the products, especially the strips which have been used, showing to the chemist and they buy. So having created the stickiness factor, we sincerely feel in addition to our own people who have been taking care of that business, that our focus has to be shifted to the larger markets now. And it must be out of place to mention one more thing, which I told even in my board meeting, I happened to see the video of the Taj Hotel Mumbai blast. I was told there were 600 employees at that time, 600 guests and 500 room guests and 600 visitors. When the blast happened, the people took actually the guests out and they didn’t stay there, especially the employees, they came back. And the Harvard professor who wanted actually to understand the case study started checking with everybody, including Mr. Tata, and they were not in a position to give the correct reply. But he went down under and then he checked with the HR guy who said we made it a [ priority ] to select the boys from small towns. This has become a big success to that particular institution. Out of 34 people who died, 50% of them are their employees. The idea of telling this actually, although we are a smaller company, what we have done is actually we selected people from the smaller villages and the smaller towns. That created the extraordinary grit and gratitude along with the promoters of the company. So now the people who are there, they are enough to take care of it. These are the people who were not in the position to earn even INR 5,000, INR 6,000 in India. They are all earning $5,000 to $6,000 in addition to what actually is the actual spending that is being borne by the company. So the gratitude and the grit, which I said. In Chile, of course, people were very hesitant because [indiscernible] these smaller markets when we go and replace the [indiscernible], that results in a physical risk. We brave the physical risk as a family. We showed the way for our people that there is nothing. Even today, one of the family numbers, that's my son, who manages the whole show there. So the next level is actually the creator is always the promoter. The producter is always the professional. Now you move the professional, move to the bigger geographies and use some of our ideas which we still feel is valuable, so that they know the outcome will also be palatable. Yes, please. Yes, Mr. Ashish, is there anything you want to ask?

Yes, yes. Sir, and are we planning to set up our own front end in the U.S. .

Yes. I would request actually the COO because he's the one who signed in that area. You bring the question to him for correct reply.

And also if you could share by what are the time lines?

Yes. So at this point, we have 12 products that are our own. And half of these products, we have signed exclusively with a partner in the U.S. Now this exclusivity will start to run down sometime by 2023 and '24. In addition to this, we have, as I was saying, 12 products that we are going to be filing this year. We have 3 products already under review with the FDA with the target dates that are anywhere between April to September of the current calendar year. So by this time next year, we'll have the structure in place for our entry to the U.S., but actual sales, et cetera, we feel that by middle of next year we can launch our own label over there. Yes. So you can say it as middle of next year. And I would just like to make one small note on your initial question, you said that the ROW markets' margins are usually lower than U.S. The point is correct. But in our company, if you see, because of our business model of eliminating the middlemen, our ROW margins are well above the peers. If you could do some comparison, I think you will find that out for yourself, which is a credit to the business model that we operate on right now.

Yes. I would like to add, sorry, in fact, actually, I couldn't absorb -- I couldn't process what you said better. In the course of my speech, I said actually that in the last 3 years and 9 months, we have -- we generated the cash profit of INR 1,000 crores for the business, or say, INR 1,200 crore or something, INR 1,100 crore, sorry, last year. I don't think this is something very usual with PS. This is something, a rarity. I think that will give you the correct kind of [ times-wise ].

And sir, have you broken even at -- in the U.S. business because I guess we have invested around INR 120 crores, INR 130 crores initially, right, 3, 4 years back. So in terms of cash flow, have we broken even?

Are we talking -- please, please go ahead.

Yes. On the investment, it's much more than that. As you know, we have invested into both CapEx and the R&D over the last 5, 6 years almost. But in terms of a breakeven, as I was explaining during the course of my initial comments, when you look at the business with -- as is, without the R&D and the assets that we are filing, then on a cash flow basis, we would break even at the end of this year. But at the same time, we are following a very conservative model where we charge off all of our R&D expenses. So we feel confident that next financial year, we should break even in a wholesome level.

Mr. Ashish, I would like to add one thing here. If you look at the injectables space, the generics space in the U.S. too, the top 2 companies, which were #1 and #2, today where actually they are no more #1, #2. They've got business [ fatigue ] already. That clearly shows generic is a model where there is nothing in the form of creation of monopolies, unless you have some extraordinary business model differentiation. And most of the products, actually, it really becomes generic for a period of time. So once you look at it actually, there will be a time even if you don't break even now, you would be in a position to get into that space because what is important at this juncture is to actually withstand the pressure in the form of the amount of money one spends on the R&D and the operating costs and the expansions, which is definitely possible considering our cash flow. So it's not the breakeven, what really matters is the way in which you want to grow and the kind of resources which you have, right, from people to money. Yes, please?

Okay. Okay. Just one question before I get into the queue. And since we are like targeting around 25 to 30 products in the premixed bag line, is it possible that some of the products will be converted into premixed bag formulation? And if yes, would this premixed bag formulation business be at a similar EBITDA margin level just today?

Premixed, Vivek.

Yes. So the premixed pipeline, we have about 10 to 11 products. So overall, our pipeline is more than 45, 50 products right now, of which 10 to 12 of them are premixed bags. Typically, the competition in premixed bag is lesser than vials. In fact, in India, to the best of my knowledge, only 3 companies have premixed bags, us being one of them. So we feel that the margins in premixed bags are higher than regular-wise. But of course, on the flip side of it, we've recently found that the cost of freight has gone up significantly. I'm talking about 3 to 5x in some cases. So for a brief period till a certain level of normalcy comes back in that, I think there'll be a little deflation, but compared to regular vials, I think there is still a fair percentage more realization on the premixed bag.

And how would this stack up against our current consolidated EBITDA margin? Would that be a bit lower or in line?

So our EBITDA margin, which you see right now, on Caplin Steriles' business still is in direct. So that does drag it down a little bit. The minute you have overall breakeven on the company, just by virtue of that actually, you will start to see higher EBITDA margins. So if anything, I think it will -- it can only go up from here is our understanding -- is our suggestion.

The next question is from the line of Girish Bakhru from OrbiMed.

Just carrying from the previous question, how much is the addressable market for these 12 products in premixed?

I don't have the numbers right now. But many of them, if you see, there's only about 2 to 3 players. A couple of them have only one. But I don't -- I mean the exact split of the premixed bag, I don't have right now.

These are mostly oncology products, is it? What products?

No. These are general category products. And usually -- okay, let me explain. In the U.S., how it happens is anything that is above, let's say, 40 and 50 ml, there are -- it used to be a long time ago in bottles, glass bottles or plastic bottles. Today, it is in bags. But at the same time, recently, what has been happening is that why we call it as a premixed bag is there are some solutions that needs to be drawn out of the vial and then added into an infusion bag. So now there is a new concept over the last few years where the premixed is already available. So that the number of steps that a health care worker or a nurse needs to take is reduced. So the product directly comes premixed that can be administered at the hospital. So that's what's the concept of a premixed bag.

Okay. Okay. And I mean when you say 3 companies, I mean, I'm not sure if this is something that will attract competition in the future? Do you think more companies can eventually install these lines and this segment can get more crowded?

So of course, there is no way to say. But the one thing that we have seen for sure is injectables per se is a long-term, very, very expensive proposition. So even if competition comes in, we feel that it will usually be from the big boys, and that is not a competition that we consider.

I would like to add one more, Mr. Girish. In the next 15 to 18 months, we'll have 7 lines actually in our US FDA injectable plan, which means the variety and volume will also be high. Most of the customers what they expect actually is the quality first, next actually variety and volume. Whether if it's ROW market or regulated market, if I'm in a position to boost variety, then there is an opportunity for us to increase the price also. If the variety is low, then your negotiation capacity goes low. You will not be in a position to accumulate more money. So ultimately, the kind of products, first, it all starts with extraordinarily superior technology. So the big companies which are into monoclonal antibodies and all kinds of biosimilar stuff. The next top company if you would see, all the branded companies now. But again, if you look at the reality, even in the U.S., 90% of the prescriptions are generic. So the volume is big. And if you look at the number of factories that manufacture in India, especially companies which are going for their own ANDAs, I would say companies of our size is few and far between. So we have certain characteristics that would definitely make us actually to make good margins and grow comfortably in the years to come.

So that's where I'm a bit confused, because total pipeline right now is getting to 45, which is where we are also, you know, variety, and I mean bringing in these different formulation formats. So I'm curious to know, is the product selection for the sterile business more based on the fact what will give you attention from these distributors who would want to look at a company of your size? Or how is it exactly based?

A company of our size will not remain the same actually in the next few years as you are aware. If you look at actually any company for that matter, not all companies are really growing. Some are like children, they grow somewhat like dwarfs. And if you look at our listing, in the last few years, we have been growing consistently. In spite of actually the issues that we've faced in the form of COVID and other things, the growth has been good. Now that we are getting into the bigger geographies and bigger products, so there is entry barriers. That challenge will be there. Once we handle it, it's not the question of whether you'll be able to do it or not. It's a question of, actually, as I told you before, the most important is the resources. First comes actually, as you know, our people first. Second is whether you have the money, it cannot be in the form of actually borrowed money. Then what happens, that always creates issues. You are also aware what has happened to some companies which borrowed heavily, initially thinking that they can leverage with loans, which has not happened. So we are very conscious of certain things. It's all actually from our own money. When it comes to our own business model, again, it's not borrowed. We will also follow the big players once we go for actually -- once we achieve what you call actually critical marks. And then we'll follow actually the model that will be in the form of catering to the top of the permit. But until that time, if you are able to renew the intermediaries and create actually a model which will represent the distributors to get to the last mile, that will definitely give us more profit and cash flows also. So I sincerely feel it's not the number of products. Today, we have 400 to 500 products registered in the Central American market, which no other company does it. What we have done is, if you see, even 30%, 40% of our formulation, it goes from China to South America. I will also tell you one more thing. Of course, this one, I don't want to say, but unless I say, it will not convince you, I'll tell you. When we go for an API plant, it's true we'll go for the captive consumption. The next step would be, China is one country which takes full actually time to complete the registration, whether it's a formulation or API. Our next step would be to export of intermediaries where you don't need anything in the form of registration. Then we will approach to some companies. We've already got 400 or 500 product formulations registered in Latin America, which I said now. We will view the intermediaries from our own source. We will give actually the [indiscernible] to our people in China who is going to manufacture our formulation. We will also tell them that we'll give the export orders. Then what will happen, one portion of our product, again, will go from China. Now you reduced it, we will increase. Okay. You may ask one question. There are issues now between China and India, and then China and the world. Issues are there, but what is visible is visible. What is not visible and latent is also an opportunity. At the end of the day, whether we like the person or not, as long as there is an opportunity to do the business, we need to do it.

Right. That's very helpful. Just last one, if I can squeeze. I mean, when you talk of the scale, I mean, when you say that your company will not do the same size. With this capacity expansion also within sterile to 3x, what is the number where you would say that scale has been achieved? Is it $100 million? Or is it higher?

Yes. I would ask the COO because he is specializing on the U.S. business. I would ask him to actually reply to your question.

Yes. So just to add one point on the previous question, Girish, was -- see, when it comes to injectables, when it's an injectable in a vial form or a bag form or a prefilled syringe form, I would say, 95% of them goes through the hospital network. So you can't really zero in on 1 or 2 therapeutic segments that you will focus on. That would be in the oral solid dosage model. If we are in oral solid, we can focus on CNS, specifically CVS, all of that, right? But when it comes to injectables, you have to be therapy agnostic because everything goes through the hospital model. So if you see some of the very successful injectable companies, both out of India, Israel, U.S., and all that, you will see that they don't have a specific therapeutic segment that they focus on. It is all what you can manufacture and what kind of variety that you can have. Okay? So we are following a similar kind of a model. And when it comes to premixed bag, the concept of filling and stabilizing is pretty much the same as a vial. So this just needs some additional equipment, which is what we are doing. And #2, I think your question was on capacity. So right now, the public statement that we have made is, we will be targeting $100 million revenue by 2026. And whatever capacity expansion that we are doing is definitely much more than what would be necessary for us to achieve that. So our capacity expansion, to the best of our knowledge, will be enough for at least '26 and beyond for us. Because right now, we have 2 vial lines. We have an ophthalmic line and a bag line coming up in for the next couple of months. We are going to add 2 more lines that run at twice the speed of the existing lines. And then we also have a high lyophilization capacity and prefilled syringe is coming. So all put together, we are going to triple our existing capacity.

The next question is from the line of [ Akash ]. He's from an individual investor.

You have some ambitious plans to grow the business over the next 5, 6 years. You're going to become one of the top 25 pharma companies, and you want to generate cash reserves of INR 1,500 crores. So related to this, so my question is, what is the growth rate or CAGR you are targeting to achieve this over the next 5, 6 years? Secondly, do you expect any more CapEx to achieve this target in addition to the INR 450 crores that you are already spending? And thirdly, do we have the management bandwidth to achieve this? Or how are you planning to strengthen the management team and also the Board?

Thank you. Your question was 3 parts. Let me answer the second one, CapEx. Our CapEx, as I told you, which is only from the internal accruals. And if you look at the INR 1,000 crore, which I said, we generate that, we have around, close to INR 600 crores actually in the form of deposits. That alone will be enough attribute to tell you that we have enough cash flow to take care of our capital expenditures. #2, CAGR, you know that we have been comfortably growing now. If you ask me actually what will happen in the next 5 years, last 3 years, 2019, I spent entire year, I made 11 trips to China for the newer projects. And by that time the COVID came. 2019, 2020, 2021, I have not been to the market. Our people have not been to the market, except the one who is already in the market, which, of course, in Central America. So currently, I don't want to give you anything without even seeing what is the ground reality. That's second question. Third one, management bandwidth. As I told you, what is expected from any employee or executive is, one is freedom, respect and prosperity. And most important is the prosperity. In addition to giving salary, if somebody can offer actually a share at par value, in the sense, today my share is, I think, INR 800 or something. If I give it at INR 2, what if actually an employee will be in a position to get better than this in other companies. So we'll cross the bridge when we reach there. And we are sure of increasing the management bandwidth and it has been happening now. We will have challenges. It's not that we don't have any challenges and we'll be able to attract everything. That's the reason I said, we have to create certain things in the form of a newer environment and own it up. That alone can actually attract the talent. We're sure of it. These are the 3 answers which I am able to submit to you. If you have any questions, please ask again.