Glenmark Pharmaceuticals Limited (GLENMARK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Glenmark Pharmaceuticals Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Agarwal. Thank you, and over to you, sir.

Yes. Thank you, moderator. Good morning, everyone, and a warm welcome to the Q1 FY '22 Results Conference Call of Glenmark Pharmaceuticals Limited. Before we start the call, a review of operations of the company. For the first quarter of FY '21/'22, Glenmark's consolidated revenue from operations was at INR 29,649 million, as against INR 23,448 million, recording an increase of 26.4% year-on-year. On to the businesses. First, the India business. Sales from the formulations business in India for the first quarter FY '21/'22 was at INR 12,250 million, recording a growth of 57.1% year-on-year. Q1 FY '22 was a landmark quarter for the India business with both the COVID and non-COVID portfolios of the company performing well. The India business outperformed industry growth, continuing the trend of the past several years. As per IQVIA MAT June 21, Glenmark's India business recorded growth of 35.4% as compared to the IPM growth of 14.7%. Glenmark's India formulations is ranked 13th, an increase of 1 rank with market share of 2.6% as compared to [ 2.24% ] in Q1 last year. Glenmark is the fastest-growing company among the top 20 companies on a MAT June 2021 basis. Glenmark is ranked #1 in antivirals, #2 in derma, #4 in respiratory and #6 in the cardio markets in India. The company launched 7 new products during the quarter. Glenmark's novel patent-protected and globally-researched sodium glucose co-transporter 2 inhibitor remogliflozin continues to do well in India. Total remogliflozin sales, including brand extensions, grew strong double digits during the quarter. Glenmark has recently signed an exclusive long-term agreement with Canadian biotech SaNOtize to commercialize nitric oxide nasal spray for COVID-19 treatment in Indian and other Asian markets. Studies have shown that the nitric oxide nasal spray is safe and highly effective in reducing viral load in COVID-19 patients and reduces onward transmission. Phase III clinical trial is expected to be completed, followed by commercial launch under the brand name FabiSpray in India later during the calendar year. During the quarter, Glenmark became one of the first companies in the world to launch Ryaltris-AZ nasal spray, a novel fixed dose combination of Mometasone furoate and Azelastine for the treatment of moderate to severe allergic rhinitis in India for patients above 12 years of age. Launched at an affordable cost, the product provides a far more convenient cost-effective treatment option in the country and reinforces the company's strength in the respiratory franchise. Our Consumer Care business. Secondary sales of Glenmark's Consumer Care business grew by 24% year-over-year during the quarter. Candid Powder recorded its highest ever secondary sales in June '21. Similarly, La Shield and Scalpe + both recorded their highest secondary sales in the quarter. The company also successfully launched Candid Cream during the quarter, which is available in more than 30,000 outlets currently. Coming to North America. North America registered revenues from the sale of finished dosage formulations of INR 7,878 million in Q1 FY '22, recording a growth of 6.1% year-on-year. On a constant currency basis, the revenues have grown 8.5% year-on-year during the quarter. In Q1 FY '22, Glenmark was granted final approval and launched Theophylline Extended-Release Tablets, 300 mg and 450 mg. Glenmark has been granted a competitive generic therapy (CGT) designation for Theophylline Extended-Release Tablets, 450 mg. With this approval, Glenmark is the first approved applicant for such competitive generic therapy and is eligible for 180 days of CGT exclusivity upon commercial marketing of the 450 strength. Glenmark also received approval and launched Arformoterol Tartrate Inhalation Solution. Arformoterol is manufactured at the company's North America manufacturing facility based in Monroe and marks the company's first nebulizer approval. In addition, Glenmark launched the previously approved product, Rufinamide tablets, as one of the first available generics on the market. The company filed 8 ANDA applications with the U.S. FDA, including 3 filings for Monroe, and is on track to file 18 to 20 ANDAs in FY '22, including 4 to 5 filings from Monroe.. Glenmark's marketing portfolio through June 30, 2021, consists of 172 generic products authorized for distribution in the U.S. market. The company currently has 44 applications pending in various stages of the approval process with the FDA, of which 21 are Para IV applications. Now talking about the ROW region. For the first quarter of FY '22, revenues from ROW region was at INR 2,686 million, recording growth of 26.7% year-on-year. In Russia and CIS markets, the company is witnessing recovery with secondary sales having grown 42% year-on-year in the region. In Russia, as per Q1 IQVIA, Glenmark's revenues grew 29% in value terms vis-a-vis 13.2% growth in the overall retail market. Also during the quarter, the company successfully commercialized Ryaltris in Russia with indications of seasonal and perennial allergic rhinitis in patients over 12 years of age, strengthening our respiratory franchise in the market. Secondary sales of the company grew 20% year-on-year during the quarter in Asia, with strong growth in key markets like Philippines and Sri Lanka. The company also witnessed recovery in the Middle East, Africa region with secondary sales growth of 52% year-on-year, with growth witnessed in markets like Kenya, South Africa and Saudi Arabia. Europe. Glenmark's European operations was at INR 3,059 million, recording a growth of 11.7% year-on-year. The company witnessed a mixed performance in the Western European region. While growth was affected by continued COVID restrictions in some countries, key markets like U.K. and Netherlands witnessed positive growth. The Central Eastern European region witnessed healthy growth across most key markets. In line with our global focus on the respiratory segment, Glenmark became one of the first generic companies to successfully launch Tiotropium Dry Powder Inhalation (sic) [ Inhaler ], the bioequivalent version of Spiriva Handihaler under the brand name of Tiogiva in the UK during the quarter. The company has a strategic exclusive in-licensing agreement to market Tio DPI in Western Europe and standing subsequent launches of the product across markets in Western Europe. In this quarter, Glenmark concluded the DCP procedure for Ryaltris in Europe, enabling approval in 17 countries across E.U. and U.K. with launch plans in the current year. Latin America. Glenmark's revenue from its Latin American, Caribbean operations was at INR 675 million in the quarter, recording a growth of 2.5% year-on-year. Revenue growth was impacted by Brazil, where the market remained challenging due to the pandemic. However, we have begun to witness recovery in this region with most of the other markets recording positive growth momentum during the quarter, including Mexico, which grew 63% year-on-year during the quarter. Glenmark's specialty and innovative R&D pipeline. We start with Ryaltris. Ryaltris is currently under review with the FDA as a treatment for seasonal allergic rhinitis in the U.S.A. Glenmark's response to the agency's CRL was submitted to the FDA in July 21 with the PDUFA goal date in Q4 FY '22. In April '21, Glenmark concluded the DCP procedure in Europe, enabling approval in 17 countries across E.U. and U.K. with potential launch in key markets in H2 FY '22. During this quarter, Glenmark also received regulatory approval for Ryaltris in Zambia, Ecuador and Peru. Ryaltris sales continue to progress well in Australia, South Africa, Ukraine and Uzbekistan. In FY -- Q1 FY '22, Glenmark's partner in China, Grand Pharmaceutical Company Limited finalized the Phase III protocol for China and submitted the IND application in July '21. In South Korea, Glenmark is working with its partner Yuhan Corporation to potentially launch the product by H2 FY '22. GBR 310. Glenmark had announced successful Phase I results for GBR 310 that suggest similarity in pharmacokinetic, pharmacodynamic, safety and immunogenicity profiles between GBR 310, and the reference product, omalizumab, marketed in the U.S. under the brand name Xolair. The company is in discussions with potential partners and is targeting to conclude a deal before initiating Phase III studies. GRC 39815. GRC 39815 is the company’s respiratory pipeline asset being developed as an inhaled therapy for treatment of mild to moderate COPD. It is currently under Phase I clinical development with a single ascending dose study in the US. The Phase I study is expected to be completed in the next few quarters. GRC 17536. GRC 17536 is the company’s pain pipeline asset being developed as an orally administered treatment for pain in patients with painful diabetic peripheral neuropathy. A regulatory submission to DCGI for conducting the Phase IIb DRF study in India was done in Q1 FY '22, and the study is scheduled to be initiated in the next quarter. The company is evaluating further options including out-licensing for the molecule. GRC 54276. GRC 54276 is being developed as an orally administered IO-adjuvant treatment for patients with solid tumors in oncology. Pre-clinical in-vitro and in-vivo profiling was completed in Q1 FY22, and pre-clinical DMPK and non-GLP toxicology studies are currently underway. Further evaluation of the molecule is ongoing to advance towards clinical studies. Glenmark Life Sciences (GLS). The equity share of GLS were listed on BSE and NSE on 6th August '21, following a successful IPO. Pursuant to the IPO, GLS published its unaudited financial results for the first quarter of the financial year on August 13, 2021. For the first quarter of the financial year, GLS registered revenue from operations, including captive sales of INR 5,249 million as against INR 3,969.7 million during the same quarter of the last financial year, recording growth of 32.2% year-on-year. The EBITDA margin for Glenmark Life Sciences, including captive sales of 31.3% for the first quarter of this financial year. For Q1 FY '22, external sales for GLS was at INR 3,040 million as against INR 2,348 million, recording growth of 29.5% over the corresponding period last year. For further updates on GLS, please log on to www.glenmarklifesciences.com. Ichnos. Glenmark has invested INR 1,617 million, which is around $21.9 million, in the first quarter of the financial year as compared to INR 1,735 million, which is $23 million in Q1 last year. For further updates on the pipeline and the organization, please log on to www.ichnosciences.com. The pipeline update for the third quarter is published on this site. Key objectives for FY '22. We expect revenue growth of 10% to 15% during the year. We expect to sustain EBITDA margin performance at similar levels of FY '21. We expect to reduce debt by at least INR 16 billion during the -- in FY '22 through a combination of free cash generation and IPO proceeds. Post FY '22, the strategic priority is to enhance the free cash generation for further debt reduction. We prioritized this over R&D investments and capital expenditure. We also expect to close 1 to 2 out-licensing agreements in Ichnos during the financial year. Some notes before we open for Q&A. The India formulation revenues includes INR 350 crores of FabiFlu sales with EBITDA of INR 70 crores during the quarter. ForEx gain for the quarter was at INR 38.9 crores as against INR 40 crores last year, which is recorded in other income. Gross debt for the period ending June 30, 2021, was at INR 4,636 crores as compared to INR 4,687 crores as on 31st March 2021. The net debt for the period ending June 30, 2021, was at INR 3,444 crores as compared to INR 3,549 crores as on 31st March 2021. The total net debt reduction was at INR 105 crores. And this is after adjusting for onetime expenditure of around INR 40 crores in ABCD Technologies and around $7.5 million at premium on prepayment of FCCBs during the quarter. Inventory for the period ending June 30, 2021, was at INR 2,426 crores as compared to INR 2,277 crores as on 31st March 2021. Receivables for the period ending June 30, 2021, was at INR 2,601 crores as compared to INR 2,572 crores as on 31st March 2021. Payables for the period ending June 30, 2020, was at INR 2,354 crores as compared to INR 2,238 crores as on 31st March 2021. The total asset addition in the quarter was at INR 165 crores, of which the tangible asset addition was around INR 105 crores. The R&D expenditure for the year -- for the first quarter is around INR 284 crores, which is around 9.57% to the total net sales year for the first quarter. Before we open the floor for Q&A, I would like to introduce the management of Glenmark Pharmaceuticals on the call. We have Mr. Glenn Saldanha, Chairman and Managing Director; Mr. V. S. Mani, Executive Director and Global Chief Financial Officer; and Mr. Robert Crockart, Chief Commercial Officer. With that, we'd like to open the floor for Q&A. Over to you, moderator.

[Operator Instructions] The first question is from the line of from Krish Mehta from Enam Holdings.

So I have 2 questions. The first one is on the debt repayment from operating cash flow. So is it fair to assume that around INR 400 crores to INR 500 crores of flat debt repayment will be made through operating cash flow?

Krish, about INR 400 crores will be paid from the operating cash flows. So we have set a target of about INR 1,600 crores, of that, IPO will give us at least INR 1,200 crores. Because whatever we receive in IPO, there is some amount of issue expenses as well as on the [ OSS ] side, there will be some tax on that. So net around INR 1,200 crores will come from the IPO, which whatever we are using and balance INR 400 crores plus will at least come from the internal generation of cash.

And my second question was on the Ichnos licensing deals that you mentioned. So is there any time line we can expect when it's likely to happen, whether Q3 or Q4 of this year?

So Krish, our target is to close this fiscal year at least 1 deal, right? So between 1 to 2 deals is when we'll close this fiscal year. I mean, we've made a lot of progress, but -- and we are pretty confident that should happen.

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

Just speaking of your [ trough ] after the last question around -- in your commentary you've sort of stated in the presentation, in terms of a strategic priority being prioritizing debt reduction going forward over CapEx and R&D. Can you just help us talk a little bit more through in terms of how you're looking at subsequent to FY '22 on this whole -- how you look at the utilization of cash flows? So what kind of debt reduction does it imply? And what does it really mean for the balance sheet post-FY '22?

So I think, Nitin, strategically, what we are saying is, as Mani mentioned, right, we generate INR 400 crores, INR 500 crores from the business this year. That should keep escalating every year in FY '23 and '24. So I mean, if you run the math, right, I think we will have very, very low net cash or net debt numbers by the end of FY '24. So every year, you can expect the numbers -- the free cash to keep escalating from the business. That's what we are targeting.

And is there a number that we're working with in terms of what we're looking to reduce the debt by, a net debt by over the next 2 years? Barring Q4 FY '22?

I mean, Nitin, again, if you read what I'm saying, I'm saying that from this year onwards, every year, the free cash generation of the business will keep escalating. And all that free cash will go towards reducing the net debt. So if you do the math, by FY '24, it will be a very low number.

And secondly, on -- just to associate a point. So how should we look at the CapEx now for the business over the next 2 to 3 years? We obviously got the GLS listing. They have their own growth plans. Taking that into account, what kind of annualized CapEx number we should look at now including tangible, intangibles?

So Nitin, I'll take that question. So what we are saying is that going forward, we are looking at about INR 650 crores to INR 700 crores, and maybe next year onwards a little bit lower, INR 650 crores or so. So as you can see, in the first quarter, that probably will be the trajectory at which we'll do. We are at about INR 160 crores or so in the first quarter. So I think INR 650 crores to INR 700 crores is what we look for the current year, and going forward, it will be more towards INR 650 crores or so, and that will include the GLS CapEx as well. Because many of our important CapEx decisions are already implemented in terms of Monroe and et cetera, and also some of the other things in terms of in-licensing, et cetera. So on a broad basis, we are looking at this as a number.

And Mani, this number will continue for least-- what time are you comfortable with this kind of CapEx before we sort of step up CapEx again?

About 3 years, Nitin. Beyond that, it will be pretty difficult. But 3 years, yes.

One more, sir. Glenn, on the business, we talked about the India business, the whole nitric oxide licensing deal that you talked about. The product -- I mean can you just talk us through your own thoughts on this product and the possible potential of this product? And when does it begin to sort of impacting your numbers potentially?

Sure. So Nitin, obviously, this is a very exciting product, primarily because we think it will not only work in treatment of COVID, but mainly prevention of COVID. And being a nasal spray, the convenience aspect, you can use it pretty frequently for prevention of COVID. So it's a very exciting product. We think we will -- we are hoping -- we started the Phase III clinical trial in India, and we are hoping if we do get an emergency use authorization, we could launch some time as early as October, November. Otherwise, close to the December time frame.

And so this is going to be a device product. So this is going to be what -- our internal manufacturing? Or this is something that you're going to be sourcing, Glenn?

So initially, it's sourced, but then we will make it ourselves.

And lastly, just to share it, I mean aside of these COVID opportunities -- related opportunities which are there. How is the base business looking like for India?

So India, Nitin, we've clearly been among the fastest-growing companies in India, and we continue to sustain those growth -- that growth momentum. And we are very excited about the prospects of India. We have 2 or 3 big launches in this month and next month. So I think that will drive India growth. So I think, all in all, next 2, 3 years should be good years for the India business for us.

I'll squeeze the last one on the U.S. How is the -- there has been too much -- a lot of talk around generic pricing pressure, and most of our peer companies have faced pressure in the current quarter. What has been our experience, given the fact that our portfolio has been significantly eroded over -- it has significant pricing pressure on the dermatology side over the last several quarters? And what does the BROVANA launch really imply for us in terms of -- we haven't seen much -- I mean how meaningful a product -- what kind of market share are we looking on the product going forward?

Robert, do you want to take that?

And it's now outside for [indiscernible] It's Robert here. So first of all, I think on the pricing erosion side, we have seen a bit of an increase, and we're probably looking at it a little bit of more around the high single-digit levels. And of course, this has an impact as we go along. When you're looking at your question on the BROVANA, just to remind you that we've already launched the product right at the end of June. So it's still very early days and didn't really have a big impact in quarter 1. However, as it stands today, we already have a 28% [indiscernible] So we're still pretty optimistic in terms of what this product can bring us.

Sorry, I missed the last part, Robert, what did you say about -- where we are with currently in the product?

So currently, our market share on BROVANA is around 28%. So we're making good progress. What I did say was that we only launched at the end of June, right? So the impact in quarter 1 was low, but we're quite optimistic about quarters moving forward. Hope you got that.

Got it. And secondly, just to conclude that, how do you see the approval for the rest of the year?

Nitin, about...

12.

You can assume every year, we will have about 10, 12 approvals. So we expect at least another 7, 8 approvals we have this year.

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

Just the first one -- I missed the data point on India growth excluding FabiFlu?

So we did about INR 350 crores of Fabi in the quarter. So excluding that, the growth is around 12% to 13%.

I'll note it down. So just then, surprised like that if we remove that when we're talking about domestic growth as well, was it that the COVID portfolio kind of impacted the non-core part of the portfolio? Or how should we -- and you talked about growth in the India domestic business, so just trying to understand why the weakness in the rest of the portfolio?

So I think, Shyam, overall, 12, 13% is a decent number for non -- without COVID in terms of growth. I don't know too many companies who are delivering above that in India, if you take out the COVID products. So I think it's a decent growth overall on the core business, even without the COVID products. And if we can sustain 13%, 14%, right, for the rest of this year, I think that will be a great performance for the India business, without the COVID portfolio obviously.

So maybe, Glenn, we didn't have a big impact yet last year, perhaps, like the other guys. Maybe -- would that be another way to look at it?

Yes. But even then, Shyam, look, the Indian IPM -- if you strip out COVID products, it is like in the double-digit range at best. It's not like we are underperforming the IPM. We've always done better than the IPM, and we will continue growing from strength to strength in the India portfolio. It's all the new launches that we have.

And then just one on the pricing environment and how you would look at it through the domestic India [indiscernible]. We have seen so far at least industry seems to be growing on the back of price growth as well. So how is it for us?

I think, overall, the pricing environment is stable in India. And most of our growth is coming out of new product launches and volume growth, right, more than just price growth.

Got it. helpful. Just moving over to the U.S. The 28% market share for BROVANA -- what is the denominator we are talking about? Because we have an [ AG ], we have other players as well. So just trying to understand like-for-like, are we comparing with the whole market improving brand? Or if you can help us, please?

This is on the overall market, Shyam, on the overall BROVANA market including...

Okay, and how do we -- yes, I'm here. I can hear you. Sorry again, you are saying that it is of the overall market, right?

Yes. And it will take time. Look, it's not going to get captured immediately. So please don't take this as next month, you'll see the IMS sales or IQVIA sales and expect the reflection. It's not going to happen. It will take time to build out. But I think Robert's statement was more in terms of what we've already captured so far in terms of market share.

This could, some of this could be contracted as well and not yet sold. Maybe that's the way to look at it.

Absolutely.

Last question is on the R&D expense. So I think it was called out at about 9.6%, 9.7%. So it seems to have come out of that double-digit number. How should we look at this now on a go-forward basis?

So Shyam, Mani here. So last year, we did about 11.5% or so. So this year, we are in track somewhere when the first quarter was a little more muted, we'll track somewhere between 10% and 11% more towards the 10.5% or so. That's where we'll be. So in terms of over the last 2, 3 years, we have progressively kind of come off substantially.

Got it. And you called out, I think, $20 million for Ichnos, right?

$23 million -- almost $22 million. What we called out was $21.9 million.

So -- and the remainder is from generic R&D?

Yes, the remainder is generic R&D.

The next question is from the line of Prakash Agarwal from Axis Capital.

My first question is on the India business. So Favi did phenomenally well. And just trying to understand how'd the run rate be in July, August? And what is your expectation? How do you see this product? Are we seeing their offtake, given cases are down or -- billings are still going on?

So Prakash, we've had virtually no sales of Favi in the last -- in July and August, and even June came off pretty significantly.

And looking at Q2 of last year, you had a heavy drop there. How do you expect the remaining 9 months going forward for your India business?

So I think Q2 in India, obviously, will be negative growth for us on the India business. But I think overall Q2, we are seeing -- we are expecting a very good Q2 on the back of a lot of traction that we are seeing in the ROW markets, in Europe. In the U.S., we are expecting close to double digit. So I think we are expecting a strong Q2 on a consolidated basis. However, on India, we will be negative in Q2 because of the high Favi sales we had last year.

Fair enough. And -- I mean, the correlation of lower gross margin is a function of Favi sales. Is that right?

Yes, Prakash. The lower gross margin is clearly a function of Favi sales. So as and when we don't have COVID sales, we'll automatically go back to the where we used to be at 66%, 67%.

Do you expect the gross margins to normalize from Q2 this year?

Yes, broadly. As and when the COVID sales are off, it will definitely be there. That's the number.

And India sales, you are saying that [ ex AV ] anyways we are guiding for 10%, 12% growth?

Yes, yes, absolutely.

Yes.

Okay. And second one is on the investment. So clearly, we have moderated our CapEx, R&D, et cetera, and costs as well. So the free cash flow is very good. I'm just trying to understand, what are you thinking about next level of investment, if at all? Where would that be over this year, next year? What are you thinking about investments now and in its present state?

So Prakash, our primary objective right now, as we've said in our guidance, right, is to accelerate the free cash of the business and to pay down debt. And the next 2 years or 3 years will go clearly in that as the primary objective. Outside of that, we may see some in-licensing deals to -- in certain geographies to accelerate the business. But Mani also guided towards the total CapEx for the next few years. So it's all within that in terms of in-licensing cost.

And Monroe investment is largely done?

Monroe is done.

Okay. So CapEx for this year and next year is looking at?

So as I guided earlier, Prakash, around INR 650 crores to INR 700 crores. Next year, will be closer to INR 650 crores . This is what we're looking at.

And these are -- I mean, just closing the loop here is, these are maintenance CapEx? Or is there anything that intangible is helping it?

Yes. So largely, in GPL, most of them will be maintenance CapEx, but in GLS, as we had -- I could tell that we are obviously spending some money on putting up some in CapExes in their plants and something on the oncology side. So those are not maintenance that are like greenfield investments.

[Operator Instructions] The next question is from the line of Kunal Randeria from Edelweiss.

Glenn, we have had some niche launches [indiscernible] like BROVANA, COPD and Tiotropium and [ Qudexy ]. Just wondering how do you see launches in the second half? Do we expect such launch quality? Or you think some period of consolidation before it starts to improve? And secondly, how many of a pipeline products are sole FTF or some which needs the COPD [ designation ]?

So I think it's hard to guide towards launches. At Glenmark, we never guide towards any specific launches because there's still a lot of uncertainty in terms of the approvals. So we prefer not to put out any color on the quality of launches, at least in this year. But I think strategically, as a company, we make sure that we only file products which are -- have got a certain value built in them, whether it is CGT status, whether it's first generic, whether it's in the first wave of generics. So we're very focused in terms of what filings we do. So obviously, a lot of that may translate into the quality of launches, as and when they do come up. So I think all in all, the U.S. business, our perspective is if we are able to grow this business around 10%, 12% every year, I think we've done well. And this year, we are clearly positioned to grow at about 10%, the U.S. business.

Sure. Any sort of number, or is there some range you'd like to give for CGT or FTF products? Not for this year, but in pipeline?

No, we don't guide to any FTF for CGT or any of our pipeline.

My second question is actually on Ryaltris. So firstly, what are the CRL about that has led to this delay for a few months? And secondly, I understand still early days for you but how has been the feedback so far from the doctor as well as payer?

So regarding the CRL, it was -- sorry, regarding the U.S. CRL, it was primarily on account of our Baddi manufacturing facility, which is under a warning letter. What we've done is, we've now transitioned onto a U.S. manufacturing location. And we have refiled [ basis ] that. So we are hoping it will go through -- it should get approved [ basis ] at this time. Regarding the response of doctors, it has been very positive. I think the product has beaten all our expectations in the markets where we've launched it. So be it South Africa, Australia, Ukraine, we are launching in Russia. So the feedback is really very positive. And we are hoping to launch in Europe starting in Q3 of this year. So all in all, it should be a big product for the company at a global level.

And then just one more if I can squeeze in. You have mentioned that [ Australia ] market is around [indiscernible] in Europe. So what is the kind of competition that we can expect here?

Sorry, I missed out the question. Can you just repeat that?

So, sort of speaking about market you had mentioned, I think, in [ last quarter's ] press release that it is around [ $770 million ] in Europe. I was wondering what kind of competition do you expect?

So we are expecting at least 1 more generic in the next 6 months. And that's the only visibility we have. And this is from not an Indian player. So 1 more generic is what we anticipate in the next 6 months.

And have you launched it in all the market?

No. We've just started the launch process. It will take us at least 6 to 9 months to even commercialize in all markets.

[indiscernible]

Sorry, we couldn't understand your question. What...

Kunal, your voice not coming very clearly. Could you come closer to the phone?

Will your competitor take just as long to commercialize? I mean, will they remain 6 to 9 months behind you in other markets still?

Absolutely. I mean, that's the typical process in Europe. So you'll start country by country, and it typically takes that long to commercialize in most of the markets.

The next question is from the line of Tushar Manudhane from Motilal Oswal.

Sir, just on this market promotional expenses, how do you see -- has it been back to pre-COVID levels, at least, for the branded in this market?

So on a -- one , definitely, on a broad basis -- There are 2 parts to it, okay. Obviously the marketing expenses will be back to pre-COVID levels. And if you're referring to the other expenses line, obviously, in the first half, normally, it's a little lower than the second half. So on a full-year basis, we'll be back to about 36% or so. We were close to that last year. We'll be slightly above that.

[ So is it any, let's say, improvement in ] gross margin at FabiFlu to some extent...

Yes, yes. I mean that will also happen. I mean it's not that everything is planned. But historically, if you look at it, our H1 normally the overall other expenses are a little lower compared to H2. And normally, the sales are also a little higher in H2.

The next question is from the line of Harith Ahamed from Spark Capital.

On Tiotropium DPI launch that we have done, this product has been licensed from whom? And what are the terms with this partner in terms of revenue share or profit share?

So this is licensed from a European manufacturer. And I mean, we can't disclose the precise deal terms, but it's in-licensed from a European manufacturer.

And my second question is on Ichnos. Are there any data readouts that we should expect from the lead assets in the next 6 or 12 months? So just trying to understand some of the milestones that we should look forward to from Ichnos, from a pipeline progress perspective?

So Ichnos near term, as we've discussed, right, you should see some deal action on ISB 880 and ISB 830, that those are near-term events. In addition, I think ISB 1342 you should see a readout in the next 6 months is what we believe. If all goes well, we should have PoC in the next 6 months. So I think these are the 3 and ISB 1442 the start of phase -- the IND filing and start up Phase I. So these are the 4 inflection points for Ichnos in this year.

Last one from my side. The seasonality that you see in some of our segments, especially ROW, E.U. and LatAm. This is on account of what exactly? I mean, is it because of our respiratory products and the seasonality that those products typically have? Or is there any other reason for [indiscernible] weaker than fourth quarter?

I think there are 2 things which are impacting the -- the volatility in sales are purely because, one is COVID is still around, okay, in many geographies. So there are still some lockdowns. There are still some geographies which are getting impacted across the world. So that is 1 impact. Second is, of course, respiratory is a big franchise for us. Latin America, particularly we lost out heavily because of our respiratory sales coming off during the COVID period. But I think starting Q2 should be a good quarter for many, many geographies around the world. And that's what we are seeing on the ROW side. So strong traction coming out of ROW. Likewise, Europe also should come back to seeing good growth numbers from second quarter onwards.

The next question is from the line of Alankar Garude from Macquarie.

Glenn, you mentioned about the next few years been good for the India business. So from a capital allocation perspective, are there any plans to increase our focus on India going forward?

I think, Alankar, we are anyway growing this business above the market. The bulk of our focus today is on products, making sure we get new products to the market and making sure we continue to gain market share in the segments which we operate, which is mainly dermatology, respiratory, cardiovascular and diabetes, the 4 segments in oncology. So I mean, these are the segments we are driving. And I think the bulk of our focus is on bringing new products to market and trying to gain share through the product group as opposed to large field forced expansions and further capital investments in the India business.

Understood, Glenn. And my second question is for Robert. So I would assume our U.S. portfolio concentration would have come down quite a bit over the past 3 years. Any color you can provide on what would be the sales contribution from our top 10 products in the U.S. now versus what it was, say, 3, 4 years back?

[indiscernible] If you just look at our portfolio as a whole today, the biggest portion of our portfolio, we are #1, #2 or #3 player in the top 3 players. So proportionately still, our top 10 products will still bring in a very higher position of our business from a relative perspective.

But has that number come down over the last few years or it's pretty much intact?

No, it's come down.

Pretty much.

I mean the shares are high. Just to add to what Robert is saying about -- market shares are high. But in terms of value to the overall business, we don't have a single product which is more than, let's say, [ 15 million ] in sales. So it's a very diversified business today.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Yes, my question pertains to the agreement with SaNOtize. By when do you expect -- I mean, if you could give some details of the trial and the time lines of launch?

So the trial is underway. I think it's a 250, 300 patient trial, but we are running in India. And we are hoping -- it all depends on the regulators as to when they would approve us and whether we would get emergency use authorization or we will have to complete the trial and then launch it. So it could be anywhere from October right up to December time frame is what we anticipate.

For the EUA filing?

No, this is for either EUA or final approval.

And in terms of my second question on the ROW market. Whatever supplies are going into ROW? Are they mainly COVID-related or they are mainly the other products?

So I can take that. I mean what we have seen in the last quarters, obviously, across the board through all the ROW countries, whether Africa, Asia, CIS, so Middle East, even our Russian business, on our base business, we've seen exceptional growth. So we are very optimistic about our business today. And just to answer you in short, in quarter 1, there was very little of the COVID product that went out into ROW.

So what would be the percentage for COVID?

Can you repeat the question?

It's negligible. The COVID products are negligible in ROW.

The next question is from the line of Prakash Agarwal from Axis Capital.

Just wanted to understand the margin guidance better. So this quarter, particularly gross margin and EBITDA margin marginally lower because of higher COVID-related sales. Next quarter, you talked about Europe and LatAm bouncing back, plus U.S. high-margin product BROVANA is there. So I mean I'm just trying to think that 19%, 20% is definitely in the bag. So would you be also -- do you have upside risk on this, like you expect better margins going forward?

Prakash, we would like to guide to 19% to 20% margin, 19% plus. And if we get anything better, that's a bonus. I mean we would -- because as you know, there are COVID times, there are uncertainties. So we would like to guide to 19%. So GP obviously, as I guided earlier, we always have a 66%, 67% GP. I mean if there is no COVID sales, automatically, it goes back there, yes. That's how it trends.

No, but are you baking in higher cost going forward for the next 9 months? Or how should we...

The other expenses, as I explained, for a full year basis, if you look at it, it is almost about 26% plus. In this quarter, it was a little lower. As I also, I mean, informed earlier that the first half normally it's a little bit lower and it builds up in the second half as we get to looking at launches, et cetera. So on an overall basis, what I can guide to is to say that we would do EBITDA margin of 19% plus. That is my number.

Perfect. And secondly, I missed one point on the 1 or 2 launches, which I think Glenn said in India business, large launches, what would those be?

Prakash, we can't mention, but I think you'll see it in the next 2, 3 months. We have some ongoing launch activities on multiple products. I think in the next 2, 3 months, it will be evident.

So are these the core diabetes franchise or these are...

This is all within our therapeutic areas.

Non-COVID?

Correct.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ravi Agarwal for closing comments.

Yes. Thank you, moderator. We will read the disclaimer before we end. The information, statements and analysis made in this presentation describing the company or its affiliates' objectives, projections and estimates of forward-looking statements. 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 those statements depending upon economic conditions, government policies and other incidental factors. No representation of warranty, either expressed or implied, is provided in relation to this presentation. This presentation 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. With this, we end the call today. A very big thank you to all of you for joining us on the call.

Thank you very much. Ladies and gentlemen, thank you all for joining us, and you may now disconnect your lines.