Gufic Biosciences Limited (509079) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Gufic Biosciences Limited. [Operator Instructions]. I now hand the conference over to Ms. Ami Shah Company Secretary from Gufic Biosciences Limited. Thank you, and over to you.

Thank you, Yashasvi. Good evening, and a warm welcome to the Gufic Biosciences Limited Earnings Conference Call for the Second Quarter of FY '22/'23. I have with me Mr. Pranav Choksi, Chief Executive Director and Whole Time Director; Mr. Devkinandan Roonghta, Chief Financial Officer; and Mr. Avik Das from Investor Relations team, to give the highlights of the business performance of the company and to clarify all the queries of the investors during the call. We will begin the call with business highlights and overview by Mr. Avik, followed by financial overview by Mr. Roonghta. After the opening remarks, the operator will open the breach for Q&A session. But before we proceed with the call, please note that some of the statements made in today's discussion may be forward-looking and are based on management's current expectation, and this may be viewed in conjunction with risks and uncertainties involved in the business. The company assumes no responsibility to publish or update or amend, modify, revise any forward-looking statement based on any subsequent development, new information in future or except as required by the applicable laws in force. This call is being recorded, and the playback of the call has been made available on our website shortly after the call. The transcript of this call will also be permitted to the stock exchanges and will also be made available on our website. I'll now hand over the call to Mr. Avik for his opening remarks. Thank you. Over to you, Mr. Avik.

Thank you, Ami, and good afternoon to one and all, and thank you very much for joining on this call. So I'll quickly begin the call and give you all a highlight of what happened in the past quarter. So the past quarter, we have started gearing up to take our Indore facility live. And in view of that, we have started investing in R&D for new molecules and drug delivery systems, which will eventually smoothen our entire process of going live at Indore. With respect to that, we've already started taking validation batches to create the data and build up dossiers for the pipeline products. And this will definitely help us reduce our time to market significantly once our plant is up and ready at Indore. So this has been the broad theme for the last quarter for us. And now diving into our divisions, Critical Care division. We have an update over here, where we've we launched a subdivision within this flagship division by the name of [ Sparsh ]. This division will use the most advanced technology and smoothen the supply chain process for delivering 100-plus high-quality injectable products, primarily to untapped hospitals and nursing homes, which include not only the suburban, but also the rural market. And as per our initial estimates, the addressable market size of this market is roughly INR 9,500 crores, and it is growing at a CAGR of 12%. We are also very pleased to inform you all that Gufic has received the DCGI approval for manufacturing and marketing biochem in Dual Chamber Bags, which is our proprietary technology. And as we all know, given the industry trends, the Critical Care segment by and large face headwinds due to reduced hospitalizations and excess inventory in the trade channel. And we've taken some strategic decisions to mitigate that, and we'll touch upon that as the call progresses. We are also very glad to announce that we are planning to launch ceftazidime-avibactam soon. And Gufic will be the only Indian company to launch this product other than the innovator with an in-house manufactured API. So this is again in line with our strategy to go backwards for all our Criticare products and new products and have the API manufactured in-house. We are also launching a novel once-a-week anti-infective dalbavancin for the first time in India in Q4 in FY '23, and we are very much on track to achieve our target date for the launch. We have also received the DCGI approval to conduct Phase III clinical trials for Thymosin Alpha injection for sepsis. Now coming to Ferticare division. This division has done phenomenally well for us this year, and it continues to register double-digit growth. And especially some of our flagship products like Puregraf, which is HMG and Puretrig, which is HCG. We continue to have dominant market share in these products. We've received DCGI approval to conduct Phase III trials with Thymosin Alpha for endometriosis. And as we had updated last quarter as well, we have launched dydrogesterone with our own API. And this is a vibrant market and it's gone above INR 800 crores now and growing at a healthy pace of 50% year-on-year. So our initiatives to develop the recombinant alternative to derisk geopolitically is also going on track. And within the next 18 months, we should be able to launch the recombinant products as well. Another update over here is that we've increased our market penetration with enoxaparin in the Infertility segment, and we created a good brand within this molecule in this segment. And we've also come up to second rank in the high-growing cetrorelix market. Now coming to our other divisions. Some key updates over here is we've launched a cannabis extract-based topical solution for muscular and arthritic pain. And we've also initiated development of a unique liposomal iron formulation in these divisions. Now coming to our International Business. I'd like to highlight that we've received 2 new product approvals from reg markets, and we've also received 1 product approval from Health Canada. And as informed earlier, we are gearing up for many more approvals to come, primarily for our Indore and our new approved plant at Navsari. And in order to further our alliances with our partners globally, we very recently participated in CPHI, which was held in Frankfurt. And in the coming quarters, we'll make announcements of the developments that happened there. And with respect to our [indiscernible], our center of excellence targeting toxins and new-age therapies. We're very happy to inform that we have developed 20-plus combination therapies, which are unique to [indiscernible] only. And these will be used for skin and body transformation using FDA-approved technology. So coming to our Aestherderm division. Here, we partnered with the ICCG in the field of cosmetic vaginal tightening and rejuvenation and we've organized training camps for -- to use botulinum toxin for these indications. Now with this, I'll hand over the call to our CFO, Mr. Devkinandan Roonghta, to quickly take you through the highlights of the numbers of the past quarter and H1.

Thank you Avik. Good afternoon, everybody. Firstly, I would like to inform you that the quarterly results of Q2 of 2022/'23 versus Q2 of '21\'22 is not comparable because last year Q2, we are having a COVID-related sales. The total sale for last year, Q2 was INR 194 crores, out of which INR 47 crores was related to COVID-related sales. If I relate the COVID-related sales, the sales for last year was INR 147 crores against this year's sale of Q2 is INR 175 crores, which is 19% higher than the last year's COVID sales. EBITDA of last year was INR 36 crores. This time the EBITDA is INR 33.4 crores. Basically, this year, we are -- this quarter, we have conducted a lot of validation batch for our Indore plant. And therefore, the R&D expenses is slightly higher as compared to the previous 2 quarters. EBITDA margin last year was around 18.6%; this year, 19%. Profit before tax were INR 30.4 crores; this year, INR 27.3 crores. PAT was 15.6%. This year -- this quarter, it was 15.5%. Profit after tax was last year INR 23.3 crores. This year, it was INR 20.2 crores. PAT margin was 12%; this year, it was 11.5%. Thank you.

Should we begin the question-and-answer session?

Yes.

We will now begin the question-and-answer session. [Operator Instructions] We have our first in from the line of Keshav from RakSan Investors.

Sir, it's very fascinating to see so many things Gufic has been trying to do. So we are a substance manufacturer, in that we are expanding our capability to biologics or expertise in NDDS and injectables. We have a branded portfolio, so we need to be reasonably agile on marketing spend as well as on manpower for that. And on top of that, we are doing innovation as well. So we have clinical trial management capabilities. And so lastly, we have a portfolio that is predominantly injectables, and we are intending to get into regulated markets such as U.S., which puts an even more quality burden on us and our quality control will then have to be top class. So is it not that we might be spreading ourselves too thin because all of this has a monetary bearing and all sorts of R&D spend is after all coming with an ROI? So if you could help understand the overall vision as to what puts us in a position to succeed in such a wide arrays of endeavors and why not have a limited but more focused approach instead of that?

Keshav, Pranav here. Thank you for the question. I think very well put, I think, summarized our, I would say, a company in a nutshell, but all there you a reason why we are a little bit going wide, and I would say, more than going wide, if you look at the core competency of the company, which is still injectables and new drug delivery systems and innovation, which has been there in the past. But what we see as -- if you see in the last 5 years, and this is what I have felt since the last decade, actually, pharma is getting more and more commoditized. And that's right, if we keep on sticking to the same thing day in and day out, then there will always be, I would say, an economic of scale or there might always be an erosion. There always might be some people who can -- we are ready to do it at a much cheaper rate. And that's the thing which will always affect us. Today, what you have seen, U.S. was always an attractive market before. But if you see the way erosion has happened not only in India, Europe or rest of the world, you have to also want to see this very soon. The reason we are getting into a little bit of I would say, biological line is because, first of all, the entry barrier for anyone to get into what was the entry barrier of pharma, maybe 10, 15, 20 years ago, the biological will be a little bit more tougher and more complex to get into. At the same time, the core competency of the people working in this company, including me and my team, is also doing complex molecules and biologicals, where we feel that it's more of a capital cost initially to be taken care of, and I agree. I mean, we are still not doing NCE. So let me please clarify that the R&D work which we're doing is not -- it is capital intensive, yes, for sure. But it's not, I would say, like a 50-50 or maybe like there's more than a 50% chance of failing in this because this is doing something which has already been proven, but it's a much more efficient way and a much more, I would say, organized way. And plus we have the Board of Directors like Dr. Dr. Balram Singh who have more than 35 years' experience in handling it. It's something which we are doing as proof of concept. So sorry, I'm using all these fancy words. But in a nutshell, if I tell you, we are doing mostly biological R&D work which has -- which uses our core competency, but will be still a big entry barrier for others to get into because we foresee that the margins in the future, especially -- since we're into injectables and the core community will get affected more and more, and we will have to be in other things, which not only offset them, but also give us more fodder and more revenues down the line, which will help us to invest further in line. So just to give you a nutshell, our botulinum toxin might have taken 4 years for us to get invested, but the margins which we achieved in botulinum toxin and the level of penetration which we go through can easily fund our foray into biologicals going forward. Right now, what you see, like I think what Roonghta sir also said, apart from the validation cost, which we see right now one time for the Indore things. So there are -- whenever we go for any regulated market there is, of course, a 3-batch validation to be done on an R&D level, then there's a tech transfer, then the scale of that has happened. So initially, for the first -- for the next 8 to 12 months, you will see a cost increasing of validation. But once the validations are done, they are basically your dossiers, they are basically your assets, which you can use for the next 5, 10, 15 years until that molecule has that relevance in the geography area. So what we are investing right now in validation, the same thing we're doing in biologicals and what are you called as -- in other things. We are doing something where we're creating data. We're creating relevance which can either be encashed at any moment or -- if we can drive the entire wave of regulatory post development, then we can get a much bigger share out of it. We sometimes definitely feel that we are maybe biting on things which are a little bit on a higher side, but that has been always the DNA of Gufic from day 1. Today, when we -- I think in 2008, 2009 when we were maybe around a INR 40 crores, INR 50 crore company also, we were doing complex molecules and working on R&D comps and working on NDDS, which was not even companies of our size were not doing. And hence, today, also a lot of big companies or even companies from abroad look to us for innovative products and look to us for new things which they can out-license for certain geographies also. So I feel that the DNA is something which we don't like to change, which has been a success mantra. At the same time, of course, we have Roonghta sir and we have the right thing that we should not go overboard. Sometimes there's always going to be, I would say, a pressure for us in terms of, I would say, allocating the resources much. I would not say managing is an issue. It's mostly allocating the resources, when and when, the timing is the most crucial. But we, rest assured, that we will not go slow until that there will be a big chance for failure. So we feel for long-term sustenance. We have to be into something which is more unique and which gives us better margins, which can sustain the next cycle of growth also. So we will be, like in, this is what we all feel and we should continue to do so.

Just 1 clarity. So when you say that we have the capabilities to get into biologics, is lyophilization a critical factor because the rest of it, we are in-licensing, right?

No. So I'll explain how. So if you see when the botulinum toxin also came, the strain of the botulinum toxin was in-licensed from U.S. But the entire development work in terms of lyophilization, in terms of formulation also was done in-house. Also, when I see right now, once the strain comes, there's a master strain, you have to work on a reference strain. The first step of stabilizing the strain is lyophilization. But then when we -- tomorrow, we are working on the topical format, that is topical linings, like cream or a lotion or a gel, then that also involved some sort of a unique formulation, I would say, core competency, which we possess. Third example, we're working on, let's say, tomorrow we're working on oral form of a vaccine. Now the formulation development capability is in-house. The entire work on the genome and the entire work on the thing is something which is a collaboration between Gufic and Prime Bio, by which we do most of the work in our R&D center here. So because of the background we have in biotechnology, it's not that we are in-licensing the technology. We're enlighting the in-licensing strain. Getting the right strain and the right genetic code is important for us. How do you then -- I would say, express this in the right vehicle and then you expand -- and then, what you call, scale it up in a more efficient way, that is a strength of Gufic as a company. So I would say scale is in-license. I'm saying, the genetic strain is in-license. The remaining development is done in-house by the company.

Understood, sir. clearly. And sir, secondly, can you help understand the nature of relationship with Selvax? Are we development partner? Would we be playing a CRO role in clinical trials? Or if you could help understand.

So Selvax a little bit different of a model. Selvax where the product has already been developed by them. It's not something where we have contributed in the development part of the concept, which is about this inter-look into. The thing we have collaborated with them that we are working on certain PD1 inhibitors of our own. And then we saw the technology, which is used by them, which is a combination of anti-CD -- I mean, anti-CD40 antibodies that inter-look to. So that technology which they're working on is very unique, which can also complement our development going forward only on the condition that it results certain milestones as they have committed to us. So Selvax, is basically, I would like to say, a product developed by them for solid tumor. And if that works with certain, I would say, milestones which we need to see in the next 1 year or 2 years, then we will be using that as a platform to combine the PD-1 inhibitor to go for a much more superior option.

Okay. Okay. Understood, sir. Sir, can I take 1 more question or should I come back in the queue?

I don't know. I think, moderator -- I think I don't know, I'll leave it to the moderator.

Please go ahead, sir.

Okay. Yes. So sir, it's -- I'm not very much aware of how clinical trials work over here. What the time lines are like. And so if you could elaborate and also be forgot about where we fit in, in the Thymosin Alpha Phase III trials that are happening for a couple of indications. So are we handling the clinical trial management bit of it? Or are we the innovator for the repurposed indications?

If you see Thymosin Alpha, we are the innovator for the repurposing factor of it by tweaking the peptide at [indiscernible] of the formulation, we did it for COVID initially. Now we have tweaked it in a separate way for sepsis management because sepsis, if you see, severe patients or moderate patients had the same, I would say, inflammatory parameters getting flared up, plus something else, which happens only in sepsis. That's why we are doing for the repurposing part of it. To answer your question, we are actually the, I would say, a company who is working -- who are got them the molecule done and then we outsource a third-party agency to run the -- so there is a CRO basically, a clinical research organization, which gets the mandate from us then we coordinate with either, I mean, private or public, I would say, institutions all around India based on the permission of the honorable DCGI. So they're under trails. We are just the company whose molecule is being tested and eventually, we wait for the results.

And sir, what are the time lines like?

It depends on -- so you're asking about sepsis or endometriosis? So if you see sepsis is something that a patient is there around 10 to 14 days and then there's a monitoring of another -- totally it comes around 28 to 45 days, depending on the patient's health. So endometriosis is for a longer time because we not only have to see -- at least the 3 cycles of the women has to be seen post administration. So that is kind of 4 months. So based on that, depending on the recruitment -- depending on the patient's size, the patient will takes time. It can be anything between a minimum of around 15 months to a maximum of 24 months, I guess, depending -- again, depending on the patient's size side, the recruitment and the catchment area and also the duration of treatment.

Okay. So if it's indeed succeeds so we cannot expect anything for the next 3 to 4 years. Is that correct?

For sepsis, we already have started earlier because [indiscernible] also. I hope for sepsis, that should be obtained by mid of next year, and we should see the product being sold post, I think, October 2023. For endometriosis, definitely, we will be able to see visibility of the commercialization of that indication, I mean, 2024 end or maybe early 2025.

We have a next question from the line of Rajat Setiya from iThought PMS.

First of all, thanks to the management team for taking [indiscernible] that we gave last time and for the quick initial remarks in the beginning. Thank you so much for that. So first question on the [ Sparsh ] subsegment that we have recently launched, so -- under the Critical Care segment. So this basically segment is different from the -- in the sense that it will be focusing on the untapped hospital segment side, but it will still be selling the same products and sales team will be the same? Or how will that be?

Rajat, so [ Sparsh ] is a little bit different. What we realized in the last 7 years in Critical Care. Our most of the business comes from Class A markets, that is from tertiary hospitals or maximum secondary hospitals. Our presence into small nursing homes, or even I'm saying, forget the Class B or Class C towns, I mean now in India, you see a lot of development happen. I cannot say anything is class B or class A. You get my point. I'm saying up any city beyond Mumbai, beyond Bangalore, beyond Delhi and those 8, 10 metros what we have now, they are considered to be a Tier 2 or Tier 3 for us. So getting there, we were mostly, if we have, let's say, a team of, let's say, 180 people in Critical Care, we [indiscernible] first it was Critical Care, then [indiscernible] came, then a separate task force from [indiscernible] task -- even in Critical Care, they were divided into Critical Care Live, which was handling around a good set of antifungals and the other divisions was handling separate antifungals. But if you see your primarily, around 64 molecules, which was handled by this 180-team. Now with Indore coming in and with the existing channel, what we have, we have more than 103 molecules, which we are working on, which we also want to take on the international markets also. Now if I have to take out to the international markets, again, [indiscernible] subset of A and B, where international market potential and in domestic market potential. And then we came -- in this subset, we came to the 103 molecules, which then work from these factories going forward, which will be having a good market and good growth in either of these geographies. So we thought that why don't we take them in a different way, where we don't want to -- we already have a pipeline and are, I would say, market setup for Critical Care division in the next 2 to 3 years, where I'm seeing, we have these Dual Chamber Bags and we have ceftazidime-avibactam, then we have ceftazidime and others. But as these new molecules are being loaded up, the older molecules either are getting neglected or maybe the erosion in margin is happening so much that the Critical Care cannot sustain their PCPM in terms of keeping these, I would say, tail-end brands also. So we created this [ Sparsh ], which will be a unique way by which we don't want to be dependent on the channel for our business. That is -- normally, you have [indiscernible], when you have a stockist, then you have a retailer. And sometimes beyond stockist, you don't have control because we tell them to give it to the hospital, but they will also buy some goods from us and they can sell it anywhere in the open market also, which might be maybe a small percentage but still it's substantial when I consider 20% of INR 200 crores. So we thought that we'll cover the [indiscernible] more on the lines of an international approach, where we directly have only 4 to 5 [indiscernible] and then we have only 4 to 5 distributors all around India. And then we go for the last mile approach, where we not only, I would say, integrate in a system in an IT setup, each and every pin code-wise hospitals or nursing homes or even [indiscernible] doctor having his own setup of 5 ICU beds also, maybe just a basic ward also. And these, I would say, unique primary centers are being tracked on a pin code basis on all-India basis, by which we track them by a system in terms of what is the purchase on a monthly basis. And then we know and as the distributors work is only to buy from us and make it reach there. How much to sell, what to sell and what rate to sell is all determined by us end-to-end, by which we can control the margin much better. Otherwise, there's always a scope of more erosion because of the channel getting more greedy in the entire process, plus there is less chance of substitution also. So when in particular, handling high-end products and new edge products, the old products, which can be easily substituted because of XYZ reason, it's not related to quality or pricing, is something which we want to get into. And that is where the [ Sparsh ] has come up in a way which is mostly electronically guided. We have a team [indiscernible] this along with, of course, a team in the field. But here, we can talk about higher PCPM where we have a target of the -- every person has to handle minimum 300 centers, the PCPM target is around 12 to 15 lakhs in 1, 1.5 years, where it's more of a availability of the entire 103 SKU baskets in a much more efficient way, using a very lean and mean channel in middle. So it's just Gufic, a single distribution point and directly the hospital. And that is how both [indiscernible] come, and we are trying to monitor electronically on a daily basis. So every transaction, every purchase can be tracked on a, I would say, a minute-by-minute basis and see that can we come up with the business productivity model also? And then also a lot of new molecules which you want to launch, we can get more active directly to the trade because of this.

Understood. Thank you so much for this detailed answer and the concept here. Now moving on to the 2 launches that we have done, 1 in the anti-infective side dalbavancin and then the other one, ceftazidime plus avibactam. Just wanted to understand how much time did it take us to come up with those 2 production in terms of R&D and efforts that have gone into coming up with these products? How much money have we spent in the R&D here? How big is the market? And what kind of growth rate for these 2 particular products? Yes. And at what price differential are we going to sell this product with vis-à-vis to competition? I mean we are the first ones, I think, in terms of generics here, right?

Yes. So I think, firstly, we have to clarify, we'll be launching ceftazidime-avibactam in the month of November. We have built up the inventories in the last 6, 8 months to keep all the APIs and all the formulation side because the patent expires in January 27, 2023, but we are coming with a unique [indiscernible] by which we can launch it 3 months before anyone else can [indiscernible]. Ceftazidime-avibactam innovator is Pfizer in India. They have the brand name as Zavicefta. And they are the only one who are selling it in India right now. And like you rightly said, we are the first generic for that molecule in India, and we are going to launch it on our own and then maybe offer it to 3, 4 of our, I would say, associates also in terms of CMO also. So just to answer your question. Yes, the work on this molecule started around 2 years ago because we knew that it was going off-patent in [ 2023 ]. We first worked on the API. If we have to sustain this on a longer version, it's always better to work on the API because keeping in mind the antibiotic market, price erosion is inevitable and especially for [indiscernible]. It can give you also high revenue, but if you're not good enough, strong enough in the backward integration of avibactam, then it would not make sense for us. And avibactam and ceftazidime is just 1 combination. We are going to work on multiple combinations of avibactam down the line. That's why we worked on the API on our own. That's why it took us 2 years. And then, of course, first, we started developing the API. Then we worked on a different [indiscernible] differentiate ourselves at the innovator to start of it by which we can get a 2, 3 months' headway to launch it before the other competition? And currently, we also came up with a pricing, which is much more unique. I cannot share the strategy with you, how much we're going to launch it and all that because it's only launched next and I don't want to make it public right now. And next one, I mean, in the month of November end, we are going to launch it. In December, it's going to be in the market. So of course, maybe in the next call, I will give you more insights, and I'll give you the feedback also of the launch by then. Coming to dalbavancin. Dalbavancin is a product which is not available in the Indian market. It's a very unique -- 2 injections on the first day and then followed by maybe, if required, third injection on the fifth day or seventh day depending on the patient. This is only molecule available internationally. The innovator has also not brought this molecule into India because they feel that -- right now it's being sold internationally at around $1,400. We want to launch this molecule in India at a fraction. Where with this molecule, it's not going to give us, I would say, the volume. But it's going to give us a bit value, it's going to give us a good reputation because in the entire basket, what we have, we have almost all antibiotics, antifungals in our basket. And we feel down the line when the resistance is going to come up for other brand-positive options like teicoplanin, vancomycin, Linezolid, it can be very unique, I would say, proposition advantage for certain patients where these other molecules are not responding. And getting them at a fraction cost for the Indian market always makes it much more sweeter in terms of affordability. More importantly, this molecule is going to be a big focus for us for the international market because we say in India, more than Gram-positive, Gram-negative is more of significance. Dalbavancin for us next year will be a very important product for Indore because we see the markets in U.S. and Europe and other countries being -- taking this product in a much more gung-ho manner. So, dalbavancin, I would say, is more of an international product in the short-term and then coming to India on a long-term. Even though we launch it next year together, but I think you will see the actual numbers and values coming up maybe in the 3 to 4 years [indiscernible]. Ceftazidime-avibactam, of course, will be a product for short-term where you'll see a better volume growth and, as you say, revenue growth also because cephalosporins and I would say, being broad spectrum for Gram-positive, Gram-negative and cephalosporins normally also for the Indian market is always preferred for various reasons. This is my -- do I answered that properly? Or I hope I did not miss any point.

Yes, yes. Just wanted 1 or 2 things that -- I mean, the follow-ups here. So how big is the market for avibactam which we are going to sell in India?

So the ceftazidime-avibactam market, again, [indiscernible] numbers are not in my mind. But if you know, cephalosporin a whole is around a big way. This molecule, if priced properly, then almost take a big share of the entire cephalosporin market. Again, I may be wrong. I don't want to give any wrong answers. I know that cephalosporin for a fact is more than INR 1,000, INR 1,200 crores thing. Ceftazidime-avibactam might not be more than around INR 80 crores, INR 90 crores [indiscernible] I don't know, it might be around -- I'll just give you exact numbers in the next 5 minutes, plus or minus. But just to give you a feedback, the reason that ceftazidime-avibactam in India has not grown because you still you have the cheaper cephalosporins available. Our foray will be there to make this molecule more affordable because doctors need this molecule much more. And we foresee that this market of ceftazidime-avibactam will at least go to at least a multiple of INR 100 crores in 2 to 3 years' offset. That is our projection for the molecule. I'll just come back to you with the current market size of ceftazidime-avibactam. Only 1 player is there and that's Pfizer, where the product is imported into India and with a patent protection. So until now, the market is quite limited.

And we will -- how much money would we have planned in the R&D of [indiscernible] products?

Sir, can I request you to come back in the queue? We have our next question from the line of Rohan Agarwal from [ Luke Capital ]. Mr. Agarwal, can you please unmute your line?

Can you hear me?

Yes.

I had a couple of questions. My first question is I'm not sure if you've discussed this already, about the commissioning of the Indore plant. Could you just give us a bit more color on when it will start impacting our P&L?

It has already started impacting our P&L in terms of salaries which are being paid right now to the people there. But the revenue impact on the P&L should come by around first quarter 2023. We have started the construction in December 2021. We have finished the construction. [indiscernible] and the R&D building being has been done by October 2022. The machines are under process of getting installed. We feel the installation should be mostly completed by around February and there will be around 2.5 -- will get parallel installation and validation happening. But we feel the entire validation and entire, I would say, commissioning should be completed by March or April 2023. And then we should see the revenue coming in by June -- May or June 2023 for us.

Sure. And another question I had was, earlier you mentioned about Dual Chamber Bags. Could you just tell us more about it? And what sort of market size are we targeting with regards to that?

So we -- so Dual Chamber Bag is basically a drug delivery system by which -- I don't need to explain the product as such? You just want me to talk about the market address it. Is that right?

Sure. I believe it's a mechanism by which the transmission mechanism for the...

Yes. I would say it's just make the entire, I think, very administrative as well as patient compliant in terms of -- more than the patient, it's more compliant for the nursing staff and the hospital staff. They save almost at least 3 to 5 minutes depending on their efficiency on every administration of every injection. So it's a single bag where the IV bag and the powder is in the same bag, and you can just press it and it mixes. There is a good video on our website, if you have time, please go through that, I think that is a very self-explanatory video, which shows about the Dual Chamber Bag. Answering your next question. We were supposed to launch Dual Chamber Bag in this quarter. That is, I think, maybe around September itself, in October, where we already have the permission, everything was in place. And then the government came up with NLEM in terms of putting, I would say, meropenem also in this list. Our target was meropenem and then dori, and then imi. And of course, we've got a biapenem license also. So we just have now decided to launch the product maybe in December or January to get more clarity from the government that even though we know for the fact that the pricing will not have any impact on the margins or in our strategical launch. But now since we come to the schedule, we just have to go to them and now we have to get an NOC from them that since our normal vials are under price -- NLEM, we are going to come up with a Dual Chamber Bag approach. So why don't you give an exception and allow us to put the MRP, which we desire. So that pressure is there. The market addressable thing is penem as a market is close to -- we are going to start with penems and then we'll go with other antibiotics also like fosfomycin, [indiscernible] other antibiotics like vancomycin on an export base, not in India. India, it won't work. Even ceftazidime-avibactam launch right now, will be eventually launched in a Dual Chamber Bag once we get the [indiscernible] permission. So this approach can be applied to all these molecules, which are, I would say, a little bit expensive than the routine ones as well as it's something which you have the right administration, I think volume of 50 mL, 100 mL to guide them. So we hope that we can get this in multiple products. But starting off, you want to start with meropenem, biapenem and [indiscernible], which should be around, I think, INR 800 crores to INR 1,000 crores market size.

Got it. And my last question is just regarding the Center of Excellence that you have started. Just wanted to know how it will help fulfill our business objectives?

Okay. So I think -- sorry, I'll repeat the thing that for -- So the reason we went for is also something which we thought about was when we see the toxin market, you have a toxin, fillers and you have the different, I would say, machinery available, which are mostly noninvasive, which mostly help for body and face contouring. Internationally, the toxin market is close to USD 7 billion to USD 8 billion. U.S. is around to $5 billion to $5.5 billion, I believe. I'm talking about numbers, which are in the outer line. There's somewhere mentioned $4 billion to $5 billion, that is 2017, '18, now it has come to [indiscernible]. And I saw Indian market, which is still very small. I think it is the fraction of what we have. If you see the U.S. market, around 0.4 billion people. India market, 1.4 billion people. Still, the market is in fraction. So we [indiscernible] north end, it was already decided and why we wanted to get in the Center of Excellence. A lot of doctors want to use it. They aspire to use a toxin or a filler or these things, but they don't know how to use this in a combination. At the same time, a lot of people and -- we have great team of doctors in India, but we have very few. A lot of -- few doctors have the power and have the expertise by which they can use this in a much more efficient way. You don't want any face or body job to go bad also. So there's a particular way and there's particular SOP, by which we can use the toxin or a filler and also using some machines like Ulthera or use certain machines like Radio Frequency, ultrasound or something. We can actually mold a face or a body depending on what you desire, if you do it in the right way. And that is something which we thought is something maybe Gufic as a thing because we have a doctor working with us who had earlier worked in [ Allergan ], who has worked in [indiscernible]. And we have a big team who has worked in these specific therapies, and that's what Avik mentioned. There are almost 20-plus and we're in the process to getting around close to 35 different, I would say, techniques by which you can use toxin [indiscernible] machines, and use maybe in some cases, fillers; not in all cases, fillers; but toxin in some cases [indiscernible] uniquely go for a body and face contouring, which you desire. This can also involve in terms of, I would say, getting rid of some excess fat or getting rid of pimples, getting some depressions or some defects, I mean, some, I would say, undercuts taken care of. But this is something which has to be trained and that is -- Center of Excellence has been created with a single vision that we want to actually train the doctors. We want to handhold them. We want to actually give them [indiscernible] we have invested a lot of money on Center of Excellence. We want people to come, see it for themselves, see how it can be done. Also handhold them. Even our team will go that to them and make them -- train them for around maybe 5 days, 7 days. And then once they know, they are free to work. Then we will certify them also with a particular thing, which we have tied up with not only Indian, I would say, Board, training some -- AIIMS, we have tied up with a doctor from Germany, we're tied up with a doctor from U.S. And then now we're [indiscernible] someone from Australia to work specifically on some cadaver training also we want to do, by which the hands of these doctors in India [indiscernible]. So we get a lot of inquiries from the dermatologists and these other doctors who -- "I wanted to use the filler, I want to use the toxin. It is that something I would add in my arsenal, which I can give to my patient and things. But who will train me, who will hold my hand." And that is the thing we have come up with, with the Center of Excellence, which, of course, eventually, it will help us to sell our toxin, our fillers and our entire, I would say, cosmetic range.

[Operator Instructions] We have a next question from the line of Bhavya Sonawala from Prime Asset Source Private Limited.

Just 2 questions. With regard to the Dual Chamber Bag, I just wanted to understand how different is the international market, what we are envisaging the domestic market to be in terms of Dual Chamber Bag in terms of usage, if you can throw some light on that?

Sorry, Bhavya. So you mean to say the market size or...

Not the market size, but how well accepted is it? And how is it -- is it in -- I just wanted to understand how the international market is in terms of Dual Chamber Bag.

Yes. What is the response of the bag internationally? And why do I feel confident that we can [indiscernible]?

Yes. That's right. That's right.

So basically, there are 2 companies we're talking on this. One is, of course, B. Braun and second one is, I believe, Baxter. But if you see the price difference between a vial and their bag is almost 3 to 5 times. So internationally, the costing is the big impact in what I feel for them because they have not -- and also it's a good registration process, which has to be in each and every country, which might be of anything. So again, I will not comment on how they are doing and what they're doing. But I feel the pricing difference between a vial and a bag, if it crosses a particular percent, it doesn't make any relevance for them to do that. Why would -- anyway these are anti-infective mostly where the products are being used, where price is always a big factor. What we have done right now, we are trying to get the product launched right now almost close to the current MRP [indiscernible] for maximum around 50% to 20% above that for the penem market. For ceftazidime-avibactam, we are asking for a little bit higher pricing because [indiscernible] control. So we feel since the current pricing for us is not as high, I mean, I get 1 time, 2 times, we're talking about only percentage over the current thing. And with economic of scale, we have a clearcut road map. In the next 2 years, we will have manufacturing of this bags also in-house because once we reach the critical mass. So at that time, we have already done our homework and we have done our research that eventually in the next 2 years, we foresee that the bags and the vials should be at the same size once we reach that critical mass -- at the same price, sorry, what I mean. So again, I don't know if internationally, I know there is no relevance of the international for us to get into this market in India. We saw a good solution, and we saw that the current pricing supports our strategy. And in the next 2 years, if the -- critical mass is achieved, then we are almost seeing that whether can it replace the vial overall as such also.

We have a next question from the line of Saurabh beria from Axanoun Investment Management.

My question was, over the last 5 years, our contingent liability as a percentage of net worth has been very high. It majorly comprises of letter of credit and bank guarantee. Can you elaborate more on both of these types, like the nature and the purpose of this activity?

Sure. Saurabh, I will request Roonghta sir to this question. But just to understand, most of our raw materials sometimes which we use in a unique way is imported. That's how a lot of our RM, which is coming -- which [indiscernible] to the recombinant form and that's why maybe in the next 2 years will be a little bit, I would say, derisked from us. But if I understand it correctly, a lot of material comes from Korea, from Italy and of course, from China. And for that, we open LCs and then [indiscernible], I think is this the thing. Roonghta sir, can you throw some light. Whether I understood the question right or wrong?

Yes, yes. Just following on the question. Can you elaborate the exact nature of these transactions?

Sorry, Roonghta sir, do you want to say something?

Yes. Basically, we import our raw material from China, Europe and other countries against the LC. And sometimes the LC period [indiscernible] credit period of 30 days or 70 days or 180 days. And accordingly, if given a credit period of 90 days, for remaining 90 days, sometimes we take a buyer credit because it is cheaper. And we are also having a export. And because of our export [indiscernible] so we do not require to pay raising costs. So our borrowing costs will be 3% to 4% compared to [indiscernible] that is the reason we are purchasing a buyer credit for the bank.

Okay. And my next question was our R&D expense as a percentage of sales has been quite low when compared to the other pharma companies. So is this because of the nature of the business or any other reason?

Basically there are 2 types of R&D expenses. One is, we call as a, validation bags. The validation bag is basically consumption of raw material and packing material, that basically goes under the head of raw material consumption. Then there is second type of expenses, which we are giving to doctors for conducting the trials, that is going on other expenses. And [indiscernible] R&D expenses as we incur [indiscernible] third parties, is we are showing under the R&D expenses. So therefore our -- overall our R&D expenses are in the range of around 8% to 10% of the turnover, whereas the direct payment of R&D expenses was hardly around INR 4 crores to INR 5 crores.

Okay. Can I use it with another question if the moderator allows?

Sir, I request you to come back in the queue. We have our next question from the line of Nitya Shah from Kamayakya Wealth Management Private Limited.

Pranav sir, congrats on the DGCI approvals and entering some new segments in the sector. So my question is regarding Botox. I saw in your presentation that the market size for Botox is between INR 150 crores and INR 200 crores, which is very miniscule. So I want to understand from you, where do you see this market size and demand reach in the next 5 years, especially in the cosmetic -- And what is the cost of -- and since the cost of treatment is lower in India in comparison to all the other countries, so do you see this as an export opportunity for Gufic?

Yes. So [indiscernible] along with cosmetic, neurological conditions and medicine use also will be equally important for botulin toxin. So Stunnox and Zarbot is our brand names. So Stunnox has been strategically launched for cosmetics and Zarbot has been launched for the medicinal uses. So yes, the current market is small and that's why I feel that at least we hope that we can contribute in also not only -- minimum or target is in the next 3 to 5 years, the growth will take time to gain momentum. But like you see, even countries like Thailand, forget U.S. and Europe and other things, but countries like Thailand and Vietnam and even our neighbors surrounding in the Southeast Asian market and here in South America or even in Middle East, the penetration has been due. So just to give you an indication. We were in a seminar some time ago. A market like Iran has a consumption of around 800,000 vials. A market like Russia has a consumption of around 1 million vials. A market like Thailand, again, on what I have been told, but of course, these are all data from the IMS there, whatever is there, is it more than around -- it's also around anything between 800,000 to 1 million vials with that population as such. So more than -- again, I feel it's not a question of affordability. I think affordability is always there. Is this a question of accessibility and the more options available? And one is awareness, of course. People should be aware that why don't you do it? But I think awareness is building up quite faster than what we see. More importantly, if I know about it, how do I get it done from, and who can help me to do this particular procedure in a very confidential manner or in a clandestine manner or a secret manner? But still, I don't want to go out and talk about because I have got this one. That's the normal Indian psychology what I feel, I may be wrong. And that is where we feel that if we can get more and more people trained to have this treatment available in their regional or in the neighborhood, I would say, trusted medical space, then we will have reached the penetration. So if I give you the numbers of 800,000 or 1 million vials, the market has a potential to become even INR 2,000 crores or INR 3,000 crores for India from the current market at INR 150 crores. But someone has to do the hard work of starting that initiative and that will be tough, but we'll work on that.

Definitely. And my second question was on like the last candidate asked about avibactam. So I wanted to understand that what is the R&D cost and the market size for avibactam?

So market size, again, like -- to answer you on the call, I didn't get time to see the ORG IMS data as of now, but I'll ask my team member if they can do that. But I think it should be around anything between INR 60 crores, INR 80 crores. But again, I'll reserve my comment until I actually give the number. But it has a bigger potential very frankly, because the cheaper cephalosporin is available as such. So I just feel that avibactam -- coming to your first question, I cannot -- I don't know, I cannot give you a specific number as of now. But if you can give me time, you can send us a query, once again I'll specifically try to give you numbers. Every molecule has much overlapping cost of manpower in terms of batches, in terms of things. So maybe R&D and consumption is something I can tell you materially. But how much growth has happened, how much trial has been done, clinical data has been done? Because we did also a certain sort of not only in vitro but now we're in the process of doing some in vivo study also that we are -- product is matching the innovators one. So there are sort of many different factors which come on it. But on an average, we see any molecule which has to be launched, specifically injectables, from a commodity product to around INR 3 crores to maybe a specialized product like dalbavancin around INR 13 crores. This is a normal range which happens for any R&D development for any molecule. So this, of course, includes the [indiscernible] cost and the clinical data also is required. So this is a normal average cost which goes behind every -- each and every molecule which we work on.

[Operator Instructions] We have a next question from the line of Aman Vij from Astute Investment Management.

Yes. Sir, my question is around Ferticare and Critical Care segment. So first on the Ferticare segment. You had talked about we have an aspiration to reach the top 3 players in the next 3 to 4 years. So could you talk about the -- what is the sales of the, say, third player currently in this segment?

The basket size, what they have, you are saying, right?

Mr. Choksi, I'm sorry to interrupt. You are not audible. Can you repeat, please?

Okay. Sorry. So Aman, if I understood your question right, you're asking me the actual crores of value...

Yes, yes, yes.

Again, I think, what I suggest, is all the numbers, I reveal -- If you want, please write to us and we'll give you specific numbers. But yes...

An estimate is okay. Even rough estimate.

So again, I see -- I just tell you that I'm around maybe INR 30 crores, INR 40 crores away from them. I'll just give you that indication. So I think with the HMG what we have, and on HCG we have, coming with the entry of dydrogesterone and also the entry of recombinant molecules coming in, I think we can achieve that very easily -- again, reasons are because we have the backward -- backward advantage of manufacturing, which is something which will take us a little bit faster. So again, I think that is the gap, what I see right now. And of course, there's a bigger gap with the top 2, but which we foresee that in the next 24 to 36 months, it can help us to compete that in a much more efficient way.

One clarification on this and then Critical Care question. So you had talked about our current market share roughly, offset market is around 3%. And you have talked about taking it to 10%. So that means we are talking about Fertility segment becoming like 4 to 5x. So are you expecting this kind of growth in the next 2, 3 years for us? And if yes, -- then sir, in terms of molecule launch because one of the big molecule we have launched is dydrogesterone. But there you are talking about we are only targeting very less sales compared to the core market. So we will require like INR 50 crore plus kind of product. So if you can talk about your thinking, okay, how will we reach this 4 to 5x sales of Fertility segment in the next 3, 4 years.

Yes. So, I mean, dydrogesterone is, of course, one of the product, but I would not say the main product to get it through. It is actually Infertility segment which you talked about. We normally talk about the stimulating hormones and we normally talk about down-regulation or up-regulation of these different body cycles. So more than there would be more of even the HCG, HMG, FSH [indiscernible] the recombinant molecules of, again, FSH and HCG coming in, which would become a game changer for us. Dydrogesterone, like I said, they're already players in the market. And that's why we are a little bit, I would say, guarded on that estimate because dydrogesterone, I think 2, 3 companies have done a wonderful job. We are actually a little bit late in that, and that's why we are being a little bit conservative because you don't know how much we'll save. But more importantly, to answer I think why they're looking from 3% to 10% is because of the hormones, the peptides and the recombinant molecules coming in and the scale which we are getting into manufacturing and the backward integration once the recombinant molecules come, that we'll foresee. The market as such, if you see, has already consolidated much more in the Infertility segment, but there are a lot of players who are actually just buying from a manufacturer and then trying to sell it in the market and take the share. So we see a lot of penetration of these buyers, sorry, [ medical ] companies happening in the next 2 to 3 years. and that is where we feel that there will always be a scope of much, I would say, better penetration going forward. So I would say recombinant molecules, expansion of efficiencies of our hormones and peptides, plus the launch of certain peptides for endometriosis, along with the combination of orals, plus, I would say, some unique molecules we are working on reoccurrence implantation failure, and also on, again, endometriosis, which already we have spoken in the past. These are the things which will help us to take that market share much more.

We have the next question from the line of Keshav from RakSan Investors.

Sir, in your presentation, there's a mention of us building capabilities for peptides and cyclopeptides. And earlier, you had also alluded about vancomycin. So are we currently sourcing the drug substance or -- and we are just formulating, is that the correct understanding?

So vancomycin is not the peptide I was referring to. Vancomycin is normally -- even though it's off risk of peptide derivative, but it's more of a fermentation thing. That is something which we are outsourcing only because -- for the regulated markets and there are already players who have better efficiency in terms of fermentation in that. It's not our trend. On the peptide, I was referring to is mostly these biological peptides, which are going to be used for infertility. Also they're going to be used for sepsis management. Also they going to be used for female, I would say, female, I would say, sexual drive also, which are going to replace certain oral things also. So these are mostly peptides, which we're working, which are different from that and -- for which already some trials are going on in terms of endometriosis. Then it will be something for sepsis. And downtime, we're also trying to work on peptide for some other indications, I cannot disclose right now, but that is what I refer. And then we are looking at new drug delivery systems by which we are trying to get these peptides in the form of these implants or specific methods, which have a international market. Once in a month or once in 3 months or once in 6 months options available. You could just take a simple, I would say, depo intramuscular, or I would say, subdermal implant, which are much more longer-term.

We'll take our last question from the line of [ Narendra ] from [ Whitehouse Capital ].

My question is on ceftazidime-avibactam. As I understand, this is basically used as an alternative to our existing antibiotics that is carbapenem and drug-resistant organisms. But does it mean once the ceftazidime-avibactam is more easily available, our existing carbapenem sales will be impacted to some extent?

Sir, I still -- a very good question. I think, sir, you already have a background knowledge about the, I would say, the -- again, I'm seeing, pharmacology part of it. So I feel more than they get affected, there are a lot of conditions where people are using a cocktail of products going forward. So instead of that cocktail, this will be a little bit more of a drug-of-choice in certain cases where you don't want to go and try and error. I mean you don't want to go for trial and error. Yes, penems, I would say, penems in the market is so huge that I don't think much impact will come. If the affordability of ceftazidime-avibactam becomes more cheap, which will take some time, and we're all trying to work on that. And definitely, you will see some dent happening in the penem market. But right now, because of the pricing difference between both, I still think there's enough space for both, and they will survive.

Okay, sir. Sir, the next question is on Thymosin Alpha and sepsis. So as I understood, there is already reasonable data over the last 10 years to suggest that this may not make much impact in sepsis treatment as such. Are we doing something different here? Why you are going ahead phase III trials when there is already some evidence?

So if you see that on the contrary, we went through almost 200 publications and that we've seen that the Thymosin Alpha, if used in a much more, I would say, efficient manner because ulinastatin always have the issue of working and not working depending on the timing when it's used and there's a big debate, I won't get into the debate right now. But if you talk about Thymosin Alpha, we have seen the results in COVID. And even the 200-plus publications of sepsis has shown that when used in the right time initially, it can really help to, I would say, suppress the infinity parameters, which we have seen in COVID also like certain cytokine storm and certain CD4/CD8 or even -- I would say, specific of infinity parameters were taken care of. So we feel like that it still has a role to play because if you see our Immunocin Alpha was the only product which was approved in moderate-to-severe patients during the COVID thing. And that is mostly because of infinity parameters where we see in a normal case, maybe 3 people who are dying out of 4. In case of Thymosin Alpha, only 1 patient died of 4. So we -- I mean, that's a big -- right now, we feel still 1 patient died, but we have survived -- 2 people survived on the contrary. So that way, we feel we are still quite bullish and the data -- what we did independent trials before also via some doctors who have tried it in the past, they are quite gung-ho and we still feel. I think what -- if you need, we will try to send you some publications which we have, and maybe I would like to understand for me what publications you have also to actually go through this data. And maybe you can teach us something which we are not aware about. I will be more than happy to see what you are looking into.

I'd like to go through in detail, sir, let's see if there anything. Sir, other question is, which was mentioned in Q2 presentation. Actually, channel checks do suggest that Q2 impacted highest occupancy for hospitals and ICU in particular.

Sorry, your final question is unclear. Can you specify that point again? I did not hear your last sentence.

Please use me handset.

Can you hear me now, sir?

Yes, better. Please go ahead.

Sir, in the presentation, it was mentioned that Q2 sales were impacted because of low hospital occupancy. But the channel checks do suggest that Q2 impact was one of the highest points in Critical Care admissions and occupancy. Can you throw some more light on it, sir?

So your question is that in Q2, we have mentioned that the Critical Care sales in Q2 were impacted because of less hospitalization and channel, what do you call, stocks -- inventory levels, right? That's what we have written. But do you feel that hospitalization has gone up in Q2? That's what you feel? Or that's what you have read?

That's what I feel, sir.

Okay. So what we feel, I think, [ Narendra ], very frankly, there were 2 issues in a lot of cases, what I feel and what we have worked in the thing. What was pre-COVID conditions in terms of planned surgery and other hospitalization, that still has to come and [indiscernible] but there is a lot of inventory in the channel, which is blocked. So a lot of people post COVID has also had maintained very high inventory, not only -- including -- hoping that, I would say, being prepared for if something comes back again. And that high inventory has led to a lot of, I would say, inventory in the channel. And that is also 1 way which is affecting us. That's my opinion. Because right now, so many companies had the anti-infectives, antifungals. So it was not only COVID, but even mucormycosis has also led to a lot of increase in antifungal inventory also. And then we spoke to doctors and all that, we have it, but in the hospital stock, in the distributor level stock and other, we have so much stock, but even if hospitalization is happening, firstly, we are trying to use that inventory first and then we'll go to the new one. So that's what we got the feedback. And that's what we felt that our Critical Care could have done much better. So even though Roonghta sir said that from, one, if I remember the COVID sales last year and I do a normal Critical Care or 2 Critical Care, we have still seen not that much growth, which we have seen in other divisions' part of it. So that's why we feel that our Critical Care should have been much more, but we do feel it was affected because of these 2 factors.

Thank you. I would now like to hand the conference over to Ms. Ami Shah for closing comments. Over to you.

Thank you. Thank you, everybody, for joining this call. I hope all your questions and queries are satisfactorily answered by us. And in case if there are any further questions that have remained unanswered, you can reach out to us or Mr. Deven Dhruva from SGA, our Investor Relations partner. The contact details are already provided on the last part of the presentation uploaded on the website of the stock exchange and also on the website of the company. Thank you, once again, hope to reconnect in the next investor call.

Thank you. On behalf of Gufic Biosciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.