Gufic Biosciences Limited (509079) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of Gufic Biosciences Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Ami Shah, Company Secretary and Compliance Officer of the company.

Thank you, Melissa. Good afternoon, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Pranav Choksi, CEO and Executive Director; Mr. Devkinandan Roonghta, CFO; and SGA, our Investor Relations Advisor. We have uploaded our results and investor presentation for Q1 '24 on the stock exchange website and on the company's website. I hope everyone had a chance to go through the same. Now let me begin with an overview of the business for the same quarter. Starting with the Indore facility, we are pleased to inform that the validation of the society or validation of the facility is on track for completion by September 2023 and commercial production is all set to begin in October '23. Coming to the Critical division, we were able to retain our leadership position in the lyophilized injectable within the anti-fungal and anti-bacterial segment. Our broad-based portfolio is making a strong comeback witnessing growth across key molecules. This resurgence follows every quarter of subdued performance largely attributed to post-COVID inventory build-up. Our Sparsh division molecules have undergone our comprehensive market mapping, encompassing around 8,000 hospitals across India. We have established presence in 6,000 plus hospitals with the 92 molecules that were launched. We are also happy to announce that Gufic has secured DCGI approval for the manufacturing and marketing of Dalbavancin. And we are the first company to receive such approval in India. Trial for sepsis involving Immunocin-Alpha have concluded successfully and we anticipate DCGI approval by Q3 of this year. On the Ferticare business front, the introduction of an enhanced Human Menopausal Gonadotropin marks a significant step in boosting the success rate of IVF titles. This advanced formula aims to reduce the chances of cycle failure. Gufic's strategic investment in developing recombinant alternatives to critical hormone using in infertility treatment positions us to be self-reliant. The development work for this alternative is well underway and we anticipate product regimens within 15 to 16 months. Thymosin Alpha 1 trial targeting endometriosis treatment has been successfully concluded, marking a significant achievement in our commitment to tackling complex reproductive health challenges. Coming to the Healthcare, Stellar & Spark division, the successful launch of a new zinc-based multivitamin has been warmly received in the market. This strategic addition has expanded our portfolio and bolstered our presence in the mass market division. Also brands, Gufican and Gufibis, are making steady strides, gaining traction in their respective niche categories. As these categories evolve, we anticipate these brands to experience substantial growth. Coming to the Aesthaderm & Neurocare division, our successful completion of a split face trial comparing Stunnox against a product from the market leader has yielded remarkable results. This achievement has not only created awareness, but also instilled confidence in our offerings with the applicator fraternity. We intend to leverage the insightful findings from this study to drive further awareness and accelerate market development efforts. The inauguration of a training center Arisia in Mumbai has marked a significant milestone. This center facilitates training on innovative therapies that combine cutting-edge machines with the utilization of fillers and botulinum toxin for face and body contouring. This strategic initiative not only cultivates awareness about Stunnox, but also curates a specialized applicator base, carving out a niche segment for our products. To effectively tap into the neurology segment, we have assembled a specialized team boasting extensive domain knowledge. This team is equipped with the necessary skills and connections to strategically target this critical segment, ensuring a focused approach and meaningful impact. Lastly, on the International Business plan, we have received 1 new product approval from Columbia and 2 new product approvals in Philippines. Our strategy for Europe and Latin America centers on leveraging our existing formulations in countries where we have established a presence. Simultaneously, we are also targeting new countries based on market gaps and opportunities, ensuring a comprehensive approach to expansion. With this, I now hand over the call to our CFO, Mr. Devkinandan Roonghta, for the update on Q1 FY '24 results and financials.

Thank you, Ami. I will go into highlight the financial results of Q1 of '23-'24 versus Q1 of '22-'23. Total revenue from the operations for current Q1 is INR 195 crores, whereas previous year it was INR 165 crores. EBITDA is INR 36.4 crores for the current Q1 of the current year versus INR 33.6 crores Q1 of the last year. EBITDA margin for the current Q1 is 18.6%. Last year it was 20.3%. Profit after tax for current year is 20.6%. Last year it was INR 21.1 crores. PAT margin is 10.6% compared to 12.6%. There has been increasing [indiscernible] because the increase in the finance cost. The whole contribution has been gone for Indore CapEx plant. Thank you.

Yes, we can start with the call.

[Operator Instructions] We have the first question from the line of Pujan Shah from Congruence Advisers.

My first question would be on the launch of Dalbavancin. So could you just pan out the market sizing and how we are figuring out, because we are the first company to get the approval? So how we are looking into it? And what are the like assumptions built on to the revenue and profitability for this specific?

Yes. So Pranav here. Dalbavancin actually is basically a gram-positive antibiotic which is in line. So when we consider the current market size in terms of the market represented, we have to consider the current available options. So the current level of options would be a combination of linezolid, vancomycin and teicoplanin, which totally comprised to a market of more than around INR 600 crores -- approximately INR 500 crores, INR 600 crores as per the ORG IMS. But if you see, now in India, most of the infections were gram-negative and then we saw a survey of mixed infections coming in. So we foresee that gram-positive along with -- because of the onset of these infections, which is a combination of gram-positive and gram-negative here to stay. And that's why this will be a very unique tool in people in addressing this thing. Now if you understand Dalbavancin, the main advantage what it has is it is to be used on the first day and then directly on the 8th day. So unlike other injections where everything has to be used on a daily thing. So I don't foresee that Dalbavancin of course immediately will -- first I'll tell you the good points and I'll then tell you the negatives also of Dalbavancin, which will help you maybe understand a little bit more about the market insight and then that's why I'll come to the projection. So Dalbavancin advantages are, it has to be used on the 1st day and the 8th day. So the ease of compliance is there for the patient. However, this is very good for patients which are normally going for any single day operation on a single day territory and they have to be discharged in 3 to 4 days. So something like a knee replacement or any soft tissue infections where the process is hardly to be hospitalized for 3 to 4 days. This is a very effective tool where the doctor can be rest assured that the patient is protected against any infection due to the surgery for a longer time, even though he's not -- he or she is not going to be in the hospital. So the advantage is the ease of use. It's a much more stronger antibiotics. It is also the advantage of resistance to be formed against this molecule. As of now what data is available is much lesser than others. Now the negative part. The negative part is that the pricing, of course, because this is a new molecule, it is -- it comes with a premium. So the cost is much higher. The cost of therapy of this product is almost as of now, around 2x, 2.5x what we have done. This is also comparing teicoplanin. The reason we have done 2.5x, because still, if you compare this with the international market, this is still one fixed -- the price of international products. Otherwise, India when you see, since always medicines are available in a much more economical manner, still it will be 2x, 2.5x. So we foresee that initially for the first 1 year, 2 years, this will be the drug of reserve for Intensivist. However, for ortho surgeries or cardiac surgeries, especially in endocarditis, this can be the first drug of choice when other molecules are going to give a resistance. So keeping all these factors in mind, the price balance along with the advantage what it has of the molecule, we foresee that it should start with around -- maybe anything between around 3% to 5% market share in year 1. Gradually, we foresee that in the next 3 to 5 years, as the pricing becomes better, as we also introduce much more efficiency in terms of our production efficiency in terms of our scale of operation, we foresee eventually this will be the drug of share, maybe a 30% market share in the next 3 to 5 years. And I hope down the line, it should -- because of the ease of using it maybe once in a week, that is -- and also, I mean it used to be used only twice, on the 1st day on the 8th day, it is going to be a very good tool. So I hope that in the next 5, 7 years, once other resistance comes up and the safety is established more, this should be a big chunk of the total gram-positive market. One more reason Gufic has actually worked on this molecule is because internationally this is going to be -- gram-positive infections are much bigger in Western countries. And since this molecule has already been approved by us for India, we will launch India of course first. But eventually, our target is to take care of the -- from Indore to the countries like Europe -- I mean, countries in Europe and U.S. and Canada and South Africa where gram-positive infections are much more. So I see a much bigger traction happening initially for these markets first, and eventually, India should catch-up in the next 3 to 5 years.

Okay, sir. That was a quite detailed answer, but I just wanted to follow-up on that, that if you wanted to get on the export side, so do we need any registrations or approvals specifically from U.S. FDA?

Absolutely. It will take us 2 years at least, yes, because we will have to take the batches' ability. And then in some countries, we might require to do some small trial also where it's not introduced.

Okay. And my second question would be on the Dual Chamber bag. If -- sorry if I missed, I haven't read the detailed presentation what you have presented. But just wanted to know what is the update about the Dual Chamber bag? How it's going on? And how we are planning to grow further?

Yes, yes. So Dual Chamber bag, as I mentioned in the last call also, was launch keeping in Meropenem and Pip, Tazo. But unfortunately, we got only a 15% approval from the NPPA in terms of price increase. So for Piperacillin-Tazobactam, we could not launch it. Eventually, we decided to launch only for Meropenem and Sulbactam and Meropenem. So that will be launched in the month of -- I mean, it is already -- I think as we speak, it should be entering the market space right now. And it could be launched along with the Teicoplanin molecule also in the month of September. So this quarter, that is Q2, we'll see the launch of Dual Chamber bags in India by Gufic.

Okay. Got it. And sir, congratulations on this first division. We are doing a very well product profile for the Sparsh and we are growing excellence for that. So congratulations on that, sir.

We have the next question from the line of Ayush Mittal from Mittal Analytics.

Yes. First of all, I'd like to share my appreciation to the team for the nice work you have been doing. It's heartening to see so many new product launches and things taking place for the company and we being able to build upon our past track record. I have a couple of questions for Pranav. So first, given that a large expansion is coming up and it's almost near completion, so how do you plan to utilize it going forward? What are we doing to -- given that we are already one of the largest lyophilize player, how will such a large CapEx that we have done get utilized? And some thoughts on the utilization. Part one. Second, how do you see this as a -- as we start doing more of a work in our own brand name, how do you see the conflict as a contract manufacturer to the larger companies?

Yes, Mr. Mittal. So I'll answer your first question. So currently, our immediate plans from Indore would be to take care of the domestic market, both purely from our front end as well as contract manufacturing for some of our current clients as well as of course new clients, which we are coming up. I mean, we already have started targeting them. So what we have done, we have identified around 323 molecules which can be made in this particular facility. Out of that, we have -- and all this is based on the ORG IMS and the business analytics. And then we have seen who are the top 10 to 15 players of that and what is their current source of, I would say, the products. So some of them which are currently are -- if via scale and via automation and also with the new ruling of QR code and track and trace and traceability part of it, these are the USCs which we as a company would start offering to our existing clients here. So let's be very clear that, at least for the first year, the capacity utilization would be from India primarily, because first, we would have to apply for a WHO then followed by a EU and U.S. and so on which normally takes post-commercialization at least 1, 1.5 years at least to get that done. Side by side, of course, the almost 10% to 15% -- it's actually more than that. Initially, maybe on an average, it would be 20% capacity on the 12-month's usage. But otherwise, initially 30% to 40% of the capacity would be used initially to come up with validation batches. And this would be required for creating dossiers and documents to be filed for international markets. So that would be another capacity utilization, which of course, would come at a cost to the company. But eventually, they would be sowing the seeds for much better expansion and also price realization, because as you know, India would be a year 1, but as and when those same products are taken to the international markets, the price -- the margin would be much better and also the pricing and the advantage also would come and we would be realizing that. Front end would be things for -- as I have mentioned before, Sparsh is one way where the front end would be increased. Even for that matter, Gufic Critical Care has come back with the bang now. So I foresee that with other exports coming in, Navsari facility would be mostly chockablock with capacity by 2024. And I'm seeing on a pessimistic way, optimistic it might be a chockablock by around June 2024 because we already are now seeing orders which are till October and November. So we foresee that this will help us -- Indore will help in a very big way to not only derisk our operations, but also to take care of the excess capacity from Navsari to Indore, which will of course be primarily in year 1 for India and then the other markets from year 2 depending on the accreditation. Answering your second question, would it be an issue? I don't think so, because in India, that's the beauty. The pharmaceutical market right now is around INR 2,10,000 crore. We foresee that even -- I mean, again, I don't want to quote anything, but if you see all the different business analytics for even the reviews of what we get for the India market and the projections what we get, in the next 9 years to 10 years, we see the Indian pharma market going to be anything between INR 7 lakh crores to INR 9 lakh crores. So in 76 years, it has be INR 2,10,000 crores and now coming to INR 7 lakh crores to INR 9 lakh crores market in the next decade, let's assume, we are looking at almost a 3x to 4x increase in market size itself. So anyway, that is where I'm looking that as a worst condition that we -- international market goes for a toss, the Indian market is there to back us up. And that's why the investment also done in the facility has been very unique. Even though having such a huge capacity of 2 crores ampules -- I mean, 2 crores ampules, 1 crore vials and 50 lakh lyophilized vials per month, we still have been able to balance the investment where others normally take -- same investment would be around anything between INR 800 crores to INR 900 crores or INR 1,000 crores as such for such a capacity. We have managed and balanced using expertise to make it quite a compact offering. And we hope we can take it forward. So especially answering contract manufacturing and the thing about front end, because the market is going to expand so much, everyone have their own unique channels and they have their own unique set of clients. So -- and also, if you see the market itself also is more than happy to accommodate multiple players. Some markets also -- I mean, I normally work in the field, I hear hospital thing in a Gufic, we will only like -- we were -- all the hospitals and the nursing homes also derisk themselves. They don't completely buy everything from Gufic. Even if they have a 50% to 60% Gufic share in terms of their pie, they always keep any 2 or 3 other clients always there to derisk that business. That's why I always feel that the business of contract manufacturing and I would say our own branded business will go hand-in-hand because we have some unique propositions as a company which always the client would desire, Dalbavancin being such an example and some products coming in the future. And we also are -- we always have been very fair with our clients that whatever pricing the MRP and the entire plan is very transparent where it's a win-win for both of us. So I don't foresee any conflict as such, but yes, it can get challenging, but there's always a solution for that.

Okay. So we have been talking about ramping up our exports in a significant manner, but we don't see it in the numbers still. Any thoughts on that?

So that's what I'm saying. So if you see the -- most of our capacity is still mostly utilized in Southeast Asian markets and Germany and followed by India. So whatever benefits we are getting in numbers should start. So the Brazil or Canada market always starts with a particular gestation, even Russia for that has started with the gestation. So even if you see this time's numbers, the major growth apart from Sparsh has been critical care and exports, whereas the business like contract manufacturing has little bit again supported a further dip, again, not because of lack of orders, but it would be lack of capacity which we are trying to divert to our own products and our own front end. So with Indore coming in, we feel that a little bit of that solution should come up. So more and more, we get -- I mean, moment Indore comes, a little bit of our domestic business should be shifted there eventually and that would free up a little bit more of export capacity which would take care of it. We foresee, like I said, 15%, 20% growth year-over-year would be taken care of by these 2 things. And that is where export would play a big growth.

Okay. Sir, my last question is more around the statement you just now said that the CapEx that you have done, somebody else would have a similar size, the cost would have been maybe INR 800 crores, INR 900 crores, while we have done it at a very, very reasonable value. So any references for this number? Like how can we be...

Please don't draw me to references. But yes, there -- you can always have market information and there are always -- there was a deal which happened last year where the capacity was 1/3 of us, but it was sold at almost 2x our investment. So that's an example of that. And also, it depends on the selection of the machine, it depends on the selection of the civil plan, the compactness, the packing line and end-to-end. So I didn't mean that -- I mean, we have done a great job. I mean, what I -- the point what I was trying to make is, we have not -- tomorrow, the survival in this plant of export and this, what you call, in domestic market is a pure bias of the running cost and the capital investment which you put in. The capital investment has to be amortized on the next 3 to 5 years and the running cost also has to be managed. So what I meant to say that since we have been in the field for -- of lyophilization injectable since the last I think 30, 40 years, that is even before I was born. So we have certain expertise to handle that in a much more efficient manner because of our core competency, nothing else in pure humility. And that is what I feel that tomorrow it's no use buying the best of machine, I'm talking about everything from Europe or something and putting a big investment when you know that eventually the per vial cost is something which is going to help you penetrate the market. And in that context, I have mentioned that the investment has been a little bit, I would say, balanced in terms of achieving our objectives entering the right regulated markets, at the same time, taking care of the running costs by minimum -- I mean, by having maximized automation and minimum other overheads which might be redundant. That's what I meant.

We have the next question from the line of Akshada Deo from Vivog Commercial Limited.

Yes. I wanted to know what was the capacity utilization for Navsari plant for this quarter?

Ma'am, we would be pushing right now anything between around 80%. That reason also being 80% because there are other preventive maintenance and media fill and other activity which happened for validation and dossiers also. The commercial utilization will be around 80%, which we are almost in the brink to pushing and that is tight on numbering. So that is the current capacity utilization. One more reason why I mentioned a lot of products which we have registered, this is I'm regarding to the lyophilized form. Of course, we also have a Penem block there in Navsari where the utilization is approximately 35% as of now.

Okay. And sir, I wanted to know what was the mix of exports this quarter?

Export normally is around 20 -- I don't know the exact rupee value, but on an average, as we see, we get these reviews on a moving MAT level, it's always around some 15% to 20% of our revenue.

Okay. I just wanted to know the reason for the dip in margins this quarter. I did see that Critical Care section had more volumes. Was that the only reason?

Again, I think Roonghta sir will be in a better position to answer that, but I don't foresee any change in gross margin. So I think Roonghta sir, can you please take this point, sir?

Typically, if you see the GC, GC has been maintained at 51%. The margin has been reduced because of the increasing in the other overheads. Other overheads, last quarter, we were INR 33 crores. This quarter, it has increased from INR 33 crores to INR 39 crores. There has been increasing around INR 6 crores, mainly because of the R&D expenses, validation batches as well as filing of dossiers. All this -- because of the Indore capacity also, R&D cost has been increased. And that was the reason for the dip in the EBITDA margin.

Okay, sir. Can you just give the exact number on spend on R&D this quarter? And what is the plan for rest of the year?

Yes. But just to elaborate, I'll just clarify what sir meant, because R&D, it's more of a combination of R&D and testing. So every R&D is basically done for the product once, then once the product is developed and when we have to take the product on the international market? Like, I'll give you an example of Liposomal Amphotericin B. Liposomal Amphotericin B was already launched in India. Now in order to take a product to Brazil, in order to take the product to Germany or any other market, we have to take the R&D sample, which is the innovator's product. And then we have to compare that product with our product in the form of a laboratory, then we have to do at least 6 to 7 different tests which cost us only INR 1 crore per product. So normally, if it was just Europe, then that same test can suffice to all the countries in Europe plus South Africa, Canada, Russia and so on and so forth. Normally, for a country in Brazil, the product itself has to be brought -- have to be purchased from Brazil. It has to be sold locally in Brazil and then it has to be compared. So this is just one example I'm saying. So like that, in this quarter, we have done a certain tests for Liposomal Amphotericin B, plus as I think Ami mentioned in her previous things, the launch of 2 products, 1 product that is for -- in fertility, where we are doing a head-on trial versus [ Menopur pairing ]. And the second product would be there for endometriosis. So that is where the clinical trial comes. So that again will be an additional addition. Like that, I'm just giving 2, 3 examples, but such things which we have taken a little bit more on our, I would say, focus has increased the, I would say, cost from the other expenses. Otherwise, if you see the running cost or the employee cost or the gross margins are same. But we have an opportunity which we feel that right now, I believe there's an issue of some supply of Menopur in India. So there's a big opportunity for us, which is a total INR 220 crores market, out of that Menopur is almost 15%, 20% market share. It's a good time for us to hit the market provided that we do a proper 200 patient study and prove that the product is as effective and as -- gives the deliverables what a product made in Europe would do. So that's why some expenses have done. Answering your question about how this would look, so we always have a plan of increasing the R&D, because as I mentioned before, we are doing a lot of trials on our biological platform of vaccines also and also for our topical and in terms of our other Botulinum Toxin drug delivery systems. So I foresee that this increase in what you call expense on the trials -- and when I mean trials, clinical trials, both human and animal trials as well as certain dossier-related and lab tests would continue for the next year also.

Okay. That was quite a detailed answer. But I would just like to know if you have planned any number specific? And what was the number for this quarter?

So again, the number -- again, I think I can get back to you on the number, but Roonghta sir, do you have any specific number? It would be around INR 8 crores to INR 9 crores per quarter normally spend?

Yes, I will also get back with the numbers.

We will get back to you, ma'am. I think if we can get your details, we'll send a communication to you.

We have the next question from the line of Nitya Shah from KamayaKya Wealth Management.

Congrats on a good set of numbers. I just want to understand now recently, the IMC has announced that you aren't supposed to give the brand names anymore, it's just the molecule that will matter. So I just want to understand what would according to you be the impact of this? Will it be positive or negative for us?

So I think a very, very good question. And I don't know how to answer this question properly, but I'll try my level best. So I'll just give you an example. When you have a multivitamin where you have more than 8, 9 vitamins plus iron, plus some protein or something to be prescribed, I can't understand how a generic product can be prescribed that way. If you expect the doctor to write those 20, 30 things, even in terms of some fixed dose combinations or in terms of even 3 products in 1 or 4 products, I don't know if the practicality is there to do that. At the same time, I'll just give my opinion. If today, we are going to remove the power away from the doctors, which is a medical fraternity, which is responsible for people's health and give it in the hand of a chemist, because in India if the doctors don't decide which product to give, the chemist will decide which product to give. And if the chemist decides which product to be given then he will decide that what is the best margin available to him. So I don't know -- again, I'm trying to -- I know that I'm not answering your question, but I'm just saying that I don't think it's a very practical thing. Of course, a lot of representation has been done by the industry and more than us the IMS, I mean, Indian Medical -- sorry, IMC is much more concerned about it, because then for us to be a proper generic country, we are more than happy, but then there should be a uniformity of manufacturing standards all over India. Unfortunately, the manufacturing standards in India are still not uniform state by state. You will see a lot of companies who manufacture -- who have WHO GMP, but still do not adhere to the GMP standard, which is a very sorry state. But again, I'm trying to be as politically correct in this reply, but I feel it will be a big challenge to, I would say, drive this move. And if it happens, it will be chaos according to me. But -- that's it. We have all these brand power and these big, big -- I mean, more than me, I think I'm a very small fish in this. More than me, the big pharma companies of India would be in a better position to answer that because it will be a bigger, bigger headache for them also going forward. So again, I'm sorry, I did not answer your question, but I hope you understand my...

I think we will take it as it comes.

Yes, yes.

We have the next question from the line of Bhavya Sonawala from Samaasa Capital Private Limited.

I just have one question. You have been mentioning that Criticare is back -- has shown a comeback. So I just want to understand what kind of growth can we see going ahead? And overall, are we increasing the addressable market for Criticare going ahead, if there's any plan about that? Yes, that's it.

Yes, absolutely. So I think let me divide that into 2 parts because Critical Care has been launched, keeping in mind -- I mean, it is currently taking care of most of the new-age anti-infective and other markets, plus we have come up with these divisions under Critical Care which are Mycocare, Primacare, where the Primacare market actually goes to the rural market and to the primary healthcare center. And we have a Mycocare, which is mostly for -- a center for going to -- going for products, which are mostly servicing the oncology industry as the secondary line of therapy, not the primary, the second line of therapy. So always, there are plans to increase the base of Critical Care by adding new, new products. The market it represents may also increase. I think ceftazidime/avibactam which was launched in January -- I'm sorry, January or February have seen -- I think that is one brand of us which in the last -- which has featured in the top 20 brands in the last 12 months of India. So like that, we have planned to also launch some anti-fungal on, I would say, oral products. And as I mentioned before, I think a gentleman asked me, Dual Chamber bags also would help us to increase the addressable market in terms of patient compliance, plus there are some new molecules which we have launched, plus Sparsh has come for those other products which we'll be catering. There are almost I think 130-odd SKUs there which are there to take care of these other primary and secondary markets. And that is how the interest go. The only issue sometimes what we face with Critical Care and Sparsh would be that these are all RM-sensitive products. So when the RM goes down, the pricing goes down. So even though the growth might be much higher, sometimes the value is not captured because we mean at a 30% unit growth, the value might just fall down by another maybe 10%, 15%. So eventually, you just see a 10%, 15% growth, but the actual unit growth is almost 30%. So that is the challenge which we have. But nevertheless, I think the market is ever expanding. And with Critical Care and Sparsh, of course, a lot of new -- every quarter, at least I know, there is a product which is planned to be launched. We'll ensure the growth continues.

Understood, sir. So is it fair to assume the growth in Criticare will probably be ahead of -- I mean, will it cross 15%, 20% expectation?

Yes. So like I said, 15%, 20% as we say, I would say, anything between 10% to 15%, keeping in mind the erosion in prices what we have because that's one product which -- like Dalbavancin, I'll give an example. It always starts off with a high MRP and then you see a erosion happening in terms of MRP in terms of the price to the market. So keeping that in mind, anything between 10% to 12% in terms of value is our target, which internally would come to anything between 25% to 30% unit growth. That's how we target Critical Care.

[Operator Instructions] We have the next question from the line of Yash Tanna from ithought Portfolio Management Services.

Congratulations on a decent set of numbers. So my question is on the Indore facility. So right now, we have interest costs that is hitting our P&L. And so how many quarters do we feel before we can breakeven on the Indore facility since you mentioned that there will be filings and that will also come as a cost to the company. So how many -- what's the timeline before we can breakeven on the Indore facility?

Roonghta sir, can you discuss -- I mean, can you add on this keeping in mind the quarters?

Yes. We would like -- our commercial production we'd like to start from the Q3 of this year. Then Q3 of this year plus Q4 of this year and maximum till April, Q1 of next year, we will expect from Q2 of next year, we will able to breakeven that Indore project cost -- Indore finance cost and every -- all the cost of Indore.

Sorry. Roonghta sir, you mentioned Q2 of next year, right?

Yes, Q2 of next year.

Okay. And my second question, I think, Pranav sir, you partly answered that, but since Critical Care is also coming off a low base and I think exports we have registrations and with this Indore facility also coming in, do we think that we can overshoot the 15% to 20% guidance that we have given? And similarly, on the bottom-line as well with the Indore cost, do we believe that we can grow 15% to 20% on the bottom-line as well?

I think bottom-line -- let's use the word bottom-line in terms of EBITDA, yes, because post-EBITDA with the interest and depreciation hitting of Indore, maybe in a way different thing, Roonghta sir will comment on that. But definitely, EBITDA 15%, 20% should not be an issue. And I think Roonghta sir will elaborate on that. Coming to your point about the other growth and then I'll hand over to Roonghta sir to talk about the bottom-line. The top-line, we buy -- we give a minimum expectation of 15% to 20% is, like I said, Critical Care and other things, certainly, they are very price-sensitive which has an impact on contract manufacturing also in terms of certain cases also, maybe sometimes in export also. And last year, we have seen a big yo-yo in terms of price going up last year and then just falling suddenly. The problem with the market, when the price falls suddenly also in the market, they expect you to give a better revision growth. So keeping the unit growth much higher of 25%, 30%, yes, 15% is a bare minimum of what we think. Anything higher would definitely add up and should start kicking. But 15% I see as a very, I would say, fair thing to comment right now. If it happens more, I'm sure we would love to share that with you. So Roonghta sir, can you comment on the bottom-line part of it?

Basically, if you see, our EBITDA margin will going to be maintain around 19% -- between 19% to 20%. And out of EBITDA margin, if -- other expenses is also going to increase around 15% to 20% compared to last year. And the finance cost is going to start from the Q3 of this year and it will be going to increase by around INR 2 crores per month. And there were other increases in the depreciation cost that is also going to increase around INR 1.5 crores per month. So looking to the top-line, we were able to maintain whatever the profit was in the last year during the current financial year also.

We have the next question from the line of Shresth Toshniwal from [ Earth Advisors ].

So this is for the update on commercialization of Carbapenems. I want to ask what is the range of Carbapenems that we are currently supplying. Could you give us an estimate of the market you're targeting here? Is it coming in from Indian companies to the supply base or is it coming in from the import substitution that is playing out?

You mean the API point of view or the formulation point of view? Can you please -- sorry, I missed your question. So can you repeat that again, please?

So we are supplying Carbapenems and since there's a range of Carbapenems, some market experts say that if you supply a range of Carbapenems, it increases the stickiness of your customers. Am I correct?

Right.

So along those lines, what is the range of Carbapenems that we are currently supplying? And the market that you're gaining here would be coming in from Indian companies you're supplying Carbapenems or is it the import that we are targeting?

Okay. So again, what I understand, basically, we make injectables of Carbapenems in India and we make the entire gamut from Mero, [indiscernible], Dori, whatever injectable Carbapenems have been approved in India, we make all of them. So that is the answer to question #1. And the total market size according to me would be around, if I'm not mistaken, INR 1,400 crores to INR 1,500 crores. However, I would still get back to you in terms of the ORG IMS data. Currently, we supply in India by buying API -- of course, we have started making some APIs in-house of the Carbapenems, which are primarily 2 of them, which is of course of the major market size. Otherwise, wherever we don't have the economies of scale, we buy from Indian companies and of course import the API wherever required for our own use. So I don't think -- I mean, so the sources of the APIs have been well established, plus we have interest in 2 of them, which are quite, I would say, of scalable in nature. And we hope that this -- like I said, this was started in August 2022, the facility. So we are hoping to take care -- take this facility in international markets also by next year. It will not be -- it has not been designed for U.S. and Europe. But yes, apart from U.S. and Europe, the other countries, we already have started the process of registration. So we hope that the Penem further should be increased by 2024, 2025 also. So I hope I answered your question because that import substitution I was not very clear, so I tried to answer it in my way.

Okay. If I could just ask a follow-up. Recently, when the laptops were banned and other gadgets were banned, there was also talk of ban on -- potential ban on antibiotics.

Yes. You mean imports, right? You're saying import of...

Yes, yes, import of antibiotics. I understand that we have significant imports coming in from China and I think especially in Carbapenems, so which poses to some extent, the national security risk. So how would that ban affect us? And if this...

Okay. So that's -- I understood that. So frankly, if you still ask me the key starting raw material of all the people who are making it in India also still come from China, very frankly, for the Carbapenems. Of course, at the same time, I'm very happy that Aurobindo has taken this lead and they have been -- I think they have a factory which is going to start making the KSM also, the key starting raw material in India also for Penems, should be up and running very soon or it's on the verge of being start or it should be, I don't have the exact information about it. But with Aurobindo coming in, I believe there's another company also who is on getting it done. So getting the material is not an issue. And even then if the ban happens, we have of course 2 or other Indian manufacturers who are already working on it and should be self-sufficient. Also, like I said, we also are interested in 2 of the Carbapenems to be made in-house. And for that also, we'll be sourcing the KSM from India. So there are 2 companies as of now, which we have started talking to and we will be validating them going forward. However, I'm sure if the ban happens, there will be other mushrooming effect which will come for others also. So I don't foresee any challenge happening right now.

So on the supply side, you are safe. And on the demand side, would that affect the demand for our products?

The demand, I don't think if the ban happens, if the supply is enough from Aurobindo, there will no impact on demand as of now and also on the KSM. So right now, on the contrary, you see Penems from last year to this year has just crashed by 40%, not even 40%, in some cases, even 80% of the value of what it was being sold to. So that impact has come in that. But I don't foresee that any demand changes -- if it's a global shortage and the products which are manufactured in India and the capacity is not sufficient to take care of the Indian market, which would be a problem. But right now, what I hear from sources close to the market that Aurobindo is creating a capacity which is quite decent taking care of the international and domestic market, plus there are other player who is also taking it up. So I don't foresee anything as of now in the next 2 years at least, subject to any demand increasing suddenly.

[Operator Instructions] We have the next question from the line of Vishal Manchanda from Systematix Group.

So I have a question again on the Penem plant at Indore and your total Penem capacities basically. So wanted to understand what percentage of the total India volumes would you be catering to through your Penem capacities?

I think sir there's some confusion. The Indore facility is not Penem. The Penem block has been made in Navsari, which was commissioned last year, which takes care of injectable Penems only, not oral. And the facility in Indore, which is coming up is purely lyophilized injectables, ampules and liquid vials along with certain specialty injections like liposomal depots and also sustained-release formulations in the form of injections. So can I now -- based on that, would you like to ask me a question, which is more specific, I'll answer that specifically?

Okay. So just whatever cumulative Penem capacities we have got and what percentage of the market are we addressing that -- addressing today?

Okay. So the capacity in Navsari, what we have, we -- so the total -- the capacity of the Navsari factory can take care of I think 40% of the Indian Penem market. However, we have a ambition because there are lot of players who do it in India per se, but a lot of payers don't have a dedicated facility who have a Dual Chamber machine plus powder filling plus also lyophilized. So that way, we were quite unique. So our offering in a Penem is not only just the simple powder filling Penem where a lot of players are there in India, which is anyway not our target. So our main objective in Penem would be of course international markets where we'll have the lyophilized and the powder filling products. So we have Ertapenem combined with Meropenem, which -- I mean, Ertapenem and Meropenem as a part of a product basket, which will make us very unique. Otherwise, different clients need to get some other companies registered for powder filling products, which there are many, but not many people are there in lyophilized. And also it's a dedicated Penem block. Not many people have a dedicated Penem block subjected with this, just the single machine. And the second thing will of course be the Dual Chamber bag, which we will -- which we are also planning to take to the international market. So that is the unique proposition we are trying to cater into. As the scales happen, probably, we're looking at backward integration of the bags also, which will make us more. So we foresee that and we would try in the next, I would say, 3 to 5 years that because of the economies of scale and our own efficiency in sourcing, we want to get the bags cost at same price at the vials cost. If that happens, which I foresee should happen to by us in 2025, then we see a bigger chunk of the market coming to us.

Okay. And any kind of -- would you have orders for your Dual Chamber bags from the top players in Indian markets from a contract manufacturing perspective?

We are not in -- this Dual Chamber bag will be sold by us only. We are not offering it to anyone at this moment. It will be only sold against the Gufic brand name.

Any feedback that you would have got from the kind of customers on their willingness to take these -- absorb these Dual Chamber bags?

Yes. So since 6 months, since we could not -- we did not get an approval for the price which we desired. So we're just doing sampling and we're getting feedback from the markets in the last 6 to 8 months. So the patient compliance and what you call the overall application by the nursing staff is quite good and even the doctors appreciate it. I would be in a much better position in the next quarter to give you a little bit more in-depth feedback because the products are just reaching the market this month. So in the Q3 call, I'll be in a much better position to tell you how has been the response now since the company -- I mean, since the channel has to now pay money for it, they will be much more upfront with their feedback. But keeping in mind what we have planned in terms of economics, it should be a good product. We're also taking it slow to ensure that there is no other surprises which will come against that.

Okay. You have partnered with Technoflex on the Dual Chamber bags. Would this partnership be exclusive or they can look to partner with the shares?

Yes. As of now, it's exclusive. And it would be for the next -- we have almost more than I think 10-year agreement, if I'm not mistaken. I'll get back to you. I think it's a 5-year with automatic renewal of 5 years or something. But again, I'll get back to you on that point. Yes, it is exclusive. And like I said, it's -- the pricing on whatever investment which we have done, the entry barrier would be at least 2, 3 years more for others to come, even though filing a peak and all that.

Okay. And if you could just share some color on your R&D thought process because you have been identifying multiple opportunities. So just wanted to understand how do you kind of watch the -- like do you have a very -- do you have a dedicated team that keeps identifying opportunities? Because we haven't seen other companies being able to get products to the market and unique products to the market so often as Gufic. So some color on how do you do that?

So we normally have 4 to 5 core competencies in terms of the therapeutic pipeline. And based on that, we have a business development team which comprises of data analytics as well as medical, I would say, experts. So keeping in mind, we always do a projection or sort of a forecasting of what will be the next disruptive, I would say, change which would come in the therapeutic -- in that particular therapy in the next 5, 10 years. Most of the source of information is international markets or it would be our own R&D team, which -- so we told them that right now we have this particular product and this is a zenith. Can you work on some unique proposition in terms of drug delivery system or in terms of some, I would say, some unique U.S. piece, which would make it a little bit more beneficial? So we talk about a differentiation factor, which can be minor to major depending on the molecule and the pricing point which we have. And then we always back it up like -- let's say, if we get into the space of anti-infective, which is of course our major product -- a major product line for us, we try to see what all products are going off patent. What are all products that are going off patent in terms of a delivery system or what new development has been happening in terms of -- is there going to be a big disruption in terms of a company? Like I said, you have a vancomycin, linezolid and teicoplanin, which was once a day for 14 days, 7 days, 10 days, depending on the current therapy. If you have a unique injection, which is just on the first day and on 8 day and then you don't need to take it for any time longer, it's going to be a disruptive thing. Now currently, the price can be the challenge for making it disruptive, but someone has to start somewhere. If we can launch the product now, maybe in 3 to 4 years, we will be in a much better position to make it affordable like the things -- like the same thing with Dual Chamber bags as I mentioned. You have to make it at the cost of -- so first, we look at, I would say, some unique defects which are there in the current supply. If we can fulfill them with something and then it's not commercially viable, does scale bring the commercial viability and then we take the decision that we should get into that. And of course, the most important point, whatever decision or whatever selection which we do has to be having its roots in our core competency, which is in terms of our sales or I would say a marketing and sales, and apart from that, our infrastructure also should be able to make that product, because after Indore, I don't think that we would be spending much more of our money in those years in terms of front end marketing and marketing authorization and also in terms of market development. Indore would be one of the last major capital investment for us in the next at least 2 to 3 or 4 years at least till we get back to a normal thing. So that is how the entire mindset and the thought process works.

Okay. And just one final one on Stunnox. If you could share what patients -- how many patients have we been able to get...

I believe this is the last question. I think that's why you're not being interrupted by the -- I think the operator that 2 questions. So can I answer that question, ma'am, because I'm getting your feedback here that for the next question. So can I go ahead and answer this question?

Sir, we actually have a participant waiting.

So let me just take this one and then we'll move on to the next one, because I'm getting these reminders. So please, sir, can you ask your question?

Yes. How many patients would we have on Stunnox currently? And how is it versus the innovator brand Botox?

So how many patients do we have today? I don't know, sir, but I know that for a fact in the last I think 18 months or 20 months, whatever, 24 months of launch, totally around 1,428 doctors have used our product as of June 2023 -- July 2023, sorry. So every month, we get a number where we get the number of doctors who have used our product. How many patients they have used up on, I don't know. But yes, depending on the sale, we can just make an estimate out of it. This is only for Stunnox. This is mostly for the cosmetic and we have a separate doctor of around 323 or something which neurological experts or neurosurgeons or other physicians who have used Zarbot, which is Botulinum Toxin which we have trademarked for the therapy, I would say, the medicine in U.S. That is the number I have in terms of doctors. I don't have the number in terms of patients.

We have the next question from the line of Hitesh Bopat, an Investor.

As I see, we must be clocking around INR 700 crores of turnover. So may I get the divide between CMO and our own branded sales?

Yes. I think 50% to 52% would be our own revenue. Around 25% would be CMO. Remaining will be exports and then API.

Okay. And what must be the operating margin in CMO and our own brand?

I would I think request Roonghta sir to answer that question.

Typically, it's very difficult to give operating margin, but I can give a GC margin, gross margin. In case of our own manufacturing, the GC will be around 55%. In case of export, it will be around 60%. In case of third-party CMO business, it will be between 30%. It will be GC, gross margin, but to compare with operating margins, it's very difficult because see costs cannot be allocated on the basis of the business line.

Okay. Another question would be how we foresee next 3, 4 years next leap of growth may come? Like from the existing verticals for existing way of business or we would be intending to enter the higher regulated market like Mexico or U.S. or any idea?

Yes. I think it will be a combination of everything, right? The domestic market itself would grow. The dossiers which we have filed in internationally would of course come back and give us. And when and how that international market little bit depends on the regulatory agencies there. And of course, Indore coming in would be our next growth driver. Apart from that, the new product launches both in the domestic and international market, plus I mean, for example, Dalba or Dual Chamber bag and so on. And then of course Botulinum Toxin will be another -- which we would like to ride on. So there are many growth factors and I'm sure one of -- I mean, each of them would contribute in their own sweet way.

Okay. Sir, one more question. Lastly, can you share some update on Dydrogesterone? Like what must be the revenue, existing revenue? And how we are targeting -- because it has been in very nascent stage in India, I believe.

No. Now I think it's much more -- it's quite now entering and almost reaching towards the level of saturation I feel, my personal belief. A lot of brands have been launched. But yes, I think API would be still the key. If the person who can control the API would be a thing. At the same time, it's a wonderful product because it's going to grow more and more. In the last 2 years only, you have seen it almost doubling up. So that's a beautiful thing. Our portfolio would be around -- I think around -- anything less than around -- sorry, 3% would be of our revenue would be Dydro last year. This year, we hope to make it the same percentage because the growth also would happen. And we all are now waiting for the new drug -- I mean, sustained-release formulations and others which would help it. So I feel -- yes, that's it. So Dydro, a lot of players are there. But however, differentiated would be the API and followed by marketing strategy.

I believe we have our own API or we are dependent on API of others?

We have a small capacity of own API, but we are looking to expand that depending on the market, but the pricing is just eroding day by day. So we are evaluating whether we'd go head-on and invest so much or we stick to what we have. So we are evaluating the current scenarios. The price has just become half in the last 4 months only.

Ladies and gentlemen, that was the last question. I would like to hand the conference back to Ms. Ami Shah for closing comments.

Thank you everyone for joining us. I hope all your queries are satisfactory answered by us. And in case if there are any further queries that has been remained unanswered, you can reach out to us or Mr. Deven Dhruva from SGA, our Investor Relations partners. Thank you. Once again, we look forward to such interactions in the future.

Thank you members of the management. Ladies and gentlemen, on behalf of Gufic Biosciences Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.