Indoco Remedies Limited (INDOCO) Earnings Call Transcript & Summary

Good morning to everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to this session with Indoco Remedies as a part of our investor conference. At the outset, I would like to thank the management of Indoco Remedies for giving us an opportunity to host them at our conference. Among the senior management of Indoco Remedies, today, we have with us Ms. Aditi Panandikar, Managing Director; Mr. Sundeep Bambolkar, Joint Managing Director; and Mr. Pramod Ghorpade, CFO. I would request the management to commence this session with some opening remarks on the business environment as it stands today, further to which we will open the floor to the investors for Q&A session. Thanks, and over to you, ma'am.

Yes. Good morning, everybody. I really can't make out how many people are online, but all the same, nice to interact with all of you. So coming to Indoco, as you know, 3 quarters behind us, we recently had a call after our third quarter earnings. And most of you are aware of where we are. I cannot judge who is at what level for understanding about the company for where I should start. But very broadly, therefore, I'll give a brief background. At Indoco for the 9 months completed, we have done a top line of INR 1,200-plus crores and the company has about 60% revenue coming from India business -- 55% to 60% and the rest coming from international and API. API is a very small contribution, considering it's a division which was created to support international formulations, right? So in India, we have several marketing divisions, 2 divisions Indoco, that is Pharma and Spade focused entirely on acute. We have Spera for gynecology, Excel for ophthalmics and the 2 dental divisions [ WARREN, Ace ] and NxGen. In addition to that, we have a division for chronic, that is Synergy. Broadly, we have 40% coming from pure acute. Another 50% coming from subchronic and 10% from chronic. In subchronic, we typically classify those molecules and therapies which are other than cardio/diabeto but still a prescription runs for 2 to 3 months at least. For India business, we have 3 brands in the top 300 for the industry, Cyclopam, Febrex Plus and ATM. Cyclopam is an age old legacy product but continues for the year -- this year, for example, on a YTD basis is growing by 20%. Febrex Plus has had a challenging year given the respiratory portfolios, ups and downs due to COVID base. But as regards prescriptions go, it is on a firm footing. ATM is an Azithromycin brand, which did excellently well last year post COVID and during COVID time also. Of course, it has not done as well as last year, but on prescription fronts and market share, it is still ranked #3 and doing well. The dental divisions hardly got impacted for COVID and continue to perform very well. Stomatological as a space, if I'm not mistaken, we are growing at double-digit higher -- higher-double digits this year also. So that is roughly about India business. About a year ago -- 1.5 years ago, we made some structural changes in India, adding a CMO function in order to overcome inherent -- an inherent weakness of the company, which was making -- launching new products and making them a success. Happy to share in the last 15, 16 months since we created this kind of a change, we have already launched 3 new launches. A fourth one is underway just now. And the first launch product, Noxa is a leader in its own market. It was the seventh brand of ozenoxacin to be launched but it became market leader within 3 months of launch and continues to hold that position today also. The second launch was a product called Dropizin, which is peripherally acting cough syrup for dry cough. So it has less sedation. It is also doing very well. And [ as pre Evax ], in the 15th month of launch, it has crossed the revenue of INR 1 crore already. The third product, Subitral, which is an itraconazole with SUBA technology, microcrystalline, is also doing decently all right. And as we speak, there is a new product, again in the antifungal dermal space, which is under launch. I can talk about it a little later, not today, maybe in future meetings once the launch is completed. We work in a very competitive space. So that is briefly about the India operations. The dental divisions are doing WARREN NxGen, which is more focused on creating prescriptions has been doing exceedingly well this year. WARREN Ace, which has more of the [ OTX ] kind of toothpaste portfolio is finding its own feet with a new direct-to-consumer front, which has been -- which is under creation right now. So through social media and other means, we are trying to reach our consumers directly. That will also help those products. Coming to the chronic space. We combined 2 divisions, CND and focus into 1 division synergy in order to sort of be able to focus on those products which are in high-growth therapies, and we are doing quite well on those products. The division is focusing on 5 or 6 products and brands only and is able to concentrate on that. One of the products we focus on is an age old good brand of the company, Glychek, it's a gliclazide metformin combination. The second product they focus on is alogliptin brand ALOJA, which is the only alogliptin available in India that is with Indoco as a company. So broadly, that's about India business. There is some structuring -- restructuring going to happen but no real increase in manpower, frankly. We hope to be able to work with the same set of people as we go after increasing and creating better per head yield. Coming to the prescription business, we are ranked 20th among several players. So we do at least 8 to 9 positions better on the number of prescriptions we generate from doctors. We are hoping as the product mix and portfolio shifts, and we create prescriptions of much higher value, and for subchronic and chronic business, giving more contribution, we shall be able to climb the ranks within the retail audit 10 ranks itself. Coming to international business. Our international business is largely divided into 3 baskets. One is generic support to U.S. The other is generic support and front end for U.S., generic contract manufacturing and front end for Europe and U.K. and emerging markets where we sell our own branded business. I'd like to invite Mr. Sundeep to say a little bit about international business before we come back to some other things. Yes, Sundeep.

Thank you, Aditi. Coming to the international business, I'll talk about the U.S. first, which is the most sought-after territory -- geography. So in U.S., we are specializing in ophthalmics and injectables. Happy to report that our lacosamide injection, which was for 3 to 4 months at least the only generic available in the U.S. market is doing very well, continues to do very well. We have also launched brinzolamide ophthalmic suspension and brimonidine-timolol ophthalmic solution. So these 2 products in the longer run will give us a very good traction. All of the 3 put together in fact. We have an impressive lineup of ophthalmics and injectables, are doing well in the U.S. As far as solid dosages are concerned, we are doing very well on allopurinol. That's one single molecule because we are backward integrated as far as the API is concerned. We have our own ANDA, which has been out-licensed to the front end. So we continue to do exceedingly well there. And there are some impressive products in the R&D pipeline, which names I cannot give out today, at least 3 solids, which we will be filing before December this year. So we should be getting approval in about 12 to 14 months after that. Coming to Europe. We have already said that 17% to 18% growth will not be a problem for Europe. We are very confident of doing that. Among the legacy products which are there and not so profitable ones, we are doing good volumes there. But the new products like colchicine, phenytoin sodium capsules, these will give us much higher traction and these will be launched in the new financial year, that's April '23. So all put together, things look very bright on the U.S. and Europe front. In fact, we do hold a certain competitive advantage in products like colchicine because the regulatory agencies in future will not be allowing companies to make these products in the general area of manufacturing, and we have already set up and commercialized our new department in Goa Plant 1. Coming to the rest of the world markets, comprising of mainly Africa, Asia, Latin America. There, the margins are very good. And in particularly Africa, we are doing extremely well. Africa comprises of French West Africa majorly where we will be doing more than INR 60 crores this year. And Kenya and Tanzania put together where we shall be doing about INR 25 crores to INR 30 crores. Going ahead, the 6 countries where we are present right now in French West Africa, that's Ivory Coast, Mali, Burkina, Benin, Niger and Cameron. We have plans to expand them to Senegal, Chad and a few other countries. So that expansion will happen in the coming financial year. As far as Latin America is concerned.

Sundeep, ROW business is branded [indiscernible].

Yes, yes. We are promoting our own brands there. The same brands which we are promoting in India. It's absolutely branded business. In fact, in French West Africa, we have got about 125 to 130 medical representatives and country managers who are expat Indians of Indian origin. Coming to Latin America. Again, these are our own brands being promoted there by our front-end agents or partners. And although the business is small right now in the range of INR 35 crores, INR 40 crores but the profitability there is very high. So this I think is in short the international formulation business. And as and when questions come up, we shall answer the same. Thank you.

We also have a U.S. FDA-approved testing lab which is one of the small service businesses of the company and it's called Indoco Analytical Services, additional to which we have a CRO at Hyderabad which we acquired from Nicholas Piramal some years ago, which is called AnaCipher. So all in all, we have 5 U.S. FDA-approved formulation facilities and 2 labs. 1 for bio studies and the other for testing. Indoco is therefore able to offer an end-to-end kind of service proposition for generics. And this is also to our great advantage when we do our own filings. I think we can now have questions unless -- so we can specifically answer anything you have in mind.

Thank you, ma'am. Participant we shall now open the floor to your questions and answers. [Operator Instructions] We have one question from Aejas, Unifi Capital.

So Sundeep, sir, my question a couple are there. One, sir, I would really request you to give some more granular perspective on what happened this quarter for the brinzolamide. On call you mentioned that U.S. FDA had that change where they did it to medical devices or opthal instruments. So could you quantify when did this [indiscernible] come about? How this resulted in the deferment of the profit share which got pushed out to the next quarters? Could you speak a little bit about that journey, please. So it would be very useful if you could give some more insights into that.

Yes, sure. So this change of the CCS, the plastic components happened, I think, about 6 to 8 months back, and we have fallen in line and given all the information to the FDA. As regards in particular brinzolamide is concerned about the profit share getting pushed to the next quarter, we have made it very clear on the earnings call that there were some challenges in the supplies because of the CCS and we clarified that abundantly. And those challenges have been totally overcome now. We have shipped goods once again and Teva is selling those goods in the market. And in this current quarter, we definitely expect a profit share statement from Teva.

Got it. That's adequately clear, but sir what I understand from your previous conversations is that once Teva sells and the profit shares are recorded, it takes that typical 3 months lag for you to receive those. So that 6 to 8 months of delay of the CCS resulted in the shipments being pushed out to later...

It was for a few months, we had to stop selling the product because we didn't want problems in the market, recalling the batches and all that. So we were very, very cautious on this front. And hence, the delay in the profit share statement because we had to stop selling the product.

Can I just come in here. So contrary to our understanding of how solid dosages are, ophthalmics in particular, are well complicated products to make. Beyond the formulation, which is what we develop, there is also a matter of the container closure system, CCS, what Sundeep has been talking about. Any change in which either material of construction, dimensions, or wearing off of the molds in which those container closure systems are made, typically, anybody who uses container closure systems, even Cipla for that matter who use it for their inhalants are familiar with this, where unlike in solid dosages, where much of the product quality rests with your own tablet formulation, everything else is pretty standardized, very simple. Here, I could put 30% weightage to the closure system as much as the product. And eventually, there is always the machine on which -- every time the dimensions of the container closure system change or get modified, the machine then needs to be readjusted for that and unless you get the right specs, you cannot make a good product. So FDA also realized this, which is why they classified it from product to medical device, which would mean people like us who used to constantly suffer whenever our container closure system suppliers would make small changes, which came under the ambit of not significant enough to inform FDA but significant enough to affect our product quality, frankly. So FDA realized this and has now asked them to keep updating, sending files, which are then known to us. All this is -- it's a recent kind of development in FDA, which is good for us, actually. So long term, we should be able to suffer less on account of this. So this remains a constant theme. So in case of brinzolamide also, there was one such thing because of which after the in-use aspect we realized the system is weak. And since we work with MLC like Teva, every time we make any kind of changes, even if we are satisfied, we require the regulators to -- regulatory to clear it. So it obviously takes more time. But like Sundeep said, end of the day, we are very confident we are giving a product which is of the best standards.

Got it. This is very helpful, ma'am. And could you just speak about the timing of when the FDA got more -- because again, Sundeep, you mentioned in our October call that -- so did it happen in this October, November months specifically?

You cannot -- Sundeep, let me take this. It's not about specifically something that happens here there. When FDA -- when the container closure system guys have to modify something in the interest of product quality, they start from making more [indiscernible] product, you then do trials on the line. When those trials are successful, you put them on stability. After stability is over, you are okay, then Teva checks it, then Teva is okay. All that happens, okay? It's as simple as that. Just coming to your supply, Sundeep, if I'm not mistaken, one volume strength of Teva only, of brinzolamide has gone out, right?

Yes.

Yes. And the larger volume in the market is just going, if I'm not wrong.

Just going, yes.

So that is what you have to understand. Yes. Okay. Nothing else. I mean there's nothing much to be bothered about. Yes, there has been a postponement, but these are things we really don't control. Except we are increasing our understanding and knowledge of packaging as much as we do of the API. See, APIs are always sort of guided by the drug master files, which give us all information, which helps us analyze anything like the API manufacturer changes, how it will impact my product, kind of. But here, this part was not there. Now it is becoming sort of controlled.

This is very clear, and Sundeep, this would mean that the profit shares would come in, in the first -- in FY '24?

Yes, yes. Largely in '24, first quarter.

We'll certainly get some part in this quarter, but largely it will be in April.

So the dosage which is the higher volume, which you just comment, that will come in FY '24. The earlier one will probably come in 20...

We've started selling that also, but the larger part of the profit will come in from April onwards.

Right. Clearly got this perspective. And sir, the other thing is the Germany tender. See, we -- if I recollect, if memory serves me right, that was ending in half year '24, right? Calendar year '23, right, the Germany order?

December '22.

March '23.

March '23.

And sir, you've got an extension of that for the next 2 years?

We won the tender once again for the next 2 years.

Got it. So that business commences in again, April only as the tender expires? Or is there a timing span?

Well, the old and the new ones will start overlapping each other from end of February, beginning of March.

Wonderful. Got it. Okay. This is very clear. And sir, I think a couple of calls ago, the tender market for Africa, for SAHPRA that you used to deal with, you had said that, that pipeline is building again. So could you speak a little bit about that element as well?

Yes, sure. There are 3 to 4 products which we have filed for the tenders in South Africa because South Africa is fully a tender-driven market. So those results will be known by beginning of March or mid of March. Yes.

Got it. So we've already filed, whether we qualify and win, we'll come to know. Got it. That will change, okay. Perfect. And Aditi ma'am, could you call out what MRs productivity is today? And what are we doing really still to drive that?

On sanctioned number of people on payroll, it's 3.5. But considering we have a lot of attrition at the first level of MR. Factually, it is around 3.9 today.

Okay. And where do you see this number from a perspective of...

It's going to only go up from here simply because the acute divisions, we are not adding too many people, right, as sales go up every year. This was -- this year was going to be always a very tough year to show growth because of the -- some months you would grow, the others -- and some kind of therapies you will grow and others you would not. But per se, going ahead, I'm expecting for the next year for it to go close to 4.4 at least.

Okay. Got it. And you mentioned that your new products as a percentage of sales, which a couple of years back was very low, it started to improve. So could you call out what's been the 9-month trajectory there? And how you're seeing that as well?

Yes. So, for example, Noxa is an INR 8 crore brand now. So we -- these are products which we just multiply in the initial few years. Okay? So roughly to tell you YTD basis, if I'm not mistaken, new launches are giving us close to 4%, 4.5% of our growth. Which is higher than industry standard now simply because we are quite small otherwise. And we are planning a lot of new launches across several divisions, yes?

Next question from Mr. Aditya Khemka, InCred Capital.

So Sundeep, on comment on, that Aditi also made, on brinzolamide having 2 sort of SKUs. One being the larger market sizes SKUs, other being the smaller market size SKU. So when I check online, I just see one SKU, which is brinzolamide 0.1% mm pack. So I just want to know what the second SKU is?

There are 2 volumes, SKUs, 10ml and 15ml.

10 and 15. So is 10 the bigger market or is 15 the bigger market.

I think it's 10.

10 is the bigger. So we are so far selling 15 and we've just started selling the 10.

Yes. Yes.

Okay. So why the delay? I mean, [indiscernible] container systems again being the challenge.

Main thing, Aditya, because as the volume increases, your nitrogen purging, the highs, the caps, the strength, the top, everything changes. And if we've learned anything working with a giant like Teva is they have subject matter experts for every little thing, including the top on the machine, which is great learning for us. They have learned from their past issues, I guess. So every little thing gets standardized, validated, which is good, okay?

Like Aditi said earlier, although we are 10,000% sure, it has to go through -- they have various subject matter experts and get validated, and then only they give us the green light.

I understand. So can you divide the market, I think the brand before we launched it was about $80 million brand, right? So how is it split between the 10 and 15 mm?

Do you have the data here, Pramod? I'm not sure if Sundeep.

I can get back to you by afternoon.

That's okay. That's not a problem. And second question was on the U.S. sales, just 3Q versus 2Q of FY '23, we Lost about 9, 10 crores of sales from 2Q to 3Q. Just wondering because 3Q for the other pharma countries who have reported seems to have been a very strong quarter because the seasonal flu was very strong. Antibiotics were being prescribed, a lot more just in terms of volumes. So just trying to understand where did this slip, what resulted in this decline?

It is for India you are asking, [ Abhilash ]. Sorry. No, U.S.

U.S.

I'll not take that.

Yes. We don't really have antibiotics for U.S. No, Sundeep, anyway. That's why I thought India, yes.

One of our suspension products ophthalmic, it was to get the approval in November end or December 1st week, has got delayed to April. Beyond April, in fact. There was, of course, the stocks were ready for dispatch. And besides that there was a good milestone attached to it. And both this put together would have been more than INR 10 crores.

So there was a write off you took against the slips?

No, no, no.

No, no, no. I'll just...

We didn't dispatch the goods at all because the [indiscernible] got postponed.

Sundeep, I think Aditya's question is more regarding why it was lower than the immediate proceeding. So let me tell you that for us, we have an element of dossier income as we call it or service income against milestones on some of the other products which come in. And it is that which has fluctuated, not the commercial supply.

Okay. So last year you got some dossier income of some milestone payments for the other products, which you didn't check under this quarter. Okay.

And has this approval come in, we would have got straight away...

Yes. What he means is, we would have still -- you would have not seen the dip.

I understand. But we also launched Combigan sometime during the third quarter itself, right, or the late half of the second quarter. So I was just wondering why did Combigan makeup for the gap that was created by lack of [indiscernible]?

Combigan actually went into the market by end of November only.

End of November. It's only 1 month of Combigan sale?

Only 1 month, yes.

Okay. Okay. Understood. Now coming to the India business, right? So Aditi you explained on the call that 5% to 6% is the price increase that we have taken this year so far, right?

Yes.

Going into the fourth quarter, because we have a 12-month gap sort of situation with some of the non-NLEM brands. Will this 5, 6% go further up? Or will this be at 5%, 6%, even [indiscernible].

No, it will stay the same.

It will stay the same. And next year, again, given that [indiscernible] are again 2.5, and there will be 10% on non-NLEMs, do you expect the price increase for next year also to be 5%?

Well, we could -- a couple of points more we can expect. Aditya, we have -- as I said, we have a very unique portfolio compared to many of our peers with so much coming from pure acute. Where with GP as a customer, I think it is more with our [ boys ] whenever price gets increased for them feeling there's a competitive advantage loss or something like that. Added to which you have the [ MPPA ] creating havoc as it is. So we are very careful here. A lot of our products have a repeat purchase element attached to it, not entirely driven by prescription, which is why we are a little cautious compared to many others. But yes, by next year, you can expect at least 8% to come down.

But what would have changed between this year where we could have taken [indiscernible] versus next year you're taking it? I mean why...

We're pushing the marketing guys.

We're pushing the other team to basically live with a higher price.

I have realized this year my internal customer is a lot more valuable than my external customer. Whichever way.

Make sense, makes a lot of sense. Just 1 -- a couple of questions on the gross profit. Now again, we saw a material decline in gross profits sequentially, I'm talking Q2 versus Q3. I'm aware that the India sales is seasonal, 2Q being the best quarter and 3Q not being the best quarter. But your U.S. sales also declined, which I'm assuming would had been lower gross margin compared to India. So your mix is actually essentially flat from 2Q to 3Q. But your gross margin fell from 70% to 67%. That's a 3 percentage point dip.

No, as I explained, we had lowered dossier income for U.S., which is...

So that basically closed down. Yes. Okay.

And again, had this INR 10 crore come in and all, you would have seen margins equivalent of the previous quarter.

Yes, I see that. But...

No, but these kind of -- until our size of business remains not very large for U.S. these types of dips, quarter-to-quarter variations you can expect?

Yes. No, I get that. And there's also that ForEx element in the other operating income, which also [indiscernible], I get that. Just a couple of last questions on the cash flow, Sundeep, sir. What was our cash flow position after the third quarter?

No significant change as compared to the second quarter.

Okay? So in that case, what is the CapEx that we are doing this full year, sir?

This whole year CapEx would be in the range of whatever figure we quoted in the beginning of the year, it remain intact.

125 plus the CapEx at Goa as we [indiscernible].

So around 150, right?

Yes. Including Goa [indiscernible]

So that's INR 150 crores for FY '23. Am I right Pramod?

Yes, Aditya.

Okay. And for '24, what are we expecting in terms of CapEx?

That's still going on, working. We'll be able to clarify that position before end of March.

Right. But just for my understanding, Sundeep, so we don't need any CapEx for Europe, right?

No.

We don't need any significant CapEx for U.S., but because it just started a sterile line, if I'm not wrong?

Yes. Aditya, we want to derisk ourselves from a single sterile plant. So to that extent, some drawing board activities will start and certain CapEx investment will begin for that.

Okay. So if I understand this statement correctly, you are saying you want to develop another sterile site? And you will basically have that added to all your current dossiers to ensure that, as you derisk quarterly?

Right, right.

Understood.

No CapEx required for solid orals.

Yes, yes. No, that we get. Now that is my other question. So as an investor, what I saw immediately preceding this quarter results was that you had an issue with the FDA on the oral solid Goa 1, right? And your Goa 2 is up for inspection whenever the FDA desires to because it's more than 2 years. Now all of us understand at least given our experience in the capital markets is that sterile compliance is far more tougher than the oral solid contracts. So therefore, the worry that investors now have is that if a companies is not able to maintain oral solids compliance when the FDA audits see sterile compliance how difficult it's going to be for the company. So what are you doing incrementally now to ensure that one, you've oral solids compliance falls back into place and two, sterile doesn't fail the compliance test.

So first and foremost, getting 483s doesn't mean your plant is not compliant, okay? Because we are bound with what we can and cannot disclose with you until the responses to FDA go and until our updates to them on everything that we have committed are done. So I cannot share details of my 483s with you. I think they will come on the site in 10 days time. You will realize then that you have less to worry about plant not being compliant. So -- but we learn every time they come down. Your second question on sterile is tougher, how do you went back and all. So there is a QMS -- entire section of QMS, which works on [ bending ] backwards. So FDA also expects that if something is identified on one site, it is done at all sites. So that is a routine practice at Indoco. So any improvement measures which have been suggested at Plant 1 would be implemented in plant 2 parallelly. And they will expect that. Now regarding -- yes, sterile plants are difficult, et cetera, et cetera. All sterile plants are tough to manage, run, whatever. But we've been through a very, very tough period for our sterile unit and come out of that. We have also several 483s filed from that site, some recalls done from that site. So it's not as its Plant 2 and FDA not talking to each other. Because the verification is on even if they are not auditing. So we wait and see, and we are quite hopeful. We have 1 pass expected audit on the 2, 3 sites, which is 1 site, more on solid orals, but definitely steriles are due. Also, we are installing new lines. So whenever those lines have to be qualified by FDA, they will come down. So FDA coming down, suggesting improvements, those getting classified as 483s is a part and parcel of our life now. That does not mean business stops except after our first warning letter, we have never stopped any business anywhere. So the overhang of a warning letter or that there are 483s and therefore, would result into something -- I think I'm not saying it's not a perceived risk. It definitely is. But I think as you are getting more and more informed about how this works, you could classify it as an event, which is going to be part of everybody's normal life if they're going to be supplying to U.S.

No, that's right. So I understand your point. Now therefore, when we spoke of your vision, your sort of the conclave that you have management conclave there, you guys see a lot of potential in the export business, right? You said that whenever you achieve that INR 5,000 crores milestone the reduction of the India business will be significantly lower than what it is here today. So today, in the pharma entrepreneur world, we see 2 types of entrepreneurs. One is, let's say, a [indiscernible] there essentially how their business is growing is that they are generating cash flow for the current business, and they are deploying it and buying brands for the India business. Subsequently, the business that generates the cash is getting the capital allocation and generates more cash in future and the other set of [indiscernible] where you maybe exports is not generating much cash today. Generating some cash but not much. And India business there's most of the heavy lifting. But the reinvestment is again happening in the export business because that's where you see the true potential. Now when you weigh the risks and awards of reinvesting the capital coming from the India business to invest in Europe or in export or India. Doesn't India turn out to be a safer bet?

I get what you tried to say. Aditya, considering that half the world market comes from U.S. alone, you cannot ignore that market if you want to get to any kind of size and also be in very exciting kind of space. With that in mind, after our initial years of contract manufacturing for Europe, the intent seriously was to do U.S. It's only because of the regulatory challenges we had that it got postponed a bit. But I think since this year or last year, the reinvestment we are willing to do in international is now only to the extent of what they can manage. So this kind of India sort of subsidizing the international, it had to be done until the international business got to a particular strength or size where it could stand on its own 2 feet. So that is behind us now. So you will see at Indoco also where we start inclining a little bit now more towards the torrents of the world. So sales maybe 1 unit for sterile. I don't see any other capital expenditure going towards international business from this day forward. Our R&D also, which does work largely for U.S. we are now sort of filing the same product globally and looking at some of those products even for India. So everything is getting -- so the kind of -- over the last decade, the kind of investment CapEx and otherwise you saw for international from the profit generated from India, that may not happen going forward. And won't be needed also.

Yes. What my suggestion to you is that, this year, you are doing INR 150 crores of CapEx, and most of it is obviously U.S. and Europe. And I'm sure they're not generating that cash this year. But next year, if you have a INR 100 crores, INR 125 crores, maybe you do that only if there is that kind of cash. And India should not be subsidizing any more.

They won't. See, there is a time for each. So while India was doing this, we did not also invest in India. You know that. We have not added divisions. We are not -- our entire CMO thing also started after we knew we could now relook at this. So we did not want 2 disruptions. So 1 business was steady and doing the thing. So next year you can expect some more disruption in India for the good.

Yes. So that's good. So next year basically the cash flow that India will generate India will consume, not U.S. Europe.

Most of it.

Okay. No that's good to know.

Rest is my kids only.

That's what we'll love to see the cash flow of India being reinvested in India rather than subsidizing the other businesses. That's all what I want to...

Also, Aditya you must understand, you might be reading some articles which have started coming back about what goes down comes up U.S. kind of. I know you're very passionate about India as much as I am and many of us are. But we have to understand, like I said, there is so much opportunity out there. And sometimes when people stop seeing opportunity and they retract is also a great time to stay there because you get yours. And we have got a very nice niche with injectable and ophthalmics. So delays will happen here and there, some regulatory issues. I'm not really bothered about the space that we are in.

No, that makes a lot of sense. As long as the compartmentalization is in your head and you stick with that, I think...

It is there on paper. It's at business level, it's everywhere.

So that's also, I mean...

But if you're going to ask me, I'm not going to tell you.

I know. I know. But hopefully, someday you guys scale in your U.S. [indiscernible], you can start doing segmental reporting. You can start doing segmental reporting. You can start reporting India as a separate segment and export as a separate segment.

Reporting to you, you mean. To me, already reports that.

In profit and assets also, [indiscernible] only top line.

Yes, yes.

Segmental reporting, you require a report. Okay. Thanks a lot for taking my questions. I look forward to next year when Europe and U.S. will be self-sustaining in terms of cash flow [indiscernible]

We have another question from Aejas, Unifi Capital.

[indiscernible] case now, anyone else is there, I'm just using the opportunity. So Sundeep, actually if you could give -- we know that in the U.S. market, ophthal, there are very few players, [indiscernible] Bausch [indiscernible]. if you could just [ Alcon ], could you just speak about how the ophthal players are evolving? How is the market formation really taking place? How is the -- how is that evolution of the industry taking place? And is there any incremental new competition really in ophthal?

See, it all depends on how the top players are performing. Majorly, there have been all these players, which you have talked about are doing exceedingly well in ophthals. And the biggest advantage of ophthal and injectable market is that once the product goes generic, the prices don't crash like solids. To give you an example of lacosamide injection, the market before it went generic was $43 million. And after going generic, after a good 3 to 4 months, it had grown to $48 million. That's because Indoco and its front-end partner were the only company selling this particular generic. And as a result, the units went up, although the price was lower than the innovator price. The number of units went up. And as a result, the market stayed wherever it was. So there was no crazy competition like 15 or 20 people entering the market and damaging the market totally and prices crashing to 99% -- below 99% of the innovator. So that's the first point. Secondly, it will all depend on how we as a company can introduce more new products through our R&D, our new injectable and ophthal pipeline, which we are very much eager and passionate about and in the process of doing. So going forward, I think the evolution of the market will depend on how many players enter. As of today, it's quite niche because not many Indian players are entering the market and damaging the price. So that -- these are the 2 factors which I see.

Got it. And sir, just a follow-up. Brinzolamide it's Novartis, Bausch and then us, right? They're just -- it's still a 3-player market only at the moment, right?

3 to 4 players, yes.

Okay. And sir, what is the size of the market today of brinzo?

It remains around $80 million.

$80 million market. Okay. This is post the generic...

Of course, post all these players coming in.

Okay. And sir, lacosamide, the tablets is the larger portion, not the injectables, right? Out of the...

Yes. But tablets there's huge competition. When we produced there were already 14 players in the market.

Got it. And sir, out of that $1 billion lacosamide market, how much would be tablets and injectables, I mean the rough cut? So you said $48 million, $50 million is injectable. So the rest of it is all...

And that market has clashed already. It's no longer a $1 billion market.

Okay. So the injectables are still holding through?

Correct.

Got it. And sir, for Combigan, what it's -- again, [ Apotex ], [ Sandoz ] and [ Allergan ], right? And that market is what about $400 million give or take. How do you see that market from a post generic? What kind of size do you see for that?

Since we have just started selling, as I answered Aditya's question from end of November onwards, we'll get a good hang of it within a month or two.

Okay. But this still 3 players only, right? The innovator and your part.

Currently, 3 to 4 players only.

Got it.

[Operator Instructions] Mitesh as the queue assembles if you have any questions, please go ahead.

I have a few questions regarding U.S. again. So U.S. would look like a key driver for us and given one of the fastest growing, no doubt about it. Can we think about the front-end team over there for especially over a period of time on injectable ophthalmic as well?

I'll commit for that. So Mitesh, we have been looking at a front-end -- setting up a front end for some time now. But we are very clear that you have to have a portfolio of a size that merits that, okay? So because the cost of running a front-end operation in U.S. are not low. A, you need a substantial number of ANDAs, 25-plus running and commercial of your own is when we were planning. So baby steps have started. We have done exploratory work. We shall see. And it's only when we can absorb that, it is possible. So that is the thought process.

So when can we see that actually in a...

When it happens, we will tell you.

Sure. And the U.S. what would be the contribution of the oral solid in the overall portfolio?

Very small. We just have 1 glimepiride and 1 alopurinol. Although alopurinol volumes will now pick up. I don't know what the numbers exactly have a contribution, it will be very small. Pramod, do you have it? We could share it with you separately.

Yes, sure, sure. And another question is regarding your margins. Actually, can you tell us that on a hierarchy wise, what would be the highest margin and then after, what would be the lowest one?

So what product, geography, market?

Geographical-wise. The U.S. would be the highest contributor or the India?

Yes. So India, U.S., depending on product mix, pretty much close followed by merging, followed by Europe, followed by U.K., roughly.

Yes. Got it. Got it. And over a period of time, you said you guided about the INR 5,000 crores top line. I think what would be the geographical mix because U.S. like currently would be just mid-teen for us. So it would be like higher -- one of the highest contributor or like second highest after the India?

Yes. Second highest after India.

Okay. I think the way Aditya has said, most of are looking the U.S. -- sorry, Indian market. And most of the larger players are shifting their focus into Indian market because 1 particular side, it's difficult for the -- any of the company to be survive in the U.S. -- not survive, I can say the consistency and the growth is always a challenge for any of the companies but the size will be increasing. What's your thought on this, actually?

So actually, what you say is based on your understanding and train. Frankly, since we got listed in 2005 right up to today, for me, there have been seasons where people have preferred companies having business in U.S. or having business in India. I remember when we got listed, please used to ask me how many NDAs you have and we were only in India. We didn't have anything else. So I guess your perception changes based on how majority of people in the segment are doing and what they share with you. As far as Indoco is concerned, we are very clear, whichever geography we are present in, whether India, U.S., Europe, API for that matter and including our services, we are very clear that we are in businesses which make sense to us, even for our size where we are making -- it's an advantage. So we will continue to pursue that. I think most companies do it. We like the fact that we stay derisked. How much you want from each and where the contribution will come from or not? That is where management makes decisions, I think. It's not about being or not being there. You don't totally take a u-turn. Of course, if there's a new company today, they may decide they don't want to be in India. They don't want to be in U.S. But a company of our size, stature and age, 75 years and contributing every year is not easy. I think we've been able to do that because of how we are. We have various geographies. We have various busy segments. Sometimes it may seem to the outside world that, that is defocused. We feel that is derisked. So okay? Yes, I agree, like Aditya said, you may focus on where you want to spend and not spend everywhere, but that doesn't mean you don't exist in some geographies or something like that.

So in India, apart of the organic growth, we continue to be looking the inorganic opportunities because most of our...

Yes, we are. Yes, we are, but values have to be sensible also. And also, if you see, it takes 2-3 years to create a INR 10 crore brand now for Indoco or max 2 years at the best. So to buy anything unless the brands are that kind and valuable, it doesn't make sense.

And another question on the CRO front. I have never seen any formulation companies offering their own CRO strength to the others...

All have. They have different names. So [indiscernible] for marketing. Most have and people have no issues with us. So we recently expanded and doubled our capacity for outsiders because there is so much demand and we consume 60% to 80% of that capacity.

Got it. Got it. I think that's it from my end. [indiscernible]

Yes. Thank you. Bye.

[Operator Instructions] Mitesh, if you have any questions you can, else we can conclude this call.

Yes, I think -- so I'm done with that. So thanks Aditi madam and all the management and the participation for part of this conference. Any closing remarks you want?

I think we have spoken quite a lot, but the management is extremely confident about its performance. As we said earlier also, here and there slight blips should not be taken as you know the real performance of the company. The order book for U.S. and Europe is extremely, extremely healthy. So we look forward to a really good performance this year and for the years to come.

Thanks a lot, sir. On behalf of Nirmal Bang Equities, we'll conclude this call. Thanks a lot.

Thank you, sir. Thank you.

Okay, Mitesh.

Thank you.