Jubilant Pharmova Limited (530019) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Jubilant Life Sciences Limited Earnings Conference Call for the quarter ended September 30, 2020. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Hemant Bakhru, Head, Investor Relations. Thank you, and over to you, Mr. Bakhru.

Thanks. Good evening, everyone. I'm Hemant Bakhru, Head, Investor Relations, at Jubilant Life Sciences. Thank you for being on our Q2 FY '21 earnings conference call. I would like to remind you that some of the statements made on the call today could be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release that's also shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman and Managing Director; Mr. Pramod Yadav, CEO, Jubilant Pharma; Mr. Rajesh Srivastava, CEO, Life Science Ingredients; Mr. Syed Kazmi, CEO of Jubilant Therapeutics; and Mr. Arun Sharma, CFO, Jubilant Life Sciences. I would like to invite Mr. Shyam Bhartia to share his comments now. Over to you, sir.

Thank you, Hemant. Good evening, everyone. I'm sure, you would have had a chance to go through our presentation and press release, which we have shared with you. Q2 has been a substantial improvement over Q1 despite continued adverse impact of the COVID-19 pandemic in at least first half of Q2. LSI segment's performance continued to be strong with quarter-on-quarter as well as year-on-year EBITDA growth. Our Drug Discovery & Development Solutions segment witnessed strong growth, led by continued healthy demand from customers during the quarter. Pharma business performance improved substantially quarter-on-quarter, led by growth in CMO and Generics. Radiopharma continues to have temporary negative impact due to COVID-19 related restrictions on hospital visitations. Demand conditions have started improving. And Allergy business is already at pre-COVID level during Q2 FY '21. We continue to see new business opportunities in CDMO, Generic and Specialty Pharma segments. We have announced a strategic partnership with SOFIE Biosciences where Jubilant will become the largest shareholder with 25% equity stake. Pramod will elaborate on this partnership. We continue to see improvement in demand in most of our business segments with strong demand recovery and expected new business sign-ups. We expect a strong performance in our Pharma, LSI and DDDS businesses in H2 FY '21. The company reduced its debt on a constant currency basis by INR 193 crore in H1 FY '21. This is in addition to INR 515 crore reduction in net debt during FY '20. We remain focused on further deleveraging by generating healthy levels of cash flow. We also have on the call Syed Kazmi, CEO of Jubilant Therapeutics, who will elaborate on our opportunity for proprietary novel drug business. With this, I will hand over to Pramod to discuss the Pharma business.

Thank you, Mr. Bhartia. A very good evening to all of you. Pharmaceutical Q2 revenue grew 4% year-on-year, led by a strong performance in CMO and the Generics. Especially in Pharmaceutical segment, comprising of Radiopharma and Allergy businesses, the revenue declined by 21% year-on-year with continued impact of the lockdown, priority given by hospital systems to treat COVID-19 cases and also extra-cautious approach for lung procedures to avoid risk to the medical Staff. Both Radiopharma and Allergy businesses have recovered in second half of Q2 with Radiopharma is at our -- at around 90% of pre-COVID levels, just barring lung procedures. And Allergy business has fully normalized to 100% of pre-COVID level. We continue to see improvements in volumes in Specialty Pharma segment. In CDMO business, we continue to witness a strong growth led by higher capacity with new COVID-related deals as announced in Q1 call. The CMO business growth led by capacity expansion via debottlenecking initiatives, including new Lyo installations and 24/7 operations in all areas, including Inspection and Packaging. We signed another supply agreement in CMO business, taking total deals to 5 in H1 FY '21. We believe these signed deals could contribute up to INR 500 crores in revenue in next 12 to 15 months, depending upon product approvals by the U.S. FDA, like remdesivir of Gilead approved by U.S. FDA has contributed to CMO revenue growth already. Under our 5 COVID-19-related contracts, we have already produced about 1 million vials, including remdesivir for Gilead. We are excited about the new business opportunities in the CMO businesses. We are pleased with our Generic business, which experienced a 43% year-on-year increase in revenue per quarter, driven by launch of remdesivir in India and other licensed countries and limited competition in select products in the U.S. market. We remain confident of continued growth in this business. We have doubled remdesivir manufacturing capacity in India that allow us to service more demand in India as well as expand access to more countries. As mentioned by Mr. Bhartia, the Jubilant Radiopharma will become a strategic investor to -- in SOFIE Biosciences with 25% equity holdings and the largest shareholder. SOFIE is an innovation leader in molecular theranostics, one of the fastest growing field in the medicines. Theranostics is a combination of diagnostic and therapy using the same target molecule. SOFIE has 3 lines of businesses that are highly synergistic to Jubilant Radiopharma. The first is a network of 14 Radiopharmacies dedicated to PET tracers, which is complementary to Jubilant's [Technical Difficulty]. And the second business line is a specialized CMO facility in New Jersey, which is dedicated to early clinical developments of theranostic agents by which Jubilant can also partner with innovators early in the development phase. And finally, SOFIE owns 70% exclusive rights of a propriety fibroblast activation protein inhibitor, called FAPI. This is molecule developed by University of Heidelberg, the most celebrated Center of Excellence in theranostics. FAPI has received worldwide acclaim for its value-added key next-generation theranostic agent with the ability to greatly enhance the detection and treatment of wide variety of oncology diseases. With our deep expertise in R&D, regulatory affairs, marketing and uncompromised quality, SOFIE and Jubilant are partnering to become a theranostic powerhouse. The EBITDA for the quarter was at INR 343 crore as compared to INR 386 crore in Q2 FY '20. CDMO and Generics delivered strong growth though Specialty Pharma continued to have temporary impact of COVID-19. We continue to execute on our strategic initiatives across the businesses and expect better performance in Q3 and Q4 over Q2 FY '21. Coming to regulatory compliance status of our Roorkee Dosage Form and Nanjangud API manufacturing facilities. The 2 sites have already completed remediation measures with respect to Warning Letter and Official Action Indicated, OAI, issued by U.S. FDA. TGA of Australia during their inspection of both the facilities in November '19 verified active actions regarding the observations provided by FDA and Health Canada, and awarded with highest compliance rating, A1, which provides an assurance that our remediation efforts were effective. As a result of this successful TGA inspection, Healthcare Canada, which had performed a joint inspection with the U.S. FDA of the Nanjangud Group facility in December 2015, also converted the noncompliance NC status to compliant status in November 2019. We are confident that our remediation efforts and engagements with the U.S. FDA will soon resolve the OAI and Warning Later status of our 2 manufacturing sites. We are pleased to report that our all manufacturing facilities in North America and India have been fully operational through Q2. With this, I hand over to Rajesh to provide insight into LSI and DDDS business.

Thank you, Pramod. Very good evening to all of you. I would like to start by highlighting that despite the challenging market scenario due to COVID-19 pandemic Life Science Ingredient business segment reported EBITDA of INR 139 crore, which is higher year-on-year as well as quarter-on-quarter basis. Our EBITDA margin is 17.7%, which is 559 basis points higher on Y-on-Y basis and 89 basis points higher on quarter-on-quarter basis. I am pleased to inform that we continue to have normal operations at all our facilities without any disruptions. I'd like to thank all our colleagues for working diligently, following strict safety measures and new practices, adding continuity of our regular business operations while continuing to serve our global customers. In our Specialty Intermediate business, Pharmaceutical segment witnessed significant improvements in demand. Though agrochemical segment demand was lower due to extreme weather conditions in certain geographies like cold weather in Northwest Europe and excessive rain in North America. Our nutritional product business has shown strong revenue growth, up 11% year-on-year, during the quarter. Business performance was supported by price recovery in vitamin B3 and other products from a low level in FY '20. Vitamin B3 business has witnessed lower demand during end of quarter due to destocking by the customers, especially in Europe and U.S.A., where lockdown started easing up. However, we expect demand to improve going forward, while pricing environment continues to be strong. Our life science chemical business delivered revenue growth up 6% year-on-year, led by strong demand on all the products, including Acetic Anhydride in domestic and export markets, driven by higher demand in Pharma segment. Revenue growth of Life Science Chemical business was modest due to lower price of acetic acid year-on-year basis. We continue to focus on optimizing product portfolio to improve margin in Life Science Chemical business, which has led to improvement in margins both year-on-year and quarter-on-quarter. Overall, LSI segment Q2 FY '21 revenue was at INR 784 crores as compared to INR 753 crores in Q2 FY '20. We expect LSI business to achieve close to double-digit growth in revenue and significant growth in EBITDA with higher margins and very healthy cash generation in FY '21. Now coming to our Drug Discovery & Development Solutions segments, DDDS business continued to deliver healthy performance during Q2, driven by strong demand from biotech companies, from integrated services and functional chemistry. The business has a healthy pipeline of new contracts and customer acquisition. Q2 FY '21 revenue increased by 23% year-on-year to INR 75 crore. EBITDA stood at INR 21 crore versus INR 29 crore in Q2 FY '20. As we informed in the last quarter, the business has committed investment to double the chemistry research capacity, project is progressing well and we expect the facility to be up and running by Q1 FY '22. With this, I now hand over to Syed to discuss the project's proprietary novel drug pipeline.

Thanks, Rajesh. Good evening, everyone. In our Innovative Therapeutics business, we are working on more than 4 programs to deliver precision medicines focused on both first-in-class and validated the intractable targets to address unmet medical needs in the area of oncology and auto-immune disorders with potential to fast track promising assets from discovery to clinical stage. Our first-in-class LSD1/HDAC6 dual-inhibitor and [ PAT4 ] programs, which are the most advanced in the world today in their class, address multibillion-dollar market segments in hematological malignancies, solid tumors and autoimmune disorders, such as rheumatoid arthritis. We plan to initiate Phase I clinical trials for our new program in the second half of FY '22. Shyam?

Sure. Thank you. This is Arun Sharma. Thank you, Syed, for the brief on proprietary innovative pipeline. Good evening. Very good evening to all of you, and thank everyone for taking out time and joining us on our quarterly earnings conference call. I would like to highlight the company's financial performance during the quarter ended September 30, 2020. I would also like to highlight that from this quarter onwards, we are highlighting proprietary novel drug as a separate segment. Revenue from operations during the quarter was at INR 2,375 crore as compared to INR 2,266 crore in Q2 last year. Pharma revenue was at INR 1,516 crore versus INR 1,462 crore in Q2 '20. While LSI reported revenues at INR 784 crore as compared with INR 753 crore during Q2 FY '20. Drug discovery revenue was higher by 23% year-on-year to INR 75 crores. Reported EBITDA during the quarter was at INR 493 crore as compared with INR 481 crore in Q2 FY '20, with a margin at 20.8% versus 21.2% in Q2 last year. Pharma EBITDA grew [ 91% ] quarter-on-quarter and LSI EBITDA grew 12% quarter-on-quarter. Depreciation and amortizing expense during the quarter was at INR 116 crore, down 1% year-on-year. Finance cost during the quarter was INR 64 crore, down 11% year-on-year. Average blended interest rate for Q2 FY '21 was at 5.72%, INR loans at 7.48% and USD loans at 5.07%. PBT grew by 7% year-on-year. Q2 FY '20 had a lower tax incidence due to deferred tax liability reversal of INR 50 crores. Reported PAT during the quarter was at INR 224 crore as compared with INR 249 crore in Q2 FY '20. However, adjusting for tax reversal, PAT is up 12% year-on-year. EPS for Q2 FY '21 is INR 14.1 per share versus INR 15.7 per share in Q2 FY '20. The company's net debt on a constant currency basis stood at INR 3,063 crore, a reduction of INR 193 crore compared to March 31, 2020. We continue to have a strong cash position and generate -- and expect to generate healthy operating cash flows during the year to further reduce our debt levels. Capital expenditure for the quarter, excluding R&D capitalization, was at INR 110 crores. For FY '21, we plan to spend around INR 500 crores. Before I conclude, I would like to provide an update on our reorganization proposal. After filing the Composite Scheme of Arrangement with BSE and NSE stock exchanges, we received no objection letters from both exchanges in January 2020, post which company has filed application for approval of the Composite Scheme of Arrangement with NCLT Allahabad branch. On August 8, 2020, the company arranged an NCLT convened meeting of shareholders, secured and unsecured creditors of the company at its Gajraula facility for voting on the Composite Scheme. I'm glad to mention that equity shareholders, secured creditors and unsecured creditors of the company have approved the proposed Composite Scheme of Arrangement with the requisite majority, and the same has been mentioned in the Scrutinizer report dated August 8, 2020, which has been filed with the stock exchanges. With unlocking underway, we expect NCLT to function at normalized levels and expect reorganization to get completed by January 2021 time frame. With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Saion Mukherjee from Nomura.

Sir, on the Specialty business, where we have seen 21% decline, you talked about COVID-related disruptions. Now we also have seen an approval for MAA by Curium. I'm just wondering, is that having an impact in terms of pricing and volume for this product because I understand this is one of your large products in the Specialty space. Can you just throw some light there?

This is Pramod here. So in Specialty, the major impact is because of COVID. One is this hospital visitations are less, so we are operating at about 90% of pre-COVID level and there's also impact, I mentioned in my speech, about lung procedures. So we have a product called DTPA. And in lung procedure, the patient has to inhale and exhale multiple times. So that exposes the risk to the medical staff who is there in the room. And that product currently, its consumption has -- its use has gone down. So these 2 are having a larger impact. There is some impact because of the competition, but that was anyway planned. So that's not a major impact.

And sir, do you -- okay, sir. And do you have a visibility like how this would play out because typically, see what we see in Generics, right, whenever a competition comes, we see significant erosion. I mean what gives you confidence that it would not be very disruptive?

So what you see in the Generics generally doesn't happen in Nuclear Medicine or Radiopharma business because here, the number of players are very limited. So when the generic comes, what happens is that market share to a certain extent gets adjusted. But that also takes little time because when the new player comes, their capability to consistently produce the product of the right quality and maintaining the supply consistency is not known. So yes, you have to give some market share, but not much. And the price erosion generally doesn't happen the way you see it into generic industry.

Okay. And sir, just a second question on the CMO business. I might have missed some of the numbers you said. So you mentioned INR 500 crores revenue from COVID-related contracts that we have over the next 10 to 12 months. I remember last quarter, you mentioned about INR 50 crore upfront. And then you also mentioned about remdesivir sale happening this quarter. So this INR 500 crore includes the remdesivir also made? And have we already booked any of that INR 50 crore upfront licensing amount that was expected for this fiscal year?

So first, let me clarify on remdesivir. We have 2 businesses of remdesivir. One is we are doing contract manufacturing for the remdesivir through U.S. for Gilead. So that is what I mentioned in my speech. And I mentioned that we have already produced about 1 million vials, including remdesivir on the vaccine-related products in [indiscernible] facility in U.S. [Technical Difficulty] we have is our voluntary license for manufacturing and marketing remdesivir in India and other 126 developing countries, where we are making remdesivir ourselves and then we do fill and finish and sell over here. This business what we are doing in India and other 126 countries is booked into our generic business. So that's on remdesivir. And your other question was on about INR 50 crore onetime charge for the COVID-related products, what we had the capacity charge, et cetera? Yes, quite a good portion of that has come into the Q2 revenue.

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

Sir, continuing from the previous question regarding Curium. So Curium has also commented on launching a series of products over the next 2 years in Radiopharma in U.S. So in general, can you comment on the competitive intensity within the Radiopharma manufacturing space? And are we expecting any further competition, say, over the next couple of years for any of our products in the portfolio?

So we have also announced that we have about 7 to 8 products pipeline and Curium also have -- may have announced. Overall, the Radiopharma business is now attracting quite a lot of interest from the manufacturers, from the investors, from the medical community, from everybody. And it's -- a lot of interest of that is happening because there is a huge opportunity of using these products, which so far traditionally had been only used for the diagnostic purpose but also for the therapeutic purpose. And there have been the molecules where the same molecule with the different cancers, you can use for the diagnostic as well as the therapeutic, which is called theranostics, which I mentioned in the speech where we have done this partnership with the SOFIE Biosciences. You may have seen couple of deals happening in the billions of dollars where the large pharma companies have acquired those of the businesses which were getting used for the theranostics. So there's a huge opportunity, huge interest. This is a field which will continue to attract investments, which will continue to attract the interest, and we are at the forefront of this.

Understood, sir. So basically, there is some likelihood that competitive intensity in this space could increase over the coming years. Is that right?

It will, but this is not as easy to enter in this business as you can enter into the generic business. The reason is that it has its own issues of the managing entire supply chain because you are handling the radioactive material. Then even into the generic, it takes a long time for the development. Third barrier of entry comes, how do you distribute the product. So like in the U.S., there are only 3 major players who are having this distribution network of the Radiopharmacy, and we are one of them with the second largest network. So there are many entry to barriers to this business, much, much more than what you see into the other delivery forms or the other kind of the generic businesses.

Understood, sir. Sir, my second question is on the LSI segment. Now 17.7% margins in this quarter, you have called out good demand and improved pricing in Vitamin B3 and some other products. But historically, if we look at the LSI margins, they have been fairly volatile. So would you like to call out any short-term benefit? Or would you say that there has been a structural improvement in LSI margins possibly because of some low-margin segments contribution coming down?

Yes. So Rajesh, here. So as you know, LSI, the margin depends on 2 things: one is the product mix, and secondly is the raw material prices. Now we are working continuously to improve our product mix to improve margins. And that has actually shown results in last 2, 3 quarters, and we continue to make our efforts to churn out the product mix in a way so that we can keep our margins improving. And therefore, we can say that going forward also, we expect the margins in the same level of 15% to 17%, at least for next couple of quarters.

Understood, sir. And one last question, if I may. Any comments on Triad? Any comments on what is the traction which you are seeing, the plans which we had? And on breakeven, if you can comment on that, that would be helpful.

It's Pramod again. So yes, as I mentioned, this business has many entry to barrier. And the entire distribution network of radiopharmacy [Technical Difficulty] important sector and that was the reason that we did that strategic acquisition. I already integrated that business entirely with our business of Radio Pharmaceuticals. And we have been reporting [indiscernible] of both those businesses clubbed together. So we are -- there is no more tracking that business [indiscernible].

Okay. But sir, earlier, you used to comment on whether we will achieve breakeven or not. So no comments on that as well?

Yes, because we integrated our business. After that, when we made this announcement, earlier, they were operating this under the name of Triad. And the other business, we were operating under the name of the Draximage and then we say that now our both the businesses get clubbed together and will operate under the name of Jubilant Radiopharma.

Okay. Fair enough, sir. So maybe one different way to ask this question would be, are you happy with the progress as far as the distribution side of Radiopharma is concerned? Or do you expect some material improvement there coming through on the operational side?

So in terms of performance, I will say we are tracking as per our plan, as per our budget. So we are quite satisfied with that. And more important that we see the future of that business, the kind of -- the strategic advantage it will bring to the portfolio of the products we are working upon.

The next question is from the line of Sunil Singhania from Abakkus AMC.

Sir, just one question. On the Radiopharm side, the degrowth has been pretty sharp. And you mentioned that you are back to 90% normalcy. Is there a significant drop in pricing because the revenue growth has been 30%? And the second thing is on the Triad business. Last year, there was a loss of almost $30 million. And we acquired, at that time, it was profitable. Can you shed some light there?

So I'll not say there is significant erosion onto the prices. There -- when the competition enters, you have to make the minor adjustments into the prices. So that happens. But it's -- there's nothing close to a significant level. And as regards to the Triad business, I just answered to another colleague that we have merged the businesses and clubbed the businesses, both under the brand of Jubilant Radiopharma. But the number what you have when we acquired it was making profit. And then in year 1, we made the losses. For that the reason was that during the time of acquisition we lost some of the customers because the acquisition process took quite long due to various regulatory approvals, which were required there to transfer the licenses, et cetera. We are now tracking quite well on the growth chart. And we have the plan in place, by which we are expecting to continue to grow at this point in time.

The next question is from the line of Aditya Khemka from InCred AMC.

Pramod, sir, 1 question for you. So I know you have been responding to the questions on AMA competition from Curium. When you say there has been some price erosion, can you just, for our understanding, because we don't understand the Radiopharma business as much as you guys do, can you just kindly give me some flavor on what is the extent of price erosion? Is it like a single-digit erosion? Is It a double-digit price erosion? And on similar lines, can you also comment on the level of market share loss? Curium has been in the market for 3 to 6 months. So have we lost like a single-digit market extent to Curium, double-digit market share? That would be really helpful to understand how that industry works.

Soon supply position earlier. And now there is a competition. So there are 2 players working in the market. Any information product specific I will share will hurt our -- the competitive interest. But to give information to you at a broad level, like in case of the normal generics when the generic player enter there could be price erosion or market share erosion to the extent of 30%, 40% or so. In our case, it is much, much lower than that.

Sorry, sir, the benchmark you took with the new generic player enters the price or market share erode by 40%, 50%. Is that the benchmark you are talking?

Yes. I said that's somewhere around that. But in this case, as I earlier mentioned that when the generic player enters the price erosion doesn't happen to that extent. So it is much, much, much lower than that.

Much lower than that. Okay. Got you. And that is helpful, sir. And secondly, on the Triad profitability. So you mentioned to the previous participant that while we made $30 million loss in FY '20, and I know you are not sort of breaking the numbers out. But from a front-end presence perspective from Triad, given that we lost a few contracts during the restructuring of the business, now, are we back on our front-end sales to the original number and profitability? Or are we still behind what the original numbers were before we acquired the Radiopharmacy?

So I can mention you about the sales. So we did lose the business but we also then gained quite a lot of business. And we also mentioned that we are doing the renovation of the pharmacy network. We are also opening up new locations where we are not. And with that, we have the firm plans in place to grow the top line quite aggressively. And more important than that, as I mentioned earlier, this network gives us assured availability of the network to move our product, and especially the innovative products which we will be bringing out in the market. And now with our -- the partnership with SOFIE, who have a network of 14 pharmacies on the PET side and we have most of the PET. We have only 3 PET which are operating. With this partnership approach, now we will be able to leverage our strength in the distribution network even much more.

Right, sir. Could you quantify what is the market share now, we will have in front-end Radiopharmacy business once we combine the Radiopharmacies of SOFIE and Triad?

So both the markets are slightly different. We are into PET and within PET, we say that we are the second largest. And within the PET network, if you look at the market share for the PET, SOFIE is close #2, again.

Okay. Okay. Understood. Understood. And the question to the CFO on this NCD rate. So I think, INR 100 crore NCD is approval today. So we are -- for the past 2, 3 years, we have been in the phase of paying down debt. I'm just wondering why this INR 100 crore NCD rate. What is it that we'd be using the funds for?

No, this is an enabling resolution we have taken, and this will be used primarily to -- in case we go ahead with this NCD, this would be primarily use to reduce the debt, which is at high cost. So we're not going to add any debt efforts and only this will go in reducing the interest cost further.

Understood. So sir, while we have reduced debt by INR 200 crores in the first half of FY '21? Is there a number you would like to guide investors to as to how much we can reduce debt in the balance of the year and then what is your debt repayment target for FY Q2, if you have thought about that?

It's very difficult to quantify a number, but our rigor to reduce debt continues, and we'll try to beat leverage as fast as possible depending on the cash generations we do in second half.

And I've just one booking question, sorry. Firstly, so on the bookkeeping side, I sort of missed the comment on the restructuring. So the management mentioned in the opening remarks that we expect the restructuring to happen by Jan 2021. And would that mean both the different stocks be listed by Jan [ 2021? ] Is that how I should interpret it?

Yes. So we are looking forward to NCLT to operate in a normal manner and give us the approval maybe somewhere in Q3. And what would happen, to be clear on this, once you do a demerger, then this company Jubilant Life Sciences Limited, resilient company will be listed immediately and the Jubilant [indiscernible] which is the LSI portion that will get shifted to this new company [indiscernible] Limited will get listed within 30 days' time.

Within 30 days?

Yes.

[Operator Instructions] The next question is from the line of Ranvir Singh from Sunidhi Securities.

Sir, my question pertains to that R&D activity. So that 4 programs we have currently, what R&D budget we have for FY '21 and FY '22 for these programs?

Syed, you there? So I think we don't have Syed on the call. So the CapEx program for the R&D is around $15 million what we have going forward. And this all will be funded through monetization of a few of the molecules what we have going forward.

Through monetization means, we will be doing out-licensing?

We are working on it quite aggressively, and we hope that you should be able to do something in the next 12 to 18 months.

And what we have invested in SOFIE of 25%?

So in SOFIE, we have invested $25 million for the 25% of the equity.

The next question is from the line of [indiscernible].

This is [indiscernible] Bank. Now we earlier had some discussion on deleveraging. Now I'd like to move down a similar way and understand that under the pharma business, there are hardly 2 issues of bonds, specifically, I'm referring to the one in 2016. And I believe that 2016 issue will be coming due sometime in October 2021, just next year. I'd like to understand what are the company's plans, specifically the pharma business on refinancing?

Yes. So a good question. We are working on 2 options to see how we can partly refinance and partly use our resources to take care of these bonds which are coming up for repayment in October 2021. And what I can tell the investors that is we are working very closely with a few banks to connect the line for this. And maybe we should be able to give you some concrete answers over the next quarter, and we'll try to refinance this before the end of fiscal year '21.

[Operator Instructions] The next question is from the line of Saion Mukherjee from Nomura.

Sir, on remdesivir, I think, you are increasing the capacity for India. But now cases coming down, do you see still such high demand to put up additional capacity for remdesivir?

So we have already increased the capacity and increased capacity is operating. So far, we have been running this plant at the capacity, and we have that demand. But yes, you are right that the number of cases are coming down, but we have the license for another 126 countries. And how the COVID situation will develop, we don't know. So it's good that we have capacity in place to be able to meet the requirement of the patients as per the need.

Okay. Okay. And sir, on the nutritional product business, you mentioned there is demand and the pricing also has improved, but now we have some inventory issue. So how do you see the second half playing out for the segment?

So this inventory issue was in the beginning of the second quarter because what happened that in the first quarter when the lockdown started in India, in this part, all the customers in U.S. and Europe started stocking the material. And then in a month or so, they realized that availability and supplies have no problem at all. So after 2, 3 months of stocking, they have started destocking. So that destocking scenario is over. I think it is over by mid of last quarter. So now the situation is that it will need material. So actually, the demand in vitamin business should be better in Q3 than Q2.

Okay, sir. And sir, just one question, if I can ask on proprietary programs. I see some of the trials starting. You mentioned you will monetize also. So I'm just wondering, is there a risk of significant cost increase in the proprietary program which can hurt overall margins or EBITDA for the business?

This is Syed, I can answer. In terms of the risk of these programs, of course, in the innovative business, there is always risk, but we have carefully selected these programs and have done all the necessary preclinical, if you will, studies in collaboration with a number of scientific advisory board members and key opinion leaders to manage that risk and going forward, initiating the clinical programs in a specific patient populations with self imaging signatures to increase the feasibility of success. And we are working in a semi-virtual mode and with our scientific work going on in Bangalore and our development stage work to initiate investigational new drug trialing is happening here in the U.S. So we are managing cost, and at the same time, we continue to explore our partnership with pharma and biotech companies for some of our other pipeline programs.

Okay. Sir, is there a cost number that you can guide to in terms of what can be the potential increase over the next 2 years?

In terms of the cost number for the innovative business, at this point, I think it's very hard to tell if and when we are going to do those partnerships that we are exploring. As we generate more data and especially because these programs are first-in-class and novel with the clinical proof-of-concept, the chances of having a meaningful partnership and the revenue coming in from that partnership would be higher. But that depends on a number of factors, depends on the science, depends on the data that we generate. But we are being very diligent in terms of going after indications where there is a higher probability of success to generate meaningful clinical benefit data, which then can be partnered with appropriate pharma companies.

The next question is from the line of Rahul Veera from Abakkus AMC.

Sir, just a quick question on Triad. What is the target for the breakeven for Triad, sir? Like by which year we are expecting it to break even?

Pramod, again. So I think, look that you missed the earlier question answer, where I mentioned that we are no longer tracking the Triad separately. This as well as our earlier business, both are under the same name of Jubilant Radiopharma and the businesses have been integrated.

Right. Fair point. But sir, after entering Europe, will there be any additional cost now since you are expanding on the European side now?

So on the European side, what we are doing is we are doing installations of the RUBY-FILL, which is our another star product, which is very, very innovative, state-of-the-art and that has been developed over the many years of the research and the innovation efforts on to that. We are expecting to do our first installation of the RUBY-FILL in the year of -- approved product this year. And then we have plans to continue to ramp up the installation.

Okay. Sir, on the remdesivir side, I understand that we've increased our capacity and possibly the cases are going up. But even after including the 126 countries that we are planning to export, how many license have we been brought till now? And by when we can expect it to have -- our plans to be fully utilized?

So as of now, our plant is already fully utilized, and we have many orders in place already for the coming months for India as well as outside. We have already done the registration or filed for the registrations in almost 70 countries. Exporting the product, I may not be able to tell you exactly how many countries, but I know it's somewhere close to 15-plus. We are already exporting. We continue to get more and more approvals into the country and we will continue to export there.

The next question is from the line of Dixit Doshi from Whitestone Financial.

Firstly, sir, can you give the sale of remdesivir for current quarter?

So we don't disclose the specific product revenue or product EBITDA. But I mentioned this is clubbed into our generic business.

Okay. Okay. And secondly, sir, so as of now, our net debt is around INR 3,063 crore. So can you just break this up, in terms of demerger, how much will go to pharma business and how much for LSI?

So to be precise in this, INR 2,200 crores will be at pharma level and the balance will be at LSI level.

INR 2,200 crores pharma. Okay. And can you give a rough breakup of depreciation in terms of those business mix, approx percentage?

Yes, total depreciation for this quarter is INR 95 crores. So major depreciation, it will be around INR 45 crores will be for LSI business and balance will be pharma and DDDS business.

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

Sir, one question on the API business. You mentioned about a strong order book. So can you just elaborate on that? Also, any thoughts on participation in the PLI scheme, especially after the recent changes?

So after our plant was closed for about 2 months, we had mentioned that now for the rest of the year we will be running the plant almost at full capacity. And we continue to make the effort to do the debottlenecking with the quickly or have that bottle at MS if we can. And that the plant is running at capacity, we have the order book. And that's how in Q2, you have seen that there has been a substantial improvement over the Q1. And we expect that in Q3 and Q4 the performance will be even better than Q2.

And sir, on the PLI scheme, any thoughts on participation after the changes recently?

Yes. Anyways, the deadline is "I think" 30th November, which is quite close. As for the earlier scheme, we were not making any plans to participate. And we don't have concrete plan, again.

Understood, sir. Sir, my last question on RUBY-FILL. Any comments on the traction over there? And in general, as far as the market is concerned, could you comment on how quickly the market is transitioning from PET to SPECT? Any thoughts would be helpful.

So the market is transitioning from SPECT to PET? The PET is a segment which is growing more than the SPECT. SPECT Is also growing, but PET is growing more. And in terms of the RUBY-FILL, overall, I will say that this product continues to do well. We -- whatever we have planned for this year for a number of installations, we are already having a very strong funnel for that, and we have plans to install that many sites within U.S. and also now we are expanding outside the North America, getting into Europe. We also have plans to do the installations into the other part of the world slowly, slowly. So whatever projections we had made earlier for this product, we are tracking on them quite good.

Sir, on PET itself, so if I remember correctly, earlier, the overall share was less than 10%. So any thoughts on the market? How is it moving?

So PET is growing by about 7% to 9%, and that's a very healthy growth rate into the PET. And that is the current rate at which it is growing. As more and more of the theranostic product comes into the market, it's likely to grow even at much faster pace.

And would it be fair to say, sir, that PET will be growing at about 3%, 4%?

Yes. So if PET, as of now, continues to grow with that rate, but when the theranostic product comes in the market, it's not necessary that all the products will come through PET. There are also products which are through the SPECT, and they will also lead to the growth of the SPECT as well, even more growth.

The next question is from the line of Pratik Kothari from Unique Asset Management.

Sir, couple of questions around the stake which you took in SOFIE Bioscience. One is, what kind of business, et cetera, that it generates in terms of top line, bottom line? And also, second, I understand the part where you said that there are in similar business line as compared to our Radiopharma business. But if you can maybe briefly talk about what do we expect to do with them? What kind of synergies do we expect? What would that business relation look like?

So in terms of top line, they are about 68 million. And in terms of businesses, I briefly mentioned in my speech. So they have 3 business lines. The one is they have this PET network and we have the network of SPECT and PET, but majorly on SPECT, and we have -- at 3 of the locations we have PET. They have PET at close to 14 locations. So there are quite a lot of synergies possible on this entire -- the network of the distribution through the pharmacies. Now the second business they have is of very state-of-the-art CMO. So you may have -- since they are the many of the CMOs available for the traditional pharmaceutical products, but for the Radiopharma, that kind of CMO facilities are not available. So if we develop a product, which requires it compounding with the radioactive material and you don't have all those facilities, then you are kind of hand-cuffed. So most of the innovation, which will be happening, will be going through such kind of the CMO facilities. They already have many good contracts for such CMOs, and that will help us to get close to those innovations at a much early stage and either acquire the innovations or in-license or do the partnership even on that front also. So we will be much earlier into the game. And the third piece is they have their own innovative platform of the FAPI, which is the fibroblast activation protein inhibitor, which, along with the different radioactive materials can be used for the various kinds of cancers, almost 20 different kind of the cancers, it can be used for, for the diagnosis. And it can be also used for the therapeutic use. And you imagine that if in the therapeutic use, it can be used even earlier -- at a stage earlier than when the cancer is developing, it will also help to overall manage the entire disease in a much more efficient today. This is expected to be another blockbuster. So when the Novartis acquired the AAA at about $4 billion that was being talked about, the Lutathera was talked about a blockbuster. If the FAPI development is happening and if it happens that way, it is expected to be equivalent or even a better product.

Okay. Fair enough, sir. What margins would they be making currently?

So the margins have not been disclosed so far.

The next question is from the line of Ranvir Singh from Sunidhi Securities.

Sir, I understand you may not give a separate number for remdesivir, but just for understanding purpose ex remdesivir whether we have grown -- or growth has been healthy even without remdesivir in Generics business?

Yes. So in the Generic overall growth of the 43%, what we have reported has been contributed by remdesivir as well as the other products into the U.S. as well as non-U.S. markets.

Okay. And even in CDMO business also, which includes API, so have you seen remdesivir API also from going into sales of CDMO?

Yes, [Audio Gap] the plant is already approved by the DGCI. And that API, we are transferring for the formulation.

So if we exclude this remdesivir finished doses as well as API, then what would be the growth in pharma sector -- pharma segment?

So even if we exclude that, there would have been a growth -- there would have been a good growth.

Okay. Okay. And that in LSI study...

Sorry to interrupt, the growth is there into [Technical Difficulty] the plant is running at full capacity because of COVID-related business we have and the growth is of -- API plant is also running at full capacity. And into the Generics, we continue to play towards.

So In case demand goes up, then what -- how we are going to cope with it?

So in API, we're debottlenecking plant, I mentioned. So we are making those investments. In CMO, yes, currently, our plant in Spokane is running at capacity, but in Montreal, we have capacity. So in Montreal, we can take more of the business and we can grow. In case of Generics, we have the capacity available. So we can produce more volumes. And even in case of the Generic, we had expanded the Roorkee plant earlier. And now we are in the process of also an expansion into Salisbury, where we are increasing the capacity almost by about 80%, 90%.

Fair. Fair. And earlier, you used to give order book position in CMO. So it is possible to indicate something, what kind of order book currently we have for CDMO business?

So if the orders are on the long-term contract and they continue to get renewed and the plant is running at 100% capacity, then order book itself -- that numbers are irrelevant. So we stopped reporting that.

Okay. And sir, in LSI segment, that acetic acid prices, what had been the trend now? As on today, price has been stable or we see volatility continues there?

So in Q2, the price was increased from Q1 level. And at present, also, the price is higher than Q2 level. The price has gone up from Q1 to Q2 and now also price has gone up a little bit. So currently, it is at $370 per ton, while in Q2 it was in the range of $330, $335.

Okay. Okay. So any increase in prices is translated into our improvement in margin? Or how is this sort of margin will remain same?

Mostly, the acetic acid price is passed on, but there is a lag -- as we always keep saying, there is a lag of about a month. But mostly it is passed on to the customer in the end product pricing.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Over to you all.

Thank you, everybody, to be on the call. If you have further questions, I think Hemant will be able to answer it one-to-one. Thank you, and wish you all a very happy Diwali.

Thank you. On behalf of Jubilant Life Sciences Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.