Jubilant Pharmova Limited (530019) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Jubilant Pharmova Limited Earnings Call for the quarter ended December 31, 2021. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Mayer, Head, Investor Relations. Thank you. And over to you, sir.

Thank you, Margaret. Good evening, everyone. Thank you for being with us on our Q3 FY '22 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 has been shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman and Managing Director; Mr. Arvind Chokhany, Group CFO; Mr. Pramod Yadav, CEO, Jubilant Pharma; Mr. Giuliano Perfetti, CEO, Jubilant Biosys; Mr. Syed Kazmi, CEO, Jubilant Therapeutics; and Mr. Arun Sharma, CFO, Jubilant Pharmova. I now invite Mr. Shyam Bhartia to share his comments.

Thank you. Good evening, everyone. Welcome to this conference call. The company's performance during the quarter was affected by headwinds witnessed in Pharmaceuticals segment, which was partly mitigated by continued robust performance in the Contract Research and Development Services, CRDS, segment. In the Pharmaceuticals segment, while the radiopharma business witnessed improved performance, generic business was affected by lower volumes due to Import Alert at Roorkee plant, latest sartan issues -- impurity issues and pricing pressure in the U.S. generics market. Our API business was affected due to lower volumes resulting from an unplanned shutdown during the quarter. Performance of API business is expected to normalize in Q4 FY '22. In our Contract Research and Development Services business, we continue to witness strong growth on a year-over-year basis, driven by robust demand from our customers for our drug discovery services. I'm glad to mention that in the Proprietary Novel Drug business, our lead program, LSD1/HDAC6 inhibitor has successfully received FDA clearance for our IND filing and is on track for initiation of Phase I trials in Q4 FY '22. Additional IND filings for pipeline programs are expected to follow in FY '23. I would like to mention that over the medium term, we have a strong growth levers in our businesses. To drive growth in these businesses, company will continue to invest accordingly. I'm glad to update that our strategic initiatives of API demerger is progressing well. And in January 2022, we have further received approval from the shareholders and unsecured creditors of Jubilant Pharmova. We expect to complete the reorganization during Q1 FY '23. With this, I hand over to Pramod to discuss the Pharma business.

Thank you, Mr. Bhartia. A very good evening to all of you. Pharmaceutical revenue was at INR 1,186 crore versus INR 1,692 crore in Q3 FY '21. Radiopharma business witnessed improvement in sales year-on-year. However, on a sequential basis, performance was lower due to customer order scheduling and the surge in COVID cases in North America, especially in the month of December '21. However, we continue to maintain the majority market share. Spike in COVID cases impacted Ruby-Fill installations during the quarter and pushed our new installs to the fourth quarter. The strong performance on new installs is expected in Q4 as it generally witness higher installations. Phase II and Phase III clinical trials for NDA of our I131 MIBG are progressing satisfactorily. Radiopharmacy business witnessed a steady performance year-on-year. Turnaround plan is on track with positive outcome over the last 2 to 3 quarters. However, COVID impact remains uncertainty. The Allergy Immunotherapy reported robust performance on year-on-year and stable performance sequentially. The business continues to operate at volumes higher than pre-COVID levels. As mentioned during the previous call, CMO business revenue was affected. Hence, the revenue related to COVID-related one-off deals tapered off and also because of some customer scheduling. In Q3 FY '22, we realized INR 80 crore of COVID-related revenue as against INR 200 crore in Q3 FY '21 and INR 150 crore in Q2 FY '22. Business now is expected to operate at the normalized levels. The API business performance was affected due to lower volumes resulting from unplanned plant shutdown during the quarter. We expect now to see improvements in coming quarters. In generic business, performance was affected by impurity issues in certain sartan products which is an industry-wide issue, the lower volumes due to Import Alert at the Roorkee plant, the pricing pressure in the U.S. market and lower Remdesivir sales due to fewer hospitalizations. Our usual strategy is to increase production further in U.S. facilities, increase sales from the Roorkee in non-U.S. market and simultaneously transfer some of the Roorkee products for the U.S. market to CMOs to get back in the market early. I am glad to mention that we have resolved the sartan impurity issue in very short span of time and have relaunched the product in the U.S. market, which will support performance of this business in the next financial year. With regards to Roorkee Import Alert, our remediation activities are ongoing as per plan, and we expect to complete sale in H1 of calendar year 2022. In 9 months of FY '22, Pharmaceutical business revenue was at INR 4,271 crore versus INR 4,304 crore in 9 months last year. And EBITDA during 9 months of FY '22 was at INR 864 crore versus INR 1,022 crore in 9 months FY '21. With this, I hand over to Giuliano to provide insights into the Contract Research and Development Service business.

Thank you, Pramod. In our Contract Research and Development Service business under Jubilant Biosys, we continue to report robust performance driven by sustained strong demand from biotech companies for our integrated discovery as well as functional service, such as chemistry, DMPK and discovery biology. The business has an active pipeline of new contracts and customer acquisition for FY '23. Q3 FY '22 revenue grew 51% year-on-year, and EBITDA grew 59% year-on-year with a margin of 38.5% versus 36.4% in Q3 FY '21. Our 9 month FY '22 revenues was up by 49% year-on-year, EBITDA by 72% year-on-year, and margin stayed at 56.7%. I'm glad to mention that we are ramping up capacity utilization at our new state-of-the-art Chemistry Research Innovation Center at Greater Noida as per the plan. The new facility has been designed with the highest global compliance standards to support both biotech and big pharma by delivering superior speed, quality and innovation. In view of the strong demand from our customers, we have put [indiscernible] expansion of the Greater Noida facility, which will be delivering both chemistry and DMPK services. With this, I now hand over to Syed to discuss the Proprietary Novel Drugs pipeline.

In our Proprietary Novel Drugs business, we are focused on developing potential first-in-class and best-in-class precision therapies in oncology and autoimmune space. The company uses proven discovery engine with a structure-based drug discovery expertise and a track record of partnerships. The acquisition of our out-licensed EGFR (sic) [ EFGR ] program to Lengo Therapeutics by Blueprint Medicines in December 2021 provides validation for our platform. We received our initial share of proceeds from the transaction in Q3 FY '22, that would be followed by additional milestones and royalties as part of our licensing agreement. We currently have 4 highly differentiated active programs in the pipeline. A novel first-in-class dual LSD1/HDAC6 inhibitor, JBI-802 with synergistic antitumor activity that provides superior efficacy and optimized [indiscernible] index with quick-on quick-off kinetics compared to LSD-only and HDAC6-only inhibitors. Then we have a substrate comparative brain-penetrant PRMT5 inhibitor, JBI-778, with sustained exposure in both brain and plasma to treat many types of tumors localized in the brain. Number three is an oral brain-penetrant PD-L1 inhibitor, first ever potential checkpoint therapy for brain tumors. And finally, number four, a novel PAD4 inhibitor with potential first-in-class profile in tumor metastases and autoimmune disorders with no immune suppression, validated by collaborations with Boston Children Hospital, Harvard and Wistar Institute. The lead program, LSD1/HDAC6 inhibitor has successfully received FDA approval of IND filing and we're on track for initiation of Phase I trials in Q4 FY '22. Additional IND filings for pipeline programs are expected to follow in FY '23. We are transforming Jubilant Therapeutics to a clinical stage biotech with higher value creation opportunities through potential offering, deals, capital markets access subject to the emerging scientific results. With this, I now hand over to Arun to discuss the financials.

Yes. Thank you, Mr. Syed. A very good evening, and I 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 for the quarter and 9 months ended 31st December 2021. First, I'll discuss about the quarter. Revenue from the operations during the quarter was at INR 1,311 crores as compared to INR 1,777 crores in Q3 last year. Pharma revenue was at INR 1,186 crores versus INR 1,692 crores in Q3 '21, while Contract Research business reported revenues at INR 120 crores as compared to INR 79 crores during Q3 '21. The reported EBITDA during the quarter was at INR 200 crores as compared with INR 496 crores in Q3 FY '21 with margin at 15.3% versus 28% in Q3 FY '21. Depreciation and amortization expense during the quarter was at INR 93 crores versus INR 96 crores in Q3 FY '21. Finance cost during the quarter was INR 37 crores versus INR 46 crores in Q3 FY '21, a reduction of 21% Y-o-Y. Effective tax rate was 27.7% versus 35.6% in Q3 '21. Current quarter benefited from reversal of certain deferred tax liabilities. Reported PAT during the quarter was at INR 51 crores as compared to INR 219 crores in Q3 last year. EPS for the quarter was at INR 3.2 per share versus INR 13.75 per share in Q3 FY '21. Now to 9 months financials. For 9 months FY '22, revenue stood at INR 4,603 crores versus INR 4,519 crores in 9 months FY '21. Pharmaceutical revenue was at INR 4,271 crores versus INR 4,304 crores in 9 months FY '21. Contract Research and Development Service revenue was recorded at INR 315 crores against INR 211 crore last year. Reported EBITDA for the period was at INR 923 crores versus INR 1,023 crores (sic) [ INR 1,033 crores ] in 9 months FY '21. Depreciation and amortization expense was at INR 281 crores versus INR 263 crores in 9 months last year. Finance cost was at INR 106 crores versus INR 141 crores in 9 month FY '21. Lower finance cost was due to lower gross debt and lower cost of debt in Q3 FY '22 versus Q3 last year. Average blended interest rate for 9 months FY '22 stood at 4.58% versus 5.15% in 9 month FY '21. Effective tax rate of 32.6% versus 34.8% in 9 month '21. Current period benefited from reversal of certain deferred tax liabilities in Q3 FY '22. PAT for 9 months FY '22 was at INR 354 crores versus INR 401 crores for 9 months FY '21 with EPS of INR 22.26 per share versus INR 25.19 per share in 9 months FY '21. Net debt on constant currency basis on December 31, 2021, was at INR 1,792 crore versus INR 1,928 crores as on March 31, 2021. During the quarter, we saw net debt on constant currency to decrease by INR 32 crores. On YTD basis, net debt on constant currency rates were lower by INR 137 crores. Capital expenditure, including R&D capitalization, was at INR 112 crores for the quarter and INR 350 crores for 9 months FY '22. For FY '22, we expect CapEx of around INR 500 crores to be incurred. 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 Rahul Veera from Abakkus.

Absolutely disappointing numbers that we have shown up. But I would like to understand a bit deeper into specifically the [indiscernible]. On the generics side, we had mentioned in our earlier notification that the impact of...

Sorry, sir, your voice is not very clear, sir.

Okay. Sir, in the earlier notification, we mentioned that the impact of Roorkee Import Alert would not be more than 3% because of the exempted product. But sequentially, if we see within one quarter itself, we're seeing the whole annual impact if we try to [indiscernible] of INR 150 crores that we see is the decrease in the generics. So I would like to understand what exactly has happened and what will be the run rate going forward, sir?

Rahul, this is Pramod here. So since we gave earlier about the 3% of the overall company revenue for the restricted product, that's the impact we are still measuring for the financial year '22. But in addition to that, there have been the other factors which have impacted the overall performance, which we mentioned, which are -- one is the sartan impurity issue because we had to withdraw the product from the market, which is also an industry-wide issue. We also had the lower sales of the Remdesivir as you know that the hospitalization due to Omicron is not there much. And the Remdesivir is prescribed for the hospitalization. So that sales was lower. And other issue is overall generic prices in the U.S. For us, the major market of the generic is U.S. and the entire U.S. generic industry is going through this cyclic trend where the price goes up and then comes down for a year or 2. So we are also not immune to that, like everyone, we are also impacted because of that. These all are the reasons which have led to the impact in the performance. There was also some impact of the products which were exempted because we had mentioned in our last call that we took almost a quarter to restart the supplies to meet the FDA requirements for the additional quality checks.

Also, sir, have we restarted the products, exempted products back to U.S.? And also, we were planning that the remaining capacity would be diverted to the other markets.

So the exempted product supplies have started to U.S. market. And with regard to the diversion of the capacity to the other market, our -- the efforts are ongoing in that direction. And we expect that in next financial year, our sales to the non-U.S. markets in comparison to FY '22 will be much higher. And same way, we are also -- I had mentioned in my speech that we are also increasing capacity utilization of our U.S. facility, and we expect that facility to operate at a higher run rate though the pricing pressure for the products in the U.S. market remains there. And I also mentioned that the products which are restricted for the U.S. market currently, we are also in the process of transferring them to the CMO so that we can get into the U.S. market early. So those efforts are also ongoing.

And sir, in terms of the CDMO, our current run rate of INR 370 crores, is that the normal base or there will be some products which are one-offs even in this quarter for the CMO business?

In this quarter, we said that about INR 80 crore of the revenue will be realized by those COVID-related deals. And those deals are now almost getting over. So from Q4 and into the next financial year, we expect this business to be operating at the normalized levels.

[Operator Instructions] The next question is from the line of [ Divesh ] from VF Investments.

So just wanted to get a quick view, if we were to model Q4 specifically within Pharma segment, starting with the specialty pharma, CDMO Generics, in your view -- I don't need a finite number, but would we be looking at improving trajectory for all of the subsegments or some would still decelerate before starting to accelerate? Can you give a qualitative view in terms of Q-o-Q, what should we expect?

Yes. So see, the issues because of which the Q3 performance is impacted, some of the issues are one-off and some of the issues will take a bit longer to get fully resolved. So like in the CMO business, COVID-related deals, which have tapered off, I am saying now the business will operate at a normalized level. And it will continue to operate at the normalized levels, which are also healthy margins. With related to API, the plant shutdown was the one-off activity. In Q4 onwards, the plant is expected to operate at a normal level, and it's currently operating at the normal level. So in API, the overall performance in Q4 will be definitely better than Q3. With regards to generics, the Import Alert impact will continue. The U.S. pricing pressure impact will continue. The lower sales of the Remdesivir impact will continue. However, the impurity issue of the sartan is getting resolved. We have launched the product in the market, but more impact of that, you will start seeing from Q1 of next financial year.

And Q3, like our EBITDA is about 15% for Pharma segment. Let's say, Q4 or Q1, when we sort of normalize operations and the issues are behind us, what is the sustainable EBITDA for Pharma segment in your view? Again range is also good enough.

It will be difficult to give a range, but in Q4, we don't expect too much of the change. It will be marginal improvement over Q3. And then we expect that in next financial year, in the operating businesses, we will see the improvement. We expect to see improvement in Radiopharma business, hopefully, because the COVID should be behind us by that time. The allergy business will continue to improve and will keep on delivering the healthy performance. But the COVID deals in the CMO business and the issues of the generics will have a hand.

And then one last one because we called out certain improvement within Q4, and we are already 1 month in Q4. How are you seeing Ruby-Fills, which sort of installation were moved to Q4? Are they on track for your internal plans? Are they looking good?

Yes. So in Q4, we are doing -- we have already done quite a lot of installs, which we missed in Q3. So January was a good month for that. We also have many of the contracts signed, which we plan to install in the month of February and March. So in terms of overall installs planned for our FY '22, I will say that we are on track. But quarter-on-quarter, there have been variation and more related to the COVID impact.

And if I can squeeze one more for CRDS segment, we have done about INR 315 crores on 9-month basis in this year, and I believe new CapEx is going to come online. Do we have a view in terms of what are we expecting in FY '23 on CRDS based on new CapEx that is going to come online?

Yes, Giuliano speaking. I think we have -- we expect a large number of contracts for renewal to be signed. And we do expect definitely a new year, which is higher in terms of the overall revenues than the previous year. And that's mainly due to the utilization of the new assets, which is included Noida as mentioned and which we are now ramping up to fully utilize that.

Would you be able to put a number for us to sort of model our analysis? Again, a range would be good.

Well, what I can tell you for the moment is that we do have already, let's say, N number of new contracts and renewals, which are -- which we think are -- will be realized in the next year, and we're working to fulfill this pipeline. But difficult to provide you a precise number right now since we are finalizing this evaluation from our side. But I think the performance of Q3 and Q4, it will be helpful to identify the level for next year.

[Operator Instructions] Next question is from the line of [ Vivek Gupta ], an individual investor.

I was hoping I would congratulate the management, but seeing the numbers, I'm really disappointed and I hope so is the management. So my first question is, like I've seen there's a significant drop in generics, probably I'm not sure if some of the previous participants have asked that question or not. You have been attributing that it is related to this Import Alert issue at the Roorkee plant. But there's significant drop on the generics. On one side, we're seeing it is 3% drop, and on one side, we are quoting a significant number. I'm not able to understand what is the reason behind it. Next question. We have been telling in each and every con call that there will be a turnaround in the radiopharma business. I believe management is seriously clueless as how it's going to pan out. And we are passing it to the subsequent quarters and eventually into the next financial year. This is my next question. And I want to understand how we're going to really plan out the significant turnaround, which we have been just talking and talking and talking with no execution. And one thing is, I've seen that there is significant hit in the margins also. Every time we will not be contributing or attributing it to the COVID thing. Management has to take a stand on this. Investors are losing their money fiercely. And I'm not really sure what will push investors to stay invest in this business.

So your first question on the generics, exactly same question was asked earlier, I think, by Rahul. Maybe you were not on the call that time. And we had explained that due to Import Alert, the impact guidance which we gave to the market earlier for the restricted product being about 3% of overall company revenue. We are staying within that guidance. The additional impact on the generic business which has come are due to the other reasons as well, like the entire U.S. industry -- U.S. generic industry is going through the pricing pressure, so also we, so we are also impacted. The sales of the Remdesivir, in spite of higher -- the surge of the Omicron is much lower in comparison to previous year. And the reason for that is Remdesivir is being administered when the patient goes to the hospital. And thankfully, the Omicron is not leading to much of the hospitalization. It's good for the society, but it has impact on the Remdesivir sales. And other issue is the impurity issue of the sartan, which is again the industrywide issue. And we were also impacted because of that as we had to recall the product, but we have already cleaned up the process, and we have already launched the product in the market, and we expect from next financial year, we will see improved performance due to the sartan issue. So this was on the generics. With related to the radiopharma business, I can understand the sentiment on, rather, behind your all the questions. So the fact is that we are also not very happy with the performance. And we continue to see, as the business starts coming out, again, the COVID surge comes and we see the number of cases or the elective diagnosis, which is happening at the imaging centers getting down. Now we have an advantage of being in both sides of the businesses, the manufacturing product and then also distributing. From our pharmacies, we track the number of doses being dispensed on daily basis, on the weekly basis. And we see a direct correlation of the number of doses that can dispense versus the COVID cases, which are there in the U.S. As we speak, we are back to about the 90% of the pre-COVID level, which had improved about 96%, 97% in Q2 of this year. Now that's the reality. However, when we talked about the overall plan to turn around the business, we had given the guidance that it will be turning around by FY '24. It was not to be turned around immediately and the turnaround was to happen because of 3 different initiatives: overall growth of the top line, the improvement in our procurement efficiencies, and overall operational efficiencies. I am happy to inform that the improvement in the procurement -- that most of the initiatives have been implemented, and we have already started seeing benefit of that. In terms of operational efficiency also, the projects are on track. Some improvements have started flowing into the bottom line. Some are yet to be captured into. Growing the topline is -- we are growing the topline, but it's bit challenging in this current environment, especially during the time of COVID, when the hospitals and the hospital systems are much more busy into other activities. For them, changing the vendors and changing their entire software and shifting to another supply chain is not the priority. But even then, we are winning the deals and it's a business where you have to continue to win and there's a continuous churn out. Our overall winning rate this year has been higher than the last year, and our churn out has been much lower than what it had been last year. So we are on track. But yes, it will take time. We don't expect this business to turn around before FY '24.

[Operator Instructions] The next question is from the line of Rahul Veera from Abakkus.

Pramod, sir, just wanted to understand now, even if you consider specialty pharma at INR 633 crores revenue, ideally, even if you consider radiopharma plus allergy business at higher margins of 40%-plus and the losses of trials, still the net-net EBITDA margin should be 30%, which comes to around INR 180 crores, which is the reported EBITDA for the Pharma segment. So sir, where is the assumption going wrong? Was there a large loss going on in generic business at INR 188 crores of topline or is it the CDMO business at INR 300 crores -- INR 375 crores of topline not generating any EBITDA? So which segment is hitting us the hardest?

This quarter, the generic segment had a hit us and that's the reality. And there was also impact in the API, which we mentioned that the plant was under unplanned maintenance shutdown. But about your -- the radiopharma business, you were very quick in speaking, I was not able to catch the numbers you were talking about.

Sir, at INR 633 crores of topline in the specialty pharma, where we include allergy plus trials plus radiopharma. So sir, I believe between the 3, right, allergy is close to monopoly, in radiopharma, we are close to monopoly. That business -- these 2 segments within specialty pharma should be generating 40% to 50%-plus EBITDA margins. And there will be some losses in the trials that we have to include here so even if I consider net-net 30% EBITDA margins for the specialty topline. So this itself should be the total reported EBITDA. Then the CDMO businesses, we are probably being at a very low margin, and there is a major loss happening at the generic business. So just trying to reconcile.

So you took the benchmark of 30% of EBITDA margin in the specialty. We are not at 30%. We are lower than 30%. We have very good margins in radiopharmaceuticals, which is about developing and manufacturing products. We have good margins in the allergy. But on the pharmacy side, we have not.

So losses have expanded? So I'm just trying to understand that.

Losses in FY '22 are lower than FY '21 due to all the plans which I mentioned on the previous question. So I had mentioned that we are improving year-on-year. We are improving quarter-on-quarter. So we are on track. They were higher in FY '21. The losses are still there, but lower than '21.

And then INR 188 crores of topline in generic, would we be making any money in the EBITDA level, sir?

The generics in this quarter, we didn't make money.

The next question is from the line of Bharat Celly from Equirus Securities.

So I just wanted to understand sartan issue a bit more. So can you just tell us exactly how you are going to relaunch some of the product? And whether the other competitors also had to at least continue the production or you were the only one? And how the prices are going to be, whether are we going to see a further increase in the prices once we enter the market or the prices are still subdued?

So the fact is, we did not have market share. There are other 2 players which had a much larger market here. And when we saw the impurities, we have withdrawn the product. The other companies -- we had also analyzed the samples for the many players, and we have seen that almost everybody had the impurity. But every company is taking their own call when to withdraw or when to recall the product. In the meantime, we had cleaned up the process. There are 2 of the Losartan products that we have in the market. One is the Losartan Plain and other one is the Losartan HCTZ. For the Losartan HCTZ, we have already launched in this quarter. And the Losartan Plain, we plan to launch in the next quarter. About the other players, I will not be able to comment, what is their strategy and what they are doing. But we have seen that there have been the disturbances in the supply chain of the Losartan from the many players.

And is it safe to assume that there could be some price change here? Whether the prices are going up, if all are having supply issues related to the quality, so the -- are the prices inching up again like it happened last time?

So, so far we have not seen change in the prices.

And sir, I'm still unable to understand one part. Considering that, as you mentioned, we didn't have much market share in Losartan, so why we have lost out on the revenues in a bigger way? Because considering our market share was low and the pricing had already collected in the past quarters, so it doesn't add up. What exactly -- there shall be something apart from sartan as well as the [indiscernible] issues, which would have impacted us. And even if we do that math, still there seems to be a big gap and it can't be explained just by the price erosions.

So when I said that we -- that our market was not very high, it's a question of the relativity. The Losartan market size, as such, is very, very large. The Losartan overall market size is I think more than 4x of the Valsartan. So it's a very large market. In that large market, even a smaller market share also means a reasonably good number for our generic business.

So if we have to just prioritize in terms of what would have led to sharp decline in the generic business, so what you will keep it at first? Will it be sartan business, which will be impacting the most?

No, sartan business is not the one which is impacting most. But in the sartan business, we had to do write-offs of the inventory which we recalled. So that had an impact on EBITDA. There was an impact due to the Remdesivir. If you ask me how to do the prioritizing in between the 4, then I'll refer to -- you can connect with me after the call, and then we can discuss.

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

Just again on the sartan, just would like to understand whether the -- whatever changes had to be done at the manufacturing level. So for that, whether the U.S. FDA kind of confirmation was required to restart or it was done on the company's prerogative?

So the impurity was coming from API. So we had to clean up the process, and we had to revise our DMF, that was done. Then this is that revised DMF, we had to also file the regulatory approval for the formulated product, that we did and for that also we received approval, and then we launched the product. So this -- all these activities takes time, but we have been able to accomplish that within 3, 4 months.

And now they don't have any issue per se on the sartan side? From the U.S. FDA?

Yes. So our product is absolutely free of those azido impurities, which was the issue. And with that impurity-free product, the Losartan HCTZ we have already launched and the Losartan Plain, we will be launching next quarter.

And just lastly on this topic itself, like -- so -- but then is there any scope of market share gain now, now that you have resolved the issue compared to the peers?

Yes. So I mentioned it's -- every company will take their own call, what they are doing with this impurity and when are they recalling the product, and by when they are able to clean up. So I will say that we are one of those who are ahead in the game. The impact of that, we are yet to see.

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.

Of this INR 500-odd crores drop in revenue in Pharma that we have seen, it seems to be pretty substantial. So how much of this was a quarter-specific sort of a problem which you see going away? So how much of this INR 500 crore drop can potentially add back in Q4?

So the impact on API will add back in Q4. The impact of the Losartan will start getting added back in Q4 and then more in the next financial year. But the impact of the COVID-related deals or the impact of Import Alert, or the impact of U.S. pricing pressure and the Remdesivir sale, that will not get added back in the Q4.

But if you have to quantify against this INR 500 crore drop, if you can give a range of percentage of revenue which can potentially normalize in Q4 from this INR 500 crore. So what can be that number?

So I had mentioned that we may see improvement in radiopharma and allergy depending upon how the Omicron surge continues. But overall, we expect Q4 to be better than Q3, but not substantially.

And sir, when it comes to our radiopharmacy business, now on one side, we are seeing lack of hospitalization because of COVID, and let's say, in case of Remdesivir. And there, our sales are down. And at the same time, what can be the reason when the hospitalizations are low and everything, then why are people not sort of going to the hospitals to avail of our radiopharma products? It seems to be like we are getting hurt on both sides of the business. So any particular reason why we are facing these challenges? Because people will also know that hospitalizations are low and all that, so their fear factor will go away, and they would potentially want to get these treatments, right?

So in U.S., in the month of January, many of the hospitals had reached at about 90% to 95% of the bed capacity. So in the U.S., the number of cases for the COVID are much, much higher than what is getting reported in India. And then it comes -- the impact comes on 2 accounts. One is that, as such, the hospitals, for them the priority gets shifted because they have to keep the COVID patients and whatever operations they are doing, they have to do with all the COVID protocols. And the healthcare workers are also getting impacted because of COVID. So there is absentees and we are seeing that absentees impact in the U.S. all over. The airline industry is getting impacted, departmental stores are getting impacted, supply chain is getting impacted and the healthcare system is under pressure. So that has an impact on the elective diagnosis, especially because in any of the nuclear medicine process, it takes a longer time. Then the tendency is for the patient to shift to less accurate modalities like CT scan, et cetera. And it will continue with the treatment.

And on the generics business, sir, how do we sort of see the pricing pressure? Has it -- so I mean, the general understanding was that in the last quarter, we saw a stabilization of the U.S. generics pricing erosion. So this quarter on a Q-o-Q and a Y-o-Y term, if you can quantify the pricing impact that came on to your portfolio, that would be very helpful. And if you can give a range of pricing erosion that you have seen on a Q-o-Q and Y-o-Y basis.

So like Y-o-Y, I would say that we are into near double-digits in terms of the price erosion. And that's the impact we are seeing on the business. But it's not different from what many other companies, [ I think, reflected ].

And on a quarterly sequential basis, how have you seen against Q2, which was -- which we were thinking at least that's the sort of the bottom?

No. Sequentially, because of pricing, it's not much of the impact. The impact is in comparison to last year.

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

Yes, Pramod here. Thank you everyone, for joining the Q3 FY '22 Jubilant earning call. If you have any questions, please feel free to reach out to our Investor Relations Head, Mr. Vineet Mayer or to Arvind Chokhany who is our Group CFO and we will be more than happy to answer your questions. And very happy weekend to everybody. Thank you.

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