Jubilant Pharmova Limited (530019) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Jubilant Pharmova Limited Earnings Conference Call for Investors and Analysts for the quarter and year ended March 31, 2022. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Mayer, Head of Investor Relations. Thank you, and over to you, sir.

Thank you, [ Inba ]. Good evening, everyone. Thank you for being with us on our Q4 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. We also have Mr. Chris Krawtschuk, who is the Global Pharma CFO. I now invite Mr. Shyam Bhartia to share his comments.

Thank you, Vineet. Good evening, everyone. I hope you and your family are safe and healthy in FY '22, the company reported stable revenues despite COVID-19 challenges due to diverse range of our businesses, improved performance in Specialty Pharma business and strong growth in Contract Research business was offset by lower revenues in the CMO, API and Generic businesses. In Q4 FY '22, the company witnessed a healthy improvement in operating performance sequentially due to growth in both Pharmaceuticals and Contract Research businesses. However, year-on-year basis, performance stood lower due to weaker performance in the Pharmaceuticals segment. The Pharmaceuticals segment sequentially witnessed healthy improvement in revenues in all businesses. On a year-on-year basis, we witnessed growth in Radiopharma and Allergy Immunotherapy businesses, while lower performance in CMO business due to tapering of COVID-related revenues, lower volume in Generic business due to import alert and lower volumes in API business. Contract Research and Development Service business continued to witness strong growth on year-on-year and sequential basis, driven by robust demand from our customers for our Drug Discovery Services. In Proprietary Novel Drug business, our lead program, LSD1/HDAC6 inhibitor has successfully started Phase I/II trials. Additional IND filings with the FDA for pipeline programs are expected to follow in FY '23. I'm glad to share that API demerger is progressing as per plan and is expected to be effective from July 2022 onwards with effect from April 1, 2022, as the appointed date. This demerger will enable us to create synergies between CRO and CDMO businesses and help in supporting our customers for their needs from early stage of research to commercialization of active ingredients and will provide a competitive edge to this business. I'm also glad to share that Board has recommended a final dividend of 500%, that is INR 5 per equity share of the face value of INR 1 each for the financial year 2022. I would like to mention that over the medium term, we have strong growth levers in all our businesses. To drive growth in these businesses, the company will continue to invest accordingly. With this, I hand over to Pramod to discuss the Pharma business.

Thank you, Mr. Bhartia. A very good evening to all of you. For the quarter ended, revenue was at INR 1,380 crores versus INR 1,486 crores in Q4 FY '21. Our Radiopharma business witnessed improvement in sales, both year-on-year and sequentially, which is mainly driven by the recovery from easing of COVID-19 pandemic and also some customer order scheduling. The RUBY-FILL installations showed encouraging trends and increased strongly during Q4 FY '22 versus Q3 FY '22. The Radiopharmacy business also witnessed growth year-on-year due to higher volumes. The turnaround plan is working well and is getting reflected by higher volumes and lower losses. The Allergy Immunotherapy continued to report robust performance, reflected by growth in volumes both year-on-year and sequentially. The business continues to operate at volumes higher than pre-COVID levels. In addition to robust growth in the U.S. market, business witnessing healthy growth in non-U.S. markets as well. As mentioned in the previous call, CMO business is operating at normal pre-pandemic levels now. The COVID-related one-off deals tapered off as indicated earlier. The API business witnessed better performance sequentially. However, on a year-on-year basis, performance was lower due to decline in volumes resulting from some stabilization issues after shutdown in Q3 FY '22. We are planning asset replacement programs in H1 FY '23 for plant upgradation and capacity expansions, with volume expected to normalize in H2 FY '23. The Generic business performance was driven by lower volumes due to import alert at the Roorkee plant, pricing pressure in the U.S. market and lower remdesivir sales due to fewer hospitalization. We have relaunched impurity-free Losartan HCTZ in the market and are gaining market share. We have also recently launched impurity-free plain Losartan and expect to gain market share in Q1 FY '23. With regards to Roorkee import alert, our remediation activities are ongoing as per the plan, and we expect to complete same by mid of calendar year 2022. I-131 MIBG clinical trial is underway with launch expected in FY '25. In Q4 FY '22, on a year-on-year basis, while Radiopharma business profitability increased due to recovery from COVID-19 and favorable customer order scheduling. However, overall profitability in Pharmaceutical segment was lower due to impact of import alert, lower volumes in API business, the continued tapering of COVID-related one-off deals in CMO business and pricing pressure in the U.S. generic market. In FY '22, the Pharmaceuticals business revenue was at INR 5,651 crores versus INR 5,790 crores in FY '21. EBITDA during FY '22 was at INR 1,087 crores versus INR 1,386 crores in FY '21. With this, I hand over to Giuliano to provide insight into Contract Research and Development Services business.

Thank you, Pramod. In our Contract Research and Development Service business under the Jubilant Biosys brand, we continue to report strong performance driven by robust volume growth. The business has a high demand from biotech companies for integrated services, functional chemistry and DMPK, Discovery Biology and Clinical trial data management supported through Trial stat, Canada. Our Q4 FY '22 revenues grew 51% year-on-year, and EBITDA grew 30% year-on-year with a margin of 37.6% versus 43.7% in FY -- in Q4 FY '21. Our FY '22 revenue was up by 50% year-on-year, EBITDA by 56% year-on-year, and margin stood at 37% versus 35.6% last year. As previously mentioned, we are ramping up capacity utilization at our new state-of-art Chemistry Research Innovation Center at Noida as per the plan. With this new service of our infrastructure, compliance with the highest industry standards and the work we have done to first finance our operating model, we are able to successfully support the business expansion in both biotech and big pharma segment by delivering superior quality and -- superior speed, quality and innovation. In view of the strong demand from our customers, we have approved further expansion of the Greater Noida Facility, which will deliver both the DMPK services and Chemistry services. I'm also glad to share that we are working to shape the new strategic platform Jubilant CRDMO. The reorganization will enable common management of Drug Discovery Service business, CDMO and Generic business, with primary focus on pharmaceutical customers. Jubilant end-to-end model, leveraging our API business, allows to seamlessly transition our customers through a part or the entire of the complete development cycle from discovery, research to development and manufacturing, including Generics. With this, now I hand over to Syed to discuss the Proprietary Novel Drug pipeline.

Thank you, Giuliano. Good evening, everyone. In our Proprietary Novel Drug business, we are focused on developing potential first-in-class and best-in-class precision therapies in oncology and autoimmune space. The company uses Jubilant's proven discovery engine with a structure-based drug discovery expertise and a track record of partnerships. I'm happy to share that we have now started the dosing of the first patient in a Phase I/II clinical trial of JBI-802 in patients with advanced solid tumors. The Phase trial is an open-label, 2-part dose-escalation and expansion study designed to define the safety and tolerability, explore predictive biomarkers and assess [indiscernible] activity of JBI-802 in study participants with advanced solid tumors. JBI-802 effectively modulates 2 validated oncology targets leading to synergistic antitumor activity with a reduced risk of thrombocytopenia. This is our first internally developed product candidate to enter clinical development. Other advancing programs in our pipeline include an oral brain penetrant inhibitor of PRMT5, called JBI-778, which is expected to go for IND filing with FDA, here in the U.S., by middle of this year, and an IND track oral brain penetrant PD-L1 inhibitor JBI-2174. These 2 programs are initially focused on brain cancer, including glioblastoma and brain metastasis. We have transformed Jubilant Therapeutics to a clinical stage biotech with higher value creation opportunities driven by emerging data from first in-human study, including potential capital raise at portfolio level as well as individual asset partnering monetization. With this, I now hand over to Arun to discuss the financials.

Thank you, 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 Q4 and FY '22. First, I'll cover Q4 FY '22 financials. Jubilant Pharmova revenue stood at INR 1,528 crores versus INR 1,580 crores in Q4 FY '21. Pharmaceutical revenue was at INR 1,380 crores as compared to INR 1,486 crores in Q4 FY '21. Contract Research and Development Services witnessed strong growth with revenue at INR 142 crores as against INR 94 crores in Q4 FY '21. Reported EBITDA during the quarter was at INR 244 crores as compared with INR 381 crores in Q4 FY '21, with margin of 16% versus 24.1% in Q4 FY '21. Depreciation and amortization expenses during the quarter was at INR 101 crores versus INR 86 crores in Q4 FY '21. Finance cost was at INR 40 crores versus INR 43 crores in Q4 FY '21. PAT was at INR 59 crores as compared to INR 173 crores in Q4 '21. EPS was at INR 3.74 versus INR 10.86 in Q4 '21. Now I'll move on to FY '22 financials. Full year revenue was at INR 6,130 crores versus INR 6,099 crores in FY '21. Pharmaceutical revenues at INR 5,651 crores as compared to INR 5,790 crores in FY '21. Contract Research and Development Services witnessed strong growth with revenue at INR 457 crores as against INR 305 crores in FY '21. Reported EBITDA at INR 1,186 crores versus INR 1,414 crores in FY '21. Depreciation and amortization expense was at INR 382 crores versus INR 349 crores in FY '21. Finance cost at INR 145 crores versus INR 184 crores in FY '21. Blended interest rate -- average blended interest rate for FY '22 improved to 4.56% from 5.07% in FY '21. Effective tax rate was at 34.5% versus 34.1% in FY '21. PAT was at INR 413 crores as compared to INR 574 crores in FY '21. EPS is at INR 26 versus INR 36.05 in FY '21. Net debt on a constant currency basis on March 31 '22 was at INR 1,860 crores versus INR 1,928 crores as of March 31, 2021. On a YTD basis, net debt on a constant currency was lower by INR 69 crores as compared to March 31, 2021. Capital expenditure, excluding R&D capitalization, was at INR 87 crores for the quarter and INR 437 crores for FY '22. We expect to incur CapEx of around INR 700 crores to INR 750 crores in FY '23, primarily towards expansion in our CMO business and enhancement of CRDS capabilities and capacities. In addition, we expect product development expenditure of INR 250 crores to INR 300 crores. 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 ] We'll take our first question from the line of Vivek Gupta, an individual investor.

I'll start with the basic one and then I'll proceed with more of the performance perspective questions. My first question to management is if you are scheduling a conference call for 5:00 p.m., why are you releasing the results at 4:40 around thing? At least give some time to the investors to go around the presentation to understand what is your financial performance. If you cannot give -- deliver the results in the market hours of the same day, at least then schedule a conference for a day later. This is one general feedback. The next point is we have been talking about this import alert at Roorkee plant for past some quarters now. When the import alert was issued, we told that it is a small alert and it is more of hygiene perspective things and it should be resolved soon. I understand the USFDA inspections were pending, so it might take some time. It might have taken some time. But I think now you're saying that it will be resolved by mid-calendar year. I'm not sure why we are going in that direction. We are not able to resolve this small alert as per management commentary earlier. The next thing is I've been seeing that management is using this term for COVID, COVID, COVID in every quarter of their nonperformance. So I expect that going forward, if the COVID is actually the reason, we should use that term, but if it is some other reasons, there's some generic pressure going on and some other things, let's not use and cover the nonperformance behind this term COVID. And I also want to understand why we have been reporting such low margins quarter by quarter. And we have seen that Jubilant Pharmova is not having a clean USFDA record earlier also. So what precautions you are taking for the other manufacturing facilities, which are not under observation for now, so that no further alerts are issued by your USFDA?

Yes. So [ Vivek ], this is Pramod. And your feedback on the timing of the releasing the results and the timing of the investor call is duly noted. Thank you very much for the suggestion. We have made a note of same. With regard to your other questions coming on to the Roorkee import alert. When the import alert was issued, that time also we indicated that all the remediation activities will be completed by early 2022 in the first half of 2022. Now the import alert may have been issued due to the cleaning validation, et cetera, not an issue on a data breach or data integrated. But whatever is the remediation required on the cleaning, especially when you are operating the plant with the multi product on the campaign basis, we have to go through the protocol. I don't think there had been any wrong judgment on the timing part. Even in my call, I mentioned that we expect to complete this in the mid of the calendar year '22, and we are almost on the verge of that. Once our remediation activities are completed, we are as such keeping the USFDA informed time to time on the progress. And then once we have informed to the USFDA that all the remediation is completed and please appreciate, we will have to wait for USFDA to come for the inspection and wait for the outcome of the inspection. Though as of now, we feel quite confident that the kind of remediation we have done, the inspection should go through well and import alert should get lifted.

Okay. But -- yes, yes go ahead please.

No, no, you can go ahead.

No, no, continue, please. Sorry.

With regard to your comment on the COVID, for the Generic business and the API businesses, there may not have been that much impact on the COVID. But in our commentaries, we have been talking about COVID impact predominantly on the Radiopharma business, which is elective diagnosis, where the each procedures in the hospital set up lasts a couple of hours. Such procedures and especially in that also the lung procedures have definitely taken a hit because of the COVID. And while they have taken a hit and as the doctors have shifted to the other modalities, like CT, et cetera, which may not be as precise and as accurate as the nuclear medicine lung procedure gives the image, but they are more convenient. You can do the CT scan in 5, 10 minutes instead of making the patient wait for 2 hours for the nuclear medicine procedure. In spite of COVID, number of cases have been gone down. In the U.S., situation continues to remain volatile and the lung procedures are taking time to come back to the earlier level. And we have been seeing the trend, our 2 products, which are impacted because of this, the MAA and the DTPA. The DTPA has taken a larger hit on the [ revenue ]. And that's a reality which we have to accept. There are the reports available, which we have seen and everyone acknowledges that, yes, these procedures have taken a hit. I am missing your third question, if you can please repeat?

Seeing that -- as per your history, company's history, you guys don't have a clean USFDA record. It is not for the first time that import alert has been issued at Roorkee plant. So as a part of the ramification or to avoid these types of situations in the future, what are the steps that management is taking? The management [indiscernible] facilities.

Yes. So one is that I don't -- I may not necessarily agree 100% with you that we do not have a clean record on the USFDA. Our...

No, but your company history clearly states that. I think it's nothing to disagree or agree, it's in your company's history that you guys don't have a clean USFDA record. So a small import alert to resolve, you guys are taking 1.5 years or so. So you don't understand the investors' belt, which is getting [ deviated ] in the meanwhile. There is a couple of quarters for nonperformance. I do understand it may be a quarter or 2. But down the line, if you guys are not giving any good performance, you understand your EPS has got halved on the last financial year. I cannot digest that thing, that EPS has got halved, and you guys are giving the statements in your opening remarks, and I think there's nothing to feel proud of with the performance which you have been delivering. I'm sorry if I'm being blatant, but that's true. You can continue to take some other questions. I'll step out, sorry.

No, no, but let me answer your question. So we have 6 manufacturing sites in the Jubilant Pharma. And currently, our 2 sites are under compliance issue. The 4 other sites in the North America are having a very clean record. And that's why I said that I may not necessarily agree 100% with you. But yes, our 2 sites in India do have a compliance issue. But once the site is put under import alert, if you look at the other companies, the time they have taken to come out of the import alert, it's generally always between 1 year to 3 to 4 years. We came under import alert last year, and we are still feeling confident that if USFDA comes for audit in the Q3 and Q4, we should be out of it. So that's the status as of now. And yes, our EPS has come down because of the import alert. Performance is impacted. But the performance is also impacted because of the other reasons, which we discussed earlier, which we expect now that is going to bounce back. Though we indicated to the market earlier that we expect FY '23 to be stable as FY '22. But for each of the business, the kind of strategies, robust strategies we have in place, we expect quite a turnaround from FY '24. You had also asked a question about what are the measures we have taken. So we have taken a lot of measures. And each and every observation of any regulatory agency, which is there at any of the site, we are implementing that 360-degree across all the plants. We have also done a lot of changes in the way we manage our all the quality systems, the way we have the quality governance in place. We have taken help of the best of the expertise available. And the entire team is working very hard on this. And we are ensuring that our each and every plant is always ready for any inspection. And there have been various inspections in our other North American sites after the Roorkee import alert, and those inspections have gone extremely well.

[Operator Instructions]. We'll take the next question from the line of Vishal Manchanda from Nirmal Bang.

So can you quantify as to where are we in [ DTPA ] and MAA in terms of below normal -- so are we at 80% of the normal sales or 70% of the normal sales?

Yes. Vishal, in case of DTPA, we are seeing it's still at about 60% of pre-COVID levels. And in case of MAA, there have been variation quarter-on-quarter. But when I look at overall year, we are at about 80%.

And for the fourth quarter, where would that be?

Fourth quarter was especially good performance for the MAA and the DTPA kind of the product. But I mentioned in my call that this is because of the easing of the COVID as well as some customer order scheduling. Because when we look at overall vials what we have dispersed and overall scans, which are happening, we see inventory getting built up in the system. And I expect some correction on that part in the next quarter.

Okay. So MAA and DTPA sales might correct, Radiopharma sales might correct next quarter, 1Q FY '23?

Yes. That's what we are seeing the trend because the overall number of -- the procedures have not gone up in proportionate to the overall procurement that the customers have done for these products from us.

Okay. Okay. So any guess on when we can see these products be 100% normal quantities being shipped for these products, maybe 4 quarters down the line or it can take still longer?

I don't expect that shift will happen overnight. Like DTPA had gone down to about 20%, 25%. It has come back to 60% in 2 years' time. And it's -- and we expect it to come back slowly, slowly. But we feel that it will take at least about a year or more to come back to the pre-COVID level. MAA didn't go down so low. It went down to close to 60% and has bounced back to 80%, but it still has room to cover.

So every time when a patient is being -- so when a patient -- so whenever there is MAA used, either DTPA can be used or [ xenon gas ] can be used. Is that right understanding?

Absolutely correct.

Okay. So [ xenon ] gas probably has got a better share now versus DTPA earlier?

So in our Radiopharmacy business, we are also distributing xenon of others, and we have seen that xenon is also equally hit.

Okay. So can -- so is it right to say that the doctors are comfortable using xenon gas and, hence, DTPA demand might not normalize at all?

Pulmonary embolism, when it's at a critical stage, then the correct diagnosis, doctor can do only with the VQ procedure, where they use MAA and the DTPA both. Now as I mentioned earlier, one can go for less accurate modalities. But then it is the issue of how correct diagnosis that doctor wants to do.

Okay. And on the Radiopharma distribution business, so we have been working to turn this around. And so this has been a loss-making business for us. Where are we in the journey? And have we been able to cut some of the losses there?

Yes, absolutely. Quarter-on-quarter, we are seeing that our losses are coming down. But the business is still under losses. So we had mentioned that by FY '24, it will breakeven. The way the pace as well as the losses are coming down, we are very confident that by FY '24, the business will be at breakeven. And I also mentioned in my speech that we have seen in the last quarter higher volume, and which have led to the lower losses. And the losses are coming down in that business because of not only just the volume, we have implemented all across the 3-prong strategy, the higher top line, where the contribution flows down to the EBITDA because cost proportionately doesn't go up, the higher operational efficiencies in terms of drawing up more doses from same number of vials and also the procurement efficiency. Procurement efficiencies, we have already implemented. And we have seen, as our volumes are growing, our operational efficiencies are also increasing, plus those higher volumes are also leading to the higher impact into the bottom line.

So would you also need to shut down some of your -- so some of the pharmacies that kind of less utilized or significantly underutilized?

We have done that. In this business, at one point of time, we had close to 52 pharmacies. And now we have close to 48. So very strategically on the selective locations, we have done that. Plus at some places, we have started operating the pharmacy with the hub and spoke model, where when the requirement at any of the pharmacy is not up to that extent and that is operating as I spoke to another hub nearby. And with that also, we have been able to reduce our cost. There's quite a lot in those pharmacies.

Okay. Okay. And just any -- if you could quantify what is the remediation costs you would be incurring?

So that's not much, means it may be just -- I mean there's a couple of million dollars. It's a small amount.

Okay. Okay. And just one more on RUBY-FILL, how is that progressing?

Sorry, can you please repeat? .

Is RUBY-FILL growing in market share? And was Q4 good for RUBY-FILL?

Yes. So on the RUBY-FILL, we remain very upbeat. As I mentioned, that our Q4, the number of installs were substantially higher than the Q3. But overall, in FY '22, the installs could have been better, but we did have the issue related to the COVID. But the way currently we have the product, the pipeline, and we have the number of contracts under negotiations, et cetera, we are seeing FY '23 to be a very strong year for the RUBY-FILL.

What kind of growth can we look at for RUBY-FILL?

In terms of growth, I can confidently say you that we will definitely -- we have the ending of the FY '23 with more than 50% installs with what we started [ FY '21 ].

Okay. Okay. And finally, on MIBG, when can we see the data on that drug -- our drug being tested for neuroblastoma.

Yes. So our plan for the submission is the FY '24, and then launch in FY '25 for Phase II. And for the Phase III, the plan is to make the filing in FY '25 and launch in FY '26. Both the...

And I'm sorry the Phase III [indiscernible] for which indication?

Sorry?

Is there a separate trial also on going for the same [ term ]?

Yes. So there are the 2 trials going. The Phase II trial with only Jubilant is doing, that is for the relapse after the [indiscernible]. And the Phase III trial, we are collaborating with the COG, which is Children Oncology Group, with the CHOP, Children Hospital of Philadelphia. And that is for the first indication.

Okay. And this Phase II trial that you're doing in relapsed patients, can that be used -- so you don't have to do a Phase III there, that can be directly used to file your drug with the USFDA?

So after Phase II, we will get approval for the relapsed.

So you don't need [indiscernible] Phase III trial there.

Yes, to use this as a first indication, along with the relapse, we will have to wait for another 1 more year for Phase III to get completed.

The next question is from the line of Rushabh Sheth from Karma Capital.

Just a quick question on -- some color on the margin profile for the business. I mean if you look at our margins, you're kind of down from about 23%, 24% last year to about 16% this year on the EBITDA. How do you see the profitability improving going forward in FY '23 for the whole business?

As I indicated that FY '23, we see as a stable year in -- on the lines of FY '22. So probably, we may not see the improvement into the margins in FY '23. But if the Roorkee comes out of the import alert in FY '23, then we plan to do substantial launches of the products because we expect our all the pending 36 ANDAs will start getting approvals. For many ANDAs, the reviews have been completed, and only [ CRL ] there is on the facility status. So all those products will get launched. As I indicated, the RUBY-FILL, we plan to ramp up substantially in FY '23. So that will do quite a lot of dent in FY '24. The Radiopharmacies will break even in FY '24. We also plan to launch at least one generic product. Though we haven't got the approval yet, but we are expecting approval to come soon, and then we plan to launch one generic product in FY -- this year, which will ramp up in FY '24. And then launch at least another 2 more in FY '24. So -- plus the CMO and the Allergy continues to grow. So with all that, you will see the substantial improvement in FY '24.

So how should we look at this, Pramod? So on a full year basis, you've done about 19% in EBITDA. And on the quarterly basis, you're actually down to 16%. So should we take full year FY '22 as a reasonable baseline in terms of margin remaining constant? Or should we take the fourth quarter as a baseline?

In FY '23, we see -- like in Q1, I expect some corrections happening, which we discussed earlier for the Radiopharma. But then quarter-on-quarter, I see improvements.

So we should be able to do for the full year and more like a 19% margin, that's what you are saying?

It will be difficult to put the exact number. But yes, the margins as of now, I do expect to be lower than 20% -- 19%, 20%, lower than that slightly.

Okay. And another question was on the Pharmacy side, Radiopharmacy side. I know my earlier participant asked that question. My question is more fundamental in nature, in the sense that we've kind of struggled with this business now for many years. It's still loss making. Of course, you are saying there will breakeven in FY '24. We have many other growth drivers in the business, so we have CDMO, we have CMO, we have API, of course, the Radiopharma business. Why should -- and my more bigger concern is there a lot of management time and effort goes into kind of turning around this business and trying to make this Pharmacy business profitable. Is it worthwhile for the management to spend so much time and effort in turning around the business, which kind of has struggled for so many years, and we are still seeing 2 years to EBITDA profitability? So does it make sense? Or does it make sense to kind of take a hard decision, maybe relook at this thing and maybe the time and money is better spent in terms of growing other lines of businesses. It's a more philosophical question to kind of keep struggling with the Pharmacy business, which has kind of taken a toll on us in terms of profitability and, of course, management time for the last 3, 4 years now.

Yes. So Rushabh, let me try and address the question. It's a very good question, and you are asking the right question because we also asked the same question internally. If we look at overall Radiopharma market in the North America, if we put that number close to $2.5 billion. If you see the number of products, which are under development by various companies, including us, and many research institutes and many other companies, and if you look at the way the large pharma companies are getting interested in so-called the therapeutic and the theranostic products in the nuclear medicine space and if you look at the various reports, which are available in the public domain, this market from $2.5 billion is expected to grow anything between $10 billion to $20 billion in the next 5 to 10 years. So huge growth. We, as a company, are most strategically placed in the market, where we have our own research and development. We have our own regulatory and commercial team to get our products approved and take them to the market. We have our own sterile fill and finish facility, where we can make the product and do the fill and finish. And then we have our own network of partnerships. If this entire growth has to be captured, ultimately, the product has to reach at the imaging center through the compounding part. Most of the [indiscernible] of that route. And if you look at total number of networks in the U.S. for the pharmacies, they are only 3, 4 of the networks. So all this growth, which will happen, has to be channelized through these networks, which are there. Now unless we have our own network, if we keep on doing more and more of the research and development investments into this business, and we are also open to look at inorganic growth opportunities in this business for acquiring technologies and acquiring products, our strategy is not only to have this network but rather grow this network and have a higher market share in the distribution so that when we bring the product we are able to take the product to the customer to a much larger base of the customer. So it's a long-term strategy. And in that long-term strategy, this network becomes very important and it fits perfectly. But yes, if it was a short-term strategy, then whatever points you raised are the valid points.

Yes. But long term also is, what, I mean, long term has to be defined, right? It cannot continue till perpetuity. And EBITDA profitability is also not good enough. I mean you have to kind of make an ROI on the investment. I mean EBITDA profitability might be good to kind of stop the bleed, but does it make sense? So that's what I'm saying. So at what point of time you kind of throw in the towel and say that, look, this is not making sense. You're absolutely right. I'm sure this is the reason why you would have bought it. But the fact of the matter is that it's not really panned out the way you guys anticipated and it's kind of taken, of course, a lot of things have happened in the middle, but clearly still struggling in terms of trying to break even the business. So at what point do you kind of take a call as a Board to say that, look, guys, this is good thesis, but it's not working for us and maybe we need to relook at it. So that's my question to you that where will you take a call that this is bleeding. It's not making an ROI. It's taking up a lot of management time. And should we continue with it or not?

So one is that we are not saying it's long-term turnaround. We are saying that it will become breakeven in FY '24. And then we are not saying it will stay breakeven. From there, it will continue to grow. So the EBITDA will continue to improve. But if you look at this entire growth, which will happen in the Radiopharma business, and especially the therapeutic and theranostic products, when they get launched, they get launched at 80%, 90% margin levels, even more than 90% market ever. So important thing is how to make sure that such high-margin product when you bring into your pipeline, you are able to take them to the customer to a much larger base, even if into the distribution you are not making much of the money and even if you are making single-digit EBITDA, that's less important than to ensure that as soon as the product is launched, you have a control where you can have a direct access to the customers as much as possible.

[Operator Instructions]. We'll take our next question from the line of [ Cinderella ] from JM Financial.

I just want to understand the Radiopharmacy growth outlook and the RUBY-FILL franchisee. How should we look at it in terms of growth, additions and the way ahead over FY '23 and [ FY '24 ].

As regard to Radiopharmacy, as we discussed quite a lot just now, in FY '23 at least -- our focus is to reduce the losses and take it closer to the breakeven, and then look at the growth. With regard to the RUBY-FILL...

Can you comment on any additions in terms of the RUBY-FILL? How is it going? What are -- the any parameters you can help us understand the growth strategy?

Yes. I'm coming to RUBY-FILL. So with regard to RUBY-FILL, here, we have a product which is state-of-the-art product, where we have only 1 competitor. And we believe and our customers also believe that our product is much better and much more safer than the other product available in the market. Basic [indiscernible] and the kind of the response we are getting, the kind of traction we are getting from the market, we have been growing our RUBY-FILL franchise. And the RUBY-FILL franchise, we plan to continue to grow not only in U.S., but also outside the U.S. So we are -- we have installed -- we are installing more and more units at Canada, into the Europe, into the various countries. Our product is now approved into the Europe. We are also looking at taking the product approved into various other countries. Ultimately, we have to take the RUBY-FILL to the global franchise. So it has market everywhere. Wherever you have a cardiac patients, you have the market for the RUBY-FILL. So it's a good product. It's a huge opportunity. Issue is that we have to quickly ramp up. There have been the various supply chain challenges into this because of COVID, which we expect are now -- which we expect now are behind us. And as I mentioned, that pipeline is extremely strong. So in FY '23 itself, we expect our install base to grow more than 50% of where we closed in FY '22. And then we'll continue on this growth trend.

Anything around the new products that we are going to add time lines around that, if you can help us understand?

So I mentioned 1 product we are expecting approval, shortly. And if that approval comes, then we will launch that product immediately within 2 to 3 months of the product getting approved. Seeing our filings, we expect 2 approvals in FY '24. And then I think, at least another 2 in FY '25.

[Operator Instructions] We'll take a next question from the line of Vinay Jain from Karma Capital.

So my first question was on the profitability of the Pharma business. So if I just were to compare it on a sequential basis, in the previous quarter, which is the third quarter, we reported EBITDA margins of 15%. And that had a certain inventory-related write-offs pertaining to a certain issue, and also the remdesivir or the COVID-related portfolio, which was there. Now on a sequential -- on a quarter-on-quarter basis, our revenues have gone up by almost INR 200 crores. And despite that, the margin improvement seems to be not that meaningful. So did we have any similar sort of inventory-related write-offs, which we took in the current quarter as well?

In the current quarter, we took some inventory write-offs in the API business. And other than that, the margins were lower in this quarter in our CMO business. And I'll not say they were lower because the margins now have come back to the pre-COVID level. In the Q3, we still had some COVID deals, which were at a much higher margins.

Okay. But then this now, at least for the CMO business, should normalize at the current level, right, the margins which were there for the current quarter, for the CMO business, especially?

Yes. Yes, the CMO now will be operating at stable margins. And, yes...

Understood. And in terms of RUBY-Fill, again, so initially when we launched it, we had stated that the existing market for the single product, which was Bracco's product was around $65 million to $70 million, and we said that the market opportunity could be as big as $250 million. And despite the settlement or the litigation, which was going on with Bracco, we were doubling the installations. And even in few -- in one particular year, we have even tripled the installations. Last 2 years haven't been that great for us. So '21, there were restrictions, travel restrictions because of which the installations were impacted. And this year also, the year gone by, the volumes were lower than what you guys were expecting. So why this 50%? So I was under the impression that the volumes should -- the installation should at least continue doubling because of the setbacks, which we have seen in the last 2 years? And now that the Bracco-related litigation has also been settled and the court has given the judgment in our favor.

So when this Bracco litigation was settled, unfortunately, right at that time, immediately after that, we were hit with the COVID. So we couldn't take the complete leverage of that. And currently, in the hospital systems, if you see, when they change such type of the product from one vendor to other vendors and then they make the changes into their entire larger software systems and their other tools, it's a little lengthier process for them. And especially during the time of the COVID, it takes a backseat in terms of the priority. And because of that reason, I'll say that the point which you are raising that the number of installs could have been even more than 50% what we are guiding. But I have not guided that it will only grow by 50%, I said it will grow more than 50%. And we need to wait and see how it shapes up. But the way the quarter, the current quarter, we are seeing our discussions with the customer, we feel confident that now we are getting back on the track.

Understood. So 50% is a minimum which you are expecting over '22. Got it. And one question related to the proprietary business. So over there, again, we were looking for some sort of funding, either at the product level or at the company level, to take care of the clinical trials and the IND filings. So this year, if you see, we have done around almost -- there is an expense of around $5 million, which has been charged to the P&L. So typically, what could be the -- and obviously, with the clinical trial is just commencing, the expenses are expected to go higher. So any update on the funding part, if you could provide us where we are right now?

I'll request Syed to address this.

Yes, sure. Thanks for the question. We are indeed in active discussions with some of the top global biotech investors, as we speak. However, I'm sure you are aware the volatility of broader U.S. biotech market in the last few months. So we have been very cautious in terms of timing and valuation, at which we do external capital rates. So -- but we are very confident that the potential for our platform and pipeline of novel assets, and we'll do what is best to maximize the value. And then as I mentioned in our -- in my opening remarks, the programs are moving forward as planned. So we're hitting all milestones. So as soon as the market improves, we are certainly going to be reactivating these -- both at the [ Holdco ] as well as at the asset level, including potential partnering and asset monetization discussions.

Okay. So if you could just give some color on what could be the cost related to IND filing and maybe Phase I and II clinical trials for these products? Or maybe what would be cost required. So again, we are planning to do almost 3 more filings in the coming financial year. So what could be the cost which could be incurred in, say, FY '23 for us related to Proprietary Drugs business?

So the primary cost is going to be on the ongoing clinical trial program that we have with our JBI-802. The second program is going into IND midyear. And then, as you know, it takes several months to start the clinical program. So that will be maybe towards later part of this calendar year. And the third IND filing is right now planned in fourth quarter of FY '23. So I think the [ brand ] expense, which is typical as you know, for a Phase I/II study, it is right now focused on the first part, which is dose escalation that is usually done in 25, 30 patients. And typically, depending on the number of endpoints and procedures and imaging to look at the tumor size and tumor shrinkage and all the safety parameters could anywhere between $5 million to $10 million.

Mr. Jain, may be request you to return to the queue. There are several participants waiting. We'll take the next question from the line of Vishal Manchanda from Nirmal Bang.

I just had one question. Can you share the cost of getting tested with RUBY-FILL versus the normal route that you do cardiac scan? So how expensive is a cardiac scan with RUBY-FILL?

Especially -- Vishal, especially in the U.S., it's a little complicated system because it will depend upon what kind of insurance you have and how much co-pay you have on that. But just...

If it is out of pocket, what would be the cost?

Just a ballpark number, I'll say one can take around close to $2,000. But then it will depend upon -- it could be higher or lower depending upon what kind of the policies that the people have with their insurance companies.

And what would be the cost of the SPECT -- sorry, SPECT scan, right? Cardiac SPECT scan?

That could be probably about anywhere between 30% to 50% of this.

Okay. So when you look to launch it in other geographies, so will there be -- you would need to ensure there's a reimbursement mechanism in place, considering the cost of the test. So is that also something that you need to kind of work on, while you are looking to build this product in geographies beyond the U.S.?

I'll answer this in 3 ways. One is that you are right, your reimbursement mechanism has to be put in place in the countries, where we make an end, and that's what we continue to evaluate. The other thing you have to look at from the patient perspective, like when in absence of the RUBY-FILL, when the patient goes to the doctor with any of the heart issue, heart pain, et cetera, we have seen almost in 80%, 90% of the cases patient comes back with 1 or 2 or 3 stents in the arteries. That's a kind of a common practice. You will do the scan and some blockage will be there and a stent will be put in. With the RUBY-FILL, when they are able to measure the blood flow and they are able to quantify how much is the blood flow in the arteries, even if there's a blockage, we have seen that at least 2 to 3 patients out of every 4 patients do not require a stent. So the patient feels much more comfortable that they have been able to avoid so much of unnecessary intervention, otherwise, which would have been if stents are put. The third point is that, wherever the insurance, the -- for the insurance companies, the cost comes down. So you were trying to compare the cost of the scan, but when you also add the cost of putting the stents and then post care after that, for insurance companies, the cost comes down substantially by ensuring that the doctors are recommending the scan through the RUBY-FILL. And then only the required patients are going through the procedure.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference back to the management for closing comments. Over to you, sir.

So thank you all for joining this call. For any further queries, you can get in touch with me, Vineet, and we'll be happy to answer those. 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.