Laurus Labs Limited (LAURUSLABS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Laurus Labs Q1 FY '21 Earnings Conference Call hosted by Kotak Securities Ltd. [Operator Instructions] I would now like to hand the conference over to Mr. Chirag Talati from Kotak Securities Ltd. Thank you, and over to you, sir.

Good morning, everyone. On behalf of Kotak, I thank the Laurus' management team for giving us opportunity to host this call today. From Laurus, we have with us today Dr. Satyanarayana Chava, CEO; Mr. V.V. Ravi Kumar, CFO; and Mr. Monish Shah from the Investor Relations team. I now hand over the call to Dr. Satya for their opening remarks. Over to you, sir.

Thank you, everyone, and very warm welcome to our results conference call for quarter 1 financial year '21. I wish everyone, their family members and their colleagues are safe during this COVID pandemic. The national lockdown in late March and most of April 2020 had resulted in very little impact on our operations. We quickly restored operations near-normalcy at our plants and other locations by end of April '20. At Laurus, we are committed to protecting the health and well-being of our employers and their families. We have enhanced the safety and hygiene requirements across all locations with thermal screening on a daily basis, along with elaborate sanitation protocols, maintaining physical distance and norms, and sanitizing all transport vehicles. With all these efforts, all of our units came back to normal levels of production during April '20 itself. I'm very thankful to all our colleagues for rising up to this challenge and ensuring business continuity. Moving on to our quarter 1 financial year '21 revenues. We achieved INR 974 crore revenues, showcasing a robust growth of 77% on year-on-year. When we look at our growth pattern. Interestingly, anti-viral APIs, we achieved 19% growth, INR 336 crores from INR 283 crores. Oncology, we grew our business by 13%. Industry and other products, we increased our revenue from INR 44 crores Q1 FY '20 to INR 135 crores quarter 1 financial year '21. Overall, the generic API recorded a 40% growth, almost INR 150 crores growth, from INR 372 crores to INR 522 crores in quarter 1 current year. Synthesis business also recorded healthy growth, INR 73 crores to INR 100 crores. But more importantly, the generic Formulations division achieved significant growth of INR 246 crores growth, from INR 106 crores to INR 352 crores. In total, the INR 551 crores we did in Q1 FY '20, we did INR 974 crores in Q1 FY '21. As we were communicating earlier, we are on track to improve our ARV API sales to previous highest around INR 1,350 crores this year itself, based on the current forecast. To begin with, I would like to share key updates on our Formulation business. The Formulation business division reported INR 350 crore revenue. The revenue contributions from the FDF segment has improved to 36% of the quarter as against 29% of the whole financial year '20. The growth driver for the Formulation business remains business in partnership with Global Fund, RevPAR and also from various in-country tender businesses. During the quarter, we also got approval for 2 frontline products, TLE400 and TLE600, and we expect to generate revenue in the coming quarters. We continue to have good visibility for our business in FY '21 and beyond. Apart from the LMIC business, we also have healthy growth in developed markets of North America and Europe. The sales growth in the U.S. primarily because of increased volumes of existing products and the launch of hydroxychloroquine by our partner in the last week of March. However, with the WHO ending global trials on hydroxychloroquine and a lot of controversies surrounding the product, we don't foresee any increase in demand in the coming quarters, but we continue to maintain our mid-teen market share in pregabalin. We have a total of 8 final approvals and 5 tentative approvals, a total of about 26 ANDAs filed so far. In Canada, we have 5 approvals, out of which we have launched 3 products, and we intend to launch 2 more products soon. As far as EU is concerned, I'm very happy to share that the contract manufacturing opportunity for certain non-ARV formulation products is performing very well. And we have a very robust order book for FY '21 and beyond. Besides these current products, we are also in the process of launching 2 new products in various European markets under our own label. So far, we have obtained approvals for 5 products, of which we have launched 2, and we will be launching 1 more product in the near future. During the quarter, we acquired Aspen Pharmacare through South African subsidiary, Phekolong Pharmaceuticals, and we renamed it as Laurus Generics SA (PTY). We did this to help us to enter the South African formulation tender market from the next tender cycle. As you are aware, South African ARV market is the world's largest tender-driven market. With a robust outlook and order book, we continue to invest in FDF infrastructure. As you're aware, we have undertaken debottlenecking project and the capacity expansion project in the existing building. Both will add to our existing capacities during current year itself. We have also undertaken a brownfield expansion project on the same site with similar capacities, which will become operational during the next financial year in 2 phases, partly by September '21 and fully by December '21. With this expansion, our FDF installed capacity will be closer to 9 billion units per year. On the R&D front, we continue to invest at similar levels of expenditure, and we aim to file about 8 to 10 ANDAs every year. R&D as a percentage of revenue decreased because of increase in revenue to 4.3% for quarter 1 FY '21. And I'd like to share the status of our filings: 26 ANDAs in U.S., 9 dossiers in Europe, 11 in Canada, 8 with WHO for ARV and FC products, 2 dossiers in South Africa for ARVs, 2 dossiers in India for the rare disease drugs. And we also filed 11 -- 12 products in various rest of the world markets to capture the ARV opportunities. Out of the 26 ANDAs filed in U.S., we believe there are 9 Para IV and out of these, 7 possible opportunities having an addressable market size of over $10 billion. From the beginning, our approach remains product specific, not market specific. When it comes to the division specific information, our anti-retro business recorded a healthy growth of 19% for the quarter. The growth was led by higher volumes and uptake in TVS, along with the commencement of third-party sales of dolutegravir. The second line ARV is now seeing good traction in terms of customer registration, and we expect healthy revenue generation from second half of this financial year. I expect this segment should deliver good growth this year on the back of higher sales on the first line treatment and also the stability in the Efavirenz market, and third-party sale of lamivudine. When it comes to oncology APIs, we did INR 51 crores in the current quarter, and we recorded a 13% growth. I would like to mention that we have one of the largest high potent API manufacturing facilities in the country. And we have seen good traction on the customer front, and we expect reasonable growth in this business and confidence to increase market share of 3 of our key products. The most important part of our API business is diversification of our APIs revenues other than anti-retrovirals. We did very well in that front. We did the -- non-ARV, non-onco API is INR 135 crores in quarter 1 with a growth of almost 200% when compared to the previous year. The growth in this segment was driven by new contract non-purchasing products, along with higher volumes of existing products. We also have a certain amount of dedicated capacities for select opportunities, which will enable us to grow this business further in the next financial year. This business is growing with global partners, and we are in a sweet spot to capture opportunities under the current global supply chain disruptions. On the back of sizable order book, new product introductions and expanded capacity is available, we are very optimistic about the growth prospects of generic API contract manufacturing as well. The other business, which is also -- we are very bullish is our CDMO business. We did a sale of INR 100 crores for the quarter, with a growth of over 37% year-on-year. Currently, we have close to 50 active projects, and we had the highest number of customer additions in the last 2 quarters, with programs in various clinical stages. We have incorporated in only one subsidiary, Laurus Synthesis Private Ltd. in May '20. This was done in order to do the business and increase the focus and eventually a dedicated R&D and manufacturing sites in the near future. I would like to inform you that the new subsidiary, Laurus Synthesis Private Ltd. acquired assets off a pharma unit in Vizag for a consideration of INR 61 crores in the last quarter. This unit will be used to -- for early clinical phase chemistries for the Synthesis division. With that, I would like to hand over to Ravi to share financial highlights.

Thank you, Dr. Satya, and very warm welcome to everyone for our quarter 1 FY '21 earnings call. I wish all of you and your family members to be safe and healthy in this toughest time in the history, at least in this century. So the total income from operations for the quarter is at INR 974 crores, against INR 554 crores (sic) [ 551 crores ] with a 77% growth. With better product mix, we have seen an improvement of gross margin by 4%. So this includes the part of the ForEx gain to the extent of a couple of percentage points. Our EBITDA margin came at 29%, and this is mainly because of the operating leverage and the change in product mix. And our ROCE improved to 32%, which is because of the higher profitability. Our diluted EPS is 16.1 on a non-annualized basis with a growth of 1,050%. On the CapEx front, we invested about INR 91 crores. Apart from that, we also invested INR 61 crores asset through our wholly-owned subsidiary, Laurus Synthesis Private Ltd. And we have many opportunities to invest in FDF and API infrastructure. And so we'll be incurring CapEx close to INR 300 crores in this year. All the CapEx opportunities are brownfield at this juncture, and we'll have a short payback period. We expect our CapEx program to be mostly accretive. But of course, we are also looking for an alternative site for the Formulation, but that will take more time. With this, I will request the moderator to open the lines for the Q&A.

[Operator Instructions] We take the first question from the line of Karan Rathod from AUM Advisors.

Congratulations on a great set of results. Sir my first question is with respect to -- we've been hearing a lot of reports with respect to U.S. pulling out of WHO, especially for stuff like AIDS and malaria, et cetera. So if you can just comment on what your view is and the sustainability of your FDF sales in LMIC countries, as the first question, please?

The major funding for HIV, TB, malaria programs comes from 2 organizations. One is Global Fund. Another one is the PEPFAR, that is President's Emergency Plan for AIDS Relief. The Global Fund operates in 150 countries, is a 3-year funding cycle, and the current cycle is for 2020-2023. The current funding cycle pledges $13 billion, out of which $4 billion allocated for FY '20 for fighting HIV, TB and malaria. What is also very important, Global Fund allocated a $1 billion to mitigate the impact of COVID-19 on treatment of HIV, TB and malaria patients. What it shows, they're increasing the funding during this pandemic. They haven't reduced the funding. The same thing happened with the PEPFAR. They operate in 50 countries, and again it's 150 countries the Global Fund. They -- from the inception, PEPFAR has spent $85 billion on AIDS funding itself, and 35% is spent on care and treatment. Even this -- under this crisis, $500 million additional flexibility was given by PEPFAR to the countries who are using those funds. The U.S. pulling out of WHO has minimal bearing on the funding mechanism. It can have a bearing on how WHO operates in the principles and quality, but WHO doesn't fund any of these programs. And most of the HIV funding is also coming. At least half of the HIV funding is from country associates. So there is a little or no impact on HIV funding because of this pandemic or because of U.S. pulling out of WHO.

Sir, my second question is that your API sales, others grew by more than 200%. If you can throw some light. Is there any sort of one-off or something which can't be [ initiated ] over the next few quarters? Is there anything of that sort within this space? Or do you think that this sort of growth rate can be achieved of a pace that you have established in Q1?

The one and one new product we have launched in Q4 FY '20 and Q1 FY '21 is hydroxychloroquine. That generated less than 5% of revenue and less than 5% of gross margin. So there is no one-off revenue or one-off gross margin or profitability in the Q1.

Okay. And sir, my last question is, if you can just talk about a little bit about the guidance in terms of CapEx for FY '21 and FY '22. And with that capacity, what will be peak sales achievable as for user [ recognition ] for the Laurus as a whole?

I think I can talk about how much capacity CapEx we are investing, and we have to wait and see how much revenue it generates. We are increasing our API capacity by close to 20% in the next 12 months, and we are increasing our formulation capacity by 80% in the next 18 months. So we initiated our CapEx program already, as Ravi mentioned and -- earlier our CapEx is for future requirements. Now the current CapEx, you know what products we will make and how much we will make. So these CapEx also, we are doing in a brownfield way rather than creating a greenfield sites.

So did you mention 80%? Was the number 8-0?

[indiscernible] capacity 8-0, 80%. You're right.

We take the next question from the line of Nikhil Mathur from AMBIT Capital.

Sir, my first question is that how much time does it take for you to get visibility on order book and then fulfill the order? The reason I'm asking this question is that in this particular quarter, be it other APIs, be it ARV APIs, formulations, Synthesis, the growth on a quarter-on-quarter basis is phenomenally higher versus what it was in 4Q or 3Q. So what I am trying to understand is why was the guidance a bit soft during the 4Q results? Surely, this order book would have been a bit visible, right?

You're right. Maybe you can blame us as we were conservative while giving forecast. Yes, we were not giving. But when you're asking, we are not giving how much we will grow also. So today, we can -- as everybody thinks, we also have the vision to grow, and we have the ability to grow we have products, we have facilities, we have all relevant regulatory inspections done. We wish we will also grow as much as we can. We can only comment at this stage. But we are not giving any absolute number guidance for our revenue or profitability from the beginning.

Sure, sir. And sir, around these segments, do you have the order book visibility over the next 2, 3 quarters, that whatever sales base has been achieved in different segments, that can be replicated in the subsequent quarters? I can understand there can be quarter-on-quarter variations depending on certain order, mistiming or the timing mismatch. But are you sounding confident that this particular sales base and all the segments can be replicated over the next 2, 3 quarters?

You have to compare our quarter 1 FY '20, quarter 1 FY '21, there is a quantum jump. But when we look at our quarter 2 number, quarter 2 we did more than INR 700 crores. So we will see certainly good growth. We can assure you that we will -- we have the ability to maintain -- to sustain the growth what we have demonstrated in Q1. I'm not able to give you the exact number, but we have the ability to sustain the EBITDA numbers, our PAT numbers, percentage wise.

Sure, sir. Sure. Another question I have is on the gross margin. Now I think this is very helpful, quantification FX benefit of a couple of percentage points. But if I still compare it to quarter-on-quarter, I think ex of assets also, the gross margin has improved by almost 2 to 2.5 percentage points, and this is despite Synthesis contribution being lower, which is the usual seasonality in your business. So can you help us understand that what is -- what has changed here that even with Synthesis contribution being lower, the gross margin is still better on a quarter-on-quarter basis? Or there was some FX loss in 4Q?

The gross margin improvement, as Ravi mentioned, partly helped by ForEx gains, by close to 2 percentage points. Another significant reason for gross margin improvement, primarily change in product mix and improved extensions in our process and also purchase efficiencies. And we can also tell you the gross margin improvement is not because we increased our API prices. It is because of our internal efficiency improvement, we're able to improve gross margins.

Okay. Okay. And just one final question. I'll then jump back in queue again. So the employee cost has increased substantially from INR 88 crores to INR 111 crores in this particular quarter versus last quarter. So is it some front-ending of expenses or this is the new base that we should be modeling for the remainder of the quarters in FY '21?

Actually, first word [indiscernible] and listen very carefully. So can you just repeat your question, if you don't mind?

I've seen the employee cost on a quarter basis has gone up from INR 88 crores in 4Q FY '20 to INR 111 crores in this particular quarter. So I'm trying to understand, is this a new base or there was some front-ending of expenses, and hence, in the subsequent quarters, the employee cost might be a bit lower?

We have incurred close to INR 15 crores, INR 16 crores of employee cost as incentives during the COVID pandemic in the Q1.

The incentives, we have provide an additional...

Additional transportation cost to our colleagues. So those were close to between INR 15 crores in Q1. And we don't know how Q2 will behave because still we are not out of the COVID pandemic across the country and world. It all depends on how the COVID situation will vary from Q1 to Q2.

Sure, sir. And just one final question linked to employee cost. When is the usual variable payout for your employees? And which quarter is that paid out?

Which one?

Already paid out.

It's already paid out, okay, okay.

[Operator Instructions] Next question is from the line of [ Suchi Nahar from Nahar Investment ].

Is my voice audible? Hello?

Hello. Yes, please. Go ahead.

Yes. First of all, congratulations for great set of numbers. So my first question is, can you provide details around volume growth versus the value growth for the different segments, like ARV, API, oncology and other API and Custom Synthesis?

We are not, like, quantifying volume growth versus value growth. As Dr. Satya said, there is no price increase. So you need to take it as...

Volume growth.

Volume growth only. The whole thing is in volume growth.

Okay. Okay. Fine. And second question is, like a company has started commercial scale production for 4 products in Custom Synthesis. So if you can share more details around the revenue visibility or opportunity size for this product?

We are not giving the details of revenue product-wise, which is against our principle in giving that sensitive information, how much we are selling APIs commercially. But we can assure you, we, firstly, volume growth in our commercial products during the current financial year itself.

Okay. Okay. And like, previously, I already sent them in to the Investor Relation regarding if you can give some clarity offline or right now on the call for the [ AMD ] approvals that we have received till date? Or something like, that you have mentioned in this quarter result. So if you can provide that data offline or that whatever is feasible for you?

We will ask Mr. Monish to get back to you with details.

We take the next question from the line of Prashant Nair from Citigroup.

Just I have a couple of questions. So firstly, on the other API sales. So how do we see this particular category growing? Is this quarter run rate representative of what the ongoing lift could be? And secondly, on the broader API business itself, is there any element of stocking up by your customers given that we are still -- things happening with the pandemic and different lockdowns? Or is it just business as usual kind of stuff.

The contract manufacturing of generic APIs is the growing segment for the company. And we expect -- you have to look this contract manufacturing year-to-year rather than quarter-to-quarter. Because of production schedules at our end and at customer end, we do make campaigns of contract manufacturing products. And if you take the year-on-year, we are very confident to grow this segment. When it comes to -- you can't multiply our INR 130 crores into 4, can you do INR 500 crores of contract manufacturing. There will be a significant growth year-on-year, but we can't guarantee you. You can't do the simple arithmetic 130 into 4.

But Prashant, it is not stocking of the -- by the customer, okay?

Okay. So it is more a function of timing of supplies somewhere and then. Okay. And just one more question. Your cost of debt seems to have come down. So can you just give us a sense of what is the current cost out there? And how do you see this over the next year, year after year?

The current cost of debt is less than 7, inclusive of everything. So -- but we expect to be improved from now onwards.

But we can do [indiscernible]?

Yes. Correct. Correct.

We take the next question from the line of Nitin Agarwal from IDFC Securities.

Congratulations on a pretty solid set of numbers. Sir, 2 things. One is on the Formulation business. Does this business contain largely -- does the impact of hydroxychloroquine reflected in FDF or another API, sir?

As I mentioned earlier, Nitin, the contribution of hydroxychloroquine in our Formulation business -- well, actually, both API and Formulation put together is less than 5% of our sales and less than 5% of gross margin. So our future quarters’ revenue is not dependent on any opportunistic sales related to COVID or any other onetime.

Okay. And sir, secondly, on your finished formulation capacity, the last quarter, you indicated that you were almost running at peak capacities. And we've had a meaningful delta on that number in Q1. So there has been some volume increase in the Formulation business, sir, this quarter or has just been a value increases come through in this quarter for the Formulation -- your FDF business, sir?

The higher revenue is coming because of volume growth. We have done some operational efficiency programs regionally. And we are also debottlenecking in 2 figures. The first debottlenecking will come handy in September, and new line additions within the existing building will come by December. And we're also building a very large capacity in the same site, mostly for non-ARV products. So we are having constant capacity enhancements within the existing building as well as we are putting up a new building.

Nitin, are you there?

Yes, sir. Yes. And sir, but to sort of wrap, just one last question. Sir, on the gross margin improvement, as you alluded to in the past, so 2Q, if you look at it, 2 percentage improvement essentially is on ForEx. On the mix, sir, the bulk of improvement, is it on any particular segments where the improvement in gross margin has come from? On the API side? Or is -- what is it really driven because if we have any sharpish improvement, even adjusted for the ForEx gain, sir?

The majority of that gross margin improvement came from API business. You're right, Nitin.

We take the next question from the line of Tushar Manudhane from Motilal Oswal Fund.

Firstly, congrats on great set of numbers.

Sir, sorry to interrupt, but your audio is not audible, sir. We are unable to hear you.

Am I audible?

Yes.

First of all, hearty congrats on great set of numbers for the quarter gone by. Just would like to understand on the other API segment, what would be the product concentration, maybe like 2, 3, 5 products contributing how much of the revenue?

In other API segment, it consists of non-ARV, non-Onco, we won't be doing that. And we also do contract manufacturing with generic APIs for other customers. There is no product concentration in -- on other APIs. It is very well spread. And in the other APIs, we are -- there is no ARV product, our onco product we are doing contract manufacturing.

Okay. Great. And on the ARV API side, lamivudine on the external -- or revenue, sir, on the external sale side?

You're right. The increase in ARV API sales primarily came from increased margins of Tenofovir and third-party sale of lamivudine and dolutegravir. We're in third-party sale of lamivudine. These are new approvals to our customers. Whereas Tenofovir, we had -- most of the customers were approved much earlier. So the sale improvement came from 3 APIs, Tenofovir, dolutegravir and lamivudine.

Sir, on this DTG side, I mean, as of -- conceptually, it was like this is relatively low volume product compared to say Efavirenz. But despite that, this -- if you can just highlight what kind of market share we have now on DTG API side through sale to the formulations?

Actually, we are trying to improve our market share from -- for dolutegravir. We started commercial sale only -- actually Q4 FY '20. So we expect to increase our market share as the dolutegravir increases market share in the first-line treatment. And when it comes to Efavirenz, that is also interesting. Efavirenz demand came down globally by 60%. But our revenue drop in Efavirenz is not 60%. That means we were gaining market share of Efavirenz even the volumes are going down. So we can say the Efavirenz sales have stabilized, but was the reason where we had a lower sales in the previous quarters. Now we are back on track to achieve growth, led by Tenofovir, dolutegravir and lamivudine. And next year also, we expect to grow in ARV APIs primarily because of second line APIs, which we start selling from second half of this financial year.

Okay. That's helpful. And just on the Formulation side. Why do we have 8 ANDA approvals? But we have commercialized to maybe one. Sir, any particular reason for not or rather postponing the commercialization of the ANDA? Is it to do with the economic liability or the capacity constraint some other products becoming more interesting?

No, we have a very different plan when we are going on launching. We are also getting in-country approvals. See, you get approval from FDA is not the only criteria. You have to get the local country approvals also. We're in the process of getting these approvals, and we will launch 300 to 400 in Q2 itself.

We take the next question from the line of Kaustav Bubna. We take the next question from the line of Amey Chalke from Haitong Securities.

Congratulations to the management on great set of numbers. I have 2 questions. First is related to TLE. Sir, if you can explain the TLE landscape at present in the tender market? And then how much -- which has happened from the older products to the newer therapy? And who all competitors are active in -- how many competitors are active in the market? And also, if you can give some color on the expected price for [indiscernible] or new [indiscernible] we expect in this product?

In the first line, DLT treatment occupies maybe 70% of the market share. Remaining 30% is done through TLE or TEE. And we expect that ratio will continue in the future as well. And the first line API -- first line ARV treatment value broadly will be $1.5 billion. So you can say DLT, sale could reach $1 billion for all companies put together.

And sir, do you expect any new entrants in the DLT market because I believe there are 4 players currently.

There are 8 approvals right now. There are 8 approvals right now in DLT. Four -- actually 5 are commercial selling. And I think there is a market for everyone. We are not worried about new players coming in. It all depends on the ability to meet demand when market exists. We believe we are well prepared to take the opportunity.

Sir, second question related to TLE and TEE. Now considering this large part of the market has already been shifted to DLT, do you think there is still good opportunity left in these other approvals?

We strongly believe there is an opportunity in TLE400. There are only 2 approvals. And we are the third one. So the market shifted from clearly TLE600 to TLE400, and we believe TLE400 will be used primarily for women HIV patients because of significant weight gain observed on dolutegravir treatment. So 20%, 30% market share will be Efavirenz based, and the remaining will be dolutegravir based.

Okay. Okay. And sir, just to get some comments on the recent government’s PLI scheme, how do you view it for the Indian API? And also, are we -- are you looking forward to participate in this scheme?

The PLS scheme announced by the government is a good step towards the sell-through substancy in certain APIs. And we are evaluating the opportunity, and we will participate in a few of the APIs where there is a product already we have developed and we have capacities. And we are looking into it.

We take the next question from the line of Kaustav Bubna from Rare Enterprise.

Could I please request you to give me the breakup of your generic FDF business. This INR 352 crores of revenue, which you did, could you break up rest of the world tender, North America and Europe, the amount of revenues in percentage terms?

As we were discussing, this is 3/4 LMIC and 1/4 in advanced market. I think the revenue is -- broadly falls into that ratio.

Next question is from the line of Madhu from MK Ventures.

Congratulations to you and the entire team for brilliant set of numbers. My question is maybe medium term, with the kind of cash flow with the company generating, when do you think you will become free cash flow positive, given your robust CapEx plan as well?

I will ask Ravi to answer this question.

We are -- even in quarter 1, we are at free cash flow, but have a small amount to -- because the end of this also increased to gear up and further revenue growth in the coming quarters. So the -- this year itself, we will have a free cash flow, even after spending the CapEx.

But Ravi, do you think that debt will come down substantially over the next 2, 3 years?

Debt will -- it all depends on the opportunities. If we have a better opportunity for investment into further CapEx and business, we will -- definitely will consider -- we will not consider in debt reductions. We'll use for the CapEx expansions. If we don't find that reason, then we will pay fee. If you look at our debt, the overall debt cost is around 6.6% rather. So -- and it will further come down. It is not very significant. Even if we take a tax rate, the effective debt cost will be very small.

So Ravi, just one last question for me. What is the risk which you see, if at all, any, over the next 2, 3 years for the company?

The risk will be the regular risk of any of the pharma business, the regulatory and safety. Other than that, we don't find any major risk anticipating.

But Ravi, I will add one point here. There is no capacity risk. We have enough capacities. There is no...

[indiscernible] for management, we are unable to hear you. Hello?

There is no capacity risk. There is no product risk. There is no...

Sir, please stay on line. We are just trying to reconnect the management back.

Hello?

Over to you, sir.

Can you hear me?

Well, we can hear you. I can hear you.

Yes. Okay. Good. I think when it comes to the risk, there is no regulatory risk, we believe. There is no product risk. There is no customer risk. And in the therapies where we are right now, all chronic, and we don't see any seasonal variance in the uptake as well. So it looks like we are in a good platform right now to maintain this growth and provide sustainability to all of you.

We take the next question from the line of [ Sajal Kapoor from Unseen Risk Advisors ].

Many congratulations Dr. Satya on this fantastic set of performance, really beating all expectations. So just a couple of questions. First off, on our CDMO business. Today, we have a total of 47 active projects and 4 in new commercial supplies, which is great. But can you also share the number of customers we serve today? And how that number has changed over the years? That's one. And on the presentation slide deck, you mentioned that several late-stage projects have been executed. So would you mind sharing how many molecules do we have in Phase III?

Yes. And we -- currently, we are working with 4 out of top 10 big pharma and several small, medium and virtual data companies. We had success in all categories, big pharma, medium and virtual companies. We have, as we mentioned, several in the late stage. We can't quantify right now because that is the challenge with this 1Q. We don't know whether -- which molecule move into the next phase and how much market they get. But we have added a significant number of customers in the last 2 quarters. Interestingly, couple of customers' opportunities are very large opportunities. You can only say this. Beyond this, it is not appropriate for us to give details on the customer projects.

Sure. No, I appreciate the confidentiality in this business. And second question, Dr. Satya, on this reported shortage of the HIV medicines in about 70 countries. So what's your take on this statement that came from WHO, so it's credible? And also the -- we now have the market accessibility. So do we have the requisite capacity because this shortage should mean that there should be a surge in the requirement, and the restocking has to take place because it's essential medicines. And yes, what's your sense of this acute shortage in the HIV medications that several countries are now reporting?

Yes. There are 2 aspects here. The most of the countries are going to multi-month dispensing. Earlier, there is to dispense monthly medicines. Now they moved to 3 months. Eventually, they want to move to 6 months back, and if they get 180 tablets, when they go and see a clinician. So that is one. And second, the supply disruption happened, especially with one drug called lopinavir/ritonavir where there is a lot of hype because it is used in the COVID treatment, a lot of stocking happened in that drug. That was in the shortage for in many countries in the second line. There were alternative for second line. So I don't think the same kind of scarcity exists today because many studies through lopinavir/ritonavir is not very effective in reducing treatment time for COVID. So that hype is over. So we don't expect any shortages of HIV medicines right now.