Lupin Limited (500257) Earnings Call Transcript & Summary

Thank you. Good afternoon, everyone. Welcome to this earnings call of Lupin. My name is Kamal Sharma. With me, I have Vinita Gupta, Nilesh, Ramesh Swaminathan, Arvind Bothra and Rajiv Pillai. You already have the results in your hands, and you will see that this has been a good quarter. If you look at sequentially, there has been a growth in sales. There has also been improvement in EBITDA margin by 5.3%. On a year-on-year basis also, the revenue line has gone up by 6%. Although at the EBITDA level, we have -- we are down by about 1.5%. This has also been a year of strengthening a lot of overhangs, which had been there in our system. And therefore, we have a much stronger position to take the company ahead now. In order to take you through the financial details, I will hand this over to Ramesh, and then we'll open the floor for question and answers. Thank you, and over to Ramesh.

Thank you, Dr. Sharma. Friends, it's good to be back, interacting with you all after hiatus of 18 months. So very happy to be back at the Lupin family. In terms of the financials, your results are already with you, but let me take you through this again. Sales at INR 3,791 crores for quarter 4 as compared to INR 3,716 crores for the previous quarter, was actually a 2% growth, which is -- but it's flat as compared to Q4 of 2019. U.S., our most important market, grew 13% sequentially, USD 212 million as compared to $186 million in the previous quarter. Though, of course, there has been a decline vis-à-vis Q4 of last year and that you recognize is essentially because of Ranexa. The India region saw a growth of 15.2% vis-à-vis last year. Though, of course, you would also recognize that Q4 is weaker -- is always the weakest quarter in the year, and that's why you found a decline vis-à-vis Q3. EMEA, of course, that did very well. It grew at least 25% in vis-à-vis, in fact, Q3. And as compared to the previous year, there's about 10.5% growth. Growth is particularly strong in South Africa. In terms of the full year itself, U.S. sales were close to $800 million vis-à-vis $777 million in FY '19, a growth of about 3%. India region grew about 12.7%, in terms of the full year, that is. In terms of gross margins for this particular quarter, it was 62.9% vis-à-vis the previous quarter of 63.4%, eventually you'd recognize that this is essentially a sales mix issue. In terms of the comparison with the previous year, it's down from 68.9%, but that you would also recognize essentially because last year, we had a large conference coming in from analyzing sales in the base itself. This quarter, of course, they were a favorable impact. There's a favorable impact of the U.S. dollar gains vis-à-vis the dollar -- vis-à-vis the rupee, but unfortunately, it's been negated by ForEx in South Africa and Brazil. In terms of EBITDA margin, we delivered improvement in operational profitability on a sequential basis, which is 19.4%, which is 530 basis points increase vis-à-vis the previous quarter. We are -- we closed the full year at an EBITDA margin of 18.7%, which is expected -- within the expected range of 18% to 20%. Vis-à-vis Q3, it is higher because of lower R&D and of course, the sales promotion spend. And there's, of course, something to be said about the ForEx also. In terms of ETR, we have done fairly well. Though, of course, for the full year, it's still hovering around the 40% mark. But going forward, you would expect it to certainly go down, and this is actually evident even in this particular quarter. For the full year next year, I think it should be around the 35% mark. This year, we did a lot of things in terms of the balance sheet restructuring. We undertook significant measures, decisions in terms of optimizing our capital allocation and work towards normalizing our ETR, which, for various reasons, has been higher than the standard. We divested our Japanese operations and undertook an impairment of the Gavis acquisitions to strengthen our balance sheet. And we believe that all of this would certainly result in better ratios over time. We, of course, use the divestiture of Kyowa to repay a large portion of the debt. And certainly, the overall debt ratio is very favorable, standing at around 0.12. I think we're very well positioned for better performance in the quarters to come. But for sure, there is, of course, this overhang of COVID, at least in the first quarter. But over to the team for -- and to you for further discussions on the various issues late into the past year as well as the future. Hello?

Yes. We can go ahead with questions now.

Yes. We can go ahead with questions.

[Operator Instructions] The first question is from the line of Prakash Agarwal from Axis Capital.

Congratulations on clearing out many facilities in the last quarter. Just wanted to understand what's the update for the important facilities for Goa and Indore. Where are we in terms of submitting the CAPA plan and what is our estimation that by end of this year or financial year, what is the estimation for the resolution?

Prakash, this is Nilesh here. And as far as Goa is concerned, we completed our final update about 3, 4 months ago. So the idea, as we had shared earlier, in March/April, we were going to go back to FDA for a reinspection. There are some activities, some additional enhancements that we've been implementing at the site. But the plan is basically, in the next couple of months, to go back to FDA and be ready for a reinspection. Pithampur will follow very shortly after that. In Pithampur, there was a much more detailed implementation on the -- they implemented the program that we call Quality First. And we have seen very good progress with that. I feel really good about it. We've still been sending updates. But I think in the next couple of months, Goa, and very shortly after that, Pithampur. Probably even before Goa, would be Somerset.

So when you say a couple of months, is it completion of the CAPA plan?

So for Goa, we're done. Somerset, we have done as well. There are certain additional enhancements that we have been doing, which we would like to complete before we have interaction with the FDA. Again, in Pithampur, while we're done with the specifics, but there are still certain additional works that we want to complete in the next 2, 3 months before we go back.

Okay. So by next couple of months will be done with our entire work that we plan to do and request FDA for a reinspection?

Yes. In a phased manner, likely Somerset followed by Goa, and then Pithampur.

Understood. Okay. Fair enough. And my second question is on the US business. So we saw a good Q-on-Q improvement. I understand there could be some Levo impact, which would either improve. So would there have been any COVID-related stocking? If you could just highlight how is the movement, how much of it is sustainable and what is the expectation on the progress?

Okay. So we have some impact of COVID-related stocking in March, in particular, Prakash. But a big part of the ramp-up was really levothyroxine as well. And it went from Q3 where we had 5% share to 13% share in Q4. So that is -- that ramp up is starting to show. And we also had ramp up in other products. We had -- some of the flu products ramped up, plus we had a couple of recent launches. We launched Vimovo authorized generics in the quarter, that is a very nice launch for us. We recently launched Apriso authorized generic as well. It's another good launch for us that will build into fiscal year '21. So some impact of COVID in March, and we are seeing some softness in April, May. So, we certainly will see the impact of COVID in Q1. But the COVID impact aside, we feel really good about our growth drivers for fiscal year '21, apart from levothyroxine, pretty solid base business. This business actually has been very stable through fiscal year '20, and we've been able to really -- very minor price erosion. We've been able to offset that -- more than offset that in terms of volume. So combination of a strong base business plus the Levo continued ramp up, some of the new product launches that we've had in the tail end of fiscal year '20 that will really by far -- the full year impact into fiscal year '21. And then we are very hopeful to get albuterol approval soon. We have had strong interaction with the agency, especially in the last couple of months and hope to bring it to market a little bit sooner than we had stated in the past. So that should be another very good driver as well.

Any timelines you are attributing to albuterol approval through this quarter, next quarter?

So Prakash, we had said that we would launch in the second half of the fiscal year. Hopefully, it will be a bit sooner.

The next question is from the line of Aditya Podar from BDT Financial.

I wanted to ask a question on ProAir. But you said that it's going to be launched in a bit before the second half and the update for Goa and Indore just given. I just wanted to know on the debt, what is the plan to bring down the debt? And any other non-core -- I mean any other non-core businesses or assets to be sold off?

The debt is down because we have repaid a huge chunk of it. So right now, even after, in fact, the year-end, we actually paid off about $267 million, which does not obviously reflect in the figures because as of 31st March, the debt equity ratio stands at around 0.21 -- 0.12x. But there's something to be said about the fact that the overall working capital has gone up between December and March. But we will do what it takes to bring it down to more acceptable levels over the next few weeks -- next few quarters.

And if I just add to it, we took a pretty hard look at all of our different subsidiaries and determined that we wanted to divest Japan, but we don't have any other non-core assets at this point in time. We are very strongly focused on building not only our 2 major regions India and US, but also the other markets.

The next question is from the line of from Krishnendu Saha from Quantum Asset Management.

I just got a couple of questions. Is this a new norm this quarter with Japan out of the revenue stream and all. So is this EBITDA margin the new norm, the 19.4% with the other income and 14% without other income? And the second question is, in Japan, is there any contract for us to supply anything for the next 1 or 2 years with them? And the third question is what could the effective tax rate be this fiscal year and how do you see the EBITDA margin going ahead?

Well, several questions to the same breath. But I'll take the effective tax rate which was the third question that you asked. You would recognize this year has been close to about the 40% mark. But going forward, we have done a lot to actually to restructure the business, and of course, do what it takes to bring down the effective tax rate. We do believe that will be closer to the mid-30s, 34%, 35% range and progressively it will certainly come down.

On the other -- is this -- the EBITDA margin for the quarter, is this a base number we're looking at? Is this like, this is the number without Japan, right? So is this...

So I will take that question. So as you would recognize, the EBITDA margin is actually a function of several things. In terms of the realization that we have on products and, of course, the kind of measures that we take to contain the cost and, of course, the kind of R&D spend. And of course, we spoke about the fact that there is albuterol, which is a possibility during the course of this year, but we'll take that apart. Overall, I think, EBITDA could certainly be between the 19% and 20% range and this is without taking into account the COVID impact in the first quarter. As you would know, there are several moving parts out there across various geographies. India, for example, has been impacted in this particular month. And for all practical purposes, we believe that it would indeed be the case when it comes to next month as well. There has been an increase in expenses because of trade costs going up. There could be some increases because again raw material price is up and this is something that's not been quantified as yet. There is, of course, the impact in the America itself, and Vinita will certainly take us to that story. It's going to be certainly impacting our business in the first quarter, for sure. But if you would take that all apart and if we maintain kind of status quo, we do believe that there is a lot of -- there is certainly improvement going around between 19% to 20% and this is without taking into account the ForEx impact.

Sure. Yes, yes, it does. And just on the Japan, do we have any contracts to supply anymore for the next period or so? Or this is just sort of business is off completely?

No. As we had shared this in the past as well, there is a multi-year agreement to supply products that we were supplying out of India. And in fact there are couple more products that are getting added to that as well and that part of the business will continue. It's obviously smaller, but it will continue.

Nilesh, where would that line item be coming in from in the revenue item, where would we see it?

It would be in the regular revenue line.

No, it is essentially phased, right? Because you're billing to Japan, to a third party. It is going to be coming in the other third party sales, of course, albeit at a lower margin though.

Okay. It will not be in APAC? Okay, fair enough. I'll take it offline.

To answer that part, we would club that into the APAC number as well.

The next question is from the line of Tushar from Motilal Oswal Securities Limited.

Just a clarity on albuterol. So are there any queries pending now with respect to the US FDA?

Yes. We responded to all the queries. And like I had mentioned, we've had interactions -- some interactions with them in the last few weeks and have responded to all the queries.

That's great to know. And just on the R&D spend, we had this -- fourth quarter is 9.1%. So any outlook for FY '21?

If you want me to answer, so I would say that -- sorry, go ahead, Vinita.

Go ahead, Ramesh.

Yes. The R&D spend should be kind of the same level as last year, about the INR 1,500 crore range on a full year basis.

Got it. Okay. And just lastly, any MR addition in the domestic formulation side this year?

Yes. So pre-COVID, we had a plan to add a few hundred MRs. Some of them will still get added, because we spun out three divisions last year.

Hello.

Yes, there's a lot of disturbance on the line. I think there is some -- we spun out 3 divisions last year. But materially, there'll be no additions. And obviously, in places where we feel that we don't want to fill up in the near term, we'll see what to do. But there won't be a material addition this year, especially given that we have seen a slowdown in May, more so than at April. Obviously, we'll watch the spend line very closely as we hope to see that growth coming back in India.

Got it. Got it. And just lastly, on Levothyroxine, if you could just help us with the market share currently? And what kind of capacity utilization we stand at?

The market share, as I mentioned, has ramped up from the 5% level in Q3 to double digit, to the 13% level in Q4. And we are well positioned from a capacity standpoint to take like 20%, 25% share, if we have the opportunity to do so.

The next question is from the line of Nithya Balasubramanian from Bernstein.

Yes. So my first question is on your biosimilar pipeline progress. If you can update us on where you are on pegfilgrastim for the U.S. and ranibizumab?

Sure. So on pegfilgrastim, we actually are at a very good position. We just completed the PK study successfully. Now it's a question of ramping up the product and filing. Some of it will still take a little bit of time, but before the end of this fiscal, we expect to file, and then obviously we would look for a quick approval. We are very excited with the fact that we've been able to cross all the hurdles that were there in developing the product. On ranibizumab, we have started the India-centric trial, and the plan is in Q3 to start a global clinical trial.

Okay. Are you planning on filing the Phase III in peg?

I wouldn't be comfortable sharing our strategy. It is a competitive strategy as far as filing is concerned. But we -- like I was saying, we have been able to complete whatever clinical development plans were required to be able to file the product.

Okay, understood. And my second one was on SOLOSEC, what sort of an impact have you seen, because of COVID. Obviously, clinics are shut and within acute therapy, we did notice a sharp downturn in the prescription share. Do you see that -- are you seeing that coming back up and do you see like the COVID impact has put a spanner in the work?

Yes, there was a significant impact of COVID on the OTC bio specialty per se as well as on SOLOSEC. We saw really the visits of OB/GYN office come down to 20% level pre-COVID, and only for critical conditions. So we saw significant disruptions with SOLOSEC. And from Q3, we had started to see a good ramp up into Q4 in January, and in February we started to see the COVID impact and this impacted the scrips which we have seen down to almost 45% pre-COVID levels at the lowest. So in the last 4 weeks, we have started to see this stabilize. In April, we saw the scrip levels hit the bottom and since then we've seen it grow slowly. However, we have taken some measures, significant measures us to lead to optimize that business. We had realized that SOLOSEC is going to be a slower build. I mean, it was -- had consistent growth but still at a slower level. And pre-COVID, we just saw a strong reception to virtual calls, and doctor coverages through telehealth and taking virtual calls as opposed to the face-to-face interaction. So we have really restructured operating model going forward, to a higher level of virtual investment, and very significantly reduced our operating spend and burn rate nearly by 50%. We downsized the decided people in the last couple of weeks to be able to really reduce that burn. So now having restructured the operating team, plus having the same focus on a different mix of virtual versus face-to-face interaction, starting to see scrip ramp up from the low of April. And the recent wins that we had through the SOLOSEC was put on preferred position by ESI couple of weeks ago. We also had very positive readout of trichomoniasis study to expand the use of SOLOSEC. We feel pretty good about growing the business at a burn rate that we can sustain while SOLOSEC grows.

If I might ask you a follow-up. Now with the measures in place, when do you see your specialty business breaking even?

So much sooner than what it was last quarter, I would say. It should be pretty soon, I would hope in fiscal year '22.

The next question is from the line of Anubhav Aggarwal from Credit Suisse.

Vinita, one question on albuterol first. Just wanted to check, why is this product still in the shortage when IQVIA volume shows that now that shortage which was there is no longer there. Why is FDA still putting this under shortage item?

Anubhav, so actually, even though the demand for albuterol went up significantly due to COVID. Being a rescue inhaler, we saw a significant jump, I want to say something like 30%, 40% through March as well as April. Since then it has stabilized, but still at a level well above the pre-COVID levels. Given the respiratory distress, as albuterol is a critical medicine required to -- for treatment of COVID. The demand has gone up. And from a supply perspective, we know that Perrigo launched in February but had very limited share so far. And Cipla launched recently, but again stated that they're going to make product available over the next few months. So we do think there is short supply.

Okay. And just -- I know data may not be available on this, but roughly, Teva mentioned before that generics came in, that 40% of market was subscribed by generics. What would that number be right now? Where you're talking...

Sorry?

So let's say, what percentage of albuterol market is described by physicians as generic prescription right now. For example, Teva mentioned before the generics came in that it was 40%. What would that number look like currently?

Well, right now, I think generics are at over 60%.

Yes. But no, I was asking...

Because we have all the AVs put together.

Okay. Sure. And just one question on famotidine also. I wanted to check how sticky is the volumes that we gained. Our product is a suspension product. Do you think there could be shift away to tablet or to let's say, move away to omeprazole at a certain point of time or this is what we called as very sticky right now?

It feels -- it seems like it is different right now after the ranitidine debacle. I mean, we saw a good amount of share move to famotidine, and obviously, we are in a very good position to leverage that.

But is it a supply shortage issue on that oral solid side, which is benefiting us, and once that is back we may have issues, I'm just thinking from a customer perspective, patient perspective, would the preference be higher for a oral molecule versus the suspension one or patient is indifferent?

Sorry.

I'm saying on the famotidine side, is the patient indifferent between the oral form and suspension form?

Yes, yes.

Yes, okay.

So maybe we can take that question offline. I don't have the mix of oral solid versus what it was prior to this ranitidine change and we'll take it offline.

Sure. And just my last question was on SOLOSEC. I just wanted to check after the Express Scripts preferred supplier, will net pricing, which is a combination of the rebate to Express Scripts and the coupon that -- coupon strategy we had, will there, in the short term, net pricing be down? And hopefully, till the time volumes come up, can we see a dip in SOLOSEC sales and ultimately getting the benefit out of it? Will it follow that kind of curve?

Actually, that's a very good question. The net pricing has actually improved quarter-on-quarter. Given the other measures we took, we changed our co-pay from 25 to 75, ramped it up through the last 6 months. So that will itself had a positive impact on net pricing. And with Express Scripts now, the net price will increase even further.

Okay. Okay. So that co-pay is benefiting. Okay.

Next question is from the line of Neha Manpuria from JPMorgan.

Vinita, on SOLOSEC, I remember you mentioning in one of the calls that the cost per SOLOSEC was somewhere around $12 million to $13 million a quarter. Is that number right pre-COVID? So the 60% reduction that you mentioned is essentially on this $15 million cost base? Is that the way to look at it?

Yes, roughly, yes.

In that case, how should we look at the entire leveraging this cost base? Because we have been looking at in-licensing deals to leverage the cost that we have for SOLOSEC. Do you think COVID slows our ability to augment our specialty portfolio in the U.S.?

Actually, COVID potentially makes other opportunities available. But it really helps us get to breakeven sooner just on SOLOSEC. And we still have some of our legacy products like Methergine contribute to the top and bottom line. Antara contributes to the top and bottom line. So we believe that with the current burn and the SOLOSEC growth that we have planned. Plus, we continue to look for opportunities. In fact, we are seeing more and more companies that are struggling through COVID and I will think they are having discussions around trying to find synergies.

Okay. Understood. So the specialty investment continues to be a priority for us as we look ahead from a medium-term perspective.

Sorry?

The specialty investment continues to be a priority for us in the medium term. That hasn't changed?

Yes, it is. Yes, it is. It is important to us. We just determined that based on the fact that SOLOSEC is going to be a slow build, it makes sense to do it at a different operating burn.

Understood. And on the U.S. -- on the generic business in the U.S., if we look beyond the Levo ramp-up and albuterol, how should we look at the growth from that base? Because you'd have 2 large products in our base by debt.

Yes. Beyond that I think we have a very rich pipeline, Neha. Looking beyond fiscal year '21, we have on the inhalation front, Spiriva, that we hope will get approved for this calendar -- this fiscal year, but will be launched in the next couple of years. We have other 4 to 5 products that will come to market. We have -- Levo certainly will continue to be as a premium product going forward. As we look at it, albuterol as well, is a material opportunity. But looking at Spiriva and other pipeline products coming in, we have also invested further into our inhalation pipeline. Recently with Fostair, we filed Dulera as well. We extended our pipeline. And then we have injectable products as well that we have filed [indiscernible] rest of the products filed and multiple products to file.

Understood. And my last question. On Fostair, what was the timeline for launch in Europe and how material can that opportunity be for us?

So we intend to launch later this calendar year in Europe, third quarter fiscal.

Okay. Would this be a pretty good launch? Is this -- how material would this product be for us? I'm assuming, it will take some time to ramp up.

That's right. It will take time to ramp up. It's not going to be overnight. But in the next 2 to 3 years, we look at it as a huge opportunity for our Europe business per se and our inhalation business in Europe.

The next question is from the line of Hari Belawat from Techfin Consultants.

This is regarding your financial results which are published every quarter and yearly. This exceptional item is appearing for last many quarters continuously. And in fact, if we see FY '20 and FY '19, these are affecting on the bottom line also. So what is this exceptional item particular impairment of intangible assets IP? If you can throw light on this please?

Yes. So this has been appearing last couple of years. So this year, for example, we made a huge profit when it comes to, in fact, the sale of Kyowa itself. Apart from that, we actually had a loss when it comes to sale of KCC. Also took some provisions when it comes to, in fact, the Texas settlement that we had in America. And on Gavis impairment, we took again a knock. So all of this actually comes in the full year results. Well, it's exceptional, and that's why it's coming in at the line that it does and this is in line with the accounting principles.

I agree, sir. But like this IP is impairment of IPs. What is that other this investment we understand, profit or loss is okay, what happens to these IPs? We have acquired at certain cost and we are not using these IPs anymore so that you have provided in your accounting.

Yes. The reason is because that any asset that we purchase is supposed to be bringing in certain cash flows. If the cash flows are not in line with what we projected, there is obviously a need for an impairment of that particular carrying value, and that is what is reflected in terms of this impairment.

Actually, bottom line, these exceptions have converted your bottom line in red, in fact, FY '20 and even FY '19 also reduced. Anyway, if that is the practice, we accept it. Another one is discontinued operations you have shown a profit of INR 130 crore during this year, how is the discontinued operations are giving profit to us, PAT?

It's actually a reclassification of the financials, the way the accounting standards warrant it. This is essentially marked -- earmarked for our Kyowa Japanese operations to the extent that it's not been continuing for the full year that is.

Anyway, these are all accounting practices, but they do serve a picture -- a different picture of the company's performance overall. Yes. Just last question. Anything we are looking on for corona drugs or a vaccine? We are a big company. R&D expenditure also is very large. What are we -- any steps you have taken for any new drug or vaccine?

We have multiple drugs that are relevant for -- during COVID crisis. There are 2 major ones, one that is short term is hydroxychloroquine, but the other that is azithromycin, has ramped up significantly. And we have significant share of azithromycin, 40% share in the US market. We ramped up our supply significantly to serve the need through the COVID crisis. The other major drug from our existing portfolio is albuterol, as I mentioned earlier. The demand for albuterol went up significantly, but we are hoping to be able to get that approval and participate in the market soon with that product. Beyond that, we have explored our anti-microbials. We have a pretty good pipeline of anti-infective, anti-viral products that are still being explored to see if any of that work for COVID.

And other things greatly during this FY '21, I understand.

The next question is from the line of Vishal Manchanda from Nirmal Bang.

Could you share your CapEx guidance for FY '21 and FY '22?

Sorry, last year was INR 500-odd crores, and we believe that it could be around the same vicinity. Obviously, it really is linked, in fact, to our MPP and the way we expect that growth to take place, the kind of the products that we bring to the market and so on. But it would be certainly in line with -- it's not going to be very different from what we have spent in the past.

Ramesh, as we discussed, it will be slightly more than last year's number. Last's year number was a significant low. It's going to be slightly more as we're adding capacities for certain sets of products and will remain similar for the next fiscal as well.

Right. So that includes the maintenance CapEx. Is that right?

Yes.

Yes.

And the depreciation expense was sharply lower on a quarter-over-quarter basis. So should we take this as the base number going forward, about INR 210 crores on a quarterly basis? Is that the best number to look at?

Yes. It's been reset because of the amortization, depreciation and amortization come together because of the impairment that we've taken on our intangibles. And of course, the business that we have sold and so on and it gets reset. Yes, going forward, this particular quarter would be indication of things to come.

Okay. And could you kind of call out the net ForEx benefit during the quarter?

Yes, we could. It's close to about INR 120 crores odd.

Okay. And just one final one. You have been talking about an approval for Fostair Inhaler in Europe. So is that due any time now?

Well, hopefully, soon. We expect to launch it later in the year in Europe. But we are hoping in the next quarter, we should get the approval.

Would this be for the MDI version or the DPI version?

It's for the MDI version.

What is the sales for the MDI version in Europe?

$500 million plus.

That's for the MDI version only?

That's right.

The next question is from the line of Sameer Baisiwala from Morgan Stanley.

A few questions. So on albuterol, if you were to get approval on the timelines that you mentioned over next year whatever 3 months, would you be having a staggered launch or do you think your supply chain is good enough for a full blown launch?

So we've been preparing well, Sameer for this launch. So we will hope to maximize it.

Okay. Excellent. Vinita, on SOLOSEC, for the new indication, trichomoniasis, is the drug presently being used for that indication off label? Or do you think getting the new indication approved would make or would give a good boost to sales?

Yes. Hard to say, so there is a little bit off label for trichomoniasis, but obviously positive topline results and getting the label will make a material difference to really try to expand the use of the product. So at present, it's still a little bit away before we can get into the label, but our medical team, the MSLs will start working on it right away.

Okay. Excellent. And if I missed you when you're talking about Spiriva, did you mention that you will get the approval in the current year?

Yes. We have had a pretty -- we have a very strong file in place, and we hope to get the approval soon. I mean, of course, we can't launch for couple of years, we'll get the -- we hope to get approval this fiscal year.

Great. So if I understand correctly, I think you -- the key patent expires middle of 2022. So maybe that should be but what about the underlying IP court case?

Yes. It would be likely get a [indiscernible].

Sorry?

It will likely get a [indiscernible]. The court case continues. So it's likely going to continue.

Yes. But how do you plan to take IP part forward? I mean, would you hope for the full cycle?

Medicaid. And we'll see based on how it unfolds, what makes sense. It's a material opportunity for us, so we will determine what the best way to maximize it.

Okay. Excellent. And just one final one. On complex injectable portfolio, can you update us? And you mentioned something which was not very clear. So how many filings have you done? And these are for the substantive big products that you've been talking of in the past. And when do we start seeing the approval cycle?

So I think to date, we probably have maybe 6 to 10 filings, if I'm not mistaken, not recalling that sort of number for the past couple of years. We've made progress on -- we've not had any of the complex injectable filings as of yet, with the exception of Fosaprepitant, which continues to be a nice opportunity that we are trying to figure out how soon we can launch. On the Depot products, on Risperdal Consta, Paliperidone, we've made significant progress in the pipeline. So it is still in the pipeline phase, but we have gone past proof-of-concept and have started working on the clinical study. So there is a good progress on that platform.

And the filings for these products would be current fiscal or for next fiscal?

No, the next fiscal. They will be going for clinical trials now this year, a little bit delayed also because of COVID.

The next question is from the line of Darshit Shah from Nirvana Capital.

Sir, basically, I would like to know your assessment on the recent US FDA move to kind of recall Metformin extended release tablets. So what kind of impact do you see? I mean would it be a kind of normal batch recall for few of the companies? Or you probably think it might be a national recall like it happened in other products like Ranitidine and so?

So currently, we see it as -- it is not an across-the-board recall for Metformin. We see it for certain batches, certain kinds of formulations as well. So I think it's still very piecemeal. We don't see it in an across-the-board issue for Metformin.

And anything have we heard from the US FDA for our products in this regard?

So there's a discussion on 1 particular batch that we'll be having with the FDA, which we would likely end up recalling.

The next question is from the line of Surya Patra from PhilipCapital.

Just if you can update on what is the revenue number for the branded segment for this quarter? And I'll ask a second question.

Yes, on similar level as last quarter of $4 million.

Okay. Secondly, on albuterol again. If you consider all the 3 brands are likely interchangeable, and this is a kind of a billion-dollar product opportunity, slightly more. And if that way if you consider then it is already a 6-player market, it has become. So you will be joining as a seventh player or so. And so going ahead, what is the kind of aspects that you are having? And what is the kind of level of competition and pricing scenario, all that you are foreseeing for this present opportunity in the U.S.?

Just can you repeat your questions on albuterol? I can't hear all of it.

Yes. So if I say that, this all 3 brands in the albuterol, those are interchangeable, then already for these 3 brands put together there are 6 players in the market. And we will be joining the market as seventh player and possibly there could be more competition going in. So generally I'm trying to assess that, okay, what is your expectation about -- for assessment about the competition in this space and the pricing scenario. And your aspiration out of this product opportunity in the U.S.?

Yes. So we believe that right now the way to look at it is that you have the 3 brand companies, [indiscernible] the brands. And you have Apriso as the first true generic suppliers and the other true generic of the Vimovo AG. And 3 of our generic players. But given the market conditions right now the way we look at it, it is a pretty attractive market from a pricing perspective. And we will be very prudent in how we go get share. We currently expect to get a fair share, a double-digit share and have planned the capacity accordingly.

Okay. Okay. And on the -- about the kind of R&D spend or on the -- anything on the cost rationalization front going ahead because obviously, the kind of margin levels that we have been delivering or seeing since last sometimes. So, that is bit suppressed always looks like because of the kind of aggressive spending size with R&D. In the cost point, do you really see some improvement going ahead either because of some of the activities that is -- that will may not be there going ahead. For example, your remediation expenses could be possibly getting to rationalize, or anything on the cost front that you can give us some indication with rationalization measures.

Yes. Vinita, you want me to take that question?

Yes, please.

Yes. The endeavor is constant. The early part of the discussion, I actually alluded to the fact that it's actually a function of 3 things. The kind of products that we bring to the market, the kind of cost that you incur and of course the R&D expense and the like. I don't want to talk more about these products which anyway would happen over time. And we are, as you would know, geared up for a lot of things. So we have our inhalations portfolio, we have biosimilars, we have specialty and complex injectables and the like, but all of those will happen over time. But one thing that's constant out there is, of course, trying to read out the boundaries when it comes to, in fact, the -- on the cost front. And this is obviously going to be across several lines. We've had a continuous engagement program with, in fact, leading consultants working on several lines. We have a program to implement on the procurement front, which is really the raw materials, alternate vendors and the likes, route synthesis and conversion. We are working on, in fact, SG&A, the R&D expense front and for sure on the overall workforce itself. Yes, so we have actually seen some good results, in fact, the course this year. Basically it's not so visible to you because it's actually camouflaged in several parts. And there are several moving parts there itself, amongst lines. So -- but as we unfold and as we go into the future, I would imagine there would be significant visibility on that, towards the end of the next fiscal, that is you would actually see a closing date which is certainly superior. But all of this, of course, assuming that normalcy returns in terms of the business. As you would know, the first quarter has been impacted -- would be impacted because of COVID across various parts of the globe. India, for sure, there are dark clouds. There are dark clouds in America. There is ForEx fluctuation in the emerging markets. And of course there is -- business is down in certain other -- in other parts also. So those are again, some of the things that we can't actually talk about, but in a general sense, you would expect that cost to be -- there is going to be tremendous focus on cost, and that would be contained.

I think maybe, if I can just add, so one part is one of the things that we've had is challenges. Some of the cost optimization we've done, there's actually a reduction in the realization as well, and that's why it's not getting reflected. But what Vinita shared as far as reducing the SG&A in the US on the specialty front that was part of the overall rationalization as well. And that will reflect in the numbers.

Okay. Just on one question on the taxes front. Ramesh sir, if you can just clarify this 30%, 33% kind of a guidance what you are giving for the current year, is it just because of that divestment of Japan that is resulting into?

No, we have done some significant restructurings. So we have actually taken issues upfront in terms of trying to bring down the losses in various subsidiaries, some tax planning in terms of the way we actually positioned or domiciled our IP. Then of course, so -- and of course, the kind of products coming in from various parts in terms of the overall footprint, in terms of the certain advantages of SEZs and the like. So all of this will bear fruit and that's why you would find a reduction in the ETR from 40% to much lower levels that I indicated.

The next question is from the line of Nimish Mehta from Research Delta Advisors.

Most of the questions have been answered. Just one thought I would like to have from your side is, now that the lockdown related logistics issues are behind us. How do you see the migrant labors related issue impacting us and also in the industry, I mean, does it mean that the logistic issue will once again be a problem for us, and in that case, some smaller companies in Indian market may take over market? How do you see the situation?

So I would say that the logistics issue the biggest one, biggest problem with the logistics issue was the fact that courier companies actually had switched off. And I think that was a big challenge. I would say that we've been able to -- in fact, I think the bigger companies did better. And I would -- going forward, I don't see the logistics issues as an issue. Even in the current status with the red zone, green zones, we are able to make product available adequately. I think the real challenge that we're seeing in India at this point of time is demand. Specifically, in May, we believe that the market, specifically for acute has significantly de-grown. Chronic also, there is not increase because while doctors are starting to open up, there isn't adequate footfall. And I think May and June will go in that state of repair, and we really see the market taking off only after.

But because of the migrant labor who is going back to their homeland, we don't see any particular issue because of that. Is that a fair understanding?

Yes. Not specifically on that count. Can we take last question now?

Sure. We take the last question from the line of Prakash Agarwal from Axis Capital.

Yes. I had one clarification and one or two more questions. So one is on the press release you speak about your Florida inhalation facility inspection by US FDA, but done by UK MHRA. Can you clarify, would they come back when the things normalize or is it temporary EIR or how do we think about it?

No, it was basically for calculation with the capacity between the UK MHRA and the FDA. FDA inspected the site for Fostair that we have filed both from Coral Springs as well as Pithampur. We now have approval at both sites to manufacture Fostair, to have the flexibility from both sites that we wanted to build to be able to ramp up both albuterol and Fostair effectively.

So basically, FDA did it on behalf of MHRA but it is a permanent status of the site.

And we are really thinking of leveraging it as -- not right away, but we are thinking of leveraging it for some government business in the U.S.

Understood. And I missed your comment on Levo. So you mentioned your mid-teens now 13% to 15% and fiscal '21 you have expectation to go to 20%, 25%, is that right or 30%, 35%? I missed that.

In terms of market share, 30%, 35% would be a dream and it certainly would be tough to command a rational share perspective. But we would be very happy to get to 20% plus.

20% plus, that's fair. And one more on Metformin. So when FDA is talking about Metformin and DMA issues, it captures even though the entire basket like the Glumetza of the world, including the Metformin generics?

Yes. So I think FDA has obviously been evaluating. So if the IR products, DR products, if the fortamets, the Glumetzas, and yes, there's a whole bunch of products, glucophage, so there's a whole bunch of products out there.

Okay. So it would be the entire basket. As of now, we have just heard or we are evaluating one recall is what you're seeing?

Yes.

Okay, perfect. And last one from a demand perspective. What I understand is both India and U.S., because of obviously lockdown and patients not able to go to doctors, prescription levels have come down, but when you compare India and U.S. which business is seeing more impact on volume would it be U.S. or the India business?

So volume is obviously much higher in the U.S. from an overall perspective, right? But I think the -- in the U.S., I think, while generics continues, and there is some pressure in specialty right now. In India on the branded generics right now, obviously the impact is more.

So the prescription, Prakash, overall in the U.S., prescriptions are down 20% even now, when we compare it to the baseline pre-COVID just because of many people have just not done doctor visits. So their prescriptions are pre-prescriptions. So this is improving week after week but it is still 20% down overall.

And as Nilesh said, India will be more, right, I understand, because of the lockdown.

Yes. But I think in India, I think, the good thing that we've seen is that in green zones, even in orange zones, there's a fair bit of returning back to normal as well. So, obviously, I think the India story is still panning out. But there are parts where normalcy is coming and there's obviously the -- particularly, the red zones, which is also the biggest -- in some ways, the bigger part of the market, which remains a big concern.

Okay. And the last one, like we have couple of licensing deals with AbbVie on the MALT1 inhibitor and going up with the MEK inhibitor. So is there any progress there and are we expecting any milestones in '21, '22?

Sure. So yes, as far as the BI deal is concerned, there is certain development. We would expect some milestone in FY '22. There are certain clinical developments, which have to be done, and they've been basically delayed by a quarter. Thanks to COVID. On AbbVie also, obviously, there are a bunch of future milestones as well, but that one, in particular, is more in the overall AbbVie development portfolio. We feel very good about the compound. We believe that it will move ahead. But obviously, there is an assimilation process internally before we take it forward.

I now hand the conference over to the management for closing comments.

Yes. Thank you for connecting on the call, and hope you had reasonable answers to all your questions. I look forward to seeing you next quarter and connect with you again for a chat. Thank you very much and all the best.

Thank you.