Torrent Pharmaceuticals Limited ($500420)

Ladies and gentlemen, good day, and welcome to the Q4 FY '26 Earnings Conference Call of Torrent Pharma Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudhir Menon, Executive Director of Finance and CFO. Thank you, and over to you, sir.

Thank you. Good evening, and welcome to Quarter 4 FY '26 Earnings Call of Torrent Pharma. Pursuant to the acquisition of controlling stake in JB Pharma, the consolidated financial statements include the financial results of JB Pharma, its subsidiaries and the acquisition effects from 21st January 2026. Consolidated revenue for quarter 4 was INR 4,197 crores, up by 42%, while operating EBITDA at INR 1,356 crores was up 41%. The combined operating EBITDA margin stood at 32.3%. Excluding JB Pharma, Torrent Pharma's base business revenues grew by 16% for quarter 4, operating EBITDA grew by 16%, and the margins were 32.7%. For the full year, the overall revenue grew by 15%. EBITDA margins were maintained at 32.7% and operating EBITDA grew by 16%. Our 2 largest branded markets, India and Brazil, continue to deliver healthy double-digit growth. India business grew at 15% and Brazil grew at INR growth rate of 30%. On the generic side, U.S. business grew at 31% INR growth, and Germany grew at an INR growth of 16%. A quick update on the merger process. As you are aware, we have received the requisite shareholder approval for the merger of JB Pharma with Torrent, and we are in the last stage of the process now. The overall leverage, that is net debt to EBITDA, considering JB's full year EBITDA for '25-'26, we stand at 2.3x. Today, the Board has recommended a final dividend of INR 9 per equity shares. I'll now hand over the call to Aman for an update on India business.

Thanks, Sudhir. The India business revenue at INR 2,215 crores registered a growth of 43%. Torrent's base business ex of JB grew at 15% during the quarter versus the IPM growth of 10% as per the Pharma track data set. Our base business continues to be amongst the fastest growing out of the top 10 countries in the IPM on a full year basis. The Curatio business grew at 27% in FY '26, driven by strong demand generation on account of OTC ad spends and field force expansion. We are quite hopeful that the business should continue the same strong traction in the coming year as well. Our field force at the end of the year stands at 7,100 heads of JB. The significant organic growth acceleration seen over the past 2 years gives us comfort that the expansion has been executed well, and we will further continue to pursue expansion in the upcoming financial year. An update on semaglutide. Our launch is off to a very strong start and is ranked first out of all the generic launches. We have launched 2 brands, Semalix and Sembolic. Product availability in the injectable and oral formats has benefited our brands significantly, and we believe the early advantage should help sustain high market share over the coming quarters. Torrent held 38% share among generic players as per the KharmaTrack April data set with 28% share in the injectable format and 100% share in the oral format. As of 21st May, one more competitor has entered the oral market, and hence, the market share will be impacted. However, the 2-month head start and early mover advantage provides adequate comfort of maintaining majority market share. In terms of new product pipeline for the India business, we were the first to launch generic brexiprazole in April in the India market after conducting the clinical trial. As far as the launches in the CNS and psychiatry space go, it's off to a pretty good start. We would classify this as a moderate sized opportunity, and it would help us improve our market share in CNS. We are currently conducting a Phase III clinical trial for resmetirom, which is approved by the U.S. FDA for MASH. There is currently no innovator present in India. And assuming the trial completes successfully and within our projected time lines, we may be the first to launch this in the India market after the patent expires. This is currently projected to be a large-size opportunity for us. Several other such products are being worked on in the India market with the goal to be the first to market and gain an early mover advantage. The launch of semaglutide, along with the promising upcoming in-house pipeline is reflective of our ramp-up of India-based R&D pipeline and spending. Going forward, we expect our India business to continue outperforming the market growth. The key levers that will help us outperform would be the semaglutide launch, which will add significantly to the base business growth, continued strong traction in the Curatio business, chronic business outperformance and the upcoming first-to-market new launches. In absence of any demand shocks in the financial year due to geopolitical factors, we expect that our base business may potentially deliver a very strong year of organic growth higher than the previous year. I will now hand over to Mr. Sanjay Gupta for the international business.

Thanks, Aman. We'll start with the branded generics market of Brazil. Based on internal sales, Q4 constant currency revenue was BRL 259 million, registering 11% year-on-year growth. IQVIA data shows Q4 market growth at 6% with Torrent growing at 17%. We are seeing healthy volume growth, coupled with mid-single-digit price increases. Our new launches, particularly the launch in very large markets like Rzloside and Azetamib is getting good traction. We have also launched our first oncology product in Brazil. Torrent has a rich pipeline of 58 molecules, for which we are currently waiting approval from ANVISA. In Germany, our German business registered a constant currency revenue of EUR 31 million, down by 1%. The growth continues to be impacted due to disruption at a third-party supplier. An important regulatory development in Germany during the first -- during the recent months is the automatic substitution of biosimilars and the inclusion of biosimilars in the tender system. Torrent has launched its first biosimilar in Germany, and we will start participating in tenders for the same in the coming months. In the U.S., we registered constant currency revenues of $38 million, up by 9%. Growth is coming from our new launches where we have achieved our target market share, and we are also seeing increased purchase volume on existing products. In case of JB Pharma, the international CDMO business was impacted due to change of control and realignment of business practices. There has also been a negative impact due to the ongoing geopolitical situation in the Middle East. With that, I would like to conclude the opening comments and open the call up for questions.

[Operator Instructions] We take our first question from the line of Kunal Dhamesha from Macquarie.

First one on the synergies front, now that we have this asset in our hand, how should we think about phasing in of cost synergies, which we have guided to be around INR 400 crores to INR 450 crores, let's say, over the coming quarter, how should we target the phasing in?

So we have shared the full details on the JB call, but happy to share further here. There's no material update from the last call. Synergy execution remains on track. We had guided for up to INR 450 crores synergy by year 3 and about 20% of that in year 1. It's difficult to quantify quarter-by-quarter because we implement something as an action, but the actual reflection of the saving may take some time and may vary. But our early sense is that the margin trajectory that we had expected for this year, we are tracking above that so far.

Sure. and...

Kunal, sorry to interrupt. Can you use your handset mode, please?

It's on the -- okay. Can you hear me now?

Yes.

Okay. Okay. Sir, second one on the similar aspect. Do you think anything on -- any updates on the revenue synergy side now that you've been managing this business? Do you think that there could be some revenue synergies which will accrue to us over the next 2 to 3 years?

So the confidence on the revenue synergy getting delivered is certainly getting higher. But again, the time line remains the same. We have said that this year, we will not see any material synergies because all the changes take time to implement. But certainly, as we spend more and more time and see the business within our own hands, it's giving more comfort for sure.

Sure. And lastly, on the clarity on the INR 70 crore acquisition cost, that one-off charge, and the INR 19 crore one-off charge that we have, are these both part of this quarter or a part of the INR 70 crores is in this quarter number?

No, I think as far as Torrent is concerned, the exceptional item indicates INR 46 crores and the balance is pertaining to JB, which is around INR 19 crores, I believe. So this is pertaining to this quarter.

Okay. So INR 46 crores is pertaining to Torrent and the INR 19 crores is pertaining to JB?

Correct.

For this quarter?

Correct.

[Operator Instructions] We'll take our next question from the line of Neha Manpuria from Bank of America.

My first question is on the India business. I think we talked about some new launches, which would be first to market. Can we flesh out the strategy a little bit more in terms of what we are thinking? And I think I also heard an increase in R&D spend as we look at more such launches. So could you give us some more color other than the NASH product? What are the areas that we are looking at? And what kind of investment would this require? Or can we leverage off our existing MR base?

Yes. I don't think it's going to lead to any real material increase in R&D spend because we are more reallocating the spends to India from some other markets, so net-net, it should not be a major increase in spending. But the objective is to increase certainly the opportunities like oral semaglutide, for example, which has worked well for us. Can we deliver as many more opportunities as possible is what the thinking is, and these are very difficult to get the number of opportunities, we don't get them every year. So there's no specific kind of number that we can share that these many per year can be expected. As and when new products are approved in the U.S. by the U.S. FDA or any other markets, we would keep a track of these and be quick to add them to our India pipeline.

Understood. And would we be open to in-licensing products, like I think some of our peers have tried doing this from China or from other markets. Would that be something we would be open to, to sort of increase that? And for this NASH product that you mentioned, any sense on how big this opportunity can be in India?

So China, yes, we are in talks with multiple companies at the moment. But the deal terms are being worked out. So hard to say if and when they can get concluded. But the opportunity, especially in oncology products from China is quite interesting, and we're looking at a few products as we speak. What was the second question again, sorry?

The NASH opportunity, the NASH product that you mentioned, how large do you think could it be, I mean, in the next, let's say, 3, 4 years?

So again, the market size and market share is all dependent on the time of launch and whether we finish the trial in time and what's the competition within the next few months looking like. Our objective is that any new such launch should add incrementally minimum 1% to 2% to the total India growth over the first year or 2 years of launch. So we think this is one product that can help achieve that.

Understood. And sorry, what are the launch time lines for this? I think you mentioned post patent expiry. So when should we expect this launch?

The patent expires, I believe, within the next year, but our launch time line, we cannot share at this moment, but would be, say, in the next 12 to 18 months, certainly not before the patent expiration, it will be after the patent expiration.

Understood. And sorry, my last question, the 7,100 reps that we mentioned ex JB, there is no need for us to increase these reps, right, as we look at entering these newer products? Or do you think the Torrent rep count would also go up? Or would you look at an integrated MR base now that the JB acquisition has happened?

No. With the base of the Torrent reps plus JB reps, there is no need to add MRs.

[Operator Instructions] Next question is from the line of Kunal Randeria from Axis Capital.

Sir, you have 2 GLP-1 brands in the market, Semalix and Sembolic, which have around, I think, INR 11 crores sales as of April. So how much of it would be oral? And how do you see the future of the oral form in terms of competition as well as the percentage of the total sema generic market?

So the total share that we saw in the April data and the April data is quite reflective of our internal sales as well. It was about INR 17 crores total with both brands in all formats. Out of that, INR 6 crores was the oral sales and INR 11 crores was the injectable. So in that sense, I think it's pretty much what we expected because the oral market would end up being maybe 20% to 30% of the injectable market, and that's how this is playing out as well. In our case, the share of oral is higher because there is right now no other player on the market. But as players enter the market as well, that should further help the market share of oral as well.

Okay. So you see a lot more competition coming in? Or will it be just one more player that's launched recently?

As of now, there's one player. There may be a few more, but the time lines are uncertain right now. We are not sure when that could be expected.

Sure, sure. Sir, second question on the U.S. business. Obviously, a very strong year in FY '26. So just wondering how should we look at in FY '27? How many launches are planned? And any niche products that we should be aware of for FY '27?

So I cannot disclose individual products. But generally, we would be having a single-digit number of launches in the coming 9 months, 10 months. So -- and it would give us a positive traction on the overall revenue figures. Now really, honestly, the potential of each product depends upon the number of competitors that show up. We have a reasonable number of early launches. So I would say that single-digit growth is a good way to look at U.S. going forward for the next couple of years before we get our own major products launched.

Okay. But any kind of 180-day exclusivity kind of products?

The issue with 180-day exclusivity is you don't know how many people have exclusivity. So we don't have, let's say, single exclusive product. So we are the only day 1 filer.

[Operator Instructions] Next question is from the line of Rahul Jeewani from IIFL Securities Limited.

Sir, you indicated that our organic India growth in FY '27 would potentially be better than what you have delivered in the past, given the drivers which you talked about, seme chronic outperformance, et cetera. So can we expect, let's say, a mid-teens kind of a growth on your organic India business for FY '27?

Yes, but we had also mentioned that this would be in absence of any external demand shocks, which currently is unknown to everyone. So if there is no such situation, then yes, I think that would be realistic.

So we are talking about the India business. So what kind of, let's say, apart from API raw material cost escalation, which we could see because of the Middle East war, what kind of demand shocks are you referring to?

No, within the domestic market itself, right? We don't know what the extent of the impact it may have on the GDP growth. I mean it's very early right now. But if at all that's going to happen, then obviously, there may be some impact in the domestic market as well. So it's too early to comment right now, but that's what was being referred.

Okay. Sure, sir. And you also referred to the fact that the EBITDA margin trajectory, obviously, this is only the first quarter has been better than your expectations. So can you further clarify on that? Also, this quarter, margins which we are seeing for the merged entity is post ESOP cost. And as there should not be any ESOP cost for JB going forward, we should see an improvement in margin levels from 1Q onwards. So is my understanding correct?

Yes. So on the first part, the margin trajectory so far, meaning the -- essentially the synergy plan for the first year, I think we are tracking ahead of what we had expected. Some costs we were able to take out a bit sooner than what we thought. And hence, it would reflect in the margins accordingly. So that's a positive for us. On the second, maybe Sudhir can answer that.

Yes. So Rahul, the EBITDA margin we are talking about and the improvement we are talking about is ex of the ESOP charges.

Sudhir, I was just checking the consol margins, which I think we have reported for the quarter, the consol margins which we have reported, that's post ESOP.

So I think what we have indicated in the press release is without considering ESOP, what is the EBITDA margin.

Okay. Sure, sure. And just a clarification in terms of synergy, the cost synergies tracking slightly ahead of expectation. So earlier, we have talked about this phasing of cost synergies over the next 3 years, 2020 over '27 to '29. So does that potentially mean that in FY '27, the cost synergy benefit would be higher than this quantum of 20%, which you have highlighted earlier?

That's probably difficult to say, but certainly, the phasing would be kind of earlier. So what was expected next year, maybe it's delivered this year. Next year, whether the actual synergy number is higher or not, that we can share maybe in a couple of more quarters.

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

Just one question I had on the minority interest. There is a number of minus INR 25 crores. Can you just explain that? And why is it a negative number? And whether the JB minority interest is factored in this line item?

Absolutely. So I think Saion, as per the accounting standard 103 on business combination, basically, you have 2 methods, okay? So one is fair value as far as noncontrolling interest is concerned. The other is proportionate interest method. So basically, if you see there is an amortization charge of INR 257 crores, right, which we've given in the press release, which is pertaining to the fair valuation of intangibles, which have come into the balance sheet, right? Minus there is a deferred tax liability reversal of roughly INR 62 crores, INR 63 crores. Therefore, net negative is minus INR 195 crores. And the PAT indicated in the press release by us for JB for the stub period is INR 143 crores. So basically, the balance INR 52 crores is allocated in the ratio of 51.2%, which is NCI and 48.8% for owners' equity.

I see. Okay. Okay. So it is not the JB profit, but the adjusted profit after amortization. Okay

Correct.

And the other one, I don't know whether you already talked about this, but this depreciation, amortization charges that you have, this would sustain? I mean this is the number we should work with for the quarters ahead?

Correct. So this number which has come is with effect from 21st of January. that's the number you should work for the full year, yes.

Next question is from the line of Rupesh Satia from Long Equity Partners.

My question is on semaglutide for Brazil market. So I mean, in general, can you tell us where we are? Is our file under review now? When can we expect the launch? How do you see market formation? Do you expect to launch both Ozambiice and Wegovy or it will be one form? Entire color around it would be very helpful.

Sure. So roughly, the market is $1 billion for semaglutide. And you can divide it into for the injectable, it's 75% and for the oral roughly 25%. Now there are 2 products here. You're talking about Ozempic and Wegovy. Ozempic is going -- declining very fast and Wegovy is growing very fast. So initially, all the companies -- so there's no launches in Brazil as of today. So it's been off patent for a few months -- for a month, 2 months, and there's no launches. [indiscernible] has rejected files, but it has not approved any files. And so all the companies so far that have filed have filed Ozempic. There have been no filers of Wegovy. And we are in the same mode. So Wegovy -- our Ozempic file is under review. So we don't know when it will get approved. So I won't hazard a guess. But suffice it to say that we expect to be amongst the first 5 players on the Ozempic side, but it's a rapidly declining market because of the transfer of patients to Wegovy. We have not yet filed Wegovy in Brazil. We are working towards it. So I don't have an update on that to share today.

Okay. Okay. Just wanted to follow up. So Ozempic and Wegovy, it's not like India, right? I mean many people in India use Ozempic for weight loss. So you can't do that in Brazil is what I'm assuming. You can correct me if I'm wrong on that. That is one. And second question is, my understanding is there is a 28% duty if your manufacturing is not local. I mean, I don't know how they define local manufacturing in terms of value addition and all that. So is that a big hurdle for you and other Indian generic players to gain market share in Brazil?

No, I think custom duties have never been a hurdle for us, and I don't expect this to be a hurdle for importing product. Duty is 8% Correct. 8% in Brazil, but we are able to absorb that given that it's a branded generic market with sufficiently high gross margins. So we don't have an issue with the customs duties.

But duty is there. There are local manufacturers who are compliant with their laws and we will face a duty or everybody will face a duty. I mean, how is the market formation?

Duty on the APIs, but not on the finished product. And when we are importing finished product, we pay the duty on the finished product.

I see. I see. Okay. Okay. And Ozambique cannot be used for weight loss. That is the correct understanding, right?

Historically, Novo had not launched Wegovy in Brazil until about a year ago. So everybody was using Ozempic for everything. But since Wegovy has been launched, the [indiscernible] has become very strict and there is not possibility to substitute one for the other. So hence, you see the market trend where Ozampic is declining very rapidly and Wegovy is picking up because all the off-label use of Ozempic in weight loss is going away.

I see. I see. And can you just give some color about other markets, Canada, Turkey, Saudi Arabia, some other major markets, how are we placed in those markets?

So our disclosure has not been very high on the other markets. I would just say that in some smaller markets, I would say that we are ahead of the curve compared to our peers. So would these markets be material at the level of Torrent? I don't -- I'm not sure. So -- but I would say that about 4, 5 markets, we've already filed Ozempic. And we are in the wave 1 of launches or if not sometimes, we are also the first one that will come to the market. Other markets, we've kind of not got in normal leadership board, and we would be probably Wave 2 or Wave 3. So it is across the board. But yes, we have 5 markets where we would be in Wave 1.

And any volume guidance would you like to give for '27, '28, '29 in terms of number of drug devices?

No, no, not for markets outside -- not for any market. No, we won't give volume projections.

Total, I'm not asking market specific, total number of pens for injector...

[indiscernible]

Sorry?

See what the competition dynamics are and then we'll determine what the volumes would be because it's hard to give volumes in a vacuum.

Next question is from the line of Tushar Manudhane from Motilal Oswal.

Sir, regarding...

sir, may I request you to use the handset mode, please?

This is better?

Yes, please go ahead.

Yes. Sir, as far as Brazil market is concerned, the reported growth of 12%, but the IQVIA reports of 17%. So this disconnect as if you could explain and how to think about the growth outlook for, say, FY '27, '28 for Brazil market?

So I would suggest that you look more at the annual trend and don't get swayed by too much by the quarterly variations in IQVIA or even in our internal sales because internal sales also is actually I'm transferring the stock to wholesalers and retail warehouses. So I think a good bet is the annual numbers that we report as well as IQVIA numbers over a longer period of time. And you will find that both the trends do match. So I would guide you towards a double-digit growth for Torrent in the coming year. I will not give guidance by quarter because it can be anywhere. But over the course of '26, '27, we should be between 10% to 15% of top line growth.

Understood, sir. And how much of, at least as far as FY '26 is concerned, could be driven by new launches? I suppose there were a pretty decent number of launches in Brazil for FY '26?

Correct. It's basically driven by a lot of new launches and particularly launches in huge markets. And in my opening comments, I referenced one market, which is Rzuat and Azetamib, which has become one of the largest market where we play. And we currently have about 8.5% market share, and we are working towards building that share. So that market is roughly trending towards BRL 850 million per year, which is amongst the largest single market that we operate in Brazil.

So if I combine all the product launches, like the way we sort of look at India in terms of price volume, new launches, is there any way to break this 12% constant currency FY '26 growth into price volume and new launches for Brazil?

Yes, I can give you that. So essentially, we have -- so what we have is a volume...

I'm sorry, sir, there was some disturbance. Can you just repeat the answer again?

So I can give you the numbers for Q4. And the volume growth is actually flat, slightly negative. Price increase is 5% and NII is about roughly 7%.

Got it. Got it.

So NII is the main driving force in our business.

Sure, sir. And given the 58 products under envisage review, how many products do you expect to get approved like in the upcoming year?

Capacity launch is constrained by the teams we have. So we would launch about, say, we have 3 teams. And ideally, we launch about maybe 2 products per team per year.

Okay. If I heard you correct, you would be launching 3 teams, right?

We have. Historically, we have 3 teams.

Does that answer your question?

One more on the Germany side. Germany, we have seen stable business even in CC terms. Given the tenders currently in terms of tenders you have participated, what kind of outlook is there for Germany business?

Low single-digit growth for next year. Below 5%.

And lastly, if I may, on U.S., given the kind of run rate we have made like $38 million per quarter, is this business sort of -- if you could share what kind of gross margins we are making in this business?

So we don't reveal margins by business, but I can share with you that the business is profitable before R&D expenses, which was our objective. And we are working towards make it profitable from everything, all costs included.

Next question is from the line of Abdul Abdulkader Puranwala from ICICI Securities.

Sir, my first question is with regards to the JB deal. So now that we have a complete hold on this asset, sir, if you look at JB's numbers, there are certain businesses which have been discontinued. So is that already there into the base? Or there are a few more businesses which you are still evaluating whether to continue or not?

The discontinuation that was done in Q4, that impact would remain in the rest of the financial year, which is what we had shared in the JB earnings call as well. I don't think we're planning to discontinue anything further at this stage.

Okay. Okay. And sir, on the INR 450 crore synergies, so 20% would be in the first year, how should we think about the balance? Would it be year 2 or a slight spillover to the third year as well?

We had shared 20% in the first year, followed by 60% cumulative and then rest -- sorry, 60% to 80% cumulative in the next year and then the last 20% in the third year.

Understood. And sir, just last one from my end on the India business for semaglutide. So with the kind of success we have seen in the injectable space, sir, are we also looking on to any other different form of the drug in the sense as compared to the pin format what we have? Are we also looking in the -- on the vial side or any other different form to launch?

We are looking at vials, but it's not a big priority at the moment. We believe the bigger market opportunity will remain in the pens and the oral. The vial will have its own niche set of opportunity, but we are not too -- I mean, we're not in really any advanced stage to launch the vial right now.

We'll take our next question from the line of Damayanti Kerai from HSBC.

My first question is on your R&D focus. So looking at this quarter's number, how should we look for R&D as a percentage of sales on an annualized basis? And where are these spend going?

So we're at about 5% this year and in FY '26. Maybe incremental 0.5% is what could be expected in the upcoming year. And it would be largely going to India and U.S.

Okay. So for both India and U.S. major of the cost and in the existing business lines, right?

That's correct. That's correct.

Okay. And on India, you have now over 7,000 MRs, which is in line with your earlier indicated number. So looking at '27 plan, do you have plan to add on or expand your team again? Or do you think this is the right size? And now you will just focus on, say, merging with JV and then that will be the MR strength, which is there for the combined portfolio?

So I believe last quarter, we had mentioned that we anyway had a plan to go up to 7,500 in FY '27. That plan continues. That will be executed as per plan. And after that, once we have the full JB MR strength merged as well, then we don't really have any plans to expand further.

Okay. So after reaching 7,500 headcount in Torrent team, then JV will be added and that will be your team size to continue?

That's correct.

Okay. And my last question is, if you can give the split of the base India business in terms of the drivers, volume price and new launches for fourth quarter and then for the full year?

Yes. So for the Torrent base business, the PharmaTrack data shows 14% growth for Torrent. Breakup of the 14% is 3.8% volume versus 1.7% of the market, 6.7% price versus 5.5% of the market, 3.4% new products versus 3.3% of the market. And I believe the full year could be something similar. I don't have it with me right now, but it's not too different.

Okay. And this volume number which we are seeing, semaglutide should be sizable driver there, right, in terms of the pickup, which we saw?

No. In these numbers, there is no semaglutide reflection. It was only the last 9 or 10 days of the March month and so the Q4 that we launched semaglutide or rather everyone launched semaglutide. So there is negligible reflection of semaglutide in this pickup.

Sure. And just I think before I get back in the queue, for the JB mergers, only the NCLT approval is remaining, right? Or correct me if I'm wrong.

That's right.

Only the NCLT part.

There's a final hearing, which will happen with NCLT.

When is that, sir?

It's in the next month.

Next question is from the line of Bansi Desai from JPMorgan.

Just one from my side. So on sema injectable in India, given we are getting this manufactured from our partner, how should we think about the profitability here? And should we assume the margins to improve as the product scales?

Yes. So as any new launch goes in the India market, you start off with lower gross margins because largely the API prices are higher during the launch time and progressively every year, they start increasing. And eventually, in most products, it reaches the overall base business level of profitability or rather gross margin level. So this is a partnered product, so maybe there could be slightly lower gross margins here, but it's not materially lower. We expect a similar trajectory to follow in semaglutide injection as well.

But on EBITDA margins, how should we think about it? Will it reach corporate average at some point in time as product reaches a particular critical mass?

Yes, absolutely. So given the lower gross margin at launch and the higher spend at launch, margin -- EBITDA margin of the sema franchise would obviously be much, much lower. But our approach has anyway been to look at market share first and profitability later. And hopefully, by next year, I think it should start reversing.

And for any reason, if the product really scales to a sizable opportunity for us in India, do we consider having this manufactured in-house, maybe parts of it?

Yes, absolutely.

Okay. And my second question is on oral. Again, if you can let us know, is this product manufactured in-house for us, at least the formulations? And how is the profitability there?

So the product is manufactured in-house. It was developed in-house as well. The API is outsourced. We don't make API. The gross margins currently are lower than the injectable, but we are already seeing the overall semaglutide API prices dropping significantly. So this should also come up to a reasonably high level in the next maybe 6 to 12 months.

Okay. And both for injectables and oral pricing, for you and for industry, how should we think about the price trend? Will this follow the usual IPM trends of 4%, 5% increase every year? Or with competition, you believe that there is room for prices to even go down before it stabilizes?

No, I think already there are products which are -- the competing products which are launched at varying price points. So each company may have decided a different approach, the GTM, go-to-market approach of pricing. In our case, we think this would follow the normal kind of price trajectory of the IPM.

Next question is from the line of Kunal Dhamesha from Macquarie.

If you could highlight how is the attrition level in JB Pharma sales force now versus their own historical track record and relative to Torrent's attrition rate?

JB's attrition was higher than industry average pre-acquisition. It's come down to below industry average in April, so last month. And it's still a long way away from Torrent's base business attrition. But I think by next year, it should be somewhere there. Our base business is somewhere high single-digit attrition.

Sure, sir. And second one on the semaglutide, the supply of pen because we're getting it from partner, let's say, if we continue to hold the market share that we have initially and if the market continues to explode, would we have enough supply from the partner? Or do you think it can become a challenge at some point in time?

So on most SKUs, we don't foresee a challenge. Maybe some SKUs, there could be a challenge because, a, market size is still unknown. It's very early days. So we don't know how strongly this trajectory may continue for the generics to take away share from the innovator. And second, our own market share is higher than what we anticipated. So I don't see a major issue, but maybe on a few SKUs, there could be a temporary challenge there. We can share an update on that maybe by next quarter.

And these SKUs would be mostly higher dosage from SKUs where we might face some challenges?

No. The higher dosage is still picking up in the market because patients start with the lower dose and move up to the higher dose. So more likely in the lower dose, but the contribution to the overall sales in the SKUs that we project where there could be a challenge is pretty low. So we don't foresee any real market share loss because of it.

Sure. And lastly, on Europe business, I believe we have launched biosimilar already. Is that the correct understanding?

Correct.

So is it a partnered product? And if you can elaborate what is our strategy there in Europe and from the biosimilar perspective? And then how the biosimilar business economics are compared to, let's say, our current business economics, which is primarily small molecule? Is it accretive from a profitability perspective, from a return on capital perspective, that would be helpful.

So let me just share with you the landscape is changing very fast. So historically, companies selling biosimilars had large promotional teams and the products are nonsubstitutable and they were not part of the tender process. So hence, companies were building up equity with doctors. So that has changed and it's going to change further. So it is becoming like any other generic product because the products are made substitutable. And moreover, more importantly, the procurement is going to be done in the channel in which we operate, which is through tenders. So those 2 changes just happened in April of this year. So hence, it makes sense for us to be in this area because this is part of our core business, which is to supply products through tenders and substitutable products. So it's early days. We just launched one product. So, so far, the sales are not material. But we find that our partners are good partners in the sense they understand the market, and they will accompany us as the prices keep coming down in the tender system. So I won't comment before that because it's still very early. And we have not yet even quoted in one tender. The tenders are expected. The first one is in the June, July time frame.

And sir, these partners are from, let's say, Asian countries, the manufacturing partner?

So the first one is our European partner.

Okay. Okay. Sure. But would you eventually look at Asian partners?

Yes. Our goal is to build a portfolio as this market becomes more and more like the generic market. So we are open to partnerships around the world, and we are looking at them.

Next question is from the line of Saion Mukherjee from Nomura.

Aman, since Torrent has emerged as the largest player in sema and you have all the formulations in play, so like 2 months have passed, what is your sense how large this market would be, let's say, 4, 5 years down the line? And if you can talk about the dynamics that's there between different formulations that you are selling, someone where you have to change the cartridge, the other one where it's more of a use and throw, there are pluses and minuses. If you can share what's been the experience, which is the kind of formulation which is gaining more traction? And obviously, how big this sema market can be, let's say, 4, 5 years down the line?

So it's anyone's guess what the market size could be in 3, 4, 5 years, but certainly, it's looking to be significantly larger than any product launch that we've seen. Our own launch, we can talk about more, which is in all 3 formats. The general reception from prescribers has been that the closer the product is in terms of convenience and users to the innovator, that's received a higher acceptance because it's less education involved and more ease of educating the patients as well. So that's been the trend that has been seen. In terms of our own market -- or our own sales expectations for semaglutide, they are bearing higher than what we had internally projected. Just to give a kind of comparison, the previous kind of high market share launch that we had was sitagliptin in '23. That did about INR 70 crores, INR 75 crores in the first year, and that was probably amongst our best launches in the last decade. That's again in the diabetes space. We had about 20%, 22% market share out of generics. In comparison, I think we may be looking at something like INR 200 crores to INR 250 crores for semaglutide at this stage. It could vary. We can share an update in the next coming quarters, but that's the difference in the opportunity size that we're seeing. So we don't want to comment on how big the market will be in 2, 3 years because things can change a lot, and there's a lot more innovative pipeline also coming in the next 1, 2 years. So the preference of prescribers will keep changing. There's more oral innovation also happening. Those products may come in the market in the next 1, 2 years. So everything is still very dynamic. But in the overall scheme of things, it's still by multiple factors, the biggest launch that we have seen and probably the biggest opportunity for the industry.

Understood. Just one follow-up on pricing comment that you made where you expect the pricing to be similar to any other product, which means it would be inflationary. But I understand that in oral, for instance, Dr. Reddy's launch is at a materially lower price. Is that true? And like how would that work out? Or do you think that's an exception and most of the launches going forward would be closer to the price point that you have?

No, I think in the injectable, that is not really the case. I think the price, once you launch it, at least we are sticking to it. We have no plans to reduce it. In terms of the oral, you're right, the Dr. Reddy's did launch at a lower price, but we have also reduced our price to INR 109 per tablet compared to INR 149. The reason for the higher price initially was that we had the much higher API that we procure -- much higher priced API that we procured prior to launching it. So the first 2 months, we didn't have an option but to launch it at a higher price. Now if the API prices are reducing, even the oral, we've taken the reduction, but I don't foresee any further reduction in pricing from -- for the oral [indiscernible].

As there are no further questions, I now hand the conference over to management for closing comments. Over to you.

Thank you very much for your interest in Torrent, and we look forward to being in touch with you soon. Thank you.

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