Sun Pharmaceuticals Industries Ltd. ADR (OTCPK:SMPQY) Q1 2023 Earnings Conference Call July 29, 2022 9:00 AM ET
Company Participants
Nimish Desai – Head of Investor Relations
Dilip Shanghvi – Managing Director
C.S. Muralidharan – Chief Financial Officer
Kirti Ganorkar – Chief Executive Officer, India Business
Abhay Gandhi – Chief Executive Officer, North America
Conference Call Participants
Kunal Dhamesha – Macquarie Group
Prakash Agarwal – Axis Capital Limited
Damayanti Kerai – HSBC
Neha Manpuria – Bank of America
Krish Mehta – Enam Holdings Pvt. Ltd
Sameer Baisiwala – Morgan Stanley
Surya Patra – PhillipCapital
Dhara Patwa – SMIFS Limited
Nimish Mehta – ResearchDelta Advisors
Naushad Chaudhary – Aditya Birla Group
Alok Dalal – CLSA India Private Ltd.
Saion Mukherjee – Nomura Securities
Operator
Ladies and gentlemen, good day, and welcome to Sun Pharma’s Q1 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Nimish Desai. Thank you, and over to you, sir.
Nimish Desai
Thank you. Good evening and a warm welcome to our first quarter FY 2023 earnings call. I’m Nimish from the Sun Pharma Investor Relations team. We hope you received the Q1 financials and the press release that was sent out earlier in the day. These are also available on our website.
We have with us Mr. Dilip Shanghvi, Managing Director; Mr. C.S. Muralidharan, CFO; Mr. Abhay Gandhi, CEO of North America; and Mr. Kirti Ganorkar, CEO of India Business. Today, the team will discuss performance highlights, update on strategies and respond to any questions that you may have. As is usual, for ease of discussion, we will look at consolidated financials. Just as a reminder, this call is being recorded and a replay will be available for the next few days. The call transcript will also be put up on our website shortly.
The discussion today might include certain forward-looking statements, and this must be viewed in conjunction with the risks that our business cases. We are requested to ask two questions in the initial round. If you have more questions, you are requested to rejoin the queue. I also request all of you to kindly send me your questions that may remain unanswered today.
I will now hand over the call to Mr. Shanghvi.
Dilip Shanghvi
Thank you, Nimish. Welcome and thanks for joining us for this earnings call after the announcement of financial results for the first quarter of FY 2023. Let me discuss some of the key highlights. Consolidated sales for the quarter were at Rs. 106 billion recording a growth of about 14% year-on-year on like-to-like basis, excluding the contribution of COVID products from quarter 1 last year. The reported top-line growth was 10% year-on-year and 13% quarter-on-quarter. All our businesses witnessed good growth driven by a combination of robust growth of our specialty business and all-around growth across all markets.
Let me now update you on our global specialty business. For first quarter, our global specialty revenue was approximately US$191 million across all markets recording a growth of 29% year-on-year. Ilumya, Cequa, Odomzo were the growth drivers, while Winlevi is also gradually ramping up. Specialty R&D accounted for approximately 21% of our total R&D spend for the quarter. Abhay will give you more details on the specialty business later.
I will now hand over the call to Murali for discussion of our first quarter financial performance.
C.S. Muralidharan
Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you. Our Q1 financials are already with you. As usual, we will look at key consolidated financials. We recorded the highest ever quarterly revenues in Q1 with sales at Rs. 106 billion, up by 14% year-on-year, excluding the contribution of COVID products for Q1 last year. On a reported basis, sales are up 10%, material cost as a percentage of sales was 27.2%, while staff cost stands at 19.5% of sales.
Staff costs are higher over Q1 last year due to overall merit increase, full quarter consolidation of the Alchemee acquisition and expansion of the sales force in India. Other expenditure stands at 28.6% of sales higher than Q1 last year. The increase in other expenditures is attributed towards higher selling and promotion expenses, and consolidation of the Alchemee business. As indicated in our past earnings call, the expenses are seeing an increasing trend across all the markets as we reach full normalization.
ForEx gain for the quarter was Rs. 1,457 million, compared to gain of Rs. 799 million for Q1 last year. EBITDA for Q1 was at Rs. 28,844 million, including other operating revenues up by 2% over Q1 last year, with EBITDA margins at 26.8%. The single-digit growth in reported EBITDA year-on-year is due to multiple factors like normalization of selling and promotional expenses for full quarter of consolidation of Alchemee acquisition, salesforce expansion in India, an absence of COVID product contributions in the current quarter.
Reported net profit for Q1 was at Rs. 20.6 billion, up 42.7% year-on-year compared to Q1 last year. Excluding the exceptional items of Q1 last year, the adjusted net profit was up by 4.1%, reported EPS for the quarter was at Rs. 8.60 per share.
Let me now discuss the key movements versus Q4 FY 2022. Our consolidated sales higher by about 13% quarter-on-quarter at Rs. 106 billion. Staff costs have increased in absolute terms quarter-on-quarter on account of annual merit increases, expansion of salesforce in India on full quarter consolidation of Alchemee. Other expenses are higher due to increase in selling, promotional and travel expenses as well as consolidation of Alchemee acquisition.
EBITDA for Q1 at Rs. 28,844 million was higher by 23% compared to Q4. EBITDA margin for Q1 was 26.8% compared to 24.8% for Q4 of last year. Net profit for Q1 at Rs. 20.6 billion was higher than the adjusted net profit of Q4 by about 30%. As of 30 June, 2022, net cash value was $2.2 billion at consolidated level, and about US$860 million at the ex-Taro level.
Let me know briefly discuss Taro’s performance. Taro posted Q1 FY 2023 sales of US$156.7 million, a net profit of US$14 million. Taro’s financials include the first full quarter of consolidation of the Alchemee acquisition.
I will now hand over to Mr. Kirti Ganorkar, who will share the performance of our India Business.
Kirti Ganorkar
Thank you, Murali. Let me take you through the performance of our India Business. For Q1, the sales of formulation in India were at Rs. 33,871 million, up by 13% on like-to-like basis, excluding COVID product sales of Q1 last year. On reported basis, the growth is 2.4% over Q1 last year. India formulation sales accounted for about 32% of total consolidated sales. There were no COVID product sales in Q1 of this year. In terms of core business growth, we continue to witness good growth across therapies in chronic and the subchronic segment for the quarter. We have mentioned the trend of the past few quarters of outperforming the average industry growth, which has led to increase in our overall market share.
As per AIOCD AWACS June 22 MAT data, our market share has improved by about 0.5% over the last 1 year to 8.5%. As per SMSRC report, we are number one ranked by prescription with 11 different doctor categories. The expansion of the sales force in India is on track, and we have achieved about 90% of the targeted hiring. While we continue to increase our reach and access, we are also focused on continuously increasing our share across key therapies and improving overall productivity.
For Q1, we launched 22 new products in the Indian market. We also continue to remain the partner of choice for in-licensing of products even our strong number one position in many therapy areas, including therapies for the treatment for COVID infection, coupled with our large distribution network.
I will now hand over the call to Abhay.
Abhay Gandhi
Thank you, Kirti. I will briefly discuss the performance highlights of our U.S. businesses. For Q1, our overall sales in the U.S. grew by about 11% over Q1 last year to US$420 million. While all our businesses in U.S. have grown, the main driver of growth was a specialty business driven by Ilumya, Cequa, Odomzo and Winlevi. U.S. accounted for over 30% of consolidated sales for the quarter. Specialty sales have also grown compared to March 2022 quarter, despite the seasonal decline in LEVULAN sales.
While doctor clinics have been opened in the U.S. during the quarter, the situation has yet to fully normalized, patient flow to doctors clinics, as well as frequency of doctor calls by our medical reps are both still below pre-COVID levels. Winlevi is gradually ramping up, and more than 10,000 doctors have prescribed the products till date.
Let me now update you on our U.S. generics business. While the U.S. generic business continues to be competitive, the Sun ex-Taro generics business has recorded growth both on YoY and quarter-on-quarter basis. This growth is driven by a combination of new launches, market share gains for existing products, and better supply chain management. For Q1, we launched 2 new generic products in the U.S. market on ex-Taro basis.
I will now hand over the call to Mr. Shanghvi.
Dilip Shanghvi
Thank you, Abhay. I will briefly discuss the performance highlights of our other businesses, as well as give you an update on our R&D initiatives. Our sales in emerging markets were at US$245 million for first quarter, up by around 12.6% year-on-year. There has been significant volatility in various emerging market currencies, which is impacted our reported growth. The underlying growth in constant currency terms was about 16%.
Emerging markets accounted for about 18% of total sales for first quarter. In emerging markets, we have presence in the branded generic space, and it continues to perform well, and these maintain our strong positions in key markets. Formulation sales in rest of the world markets excluding U.S. and emerging markets, were US$190 million in first quarter up by around 3% over first quarter last year. The rest of the world markets accounted for approximately 14% of consolidated revenue.
API sales in the first quarter were Rs. 5,987 million, up by about 16% over first quarter last year. We continue to invest in building the R&D pipeline for both the global generics and the specialty businesses.
R&D efforts are ongoing for the U.S. emerging markets, the rest of the world markets, and for India. Consolidated R&D investments for first quarter were at Rs. 4,608 million compared to Rs. 5,926 million for first quarter last year. Lower R&D spending is a timing issue and we expect it will gain momentum and be in line with our guidance in the rest of the quarters.
Our current generic pipeline for the U.S. includes 89 ANDAs, and 13 NDAs, awaiting approval with the U.S. FDA. Our specialty R&D pipeline includes 4 molecules undergoing clinical trials. Ilumya is undergoing a Phase 3 trial for psoriatic arthritis, while SCD-044 an oral dermatology product is in Phase 2 trials for psoriasis and atopic dermatitis. MM-II is also in Phase 2 trial for treatment of pain in osteoarthritis. Our GLP-1 agonist GL-0034 is undergoing a Phase 1 trial for Type 2 diabetes.
With this, I would like to leave the floor open for questions. Thank you
Question-and-Answer Session
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead.
Kunal Dhamesha
Good evening. Thank you for taking my question. The first one on Taro, is there any one-off related to integration cost in the SG&A expense for quarter 1?
Dilip Shanghvi
I mean, Taro, we cannot give information beyond whatever Taro has shared. So sorry, but I can’t respond.
Kunal Dhamesha
Okay. And second one on psoriatic arthritis trial. We were looking at some revised timelines on that, because some centers where I think – there were some issues and we were looking at new centers, all those have been figured out, or is it still ongoing? Any timeline in terms of when the trial can get completed.
Dilip Shanghvi
We have not given guidelines of the completion of the trial, but the – what you call challenges in both Ukraine and Russia have contributed to potential delay.
Kunal Dhamesha
But does it also affect our U.S. timeline for that product?
Dilip Shanghvi
I mean, the product is a multi-sensor global study, I mean the trial. So based on which then we will file in all the markets, so it will effect.
Kunal Dhamesha
Okay. So to that extent, if you’re not able to solve that or till the Russia-Ukraine thing, there’s no basically normalize?
Dilip Shanghvi
They have to make up for that in some other country.
Kunal Dhamesha
Okay. So then there is some upside this core, basically R&D could even be lower in the coming quarter.
Dilip Shanghvi
We are addressing the issue.
Kunal Dhamesha
Okay. Thank you.
Dilip Shanghvi
Thank you.
Operator
Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Prakash Agarwal
Yeah. Hello, good evening. My question is on the cost, which is staff and SG&A, R&D. So both these places, there has been a double-digit growth both YoY and QonQ. So is it a function of currency or inflation or increased promotions, both in India and U.S.? If you could just give some color? And is it here to stay?
C.S. Muralidharan
So, as far as expenses is concerned, we already said that it will be inching up as the operations normalize across the markets, and with the increasing sales in India Valcyte [ph] business and also in our global revenues and normalized operations. These expenses increased to the current level and there is no specific ForEx-related component including that.
Prakash Agarwal
But I mean only because of India? Or are there promotional, which is…
C.S. Muralidharan
This is across markets.
Prakash Agarwal
And if there could be any comment on the U.S., if you have increased your promotion with respect to your growing specialty portfolio?
C.S. Muralidharan
This is very difficult to comment specifically if any market, how much increase happened towards SG&A.
Prakash Agarwal
Okay. So these are all base level cost increases, which are here to stay there’s no one-off as such?
C.S. Muralidharan
No. No. There is no one-off.
Prakash Agarwal
Okay, perfect. And I think, Dilip, I mentioned about R&D in the timing issue, but all of last year also we had lower than guidance R&D. So just trying to think this better, the trials are ongoing. In the past, you said, as a color that recruitments have been delayed, but I think world in the last 6, 12 months is coming back, already come back to normalcy. So if you could give more details, and why we are seeing that kind of timing issue that would be very helpful? Thank you.
Dilip Shanghvi
No. I think, we are saying that rest of the year, the R&D spend will make up. So if you see the percentage of the innovative R&D has come down significantly, so which is what we are expecting will go absolutely, overall percentage of the innovative R&D in the total R&D cost will go up.
Prakash Agarwal
Okay. I missed the percentage, sir. Could you please help me with the percentage?
Dilip Shanghvi
So we’ve indicated that innovative R&D is 21% of the total R&D spend.
Prakash Agarwal
For the quarter?
Dilip Shanghvi
For the quarter. Yes.
Prakash Agarwal
Okay. Perfect. Thank you, sir, and all the best.
Dilip Shanghvi
Thank you.
Operator
Thank you. Participants, next question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Damayanti Kerai
Hi, thank you for the opportunity. My question is on Cequa. So post-entry of generic for Restasis, have you seen any change in market dynamics for pricing or prescription pickup for the branded products, including your Cequa brand?
Abhay Gandhi
Not really, Damayanti. If you see the market share, even post-launch of the generic, we’ve been able to show an increase in market share. So we are able to navigate through the situation.
Damayanti Kerai
Okay. And anything on the pricing part or it’s similar as compared to the generic entity?
Abhay Gandhi
So all segments of business put together, I don’t see an impact – a negative impact on the pricing.
Damayanti Kerai
Sure, Abhay. And my second question is on Halol plant. What is update there? And any timeline or any updates you all heard from the FDA?
Abhay Gandhi
No. We are awaiting the EIR, which means Establishment Inspection Report. Post which, we can then update. But otherwise, we continue to update FDA about the remediation for all the 483s that we have received.
Damayanti Kerai
Sure. Thank you. I’ll get back in the queue.
Abhay Gandhi
Yeah. Thank you.
Operator
Thank you. Next question is from the line of Neha Manpuria from Bank of America. Please go ahead.
Neha Manpuria
Sir, thank you so much for taking my question. The first question is on…
Operator
Ma’am, sorry to interrupt you. Your voice is not clear.
Neha Manpuria
Is it better now?
Operator
No, ma’am.
Neha Manpuria
Okay. Is this better?
Operator
Yeah, slightly better than before.
Neha Manpuria
Okay. Sorry about that. Abhay, on Winlevi, if I were to look at the prescription data, there seems to be some sort of a stabilization after the initial momentum that we saw in the product. Has there been any change in the promotion that is leading to this? And what’s your view on Winlevi’s contribution meaningfully in sort of increasing to the specialty sales that we are reporting, any sense there?
Abhay Gandhi
So, I mean, if I look at the data, I see quarter-on-quarter, we have grown by nearly 22%. I don’t know why you say that there have been set up a slowdown.
Neha Manpuria
No, I’m looking at it more in the, let’s say, last 6, 9 weeks probably.
Abhay Gandhi
Oh, I mean, don’t forget, these are also the summer months where derm products generally each month slow down a bit. So therefore, if you’re looking at 6, 8 weeks, 9 weeks kind of a period, you’re right. But then I look at it on a quarter-on-quarter basis even in a slow quarter if we have grown by 22% that’s a reasonable number.
Neha Manpuria
And there is no change in promotions in Winlevi since our launch, right?
Abhay Gandhi
I mean, when you say change, I mean, there is nothing which is authentic [ph]. Of course, we will keep looking at what is it that we learn about the product as we promote and make improvements as we go along. So the change will always be there. But it’s a change for the better is what we hope.
Neha Manpuria
Okay. And in terms of contribution of Winlevi, when do you think you have adequate formulary coverage to start seeing Winlevi contribution, I know, it’s difficult to sort of trend that down. But in your view, what is your assessment based on your conversation with the formulary?
Abhay Gandhi
So product wise, we don’t give the split, but we have always been very positive and optimistic about Winlevi. And otherwise, would not have had 10,000 doctors in some 7, 8 months prescribing the product. And we continue to invest on the product and with the hope that it will be an important contributor to the overall business.
Neha Manpuria
Understood. And my second question is on, the emerging markets business. Closed about 5, 6 quarters now, we’ve been seeing very strong double-digit growth in that business, despite the FX volatility. Is there anything that you would like to highlight in that business? What’s the strategy for growth there, is it profitability going to put into market? Any color there, please?
Abhay Gandhi
Yeah, I missed the question.
Operator
Ma’am, sorry. But again, your voice is breaking, ma’am. May I request you to rejoin the queue, if possible?
Neha Manpuria
Sure.
Operator
Thank you. Next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Krish Mehta
Thank you for taking my question, and congratulations on a great quarter. My question was on other income, if you could just provide some explanation on why the other income was really low this quarter? And how you see it going forward given the large cash balance that we have on our books?
C.S. Muralidharan
So other income’s definition is not really core to overall business, it comprises various moving parts, including fair valuation of U.S. price, certain factory income across multiple geographies, which do fluctuate from quarter-to-quarter. So I think in my overview, comparison strictly on a quarter-to-quarter may not be correct.
Krish Mehta
I was actually looking at it over the last 16 quarters, and we’ve always tended to be above Rs. 100 crores, and given it was Rs. 2 crores. I was wondering if there’s a one-off, if there’s a trend.
C.S. Muralidharan
No. There is no one-off. There is no one-off.
Krish Mehta
Okay. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala
Thank you, and good evening, everyone. First question is on Pentasa, so good launch. Did this 1Q results capture full 3 months impact, including launch inventory? Or was it less?
Abhay Gandhi
This captures the whole quarter.
Sameer Baisiwala
You launch in the middle of May. So therefore, I want….
Abhay Gandhi
You’re talking the approval period. We’ve launched it in the month of May, actually. So it’s 1.5-month sales roughly that we are able to capture.
Sameer Baisiwala
And plus some launch inventory? So…
Abhay Gandhi
What do you exactly mean by launch inventory? We didn’t stock up the distributors. If that’s the question, did we like stock it up? No.
Sameer Baisiwala
Okay. This is very useful. And the second question is on Winlevi. First is on the expansion of the deal to newer markets. So if you can just get us, how much regulatory work needs to be done here? And how meaningful can this be? I mean, just qualitatively if you can.
Abhay Gandhi
No, I think, Sameer, regulatory work in different countries are different. In some country, we just have to file the existing product with existing studies. In some country, we have to do some kind of zone for stability study or those kinds of things. Especially in Japan, I think we will have to run the Phase 2, Phase 3, for sure.
Sameer Baisiwala
Okay. So, sir, it’s fair to say that it’d be at least 1 year before the approval cycle begins in these new markets?
Abhay Gandhi
Minimum.
Sameer Baisiwala
Okay.
Abhay Gandhi
Because many countries have approval cycle of 2 years.
Sameer Baisiwala
Okay, yeah. Fair enough. And just for the U.S. market for Winlevi, Abhay, would it be fair to say that large part of the prescriptions being generated, our end of co-pay scheme and a smaller portion has been getting reimbursed?
Abhay Gandhi
I mean, you can say that. Do remember co-pay also leads to a realization, so it’s not exactly like free. But we are increasingly seeing that a lot of our prescriptions are actually going through the payer system even without contracting. So that’s very useful, because it shows that doctors are interested enough in the product to take the effort of raising the priority.
Sameer Baisiwala
Okay. But including that also what’s going directly through payers, so – but still larger part is co-pay. And you say co-pay, of course, you get some money, but it’s just barely about covers the costs, and maybe little bit margin?
Abhay Gandhi
You’re putting words in my mouth, Sameer. But, yeah, I mean, I would – okay, let me just say that if everything goes through the payer system, I would be the happiest person.
Sameer Baisiwala
Okay. Fair enough. And on LEVULAN, when you see, Abhay, the sales getting restored back to pre-COVID levels?
Abhay Gandhi
Very difficult question to answer. Because, if I see in the U.S., Sameer, even today the social distancing norms and I’m talking in clinic, not in the outside world, how many patients are taken up in a day and all that is much lower than what it used to be in the pre-COVID types. So to that extent, the throughput per doctor has definitely come down. Having said that, I mean the number of doctors who are now doing PBT [ph] therapy has increased from what it used to be like a year or 2 years ago. So between the positive and the negative pull, what really translates as a growth is very difficult for me to estimate at the moment.
Sameer Baisiwala
Thank you so much. Yeah.
Operator
Thank you. Next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Surya Patra
Yeah, thanks for this opportunity. Sir, just first on the Alchemee, since it has been integrated and it has obviously had implication on the staff cost rise, other expenses rise and all that. And this quarter, we have seen kind of a meaningful underperformance at Taro end also. So just to understand a bit whether this is a kind of a profit-making company or it is a loss-making company? Or how – what is the kind of profitability of it’s the portfolio that has been added? Some sense on that if you can give, it would be helpful.
C.S. Muralidharan
So this is Murali. I think, we all – what Taro has disclosed, we’ll be unable to formulate any further information on Alchemee acquisition.
Surya Patra
Okay. Fine. Second question is on the Revlimid. So, now are you in a position to get the launch timeline for this? And that is first. And secondly, on this, so do you think the competitive intensity could be higher than what it was earlier expected among the first wave launch place, because what we are seeing that although it is a volume limited kind of condition that is there for everybody? But in case of Taro, it seems a double-digit kind of a – double-digit percentage of volume that they have done post-lunch. So do you see the condition of limited volume one is not so rigid, and people can do more than what it is mentioned in the terms?
C.S. Muralidharan
No, I think, every company has their own different contract and agreement with the innovator. So once you’re bound by a contract, you abide by it. So I think that’s a simple answer to your question. Even we will abide by whatever we have committed in our contract. So I think that should answer the latter part of your question. As to the first part, I mean, internally, I am clear when we will be likely to launch. But, on our calls, we don’t give product price details, so when exactly we are launching, that’s also competitive information.
Surya Patra
Okay. Just last question on the salesforce addition, so we had indicated around 10% kind of arise in the current financial year. So when you said that 90% of the targeted addition has been done, so that means the full cost impact of that has already been reflected in the numbers. Is that right?
C.S. Muralidharan
Yeah. That’s correct.
Surya Patra
Okay. Okay. Sure. Thank you, sir. Thanks a lot.
Operator
Thank you. Next question is from the line of Dhara Patwa from SMIFS Limited. Please go ahead.
Dhara Patwa
Yeah. Hi, good evening, all. So I have a question regarding, Ilumya. Since the trials are ongoing term psoriatic arthritis. So how does the pricing differ? Do we keep the same pricing as the current indication of psoriasis or the pricing differ for different indication?
Dilip Shanghvi
I think pricing for every product is a function of appropriately choosing the price, which will allow you to get appropriate reimbursement as well as access in different formularies. So it’s difficult to respond today, because it’s better to take those decisions closer to the market and we have to remain competitive with whatever the pricing for IL-23 for that indication would be at that point of time, so that we can get good acceptance.
Dhara Patwa
So, sir, it may be fair to assume that whatever the competitors are offering will be more or less 10%, 20%, I think?
Dilip Shanghvi
I think that is how we have priced Ilumya for psoriatic arthritis, that’s in line with a competitive pricing for psoriasis. So we will continue with the same practice.
Dhara Patwa
Okay. Got it. And, sir, I wanted the CapEx guiding for FY 2023?
Dilip Shanghvi
I mean we have not given any specific guidance, but we have no major investments. However, in any case, some kind of debottlenecking of minor upgradation. We would generally spend a few Rs. 100 crores every year.
Dhara Patwa
Okay, sir. That’s it. Thank you.
Operator
Thank you. Next question is from the line of Nimish Mehta from ResearchDelta Advisors. Please go ahead.
Nimish Mehta
Yeah, thanks for the opportunity. Just one question on Halol. Sir, have you been able to…
Operator
Sir, sorry for interrupt you. Your voice is not coming clear. Can I request you to speak through the handset?
Nimish Mehta
Sure. Sure. Just one second. I hope, is it better?
Operator
Yes, sir. Thank you.
Nimish Mehta
Yeah. So my question is on Halol. Is it fair to assume that you have been able to shift on the injectable approvals that were held up at Halol to other facilities? Or it’s still work in progress? How do we look at it?
Dilip Shanghvi
No, I think we’ve not responded to the issues specifically about Halol. We hope that we should get approval once we will get the EIR, some of the critical product on a safety basis, we may evaluate transfer to the third party.
Nimish Mehta
But as of now, we have not really shifted any products to other facility? Is that fair to assume?
Dilip Shanghvi
Yeah. Not yet.
Nimish Mehta
Okay. Okay, fine. Thank you very much.
Operator
Thank you. Next question is from the line of [Harish] [ph] from IDFC Asset Management. Please go ahead.
Unidentified Analyst
Yeah, I hope, I’m audible.
Operator
Yes, sir. You are.
Unidentified Analyst
Yeah. Thank you for the opportunity. I just had one particular question. So just wanted to get your view on the sitagliptin genericization, what is the ground level understanding as of today? I mean, I understand that it might be a little bit early to comment, because the market formation is yet to happen. The transition is taking place. So just wanted to get your view like what do you see as the upside to the overall transition any particular risks that we are seeing right now? And which particular molecules should be possibly more at risk in terms of lupins [ph], or would it be more towards glimepiride, so any thoughts on that transition?
Dilip Shanghvi
I think it’s a very broad question about sitagliptin marketing. So, what I can say is the patent got just expired on July 5. So we are too early to the market. And as of today, as I understand that there are 25 companies, which has launched the generic products, and the pricing is in the range of Rs. 9 to Rs. 10 for 50 milligrams. And the market dynamics is very competitive, as everyone is trying to get market share out of what market share Sun has and Merck had. So we have about 33% market share. And our objective is even was patent expiry, how do we protect our market share and grow over that? That’s what we can say.
The other question on DPP4 like sitagliptin will impact other therapy areas is very difficult to say. Maybe after 1 or 2 quarters, we will have more clarity on how it is impacting the other therapies.
Unidentified Analyst
Okay. Thank you.
Operator
Thank you. Next question is from the line of Naushad Chaudhary from Aditya Birla. Please go ahead.
Naushad Chaudhary
Hi, thanks for the opportunity. Just a clarification, sir. If I look at your specialty business, the quarterly run rate that has crossed our targeted annual rate of around $750 million, if I remember it correctly. So would you like to revise your target here and what we should expect in FY 2024 and 2025 from this piece of business?
C.S. Muralidharan
So, Naushad, do you want to clarify that we have not given any annual target or guidance on a global specialty sales. So I think it’s important to recognize that as such, we are not giving any guidance on any specific individual business.
Naushad Chaudhary
Okay. So in terms of growth rate, should we expect this kind of momentum to be continued in this business?
C.S. Muralidharan
No, I think you should factor everything that we’ve given within our guidance. It’s a mixture of how we expect all our businesses to perform that will include specialty, generic, all markets.
Naushad Chaudhary
Okay. And, lastly, in terms of our exceptional cost and provision, if I see a last 4 or 5 years, the quantum has been quite high versus in this quarter, I won’t see there is much of that. So should we – going forward, should we expect the magnitude of that should come down significantly?
C.S. Muralidharan
So, in terms of litigation, we have given expressed disclosure or annual report ongoing litigation. And these matters will had decided as and when litigation come up for hearing and content on this point of time, we will not be able to comment any outcome of these litigations.
Naushad Chaudhary
All right. Thank you. That’s it for my side.
C.S. Muralidharan
Thank you.
Operator
Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead. Neha, may I request you to unmute your line from your side, and go through with the question, please. You did not response, we move to the next participant.
Next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala
Yeah. Thanks. A question on India Business. When you do go down to smaller cities and towns, any thoughts that you can share? What is the limiting factor for you to drive growth? Is it the less healthcare infrastructure or doctors? So just your thoughts on that would be great?
Dilip Shanghvi
Yeah, Sameer, what is the question?
Sameer Baisiwala
Well, so the question is, since to drive India growth, we’re trying to geographically expand which I read as going into smaller towns and cities. So when you are doing that now at a larger scale, what do you think is the key limiting factor for you to expand your business? I hope I’m clear.
Dilip Shanghvi
No, I actually I don’t understand the question. What is the limiting factor means, we remain very positive about our India Business to be able to continue to grow. The reason why I think we are expanding is that we are seeing that over time, as a result of the trickle down. And also because in some of the specialty we were not reaching out to 100% of the universe, there is an expansion, but, Kirti, can explain.
Kirti Ganorkar
No, I think, what you are assuming, but we are going into rural markets and smaller town, that’s not correct.
Dilip Shanghvi
That is not correct.
Kirti Ganorkar
That’s not correct. So when we are saying we are expanding, it’s not necessarily we were expanding into smaller towns and rural areas. There is a lot of expansion is happening in metros and Tier 1, Tier 2 cities.
Sameer Baisiwala
Okay. That’s fine, sir. I will maybe take it offline. So – and the other question is, is there any update on the biosimilars? I think you had mentioned a few quarters back, that you’d be commencing both on this.
Dilip Shanghvi
No. We also said at that time, Sameer, that we are looking at products in the third wave of approvals in the sense that we want to be in time for the launch along with patent expiry, but products that are likely to be going off-patent in the third wave. So that, I think, that we are pursuing.
Sameer Baisiwala
Okay, still early days. Okay, that’s fine. And, sir, I’m a little confused about the Taro’s results, and I know, you’re not taking any questions on that. But I just express, what’s going on my mind. So – and they don’t do a call. So unfortunately, we can’t ask anyone else. So the small point here is that if I see pre-Alchemee and post-Alchemee full quarter impact. The sales have just grown about $15 million or something like that, and the cost has gone up just the SG&A about $30 million. So it’s almost a big negative factor this one.
And second, my understanding was, I think, 2021 full year, Alchemee’s total sales was more like $160 million, $170 million. So actually on a quarter basis, it should be a much higher number to begin with. So I’m just wondering whether the Taro’s result is a quarter as usual – business as usual, or is it something – it’s going to get better as we go forward.
Dilip Shanghvi
No, I think, Sameer, you started the question in a way which I think you understand, that’s difficult to share beyond whatever that we have shared. And I understand that the challenge that you have in terms of putting a certain kind of model. However, I think, if you look at it in a positive way, then in spite of a loss of potential profit in Taro of almost $30 million. We’ve grown profitably. So even if I think philosophically looking at that in our business, there will be challenges in product or in some subset of business. How do we find a way to make up for that challenging as a company overall in the business, and that’s how we want to run the business on a long-term basis.
Sameer Baisiwala
Yeah. Very clear. Thank you so much.
Dilip Shanghvi
Thank you.
Operator
Thank you. The next question is from the line of Kunal Dhamesha from Macquarie Capital. Please go ahead.
Kunal Dhamesha
Thank you for the opportunity, again. This one is on Winlevi. So given Winlevi was already approved at the time of North America in licensing agreement, did that agreement included some form of initial inventories to be transferred to Sun Pharma?
Dilip Shanghvi
Sorry, what is the question? Initial inventory?
Kunal Dhamesha
Yeah. So, I mean, the upfront payment of $45 million in the agreement would have also included some kind of inventory, because it was already approved product and we were about to launch.
Dilip Shanghvi
Whatever we have disclosed is disclosed. There is nothing on inventory that I can specifically answer to. It was not a marketed product, that’s where you’re going. It was an abroad product, but not a marketed product.
Kunal Dhamesha
Okay. So the supply would have only started just before…
Dilip Shanghvi
Also you have to understand that the product came with Sun label. So it theoretically cannot be part of the – it was introduced for Sun [ph] after the agreement was signed in a certain transition period that we had agreed to. So there was no buying or something of an existing inventory, if that’s where you’re going with discussion.
Kunal Dhamesha
Okay. Clear. Thank you.
Dilip Shanghvi
Thank you.
Operator
Thank you. Next question is from the line of Prakash Agarwal from Axis Capital Limited. Please go ahead. Prakash, may I request you to unmute your line from your side, and go through the question, please.
Prakash Agarwal
My question is on the impact of the trade generics and private labels, which are in a way impacting the volume of the market. You see 3, 5 years of volume has been really dismal. What is our sense and what is our strategy to have a volume growth? And do we see this impact increasing for the market as well?
Dilip Shanghvi
Which market are you referring to?
Prakash Agarwal
IPM, branded generic.
Dilip Shanghvi
IPM?
Prakash Agarwal
Clearly in terms of volume share, right?
Dilip Shanghvi
Yes. You are talking of the generic-generics versus branded-generics, right? That’s the question.
Prakash Agarwal
So we have seen the IPM last 10-year growth, 5%, 6% has been volume growth, 3% price and 3% new products. If you see the last 3, 5-year trend ex-COVID also the volume has come down to 2%, 3%. Is this due to the – I mean, my sense is there is some impact from trade generics and private labels, which is leading some volume share. What is your view going ahead that this is going to continue and increase? And what is our strategy to come back that?
Dilip Shanghvi
In my view, we are growing well both by volume and value also. And the impact of this – even if it’s some impact, it will not be a meaningful impact. That’s my sense, probably.
Prakash Agarwal
But can you – being a market leader, can you comment on the market volume impact also?
Dilip Shanghvi
Sorry.
Prakash Agarwal
The question is, do you foresee this impact increasing for the market?
Dilip Shanghvi
It’s difficult to predict that’s what will happen.
Prakash Agarwal
No. Also get this parallelly we have to understand that excess is continuously increasing, because affordability of drugs, financial capacity to pay is constantly increasing. So maybe a small part of that will go to this.
Dilip Shanghvi
The percentage of that how much it will impact the future there.
Abhay Gandhi
No. I mean, we will continue to grow.
Prakash Agarwal
Okay, understood. And on the NPPA side also we haven’t seen price increase for – sorry, price control expansion for some time now, the last list was 2015, and then there were some small list coming in. Are you in discussion with the regulatory authority and what thought process we are using pricing increases. I mean we have taken – everybody has taken price increase. But for the core portfolio, essential product list, what is your sense on the price rationalization, which might come?
Dilip Shanghvi
No, no, you’re talking of when NPPA will come with the new, we are not aware of that. Yeah.
Prakash Agarwal
Okay. Okay. I guess, it’s long overdue. So that’s why I was asking. Okay, no problem. Thank you.
Operator
Thank you. Next question is from the line of Alok Dalal from CLSA India. Please go ahead.
Alok Dalal
Yes, good evening. Dilip, when do you expect Ilumya approval in China and the African market?
Dilip Shanghvi
No. I think we’ve shared with you the date on which we have filed the Chinese product, because it needed to do some clinical studies and all of that. So it’s difficult to predict, there is a certain amount of process that we need to follow, hopefully, we should be able to close all these issues in 12 months. But I’m not predicting that we will launch the product in that time, because regulatory issues difficult to predict till we get the approval.
Alok Dalal
Okay. And on the African market?
Dilip Shanghvi
Which African market? We haven’t said anything about any African market.
Alok Dalal
Okay. I thought there is an out-licensing for – with Hikma as well, I mean, the partnership with Hikma.
Dilip Shanghvi
That’s mainly for GCC countries.
Alok Dalal
Okay. Understood. Also, on the specialty side, do you think that pipeline products are large enough now to help sustain the base? The question that I’m trying to ask is that the specialty business has become pretty large. And as years pass, some products will reach the maturity stage. So do you think the pipeline is good enough for you to continue that momentum going or in-licensing becomes a big part of that?
Dilip Shanghvi
No. I think, we’ve always said that filing our own new product, at the same time looking at opportunities in organic both licensing as well as acquisition is something which will continue to help us expand our specialty business.
Alok Dalal
Okay. Because since the base has become very big, you will also need products that are large enough for you to sustain and grow on that base?
Dilip Shanghvi
I mean that’s a reasonable expectation.
Alok Dalal
Sure. Thank you very much for taking my questions.
Dilip Shanghvi
Thank you.
Operator
Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Saion Mukherjee
Yeah. Thank you. I just have one question for, Abhay, on Ilumya. Abhay you mentioned, I think, a few calls back COVID sort of had a negative impact. Now, we are seeing the traction coming through the product has been in the market for some time, there is enough data, formulary access, et cetera, has improved. So should – I mean, should we – I mean, how are you thinking about growth Ilumya in the U.S.? Will there be a spurt in growth in the sense that we will see an acceleration or it would be gradual steady rise in its market share?
Abhay Gandhi
That’s more expectation of how Ilumya will grow is part of our total guidance. So I think I have nothing specific to add on the product base.
Saion Mukherjee
No, I wasn’t asking for this year’s guidance like more from a 2, 3-year perspective.
Abhay Gandhi
So any product in chronic segment doesn’t really see its purse as such. So when, I mean, therefore, I wouldn’t want to classify and give you any kind of an answer, which you will suggest that. I think it’s what you do each and every day with each and every doctor in the prescriptions, it gradually builds upon the product base. I think that’s the nature and that’s the beauty of the chronic segment, and we understand that pretty well.
Saion Mukherjee
Okay. Yeah, thanks.
Operator
Thank you very much. There are no further questions. I will now hand the conference over to Mr. Nimish Desai, for closing comments.
Nimish Desai
Well, thank you, everybody, for taking time out and joining our call. If any of your questions have remained unanswered, do send them across, we will have them answered. Thank you, and have a good day.
Operator
Thank you very much. On behalf of Sun Pharma, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
Dilip Shanghvi
Thank you.
Be the first to comment