Blue Jet Healthcare Limited analyst Q&A

Thank you very much. We will now begin with the question-and-answer session. First question is from the line of Parth Mehta from Vallum Capital. Please go ahead.

Yes. Hi, sir. Congratulations on a good set of numbers. Thank you for taking my question. I just have a few questions. First one on the pharma intermediate segment. The innovator in their conference call had mentioned that they are looking to add other sources for their product, other sources of supply for their product. So just wanted to know how do we make sure that your wallet share in the supply of your intermediates remains intact for that player?

Based on the customer forecast, what we could actually confirm is whatever number they have actually indicated to us in FY calendar year '25, that is an intact. So we go based on what the forecast we receive. And we don't speculate on other news articles.

Right, got it. So not news articles, but they are mentioned in that we are looking on for the other sources of product.

Just to add on to that, Parth, I think what we need to also understand and recognize is that the ramp up that we have done as a Company from the time we started the investments in the plant to scaling up to this such a successful outcome, we have done, I think it's been a very good outcome for the innovator and for us as a Company. So we are definitely in their good books. Even if they evaluate others, I think that is what Ganesh mentioned.

Right, got it. So it is completely based on how the forecast of the Company gives, understood. Second, just a book keeping question if you could answer me. What would be our capacity utilization across all the segments based on whatever the capacity that we have?

Great, thank you.

But at the same time, this is excluding the capacity that we are building up at Maha d. So this number will be different in about 6 months.

Thank you. Next question is from the line of Sudarshan Padmanabhan from ASK NDPMS . Please go ahead.

Thank you for taking my question. So my question is to take forward the comments on the CAPEX specifically on the CMI space. One is on the transit side, how much of the inventory is basically which has not been recognized. Second is a little bit more strategic, now that we have the gadopiclenol iodinized molecule and also new capacity of gadopiclenol coming in. If you can give some color on how do we see the ramp up in the near term as well as on the longer term on this year?

Maybe on the first question on transit. Now this is part of the game. I think that would be some quarters we may have a slightly higher goods in transit and it could be different for certain other quarters. I think this you have to just straight away go ahead with the recognized turnover what we record. And this is according… now we have come to a stage that this is part of our operation and we have to just move ahead. So I don't want to make any specific exclusions and calculations on what is goods and transit and how it is moving ahead. I think that's the first part.

Yes, so the second part is, with the opportunities in the CMI space ahead, the gadopiclenol all and the iodinated molecule and also our customers which has added capacity and as a part of our capacity is also towards this, how do we see the ramp up stay in the near term as well as in the longer term for the CMI space?

As far as gadopiclenol is concerned, this is an NCE molecule. I think I have mentioned it in the past that the growth will be linear because the molecule has to find its own space in the marketplace. And we believe as the market size grows, our supplies of advanced intermediate would grow linearly. We are the sole supplier of this particular advanced intermediate. So we just need to follow how successful the innovator is as far as this particular molecule is concerned. As far as the iodinated molecule is concerned, we expect commercialization this year. And our belief is that FY'27 onwards, when you look at a full year performance, this could be a molecule of significance. And FY'26 is where we will be kick starting our commercial operations.

So if I look at the margins specifically in the second half, a lot of the incremental benefits have come through operating leverage. And given that we are talking about the momentum continuing in the pharma intermediate space and potentially the relative better growth and offset in the CMI space, how do we see the margins? I'm not specifically talking about in a particular quarter. But if I'm looking at F Y'26 and FY'27, because if I understand right, we are still overall at around 75% utilization. So even the utilization can be a little higher, plus or minus, in a quarter but on yearly basis. So on that side, should we see a steady state ramp up in the margins over the next couple of years?

I think, we don't give any forward guidance, but then I think it would suffice it to say if you will see the complexion of our business . We are in very highly demand in price in elastic markets. So, I mean, if you look at contrast media, we have been supplying to innovators, and we don't see too much of pressure on price because the segment is not at all generalized even though there are no patents.

Thank you. Next question is from the line of Shashank from Emkay Global. Please go ahead.

Yes, hi. Congrats on a good set of numbers. My first question was on the other expenses this quarter. I think we have seen a QOQ decline in other expenses. I just wanted to understand how we should look at this line item going forward, particularly when new capacities come on stream, we also see other expenses increasing towards the second half of next year. I just wanted to get a sense how we should look at it.

See, the other expense includes ocean freight, okay? For some of these products, if it is delivery at place then we incur the sea freight. And some of the new products, for example, the new cardiovascular intermediate work we are supplying is ex works. So we don't incur the sea freight. So like when you see the reduction in other expense, it's because we didn't incur, it is all to the account of ocean freight. So it is all about the equal terms of the contracts we enter in. So if you want to really look at from a long-term perspective, I think it is more to do with the product mix and the delivery terms of these products. I think that's the main reason why you see a lower OPEX for this quarter. And way forward, it will be in this fashion because now the product mix, earlier the contrast media was dominant. Now you see both contrast media and PI-API is more or less of equal weightage. And you would see this new norm in the OPEX now.

Got it, sir. Thanks. That's very helpful. Just wanted to check for an update on the small volume pilot plant that we have been building at Unit-2. So are we on track to sort of bring that on stream sometime this year and just wanted to understand what your plans are with that plant, given that we are also setting up an R&D center now ? So how do you sort of plan to leverage the capabilities at this plant as well?

Like you very correctly mentioned, that we are building a new R&D center. The R&D center that we are creating will have a kilo facility. And that kilo facility will be further supported by a pilot plant. So the milligrams to kgs to the higher quantities which go for validation, the 50 to 100s will come from the pilot plant. So that's the fashion in which we plan to straddle the entire value chain. Value chain of both pre-clinical, clinical, and post-clinical.

Just the last one on the gadolinium -based intermediate sales. I think we did touch upon in the opening remark, but just wanted to get a sense if we can see an uptick in this product from the first quarter this year itself, or will it be probably a bit more gradual spread out across the year? And also wanted to understand if you are hearing anything from customers or industry participants, if there are any challenges that contrast media formulation players are facing particularly in their gadolinium based portfolio?

Maybe I will just take the first part and the second part, Shiven will answer. Our understanding is this particular intermediate will grow gradually. Being an NCE molecule, it has to find its own market space. So we don't expect a ramp up on this particular product, but we are actually seeing signs of the gradual growth happening and we have already started witnessing this based on our order book. Shiven, on the overall trend on contrast media now.

I think on the gadolinium based molecules in terms of the usage is definitely increasing at a faster pace and the general acceptance around these certain new molecules also increasing over time. From a customer perspective, we haven't received any material negative observations on the outlook or difficulties from a formulation standpoint. But in the ever -increasing changing environment, because of geopolitical issues, you would have seen some remarks but from a medium to long-term perspective, I think the growth strategy is very much aligned.

Thank you. Next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.

First on the contrast media, I just want to check this here. The growth has been muted, in fact, it's declined.

Yes, I think I got the point, Sanjesh. So if you see contrast media from a FY'25 perspective, H1 was muted because of the reasons that we mentioned earlier. But H2 saw a significant recovery. So I think from now on, with linear growth in the other molecules that we have spoken about, the results could be encouraging.

What about the underlying molecule? Do you expect still to grow in ABA-HCL?

I think from the end API perspective, the molecule is seeing a double-digit growth. So if the end molecule is winning, I think the other supply chain should also ride this journey.

Second on the cardiovascular product, we spoke about. How does the order book look for us for FY'26 considering that the exit has been very strong and one thing on the utilization, VK you said that the plant run at 60%-65% utilization I believe it's for the year. How has been utilization for the exit?

Sanjesh, I think firstly, nice to have you here, but your point is very valid. I think you should not look at it from this exit. You should take a more of an analyzed picture. So I think look at the annual volumes, and based upon the annual volumes is the capacity utilizati on that I had mentioned. Last call also I had said that given the projections that we have and the way this molecule is gaining traction, we could double. So that's where we are today. Our utilization is about 60% or 65% whatever. And this is on and as-is, where-is capacity. And then we have further headroom to de -bottleneck. So I would not like to give any forward-looking guidance. But should there be an uptick in demand, even a huge uptick in demand, we are well poised to address it.

Very clear. And on the Mahad, the Unit-3 what we are working on, you said it's a continuous plant. Is it the feedstock which we are talking about or this is some other plant are we looking at?

It is the feedstock but also there are other derivatives that can be made from that plant. So the use would be one for captive and also for potential sales in this ecosystem.

And do we have enough demand for that product?

Yes.

Are there any other application apart from the contrast media?

No, it's majorly for the contrast media universe. There are some select APIs that you can do outside this thing, but that's not our focus. I think we'll be more aligned towards the contrast media.

Very clear. On this Mahad Unit-3, the MPP which we are putting up, will it be a cGMP plant or you are looking at going full haul USFDA approval and complete into an ecosystem of pharma? How are we thinking? Because I think you said it's a state -of-the-art process. We have 30 reactors. Are we thinking big here from the pharma side or we still want to be close to the intermediate what we have been doing it very well now?

The plant will have the capability of doing the finished product and that's the reason that we are creating two clean rooms over there. So that has versatility and flexibility. At least two products can be made at the same time. So that's the capability that we are creating. As I also mentioned that even the particle sizing area is G MP. So the plant will be completely USFDA approvable. Now, whether we trigger that or we don't trigger that is an option that I think is something that we along with t he client will have to exercise. But then the design and construction and everything is going to be complete GMP level.

Okay, that's clear. And VK, you spoke about 20 new opportunities. 30 % of them in late stage, phase 3 or commercial.

Right.

So I would say that it's a mix. A couple of places, we are in very advanced conversation. Kilo quantities have already been supplied. And since in those areas, they are switching from a Chinese source to us. Maybe the commercialized, maybe, we cannot say for sure, but maybe the commercialization also happen very fast. For others, we are in the process of giving small quantities because they are still in the clinical phase. So small quantities and then there's going to be a validation process and then a regulatory process. So there'll be some sort of a wait.

Thank you. Next question is from the line of Darshan Shah from Multi-Act Equity. Please go ahead.

So one question on the fund raise part, you have mentioned a Rs. 1500 crore number in the announcement. So what is the plan? How much do we intend to raise? Anything finalized on that?

Still, I think we would be able to share more visibility on it on the immediate quarter.

So it's not yet been decided?

It has been decided but not in the position to disclose it at this point in time.

Okay. And one more thing in the Pharma intermediate segment . In this presentation, you have mentioned that the number of molecules that are there are around 28 and in the previous quarter that number was 22 . So the incremental six products that have come in what kind of visibility do you have on that? And any significant addition in terms of pipeline if you can just talk about that?

I think what we need to be more focused on are on the 30 % of the overall RFPs that we had mentioned which are in the phase 3 and almost commercial in nature. I think those are the high conviction ideas I've been focusing on for the earlier two calls as well that these see a very strong visibility from a short to medium term perspective.

Okay. And just once again on the pharma intermediate capacity utilization side, this 65% number that you mentioned is for Q4 or for the full year?

Full year.

Full year, okay. So Q4 would be higher than that. Okay. Got it. Thank you.

Thank you. Next question is from the line of Nikhil from SIMPL. Please go ahead.

Yes, good evening and congratulations on good set of numbers. I have two sets of questions. One is on contrast media. If you look at our contrast media run rate, in 23, we were at Rs. 500 crore. And at that time, there was one single large customer. Today, we are at Rs. 400 crores. Now incrementally, when you say that the gadolinium and the iodinated products will come and during this phase, one of our key customer also went for capacity expansion. So should we understand that this 400 is the base on which we will grow or first we will go back to that 500 and then we will grow? How should we, because that 450-500 was a stable base till the time the customer had not gone for a capacity addition. So if you can just help me understand this?

FY'23 number, this is the year in which the customer wanted certain quantities of security stock. So they wanted to, instead of a full year, we would have actually supplied more than a 12 month requirement. So this is a sort of outlier in the whole conversation. So it is not a 12 -month sale, maybe it is 12 plus whatever security stock the customer wanted. Now to come to address your second part of the question, on a conservative approach, we would like to start with this as a new base, whatever we are at the 400. And from here, we wanted to build up not only on the largest molecule, we are also having two other molecules. And we also believe the largest molecule would also like start growing from this stage. Maybe we would put a high single digit growth and we will have this iodinated and the gadopiclenol which will add to this growth story. Shiven, you wanted to add on this?

Yes, I think the base business as you rightly mentioned out, I think the real up tick will happen when you add these two molecules. And capacity is on stream and we are scaling it up at our end.

Okay, and for the contrast media, once we, so VK sir mentioned in the starting that we at a Company level, we are at 70% utilization. For contrast media, what is the peak revenue which we can do? If all the three products and everything plays out and even other products come, what is the peak capacity or peak revenue we can generate here?

It's very difficult to stipulate a specific number because capacities are added every six months. As VK sir mentioned, we have been able to quadruple our capacity in the past few years. And there are some lines being on the Unit-3 side, on contrast media specifically. That's significant ramp up of capacity. So I think that number would always be fluid in our case because the business is growing at that pace.

And then, one just one more point to what Shiven has said that we have two types of growth in our business. One is the secular growth that we get because the market is growing. The second is that each time we forward integrate that we that means that we give a more advanced intermediate. Sometimes the value is, 2x-3x from the same capacity. So this is just to support what Shiven was saying that it is not easy to make a linear calculation.

Okay, got it. Second set of question is , you mentioned in the discussion on those 20 product opportunities that some of them may get commercialized. And if I attach it with our CAPEX plans, one is this MPP in Mahad and following up with this larger plant which we are planning in Dahej for which we are also looking at this QIP. How should we understand our CAPEX and demand visibility? Because this Mahad plant will come in 27, which you mentioned, and you said some of these opportunities which are mov ing from China may happen quickly . So how should we understand how do we define our CAPEX and how do we attach with the demand visibility we have from some of these newer molecules which we are looking at?

So somehow, at Blue Jet, we have been able to balance the demand and capacity very well. And as you would see that the primary reason for having a high asset turn is that our gestations are low. So I think we are going to maintain that or preserve that DNA of the Company. And what we are planning today is based upon certain client lock-ins and visibility that we have in contrast media, in pharma intermediates, and even in the sweetener segment. Even in the high -intensity sweetener, we are working on a new product, and which should give a fill up to that segment as well.

Sorry to interrupt here. I understand on these three because we have been in this business. My question was more on the newer opportunities which we are looking at. And this multipurpose plant, I believe would be to meet those newer opportunities and demand because for the contrast media and the API, we have a dedicated plant. So this MPP which we are putting, my assumption can be wrong, is for the newer opportunities which we are coming.

Exactly, very good point. But for the immediate opportunity that we have been working on for the past 24 to 36 months, we have other multipurpose plans that will cater to the immediate requirement from our existing manufacturing footprint. As you rightly mentioned, some lines are dedicated, but some are flexible in nature. So we will cater to the immediate requirement from our existing plants.

Okay. So we don't see a demand, a capacity challenge if some of these opportunities come up.

That is correct.

Thanks a lot. I'll come back in the queue.

Thank you. Next question is from the line of Dr. Kunal Dhamesha from Macquarie Group . Please go ahead.

Hi, thanks for the opportunity. The first one on again just going back to the capacity versus CAPEX. I think my understanding and correct me if I'm wrong, was that with the Mahad facility, we were more or less like sorted till FY'27. Now with the additional investment in Mahad, does that kind of give us better capacities for a longer period or would it say that it's still F Y'27, till which we are sorted, and then we need Dahej to grow further from there?

Yes, that's right that for the next two years we don't see any bottleneck as far as capacity is concerned, but beyond that we will have to plan and augment.

Yes.

And for the PI API project, the cardiovascular intermediates, do you think need for de - bottlenecking this year?

You know, as I mentioned, we are at 60%-65%. So there's a huge room to address any uptick in demand. And after that, if any de-bottlenecking is needed, I think we can do it very easily. It's a big plan that we have created.

And then how much, let's say hypothetically, if you do de -bottlenecking based on your current plan, how much more capacity you can have? A ballpark number.

A very ballpark number, I think, which is subject to change. Don't hold me on that. I think we'd be on a conservative basis, about 20%.

And how fast it can be done?

It will take a few weeks, about 8 to 9 weeks. But I think these discussions will happen, I think, well in advance when we discuss with the customer.

And these new products which you suggested, a couple of products in a pretty late stage kind of development cycle, where this will be kind of accommodated to start with Unit-2 and then move to Unit-2 to Mahad Unit-or how should we think about it?

It will be a combination of both. As we mentioned earlier, I capacity constraints would not be there at this point in time, as we have two major capacities coming on stream in the coming quarters.

But since we are in intermediate, just understanding question, since we are in intermediate, for us changing the facilities is not a big switching cost for our customers. Is that a correct understanding or?

Ideally, we should not, right? Because these are regulated intermediates. And there's definitely a pathway that we need to follow.

Sure. Thank you for those responses and all the best.

Thank you. Next question is from the line of Vidit Shah from Spark Capital. Please go ahead.

Hi, good evening and thanks for taking my question. Just wanted to get some color on the CAPEX plans post-Mahad and Dahej. You said you'll share more details in the next coming quarter, but just broadly in terms of high -level strategy, what are the focus areas that the Company is targeting to use this Rs. 1500 crores would be great?

Sir, I would not comment on the Rs. 1500 crores but then our baseline CAPEX that we had said in one of the previous calls is about Rs. 200 crores but given the extra work that's happening in Mahad and some upgrades that are happening at Unit-2 Ambernath, I think we'll be a little more than Rs. 300 crores excluding any of the new sites or Dahej or whatever. Excluding that, we'll be around Rs. 300 crores plus.

Okay. And the late-stage pharma intermediate molecules that you are working on, would you be able to share what sort of therapies they go into?

So a couple of opportunities that we are tracking are the advanced intermediates to GLP -1s, right? And the others are in our traditional segment, the chronic segment, like we have this cardiovascular or the oncology. So in that chronic segment.

Okay, understood. And we have seen some reports of China restricting exports of gadolinium in April this year. Just want to clarify if we're seeing any impact of that or is it business as usual?

It is business as usual as far as our manufacturing is concerned.

Got it. And just the last one on the income tax notice that we have got of Rs. 200 crores. I understand that we have a little bit of a provision, but if you could just help us understand the history of the case and how you see this panning out?

This is on the income tax. Our case, we are quite comfortable on the stand what we have taken and we need to actually wait and watch how the appeal process goes from now onwards.

Got it. But there is some sort of deposit that we have to pay to go into appeals and all of that. So would that be an impact on cash flows?

No, not significantly. It is procedural and it won't have any significant impact.

The next question is from the line of Ayush Agarwal from MAPL Value Investing. Please go ahead.

Thanks for the opportunity and great set of results. The first question is on the cardiovascular intermediate product. We did about 200 odd crores in Q4. Can this be a new base and can we grow from this base in FY'26 on a quarterly basis?

I would only say that the molecule is doing extremely well. You can track the growth of the molecule. I mean, it's doing well in the US, it's doing well in Europe, it's getting new markets open like Canada etc. Nevertheless, refraining from giving any type of guidance . I would recommend that you should not look at the last month or the last quarter. We should look at the annualized ramp up that's happened and that should be I think more reasonable approach.

Understood. So second question is on this GLP-1 intermediate molecule. Roughly what could be the opportunity size for us in this molecule? Can this also be as large as the cardiovascular intermediate or larger?

We would refrain from commenting on that, but the overall opportunity size around this set of molecules is considerably large.

Would we be working directly with the innovator?

Hard to comment at this point in time.

Thank you. Next question is from the line of Vivek Patel from Ficom Family. Please go ahead.

Very good evening, sir. I just want you to understand what is the level of competitive intensity in the cardiovascular molecule that they are dealing with and I understand that in the last call I believe you have mentioned about certain geographies receiving this molecule very well, some are bigger in size and some are going very fast. So just expand on the intensity and the scale of the molecule and the growth of certain different geographies? Thank you.

Are you asking about the potential growth of this molecule, right?

I am asking about how it has played over the last few quarters and how do you feel or what is your assessment of the growth as well?

So if you are talking about the molecule , then this is gaining very good traction. Today , there are 9,000 cardiologists in the US who are prescribing this and this has become the primary line of treatment. Earlier it was the secondary line of treatment. Because of the label update and label expansion, both in the US and Europe, I think the addressable market of this has grown 7x of what it used to be. So I think it's a blockbuster, a very big opportunity, and still protected by a patent. And I'm n ot sure if you people have seen that Esperion has done a settlement with the generic companies, 1 or 2 generic companies, not all, that they will not enter with a generic till 2040. So this is an indirect prolongation of the life of the patent.

And how is it doing in other geographies in Latin America, Europe, otherwise?

It's growing actually faster in Europe and faster in Latin America than US.

Thank you. Next question is from the line of Rupesh from IntelSense. Please go ahead.

Hello, sir. Thank you for the opportunity. My question, is in cardiovascular intermediate. So, Esperion has out licensed this product to Dai ichi for Europe. And my understanding is , this is the year when Daiichi has to start building its own manufacturing supply chain. I mean, I think today they are taking the supply from Esperion and that I think is changing starting this year. So my question is, are we engaged with Daiichi, have we signed some contract, is there some long- term understanding how the reserves for capacity? This is my question.

I think that's more about the formulation. So we shouldn't be very concerned about that. So what Daiichi, the technology transfer that's happened and it's in public domain. So that's more about the formulation at this point of time.

Yes, but there is another supplier also, right? Sorry, sir. There's another supplier in India. So my question is for API, can you confirm you would be supplying to both Esperion and Daiichi?

That is automatic because Daiichi …so our product goes for the European market as well. So what Daiichi is selling anyways has got the intermediate of Blue Jet. So it is not something that, you know, and if somebody tries to move away, then there's a regulatory pathway. So it cannot be done easily. I mean, there are regulatory issues if somebody wants to change. So I think, and more than that, we are protected with contracts. So I think, I don't know if that's what you are trying to understand. But the discussions are ongoing with the CDA, but discussions are active with either parties.

Thank you. Next question is from the line of Ankit Mittal, an I ndividual Investor. Please go ahead.

. So I had question on pharma intermediates as well and on the capacity utilization questions earlier in the calls , so you mentioned for the full year utilization is 60 %-65% and for the full year, you did close to Rs. 462 crores in revenue, in pharma intermediate. And so if I do the math, at complete full utilization, the revenues would come to around Rs. 770 crores. And if I just analyze the report numbers, like of Rs. 196 crores, it's close to Rs. 780 crores. So is it safe to imply that in Q4 our capacity utilization was close to 100%?

I think the math that you do, that could be good arithmetic, but let's leave it at that. I have answered this part many times to other participants.

Okay. Thank you.

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

Thank you very much for all the participants and we will meet in the next quarterly call, Q1 call. Thanks.

Thank you very much. On behalf of Blue Jet Healthcare Earnings C onference Call, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you. ____________________________________________________________________________________________________ (This document was edited for readability purpose.)