Torrent Pharmaceuticals Limited analyst Q&A

Thank you very much , sir. We will now begin the question -and-answer session. The first question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.

Saion, Quarter 4, we did Rs. 75 crores of insulin business. And what was your second question, Saion? If you could just repeat.

So, how this is going to shape up for next year?

It should more or less remain at the same level, which is a quarterly run rate of 75.

Okay, so the Novo's decision to discontinue doesn't impact your business?

No, it doesn't impact because we manufacture vials for them and they have discontinued pens, I would say.

And my second question was on Semaglutide. Have we made the filings in Brazil and do we expect to be there on day one?

No, I prefer not commenting about individual product strategies. Actually, the approval for this product would not be so straightforward. So, it's hard to predict as to when we would be on the market. So, I would refrain from making predictions about Torrent and about our peers.

Understood, but what about India? Are we ready for day one, launch in India?

Yes, India first wave is looking likely at the moment for both the injectable and the oral.

And oral also you expect to launch in March next year or it will be sometime later?

The exact date is not certain, but it would most likely be in the first wave of any generic launch.

The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Hi, thank you for the opportunity. My question is on Brazil segment. So, in view of this channel destocking, how should we look at the segment growth for FY '26? And I think the curren cy issues remain, so, overall, what kind of impact we can see on the overall EBITDA margins?

So, I will speak about the top line in local currency and maybe Sudhir will answer the question on the currency and the EBITDA margin impact. So , on a like-to-like, on a constant currency basis, we expect the business to grow in double digits. So , in the range of 10% to 12%, a few percentage points higher than the market. So, the last two years, we have seen the market grow at about 9%. So, we expect to be higher than that by 2% to 3% points.

Yes, and Damayanti, I think if you look at Quarter 4, the BRL has appreciated by 5%. So, Quarter 3, the depreciation was 17%, Quarter 4 has come down to 11%. We should see some improvements happening for the next year. Having said that, Brazil contributing only 10% of my overall revenue, the impact is not that significant on the bottom line. There would be some impact, but it’s not significant.

That's good to hear. My second question is on India business. So, again, if you can bifurcate growth between volume, price and new launches. And you have been maintaining obviously above market growth consistently. But at current level, do you have like more visibility on say more synergies from Curatio or what will be sustaining this above market growth for India in coming quarters? And just I think on the operating margin part, should we assume 32% EBITDA margin is something which you will sustain in near term?

So, the breakup of India business, our reported growth is 12% and the reflection in AIOCD for the quarter is 14%. The breakup of that 14 % is 4% volume against 0.2% of the market, 7.4% price versus 5.3% price growth of the market and 2.3% new products versus 2.3% of the market new products. In terms of Curatio, I think, yes, the revenue growth has been quite accelerated, I would say, over the last couple of quarters. This full year, I think, the Curatio portfolio has grown around 18% or 19%. It has become, I would say, relatively sizable in the total India business now and we believe that the upcoming year at least our ambition is that the growth should be potentially higher than the previous year as well. We are seeing pretty good traction in all the investments that have been made and the territorial expansion where there was not enough presence before. They are all giving us pretty good results and we continue to reinvest in those brands and those divisio ns. So, overall, I think Curatio portfolio should continue accelerating the overall India business growth profile as well.

And, Damayanti, on the margin story, I think we will wait for Quarter 1 and then probably directionally we can guide you.

Just a clarification on Curatio. As Aman mentioned, you still see a lot of room to even expand from here on. And that should be one of the key drivers for India business in coming quarters.

That's right..

The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

Yes, thanks for taking my question. My first question is on the U.S. business. Sanjay, you mentioned that the growth so far has come from volume growth in existing contracts. When should we start seeing traction in new launches now that the facility is cleared and should we assume a step up in U.S. in '26?

So, I think it will be, you know, we have launches from the product that we had filed a few years ago. So, there would be, let's say, close to 5 to 10 launches each year. But the value of those launches is a little bit not so high because of the delay that we have had in getting approvals for these ANDAs. But as we ramp up launches of new ANDAs, which were filed in the last two years, you would see that. So, I would expect not much impact this year, more impact next year and even higher impact in the year afterwards.

So, FY '27 is probably when you see a better traction.

Correct.

And my second question, Sudhir, usually we have mentioned that we should be able to grow margins by 75 to 100 basis points historically. Any reason for reserving the guidance this time around given that U.S. will improve, we are talking about double -digit growth in Brazil and India continues to do well?

No, I mean, nothing of that sort, Neha. Usually, end of Quarter 4, I try and avoid giving any guidance and then based on Quarter 1 results, it's more clearer where we are heading for. But you are right actually, given the branded business contribution which we have and that two or three levers playing out every year for us, there needs to be an improvement coming in. The only additionally thing I would like to guide you is that there is some increase which we believe will happen on the R&D side, not significant, but against 5 maybe moving towards 5.4 kind of a number. So, that’s something additionally which will play out next year, and therefore my comment, that let's wait for Quarter 1 so that directionally I can tell you for the full year what kind of EBITDA margin improvement can happen.

The next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.

Sir, just with respect to this Semaglutide business prospects, I would like to understand that in terms of like many companies are gearing up for, let's say, launching in first wave. From availability of a product perspective, from a manufacturing perspective, you think it’s a constrained or we got to tie up with a specific select companies or there were multiple suppliers available for this product?

No, as far as we are concerned, we have secured supply for the launch. For the injectable, as mentioned, it's a partnered product. And the oral product will be in-house developed where we have adequate capacity. So, we don’t see any constraint.

And even for selecting a partner, like as far as Torrent’s tie-up is concerned, just to understand were there are multiple suppliers or vendors available and so choosing a partner or the number of partners relative to other products, let's say, when you sort of think about launching in India market, this had a limited number of supplies.

So, the best way to judge this is by looking at how many companies are working on the clinical trial of the product, which is publicly available information. Now, judging by that number, it's looking like there will be multiple players coming into the market for sure. It is the question of when their trial is completed and when their entry into the market is approved . So, depending on whoever is the first wave, that could define a lot of the market share trajectory for most of the companies.

And further addition of MRs in FY '26, if you could guide for that number as well?

Yes, so we closed this year at 6,400. Additional expansion is already underway. So, maybe by the end of Q1, we should have 200 to 300 more. And potentially for the end of the year we may be between 6,800 to 6,900.

The next question is from the line of Bino from Elara Capital. Please go ahead.

Hi, good evening. There is this product Eslicarbazepine in the US. I believe you are a first to file exclusivity holder and have a settlement with the innovator. One of your competitors have already launched the product. May I know if you have launched as well?

Yes, we have launched a product and we have north of 20% market share in this product. But the generic pricing on this is not a very attractive price.

And did you launch it in Q4 or Q1 now?

We launched it on day one, which was in Q4.

And second, sir, I saw that you have taken an enabling resolution for raise of funds. So, is that anything particular in mind?

No, there is nothing specific in mind. We do this every year. And this is the practice that we have been continuing, I think, probably since last more than five years, I would say. So, it's only an enabling resolution, nothing specific.

The next question is from the line of Vivek Agarwal from Citi Group. Please go ahead.

Yes, thanks for the opportunity. So , my question is related to Bra zil. If you can help us understand, sir, how many MRs or the salesforce that we have at this point of time? Have you increased the number of people on ground in the last few years? And how to look, let's say, over the next two, three years, as far as the number of people?

Correct. So, we have about 330 MRs in Brazil. And so essentially, we had two teams, one team in Cardio and one team in CNS. And over the last two years, we have added an additional team in CNS. So, now we have two teams doing that. Our plans for the future, right now, we don't have any plans in the short run for this year. And we will see how the business develops, how the new products perform, and then we will take a call. But we will give some guidance when it comes, right? So, in the future, when we are ready to add. Unlike India, like we are not that mature to add people today. We don't have plans.

Understood, thank you. And if we look at the MR productivity, right, so I don't have any clarity what kind of the productivity that is there in Brazil. So, if you can help us understand basically how far you are from the normalized level of productivity in Brazil or is it, for example , the productivity already optimal? So, how we should think from that perspective?

At present, because of the recent addition of these 120 people, our productivity is below where it was before. So, it's roughly 200,000 BRL per month.

And again, actually, the question is on MR, but it's from India, right? You are saying that this particular year you expect to add around 600 to 700 MRs. So, any particular segment where you are adding or is that going to be across the board?

No, it will be across a few divisions and maybe two different therapy areas. We are looking at maybe 400 to 500 new MR additions this year.

And last question, if I can squeeze in. As far as the Curatio is concerned, , this year the growth was quite decent and 18%-19% kind of. So, how far or at what level as far as the margins are for this particular business? And do you still expect that the margins can improve from here on in this business?

Yes, because currently we are still reinvesting in that business. And I would say a reasonable kind of margin is being reinvested in the platform. Maybe next 1-2 years that may be required and then over time it should start tapering down and that’s when the margin would further likely expand. It’s already come up quite a lot from the pre-acquisition level, but there is certainly a scope to increase significantly from here as well.

And sir, when you talk about 6,800 to 6,900 MRs, does that include Curatio?

Yes, that includes about 600 to 650 MRs in Curatio as well.

The next question is from the line of Dheeresh Pathak from WhiteOak. Please go ahead.

The comment that you made looks like R&D spend is going to be up like 20% or so this year. So, where are you investing in R&D this year?

So, there is a few territories which is seeing an increase including India. India, we are adding complex products which require higher investments than the usual approvals that we have seen in the past. So, that's one lever. And a few products in Brazil and some of the other territories where Sanjay can add as well.

So, we have started adding complex products to the U.S., the kinds that need between $5 million to $10 million as against what we had before, which were oral solids where the range is typically $2 million per product. So, there is an aspiration to go into more complex products in the U.S. which are a little bit more expensive as they require clinical trials.

So, it's more branded segments versus U.S., I would say. Aman Mehta India, Brazil, mainly. Large part of it, actually.

The next question is from the line of Shrikant from Nuvama. Please go ahead.

Hi, good evening. Thanks for the opportunity. Two questions. First is on the domestic MR expansion. Which specific therapies have we added these MRs in last year?

So, last year, we shared that we had most of the expansion done in the chronic therapies and in sub-chronic which will include gastro. And the upcoming year expansion would be within chronic as well.

And the second question is on Semaglutide market in Brazil. So, can you please elaborate more the market dynamics there in terms of the current market size and the kind of competition you expect and the kind of volumes that are there?

Yes, so currently the product has been in short supply. So, the market size is, it's kind of hard to turn down. It will be north of 500 million. But the exact size is hard to gauge.

And once the product goes off-patent, what sort of competition do you think will enter there?

So, there would be, I would say, between 5 to 10 filers, but then approvals are not straightforward. So, we have seen that the filers are there even in more advanced markets like the U.S., but the approvals are much lesser.

And how should we think about the price erosion once it goes off-patent?

It wi ll depend upon the number of competitors honestly . So, I think we will wait for that comment.

Okay, no problem.

The next question is from the line of Rahul Jeewani from IIFL Securities. Please go ahead.

Yes, thanks for taking my question. Sudhir, you had earlier pointed out that the insulin CMO sales which we had logged in 2Q and 3Q would get recouped in 4th Quarter. But that doesn’t seem to have played out. So, do you think that business has got lost and hence you are pointing to this insulin CMO sales are standing only at a Rs. 75 crore per quarter kind of a number going forward?

No, I think there was some amount of destocking which was done by the principal. And therefore, Quarter 4 sales at 75. You are right, I mean, the sales should have been higher. Our expectation is, some catch up would happen in Quarter 1 and Quarter 2, what was not there in Quarter 4. But broadly, I indicated yes. I mean, the same run rate should minimum get maintained for the current year as well. But there should be some catch up which is happening in one quarter.

We are guided to almost Rs. 120 crore of sales getting recouped in Quarter 4. So, do you think that the same quantum will get recouped in Q1 and Q2 o r the numbers could be lower now because of, let's say, whatever dynamics are playing out in the insulin market?

Rahul, I have actually not taken stock of what's happening for Quarter 1. Maybe once we have Quarter 1, I can give you directionally what kind of incremental sales will happen in insulin business.

Sure, sir. That's it from my side.

The next question is from the line of Charul Agrawal from Bank of America. Please go ahead.

Hi, sir, thank you for taking my question. I wanted to understand more about the consumer health segment. How are you thinking in terms of increasing the expense from here basis the kind of traction that you are seeing?

Yes, so we have maintained the same number of brands that are on the platform, which right now it's mainly four in a meaningful way. We continue to invest in these four brands. We are seeing pretty good traction across all of them in relation to the spend that is being done. I would say, out of the four, maybe two brands are taking up , say, 50% to 60% of the spend, or rather 60% to 70% actually, and the other two are about 30%. So, overall, relative to the investments being made and the size of the relative brands, they all seem pretty good acceleration. The two main arrowheads being Shelcal and Tedibar.

So, do we expect the spend to be at similar level or can it go up significantly from here?

From the previous year's base, it would increase slightly. Not anything major, but there would be say a high single-digit increase.

The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Just the first one on the U.S. business, $130 million revenue annually. If you could double click on the traction part, I thought you said fiscal '27 is going to see a much larger traction than '26. So, I was v ery surprised. I thought we have an imminent launch coming up for Entresto and many other products as well. So, just curious to know why the traction comes next year, not this year.

So, Entresto has been an interesting journey, actually. So, basically, we have seen that there has been a kind of delay in the launch of generics on this product . We were anticipating the first generic four - five months ago. And at present, we are anticipating a generic in the course of a quarter, July-August timeframe. And then we expect multiple entrants at the same time or in a short window. So, I don't think the opportunity is as big for the generic industry as it was a few months ago. We have approvals on this product, and now we would be launching as soon as possible and as soon as our settlement agreement allows us in line with the terms in that agreement. But it's going to be a multiplayer opportunity whenever it happens.

Yes, but the date is 15th July, right? That's when the pediatric exclusivity ends, right?

Correct

And you expected multiple players there?

You can see all the approvals on the FDA's website.

Fair enough. So, in the sense, we did 1% growth for U.S. this year fiscal '25, what's the likely guidance then for '26?

I mean, my goal right now is to, so, I have a few opportunities to launch products. So, I would say in the coming year, I will expect to launch about between, say, 7-8 products. And some of them, so we just launched that Eslicarbazepine. We just launched Esomeprazole granules. So, we have launched another one which is Diclofenac sachets. So, we are launching. These are smaller products, but I think in the end if we have 7 to 8 launches, it will add up to a meaningful figure which will help us in compensate for the price erosion as well as other things that happen in the U.S. market in terms of share loss or new competitors or things of that sort. So, I would say that for the next 12 months, my goal would be some growth in the right direction without trying to quantify it.

Understood. Helpful. If I were to look at the balance sheet, Sudhir, I think you said 0.6 net debt EBITDA. Sorry if I caught the number wrong. So, what are the usages of cash as you looked in fiscal '26, what you generate?

No, so I think the priority is to repay and bring down the debt, right? And which I think maybe by first half of FY '27 or maybe Quarter 3 of FY '27, I should be able to prepay everything and should get into net cash. Rightly for FY '26, the goal is to use whatever cash flows or excess cash which is available to prepay or repay the debt which I have on my balance sheet.

Understood. Helpful.

The next question is from the line of Dheeresh Pathak from WhiteOak. Please go ahead.

So, let me clarify. So, the market was about half a billion at the end of 2023. And then at the end of 2024, the Novo Nordisk launched Wegovy and the market was about 880 million reais. I am talking in reais. Currently we expect the market, we don't have data, analyzed data, but I would expect by the end of 2025 the market to be about 1 billion reais. And that's where I would expect it to be at the end of this year. Just extrapolating on the current size and the current trend that I am seeing. We have access to the product and reserve. So, we have signed up with a partner who has the dossier and we would be expecting an approval, but it’s highly uncertain. People who have filed long ago in the U.S. or in Brazil have still not received approvals. So, I don’t know. It’s not a straightforward product which would get approval like on Day 1 of patent expiry. Hence, our reluctance to make predictions on the timing of launch on the way it would go from, but we would be have access to the product.

When is the market formation expected? And are we expecting to be in wave one or subsequent?

So, my current expectation is wave one. The only thing which I cannot tell you is how wide is the wave. So, technically it starts in 2026, right? And we would expect at least one player. So, there is one company which is, you know, I would expect one very large Brazilian company which has its own product and which has also filed in the U.S. So, I would expect them to be close to the date of patent expiry, but it’s up in the air as far as everybody else is concerned.

And would you have a sense of the market in terms of volumes? You gave me a value, 1 billion reais, but we have it in volume like how many pens or auto injectors or how many patients you think are there?

No, I don't actually have that data with me. So , I have been monitoring the value growth and obviously the values correspond to it because the price has not evolved a whole lot in the last two, three years. But yes, we can provide you with that data if you are interested. Our Investor Relations will be happy to provide that.

Okay, we will reach out to you. Thank you so much.

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Sanjay Gupta for his closing comments.

Thank you very much for your interest in Torrent. We conclude today's call here and we hope to speak to you soon. Thank you. Bye bye.

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