Torrent Pharmaceuticals Limited analyst Q&A

Thank you very much. We w ill now begin with the question -and-answer session. Our first question comes from the line of Damayanti Kerai from HSBC. Please go ahead.

Hi, thank you for the opportunity. My first question is on India business. So, two things. First, can you split the growth across the drivers, volume, price and new launches? And second part will be, can you talk a bit about GST impact on the business during the quarter?

Yes, sure. So, as per the AIOCD data set, our growth for the quarter was 12% versus 8% of the market. Breakup of volume is 3.7% versus 0% of the market. Price at 5.5% versus 5.5% of the market and new products at nearly 3% versus 2.5% of the market. GST impact was minimal. I think probably due to additional discounts and some one -off costs, I think it's probably about a 0.5% impact I would say, so not too much.

And since then, now the business is as usual, right? After 22nd of September?

The business is as usual? Sorry, what was the question?

Yes, after the GST impact, this month has been pretty much in -line and we would rather wait for this month to get over and then December because the seasonality impact of Diwali and all would play a bit of a role. But I think it's pretty much in line with our H1 performance.

Sure. My second question is on Brazil market. So, very strong underlying growth which continued. My question is your plan for filing for semaglutide. So, I understand earlier you commented in India, you plan to launch at the time of market formation. But if you can talk a bit about your plans for Brazil market, have you filed the application?

I can confirm that our application is with ANVISA. We are waiting for approval. I really cannot comment as to when we will expect the approval to come.

Okay. And my last question is on Germany business. When do you see supply disruption getting normalized, which impacted recent quarter performance?

So, we are obviously working and pushing our supplier towards ending it quickly. Right now, all indications are that to some extent will continue in Q3. Hopefully, Q4 onwards, it will not be the case.

Okay. Thank you for your response. I will get back in the queue.

Thank you. Our next question comes from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead.

Hi, sir. So, just to follow up on the previous one. So, in Germany, what kind of growth are we looking at this year? And how should we look at it from an F'27 perspective?

I would refrain from giving a guidance because what we are facing is kind of an out-of-the-box situation with one of our major suppliers facing disruption. So, like I told the previous caller that I would expect this to be over by Q3. But if it is, by any chance, doesn't get over, then we will be impacted going forward. So, I would refrain from giving guidance on Germany going forward until the issue is resolved.

All right. And this is just on the Semaglutide opportunity in Brazil. So, how critical is this launch for you and any color on how do you see the market shaping up?

So, the market is huge. It's like a billion -dollar market by the time it goes generic. Essentially, the market is shifting towards Wegovy and Ozempic is coming down as can be expected. What we are expecting is approval in wave-1. I don't know exactly how ANVISA is going to treat these because we hear different stories that they're going to process by batches or they're going to process in order of application. So, right now, there's a bit of uncertainty as to how ANVISA is looking at a ll the companies who have filed. I t is a major opportunity. It's probably a very important opportunity no matter the number of competitors. So, beyond that, I don't know what you expect me to comment. Usually, we target 15% market share for our products. So, I think 10% to 15% of Sema would be a material opportunity and would move the needle for Torrent. But again, we are not sure about the approval process.

Understood. And also, just one final one from my side. Also, if you could just comment briefly on how your key brands have done in India ? What I'm referring here to is Shelc al, Unienzyme and the acquired brands like Tedibar.

All brands have done pretty well this quarter. Just to give a sense of the therapeutic growth breakup, Cardiac has grown 14% in the quarter. Car diac is our largest contributor a nd Gastro has grown 15%. And the overall Derma piece, including Cur atio has grown about 29%. So, overall, it's been a broad based kind of growth that we have seen. We think the chronic business should continue the high volume growth as well, given the expansion that's happened over the last couple of quarters. So, upcoming quarter, we believe the same momentum should hopefully continue.

Understood, sir. Thank you.

Thank you. Our next question comes from the line of Rahul Jeewani from IIFL Securities Limited. Please go ahead.

Thanks for taking my question, sir. Given that now we have received approval from CCI for the JB Pharma acquisition, can you talk about in terms of when do you plan to have operational control of the asset? And what kind of a synergy number are we looking at from, let's say, our next 2 to 3 year perspective?

So, Rahul, as I said in the opening briefing, that we have got SEBI approval for MTO, which will kind of get over in the third week of December. And then probably January, we should see the closing of transaction. And once that is happening, I think we sho uld be able to start giving you indications on what kind of synergy value we are looking at.

Okay. So, you will comment on synergies after, let's say, the buyout from KKR in January 2026?

Correct.

Okay. Sure, sir. And just one other question on the India business. This quarter, we saw very healthy volume growth of around 3.7% versus market volume growth being very tepid. So, what is allowing us to, let's say, outperform volume growth? So, are we seeing volume growth in our focus therapies?

Yes, we are. Mainly driven by chronic performance in most of the chronic divisions. So, if you recall, most of the expansion since the last two years has been in this segment, cardiac, diabetes, and CNS. And we're seeing the bulk of the outperformance happening there. Some of the new launches from last year and two years ago have now become pretty sizable contributors to the overall India business. So, they're also continuing to grow reasonably well. That's also adding to the growth. And the overall volume growth, I think, six months into the year, I believe, now is giving us a pretty good signal of comfort that the expansion probably has given us that desired outcome. So, hopefully that continues for the rest of the year, and our expansion also is on track. We will be almost at 7,000 MRs by the end of the year. We plan to enter into one new therapeutic area this quarter as well, which hopefully we should share by Q4 on the status of that.

Sure, Aman . And just if you could also comment in terms of how are you looking at the semaglutide opportunity for the domestic market? So, while Brazil, you are targeting to be in wave 1, what about the India market?

Yes, the endeavor continues to be in the first wave on market formation. When that could be is still uncertain, we'd rather wait before commenting on that. But it certainly seems based on the Mounjaro launch that the market potential may be higher than what was expected even a couple of months ago because Mo unjaro has just taken off very rapidly. The dynamics would be obviously very different at generic pricing. So, yet to see what exactly the opportunity is. But again, our market share targets have been fairly aggressive in the recent launches. We will have the same targets for semaglutide as and when it launches. And if we are in the first wave and if we do launch well, I think it would be a pretty meaningful growth accelerator in the next year.

Sure, sir. And just in terms of S ema, when the market opens up, would we launch both the injectable and the oral version? Or do you think that the oral launch could be a few years away?

No, not a few years away, maybe slightly after the injectable, but certainly both are planned within the next financial year.

Okay, sure. That's it from my side. Thank you, sir.

Thank you. Our next question comes from the line of Tushar Manud hane from Motilal Oswal Financial Services. Please go ahead.

Thanks for the opportunity. Sir, again on the India market side, the price growth has been sort of getting a little moderate. We used to have 7 %-8% price growth. We are now down to 5.5%. So, while of course, the broad -based growth is definitely a commendable thing, but just on the pricing aspect, if you could throw some light?

No, I think this is pretty much in line as to what we had planned from say a couple of years ago that expansion has to deliver volume growth, pricing growth has to be in line with the market growth and some years it may be higher, some years it may be lower. This year we felt this was the appropriate kind of price growth that maybe that the market may allow, and I think within this range plus minus 1% or 2% should continue for the next couple of years.

No, I would not think so. Our impact was minimal; our discounts were minimal. So, I cannot comment on what industry has seen as an impact, but we have certainly not seen beyond half a percent of growth impact.

So, secondly on Brazil, typically the product approval timeline is pretty long. This is our earlier experience. So, from that perspective, what is your thought on semaglutide market formation?

So, you are right. So, traditionally, in fact, in Brazil the approval delays are getting longer. It used to be 24 months and today if you file a new dossier, it is going to be 36 months. But ANVISA is treating semaglutide in a different manner because of the importance of the drug. So, I am not very clear as to, they have given out statements which have evolved over time. So, we would expect them to treat this kind of as a priority filing in the interest of patients and in the interest of healthcare economics in Brazil. So, hence, I do not think this is a typical filing.

Got it. And on the same product for India market, the patent expires in March. So, market formation likelihood in March itself or is there a risk for the market formation itself getting bit delayed?

No, there is litigation ongoing right now. So, hard to comment. So, we will have to wait for some time to understand exactly when the market can form.

Got it. Thank you.

Thank you. Our next question comes from the line of Amit Kadam from Canara Robeco Mutual Fund. Please go ahead.

Hi. Good evening. Just can you take us through some changes in the working capital? Saw some little deterioration in terms of receivables and payables. Just can you elaborate what has happened in this particular half?

So, when the GST implementation was rolled out, I think most of the industry players have extended the credit period for one month. So, that is something which has impacted the cash flow as at 30th September, which will come back in October.

And payable?

There is an acceleration of insurance discounts, which we see happening in Germany. So, that is the reason why payables have gone down.

Okay. Now, how do you think about this line? This will also normalize by next?

Yes. It should normalize. You will see these things normalizing in Quarter 3.

We have a FOREX loss of Rs. 39 crores, which is sitting in other income. So, if you look at the other income, it is negative, right?

Okay. 39. That is what you said?

FOREX loss of 39.

Okay. That is it. Thanks.

Thank you. Our next question comes from the line of Neha Manpuria from Bank of America. Please go ahead.

Thanks for taking my question. First one on India, the field force expansion that we have done, I think you mentioned the number 7,000 by year end, which is adding like 600 people over the course of FY '26. If you could just give us some color where we are adding this field force. Is there any specific therapies that we are looking at? Is this for market coverage? Any color here?

About half would be for the existing divisional expansion within chronic and subchronic and about half would be for a new therapy entry, which should be probably by early Q4. So that is the broad breakup.

And the new division you mentioned, you will announce at a later date?

That is right.

Understood. And on Brazil, Sanjay, I think you mentioned that we should expect like one or two product launches every year in each division. If I look at Brazil's growth in the last two quarters, there has been a very strong growth. Has this been driven by these product launches coming through or is that yet to reflect in the growth going forward?

No. The product launches have been going on since two years. So these numbers incorporate the new launches. Plus, we launched a couple of big products. We launched Rozucor Ezetimibe which is a BRL 600 million market. And then we launched Lisdexamfetamine, which is ADHD drug, which again is a BRL 600 million market. So we have a few products in very large markets. So even with like market shares and single digits, still it has a material impact on our topline. So new products are contributing and we are seeing also very good volume pickup on our existing mega brands. So we have eight products, which are existing mega brands, which are doing well in volume terms. And price increases continue in single digits. So overall, the business is healthy.

And in Brazil, what would be our focus therapy areas for product launches?

Thank you so much.

In the branded generic segment. But we have another generic, which is generic-generic.

But that's a small one, right? We have reduced that segment over time?

So what we reduced, Neha, we discontinued actually what was called the tender business, which was the government tender business. So what we have is a pure generic-generic segment, which accounts for about 15% of our sales.

Okay. Fair enough. Thank you.

Thank you. Our next follow up question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Sir, I might have missed the comment, but just wanted to know the number of ANDAs let's say filed, approved, launched for the 2nd Quarter?

So in the US, we would have during the course of this fiscal year, about 4 to 5 ANDAs filed. We are ramping up this number. And we expect this number to reach maybe close to 10 next year, and subsequently about closer to 15. So that is the ramp up in US investments, which is happening, or which has started since about six to nine months . But this year would be mid - single digit, next year close to 10, and the year after closer to 15.

So accordingly, what like R&D spend as a percentage of sales to be considered?

Yes, it should be around between 5 to 5.5 in Quarter 3, Quarter 4 put together.

And I would say the increase up to 10 or 15 would probably be a kind of one -time increase, because if you recall, we have had a bit of a dry spell for the last couple of years. So in order for the business to maintain a decent growth profile, we have a bit of catching up to do in that sense. So I think after 2 years, 3 years, again, it may come down to single digits filings.

Got it. Sir just, I think strategically given this segment for say, maybe on account of return ratios or profitability point of view, there is relatively limited investment into this geography. So is there any way probably to sort of exit and allocate that capital for more for a branded business of probably India and Brazil, probably sale of ANDAs and the plant as well? Is that a way out?

No, that is not what we have been considering at all. We think that because of this slightly prolonged period of no launches, we are in this position right now. And given the nature of the business in the US and filing duration and approval uncertainty, yo ur investments generally would take minimum 3 years, 5 years to show reasonable kind of movement in profitability. So we are aware that obviously this is not the greatest position to be in right now. But it should improve from here if the filings are done right and the products are launched and essentially the launch engine has to be back working again. But I do not see any reason why one should exit this market at all.

Because earlier the inspection or the compliance was the key concern. But been resolved that for now pretty long period of time. But like the product commercialization or the uptick in both filing as well as approval and then commercialization is still tak ing little longer. And so the question.

Yes, it is true that the resolution took time. But that was essentially those due to COVID right when we could not get the inspectors in for more than 2 years. So I think…

No, sir. I meant post compliance coming in place. After that also we have taken little longer to see the pickup in United States.

Yes, I think the R&D engine is more like a battleship. So we had oriented it more towards Brazil and Germany. And then we have now ramped up the US. And the fruits of that ramp up will be next year when the filings move up to close to 10 and the year after when we expect them to move up closer to 15. So it is a little slower process. It is slower than what I had communicated in the past. But it seems that it is coming around.

Thank you. Our next question comes from the line of S Mukherjee from Nomura. Please go ahead.

Thanks for taking my question. So just on the comment you made on the optimism around the US business, if you can take us through your thoughts as to how you see this business scale up from a slightly longer-term perspective, what are the kind of filings you would be chasing, any differentiated assets, if you have any big plans for injectables, biosimilars, etc. Since you would be staying put in this market, how should we think about the business evolving over the next five years?

I think optimism is to the degree that we want to return back to profitability, right? So I don't think we are intending to make any large investments in the US Gx space in terms of CAPEX or anything of that sort. We believe the current infrastructure that we have would allow us reasonable opportunities to launch a few good products in the next, say, three-year period, five- year period. And we're also looking at partnering with for certain products in which capabilities we don't have today. So the idea is that we need to get back to a reasonable level of sustainable profitability, which because the last few years has not been achieved. So I would say the optimism is essentially directed towards that and nothing beyond that that we're looking at investing.

I think H1, the total CAPEX is roughly 200 plus. For the full year, it should be maybe around Rs. 300 crores. And over the next three years, on an average, I think the CAPEX should be between 250 to 300 per annum.

Okay. Thank you.

Thank you. Our next question comes from the line of Kunal Randeria from Axis Capital. Please go ahead.

Hi, good evening, sir. So in the last 1.5 years, you have added around 1200 reps. Do you mind sharing which divisions you've added these?

Which divisions you mean?

Yes, sir. I mean which, cardiac, gastro, where exactly have you added?

Across almost all cardiac, gastro, including diabetes, derma, pain management, VMN, it is pretty much all. So it's been, I would say, majority in the chronic divisions and maybe say 30% to 40% in the sub-chronic divisions.

Right. So there was no one particular therapy where you were adding, it was just across the board. Got it. And secondly, for the upcoming GLP -1 launches both in India and Brazil, will you need to form a separate team and add more personnel, or you have already recruited those?

So for Brazil, it will be part of our existing diabetes team, cardio and diabetes team. At some point in the future, we will expand the team. But right now, we don't plan to do it in the next 18 months.

And India business?

We will probably share that in the coming quarter.

Thank you, sir. Got it.

Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to Mr. Sanjay Gupta, Executive Director of International Business for closing comments.

Thank you. Thank you all for your interest in Torrent Pharma. We look forward to being in touch with you. Bye-bye.

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