Orchid Pharma Ltd (NSE: ORCHPHARMA) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Mridul Dhanuka — Whole-Time Director
Sunil Kumar Gupta — Chief Financial Officer
Analysts:
Vishal Manchanda — Senior Vice President, Institutional Research
Vivek Patel — Analyst
Viraj Parekh — Analyst
Neeraj Bukalsaria — Analyst
Rupesh Tatiya — Analyst
Kumar Saurabh — Analyst
Vidit Shah — Analyst
Harsh Bhatia — Analyst
Aashita Jain — Analyst
Romil Jain — Analyst
Nikhil Upadhyay — Analyst
Presentation:
Operator
Hello. Ladies and gentlemen, good day, and welcome to the Ockid Pharma Limited Q3 FY ’25 Earnings Conference Call hosted by Systematix Institutional Equities. 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. Should you need assistance during the conference call, please signal an operator by pressing star zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Vishal Manshanda from Systematix Institutional Equities. Thank you, and over to you, sir.
Vishal Manchanda — Senior Vice President, Institutional Research
Thanks, Lizan. And good evening, everyone. On behalf of Systematix Institutional Equities, I welcome you to the Q3 FY ’25 earnings call of Orchid Pharma. We thank the Orchid Pharma management for giving us an opportunity to host the call today. We have with us the senior management of the company, represented by Mr, Whole-Time Director; and Mr Sunil Kumar Gupta, Chief Financial Officer. I’ll now hand over the call to the company management for opening comments. Over to you, sir.
Mridul Dhanuka — Whole-Time Director
Thank you. Good evening, investors, ladies and gentlemen. I am delighted to welcome you to our discussion on the results for the 3rd-quarter of FY 2025 of Orchid Pharma Limited. First, let’s review the financial performance of Q3 FY ’25. Our total income for this quarter reached INR227 crores and our EBITDA for the quarter was INR37 crores. Looking at a cumulative view, which we always talk about, for the first-nine months of FY ’25, our total income has been INR710 crores, reflecting a 15% growth over the same-period last year. This growth underscores our continued focus on execution, cost optimization and strategic objectives. Our EBITDA for nine months FY ’25 stands at INR115 crores, showing a strong improvement over INR99 crores from the previous year. Our continued focus on profitability has seen our PAT improve from INR62 crores to INR78 crores over the same-period, a marked increase of 26%. While this nine-month period has presented some shift in base, we view it as an opportunity to strengthen our foundation for sustainable growth. Several factors have influenced our financial performance, but we remain steadfast in our commitment to long-term value-creation. The market is currently undergoing a realignment between demand and supply, which brings both challenges and opportunities for value optimization. In-line with our strategy, we have focused on maintaining healthy margins rather than opting for higher-volume at reduced prices. While our overall volumes have increased by over 20%, price corrections in a few major products have kept their total sales number muted. We have always positioned Orchid as a company focused on long-term sustainable growth. Our unwavering commitment to operational excellence and innovation ensures that we continue to chart a strong growth trajectory. We remain optimistic about the future growth prospects of the business, especially looking backwards five years from today. This quarter has been particularly dynamic with key projects progressing from planning to execution and early revenue realization stages. While some are still in their initial stages, the momentum is encouraging. Thank you. In terms of key business update, let me first start with some good news. The long-awaited new GMP audit at Orkids facility was conducted in October ’24 and we have successfully received the certificate of compliance of short recently. In preparation for this audit, our general focus was on compliance and regulatory readiness, which has led to a one-time increase in expenses to the tune of INR3 crores. Coming to, which is Orchid’s brand-name and, we did a mega launch event in November 2024 during the global AMR week for this product in particular and Orchid AMS in general. The occasion brought together global experts on antimicrobial resistance to discuss emerging challenges and role of new-age antibiotics to mitigate those challenges. This event reimposed Orchid Pharma’s commitment to tackling AMR through innovative solutions. Domestically, Enmet is performing as per our initial expectations. The acceptance among doctors and hospitals has been encouraging and our partnership with continues to drive strong market penetration. On the global front, early adoption trends are promising and we anticipate exponential expansion in this going-forward. In the US market, we eagerly await news of progress of a possible partnership by Alekra regarding our filing in the US, we previously reported receiving a RTR observation from the US-FDA. Since then, we have made substantial progress in addressing the noted deficiencies and are on-track to refile in the next quarter in-line with the 181st day launch ended-up in Q1 FY ’29. Our approach remains focused on ensuring full compliance with regulatory requirements to facilitate a smoother approval process going-forward. On the Orchid AMS division continues to gain momentum with growing doctor adoption and increased awareness of antimicrobial resistance. Our commitment to responsible healthcare solutions is being recognized and we are encouraged by the engagement we are witnessing from the medical fraternity. This is a long-term investment for the company and to support this cause, currently, it is the investment phase of the business. It is an EBITDA drag of about INR6 crores on a nine-month basis currently, while we continue to build the team and start interacting with doctors, hospitals and the medical community in general. Coming to the 7ACA project, which is a crucial initiative that will further strengthen our API capabilities and contribute to India’s self-reliance in critical pharma ingredients, I’m happy to share that this project is advancing well since the breaking of ground on Ganesh last year. Despite initial weather-related and festive delays, construction is now moving at an accelerated pace. We have initiated the ordering process for major engineered equipment, which will be completed by Q1 FY ’26. This project represents a long-term investment in Orchid Pharma’s manufacturing strength and is expected to bring significant cost synergies upon completion. This is a pivotal element of our long-term growth vision, reinforcing our leadership position in API manufacturing and ensuring supply-chain security. As we step into the final quarter of FY ’25, we are confident that despite short-term headwinds, our commitment to operational excellence, disciplined execution and strategic expansion remains strong. In the upcoming quarters, we’ll see an enhanced focus on regulatory milestones, ensuring a smooth repiling forcepta and introduction of new products and expanding our AMS division. Additionally, we will continue executing the 7ACA project as planned. We are confident that these initiatives will drive sustained performance and create long-term value for all stakeholders. In closing, I would like to thank all stakeholders, employees, investors and partners for your trust and support. With your continued belief in our vision, we look-forward to achieving new milestones and creating further value. I now welcome your questions and look-forward to a productive discussion.
Questions and Answers:
Operator
Thank you. Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone wishing to ask a question may please press star in one on your telephone. If you wish to remove yourself in the question queue, you may press star and two. Participants request that they use answers for asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Vivek Patel from Family Office [Phonetic]. Please go-ahead.
Vivek Patel
Very good afternoon, sir. Hello. Thanks for the opportunity.
Operator
Sir, your audio sounding very muffled. Can you come a little more closer to the mic or use the handset mode while speaking.
Vivek Patel
Is it better now?
Operator
Slightly better. Please proceed.
Vivek Patel
All right. Thank you. Very good afternoon, everyone, and thanks for the opportunity. I just had a quick question on what could be the potential impact of the launch of WCK522 or on thank you.
Mridul Dhanuka
Sorry unfortunately your voice is not very clear. I could not hear the question.
Vivek Patel
Is it better now sir?
Mridul Dhanuka
Yes.
Vivek Patel
Yeah, sorry. Very good afternoon, sir, and thanks for the opportunity. I just had a quick — hello.
Mridul Dhanuka
Yes.
Vivek Patel
I just had a quick question on the potential impact of the launch of of or WCK52 on. Thank you.
Mridul Dhanuka
Yeah, I think both are completely different segments of operations. Unfortunately, I would not have a comparable analysis on them unless submits long-term clinical trial data in the public domain. But as of now, I believe the market is really large. I have shared earlier that with the currently with the 5 million people dying due to AMR, it has the potential to address one-third of that. That’s a significantly large number in itself. And any new products which actually address the same market are actually welcome to save more lives worldwide.
Vivek Patel
Thank you, sir. Thank you.
Operator
Thank you. The next question is from the line of Viraj Parik from Asset Management. Please go-ahead.
Viraj Parekh
Good evening,. Am I audible?
Mridul Dhanuka
Yes, Viraj.
Viraj Parekh
Hi. So a few questions from my end. In your opening remarks, you mentioned that there was price correction in a few of our products, which led to a little bit of a degrowth in our top-line. So if you could elaborate more whether this price correction is temporary? And is it in our top three products? And how do we look at it going ahead for the few quarters?
Mridul Dhanuka
Yeah. So the price correction is in the top three products. And as I explained, we are focused on retaining margins as you would have seen, the margin profile is similar what we expect. So we have maintained the margins largely due to what has happened since the — Orbindow started making Penzi, some of the prices from China have dropped. So they’ve been a little volatile, they have seen maybe or windows not producing in a full-fledged way. So they’ve been a little volatile. Whatever benefits are there and I’ve explained earlier that the emerging market business works on a spot price basis, so customers track the starting material prices and that’s the impact which has come. Unfortunately, how it’s going to behave in the future in terms of PENG pricing and-or Bindo producing or not producing. I won’t be able to give a forecast on future.
Viraj Parekh
So, I believe our gross margins may be in the range of 40% plus-minus 1% or 2% as you’ve guided before. But what I’m trying to get a sense of is on the top-line, how do we look at it going ahead? Due to the heavy concentration we have in our top three products in our core business, our nine-month growth stands at 13.5% and I’m just trying to get some flavor in terms of the quarterly growth which we are looking at from our core business. I’m not looking at margins. I believe there is an EMS drag on our operating margins. That’s fine. That’s an investment we’re making right now. But from a core business growth point-of-view, how do we look at sustainable growth going ahead?
Mridul Dhanuka
Yeah. So we still believe that if you look Orchid as a long-term business and even three years from today, if you’re looking backwards, you would still see that 20% CAGR, which I’ve already promised.
Viraj Parekh
So will that stand true for this financial year?
Mridul Dhanuka
I’m not sure. I’ve always maintained QS QT the quarter say, quarter truck, I won’t be able to give a guidance.
Viraj Parekh
Second question is more on the royalty front. We were expecting some kind of royalty to flow-in, in this financial year. So is there any update on that?
Mridul Dhanuka
Yeah. So we have received the royalty, but at this stage I would not be able to share the numbers with you. So royalty came in even last quarter, but the number was a very small fraction. It is a significantly larger number than last-time. And as expected, within the first three, four quarters of growth and the volume spreading will start materializing. So anything material to report, maybe in the next quarter we will — when we share the annual report number, maybe we’ll talk about some royalty numbers then.
Viraj Parekh
So are we tracking the kind of sales that are happening on the basis on which we are getting royalty? Is that something we actually tracking as a company?
Mridul Dhanuka
So unfortunately, because it’s a new product currently, it’s not having coverage from the reporting agency, but we do have audit rights and annually we will exercise those to make sure that there is no leakage.
Viraj Parekh
Sure. And just last question before I get back-in queue. Can you have some kind of a timeline we have for a 7 ACA project commission? I believe we started construction last Ganish. So.
Mridul Dhanuka
Yeah. So we have talked about the motor trial happening in April of ’26. Currently, it looks that we should be able to meet those deadlines.
Viraj Parekh
Thank you,. All the best.
Mridul Dhanuka
Yeah.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star in one. Participants, if you wish to ask a question you may please press star in one the next question is from the line of Ni Raj from Damak. Please go-ahead.
Neeraj Bukalsaria
Yeah, hello. Thanks for the opportunity. Sir, my question was around our potential launch in US. It seems like our partner Allegra, you know they have — they are still yet to finalize on a partner. Just wanted to understand what is happening on that front. Actually, companies spend their lifetime going through trials and USFDA, but it’s almost one year. Everything is clear. The USFDA has also cleared our product, but it is very unfortunate a partner we have not been able to finalize on the partner. So what is happening on that front?
Mridul Dhanuka
Yeah, Niraj, that’s really a cause for concern. I agree with you. Unfortunately, we don’t have any control over Alekra and their communication is also poor. So when we spoke to them last-time, they talked about that they are aware of this challenge and you know they are actively working on several discussions. That’s what they said. I don’t have any further information.
Neeraj Bukalsaria
Okay. And secondly, like to the answer to your previous participant, you mentioned that like in the just quarter, which ended Q3, we did receive some royalties from the European region. I’m not looking for the exact number, but I believe that must-have flown through in our P&L. But as I can see, they were quite one-offs as well because of which our EBITDA number came down. But assuming that all of those royalty went straight to the bottom-line, so excluding those royalties, our EBITDA would have been even lower. Would that understanding be correct?
Mridul Dhanuka
Yeah, but I don’t think the number of royalty would be material enough to affect EBITDA by much. So — but yes, logically your math is correct.
Neeraj Bukalsaria
Okay, understood. Thank you so much. All the best.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star in one the next question is from the line of Rupesh from Capital. Please go-ahead.
Rupesh Tatiya
Hello, sir. Thank you for the opportunity.
Operator
Sorry to interrupt, Mr Rupesh, sir, your audio sounding very muffled.
Rupesh Tatiya
Just give me a moment. Is it better now?
Operator
Much better, sir. Please proceed.
Rupesh Tatiya
Yeah. Okay. So my first question, sir is can you give some update on the India — India market update for backdown, how is the traction? What is the hospital coverage? How do you see it going-forward in the next one year?
Mridul Dhanuka
Yeah. So as I alluded in my opening speech, we are progressing as per our plan on India and we are able to leverage the distribution network of our partners significantly. So it is going as per our plan. As a policy, we don’t share product-wise numbers, but we expect continued healthy growth in this going-forward as well.
Rupesh Tatiya
And this is not counted in your AMS division, right?
Mridul Dhanuka
No, that is not counted as the AMS division. AMS division is only the sales that this is a partner sales, not part of the.
Rupesh Tatiya
So — Sipla sales is not part of this that I understand, but our own sales force doing — selling of that would be part of number?
Mridul Dhanuka
Yes.
Rupesh Tatiya
Okay. Okay. So our sales force, I mean, of sales-through our sales force that hasn’t picked-up materially yet.
Mridul Dhanuka
Yeah, yeah. So it will take time. You see it, nobody knows who’s Orchid in the domestic market. So for the first considerable period of time, we don’t see people are, you know creating significant traction. Most of the time is just getting the foot in the door, talking to the hospital, asking them to approve us as approved vendor. All of those things take time and currently, the time is to build these relationships. That is why we decided that we need to partner with somebody because patent life for the product is minimal rather than trying to reach the universe on our own.
Rupesh Tatiya
Okay. Okay. And how — I mean, how do you see this progressing? Can we can it contribute, let’s say, meaningfully to our revenue in FY ’26? Can you mean a piece.
Mridul Dhanuka
Or did AMF you mean?
Rupesh Tatiya
No, no MAT a factor.
Mridul Dhanuka
I’m not sure quite what you mean by meaningfully, but it would significantly contribute to the overall EBITDA of FY ’26.
Rupesh Tatiya
Okay. Okay. And the second question is what how is the doing? We launched some one year-ago and some competition has also come in. So how is that product doing in the India market?
Mridul Dhanuka
So itself, whatever when it was launched, we have the same share about more than 50% of the share is with Orchid in the India market. And due to the initial launch, there was a lot of exuberance and I think about 50 brands or more than 50 brands launched in the initial days. And due to competition, there has been some price erosion. But this is a product which was, you know will be becoming more stable because it is more of a second-line treatment. Whatever growth was there was largely because Pfizer product was expensive and not available. And once those numbers are achieved, it is not going to have exponential growth even for going-forward.
Rupesh Tatiya
Okay, okay. And the third is project, I mean where are we? Can you give some update and timelines on commissioning?
Mridul Dhanuka
Yeah. So project, we are under-construction phase and the current launch imagined is November, December of ’26, subject to the approval of the drug in India. Currently, the drug is not even registered in India. Our facility will be ready by that time.
Rupesh Tatiya
December ’26.
Mridul Dhanuka
Yes.
Rupesh Tatiya
Okay, okay. And on seven ACA projects, I mean, have you got some clarity on PLI is — has anything changed there materially or how is that?
Mridul Dhanuka
No change there.
Rupesh Tatiya
So I mean, whatever the duration of the PLI scheme, the incentive, all of that remains as originally planned because I think the project is significantly delayed compared to original — whatever was the government’s requirements.
Mridul Dhanuka
Yeah. And as I’ve explained on a few previous calls, so the government letter has not changed, but the communication that we are receiving from the government is full of assurances. They are saying all the other projects are late. We do — you don’t worry, you go and execute the project. We are behind you. So all of that support and communication is there. We expect the latter they have not given us an expansion to anybody, not even, but also two years late. So we don’t have any letter from them saying this is extended, but only assurance. So that risk is there like I’ve talked about in previous calls.
Rupesh Tatiya
Okay. Okay. And then the final question is this, I mean, at least my expectation was when the penicillin plant will come online, you know, there would be dumping from China, which is what has happened in some of the other pharmaceutical products. And at least I was expecting some sort of margin expansion, but what you’re saying is in emerging markets at least or unregulated markets, the end-product prices have also reduced, but how is it with respect to the regulated markets?
Mridul Dhanuka
So regulated market, the prices have not much impact with respect to what’s happening in the starting material prices. But obviously, because in a regulated market, we have a very good share. There is always a competition competitive strength, not strength, let me say competitive pressure from the Chinese to try and enter. So that pricing pressure is always there, significantly muted compared to the emerging market, which is like a daily battle.
Rupesh Tatiya
So then I mean, do you have some view on how this will evolve, let’s say, in next six months or next one year?
Mridul Dhanuka
So nothing short-term, but what’s going to continue to happen is basically we need to converse with expanding our customer-base to reduce that risk of anybody switching to a Chinese. And while we may have to watch out for what is going on between customer and China.
Rupesh Tatiya
Okay. Okay. Thank you. Thank you for answering my questions.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star in one. The next question is from the line of Kumar Saura from Scientific Investing. Please go-ahead. Go-ahead.
Kumar Saurabh
Hello, sir. My question is on the USA launch. I think — and sorry in case it’s repeated if I missed in the beginning. So I think we got approval, but there has been a delay and there is a patent expiry. So we are losing on-time. So what’s the update on that and do we have a backup plan?
Mridul Dhanuka
Yes, Saurab. So unfortunately, this license is not in orchid control. It will be whenever Alekra decides to license, it will be licensed only then.
Kumar Saurabh
Okay. Okay. And the second question I have on if we look at all the three, four triggers which we have in the business, whether it’s the Indian formulation launch or these molecules or the backward integration, everything looks like margin-accretive, but you have given a guidance of 17% margin. So is it more a short-term margin guidance where in long-term over a period of four, five years as some of these things play-out, you see the margin expanding beyond 17% sense there.
Mridul Dhanuka
So unfortunately, I have never stated a 17% number. I don’t know which margin you’re talking about. The guidance we have only given is on the gross margins remaining stable 40% plus-minus 2% for the near-term. So that’s the guidance I’ve given. And the other thing I’ve talked about is due to our volumes increasing and productivity enhancement, we should see our EBITDA margin expansion of 100 basis-points or so every year. So from which year you are coming calculating 17, I don’t know. So unfortunately, I can’t answer.
Kumar Saurabh
Okay. Okay. Okay. And the last question is the Indian AMS business formulation business, which we have launched and we also have a SIPLA partnership. I think there in one of con-calls, we have said INR100 crore in three to four years. So does it include CIPLA numbers also or is it only done through our team?
Mridul Dhanuka
No, that imagination is only for own AMF business, not including Siplace.
Kumar Saurabh
Okay. And last question, sir, on the sterile business, like what is the capex expansion plan and what is the growth plan for coming years?
Mridul Dhanuka
So sterile, we expanded some capacity last year we commissioned. So right now there is no capacity expansion planned in the sterile business. So whatever we commissioned last year, that is going to serve us well going-forward for a couple of years.
Kumar Saurabh
Okay. Okay. Thank you, sir. Thank you very much.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star in one. Participants, if you wish to ask a question you may please press star in one. We take the next question from the line of Viraj Parek from Asset Management. Please go-ahead.
Viraj Parekh
Hi, thanks for the follow-up. So just two questions. How much money do we still have in our banks from the money we’ve raised?
Mridul Dhanuka
MR. Gupta, can you please answer that question?
Sunil Kumar Gupta
Yeah. Sir, it is INR194 CR crores.
Viraj Parekh
And sir, approximately from this, how much interest income are we earning?
Sunil Kumar Gupta
How much? We are getting around 7% interest.
Viraj Parekh
Around 7%, right?
Sunil Kumar Gupta
Yeah.
Viraj Parekh
Right. And Vidal, in your opening remarks, you mentioned that we had our European or inspection get completed in October. So just wanted to have an follow-up for the US-FDA. Do we have any — have you received any kind of notification from them in terms of the order?
Mridul Dhanuka
So as we speak, the inflection is going on. They came on Monday.
Viraj Parekh
Okay. Okay. Thank you so much. That’s all.
Mridul Dhanuka
Yeah.
Operator
Thank you. The next question is from the line of Vidit Shah from Spark Capital. Please go-ahead.
Vidit Shah
Hi, thanks for taking my question. My first question was on the AMS division. We’ve seen a significant ramp-up of expenses in this quarter in terms of both the employee costs and other expenses. So if you could just help is this in account with new product launches, increasing geographies? And when are we expecting this division to breakeven going-forward.
Mridul Dhanuka
Yeah. So this is not just new products or geography, it’s a completely new business segment, which is B2C, Orchid till now was only present in B2B business. So we expect a negative EBITDA run-rate for another year or so more after this financial year and then it will become EBITDA accretive to us.
Vidit Shah
Okay. And what would the revenue have to be? Are we — are all the cost factor-in — are factored in now? So I mean, so we are doing about 20040 — about INR200 lakh and INR300 lakh to rupees as cost. So is that the breakeven revenue or do we have to go up to INR40 odd crores to sort of breakeven?
Mridul Dhanuka
Sorry, can you come again, please?
Vidit Shah
Yeah. So I was asking that we’re doing about INR3 crores of cost on a quarterly basis or let’s say, annualized run-rate of about INR12 crores. So is that the breakeven revenue that we should expect or is the breakeven number something different in terms of revenue.
Mridul Dhanuka
So the revenue number, unfortunately, I will not be able to share a breakeven, but it would be higher because out-of-the revenue, there’ll be significantly gross margins would not be the same amount as revenue. So there would certain amount of gross margin and then whatever is the gross profit on that INR12 crore drag if we calculate the same extra position.
Vidit Shah
Fine. And just a clarification on the EU GMV audit that we got done, did you say in your opening remarks that the expense incurred was about INR3 crores for this?
Mridul Dhanuka
Yes.
Vidit Shah
And do we expect a similar number for — on the US-FDA as well?
Mridul Dhanuka
No, that was in general, we were expecting that was a planned audit for Europe. So we had called them and we knew about it. So that was general, let me say, look and feel of the facility kind of one-time. So nothing need — more needs to be done for the US-FDA.
Vidit Shah
Okay. Fine. Understood. Thank you so much.
Operator
Thank you. Thank you. The next question is from the line of Bhatia from Bandhan Mutual Fund. Please go-ahead.
Harsh Bhatia
Yeah. Hi,. Just one clarification. I joined the call a bit late. You mentioned on the pricing part from the Chinese counterparts, particularly for the top three products. So we have been seeing the pricing coming off sharply since the last couple of quarters. Is that the same thing that was going on from these three products, but this time around we decided to not basically give up profitability and therefore reduce the volumes or what exactly happened?
Mridul Dhanuka
Yeah. So the general price that you were seeing from China was not reflecting in forin, then Orchid is never the first one to go out and reduce the price. So while we were able to maintain significant growth in the first two quarters and maintain the pricing. What we realized while we coming to quarter three was that those prices were no longer relevant and we had to drop the prices. Of course, the cost had also significantly dropped. That’s why you see that the gross margins have been maintained. So this time we decided to not sell the capacity that we had and even the product in-stock, you would see that the inventory has increased for this quarter. So we have decided to keep some stock with us rather than sell at a lower-price. So I’m not sure what’s going to happen this quarter. I don’t expect any further fall, but it’s not that we were not passing to the customer, the customers are tracking the price of the starting material and negotiating with us.
Harsh Bhatia
But you would say after this 3rd-quarter, whatever you could share, you are sort of benchmark to the pricing for the Chinese competitors that would be fair to say.
Mridul Dhanuka
Yeah, spot market price is business is like even for $1, which is like less than 1% of the price at times, the business will shift. So the prices are that low.
Harsh Bhatia
Sure. And in, you mentioned second-quarter as well as 3rd-quarter, fractional royalties have already been booked. Obviously, 3rd-quarter would be slightly higher than second-quarter.
Mridul Dhanuka
Yes.
Harsh Bhatia
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Ashta Jain from Nuvama Institutional Equities. Please go-ahead.
Aashita Jain
Hi,. Good evening. So just two questions from my side. See, firstly, is there any update on the Dhanka Labs merger?
Mridul Dhanuka
We are just receiving dates after dates from the court. So.
Aashita Jain
Okay. So what are internal expectations of this merger now?
Mridul Dhanuka
Unfortunately, I stop forecasting in this matter.
Aashita Jain
Okay, okay. And secondly, in terms of capacities, I understand sterile we had expanded last year and overall was this year. So what are our current capacities in both and the capacity utilization, say, on Nine-Month FY ’25 basis?
Mridul Dhanuka
Yeah. So as I’ve explained earlier, the capacity in terms of tonnage is not relevant for because of the fungibility and the price variance between different products ranging from $100 to almost $10,000 a kilogram. So let me say that for the next two years, we don’t need any capacity expansion to be on the growth track as we imagine?
Aashita Jain
Okay. And just one clarification, when you say 20% growth for over three years time-frame, you are — you’re not including — are you including also in your 20% growth forecast?
Mridul Dhanuka
And-or bacter with respect to the domestic market would be part of that. The royalty piece will not be part of that.
Aashita Jain
And is not part of the that.
Mridul Dhanuka
Also is — will be commissioned only in December ’26, so next two years, so I don’t see any revenue there, right?
Aashita Jain
Okay. And lastly, how are you looking at of bacter pricing in India compared to. How are you looking at it from the Indian perspective?
Mridul Dhanuka
Yeah. So in India, is now under DPCO and is priced a significant premium to.
Aashita Jain
So significant premium okay.
Mridul Dhanuka
Yeah.
Aashita Jain
Okay, understood. That’s all from my side. Thank you.
Mridul Dhanuka
Thanks.
Operator
Thank you. The next question is from the line of Rupesh Tatia from Intelligence Capital. Please go-ahead.
Rupesh Tatiya
Hello, sir. Thank you for the follow-up opportunity. Sir, this — can you be — I mean, what is the spend — capex spend for 7 ACA, total plans and how much have we spent already? This is for fixed asset.
Mridul Dhanuka
Yes. The budgeted spend was INR600 crores, out of which, Mr Gupta, can you just say how much have we spent till now?
Sunil Kumar Gupta
Yeah. It is around INR80 crores we have already spent.
Rupesh Tatiya
Okay. Okay. So then if you’re expecting water trials by April, so significant spend will come in Q4?
Mridul Dhanuka
Yes, a lot of material has been booked. It will be — the payments will be back-ended, some of the largest orders for equipment has gone, but their payments will be staggered and closer to delivery, there would be large chunks of amount flowing down.
Rupesh Tatiya
Okay. Okay, okay. And I mean, given how these trials go, is it fair to assume, sir, that in second-half, there will be significant capacity utilization at least 50% and even on quarterly run-rate, there can be full capacity utilization because everything needs to be consumed internally yeah.
Mridul Dhanuka
So I don’t think there is going to be any challenge with respect to the demand of the product in terms of capacity utilization. But fermentation is a typical product and it was a chemical product, I would have fully agreed with you. You but in a fermentation product it does take some time to actually scale-up and get everything ready and up and going so we have multiple fermenters and each of them have almost like a mind of their own right so if sometimes they don’t like the food they will say we are not going to produce the product. So I don’t know-how to scare you. The idea is basically the ramp-up will be slower than a chemical product typically. But yes, our intention is to do as fast as possible.
Rupesh Tatiya
Okay, okay. And sir, I mean, including PLI and your own margin assessment, what would be the return period in which we will recoup this investment in at least in your assessment, in planning.
Mridul Dhanuka
So in terms of you know, I’ve not looked at the business like that, but within three years, it must come back, the investment.
Rupesh Tatiya
Okay, okay. And I mean generally — generally what I have seen is when Indian companies are trying to backward integrate for some of these large-volume critical products, a lot of dumping happens. I mean with penicillin is happening for met forming backward integration. I think those people are facing dumping problem. So I mean, how do you see the dumping in case of 7AC also when our line comes online?
Mridul Dhanuka
So obviously, there’s going to be pricing pressure, but it’s going to be different than PENG because PenG long-term weighted-average price was about $10 to $12. And just recently after India announced the PLI, the price went to $30. So I think the Chinese can still make money in the long-term average price at $10 to $12 kind of number. So I do see a possible crash one is once India starts producing full-fledged. I don’t think current prices are sustainable. But in 7 ACA, the long-term average price is only $63. Now I’m not saying that the Chinese will not drop price, but I don’t think the price can drop by 20%, 30%, 40%. So a small drop-in price, we are significantly cushioned with the PLI, the GST benefit and the custom duty impact that any import from China would have?
Rupesh Tatiya
So I mean, are you working at some proactive anti-dumping duty with the government — as and when the line comes on one?
Mridul Dhanuka
Yeah. So we’ve had conversations with the government and they are like we will support you, but the dumping actually has to happen before anti-dumping duty can be placed.
Rupesh Tatiya
Okay. Okay. And then, sir, this USFDA inspection, did I hear you right that this is like you invited USFDA? This is not triggered due to some product filing, anything like that?
Mridul Dhanuka
No, no. That was for the EUGMD. We triggered the EUGMD.
Rupesh Tatiya
Okay. Well, how about USMDA?
Mridul Dhanuka
USMDA they walk-in as it is.
Rupesh Tatiya
But then how is the business development going? I mean one of the customer we were working with that customer had issues with his plan, but how is the business development happening in the US season?
Mridul Dhanuka
So that has significant setback. Unfortunately, there are not too many customers who can take our product because of the limitation of site. So we are working on how to mitigate that. Maybe a couple — in a couple of quarters, we will come out with a new plan.
Rupesh Tatiya
Okay. Okay. Okay. Okay, sir. Thank you. Thank you for answering my questions.
Mridul Dhanuka
Thanks,.
Operator
Thank you. The next question is from the line of Ramil Jain from Electrum PMS. Please go-ahead.
Romil Jain
Hello. Thanks for the opportunity. Am I audible?
Mridul Dhanuka
Yes, you are.
Romil Jain
Sir, just one question on the momentum. So because we’ve already got — you know, we are selling in Europe. So just want to understand how is the ramp-up in that as compared to your expectations because we’ve already started getting royalty from last quarter and this quarter also you mentioned that there is a substantial growth. So just want to understand whenever we get approvals in Europe in terms of distribution, can it — can it be a similar kind of a ramp-up? So just some directional points on that.
Mridul Dhanuka
Can you just repeat your question,? I could not completely understand what you were trying to ask.
Romil Jain
So my question is the distribution that.
Operator
Not only is breaking up.
Romil Jain
Can you hear me now?
Operator
Yes.
Romil Jain
Yeah, my question is in Europe, we have started selling as a ectom. So how is the pickup versus your expectations?
Mridul Dhanuka
So we had planned for the three geographies, which we thought would be large geographies in a cumulative way. This is only 1/4 of actual business which has happened. And looking at how we are looking at launch in India, the same thing would repeat for Europe. It’s not going to be that easy because the doctors need to be convinced country-by-country. US would be significantly better or faster, I would say, because it’s one country, Europe being an amalgamation of several markets, each would have their own dynamics and the ramp-up would be slower. But obviously, it would be exponential month-on-month, year-on-year, quarter-on-quarter.
Romil Jain
Okay, okay. And let’s say in Q4, the quarter we are in, how is the growth versus, let’s say, Q3? I mean, is there also a substantial growth happening?
Mridul Dhanuka
So Q4 is what is starting. So we don’t have month-on-month visibility. We only get to see the numbers once Alekra reports to us, which is the period is 45 days at the end-of-the quarter.
Romil Jain
Okay, okay. And just one question on the tax-rate. So from when do we see the taxes coming in fully or if you can give some understanding on that?
Mridul Dhanuka
MR. Gupta, can you please answer that question?
Sunil Kumar Gupta
Yeah. Actually, sir, right now, we have carry-forward losses of INR790 crore, still in our booking.
Romil Jain
INR790 crores.
Sunil Kumar Gupta
INR790 crores.
Romil Jain
Okay.
Sunil Kumar Gupta
So all depends on our future profitability and assuming this investment also because then we will get depreciation benefit also income tax depreciation benefit. So I don’t think for next four, five years, there will be any possibility of tax.
Romil Jain
Okay. Okay. Got it. And sir, just one last one on a. If you can just reiterate the kind of market size that we are seeing because obviously it’s a very important drug for the whole world. So just want to understand a little bit on.
Mridul Dhanuka
So the market potential is immense and unfortunately, I don’t understand the new drug market very well. I don’t think anybody in India, having not invented anything understands that. But I do have certain key guiding numbers which give me comfort that it could be a very large product. And some of those I’ve shared earlier, I’ll just repeat. So this product is targeted directly against the comparison against. The originator brand-name was, which was a $1 billion product just in US in 2007 when the patent expired.
Romil Jain
Okay.
Mridul Dhanuka
Right? Then it is also comparable to meropenem because it provides an opportunity for the doctors to treat patients with and rather than meropenem. So it is called a meropenem sparing therapy. For a large percentage of patients, instead of, this product can be given. And even if you look at India market, that’s INR1,000 crore business just for India for. So it can replace that also. And other antibiotics, it’s a very, very potent product being a new antibiotic. So it can be a significantly large number. Now what number actually translates to our sales of I am unable to forecast.
Romil Jain
Okay. On the global number, just wanted to understand what can be the market over the next two, three years.
Mridul Dhanuka
Yeah. So I have imagined when I came out with the first guidance note on this product three years ago, my imagination was a $2 billion lifetime sale across the world.
Romil Jain
Okay. Okay. Okay. Okay, sir. Thank you so much, sir.
Mridul Dhanuka
Thank you.
Operator
Thank you. Thank you. The next question is from the line of Nikhil from SIMPL. Please go-ahead.
Nikhil Upadhyay
Yeah. Hi, good evening. Thanks for the opportunity., you’ll have to bear with me because I missed the initial part of the call because there were few other calls there. So I joined the call a bit late and some of the questions could be repeated. Just on the sale, if you — we’ve seen some drop year-on-year while a lot of new capacities had come up for us in the first-half. So if you can just pair a minute and explain what exactly happened here?
Mridul Dhanuka
Yeah. Yeah. So our volumes have increased by 20%, but there has been price correction in two, three key products, which has led to the overall numbers being muted.
Nikhil Upadhyay
Okay. And on N-metas of Bectom, I think you were discussing about we getting the revenue visibility in 45 days, but if I remember, we launched the — Elekra launched it in, I think October or November. So one is, how do we book the royalty? Is it at the end-of-the year or is the royalty booked on a quarterly basis? Some guidance here.
Mridul Dhanuka
Yeah, quarterly basis.
Nikhil Upadhyay
And have we booked anything in this quarter or.
Mridul Dhanuka
Yes, we have.
Nikhil Upadhyay
Have we shared this number or.
Mridul Dhanuka
No we don’t share product-wise number.
Nikhil Upadhyay
Okay. And on the domestic side, have we launched the product and how large is the MR team today and added to that what all other products we have launched?
Mridul Dhanuka
Yeah. So on the domestic Orchid AMS business, the team is about 50 people on-the-ground. It’s a hospital business, so it does not involve doctor to doctor promotion like a typical product. The business is only for injectable products, so sold-in hospitals. And this is launched with a wide portfolio of about 25 to 30 products covering the entire gamut of antimicrobial resistance management.
Nikhil Upadhyay
Okay. And a last question from my side on our capex is, if you can share the timelines, any changes there or largely we are meeting the guidance?
Mridul Dhanuka
Yeah. No changes as of now.
Nikhil Upadhyay
On both 7ACA and the line.
Mridul Dhanuka
Yeah line.
Nikhil Upadhyay
Okay. Fine, thanks. I’ll come back-in the queue. Thank you.
Mridul Dhanuka
Thanks again.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star in one participants if you wish to ask a question you may please press star in one a reminder to the participants anyone wishing to ask a question please press star in one. The next question is from the line of Vishal Manchanda from Systematix Institutional Equities. Please go-ahead we have lost the connection from Mr Vishal. MR. Vishal is reconnected. Please go-ahead, sir.
Vishal Manchanda
Good evening and thanks for the opportunity. Sir, you talked about filing for Zavicepta through a different route in Europe. So if you could update on that, where are we?
Mridul Dhanuka
Sorry, you’re talking about selling in Europe.
Vishal Manchanda
Yes. So earlier in some of the — one of the calls, you had indicated you are also planning to file generic Xavicefta in European markets and through you have a process innovation or a patent non-infringing route.
Mridul Dhanuka
Yeah, yeah. So the US and the Europe products both are ready. So for Europe, we are currently preparing the documentation for filing the DMF. And then we will go with the MA registration. So while in US, our intention is to file AND on our own for Europe or being a — we don’t have local entity and we don’t plan to have in the future as well. So we are looking for partners to partner with to sell-in the Europe.
Vishal Manchanda
Okay. And so with this non-infringing route, how early can we be there on the market in Europe?
Mridul Dhanuka
Unfortunately, I don’t have the number right now, but I think it should be slightly earlier than US.
Vishal Manchanda
Okay. Okay. And any sense on how large the market is? So the ex-US is about $500 million around and how much of that would be Europe and Europe?
Mridul Dhanuka
I’m just making a very wild guess here. Here or I think ex-Europe, one-third of the market should be Europe.
Vishal Manchanda
Okay. So around about what the US is about $150 million to $200 million.
Mridul Dhanuka
Yeah. Yeah.
Vishal Manchanda
Okay. Okay. And just a clarification a clarification. You said we have 20% volume growth this quarter. But I was flat.
Mridul Dhanuka
I was talking about nine months cumulative.
Vishal Manchanda
Okay. And how about this quarter if you could.
Mridul Dhanuka
Unfortunately, I don’t have the number handy, but it would not be much different, should be around 15% to 20%.
Vishal Manchanda
Okay. And so like, so would — do you think we can grow 20% like we have grown in the last few years on a Y-o-Y basis for full-year FY ’25.
Mridul Dhanuka
I don’t give short-term forecasts, Vishal. Things can happen. So unfortunately, with the price correction, I’m not sure whether I can say that Y-o-Y basis, we should reach that number. But like I said earlier, if you look three-by-three years from today backwards, you would still see a 20% kind of.
Vishal Manchanda
Okay. And for the price correction that you are — you’re talking about, is this more related to the overall products or also with the sterile products as well?
Mridul Dhanuka
One of the sterile products, but yet largely related to other products.
Vishal Manchanda
And these are spot prices reduction, not for your long-term contracts that you run with your customers?
Mridul Dhanuka
Yes. Largely the spot price rations.
Vishal Manchanda
Okay. And these prices are volatile. So we can also expect prices to go up and as you would have seen in the past. So or is there a case to worry like they expect that tend to remain at lower levels for a longer time.
Mridul Dhanuka
No, I don’t think so. It’s also dependent on the demand and the supply. So they will continue to remain volatile. Although this correction is a sharp one which normally does not happen in such a short period of time.
Vishal Manchanda
Right. Sir, what we have also been witnessing is what China typically does is they tend to — they tend to kind of lower the final API prices while they do not reduce the key starting material prices as much and they lower it to the point where your gross margins are negative if you kind of use the raw-material to manufacture the final API, the gross margins are negative. So how are we looking at this from a septry oxon perspective? So when — like when we do seven ACA and we do and they cut-down on the prices. And I think right now, even the prices spread is not very encouraging.
Mridul Dhanuka
You are absolutely right, and that’s the idea that we want to be free from the clusters of China on the starting materials. That’s why the investment is INR7ACA. So although even at current prices, we can compete on, but that’s a product we don’t want to increase significant volumes because it’s not significant margin-accretive as I’ve explained earlier. But in-principle, your argument is correct and therefore, we have decided for the 7 APA, how do we become free from China and you know, not allow them to control our margins?
Vishal Manchanda
Okay. Okay. And sir, just one final one on the EU GMP inspection, this was triggered by — this would have been triggered by one of your customers whom you would be supplying the.
Mridul Dhanuka
Correct. But we requested the customer to trigger that because the period had become long. So we asked them, we were talking to few customers. Unfortunately, you know, because of the — after COVID, there is a significant backlog and I think we were planning it for more than a year before we got a confirmation of a possible order.
Vishal Manchanda
Yeah. Okay. And sir, any sense on the market opportunity for this product? Would this be a decent opportunity for you? Or this is a — this is a competitive market that you would be selling for?
Mridul Dhanuka
Which product.
Vishal Manchanda
This product-specific inspection that happened at the EUGMP?
Mridul Dhanuka
Not only for just one-product, it’s for the entire range of operate product for the European market.
Vishal Manchanda
Okay. Got it, sir. Got it. Thank you very much.
Mridul Dhanuka
Okay.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question please press star in one participants, if you wish to ask a question, you may please press star and 1. As there are no further questions, I now hand the conference over to the management for the closing comments.
Mridul Dhanuka
Thank you. I would like to thank all the participants for their insightful questions, keeps us on our toes. I would also like to thank all our stakeholders, the employees, partners and investors for their trust and support. With the continued belief in our vision, we look-forward to achieving new milestones and drive further value-creation. Thank you.
Operator
Thank you, members of the management team. Ladies and gentlemen, thank you, ladies and gentlemen, on behalf of the systematic Institutional Equities, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.