Cipla Limited (NSE: CIPLA) Q2 2025 Earnings Call dated Oct. 29, 2024
Corporate Participants:
Diksha Maheshwari — Investor Relations
Umang Vohra — Managing Director and Global Chief Executive Officer
Ashish Adukia — Chief Financial Officer
Analysts:
Damayanti Kerai — Analyst
Anubhav Agarwal — Analyst
Unidentified Participant
Surya Narayan Patra — Analyst
Ankush Mahajan — Analyst
Neha Manpuria — Analyst
Bino Pathiparampil — Analyst
Vishal Manchanda — Analyst
Shyam Srinivasan — Analyst
Saion Mukherjee — Analyst
Tushar Manudhane — Analyst
Alok Dalal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Cipla Limited Q2 FY 2025 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Ms. Diksha Maheshwari from the Lead Investor Relations team. Thank you and over to you, ma’am.
Diksha Maheshwari — Investor Relations
Thank you, Reo. Good afternoon and a very warm welcome to Cipla’s Q2 FY 2025 earnings call. I’m Diksha Maheshwari from the Investor Relations team at Cipla. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements, which are predictions, projections or other estimates about future event. These estimates reflect management’s current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Cipla does not undertake any obligation to publicly update any forward-looking statement, whether as a result of new confirmations, future events or otherwise. I hope you have received the investor presentation that we have posted on our website. I would like to request Umang to take over.
Umang Vohra — Managing Director and Global Chief Executive Officer
Thank you, Diksha. Good afternoon to all of you. We appreciate you joining us today for our second quarter earnings call. This quarter, we yet again delivered a strong profitability. The reported EBITDA margin stood at 26.7% for the quarter, which is our highest ever quarterly EBITDA margin that’s reported by Cipla. Growth in EBITDA outpaced top line growth of 9% year-on-year, which was primarily impacted due to a changed seasonal pattern. I would now like to start with the updates on our key markets.
Our One India business witnessed a slow seasonal growth, especially in the acute category. In Antiinfectives, one of our largest therapies, the market growth came at 4.9% as against the last year growth of over 12% as per IQVIA MAT September 2024. This impacted both our branded prescription, as well as the trade generics business.
On an overall basis, One India growth stood at 5% year-on-year. Our endeavor is to outpace the market growth on a full-year basis with the revival in the season and the respiratory uptick starting in quarter three of this year, which should revert back to our growth trajectory. While we are showing slower growth, we have continued to invest both in field force and investments in the field. Our number of people on the field has now reached 8,700 people.
During the quarter, our branded prescription business continued to outpace market growth in chronic therapies. Respiratory grew by 9%, cardiac grew by 11% and urology by 15%. Our share of chronic also improved to 61.5% as per IQVIA MAT September 2024. Performance of our big brands was one of the key highlights for this quarter. In our branded prescription business, we have added three new brands in the category of revenue of over INR100 crores. We now have a total of 25 brands in this category, along with 21 brands in top 300 as per IQVIA MAT September 2024.
Cipla continues to be the largest pharma company in terms of volume and the only player with 2 billion unit sales in IPN [Phonetic] as per the MAT September 2024. In our trade generics business, the business was impacted by — by the season. However, we expect it to revert to the usual growth trajectory in the coming quarters. Our Consumer health business witnessed strong traction with anchor and transition brands continuing to grow bigger. The business posted a robust growth of 20% plus, anchor brands of Nicotex, Omnigel and Cipladine maintained their leadership position in their segments. The business is focused on driving a very healthy secondary growth and thrives to look for opportunities to invest in products and channel to strengthen the distribution network. The operating profitability of our business is consistent at 15%.
In North America, we delivered a quarterly revenue of $237 million, barring a temporary supply issue in Lanreotide, the sustenance in revenue has been supported by continued positive traction in our differentiated portfolio. Albuterol further enhanced its market share to 19% in this quarter. The Lanreotide franchise consisting of Firefight [Phonetic] B2 and ANDA assets reached a market share of 35% during the quarter as per IQVIA MAT 2024.
Currently, we are facing some supply challenges in Lanreotide and hence we expect the quarter three Lanreotide franchise sales to be lower than quarter two. However, these issues are anticipated to be resolved by the end of quarter three and starting quarter four 2025, we should be able to recover sharply in the Lanreotide franchise. We’re also working to increase the overall capacity of Lanreotide in through capex investment made by our partner. During this quarter, we also received four new generic drug approvals, including one peptide in the US market.
Progressing on our journey of strengthening the Africa story, we now have merged the North Africa business, which was part of EMU with the SAGA region and renamed it as One Africa. Our overall One Africa business recorded a vigorous growth of 22%, with South Africa also delivering a similar growth in local currency terms. In the private market, our secondary growth was at a healthy 8.6% versus the market growth of 0.5%.
Our South Africa private market now ranks number two in the market with the prescription business maintaining its number one position. North Africa also demonstrated a strong growth during this quarter. In EMEU, our deep market strategy has started paying-off with the business delivering a solid growth of 18% in US dollar terms, with a pick-up in both our DTM and B2B categories. I will now cover some of the issues regarding the regulatory — the regulatory inspections. Resolution of our regulatory issues remains our top priority. Our Goa facility recently underwent reinspection by the US FDA. The facility was issued six 483 observations. We are still waiting for the classification of the inspection.
At Indore, our focus remains on remediation and implementation of the CAPA. De-risking of generic Advair, our major inhalation asset has been progressing as per expectations. We expect to launch this asset in the half one of FY 2026. For generic Abraxane, while we are more likely to launch it from our Goa facility, this may require approval for the facility impacting the timeline of the launch. We have continued with our efforts to derisk the product through the CMO side.
On the sustainability front, we have had some good progress. During the quarter, Cipla achieved ranking with the S&P Dow Jones Sustainability Index and the score has improved to 79 from 70 that was there in the previous year.
To summarize the overall company outlook, we are on track to achieve our margin guidance for the year, that is between 24.5% to 25.5%. Last 12 months have been audit heavy with our facilities of Inwajhan [Phonetic], Kurkumbh, Patalganga, China and Goa audited. All these facilities have been — have cleared with either a VAI or NAI, except for Goa where the classification is still awaited. In Lanreotide, we are in the process of resolving our supply issues. Our trade generics business, the model change has been successfully implemented and we now have a better control on the channel.
With this, I would now like to turn the call over to Ashish for the financial and the operating performance.
Ashish Adukia — Chief Financial Officer
Thank you, Umang. Just coming to the key highlights of the quarter and please note that the growth percentages that I’m going to talk about are all adjusted for QCIL divestment that we did last year in quarter three. We reported a quarterly revenue of INR7,051 crore, with a growth of 9%, driven by our core businesses of India, North America, South Africa, as well as EMEU. The EBITDA margin excluding other income stood at impressive 26.7% for the quarter, up by about 70 basis-points Y-o-Y and 111 basis points Q-o-Q basis. The reported gross margin after material cost stood at 67.6% for the quarter, which is 159 basis-points above last year’s figures, mainly driven by overall better mix.
Total expenses for the quarter include employee expense, as well as other expenses that stood at INR2,882 crore. The employee expenses includes our strategic investments, which Umang also mentioned in the India branded prescription business via field force, especially on chronic therapies. Between FY 2023 and half one FY 2025, we’ve added almost 1,500 plus feet on drought.
As highlighted earlier, we have also introduced retail task force in India trade generic business, a team of almost 500 plus feet on ground for better visibility and control over business, leading to improved customer relationship. These investments will help us meeting our long-term organizational growth goals. Increase in other expenses is on account of new launches in India branded prescription business, it’s an investment towards that. It also includes commencement of our plant operations in China, which is expected to start supplies in this financial year itself and investment in our MDI facility in Fall River for filing new products and derisking some of our existing pipeline.
R&D investments for the quarter are at INR385 crore or 5.5% of the revenue, driven by product filing costs and developmental efforts higher in the quarter by 2% versus last year. Our profit after tax first quarter is at INR1,303 crore or about 18.5% of sales with effective tax rate at 27%. Our free cash generation and operating efficiency continues to drive healthy net cash position. As at September 2024, our debt on our balance sheet, including the lease liabilities stood at INR461 crore, with net cash equivalent balance of INR7,950 crore. This quarter we had paid out dividend of INR1,000 plus crores.
Now I conclude with key focus areas and growth levers in the subsequent quarters. The priority for One India would be to continue to grow ahead of the market in branded prescription and accelerating the growth trajectory in trade generics, while further working on solidification of the growth levers for wellness portfolio, including ramping up in new launches. In North America, our focus would be on commercial execution, expediting the launches from our US facilities and resolving the supply issues that we talked about.
Derisking key launches for FY 2025 remains one of our key priorities. In South Africa, continued focus stays at margin expansion and in EMEU, our top priority is to maximize top line with focus on deepening our penetration in identified core markets, while sustaining the strong margin trajectory. Our ROIC for the quarter on an annualized basis was 30% plus. And like Umang said, our EBITDA guidance remains unchanged at 24.5% to 25.5%.
I’d like to thank you for your attention and would like to hand over now to the moderator for Q&A.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from Damayanti Kerai from HSBC. Please go ahead.
Damayanti Kerai
Hi, good afternoon and thank you for the opportunity. My first question is on our [Technical Issues] opportunity. So obviously, I think we are waiting for Goa clearance for this particular product. But can you comment in case we don’t heard back favorably from the US FDA regarding classification, etc., how far this product can be pushed in terms of launch in the market? If I remember correctly, earlier, you said that this launch could possibly come in second half of FY 2025. So what is recent thought on this product?
Umang Vohra
Yeah, I think it depends on the clearance of Goa, right? And I think from the time of the clearance, the clock starts pretty much for this product. So it’s — from a — from a timeline perspective, this is the fastest possible way.
Damayanti Kerai
Okay. In case Goa takes slightly longer, then you proceed with the CMO route, then how long I guess we have to wait?
Umang Vohra
So the CMO route is going to take much longer that you know it will have to be filed as a — as a supplement. So that will –that is definitely over a year.
Damayanti Kerai
Okay. Okay. My second question is on the supply issues, which you mentioned on Lanreotide, is it purely that capacity constrained or there are some other issues? And are you remain confident about resolving this in a quarter and then supply is going back to the normal level? And then a quick question on the four approvals which you got during the quarter. So I believe one is the peptide product, Calcitonin. So do you have manufacturing capability for that particular product or it will be again done through CMO?
Umang Vohra
The most Calcitonin-Salmon is likely from a CMO because the source of the API itself is different. So yes, I mean that we are not doing it, it’s being done through a partner. So that’s on Calcitonin.
Damayanti Kerai
Okay. And on Lanreotide issue?
Umang Vohra
So Lanreotide is I think there are two things that are happening. One is, as we are expanding capacity, we’ve got to reconfigure, the partner has to reconfigure the lines. I think some part of it is that. Some part of it is also that you know that there was — there is more demand than we anticipated. So I think it’s a mixture of both. So it’s capacity creation plus also maybe maintenance at the site because of which this quarter is down. I think we are confident that quarter four onwards, we are good with this.
Damayanti Kerai
Sure. And you mentioned, you are investing in the partner side for capacity expansion or how is the arrangement there?
Umang Vohra
No, our partner is investing. Our partner is investing, it is their site.
Damayanti Kerai
Okay. My last question is on India business. So again, I guess we expect to see better seasonality in 3Q. So are you seeing like initial sign of better pick-up in the respiratory for third quarter and that’s why you believe you could still outpace market growth in the full year basis? Because 3Q after 3Q, I believe fourth quarter is generally a lean quarter, right?
Umang Vohra
That is correct. That is correct and I think we are likely — so the seasonal triggers for respiratory, the pollen alerts, the pollution environment typically starts after Diwali. So we are beginning to see some of that rising, but hope, hoping that you know I don’t know how we will see the season, but we are hopeful that this particular time of the year will mimic the other. Unlike the acute season, this is not solely a seasonal trigger. It is also the impact of pollution in the air. It is also an impact of allergens and pollen.
Damayanti Kerai
Okay. Okay. Thank you, Umang. I’ll get back in the queue.
Operator
Thank you. The next question is from Anubhav Agarwal from UBS. Please go ahead.
Anubhav Agarwal
Yeah. Thank you. Good evening. Just continuing on the question on Lanreotide, I’m just trying to reconfirm that at your partner, there is no external constraint because of which the supply has been impacted because for European partner supply was impacted in the June quarter, now you face constraint in September and you’re guiding for the December quarter also being impacted. So first, sounds strange that partner is expanding, that’s why nine months of total capacity being out and severe shortage in Europe and you also facing shortage. So confirming that there is no external dependency for the partner, it is just because they were expanding — that’s why they’re facing so much shortage.
Umang Vohra
So I think what we can confirm to you, Anubhav, is that the issue is not a supply-chain related issue in terms of material or anything. The issue is linked completely to the partners production.
Anubhav Agarwal
And Umang, how do you get confidence that this will come back to full normal level and…
Umang Vohra
Because we visited, because our teams have visited, they made an assessment and we are on regular calls with the partner. So we have our confidence in that.
Anubhav Agarwal
And what would be the impact for you guys? For example, $237 million revenues this — would it go down, but it’s about two — below $225 million for next quarter, just the sensitivity, what kind of impact will it be for supply and three for this?
Umang Vohra
Yeah, I mean, we are going to see a fairly reduced number on Lanreo for quarter three and I think, yeah, it could — it could be lower than the $220 million mark, depending on how quickly we get supply back, we could be looking at something in lower than $220 million.
Anubhav Agarwal
And just one more clarity, in this quarter was the generics development, was this quarter-on-quarter higher in September versus June quarter?
Umang Vohra
And I’ll ask Ashish, Ashish, do you want to comment on that one?
Ashish Adukia
Yeah. We don’t give guidance on Lanreotide sales because of the contract that we have with them. And on the previous question, just want to clarify that quarter one, quarter two — quarter one, quarter two has not been impacted in Lanreotide, while we may have talked about some anticipated supply issue on our calls, but the numbers we achieved 35% share in Lanreotide franchise of both assets and that’s what we should revert back to after we have the supply issues sorted out in quarter four.
Anubhav Agarwal
Thank you, team. That’s helpful. Just one more last clarity on this. So once capacity is expanded, are we talking about, let’s say, just a ballpark understanding, can our market share go up by 20%, 10%, some ballpark understanding in next one, two years on this product.
Umang Vohra
So yeah, market share would be higher.
Ashish Adukia
Yeah. It’s definitely aimed…
Umang Vohra
That is for sure.
Ashish Adukia
In this case.
Anubhav Agarwal
No, that’s obvious, right, because…
Umang Vohra
Yeah and just one, Anubhav, just one thing, I think one of the reasons we’ve attributed is to capacity increase. Not all the reasons on production not being there is solely linked to capacity, just to be very clear. There are no reasons on supply chain that constrain the product. The reasons that are constraining the product is production at our partner site. One of the reasons the production is there due to increase of — increased plan for capacity, but there are other reasons as well which may have perhaps which may be the same that you may have picked-up on from the European partner for this for our manufacturing part.
Anubhav Agarwal
Sure. Thank you. Thank you, Umang. Thank you, Ashish.
Operator
Thank you. The next question is from Amaya [Phonetic] from JM Financial. Please go ahead.
Unidentified Participant
Yeah. Thank you for taking my question. First question I have on the Africa region, so this quarter we have seen a good amount of up tick in the Africa segment. So you expect this sales to normalize in the coming quarter because there has been some 10 million jump in the vendor sale, as well as there is a 17%, 18% growth in the private revenue, while the secondary growth has been in single-digit. So if you can clarify?
Umang Vohra
Sure. See, a couple of things I would like to highlight, one is, like you rightly said, there has been significant increase in the tender business, okay and this is more opportunistic where we make good margin is where we participate and we did some vaccine tenders as well, which has helped us to grow that. Our tender business will always depend on tenders coming in as well as the margin that we are making. So it will sustain, but it can also — certain quarters may be different.
The other reason for the performance is also now we fully integrated Actor, which was not there in the previous quarter. So that has also added to portfolio — to OTC, as well as RX and this is going to be sustained — this will sustain because Actor is now part of our portfolio. So we’ll add to growth through Actor. And the third thing I would like to highlight is that, we have been constantly focusing on new launches in South Africa, which has also helped us to grow faster than the market. So, yes, it is — it’s a big difference, but these are some of the levers which has helped us and will continue to help us to grow faster than the market.
Unidentified Participant
So is it fair to say that INR800 crore quarterly run rate is largely a new base or vis-a-vis or some movement in the tender like the…
Umang Vohra
No, we can assume this to be the base, there’ll be no de-growth, I would say. But anyways, like we always have said, the focus on Africa will always be margin for us because it is margin dilutive on an overall basis. So it’s lower than 25% at the company level. So the whole idea is just to focus on margin to get it back to track. So if that means that we have to give up some revenue, we may give up, but we don’t anticipate de-growth in One Africa.
Unidentified Participant
Sure. Thank you so much. The second question I have is, if you can provide the updates on some of the filings like respiratory filings like Dulera, Cor [Phonetic] and Symbicort?
Umang Vohra
Yeah. So there, the timeline has not changed for us, so the guidance that we had given earlier, you know that of FY 2027, that continues to be there for Symbicort and QR and one more inhaled partner inhaled asset that we’ve talked about.
Unidentified Participant
Sure. Thank you so much. I will [Technical Issues].
Operator
Thank you. The next question is from Surya Narayan Patra from PhillipCapital. Please go ahead.
Surya Narayan Patra
Yeah. Thanks for the opportunity, sir. First question about the sequential decline in the US sales for the quarter what we have seen. Could you clarify what would have impacted because sequentially we have seen improvement on Albuterol. We have seen sequential improvement in Lanreotide and obviously, the Revlimid would be sequentially remaining flat or slightly improved. So what would have impacted the Q-o-Q performance in the US, whether it is any pricing [Speech Overlap] okay.
Umang Vohra
One is definitely Lanreotide, right, because we — yeah. So one is Lanreotide.
Surya Narayan Patra
The press release indicates our Lanreotide market-share has improved quarter-on-quarter.
Umang Vohra
That is on — that is as of August.
Ashish Adukia
Yeah, yeah, it MAT of August, that’s right, Umang.
Umang Vohra
So that is as of August. I think the issue here is largely on account of a reduction in Lanreotide and potentially one other product which we may have. And also please keep in mind, though we did the $250 million number in quarter two, we were very clear that, that was not the trend line for the US business and the real trend line for the US business was between $230 million and $240 million.
Surya Narayan Patra
Yeah, sure. Okay, sir. That is — that was my first. Second question was about the removal of the patent of this Advair, as well as Albuterol by GSK and Teva on the request of US FDA. So because of that, have you seen any kind of enhanced competition or any pricing implication or do you even expect any kind of if not seen so far, going ahead do you see enhanced competition price over Roche [Phonetic] or what impact that you do see because of those developments?
Umang Vohra
It’s difficult to quantify at this stage. But as of now, we don’t see really a big impact of this.
Surya Narayan Patra
Sure, sure.
Umang Vohra
Because even if the patent is off for anybody to develop the product, it is going to take three years or four years. So I don’t think that, that will — that will impact us.
Surya Narayan Patra
Okay. And just last one point, I wanted to clarify a bit about this Africa integration, the one Africa thing, see a) what is the kind of a synergy that we can have — having seen the success here in One India, while it sounds similarly for Africa, One Africa, but what synergistic benefit that can flow out of these initiatives who may not be on the revenue side, on the profitability side and your strategic initiatives for that because new product launches, in-licensing for Africa market, those have been the kind of strategy that you are in any way following for those markets. So now with this One Africa, what one should really think and what changes that one can see?
Ashish Adukia
See, I think I can probably — and Umang, you can add. So one is a little bit more focused approach to Africa because in EMEU, it’s like 85 countries sitting out there, okay? So when you just bring it along with Africa, you get a better leadership focus to actually grow that region and we see some potential out there. So that’s one. Second is some supply chain benefit you will get specialty products going from India to Africa, so there can be some benefits out there. Yeah, apart from that, you know, our One Africa strategy broadly is top cities rather than top countries within the Africa. So rather than going deep in each country, you go deep in top 20 cities. So this actually helps us to achieve that focus on top 20 cities as well in Africa.
Surya Narayan Patra
Sure. Yeah. Thank you, sir. Thank you. Wish you all the best.
Operator
Thank you. The next question is from Ankush Mahajan from Axis Securities. Please go ahead.
Ankush Mahajan
Thanks for the opportunity, sir. Sir, my question is related to — we have G development sales and Lanreotide, right? I try to understand that what about base business, how it performed in the last quarter?
Umang Vohra
See we’ve covered that question I think on Lanreotide like we’ve already covered. So yeah, I think — is there anything specific that you would like to ask?
Ankush Mahajan
I’m talking about the base business.
Umang Vohra
Yeah. So base business has so overall done well. In some parts we’ve seen some erosion, especially in the business of where we have the government supplies, there we’ve seen — more in the oral solids we’ve seen some erosion. Yeah, otherwise and Albuterol was our key assets. We’ve grown in our market share. Budesonide continues to be a strong franchise for us where we can supply, you know, as much as we can. And overall erosion has been roughly in the low double-digit, maybe 10% somewhere around that number.
Ankush Mahajan
Thank you, sir. Thank you.
Operator
Thank you. Next question is from Neha Manpuria from Bank of America. Please go ahead.
Neha Manpuria
Yeah, thanks for taking my question. Umang, on generic Advair, once the filing timeline from the US facility was towards the end of this calendar year, is that still on? I mean, are we on-track to file Advair and that would then trigger an inspection for that facility, right? So despite of that, we expect that we will get approval — we’ll be able to launch the product in first half fiscal 2026, is that correct?
Umang Vohra
Yes, the facility inspection will have to be triggered, you’re right about that. I think our filing our batches are currently underway.
Neha Manpuria
Okay, got it. Got it. And my second question, Ashish, on the gross margin, the quarter-on-quarter improvement, I know it’s sort of flattish to slightly better despite US being lower, you know, even though acute wasn’t as strong, there is some acute impact in this quarter, tender business is higher. So what exactly happened? Is there anything else have we seen a better API pricing environment, what’s helping the gross margin trend?
Ashish Adukia
The mix benefit that we’ve got and like I said in tender, now in South Africa, there has been tender, but there are other tender businesses elsewhere, which may have come down. But overall, it’s the mix, so that has benefited us for the margin — the gross margin.
Neha Manpuria
Okay. That’s the only driver that — there’s nothing else in terms of the API cost, etc., that we’re seeing in API.
Umang Vohra
API cost has moderated overall, okay, but there are other costs to in propellant that has gone up, freight that gets captured in this thing has gone up because of the Red Sea issue. So it’s been a mixed bag out there.
Neha Manpuria
Understood. And you know from a gross margin — from an EBITDA margin guidance perspective, given that we are a little overshade over 26% for first half, I know fourth half — the fourth quarter tends to be seasonally slow for you. But then are we — other than the one-off impact that we talked about in US because of Lanreotide, given that India will be significantly stronger, any reason to still keep the guidance at 24.5% to 25.5%, is there any other costs that we are anticipating which would keep margins lower in the second-half?
Umang Vohra
We are expecting a normalized quarter three and quarter four. I think quarter four is usually sometimes sub-20% kind of a margin. So on an overall basis, we are still staying with the guidance that we have given. Yeah, so…
Neha Manpuria
Understood. Okay. Thank you so much.
Operator
Thank you. Next question is from Bino from Elara Capital. Please go ahead.
Bino Pathiparampil
Hi, good afternoon. I have questions on the US.
Operator
Bino, I’m sorry, but your line is not very clear. If you’re on hands free, request you to use the handset.
Bino Pathiparampil
Yeah. Is it better now?Hello, hello?
Umang Vohra
Still the same. We may ask you to repeat the question in case we don’t understand.
Bino Pathiparampil
Hello, is it better now?
Umang Vohra
No.
Ashish Adukia
But go ahead and ask a question if we…
Umang Vohra
Bino, please go ahead. Bino, please go ahead, we’ll try and understand the question.
Bino Pathiparampil
Okay. First question, have you seen any pricing impact in Albuterol after the recent competition entry?
Umang Vohra
Albuterol is already…
Ashish Adukia
No, I think.
Umang Vohra
Sorry, go ahead. Go ahead, Ashish. Go ahead, go ahead, go ahead, please complete.
Ashish Adukia
No, no, Albuterol. See, already there is multiple players out there and we see some because there is competition, we see some erosion in Albuterol franchise, yeah.
Bino Pathiparampil
Okay. So I assume nothing major after the latest competition?
Ashish Adukia
Yeah. It’s more than zero.
Bino Pathiparampil
Got it. And second, for your Lanreotide, between your Lanreotide 505(b)(2) and generic products, is there a pricing difference or is it more or less the same?
Umang Vohra
Bino, there will be a difference, but we are not going to comment on that. I think we are determined by market factor. It’s not so much that what we control, I think it’s a function of the market and you know, I don’t think that’s something that we necessarily control.
Bino Pathiparampil
Okay. And last question, I believe second wave of entrance will come in generic [Technical Issues] towards Lanreotide that is towards the end of this year, would we be one of them?
Umang Vohra
Bino, can’t comment.
Ashish Adukia
Right, right, yeah.
Umang Vohra
Yeah.
Bino Pathiparampil
Okay. Thank you. I’ll join back the queue.
Operator
Thank you. The next question is from Vishal Manchanda from Systematix. Please go ahead.
Vishal Manchanda
Good evening and thanks for the opportunity. A question on the US, basically to understand the concentration risk, can you share what your top three — top three products would contribute to the USA?
Ashish Adukia
No, see, again, I think it’s a differentiated a portfolio approach that we have. So we have large products in our portfolio, but we don’t give indication of what concentration level is, again because of the reasons that we have mentioned earlier.
Vishal Manchanda
Some broad numbers like 40% plus or less than 40% somewhere?
Ashish Adukia
So see, I think our you know old the — the vintage portfolio of oral products that was there earlier, which you know where there is enough competition. We’ve mentioned that, that is subject to erosion and that is about 30% of our portfolio.
Vishal Manchanda
Okay, okay.
Ashish Adukia
So, 70% would be more differentiated assets for us.
Vishal Manchanda
Okay. And second on your plant in China, would you have filed for approval for the China markets for the recipes like the Pulmicort Respules?
Ashish Adukia
No, for the — we’ve got the US FDA approval for facility, as well as for the product. And yes, of course, we look to get China approval as well in the future.
Vishal Manchanda
But would you have filed or you are yet to file for the product there?
Ashish Adukia
For China approval?
Vishal Manchanda
Yes, Pulmicort Respules.
Umang Vohra
Yeah, we are not giving — we’re not giving that level of detail, I’m sorry, but you can expect us to be a player in that market because of the facility in China.
Vishal Manchanda
Okay. Okay. And just one final one on India, any thoughts on how do you kind of intend to play in the GLP-1 space, any in-licensing opportunity that you would be seeking or maybe participating in the semaglutide generic opportunity?
Umang Vohra
Yes, sema generic, we will be participating and I think hopefully we will be amongst the first wave of people to enter in India. In-licensing is always an option for us in our in deepening our partnership with large multinational corporations that sell categories of GLP-1. So I think that is where we are right now from a GLP perspective.
Vishal Manchanda
Are opportunities available for out-licensing, so are innovators open to out-licensing in India, so since I understand Eli Lilly which normally out licenses their products to India hasn’t done so-far.
Umang Vohra
Yeah, I think part of you’re right, part of it could be a recalibration of whether they’d like to launch by themselves or you know or have another partner, but it’s also linked to how they view global capacity because the initial period you know, partners were not able to supply product to market for their existing demand. So now that we believe that is resolved, I think maybe some of the discussions could commence again with the partner, with the rest of the people in India who could potentially be partners for their drug.
Vishal Manchanda
Got it, sir. Thank you. Thank you. That’s all from my side.
Operator
Thank you. Next question is from Shyam Srinivasan from Goldman Sachs. Please go ahead.
Shyam Srinivasan
Good evening and thank you for taking my question. Just one back on Lanreotide, so the August market share is what you’ve disclosed. So where did say like September market share for Lanreotide 505(b)(2) plus generic end up at?
Umang Vohra
Will be far lower.
Ashish Adukia
Yeah, but we have not received the data as well, like, yeah.
Shyam Srinivasan
Should we think of it like at Q1 levels, 20% or even lower than that?
Umang Vohra
No, I think we — so just Shyam, the full flow-through of what that share would be in September may not come out because there is still stock that we had a little bit of stock with us, but you will start seeing that perhaps in October quite significantly.
Shyam Srinivasan
Understood. And Umang to your comments that likely be a Q3 — sorry, a Q4 bounce back and are we again talking about similar market shares like 35 or you think we can go higher post the expansion?
Umang Vohra
I think we can go higher, but it will take some time to ramp-up to that. So I think on quarter four because we are expecting a period of a month or two months there would have been no production at all. So which we now have crossed because of September and October. So building that stock back into trade and channel, I think it will take a little bit of time. So quarter-four, the bounce-back will not be higher than — higher than where Q2 was, if that is — if that’s your — that’s your question.
Shyam Srinivasan
Understood. Yeah. So maybe we are gunning for 35% share back in Q4, that’s what you’re saying?
Umang Vohra
Well, we want to gun for that, but it completely depends on how quickly the path [Technical Issues].
Shyam Srinivasan
My bet, 35 was just one month, so maybe for the average for the quarter is lower. So okay, I get it. Sorry, my, my bet.
Umang Vohra
Yes.
Shyam Srinivasan
Yeah. And the second question is just on cash. We have now a $1 billion of cash on the balance sheet. So just want to understand how are we thinking about capital allocation, either dividends or buybacks or even M&A, if you could outline some of the key priorities for us, please?
Ashish Adukia
Sure. Sir, no, I can go first on this one. I think it’s again what we’ve mentioned earlier, key market for us is India, where we would like to grow. So we would look to do — make acquisitions in India in the dom form space mainly, followed by US, we keep looking at differentiated portfolio, which comes with some stickiness in the revenue and not facing enough in erosion where there is some entry barriers. So I think we look at those kind of portfolios in the US. And as we speak, we’re looking at some and then of course on the return of capital to the shareholders, we’ve talked about 30% dividend payout, we are already close to that. And with the improvement in profits that should continue to go up.
Buyback is a matter of discussion at our Board. So you know that’s an active discussion we always keep having when we look at our use of cash.
Shyam Srinivasan
Ashish, last follow-up. So valuation for assets, is it something that you’re seeing is frothy or is it comfortable or are you seeing a lot of assets that are available?
Ashish Adukia
No, so just because we have cash, I don’t think we will pay more than we think the value of the asset is and the value of the asset depends on what it can do at a pace level and what synergies that are available with our business. So in India, certainly, there will be synergies. So there can be some value that you can attribute to that. In the US, you know, we’re looking at assets that are in the institution side, so more injectables kind of assets where we have built an infrastructure of institutional business through Lanreotide now. The idea would be to also feed that with products, so that you can actually realize some economies of scale out there. So, yeah, these are the strategies that we focus on to make sure that we achieve our internal hurdle rate.
Shyam Srinivasan
Got it. Thank you and all the best.
Ashish Adukia
Thank you.
Operator
Thank you. Next question is from Saion Mukherjee from Nomura. Please go ahead.
Saion Mukherjee
Hi, good evening. My first question was in regarding the India business. If you can give some color, particularly on trade generics and consumer. So do you think trade generics has recorded growth this quarter compared to last year given the restructuring we have done? And also on Consumer, I remember last year was muted. We had seen like 21% growth this quarter. Why are we seeing sort of that volatility and what’s more of sustainable growth here?
Ashish Adukia
Sure. So trade generic, you know, I think a couple of things. One is season, while our distribution model issue that we talked about in the quarter one which had impacted the financials is complete and there is no reason — that’s not the reason for growth not to be normal. I think the season like we talked about in Antiinfective has been weak and is primarily an acute portfolio, so that’s been an issue. And also it’s — certain regulatory changes in certain FTC products, etc has also impacted part of the sales. So overall trade generic is more or less a very small increase over on Y-o-Y basis. On CHL, I think we’ve seen a very smart rebound. I think last year, like you said, was muted. So now this is more normalized growth that we’re seeing. It’s also the growth has been supported by the Astaberry acquisition that we made, albeit, it’s not very large, but yet we’ve seen some growth coming from there as well out of the 21% growth that we saw in overall CHL.
And this growth should sustain because there are strong brands and we are working on growing them further.
Saion Mukherjee
Thanks, Ashish. And my second question was on the tender business. So in South Africa, the vaccine tender, so has that scaled-up the kind of numbers we are seeing this quarter or this go for it to sort of go up further? And also if you can share like what percentage of your other business like outside of South Africa international business ex-US, what is the quantity or what is the percentage of tender sales there approximately?
Ashish Adukia
Yeah. So no, no, no see, we got the benefit of certain tenders in this quarter. So tender may, you know, remain flat or may come down as well. Overall, like I said, the — we will still continue to grow between 5% to 10% in Africa. And EMEU, it’s a very large market, it’s a mix of DTM, B2B primarily, not a lot of tender out there and that has grown overall as a market that has grown for us at about 18% in — so and but more normalized growth out there would be, you know because the dollar market you should expect about 8% again about under 10% I would say.
Saion Mukherjee
So this is the overall growth in the EMEU you’re referring to, Ashish?
Ashish Adukia
Yeah, overall EMEU market. We don’t see about the breakup because it’s a large number of categories like I said out there, DTM, B2B in different geographies, we have different approaches.
Saion Mukherjee
Right. But overall on a consol basis, you’re saying the contribution from tender is not very significant?
Ashish Adukia
It’s not quite significant, yeah.
Saion Mukherjee
Okay. And if I can just ask one more question. This is on R&D, so that spend is — the growth is quite muted. So how are we thinking, what are the new areas you’re planning to invest? And over the next two quarters and also going forward in fiscal 2026, what’s the trajectory on R&D spend that you’re expecting?
Umang Vohra
I think the comparison on R&D, yeah, Ashish, let me take this. I think, Saion, the comparison on R&D is also linked to a large scale trial that was happening in the previous year. So from an already elevated base of R&D number, we are showing that muted growth which you’re referring to, that’s one. Second, I think the top line has expanded quite significantly, which is why you’re seeing the percentage coming down a bit. But overall, I think in terms of new areas, oligonucleotide, we are looking at that, peptide, we’ve almost completed our full portfolio. We are looking at, you know, respiratory assets next gen that’s coming up. Our bio asset that we are developing that has moved into will be moving to Phase 1. So I think a lot of those diversifications are happening.
Saion Mukherjee
And do you expect any step up here or because of these things or it will take time before you know the trial start on a larger scale?
Umang Vohra
I think the big contributor we have seen, Saion, is basically when you have to do large-scale clinical trial, that gets added to this base of RNA. So as your products — as your project — as your products reach to get to that Phase 3 or the PD studies, that’s when you realize that this gets added.
Saion Mukherjee
Right. So that’s a few years out, right, Umang? Or do you think some…
Umang Vohra
Yes and no because the respi asset may also start in about a year or so, right, depending on the patent outlook, those would start I think the Phase 3 on the bio asset could be in the 2027 timeframe. So I think some of these will start coming up, depending — some will come in 2026, some in 2027. I think 2025 we should have another 10 as well.
Saion Mukherjee
Okay. Thank you very much.
Operator
Thank you. We’ll be able to take the last two questions. We take the next question from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Tushar Manudhane
Yeah, thanks for the opportunity. Sir, just on Goa with the 483 observations. So where are we in terms of like say sort of resolving this or sharing the data with US FDA?
Umang Vohra
No, I think from a Goa perspective, we believe that we have responded to the FDA and the FDA has to make its determination.
Tushar Manudhane
So subsequently, has there been any communication from US FDA in terms of the response appropriateness or anything of that sort?
Umang Vohra
Yes, the FDA does send us follow-up question, which we have also replied to. So now the — but the FDA has to make its own determination, which you know the process is ongoing.
Tushar Manudhane
Sorry to drag on this, but just that — so this is like basically the course of actions the company is going to take as far as resolving the issues on Goa side, but what could be the timeline to implement those measures and get the issues resolved?
Umang Vohra
So the timelines we have committed to the FDA with over next six months to a year perspective. From aspect that we have put — that we have — that we have determined are important, but those are — I think the classification of the — of the — you know the inspection by the FDA that data is awaited from the FDA. So we will always have regular corrective and preventive actions for that.
Tushar Manudhane
Got it, sir. Got it. And lastly, sorry, lot of questions being asked only on Lanreotide, but just maybe one from my side in terms of the partners facility, is that the dedicated facility for Lanreotide or is there — it’s a multi-product facility?
Umang Vohra
No, the facility is multi-product. I think the production equipment is dedicated to us or to the category of product, let me put it that way.
Tushar Manudhane
Got you. Got you. So I think the expansion of the facility is not just because of the demand which maybe like C plus product is seen for — the partner is looking for the demand for the other products as well, is that the way to understand?
Umang Vohra
Well, on the line specifically, it is to this product right, but on the overall capacity that the partner may be planning, it may be linked to other products.
Tushar Manudhane
Understood. Got it, sir. Thank you.
Operator
Thank you. Next question is from Alok Dalal from Jefferies. Please go ahead.
Alok Dalal
Yes, hi, good evening. Umang, just to confirm, did you mention about 10% price erosion for the quarter on a portfolio wide basis?
Ashish Adukia
So it’s Y-o-Y [Speech Overlap]. No, no, so I can clarify that. So Y-o-Y about 10% on a blended basis overall, okay? So that’s on an average basis. Q-o-Q is low-single digit, so about 3% to 5% roughly.
Alok Dalal
Okay, fine. So not much change with respect to price erosion in the US?
Ashish Adukia
Yeah, yeah and this is including your Exelon portfolio, everything, the government tender, everything put together is 10% Y-o-Y.
Alok Dalal
Understood. Okay. Okay. Thank you very much.
Operator
Thank you very much. We’ll take that as the last question. I would now like to hand the conference to Ms. Diksha Maheshwari for closing comments.
Diksha Maheshwari
Thank you, everyone, for joining in. If you have any further questions, please write it to investor.relations@cipla.com and wishing you all a very Happy Diwali.
Operator
[Operator Closing Remarks]