Cipla Ltd (CIPLA) Q2 FY22 Earnings Concall Transcript

Cipla Limited (NSE: CIPLA) Q2 FY22 Earnings Concall dated Oct. 26, 2021

Corporate Participants:

Naveen Bansal — Director, Finance

Kedar Upadhye — Global Chief Financial Officer

Umang Vohra — Managing Director & Global Chief Executive Officer

Analysts:

Prakash Agarwal — Axis Capital — Analyst

Kawaljeet Saluja — Kotak Securities Limited — Analyst

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Forum Parekh — Choice Institutional Broking — Analyst

Anubhav Aggarwal — Credit Suisse — Analyst

Kunal Dhamesha — Emkay Global — Analyst

Surya Patra — PhillipCapital — Analyst

Nitya Balasubramanian — Bernstein Research — Analyst

Nitin Agarwal — DAM Capital — Analyst

Charulata Gaidhani — Dalal and Broacha — Analyst

Sameer Baisiwala — Morgan Stanley — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to the Cipla Limited Q2 FY22 Earnings Conference Call hosted by Kotak Securities Limited. 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. [Operator Instructions] I would now like to hand the conference over to Mr Kawaljeet Saluja from Kotak Securities Limited. Thank you, and over to you, sir.

Kawaljeet Saluja — Kotak Securities Limited — Analyst

Thank you, Stanford. Good evening, everyone. On behalf of Kotak I thank the Cipla management for giving us the opportunity to host their 2Q FY22 earnings call. From Cipla we have with us Mr Umang Vohra, Managing Director & Global CEO. Mr Kedar Upadhye, Global CFO and Mr Naveen Bansal from the Investor Relations team.

I now hand over the call to the management team for their opening remarks. Over to you, Naveen.

Naveen Bansal — Director, Finance

Thank you so much. Good evening, and a very warm welcome to Ciplas Quarter 2 Earnings Call. I am Naveen 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 events. These estimates reflect managements current expectation of the future performance of the company. Please note that these estimates involve several risks and uncertainties, including the impact of COVID-19 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. With that, I would like to request Kedar to take over, please.Thank you, Naveen. Good evening to all of you. We appreciate you joining us today for the second quarter earnings call for the financial year 2022.

Before I begin I hope that all of you and your families are safe and well. These are also festive times ahead and I always believe that pharma is a amazingly complex sector, and you all keep doing amazingly good work, a lot of hard work during the course of the year. I’m always impressed by your commentary and your direct and indirect push to management teams to improve the performance. So I wish that you get to spend decent time with your family during these festival days ahead.

Coming to the quarter, we are pleased to report historically the highest quarterly revenue with a 10% YoY growth. Our continued rigor on cost and operating efficiency, while continuing our focus on growth-linked investments have helped us deliver robust EBITDA margin ahead of 22% for the quarter. We expect these efficiencies to continue in the coming period as well. The 10% growth was driven by sustained momentum in branded markets of India and South Africa and emerging markets.

On a high base of FY ’21 last year, the growth in one India is impressive. It’s led by sustained traction across core therapies, both in prescription and trade generics business despite significant moderation in the COVID contribution.

EBITDA percentage of 22% ahead is in line with our guidance and includes inventory provision deemed appropriate for the COVID inventory that we’re carrying.

Our working capital levels reflect our commitment to ensure the continued serviceability of supply given several headwinds in the sourcing environment.

Our US revenues continue to see desired traction led by Albuterol and now with Arformoterol in quarter two. We also witness steady momentum in the select products which positions the portfolio to better respond to price erosion seen in the rest of the portfolio. And our free cash generation and operating efficiencies continue to drive our strong net cash position.

Coming to the financial performance, we wanted to highlight certain specifics. At a company level, the contribution of COVID was little more than 5% for this quarter. Adjusted for the same revenue growth of the company that is strong trajectory of more than 10% on a like-to-like base of last year. As alluded in Q1 call, while our emerging market business has recovered during the quarter, select product in our European operations have seen some bit of competition. Similarly tender flows in SAGA was also partly impacted by some delays in the order confirmation from clients.

For the quarter, overall income from operations stands at 5,520 crores, gross margin after material cost stood at 61.3% for the quarter. While the gross margin was in line on a year-on-year basis, the sequential decline of 100 basis points is attributable to change in mix on account of normalization in the COVID portfolio and normalization of the API profit share with some inventory provisions that I referred to earlier.

Total expense which include employee cost and other expenses, stood at 2,157 crores, increased by 3% on a sequential basis.

Employee cost for the quarter at 878 crores, it declined by 1% on a sequential basis. The other expenses, which include R&D, regulatory, quality, manufacturing and sales promotion stood at 1,279. They increased by 6% largely driven by sales-linked variable expenses that we incur for various geographies. Total R&D investment for the quarter is about 274 crores or 5% of revenue. All priority projects continue to be on track, and we expect R&D spends to respond to the clinical trial program going forward.

Reported EBITDA was 1,226 crores or 22.2% of sales. The effective tax rate is 28.5% and we reported profit after tax of 211 crores or 12.9% of sales. As of 30 September, our long-term debt stands at ZAR720 million. These are for operating requirements at South Africa.

During the quarter we have prepaid the outstanding $137.5 million InvaGen acquisition debt. With that we have completely repaid all the loan for the US acquisition.

We have working capital loans of $74 million, ZAR337 million on AUD5 million which act as natural hedges, towards our receivables. Driven by our relentless focus on cash generation and rigor on cost discipline during the quarter we continue to be a net cash positive company. Outstanding derivatives as a hedge for receivables as of 30 September are $155 million, ZAR666 million, AUD17 million, GBP7 million and EUR6 million.

Further outstanding derivatives as the hedges for payables as of 30 September are $11 million and EUR1 million.

We have also hedged a certain portion of our forecasted export revenues. Outstanding cash flow hedges as on 30 September are $280 million, ZAR460 million and AUD9 million. We have, as you are aware, we had announced a scheme of demerger for our consumer health business and the India-based assets of the US business. We continue to believe that this scheme will simplify the structure, maximize efficiencies and it has the potential to unlock value for all the stakeholders of the company.

We did an extensive assessment and we understand that certain changes in the regulatory environment have made it feasible for the proposed transfer to be done quite efficiently to an alternate option, and without the need for the scheme of arrangement. Accordingly in the meeting today, the Board has approved not to proceed ahead with the scheme and to examine transfer of this businesses by way of more efficient option.

To close, we saw robust momentum across portfolio and geographies for first half. Growth levers in the subsequent quarters will include continued momentum across all regions, robust traction in our respiratory franchise in the US and continued launches. And thirdly pivoting businesses to sustain strong execution and driving expansion in the operating profit already.

I would now like to invite Umang to present the business and operating performance. Thank you.

Umang Vohra — Managing Director & Global Chief Executive Officer

Thank you, Kedar. I hope I’m audible. I would like to wish all of you and your families good health and I hope that everyone is safe and well. We continue to support the government efforts on ensuring availability of our COVID and other lifesaving products. We are pleased to see the robust vaccination rates in the country and are happy to report that 89% of our colleagues across our operating geographies have taken at least one dose and 59% have been fully vaccinated.

Coming to the strategic updates and operational performance I’m pleased to see continued delivery reflected in the robust performance for the quarter, driven by our branded markets of India and South Africa, supported by the unlocking of our respiratory franchise in the US and traction in emerging markets, despite geopolitical headwinds.

Our EBITDA margins for the quarter came in at 22.2% and continue to reflect our commitment to maintain the trajectory in FY ’22 despite significant moderation in the contribution of COVID versus the previous year.

In India, our One India strategy continues to see seamless execution after delivering over $1 billion for our One India franchise in fiscal year ’21. We are tracking towards delivering $1 billion of revenue for our branded prescription business in India.

On a high FY ’21 base which included COVID products the One India business grew 16% year-on-year, driven by robust traction in core therapies, despite expected normalization and the contribution from COVID product levels that we witnessed in the earlier waves.

The revenue growth of 25% adjusted for core COVID products over quarter two of the previous year stands as testimony to the strong on ground engagements with healthcare professionals and the strength of our large brand.

We believe and are hopeful that this traction is likely to continue for the rest of the year as COVID-19 cases respond to the vaccination drive across the country. Continued the strong performance during the quarter, driven by sustained volume growth across almost all our therapy. Our acute and respiratory nebulization businesses are also tracking well. As per IQVIA MAT September 21, we continue to maintain ranks and market share in acute therapy areas across respiratory, urology, anti-infective and cardiac. Over the last three years we have forged strong partnerships with several MNC organizations for the strategic widening of a therapy base, with specialty offerings across cardiology, anti-diabetic, and the oncology franchise. With an ambition to increase access to innovative medicines and enhance our chronic portfolio we have also recently announced a partnership with Eli Lilly for the diabetese franchise. This is of course subject to regulatory approvals. The Trade Generics business and consumer businesses have continued to deliver strong growth across flagship brands in respective businesses for their quarter. Coming to a North America business, the US Generics core formulation sales for the quarter were a multi-quarter high of $142 million, in line with our expectations for the sequential run rate. Select products like Diclofenac, — and Citalopram and Omeprazole have witnessed steady momentum which along with Albuterol has helped in inching up the run rate and offsetting the price erosion in the rest of the portfolio. As per IQVIA week ending 8 October, ’21 we have clocked an 18% share in Albuterol. And I’ll Arformoterol, which we launched in the current quarter has gathered about 39% share in the generic market. Difluprednate ophthalmic emulsion, which was also launched during the quarter is also tracking well in terms of the desired contracted share. We continue to maintain strong focus on the adequate supply of products and prepare for upcoming complex launches in the subsequent quarters. On Advair, we have responded to the CRL to the USFDA and we will continue to share the updates on progress on the file as we hear more. We have been in continuous communication with the FDA for the Goa Plant. We are awaiting the inspection scheduled from the agency. Coming to Saga which includes South Africa sub-Saharan African and GTA. The overall Saga region Saga regions have reported robust growth of 8% on a year-on-year basis in US dollar terms. Our South Africa private business reported 20% growth over the last year for the quarter in local currency terms. In secondary terms, we continue to maintain market beating growth of 8.7% versus the 5.4 private market growth as per IQVIA MAT August 21. The sub-Saharan and CGA tender business, as you mentioned earlier, witnessed some delays in order confirmation from the plan. Our international markets reported 14% revenue growth year-on-year in US dollar terms. Our emerging markets business rebounded after resuming Middle Eastern supply that demonstrated strong performance in our direct to market businesses and from the contribution from COVID therapy products. We have witnessed incremental competition in Europe for a select category, leading to lower-than-anticipated performance. We expect to offset some of these headwinds with traction and new launches in the subsequent quarters. During the quarter, we launched the Vatelizumab biosimilar on the partnership in Spain to strengthen our oncology portfolio. Turning now to our outlook, we continue to strengthen our revenue streams with a differentiated portfolio. Our product development capabilities and derisking the supply chain across our markets. We are witnessing emerging demand across our businesses. I mean, gradually recovering COVID environment. We are geared up to capitalize on the opportunities across the healthcare ecosystem to drive a robust portfolio momentum and strategic capital allocation. Our near-term priorities include the continued execution on the demand levers in the chronic and acute therapies. Improvement in manpower productivity across the branded and generic markets of India and South Africa. Active advancement on innovative consumer centric products to accelerate the augmentation of a global consumer wellness franchise across both India and South Africa. Continue to lead and grow respiratory categories like Albuterol and achieve our fair share in several other products that we are likely to launch, monitor our key filings and accelerate a global Lung Leadership aspiration, maximize the value opportunity in the US complex generics, the continued launch momentum and manufacturing facilities in a state of compliance and control and continue the high vigil on cost and cash management, operating margins and the return on capital employed. With this I would like to thank you for your attention. Wish you a very Happy festival season and for those of us in India, a very happy Diwali and will request the moderator to open the session for Q&A.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] The first question is from the line of Prakash from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital — Analyst

Yeah, hi, good evening. Thanks for the opportunity. My first question is on the gross margins. I mean, you had a good growth across India and South Africa. All the branded generic market, which has very good gross margins and US you are good market share across key products. Just trying to understand what has led to a marginal dip in the gross margins as the increase in raw material led by China or other factors affecting us and what is the outlook on the same?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yeah. Prakash, there is some escalation on the Chinese source items which was there actually in first quarter as well and some of that last year as well. I think incremental to the quarter is the provision that I referred to some of the COVID inventory we had to adjust based on the recoverability, so that’s the only thing which is incremental to the quarter, Prakash.

Prakash Agarwal — Axis Capital — Analyst

How much is that. Sorry, I missed that.

Umang Vohra — Managing Director & Global Chief Executive Officer

So about maybe you should take somewhere 80 to 100 basis points.

Prakash Agarwal — Axis Capital — Analyst

So this is non-recurring is what you’re saying.

Umang Vohra — Managing Director & Global Chief Executive Officer

Every quarter, we will have to sort of keep making an assessment. As of now, our assessment based on the existing balances that we’re carrying I think we have taken this provision in the book.

Prakash Agarwal — Axis Capital — Analyst

If we adjust for that your gross margins were actually better than what you have seen in the past.

Umang Vohra — Managing Director & Global Chief Executive Officer

Correct.

Prakash Agarwal — Axis Capital — Analyst

Okay. And is there any outlook. How do you see it forward?

Umang Vohra — Managing Director & Global Chief Executive Officer

See actually if we go geography by geography what we’re driving is mix improvement, what we’re driving is discipline on pricing and the best we could do to deal with some of the headwinds. And I see a lot of headroom to improve for each business and at a company level.

Prakash Agarwal — Axis Capital — Analyst

So on the blended basis, it is looking northwards is what I wanted to understand.

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes.

Prakash Agarwal — Axis Capital — Analyst

Okay, perfect. And my second question is on the US so US while you alluded to increase in market share. Plus you had a couple of new launches, where you have got very good market share. Do you see the QonQ performance is pretty flattish. Any particular reason? Is there a base business, price erosion, which has increased. Or is this is not converted into realization and it would be converted into upcoming quarters, how should we think about it?

Umang Vohra — Managing Director & Global Chief Executive Officer

No, I think here the issue is that the price erosion is there on the rest of the portfolio. Our launch momentum is continuing to keep us ahead. I think we are one of the few companies which is recording a growth actually quarter-on-quarter sequentially. In the US, the growth should be higher when we have the new — when we have the bigger launches coming.

Prakash Agarwal — Axis Capital — Analyst

Okay. And lastly on Advair. Is there any color, which you can share or the progress?

Umang Vohra — Managing Director & Global Chief Executive Officer

Well, the agency, we know reviewing our file. We haven’t specifically got any any further communication from them.

Prakash Agarwal — Axis Capital — Analyst

Okay. It remains a fiscal ’23 approval and launch?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes, that is correct.

Operator

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

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Thanks for the opportunity. First on the biosimilar fronts we have good number of products now, which are like kind of outlicense. But if you could throw some light in terms of the overall investment, which we would like to do in this segment in terms of manufacturing or product development?

Umang Vohra — Managing Director & Global Chief Executive Officer

I I’m sorry, could you repeat your question please?

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

So we have a decent number of products in terms of outlicense in the biosimilar space, but would like to understand like is there are any thoughts on the investment in this segment in terms of manufacturing and/or product development?

Umang Vohra — Managing Director & Global Chief Executive Officer

We have recently announced a JV for the regulated markets in the world, and overall biosimilar development, so that over a period of time. I think the cost will Period of time, I think the cost will come in for that. And the objective is to take a few products to the market. The rest of the partnerships we have a more commercial partnerships on biosimilars. So they are already in our numbers.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

So in terms of like the number or the amount of investment which we envisage over next two years?

Umang Vohra — Managing Director & Global Chief Executive Officer

I don’t think two years will be significant at all because some of the products we are after are going to be launching after four years or five years. So I don’t think the next two years, we’ll see that amount of investment, but it will gradually build up.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

And just secondly, anything further on Goa site?

Umang Vohra — Managing Director & Global Chief Executive Officer

I’m sorry. I could not hear that very well.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Anything further on Goa site from the US FDA inspections system?

Kawaljeet Saluja — Kotak Securities Limited — Analyst

Umang the question is, do we have an update on the Goa site?

Umang Vohra — Managing Director & Global Chief Executive Officer

So Tushar, there is I mean nothing specific that we can give. We are in touch with the agency, updates are frequently being sent. We believe we are in a good shape for the agency to inspect the plant and we are working with them for a reinspection.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay. Thank you.

Operator

The next question is from the line of Forum Parekh from Choice Institutional Broking. Please go ahead.

Forum Parekh — Choice Institutional Broking — Analyst

I just wanted to know like ex of Albuterol what would be the price erosion in our base portfolio in North America region?

Umang Vohra — Managing Director & Global Chief Executive Officer

It is not, Forum, it is not crossed the historical percentage. It’s still, I mean if I recollect, it used to be mid to high single digits. At an overall portfolio I think it is still at that level. But product by product the trends could vary.

And I think the price erosion in my view and my experience is always a product-by-product metric which plays out. While we may mathematically add up at a overall business level, that’s not how it plays out in reality, as you can guess.

So I don’t have any evidence to say that it is significantly reduced or significantly gone up compared to the historical erosion percentage.

Forum Parekh — Choice Institutional Broking — Analyst

Okay. So then we can assume that the new launches in Albuterol would continue to mitigate the price erosion going forward?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes. That’s true. Mitigate and grow the base, correct.

Forum Parekh — Choice Institutional Broking — Analyst

And my second question is, you had guided last concall that EBITDA margin for FY ’22 would be about 22%. So do we still stand tall on that amidst the raw material price hike and China issues?

Umang Vohra — Managing Director & Global Chief Executive Officer

Our attempt will be to stay in line with what we spoke. There are headwinds, but there are tailwinds as well. And as I said, I think, improved pricing discipline, mix improvement, whatever we could do on addressing cost base, I think all these levers are available for us to stay within our guidance.

Forum Parekh — Choice Institutional Broking — Analyst

And last question, if I may squeeze in please. Can you just guide on the capex side, what would be the incremental capex, if any?

Umang Vohra — Managing Director & Global Chief Executive Officer

The capex for the current year is in the magnitude of 800 to 900 crores or so for them. That includes investments for automating our manufacturing infrastructure. That includes couple of API projects, couple of new lines, capacity additions on reactors and maintenance capex and some laboratory lab set of cost as well.

Forum Parekh — Choice Institutional Broking — Analyst

All right, thanks, thanks a lot, sir.

Operator

Thank you. The next question is from the line of Anubhav Aggarwal from Credit Suisse. Please go ahead.

Anubhav Aggarwal — Credit Suisse — Analyst

Yeah, hi, good evening to all. Umang, just couple of questions, one is on the Albuterol I think 18% market share. You mentioned on the out of the generic suppliers only right not of the total market because IMS on the total shows 15%.

Umang Vohra — Managing Director & Global Chief Executive Officer

Yeah, we have mentioned, Anubhav, on the slide 18.2 is between authorized generics and generic generics. In the total market, it’s a little less than 15%. You are right Anubhav.

Anubhav Aggarwal — Credit Suisse — Analyst

So just two observations there. One is that the banks are not losing market share, so they are still about all banks put together still about 20% share for some time now and second Ciplas share has been it’s good share at 15% but been around at 15% now almost more than a quarters odd. So, can you just comment on both the observations when will Cipla start to show increasing share and why brands are not losing share.

Umang Vohra — Managing Director & Global Chief Executive Officer

Anubhav. I think this is a category where frankly all the shares that have been gathered by the two decent entrants are all from the brands only. I don’t think that over the last 1, 1.5 years, the share that people have increased, I think brands have also lost share. There is one brand, which does not have a generic alternative as yet. And I think that brand may have also a strategy for holding on to their share in the marketplace.

So, but I think the gradual — the brands will gradually begin to lose share. I think the initial uptick in the shares has happened. And I think that from a Cipla perspective, we have guided earlier also that we will see a gradual ramp-up from here on, on shares and Proventil used to be 8 to 7%, 8% category. It’s now 15%, 16% category. Of the total market and we kind of see that this will continue to inch up but gradually.

Anubhav Aggarwal — Credit Suisse — Analyst

Sure. That’s helpful. And the second question is on the margins. Expectations for next year. I’m not asking for guidance here. But if, let’s say, Advair approval for us get delayed for whatever reason right. So let’s say, would you still think that this margin trajectory for the company 22%, 23% can continue with Advair, without Advair?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes. I’d like to believe it. I mean I think the big one there would not be so much whether the core business margin would continue because the core business stands today without Advair or anything else. But it’s also a combination of how our R&D spends begin to ramp up with respect to the new respiratory products that will go into clinical trials.

So I think there could be there could be 1 odd percent of R&D increase and some operating efficiencies balancing that out. But by and large we are committed to this trajectory.

Anubhav Aggarwal — Credit Suisse — Analyst

And just last question on the COVID run rate. So we were doing about 100 crore a month COVID run rate in second quarter. By and large, right, would this run rate would have come down to less than 50 crores per months now with much less COVID cases?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes broadly for India, yes you are right. Our COVID run rate is probably down to that. I mean it fluctuates month-on-month. So there is no real I can see, it’s 50 per month or 60 per month because it’s now become more localized as outbreaks happen. But yes, we have significantly lower, significantly lower versus last quarter. As well as actually versus the previous-year quarter on COVID.

Kedar Upadhye — Global Chief Financial Officer

Yeah, I mean just some numbers Anubhav to model, I think especially India revenues have seen a 60% dip between quarter one to quarter two. So if India was 150 crore per month now quarter two is only 60 crore per month. And we have to see how that stays in the balance of the quarter. So that’s the India COVID revenues for you.

Umang Vohra — Managing Director & Global Chief Executive Officer

And some COVID will always stay, it’s not going to disappear. Some part of the revenue base will stay.

Anubhav Aggarwal — Credit Suisse — Analyst

Thank you guys very helpful.

Operator

Thank you. The next question is from the line of Kunal Dhamesha from Emkay Global. Please go ahead.

Kunal Dhamesha — Emkay Global — Analyst

I thank you for the opportunity. The first one is on the other expenses. On a sequential basis, if I exclude the R&D out, the other expenses has gone up by around 67 crores. But do you think that the 1,000 crore run rate which we have in this quarter, that is the run rate, which will continue, or do you see some more costs coming back as more things normalize because I think July was also slightly impacted by COVID. So any color would be helpful on that.

Umang Vohra — Managing Director & Global Chief Executive Officer

No, I think on the cost, with respect to the detailing work which is happening in India, some of the field activities in international markets and all other activities in the plants and deposits, I think current quarter builds most of that. This quarter sequentially has gone up, which I referred to in my section is all because of the variable sales linked expenses.

So we do have some sales commissions and fees like commercial fees.

The increase is all on account of this variable sales linked expenses and that part will be trending appropriately with the sales level. In my view the fixed part, which is outside this variable I think mostly current quarter bakes in all those spreads.

Kunal Dhamesha — Emkay Global — Analyst

Okay sure. And Okay. Sure. And since that part might not more a lot and as gross margins could improve by 100 base, which is because of non-recurring inventory. So even better chance for higher margin for the second half?

Kedar Upadhye — Global Chief Financial Officer

I mean the overall margin will always be subject to several variables. We have committed to what we’ve spoken in the past, on the margin trajectory. I mean it becomes difficult to sort of give quarter-by-quarter guidance or estimate on the gross margin because it’s subject to several variables in revenue topline costs, our activity. So we wouldn’t want to get that. We would stay with what we have communicated. And obviously long term as we said there is a headroom to improve for each region and at overall company level.

Kunal Dhamesha — Emkay Global — Analyst

Sure. And in that case could you just like to, can you provide, let’s say, some more detail on couple of headwind or tailwind which you see, which could impact the profitability?

Kedar Upadhye — Global Chief Financial Officer

Yeah, the biggest tailwind is the launch momentum and biggest headwind is the commodities inflation, and the escalation in the Chinese source materials. Some of that we have already seen in the first quarter and second quarter as well. But the launch momentum will be the biggest tailwind.

Kunal Dhamesha — Emkay Global — Analyst

Sure. Thank you.

Operator

Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.

Surya Patra — PhillipCapital — Analyst

Yes, thank you. Thanks for this opportunity. Just on — first question on the respiratory. So we have seen obviously Cipla is doing well in terms of securing their businesses in the global market with the domestic delivering strong over 20% kind of growth. And Albuterol is also doing great.

So in the global market is it the cost advantage that you are securing aspiration? And in the domestic market or in the emerging market this strong growth, is it also currently influenced by the COVID related aspect and may subside subsequently. If you can clarify on these two aspects of our respiratory business?

Umang Vohra — Managing Director & Global Chief Executive Officer

I think it’s a. Let me put it this way. The first is, there is a technical barrier to respiratory. I think in most emerging markets we’ve crossed it and recently in the launches in US. Also we are showing that we can do that. And of course each launch is different, each product is different. So we have to stay humble because it’s not a card launch that you’ve launched, an MDI so you can launch a DPI, se we are well aware of that and are working expeditiously to launch these.

So one is the technical ability to get a product to get a robust replicable product and to get it approved. And of course in some of the emerging markets of the world cost is also very important part of the overall supply chain. I think we’ve been both cost and capacity and we have both of those.

Surya Patra — PhillipCapital — Analyst

And COVID influence and whether it is also benefited in any way by COVID related aspect in the domestic as well as emerging market?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes, in the — when the COVID wave was pretty high and so that was in early part of quarter one, and also to some extent in US in, I would say 12 months back, we saw that the COVID wave was high. That time of course there was a little bit of benefit for the inhalers sale as well.

Surya Patra — PhillipCapital — Analyst

Even second thing from the in-licensing business activity that we’re trying to do, there is a obvious right that will take over gradually over last, let’s say, 12 month to more 18 months kind of time frame.

So there is a significant estimate that we have seen in all of our important market whether is a domestic market, Africa, emerging market, Australia and all that. So there is the rising trend of in-licensed product an important one.

So is there a kind of conscious decision to expand and monetize our reach or marketing capacity so that it’s been indirectly to some extent complements our margin expansion from the cost of goods?

Umang Vohra — Managing Director & Global Chief Executive Officer

Look. I think the way we looked at the in-licensing strategy is with the product patent regime in India, the ability for Cipla to offer itself as a partner to take therapies deep for some of our multinational partners and that is what we are — that is the alliance we are signing up.

And I think this gives a good leeway because with the product patent regime in India, you can’t really launch products unless the patents are off.

So collaborating for in-licensing some of these products is a good model in our view, and it also gives us a head start when the product goes generic.

Surya Patra — PhillipCapital — Analyst

So just last one question, on the Revlimid, is there any kind of preparedness from our side for the ultimate launch plan for Revlimid in the US?

Umang Vohra — Managing Director & Global Chief Executive Officer

If the question is will we be prepared to launch, when we are allowed to, yes, the answer to that is yes. And just like any other launch, we will be prepared.

Surya Patra — PhillipCapital — Analyst

Sure. Thank you.

Operator

Thank you. The next question is from the line of Nitya Balasubramanian from Bernstein Research. Please go ahead.

Nitya Balasubramanian — Bernstein Research — Analyst

Thank you, Umang. Can you update us on generic ABRAXANE, where are you on the review to the FDA as well as some color you can give us on the respiratory pipeline?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yeah, certainly, I think on ABRAXANE. We are in communication with the agency and the review of our file and the questions that we’ve been asked. I think we are responding to that on the on this. Your second question was on the respiratory pipeline. I think the progress is pretty much on track with how what we communicated last time and we will be introducing more products into the clinical trial as well. Meanwhile, the review of the files that we’ve already filed are ongoing.

Nitya Balasubramanian — Bernstein Research — Analyst

Umang on generic Abraxane, do you have a TAT date from the FDA?

Umang Vohra — Managing Director & Global Chief Executive Officer

Well, the TAT date is there, but it’s the TAT date is it’s consequential and inconsequential in some way it’s consequential for our own review, but there is a market formation date, which is probably a more important piece of that that product.

Nitya Balasubramanian — Bernstein Research — Analyst

And I presume the Goa facility inspection is also a critical path?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes, that is correct. For ABRAXANE the inspection has to happen because it is from the go office.

Nitya Balasubramanian — Bernstein Research — Analyst

On the respiratory pipeline, I think Umang you had mentioned a partnered asset which already filed and 2 other assets, which is supposed to be in clinical trials. So are you on track to, I think the last time you mentioned, you will be filings somewhere in FY23, are you still tracking on those timelines an any update you can give us on the partnered asset?

Umang Vohra — Managing Director & Global Chief Executive Officer

Well, the partnered asset is already I think the data has gone out and obviously the FDA is reviewing it. So that is on that is and consistent. I think the, the other product. Also, yes, we are on track to filing and other product. Also at the end of FY23 and we will be initiating clinics on one very shortly.

Nitya Balasubramanian — Bernstein Research — Analyst

Understood. My second question was on, if you could help us understand the rationale behind CHL demerger because you’re One India strategy was supposed to enable you to leverage synergies across your branded trade generics and consumer products and there seems to be not in line with that strategy, if you can help us understand your though processor there.Yeah, certainly, I think it’s CHL the strategy for the One India piece is to look at products and where they create maximum amount of value, both for the company as well as for for the stakeholders of the company. And I think if you look at the CHL a platform, It’s a great platform where we build tremendous capability in being able to brand products.

The consumer division in the marketing division looks, so it’s all one entity, it’s one Cipla. And we figure out which part of the business is best placed to take a particular portfolio and products that lend themselves to consumerization happy ability to go down a certain route. And I think the aggregation of a branded business in one entity gives tremendous options to shareholders and stakeholders at a later date, both from the placement and the marketing of the product in the current term as well as from a

Umang Vohra — Managing Director & Global Chief Executive Officer

As well as from a — as well as from the ability to look at a branded business in total at a later time.

Nitya Balasubramanian — Bernstein Research — Analyst

That we get. My question is, if that is the case than why the demerger and how does it help you?

Umang Vohra — Managing Director & Global Chief Executive Officer

Well the demerger helps because you’re putting all your branded and consumerized assets into one entity. That doesn’t mean that because the entities — right now, all these entities are subsidiaries of Cipla.

So the One India strategy happens irrespective of which subsidiaries it may lie in. For example, some of our brands that we sell in the prescription business may be lying with another subsidiary of the company but that doesn’t mean that they don’t belong to the One India business.

So it’s just a placement of assets here and I think at a future date there will be options available on how we could structure a branded business to continue to further the progress of some of these brands.

Nitya Balasubramanian — Bernstein Research — Analyst

Got it. Thank you so much. And all the best.

Operator

Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Hi, thanks for taking my question. Umang two questions, one is on Albuterol in recent times, have you seen a price based activity increasing. I mean pricing-based competition, that being a bigger strategy for new companies coming through and leading to heightened pricing erosion in the overall sales versus what you seen in the initial days?

Umang Vohra — Managing Director & Global Chief Executive Officer

Well there have been more entrants, certainly. I mean from the time we came in, there’s always — there’s also been another competitor. I think we see normal price erosion on Albuterol, not something which is de-stabilizing the market, if that’s your question.

Nitin Agarwal — DAM Capital — Analyst

What I really meant is, so is it leading to a situation where our — say our pricing depression, what is the volume increase sort of netting itself out in terms of our ability to get incremental absolute dollar increases on our contribution for the product?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes, actually where we are, we are very happy with how the overall value monetization for us has happened in this space. And as I mentioned earlier, we are okay with — and we’ve been mentioning this over the past two or three analyst calls, that we are okay with a gradual increase in share from here, as against upticks in share where we pick up 5%, 5%, 7%, 7% chunks of market share. I don’t think that’s where we want to go.

So we are okay with the gradual ramp up from here.

We are conscious of the amount of effort that goes into manage and maintain a supply chain, as well as you know we are conscious of how best we are served with the share value dynamic.

Nitin Agarwal — DAM Capital — Analyst

Secondly on — we look through the US business, look through the next four to six quarters, barring Advair, how do we see the complex or meaningful $10 million, $20 million launches in the portfolio? How should we look at that, from a timing perspective?

Umang Vohra — Managing Director & Global Chief Executive Officer

I think most of, you know, look we have TAT dates which are there but realistically, I mean, if I was two probably hedge a little on the side of comfort, I think starting quarter three, we should have a fair number of high value launches coming in for the US business. So I think it’s really the next two or three quarters, where we will have launches. I think I’m also quite confident that the next two, three quarters will result in some, in some potential meaningful launch or launches. But I think the bulk of the work will really happen from quarter three of next year.

Nitin Agarwal — DAM Capital — Analyst

Second half next year onwards.

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes second half next year, I think the launch trajectory is very well shaped up, and I think in the interim also we will have launches but really the big momentum will come at that time. The last One India market, I think, this quarter was slightly unusual quarter if I may in the sense of the very high acute driven sales which came through for industry. I mean as we head into the winter season, which is typically a lower — lower acute — lower quarter for the acute perspective, how should we look at our India business in the second half and sort of going forward, given the fact that you’ve got a pretty substantial base over the last three, four quarters, firstly COVID, very high infection driven sales in this quarter?

Nitin Agarwal — DAM Capital — Analyst

I think we had two impacts versus the previous year. The previous year had a significantly larger COVID base and it had very little anti-infective base. And because there were hardly any viral infections and other infections going around when the COVID outbreak was there in the previous year. This year we have seen almost a significant reduction in the COVID and an increase in anti-infective. I think the winter season typically for Cipla is when the respiratory sales begin to peak.

But if your question is whether I can give you a certainty in terms of what, how each of these will play out. I think they constantly change. Every 15, 20 days we are seeing different market shifts and patterns.

I think we are hoping to see a relatively strong respiratory season this time in quarter three and I think over a period of time the India growth will begin to moderate back to its historical average of 10% to 12% in the industry growth. And of course we will try to be higher than that.Thank you. And best of luck.

Operator

The next question is from the line of Charulata Gaidhani from Dalal and Broacha. Please go ahead.

Charulata Gaidhani — Dalal and Broacha — Analyst

My question pertains to the antiretroviral, do you expect a degrowth now onwards?

Umang Vohra — Managing Director & Global Chief Executive Officer

No, I think we should be able to hold on to the current base. For the quarter, we explained, there was some bit of a delay in order confirmation from some of the tender based agencies. But we don’t expect significant decrease from here, we should be able to hold on to the current base.

Charulata Gaidhani — Dalal and Broacha — Analyst

Okay. That is for Saga.

Umang Vohra — Managing Director & Global Chief Executive Officer

Yeah, I was referring to CGA which includes ARVs largely.

Charulata Gaidhani — Dalal and Broacha — Analyst

Okay. And what about ARVs in India?

Umang Vohra — Managing Director & Global Chief Executive Officer

ARVs in India, in fact is doing well and we don’t carve that out separately. But we have one you know couple of high-value tenders and that’s going fine.

Charulata Gaidhani — Dalal and Broacha — Analyst

Okay. And can you give the value for consumer health and trade generics in the quarter?

Umang Vohra — Managing Director & Global Chief Executive Officer

We can. We’ll will take it offline Charulatha, we don’t necessarily mark that separately, but we could give you indicative numbers. From the investor deck you’ve seen kind of brands, which are there in the consumer health business, so we have spoken about OMNI Gel growth, we have spoken about Cipcal. So OMNI Gel has grown by 41% in the first half, Cipcal grew at 16%, comp sales grew at 58%. Nicotex, which is the flagship brand grew at 13%. There are lot of emerging consumer brands in India now, so we have Prolite ORS. That in fact grew at 110%.

So I’m giving you first half YoY growth Charulata. Clocip grew at 59%, Cipladine grew at 52%, Maxirich grew at 44%. And then there are brands in South Africa also and all of this is seeing very healthy, very healthy traction.

Charulata Gaidhani — Dalal and Broacha — Analyst

Okay, fine. Yeah. Thank you.

Operator

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi, thank you, and good evening everyone. Just taking the previous Nitin’s question. So when you, Umang, when you’re referring to a strong second half next fiscal, you have in mind Revlimid, Abraxane and Advair in mind?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yes, those would be our pipeline products, Sameer, yes, I have that in mind.

Sameer Baisiwala — Morgan Stanley — Analyst

And these are sort of looking at the progress or settlements — regulatory progress or settlements, etc., they are heading towards that second half next fiscal sort of time zone?

Umang Vohra — Managing Director & Global Chief Executive Officer

That is correct, yes.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. And just on biosimilars JV with the Kimbell, if you’re going to share what would be — is it only product development or would they also be doing commercial-scale manufacturing? And second is, is it limited to respiratory biosimilars and if so then what about onco and immuno biosimilars?

Umang Vohra — Managing Director & Global Chief Executive Officer

I think Kemwell is very strong in manufacturing Manufacturing and analytical capabilities related to manufacturing, so they are our chosen obviously partner and that their role is basically doing this and of course, two organize, we do the commercialization and the two of us do development together. So right now, where we are, is we are trying to set this up. We have not, obviously, it’s a new JV and it’s, we have the first thing that we need to put in place is a team which is the work in progress. On the product selection, yes, I think there could be a combination of respiratory and oncology, but these product will have its own merit of being chosen with the perspective of trying to be among the first to enter the market.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. So it’s not only respiratory, because I think that’s what FBR says.

Umang Vohra — Managing Director & Global Chief Executive Officer

No, it’s largely, it’s going to be more structured around respiratory, but if we come across an exciting product on the oncology, immuno space we will pick it up.

Sameer Baisiwala — Morgan Stanley — Analyst

And through the JV only.

Umang Vohra — Managing Director & Global Chief Executive Officer

That is correct.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, got it. And what’s the current contribution from biosims in your overall sales?

Umang Vohra — Managing Director & Global Chief Executive Officer

Across our markets, I don’t have that number readily available. Maybe Kedar can send it later.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. I mean it will be less than 5% sort of a number or –?

Umang Vohra — Managing Director & Global Chief Executive Officer

Yeah. That’s right.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. And just on the India business. Can I just clarify, did you say that it’s 5% contribution from COVID but we are overall India sales?

Umang Vohra — Managing Director & Global Chief Executive Officer

No, no that’s total at a company level. The India COVID sales in — from quarter one to quarter two have got moderated by 60%. But what we mentioned the overall percentages is at a company level. So there is some international revenues also which we have shipped this quarter.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, very clear. Okay. And just on the, on the field on the ground, activity in India is everything normalized medical reps or doctor calling etc., is it back to life, sort of pre-COVID or is it any different?

Umang Vohra — Managing Director & Global Chief Executive Officer

It is back to life. Everything may not be offline. So I think some of the training, some of the cycle meetings, some of the doctor interactions. In terms of number of activities, I think the attempt is to go back to what we were, but I think the mode of that is not exactly in line of pre-COVID more. And some of that maybe offline. Some of that may be online. But yes, our people are on the ground. That attempt is to meet identified set of doctors per day. So I think it’s a hybrid model more offline than online if you compare to last year.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. I mean, where do you think this is going to sort of mature or stabilize between virtual doctor calls and physical meet. Is it like 80:20 or anything in your mind?

Umang Vohra — Managing Director & Global Chief Executive Officer

Somewhere there, Sameer, somewhere there and our feedback suggests that both the pharma companies and the — the channel partners and the customers doctors are sort of adjusting to this hybrid modality. So whether it’s 80-20, 90-10 I think the, the times only will tell. But in terms of the detailing activity, most of that is back, except as I mentioned the cycle meeting etc. may not be 100% there. Conferences are not happening, international travel is very smaller compared to what it was. But everything else is largely — largely started.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great, thanks. That’s it from my side and Happy Diwali in advance. Thank you.

Operator

Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.

Anubhav Aggarwal — Credit Suisse — Analyst

Yeah, thanks for followup question. Umang, I have two questions, one is on Abraxane. The comments that you mentioned. So is it that we have to do any data on that, do you do the data or is it just some questions which you need to respond and you can still launch by September timing which you assessment?

Umang Vohra — Managing Director & Global Chief Executive Officer

I think we have to respond to some questions as well. And obviously some of those questions mean we have to redo some of the data etc. to respond to it, which I think we are doing.

Anubhav Aggarwal — Credit Suisse — Analyst

Major data that you’ll have to do that, there is a risk that you may not be able to come by September 2022?

Umang Vohra — Managing Director & Global Chief Executive Officer

Look, I don’t know whether September — we are confirming a September date or not, but I just know that most of these launches will happen in the second, starting quarter two, quarter three, because the product is also, I mean the settlement terms are confidential for each party. So I can’t confirm a September date. I can just say that, yes, we are on track and most of these launches will happen in the second half of next year.

Anubhav Aggarwal — Credit Suisse — Analyst

And second, Umang, this is a repeated investor question which for some reason keeps coming every quarter, but I would like to reassure investors that your continue with the firm.

Umang Vohra — Managing Director & Global Chief Executive Officer

Based on what we have, I should have already have left and I’ve been sitting somewhere else. But no my confirmation is that I’m very much here. I’m actually in the role, I’ve just signed a new contract so very much here.

Anubhav Aggarwal — Credit Suisse — Analyst

Thank you very much, Umang. Wish to speak — talking to you for years now. Thank you.

Operator

Thank you, ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Naveen Bansal — Director, Finance

Thank you everyone for joining us on the call today. If you have any follow-on questions do write to us on Investor.relation@cipla.com or you can reach out to either myself or Ankit, Sandeep Investor Relations team. Stay safe have a good night ahead. Thank you so much for joining us.

Operator

[Operator Closing Remarks]