Glenmark Pharmaceuticals Limited (GLENMARK) Q2 FY23 Earnings Concall Transcript

Glenmark Pharmaceuticals Limited (NSE: GLENMARK) Q2 FY23 Earnings Concall dated Nov. 13, 2022

Corporate Participants:

Utkarsh Gandhi — General Manager – Investor Relations

Brendan O’Grady — Chief Executive Officer – Global Formulations Business

Glenn Saldanha — Chairman & Managing Director

V. S. Mani — Executive Director and Global Chief Financial Officer

Analysts:

Saion Mukherjee — Nomura Securities — Analyst

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Nitin Agarwal — DAM Capital — Analyst

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

Kunal Randeria — Nuvama Wealth Management Ltd. — Analyst

Nikhil Mathur — HDFC Mutual Fund — Analyst

Sachin Kasera — Svan Investment Managers — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, welcome to the Q2 FY23 Earnings Conference Call of Glenmark Pharmaceuticals 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 now hand the conference over to Mr. Utkarsh Gandhi, General Manager – Investor Relations for Glenmark Pharmaceuticals. Thank you, and over to you sir.

Utkarsh Gandhi — General Manager – Investor Relations

Thank you, moderator. Good morning everyone and a very warm welcome to the Q2 FY23 results conference call of Glenmark Pharmaceuticals Limited. Before we start the call, a quick review of the operations for the Company for the quarter-ended September 30th, 2022. For the second quarter of FY23, Glenmark’s consolidated revenue from operations was at INR33,752 million as against INR31,474 million in the corresponding quarter last year, recording a growth of 7.2%. For the six months ended September 30th, 2022, Glenmark’s consolidated revenue was at INR61,525 million as against INR61,123 million, recording an increase of 0.7%.

We will provide some key highlights for each of our businesses starting with the India Formulations business. Sales for the formulation business in India for the second quarter of FY23 was at INR10,916 million as against INR9,689 million in the previous corresponding quarter, recording growth of 12.7%. India business contribution was at 32.3% of the total revenues in the second quarter of FY23 compared to 30.8% last year.

As per IQVIA MAT September 2022 data, Glenmark’s India formulation business is ranked 14th with a market share of 2.19%. During the quarter, Glenmark’s India business continued to strengthen its position in its core therapy areas, in terms of market share. As per IQVIA data, the Cardiac market share increased to 5.3% compared to 4.73% last year, while the anti-diabetic market share increased to 1.82% compared to 1.79% last year.

In Dermatology also, the market share increased from 8.12% to 8.16%. And in Respiratory, the market share changed from 5.30% to 5.27%. As per IQVIA data, the Company is ranked second in the Dermatology segment, fourth in Respiratory and has increased its ranking to fifth in the Cardiac segment. The Company has nine brands in the IPM Top 300 brands in the country on the basis of the IQVIA MAT September ’22 data.

The Company launched nine new products during the quarter and continued to gain market share in some of the key launches in cardiac and anti-diabetic segment. The key new launches which are driving growth in the anti-diabetic segment includes sitagliptin and its fixed dose combinations with metformin and dapagliflozin respectively, all of which were launched at the start of the second quarter of FY23. The Company has introduced eight different combinations of sitagliptin-based drugs under the brand name, SITAZIT, and its variants to increase accessibility to affordable and quality treatment options for patients with uncontrolled type-2 diabetes.

In the first quarter, Glenmark had also become the first company to launch teneligliptin + pioglitazone Fixed-Dose Combination drug for Type 2 Diabetes under the brand name Zita Plus Pio. At the time of launch, it was the only available DPP4 and glitazone combination brand in India. Glenmark also recently launched a combination of teneligliptin with dapagliflozin.

Recently, Glenmark also became the first Company in India to launch lobeglitazone 0.5mg, under the brand name LOBG, for the treatment of uncontrolled type-2 diabetes. With this launch, the Company aims to improve glycemic levels in uncontrolled diabetics and create a new pathway to treat insulin resistance in India. Glenmark now has a strong portfolio of products across various levels of interventions for the treatment of Type 2 Diabetes in India. The Company has an overall healthy pipeline of differentiated products which it plans to launch in the market going forward.

The Consumer Care in India, the primary sales for GCC business in Q2 was INR555 million with a growth of 8%. This was mirrored by strong secondary growth of 11%. As of YTD September, the GCC revenue was at about INR1,203 million with growth of 42%. Our flagship brand Candid Powder delivered strong revenue growth of 11% for Q2 and 44% for first half of FY23. La Shield portfolio, which is our second brand delivered 31% growth in Q2 and more than a 100% growth in the first half, while Scalpe+ portfolio recorded 18% growth in Q2 and 28% growth in the first half of FY23.

Moving on to North America. North America registered revenue from the sale of finished dosage formulations of INR7,533 million for the second quarter of FY23 as against revenue of INR7,543 million for the previous corresponding quarter, recording a decline of 0.1%. North America business contributed 22.3% to the consolidated sales in the second quarter of FY23, compared to 24.0% in Q2 last year.

In the second quarter of FY23, Glenmark received final approval for Norethindrone Acetate and Ethinyl Estradiol Capsules and Ferrous Fumarate Capsules, 1 mg/20 mcg, the generic to Taytulla, The Company filed one ANDA in the second quarter and plans to file 10 to 12 ANDAs in FY23. Glenmark’s marketing portfolio through September 30th consists of 176 generic products authorized for distribution in the US market. The Company currently has 47 applications pending at various stages of the approval process.

Moving on to Europe. Glenmark’s Europe operations for the second quarter of FY23 recorded revenue of INR3,785 million, as against INR3,383 million, recording a growth of almost 12%. Europe business contributed 11.2% to the total revenues in second quarter of FY23 compared to 10.7% in last year.

The Company continued to achieve a healthy double digit-growth across all key markets in Europe in the second quarter of FY23, in spite of ongoing macroeconomic challenges. Glenmark’s covered market growth continued to remain strong across both Western Europe and the Central Eastern Europe markets. Base business growth in Western European markets such as UK and Germany remained strong while CEE markets like Poland, Czech and Slovakia benefited from new product launches. Overall, Glenmark continued to launch multiple new product across various markets and the respiratory portfolio in Europe also continues to gain market share across both western Europe and CEE countries.

ROW, which consists of Asia, Middle East Africa, Latin America and Russia CIS. For the second quarter of FY23, revenue from the ROW region was INR6,154 million as against INR7,486 million for the previous corresponding quarter, recording a decline of 17.8%. The decline was on account of a high base last year due to strong sales of the COVID portfolio. Adjusted for that, the region recorded 15%-plus growth in Q2. Our ROW business contributed 18% to the total revenues in Q2 of FY23 compared to 23% in Q2 last year.

While the overall macroeconomic situation continues to remain challenging, the pharmaceutical market in Russia has remained stable and provided opportunities for growth. Overall, Glenmark’s Russia business recorded a positive trend in the second quarter. For the month of September, Glenmark outperformed the Retail market by value and also gained two positions in terms of the overall ranking from the retail market. Glenmark also gained three positions, and was ranked eighth on the Dermatology market, while it continued to be ranked second on the Expectorants market in Russia.

Business growth was aided by strong performance in key products such as across the Dermatology market, as well as additional promotion on the new indication for Ryaltris. Asia region recorded a slightly subdued growth in the second quarter. Markets such as Malaysia and the Philippines recorded double-digit secondary growth, but there were multiple headwinds in other Asian countries like Myanmar, Vietnam and Sri Lanka which led to a slightly lower growth.

As per IQVIA MAT June 2022 data for the Philippines, Malaysia and Sri Lanka markets, Glenmark is ranked sixth over — in the overall covered market and ranked first in the dermatology segment. Our partner, Yuhan Corporation received approval for Ryaltris in South Korea towards the end of the second quarter. And also, Ryaltris continues to do well for us in [Technical Issues] and the Philippines where the product has already been launched.

In Middle-East and Africa, the region recorded 21% growth in secondary sales during the second quarter of FY23, while growth in Kenya was marginally [Phonetic] impacted by macroeconomic factors. Glenmark continued to achieve strong secondary sales growth of 30%-plus in South Africa and Saudi Arabia. As per IMS MAT data, Glenmark is ranked third amongst all generic pharma companies in Kenya.

Latin America witnessed growth of 22% at a regional level with most of the markets recording good growth during the second quarter. The respiratory portfolio in Latin America continued to gain significant scale, particularly in large markets like Brazil and Mexico. And the Company is planning to launch additional products in the region to further augment the overall portfolio.

Some updates on our Global respiratory business, for the second quarter, starting off with Ryaltris. In FY23, Ryaltris is targeted to be approved/launched in 34 markets globally. As of September 30th, 2022, we have already received approval or launched the product in 16 markets either through our own field force or through our partners, and they are further awaiting approval in 18 markets, which are expected to be received in the second half of FY23.

Glenmark’s partner in the US, Hikma commercially launched Ryaltris in August 2022. As mentioned before Glenmark also supplied product to its partners in South Korea, Yuhan upon its approval in the second quarter, and to enable them to launch the — to complete the commercial launch of Ryaltris in October 2022. Following approval in Canada, Glenmark’s partner Bosch intends to launch the product in the fourth quarter of FY23. And additionally in the second quarter, Glenmark received marketing authorization grants for Ryaltris in Malaysia, Kazakhstan, Moldova and Dominican Republic; and also submitted the MA application in Vietnam and Zimbabwe. The Company is awaiting regulatory approvals for its filings in Brazil, Mexico, Vietnam and several other emerging markets.

Ryaltris sales continued to grow in various markets where the product has already been launched across the globe. Some of the key markets include Australia, the UK, Czech Republic, Poland, Italy, Russia, South Africa and the Philippines. Glenmark’s partner in Europe, Menarini intends to launch the product in H2 of FY23 in additional key European markets. And, Glenmark’s partner in Mainland China, Grand Pharmaceutical has made significant progress on the enrolment in the Phase 3 study with approximately 70% of the recruitment being completed by end of second quarter. Grand Pharma aims to complete the study by mid-2023 and submit the NDA application by the end of 2023.

In terms of other key respiratory products, as mentioned in the first quarter also, clinical trials continues to move forward as per plan for the generic Flovent pMDI. And we expect to file the product in the calendar year 2023. And we plan to file at least one more generic respiratory pMDI in the US in the calander year ’23 and continue filing momentum beyond that.

Some updates on our innovative R&D pipeline. Our GRC 54276, which is our HPK1 inhibitor is the Company’s oncology pipeline asset being developed as an orally administered IO-adjuvant treatment for patients with solid tumors in oncology. A Phase 1 dose escalation study is ongoing in India as per plan. Successful recruitment of patients in Cohort 1 was completed in the second quarter of FY23. There were no dose limiting toxicities observed in that first cohort and subsequently Cohort 2 has been initiated. In total, ten patients have been already been dosed with the drug.

GRC 39815, this is the ROR-gamma-t and the Company’s respiratory pipeline asset being developed as an inhaled therapy for treatment of mild to moderate COPD. This is currently under Phase 1 clinical development in the US. A quick update on Glenmark Life Sciences. Revenues from operations including captive sales were INR5,093 million as against INR5,618 million recording a YoY decline of minus 9.3% due to the high base of COVID products last year. During Q2 regulated markets contribution increased to almost 74% with growth of 7% QoQ. CDMO business also recorded strong growth of 27%-plus QoQ. GLS filed four DMFs / CEPs during the second quarter and also made progress on the capacity expansion initiatives across its plants.

External sales for Glenmark Life Sciences in Q2 FY 2023 were at INR3,744 million as against INR3,354 million in Q2 FY22, recording a growth of 11.6% YoY. For further updates on GLS, please log on to their website, www.glenmarklifesciences.com.

Lastly on ICHNOS — ICHNOS Sciences. Glenmark has invested INR1,727 million, almost $22 million in the second quarter of FY 2023 compared to INR1,850 million, which was about $25 million in the corresponding quarter last year. For the first six months of FY 2023, Glenmark has invested INR3,363 million compared to INR3,467 million invested in the corresponding period for the previous financial year. For further updates on the pipeline and the organization, please log on to www.ichnossciences.com. The pipeline update for the second quarter of FY23 has been published on their website.

I would just like to state our key objectives for FY23, which remain unchanged from the start of the year. Revenue growth of 6% to 8% during the year sustaining our EBITDA margin performance at similar levels as of FY’22. Capex of about INR700 crores to INR800 crores, keeping our focus on enhancing free-cash generation and debt reduction and closing out 1-2 out-licensing deals across our innovation pipeline.

Some additional notes to the results before we open the Q&A. Reported EBITDA excluding other income was at INR612.6 crores with a margin of 15.4%. There was a COVID-related inventory provision of INR31 crores in the second quarter. Adjusted for that, EBITDA for Q2 was INR652.6 crores with a margin of 19.3%. Forex gain for the quarter was at INR81 crores, which is recorded in other income. Gross debt for the period ended September 30th, 2022 was at INR3,954 crore as against INR3,670 crores as of March 31st, 2022. Net debt for the period ended September 30th, 2022 was at INR2,715 crores as against INR2,260 crores as of March, 31st. The increase in net debt was primarily on account of adverse forex exchange impact during the first half of FY23.

Our working capital inventory for the period ended September 30th was at INR2,865 crores as against INR2,500 crores in March. Receivables were at INR3,328 crores as against INR3,101 crores, and payables was at INR2,348 crores compared to INR2,289 crores. Total asset addition in the quarter was INR134 crores, most of which was related to tangible assets. R&D expenditure in Q2 FY23 was around INR330 crores, which is close to 10% of revenue from operations for the second quarter. For the full-year we expect R&D expense to remain around 10% to 11% of assets [Phonetic].

Before we open the floor up for Q&A. I would like to introduce the management of Glenmark Pharmaceuticals on the call today. We have with us, Mr. Glenn Saldanha, Chairman and Managing Director; Mr. V.S. Mani, Executive Director and Global Chief Financial Officer and; Mr. Brendan O’ Grady, Chief Executive Officer, Global Formulations business.

With that, we’d like to open the floor up for Q&A. Over to you moderator.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions]. The first question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.

Saion Mukherjee — Nomura Securities — Analyst

Yeah. Hi, good morning. My first question is on the other expenses. They have gone up almost 18% year-on year, much higher than the way the topline has grown. If you can just elaborate on this why the expenses are moving at a much faster pace?

V. S. Mani — Executive Director and Global Chief Financial Officer

So good morning, Saion. Mani here. I’ll respond to this question. So, Saion, obviously last year if you recollect, the first quarter and a little bit of the second quarter we had some amount of the COVID effect, okay. So obviously, current year, we don’t have COVID effect and obviously everybody is ramping up on their marketing initiatives, etc. So the cost is a little up.

I would also urge you to look at, see on a half yearly basis if I look at it, yes, it is definitely higher than the sales growth. But on a half year basis, year-to-year, it’s about 12% growth, okay. So the first quarter was still a little low, second quarter has been little higher, but obviously we are trying to — you know, kind of take some initiatives and therefore the spends are a little higher.

I think, but the overall, even still if you take that, our other expenses to sales is about 25% — 25%-odd. So over the years we’ve kind of brought it down to 25%, 26%, compared to what it used to be. And I think, we’ll try our best to keep it around those levels.

Saion Mukherjee — Nomura Securities — Analyst

Okay. And the second question is on your net debt level, it has gone up for the six months. I think one of the objective is to organically, to kind of bring down the net debt. So, what’s your comment for the second half, and how you see net debt level by the end of the year?

V. S. Mani — Executive Director and Global Chief Financial Officer

So, Saion, absolutely, that’s been one of our key objectives over the last couple of years. We have made some progress there. But I think, definitely, we would like to do more. So, what I would like to say is that obviously, the objective remains the same. But, and also, we certainly will see it, assuming that currency remains at the current levels or kind of goes lower, and there are no major disruptions in the supply chain, okay?

So, one of the reasons where you can see over the last couple of quarters the inventory levels have — while they’re still — I mean, they’re still important and we need to keep it at those levels, bit of the inventory, I mean, a bit of our debt increase also is due to some of those inventory and some of the working capital issues that we’ve had.

And that’s across the board to everybody.

Saion Mukherjee — Nomura Securities — Analyst

Okay. And just one final question if I can ask on the US market. So, what would be the dollar million impact because of the Baddi import alert? And what’s your outlook therefore on the US market going forward?

V. S. Mani — Executive Director and Global Chief Financial Officer

So Saion, as you can see that, we had also kind of indicated that it is about 1% to 2% of our overall global sales. It’s about at best about $20 million or so. So I think, but also we will work actively on-site transfers, etc to mitigate what we have. So obviously, we’ll try to best to ensure that it will not get impacted. But, if you ask me on impact, this is what it could be at best totally, for a full-year.

Saion Mukherjee — Nomura Securities — Analyst

Okay, thank you. And, I’ll join back.

Operator

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

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

Yeah. Thanks for the opportunity. Sir, just on this other revenue — other revenue as a segment, significantly up this quarter. Is this to do with some milestone income and if you could quantify?

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah. A certain portion of that is due to the basically a milestone that we’ve received. Normally we don’t give an indication what is the amount, because these are between agreements, between us and the party concerned. But, a decent part of that is still sustainable only. That’s what I can guide you.

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

You mean to say these other revenue as a quantum is sustainable for the remaining?

V. S. Mani — Executive Director and Global Chief Financial Officer

Not the full amount, but at least a certain portion of that. At least 20%, 25% is definitely sustainable, yeah.

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

And just as a clarity, this inventory provision is done of what, INR31 crores in COGS or in other expenses?

V. S. Mani — Executive Director and Global Chief Financial Officer

No, it is done in sales. You get a good return, you know, so it goes to sales directly and then, obviously it has no value. So it immediately impacts your COGS as well as EBITDA, it goes straight to the EBITDA. You sold a good, it came back to you, it has no value today, you write it, I mean, it expires. That’s how expirees work.

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

Right. So it is deducted from sales itself is what…[Speech Overlap]

V. S. Mani — Executive Director and Global Chief Financial Officer

Exactly, straight. And it has no value to it.

Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst

Understood. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Yeah. Just a first question on Ryaltris, and we have launched through the partner in August. Any early signs or anything that you can share there? And you have now launched it in multiple countries. So if you could help us understand how large this is, or any outlook here will be very helpful.

Brendan O’Grady — Chief Executive Officer – Global Formulations Business

Sure. So, I’ll take that question. So, we launched in the US to Hikma. The launch date was August 30th, so — by at the end of August, kind of midway through the fall allergy season. So, I don’t expect to see a ton of uptake in the fall allergy season, because it will take the reps a couple of months and a couple of cycles to see physicians to generate demand. But, what I’ve seen to date is the uptake has been good, it’s been well-received. I think it’s going to take a little bit of time to get payer access. Again, I reviewed the plan there. And they’re a little bit ahead of where I thought they would be with payer access.

So, I think as we work through the rest of the late fall, and we get into the early spring, I think Ryaltris will be successful on a good trajectory in the US. As far as other markets, I think as we mentioned, we’ve launched 16 through the second quarter, another five so far year-to-date, so up to 21. We’ll launch another — we’ll have 34 by the end of the year, six directly, and then seven through partners.

So, Ryaltris is off to a certainly a good start. And from a revenue perspective this year, I would expect probably $20 million to $30 million in revenue for Ryaltris for Glenmark.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. That’s very helpful. My second question is just again on the US business. So, it’s declined about 11%, I’m just talking in dollar terms here. So, if you could help us understand what’s happening in terms of the base business. And, how are we mitigating — how should we look at it in the second half? Will it stabilize here? You think there is erosion still ahead?

Brendan O’Grady — Chief Executive Officer – Global Formulations Business

Yeah. I mean so — thanks for the question. I mean, if you think about the US business, I think it’s challenging market for everybody. We continue to see price erosion along with the market. And I think that the regulatory environment has been challenging as well. So, trying to get new products approved and launched in the market is key to combating price erosion. I think that if you look at the US, we’ll be probably about flat to where we were last year. I think that you’ll see third quarter improve over second quarter, and I would expect that fourth quarter even with the Baddi impact, fourth quarter will improve over the third quarter.

So we’re gaining momentum as the year goes along. Again, we’ll probably be relatively flat to last year, and we hope to see several new product approvals as we go throughout the rest of this year.

Shyam Srinivasan — Goldman Sachs — Analyst

Yeah. I’m just trying to do the math here. So we had about $410 million or $412 million something last year. We have done for the first half like $180 million. So we should be getting there right, or?

Brendan O’Grady — Chief Executive Officer – Global Formulations Business

I think we’ll be close to right around $400 million, give or take somewhere in there. We’ll see how things go. But relatively flat to last year.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. That’s helpful. And my last question is on I think, the gross margins, I think, is this just the impact of that out-licensing impact or how should we look at gross margins for the rest of the year right now? Should I just strip out — you’ve not quantified it, but how should we look at just the gross margin line?

V. S. Mani — Executive Director and Global Chief Financial Officer

See, gross margin, inherently, I think in last one, two quarters we had some challenges because of the input costs going up etc. We’re seeing it slightly taper down. So, I think gross margin we should look at anywhere between 64% and 65% easily. That’s historically where we are. We should more or less be there.

Shyam Srinivasan — Goldman Sachs — Analyst

And the adjusted EBITDA, Mani sir, on 19%, that is sustainable, is that the second half outlook?

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah, yeah. It is sustainable.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Thank you and all the best.

V. S. Mani — Executive Director and Global Chief Financial Officer

And Shyam just one thing maybe — may not be so important but the — when you said in dollar terms our quarter was lower by compared to decline was about 7% to 8%. I mean 11% was a little higher.

Shyam Srinivasan — Goldman Sachs — Analyst

Okay. I had a historical number of $107 million, probably maybe that’s lower than that, you’re saying, last year number.

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah, it’s a little lower than it.

Utkarsh Gandhi — General Manager – Investor Relations

It was about $102 million last year actually. And this year we had about $95 million. Anyway, that’s okay.

Shyam Srinivasan — Goldman Sachs — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Saion Mukherjee from Nomura Securities. Please go ahead.

Saion Mukherjee — Nomura Securities — Analyst

Yeah. Thanks for the follow-up. Just one question on India. So, you reported around 13% growth. Now, you mentioned also that this INR30 crore is a return — sales return. Is it true to assume it is in India and if we are to add that, then we get to more like, 15%, 16% growth, I guess.

And then… [Speech Overlap]

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah. It should — you have to add-back to India and it should be higher growth, yeah.

Saion Mukherjee — Nomura Securities — Analyst

And then, last year you would have had some savvy [Phonetic] in the base also right? So I’m just wondering this growth number looks a bit high.

V. S. Mani — Executive Director and Global Chief Financial Officer

No. Second quarter didn’t have any major savvy at all.

Utkarsh Gandhi — General Manager – Investor Relations

Saion, last year, we had savvy in ROW, okay?

V. S. Mani — Executive Director and Global Chief Financial Officer

In second quarter.

Saion Mukherjee — Nomura Securities — Analyst

Okay. So, Glenn, like — so, I mean, what kind of growth expectations you have for India? I mean for this year and also, let’s say sustainably going forward?

Glenn Saldanha — Chairman & Managing Director

So, I think in India it’s safe to assume we are growing between 10% to 15% on a sustainable basis.

Saion Mukherjee — Nomura Securities — Analyst

Okay. Thank you.

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. Glenn, on the US plant, by when are we expecting the Monroe re-inspection to be done?

Glenn Saldanha — Chairman & Managing Director

So we are currently under in the remediation mode, Nitin. We are hoping in Q4 we will — we will get an inspection, right. And next year we are hoping to commercialized products from the US, from Monroe.

Nitin Agarwal — DAM Capital — Analyst

And how many ANDAs would we have in Monroe filed by now? Roughly?

Glenn Saldanha — Chairman & Managing Director

About I would say about six to eight ANDAs.

Nitin Agarwal — DAM Capital — Analyst

Okay. All put together including the filed and approved?

Glenn Saldanha — Chairman & Managing Director

That’s correct.

Nitin Agarwal — DAM Capital — Analyst

Okay. And secondly on — sir, incrementally, sorry — just to push that, when you are doing your now incrementally ANDA filings, I presume it will not be going ahead in Monroe for the time being. So is there some impact on your plans on account of that where some of the filing that you were proposed to do from Monroe you probably couldn’t do right now, but you may be doing alternate sites from there for the filings?

Glenn Saldanha — Chairman & Managing Director

I mean, clearly. Nitin, obviously because of the Monroe situation, lot of our filing plans got pushed out, right, from Monroe. So some of those filings will hopefully come through next year, right, in terms of new filings for injectable products. We have some alternate strategies around injectable products, but we can’t really elaborate right now.

Nitin Agarwal — DAM Capital — Analyst

Thanks. And secondly, on Ryaltris, the guidance that we gave for $20 million, $30 million of revenue this year for Ryaltris, now given the fact that we’ve got multiple partnership agreements, which are there on the product, is it fair to assume a lot of the $20 million $30 million whatever revenue that you’ll make on Ryaltris would be essentially just a royalty income and profit share for us?

Glenn Saldanha — Chairman & Managing Director

No. So, I think we are launching on our own Nitin in many, many markets. So, I would not assume that it’s only profit share or royalty income, right. A lot of it is our own share, right, for the year. Also going forward, it’s a mix, right, we have some markets where we commercialize on our own markets in South Africa, markets in Russia, markets in Asia, multiple markets, right, which we sell on our own. So it’s a mix.

Nitin Agarwal — DAM Capital — Analyst

And Glenn when you talk about this number of $100 million-plus peak revenues for Ryaltris, the assumption is that bulk of these revenues will be coming through our own front-end sales.

Glenn Saldanha — Chairman & Managing Director

Again, it’s a mix Nitin. And that’s why the margin profile on this, $100 million, $150 million will be significantly higher, because it will also have partner royalties flow in there, right. Partner royalties and partner transfer prices, right. So I think it’s really a mix.

Nitin Agarwal — DAM Capital — Analyst

Right. And on that, Glenn, on Ryaltris, we did book some milestone this quarter across where the partnership that we’ve done. Are there meaningful milestones still to be realized or it’s going to be largely from here on royalty income and sales income that’ll come through on Ryaltris?

Glenn Saldanha — Chairman & Managing Director

I think constantly there will be milestones coming through, right — Nitin, right, on a consistent basis. One is of course some sales-linked milestones, two is some development milestones, right on approvals. So I think milestones will keep coming through, right, on an annual basis to us, in addition to, of course royalty income and other transfer pricing income that we make through partnerships.

Nitin Agarwal — DAM Capital — Analyst

Okay. And lastly on the innovation R&D portfolio, I mean, how should we look at the next maybe 12 to — six to 12 months on the portfolio from news flow perspective from a licensing perspective?

Glenn Saldanha — Chairman & Managing Director

Currently, I think it’s safe to assume that we’ll close at least one licensing deal a year between GPL and Ichnos, right on a consistent basis, on the innovation side. So, if we achieve that, I think we would have done well, right, on a consistent basis. We closed Almirall, obviously, Almirall — the product is now in Phase one, there will be subsequent milestones coming through from Almirall on a consistent basis. So, I think this can be a good revenue stream for us right, between, new deals, existing deals, Ryaltris milestones, Ryaltris royalty inflow on a consistent basis, which will help sure up the overall revenue line-item, the EBITDA margins on a consistent basis.

Nitin Agarwal — DAM Capital — Analyst

So Glenn we’re already in mid November, you know, for FY’23 do you still see the prospects of our licensing deal coming through for — from the portfolio?

Glenn Saldanha — Chairman & Managing Director

We still continue to maintain that we will try and close the licensing deal this year.

Nitin Agarwal — DAM Capital — Analyst

Okay. And, I think pushing one last, Mani sir, on the net debt, given — I mean, there were some working capital pressures in H1 now for the year do we see how they will be able to generate cash to maybe make some impact on the debt levels going forward by the end of the year?

V. S. Mani — Executive Director and Global Chief Financial Officer

Certainly, Nitin. I think that’s going to be the endeavor. And anyway, rupee if it remains stable, and also the disruptions are lesser in the second half, we should definitely see some improvement, yeah.

Nitin Agarwal — DAM Capital — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Harith Ahamed from Spark Capital. Please go ahead.

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

Good morning. Thanks for the opportunity. So, in your press release you’ve talked about plans to file one additional respiratory inhaler product in the US in the next calendar year and this is apart from generic of Flovent. So, have we started clinical trials for this. And then, any color on this product will be helpful.

Glenn Saldanha — Chairman & Managing Director

So at this point we can’t give any visibility to what the product is or what we’re doing in terms of a development pathway. We still maintain that we will be able to file this additional product next year.

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

And this is a inhaler product, just to confirm.

Glenn Saldanha — Chairman & Managing Director

That’s correct.

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

Yeah. And trying to understand the compliance situation be — a little better. We’ve been non-compliant at this facility from early-2019 and so, I presume you’ve undertaken a fair bit of remediation measures before it got re-inspected this year — earlier this year.

So, you know there inspection has well didn’t really go too well. We’ve received an import alert post that. So, what exactly are the challenges specific to this facility? And what’s really led to this import alert situation, despite our remediation efforts? And have we undertaken any measures across the network to improve our quality systems because we have had a couple of other OAIs as well in the recent months.

Glenn Saldanha — Chairman & Managing Director

So clearly we are disappointed about Baddi getting the import alert. We’re working with the FDA to see how we can remediate and bring the facility back on track as soon as possible. I think we’ve also taken many, many measures across the firm right, to ensure that we are — we strengthen our quality systems and we continue to excel in the quality area, right across all our sites, right across the network. So I think there are several things we’ve done and we continue to work through, right to strengthen our network, our capabilities on the quality side.

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

Okay. Understood. And then the last one, the capital raise at Ichnos which you’ve talked about in the past, is that plan still on or are we shifting our focus more towards licensing some of the candidates across Ichnos?

Glenn Saldanha — Chairman & Managing Director

I think at our Investor Day which is coming up right, we will give much more visibility on the roadmap there.

Harith Ahamed — Spark Capital Advisors (India) Private Limited — Analyst

Okay. Thanks, Glenn. That’s all from my side.

Glenn Saldanha — Chairman & Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Kunal Randeria from Nuvama. Please go ahead.

Kunal Randeria — Nuvama Wealth Management Ltd. — Analyst

Hi. Good morning. Just a quick one on Ryaltris, that — being a branded product, have you already invested or still investing in sales force in the countries that you are going to market it yourself?

Glenn Saldanha — Chairman & Managing Director

So the good news is that we are continuing to leverage the existing sales force, I mean, the reason we built-out some of these segments in emerging markets is precisely that, right? Now we are actually getting the benefits of the investments we’ve made by way of sales force in these different countries. So the network, the sales force that we have is — we are able to better leverage them through the launch of Ryaltris in almost all of our countries. We have not added salesforce anywhere to the best of my knowledge right across the network.

Kunal Randeria — Nuvama Wealth Management Ltd. — Analyst

Sure. Thanks. And you believe these are sufficient to sort of for Ryaltris to achieve its potential?

Glenn Saldanha — Chairman & Managing Director

Yeah. We think we’ll get to the $100 million, $150 million mark in the next four, five years using the existing infrastructure.

Kunal Randeria — Nuvama Wealth Management Ltd. — Analyst

Got it. Thanks a lot. Thanks. That’s all.

Operator

Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Yeah. Hi, good morning. So my first question is on the revenue guidance shared for FY23. I think 6% to 8% is the number that has been shared. And first half you have closed it on a flattish level. Second half, I would also suspect that India is usually seasonally weak, especially because of respiratory. US also you’ll be having the impact of the import alert. So, what will drive this growth in the second half and that too on a reasonable base in second half of FY22?

Glenn Saldanha — Chairman & Managing Director

Clearly, see, I mean, if you assume that we currently have the same run-rate, okay, of INR3,300 crores, INR3,400 crores a quarter right, that — that itself will take you to very close to the guidance, right. I mean, what we did in Q2. So very clearly, outside of that also we have most of our markets as Brendan mentioned, US Q3 will be better than Q2, Q4 will be better than Q3. India continues to perform well for us in the second half. Europe is doing well, ROW. So, I think overall, the Baddi impact, we think will hit us in Q4. And even there, given the launches, given all the other things we have going on, we believe Q4 will be strong. So overall, we continue to maintain the overall guidance.

V. S. Mani — Executive Director and Global Chief Financial Officer

And just to add further, the first half looks a little flattish because we had heavy COVID sales in the first half. First quarter was India, second half was ROW. So I don’t — And second quarter, second half of the year will be more normal to normal, okay. [Speech Overlap]

Glenn Saldanha — Chairman & Managing Director

And if you strip that out, clearly, we are well ahead of double-digit growth, right, on an overall basis.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Right. Any Ryaltris royalties that you are expecting in second half, which will also liquidate [Phonetic] numbers in second half, October ’23?

V. S. Mani — Executive Director and Global Chief Financial Officer

Sorry, we couldn’t get the question.

Glenn Saldanha — Chairman & Managing Director

Say that again, Nikhil.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Any royalties from Ryaltris? Are you expecting that in second half?

Glenn Saldanha — Chairman & Managing Director

So we don’t guide to royalties Nikhil, right? So, I think they’ll keep coming as we go along, depending on markets and depending on as the products get commercialized.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Right. And on usage of cash, I think there is a significant amount of cash in the balance sheet. And so, obviously gross debt is also high. So, why don’t repay gross debt from that cash? I mean, in an interest rate pricing cycle, especially because your debt is predominantly in USD. Wouldn’t that help finance cost in the P&L?

V. S. Mani — Executive Director and Global Chief Financial Officer

So just to answer that. So obviously, my cash is slightly lower compared to the last year end. Besides that almost INR350 crores to INR400 crores are lying in GLS. So that’s a separate listed company, it gets consolidated along with us, okay. So, those are not something that we use. But in any case, Nikhil, any Company of our size with so many locations around, we definitely need some cash with us to manage the day-to-day, how we take care of it. I mean, at best here and there, INR100 crores or INR200 crores we could manage, but that’s about what we can. Besides that, we’re running so many enterprises across so many geographies, we need some cash. And the collections keep coming in and they keep — some of them remain in the cash.

Nikhil Mathur — HDFC Mutual Fund — Analyst

Sure. And any guidance you can give on the tax rate, it seems to be running high first half. So, if you can help on this.

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah. So, if you look at it compared to last quarter, this is better. For the year, we’re guiding around a little less than 40%. But going forward, it will come lower as we go by. Cash taxes was — and also the reason is, we are been using our MAT credit over the last two quarters in a good way.

So obviously, that doesn’t — it doesn’t amount to cash tax. On a cash tax basis, our tax rate was about 27%. So, I think in a couple of years, we’ll be able to use up our MAT, and so therefore, naturally, we can opt for a lower tax rate. Tax laws allow you to do that, you can apply for 25% tax rate. The other thing that would happen is also as we grow and grow our sales, our profitability, and the way we have been quite tight on our R&D spends and especially the innovation side, that should also contribute to improvement in the overall tax rate, that’s how it will be.

Nikhil Mathur — HDFC Mutual Fund — Analyst

So ’24 and ’25 for the time being will be mid-30s, somewhere around that?

V. S. Mani — Executive Director and Global Chief Financial Officer

Sorry, sorry.

Nikhil Mathur — HDFC Mutual Fund — Analyst

On the book tax rate in FY ’24 and ’25, it would be around 25-26% level?

V. S. Mani — Executive Director and Global Chief Financial Officer

Yeah, it should be 35% or lower, yeah, that should be around those level. But cash tax will be still around — maybe around 26%, 27%. So we’re not paying any cash because I would have used the MAT also, right?

Nikhil Mathur — HDFC Mutual Fund — Analyst

Right. Right. Sure. Thank you so much.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Sachin Kasera from Svan Investments. Please go ahead.

Sachin Kasera — Svan Investment Managers — Analyst

Hello. Good morning, everyone. A question for you, Mani, sir, what gives us the confidence in terms of being able to reduce the target for — debt and [Phonetic] with the full year target? Is it that you’re expecting significant correction back again in the working capital cycle? Or you’re expecting the profitability to grow significantly has been able to [Indecipherable] debt?

V. S. Mani — Executive Director and Global Chief Financial Officer

So obviously, cash comes from profit. So we should be able to significantly improve. I mean, as you can see we guided to higher number in terms of turnover in the second half. So that’s one part of it. As far as working capital goes, obviously, if the disruptions are not so much, and they improve, as we are seeing slowly, it will definitely help us to reduce our debt level.

Sachin Kasera — Svan Investment Managers — Analyst

Sure. Secondly, would you able to give us some sense, what is the type of impact Monroe is having in overall profitability of the Company?

V. S. Mani — Executive Director and Global Chief Financial Officer

So Monroe assets, I mean, obviously, the strategic and all that, but we have not really started any major sales from there. So to that extent, it has not really hit us in that sense. So broadly, that is where we are, okay. So, maybe if it was there, some opportunities could have been there. But today, it’s not there. So, we are waiting remediating that and hoping that we should be able to start…[Speech Overlap].

Sachin Kasera — Svan Investment Managers — Analyst

Yeah. But what I’m saying is that it must be held sometime [Phonetic] because of the cost that you’re incurring, apart from remediation also establishment costs. Is it a large number to have some impact or it’s a very small number?

V. S. Mani — Executive Director and Global Chief Financial Officer

So remediation cost, if you recollect last year we had taken something to our P&L. So, we are seeing how it goes along. Maybe there could be some in future, something a little bit coming more. But see, this is part and parcel of the business, right? I mean, obviously — and the cost obviously we have been as careful as possible now that we have — it’s under remediation. But these numbers are baked in with those numbers as well, okay. So, I mean, this is a challenge of running a plant and having some issues. But I think in the long run, it will serve us well, yeah. That’s what we see.

Sachin Kasera — Svan Investment Managers — Analyst

Sure. And lastly, on the domestic sales to sustain this 10%, 15% growth, we are looking at adding [Indecipherable] next couple of years or with the existing force within and productivity around next couple of years you can pull through.

V. S. Mani — Executive Director and Global Chief Financial Officer

I think India, we will continue to expand and grow in India. I mean, we’ll give some visibility at the Investor Day, right, on what is the road map, right, for some of these geographies. But clearly, India is a great destination from a growth perspective. So, we will continue to expand into India.

Sachin Kasera — Svan Investment Managers — Analyst

Sure. Great. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Utkarsh Gandhi for his closing comments.

Utkarsh Gandhi — General Manager – Investor Relations

Thank you, moderator. We’ll read the disclaimer before we end the call. The document has been prepared by Glenmark Pharmaceuticals Limited. The information, statement and analysis made in this document describing the Company’s or its affiliates’ objectives, projections and estimates are forward-looking statements. These statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties, which could cause actual outcomes and results to differ materially from these statements depending upon economic conditions, government policies and other incidental factors.

No representation or warranty, either expressed or implied is provided in relation to this document and it should not be regarded by recipients as a substitute for the exercise of their own judgement. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information for future events or otherwise.

With that, we would like to end the call today. A big thank you to everyone for joining us on the call.

Operator

[Operator Closing Remarks]