Jubilant Pharmova Limited (NSE:JUBLPHARMA) Q2 FY23 Earnings Concall dated Oct. 21, 2022
Corporate Participants:
Surajit Pal — Head, Investor Relations
Shyam S Bhartia — Chairman and Managing Director
Pramod Yadav — Director and Chief Executive Officer
Giuliano Perfetti — Chief Executive Officer
Syed Kazmi — Chief Executive Officer of Jubilant Therapeutics
Arun Kumar Sharma — Chief Financial Officer and Head – Group Treasury
Analysts:
Rahul Veera — Abakkus — Analyst
Aditya Khemka — InCred PMS — Analyst
Nitesh Shah — Nirmal Bang — Analyst
Amit Goela — Rare Enterprises — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Jubilant Pharmova Limited Earnings Conference Call for the Quarter and Half Year Ended September 30, 2022. [Operator Instructions]
I now hand the conference over to Mr. Surajit Pal, Head, Investor Relations. Thank you, and over to you, Mr. Pal.
Surajit Pal — Head, Investor Relations
Thank you. Good evening, everyone. Thank you for being with us on our Q2 and H1 FY ’23 earnings conference call. I would like to remind you that some of the statements made on the call today could be forward-looking in nature, and a detailed disclaimer in this regard has been included in the press release that has been shared on our website. On the call today, we have Mr. Shyam Bhartia, Chairman; Mr. Hari Bhartia, Co-Chairman and Managing Director; Mr. Arvind Chokhany, Group CFO; Mr. Pramod Yadav, CEO of Jubilant Pharma; Mr. Giuliano Perfetti, CEO of Jubilant Biosys; Mr. Syed Kazmi, CEO of Jubilant Therapeutics; and Mr. Arun Sharma, CFO of Jubilant Pharmova.
I now invite Mr. Shyam Bhartia to share his comments. Over to you, sir.
Shyam S Bhartia — Chairman and Managing Director
Good evening, everyone. Thank you for joining us on Q2 FY ’22 Earnings Conference Call of Jubilant Pharmova Limited. During the quarter, the company reported significant improvement in revenues, especially due to strong performance in specialty chemicals, CDMO sterile injectables and CRDMO, which was offset by lower revenues in Generics segment. On year-on-year basis, however, the revenues are marginally lower as performance of the CDMO Sterile business normalized due to tapering of COVID dues and weaker performance in Generics segments. In Specialty Pharmaceuticals, radiopharmaceuticals business reported increase in revenue year-on-year driven by higher volumes with normalization in demand as pandemic eased off. Our Allergy business continued to grow with higher volumes. In CDMO sterile injectables, revenue normalized year-on-year due to tapering of one-off COVID-related revenues in the corresponding quarter. There was, however, a sizable improvement sequentially due to higher volumes. Generics business revenues impacted year-on-year with pricing headwinds and Import Alert challenges. Management begins implementation of strategic reorganization, cost optimization and reprioritization of geography mix in generic business. CRDMO, our drug discovery services continues to maintain momentum from strong order book, and our API revenues stood higher on volume growth and is poised to gain further from the asset upgradation program at Nanjangud plant.
During the quarter, we refinanced our existing $200 million bonds and $150 million term loan with five years, $350 million term loan facility at favorable terms with lower interest costs. This enabled us to optimize our finance costs. We incurred foreclosure charges in the refinancing transaction, which we expect to recover over the tenure of new $350 million facility. I would like to mention that we have appointed Mr. Jaidev Rajpal as Head of our Generics business from October ’22 onwards. Jaidev joins us from McKinsey and has over two decades of rich experience in management consulting and driving and transforming leading generic pharmaceutical companies in India and global markets. Jaidev’s appointment will help the company in transforming its Generics business through commercial and operations excellence, including portfolio and R&D rebalancing. With his appointment, Jaidev will take over the Generics business from Mr. Pramod Yadav, who will continue to be the CEO of the Specialty Pharma, Radiopharma and Allergy Immunotherapy and CDMOs Sterile Injectable businesses.
With this, I hand over to Pramod to discuss about the Pharma business in detail. Before that, on behalf of the entire Jubilant team, we wish our investors and everyone present on this call, a very joyful, peaceful and safe Diwali. Thank you.
Pramod Yadav — Director and Chief Executive Officer
Thank you, Mr. Bhartia. A very good evening to all of you. With this, I’ll share performance of our various businesses in second quarter of financial year ’23. We witnessed significant improvement in performance of our specialty pharmaceutical business during the quarter. In Q2 FY ’23, the revenue from specialty pharmaceuticals was at INR814 crore, up from INR651 crore in Q2 FY ’22 and INR722 crore in Q1 FY ’23. The EBITDA was at INR198 crore, up from INR130 crore in Q2 FY ’22 and INR117 crore in Q1 FY ’23 with a margin of 24.4% versus 19.9% in Q2 ’22 and 16.2% in Q1 FY ’23. Radiopharmaceutical business witnessed improvement in the revenue year-on-year and quarter-on-quarter, driven by higher volumes. Higher sequential revenue were also on account of customer orders rescheduling in Q1 FY ’23. The Radiopharmacies business witnessed growth due to higher volumes resulting from recovery in the demand as pandemic impact went. Turnaround plan working well as reflected by volumes at pre-COVID levels and lower losses. We have good news to share on the regulatory front as USFDA completed audit with 0 observations in our Montreal Radiopharma plant during its inspection in early October ’22. The Allergy Immunotherapy business reported healthy revenue growth, which was driven by the volume growth, price increase and geographic expansion.
CDMO Sterile Injectable revenues were at INR299 crore versus INR409 crore in Q2 FY ’22 and INR263 crore in Q1 FY ’23. The EBITDA was at INR71 crore versus INR203 crore in Q2 FY ’22 and INR132 crore in Q1 FY ’23. The quarter-on-quarter variations in margin in Q1 FY ’23 and Q2 FY ’23 is due to plant shutdown twice in a year and COVID-related deals. In Q2 FY ’23, we witnessed about INR22 crore of COVID deals versus about INR162 crore in Q2 FY ’22 and about INR70 crore in Q1 FY ’23. Generic revenue were at INR161 crore versus INR333 crore in Q2 FY ’22 and INR178 crore in Q1 FY ’23. Revenues and profitability lower versus Q2 FY ’22 due to pricing pressure in the U.S. generic market, lower volumes resulting from the Roorkee Import Alert and lower Remdesivir sales. We have responded to the USFDA with a CAPA plan post audit of the Roorkee plant that had resulted in six observations. To put the business on path of sustainable growth and the profitability, we have kicked off a large-scale business transformation, which is focused on strategic reorganization of the generic business and the generic wide cost optimization, including direct and indirect costs. Also reprioritizing the geography mix to accelerate growth in the branded markets, such as India. We have identified and are in the process of executing annualized cost opportunities worth around INR100 crore across direct and indirect spend. These will be implemented by Q4 FY ’23, which while we work on identifying additional cost-saving opportunities.
With this, I hand over to Giuliano to provide insight into contract research development and manufacturing organization business and wish you all a joyous and prosperously Diwali.
Giuliano Perfetti — Chief Executive Officer
Thank you, Pramod. In CRDMO business, we witnessed year-on-year and sequential improvement in revenues, lead by strong performance of drug discovery service business. API business also reported double-digit year-on-year growth in revenues, driven by higher volumes. CRDMO revenues were at INR320 crore versus INR258 crore in Q2 FY ’22 and INR280 crore in Q1 FY ’23. EBITDA was at INR68 crore versus INR69 crore in Q2 FY ’22 and INR46 crore in Q1 FY ’23, with a margin of 21.3% versus 26.6% in Q2 FY ’22 and 16.3% in Q1 FY ’23. CRDMO revenues were at INR600 crore versus INR451 crore in H1 FY ’22. EBITDA was at INR114 crore versus INR122 crore in H1 FY ’22, with a margin of 19% versus 27.1% in H1 FY ’22. In our drug discovery service business, we witnessed strong demand from target customers for integrated drug discovery services, functional chemistry and DMPK. However we realize that market is adopting more selective approach in launching new projects. Strong incremental order flow supported by the Greater Noida facility that was commissioned in September 2021. Sequentially revenue higher in line with historical trends of Q2 during the stronger quarter. The commissioning and validation of the Greater Noida DMPK in vitro facility to enable comprehensive service capability from the site.
With this, a warm Diwali wish all and now hand over to Syed to discuss the proprietary novel drug pipeline.
Syed Kazmi — Chief Executive Officer of Jubilant Therapeutics
Thanks, Giuliano. Good evening, everyone. In our proprietary novel drug business, we are focused on developing potential best-in-class and best-in-class precision therapies in oncology and autoimmune space. The company uses Jubilant’s proven discovery engine with a structure-based drug discovery expertise and a track record of partnerships. Phase I/II trial is ongoing for JBI-802, a dual LSD1/HDAC6 epigenetic modulating agent for patients in advanced solid tumors with the primary objective to identify the recommended Phase II dose and to evaluate the safety and antitumor activity of JBI-802. Target indications include success of small cell lung cancer, neuroendocrine prostate cancer and other neuroendocrine tumors with specific genetic signatures. We expect to have interim clinical data by early next year. We have received FDA clearance of the IND for our second program, JBI-778, an oral brain penetrant and selective PRMT5 inhibitor for the treatment of solid tumors with brain metastasis and as well as primary brain tumors. We recently published cutting-edge findings on the effect of our first-in-class [Indecipherable] inhibitor in halting cancer progression and tumor metastasis in the prestigious peer-reviewed cancer research journal jointly with the Wistar Institute in Philadelphia. We also presented preclinical data on the activity of our lead dual epigenetic modifier JBI-802 in hard-to-treat mixed amplified neuroendocrine tumor models at American Association of Cancer Research, AACR, Epigenomics conference. These presentations show that our company’s R&D is gaining global recognition in the field of cancer research. Jubilant Therapeutics is now a clinical stage biotech with higher value creation opportunities driven by emerging data from first-in-human studies and additional IND files.
With this, I now hand over to Arun to discuss the financials and wishing you and your family are very happy Diwali. Thank you.
Arun Kumar Sharma — Chief Financial Officer and Head – Group Treasury
Thank you, Syed. A very good evening, and thanks, everyone, for taking out time and joining us on our quarterly earnings conference call. I would like to highlight the company’s financial performance for the second quarter and first half of financial year 2023. Q2 FY ’23 financials. Jubilant Pharmova’s revenue were at INR1,600 crore versus INR1,657 crore in Q2 FY ’22 and INR1,452 crore in Q1 FY ’23. Reported EBITDA was at INR233 crore versus INR344 crore in Q2 FY ’22 and INR204 crore in Q1 FY ’23. The accretion and amortization expense during the quarter was at INR94 crore versus INR100 crore in Q2 FY ’22. Finance cost at INR42 crore versus INR35 crore in Q2 FY ’22. Exceptional cost of INR57 crore included INR48 crore of foreclosure charges related to bond repayment and balance due to write-off of capitalized debt origination cost. We expect savings from the lower interest rate pursuant to the refinancing will enable recovery of this cost over the tenure of this new facility. Debt was at INR five crore as compared with INR143 crore in Q2 FY ’22 and INR47 crore in Q1 FY ’23. Normalized debt was at INR62 crore as compared with INR143 crore in Q2 FY ’22 and INR47 crore in Q1 FY ’23. EPS was INR0.34 per share versus INR8.97 in Q2 last year and INR2.96 in Q1 FY ’23.
Normalized EPS was at INR3.88 per share in Q2 FY ’23. Net debt on constant currency basis at INR2,204 crore as on September 30, 2022, versus INR1,951 crore as on June 30, 2022. Capital expenditure, excluding R&D capitalization, was at INR128 crore for the quarter. We expect to incur capital expenditure of around INR700 crore to INR750 crore in FY ’23, primarily towards expansion in CDMO business and announcement of drug discovery service capabilities and capacities. In addition, we expect product development expenditure of INR250 crore to INR300 crore. Now moving on to H1 FY ’23 financials. In H1 FY ’23, company’s revenue were at INR3,051 crore versus INR3,292 crore in H1 FY ’22. EBITDA was at INR436 crore versus INR723 crore in H1 FY ’22. PAT was at INR52 crore as compared with INR303 crore in H1 FY ’22. Normalized PAT was at INR108 crore in H1 FY ’22. EPS at INR3.30 per share versus INR19.06 per share in H1 FY ’22. Normalized EPS was at INR6.81 per share versus INR19.06 per share in H1 last year. Capital expenditure for H1 FY ’23 was INR226 crore. Blended interest rate on average basis for H1 FY ’23 was at 4.81% versus 4.62% in H1 FY ’22.
With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have, and wishing you and your family are very happy Diwali. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Rahul Veera from Abakkus. Please, go ahead.
Rahul Veera — Abakkus — Analyst
Good evening, gentlemen. Pramod, sir, just a quick question on the Radiopharma business. Are we touching the 90% to 95% utilization across all the molecules now, DTPA and MAA?
Pramod Yadav — Director and Chief Executive Officer
Yes, Rahul, that’s a good question. We are touching more than 95% in all the molecules, except DTPA.
Rahul Veera — Abakkus — Analyst
Okay, okay, okay. Fair point.
Pramod Yadav — Director and Chief Executive Officer
DTPA has not yet come up. And we are waiting, but rest of the products have come up to the pre-COVID level, more or less.
Rahul Veera — Abakkus — Analyst
Sure, sure. This is a good improvement, sir, as compared to the last couple of quarters. Sir, just on the financial side of it. I wanted to understand the exceptional cost, like what was the tenure of this bond? And what is the new bond? What is the interest rate and the tenure of the new bond? Just trying to understand the gap between the — how will the cost savings come through?
Pramod Yadav — Director and Chief Executive Officer
So, Rahul, this earlier bond was due in March 2024.
Rahul Veera — Abakkus — Analyst
Okay.
Pramod Yadav — Director and Chief Executive Officer
And this was at 6%.
Rahul Veera — Abakkus — Analyst
Okay.
Pramod Yadav — Director and Chief Executive Officer
And there was a term loan of $150 million, which was also due somewhere in around March 2024. So there was no urgency to refinance this. But because of our advanced planning, we refinanced this term loan and bond for a five-year tenure. So now this goes from 22 July to 27 July. So refinancing has been five years at a very competitive cost. And if you look at our coupon on this is less than 2% over so far. So that will give us phenomenal cost savings within next two years’ time itself.
Rahul Veera — Abakkus — Analyst
Okay, okay. Fair point. Fair point, sir. I’ll come back in the queue, sir. Thank you so much, sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Aditya Khemka from InCred PMS. Please, go ahead.
Aditya Khemka — InCred PMS — Analyst
Yes. Hi. Thanks for the opportunity. Sir, can you elaborate on the generic business. I think Hari sir in his opening remarks mentioned restructuring the business, finding more cost efficiencies. So can you give us a little more color on what kind of restructuring or reorganizing you are looking at? What kind of cost efficiencies you are looking at? And how are they supposed to materialize and by what timeframe?
Giuliano Perfetti — Chief Executive Officer
Yes. Aditya, as of now, the strategic reorganization is bringing the business into a separate leadership with a very specific laser sharp focus to transform the business. We are already looking at cost efficiencies. And as I mentioned, more than INR100 crore has been identified, which will get materialized by next quarter. And then, we’ll continue to get the benefit of that, while more cost savings across the entire cost area is being looked at. It will be a little too early to get into the details of that. Maybe the next quarter will be a better opportunity to have the discussion in detail.
Pramod Yadav — Director and Chief Executive Officer
This also includes rebalancing of our R&D portfolio.
Aditya Khemka — InCred PMS — Analyst
So basically rationalizing R&D spend also.
Pramod Yadav — Director and Chief Executive Officer
That’s right.
Aditya Khemka — InCred PMS — Analyst
Understood, understood. And do we have an update on MIBG theranostic molecule that we were working on? At what stage are we? When do we see a potential approval of the product? When do we see a potential commercialization timeline?
Giuliano Perfetti — Chief Executive Officer
So, as you know, there are two trials going on. One is the Phase II trial for the relapse and the refractory, in which we have to do about 70 patients, and we are close to 40% to 45% of the patients already enrolled and dosed. The other trial, which is for Phase III, which will be first line of therapy, which is a COG trial, along with CHOP. In that, there are about 700 patients, and we have already done more than 450 patients. So the trials are progressing well. The Phase two approval, we expect in FY ’25. And Phase three approval, we expect in FY ’26.
Pramod Yadav — Director and Chief Executive Officer
But actually we can market the drug after Phase two approval pending case three.
Aditya Khemka — InCred PMS — Analyst
Okay. So you can effectively — if given that Phase two works out properly on the safety and efficacy profile, you can launch the product sometime in FY ’26. Is that fair?
Giuliano Perfetti — Chief Executive Officer
We are trying to launch in FY ’25. And as I said, that’s for the relapse and the refractory. Once the Phase three is also completed, it will be the first line of treatment. So it will open up the additional market, but…
Aditya Khemka — InCred PMS — Analyst
And what part of the market would be relapse — sorry, sir, you were saying something, I interrupted you. My bad.
Giuliano Perfetti — Chief Executive Officer
No, no, no issue. So once the Phase two is done, is for the relapse and the refractory for which we are saying that we have close to 800 patients in U.S. on an annualized basis. Now out of this 800, some are the MIBG avid and some are not. Then when they are being dosed with the chemo or other antibodies and the disease relapse phase. That time the Phase two will be given. This is the Phase two approval. When the Phase one approval is there, then the patient will be dosed even during the chemo stage itself. So once the drug is in market, the doctors are free to use the way they want to use. And currently also — currently it is also being used under special FDA program, already in the — doctors are already using the drug, but only that we don’t get the price. Doctors are already using the drug in at least, how many, 14, 15 hospitals.
Pramod Yadav — Director and Chief Executive Officer
Yes, close to 16 to 18 hospitals, they’re using.
Giuliano Perfetti — Chief Executive Officer
So, already drug is being used under special access program of USFDA.
Aditya Khemka — InCred PMS — Analyst
Right. I understand that. And sir, the more I read about MIBG, the more I get interested into the molecule, seems pretty revolutionary in nature. I also wanted to understand, what are we doing for developing the molecule beyond the U.S. market. That’s part one of the question. Part two, what is the potential size of the market, refractory plus first line, both markets included in the U.S. — potential market size in the U.S. and outside the U.S.?
Giuliano Perfetti — Chief Executive Officer
Having said that, I think the largest market is in U.S. because U.S. is a market where they allow even for a few years of good life, they allow the use of the drug. But in many European markets, etc., it is very difficult to — for the patients to allow under the NICE program of U.K., etc., it becomes very difficult. And it is very important from this point of view that it is for the pediatric, the children. Now the children — the life of the children improved substantially. They can go back to school, they can go back to their cheerful if this treatment is given. So even if it lasts for four, five years, it is very important, the life improvement because when they go through the chemo or any other drug program, their quality of life is very low. When they go for MIBG, the quality of life improved substantially. So that is why from the parents’ point of view, they prefer this treatment.
Aditya Khemka — InCred PMS — Analyst
Right. Right. I get that. So maybe in Europe because most of the governments…
Giuliano Perfetti — Chief Executive Officer
But we would like to see the drug approval in U.S. I think once it is approved in U.S., we will definitely try in other countries in EU. But we have not yet started anything to do with U.S. yet.
Aditya Khemka — InCred PMS — Analyst
Understood sir. That was my question. Understood. And what is the potential market size of the product in U.S. including refractory and first line?
Giuliano Perfetti — Chief Executive Officer
Yeah, it will be in excess of $200 million on annualized basis with a 100% potential.
Aditya Khemka — InCred PMS — Analyst
Got you. Thank you. Last question, sir, on the CRDMO business side. So, phenomenal performance and phenomenal traction, obviously. Recently, given the gas price situation in Europe and given that most of your larger CRDMO peers are based out of Europe. Do you see any business migrating from the European region to countries such as India where there is relatively more stability in input cost? Or do you expect just to grow organically and Europe business to survive in this turmoil?
Giuliano Perfetti — Chief Executive Officer
Are you talking related to drug discovery services or relating to sterile injectable?
Aditya Khemka — InCred PMS — Analyst
Both. I think drug discovery won’t be as much impacted simply because there’s more manpower, less material. I’m talking more from a manufacturing standpoint, where power cost becomes more relevant to the scheme of things.
Giuliano Perfetti — Chief Executive Officer
So for the Sterile business generally like, especially into the Europe and the US, where we are doing this business for the innovator pharma companies. They like this sterile injectable fill finish to be closer to them within the geography, so that they can have a better, the supervision on the quality systems and the releases, etc. And then they do the marketing of that globally. So far, because of this power cost, etc. We have not seen the business moving out of the Europe to the US. It will be too early to comment on that. I would like to further add that, whatever the pharma companies are producing in our plant, they are being shipped to Europe with the European approvals. They have been shipped to even Japan. They have been shipped to many other countries from our facility itself. So our facility is approved with Japanese, our facilities approved with European authorities. So it is an innovator company, they market the drug globally from our facility. So that means we are definitely competitive. That is why we do it. And we have seen that the — our power cost in the US is, in fact, is better than in Europe. As of today, Europe is in a bad shape because of the fuel prices. And — but in any case, even earlier when this crisis of Ukraine, our costs were very highly competitive in US.
Aditya Khemka — InCred PMS — Analyst
Fair enough. Sir, last question, with your permission. On the Roorkee and Nanjangud compliance with the FDA, any update?
Pramod Yadav — Director and Chief Executive Officer
So on the Roorkee, I mentioned that we were audited in the month of July. There were six observations. We have submitted our CAPA plan to the FDA. The FDA generally takes around 90 days to come back on that. So we expect FDA to come back on the Roorkee sometime in the mid of November. And we are already end of October, so very soon we should be hearing. With regard to the Nanjangud, I’ll let Giuliano speak.
Giuliano Perfetti — Chief Executive Officer
Yeah. Thank you, Pramod. For Nanjangud, we got the last inspection in year 2018. And so we are now waiting for the new inspection. Of course, we don’t know exactly the time line of this. From our side, we are — we worked intensively to prepare — to be prepared for the discussion and in addition to the internal factors, which was allocated and did a very detailed and rigorous work. We also hired external consultants both from India and globally in order to be fully prepared for the inspection. But at the moment, it’s difficult to provide you a timeline. We’re trying to even ask to the FDA to mention that we are ready for inspection we’re ready for further use.
Aditya Khemka — InCred PMS — Analyst
Giuliano, just a follow-up on that. So Nanjangud, given that it is not able to supply to the American market, because of the Import Alert. What is the kind of losses we are incurring at the plant level there? Because I understand the plant will be operating at a sort of level despite no production, and we would definitely be incurring overhead expenses on plant. So any flavor or color you can provide us there?
Giuliano Perfetti — Chief Executive Officer
Yes. I think to answer your question, the inspection — the previous inspection was mainly focusing [Indecipherable]. So the related impact is on the Sartans product. And as you know, in Sartans, there is a large use of solvent recoveries. So the impact so far for us is that we are not recovering solvent and that we’re not expecting these substance to U.S. using solvent recovery. Why we are exporting in Europe? Because this is fully in compliance.
Pramod Yadav — Director and Chief Executive Officer
But, Giuliano — just one minute, Giuliano. We are exporting, all our products are going to U.S. I think that we must clarify first.
Arun Kumar Sharma — Chief Financial Officer and Head – Group Treasury
Yes, all products, not all products, products.
Giuliano Perfetti — Chief Executive Officer
All products are going to U.S.
Pramod Yadav — Director and Chief Executive Officer
Yes, the products which we have marketed in U.S. are going to U.S. Products are going to Europe. Products are going all over — yes, U.S. also products are going.
Giuliano Perfetti — Chief Executive Officer
No, no. Just one minute. There is no restriction for our existing products to be supplying to U.S. So I think the question was that we are not able to supply to U.S. That’s why we may be incurring losses. There is no loss related to non-U.S. supply.
Pramod Yadav — Director and Chief Executive Officer
Thank you for the clarification. Maybe I missed completely because — I reinforce that we are exporting to all the countries, including to the U.S., Europe and Japan and all the countries that typically we are exporting. So the impact on this [Indecipherable] is limited to the fact that we can’t, let’s say, position new products into U.S. market. That’s the current impact we have. So once we will be cleared, we will start to position the new products into U.S. market as well.
Aditya Khemka — InCred PMS — Analyst
Got it. Thank you. I will come back. I have a couple more questions but I will come back.
Operator
Thank you. Our next question is from the line of Amit Goela from Rare Enterprises. Please go ahead. It looks like Mr. Goela is out of the queue. We’ll take our next question from the line of Nitesh Shah [Phonetic] from Nirmal Bang. Please go ahead.
Nitesh Shah — Nirmal Bang — Analyst
Thanks for taking my question. Again just squeezing the generic part, last quarter, I was expecting the margin also picked out. This quarter margin would be at 50%. You said that you’ll be — you’re giving a better guidance next quarter. But can you say something about that it is restricted or we are expecting a similar kind of losses in — at least in the near quarter?
Giuliano Perfetti — Chief Executive Officer
So the margins in this quarter is lower than the expectation because when in the month of July, the FDA came for the audit. So we were to complete all the remediation before the audit and then ramp up the production in this quarter. Now because of the audit, our ramping, the remediation activities got impacted because we had to put them on hold and complete the first audit and make the CAPA plan. In the remediation, it was a widespread remediation with the support of various equipment suppliers and the partners on the software development side. So during that audit, they all had to go back and then we took time to mobilize all over all facilities [Phonetic] and which all are now getting completed by end of October. And now we are in a position where we will be ramping up the production over there and selling the products mostly into the non-U.S. market. So — and then clubbed with this, all initiatives we have taken on the business transformation, looking at overall cost across all the sectors, all geographies. From here onwards, quarter-on-quarter, our EBITDA will continue to improve.
Nitesh Shah — Nirmal Bang — Analyst
That’s it. Thanks for the clarification. My second question would be on the CDMO segment. Like you said that margin variance in the sequential mainly due to the plant shutdown. But revenue has increased sequentially and the margin came down almost to the half. What is the reason for that, if you know? Because shutdown of the plant should reduce your revenue as well, I believe?
Pramod Yadav — Director and Chief Executive Officer
You are comparing margin with previous quarter or the last year?
Nitesh Shah — Nirmal Bang — Analyst
Quarter-on-quarter.
Pramod Yadav — Director and Chief Executive Officer
Quarter-on-quarter. So, on this business quarter-on-quarter variation, we will have to start learning a little bit more. We have to take two shutdowns of the plant in a year, which is as per the regulatory compliance. And each shutdown lasts more than three weeks. So, what happens, a month in which we take the shutdown and once the batch is produced, it takes time for batch to get released from the quality. So, the quarter in which we take the shutdown, we still have the batches to be released in the market because they are in the queue and they continue to get sold. But the next quarter — so we sell from the inventory, so you have the inventory adjustment. In the next quarter, when the shutdown is not there, then you produce at a full blast, but you sell only half of the batches, balance go into inventory. So, inventory adjustment happens. So, the quarter-on-quarter, these variations will continue to happen in this business. And especially when we have two plants, one in [Indecipherable] and one in Montreal, this also becomes a little tricky to track at both the places. However, on an annualized basis, when you look at and if you remove the one-off — the COVID-related, the impact. In the CMO business, we are back to the margins level what it used to be pre-COVID, which are at a healthy margins and we will continue to operate the plant at those margins. With regard to your topline variance, I think you may have understood that how it impacts even though the margins are going up and down because of inventory adjustments. Between these two quarters, however, there was also COVID-related deal impact. As I mentioned in my call, we had INR22 crore COVID deals in Q2, while it was INR70 crore in Q1. So that also had an impact.
Nitesh Shah — Nirmal Bang — Analyst
Got it. And the last question is on the CDMO API. Your CDMO API margin has improved sequentially. It’s still at 8.5%. How much would you expect that it would be a room to further — at least on a double-digit?
Giuliano Perfetti — Chief Executive Officer
Can I ask you just to repeat the last part of the question because I didn’t get fully?
Nitesh Shah — Nirmal Bang — Analyst
Yes. So my question is about the CDMO API. Yes, last quarter, the CDMO API margin was 4%. This quarter would be 8.5%. So, I just want to know that the — why it’s a single-digit? Can we expect to be at least on a double-digit margins and what is the scope to improve that?
Giuliano Perfetti — Chief Executive Officer
Yes. So, first of all, yes, we do have an increase in this quarter. And the reason of that, you may recall that we mentioned we were working into the plant upgradation and some capacity unlock. So this program will start to be completed in the first half of this year, which is just concluded now. So, from the next quarter on, we do expect that we will grow in volume, and we do expect that will grow — we grow also in profitability. The target for this is really to come back in the next future to the same level we were used to have in the past years.
Nitesh Shah — Nirmal Bang — Analyst
That’s it from my end. Thanks a lot.
Operator
Thank you. The next question is from the line of Amit Goela from Rare Enterprises. Please go ahead.
Amit Goela — Rare Enterprises — Analyst
Sir, there has been a significant improvement in the performance of radiopharmacies like with EBITDA loss now at 5%. When are you — are you expecting breakeven a little bit earlier than previously guided?
Pramod Yadav — Director and Chief Executive Officer
So Amit, we had guided that by end of FY 2024, we will be breaking even in this business. Let’s, yes, let’s stay with this guidance, please.
Amit Goela — Rare Enterprises — Analyst
Okay. But now you’re just out by 5%, sir? Will it be a major difference to the numbers if it comes to earlier?
Pramod Yadav — Director and Chief Executive Officer
Yes. Of course, our efforts are to break even much earlier. And the team is working on that. We are continuing to see our top line growing, both because of the organic growth of the products what we had as well as the products, the new products which we have launched like the PSMA etc. So the top line continues to grow. At the same time, our operational efficiencies are also improving month-on-month, quarter-on-quarter. So the improvement is being seen all around. So yes, we should be breaking even earlier, but let’s stay with the guidance that we had given earlier.
Amit Goela — Rare Enterprises — Analyst
Okay, sir. Thank you so much. Thank you. All the best
Pramod Yadav — Director and Chief Executive Officer
Thanks, Amit.
Operator
Thank you [Operator Instructions] Our next question is from the line of Aditya Khemka from InCred PMS. Please go ahead.
Aditya Khemka — InCred PMS — Analyst
Yes. Sir, just one more question on the reorganizing. So when we did the demerger of Ingrevia and Pharmova, we created a lot of wealth for our shareholders because those were two completely different businesses being run under one entity. When I look at Pharmova today, it is still one company owning three, four very, very different businesses. It’s very little synergy to each other. So I just wanted to pick your brains on how do you see that? And how does that complex nature of business? Does it create issues because you’re running so many different houses under one house? Or does it create synergies because there might be certain sharing of expenses? Just any thoughts on the way the business is structured today?
Pramod Yadav — Director and Chief Executive Officer
Yes. Let me tell you. We have specialty pharmaceuticals business and which is headed by Pramod and generic business is headed by added by Jaidev. The generic business, we wanted to put a special emphasis because this needed a special emphasis on generic business. Now other business like Biosys is a CRDMO business and discovery services and APIs. So these are the three manufacturing businesses what we have. Now the other business, what we have is the Jubilant Therapeutics, which is a drug discovery business, of new drugs.
Aditya Khemka — InCred PMS — Analyst
I understand that, sir. My question was does the — does running so many different lines of businesses under one umbrella of Pharmova, does that not create challenges in terms of how you are managing these different pieces? Obviously it does confuse the shareholder because we don’t know what we are really buying or let’s say, if I just wanted to buy a CRDMO business, I can’t do that. But if I just wanted to buy a generics business, I can’t do that because it’s all housed into one big brand of Pharmova. So any thought on that?
Pramod Yadav — Director and Chief Executive Officer
But we have started reporting the business separately
Aditya Khemka — InCred PMS — Analyst
So that is true.
Pramod Yadav — Director and Chief Executive Officer
So that you get a — you get a view of the businesses separately.
Aditya Khemka — InCred PMS — Analyst
Right. But any thoughts on what you did with Pharmova and Pharmova and Ingrevia? Any thought of doing that within Pharmova in terms of demerging these businesses into separate clients so that shareholders have the ability and the liberty to choose what line of business they want to participate in and what lines of businesses they don’t want to participate in?
Pramod Yadav — Director and Chief Executive Officer
There is no plans as yet. But I think we’ll have to see in the next couple of years, how these businesses are panning out.
Aditya Khemka — InCred PMS — Analyst
Understood. Also any thoughts on the generic formulation business? How that is sort of performing? We understand that the pricing environment in U.S. remains very, very challenging. And how do we plan to sort of turn around that business?
Pramod Yadav — Director and Chief Executive Officer
I think we just explained that in the generic business, we are trying to reorganize and reduce cost of operation and also rebalance our R&D. So you will see that in quarter-on-quarter, you will see the reduction in costs because pricing, you have no control over it. The only thing what we can do is reduce cost of operations and cost of R&D.
Aditya Khemka — InCred PMS — Analyst
Right. And sir, in your CRDMO business, etc, where you must have seen some inflation in input cost. Are you finding — how are you finding the ability to pass on such inflationary pressures to your customers, both in radiopharma as well as CRDMO businesses?
Pramod Yadav — Director and Chief Executive Officer
So in radiopharma and CMO business, yes, you are right, our costs are going up a little bit at a higher pace than the normal because inflation in the U.S. is on a higher side. So employee cost goes up because of that. And the costs of some of the components have also gone up a little bit more than what otherwise on an annualized basis they used to be. Now we have the various contracts with the customers. So some of the contracts are like pass-through. Some of the contracts are open, we can increase the prices. Some have a limit to increase the price. So it’s a mix. But overall I can say that we are able to more or less pass on the increase.
Giuliano Perfetti — Chief Executive Officer
See, every year, it is indexed to the increase in pricing. So every year, we can revise the price for most of our customers’.
Aditya Khemka — InCred PMS — Analyst
Understood. That’s it from me, sir. Thanks a lot for answering my questions.
Operator
Thank you. [Operator Instructions] We have a question from the line of Vijay Irani from [Indecipherable] SFO DMCC. Please go ahead. Sorry, we have lost connection for Vijay. [Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.
Surajit Pal — Head, Investor Relations
Well, thank you so much for joining on this conference call. In case you have any further questions, our Investor Relations will be happy to answer all your questions or our CEO, Pramod or Arun Sharma, our CFO. Thank you. Happy Diwali.
Pramod Yadav — Director and Chief Executive Officer
Thank you so much, and happy Diwali.
Surajit Pal — Head, Investor Relations
Thank you and Happy Diwali to all of you. Thank you.
Operator
[Operator Closing Remarks]