Lupin Ltd (LUPIN) Q2 FY23 Earnings Concall Transcript

Lupin Ltd (NSE:LUPIN) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Vinita Gupta — Chief Executive Officer

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Analysts:

Neha Manpuria — BofA Merrill Lynch — Analyst

Saion Mukherjee — Nomura — Analyst

Prakash Agarwal — Axis Capital — Analyst

Kunal Randeria — Edelweiss — Analyst

Vinay Bafna — ICICI Securities — Analyst

Damayanti Kerai — HSBC — Analyst

Nilesh D Gupta — Managing Director

Sameer Baisiwala — Morgan Stanley — Analyst

Surya Patra — PhillipCapital — Analyst

Tushar Manudhane — Motilal Oswal — Analyst

Vivek Agrawal — Citi — Analyst

Krishnendu Saha — Quantum Asset Management Company — Analyst

Bharat Sheth — Quest Investment Advisor Pvt. Ltd – – Analyst

Presentation:

Operator

Welcome to Lupin Limited Q2 FY’23 Earnings Conference Call. [Operator Instructions] I now hand the conference over to management. Thank you, and over to you sir.

Vinita Gupta — Chief Executive Officer

Hi, everyone. This is Vinita Gupta here. A very warm welcome to our Q2 earnings call. I have with me our Managing Director, Nilesh as well as our CFO, Ramesh and members of our Finance and Investor Relations teams. Trust you all have seen our numbers for the quarter, and Ramesh will share a deeper analysis of our performance.

As you would have noted, our business has improved. Revenue growth was driven by the bounce-back of our U.S. business along with continued growth in our India business and also growth across all other geographies. On the margin front, we see the benefit of our optimization measures in addition to the revenue growth in the business. We are focused on sustaining this positive momentum for the rest of the year.

I would like to share some of the business highlights with you. On the U.S. front, we have continued to evolve our business with optimization of oral solids, driving growth of complex generics, respiratory franchise, in particular and executing on our new product launches. During the quarter, our respiratory franchise contribution increased, and we executed on a couple of new product launches in particular Suprep that will help growth in Q3 and Q4. It had some contribution in Q2, but since it was launched in September, more to come in Q3 and Q4. In addition, we closed our acquisition of the Sunovion brands, Brovana and Xopenex, that will enable us to enhance our respiratory position in the U.S., while contributing to revenue as well as profitability growth.

As we look at the quarters ahead, we have new product launches like Spiriva, Diazepam Gel, Nascobal nasal spray and Darunavir, multiple products where we have exclusivity or first-to-market position that will enable us to grow our U.S. business in a profitable manner. On Spiriva, while we had hoped to get an approval by now, we are close. We have responded to all the queries the agency has had raised and are working closely with the FDA to get approval by our eligible launch date. We will know more in the next few weeks, and we’ll share what we learn with all of you. In any case, we see this as a substantial contributor for fiscal year ’24 and will definitely have a significant runway based on the competitive position at present.

Switching to India, the largest part of our business, while our growth in the quarter and the first half has been below market, this is primarily due to the loss of Cidmus from our cardiovascular portfolio and genericization in the gliptins. But for the diabetes portfolio, our India business grew ahead of the market. Also, the diabetes franchise, while impacted in the near-term, we expect growth in the mid-to-long-term given the continued growth in diagnosis and increased affordability with generics coming to the market, and our own genetics.

In our top therapy areas, respiratory and cardiac growth was in-line with the market and therapeutic areas that we are trying to build like GI and women’s health, were well-above the market. We expect the second half of the year to be better than H1 from a growth perspective and are committed to get our India business back to double-digit growth in the quarters and years to come. All other markets continued to grow and perform as per expectations, in particular, we saw really strong local currency growth in Mexico and strong double-digit growth across Australia, Germany, Canada and UK, our other developed markets.

On the margin front, we have seen significant efforts that we have had underway in the last 12 to 18 months payoff, margins did improve, and we expect to see this benefit continue in the quarters to come despite inflationary pressures. A word on the compliance front. We have made progress this past year with the clearance of Goa and Somerset warning letters and successful inspection of Ankleshwar and Nagpur. However, the warning letter at Tarapur certainly was disappointing for us. We have clarified with the agency that it is only specific products that we have discontinued over the last couple of years from the site and we continue to manufacture a number of key products with a clear commitment to meet the FDA’s concerns on nitrosamine and cross-contamination that they highlighted towards during the inspection and in the warning letter.

Overall, we are moving in the right direction, as you can see from what we have delivered in the quarter and are really committed to grow both revenues and profitability in the quarters to come, while executing on our strategic plan.

With this, I will hand it over to Ramesh for a deeper analysis of our performance.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Thank you, Vinita.

Sales for Q2 FY’23 are INR4,091 crores as compared to INR3,604 crores in the previous quarter, a growth of about 13.5% quarter-on-quarter. Year-on year basis was about 2.2% as compared to Q2 FY’22 sales of INR4,003 crores. I would just go on to the margins a bit. FY’23 Q2 gross margins were 58.1% as compared to Q1 of 55.3%. This is mainly due to one-time shelf stock adjustment in the previous quarter, and in this quarter, we also had optimization of freight costs, both mix and rate and other write-offs and better product mix as well. There was, of course, some price erosion, which was well-contained though.

On the employee benefit bit, Q2 FY’23 is INR771 crores vis-a-vis INR778 crores in the previous quarter. Manufacturing expenses, very well-contained again, FY’23 was INR1,226 crores vis-a-vis INR1,191 crores in-line with the sales development itself. EBITDA, operating EBITDA excluding FX and other income is 10.6% in Q2 FY’23. Quarter-on-quarter growth in EBITDA is about 17 basis points, which is led by expansion of gross margins over Q1 and higher sales growth, which is again reported across various regions. R&D is flat as compared to Q2 FY’22 at 8.3%.

ETR, normalized ETR is expected to be between 31% and 34% as few subsidiaries like Eli, LOI, Digital and Healthcare continue to make losses. Operating working capital days improved about 140 days. In Q2, we saw 147 days in Q1 of FY’23, a reduction in our inventory despite delivering higher sales.

And with this, may I open the floor for discussions.

Questions and Answers:

Operator

[Operator Instructions] First question is from Neha.

Neha Manpuria — BofA Merrill Lynch — Analyst

Yeah, thanks for taking my question. Ramesh, on the operating cost in the quarter, last quarter we had indicated a fair bit of cost optimization efforts that you know we were expecting, have you seen gross margin improvement or operating cost, especially employee cost, other expenses, hasn’t seen the reduction, we had also indicated closure of facility. So, could you put some — give us some color there please?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah. Sure Neha. There are several initiatives that we have been carrying on, and actually we have been focusing on gross margins in terms of — apart from what we are doing on the topline front itself and as we book on alternate vendor facility – alternate vendor development in terms of routes to synthesis etc. for the gross margins. But margins bit in terms of the manpower itself, yes, we did go through the impact, and the bulk was planning at the factory level, there was a reduction, and you will find a lot more coming up in Q3 and Q4 as well. There is a shift between lines, essentially that’s the reason why you’re actually found it to be a little flattish when it comes to the manpower lines itself but believe me that there has been overall reduction which has come through.

On the SG&A front, there is a lot more sales promotion in-line with the overall sales development itself, and that’s across various regions including India. But despite all of that we have seen that the overall margins have actually gone up, and so that’s in-line with the development of the gross margins front as well as the evolution of the sales front.

Neha Manpuria — BofA Merrill Lynch — Analyst

So, are we sticking to the guidance that we gave last quarter of exit margins?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

It really depends on the product top-line profile really, so if we do get the kind of products that we were anticipating then you would look at an exit rate which is more in-line with our overall anticipation for the future.

Neha Manpuria — BofA Merrill Lynch — Analyst

Okay, which would be the number that we mentioned before in the last quarter?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, around that.

Neha Manpuria — BofA Merrill Lynch — Analyst

Okay. Okay. Got it. Vinita, on the U.S. business, given we had a lot of one-off and moving parts in the last quarter, if I were to look at the base business, one, have we seen — how is the pricing erosion been in the base? And have we been able to regain some of the lost share in existing products or was all of the improvement driven by new launches?

Vinita Gupta — Chief Executive Officer

No, so Neha, part of the improvement was just the fact that we had the one-time correction, right, in Q1 so, and we had a normalized quarter in Q2. In our in-line products, you know the bulk of the oral solid portfolio, we had a reasonable price erosion, not double-digit, so definitely price erosion was more. measured. On the respiratory franchise, actually we have seen a good improvement. It’s become a larger part of our business, so that contributed nicely to revenue growth as well as profitability growth. And the new product launches, we had 3three, and Suprep was material, but also Suprep was in the last, the end of the quarter in September so we got a little bit of contribution in Q2, we’ll have more to come in Q3 and Q4. So, majority of the revenue growth was the existing portfolio, both oral solids as well as respiratory.

Neha Manpuria — BofA Merrill Lynch — Analyst

Got it. And last question if I may, we added the two brands that we’ve acquired in the current quarter. Given we already have generic, the thought process of acquiring these brands?

Vinita Gupta — Chief Executive Officer

Yes, so one, it enhances our respiratory portfolio, we have added a Xopenex as a product in our respiratory offering, which certainly enhances our position in the respiratory front. On the Brovana front, we were already a partner, authorized generic partner, and we had a percentage, so we obviously have synergies there and have the end-to-end P&L Brovana on the front, which is attractive to us. So, we will continue to maximize the two products and look at ways and means of, one, stabilizing the revenues of Xopenex and potentially building synergies on both products given our manufacturing capability across both MDIs as well as res-fills.

Neha Manpuria — BofA Merrill Lynch — Analyst

Got it. Thank you so much.

Operator

Thank you. The next question is from Saion Mukherjee.

Saion Mukherjee — Nomura — Analyst

Yeah. Hi, this is Saion from Nomura. Vinita, just to carry-on on Xopenex and Brovana, can you share the size that you’re looking at for these two products? And you mentioned about stabilizing sales, so what is the dynamics on Xopenex here? And on Brovana, I understand brands still has around 13%, 14% market share, so is that what you’d be continuing selling? So, if you can give just some indication on the size? And also, the $75 million, how would you sort of amortize it? What’s the timeframe for that?

Vinita Gupta — Chief Executive Officer

Just taking that $75 million first, I mean the franchise is accretive in year-one, so we are very pleased to be able to transact at the level that we closed. You know, I can’t share product-specific details because as you know Brovana is part of our generic portfolio, the authorized generic is part of our generic portfolio. I mean, you can look at the IMS dollars of both products as well as the authorized generic, so it’s substantial from IMS dollars. But needless to say, the products have been accretive, will be accretive in the current fiscal year and provide synergies both in Brovana as well as obviously, incremental revenues and profitability of the residual brand, it gives us a residual brand a revenue line and potential synergies on our cost of goods going forward.

Saion Mukherjee — Nomura — Analyst

And when you say accretive, you are meaning EPS accretive, and that’s why I was asking how we amortize the $75 million?

Vinita Gupta — Chief Executive Officer

Yes, EPS accretive.

Saion Mukherjee — Nomura — Analyst

And you should be amortizing it over what period, the $75 million?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

So, so far as Brovana is concerned, it’s going to be a much lower period, and that it’s going to be more in terms of what we think is an appropriate period, but the accounting rules doesn’t provide for anything more than 10 years, so it’s going to be shorter than that.

Vinita Gupta — Chief Executive Officer

It’s much shorter than that too. Yeah.

Saion Mukherjee — Nomura — Analyst

Okay. Okay. And Vinita can you share like which one is a bigger franchise now, Xopenex or Brovana, I mean, I know you can’t share the exact revenue number? And in terms of dynamics, do you expect the competition Xopenex at some point or you expect it to be sort of a stable brand?

Vinita Gupta — Chief Executive Officer

Yeah, we expect it to be a stable brand. Between the two products, they are kind of equal, right now in terms of revenue, but Brovana obviously has got multiple generic competitors. So, we expect it to come down, while still having some residual revenues in the brand. While Xopenex, we see as a stable opportunity in the foreseeable future just given the scale of the product, the size of the product and the fact that one would have to do a clinical study to be able to get a generic version approved and alike.

Saion Mukherjee — Nomura — Analyst

Got it. Thank you. Thanks, and I’ll join back the queue.

Operator

Thank you. The next question is from Prakash Agarwal.

Prakash Agarwal — Axis Capital — Analyst

Hello. Am I audible?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yes.

Prakash Agarwal — Axis Capital — Analyst

Yeah. Good afternoon. Just a quick update on Spiriva, where are we? Last time you said you had a query on the products, so what is the timeframe, and have we replied and when are we expecting?

Vinita Gupta — Chief Executive Officer

Yeah, Prakash, so we have responded to the queries fully within October, and have filed also for priority review, which we are working with the agency. We’ll know in the next couple of weeks the status of our request but are working closely with the agency to get approval on eligible launch date later this fiscal year.

Prakash Agarwal — Axis Capital — Analyst

Okay. Okay. And eligible launch date is in Q3 or Q4, it was Q3, right?

Vinita Gupta — Chief Executive Officer

No, it was the second half, end of second half.

Prakash Agarwal — Axis Capital — Analyst

Okay. Okay. Understood. And just was checking, I mean how is the flu season, has it started, hearing that it can be a flu season this year, so are we hopeful of the Tamiflu we had in the past or that is now much genericized?

Vinita Gupta — Chief Executive Officer

Yeah, so the first time after a couple of years, we are seeing some impact of the flu season, so we’re seeing an uptick in anti-infectives as well as Tamiflu, a little bit in Q2, but we’re expecting a strong flu season to your all of the predictions in the U.S. I mean, they’re talking about a strong flu season, COVID as well as RSV, a combination of multiple issues. We’re also seeing the flu season impact on our purchase orders on the API front, on the cephalosporins. So, both the U.S. indicators as well as API forecast suggests that the flu season right now seems to be picking up.

Prakash Agarwal — Axis Capital — Analyst

Okay. Perfect. And lastly, you made the acquisition of these two brands, going forward, I mean, it was just opportunistic or that could be a strategy going forward and that too specifically in respiratory or it could be any therapy?

Vinita Gupta — Chief Executive Officer

Yeah, so it wasn’t opportunistic, it was actually strategic. We had told our team that we want to grow our respiratory franchise with established brands. We didn’t — in multiple opportunities in our pipeline programs, but didn’t want to get into dilutive assets, so we had looked at multiple opportunities, and really focused on this one to look at what we can do from a synergy perspective. Certainly, had synergies on Brovana, but as we looked at Xopenex as well, we really liked the product, we liked the product profile. It hasn’t been promoted in multiple years, so we will evaluate the potential of promoting the product with a small-scale investment, and also look at leveraging our manufacturing capability to improve the margin profile of the product, right now, it’s contract-manufactured and we’ll certainly continue the relationships in the next couple of years. But as we look at maximizing value from the opportunity, we’ll look at also bringing in synergies from a manufacturing capability.

Prakash Agarwal — Axis Capital — Analyst

Okay. Great. And lastly on the margin outlook, the margin outlook was around 15%, 16%, correct me if I’m wrong, and this is without the Spiriva opportunity exit rate of Q4?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

No. I would say that it really is a function of the kind of products that we bring, so it is, if we have Spiriva coming in fourth quarter, it will certainly have its bearing on the margin there. So, the guidance that I spoke about was essentially based again on Spiriva coming in.

Vinita Gupta — Chief Executive Officer

Yeah. So, I think it’s fair to say that you will see continued Improvement on margin quarter-after-quarter.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

That’s correct.

Vinita Gupta — Chief Executive Officer

But really to get to that 16% level plus, which we are working towards, we need material launches like Spiriva. And we have a good few products coming with Spiriva hopefully in Q4, and soon after that products like Darunavir, where we have exclusivity plus Nascobal nasal spray a little bit later in Q1 next year, Diazepam Gel, so we have a couple of new product approvals that we are chasing, hopefully in the next couple of months we’ll have a better idea of the launch timelines of each, and there is a very strong focus on trying to bring them to market at present. But as we launch these material products in particular products like Spiriva and Darunavir, we expect the margins to improve to that 16% plus level.

Prakash Agarwal — Axis Capital — Analyst

Okay. Thank you and all the best.

Operator

Thank you. The next question is from Kunal.

Kunal Randeria — Edelweiss — Analyst

Yeah. Thanks for taking my question. So, I think at some point we were expecting plant inspection related to Spiriva approval, is it still the case or we still don’t have clarity on that?

Vinita Gupta — Chief Executive Officer

We actually had record review, plant record review, we have also gone through an assessment on PK and PD satisfactorily, so we believe that we have given the agency everything that they’ve asked for. But again, it’s their prerogative to come and inspect if they wanted to. We’ll find out in the next couple of weeks where our priority review request stands, and that will give us a good idea, if there will be any plant inspection.

Kunal Randeria — Edelweiss — Analyst

Do we have any TAT date as of now?

Vinita Gupta — Chief Executive Officer

Well, we, like I said we just filed for a priority review, and we’ll have a TAT date in November for the request, in the next couple of weeks.

Kunal Randeria — Edelweiss — Analyst

So, you will get TAT date in November, if you have TAT?

Vinita Gupta — Chief Executive Officer

Yes.

Kunal Randeria — Edelweiss — Analyst

Okay. Okay. And the second question on the acquisition, I think our press release mentioned that we’ll also have whatever infrastructure is required for this product. Does it include any kind of manufacturing line or something?

Vinita Gupta — Chief Executive Officer

No, it’s just an asset acquisition. No manufacturing, we have the manufacturing capability.

Kunal Randeria — Edelweiss — Analyst

So, currently it is manufactured by someone else, you would bring it to our own plant, is it?

Vinita Gupta — Chief Executive Officer

Over time, some Brovana sooner than Xopenex, but we have opportunity to potentially bring it back in-house.

Kunal Randeria — Edelweiss — Analyst

Okay. And let’s say, one last question on the cost initiative, I think we were very sure that there will be INR20 crores savings in the employee cost line item in quarter two. So, what has changed? Why it has not materialized, or it has materialized and there is some cost inflation that is coming in the quarter two?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

It is certainly very well materialized, that is, of course, our savings there. But there has been a shift between lines, it shifted from impacts on power lines for certain incentives etc. to clear to the salesman, which is coming to the sales figure — sorry, employee figure.

Vinita Gupta — Chief Executive Officer

Employee figure.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, in India.

Vinita Gupta — Chief Executive Officer

Yeah, so there will be savings on the workforce planning that we did in the last quarter but offset by issued guidelines.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Issued guidelines.

Vinita Gupta — Chief Executive Officer

Yeah.

Kunal Randeria — Edelweiss — Analyst

Okay. And if I may ask just a last one, in terms of the FT, failure to supply penalty, what would be that number for this quarter?

Vinita Gupta — Chief Executive Officer

It was marginal actually. It come down significantly. Actually, there was a good amount of savings both in failure to supply penalties as well as freight cost as we mentioned as well.

Kunal Randeria — Edelweiss — Analyst

Okay. So, last quarter it was $4 million and this quarter is almost 0?

Vinita Gupta — Chief Executive Officer

It’s under $2 million.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, it’s marginal actually.

Kunal Randeria — Edelweiss — Analyst

Okay.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah.

Kunal Randeria — Edelweiss — Analyst

Thank you.

Operator

Thank you. The next question is from Vinay.

Vinay Bafna — ICICI Securities — Analyst

Hi, am I audible?

Operator

Yes.

Vinay Bafna — ICICI Securities — Analyst

Okay. Great. Hi, thanks, congrats on a great improvement and thanks for taking my question. Well, I’ve got just a couple of clarifications, for Darunavir, did you say Q1 FY’24?

Vinita Gupta — Chief Executive Officer

That’s right.

Vinay Bafna — ICICI Securities — Analyst

Okay. Just a couple of other product queries, any update on Dulera filing?

Vinita Gupta — Chief Executive Officer

Yeah, Dulera we had a CRL that we responded to the agency very recently.

Vinay Bafna — ICICI Securities — Analyst

Okay. So, do you expect to hear anything in the next 6 or 12 months?

Vinita Gupta — Chief Executive Officer

Yeah, we expect in the next couple of months to find out if the agency is satisfied with our response or we need to do more work on the product.

Vinay Bafna — ICICI Securities — Analyst

Okay. And so, where does this product generally move, and which you can have a final approval, any timelines for the launch?

Vinita Gupta — Chief Executive Officer

It doesn’t — I don’t know exactly when the launch stage is for that product. The near-term products as I mentioned are Spiriva, Darunavir, Diazepam and Nascobal, where we have exclusivity as well. But beyond that, products like Varenicline, will be material next year as well. And then injectable products, based on the inspection of our biotech plant, we would expect pegfilgrastim approval as soon as inspection of our Nagpur facility recently, we expect that Humegon to be approved and alike.

Vinay Bafna — ICICI Securities — Analyst

Thanks. Great. My final question to Ramesh, the tax-rate is running around 21% to 24%, it is so much higher, the corporate tax rates in India. So, how do you see this panning out over the next couple of years, and you have plan in place to bring it down?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, so, whilst, if you look at the standalone results, the absolute numbers in India and the percentage would be lower. It’s only the presence of in fact some loss making subsidiaries in various parts of is actually causing this number to deteriorate. And the first quarter, of course, there was this anomaly, because of lower sales in America caused by because the stock situation being a buzz. But we are very much conscious of this and for the full-year actually you would see it going down, and the fourth quarter, for example, it could be very much in-line with normal rates. In between, in the next 2 to 3 years we expect the tax rates to come down for sure, for sure in India, but we also expect profitability to come back to in a lot of other regions, so that could potentially bring down the overall effective tax rate for the company.

Vinay Bafna — ICICI Securities — Analyst

Thank you very much and best of luck.

Operator

Thank you. The next question is from Damayanti

Damayanti Kerai — HSBC — Analyst

Hello, am I audible?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yes.

Damayanti Kerai — HSBC — Analyst

Okay. Thanks. Ramesh, you have been mentioning about some cost initiative, results of which will be hopefully visible in coming quarters. Can you a bit elaborate like which are the areas where we are expecting significant cost benefits to come in, where you have been working for say the last few quarters?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

We have been working on a number of initiatives, and as I’ve said a few minutes ago, we have been working on actually on the direct cost also in terms of alternate vendor development, in terms of routes to synthesis. Apart from that, we have been working on optimizing the workforce at the factory level, addressing the footprint to reduce the overall idle time, we’re looking at the footprint to rationalization also, apart from the optimization of the workforce at the R&D level, and a host of other measures to the ramp-up the productivity of the sales force and alike. And apart from that there is, of course, freight, in terms of the mode of transportation to America. The FTS issues that we were facing in the past, then of course, the stock returns, so how do we actually make sure that the returns will also kind of brought down, the quantum of returns in America itself. So, all of this is actually moving in the right direction. There has been tremendous progress in this, and over the next you will see all of this certainly contribute to the EBITDA margin improvement that I’m speaking about.

Damayanti Kerai — HSBC — Analyst

So, say like Spiriva comes by end of this fiscal, and all these initiatives start yielding results. You’re hopeful that by next year, your margin should be definitely better than 16% or so, maybe like moving to high teens?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yes, that’s absolutely true.

Damayanti Kerai — HSBC — Analyst

Okay. And just a question on the marketing team in the U.S. so right now you do not have any team for promotion, right? And if required, you might build a small team for the acquisition which you did recently?

Vinita Gupta — Chief Executive Officer

Yeah, right now, we haven’t planned to build a team to promote the products. They haven’t been promoted for couple of years, so we expect to continue to deliver the revenues that we have planned without an investment, but we will assess if it makes sense to invest into sales promotion.

Damayanti Kerai — HSBC — Analyst

Okay. So, after Solosec team disintegration, right now you do not have any our specialty team in the U.S. right, if my understanding?

Vinita Gupta — Chief Executive Officer

We don’t have a specialty sales force. We promote Solosec through a partner, through Exeltis, and likewise have the option of promoting also Xopenex through a partner if we wanted to.

Damayanti Kerai — HSBC — Analyst

Okay. Good to hear that. My second question is on respiratory franchise, so obviously you have done very well in the Albuterol franchise. Can you talk a bit about your progress in Fostair, like what has been pick-up on the European market, if you can quantify any number here in terms of sales or how you have moved in?

Vinita Gupta — Chief Executive Officer

Yeah. So, it has ramped-up. It’s still, compared to the Albuterol contribution, it is relatively speaking very small given that the UK market itself is a fraction of the overall Fostair market, but our market-share has ramped-up to double-digit at this point and continues to ramp-up week-after-week. We expect to launch the product into other markets in the last quarter of the fiscal year based on our launch date agreement. So, we would expect to expand our position with Fostair beyond UK into other markets in the quarters to come, that will also help us really access larger part of the market. But the product continues to be a very good contributor to the UK market, the UK business grew significantly on a small base, primarily on the back of Fostair.

Damayanti Kerai — HSBC — Analyst

Okay. And my last question is, how do you see R&D moving from here on? And what are your priority segments?

Nilesh D Gupta — Managing Director

Yes, actually the R&D number is pretty stable, and we expect it to continue more or less at this level. Obviously, the high investment areas are areas like inhalation, injectables, then some biosimilars, and obviously a steady portfolio of the oral solids, ophthalmic kind of products as well. Over the period of last 2 years, we’ve obviously changed from focusing primarily on oral solids to these differentiated dosage forms and our intention would be to continue that. I think the budget is — the numbers are pretty well set as you’ve seen, I think last couple of years we basically stayed at this kind of number including the number that we reported this quarter as well. We feel that this is a really good number for us to be able to work with.

Damayanti Kerai — HSBC — Analyst

Okay. Thanks that’s helpful.

Operator

Thank you. The next question is from Sameer.

Sameer Baisiwala — Morgan Stanley — Analyst

All right. Thank you. A very good evening everyone. Ramesh, if I’m not wrong, I thought the exit EBITDA margin for fiscal ’23 you had earlier guided to 18%. I think they are very different numbers being spoken off in this call?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

It is going to be a function of larger products, Sameer, so it could be anywhere between 16% to 18% range, at the lowest it could be 16%, at the highest level it could be 18%, which would be the exit run-rate in the fourth quarter.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. That’s fine. And a follow-up to that is what’s the expectation for fiscal ’24 both on the top-end growth excluding Spiriva and margins including everything, if you can just help with that.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, so as I said, Spiriva is certainly going to be a very important addition to our overall portfolio, so the overall evolution on the margin front would certainly be dependent on that, whilst we make progress on various initiatives that we just spoke about, wherein the top-line moving is going to be extremely important.

Sameer Baisiwala — Morgan Stanley — Analyst

Yeah. So, Ramesh, the question is excluding Spiriva, what could be the top-line growth for fiscal ’24, I mean is it going to be mid-teens or any guidance on that?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

It is difficult to kind of estimate at this stage. There would be — because there are several moving parts in America including in fact the OSD business being what it is and so on. I would say that there is secular growth across various other geographies, but the one factor which is very difficult to kind of estimate is indeed America. We have seen in the past, you in the recent past at least that there has been a lot of surprises coming in, so Spiriva is going to be a very important factor, whilst we’re of course working on rationalizing our overall portfolio itself, to make sure that there is optimization on the costs associated with running our American business.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Sure. And just on Suprep, if my numbers correct, I mean is it at $30, $35 million kind of opportunity over 6-month period, and after that then it gets very competitive?

Vinita Gupta — Chief Executive Officer

Yeah, so, I’m going to stay away from a product-specific guidance. But it is a nice product. And right now, it looks like, we share the market of course with the brand. They preemptively launched an authorized generic, but we’ve got close to 50% share from customers that we have locked down with the product, the market share that we’ve got from a customers’ perspective. We also think that the exclusivity might be a little bit longer based on what we have learned, from a supply perspective we believe that some of our competitors might be delayed, and we might have the product, the run-rate a little bit longer than 6 months.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Great. And then final question with your permission, given that Spiriva so important anything on the supply-chain, different components., anything that that you think can make a difference or are you thinking it’s more or less streamlined?

Vinita Gupta — Chief Executive Officer

No, we have been working pretty much for the last couple of months on ensuring that we have adequate supply of everything that we need, whether it’s the capsules and the devices and all of it to ensure an effective launch. So no, relevant to launch mode from a supply perspective.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Great. Good luck. Thank you.

Operator

Thank you. The next question is from Kunal.

Kunal Randeria — Edelweiss — Analyst

Hi, good evening. Vinita, that just one clarification, on the Tarapur API warning letter. I think the warning letter states that you’re suspending production of drugs for the U.S. market. And I think you mentioned in the media that I think the supplies are continuing. So just there’s a bit of a confusion here, if you can just clarify that?

Vinita Gupta — Chief Executive Officer

Yeah, I’ll let Nilesh take the question.

Nilesh D Gupta — Managing Director

Yeah, so, we clarified to the FDA, basically there is a misunderstanding, this is what we had shared with FDA. There were certain products that we had suspended in the past. And the misunderstanding was that we are suspending supplies from the plant all together. So, we clarified, and we, you know, we have FDA’s acknowledgment on the clarification. We’ll obviously continue supplying multiple products, many products, Tarapur is pretty important in the U.S. scheme of things, and we also don’t anticipate any disruption of supply from that facility.

Kunal Randeria — Edelweiss — Analyst

So, of your outstanding filings, how dependent could you be on Tarapur?

Nilesh D Gupta — Managing Director

Nothing really. There’s no meaningful pending approval from Tarapur.

Kunal Randeria — Edelweiss — Analyst

Okay. Got it. And second question is on again Spiriva. Now, I think the Spiriva prescriptions I believe have been falling over the years, and after the introduction of Respimat I think they’ve gone down even further, because I think Respimat has taken the 50% or so of the market. So, just wondering what’s the covered market that you are actually targeting, would it be around $500 million and maybe you know you’re aspiring for 20% 22% kind of market share?

Vinita Gupta — Chief Executive Officer

So, I think you can take a look at the IMS revenues, and we target the entire market when we look at the brand pricing and what price we launch at. When you look at the net sales after the rebates for a brand, that’s more relevant for the brand than it is for generic. So, look, I mean the IMS revenues are still $1 billion or close to $1 billion-dollar-product, it’s a material product where we expect to be sole generic with maybe an authorized generic in the near-term future, we will see what happens when the product goes generic. We have seen in cases like this where brand has shifted the franchise to a new dosage form that sometimes a low-price product is able to take some of the share back, so we’ll wait to see that. But it continues to be a sizable opportunity for us in the next couple of years.

Kunal Randeria — Edelweiss — Analyst

Got it. And if I can squeeze in just one more. On the biosimilar front, I think you have a couple of products in the U.S. market, pegfilgrastim and ranibizumab, which is still under I think clinical trials. Since you — I mean, the market might be set-up by the time you enter, just wondering how we should sort of look at these opportunities?

Vinita Gupta — Chief Executive Officer

Yeah so, ranibizumab is of course in development and pegfilgrastim, the PFS, is what we were inspected for by the FDA in the last couple of weeks, so we’re actively looking at ways and means of leveraging that product once we get approved in the marketplace, whether it is through institutional sales force or through a partner, we have both options, and we are actively looking at both opportunities based on, again, the investment in commercial infrastructure versus the upside.

Kunal Randeria — Edelweiss — Analyst

So, you still think it could be meaningful an opportunity for you, because price erosion has been a very steep in biosimilars, in product like pegfilgrastim and the units?

Vinita Gupta — Chief Executive Officer

Yes, we’ll be tracking the pricing very closely, obviously, both on pegfilgrastim, ranibizumab as well as other products and as the market uptake has improved, competitive intensity has increased, so we’ll certainly see significant price erosion. That’s why we are weighing options, like I said, we have options of both partnering or leveraging our institutional infrastructure that we will have in-place for our injectables to be able to build and gain market-share with the products. So, it’s a different situation that pegfilgrastim and ranibizumab, ranibizumab is few years away, pegfilgrastim is in the next six to 12 months, so also, the launch of the next product after pegfilgrastim to determine what makes sense for us.

Kunal Randeria — Edelweiss — Analyst

Got it. Thank you, and all the best.

Vinita Gupta — Chief Executive Officer

Thank you.

Operator

Thank you. Next question is from Surya.

Surya Patra — PhillipCapital — Analyst

Yeah. Thank you for this opportunity. First question is on the R&D spend side, so you had indicated about hiving of your NCE research and hence to some extent you’re losing R&D spend on the basic research front. Any update on that?

Nilesh D Gupta — Managing Director

Yeah, so, we’ve been trying of course, so in essence we really wanted to move from you know — so, we’ve been looking at multiple options there. I think the first option was to spin-out oncology all together, transition the entire engine into an engine that produces oncology assets. It’s obviously been a tough financial market at this time is and so we decided to focus primarily on the development assets that we have. We have 5 development assets, pretty much all in the oncology space. Those are the ones that we’re taking ahead, and in the meanwhile, we’ve scaled down the NCE team. So, we’ve reduced the burn very significantly and the primary burn going-forward will be the investment into the clinical of these of these 5 assets.

Surya Patra — PhillipCapital — Analyst

Okay. But that will not have any meaningful spike in the overall R&D spend then?

Nilesh D Gupta — Managing Director

No. So, we see a reduction right now, first of all, because the last quarter it was actually there in the numbers, so in Q3-Q4 we will see a reduction in the R&D line on account of that, small, but it will happen. We don’t see a material increase, so, I don’t think we’re going to get into a deep global clinical development on on these yet, so in any case these are really Phase 1 assets, so they will go through that process, they will go through certain clinical trials before meaningful investment will come up.

Surya Patra — PhillipCapital — Analyst

So, that is it. And second, on the diagnostic investment, so, we have not spoken much about this diagnostic foray, but I think we have already created a kind of base in that business space. So, could you share that, okay, what is the kind of cost that we are currently getting on that side, and to what extent the margins are sustaining because of that, and then do you think that we…

Nilesh D Gupta — Managing Director

Yeah, so, the business is small right now and that’s the reason why we’ve not been talking about it. We said we’ll let it grow to critical mass before we really talk about it. The investment is also not heavy, and it’s already fully baked into the numbers, we don’t see clearly an increase in the burn that will happen than what is already captured in the numbers. We’ll really let the business grow for the next 1 year, 1.5 year before we talk about it. So, it’s performing well-ahead of our expectations, well-ahead of their own business plan as well. But I think we need to let it grow for some more time before we really start talking about it.

Surya Patra — PhillipCapital — Analyst

Sure. Just one more question on the let’s say the India business which has been kind of let’s say sub-par in terms of growth, that is one. And the emerging market and the RoW market and the Europe and all those are kind of doing relatively better in terms of growth. So, on this market how do you see that, okay when you are experiencing there is a profitable progress for your company as a whole, the role of these markets and your aspirations in these markets and your strategy, so, in what manner these markets are going to contribute to your profitable progress are underpinned?

Vinita Gupta — Chief Executive Officer

So, I think we talked a little bit about it, but when you look at our other emerging markets, it’s roughly 11% of our revenues, you look at the other developed markets, roughly 10% of our revenues, both growing extremely well, the emerging markets, whether it’s Latin America, South Africa, Philippines grow double-digit, and it’s a profitable business at EBITDA margin well-above the company average, and we continue to drive growth in the emerging markets, look at opportunities, opportunistically again, look at what we can help grow them faster. But are looking to find a base of these growing the emerging markets, are the emerging markets do lot of the entire pie. Likewise, the developed markets are roughly 10% of our revenues, and that’s Canada, Australia and Europe, out of which Australia is the largest now, and have done extremely well. I think that region probably was the fastest growth part of our business in this first quarter. And one because we had the integration of Southern Cross in Australia.

Two, we had products like Fostair grow in the UK business and alike and our Canadian, German business also has performed pretty well. I mean, the developed markets, I think really have really good growth drivers that have a synergy with our U.S. market, so when you look at the inhalation pipeline, when you look at the complex injectables pipeline, when you look at our biosimilars pipeline, there is significant potential in all developed markets, so our inhalation plans are global and especially for the developed markets it’s material opportunity, likewise the injectables and biosimilars. So, we expect the other developed markets to grow very nicely in the years to come as we evolve our pipeline and bring these complex platforms effectively to market.

Nilesh D Gupta — Managing Director

And if I can just add on India, that is obviously our largest market at this point of time, and we’re very aggressive about our growth prospects in India, we’re substantially adding to the sales force, at this point in time, we are obviously launching multiple new products and new divisions as well. So, that double down on India will continue.

Yeah. Surya, you might be on mute.

Surya Patra — PhillipCapital — Analyst

Sorry. On ENBREL, if you can tell us whether it has a size of $10-million-odd kind of size or it is present at, some sense on that would be huge?

Vinita Gupta — Chief Executive Officer

Yeah, it’s well beyond the $10 million-plus size.

Surya Patra — PhillipCapital — Analyst

Okay. Yeah. Thank you.

Operator

Thank you. The next question is from Tushar.

Tushar Manudhane — Motilal Oswal — Analyst

Yeah, thanks for the opportunity. Just on Xopenex, if you could just help understand the kind of market share this would be having in levalbuterol as a molecule?

Vinita Gupta — Chief Executive Officer

It is all of 100% of the levalbuterol market. Xopenex is levalbuterol.

Tushar Manudhane — Motilal Oswal — Analyst

Okay. Okay. Secondly, on the Spiriva like any particular reason that this after addressing the queries that is again refiled as a priority product, refiling, I presume this would have already done earlier and that would have what triggered inspections and the other regulatory actions where they use to?

Vinita Gupta — Chief Executive Officer

Yeah, whenever you file a response to a CRL to get priority review, you have to file for priority review.

Tushar Manudhane — Motilal Oswal — Analyst

Okay. I thought it would have been more from the U.S. FDA side to determine whether the product will be taken on the priority basis or not, so that is the question?

Vinita Gupta — Chief Executive Officer

No. I mean you have to file with a request, and then they respond.

Tushar Manudhane — Motilal Oswal — Analyst

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

Operator

Thank you. The next question is from the Vivek.

Vivek Agrawal — Citi — Analyst

Yeah, my question is on Darunavir, can you please shed some light on the product, because there are multiple forms, tablet, perpetual, etc. so what exactly we’ll be launching? And will you be having a full exclusivity on this product or is it going to be shared with some others also? Thank you.

Vinita Gupta — Chief Executive Officer

Yes, so, it’s a material product, it’s a tablet dosage form that we will be launching, and we have exclusivity. I believe we have assumed that there’ll be an authorized generic in the marketplace, but needless to say it’s a material opportunity.

Vivek Agrawal — Citi — Analyst

But would you like to highlight what is the addressable market by revenue launching?

Vinita Gupta — Chief Executive Officer

I think it’s around $300 million, if I am not mistaken.

Vivek Agrawal — Citi — Analyst

Okay. Thank you. The second question is on the respiratory pipeline as well as some of the complex injectable products. Can you talk a bit more there, are these products in terms of planning, how long for example, these products are away from filing etc.? Thank you.

Vinita Gupta — Chief Executive Officer

Yeah, so, we have multiple products in the pipeline on the respiratory front on the MDIs, DPIs and soft-mist inhaler. At the forefront, will be products like the DPIs with Ellipta franchise and the soft-mist inhaler the Respimat franchise, and we are in different stages of development in some case pilot PK studies and in other cases earlier-stage. But I would expect that we will start filing the DPI and SMI products in the next, I think, you’d see one filing in the next year and then couple of more the year after. We also have a few MDI products that we are pursuing, and you will see those also will be filed in the next couple of years. So, say a number of these we have nine or 10 products in the pipeline that are all in active development to be filed in the next 2 to 3 years.

Vivek Agrawal — Citi — Analyst

And on some of the Daco products that you’re developing, where are these products in terms of filing?

Vinita Gupta — Chief Executive Officer

Yeah, so we made significant progress actually on the Daco front with the first one Risperdal Consta out of Netherlands platform facility. We got a positive endpoint study, PD study that we completed successfully earlier this year in the last couple of months and are expecting to file that this year, end of this fiscal year.

Vivek Agrawal — Citi — Analyst

That is helpful. And the last question if I can please. India basically haven’t been impacted because of significant competition in some of the products, which are in diabetes, how we see the growth next year, is it possible to grow in double-digits, any color would be helpful.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yeah, we should be back to the double-digit growth next year, so I think diabetes will still continue to be suppressed even next year, but on the back of growth on the other chronic areas like respiratory, on the cardiac segment itself even other segments like GI and alike, we certainly would get back to double-digit growth.

Vivek Agrawal — Citi — Analyst

Thanks. That all from side.

Operator

Thank you. The next question is from Krishnendu.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Krishnendu, I think you’re on mute.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Hello, can you hear me?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yes, go ahead.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Hello. Hello.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Go ahead.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Hello, can you hear me?

Vinita Gupta — Chief Executive Officer

Yes, we can hear you.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Hello.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Can we move on to the next one? Yeah.

Operator

Okay. The next question is from Bharat.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

Yeah. Hi, thanks for the opportunity and good evening, everyone. So, I just wanted to understand partly on the cost containment measures, you have last quarter we outlined that we’re going to see around INR500 crores to INR700 crores, what you’re saying is, however whatever you have detailed out in terms of the things which we are looking out to contain the cost, it seems to add-up to save around INR500 crores INR700 crores, so what is the exact reason, because just changing the vendor or something will not lead to a INR500 crores of savings, so what exactly we are doing to do to achieve that number?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

The savings are across various buckets, and also there is a portion of it is actually going into the gross margins also because the various initiatives that we have taken. So, basically, actually I was outlining in fact our other cost measures on below that line and we spoke about several things including idle time, post-planning, we spoke about freight, we spoke about stock returns, FTS and alike, actual all of those have actually been — we have been going through that over the last several months, so to speak, some have actually start flowing into the various lines and there’ll be more to come in the days to come as well, for sure. And there have been some offsets, essentially as I was saying, while the workforce planning, for example, there has been a reduction on the on the salaries, the manpower cost, there has been shifts from potentially from some other lines which are cost that doesn’t actually real what kind of savings that we have been able to bring about. But as I showed that the overall target is very much within our reach, and we believe that it will come out when we actually all of this will actually pave the way for potentially the optimization that we spoke about.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

So, in your assessment how much we have already achieved, and by when we can achieve this exact INR500 crores to INR700 crores, again is it something which will be achieved towards the end of next year or how it is?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

So, we went about wanting to achieve close to about INR750-odd-crores and by the end of this fiscal, we think close to about INR400 odd crores would be achieved.

Nilesh D Gupta — Managing Director

But Ramesh, I think the point that you’re making is that are inflationary price increases, there are some price reductions that happened, obviously some of the delivery that’s happening right now, and the numbers is happening because of that optimization, but a good part of that gets eaten away by inflationary measures as well.

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

On the gross margins front for sure and other parts as well, yeah.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

Right. And Nilesh, last quarter actually you mentioned that we will be clocking double-digit margin irrespective of the new launches, so how do you see that comment even out for us?

Nilesh D Gupta — Managing Director

Yeah, unfortunately it didn’t work out that way, right, so we very clearly thought that we will get that bounce-back in both the cardiac space and the diabetes space. Cardiac has improved a little bit, I think pretty much back to 10%-odd, and it continues basically at 2 percentage points growth for us, so.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

Actually, I was asking from a margin perspective.

Nilesh D Gupta — Managing Director

I think we’ve said this many times over, I think for getting back to double-digit margin, we’re first of all is already there, we’re going to have a sequential increase in the in the quarters on the margin as well. To get back to that 18% to 20% certainly, we see that happening next year, but we see it in the back of the new launches, and we at least see three interesting products that we’ll be launching in the U.S. in the next year. So, obviously, next year we get back to that 18%, 20% and a number and we are hoping that it happens in Q1. But if not in Q1, and I think likely at this point in time Q2 onwards we should be at a significantly higher margin numbers.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

I understand. So, I just wanted to understand, without new launches, can we go back to margins like 12% to 13%-odd or it will be all driven by the new launches, so just wanted to understand.

Nilesh D Gupta — Managing Director

So, I think when we talk about sequentially going into Q3 and Q4, we’ll get to those kinds of numbers without the new launches.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

That’s great. And on the part of India expansion, so what sort of sales force expansion which we are doing, so how many sales force we have and how many we are adding?

Nilesh D Gupta — Managing Director

So, we have about 6,000 representatives right now, about 7,200 people in all, and this year we will add another 850 people, 850 representatives by the end-of-the fiscal.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

And what sort of cost escalation that will lead to overall?

Nilesh D Gupta — Managing Director

I think it’s baked into the numbers that we have planned. I don’t have the number off-hand, because basically it’s really getting those people ready for the next fiscal, we win, in the last two years, we’ve obviously not added much of to the representatives, in the top 10 companies we’re possibly the second smallest in terms of sales force size, so I think there’s significant room for expansion that we see, so there’ll be at least 4 more division that we’ll be launching with this new sales force addition.

Vinita Gupta — Chief Executive Officer

So, it’s fair to say that we will continue to improve our margins in the next two quarters despite this investment and we believe this investment is material for us to get the India business back to the double-digit growth.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

Right. And before I go back to the queue, just wanted to clarify one thing, when we said that we are going to get back to 12%, 13% margin in the third quarter and fourth quarters, there we are including Suprep, right?

Vinita Gupta — Chief Executive Officer

Yes, we are.

Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst

Okay. Thanks.

Nilesh D Gupta — Managing Director

I think we’re out of time, maybe one last question.

Operator

Yes. The last question is from Krishnendu.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Can you hear me?

Vinita Gupta — Chief Executive Officer

Yes, we can.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Yeah, sorry for that. Just a couple of understanding, the flu piece based on the U.S. it’s better than average for the last whatever historically, just trying if you can give us a flavor as to how it would look like in the past on the historic business, how much it could add in the coming say year or so, and how long does it last, this is one. Number two, I believe 20% to 25% of our Indian revenue on licensing business so how much of it towards comfort repricing or re-bidding like we lost Cigna to Dr Reddy’s. If you can let us know that. And Dulera inhaler which you just readied for, just to clarify how big is the market in these situations?

Vinita Gupta — Chief Executive Officer

Yeah, so, the first question on the flu season, it’s hard to predict given the 3 years we have had no flu season, but fair to say that we have started to see some pickup both in the U.S. as well as what we’re hearing from our team on the API side, they’re seeing the cephalosporin business pickup. It’s hard to really put a scale around it, but it’s fair to say that we should be able to do better than the past couple of years. And this season will really establish what it looks like going-forward. Usually, the flu season lasts from October onwards till April-May, so we would expect, again it varies from season to season, so we’ll see where we end-up, but we’re looking-forward to a strong flu season in serving patients in a strong flu season.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Is that number baked-in when we speak about margins on the top-line in the U.S. is that number we take into account or we doing as just usual we take in the last 2 years figures?

Vinita Gupta — Chief Executive Officer

Yes. Yes, we have.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay.

Vinita Gupta — Chief Executive Officer

A lot of sickness and in-license product…

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

It is mainly it is 25% it does not rose actually 16% at this stage, you will see it progressively coming down too much lower numbers, because there is going to be loss of exclusivity coming up over the next couple of years also.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. And so, with the four divisions we will launch into more, we take care of the fall which would happen in the coming years?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

Yes, and also, we expected back the growth from our newer products that you’re speaking about as well as in-license products, I’m sorry the in-line portfolio to kind of take care of that.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. I see. And if you could go to, as we try to push even harder for…

Vinita Gupta — Chief Executive Officer

Because of Dulera the market size is $200 million or thereabout.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. So, if you can just, Spiriva, Dulera and what do you call, and the JV drug which is going to get launched, and that did launch?

Vinita Gupta — Chief Executive Officer

Yeah, we talked about Spiriva, and Darunavir.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Is that launched, sorry I didn’t hear that part, sorry, if I’m repeating the question.

Vinita Gupta — Chief Executive Officer

Yeah, it’s going to be Q1 of next fiscal is when we expect Darunavir to launch, we’ve already got approval and we’ve first-to-file on the tablet dosage form, so expect to launch it in time. We are getting launched-ready for that product as well and then we have Diazepam Gel, which is a smaller product, but again, a significant amount of complexity, so we expect that to be a nice launch for us in the next 3 to 6 months, and then we Nascobal where we are first-to-file out of Somerset that we hope to launch in either the first or the second quarter of next fiscal year.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. And so, Somerset is still on with us, so we will keep the plant running and we keep it working just the way it was in the past.

Vinita Gupta — Chief Executive Officer

Actually, it is a very efficient plant now. I mean, we had a lot of failure to supply out of there as well because of the compliance issues. Now the compliance issues are behind us, the team there has done a great job in getting the service levels up to the 98% plus the same as India. That is what has really got our FTS a failure to supply penalties down significantly that we talked about in the last hour, and so, the efficiency from the plant has gone up significantly, and the new product launches will just add to what the plant can contribute to the business.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. And sorry I’ll just ask one last question, on Tarapur, the APIU plant, it doesn’t have anything to do with the growth of the Goa plant, when do we see that coming through or how do we tie those things up?

Ramesh Swaminathan — Executive Director, Global CFO, Head-Corporate Affairs, Global Sourcing, Contract Manufacturing

They are unconnected. So, in Goa we’ve already cleared the 483 and warning letter issues, right, and in Tarapur, it’s an API plant with no meaningful pending approvals. And like we have already clarified, the supply continuity remains as is.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Okay. So, Goa plant is not very much dependent — sorry, this is my mistake. Thank you for it. Thank you and best of luck.

Vinita Gupta — Chief Executive Officer

Okay. So, with that, we will wrap it up. Hope you’ve got answers to all your questions. As you can see, we are committed to deliver continuous improvement on our business as we execute on our strategic plan. This quarter certainly was a turnaround for us, and we will continue to build upon this, build on the momentum in the next 2 quarters, and there were a number of questions around cost-improvement measures, some of we have got significant benefit and we’ll continue to do so in the quarters to come, and some of it will show in the margin improvements, some will go to offset the inflationary pressures that we see. But needless to say, as we get into a period of getting approvals for some of our bigger products like Spiriva and Darunavir and the like, we expect to get to a very strong double-digit margin, 16%, 18% plus in the next fiscal year. So, we’ll look forward to connecting with you again look-forward to sharing updates on our business in the next couple of months. Thank you.

Operator

[Operator Closing Remarks]