Lupin Ltd. (LUPIN) Q4 FY22 Earnings Concall Transcript

Lupin Ltd. (NSE: LUPIN) Q4 FY22 Earnings Concall dated May 19, 2022

Corporate Participants:

Ramesh Swaminathan — Executive Director, Global CFO and Head

Nilesh D Gupta — Managing Director

Vinita Gupta — Chief Executive Officer

Analysts:

Pritesh Vora — Mission Street India — Analyst

Kunal Randeria — Edelweiss — Analyst

Prakash Sharma — Axis — Analyst

Shinya — Nomura — Analyst

Krishnendu Saha — Quantum Asset Management Company — Analyst

Kunal Dhamija — Clifford Chance — Analyst

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

Nithya Balasubramanian — Bernstein — Analyst 

Presentation:

Ramesh Swaminathan — Executive Director, Global CFO and Head

Investors from Lupin. So I was really looking forward to meeting with you today. I hope you and your relatives, your family have been keeping safe during this horrendous times. The last couple of years have been pretty bad for a lot of families. I hope you have been doing good. Of course, I have been in touch with people. [Technical Issues] about that performance, you’ve been raising questions to me from time to time. And, of course, we had our regular investor calls in the like every quarter. And you have always supported us, guided us, assisted us and we should be looking at things so on. Thank you for that.

Again, coming back to the current year performance, happy to take you through our quarterly performance, as well as our results for the year itself. It’s a smaller crowd out here, but I’m sure there are lot of people who are on the call itself, who would potentially be asking us questions. Because as per the SEBI regulation, I think we need to be live for the rest of the community to interact with us. So I really would be looking forward to questions from those people who are online, so to speak. And happy to take this [Technical Issues] again. Shall we begin with the presentation?

So this is our strategic vision.

Nilesh D Gupta — Managing Director

It’s not come up there yet. On screen. Yeah.

Operator

Next slide please. Go on to the slide after that. This is our strategic vision for us as a company, a global pharma company focused on core growth platforms. As you recognize, we have done extremely well in India over time. And as I listened to a lot of you, you have also been telling me that you should really be focusing on India. And just about a few minutes ago, it was very surprising because a lot of people are telling me, as I was listening to them, that India is the — your valuation has been captured in India, per se, and the rest of the business has not actually been valued and to that extent it is surprising in some ways. I’m sure, they’re are going to be a lot of questions about some of the parts and how we could take this forward. So they were talking to me about that. This meeting is currently being recorded.

Ramesh Swaminathan — Executive Director, Global CFO and Head

And so we are looking at India very, very seriously, both organic and inorganic growth. And as you recognize, we’ve done a stupendous job out here. And we just acquired recently Anglo-French, but that’s the way forward for a host of the years to come as well. As of the a lot of other pharma companies, we are also operating assets in on — and focusing on a lot of number of platforms, a lot of complex, really complex ones of that. I spoke about it a few minutes ago, also by the fact that we are concentrating so much on complex injectables, on our inhalations portfolio and looking at biosimilars. And the fact that OSD business is not going to be the focus area and that’s resonated with you as well.

From a global perspective, we believe that we need to be absolutely focused on efficiency. There a number of initiatives that we are taking to make ourselves a lot more efficient because there has been a tremendous inefficiencies that have crept into the system over the last few years. We are conscious of that and we’re taking all steps to kind of work on that. Because we are also building operating leverage in our capex spends as well as on R&D. Of course, the overall focus would be to really focus on product development cycles for development and to kind of compress that so that we are delivering top notch launches from time to time, so that actually helps in leveraging our topline. Continuous improvement culture, ascentian culture, if you mean and, of course, be global quality class, all of these, of course, are initiatives that we’ve taken and we are really going to focus on.

You’d like to add to that that, Vinita Gupta?

Vinita Gupta — chief executive officer

No, I think it’s fair to say compared to what you saw us do in the past, we have simplified our strategic focus quite a bit. When we used to have specialty in year. If you’ve seen in the last year we pretty much taken the specialty burn off the organization. Likewise, we have efforts underway to take in areas like new chemical entity, where again, we have established tremendous capability, but it does not really give us operating leverage in our current business. Does not get valued in our current business to finding the right path for those platforms. Our all efforts that are underway to really focus on these three core pillars of growth for the organization, which is doubling down in India, delivering on our complex generic platforms and globalizing our complex generic platforms.

When you look at our platforms like inhalation products like biosimilars, like complex injectables, unlike the oral solid dosage business, these are global platforms. With investment that we’re making both in the pipeline as well as [Technical Issues] abilities, capacities, it may possible ourselves. So that we can, from an economic standpoint, get to the end-to-end benefit.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Thank you, Vinita. So this is about the industry trends. You also noticed that price erosion seems to have become endemic and so far as the American business is concerned. [Speech Overlap]

Nilesh D Gupta — Managing Director

I think wee need to tell…

Ramesh Swaminathan — Executive Director, Global CFO and Head

Sorry, we need to, yeah. [Speech Overlap] Sorry about that. Yeah. So, price erosion is pretty endemic when it comes to the American business and we spoke about it just about a few minutes ago. In January, in particular, for example, we saw a 7% decline. Whilst it accelerated to 16%, you can’t obviously take one brush and going to paint everything — broad-brush across the entire landscape. But the fact is it is really going to be product-specific portfolio-specific, but it is there to stay. The second thing that seems to be confronting everybody is secular inflation and inflationary trends across all sectors, across the pharmaceutical sector has been. This obviously puts pressure on our overall margins. And that, obviously, had been [Technical Issues] for us again. There is tremendous need for looking at low intensity competitive launches. And Vinita and I just spoke about the fact that we’re going to focus on in fact inhalations portfolio, the complex injectables, the biosimilars and possibly even on the OSD’s niche launches not as actually capture what do you think it’s going to be value for our customers as well as for our investors.

India business will remain strong. It’s always been our focus for several years, and you’ve seen us grow in strength up from time to time. It will certainly be extremely important for us going forward as well. So it will be — it will encompass both organic, as well as inorganic strokes. And the good thing about getting out of COVID is the fact that the FDA would begin worldwide inspections and that could — it could be a double-edge sword. It could work in our favor because we have a pretty decent pipeline stuck without approvals. But at the same time — but go up, for sure, but, and we just finished our report but there’s more to come. But it could also turn to be a double-edged sword in that, it could also intensified competition, so to speak.

This is where Lupin is today, from a market cap perspective is about — next slide please. It’s about $4 billion. Market — and the revenue base is about $2.2 billion. EBITDA, about $311 million. People are very familiar with this. Globally we are the 10th largest generic company. We were higher up the league tables a few years ago and we are sure we will get back there. The 6th largest Indian pharma company, the 3rd largest in America from a prescription perspective. And we are present in several geographies from USA, Mexico, Brazil, India and we’re present in Australia, Philippines, South Africa and a host of other places. Our overall manufacturing footprint is about, we got about 15 sites, spread across India and, of course, we have plants in America, in Brazil and Mexico. And we have 7 R&D sites, again across various parts of the globe.

Next slide please. This is a snapshot of what we actually how we Q4 actually was for us. As you can see, if you look at our performance in the last four quarters, it generally has been ranging between INR3,800 crores and INR4,000 crores. Q4, there was actually a decline [Technical Issues] Q3. This is led by, in fact, a slight reduction in India and of course, reduction in America. The reasons for decline in India is because Q4, in a general sense, is always the weakest quarter for India. You know that traditionally Q1 and Q2 are very strong for India and Q3 and Q4 are a little tepid in comparison. This time around America, so we — number of people raised this question to me in the morning, why have we reached less than $200 million, because that’s what we have guided for at the beginning of this year in America. But the fact is there has been price decline. This quarter we were also stuck with in fact with some one-times, so in terms of Losartan, we had our [Speech Overlap] you are not able to sell and obviously, the turnover, also the fact that they were returns associated with the impact of the recall itself. So together and there was price decline across a number of products because we ran out of exclusivity status also Levothyroxine others, there were some — there was price reduction. So to that extent — you would also appreciate that the acute therapy range that we have in our portfolio, unfortunately, the last two to three years, we have not been able to make head wind in that because acute therapy has not been selling in America or in fact, in most parts of the globe. Then, of course, we talked about other therapy areas including other SBUs, including API. We still have an issue in terms of acute therapy products [Indecipherable] products. So all of this has taken a toll. And to that extent our Q4 has remained a little suppressed, so to speak.

And if you look at the EBITDA margins, it has also come down. There is, of course, the INR127 crore impact only because of the fact that our sales were lower, but apart from that, there was, of course, the impact of several one-times. This is including the Losartan recall and costs associated with that. As you might also know we lost our litigation for Solosec in terms of royalties to be paid to the vendor and there were associated litigation costs and the like. So all of this actually took a toll and also the one-time that actually comes into overall expenditure base. Apart from that, there was a swing from the last quarter because last quarter there were settlement incomes and those did not recur in this quarter, specifically the swing is a little more market — marked in terms of, it’s been a mixed swings in the previous quarter. The last cost 13.7% on a normalized basis, this time it came down. [Technical Issues] this is the safe as well as the one-times we took plus, of course, the [Indecipherable] But there were other developments [Technical Issues] which are very noteworthy and important. We acquired Anglo-French because actually consummated in the first week of April. An important development of the same. We also expanded — we had a bolt-on acquisition in Australia, a very important one at that for us. We announced partnerships, strategic partnerships in China. Then we’ve got a supply arrangements in China again, and for a very important products on BGCS and so on. You see the FDA approval for a number of products, three products of that. And, of course, we had our inspection of our Tarapur facility last quarter.

Vinita Gupta — chief executive officer

Next slide.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Next slide please. Vinita, this is R&D. Would you like to speak about America?

Vinita Gupta — chief executive officer

Sure, sure. So I think most of this is known, but if you look at our position in the US suddenly have a very strong market position, with 44 products we are market leaders. Very heartening development with Albuterol. All of you know that we entered a little bit later than our competitors up years in Albuterol, but have now got 22.6%, almost 23% market share. So we’ve ramped up very nicely. And when I look at Albuterol, Brovana, now inhalation products are over 25% of the company’s the US business revenues, bigger part of the US profitability. So the transition into complex generics suddenly in inhalation [Technical Issues] is happening. We need to accelerate it. Which we are looking forward to in fiscal year ’23 as well as ’24, we have material launches into the US. We have a good number of our portfolio around 60 products in the market, 113 products, we are in top three in terms of market share. And a good number of products that are pending. So from a pipeline perspective actually when we compared it with all of our peers, we have one of the richest pipelines, both in terms of number of vendors that are pending, as well as the complex products that we have [Technical Issues] within the pipeline that based on the conversation with some of you that market pretty much reflects only the India business. We have tremendous upside here with the pipeline that we have built on the complex generic front for the US.

On the revenue front, as Ramesh mentioned, we had softness in Q4, in particular, due to a couple of products, Albuterol primarily phasing. We see Albuterol really again the winter months is the volume is higher and then tapers down, so we saw some of that. Plus we had additional competition in Brovana. So we saw the impact of that. And we had the recall of Losartan. Those were the three material reasons why revenues were down in Q4. And we launched a couple of products. We launched products small though in the scheme of things. Our material products [Technical Issues] we expect [Technical Issues] now in the next months we launch Suprep into the US. And then later on in the fiscal year, we plan to launch Spiriva as well as FDA permitting Pegfilgrastim. So then we’ve had challenges this past year. I’d say, it’s been a year of really making the US business stronger from a processor standpoint, from a balance sheet standpoint, we had a number of one-time impacts of gross-to-net items [Technical Issues] FTS [Technical Issues] that we cleaned up as well as returns, inventories for the flu season products like oseltamivir and cephalosporins. So we believe that we are in a strong position, but still need new product launches to grow the business. I mean, all of you have been close to the marketplace and the trends in the US pricing pressure is still strong, especially on the oral solids, we continue to see double-digit pricing pressure. And so the only way to be able to grow both on revenues as well as profitability is a combination of new product launches and material new product launches as well as continued cost reduction and optimization and both are very strong focus for us.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Thank you, Vinita. Next slide please. Nilesh, would you like to take on this and give us…

Nilesh D Gupta — Managing Director

Sure, Ramesh. Yeah. So we feel that — we feel very good about our India business. I think it’s just coming into its own. I think there’s a lot of room for us to grow in India and we’re really exploring all kinds of things in India. And we’ll talk about some of that. So as we fix the US business, I think the core India business, we definitely want to double down on. The Q4 growth was tepid, we grew at 5% and then I think that’s an industry trend at this point of time, especially the COVID drugs as they come off and the additional market that happened on the COVID counters had come down. You will see sluggishness for the market. You’ll see sluggishness for — you’ll see even market decline. I think in April the market is actually declining for the industry. We were not positively impacted by the COVID products. We didn’t really didn’t have any and therefore we will not be negatively impacted materially as well. So should be good growth — should be a good growth year as long as COVID doesn’t play spoilsport anymore. Hopefully it’s behind us.

But the India quarterly sales, as you can see goes strong Q4 is always weak, you see high Q1 coming up thereafter, year-on-year last Q1 was big. So from that perspective, you won’t see that growth, but you will see that growth in coming quarters as well. We are — our focus is chronic. Amongst our peer set, we’re the largest proportion of sales from chronic therapy areas is the largest and that continues in our big three areas are cardiac, diabetes and respiratory. As you can see from the slide, we are growing faster than the market in all three. We are not satisfied with this growth rate. We think we can do better. And certainly FY23 but the period that we want as well, you should look at stronger growth coming from Lupin in these therapy areas, but overall for our India business as well. Three brands in the top 100, eight in the top 300, that statistic has been improving, again, not satisfied with it. I think there is again more room to grow there. Double-digit growth in areas like respiratory and gynecology. And we are launching new divisions as well. So we launched three divisions, one for diabetes, one for CNS and one for anti-infectives. Like I said, I think it’s an extremely fragmented market. There’s a lot of room to grow. It’s our home market, the US and India are our two home markets. So we have to do well in both those markets and certainly there’s a lot of room to grow in India.

Ramesh, back to you.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yes, thank you. These are the other markets that we’re present in. So essentially made some good progress across various markets. In the EU5, for example, we also — Fostair was introduced. And we have been ramping up on Remastril as well. Australia, we made this acquisition Southern Cross, which we believe would serve us in the years to come. South Africa, now the fourth largest generics player and,of course, being a market leader in cardiovascular space for quite some time. Brazil, so that’s been a loss-making unit until very recently, but it’s turning around pretty, pretty nicely for us. Mexico, market leaders in ophthalmology. Number 2 actually, Sofia is number 1. But in terms of values and then in developing a national footprint, we really are going the full hog out there. And of course, API business that’s been — the fortunes have dipped this year essentially because of acute therapy products not selling in most parts. But [Technical Issues] business continues to do pretty well. Some headwinds in India on the TB front but over all still good growth. And as you might know we are looking at getting kind of broad basing our over all portfolio of products that we serve for global institutional business.

Next slide please. The P&L essentially this is a snapshot of this was actually provided previously. We spoke about the fact that there has been a slight decline in overall sales. And we also spoke about the reason why there was a decline in overall EBITDA margins. And there are, of course, exceptional items from a write-off perspective also this time around, we had accelerated amortization of certain intangibles in GAVIS we exited [Phonetic] this year. And overall, given the fact that [Technical Issues] we actually had a huge exceptional items in Q3. We had — we ended up at the entire year at an overall loss situation. But I’d like to add that the next two quarters could potentially be — might have the same lackluster feeling, but the second half of next year onwards you would actually see a step-up in terms of sales as well as in terms of the margins that go with that. As Vinita was saying, there are a number of products that we are looking at for America over the next several years and several quarters — and for sure, I think this will begin in Q3, and Suprep, and that’s something that we already have an approval for.

This is again a snapshot of what we spoke about essentially the annualization of our annual results of for the year for the company. And, I guess, it’s something Nilesh spoke about in terms of the exceptional items, making this a very exceptional year in some base. Next slide please. Yeah. R&D, as you can see, it’s been running steady at around INR350 crore, INR375 crore-mark, so to speak, and it’s around the 8% mark. But more importantly, the character of R&D is shifting. As Vinita was also saying, it is going to be more, a lot more focus on complex generics and as it is gonna be inhalation and injectables and biologics, all the way — biosimilars, all the way. And, of course, the salience of NCE would certainly come down over time. There’s been a tight rein on overall capital expenditure, as you can see it used to be in INR1,000 crore, INR800 crore range. It’s hovering around the INR600 crore-mark, but there’s a lot of inputs on [Indecipherable] in the capex costs, expenditure outlays. And, of course, from being a cash surplus company, there is a slight increase in overall debts. There is tremendous scope for potentially working on working capital optimization. It’s around 145 days currently and we — my team are working on optimizing on that. It turned out to be a debt situation, the fact that we had to pay [Technical Issues] the penalties and came to — the settlements came to Glumetza but that is back into the surplus situation until we actually start using it from productive purposes, including M&A, and that’s something that we are saying, you’ll be looking at in India and worthwhile acquisitions in other parts also.

Next slide please. Really your slide, Vinita. You might like to talk about complex generics? You’re passionate about it.

Vinita Gupta — chief executive officer

Sure. So as I mentioned that the focus on the pipeline front to grow the business is certainly on the complex genetics and we have pivoted from an R&D standpoint from oral solids into complex generics. That’s not to say that we don’t leverage our oral solid platform. We have tremendous capabilities and capacities from plan perspective established there as well. So definitely chasing material opportunities there but really going, making sure that all of the material pipeline opportunities on the complex upfront, whether it’s injectables, inhalation, ophthalmic, derm, we cover them. And right now, I mean, our pipeline is rich with all of the material products across these platforms.

Next slide please. Okay. [Speech Overlap] Sure. So this is really what our pipeline looks like. It covers $70 billion with our products going off patent. And as you can see the oral solids are now 15% of our pipeline, biosimilars 30%, just given the sheer scale of the biosimilar products by market-size, inhalation, 25% of our pipeline and injectables 22%, also a small percentage of women’s health and depo injectables, we have captured separately from injectables. So roughly injectables is 30%. So when you start looking at installation injectables and biosimilars roughly 30-30-30 material opportunities across these three platforms.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah. Next slide please.

Vinita Gupta — chief executive officer

So again this is continuing on the same theme. We have already started monetizing inhalation platform with products like Albuterol that we have monetized in the US, now a solid product for us. And some of these platforms as you can see from the flags that we put in there are geographic are — we have the potential of leveraging across multiple geographies. So on the inhalation front, we also also launched Fostair, as Ramesh said, in UK and have plans to launch other inhalation products in UK and Europe as well, as well as China. So the inhalation platform has started and in the next couple of years will really become a material part of our business as well as geographical spread. I mean, right now we have Albuterol. But looking at the next 12 months, Spiriva and then Dulera and Fostair, we have QR the next wave of DPIs, MDIs [Alipta] products, the[Indecipherable] products all in the development on the inhalation front. On the biosimilars front, again, multiple geographies that we are addressing. And the focus has shifted from, of course, our first program pegfilgrastim for the US, which we are looking forward to bringing to market soon. The products where we can be in the first wave, where we are in first or second to launch and have the potential of really getting major upside as well as a strong long-term position.

On the injectables front, after inhalation and biosimilars in fiscal year ’24, we will see material launches coming through. We’ve had a number of [Technical Issues] filings. This past year, we had our first step peptide filing with products like [Indecipherable] products like glucagon, Risperdal Consta, on depo front, that’s pretty far along. We hope to be the first company to file a 505(j) for Risperdal Consta and so on and so forth. So material pipeline complex product pipeline on the injectables front.

On the women’s health front, we’ve made significant progress on the drug device combinations. Products like Nexplanon and Mirena. We’ve already got proof of concept and have put these products into the clinic. Again from a timing perspective is inhalation now, biosimilars next, injectables soon thereafter and women’s health in the four- to five-year timeframe. Next slide please.

Ramesh Swaminathan — Executive Director, Global CFO and Head

It’s basically what you already spoke.

Vinita Gupta — chief executive officer

[Speech Overlap] Well, I think I’ve probably spoken to most of this. I mean on the inhalation front, we’re pretty much chasing all of the material opportunities. Products that we are late, we don’t intend to get in, because there’s enough opportunity to chase. And really in terms of sizable market opportunity, apart from the US, Europe turns out to be a material opportunity for us on the innovation front followed by [Technical Issues] also in North America, Canada, Australia, Japan to partnerships and even China. Next slide please.

Ramesh Swaminathan — Executive Director, Global CFO and Head

I think we’ll do — one just flavor here, coloring — essentially we have two DPIs and four MDIs under development. And we, of course, have two products in the market and we have Tiotropium was pretty much at end of this year possibly.

Vinita Gupta — chief executive officer

That is on the Injectable front, we talked about this as well. I mean, we have — yeah, we can move on to the next slide.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Injectables. Next slide please. Biosimilars. Yeah.

Vinita Gupta — chief executive officer

So on the biosimilars front, of course, we started with Enbrel that we launched in Japan and then Europe through our partnership with Mylan that continues to evolve. Mylan continues to launch in multiple countries and we expect our share to build over the next 12 to 24 months with etanercept. The US is still longer way, it’s still 2029, but needless to say, we have reserved rights of the product for the US market. Pegfilgrastim, while we are a late entrant on pegfilgrastim, really for us, we will start learning the market through it and hope that in the next 12 months we get inspected by the FDA and we’ll plan to launch the product. We’re very pleased with our position actually on the on-body Onpro product, where we seem to be one of three and potentially in the first wave. Our customers are very, very keen to see us in the market with that product. So we think we will really grow pegfilgrastim materially with the launch of Onpro, which is 10 months behind the pre-fill syringe, but it’s going to be material anchor for us on the biologics front.

Lucentis is well underway we had some delays in the clinical trial with COVID, but now it’s well underway and again very strong partnership position in the US that we’ve already established for Lucentis. We’ll share more as we come closer to the opportunity. And right after that is Eylea. So on the ophthalmic front, both Lucentis and Eylea are going to be material opportunities for us that we would leverage through the channels that we have established relationships there. And then we have programs earlier stage in the pipeline that we’re pursuing.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Next slide please.

Vinita Gupta — chief executive officer

Go ahead.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah, I’ll go ahead with this. So as I was telling people, there’s a lot of things that we would, firstly, we have initiated the curve and a lot of inefficiencies that have crept up the system over the last few years. So we are working on all of this. That is of course considerable idle time because we have programs for a lot more capacity utilization and went ahead with a lot of capacity expansion at various factories, both the API and formulations. So there is considerable idle time out there which we wanted to clear. It obviously would mean cutting down on expenses, patch footprint, addressing the manning pattern in various parts and the like. So we are doing a lot of stuff on that front. We also know that there is a lot of write-ups in the system, because we’ve been dropping products, we’ve been — demand has been turning down and the like. So there’s a lot of scope for reduction of retard us — value erode us, if we may. And we are working on this as well.

Given our supply chain issues and OAI status and so on, we also had issues on air-freighting. So ideally, if you go back about five years ago, 100% of our products would have been ocean freight, sort of speak. But over the last few years, there has been a considerable element of air-freight just been happening, we would like to pull down on that, claw back on that and go down to ocean freighting. And that would be considerable savings from that score. Yes, of course, returns associated with base kinds of cost, the returns were essentially because of product recalls and the like. And normal returns, I think there is scope for optimization on that, in India as well as in America. We’re working on that. This might seem like an anomaly, whilst we have idle time, we have also failure to supply, which has actually again eroded our bottom line tremendously over the last couple of years.

We believe that if you were to pull up, go back on all of this, save on all of this optimization and all of this, including pulling back on low margin SKUs, there is considerable scope for improvement in our overall performance. I think the figure rests anywhere between INR500 crore to INR1000 crores. So it really depends on how much we can pull back on and how fast can we do that. So that’s one of the things we had to take known as a company and we’d like to expedite this not actually to deliver good results for ourselves, live up to our potential and deliver for our shareholders. This would obviously mean optimizing our network, optimizing on the R&D front and looking at the entire business at integrated fashion. We got the right technology to kind of work on this as well.

R&D optimization, would you like to speak on this, Vinita? Nilesh?

Operator

Next slide please.

Nilesh D Gupta — Managing Director

[Speech Overlap] And I think we’ve talked about most of this already. So we’ve optimized the R&D spend. But I think we’re chasing the right opportunities, clearly the size, the price on the oral solids has come down and the optimization is largely in line with that. But our key initiatives on the installation side, injectables side, we are pursuing biosimilars, I think, we’re still cherry picking. The idea is to have products that come in the first wave. So etanercept was different, but, and I think we learned a lot through. But if you sort of look at the rest of the pipeline that is intended to be first to market or one of two or three players in all. So it’s the optimization on the R&D, we feel good with this number. I think we’re going to be able to stick with this kind of number for the foreseeable future or will possibly bring it down a tad even, but I think we’re seeing all the right opportunities that there are. Obviously, I think we have a wealth of portfolios and platforms to work with. But the filings that we have are huge as well. So 457 filings to-date as still another 160 pending approval and a bunch of first two filings as well. A lot of that in close to end of this fiscal end in FY24 onwards you will start seeing those coming to market. I can’t see the bottom as I think I’ve touched on most of that already. So, Ramesh, I think that’s it, right.

Ramesh Swaminathan — Executive Director, Global CFO and Head

We’ve got one more slide. So Lupin has always been applauded for the quality of itself and its manpower. We always come across as a very professionally led firm. The quality of the professional staffs kind of speaks for itself. The first family included, they are professionals in the way they come across also. And they rank pretty high in the world league tables when it comes to being the most powerful CEO amongst women and the like. A lot of awards to a host of other professionals at Lupin right from — and, of course, several functions manufacturing quality professionals like a CIO and the like.

So we’ve got a lot of those and I would think that these would keep coming up, because we only going to do better from now. That’s a resolve that we have been taken. And we would live up to that expectation also. Thank you. Let’s move over to discussions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. Whoever wants to ask question may raise your hand. Requesting you to please introduce yourself with your company name and ask the question.

Pritesh Vora — Mission Street India — Analyst

[Speech Overlap] This is Pritesh Vora from Mission Street India.

Ramesh Swaminathan — Executive Director, Global CFO and Head

We are not able to hear you.

Nilesh D Gupta — Managing Director

I think mic is not on.

Pritesh Vora — Mission Street India — Analyst

This is Pritesh Vora from Mission Street India. I just wanted to understand what is our total investment made in the biosimilar pipeline till now? And what do you see the total vendor revenue come — start coming in that particular stream? What will be the US-led revenue and what will the rest of the world revenue in that particular stream?

Ramesh Swaminathan — Executive Director, Global CFO and Head

I’ll take the first part of the question. So when you speak about investments for biosimilars. The first biosimilars that we actually developed in partnership with, if we recall, Yoshindo to that extent huge chunk of the cost was borne by our partner. So we have actually been a little calibrated in the way we went about what we thought was anticipated some base. Even today, a lot of biosimilars essentially under partnered programs, not from a financial perspective, whereby the risk of development is actually borne by the financial partner, whilst we share in the success when it actually gets launched. And so we share in despite when it comes to commercial success really. So to the extent, we have kept our overall risk, the risk associated with that to the very minimum.

Pritesh Vora — Mission Street India — Analyst

Do you particularly figured how much investment has gone up till now in that particular pipeline?

Ramesh Swaminathan — Executive Director, Global CFO and Head

So the investments of two kinds, one is of course on the developmental pipeline, the other is in terms of investments for the infrastructure itself. And that’s — it’s minimal right now for INR250 crores, INR300 crores overall together.

Nilesh D Gupta — Managing Director

Yeah. About $15 million to $20 million a year would be our total biosimilar spend. And then on top of that there is funding for the key programs as well.

Pritesh Vora — Mission Street India — Analyst

You say $15 million to $20 million total up till now or?

Ramesh Swaminathan — Executive Director, Global CFO and Head

No, per annum.

Pritesh Vora — Mission Street India — Analyst

Per annum. And how many years this investment has gone?

Nilesh D Gupta — Managing Director

It’s only increase. So it wasn’t that that run rate. We’ve been investing for 10 years, but I think it started really small numbers, and I think this is kind of a steady state that we see right now.

Pritesh Vora — Mission Street India — Analyst

Right. And what is the economics there? How much — when you made this decision to investment. Did you see how the investment will be equal from US geography or the rest of the world? If you could throw some light on that.

Vinita Gupta — chief executive officer

So we, like Ramesh mentioned, had a very calibrated approach on biosimilars, just given the uncertainty and the fact that we are still learning that market and the market is still evolving. I mean, like etanercept, we had that R&D cost sharing with Yoshindo, likewise on other programs, we have bought financial investment and upside sharing with. So in a way, some of those programs we are going to look at all of it as an upside, if the program has been funded by a partner. So in terms of the revenue split right now, I mean, obviously, it’s all etanercept and it’s small and it’s going to be all ex-US right now, in the next year as we launch pegfilgrastim, we will see a material shift to the US. And as we launched ranibizumab as well, I mean, if I look at ranibizumab, it’s 50-50 between the US and Europe in terms of market opportunity, but we have a big opportunity in the US. Just given that the customer, the channels are very similar to the folks that we have established relationships with. The ophthalmic specialty channel, for example, through our wholesaler relationships is what we will be able to leverage for a product like ranibizumab or a product like Eylea. So you’ll see more of revenues in the US and partnered revenues ex-US.

So hopefully that answers your question. Yeah.

Pritesh Vora — Mission Street India — Analyst

I will question [Indecipherable]

Kunal Randeria — Edelweiss — Analyst

Hi. Good afternoon. Kunal Randeria from Edelweiss. So first question on the domestic business. This quarter, I think, it was a 5% year-on-year growth. Last quarter, it was around 7%. Right? So, and given that you have such a strong chronic portfolio and no real COVID impact on the base, any particular reason anything to share where you are missing. What adjustments need to be made, so.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Sure. So first of all, that’s India business so that includes the tender business that we do in India as well. So the India prescription business was 13.9% growth year-on-year. So that’s why I don’t see a concern with that business growth rate as such. So if you take out the tender business was lumpy, I think we’re getting back into some of those tenders going forward as well. You’ll see it normalizing. But we do report the India prescription business along with the other business formulation business that we do in India, but otherwise it was 13.9%.

Kunal Randeria — Edelweiss — Analyst

Okay sure. And secondly, the price erosion numbers in the US that you share, it seem a bit scary and obviously this is not, I mean, good for the industry and for the health of the industry. So I’m just wondering when do you see our companies starting to withdraw from molecules, how far do you think we are? Because I think you saw something similar in 2019 when a lot of these US-based companies started to do it. You think it should start now.

Vinita Gupta — chief executive officer

You’re going to see it. In all of the generic companies, all of the generic major CEOs that I’ve spoken with in the US are complaining of the pressure on the industry and we have also conveyed to our customers. The three big buyers that we’re going to have to exit and they are concerned, because for some of them we the largest suppliers. But we have told them that we don’t want to be a largest volume supplier. We also want to be a large value supplier. So, I mean you’re going to start seeing exits. We actually, for the first time in the company, put together an SOP for a very planned exit. So that we can, when we look at taking a product off that does not that has negative margin, we also addressing the plant cost, the idle cost that is associated with it. What’s happened is on the oral solid front, I mean, there is too much capacity and people are willing to really to be able to make some money on that overhead they’re willing to sell product at 5%, 10% margin, which doesn’t make sense. So you are going to see exits. I think you’re going to see exit from us. And we already have had a few. And that’s why you see that impairment on GAVIS there are certain products that we just decided to discontinue manufacturing. Likewise, you’re going to see more.

Kunal Randeria — Edelweiss — Analyst

Sure. Thanks.

Prakash Sharma — Axis — Analyst

Thank you. This is Prakash from Axis. My first question, other expenses. So last quarter 3Q, you called out a couple of items and this quarter in the commentary there is a mention of freight and input costs obviously would be in materials. But what has really changed? I mean, we would have expected the other expenses to come down Q-on-Q.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah. So there are a couple of parts to this. And so if we look at — and so there is, of course, Losartan and associated recall costs and also stocks associated with that etc., paying it off. You talked about manufacturing other expenses, right.

Prakash Sharma — Axis — Analyst

Other expenses which used to be INR700 crores, INR800 crores, now it’s INR970 crores.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yes. So that is essentially one part of it is essentially there is a slight decline in our salary costs. Some of this actually got accommodated because the incentives that we give to the sales force and the like. The shift to expenses of a different kind and that is what is actually being brought out there.

Prakash Sharma — Axis — Analyst

So what I am trying to understand like the, all the other expenses, which is they are the marketing related, traveling, freight etc. Is there any one-off, apart from Losartan recall, or it is the new normal?

Ramesh Swaminathan — Executive Director, Global CFO and Head

As I said, there is a shift between heads there and that’s what actually…

Prakash Sharma — Axis — Analyst

Okay. That would be marginal. Right?

Nilesh D Gupta — Managing Director

No, it is significant.

Prakash Sharma — Axis — Analyst

It is significant.

Nilesh D Gupta — Managing Director

Yeah, for the man power [Indecipherable] line to that line,

Prakash Sharma — Axis — Analyst

Okay and Losartan would be significant?

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah. So we also had Solosec litigation costs and the associated penalties that we had to pay. So all of this put together…

Prakash Sharma — Axis — Analyst

So normalized levels would be what, sir?

Ramesh Swaminathan — Executive Director, Global CFO and Head

I would say that the overall, so the Losartan, other costs, etc., would have cost us about $11 million over there. $10 million to $11 million and there is about, let’s say, about $6 billion in terms of — $5 million in terms of shift from one expense head to another head.

Prakash Sharma — Axis — Analyst

Okay, that’s fair. Thank you. And second for Nilesh, on the US…

Ramesh Swaminathan — Executive Director, Global CFO and Head

There’s also a swing as you might be just sort of compare Q3 and Q4. We also have settlement income, it’s essentially between Q3 it’s not there. [Speech Overlap]. Q3…

Prakash Sharma — Axis — Analyst

[Speech Overlap] or which one?

Vinita Gupta — chief executive officer

This is other expense.

Nilesh D Gupta — Managing Director

As a litigation settlements. Yeah.

Prakash Sharma — Axis — Analyst

Okay. On the USFDA side, I mean we were very hopeful like with Goa happening, Somerset and all will start getting remediated. What is really, I mean, not playing out is FDA, what is the commentary by FDA now? As we hear like you also put in your commentary industry trend, it is all over the place for five teams are in the country. So what’s really playing out? Are they more strict now or? And we had all the time in the world two years to pull our socks. So what’s really not playing out for us and for the industry?

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah, so I can speak — let me start with the industry first. So, I think the big industry part is there was definitely a hiatus of inspections in the last two years and obviously the FDA is now ramping up inspections within the country and we’re gonna to get mixed outcomes-basis the readiness of the individual company.

Nilesh D Gupta — Managing Director

I would say for Lupin just because of the geographical location, I would say, that the India plants are operating under one leadership structure and one set of principles, the overall SOPs and all are the same. But I think local implementation, there might be some nuances we should be there. We had some leadership gaps in Somerset both in manufacturing and quality and then both of those led and both of those positions have been replaced and filled back. We are not happy with what came out of Somerset. I think Tarapur is representatives. So I think, obviously, we had certain observation, we were able to address them to satisfaction with the FDA. I would certainly hope that Tarapur goes the same way. We’ve sent in a response end of this month. Next week we’ll send in an update as well basis which we should see the outcome of that inspection and then that’s what I would expect for the other inspections as well.

We are very clear that we have to get across this compliance that we’ve had. It has been going on for five years. And I think what we’ve set up is pretty solid, at the capex level from a governance perspective bringing in people like Diana in the US, I think, that is a great opportunity for our people to learn o become best-in-class as well. So we’re very committed. I think the, it’s there in the comments, it’s an aspiration. We’re certainly not best-in class at this point of time, but we know that we need to be best-in-class to be a strong generic company. And for the India plant, I think we’re there. We have inspections, obviously, which will come up for Pithampur-2, for Mandideep, these should go the same way as well. And Somerset, I think, there is a very clear plan on remediation as well. Again, we had a set of observations. We had a set of observations again. Our track record does not speak well for Somerset, but their team is extremely motivated to fix it. And this is kind of their opportunity now, they need to fix this now. And we’ve given them the tools, we have the people certainly whatever resources that they need as well. We should come out of these now.

Prakash Sharma — Axis — Analyst

So how many approvals are pending for the key facilities like which really stuck now. So for example you speak about 160 pending. So Somerset, your Pithampur-2, a couple of more which are under USFDA scanner. How much are actually locked with respect to new approvals coming?

Ramesh Swaminathan — Executive Director, Global CFO and Head

Sure. Sure. So Mandideep, there is nothing, obviously, in Somerfield we launched everything. So we have [Technical Issues] that obviously we need to fix it, there’s nothing. In Tarapur there’s one or two products that are stuck basis, that’s Tarapur status, at least one of which we’re site transferring as well. So again there is very minimal exposure coming out of that. Less than 5% of our revenues come from FDA impacted sites, first of all, of our US generic revenue. Pithampur-2 and goa were the two big sites where there were a bunch of product stuck in Goa. We’ve seen some of these approvals coming, we’ll do at least seven launches out of Goa this year. And there’s another 15-20 that will come over time as well. Pithampur is even more. I think there’s about 30-odd products which have stuck with these FDA compliances. Some of them [Technical Issues] probably we won’t launch anymore because the time value of those opportunities is gone. But there’s still some extended release products that I like, I think those will be good opportunities to launch. So that will come out of it Pithampur as well. None of these are big swingers. I think the big swinger has come out from inhalation, from injectables, from biosimilars as well, some first-to-files as well. This First-to-files are from, some of them work from Pithampur, we transferred some of them. They are mostly from Nagpur, and Goa and those are predicted.

Prakash Sharma — Axis — Analyst

Somerset, you said is how many pending?

Vinita Gupta — chief executive officer

So Somerset is the biggest one, but [Technical Issues] that is next quarter and then other products will get transferred.

Prakash Sharma — Axis — Analyst

[Speech Overlap] So they are not products pending out of somerset.

Ramesh Swaminathan — Executive Director, Global CFO and Head

So, PrEP would be from there, which would — which has approval.

Vinita Gupta — chief executive officer

It’s for final approval.

Ramesh Swaminathan — Executive Director, Global CFO and Head

It should not have an impact.

Vinita Gupta — chief executive officer

Right. It’s got final approval. So we’re doing validation batches now.

Prakash Sharma — Axis — Analyst

Understood. And lastly, GAVIS, how much is actually sitting in the balance sheet now?

Vinita Gupta — chief executive officer

$100 million.

Ramesh Swaminathan — Executive Director, Global CFO and Head

About $110 million. Yeah.

Prakash Sharma — Axis — Analyst

So of the 900, about 800 has been…

Ramesh Swaminathan — Executive Director, Global CFO and Head

Amortized over time, for sure.

Vinita Gupta — chief executive officer

Yeah,

Prakash Sharma — Axis — Analyst

Yeah. Okay, thank you.

Operator

Thank you.

Shinya — Nomura — Analyst

Yeah, this is Shinya from Nomura. So first question is on India. I mean you talked about acquisition and 10% to 12% growth that you’re talking you are factoring in acquisition. There are some headwinds that I see, like some of your licensed product like Citrus is not there with you. And then linagliptin goes off patent. So how are you thinking about that? How important would be M&A? And just if you can comment on Citrus because it’s a brand which you had built and you couldn’t retain it, so why not like spend for INR5500 crores, whatever it takes to sort of run with it, right. I mean, there seems to be a mismatch with your commitment to India and not being able to retain Citrus.

Nilesh D Gupta — Managing Director

No. So first I will clarify on that, but I think the 10%, 12% first of all is organic. It won’t happen this year because we have Citrus going out, we have certain exclusivity which are running out as well. So our growth this year will be sub 10%. But if you normalize it for the in-licensed products, you’ll actually see much, much higher growth. And I think the ongoing commitment is to grow at that 10%, 12%, sometimes stretching it to 15-odd percent as well. We’re very keen on acquisitions in India. Citrus was something that we revised offers for multiple times. We build that brand, obviously from our respective, we were very clear that, that we want to own that brand at the end of it as well. I think the valuation stretched to a limit where we were not comfortable and we finally decided to let it go. I don’t think the intent is — I don’t think you should treat that as a commitment on what is there and not even a commitment from the inorganic side, we are keen to acquire in India, there’s several assets that we’re chasing at any point of time, but you’ve seen this story in India, right. The valuations do some go out of control. Once it goes out of the [more than eight-] year payback period, we are not necessarily comfortable. So if it goes beyond that, usually that’s when we would walk away. I think we were at five, six, we went to six, seven, we went to seven and eight, I don’t think we feel comfortable at 9-10 years at this point of time, that’s where Citrus would have gone, where it finally ended.

Shinya — Nomura — Analyst

And second on execution. I mean, you’ve been facing lot of challenges globally. I mean, particularly in the US. Just wanted to understand from you, what other chat — because you talked about Somerset leadership gaps and that sort of was one of the reasons where there was the shortcoming. Are you facing any issues on the leadership front, or the manpower front because with all the issues that the company is facing and how are you trying to internally sort of address these issues because one would expect exits and one would expect a lot of churn. I mean, what’s happening if you can just throw some light on the softer aspects as to how do you ensure that you execute on whatever you’re thinking.

Vinita Gupta — chief executive officer

So there has been a lot of churn actually on the management and leadership level that I think about both in US as well as India. We face the talent, our market has been tough. And some we want to change ourselves, like in Somerset, Nilesh mentioned, the Head of Operations was position that we’ve changed and brought in someone very solid from Teva to lead the site at the manufacturing level. And on the quality front as well, we felt, well, there we had a turnover and then we brought in a person from the outside. And continuity becomes the problem when you have that kind of churn. So we’ve, faced it at the same time, we’ve always tried to scale up when we’ve had turnover and now when I look at some of our G&A functions in the US, I mean, when you look at finance, for example, HR, IT, all of them have turned over. And, but we have again skilled up. We brought in capabilities that have helped us clean up a lot of our baggage from the past. For example, the FTS cleanup that you’ve seen in the year. Unfortunately it hits the P&L now. But it’s the clean up that should have happened over the last couple of years. [Technical Issues] Likewise, the process is that the team is now very, very strong going forward for the organization.

So in the last year, we’ve also focused a lot on really putting in contemporary processes. We found that some of our basic processes for supply chain, which is crucial for a generic business were challenged. They were antiquated, to be honest. They were set 10 years ago, 15 years ago and we had a need to really revisit them so that we can really be better in terms of predicting what our next six months, next 12, next 24 months look like and take proactive decisions to get out of product or to manage the failure to supply penalties in a strategic manner.

And we have done that. We implemented IVP in the company this past year for the US. Right now, we’re doing it ex-US, for all of the developed markets and then the rest of the company. So, we have taken the time in the last 12 months to really set in very, very strong processes. So, of course, at the end of the day leadership and people drive success but processes are equally important for a company to scale up.

Nilesh D Gupta — Managing Director

If I can add. So I think the one big area that we are fixing and focused on is the US generic business. So first of all, people within Lupin obviously and people within the industry as well, I think, they get it, right. I think, they see that, that’s the one big area that needs to be fixed. I couldn’t help but smiling — but smile when you asked that question, because, I think, we’re obviously able to attract all the talent that we would want and attrition has always been a part of this industry, it’s always going to be a part going forward as well. Obviously, people like to be part of our winning team. People see that there is this period where there are challenges that we need to work through. So obviously, we talked about optimization, on R&D, on manufacturing and the like. But we’ve also talked about very clear pipeline that we will deliver on it. I think the complex generic pipeline that Lupin delivers, obviously, that’s completely getting discounted at this point of time. And I think we have to reflect that into results. But people who work closer, they see it, right. So they see products coming into the pipeline, they see products going into the clinic, approvals, launches. Right. We have an extremely motivated team and we obviously. Yeah, I think that’s — Vinita and my, one of our primary responsibility is to make sure that that team is engaged to deliver on the goals that we have.

Shinya — Nomura — Analyst

Thanks, Nilesh. Just one last point so on the cost front. So basically the issue is that the margins have been all over the place, right. I mean whatever numbers we had, and I can understand the issues there. So if you can handle and give some more granular details, like you talked about INR500 crores to INR1000 crores in terms of pipeline, and you had mentioned five or six for [Technical Issues] like idle time and failure to supply. If you can quantify those, so that we can sort of have more data handle as to what to look forward to. Because it’s very unclear as to from a single-digit margins will travel up to 20%. Right. So there’s no anchor out there. So if you can really help us and guide us to how should be build our model as, as we look forward.

Ramesh Swaminathan — Executive Director, Global CFO and Head

So, well, INR1,000 crores is obviously to be achieved over time and that’s what the endeavor is all about. So, we have begun this process and so far as the plans are concerned. We’re doing what it takes to kind of reduce idle time out there. First of cost the footprint and the manpower, it has to — all of this for part of that. Meaning, what it takes to bring down inventories, monitoring it more closely. The FTS is more under control right now. We are trying to move out of — it’s an iterative process, moving out of, in fact, low-margin products and the like. And there are issues like air freighting, so that’s focusing on, especially if there’s capacity expansion required for that particular product, we’ll go down that route. Or look at how else can we actually in a buildup inventory so it become out of that as well. There’s a lot of fires — a lot of irons in the fire. I can’t go down the part of actually market guidance in each of those initiatives, all of this put together would come to that. There is, of course, some inefficiency when it comes to, for example, our [Indecipherable] decisions on API itself, we’re addressing that as well. So all of that will get [Technical Issues] we’ll be speaking about.

In terms of the results, we believe a huge chunk of it will potentially land up in the course of the next fiscal. So it could be a upwards of INR5500 crores, so to speak. And potentially the balance over the next one year. So even if you were to coupled with in fact the topline leveraging that is speaking about because the products company [Technical Issues] and the like. The exit run rate should be pretty — exit run rate for next fiscal that is [Speech Overlap] it should be kind of reflective of what we can look forward to in the years to come. And this would be more representative of what we have achieved in the past as well.

Vinita Gupta — chief executive officer

So maybe just add, I mean from Q2, you should start seeing the impact of a number of that INR500 crore-level of initiatives around the areas that Ramesh spoke about, starting to kick in along with product launches like Suprep and then others in the second half. And then the full impact of the cost reduction also into next year. And on top of that, like I was mentioning, we are working on externalizing areas like the NCE, which again is a $20 million burn on the company. Last year we had mentioned that we are working on three areas: specialty, NCE and biosimilars. So specialty is all done. We have completely gotten rid of the burn of specialty. NCE is we working hard to get rid of that burn right now and believe that second half of the year, we should be able to get those savings. And biosimilars also, we are working on product-level risk mitigation or portfolio-level risk mitigation to reduce that burn to be able to improve our margins. So all of those will kind of different points of time of the year, but the INR500 crore-plan we have put it into our operating plan for the year starting Q2. And then more leverage to come through externalizing some of these burn items that don’t give us the upside from a business perspective.

Operator

Thank you. Now we’re going to take online questions. The question is from Hitesh Sharma. Please unmute yourself, Mr. Hitesh. Okay. Next question is from Krishnendu Saha.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Yeah, hi. Can you hear me?

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yes.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Yeah. Just a quick question on the US, can I ask, whether US is profitable as of now?

Nilesh D Gupta — Managing Director

Sorry we lost you.

Operator

Can you please repeat your question?

Krishnendu Saha — Quantum Asset Management Company — Analyst

Is US as a business profitable at the EBITDA level?

Vinita Gupta — chief executive officer

So, adjusted for the one-time.[Technical Issues] As we had a lot of one-times, it is profitable at the EBITDA level.

Krishnendu Saha — Quantum Asset Management Company — Analyst

[Speech Overlap] So, adjusted for the one-time is profitable. Vinita, it just question — how many products you think you would want to take off the market in the next year?

Vinita Gupta — chief executive officer

Couldn’t follow that question.

Krishnendu Saha — Quantum Asset Management Company — Analyst

[Indecipherable] right? Wait, wait, just a minute. Can you hear me now. Is it better?

Nilesh D Gupta — Managing Director

Yes, go ahead.

Krishnendu Saha — Quantum Asset Management Company — Analyst

Is it better? Yeah. So how many products do you think that you’ll be taking off the market in FY23 in the US?

Vinita Gupta — chief executive officer

I mean we’re putting the list together. But right now we have three to four that [Technical Issues] identified.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Or we drop ten so far?

Vinita Gupta — chief executive officer

From the portfolio, current portfolio.

Operator

Okay. Thank you. We will take the next question. That is from Mr. Nitin Dharambut [Phonetic]. Please unmute yourself.

Okay. Next question is from Sameer Baisiwala.

Ramesh Swaminathan — Executive Director, Global CFO and Head

How many people are on online, may I ask?

Operator

It says 250.

Vinita Gupta — chief executive officer

Oh my gosh.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Put in all, let’s wait.

Nilesh D Gupta — Managing Director

Sameer, we can’t hear you.

Operator

Sameer, can you just unmute yourself, Mr. Sameer? Okay, we go to the next one. Next question is from Kunal Dhamija.

Kunal Dhamija — Clifford Chance — Analyst

Yeah. Hi, thanks for taking the question. So the first one is on the Spiriva. Where are we in terms of that approval? Have we got any information requests or queries from the US FDA?

Vinita Gupta — chief executive officer

Actually we are in a really good position. We have got feedback from the FDA that chemistry, bioequivalence, PD, labeling is all fine. They are going to likely re-inspect the facility before they approve. But everything else on the filing is fine.

Kunal Dhamija — Clifford Chance — Analyst

Okay. And second one on the — I’ve heard the FTS word very frequently in this presentation. So if you can quantify how much FTS has impacted us in this year, overall. And what is leading to such operational blocks, I believe, which would be leading to non-supply and then all these kind of penalty. So if you can quantify and where do we see ourself on that front for the next couple of years.

Ramesh Swaminathan — Executive Director, Global CFO and Head

So this has really been a bit of embarrassment in some sense because we paid close to about $27 million during the course of this year itself by way of FTS. It’s like this in the last couple of years and if we’re to not be there to that extent, we would have been much better off from a P&L perspective, from a bottom line perspective.

Nilesh D Gupta — Managing Director

And I wish to clarify there was obviously a significant amount of catch up in that FDA. So [Speech Overlap] But I think it’s now current to reflect whatever may happen only within the fiscal.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Yeah, so that over two, three years.

Kunal Dhamija — Clifford Chance — Analyst

Okay. I mean, it sounded like that this is kind of a kitchen-sinking quarter but then we are also expecting the first two quarter to be similar. So again the FTS issue and other issues are going to play in the quarter or we have taken a lot in terms of provision in this quarter?

Vinita Gupta — chief executive officer

No, we actually have the FTS pretty normalized and even the Losartan impact we took into the last quarter because we expect some failure to supply penalties due to the Losartan recall. We expect the US to be soft in Q1 because we noticed that at the end of the quarter, we had good couple of weeks worth of additional inventory at our customers which they were going draw down. And we saw that impact in April. So we expect that this quarter is going to be soft.

Nilesh D Gupta — Managing Director

But then Q2 onwards it starts normalizing and then obviously late in Q2, Suprep and then other initiatives as well.

Kunal Dhamija — Clifford Chance — Analyst

Sure. Thank you.

Operator

Thank you. Next question is from Tushar Manudhane.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Am I audible?

Operator

Yes, Tushar. Go ahead.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Just again on Spiriva, I guess the facility was already inspected. So any specific reason that is triggering the reinspection?

Vinita Gupta — chief executive officer

So the agency will had to inspect also our device supplier in Germany. And so we are ready to be reinspected ourselves, we don’t know for certain whether they’re going to re-inspect us, but they are inspecting our device supplier right now.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Good. So effectively does basis your response to USFDA and reinspection does the target action date of August ’22 changes or that remains very much on track?

Vinita Gupta — chief executive officer

I mean, hopefully, they don’t need to re-inspect us. If not, then I think we should be in a good position.

Nilesh D Gupta — Managing Director

The date stands as of now.

Vinita Gupta — chief executive officer

Yeah. The date is not changed.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Got it. And just if you could clarify the FTA’s number for 4Q effect ’22 in specific?

Ramesh Swaminathan — Executive Director, Global CFO and Head

4Q, sorry, in Q4, [Technical Issues] about $4 million.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

And that is already factored out when giving EBITDA margin of 7.3% in the press release?

Ramesh Swaminathan — Executive Director, Global CFO and Head

All of this is factored into the results. Yes.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

All right. Is that adjusted for while giving EBITDA margin of 7.3%?

Vinita Gupta — chief executive officer

No.

Ramesh Swaminathan — Executive Director, Global CFO and Head

No, it’s normalized. When you speak about — it’s there in EBITDA, but not the adjusted EBITDA. It’s not normalized for that.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay, sir. That helps. Thank you.

Operator

Thank you. Next question is from Hitesh Mahida.

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

Yeah, hi. So just wanted to understand, I mean with more than $2 billion sales, I mean, why are we struggling with this single digit sort of margins and as of Spiriva and Suprep, what sort of margins are we looking at? I mean, will there be an improvement there as well? Because at almost $700 million or $800 million US sales, I mean we struggling to breakeven in that US geography.

Vinita Gupta — chief executive officer

So our struggle is really with the oral solids. With the oral solids as we’ve talked about, Ramesh mentioned, Neelesh mentioned, we’ve had one, pricing pressure, but second also cost mounting. [Technical Issues] idle cost standpoint from inventories like for the flu season products that we had additional write-offs in the year. Those are the inefficiencies and what be addressing is really the oral solid now. When we look at our other platforms. When we look at inhalation albuterol, Brovana and the like and our partnered products, we have really decent profitability on that front. It’s really the oral solids that dragged it down. So we’re very significantly addressing the oral solids through the optimization efforts that Ramesh mentioned.

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

As you had earlier mentioned, ma’am, we are looking at certain leadership roles. So frankly because across geographies like US, India finance, across those geographies, business verticals, you’re sort of struggling now. So any sort of changes are we looking there?

Vinita Gupta — chief executive officer

Yeah, other than the US, I don’t think we are struggling. I mean…

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

India growth is also sort of coming down.

Ramesh Swaminathan — Executive Director, Global CFO and Head

I think we clarified on the India growth and you will see it over the quarters as well. We feel very, very good about our team in India and the growth that we have. You’re going to get lumpiness across the sector for adjusting for COVID drugs over this period of time, but you’ll see great normalization. I think in our peer set there is possibly only one company bigger than ours that grew at a rate similar or a tad bit more than us, but in the top 10, I think, we’re number 3 or number 4 in terms of growth over a 10-year horizon, over five-year horizon, even a three-year horizon.

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

Okay, sir.

Vinita Gupta — chief executive officer

In terms of the leadership that [Indecipherable] we talked about [Technical Issues] question and I mean we are going to have a major leadership change. Alok is going to be departing from the company. As you know, he was the head of US generics biosimilars and global R&D. For personal reasons, he has decided to leave the organization further opportunities. And we have taken this is an opportunity to get closer to the business, both Nilesh and myself. We have a very strong Head of Commercial in the US, who started the US business, who will lead the P&L from a US perspective. We felt the need and has already started a search for a Chief Scientific Officer for organization with a number of platforms that we have. Our biggest unleash for the organization is a pipeline delivery and platform performance for which we identify the need of a very strong Chief Scientific Officer. So we have a search on going for it. We have a Interim Head of R&D, Interim CFO, Head of portfolio and pipeline, Sofia Mumtaz is Interim Chief Scientific Officer. And we’ve also created a very high-powered, like high power in terms of level in terms of leadership, but a very strong project management office that reports into Nilesh and myself to map and to track all products from product selection, to development, to filing and launch, to ensure that we get the most out of our R&D investment. So multiple changes there on the related to the US business that I felt was would be good to share with you.

Hitesh Mahida — HDFC Standard Life Insurance — Analyst

Okay. Thank you, ma’am. And all the best.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Questions more?

Operator

Yeah, last, just take last two questions. Next question is from Bhavana Agarwal.

Nithya Balasubramanian — Bernstein — Analyst

Sorry, this is Nithya Balasubramanian from Bernstein. So Suprep, what is the brand size of the target addressable market?

Vinita Gupta — chief executive officer

$200 million.

Nithya Balasubramanian — Bernstein — Analyst

Sorry, I didn’t catch that. If you don’t mind to repeat it?

Vinita Gupta — chief executive officer

$200 million.

Nithya Balasubramanian — Bernstein — Analyst

All right, thank you. The second one on pegfilgrastim what is the increment cost related to the commercial infrastructure? Should we expect in FY23 and also on an annualized basis?

Vinita Gupta — chief executive officer

It’s marginal in FY23. We hope to be able to, if we get approved and can launch, we hope to really be able to get enough product into the market, so that it pays for itself.

Nithya Balasubramanian — Bernstein — Analyst

So break even as what you would target in FY24?

Nilesh D Gupta — Managing Director

FY23.

Vinita Gupta — chief executive officer

Yeah. In FY24, well, depending on when it gets approved. Between FY23 as well as FY24 with pegfilgrastim, particularly, I mean, it should pay for itself. Our strategy is a pretty lean model from a market access standpoint through a couple of channels that we’ve identified as ideal channel for us.

Nithya Balasubramanian — Bernstein — Analyst

Got it. One last one, did we hear you mentioned that Lucentis is a product for which you have a partner who will commercialize the product in the US?

Vinita Gupta — chief executive officer

No, we’re going to commercialize it ourselves.

Nithya Balasubramanian — Bernstein — Analyst

Okay.

Vinita Gupta — chief executive officer

We have channel partner ideal for Lucentis. That’ll make clinics channel partners.

Nithya Balasubramanian — Bernstein — Analyst

All right. Thank you so much.

Operator

Thank you. Last question is from Kunal Dhamija.

Kunal Dhamija — Clifford Chance — Analyst

Yeah, thanks for taking the question. Again, I think for India business, we mentioned that there is the lumpy nature of the tender business. So can you please quantify what’s the tender business as a percentage of total India business for us?

Nilesh D Gupta — Managing Director

I don’t, Ramesh, do you have number? Other wise we’ll have take that offline.

Ramesh Swaminathan — Executive Director, Global CFO and Head

400 — are we talking about GIV business per se?

Nilesh D Gupta — Managing Director

For the India.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Indian, I don’t recall. [Speech Overlap]

Nilesh D Gupta — Managing Director

It’s a a couple of hundred crores at all in any case, but I don’t have the specific number right now.

Kunal Dhamija — Clifford Chance — Analyst

[Speech Overlap] Okay, sir. Okay. And on India business. Just one follow-up on the India business. We don’t have any higher channel inventories anything because in response to COVID lot of companies kind of pushed inventories and we know now that there is no COVID, we don’t have that situation. right?

Nilesh D Gupta — Managing Director

No. So like I said, we would really want a player in the COVID sector. There were some write-offs that we already took but obviously nothing like any of the bigger players in the in the COVID therapy areas.

Kunal Dhamija — Clifford Chance — Analyst

Great, thank you.

Operator

Thank you very much.

Nilesh D Gupta — Managing Director

Thank you.

Ramesh Swaminathan — Executive Director, Global CFO and Head

Thank you very much your guidance over the last seven years and your support all the time. Thank you.

Operator

[Operator Closing Remarks]