Marksans Pharma Limited (NSE: MARKSANS) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Mark Saldanha — Chairman & Managing Director
Jitendra Sharma — Group Chief Financial Officer
Analysts:
Kashish Thakur — Analyst
Ishita Jain — Analyst
Unidentified Participant
Aditya Pal — Analyst
Dipesh Sanchit — Analyst
Runit Kapoor — Analyst
Mythili Balakrishnan — Analyst
Aejas Lakhani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Marksans Pharma Limited Q2 FY ’25 Conference Call hosted by Elara Securities India Private Limited. [Operator Instructions] I now hand the conference over to Mr. Kashish Thakur from Elara Security India Private Limited. Thank you, and over to you, sir.
Kashish Thakur — Analyst
Thank you, Aditya. Hi, good evening, everyone. A very warm welcome to Marksans Pharma Q2 FY ’25 Earnings call hosted by Elara Securities India Private Limited. On the call today, we are representing Marksans Pharma Management, Mr. Mark Saldanha, Founder, Chairman and Managing Director; Mr. Jitendra Sharma, Chief Financial Officer.
Before I hand over the call to the Management, please note the disclaimer. Certain statements made by the Management in today’s call may be forward-looking statements. These forward-looking statements reflect Management’s best judgment and analysis as of today. The actual results may differ materially from the current expectation based on number of factors affecting the business.
I will now hand over the call to Mark Sir to make the opening comments and then we will open the floor for questions. Thank you, and over to you, sir.
Mark Saldanha — Chairman & Managing Director
Thank you. Welcome, everyone, and thank you for joining us in our Q2 H1 FY ’25 earnings conference call. We appreciate your continuous interest and support for the company. I’m delighted to share that we have another strong quarter marked by a broad based growth across all our markets. Our revenue grew by 20.8% year-on-year in the Q2 FY ’25, led by a very strong performance in the US followed by Australia and New Zealand.
The US market grew and remain — and remains a strategic focus for growth. UK and Europe witnessed a relatively soft quarter due to seasonality and we expect to bounce back in the second half on the onset of the winter season. Australia & New Zealand business also came in very strong this quarter with an improved growth trajectory.
The continuous — continued focus on our product mix has enabled us to deliver a significant expansion in our gross margin and also achieved an all-time high quarterly EBITDA of INR135.7 crores. The manufacturing facility acquired from Teva Pharma is ramping-up well and maintains on track to scale up operations. We expect this facility to supplement our growth further in the coming quarters.
Our strategy of expanding our present business, new product launches and enhancing supply from our new facility will help us to achieve our next milestone, which we’ve always maintained at INR3,000 crores in revenue within the next two years.
With this, I’d like to turn it over to Jitendra, to update on our financials.
Jitendra Sharma — Group Chief Financial Officer
Thank you, sir. For Q2 FY ’25, our operating revenue stood at INR641.9 crores, an increase of 20.8% year-on-year compared with INR531.2 crores in the same quarter last year. Revenue from the US and North America markets stood at INR304.2 crores, an increase of 36.8% on a year-on-year basis, driven by new product launches and increased market share. UK and EU formulation business grew by 5.7% year-on-year to INR246.7 crores. We witnessed mixed demand trends in this category. Australia & New Zealand market recorded revenue of INR63.6 crores, up by 31.3% year-on-year. The rest of the world recorded revenue of INR27.5 crores in Q2 of FY ’25.
Gross profit was at INR383.5 crores, up 37.7% year-on-year. Gross margin expanded by 732 basis points from 52.4% to 59.7% in Q2 of FY ’25. This was driven by a better product mix and continued softness in raw material prices. We recorded an all-time high EBITDA of INR135.7 crores in Q2 of FY ’25, an increase of 19.1% year-on-year. The EBITDA margin for the quarter stood at 21.1%, primarily due to addition of new employees at the Teva facility and increase in the freight costs. Profit after tax was at INR97.8 crores compared to INR83.9 crores in Q2 of FY ’24, an increase of 16.6% year-on-year. EPS for the quarter was INR2.1. R&D spend for Q2 came in at INR10.7 crores, that is 1.7% of the consolidated revenue.
Now, talking about half yearly performance. In H1 of FY ’25, our operating revenue stood at INR1,232.5 crores, an increase of 19.5% compared with INR1,031.3 crores in the same period last year. The US and North America market recorded revenue of INR555 crores, up 33.5% year-on-year basis and contributing 45% of the total revenues. The UK and EU market grew by 8.5% year-on-year to INR498.1 crores, contributing 40.4% to the revenue. Australia & New Zealand market recorded revenue of INR129.2 crores, an increase of 20.7% on a year-on-year basis. The rest of the world recorded revenue of INR50.2 crores. Contribution from these two markets stood at 10.5% and 4.1% respectively.
Gross profit was at INR712.4 crores, up 33% year-on-year. Gross margin increased by 584 basis points from 52% to 57.8% in H1 of FY ’25. EBITDA for the period was at INR264.1 crores, an increase of 22.3% year-on-year. EBITDA margin stood at 21.4%, an improvement of 49 basis points over H1 of FY ’24. Profit after tax was at INR186.8 crores compared to INR154.3 crores in H1 of FY ’24, a growth of 21.1%. EPS for the H1 of FY ’25 was INR4.1.
In H1 of FY ’25, the cash from operation came in at INR7.1 crores. The capex investments during the period were INR76 crores, which is in line with our plan to scale up the acquired facility from Teva Pharma. We spent INR22.7 crores in R&D in H1, which amounted to 1.8% of the sales. We continue to remain debt-free and cash balance stood at INR657 crores as of 30th September 2024.
With this, I would like to open the floor for questions and answers.
Questions and Answers:
Operator
Thank you very much thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Ishita Jain from Ashika Group. Please go ahead.
Ishita Jain
Hi, am I audible?
Operator
Yes, ma’am.
Ishita Jain
Hi, Mark. How’re you doing? Congratulations on a good quarter. My first question is, so in this quarter, what is the revenue share from the Teva facility and the capacity utilization on it?
Mark Saldanha
So we are — presently, our capacity utilization is around 40%.
Ishita Jain
Okay. And the revenue share this quarter from Teva?
Mark Saldanha
So…
Jitendra Sharma
Approximately INR100 crores.
Mark Saldanha
Yeah, approximately INR100 crores.
Ishita Jain
Okay. Second question, can you —
Mark Saldanha
Our current run rate is — we are ranging around INR440 crores. I mean, our current run rate is about INR440 crores a year.
Ishita Jain
Understood. And so my second question is, can you give some color on which were the new product launches in the US which contributed in part for the growth in the top line from the US geography?
Mark Saldanha
Well, it’s in all three segments that we are into Pain, Cough & Cold and Digestive. So from that angle, we have quite a few products that have contributed and this again constitutes mainly from market share that we’ve taken a bigger market share, more market penetration and a few product launches that happened during that time.
Ishita Jain
Do you want to highlight any product or any specific therapy area?
Mark Saldanha
Yeah. That’s what I said, right. The therapy is in Pain and Digestive. You can put these two as a category areas.
Ishita Jain
Got it, understood. And given how our gross margin is also inching up, could you comment on how the product mix is changing? I mean, is there any meaningful change in Rx versus OTC split or any other way that the product mix is changing?
Mark Saldanha
No right now it is it is pretty trending as to what we historically were doing. So there is no product — I mean, there is no mix change per se. But obviously, the gross margin has gone up because of a bit of a transition from a high cost material to now lowering of raw material pricing, which has upgrade a bit of a contributing factor to improve our gross margin right now.
Ishita Jain
Got it. And raw material prices are at similar levels even in Quarter 3 or current quarter or is there a trend altering?
Mark Saldanha
No, I think it is flattening, but it has obviously improved from historic highs. There’s no two ways about it. And so when we were — when we had — like I said, it’s a transition and when you have raw material because we hold the inventory at a higher cost and then you have a mix of low cost material coming into play, that’s a bit of a transition that helped in the gross margin.
Ishita Jain
Understood. All the best. I’ll join back in the queue.
Mark Saldanha
All right. Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of [Indecipherable] from Airey Investments. Please go ahead.
Unidentified Participant
Hi, congratulations on the great number. I wanted to know if there’s any stability with the freight prices.
Mark Saldanha
So it has improved. We have seen some dramatic improvement in the last, you could say 30-odd days or maybe — yeah, 30-odd days probably in the current — in the last one month. So we have seen it — we have seen it’s softening and it has improved from what we saw in the last quarter.
Unidentified Participant
Okay. Like could you give any ballpark figure because I think last quarter it was roughly around $6,000.
Mark Saldanha
Yeah, it was around $6,000, $6,500. Now we are seeing prices as low as $3,700, $3,600.
Unidentified Participant
All right. And do we expect it to go any lower since I think on average, you need to be around $2,000 max, like roughly three, four months back?
Mark Saldanha
Well, we always hope for the best and we hope….
Unidentified Participant
All right. Okay. And any update with any of the merger and acquisitions?
Mark Saldanha
No, presently nothing on table right now.
Unidentified Participant
All right. Thank you so much.
Mark Saldanha
Thank you.
Operator
Thank you. Our next question is from the line of Marsis Tarun, an Individual Investor. Please go ahead.
Unidentified Participant
Sir, as we observe in the revenues from the US has been increased a lot. Did we have any extra focus on the US over the UK?
Mark Saldanha
Well, the focus is on both geographies, but we expected — our order book status was strong in the US and that’s what we are executing. And the UK basically — the Q2 is always a softer quarter because it is summer out there. So it’s a very seasonal trend that normally happens. It normally picks up in the thirdf quarter and fourth quarter onwards. So we do expect UK to be there. But from a growth point of view, US will be the growth drivers followed by UK is still a very potential market for us.
Unidentified Participant
And can you give me an outlook for the FY ’25?
Mark Saldanha
This is the FY ’25. You’re talking of the…
Unidentified Participant
Q3, Q4.
Mark Saldanha
The Q3…
Jitendra Sharma
It will be a better quarter.
Mark Saldanha
We expect a stronger quarter than what we have done now because obviously, we do believe UK numbers will be a little better.
Unidentified Participant
Okay, sir. Thank you.
Mark Saldanha
Okay.
Operator
Thank you. Our next question is from the line of Adity Pal from MSA Capital Partners. Please go ahead.
Aditya Pal
Hi, thank you so much for the opportunity. Great set of results. Congratulations to the team. Just wanted to ask again, what would be the status of matching new capacities because Teva facility will cap out at INR800 crores odd.
Mark Saldanha
Sorry, did you say INR300 crores-odd?
Aditya Pal
INR800 crores.
Mark Saldanha
Yeah. Yeah, so obviously, then we have to look at expansion in terms of either new facilities or new blocks or new capex. So — but we do believe that we will — we are looking at touching INR800 crores plus, you are right in that, and then we are working on our next step of projects in terms of capacity enhancement or greenfield or M&A.
Aditya Pal
So because we have INR650 crores odd net cash sitting on our balance sheet and for the last few quarters, we are not — I would say last few years, we are not getting any new targets as well, even though we are putting our best efforts. So I was just thinking that if we could start investing in capacities in India, would that make sense?
Mark Saldanha
Believe me, we have tried. It’s not as easy. You don’t every day come across a Teva. So obviously some of the facilities available, the valuations are crazy. So we try to shy away from those deals and we always look for value-accretive M&As where we believe that — because we know that we need to invest a lot after acquiring, like we did for Teva. So we try to get it at the price range that we wanted to. So we are looking at it. You rightly said what’s next beyond Teva and that is very well on our mind and our team is working on that.
Aditya Pal
Perfect. Another question was, so our gross margin expanded quite well this quarter, both quarter-on-quarter as well as year-on-year. If you were to do — if you were to attribute the increase, how much would have come from our efforts of getting our raw materials contract manufactured, and how much would be raw materials of — because of raw material softening?
Mark Saldanha
So basically, I would say 99.9% is raw material softening. I don’t expect these numbers to — the gross margin to sustain. This is just a transition of what you will see out there. But definitely, we should be around 53% to 55% gross margin level.
Aditya Pal
Perfect. If I can squeeze one more, I wanted to know more on the Europe and UK. Definitely it has become a very large segment for us and we have become the top-five player and trying to become the top-three. And we are also launching new products in UK this year. If you can give some commentary on UK for the next two-odd quarters?
Mark Saldanha
So I can’t — so basically, I can give a much longer outlook than a quarter outlook because there’s always a seasonality effect in UK. But I do believe in the next coming years, UK will grow and we have a business module to see for the next five years to ensure that UK achieves new milestones. So the — it is a very important part of our business model. It is a very important geography in a country. So we do see that playing a very instrumental role moving forward. But again, the market size, we have to understand it’s not like US, but we will be amongst the top — we’re hoping that we should be among the top three companies out there in UK within the next two to three years.
Aditya Pal
Okay. Wish you and the team the very best.
Mark Saldanha
Thank you very much.
Operator
Thank you. Our next question is from the line of Kashish Takur. Please go ahead, sir.
Kashish Thakur
Thank you for the opportunity, sir. Sir, two questions from my end. Just wanted to understand the market scenario in Australia and New Zealand. So, like how long is the tender we get in the region, first, and second is like how big is the OTC market over there? What are the growth opportunities and what are we looking in or what are we planning to execute over there? That is first question.
Second question is towards the R&D spend. So what will be our R&D spend for FY ’25 and ’23 going ahead and how it will be bifurcated in that region? So can you just help us out with this, it would be very, very helpful, sir?
Mark Saldanha
Yeah. So Australian market is a very conservative market. In terms of the OTC portfolio, we can literally double our revenue from where we are over time. It’s not going to happen overnight or in one, two years. We always like to believe that it has — it will get us to AUD100 million mark eventually, but we have to work-through that. This year we are hoping to be close to AUD42 million and we are working towards that. Once we cross the first milestone of AUD50 million, our business model — business strategy is there to see it grow.
In terms of R&D spend, we are spending slightly below 2% right now. And I would see it being stable at 2% around. And it is not for one geography, it is for all our geographies that we are catering to, mainly the US, Europe, UK and Australia. So these are the geographies where most of our R&D spend is going on right now. In UK, we are definitely investing a lot in terms of R&D because we are looking at huge amount of filings and revenue potential with new product launches happening.
Kashish Thakur
Understood, sir. Thank you so much.
Mark Saldanha
Thank you.
Operator
Our next question is from the line of Dipesh Sanchit from Vanya Finance. Please go ahead.
Dipesh Sanchit
Yeah. Hi, am I audible?
Operator
Yes, sir.
Mark Saldanha
Yes.
Dipesh Sanchit
My question was regarding the US market. After the change of government and with all the noise of Trump coming, how do you see the business and do you see any potential risks or any particular changes which you need to do as a company to mitigate it?
Mark Saldanha
See, Dipesh, honestly I don’t have a crystal ball. If I had a crystal ball, I would have defined who the next president would be in the US. But nevertheless, it is difficult to know what stance the next government takes and the next president takes. And whatever policies and changes they do will have literally an advantage or an impact for everyone. It’s — I don’t think even US companies or US factories will be insulated from tariffs or anything of that stuff. So the impact will basically — will be passed on to the consumer, I guess.
So — but again, we can only speculate because like I said, I don’t have a crystal ball as to what they are planning next, but we all hope for the best and we will take calls or we will strategize only once we have a bit of more understanding and clarity on that.
Dipesh Sanchit
Fine. That was mainly my — one of my questions. I’ll fall back in line for any other question. Thank you.
Mark Saldanha
Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Runit Kapoor from Elara Capital. Please go ahead.
Runit Kapoor
Hello. Am I audible?
Operator
Yes, sir.
Runit Kapoor
Yeah. One question. So can you just give a guidance on FY ’26? How is it looking as of now in terms of revenue and EBITDA? And what is your capex guidance also?
Mark Saldanha
So I do believe, like I mentioned in my earlier opening statement and what I mentioned in couple of quarters back that our next milestone is to achieve INR3,000 crores within the next two years. And I think we are trending towards that. So we should be very close to a to hitting that number next year. I think our EBITDA will be in the range of 22 odd-percent. It’s stable. We don’t foresee any cuts where that is concerned from an EBITDA point of view.
Runit Kapoor
Okay. And this Teva manufacturing facility is right now at what capacity utilization?
Mark Saldanha
I could say about 40% to 45%. We are trending at very close to INR440 crores, INR450 crores odd. I use our trending because we’ve just started hitting new numbers. So when you look at that, I think we will keep increasing quarter-on-quarter and hopefully by next year, we will be trending at INR800 crores odd.
Runit Kapoor
Okay. Thank you. That’s it from my side.
Mark Saldanha
Thank you.
Operator
Thank you. Our next question is from the line of Adity Pal from MSA Capital Partners. Please go ahead.
Aditya Pal
Hi, thank you again for the opportunity. I just had a few follow-up questions. One was, sir, the freight cost, if you can give me for Q1 and Q2, how much would be the absolute freight cost?
Jitendra Sharma
So see actually freight cost during Q2, there was a substantial increase and like in terms of the absolute number, it was in the range of around say INR60 crores as compared to a cost of around INR40 crores odd in Q1.
Aditya Pal
Understood. And sir, if — and if I were to also try to bifurcate expenses for Teva, how much would Teva cost you out of our total cost of INR248 crores overhead?
Jitendra Sharma
See, Teva plant is — like it has broken even last quarter itself and it is basically contributing to the profits. So overall, like Teva plant is generating positive profits and it is not a drag on EBITDA. So I can comment that much right now.
Aditya Pal
Understood. Thank you so much.
Jitendra Sharma
Thank you.
Operator
Thank you. Our next question is from the line of Mythili Balakrishnan from Alchemy Capital Management Pvt Ltd. Please go ahead.
Mythili Balakrishnan
Hi. I hope I’m audible. I wanted to check with you a couple of points. One is on the US business side, has there been any change to the business model or have you added customers or [Foreign Speech] have you won wallet share? So could you just explain how this growth has come about for us?
Mark Saldanha
I would not say we’ve added a lot of customers. There might be the odd one here and there, but definitely we have expanded our product portfolios within the same customers. So that has given us obviously growth when you instead of three products, you start selling five products or six products. So that has definitely helped us to grow from that angle. From a business model, it’s still been very much the same as it was in the first quarter. The only thing is, like I said, our order book status is strong and that’s where we do believe the revenue generation will continue in the coming quarters and will grow.
Mythili Balakrishnan
Got it. And just to get a sense, some of the customers that we have are now reconsidering some of the number of stores that they have, they have reduced them, made other changes in terms of their business model of trying to split businesses, etc. Do you think any of that will have an impact in terms of our business?
Mark Saldanha
It may. It may to some extent, but again while we talk about that being a bit of a drag on certain — in a certain way, our product mix, our product growth into those customers have increased or literally doubled. So that basically overshadows any ifs and buts that may arise.
Mythili Balakrishnan
Got it. And to get us — sorry…
Mark Saldanha
The consolidation from the retailers is a positive thing from their point of view because I think they will just be — get a bit stronger from a profitability and a viability point of view.
Mythili Balakrishnan
Got it. And when we compete in the marketplace, is it the price that we are able to compete on because we have a very low cost of manufacturing or are there other aspects which are we — we are sort of much better than competition, which enables us to grab this market share?
Mark Saldanha
So I think it’s a mix of everything. You can’t rule out price. We have economics of scale. But at the same time, it is service, it is product basket, product portfolio that actually also helps in the entire gamut of things. But it is at the end of the day being reliable and being able to service the requirements.
Mythili Balakrishnan
Got it. And just to get a sense, in terms of the length of these contracts, what is the typical length for any one of these contracts with the customers?
Mark Saldanha
It ranges between — from two to four years.
Mythili Balakrishnan
Two to four years. And the product basket is something that we can increase within that or [Foreign Speech] it’s…
Mark Saldanha
Yeah, I mean, again depends on opportunities that come across. And every time a contract opens up, then you have an opportunity to either increase or lose. So it depends.
Mythili Balakrishnan
Got it. And lastly, my question is a bit of a bookkeeping one. The inventory seems to have gone up in terms of the inventory days. So just wanted to get a sense of like any particular reason why that is happening for the — quite some time now?
Mark Saldanha
There is basically new launches, our new launches into accounts, new product launches happening in. So we normally have to build up four to five months of stock before we — before they start taking product. And quite a substantial amount of our contracts started off only in the month of October so we had to stock this up before they literally turn the button on.
Mythili Balakrishnan
Got it. So that means that this inventory which is lying with us currently is now getting translated into sales?
Mark Saldanha
It is getting translated into sales until the new launches come or new product — or new launches into different retailers coming to play, then we have to reinvent the cycle. So we are still — this year, we are still way — we are still far away from hitting our order book status because the product launch is happening from now to March 2025, every month, every two months. So we have to ensure those products are launched that we have inventory to ensure that launch happens on day one.
Mythili Balakrishnan
Got it. So what I’m reading from this is that it will stay elevated till March at least.
Mark Saldanha
It will stay — yeah, till March, till we hit the optimum order and trend towards the order book that we plan for the year.
Mythili Balakrishnan
Got it. Anything on the Rx business that you’re seeing in terms of growth or [Foreign Speech] any launches, etc., that you are excited about?
Mark Saldanha
We have a couple of products that we are talking about, but we have UK have quite a few Rx items being launched and we have a huge pipeline coming in maybe in 2025 that we see new product launches happening out there. They all are high end Rx items and they’re niche products. So we expect a bit of an improvement in top line and bottom line happening out there. And US obviously the pricing pressure in Rx is as challenging as it always gets.
Mythili Balakrishnan
Got it. Thanks a lot. That’s all from my side.
Mark Saldanha
Thank you.
Operator
[Operator Instructions] Our next question is from the line of Kashish Thakur. Please go ahead, sir.
Kashish Thakur
Sir, just one question. Thank you for the follow up. Sir, we are doing very well in the three geographies in which we are present. So any plan that we want to diversify and we want to enter in other geographies as well, either in the domestic market or other, or if not now, then maybe when can we plan to do that? Can you just guide us with the same?
Mark Saldanha
Yeah. So right now, obviously, Europe is our focus region that we are looking at expanding. So that becomes a priority for us to look at M&As and we’ve been looking at it for the last year, slightly over a year on that front. So Europe is an interesting market that we’d like to get into. With regards to the domestic market, we’re always open to M&As but nothing concrete and the complexity of any domestic contract or transaction happening in terms of valuations and sentiments attached to it is always a challenging factor. But we have nothing on our plate right now where domestic is concerned. But we would love to — we always explore the — we explore any M&As based on its merit.
Kashish Thakur
Thank you, sir. Sir, as we just spoke about, we are looking for opportunities in the domestic market. So do we have any plan figure in our mind that we want to explore the opportunity which is within a specific figure, be it a small or a big acquisition?
Mark Saldanha
I mean domestic market is more branded than generic. And whichever company — if a company comes across to us, we would obviously try to evaluate the brand strength and the continuity of that brand and the growth of the brand. So it is a bit more different than most of the markets that we are into because globally, we are into generic market and out here, it’s a bit of a branded market. But like I said, so far, we’ve not had anything that came across, we’ve not even seen any potential targets which have come across. If they do, then we will have to evaluate it at that time, based on different parameters that we — when we historically look at M&As.
Kashish Thakur
Understood, sir. Thank you so much.
Mark Saldanha
Thank you.
Operator
Thank you. Our next question is from the line of Akash, an individual investor. Please go ahead, sir.
Unidentified Participant
Good evening. So you mentioned that INR3,000 crores as a revenue number possibly in the next coming years, which is — which now seems well within sight. So maybe, what’s next, like what would your long-term vision for the company be, maybe like for a 7 to 10-year horizon or are there any internal milestones that you currently have and where do you see the business grow? Just if you could throw some light on that, about your vision, that would be helpful. Thank you.
Mark Saldanha
So Akash, my vision is big, but it’s not — hey, I don’t want to sound crazy in terms of giving a number right now because here we talk — we have quarterly calls. So you’re probably the only investor who is asking us for a five to seven-year investment having outlook status. So yeah, we do have plans. We do have a five-year plan actually in place. We can — we do see visibility of where the company will go and it will evolve. It will evolve to a new company altogether. I mean a different company altogether, let’s put it this way. Like we were two years back, yeah, and if you look at us four years back where we were. So we have to — and I do believe once we grow with size, then the next milestone will be little bit shorter to achieve.
Unidentified Participant
Great, Mark. Thank you. Thanks a lot.
Mark Saldanha
Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Aejas Lakhani from Unifi Capital. Please go ahead.
Aejas Lakhani
Yeah, hi, team. Thanks for the opportunity. Sorry, I joined in late. Mark, could you just call out what is the run rate of the US business today and what is the order book visibility? Last I recollect it was closer to about $170 million, $180 million. So has that improved and what are we doing today?
Mark Saldanha
Okay. So basically, our order book stands at $200 million now.
Aejas Lakhani
Okay.
Mark Saldanha
There is an improvement. And like the last time that — it’s good. So we obviously keep trying to increase sales, right? So we don’t stop at $170 million or $180 million, we keep building our order book status. So our quarter number is trending at around $40 million odd right now.
Aejas Lakhani
Got it. And you’re expecting the acceleration to take place through the next year?
Mark Saldanha
Yeah…
Aejas Lakhani
From $40 million to $50 million…
Mark Saldanha
The first half of the year, obviously, most of the contracts started off only in September, October, a substantial amount. So we literally lost the first half of the year. And if you see, that’s where the growth will continue. We launched products in, some in July, some in August, some in September, a decent amount in October and then we have something in Jan, Feb, March. So we need a full cycle of 12 months to complete.
Aditya Pal
Got it. And all of these incrementally will be coming from the Teva facility, right? Hello?
Operator
Sorry to interrupt, sir. Sir, line from Management has been disconnected. Just give me a minute, I will connect it. Yes, sir. Please go ahead, sir.
Aejas Lakhani
Yeah. So, thanks. Mark, I just want to check. So basically the $40 million will start to trend to move towards $50 million by the next year and the incremental capacities will be coming from the Teva facility?
Mark Saldanha
Yeah, basically, it’s also coming from our US plant also therefore, I think we are growing from all the plants.
Aejas Lakhani
Got it, got it. And could you just explain the sequential increase in other expenses? I understood that incrementally INR20 crores came from the freight cost increase, but what explains the balance?
Jitendra Sharma
See, it is basically expenses coming out from Teva facility as well in terms of the manufacturing expenses and other expenses.
Aejas Lakhani
Got it. And we would be in the process of scaling up that facility. So what would we be operating at today?
Jitendra Sharma
We are operating at 40%, 45% right now. And — but again, like in terms of the overheads, we believe that we are almost fully committed in terms of our fixed overheads for Teva facility right now and now incremental revenue will not have proportionate increase in our other expenses. So I think definitely we see some operating leverage benefit getting in coming quarters.
Aejas Lakhani
Got it, sir. Thanks so much, and all the best.
Mark Saldanha
Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Kashish Thakur. Please go ahead, sir.
Kashish Thakur
Thank you for the follow-up. Sir, just one more follow-up question on Australia & New Zealand market, so just like what kind of major category would we see see over there? Is it Cough & Cold, Vitamins, like what kind of category has a higher sales? I know like Q4 will be higher for Cough & Cold as it will be — Q1, sorry, as it is maybe a reverse of what US basis, seasonally. But apart from that, how are the other performances segregated?
Mark Saldanha
So where we are still — we handle Pain, we handle Cough & Cold, Allergy and we handle Digestive. So these are the three categories we are following globally. So we are more OTC-oriented out there in Australia market and sometimes it’s just a very conservative market, so it takes a bit longer to grow in terms of what we want to achieve out there.
Kashish Thakur
Understood, sir. Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the Management for the closing comments.
Mark Saldanha
I’d like to thank all of you all for spending your precious time on an evening — on a very good evening out here. Thank you. Be safe and take care.
Jitendra Sharma
Thank you.
Operator
[Operator Closing Remarks]