NATCO Pharma Limited (NATCOPHARM) Q2 FY22 Earnings Concall Transcript

NATCO Pharma Limited (NSE:NATCOPHARM) Q2 FY22 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

Rajeev Nannapaneni — Director and Chief Executive Officer

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Analysts:

Rashmi Sancheti — Dolat Capital — Analyst

Darshita Shah — Antique Brokers — Analyst

Nitin Agarwal — DAM Capital — Analyst

Bino Pathiparampil — InCred Capital — Analyst

Nikhil Upadhyay — SIMPL — Analyst

Cyndrella Carvalho — JM Financial — Analyst

Ahmed Madha — Unifi Capital — Analyst

Harsh Bhatia — IDFC Mutual Fund — Analyst

Kartik Mehta — Klay Capital — Analyst

Ritika Agarwal — ValueQuest — Analyst

Tarun Shetty — Haitong Securities — Analyst

Unidentified Participant — — Analyst

Kunal Randeria — Nuvama Wealth — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to NATCO Pharma Limited Q2 FY ’23 Earnings Conference Call, hosted by Nuvama Wealth. [Operator Instructions]

I now hand the conference over to Mr. Kunal Randeria from Nuvama Wealth. Thank you. And over to you, sir.

Kunal Randeria — Nuvama Wealth — Analyst

Thank you, Vivian, and good morning, everyone. On behalf of Nuvama Wealth, I welcome you all for NATCO Pharma’s Q2 FY ’23 earnings call. With us, we have NATCO Pharma’s senior management team represented by Mr. Rajeev Nannapaneni, Director and Chief Executive Officer, and Mr. Rajesh Chebiyam, Executive Vice President, Crop Health Sciences.

Over to you, Rajesh, for opening remarks.

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Yes. Thank you, Kunal. Good morning, and welcome, everyone, to NATCO’s conference call discussing our earnings results for the second quarter of FY ’23. During this call, we may be making certain forward-looking statements or statements about future events, and anything said on this call, which reflects our outlook for the future must be reviewed in conjunction with the risks that the company faces. I’d like to state that the materials of the call, except for the participant questions, is the property of NATCO, cannot be recorded or rebroadcast without NATCO’s expressed written permission.

As always, we’ll begin with the results highlight and then we’ll follow up with an interactive Q&A session. I hope all of you have received our financials and the press release that was sent earlier yesterday. These are also available on our website. To summarize, NATCO has recorded consolidated total revenue of INR452.6 crores for the second quarter of FY ’23 as against INR415.2 crores for the same period last year, reflecting approximately about 9% growth. The net profit for the period on a consolidated basis was INR56.8 crores as against INR65.1 crores same period last year.

During this second quarter, the profit share associated with export of lenalidomide product to the US was minimal, as was also communicated during our prior calls. Pharma domestic business is beginning to show growth. And in our Crop Health Science division, the CTPR associated products were launched, which we are excited about and expected to boost growth in the near future.

I think we’ll take the Q&A — questions right now. The split in terms of revenue has already been shared. So, we can address those questions if you have. Over to Q&A.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Rashmi Sancheti from Dolat Capital. Kindly proceed.

Rashmi Sancheti — Dolat Capital — Analyst

Yes. Thank you for the opportunity and good morning everyone. Sir, any update on India business, like if you know how many launches, new product launches have we done in first half? How is our oncology business ramping up now, and also about your cardiac and diabetology segments? And any price hikes we have taken and have you added any new MRs, because we were also planning to do that from the second quarter?

Rajeev Nannapaneni — Director and Chief Executive Officer

Sure. Let me answer your question. So domestic is looking stable now. In the last — in the first half of the year, we launched about four brands in this Q2 — sorry, in the Q2. And regarding — in terms of growth of the domestic, I think we are looking at multiple acquisitions and hopefully, we’ll be able to find something. We’re hoping to close the transaction in the next few months. So, we are looking very seriously at multiple acquisitions. And this, I think, will drive the growth in the domestic business.

Rashmi Sancheti — Dolat Capital — Analyst

Sir, then how is your oncology business going on? I mean, are we seeing stability in that business or we are still seeing pricing pressure?

Rajeev Nannapaneni — Director and Chief Executive Officer

There’s not much pricing pressure. Things are more stable now. So the oncology revenues are stable. We’re having some good launches from oncology in the next few months. So, I think we see all these businesses growing, and I think to get a big bump in domestic, I still feel we need an acquisition. I think the challenge that we have is — we only cover specialty doctors. We don’t cover general physicians and larger segments of doctors. So, I think that’s what I believe, either we do it through increase of field force or we do it through an acquisition. I think that’s what we are working very hard at this time.

Rashmi Sancheti — Dolat Capital — Analyst

Okay, sir. And my second question is related to the CTPR. In the current quarter, have you realized any sales, or it is all pheromone sales only in your agro breakup? And also if you can update, you know, have we hired any new MRs for CTPR products, or we are planning to add new MRs over there?

Rajeev Nannapaneni — Director and Chief Executive Officer

Yeah, sure. I think CTPR, we didn’t have any sale at all. I think all the sale almost, I think we had very little — actually no sales at all almost. Lot of the sale will come in the coming quarters. We are very excited about the opportunity. I think in the near-term that’s going to drive the earnings. And we have stock and we have orders from the trade [Phonetic] and we’re looking forward to the rabi season, which is coming up in the next two months.

And also for the kharif, we are fully geared up and we are splitting this business up between two parts; our own brand and also third-party support. So both places, we are getting a very good traction and I think we have a lot of people reaching out to us from the trade and from other B2B customers, other corporates. So we believe we should do very well and I’m very excited and I think you’ll see a good bump in earnings in the next few quarters from [Technical Issues], that will drive our base business in the next few months.

Rashmi Sancheti — Dolat Capital — Analyst

Thank you, sir.

Operator

[Operator Instructions] The next question is from the line of Darshita from Antique. Kindly proceed.

Darshita Shah — Antique Brokers — Analyst

Hi. Thank you for the opportunity. Sir, my question is regarding CTPR, I wanted to understand how are we scaling up the product and what kind of revenue distribution do we expect from B2B and B2C? Are we looking at 50% B2B and rest from B2C? So, I wanted some idea from that. Secondly, I wanted to understand that how — like as what — are we placing our products at a discount to the current MNCs product that is available in the market, and how are we trying to sort of gain the market share from the MNC who is already there in the market?

Rajeev Nannapaneni — Director and Chief Executive Officer

In terms of discount, our discount is about 25% on the MRP and I’m giving additional discounts to the trade [Phonetic], so that — in fact, to give incentive to stock our product and push our products. So, we are definitely far more profitable to sell than the competitor. In terms of the split between B2C and B2B, I think way things are looking — again, unless the numbers come, I can’t guarantee. But I think 50% to 60% of the sale or even more will come from B2B and about 35% to 40% will come from B2C. I think that’s the split. I’m expecting — again, until the numbers come, we can’t say, but majority will come from B2B. I think that’s how that whole business works. I think people not only sell their own brands, they also give to other people for better reach. I think that’s how the whole business works. So that is my reading.

And I missed the question from the earlier lady. I think we are hiring reps actively now. I think we are gearing up for the rabi and the kharif season. I think we are in good shape. Again, I’m super excited and I think you will see the benefit of our foray in the next few quarters. Thank you.

Darshita Shah — Antique Brokers — Analyst

And any plans on starting exports for the products, or are we only going to first continue concentrating on the domestic market and then probably like — probably three or four years down the line?

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes. Domestic is the one that’s opening up for us. I think domestic is going to drive the near-term earnings. But meanwhile, our team is also working on some export registration that’s also parallelly ongoing. But that takes time because registrations take time outside India. But I think over a period of time, we’ll also see the benefit of that, but in the near term, it will be driven by domestic.

Darshita Shah — Antique Brokers — Analyst

Okay. And I just had one last question on the B2B part, could you give us a highlight on which — who are your clients on the B2B end? Are they MNCs or domestic?

Rajeev Nannapaneni — Director and Chief Executive Officer

We are still negotiating. That’s a little unfair to ask that question. But I think once — you will see the benefit of the earnings and the partnership. I think we’ll speak about it as we go along. But as of now, I think we are negotiating with everyone. I think…

Darshita Shah — Antique Brokers — Analyst

So the understanding is, for CTPR currently, we will start working on the B2C opportunity first with the Rabi season coming up and then eventually maybe in the second half of CY ’23, we’ll have some revenue coming in from the B2B aspect.

Rajeev Nannapaneni — Director and Chief Executive Officer

No. We are working both of them parallelly at the same time. We’ll get benefit of B2C and B2B starting from the December quarter itself. It will scale up a bit in March, and it will peak in June because that’s when the Kharif is.

Darshita Shah — Antique Brokers — Analyst

Okay.

Rajeev Nannapaneni — Director and Chief Executive Officer

We’ll see a very good growth slowly, but I think it will start off slowly in the December quarter. It will improve in the March quarter and it will peak in the June quarter. I think that’s my expectation.

Darshita Shah — Antique Brokers — Analyst

Okay. And just one last question on — are we planning — like are we expecting any kind of backlash coming in from the MNC anymore or we are clear on that path?

Rajeev Nannapaneni — Director and Chief Executive Officer

Okay. That will be the last question from you. I’ll go to the next participant after this. In terms of — just clarifying the legal position and legal update, I think we won the single bench order and we’ve also announced that they have challenged this in front of the double bench. And so let’s see how that goes. The order has been reserved. So let’s see how that goes. But we are very confident about our position and we believe strongly that I think we have a good legal position and that we are non-infringing. And I think the single judge order should be upheld by the double bench. I think that’s our personal belief.

Next caller, please.

Operator

The next question is from the line of Nitin Agarwal from DAM Capital. Kindly proceed.

Nitin Agarwal — DAM Capital — Analyst

Hello, thanks for taking my question. Rajeev, just sort of taking on CTPR again, what’s your — any sense on — have there been any more generic launches apart from yourself in the market so far?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think from what I understand lot of people are working on it. I think I heard about three, four companies who are working on it. But the only one that I’ve seen in the market so far is Best Crop.

Nitin Agarwal — DAM Capital — Analyst

Okay. So again, was the litigation position different than ours?

Rajeev Nannapaneni — Director and Chief Executive Officer

Again, see, Nitin, I don’t know exactly what their position is. From what I understand, what is available in the public domain is that they’ve also launched. But from what I also understand, their legal position in terms of the process patent has not been resolved yet by the single bench judge. I think they have launched it at risk and their legal position is not resolved.

I think — I would believe our position is cleared by the single bench. And so I think we have a better position, I would believe, on that count. And we also believe that we have stock. We have the inventory, as we all know. We have the materials. So, I think we are good to go, and I think it’s still a limited competition product. So, I think there is enough money for everyone. So, I think — and as I said, the strategy clearly is doing both B2B and B2C. So, we are hedging our bets. So, I think we’re very excited. Yes.

Nitin Agarwal — DAM Capital — Analyst

Secondly, on the US business, so you talked that it was a very limited contribution from lenalidomide this quarter. So, I guess, effectively, till the time next cycle starts, I think we’ve done with our contribution — share of lenalidomide. I think for Q3 also, there is not much one should expect on this account.

Rajeev Nannapaneni — Director and Chief Executive Officer

I think so, yes. Q3 will be primarily driven by the base business. So, I think there’ll be some improvement in the base business from this quarter hopefully because of the CTPR numbers. So, I think we should do better than Q2 and Q3, but the contribution from lenalidomide will be minimal. So, they’ll not have impact on the earnings, but you’ll see the benefit of that possibly in Q4 when we get our first quantity and Q1 of next year. So, I think Q4 and Q1 will be like what we had in the previous Q4 and Q1. I think my sense is that I think these quarters will be extremely good, and Q3 and Q2 will be little mellow compared to Q4 and Q1. And because of our agro business, that also will complicate things a little bit because generally Kharif and Rabi is where most of the sale happens.

So our agro gets — the sale from those seasons will be primarily driving the sale because we don’t have much of an international business so that we don’t get a consistent revenue in all markets. So in a way, Q4 and Q1 will be very exciting for two reasons. One is lenalidomide. Second is agro. I think that’s how the earnings are going to be. There’ll be a certain amount of seasonality, but I think all investors understand that. I think considering the nature of our business and the way we do things, I think you have to take a 12-months view on our earnings.

Nitin Agarwal — DAM Capital — Analyst

Okay. And last one. When you look at this quarter, so effectively whatever EBITDA that we’ve generated, is it fair to say that bulk of it is base business, recurring business? Is that a fair assumption to make?

Rajeev Nannapaneni — Director and Chief Executive Officer

Absolutely correct. I think this is — I mean, people always ask me what will happen if — this is actually a good example of a quarter where we had no — practically very little lenalidomide and we had the first shipment of Glatiramer. So that’s why the API sale was slightly lower and I think everything was stripped off. Still I think we had a very strong core business, which was what we got and which is going to improve next quarter because of CTPR. And so I think, yes, that’s a fair assumption. I think it stripped off all the big jackpots here.

Nitin Agarwal — DAM Capital — Analyst

And sir, if I can sneak in [Phonetic] a last one, when you look at the base business apart from the CTPR launch, what other things can one sort of look forward to over the next, say, 12 months to 18 months?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think — see, CTPR is going to drive the earnings in the next few months. Clearly, I think that’s going to be the overwhelming one. In terms of other launches, I think we are very excited about our subs. I think our subs are doing extremely well. Our Brazilian sub and Canada sub have done extremely well. Now if you look at the consol numbers, almost 40% or 50% of profitability is coming from the subs now.

If you look at the depreciation between the standalone and the subs, I think a good amount of earnings are coming from the subs. So, I think we should look forward for further growth in the Brazilian business and the Canada business. So last quarter, I think if I recollect, I think Canada was about 6.5 million. And I think Brazil was a little less than 3 million, but I see these numbers improving dramatically in the next two quarters. So, this is about 9 million to 10 million business, which should increase to 15 million, I think per quarter, I think in the next two quarters. I think that’s our expectation. So, I think that’s what we need to look forward to, in addition to CTPR on the base business. Okay?

Nitin Agarwal — DAM Capital — Analyst

Okay. Thank you, Rajeev.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Bino Pathiparampil from InCred Capital. Kindly proceed.

Bino Pathiparampil — InCred Capital — Analyst

Hi. Good morning. Rajeev, just a quick question on generic Pomalyst in the US. You had approval in 2020, but now the FDA website shows it’s discontinued. What’s the update on this product?

Rajeev Nannapaneni — Director and Chief Executive Officer

This has been approved and we have a launch date sometime in the future, a few years from now. And the exact date, we can’t reveal because of the confidentiality agreement. It’s just that it’s not an active ANDA pre-clinical stage like that. But the launch will happen. It will happen in due course and we have a settlement date in the future, which I will…

Bino Pathiparampil — InCred Capital — Analyst

Okay. So the FDA website shows it has discontinued doesn’t mean anything.

Rajeev Nannapaneni — Director and Chief Executive Officer

No, it doesn’t mean anything. That’s my understanding. Because we are not running the product. And I think that’s what happens. But I think we’ll — again, it’s a website thing. What I can tell you from our position is that we have an approval. We have a full approval and we can launch it and it is determined by the launch date, which is already signed and that’s it. So I think sometime in the future, we will launch it. Exact date, we will reveal, I think when it comes closer to the launch.

Bino Pathiparampil — InCred Capital — Analyst

Great. Thank you.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you very much next caller please.

Operator

The next question is from the line of Nikhil from SIMPL. Kindly proceed.

Nikhil Upadhyay — SIMPL — Analyst

Yeah. Hi good morning. Am I audible?

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes.

Nikhil Upadhyay — SIMPL — Analyst

Yes. I have just three questions. Rajeev, one on CTPR. So in the initial press releases, which we had sent, we had said the whole molecule size was INR2,000 crores. And in the recent press release where we had launched a combination, it said it was INR800 crores. So this INR2,000 crores is pure CTPR and there is something more over the combinations or INR2,000 crores includes everything, combinations, pure, everything?

Rajeev Nannapaneni — Director and Chief Executive Officer

That’s like this, Nikhil. INR2,000 crores is plain and INR800 crores is combination. So two together, I think it will be less than INR3,000 crores together. So what happened was we launched the CTPR first. That’s why we have launched that first and then we launched the combination later. So, I think that’s why we launched that later. But together, it is about a little less than INR3,000 crores. I think that’s our market estimate based on our market returns.

Nikhil Upadhyay — SIMPL — Analyst

Okay. And we have launched both pure as well as the combinations now?

Rajeev Nannapaneni — Director and Chief Executive Officer

That’s correct. Absolutely correct.

Nikhil Upadhyay — SIMPL — Analyst

Okay. Secondly, on the domestic part of the business, you mentioned that we are looking for acquisitions. If you can just help us understand, not on exact numbers, but what is the size or kind of acquisition you would be looking at? See, our current business is — domestic business is around INR400 crores. Would you look to see that post an acquisition, we crossed INR1,000 crores, INR1,500 crores kind of a domestic business scale? Or would we look at smaller acquisitions? Just some sense, maybe not exact numbers, but just some sense on how you are thinking?

Rajeev Nannapaneni — Director and Chief Executive Officer

I’m looking at a smaller one right now, Nikhil, I think, just to see how this — we just need to fill some gaps in our portfolio. We are looking at something around INR100 crores to INR150 crores worth of sale at this time. Those are the assets we are looking at. Nothing large. INR1,000 crores and all will become a very large acquisition. And so that I think — am I ready for something like that? The answer at this time is no. I think we’ll probably do a smaller one and we’ll see how that works. And I think as I said, we’re actively looking at a couple of transactions. Hopefully we’ll able to close something if all goes well with the due diligence. So, I think that’s the near-term plan. Okay?

Nikhil Upadhyay — SIMPL — Analyst

Okay. And lastly on the subs, you mentioned that the scale up — I think it would be a pretty significant scale up, if we say the subs would be doubling their revenue in next few quarters. So is it more driven by increased market share in the molecules we had launched? Or is it like some more new molecules we would be launching? Just some sense what drives this?

Rajeev Nannapaneni — Director and Chief Executive Officer

We got some good orders and some tender orders and some government orders we got in one particular sub, and also we have good launches in terms of new molecules. We launched, for example, apixaban in Brazil. We launched apixaban in Canada. So I mean, it’s driven by new launches and some one-times that have been driving. So overall, the subs are doing well. I think as the other caller asked me about the base business, I think what has happened is the subs have taken up the slack of the decline in the base — in the standalone, and I think that’s where we are getting a good traction. And I think my view of the business is also that we need to go global and add multiple territories and multiple countries with pipeline so that we globalize our business and bring about more stability in our mix.

I think we started this endeavor about three years, four years ago. And I think a lot of the things that we’ve said in terms of our, what you call, globalization, that we have done and spreading the risk has actually played out well. Subs are contributing. And also we have done one more launch in Australia, I think, just to give a flavor. It’s not a huge launch, of course, but again, it’s the first wave generic. Us and Sandoz are the only generics which have launched pomalidomide in Australia. So, we don’t have front-end presence in Australia. So, we did it through a partner. So, we are trying to globalize our business, use the filings that we do in as many countries as possible so that we get a better return on R&D. I think that’s how this business is going to move forward.

Nikhil Upadhyay — SIMPL — Analyst

Just one question, if you will permit me. On Revlimid Australia, there was some issue with respect to the settlement agreement. So what’s the sense because we were quite optimistic on Revlimid?

Rajeev Nannapaneni — Director and Chief Executive Officer

It’s all done. Both pomalidomide and Revlimid are settled and we have a fixed launch date for both pomalidomide and Revlimid. And pomalidomide has already been launched. Revlimid also will happen soon. We can’t disclose the date because of confidentiality, but I think as soon as the launch happens, we will also disclose that as well, once we are closer to the launch. It’s all sorted.

Nikhil Upadhyay — SIMPL — Analyst

Sure. Thanks.

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Thank you next caller.

Operator

The next question is from the line of Cyndrella Carvalho from JM Financial. Kindly proceed.

Cyndrella Carvalho — JM Financial — Analyst

Thanks for the opportunity. Rajeev, if we look at the domestic business, pure domestic business, how is the onco performing? And if I look at the IQVIA number, we are seeing a much faster growth than what is reflected in our numbers. Where is the gap, if you can highlight these two things?

Rajeev Nannapaneni — Director and Chief Executive Officer

IQVIA numbers for NATCO or IQVIA numbers for the industry you are saying?

Cyndrella Carvalho — JM Financial — Analyst

NATCO.

Rajeev Nannapaneni — Director and Chief Executive Officer

I see. IQVIA and all are not a true representation of anything because the problem with them is they don’t capture the free goods properly. So basically what happens in our business is there is X and there is bonus units. So, we give higher bonus units. Technically, our volumes are higher and it shows higher sale. So it doesn’t necessarily mean that you have higher revenue, right?

So that’s why the difference between what you see in IQVIA and what you’re seeing in an actual stated numbers. So what really matters is the numbers that we get, right, in terms of cash. So, I think, generally, IQVIA is not very accurate for like the specialty business that we do. I think it’s good for like more mass brands. It’s not so good for the more specialty products.

Cyndrella Carvalho — JM Financial — Analyst

Okay. That’s helpful. And on the onco side, how are we seeing the traction? Are we seeing some….

Rajeev Nannapaneni — Director and Chief Executive Officer

I think things are stable now. I think onco is doing reasonably well. If I can just check my numbers, give me a moment.

Cyndrella Carvalho — JM Financial — Analyst

Sure.

Ahmed Madha — Unifi Capital — Analyst

This quarter, I think it was about — INR55 crores was onco out of the sale for this quarter. Yes. So onco has been fairly stable. And we have a couple of good launches coming up by end of the year. And one big launch is — there is a court verdict pending on a product called eltrombopag. So Delhi High Court has reserved the verdict on that. So if that gets cleared up, then that will be a very good addition in domestic. And then there are few other products that we are launching.

So overall it’s exciting, it’s good, but I said, obviously to get good growth in that business, we need to expand the scope of the doctors that we’re covering. And because we cover limited specialty doctors, we are unable to grow. And I think we need to get out of that and I think the only way we can do that is by either building ground-up or you need to do an acquisition. And I think in my mind, I believe an acquisition is what we need and then add our R&D portfolio to that — in the acquired domain of doctors and increase the sale. I think that’s how I look at it. Okay?

Cyndrella Carvalho — JM Financial — Analyst

That’s helpful. And just on the subsidiary side like Canada, Brazil, and China and other Asian markets, so how should we look at it from key launches perspective? Anything that we should be looking at in terms of key launches that the subsidiary or the other EMs that you would like to highlight?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think we’ve mentioned it. I mean, I had mentioned about apixaban launch in more of the key markets and I mentioned about pomalidomide launch in Australia. And again, the other gentleman asked me about lenalidomide. So that also, the launch will happen and we will announce it when it happens. So I mean, these are the major ones and we have other smaller products and good set of filings that we have done. So, I think we’re excited. I think we have consistent pipeline coming through. So, I think we believe that we should grow these businesses.

Cyndrella Carvalho — JM Financial — Analyst

That should be over 18 months’ time frame or a little longer than that?

Rajeev Nannapaneni — Director and Chief Executive Officer

Somewhere in the near — in the next few quarters, we’ll announce as and when the launches happen. But yes, I think that’s what — we have good traction in the subs. Yeah.

Cyndrella Carvalho — JM Financial — Analyst

Thank you, Rajeev.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you. Next caller, please?

Operator

[Operator Instructions] The next question is from the line of Harsh Bhatia from IDFC Mutual Fund. Kindly proceed.

Harsh Bhatia — IDFC Mutual Fund — Analyst

Yes. Am I audible?

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes, Harsh. Go ahead.

Harsh Bhatia — IDFC Mutual Fund — Analyst

So, you spoke a little bit about the size of the domestic asset that you’re looking at. Just to clarify, would it be fair to assume that your existing base of MRs, around 300 to 400, that would be enough to sort of help the acquisition? Or would you have to add more MRs for the business?

Rajeev Nannapaneni — Director and Chief Executive Officer

We need to probably add more MRs, if possible [Phonetic]. It depends on what segment we acquire. It depends on what acquisition will come through. If it’s — see, where are we present? Let’s answer that question first. So, we are present in oncology, we are present in gastro and we are present in cardio. Cardio again, specialist cardio, not your general physician cardio. So, we are only present in these three segments primarily.

So if we add, let’s say, a brand — again, I don’t want to give too much away because nothing has come — unless we close an acquisition, I can’t answer this question. So if you buy outside these three segments, then you need to add reps. If you buy within three segments, then you don’t have to add reps. So again, you’re asking a very hypothetical question, but I think I’m very clear that either we enhance the strength of this portfolio or we add additional portfolios in terms of our therapeutic area so that we can expand our business depending on what we could close.

Harsh Bhatia — IDFC Mutual Fund — Analyst

Sure. And in terms of valuations, of course, you are seeing pretty extensive valuations come into the market.

Rajeev Nannapaneni — Director and Chief Executive Officer

We will know. I think we’ll disclose it. Yes. So, these are all things that you can only talk about once we close the transaction. I think it’s premature to say anything at this point. Okay?

Harsh Bhatia — IDFC Mutual Fund — Analyst

Fair enough. And anything on the inventory side? Last quarter we had almost INR100 crores of agrochem inventory. So this quarter we have somewhere around….

Rajeev Nannapaneni — Director and Chief Executive Officer

I think in terms of standalone inventory, if I remember my numbers, I’m just taking it out so that I can be precise with you. INR665 crores is the inventory in our books as of 30th September 2022, of which about INR110 crores is the agro inventory. Yes. So if you remove that out, I think it’s a fairly reasonable amount of inventory we are carrying. So, I think we’re good to go.

Rajesh Chebiyam — Executive Vice President, Crop Health Science

It includes raw material, intermediates, and the finished products.

Rajeev Nannapaneni — Director and Chief Executive Officer

Finished products and all. And generally supply chain has become very painful now post COVID, as you know. And I think what we could buy deliveries for three months, four months earlier, now it’s six to nine month cycle. So if you want to plan a launch or something, you need to have a six to nine month head start. So I think because of that, I think the inventories have been a little bit on the higher side, but we are trying to do things we can reduce, but I think broadly, that’s the situation.

Harsh Bhatia — IDFC Mutual Fund — Analyst

Thank you. Thank you

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Thank you.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

The next question is from the line of Kartik Mehta from Klay Capital. Kindly proceed.

Kartik Mehta — Klay Capital — Analyst

Yeah hi, thank you for the opportunity. I just have one question, can you throw some color on how Revlimid market share will — or other launches will impact? Very specifically on the fact that you mentioned that Q4, Q1 is when you and your partner would — or at least you would be recording the sales? And is it possible to have some color on when is the inventory reset in terms of increasing market share? Is it after six months at the start of the calendar year?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think we’ll get additional quantities, Kartik. As I said, the earnings of that will reflect in Q4 and Q1. I think we are ready with the product. We are good to go. Does that answer your question or…?

Kartik Mehta — Klay Capital — Analyst

Yes. So every year, it will be in that Q4, Q1 calendar year ’25 as per the settlement? Is that fair to assume?

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes. Correct. Yes, because the launch date is March 1st, Kartik. So one year expansion is [Phonetic] March 1st. That’s why the cycle is around that. See, the others are like — the others are booking in September because their launch date was in September, right?

Kartik Mehta — Klay Capital — Analyst

So Rajeev, I’m just trying my luck here.

Rajeev Nannapaneni — Director and Chief Executive Officer

Everybody has a different cycle because of their launch dates. Yes.

Kartik Mehta — Klay Capital — Analyst

Yes. So just trying my luck here. Is it safe to hazard a guess that everybody’s reset clause is after 12 months or is it — just trying to…

Rajeev Nannapaneni — Director and Chief Executive Officer

Kartik, I can speak about myself. Don’t ask me about others. And I think based on what they have told us, this is what our information is. And other people, you ask them. [Indecipherable]

Kartik Mehta — Klay Capital — Analyst

Thank you, Rajeev.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

The next question is from the line of Ritika Agarwal from ValueQuest. Kindly proceed.

Ritika Agarwal — ValueQuest — Analyst

Yeah hi sir, thank you for the opportunity. Yes. My first question is on CTPR. What is the kind of market share take up we expect in the next 1, 1.5 year? And secondly, what is the competition that we expect again in the similar kind of time period in CTPR?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think we should take good share, Ritika. I think my view is that, internally, we have been very conservative. I think 10% to 20% share at least we should get or even more if we are lucky, but I think that’s the minimum we are targeting. And it’s a very good product. So, I think we should get some traction. Competition-wise, my expectation is, obviously, Best Crop, we’ve already mentioned. They are already there and maybe another two people will join. We’ll have limited number of suppliers. It will not have too many suppliers.

I think there’ll be limited number of suppliers, but the market is so large. I think there’s enough money for everyone at least for the next few quarters for sure. And we have a very good head start and have a very reasonable legal position. So, I think we are in good shape. How much we will make? Again, time will tell. I don’t want to hazard a guess, but when market formation happens, I think we’ll give you more insights. But I mean, if you ask me instinctively, the answer is that I think we should do well. And I think that’s — I think that’s our expectation. Okay?

Ritika Agarwal — ValueQuest — Analyst

Sure, sir. Sure. Secondly, can you talk a little bit more about your pipeline in the US going ahead post Revlimid?

Rajeev Nannapaneni — Director and Chief Executive Officer

Sure. Sure. Absolutely. So I believe — I mean, again, US is going to be a super competitive business and I — again, these are my personal views. Again, I don’t necessarily subscribe to the general wisdom, but I still believe that you need to deliver at least three, four very large FTF type of products or complex generics type of products to be competitive in the US. You will have the more competitive products — the more common products you do, the more competitive it is, there is less value in that business.

So, you need to have a mix of both. And I think our target internal — I think I’ve said this in the past. If you are able to deliver another three, four products like Revlimid in the next decade, I think your whole decade is set. So, I think we are working in that endeavor. We are primarily focusing on oncology, peptides and oligopeptides. And hopefully, I mean, we’ve done — honestly we’ve done two other filings recently and we believe both are interesting FTF products. Subject to confirmation of FDA’s position, I think we can speak about that. But I think the R&D focus is on the track and I believe that we’ll able to deliver.

Ritika Agarwal — ValueQuest — Analyst

Sure. Sure, sir. Last question. What’s our cash balance currently?

Rajeev Nannapaneni — Director and Chief Executive Officer

Just give me a moment here. Rajesh, can you answer that question?

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Cash, cash equivalents right now, as of end of Q2 is about INR1,000 crores and borrowings about INR82 crores. Of that, INR50 crores of foreign bill [Phonetic] discount associate.

Ritika Agarwal — ValueQuest — Analyst

Sure, thank you sir.

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Thank you.

Operator

[Operator Instructions] The next question is from the line of Tarun Shetty from Haitong Securities. Kindly proceed.

Tarun Shetty — Haitong Securities — Analyst

Yes. Just one question from my side. Any update on Imbruvica?

Rajeev Nannapaneni — Director and Chief Executive Officer

No, no, we don’t have an update on Imbruvica at this time. Next question.

Operator

The next question is from the line of Nikhil from SIMPL.

Nikhil Upadhyay — SIMPL — Analyst

Yes sir, thanks for the opportunity. Just one follow-up on the acquisition. Rajeev, what I’m trying to understand is that if you look at like a small acquisition of, say, INR100 crores, INR150 crores, we — what kind of a scale advantage we plan to achieve from such an acquisition? Because even at INR100 crores, INR150 crore, considering the size of the domestic market or even our current size, it won’t materially change the way the business profile is. So, I’m just trying to understand what’s the idea behind a small acquisition, and even when we have a good cash balance and we see cash only accruing for us.

Rajeev Nannapaneni — Director and Chief Executive Officer

Nikhil, you are asking a very complex question. I’ll split the question into two parts. What’s the point of buying a smaller brand? I think the question is, you are buying a smaller brand because you’re getting access to, what I call, a market that you are not present in. So let’s say — I can’t give too much away, but let’s say you are operating in segments A, B, C and you want to enter segment D. INR100 crores acquisition allows you to enter a segment D, which gives you access to the doctors and the stockists and that therapeutic segment. Okay? So, you build a business brick by brick.

You can’t say that I build a house in one shot, buy a house in one shot. You either taken an approach of buying a house or you do it by brick by brick. This will take care of the brick. This is approaching the brick also. So, you’re getting that therapeutic segment that you are not there, okay? So, I think that’s how you build businesses. You add a country, you add a therapy or you add a product. That’s how you have to do it.

So, your specific question, what am I looking at? So, I answered it directly, what I’m looking at this time. So, you asked a bigger philosophical question, Rajeev, what is — 400 going to 500 will not make much difference, how will you take it to 1,000 or 2,000, which means that you need to do a very large acquisition, which is — let’s say, which will double our revenues or something very substantial.

Even that, it is something that we are looking at, but at this time, I mean, you have to get the right asset and these are not easy acquisitions to do and they won’t happen overnight. But am I looking and I believe that something like that has to be done so that we can increase our scale? Absolutely yes. To answer that question, it’s a yes. Is it going to happen now in the next quarters? That’s a bit much to ask. But at a philosophical level, yes, I agree with you because we are — we have to build scale and it’s the only way you are going to compete in this business. And I think at some level, we have to do a very large acquisition, which will help you build up scale. Hopefully, we’ll be able to speak about that over a period of time. Yes.

Nikhil Upadhyay — SIMPL — Analyst

Sure. Thanks for the explanation.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

The next question is from the line of Nitin Agarwal from DAM Capital. Kindly proceed.

Nitin Agarwal — DAM Capital — Analyst

Thanks Rajeev. On the filing that you mentioned in the US, by when do you get a sense about your first-to-file status on these products?

Rajeev Nannapaneni — Director and Chief Executive Officer

I don’t know, Nitin. So both of them, we filed. I believe that we have an interesting position. So first, we have to wait for the acceptance of the ANDA and then we’ll know what date that it got accepted and then we’ll have clarity whether we have an FTF. So, we’ll play out — both of them have been filed. So typically acceptance and all takes about 60 days to 90 days. So, we’ll hear about it in the next few weeks hopefully, if all goes well, assuming we end up with an FTF. I am assuming we have a chance, but again, until you file and get the acceptance, you can’t confirm that. But to answer your question in the next 60 days to 90 days.

Nitin Agarwal — DAM Capital — Analyst

Right. And so if you’ve probably answered that earlier, I missed it, but if you look through the US pipeline beyond FY ’23, how many “plus $10 million, $20 million” launches that you think, broadly speaking, that you can have over the next three years, four years?

Rajeev Nannapaneni — Director and Chief Executive Officer

$10 million launch you are saying or $100 million launch you are saying?

Nitin Agarwal — DAM Capital — Analyst

$10 million to $20 million plus — $20 million plus launches?

Rajeev Nannapaneni — Director and Chief Executive Officer

In our pipeline you’re saying, already which we have filed?

Nitin Agarwal — DAM Capital — Analyst

Yes. One that you already filed, which can probably get approval over the next, say, three years to four years.

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes. Sure. I mean, I can run through that one. It’s there in our Investor Presentation. I think the USD10 million, USD15 million type of products, I think you have carfilzomib, kyprolis. We have first-to-file on one particular strand and we have a shared first-to-file on the biggest strand. Then you have bosentan, then we have trabectedin, then we have — idelalisib is another one that we filed. So, these are like some of the ones that we have publicly disclosed and I think these will play out in the next few years.

Nitin Agarwal — DAM Capital — Analyst

Okay. And secondly on the subsidiaries, you talked about a significant delta in the subsidiaries. These are, again, what, largely driven by Revlimid and Copaxone launches or something else that will drive these subsidiaries?

Rajeev Nannapaneni — Director and Chief Executive Officer

No, they are different portfolio and different products. I think Canada, I think we have — Revlimid is big in Canada as well. So, that’s a significant one. Brazil is driven by, I think, a few other products, I think everolimus and apixaban. So, there is different products in different territories.

Nitin Agarwal — DAM Capital — Analyst

Okay. And I’m sorry — and lastly on the agri bit. So barring the CTPR launch in India, if I get it right, you said you are also looking at exploring opportunities for exports on CTPR registrations in overseas markets. And how do we look at the agrichem piece beyond CTPR for India as well as overseas?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think we need to build a reasonable size in domestic with CTPR. And again, we are also expecting reasonable orders from exports. Plus, we have other product ideas. Pipeline we have, we have about five to seven products we have pipelined in the agro business, which will play out in the next few months. But these filings will be done in the next few months. So once we do the filings, I think we’ll update the market. So, we have not done the filings. That’s why we’re not talking about the pipeline. But to answer your question in short, we have other products similar to CTPR which are interesting, which I believe will bring revenue.

Nitin Agarwal — DAM Capital — Analyst

And on these products, your launch — your strategy is again driven around sort of plugging loop — figuring out loopholes, leveraging loopholes in the regulatory processes or if you look at litigation or regulatory-driven opportunities even in the newer molecules?

Rajeev Nannapaneni — Director and Chief Executive Officer

No, no. I think our strategy will be driven primarily by the science of the product where we are doing an interesting product or driven by patent litigation, which is what our strength is, I think, in that area.

Nitin Agarwal — DAM Capital — Analyst

Okay.

Rajeev Nannapaneni — Director and Chief Executive Officer

And also, Nitin, we are focusing also on molecules which are — what we term, which is like 9(3) applications, which are a little bit more unique, first time, which differentiates us than the common.

Nitin Agarwal — DAM Capital — Analyst

But Rajeev, we are not looking at partnerships here, which is what probably most of the other Indian companies have been doing. We’re looking at — we’re not looking at the partnerships.

Rajeev Nannapaneni — Director and Chief Executive Officer

We are doing that. No, CTPR also we have said that. I think 50% to 60% of the revenue, we’re getting from partnerships only. I think 35% to 40% is our brands. So we have…

Nitin Agarwal — DAM Capital — Analyst

No, no. What I meant is from the innovators.

Rajeev Nannapaneni — Director and Chief Executive Officer

See, Nitin, we had this conversion even in the past as well. I think generally, we are a very aggressive generic company. And when you are a very aggressive generic company, you can’t do innovator alliances. You can’t have it both ways. You can’t say that I’ll go after your patent, but I will also supply this product to you. It doesn’t work like that, Nitin. You have to choose one camp.

My belief is we are an independent aggressive generic company, and I think you have to stick to your core strength. I think if you’re doing innovator business, then you can’t be aggressive on patents. Isn’t it? I mean, you have to let go certain portfolio or you need to let go the whole concept of doing patent challenges. So, that’s not the business we are in. And I think I am very clear in my mind. I think we will go after anyone, if we believe that there is a patent weakness and we believe that there’s a patent [Phonetic] weakness. I think that’s the business model we have chosen and we have to stick to that. Okay?

Nitin Agarwal — DAM Capital — Analyst

Okay, thank you.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Ahmed Madha from Unifi Capital. Kindly proceed.

Ahmed Madha — Unifi Capital — Analyst

Yes, thank you. Yes. On CTPR, just an important clarification. The double bench order, you said it’s been reserved. Is there a possibility of the innovator getting a stay because we have planned sales for both Rabi and Kharif? So is that even a possibility?

Rajeev Nannapaneni — Director and Chief Executive Officer

I don’t think so. I don’t think so. I think the hearing went well. Again, obviously the — I’ve said hearing has happened, order has been reserved. I think we believe very strongly in our position. And I believe — I think it will — the single bench order will be upheld. I think that’s — and we’ll give a legal update as soon as the double bench decides on it.

Ahmed Madha — Unifi Capital — Analyst

Okay. Great. So, we will go ahead and start building inventory for the Kharif season also?

Rajeev Nannapaneni — Director and Chief Executive Officer

I think that’s the idea. I think we have enough stock for the next Rabi, and I think we’re trying to build stock for Kharif as well because this inventory won’t be adequate. That’s correct.

Ahmed Madha — Unifi Capital — Analyst

Okay, thank you. All the best thank you.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you.

Operator

The next question is from the line of Cyndrella Carvalho from JM Financial. Kindly proceed.

Cyndrella Carvalho — JM Financial — Analyst

Thanks. Just one question on the capital allocation. We understand the part from an inorganic acquisition perspective. But is there any other thought process that you carry apart from building the product basket in various geographies that also we have understood? But is there anything because there will be a significant cash flow coming to us in these coming two years to three years?

Rajeev Nannapaneni — Director and Chief Executive Officer

Say that question. I didn’t understand your question. You understood whatever the cash flow you said in the end, I didn’t understand your question. Can you just rephrase that question, please?

Cyndrella Carvalho — JM Financial — Analyst

I just wanted to understand what is the capital allocation plan for us.

Rajeev Nannapaneni — Director and Chief Executive Officer

Capital allocation plan for the cash that’s coming in, the next few months? Is that correct?

Cyndrella Carvalho — JM Financial — Analyst

Correct.

Rajeev Nannapaneni — Director and Chief Executive Officer

Did I understand the question correctly? Okay. I think about 20%, 25% dividends we are doing. So, that is anyway going to be done. And anyway, we are doing some small level acquisitions, which will not be too much stress on the balance sheet, but however, we can use that. But I think that’s the near-term plan. And some of the cash flow that’s coming through, we’re also investing in R&D, in capital and in also doing interesting Paraforce. I think, broadly, little bit in dividends, little bit in accumulation of cash, keeping it for an acquisition and within R&D. I think that’s more or less what we plan. Okay?

Cyndrella Carvalho — JM Financial — Analyst

Okay. Thank you sir.

Rajeev Nannapaneni — Director and Chief Executive Officer

Thank you

Operator

The next question is from the line of Darshita from Antique. Kindly proceed.

Darshita Shah — Antique Brokers — Analyst

Thank you for the opportunity again. I wanted to understand the manufacturing capacity we have currently for agro. And I suppose we’ll be manufacturing the technicals and then probably formulating the product as well, or are we selling the technical directly in the market?

Rajeev Nannapaneni — Director and Chief Executive Officer

We are doing — primarily we are manufacturing the technical and the formulation. Both facilities are ready. So, this is a separate facility that we have built in Andhra Pradesh. So it’s running and we’re good to go. What will sell more and less and all, I think time will tell. Again, we’re trying to close contracts depending on different customers have different needs. But yes, I think as much as possible, we’re trying to sell the formulation but we’ll see how it plays out.

Darshita Shah — Antique Brokers — Analyst

And what is the capacity for technical?

Rajeev Nannapaneni — Director and Chief Executive Officer

Capacity, I think we are good. I think to service the 20%, 25% market share, I think we are good. We are extremely confident. I think we have enough capacity both in the filling line and also on the technical side.

Darshita Shah — Antique Brokers — Analyst

So, this will be a dedicated plant or will it be an MPP, as you mentioned that we have another five to seven products in the pipeline? So will we be able to manufacture those products?

Rajeev Nannapaneni — Director and Chief Executive Officer

We can do other products also. We can do — it’s a multi-product capability. We can do other products. This is going to be the key product. This is the product that’s going to drive the revenues.

Darshita Shah — Antique Brokers — Analyst

Okay. All right. Okay. That’s about it. And I just had one question on the Best Agro bit. Are we challenging them? I mean, because I suppose we have the 9(3) registration for the product and we should be ideally given a patent of about three years from the Central Insecticide Board. Are we challenging like Best Agro in terms of being able to sell that product in the market at all?

Rajeev Nannapaneni — Director and Chief Executive Officer

Challenging? What do you mean by challenging? I don’t understand.

Darshita Shah — Antique Brokers — Analyst

I mean, given that we have the 9(3) registration, how will we be selling the product in the market? I mean, what kind of loopholes…

Rajeev Nannapaneni — Director and Chief Executive Officer

See, I’ll tell you. We’re challenging them means we are competing with them. I think that’s all I can say. That’s how I look at as a challenge.

Darshita Shah — Antique Brokers — Analyst

Challenging in terms of, like from legal perspective.

Rajeev Nannapaneni — Director and Chief Executive Officer

No, no. Not with them. Our challenge is only with FMC. Not with Best Crop.

Operator

The next question is from the line of Narendra [Phonetic], an Individual Investor.

Rajeev Nannapaneni — Director and Chief Executive Officer

Yes, Narendra.

Unidentified Participant — — Analyst

Yes, all right. I have two questions. One is, in the past, we talked about filings in China. So are we pursuing them or sort of stopped doing that? And another question is around expenses. Are there any one-off expenses in employee cost or other expenses or R&D?

Rajeev Nannapaneni — Director and Chief Executive Officer

Okay. To understand your first question, you said are there any filings in China? We actually have multiple filings in China and we’ve actually got one registration in China too. I think we got registration for oseltamivir capsules in China. We didn’t do so great in the tender. I think we got some small orders, but nothing large. The China business also is interesting. Provided you are like the first, like every generic business, you have to be in the first wave with a unique product.

Otherwise — it doesn’t work in any market. That’s the only USP that works. So, I think to answer your question, we are active in China but through partnerships of course. And so we have about five or six products that we are actively pursuing registrations, but of which, one came through. So your second question was on the — what did you say about salaries and other expenses? What was the question, sir? I didn’t I understand your question. Can you say that again?

Unidentified Participant — — Analyst

One-off expenses like only those expenses….

Rajeev Nannapaneni — Director and Chief Executive Officer

One-off expenses this quarter, no.

Unidentified Participant — — Analyst

And those will not be recurring [Phonetic] in the further quarters.

Rajeev Nannapaneni — Director and Chief Executive Officer

In terms of employees, I think we already did the charges already. I think whatever employees that we did in the VRS scheme, I think a lot of the VRS was reflected in the previous quarter — previous quarters rather. This quarter doesn’t reflect any VRS numbers. Other expenses and all, it depends on the product. Sometimes if you do an interesting filing and then — then suddenly there could be a pop of INR20 crores, INR30 crores in other expenses, but otherwise nothing. I mean, these are fairly normalized other expenses. But sometimes yes, you could have a pop based on, if you’re doing an allocation for a particular R&D project, but to say that — it happens based on a project. At this time — so this quarter, I think it doesn’t happen. I think that’s the best way I can answer that question. Okay?

Unidentified Participant — — Analyst

[Indecipherable].

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Rajeev Nannapaneni — Director and Chief Executive Officer

Again, thank you, guys. Thank you for your questions. And thanks for the time to interact with us and have a good day and bye-bye. Thanks.

Rajesh Chebiyam — Executive Vice President, Crop Health Science

Thank you all.

Operator

[Operator Closing Remarks]