Shilpa Medicare Ltd (SHILPAMED) Q3 FY23 Earnings Concall Transcript

Shilpa Medicare Ltd (NSE: SHILPAMED) Q3 FY23 Earnings Concall dated Feb. 15, 2023

Corporate Participants:

Vishnukanth Bhutada — Managing Director

Alpesh Dalal — Chief Financial Officer

Analysts:

Siddharth Rangnekar — CDR India — Analyst

Kaustav Bubna — BMSPL Capital — Analyst

Pankaj Pandekar — Individual Investor — Analyst

Badri Vishal — Bajaj — Analyst

Ritwik Sheth — One-Up Financial — Analyst

Tushar — MK Ventures — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shilpa Medicare Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, Siddharth.

Siddharth Rangnekar — CDR India — Analyst

Thank you, sir. Good afternoon, everyone, and welcome to the conference call hosted by the management of Shilpa Medicare Limited to discuss the quarterly performance for the quarter ended December 31, 2022, and the strategic initiatives that are underway. The management is being represented by Mr. Omprakash Innani, Chairman of Shilpa Medicare; Mr. Vishnukant Bhutada, Managing Director; and Mr. Alpesh Dalal, Chief Financial Officer, Mr. Vishnukanth Bhutada would lead the discussion with thoughts on the business model and his perspectives on the strategy. He would be succeeded by Mr. Alpesh Dalal who will spend some time discussing the financial aspects of the performance with you. There will be an opportunity for your queries to get answered at the end of those opening remarks from the management.

Before we begin. I would like to state that certain statements made on today’s call could be forward-looking in nature and a detailed disclaimer in this regard has been captured in the conference call invitation, which is available on the stock exchange website.

I would now like to invite Mr. Vishnukanth to take this discussion forward. Thank you, and over to you, Mr. Vishnukanth.

Vishnukanth Bhutada — Managing Director

Thanks. Thank you for joining us on today’s call to discuss the third quarter performance of the Shilpa Medicare Limited and its operating and strategic development following my perspective, I shall be followed by our CFO, Alpesh, who will share the financial overview. At the end of our remarks, we will take the questions from the participants, as earlier mentioned.

We have made Shilpa Medicare to have the presence in multiple segments including API formulation, oral dissolving films and the transdermal and biologics. I shall address each of these business respectively today.

The most important business among all is the commencing of the API. So we offer a wide variety of the products within the API in oncology and non-oncology, peptide, polymer CDMO, and intermediates at its core portfolio companies of complex oncology products. Where we are the leaders in these particular products and high end only non-oncology offerings. As on 31st December ’22, we had about the 28 Onco APIs and 13-plus non-oncology APIs in the market. And we have filed almost 224 drug master files globally. Our products is available in the registered — in the U.S., EU and rest of world markets like Canada, Japan, Russia, LatAm and China, including China.

Within Oncology, we are continuously at the work to further optimize processes in order to have the best products in the market. To enhance our capability and presence in non-oncology, to bring the similar way of growth like Onco, we have started introducing new molecules in non-oncology segment. We have recently commissioned these two products, Citicholine and the Phenylephrine apart from the Ursodeoxycholic acid also has been done. In the peptide segments, we have completed the two products plant validation already. And next year, the almost another three to four product plant validation will be completed. As you know, peptide is a very complex category and I am proud to — all of our team for the commercializing in the plant and scaling up these technologies. In CDMO, we are partnering MNC [Phonetic] for their high-end API requirement.

Our research oriented approach is what used to be an asset as we grow our influence in the API industry for –. In CDMO business, we’re getting number of inquiries, some of the inquiries has been crystallized. And we are getting some reputed order also from our customers. This segment can be future growth segments where very less competition is involved in there. Next, I will speak on a formulation, where we have made inroads in a few years back. Over here, we are engaged in the production of the liquid and lyophilized injectable sterile dry powder and oral solids for the oncology, building upon our capabilities in this domain. Our teams are also creating portfolios of the complex products where we have introduced number of new products we have produced — we launched already the Pemetrexed RTU injection into the Europe and the Capecitabine dispersible tablet, 1,000 mg first time in the world in India. Soon we will be able to register the Capecitabine 1,000 mg also in Europe and other parts of the world.

Upon launch of the complex products, we are also going to launch Dr. Clot [Phonetic], it is a hemostatic spray in India, by April ’23, which is again innovative product which can be used in various segments, including the Army, the dental surgery or any of the parts where the blood hemorrhage’s possibilities are there. It is again a unique product first time in the world developed and we have worldwide patent for this Tranexamic Acid Spray, which the name has been given as Dr. Clot. Our finished dosage from manufacturing facility at Jadcherla recently received the Health Canada GMP approval, which shows the quality of the unit, which consistently we’re following, after the USFDA inspection, we have completed the successful inspections of the various authorities, including the Canada and TGA, and the various customers also. We have completed all our the — completed these remediation initiatives and have made the required submissions to the authority and we’re soon meeting — we are waiting from the FDA to come and inspect our facility. Again, a lot of products, the three products, we’re transferring from our site to the other sites, just to have the risk mitigations and the next year probably we should be able to commercialize all these three products in Oncology segments from these — the CDMO manufacturing site.

Coming on to the ODF and transdermal segment. Our [indecipherable] is operational, we have almost 18 to 20 products in ODF and two to three products in transdermal, we have completed the — plant validations already have been done. We’re proud to say that in the first instances itself we have received the UK-MHRA approval for the ODF and transdermal plant and we have — as on today, we are commercializing now, we have registered our products in the U.S. And five products we’re soon going to commercialize into the U.S., the shipment has been already made to the U.S. And these are the nutraceutical products that all five products we should be able to launch in the coming years there. We’re looking for the tapping of the new market in this category where such technologies can bring in value addition in EU and ROW market.

Within the biologics, we’re gearing to launch Adalimumab within India. Recently, we have received this — the segmenting approval also from the Government of India to launch Adalimumab, so inspection is going to happen soon of our plant to give the license for Adalimumab launching. Commercial productions and all is geared up already for the Adalimumab. This is the high concentration Adalimumab which we are proud to say that we are the only company during that time when we completed, now [indecipherable] is also large but we are the only company where we have completed initially the successful of the same Phase III also. The product development takes long time here. We believe we have an attractive portfolio here, shall we commercially launch these products in coming two, three years depending on the regulatory products including the Aflibercept, Abatacept and some of the like [indecipherable] Bevacizumab, Darbepoetin, these are the molecules. Aflibercept present you recently segmenting clearance to conduct the Phase III study. Soon we’re going to start the Phase III study for the Aflibercept, Abatacept still under the R&D and soon we’ll transfer to the plant. These are the unique molecules where very few companies have the — develop this product. The uniqueness of our model is its differentiation, where we are building strong niche in categories where we are dominant, namely in oncology, our teams are working at developing new drug delivery system to further drive advantage in the marketplace. The coming years will see the [indecipherable] transferred business mix with a higher share of the higher margin [indecipherable] as introducing new products.

I first came to the conclusion of my perspective and shall be happy to invite Alpesh to move the discussion forward. Alpesh, over to you.

Alpesh Dalal — Chief Financial Officer

Thank you, sir. Good afternoon, everyone, and we welcome you to our earnings call for the quarter and nine months ended 31st December ’22. I’ll take you through all the financial performance during the period that we are in discussion. So in Q2, on a consolidated basis, we had of — it was a muted quarter for us with overall revenues at INR265 crores as compared to INR267 crores in the previous quarter. However, our business mix, along with our efforts on bringing operational efficiencies have helped us improve our gross margin from 56% in the last quarter to 60% during this quarter.

The company also undertook certain cost rationalization initiatives, which along with the improvement in our gross margin resulted in improving our EBITDA to INR34 crores, which is about 12.8% of our revenue from INR16.6 crores, which was 6.2% of our revenues during last quarter.

Now talking about the nine month performance. So our overall revenues stood at INR802 crores as compared to INR814 crores during corresponding period last year and gross profit stood at about INR475 crores, which was a margin of about 59%. Our EBITDA for the nine months stood at INR79 crores on a consolidated basis, that’s 9.9% on our top line.

And I would also like to quickly take you through our capex that we have incurred during the quarter at the Group level since ours is a manufacturing focused company. So in Q3, we have invested about INR53 crores in capex in various divisions, but predominantly, about INR43 crores have been invested in our Albumin facility and about INR10 crores have been invested in our — as maintenance capex in our API and formulations plants.

So that’s a brief overview of our financial performance. I would like to now open the forum for Q&A.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Kaustav Bubna from BMSPL Capital.

Kaustav Bubna — BMSPL Capital — Analyst

Hello.

Operator

Yeah, you may go ahead please.

Kaustav Bubna — BMSPL Capital — Analyst

Yeah, so basically my question is — yeah, thanks for the opportunity. So could you speak about the future potential of Shilpa Biologics based on the expected launches in the next couple of years. And if you could share some revenue goal post that would be great.

Vishnukanth Bhutada — Managing Director

So, see, as far as, Shilpa Biologics is concerned, that is in a business which has been under incubation for a while for us. It’s obviously the fairly difficult segment to work in with product launches — the timelines around product launches are so — are little difficult to determine, whilst we would have our first product coming in pretty soon, for us to make or provide any revenue guidance is difficult, but broadly what we are looking in our Biologics business is that we have pipeline of our products as Vishnuji had just mentioned a while back in his speech. So we should launch our first product Adalimumab, in Q1 or end of this financial year or Q1 of the next year. That would be in the India market. We also have [Technical Issue]. So that could provide an additional boost to our efforts on the biological front. But obviously because we have to efficiently use our plant, we also are looking at various CMO/CDMO kind of opportunities and. certain discussions are In place for the same. So I think we are working on various fronts as far as Biologics business is concerned. We are looking at, as I mentioned, about our own products, our own pipeline development plus CMO/CDMO opportunities for which we are in discussion with various partners.

Operator

Mr. Bubna, please use the handset while asking question as there is lots of background noise from your side.

Kaustav Bubna — BMSPL Capital — Analyst

Okay, that’s all, all good.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pankaj Pandekar, from — is an individual investor. Please go ahead, please.

Pankaj Pandekar — Individual Investor — Analyst

Hello sir. Can you hear me?

Vishnukanth Bhutada — Managing Director

Yeah, yeah.

Pankaj Pandekar — Individual Investor — Analyst

Okay, so I wanted to know going forward like two, three years down the line when the business stabilizes and we see some growth, what kind of operating margins are you targeting? And if you can give us broad guideline on where the revenues could be like four, five years down the line, that could be nice.

Alpesh Dalal — Chief Financial Officer

See, as far as operating margins are concerned, as you would have seen across the globe that all the pharmaceutical companies and especially pharmaceutical companies in India are going through challenging times as far as pricing pressures are concerned, so that’s put pressure on our current operating margins. Having said so, what we are looking at is that we are looking at bringing in efficiencies at plant level for various products that we manufacture, right. We are also looking at introducing various complex products that can improve our margins. And we also are constantly looking at various cost-containment measures that we need to work on. So all these put together, we are trying to maintain the operating margins that we have got and would look for improving the margins based on commercialization of some of our opportunities which we have not yet been able to commercialize.

Vishnukanth Bhutada — Managing Director

If you see the — currently, we were doing only API and some of the formulations we’re doing. Now shifting of this completion of all our FDA, what are the compliance and all need to be completed, we have done all these things. So with this, Canada, getting through various customers site transfer; in API segment, peptide going to be completed, CDMO business is going to start. In Biologics, some of these molecules we are going to launch. In our film formulations, our inspections of the accruals of these — the line is already completed, some of the products we already shipped to the U.S. and the other markets. So now the — in each of the segments, we have almost at this stage except the KPI Formulation which was mature business, and that also we’re trying to see that how effectively we can maintain our margins. So there is a price pressure like introducing the new product, complex products in a CDMO volume or peptide. There is no much competitions and the margins can remain there. But this is what we’re trying to [Technical Issue] the segment.

Pankaj Pandekar — Individual Investor — Analyst

Just on the possibilities like four, five years down the line, do you see the company —

Vishnukanth Bhutada — Managing Director

Somebody’s call is ringing, I don’t know whose call. Yeah.

Pankaj Pandekar — Individual Investor — Analyst

Yeah. Okay. So sir, four, five years down the line, do you see the company doing like double the revenue that it is doing today and with an operating margin of 30%, is that possible with kind of new products that we are are envisaging?

Vishnukanth Bhutada — Managing Director

I think somebody’s call is coming — who is getting it disturbed. Hello.

Operator

Just checking. Sir, we’re checking. Just give me a moment.

Vishnukanth Bhutada — Managing Director

So the — answering your question, the segment which were there and the product mix what we have it including API, formulation and other all, this the — Possibilities of whatever you are saying is definitely there. The doubling the revenue in three, four, five years is definitely possible. I don’t see that there is any reason why it is not possible. So these are possibilities are all there, rather we should do much more than what we are thinking. So I think to answer your specific question, possibilities are definitely there.

Pankaj Pandekar — Individual Investor — Analyst

Sir and just one last question. Whenever we shortlist the product, does the company have a cut line on the gross margins that okay, we are going to do — we are going to target a specific product only, the gross margin. Like, let’s say, more than 60% or something like that. Is there some — does the management have some targets as to pickup products only in a certain gross margin range? And hello —

Vishnukanth Bhutada — Managing Director

I can tell you that in API, Onco and like peptide, polymer, these possibilities are there. When we are launching non-Oncology molecules and once we initially will initially work to launch it in India and by the way in which we have accruals and the customer reputations what we have in, due to that, we’ll be able to launch globally, all these molecules non-Oncology molecules and then it gets increases. The specifically targeting on a 60% gross margins and all. we have to see the case by case, but what were seen in each of the molecules whether it is in API or in formulation or in transdermal patches and all, we’re trying to see that is very limited competition there, even if the competitions are there, how we can overcome on that and what is the [Technical Issue] where our product is differentiated in this and we should — I would give classic example of CapEx. I think there is a disturbance from someone —

Operator

Sorry to interrupt, sir. We need to reconnect you, sir. Ladies and gentlemen, line of management is disconnected. Please wait for a moment while we reconnect them. Thank you. Ladies and gentlemen, the line of management has been connected.

Vishnukanth Bhutada — Managing Director

Hello.

Operator

Please go ahead, sir.

Vishnukanth Bhutada — Managing Director

Yeah, I was just explaining how differentiation [indecipherable] production, just classic example is Capecitabine. Capecitabine dose is 1 gram normally given to cancer patient, takes it — it’s 1 gram, but till today, nobody was able to develop this 1 gram tablets as on today. What we have done it, we have not only developed 1 gram tablet, but we have made it dispersible also. So whenever there is cancer patients are there, they will be able to take it, including either orally or they can just disperse in the water and take it. So each product like for Pemetrexed, Pemetrexed also we have made first time in the world RTU ready-to-use product, various products whatever we are taking it including the API formulations or even a film formulation or transdermal also whichever the products we’re taking it, we are seeing that what unique mix we can bring it into the market. Well, the of course the patient compliance, and the second one is cost effectiveness, third one is the acceptability of the market in this, These are all the things we’re seeing it, then only judiciously we’re selecting the products.

Pankaj Pandekar — Individual Investor — Analyst

Okay, sir. Thank you sir, that’s all from us.

Operator

Thank you. We move to the next question from the line of Badri Vishal from Bajaj. You may go ahead.

Badri Vishal — Bajaj — Analyst

Good afternoon.

Vishnukanth Bhutada — Managing Director

Yeah, good afternoon.

Badri Vishal — Bajaj — Analyst

Thank you for giving opportunity. Sir, the real picture you have given going — way going forward for four to five years and your products mainly excellent and your efforts are — should be materialized as orders expect. But If I go by Q3 and nine months consolidated result, the margins have fallen by almost 10%. Revenue segment is flat quarterly. And I doubt as per my auditor, you may be closing this financial year around INR50 crore to INR60 crore loss. So, one thing goes that is our Board equipped with technical and/or segment experts who can guide because I have seen there are 18 subsidiaries in different places around the world. We have three joint ventures. But out of which, already your auditor in your audit report has given that 11 subsidiaries are in losses. He has indicated the losses. So there has to be some thinking at the Board level, what is the risk management? Your capex, yes, it is fine. Shareholders have approved. It is good for the company. But what is the outcome? Your market cap has fallen to half from INR4,500 crores to today around INR2,000 crores. Now, you have mentioned in your approval — Canadian approval, but you have not mentioned approval after the warning letter 2020 from U.S. FDA, what you have done. There are lot of multiple allegations by U.S. FDA, which till date none of the [indecipherable] has mentioned that what you have done to U.S. FDA for rectifying the shortfall and preventive action. But nothing is there in that guideline. So it is a serious matter. Okay, I have asked through Company Secretary, one, when you got Canadian approval, but she misguided. I have put specifically, how much is the market-share or total revenue expected after this approval and she referred to some junk related target. So it is not fair on your part. Now the thing is this is a serious matter that our market share is falling and lot of improvement is there, lot of products you are including, but there is some lacking at the Board level and they have to take a serious decision, otherwise, shareholders’ confidence is day-by day decreasing. So all this phase that you have to do the SWAT analysis that’s not telling that we are doing this, this, this and all, at least so many joint ventures and subsidiaries, you have to think about them and decide on that, rest all, I wish better future and expect your way going forward what is in pipeline. Thank you, sir.

Vishnukanth Bhutada — Managing Director

Yeah, no, thanks for your — honest opinion whatever you are seeing it. I will just update you on these, we have never updated on U.S. FDA’s [indecipherable]. I personally feel we are updating every timme, what is happening on U.S. FDA just to once again reiterated at the all this third-party inspections on the various U.S. FDA ex-inspectors has inspected our facility, they have seen all these three [indecipherable] and whatever we’re putting it into the place. The data integrity issues has been all verified by these various auditors, they will see all retrospective review of our all ANDA, which has been approved or going to be approved. Is there any data integrity micro sterility issues are there in our plant or not? These are all — these efforts for two years we have completed audits and I am proud to say that none of this inspector or none of this consultant or none of so-called experts has even given one line about our plant on the data integrity issue or recalling of the ANDA or on a sterility compromise or on a micro compromise. So I can say you one thing that the FDA doesn’t, you know, leave you as it is, they will ask you to do all this retrospective review in detail, and it’s a painful point for us, but at least we’re happy and we have given all this inspection reports and all we have to submit, including full stop and comma, we have to submit to the FDA, whatever the third-party giving the report, so you cannot edit and submit it to the FDA, we have to submit this whatever third-party gives this report including full stop and comma. So answering your question that whatever we are doing it on FDA compliance and all, but it cannot be done immediately, see, it needs to be done on a very proper way, the scientific way whatever they are suggesting. We’re doing all the things and submitted to the FDA.

Answering your second question Badri — just, let me complete. I will tell you one by one. The second one is on the subsidiaries, all the subsidiaries, whatever we’re putting in the various countries, these are required for — because we’re putting these our [indecipherable] in that particular country. There we are putting like in Spain, in Austria or in Dubai or in the Canada or in other markets, please note that these are the subsidiaries or these are our company are if we want to register product in these particular countries on our own name, then you must have your own subsidiary, that is the reason why these are all majority of subsidiaries are for — because of this. And of course, there will be loss in that until as and unless once you file it, get registered and launch in that particular market, then only there profit is bound to come, because till then we’re paying our registration fees from that particular entity only and we are making the payments to all our employees those who are stationed there from that particular subsidiary.

The third thing which you are asking is the whatever we are saying it and may not happening or not happening. Please understand the field in which we’re working. I understand your pain, the market cap has fallen from INR4,000 crores to INR2,000 crores, but it is — trust me that we are doing our all effort to bring the glory of the whatever we have lost it, because I agree that the Biologicals is the only pain point in our company currently, it’s a strong business I personally feel that will definitely grow and in this also, if you take it the — if we work it on the recombinant albumin, which the project is now already under commissioning now and this is a very unique project we are bringing into the country, it is a very high-value as well as the very shortage products all over the world and life-saving products required for the country. So this once this project is commissioned into the country by 2023, ’24, ’25, I think this is also very unique project we’re bringing into the country. I can say you it is not that the — each of this year probably on the Board level, whatever we are discussing, I think —

Badri Vishal — Bajaj — Analyst

Yeah, no, I think question was also, do we have technically qualified people on the Board and all?

Vishnukanth Bhutada — Managing Director

No, no, Board upwards, we have the all — Vice Chairman —

Badri Vishal — Bajaj — Analyst

How many people —

Alpesh Dalal — Chief Financial Officer

As far as the Board is concerned, sir, we would request that you have a look at Board composition that saves cost, we have got industry stalwarts as part of our Board. We have got financial experts as part of our Board, we have got HR expert as part of our Board and these are all professionals who have come in, as Vishnuji was mentioning, Ex Vice-Chairman of Lupin, Dr. Kamal Sharma has joined our Board few months back. We have got Mr. Arvind Vasudeva who has got significant industry experience and expertise, he used to be the Managing Director of Aurobindo before BD this thing. So then we have got, you know, from finance fraternity, we got Mr. Shekhar Gandhi on our Board, and we also got HR expert Dr. Anitha Gangopadhyay, so these are all independent directors, who are — who have come and joined our Board recently in last one and one-and-a-half year’s time. They are regularly interacting with us, they are guiding us in the right direction and they are also helping us take the corrective measures that we need to take post some of the challenges that we have faced. Obviously, you may also appreciate that some of these efforts they require time and they don’t happen overnight, right. So we need to — right from time and be a bit more patient with the way things are lining up, and as you rightly pointed out that the Board will be discussing, Board does discuss the strategy, Board does guide us on way forward and all. And we are taking actions based on their guidance.

Badri Vishal — Bajaj — Analyst

Sir, thanks. Yes sir, you are right. Your proactive action, I appreciate sir, but as far as my thing goes, as per the knowledge of your Board level, some are including Chairman, he is no way connected to Pharma. Okay sir. Now, there are four independent directors, correct, si? My submission is you can strengthen the Board. It is not limited, up to 15 you can go. So you can strengthen the Board, do the SWAT analysis or risk management and accordingly you can spend them have it because it is a slow became for the past two years, downfall, somewhere something is lacking. One thing I can tell is this company depends only on one CEO, MD. He is directive and whatever is those is okay. Rest all, I don’t know how they are taken care. It is open sir. Second thing is the MD has told just now but in his con call even last quarter con call, there is no U.S. FDA work, CAPA work, corrective action or preventive action, there is no thing, just going on, it is almost two years, sir. From 2020, warning letter 320 came about cGMP and now a lot of allegation in the U.S. FDA file is there that we ignored multiple customer complaints, which should be informed to U.S. FDA. So are these things shortcoming, sir, may pull down our reputation and when I am asking a company as a investor where I have put my stake in this that when you bought the approval from Canada, how much is the market share, how much is the revenue you are getting, nothing is there, that’s how they’re keeping silence. Even for this particular con call, I have to fight because there is wrong — CDR has given wrong link and because of that I have to fight and see that Company Secretary has to do, still they doesn’t understand what is the problem. So please look into that [Technical Issue] taking proactive action and whatever is in pipeline, all the best for you, sir. Thank you very much.

Vishnukanth Bhutada — Managing Director

Thank you. We will definitely see that, your hard-earned money whatever you have put in the company and keeping the trust on us, we are trying to see that all expectations of our all shareholders, even small or bigger, we are committed to see that you should get suitable reward on this.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ritwik Sheth from One up Financial. Please go ahead.

Ritwik Sheth — One-Up Financial — Analyst

Hi, good evening, sir. Sir, just one question, what is the net debt as of December 2022?

Vishnukanth Bhutada — Managing Director

Net debt was INR775 crores [Technical Issues] at the Group level.

Ritwik Sheth — One-Up Financial — Analyst

Okay, thank you.

Vishnukanth Bhutada — Managing Director

Yeah.

Operator

Thank you. [Operator Instructions] Next question is from the line of Pankaj Padnekar, Individual Investor. Please go ahead.

Pankaj Pandekar — Individual Investor — Analyst

Hi sir. I understand that the biologics is like longer gestation period business, if you can just throw a light on the — once the capex is complete, what kind of operating margins we will be able to gain on the biologics business?

Vishnukanth Bhutada — Managing Director

So, see, first thing. I think capex in Biologics is complete — has already been completed, at Biologics unit, this is under — issues at Dharwad. We are not incurring any further capex over there [indecipherable]. As far as operating margins are concerned, see, typically it’s just becoming you know volume gain there, rather volume the traction that you get in the market, actually volume, the traction that you get in the market that determines a lot of things. Products per se, have higher gross margins, higher operating margins as well. But these are difficult products to market as well. So depending on the traction that one is able to generate in this field in the biosimilars, also, the number of markets where you are able to reach out and get a partner with various people to market your products would determine the overall profitability. So there is, as Vishnuji was mentioning, it has been a pain point for us, biologics. But it also when it starts doing the right — start getting regular flow of products as well as partnerships in various markets and all, it can also end up becoming lucrative business. So at this stage, to provide numbers or any guidance specifically, isn’t really difficult, but as I mentioned that from a potential perspective that’s in hold.

Ritwik Sheth — One-Up Financial — Analyst

Sir, just a question, again on the Biologics part, you said that the capex is complete on the biologics business, what is delaying the product to the market — I think I heard that the first product is going to be out in ’24, ’25.

Vishnukanth Bhutada — Managing Director

’23, ’24 only, not ’24, ’25.

Ritwik Sheth — One-Up Financial — Analyst

Okay. So since this capex is complete, what is delaying the product launches?

Vishnukanth Bhutada — Managing Director

Well. I think there some government procedures are involved, once it is approved, then they come for inspection, they issue the license, these are only procedural issues are pending, rest all is done. The approval from the Government of India is already received, only some procedural work, they are now trying to complete it, which hopefully we should be able to complete within this. 31st March and April, we should be able to launch the product.

Ritwik Sheth — One-Up Financial — Analyst

Okay. Okay, that’s it from my side. Thank you.

Vishnukanth Bhutada — Managing Director

Thank you.

Operator

Thank you. Next question is from the line of Tushar from MK Ventures. Please go ahead.

Tushar — MK Ventures — Analyst

Yeah, thanks for the opportunity, I joined slightly late, so maybe this has been covered before. But if you can give update on the progress of Albumin on the clinical trial part as well as on the asset monetization side, I believe we had appointed some merchant bankers for API business. If you can update on both these please.

Alpesh Dalal — Chief Financial Officer

So on the asset monetization part I’ll take up, see that’s a process that we had mentioned that we have appointed [indecipherable] to look at various handling opportunities for us, right in the API business. At this stage, I can only say that the work is on the path in discussion with few people. And it would be a little premature for me to provide further details on that, of the kind of stuff that is going on over there, but the processing is on is what I can say.

On the albumin clinical trials for this you can just go ahead –.

Vishnukanth Bhutada — Managing Director

The Phase 1, already we have received the government clearance to start the Phase 1 study. I think the batches are under manufacturing and hopefully next year we should be able to start the trials also and we should be able to complete the trials also next year.

Tushar — MK Ventures — Analyst

Next year means the next financial year, sir?

Vishnukanth Bhutada — Managing Director

Yes, ’23, ’24 I mean to say.

Tushar — MK Ventures — Analyst

So I think the earlier target the intention was to have the exhibit batches ready by Jan and early February. So we are running a bit behind schedule, sir, you’d say in that?

Vishnukanth Bhutada — Managing Director

Maybe one or two months, not more than that, but. I think the complexity of this particular product, it is not very far, but we are at the verge of competition of all these things.

Tushar — MK Ventures — Analyst

No sir, whatever issues if any have been resolved and we are actually manufacturing the exhibit batches already for the trial, or is that going to start?

Vishnukanth Bhutada — Managing Director

No, no, we have already started it. So we have to complete all this — I will not be able to drill more technically [indecipherable], but I can tell you that the ’23, ’24 certainly we’ll start the — and we’ll complete also the study, that much I can tell you.

Tushar — MK Ventures — Analyst

Sure, sir. And on the newer segments peptides, even transdermal, for that matter, is some more timelines as to the monetization, sir, it was discussed for —

Vishnukanth Bhutada — Managing Director

These film formulations in this one is already we have mentioned that we have registered already some of this nutraceutical products in the U.S. and already shipped the goods there. And the other products whatever we are trying to do it in transdermal and all, some of this — the clinical trials also has been started some of these very complex products we are taking. Some of these has been pilot bio and all has been started. I think next year, definitely we should have a good revenue in this film formulation and transdermal side also. Peptide, as you mentioned, that we are completing the validation batches in the plant, and once we complete the validation batches, then we will start. In the peptide, it is is not easy to sell also because very few people take this particular product, but by seeing the Drug Master Files and once we submit all these things with the authority, we are sure that peptide business will come in ’24, ’25.

Tushar — MK Ventures — Analyst

Sure, sir. And on the biologics CDMO side if you can qualify further some of the opportunities, please.

Vishnukanth Bhutada — Managing Director

Yeah, we’re seeing all opportunities, it’s not only the CDMO or lunching on our products, developing some of again on some complex products, these are all multiple opportunities, we’re trying to see. It was — the biologics is very different field where little long gestation period is there. Third, it’s also taking its own time to approve and then we then to start to manufacture, get it released, these are all procedural lot of issues are there in these. Otherwise, it is not like normal formulations and the FDA where even after manufacturing you need to follow several procedures in this. These are the initial [indecipherable] there. Once we launch one product probably, then it will be easy for us also.

Tushar — MK Ventures — Analyst

Got it, sir. Just if I may ask one last quickly on the API business. I think we were facing some pricing pressure on one, two of our leading Onco molecules, has that now been sort of where are we in terms of overall competitive scenario on those molecules? And this quarter, why is the non-oncology business down sir substantially. Or rather, sorry I might — I think we’ve done better. Just make a wrong on the [indecipherable], but just help me with the non-Onco side also sir, qualitatively, what are we doing in terms of new molecules?

Vishnukanth Bhutada — Managing Director

Non-onco portfolio is growing book, but we are seeing from the presentation also that the molecules which were able to launch into the market is getting it acceptance, though there are multiple manufacturers are there because of our the quality, consistency and filing into the now we initially in our selling only in India, till we get the registration in all other global in EU and all in US DMS also we’re filing it. So each molecule will definitely grow in the — once we get this the various countries too, til then we’re doing good in the non-oncology segment, whichever the molecule like Citicoline or the Phenylephrine, Ursodeoxycholic acid, all these three molecules are doing good.

Tushar — MK Ventures — Analyst

And on Onco side, sir, because even a quarter on quarter dip this time is in Oncology. So —

Vishnukanth Bhutada — Managing Director

[indecipherable] saying flat, but we’re not de-growing in there.

Tushar — MK Ventures — Analyst

Okay, generally [indecipherable] growth in Oncology segment sir? Or what is the outlook for that segment maybe for quarter four and next year?

Vishnukanth Bhutada — Managing Director

So see as far as Oncology business is concerned, what happens is that a lot of it is index driven, the market with [indecipherable], now typically what happens is that these tenders come up towards end of December, or January and based on the tender wins by our customer, we ended seeing traction in Q4, right. So if you see historically also, our Q4 results end up being better than the other quarters. So again, when you see this maybe going forward, in this quarter, you should start seeing traction back in the Oncology business, but it will have those cyclical ups and downs that will happen over there. [indecipherable] for non tender business and all there is consistency that happens and that is the business that continues on the regular basis.

Operator

Thank you. As the line for the participant has been disconnected, as there is no further question,. I would like to hand the conference over to the management for closing comments.

Vishnukanth Bhutada — Managing Director

Yes, so. Thank you all, we would — thanks for joining us and for your interest also in our company. As we have mentioned during the call also that as management team, we are trying to look at various opportunities to improve the overall operations and all and we look-forward to your continued support going forward well. so with that. I would like to end this call.

Operator

[Operator Closing Remarks]