Sun Pharmaceutical Industries Limited (SUNPHARMA) Q3 FY23 Earnings Concall Transcript

Sun Pharmaceutical Industries Limited (NSE: SUNPHARMA) Q3 FY23 Earnings Concall dated Jan. 31, 2023

Corporate Participants:

Abhishek Sharma — Head of Investor Relations and Strategic Projects

Dilip Shanghvi — Managing Director

C. S. Muralidharan — Group Chief Financial Officer

Kirti Ganorkar — Chief Executive Officer-India Business

Abhay Gandhi — Chief Executive Officer-North America Business

Analysts:

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Kunal Dhamesha — Macquarie — Analyst

Neha Manpuria — Bank of America — Analyst

Sameer Baisiwala — Morgan Stanley — Analyst

Prakash Agarwal — Axis Capital — Analyst

Shyam Srinivasan — Goldman Sachs — Analyst

Sayantan Maji — Credit Suisse — Analyst

Krish Mehta — Enam Holdings — Analyst

Nitin Agarwal — DAM Capital — Analyst

Vivek Agarwal — Citigroup — Analyst

Damayanti Kerai — HSBC — Analyst

Bino Pathiparampil — InCred Capital — Analyst

Harith Ahamed — Avendus Spark — Analyst

Surya Patra — PhillipCapital — Analyst

Ritwik Sheth — One-Up Financial — Analyst

Smith — RDA — Analyst

Mayank Hyanki — Axis Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY’23 Earnings Conference Call of Sun Pharmaceuticals Limited — Industries Limited. [Operator Instructions]

I now hand the conference over to Mr. Abhishek Sharma, Head of Investor Relations and Strategic Projects. Thank you and over to you, Mr. Sharma.

Abhishek Sharma — Head of Investor Relations and Strategic Projects

Thank you. Hello and a warm welcome to our third quarter FY’23 earnings call. I’m Abhishek from the Sun Pharma Investor Relations team. We hope you have received the Q3 financials and the press release that was sent out earlier in the day. These are also available on our website. We have with us Mr. Dilip Shanghvi, Managing Director; Mr. C. S. Muralidharan, CFO; Mr. Abhay Gandhi, CEO, North America; and Mr. Kirti Ganorkar, CEO, India Business. Today, the team will discuss financial performance for the quarter, business highlights and respond to any questions that you may have. For ease of discussion, we will look at the consolidated financials.

The call recording and the call transcript will also be put up on our website shortly. The discussion today might include certain forward-looking statements, and these must be viewed in conjunction with the risks that the business faces. You are requested to ask two questions in the initial round. If you have more questions, you are requested to rejoin the queue. I also request all of you to kindly send in your questions that may remain unanswered today.

I will now hand over the call to Mr. Shanghvi.

Dilip Shanghvi — Managing Director

Thank you, Abhishek. Welcome and thank you for joining us for this earnings call after the announcement of financial results for the quarter FY’23. Let me discuss some of the highlights. [Technical Issues] for the quarter, where at INR111,001 million, recording a growth of about 13.1% year-on-year, driven by global specialty, emerging markets and India. Our continued focus on top line growth, operational efficiencies and business continuity is producing results.

For Q3, our global specialty revenue was at INR235 million [Phonetic], up 28.4% year-on-year. Ilumya and Winlevi were the key growth drivers for the quarter. In January ’23, we announced the launch of SEZABY in the U.S. for treatment of neonatal seizures. Specialty R&D accounted for approximately 26% of total R&D spend for the quarter. Abhay will give you more details on the specialty business later.

I have been talking to you about our intent to increase our specialty footprint especially in our core therapy area of dermatology, ophthalmology and oncology. One condition in dermatology that doctors find particularly difficult to treat is alopecia areata, due to limited number of approved — I mean, effective approved treatments available. With that background, let me now briefly touch on the recently announced Concert Pharma acquisition. On 19 January, Sun Pharma entered into definitive agreement to acquire Concert Pharmaceuticals Incorporated. This acquisition adds a late-stage asset deuruxolitinib for treating alopecia areata to our global specialty portfolio. The transaction is expected to be completed in the first quarter of calendar ’23.

Our immediate priority would be to follow Concert’s plan to submit a New Drug Application for the lead asset to the U.S. FDA in the first half of calendar ’23. We can take questions on Concert today. But you need to keep in mind that we will have to restrict ourselves in what was disclosed in the press release issued at the time of announcement. Given that the transaction would require requisite regulatory approvals and the tender offer for the U.S. listed company is expected to come soon.

In summary, we will not be able to guide to peak revenue estimates for the lead product. We will also not be able to guide projected R&D spend to bring this product to market. However, it’s important to note that additional costs are expected to be incurred in R&D before the product gets commercialized. We are excited to widen our specialty offering in dermatology and plan to launch the asset across U.S. and other global markets in near-future. We will be very happy to bring this product for patients globally.

I will now hand over the call to Murali for discussion of the third quarter financial performance.

C. S. Muralidharan — Group Chief Financial Officer

Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you. Our Q3 financials are already with you. As usual, we will look at key consolidated financials. Gross sales for Q3 product competes INR111,001 million, up by about 13.1% over Q3 last year. Material cost as a percent of sales was 25.3% lower than Q3 last year, due to better product mix including higher specialty sales. Staff cost stands at 18.5% of sales, while staff cost in percentage terms are lower over Q2 last year, the increase in absolute value is attributed towards merit increase, consolidation of the Alchemee acquisition and expansion of the sales force in India.

Other expenditure stands at 30.6% of sales, higher than Q3 last year. The increase in other expenditure is attributed towards higher selling and distribution expenses, consolidation of the Alchemee business on an higher R&D. As indicated in our past earnings calls, the expenses have seen an increasing trend on account of normalization of business activities. On Halol, we have indicated that Halol shipment U.S. accounted for approximately 3% revenues before the site received Q4 alert. Apart from the loss of revenues for approximately three weeks in Q3, there is an increase in expense because of import alert. This is primarily on account of provision related inventories and some other items.

EBITDA for Q3 was at INR30,037 million including other operating revenues, up by 15.2% over Q3 last year with consulting EBITDA margins at 26.7%. We have reported strong margins despite normalization on expenses on the impact of sales force expansion in India. Reported net profit for Q3 was at INR21,660 million, up 5.2% year-on-year compared to Q3 last year. Adjusted for one-off effects in both the periods, net profit growth was higher than the EBITDA growth for the quarter. Reported EPS for the quarter was at INR9 per share.

Let me now discuss the key movements versus Q2 FY’23. Our consolidated gross sales were higher by about 2.7% Q-on-Q at INR111,001 million. Material cost at 25.3% of sales and staff cost at 18.5% of sales almost similar to Q2 levels. Other expenses at 30.6% of sales were higher compared to Q2 FY’23. Increase in other expenses, Q-on-Q was driven by higher sales and distribution expenses and increase in R&D spend. EBITDA for Q3 stands at INR30,037 million, up by about 1.6% compared to Q2, and EBITDA margin for Q3 was at 26.7% compared to 27% for Q2. Reported net profit for Q3 stands at INR21,660 million.

Now, we will discuss the nine month performance. For the nine month period ended, 31 December 2022, gross sales were at INR325,533 million, the growth of 12.1% over the nine month period last year. Excluding COVID product sales for the nine month last year, overall sales are up by about 13.6%. Material cost for nine months was at 25.8% of sales, lower year-on-year, mainly driven by better product mix, including higher specialty sales, while staff costs in percentage of sales are similar to nine month last year, the increase in absolute value is on account of annual merit increase, consolidation of the Alchemee business and expansion of the field force in India. Other expenses were at 29.1% of sales, is higher than nine months last year on account of higher selling and distribution expenses and consolidation of the Alchemee business.

EBITDA for the nine months was at INR88,447 million, a growth of 9.8% over the nine month last year with resulting EBITDA margin of 26.8%. Net profit for nine months was at INR64,891 million, up 6.6% or adjusted net profit of nine month last year. As of 31 December, 2022, net cash was $1.8 billion at consolidated level and about $621 million at ex-Taro level.

Let me now briefly discuss Taro’s performance. Taro posted Q3 FY’23 sales of $139 million flat over Q3 last year and net profit of $7.3 million. For the nine months, sales were at $426 million up by 2% over nine month last year. Net profit for nine months FY’23 was $18.5 million compared to $30.9 million for nine month FY’22. Taro’s financials for Q3 FY’23 and nine month FY’23 include in the consolidation of the Alchemee business.

I will now hand over to Mr. Kirti Ganorkar, who will share the performance of our India business.

Kirti Ganorkar — Chief Executive Officer-India Business

Thank you, Mr. Murali. Let me take you through the performance of our India business. For Q3, the sales of formulations in India were INR33,919 million by 7.1% year-on-year, for this nine months, sales were at INR102,390 million, up by 10.3% like-to-like basis, excluding COVID product sales of nine months last year. India formulation sales accounted for about 31% of total consolidated sales. There were no COVID product sales in Q3 FY’23 and negligible COVID products sales in Q3 FY’22. We continued to witness good growth across multiple therapy areas in chronic and the sub-chronic segment for the quarter.

Sun Pharma is ranked number one and holds 8.5% market share in our INR1,800 billion Indian pharmaceutical market as per AIOCD AWACS MAT December ’22 report. Corresponding market share for the previous period was 8.2%. As per the SMSRC MAT October ’22 report, we are number one ranked by prescriptions with 12 different doctor categories for Q3 FY’23. For Q3, we have launched 25 new products in the Indian market. The sales force expansion as electors to declutter our portfolio and we have been able to expand our prescriber base in key therapeutic categories. We are also increasing penetration in metros, Tier 2 and Tier 3 town. Focusing near-term will be to continue to improve the sales force productivity.

I will now hand over the call to Abhay.

Abhay Gandhi — Chief Executive Officer-North America Business

Thank you, Kirti. I will briefly discuss the performance highlights of our U.S. business. For Q3, our overall sales in the U.S. grew by about 6.3% over Q3 last year to $422 million. The main driver of growth was the specialty business driven by Ilumya and Winlevi. U.S. accounted for over 31% of consolidated sales for the quarter. Specialty sales have also grown compared to September ’22 quarter, and we remain excited on growth opportunities in the current portfolio.

Let me now update you on our U.S. generics business. The Sun ex-Taro generics business has marginally declined on Y-o-Y basis, due to stoppage of U.S. shipments from Halol in December ’22. Over the last year, this business has gained from a combination of new products, market share gains for existing products and better supply chain management. For quarter three, we launched two generic products in the U.S. on the ex-Taro basis.

I will now hand the call back to Mr. Shanghvi.

Dilip Shanghvi — Managing Director

Thank you, Abhay. I will briefly discuss the performance highlights, other businesses as well as give you an update on our R&D initiatives. Our formulation sales in emerging markets, whereas $257 million for Q3, up by around 7.7% year-on-year. The underlying growth in constant currency value was at about 14%. Emerging markets accounted for about 19% of total sales for Q3. Formulation sales in rest of the world market, excluding U.S. and emerging markets were $189 million in Q3, higher by about 4.8% over Q3 last year, the revenues of $189 million includes a milestone payment received of $12.5 million.

Rest of the world market accounted for about 14% of consolidated Q3 revenue. API sales for Q3 were INR5,154 million, up by around 9.4% over Q3 last year. We continue to invest in building R&D pipeline for both the global generics and specialty business. Consolidated investments towards R&D for Q3 FY’23 stands at INR6,702 million, 6% of sales, and this compares to INR5,471 million, 5.6% of sales for Q3 ’22 and INR5,710 million, 5.3% of sales in Q2 ’23.

Our current generic pipeline for the U.S. market includes 96 ANDAs and 13 NDAs awaiting approval with the FDA. Our specialty R&D pipeline includes four molecules undergoing clinical trial. We should be able to update the status of this trial in our next call. The R&D investments have increased compared to Q2. And we expect the continued ramp-up of the same. R&D investments are likely to increase, both for our specialty and generic businesses. Board has declared an interim dividend of INR7.5 per share for the year FY’23 against INR7 per share interim dividend for the previous year.

With this, I would like to leave the floor open for questions. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] First question is from the line of Naushad Chaudhary from Aditya Birla Sun Life AMC. Please go ahead.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Yeah. Hi, thanks for the opportunity and congrats on a decent set of numbers. Firstly, on Concert Pharma, I understand, so I don’t want any specific number, but directionally, if you can help us understand in terms of the cost structure and R&D spend the intensity would be similar to calendar year ’22 — in calendar year ’23 or should it directionally come down or go up, if you could give us the direction in terms of cost structure intensity?

Dilip Shanghvi — Managing Director

I think it’s difficult to give information in the context of — what you call, limited information. We have and also it need to kind of be cognizant of the restrictions. But conceptually, you need to keep in mind that they have announced that the Phase 3 trial is complete. And they’re in the process of filings product or they wish to file the product into the first half.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Okay. Secondly, on the other expenses, was there any one-off in this quarter? Or was there any cost-related to Concert acquisition, which may not be there in the coming quarters? Or was it normal cost structure?

Dilip Shanghvi — Managing Director

So it was a normal cost structure as said on the readout. It was on account of the nomination or accretion. But there is no one-off or anything related to the transaction.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

And last, just a clarification, if I look at our specialty business, the revenue share sequentially have moved up meaningfully, but if I look at the gross margin, which looks flat. Can you help us understand this math, sir?

C. S. Muralidharan — Group Chief Financial Officer

So the cost is concerned, while we agreed that the specialty businesses increased. It will help us to improve the margins. However, costs will also function of product and other geography mix. So as a result of which, what we’ll say is that the COGS, what is trending, is this — as part of our overall expectations.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

All right. Thank you so much and all the best.

Dilip Shanghvi — Managing Director

Yes, thank you.

Operator

Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

[Technical Issues] portfolio has been now increasing for the three quarters. So is it to do with the —

Operator

Mr. Manudhane, sir, I would request you to please repeat your question. There was some audio loss. Thank you.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Is it better?

Operator

Yes, sir.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay. This — just with respect to the R&D cost under specialty front, so that has been increasing for the past three quarters now, so is it to do with the new indication for Ilumya?

Dilip Shanghvi — Managing Director

Yeah. I think we have guided that we had challenges in terms of ramping up their clinical studies, because of the COVID and subsequently, because of the war in Russia as well as Ukraine. So that had affected recruitment of new subjects. So I think I had explained that we will gradually find a way to identifying new sites and find a way to accelerate the recruitment.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

That’s interesting. Sir, just on your comment in terms of intend to increase the specialty footprint, so if either in terms of the number of MRs or in terms of the absolute cost increase, if you can help us in the — for FY’24?

Dilip Shanghvi — Managing Director

I mean, what I shared is that our increasing focus on growing the specialty business. I mean, that doesn’t necessarily been that we would be strengthening the field force or anything at this point of time.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Understood. And just secondly on the India business, where there has been an addition of a good sales force that has been 25, 30 launches on a quarterly basis for almost three-four quarters now, but 3Q FY’23 seems range subdued at 7% year-over-year. So any particular we will do like the call out?

Dilip Shanghvi — Managing Director

Sure. I think the quarter three slightly below the market, that is 7.7%, but if you look at our MAT December growth, which is higher than the market. So MAT like we are growing — market is growing at 7.7% and we are going for — by a 11.3%. So in the quarter three, what has happened is like, as you know, istavel and istamet, these were two products we licensed from Merck and they went off-patent in the month — for July. And after that we have made this product affordable. So these were big brands where we have met the product attractive and make it affordable for the patients. So we have lost some top line but at the same time, we are maintaining our market share in terms of re-unit. So that has impacted our growth in quarter three. And as well as we had some challenges is one of the business unit in gastro were the growth were not as per expectations. But other than that, all other therapy areas, either we are in-line with market or growing better than the market.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

So gastro challenges being addressed now. So we can be back to growth up in the coming quarters?

Dilip Shanghvi — Managing Director

Yeah. That’s our continuous effort is wherever we see some of the areas, not growing as per our expectations. We try and address some of these issues, they take time also, it’s not the next quarter it will get addressed, but over a period of a couple of quarters. I think they should come back to growth in-line with market.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

And just lastly, if I may squeeze in, so this milestone receipt sits in ROWC, is right?

C. S. Muralidharan — Group Chief Financial Officer

Yes.

Tushar Manudhane — Motilal Oswal Financial Services — Analyst

Okay, sir. Thanks, thanks a lot.

Operator

Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.

Kunal Dhamesha — Macquarie — Analyst

Good evening and thank you for taking my question. Our first just one clarification on other expenses, I think in your opening remarks you said that there was some kind of inventory provision related to products being not supplied from Halol etc. So would you be able to quantify that.

Dilip Shanghvi — Managing Director

So while we have taken the requested provisions are in the inventory of other items, on the same time, it starts very significant.

Kunal Dhamesha — Macquarie — Analyst

Okay. And there are no kind of failure to supply [Indecipherable] or the remediation costs as said, I think you would have in other expenses?

C. S. Muralidharan — Group Chief Financial Officer

Whatever in terms of needs to be considered in the current quarter has been considered relevant hedges and then they are not significant enough.

Kunal Dhamesha — Macquarie — Analyst

Okay. My first question basically is on Winlevi, I think there are not just products as featured as kind of growth driver for specialty sales for the first time. Is there any particular think that has changed in the U.S., which is kind of helping us grow faster in this product now? Because as far as we are concerned, whatever prescription data, we follow is finally showing quarter-on-quarter, more or less kind of flat for prescription data. So is there anything fundamentally changed there or something else?

Dilip Shanghvi — Managing Director

So the prescriptions that you see today are more profitable than in the past quarter because there has been an improvement in the excess. I mean, as we said that, I mean on various calls, I’ve said that improvement of [Indecipherable] given ongoing process, there is no finite time to completion of that it will happen, all through the course of the lifecycle of the product. And we have a long way to go in terms of improving that even further.

Kunal Dhamesha — Macquarie — Analyst

Okay. So is it fair to say, we like one more there is big kind of PBM right now or in this quarter?

Dilip Shanghvi — Managing Director

Sorry. Can you repeat your question fair to say what?

Kunal Dhamesha — Macquarie — Analyst

We have on-boarded a big pharmacy benefits manager or an insurance company with managing that PBM with their own product. But we still see, there is lot of scope. And this kind of on-boarding, does it help with the negotiating with other guys as well? I mean, big guys basically.

Dilip Shanghvi — Managing Director

Kunal, we have to see, I mean there are competitive dynamics even amongst the payer, whether it helps us, time will tell, but we certainly would try our level best to convince other payers also to cover the product.

Kunal Dhamesha — Macquarie — Analyst

Perfect. Thank you. And second question on new deuruxolitinib, given there is another molecule with a very similar kind of chemical structure approved will this be counted as a new chemical entity for us?

Dilip Shanghvi — Managing Director

I mean, this definitely will be a new chemical entity.

Kunal Dhamesha — Macquarie — Analyst

So it would come with the associated exclusivity, etc. if it gets approved?

Dilip Shanghvi — Managing Director

That is correct.

Kunal Dhamesha — Macquarie — Analyst

Thank you. I’ll join back the queue.

Operator

Thank you. The next question is from the line of Neha Manpuria from Bank of America. Please go ahead.

Neha Manpuria — Bank of America — Analyst

Yes. Thank you for taking my question. Two questions on the Concert acquisition. First, if I were to think about the lead asset here, having — is how do you think about reimbursement and formally recovers for the product? There was — since this could be seen as more, not fully, but more cosmetic use versus medical use. That’s my first question. And second, how does this product fit into our existing presents in derma with Ilumya and the other products? Just trying to understand the additional investment that would be required to commercialize this product outside the R&D investment that you mentioned?

Dilip Shanghvi — Managing Director

Sure. Abhay, would you respond?

Abhay Gandhi — Chief Executive Officer-North America Business

I’ll respond to the first part. I mean, from a science and medical perspective, AA or alopecia areata is clearly not a cosmetic condition. However, like what you said, a lot of payers not doctors, but definitely payers may have that kind of a perception in mind. And I think the task for us, even prior to launch will be to sell the concept and make payers understand that this is a medical condition and not a cosmetic condition. And then therefore try and get [Technical Issues] I think — in that I think the doctors that we are speaking to [Technical Issues] are pretty clear and they will also be helping the put out that story.

Neha Manpuria — Bank of America — Analyst

Understood. But is the additional R&D that you mentioned prior to commercialization, associated with us helping to help get better formulary coverage when we launch the product?

Abhay Gandhi — Chief Executive Officer-North America Business

So data that we will generate from the R&D effort will be used in various forms. The same data will be used with HCPs and in a modified firm used with the payers and PBMs and even the buyers of the product. So data is data. It is how you present it to relevant audiences that will make a difference in eventually how all elements of the market dynamics interplay and have a positive impact on the product.

Neha Manpuria — Bank of America — Analyst

Understood. And my second question, how does this product fit into the existing footprint that we have in derma from a sales force perspective, doctor coverage perspective?

Abhay Gandhi — Chief Executive Officer-North America Business

So like Mr. Shanghvi also said in his readout, I mean, we have covered in psoriasis, we have products in acne, alopecia areata. This was one unmet need. So it enhances the basket of offering that we have for dermatologist and doctors who treat dermatology conditions. So I think from an indication perspective, it is a clear fitting to what we already do. And there is a significant overlap between the HCPs that we need and the HCPs, who are likely to be treating alopecia areata.

Neha Manpuria — Bank of America — Analyst

Understood. And just one last clarification on the R&D spend, is the R&D — additional R&D included in the guidance that we have mentioned in the past of 7% to 8% sales? Or should we look at, is it over and above that?

Dilip Shanghvi — Managing Director

No, I think we are currently underperforming in terms of the — what you call spend.

Neha Manpuria — Bank of America — Analyst

Yes, sir.

Dilip Shanghvi — Managing Director

But even if this gets added, I think we will get the cost only for a month or so.

Neha Manpuria — Bank of America — Analyst

No, no, sir. I mean, from a guidance perspective for next year, since you mentioned additional R&D?

Dilip Shanghvi — Managing Director

That guidance we’ll give next year. This is — because I think we will look at the — all the products in different stages of development, like what I also shared is that, we should be able to also share some clinical outcome progress with some of the other studies.

Neha Manpuria — Bank of America — Analyst

Understood.

Dilip Shanghvi — Managing Director

So that we will give that guidance.

Neha Manpuria — Bank of America — Analyst

Understood. Thank you so much, sir.

Dilip Shanghvi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi. Thank you. And good evening everyone. Sir, is it possible for you to talk a bit more about Halol situation in the sense that a, for the 14 exempted products, would you be able to restore all the sales? B, would you be using the site for non-U.S. markets and see how many ANDAs have been filed from your pending approval? Or any color around any high value product? So are you looking to side switch?

Dilip Shanghvi — Managing Director

So I think, Abhay can give more information about the exempt product and what kind of sales we will be able to maintain. But we will look at, what you call, the important products approved or in the process of getting approval for switching or filing from additional sites.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay.

Abhay Gandhi — Chief Executive Officer-North America Business

I need to add to what the Shanghvi said, I mean a lot of business that we will be talking about retaining or losing will be product specific and the situation is still a little fluid I would say. Attempt will be obviously to retain all of it, but I don’t think all of it will be retained. Some of it you can assume will be lost to competition.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Very clear.

Abhay Gandhi — Chief Executive Officer-North America Business

The attempt will be to minimize that.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, very clear. And would you be using this site for non-U.S. market or you would first rather get it back in remediation?

Abhay Gandhi — Chief Executive Officer-North America Business

No, I think we are in touch with the other regulatory agencies, but site is being used for supplies to other geographies.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Okay, great. So second question is on the specialty portfolio and Abhay, the prescription for Winlevi had kind of dipped around, if I remember correctly, October, November, and they have been inching up, so I think they’re back to 8,000 a week, but before that it used to be 9,000 to 10,000. So we are still not back up. So just any thoughts on that? And second, also on Ilumya, if I see the IMS dollar data for 3Q, which is October, November, December, it’s just flat quarter-on-quarter versus our primary sales being up. So anything to read through or it’s just a bit of an operation?

Dilip Shanghvi — Managing Director

So the first part to your question, I mean, prescriptions are moving up not at the pace that we would like, but they are moving up and I think we had made some changes to our coping plan and then we had improvement in the access. So I’m pretty confident that the growth trajectory will be able to maintain. And this is about your question on when maybe of course on [Technical Issues]. On Ilumya, I mean, personally I don’t see a challenge because of the channel that we are strong in. That is the medical benefit channel. Not all of that field that you see in the IMS will be completely reflected. So if I see and of course, on the comment, I cannot not discuss. But if I see the sales still yesterday for the month of Jan, I will — I feel pretty strong that the positive momentum will continue.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, sir. Great. Thank you so much.

Dilip Shanghvi — Managing Director

Thanks.

Operator

Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital — Analyst

[Technical Issues] So what I understood was this 14 exempt products currently are not getting sold?

Operator

Mr. Agarwal, please repeat your question. There was some audio loss.

Prakash Agarwal — Axis Capital — Analyst

Okay. Am I audible now?

Operator

Yes, sir.

Prakash Agarwal — Axis Capital — Analyst

Okay. Just wanted to understand this import alert situation better, so currently what I understand is 14 exempted products are not being sold and there are some activities that would be required to get these products enter the U.S. shore. So is that understanding right? And what is the value of these 14 products?

Dilip Shanghvi — Managing Director

So Abhay, you would like to answer or?

Abhay Gandhi — Chief Executive Officer-North America Business

Sir, whichever way.

Dilip Shanghvi — Managing Director

So I think you will have more current information.

Abhay Gandhi — Chief Executive Officer-North America Business

So batch by batch, the products that we have in India, we have started releasing to market after discussions with our quality team as well as external consultants and lawyers. And for the fresh product which we are getting from India, as you said, is a process to be followed, which we will follow and try and fulfill the needs of the market. And again, product wise and category wise, we don’t give out numbers. So I can’t really give an answer to your question of the exact contribution of these products.

Prakash Agarwal — Axis Capital — Analyst

So of the 155, is it half of the products sales or is it less than half some direction will help. And when you say batch by batch, it is — the FDA, I mean, you are releasing batch by batch or they are accepting batch by batch. If there can be any clarity there?

Dilip Shanghvi — Managing Director

We are releasing it batch by batch after thorough testing of the products.

Prakash Agarwal — Axis Capital — Analyst

Okay. And they’re accepting it?

Dilip Shanghvi — Managing Director

Yeah.

Prakash Agarwal — Axis Capital — Analyst

Okay. And —

Dilip Shanghvi — Managing Director

I think you should have clarity that it’s a decision by the Sun quality to release the batch. FDA doesn’t accept anything. Everything that we do is open for future audit.

Prakash Agarwal — Axis Capital — Analyst

Okay. But when you release it batch by batch, it can be sold in the U.S. market. Is that understandable?

Dilip Shanghvi — Managing Director

We release — batch by batch release per the U.S. market.

Prakash Agarwal — Axis Capital — Analyst

Okay. Okay. And sir, direction on the, you know 14 exempted products, it could be less than half or around half of your $155 million sales.

Dilip Shanghvi — Managing Director

So as Abhay mentioned, we are not giving any specific product related revenues or disclosure.

Prakash Agarwal — Axis Capital — Analyst

Okay.

Dilip Shanghvi — Managing Director

And overall, I think — you have created that total impact on the overall company state is not more than 3%. That should give you some direction.

Prakash Agarwal — Axis Capital — Analyst

Right. Right. Right. And sir, when you said that you have taken some provisions, so is it adjusted with COGS or is it line item with other expenses? How should we think about that? And going forward also, how is all the provisions taken yet?

Abhay Gandhi — Chief Executive Officer-North America Business

So it’s lying in both in COGS and other expenses? I’m not very significant as I shared earlier.

Prakash Agarwal — Axis Capital — Analyst

Not significant henceforth?

Abhay Gandhi — Chief Executive Officer-North America Business

I said the — whatever we have baked in the current quarter in the COGS and other expense line is not very significant line share.

Prakash Agarwal — Axis Capital — Analyst

Okay. But most of it has been taken or it yet to be taken, sir?

Abhay Gandhi — Chief Executive Officer-North America Business

We have baked in whatever is, we fully aware of, completely we have recognized it.

Prakash Agarwal — Axis Capital — Analyst

Okay. Okay, lovely. And lastly on ROW and EM sales, so dollar terms, I were looking at two year CAGR and three year CAGR, it remains 2%, 3% kind of CAGR dollar terms. So is there any focus in terms of additional launches? Or is it because of the high COVID base, or how should we think about growth in ROW in here?

C. S. Muralidharan — Group Chief Financial Officer

I think the growth is significantly more than 2%, 3%. I don’t have three year data in front of me, but if I understand the relative percentage that the emerging market has other markets have other overall company performance, it’s not — it’s actually gaining in terms of overall share. So in spite of growth in other markets, it’s growing faster.

Prakash Agarwal — Axis Capital — Analyst

So I have data from Q3 ’21 — Q3 —

C. S. Muralidharan — Group Chief Financial Officer

I think can you then take it up separately with Abhishek and rework the numbers?

Prakash Agarwal — Axis Capital — Analyst

We will do that. Thank you so much.

C. S. Muralidharan — Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Shyam Srinivasan — Goldman Sachs — Analyst

Good evening. Thank you for taking my question. Just looking at global specialty sales Q-o-Q INR200 million has gone to INR223 million. I’m excluding the milestone. That’s about INR20 million odd. But when I look at non-Taro U.S. formulation, it’s flat, right, INR282 million, saying INR283 million. So just want to understand growth of specialty U.S. versus non-U.S., looks like there’s been a bigger contribution from non-U.S. I’m obviously making an assumption on non-Taro generic, but just wanted your thoughts?

Dilip Shanghvi — Managing Director

I mean, we have the data. You don’t — but we — I think for a specific reason, we are not sharing the detail of this, and I understand that it creates a challenge trying to estimate. Our own general feedback is that I think the business is growing both in U.S. as well as in other geographies.

Shyam Srinivasan — Goldman Sachs — Analyst

Thank you. But just anything on ROW, because intuitively seems to have grown faster. So have we done better in any of the other markets? I think that’s where the underlying question was.

Dilip Shanghvi — Managing Director

So you are asking for specialty business or other?

Shyam Srinivasan — Goldman Sachs — Analyst

Yes. Just I’m doing only specialty, only specialty — global specialty non-U.S.?

Dilip Shanghvi — Managing Director

At specialty business and ROW is not very large.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. Got it. Helpful. Just a second question on —

Dilip Shanghvi — Managing Director

What you must be mixing up is that the royal income is included in the —

Shyam Srinivasan — Goldman Sachs — Analyst

No. No, I excluded that, sir. I excluded the $12.5 million, $200 million has gone to $222 million.

Dilip Shanghvi — Managing Director

It is very small part of the overall business.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it. No problem, sir.

Dilip Shanghvi — Managing Director

The U.S. and Europe.

Shyam Srinivasan — Goldman Sachs — Analyst

So I meant non-U.S. as even Europe. So if there is something that’s happening incrementally in Europe, either through Almirall or others that is also something that that will be useful to know?

Dilip Shanghvi — Managing Director

No, I think Almirall is doing quite well with the product, and that is why they triggered the milestone. But I don’t see dramatic difference in the performance. And you need to know that in Europe what happens is that different countries based on a different point of time when they get reimbursement, the sales pick.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it, sir. Helpful. Just a second question on the Concert deal from a financing perspective, I think I missed the ex-Taro cash balance for the quarter or the December end. How will we be financing it? And just the next few steps, if you could highlight, what should we be looking out for?

Dilip Shanghvi — Managing Director

So we already given our — the press release in terms of the options we have in terms of financing this transaction. So beyond that, we will not able recommend how we funding this transaction at this point of time. And the process is also being shared which has been filed with Concert also, so which is out in public in terms of what you’re following being listed entity.

Shyam Srinivasan — Goldman Sachs — Analyst

Got it, Murali, sir. Thank you and all the best. Thank you.

Operator

Thank you. Next question is from the line of Sayantan Maji from Credit Suisse. Please go ahead.

Sayantan Maji — Credit Suisse — Analyst

Yeah, thanks for the opportunity. So I believe in initial readout the year-on-year increase in specialty was driven by Ilumya and Winlevi. So what would have like to quarter-on-quarter increase, are Ilumya and Winlevi — is it mainly because of Ilumya and Winlevi or has there been benefit from [Indecipherable] stocking up as well, because dermatology portfolio usually has a favorable seasonality in 3Q?

Dilip Shanghvi — Managing Director

There was a lot of breakup in the audio. So really not sure what the question is?

Sayantan Maji — Credit Suisse — Analyst

Yeah. So let me repeat it. Is it better?

Dilip Shanghvi — Managing Director

Please? Yeah, much better. Thank you.

Sayantan Maji — Credit Suisse — Analyst

Yeah. So I was saying that in the initial, you mentioned that the year-on-year increase in specialty was mainly like Ilumya and Winlevi. So I just wanted to check, are these the two factors for quarter-on-quarter increase as well and would seasonality and stocking up —

Dilip Shanghvi — Managing Director

Sorry. I’m sorry again. Are you what — you said are you, and then I couldn’t get the next couple of —

Sayantan Maji — Credit Suisse — Analyst

Yeah. So yeah, I was asking seasonality and stocking up benefit over the meaningful contribution?

Dilip Shanghvi — Managing Director

There is — that is no. There is no real stocking of these products.

Sayantan Maji — Credit Suisse — Analyst

Okay. Okay. And my second question is on Concert acquisition. So there is an ongoing litigation that is going on between Insight and Concert. So would outcome of this event be a material one in order to launch the product on time? Or is it something which is already taken care of?

Dilip Shanghvi — Managing Director

Yeah. We are aware, but we are not commenting on that right at this point of time.

Sayantan Maji — Credit Suisse — Analyst

Okay, no problem. Thank you for taking my questions.

Operator

Thank you. The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.

Krish Mehta — Enam Holdings — Analyst

Yeah. Hi, thank you for taking my questions. The first question I had was on Concert acquisition. So the cash balance of Concert seems to be at $140 million. So how will we be treating this cash balance and will this — will the cash balance in Concert be fungible for Sun Pharma going forward? Or will be using this only for Concert?

Dilip Shanghvi — Managing Director

So we will be dealing with the opening balance sheet as for the purchase of accounting post transaction close.

Krish Mehta — Enam Holdings — Analyst

Okay, that’s helpful. And on the generic pricing erosion for Taro, we just wanted to understand on given that the operating income has picked up this quarter versus the last quarter. Do you kind of see this trend continuing for Taro? And how do you see the generic pricing trend for the ex-Taro business in terms of new product launches and market checks in existing products?

Dilip Shanghvi — Managing Director

So Taro has I think in their release said that they continue to see pricing challenges. I think beyond that, for us to respond on this call would not be appropriate.

Krish Mehta — Enam Holdings — Analyst

Okay. Thank you so much. Good luck.

Dilip Shanghvi — Managing Director

Yes. Thank you.

Operator

Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Hi, thanks for taking my question. Sir, first on the SEZABY launch, if we can just provide us some sense of the opportunity, the way we’re seeing this — we seeing this opportunity for some sort of it going forward?

Abhay Gandhi — Chief Executive Officer-North America Business

So we believe it’s a very good product in a innovative serious indication of neonatal seizures, where there was no approved product and only [Indecipherable] products are available. And therefore I think we licensed it from Spark just launched it literally last week, so too soon to say. But we are obviously very —

Operator

Sorry to interrupt you Mr. Gandhi. Sir, this is the Operator, Mr. Gandhi, the audio is not clear from your line.

Abhay Gandhi — Chief Executive Officer-North America Business

Okay. Nothing changed. Can you hear me better know?

Operator

Yes, sir.

Abhay Gandhi — Chief Executive Officer-North America Business

So I don’t know how much you caught of what I said. I think, we believe it’s an important product and in neonatal seizures, which is a very serious indication. An approved product is something that use first to the doctors in the institutions as well as to the caregivers of the patients. So I think we are very hopeful this will be a good product going there.

Nitin Agarwal — DAM Capital — Analyst

And just following up on that the grandfather products, which are unapproved products, which are there, is there a timeline for the FDA to remove them from the market? Or how does the process work?

Abhay Gandhi — Chief Executive Officer-North America Business

It’s some modeling, which we did, but it is not definitive of how it’ll be looked at by the FDA for different products. It could be treated differently, and it’ll also a function of — to be able to believe that there will not be any drug shortage and the new product will be able to the — demand of the market.

Nitin Agarwal — DAM Capital — Analyst

So this is not a laid out procedure that once you get a approved product for in a category is —

Dilip Shanghvi — Managing Director

There is no laid out procedures that within ex number of months or weeks. The existing products for us to go out of market, there is no such established procedure. But it’s something that we will have to work with the FDA, convince them and it’s roughly — we have to go through.

Nitin Agarwal — DAM Capital — Analyst

And on this exclusivity period, how long do we exclusively do we get on a molecule like this? Is this a regular 20 — commercial exclusivity will be how long for this kind of product?

Dilip Shanghvi — Managing Director

I’m not 100% sure. But I think —

Operator

Thank you, Mr. Agarwal. We request that to return to the question queue for follow-up questions. We take the next question from the line of Vivek Agarwal from Citigroup. Please go ahead.

Vivek Agarwal — Citigroup — Analyst

Fine. Thank you for the opportunity. The question is related to recently acquired from deuruxolitinib, can you also —

Operator

Mr. Agarwal, please use the handset mode, sir. The audio is not clear from your line.

Vivek Agarwal — Citigroup — Analyst

The question is related to, deuruxolitinib. So sir, can you also comment on the safety profile of the drug, how this is compared to some of the product —

Abhay Gandhi — Chief Executive Officer-North America Business

No. I think whatever is in the public domain based on which I think it’s a relatively safe product with the — what I would call a benign kind of side effect profile that was reported in the studies that are in public domain. The Phase 3 studies, I think are in line with or — maybe in the line with that. So I think it’s a safe and very effective product. That’s why I think I talked about this in a context of best-in-class product.

Operator

Thank you. The current participant has left the question queue. We’ll take the next question from the line of the Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai — HSBC — Analyst

Hi. Thank you for the opportunity. My question is on Halol, again. So what kind of remediation cost you foresee for resolving the pending issues there? And also how do you see your U.S. generic sales pending over next few quarters ex-Halol? Do you think you have headroom to minimize impact of sales lost at Halol from other facilities?

Dilip Shanghvi — Managing Director

What I think we shared at the time of sharing the information about Halol, is that based on this, we expect the impact to be less than 3% and of the total sales and we are not changing or revising our guidance because of this. Now —

Damayanti Kerai — HSBC — Analyst

Regarding the cost, yeah, regarding the remediation cost, which you might be spending for issues there?

C. S. Muralidharan — Group Chief Financial Officer

So I think, we are not sharing specific information, but there will be a certain amount of consultants and remediation costs associated with the bringing the facility back in compliance. There may also be some new investments, which may be required. So, but that’s part of the remediation process.

Damayanti Kerai — HSBC — Analyst

Okay. And any timeline like what you are targeting by when you can see regulation of issues because this plant has been under FDAs scrutiny for some time now?

C. S. Muralidharan — Group Chief Financial Officer

No. I agree with you that it has been under scrutiny and in a way I state this for a very long time, so we need to find a way to resolve the issue and that’s what we are working for.

Damayanti Kerai — HSBC — Analyst

Okay. My second question is on Tara financials. So the SG&A associated there seems to be trending at around $50 million a quarter. So how should we see this cost going ahead? I understand that this includes Alchemee, but if you can comment on SG&A number for Tara?

C. S. Muralidharan — Group Chief Financial Officer

So Taro, as published the results, they also given the press release, being a public company, I don’t think we’ll able to share more information than what they have shared.

Damayanti Kerai — HSBC — Analyst

Okay. My last question is where do you book Almirall related benefits in your financials?

C. S. Muralidharan — Group Chief Financial Officer

Milestone income we said, it’s coming ROW.

Damayanti Kerai — HSBC — Analyst

So this is milestone income, but in a regular quarter, where do you capture this number, if there is no milestones, like the normal contribution coming from Almirall?

C. S. Muralidharan — Group Chief Financial Officer

Normal sales goes with the overall whatever sell through Almirall goes on —

Damayanti Kerai — HSBC — Analyst

Okay. Okay. Thanks.

Operator

Thank you. The next question is from the line of Bino Pathiparampil from InCred Capital. Please go ahead.

Bino Pathiparampil — InCred Capital — Analyst

Hi, good evening. Most questions answered. Just one question, Dilip, like you shared the revenue contribution from Halol, would you be able to do that regarding the Mohali facility as well, because there is still some FDA issues going on there?

Dilip Shanghvi — Managing Director

I don’t have the details with me. But — I mean we don’t either give out revenue from plants or from separate businesses. With Halol, we gave out because I think it’s important for investors to be able to evaluate the impact.

Bino Pathiparampil — InCred Capital — Analyst

Understood. Yeah. And just question on [Indecipherable]. Would you be able to define the market in terms of number of patients treated a year for this implication etc., something like that?

Dilip Shanghvi — Managing Director

Abhay, would you…

Abhay Gandhi — Chief Executive Officer-North America Business

Yeah. Yeah. I mean, I don’t have the number in front of me, but if that number is available, so if you can — I mean, I will share it with Abhishek post this call. And maybe you can connect with him offline and get that.

Bino Pathiparampil — InCred Capital — Analyst

Sure, that’s great. Thank you very much.

Operator

Thank you. The next question is from the line of Harith Ahamed from Avendus Spark. Please go ahead.

Harith Ahamed — Avendus Spark — Analyst

Good evening, thanks for the opportunity. On the Concert acquisition, will you be able to comment on the purchase price allocation? Will the consideration of $570-odd million reflect largely as intangibles on our balance sheet or will there be a significant goodwill creation? And the intangibles will be amortized over what period? If you can give some color.

C. S. Muralidharan — Group Chief Financial Officer

So we, as we explained in the opening remarks, on 19th January, we signed a definitive agreement. The transaction has to close, which we — to close probably in the first quarter of this calendar year. So, once it’s completed, we will do the full blown purchase price accounting. At that time, relevant things will be taken care.

Harith Ahamed — Avendus Spark — Analyst

Okay. And from an accounting standpoint, these payouts associated with the CVRs, will there be a liability created on our balance sheet for these potential payouts?

C. S. Muralidharan — Group Chief Financial Officer

There are multiple options available to treat these type of Contingent Value Rights, which we’ll evaluate along with the consultants at the time of finalizing the purchase price accounting.

Harith Ahamed — Avendus Spark — Analyst

Okay. And then, one question on generic Revlimid, we have disclosed a settlement for that product. Any color that you could share on the timelines for launch? Will this be an FY ’24 launch for us, or is it much later?

Dilip Shanghvi — Managing Director

So, Abhay, I think we’ve given some guidance in the past.

Abhay Gandhi — Chief Executive Officer-North America Business

We are on track for launch.

Dilip Shanghvi — Managing Director

Yes. That’s what we’re saying. Yes.

Harith Ahamed — Avendus Spark — Analyst

Okay. But we are not confirming it’s a FY ’24 product?

Abhay Gandhi — Chief Executive Officer-North America Business

No. All we have said is that we are on track as per the settlement with the innovator to launch. And there is no change to that in the quarter, yes.

Dilip Shanghvi — Managing Director

Correct. That’s what we have said in our guidance.

Harith Ahamed — Avendus Spark — Analyst

Okay. That’s all from my side.

Dilip Shanghvi — Managing Director

I had lost audio for a few seconds.

Operator

Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.

Surya Patra — PhillipCapital — Analyst

Thank you for the opportunity, sir. Just first question on the Concert again. Sir, how critical is the long-term tolerability study for the success of the molecules, sir? And that is one. And secondly, sir, this is just a lead molecule that is what we are acquiring through this acquisition or there is potential other platform technology, as well as product opportunity that we are acquiring?

Dilip Shanghvi — Managing Director

So, I think the key focus or interest for us was deuruxolitinib and its proximity to market and its ability to help the alopecia areata patient who are currently not having any good approved product for treating that condition. However, the company also has licensed products to other companies and they have some products, which are not even licensed, but they have intellectual property. So, I think as we develop better sense and understanding, we will share if there is any significant additional opportunity that we are able to identify from the pipeline.

Surya Patra — PhillipCapital — Analyst

And this is a cash-free debt-free kind of acquisition, sir or because just wanted to have a more clarity about the cash number that what we are seeing in the finance…

C. S. Muralidharan — Group Chief Financial Officer

It’s a debt-free acquisition. Cash will follow along with the company.

Surya Patra — PhillipCapital — Analyst

Sure, okay. My next question is on the cost side, sir. So basically, we are seeing a kind of some impact obviously on the other expenses front and that could be because of multiple factors. But I’m just trying to understand to what extent this is led by, let’s say, Taro’s underperformance. Because it is Alchemee acquisition. Post that, obviously, we are seeing some, some impact on the cost side. So, if you can share on that front.

C. S. Muralidharan — Group Chief Financial Officer

We already in the readout said that the increase in other expenses is driven by the higher selling and distribution expense across various geographies, higher R&D spend and also the consolidation of Alchemee business. Separately, we will not be able to give any number what’s related to Alchemee business. There’s no other components, which is lying in the other expenses.

Surya Patra — PhillipCapital — Analyst

Okay. Because if we just adjust the licensing income, then the cost structure even looks slightly deteriorated. So, that is why. This licensing income, sorry, this milestone income would be a kind of a pure cash component. Adjusted for that cost structure, looks slightly deteriorated, that is why.

C. S. Muralidharan — Group Chief Financial Officer

But license income is not — is part of the revenue, right, operating revenue, other operating revenue.

Surya Patra — PhillipCapital — Analyst

Okay. And just last one question, sir, relating to the R&D. Now considering the kind of, nature of our activities and the intent to expand our specialty portfolio, so let’s say in next two-year period, the R&D spend mix towards the specialty would be to what extent of the total R&D spend directionally?

Dilip Shanghvi — Managing Director

So, I think we’ve shared with investors that our focus is on creating a significant additional engine of growth through specialty business and we have been diligently building that business and that business will require investment in new clinical strategies, R&D. So, we will comment all of that whenever that becomes necessary. But we don’t give guidance beyond the next year. So, that’s where I think I have the challenge. But directionally, I think we would be strengthening our ability to execute on various specialty-related investments.

Surya Patra — PhillipCapital — Analyst

Sure. Yeah. Thank you, sir.

Dilip Shanghvi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ritwik Sheth from One-Up Financial. Please go ahead.

Ritwik Sheth — One-Up Financial — Analyst

Yeah, hi, good evening, sir. Sir, I just had one question on the India business. Would it be possible to give a split for the pricing-led, volume-led and new business-led growth for this quarter and nine months?

Dilip Shanghvi — Managing Director

No, I think actually the what you call Syndicated Research, as well as IQVIA give you that.

Ritwik Sheth — One-Up Financial — Analyst

Okay, sir. Thank you, sir. And all the best.

Dilip Shanghvi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Niket from Motilal Oswal AMC. Please go ahead. Niket, your line is in talk mode. Please go ahead with your question. Niket, your line is in talk mode. Please go ahead with your question. As there is no response from the current participant, we’ll move on to the next question from the line of Smith [Phonetic] from RDA. Please go ahead.

Smith — RDA — Analyst

Thank you for the opportunity. Why have we discontinued ANDA approval for generic Vraylar?

Dilip Shanghvi — Managing Director

What is that?

Smith — RDA — Analyst

Generic Vraylar. Cariprazine.

Dilip Shanghvi — Managing Director

Cariprazine.

Smith — RDA — Analyst

Yeah, right.

Dilip Shanghvi — Managing Director

What is the question?

Smith — RDA — Analyst

I mean, why have we discontinued the ANDA approval?

Dilip Shanghvi — Managing Director

I don’t know what — is that a public domain information. I don’t know. We don’t give information related to future products.

Smith — RDA — Analyst

No, because it is approved and then we discontinued it, so.

Dilip Shanghvi — Managing Director

So, that must be business reasons.

Smith — RDA — Analyst

Because it is a fairly large product in U.S. So, is it still meaningful opportunity for us?

Kirti Ganorkar — Chief Executive Officer-India Business

Honestly, I am also not aware. I need to check back and come back.

Smith — RDA — Analyst

Okay, okay.

Dilip Shanghvi — Managing Director

No, since we are not aware of anything, it’s better that you speak to Abhishek and get information.

Smith — RDA — Analyst

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

Operator

Thank you. The next question is from the line of Mayank Hyanki from Axis Mutual Fund. Please go ahead.

Mayank Hyanki — Axis Mutual Fund — Analyst

Hi, I have two questions. The first question is on the nature of other expenses. So, CS commented that selling and distribution costs have gone up in this quarter. So, wanted to understand what has led to this increase in selling and distribution costs for the quarter and is it a structural increase?

C. S. Muralidharan — Group Chief Financial Officer

So, selling and distribution expenses, I mentioned that it increased across geographies. However, we also mentioned specifically the field force expansion is fully completed at the beginning of this fiscal for India. So obviously, in the current year, you will see a full expenses for S&D for those new people added. So, that’s why overall you’re seeing an increase in higher S&D spend.

Mayank Hyanki — Axis Mutual Fund — Analyst

So, this is something you are saying it’s increase acrossd the employee expense, as well as SG&A?

C. S. Muralidharan — Group Chief Financial Officer

Of course, more related with new field for expansion, obviously, the full year impact is there plus also the related spend on the S&D related to the field force.

Mayank Hyanki — Axis Mutual Fund — Analyst

Okay. Understood. The second question is on the Halol site, I mean, we continue to face trouble in this site. So, my question is just, Mr. Shanghvi that, what is the core reason for this repeated issue at Halol? I mean, most of it will of course be retrospective, but — and what have you done to like to address it over the past few years?

Dilip Shanghvi — Managing Director

No, I think clearly whatever that we thought we needed to do we’ve done, but it was not adequate. So, [Technical Issues] ensure that the expectation of the regulatory agency are met. So, we believe that we’ve now put in place appropriate focus and structure, so that we should be able to meet the expectation of the agencies. I think at the same point of time, we need to also keep in mind that a large number of our other facilities supplying to the U.S. are in compliance and we continue to what you call grow our business in the U.S., in-spite of significant pricing pressure, as well as what you call challenges in the marketplace.

Mayank Hyanki — Axis Mutual Fund — Analyst

So, is it because, I mean, we all understand Halol is one of the large and old complex, which has gotten particular disease production. Is it because of it being an old plant? Or is it because of shortage of proper skill-set, or is it because of evolving standards of FDA? And is it something which — I mean, the practices here, is it something that we would be having across your other sites as well because of, if it could be a systematic issue, which has to be addressed?

Dilip Shanghvi — Managing Director

No, I think the company policy is that whatever changes we make in one plant, if it is applicable and related to other facility, it is automatically put in priority for implementation in that facility. Now, Halol, rather than being an old plant, I think we have made huge consecutive investments and it’s become a very large and complex facility. So, we have to find a way to reduce the complexity.

Mayank Hyanki — Axis Mutual Fund — Analyst

Got it, thank you.

Operator

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi, thanks for the follow-up. So, just quick question. The product which are of a lot of interest is Semaglutide and Liraglutide. And you know it could be interesting market. So, any thoughts you can share? I can see that Sun is among the four to six filers for this product. You think it can get competitive? You still think it’s going to be attractive opportunity? Just your thoughts would be great.

Dilip Shanghvi — Managing Director

So, Semaglutide is far away, Sameer. I think Liraglutide is relatively recent, but my expectation is that by the time the patent expires and we can come to the market, a large part of the current what you call patients would have moved over to Ozempic. So to that extent, we have to look at residual market at the time of patent expiry.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, that’s fair. It’s very helpful. And just one more if I can on deuruxo and that is — it’s JAK1 and 2 inhibitor and we have this Olumiant in the market. So, is that pricing and other JAKs — are those pricing serve as a good benchmark for our product and I know it’s still some time, but any thoughts on that?

Dilip Shanghvi — Managing Director

So, my sense is…

Kirti Ganorkar — Chief Executive Officer-India Business

We have assumptions, but we have no firm decision taken of where the pricing could be. Sorry, Dilip, you were saying something.

Dilip Shanghvi — Managing Director

No, I think the idea would be to develop a comprehensive understanding on the price at which we can fully benefit from the value of the product and also patients have ability to access a effective treatment option.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay. Thank you very much.

Operator

Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sun Life AMC. Please go ahead.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Thanks for the follow-up. A few quick clarification, sir. Firstly, in the press release, we have mentioned that the adjusted for one-off, the PAT growth in this quarter was higher than EBITDA. So, can you just help me what was the one-off last year same quarter?

C. S. Muralidharan — Group Chief Financial Officer

Last year same quarter, we have disclosed there was interest on income tax refund and there was settlement income. We disclosed that, that has been adjusted.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Okay, okay. And in terms of the net MR addition in nine-month this financial year, can you share that number as well?

Dilip Shanghvi — Managing Director

Yeah, that’s in Indian market.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

Yeah.

Dilip Shanghvi — Managing Director

Net addition.

Kirti Ganorkar — Chief Executive Officer-India Business

Yes. We have completed the MR additional like 1,000 MR we have added in this financial year. So, that part we have completed.

Naushad Chaudhary — Aditya Birla Sun Life AMC — Analyst

And lastly, qualitatively on the especially related…

Kirti Ganorkar — Chief Executive Officer-India Business

Sorry…

Operator

The line for the current participant was disconnected. We’ll move on to the next question from the line of Kunal Dhamesha from Macquarie. Please go ahead.

Kunal Dhamesha — Macquarie — Analyst

Thank you for the follow-up. So, just on deuruxolitinib, with the current kind of clinical data we have, would we be able to apply for approval outside U.S. with the current clinical data that we have?

Dilip Shanghvi — Managing Director

Yeah. I think we have to evaluate country by — I mean geography by geography. Some geographies may require additional studies. Some geographies, we may be able to file the existing portfolio. So, we have to take a — it needs extra investment. We have to take country by country decision, but it’s a large-enough product for us to seriously look at potential across geographies.

Kunal Dhamesha — Macquarie — Analyst

Okay. And those additional study would be more like a briefing expertise or kind of a full fledged trial — at least for bigger geographies like Europe or Japan?

Dilip Shanghvi — Managing Director

My understanding is that Europe may not require additional study because quite a few [Technical Issues] in this study were also in Europe. So, it may not require a separate study. I’m talking more about Japan, China, in these countries, where maybe what studies we will be required, we have to get, interact with the regulators and develop and understand.

Kunal Dhamesha — Macquarie — Analyst

Sure. And just on Mohali, after it has been kind of, classified as OAI, has there been any communication with USFDA in terms of the CAPAs, etc., we would have submitted?

Dilip Shanghvi — Managing Director

I think there is a structured process about updating FDA of this what you call Response 483 and what we are doing. So that — and that we follow.

Kunal Dhamesha — Macquarie — Analyst

Thank you and all the best.

Dilip Shanghvi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital — Analyst

Yeah, thanks for the follow-up. Just trying to understand the Taro cash. I understand Taro is a separate company. But you are the promoters and Taro is not hosting any calls anymore. I mean, how do we think about utilization of that cash? Can they use this cash for similar asset acquisitions like you did in the specialty side, or it’s been there for long and is accumulating? So, what are the thoughts as a promoter?

Dilip Shanghvi — Managing Director

So, the idea would be to find profitable end use of the surplus cash, so that it can be put to use. And we constantly evaluate opportunities both in Sun, as well as in Taro. Taro also has a separate business development group. And they’ve also constantly evaluate opportunities. So hopefully, I think with rationalization of valuation, we should be able to do something.

Prakash Agarwal — Axis Capital — Analyst

And just a request, if you could have at least an annual call for Taro, that would be very useful.

Dilip Shanghvi — Managing Director

We would communicate that or share it with them.

Prakash Agarwal — Axis Capital — Analyst

Okay sir, thanks.

Dilip Shanghvi — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Abhishek Sharma for closing comments.

Abhishek Sharma — Head of Investor Relations and Strategic Projects

Thanks, everyone for joining in today. Kindly reach out to the IR team for any remaining questions that you may have. Good night, everyone.

Dilip Shanghvi — Managing Director

Thank you.

Operator

[Operator Closing Remarks]