AJANTPHARMNSEQ1 FY2023July 28, 2022

Ajanta Pharma Limited

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Management on call

Yogesh Agrawal

MANAGING DIRECTOR - AJANTA PHARMA LIMITED

Rajesh Agrawal

JOINT MANAGING DIRECTOR

Arvind Agrawal

CHIEF FINANCIAL OFFICER - AJANTA PHARMA LIMITED

Key numbers — 40 extracted

Rs.240 Crore

generic business, which comprises of Asia and Africa. In Asia during the Q1 FY2023 our sales was Rs.240 Crores against Rs. 165 Crores posting a very healthy growth of 45%. Just a caution the growth appears a

Rs. 165 Crore

ch comprises of Asia and Africa. In Asia during the Q1 FY2023 our sales was Rs.240 Crores against Rs. 165 Crores posting a very healthy growth of 45%. Just a caution the growth appears a bit elevated primarily

45%

the Q1 FY2023 our sales was Rs.240 Crores against Rs. 165 Crores posting a very healthy growth of 45%. Just a caution the growth appears a bit elevated primarily because of the slightly lower base in

Rs. 168 Crore

COVID, which created some destruction at that time. Coming to Africa during the Q1, our sales was Rs. 168 Crores against Rs. 125 Crores, again posting a very healthy growth of 34%. Here also similar caveat tha

Rs. 125 Crore

me destruction at that time. Coming to Africa during the Q1, our sales was Rs. 168 Crores against Rs. 125 Crores, again posting a very healthy growth of 34%. Here also similar caveat that like-to-like in the

34%

e Q1, our sales was Rs. 168 Crores against Rs. 125 Crores, again posting a very healthy growth of 34%. Here also similar caveat that like-to-like in the earlier Q1 that was slightly suppressed becaus

43%

s a bit more elevated. But overall the branded generic business of Asia and Africa contributed to 43% of the total revenue during the Q1 and our exports in these markets were Rs. 408 Crores against R

Rs. 408 Crore

frica contributed to 43% of the total revenue during the Q1 and our exports in these markets were Rs. 408 Crores against Rs. 291 Crores, posting a very healthy growth of 41% of previous year for the same perio

Rs. 291 Crore

% of the total revenue during the Q1 and our exports in these markets were Rs. 408 Crores against Rs. 291 Crores, posting a very healthy growth of 41% of previous year for the same period. We continue to stay

41%

rts in these markets were Rs. 408 Crores against Rs. 291 Crores, posting a very healthy growth of 41% of previous year for the same period. We continue to stay little sharp in these markets to iden

19%

Africa across various countries. Let us move to the US generic business. US business contributed 19% to the total revenue during the Q1. We registered sales of Rs. 179 Crores against Rs. 168 Crores

Rs. 179 Crore

business. US business contributed 19% to the total revenue during the Q1. We registered sales of Rs. 179 Crores against Rs. 168 Crores posting a modest growth of 6%. This modest growth of 6% was despite the s

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Guidance — 20 items

Yogesh Agrawal

opening

“So we will see the accelerated filing in coming quarters in Q2, Q3, Q4 and with that we are still aiming to file 10 to 12 ANDAs in the FY2023.”

Arvind Agrawal

opening

“Against the guidance, material cost of 25% to 26%, Q1 FY2023 raw material cost was at 29%.”

Arvind Agrawal

opening

“From the above impact we will be able to recover 1% from the price increase we have taken across market and INR depreciation against US $.”

Arvind Agrawal

opening

“So going forward we estimate the cost of goods sold to be close to 26% or in that range.”

Yogesh Agrawal

“But going forward I think we can expect the growth to remain in the mid-teens is what we are looking to give the guidance.”

Bino Pathiparampil

“Just one more question on the US market, you have this product filing generic version of Chantix, any update on when do you expect the approval for the product and launch?”

Nimish Mehta

“I understand the FDA will be launching in January next year are we likely to launch soon after that?”

Yogesh Agrawal

“I don’t have the details on the tip of my tongue to give you on that, but the fact is that we have got TA so there is no holding back I think the date and the exclusivity or the patent rights will happen we will take on the approval and probably we will be able to get the product, but having said that I think let me just reconfirm with my team and then we will circle back to you on the details for that.”

Rajesh Agrawal

“Abdulkader Puranwala: For next year FY2023, what are we targeting in terms of new launches and what are the therapies where these products would be launched or the brands will be launched?”

Rajesh Agrawal

“So we are also in the race to launch those products, so mostly it will be filtered towards those two segments.”

Risks & concerns — 7 flagged

One time inventory write off had an impact of about 2% on the inventory cost, which is due to basically expiry in the different market.

— Arvind Agrawal

So now it is difficult to predict, but if we get the inspection approval we could be launching some products in Q3, if that inspection get delayed by a quarter or so it could be in Q4.

— Yogesh Agrawal

What is changing is, I think the fact that during COVID when approvals are not coming, companies are under pressure to increase the business.

— Yogesh Agrawal

So the pressure to increase the business of the existing products will also kind of reduce a little more.

— Yogesh Agrawal

For the next year will be difficult at this point of time, but I think we should see in this range only.

— Arvind Agrawal

Because some of the litigations which are ongoing in this regard also point out that generic medicine access to certain classes of patients was denied by the PBMs and I think that is the risk what the whistleblower seems to indicate.

— Gagan Thareja

It is a complex subject I think difficult to discuss that on an investor call.

— Yogesh Agrawal

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Q&A — 13 exchanges

Thanks for the opportunity. Sir on this Africa branded generics, there has been a very robust growth for now past four quarters at least. If you could just elaborate as this has been much higher than the industry growth, so what is driving this and how sustainable is this growth over the next 12 to 18 months?

Yogesh Agrawal

No doubt, we have executed well in Africa, the combination of increasing our market share from the existing product, existing people, launching of new products and successfully taking the market share from there, also expanding of sales force there. The combination of that is in the healthy growth last year and the current quarter also. But as I mentioned in my opening remarks this quarter growth looked a bit more elevated than otherwise would have been because of the low Q1 of the last year. Without that also we would have posted 20% to 25% growth or higher than that. But going forward I thin

Just a question on the US business, the price erosion how are you looking at it last quarter versus the quarter before that and what is the latest that is what are you seeing right now versus what you saw in last quarter?

Yogesh Agrawal

I think this price erosion happened in the earlier quarter and thereafter it has stabilized. So we have not seen price disruptions in the current quarter, but whatever price erosions occurred in the previous quarter that effect will continue and which is what CFO has mentioned that 1% impact we are seeing in the cost which has got elevated. But for now the price erosion has a kind of tapered down significantly, they are quietened. We are estimating that probably the price erosion should come back to the level of 5% to 8%, which was the normal range also for the price inflation which will happe

Thanks for taking my question. My question is actually related to filing of another US product Vimovo. Any idea when can we launch because I understand this could also be a different launch and if I am not wrong you can launch upon approval, so any idea about the timeline would be helpful?

Yogesh Agrawal

Yes, for that I can share with you by and large the feedback we have from the FDA that ANDA review is complete for that. We are just waiting for the facility inspection, they have said that the approval can happen after the facility, so now we are waiting for the US FDA to announce when the inspection will happen. So, it can well be in this year as well? We hope so, I think it is linked with the FDA, now we have seen a number of pre-inspection approval happening in the industry, you must have also seen number of companies are getting the inspection. We have number or a few times written to FDA

We have taken the possible price increase I will share the breakup with you.

Arvind Agrawal

Price increase we have taken is about 7%. That is the contribution to the growth? Yes, so 7% is the contribution to the growth there. Out of the total growth 7% is price increase. 6% is the volume growth and the rest of it is 3% new product launch. Abdulkader Puranwala: For next year FY2023, what are we targeting in terms of new launches and what are the therapies where these products would be launched or the brands will be launched? For the rest of the coming years? Abdulkader Puranwala: Yes Sir. Mostly antidiabetics and cardiology. That is where the plethora of launches are taking place acro

Thanks for the opportunity. So, just a followup on US business, this quarter we have not launched any product, but any date, oral products, number of launches that we have planned for the next nine months in FY2023?

Yogesh Agrawal

No, as I said I think currently whatever tentative approvals were in advanced stage of review they are all awaiting inspection. We have four products, FDA told that review is complete they are awaiting the approval. So right now we do not have any visibility, so as I guided you, I think we are waiting for the inspection to happen to unlock the new product approvals. Without that we are expecting to post 4% to 5% probably 5% growth in that vicinity, as and when the new product gets launched then that will add to growth on the profitability. Okay and basically India business what is the guidance

Good afternoon, Sir. First of all congratulations on a very good performance. I have missed the trade generics number I am not sure if that was shared in the call today, can you please share that number for the quarter?

Arvind Agrawal

Quarter is Rs. 33 Crores against the previous year same quarter is Rs. 27 Crores. Sir, can you talk a bit about more about this segment what exactly are we doing in this trade generic and what has been driving the growth and what is the strategy going forward? In trade generics we are doing pretty much exactly the same as what some of the other companies are doing. It is a push strategy that is used where it is being sold by the pharmacies and the differentiator is we are focusing more on the chronic segments in the trade generics. We have been able to grow pretty well in the last three years,

Good evening and thanks for giving me this opportunity. Sir, on the Asia and Africa branded business is there any element of channel filling that we have so that there might be some lumpiness in the revenue in the coming quarters?

Yogesh Agrawal

Element of what? Channel filling, stocking and inventory at the dealer level? No not really. Remaining quarters also we are driving to a mid-teens growth. I think what you are really trying to understand is that this higher growth is something which may be because of the channel filling, but it is not so. Actually last quarter as we mentioned earlier also that it was the delta variant quarter where everything came to standstill. So because of that we were very low. If you see our four quarters that was the lowest quarter which was there, afterwards we picked up the numbers in the market, so I

Sir, thank you for taking my question. My first question is on what is the cash utilization avenue or deployment that do you think about going ahead?

Arvind Agrawal

It is very simple, the thing which is going on for the last two to three years. We are looking for acquisitions, we are counting for acquisition, we are always looking at all the opportunities which are coming in the market. So certainly that is one area where we can deploy the cash, but other than that I think our major capex is already completed, so there is no need there and there is no other major utilization of cash which is going to be there in the near future. Right and acquisition in the domestic front is what you are scouting for? Basically, it is only in domestic market that is India

Sir, thanks for the opportunity again. Sir, on the domestic formulation side the increase in prices on the NLEM portfolio will that get reflected 2Q onwards or there is inventory still left in the system?

Rajesh Agrawal

No, I think it has started to reflect in Q1 itself and I remember we discussed this thing a couple of quarters ago and I had mentioned that we will take the full increase. So we have done the same and it has started to reflect by the end of Q1 itself, of course you will see more reflection going forward. There has been also talk about some price cap any comment on that? I am only aware of it as much as you have information on media reports that I have also read. Just one last clarification while you have already explained it, the margins which you have guided for does not include the opportuni

Good evening, Sir. Sir, my first question is around the Africa piece, if you could delineate the Africa branded business growth between the Franco Africa and the Anglo Africa segments and also give us a flavor of what is the growth in Anglo Africa looking like and what is the salience in sales of Anglo Africa overall?

Yogesh Agrawal

No unfortunately we are not sharing the data for Anglo, Franco, but as you are aware that our bigger presence is in the Franco Africa. But both the markets they are performing well for us Anglo as well as the Franco both are showing positive growth. Could it also be possible for you to give us some flavor if not quantitative at least directionally of the Asian branded generic markets in the Philippines, Iraq, Jordan and CIS markets separately. Some idea of how you see them evolving for you over the coming two to three years? No, unfortunately I think we are giving this guidance on the continen

Good evening. Thank you for taking my question. Sir, firstly, how much percentage of our portfolio is under NLEM?

Arvind Agrawal

About 12% of the India business. Sure and the step up in revenue that we have seen in the Africa business, is this sustainable because this is a kind of quarterly run rate that we can currently work with? As I mentioned earlier we are looking at mid teen growth going forward, for the quarter the growth is slightly higher because of the last year corresponding quarter slightly low due to the COVID disruption, but we are optimistic to outdo the industry that is for sure. Just to clarify you are talking about the Africa institutional business doing mid-teens kind of growth? No, I am talking of Af

Good evening Sir. Thank you so much for taking my question. I just have one question on the Africa branded generic business and this is more of a generic question, given that as an investor I understand on the branded generic space in Africa is limited. Could you help us with a little more colour on what is going on in this business and currently how are we seeing traction. Generally we have been guided mid teen kind of growth but if you look like even at a 10-year history, growth seems to have happened in a more lumpy manner even in the branded generic space. 2013 was a great year, 2015 was a

Yogesh Agrawal

No, if you see our Africa business or for that matter any branded generic business whether it was Asia or Africa, it has been very consistent. You will see our track record of five years, eight years, ten years, the growth percentages may have varied maybe some years we may have grown at 8%, some may at 18%, some may at 25%. But there has been a consistent growth, it has been never a lumpy for us that we de-grew 10% and next year we grew 25% and again that is the outcome of very fundamental things. We believe in identifying the product, identifying the gap, good product selection, if you see o

Thank you everyone for joining this call. In case there are any further questions that remained unanswered today, please reach to our Investor Relations team. Thank you so much.

Management

Speaking time

Yogesh Agrawal

Arvind Agrawal

Moderator

Rajesh Agrawal

Tushar M

Rashmi Sancheti

Gagan Thareja

Nimish Mehta

Alisha Mahawla

Kunal Randeria

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Opening remarks

Yogesh Agrawal

Thank you. Good evening and welcome to all of you. With me I have Mr. Rajesh Agrawal, our Joint Managing Director and Mr. Arvind Agrawal, our CFO. I am sure all of you have received bonus shares in your accounts. Coming to the results they are already there with you and I am happy to share that the quarter witnessed a strong growth momentum across all our major markets of branded generic business. I will take you through business wise performance for the Q1 along with the comparison of the previous year for the same period. Let us begin with the emerging market branded generic business, which comprises of Asia and Africa. In Asia during the Q1 FY2023 our sales was Rs.240 Crores against Rs. 165 Crores posting a very healthy growth of 45%. Just a caution the growth appears a bit elevated primarily because of the slightly lower base in the Q1 FY2022, which was impacted because of the second wave of the COVID, which created some destruction at that time. Coming to Africa during the Q1, our

Rajesh Agrawal

Thank you very much. Good evening to all of you. Let me discuss some of the key highlights of India business with you now. India business contributed 30% in the total revenue during Q1 FY2023. Sales stood at Rs. 279 Crores as against Rs. 229 Crores posting a healthy growth of 22% during the quarter. This includes sales from trade generic of Rs. 33 Crores against Rs. 27 Crores in previous year same period. We launched seven new products in Q1 FY2023 with two products being first to market. Our first quarter performance has been satisfactory and it has been on the back of new product launches, market share gain and price increase. As per IQVIA MAT June 2022, we had posted healthy growth in all the therapeutic segments and exceeded industry growth rates across all therapies. We have three of our brands appearing in top 500 in the IPM now. Again as per IQVIA we improved our ranking by 1 position to rank 28 in June 2022 from being 29th ranked in March 2022. We are glad to inform that we hav

Arvind Agrawal

Thank you very much. Good evening, to all of you and warm welcome to this earning call. For needs of discussion, we will look at the consolidated financials and provide year-on- year comparison. Let me take you through key financial highlights for the quarter. It was an excellent quarter with 27% growth in revenue across all the market. Total revenue stood at Rs. 951 Crores against Rs. 748 Crores. Against the guidance, material cost of 25% to 26%, Q1 FY2023 raw material cost was at 29%. The reason for the same are one time inventory write-off of 2% due to expiry, increase in raw material and packaging material cost due to global inflation impacting about 1%, US price erosion is about 1%. From the above impact we will be able to recover 1% from the price increase we have taken across market and INR depreciation against US $. So going forward we estimate the cost of goods sold to be close to 26% or in that range. Coming to other expenses, we saw significant rise in the export freight cos

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