00:00 Hello and welcome to NDTV Profit. I am Monal Sanghvi and we are doing an earnings review
00:05 with JB Pharma. Joining us is the Managing Director, Mr. Nikhil Chopra. Welcome to the
00:11 show, sir. Thank you. Thank you, Monal, for having me
00:14 on the show. JB Pharma had numbers that were in line with
00:18 estimates, revenues up around 7%, EBITDA margins coming in strong at 27.7% this quarter, net
00:27 profits up 26%. So a strong show on the numbers. What do you think about the margins for the
00:35 year 2024 and for the upcoming year 2025? So Monal, this was one of the peak margins
00:44 that in the last three years that we could demonstrate in our operating business. And
00:50 the reason behind this margin that we could achieve was a mix of many things. What we
00:58 have been trying to do in India business, which is contributing over 53% of the revenue,
01:02 is build towards the entire chronic part of the business, particularly in chronic, when
01:07 I'm talking in the field of cardiology, within that cardiology, hypertension, heart failure,
01:13 lipid lowering medicines. That is what we are trying to do, which is helping us with
01:17 good gross margins. And secondly, also there is a robust efficiency program that we are
01:24 running in the company over the last three years. Be it productivity in the field, be
01:29 it efficiency and better bed sizes in our manufacturing plants, better vendor management,
01:37 all aspects of efficiency, that is what we are trying to achieve, which only helps us
01:41 to reinvest in the business. And overall, the trajectory that we have seen in our CDMO
01:47 business is also helping us with better gross margins. And last but not the least, is the
01:52 haircut that we have taken in our South Africa business, which was more public driven, is
01:58 also helping us in terms of better gross margins and better EBITDA margins. So this is where
02:03 we stand in terms of guidance, if I have to talk about. We have been guiding for our EBITDA
02:09 margins ranging between 25 to 27 percent, and touchwood our EBITDA margins for nine
02:15 months are close to 27.8 percent. So we will continue to guide our EBITDA margins between
02:21 25 to 27 percent for the coming year also, because there are a couple of pain points
02:26 that we are seeing in the business. And as everybody is aware about the Red Sea issue,
02:30 and equally some of the API process also going up and delays in shipping. So keeping in mind,
02:36 we continue to write for 25 to 27 percent EBITDA margin.
02:40 Sure, sir. So if I were to just understand what is the share of chronic in the whole
02:45 of domestic business versus acute and is this proportion going to be the same? Are we looking
02:51 at moving more towards chronic? How is the product mix going to be?
02:56 Very good question, Monal. In terms of that is the agenda which we are looking at in India
03:01 business, a chronic part of the business today is contributing 52 percent of the revenue
03:07 at JB. But if you look at Indian pharma market, which is 25 billion dollar market, the chronic
03:13 contribution within that is close to 40 percent. Coming back to JB, the roadmap that we are
03:21 putting in place is to take chronic contribution to as high as 60 percent with existing portfolio
03:28 that we have bought within cardio space, what we are trying to do. And there are some also
03:32 niche products that we have in the field of nephrology and a couple of products in the
03:36 field of metabolics that will only help us in terms of improving our cardio share.
03:41 When we look at chronic space, what we keep in mind is not only generating revenues. The
03:50 long term agenda is how do you at least care for the patients, look at how do they lead
03:56 better quality of life, early diagnosis, better quality of medicine, affordable access. All
04:04 this has been kept in mind, driving better adherence, reducing burden of disease. That
04:09 is a long term agenda that we are looking at. How do you serve more and more number
04:15 of patients with the quality medicines which are coming from the house of JB? And ultimately,
04:20 you can drive better revenues. That is how the balance between a humanitarian approach
04:27 and a commercial approach that is what we are trying to keep in.
04:31 Sure, sir. Sir, this is another question just for understanding. When we look at margins
04:37 of a chronic portfolio versus an acute portfolio, are they almost at par or how is the margin
04:43 profile for these two therapies? Obviously, the chronic portfolio margins are
04:49 better, but I will not be able to detail it, but the margins in chronic are better. And
04:54 one more thing which happens in the chronic space is as many as 50-60% of the population
05:00 who are taking medicines, they adhere to medicines. So there is a refill business which also helps
05:04 you in the long term. But the competition in the market is stiff. If you look at cardiology
05:10 market, which is a $3 billion market in India, three years ago, we were 13th ranked player
05:18 and we were covering 40% of the cardiology market. In three years, the journey that we
05:24 have traveled with our organic big brands like Silacar and Nicardia only becoming big,
05:30 gaining market share, and also the couple of acquisitions that we have done in heart
05:34 failure and lipid lowering pill, today we are covering 90% of the market. And we are
05:39 from 13th ranked company, today we are 8th ranked company and we are the fastest growing
05:42 company today in cardiology space in the country. Right, sir. Sir, also in India, I mean this
05:47 is going to be my last question on the domestic geography since that makes most of your revenue.
05:51 We are in the top 25, so now what is the next target? A target that we have kept for ourselves
06:00 is to improve our prescription ranking. We are from 33rd ranked company today, we are
06:05 close to 22nd, 23rd ranked company. Now, and from prescription perspective, we are 16th
06:12 ranked company. We want to be in top 12 in prescriptions. That is the target that we
06:16 have kept in mind. And long term target is to be in top 20, that we will see over a period
06:22 of time. But near term target is how do we improve our prescriptions share because according
06:26 to me, the demand that our 2000 people on the ground generate is more critical instead
06:33 of looking at gaining ranks. And as you generate robust demand, ultimately it will convert
06:39 into your secondary sale and the primary demand is going to come. So that is how we have kept
06:45 it as our short to mid term goal and eventually we will look at how do we want to be in top
06:51 20. Right, so thank you. Sir, also this time there
06:54 has been some issue on the international business front where you said that you strategically
06:58 and you did mention earlier that you moved away from the public. So if you could throw
07:03 some more light on what's happened in the South African space and going forward, how
07:08 would that have an impact on the margins because we are also going to see margin pressures
07:12 coming from the Red Sea and the freight issues. So will that kind of set off, will the South
07:17 African business now also propel and this impact go away?
07:26 Going away from the public market is a blessing in disguise because the 150 crore that we
07:35 have let go was having very thin margins. South Africa business, if we would have not
07:39 let go that 150 crore business, it would have been 400 crore business this year. But we
07:43 have let go 150 crore business so we are taking a hit of around 35 to 40 crores every quarter.
07:48 This will continue to impact until quarter one of FY25. So that is not a worry, first
07:55 of all. Overall the team is there. We have our teams based out of Jonasburg and in South
08:03 Africa we are known as Biotech and it's a 100% owned subsidiary of JB. So our business
08:10 this year will be close to 250 crores. Earlier the contribution from public was 60% and private
08:17 was 40%. Now in this 250 crore business after the cut that we have taken, we have also reversed
08:23 the contribution. Our public contribution has now come to 40% and private is now contributing
08:28 60%. So next year you should see South Africa business only be a bit accretive. That is
08:35 how I would like to guide. There are pain points. There are issues that we are facing
08:40 in terms of Red Sea which I think across sectors the companies have been facing. And there
08:45 are a couple of APIs where we are seeing some price pressures. But that is how the market
08:49 behaves and that is how you have to look at long term goals because being a responsible
08:54 company in the field of healthcare, you are responsible for patients living quality life.
09:01 So we continue to look at how do you keep your stocks for 3-4 months for forward looking
09:08 and if there are any issues that you have time to resolve that. That is how we have
09:13 been working. Right sir. So if there is an impact on the freight costs, how much would
09:18 it be in terms of percentage on our margins? I am not worried about freight costs. Freight
09:24 costs today is 4%, it may go up to 5%. More worry is about the delays. Okay sir. Sure.
09:30 Sir, just an overview on the CDMO business that you have. How is that progressing and
09:38 what sort of contribution to the overall revenue do you see from it going forward? CDMO, the
09:45 journey when we started was contributing 5% to the revenue. I am talking of 2020. Last
09:51 year FY23-24, the contribution is close to 12%. The business is as big as $50 million.
09:57 Now CDMO has to understand that 70-80% of that business happens in the field of lozenges
10:04 and other part of the business is tablets and syrups and low volume injectables. This
10:11 business long term, if I were to talk about the guidance, this $50 million business, the
10:16 vision that we have kept for ourselves and this is what we have been guiding also, this
10:20 $50 million business in the next 3-5 years, I want to take it to $100 million. Lozenges,
10:26 we are the fifth largest manufacturer of herbal and medicated lozenges globally. We have a
10:32 dedicated plant in Daman, 3 hours from here. And we are more into cough and cold lozenges
10:41 when we manufacture branded lozenges like Wix, Strepsils, Z-Cuff, Dr. Mom, Deflam,
10:49 all these are lozenges which go to South Asia, Middle East, Australia, New Zealand, Canada.
10:55 That is where we stand as of now. There are 3 things that we are trying to do. Outside
11:00 these markets where we are present and we work with some of the big market players,
11:04 in this big global consumer players in this field. The journey from $50 to $100 million
11:13 has 3 levers. One is we are trying to open new markets for us, that is Brazil, Mexico,
11:20 some parts of US, Europe, South Africa, that is what we are trying to do. We are trying
11:24 to add some more partners with us. Capacity that we have bought is close to 2 billion
11:30 lozenges that we can manufacture annually. Last year and this year we should be manufacturing
11:36 close to 1 billion. Last year we manufactured 1 billion plus, this year also we should be
11:41 crossing 1 billion plus. That is where we stand. This year the business is growing at
11:45 high single digit. And third strategy is diversifying ourselves into new category of lozenges that
11:52 is beyond cough and cold, that is for pain disorders, fulviprofen, melatonin, sleep disorders
11:58 lozenges, getting into lozenges for immunity, wellness. Immunity wellness is a combination
12:04 of curcumin, bioprene zinc, vitamin, that is what we are trying to do. Lozenges for
12:08 oral thrush, lozenges for motion sickness, meclizine, this is what we are trying to do.
12:13 So number one, new geographies, new partners and diversifying into new category of lozenges
12:21 and looking at how do we best look at our existing category, existing cough and cold
12:27 and the partnership with the existing player continues.
12:29 Sure sir. And sir my last question to you will be on what is the update with regards
12:35 to the new portfolio that you have acquired from Novartis, the Opthalm portfolio and in
12:40 general in terms of do you have any more plans for inorganic growth?
12:47 Let me answer the second question first. We continue to evaluate assets at any given time
12:52 and there are opportunities in the market and as and when there are things which we
12:57 think are substantial, we will be more than happy to share. On your Opthalmology question,
13:03 we are excited with this opportunity which has come along. It has been last 15-20 days
13:07 that we have bought into the entire operations in the world of Opthalmology. It's a 200 crore
13:13 portfolio which we have in license from Novartis for distribution and marketing for next three
13:17 years. This license is for three years and then in 2027 when we pay them $115 billion
13:26 that will be a perpetual license. That is how the arrangement is. We are marketing 10
13:35 products. Out of those 10 products, 5 products are number 1 in their category. We are number
13:40 4 player in the world of Opthalmology. Opthalmology market is growing better than the IPM market,
13:47 growing at around 14%. Our presence with this branch is in the space of Glucoma, NSAIDs,
13:56 anti-allergics, that is where we stand. I think let next three months pass, we are trying
14:02 to get to know more about the Opthalmology market. We will try to expand the portfolio.
14:07 We will try to look at how do we improve our footprint across the country. That is what
14:11 I can share at this moment of time. But we are excited about this opportunity.
14:15 Sure sir. Thank you so much for taking out time to speak to us.
14:20 Thank you. Thank you.
14:21 Thank you.
14:22 Thank you.
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