Sun Pharmaceuticals Industries Ltd. ADR (SMPQY) Q4 2023 Earnings Call Transcript

Sun Pharmaceuticals Industries Ltd. ADR (OTCPK:SMPQY) Q4 2023 Earnings Conference Call May 26, 2023 9:00 AM ET

Company Participants

Abhishek Sharma - Head of Investor Relations

Dilip Shanghvi - Managing Director

C.S. Muralidharan - Chief Financial Officer

Kirti Ganorkar - Chief Executive Officer, India Business

Abhay Gandhi - Chief Executive Officer, North America

Conference Call Participants

Kunal Dhamesha - Macquarie

Damayanti Kerai - HSBC

Sameer Baisiwala - Morgan Stanley

Prakash Agarwal - Axis Capital

Ankush Mahajan - Axis Securities

Naushad Chaudhary - Aditya Birla Sun Life AMC

Krish Mehta - Enam Holdings

Bino Pathiparampil - Elara Capital

Punit Pujara - Helios Capital

Cyndrella Carvalho - JM Financial

Neha Manpuria - Bank of America

Tushar Manudhane - Motilal Oswal Financial Services

Nitin Agarwal - DAM Capital

Surya Patra - PhillipCapital

Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Sun Pharmaceuticals Industries Limited. As a reminder, all participants lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Dr. Abhishek Sharma, Head of Investor Relations. Thank you, and over to you, sir.

Abhishek Sharma

Thank you. Good evening, and a warm welcome to our fourth quarter FY '23 earnings call. I am Abhishek from the Sun Pharma Investor Relations team.

We hope you have received the Q4 financial 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 focus -- 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 consolidation -- consolidated financials.

The call recording and call transcript will also be put out on our website shortly.

The discussion today might include certain forward-looking statements and these must be viewed in conjunction with the risks that our business faces.

You are requested to ask two questions in the initial round. If you have more questions, you are requested to re-join 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

Thank you, Abhishek, and welcome and thank you for joining us for this earnings call after the announcement of financial results for the fourth quarter and full year of FY '23.

Let me discuss some of the highlights. Financial year '23 was a good year for us with consolidated sales growing by 12.6% to INR432,789 million, driven by strong performance across markets, led by USA, India, emerging markets, and rest of the world market, all recording double-digit growths. We posted EBITDA growth of 12%, and adjusted net profit growth of 12.8% for the year. For the fourth quarter, consolidated sales were INR107,256 million, recording a growth of 14.3% year-on-year, driven by Global Specialty, Emerging Markets, India, and Rest of the World markets.

Let me now update you on our Global Specialty business. In FY '23, we recorded a strong ramp-up in our Global Specialty sales, which were up by 29% to reach US$871 million. For Q4, our Global Specialty revenue were US$244 million, up by 31.7% year-on-year. This included a milestone payment of US$6.8 million received in Q4 FY '23. Excluding the milestone payment, Speciality business accounted for 18.2% of overall sales for the quarter. Specialty R&D accounted for 31.7% of our total R&D spend for the quarter. On January '23, we announced the launch of SEZABY in the U.S. for treatment of neonatal seizures. Abhay will give you more details on the Specialty business later.

I will now hand over the call to Murali for discussion of Q4 financial performance.

C.S. Muralidharan

Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you.

Our full year and Q4 financials are already with you. As usual, we will look at key consolidated financials.

The full year FY '23 sales were at INR432,789 million, a growth of 12.6% over the same period last year. Excluding COVID product sales for the last year, overall sales were up by 13.9%.

Material cost stands at 24.6% of sales, lower year-on-year due to better product mix and higher Specialty product sales. While staff cost as percentage of sales are marginally higher than last year, the increase in absolute value is on account of annual merit increase, consolidation of the Alchemee acquisition, and the expansion of our sales force. Other expenses were at 30.4% of sales, is higher than last year on account of higher selling and distribution expenses, higher R&D expenses in consolidation of Alchemee business.

ForEx loss for the year was INR1,261 million compared to a gain of about INR1,540 million in FY '22. EBITDA for the full year was at INR116,468 million, a growth of 12% over the same period last year, with resulting EBITDA margin of 26.5%.

Adjusted net profit for FY '23 was at INR86,450 million, up by 12.8% year-on-year. Reported net profit for FY '23 was at INR84,736 million.

As of 31st, March 2023, net cash was US$1.5 billion at consorted level and US$196 million and the ex-Taro level.

Let me now discuss the Q4 FY '23 performance.

Gross sales for Q4 were at INR107,256 million, up by 14.3% over Q4 last year.

Material cost as a percent of sales was 27%, significantly lower than Q4 last year, due to better product mix, including higher Specialty sales. Staff cost stood at 20.3% of sales. Other expenditure stood at 34.2% of sales, higher than Q4 last year. The increase in other expenses is largely driven by continued normalization of sales and distribution expenses over the past few quarters. The normalization of other expenses happened to a large extent.

ForEx loss for the quarter was at INR272 million compared to a gain of INR1,610 million for Q4 last year.

EBITDA for Q4 was at INR28,021 million, including other operating revenues, up by 19.7% over Q4 last year, with EBITDA margins at 25.6%.

Reported net profit for Q4 was at INR19,845 million. Adjusted net profit is up by 36.3% year-on-year compared to adjusted net profit for Q4 last year. Reported EPS for the quarter was at INR8.27 per share.

Let me now discuss the key movements versus Q3 FY '23.

Our consolidated gross sales were lower by about 3.4% Q-on-Q at INR107,256 million.

Material costs at 21% of sales, lower than Q3 FY '23 on account of several moving parts, leading to change in product mix. Material cost as a percentage of sales should normalize going forward. Staff costs at 20.3% of sales were higher in absolute terms versus Q3 FY '23 due to higher incentives and Concert consolidation. Other expenses at 34.2% of sales were higher compared to Q3 FY '23.

EBITDA margin for Q4 was at 25.6% compared to 26.7% for Q3.

Reported net profit for Q4 stands at INR19,845 million.

Let me now briefly discuss Taro's performance.

Taro posted Q4 FY '23 revenues of US$146.6 million, higher by 2.3% over Q4 FY '22, a net profit of US$6.9 million. For the full year FY '23, revenues were US$573 million, up 2.1% year-on-year, and net profit was US$25.4 million, lower by 56.4%. Taro's financials for Q4 FY '23 and FY '23 includes the consolidation of the Alchemee acquisition.

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

Kirti Ganorkar

Thank you, Murali.

Let me take you through the performance of our India business.

Our India formulation sales for the full year FY '23 were INR136,031 million, recording 6.6% growth over previous year. The underlying business has performed well. Excluding the contribution of COVID product from previous year, the sales grew by 10.2%.

For Q4, the sales of formulation in India were INR33,641 million, recording a growth of about 8.7% over Q4 last year. India formulation sales accounted for 31.4% of total consolidated sales for the quarter.

We continue to witness good growth across multiple therapy areas in the chronic and sub-chronic segment for the quarter.

Sun Pharma is ranked number one and holds a 8.33% market share in the over INR1,850 billion Indian pharmaceutical market, as per AIOCD AWACS MAT March '23 report. Corresponding market share for the previous period was 8.31%. As per SMSRC MAT February '23 prescription report, we are number one ranked company. Sun Pharma is also ranked number one by prescription with 12 different doctor categories.

For Q4 financial year '23, the company launched 24 new products in the Indian market.

I will now hand over the call to Abhay.

Abhay Gandhi

Thank you, Kirti.

I will briefly discuss the performance highlights of our U.S. business. Our overall U.S. business grew by 10.3% to US$1,684 million for the full year FY '23, driven mainly by the strong performance of our Specialty business. For Q4, our overall sales in the U.S. grew by about 10.5% over Q4 last year to US$430 million. The main drivers of growth was the Specialty business, driven by ILUMYA, WINLEVI, CEQUA, and LEVULAN. The U.S. accounted for over 33% of consolidated sales for the quarter. Specialty sales have also grown compared to December '22 quarter and we remain excited on growth opportunities in the portfolio.

Let me now update you on our U.S. generics business. Over the last year, this business has gained from a combination of new launches and market share gains from existing products. However, those gains were offset by a full quarter impact of the import alert at our Halol facility. We launched generic Lenalidomide capsules during Q4 FY '23 in the U.S. For Q4, we launched four generic products in the U.S. on an ex-Taro basis.

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

Dilip Shanghvi

Thank you, Abhay.

I will briefly discuss the performance highlights of our other businesses, as well as give you an update on our R&D initiatives.

Our branded formulation revenues in Emerging Markets were at about US$983 million for the full year, up by about 8.6% year-on-year. For fourth quarter, sales in Emerging Markets were about US$221 million, up by 7.5% over fourth quarter last year.

The underlying growth in constant currency terms were about 10% for year-on-year for fourth quarter. Emerging Markets accounted for about 17% of total consolidated revenues for Q4. Amongst the larger markets in local currency terms, Russia and Romania have done well.

For the full year, formulation sales in Rest of the World markets, excluding U.S. and Emerging Markets, were about US$752 million, up by about 2.7% over last year. On a constant currency basis, the RoW markets grew by 10.6% in FY '23. For Q4, Rest of the World sales were US$191 million, up by about 7.4% over fourth quarter last year. Rest of the World markets accounted for approximately 15% of consolidated Q4 revenues.

API sales for FY '23 were at INR19,724 million, up by about 7.5% over last year. For Q4, were at INR3,852 million, declined by about 6.9% over Q4 last year.

We continue to invest in R&D, building a R&D pipeline for both the Global Generics and Specialty business. Consolidated investment towards R&D for Q4 FY '23 stands at INR6,657 million, 6.2% of sales, and this compares to INR6,700 million, 6% of sales for Q3 FY '23, and INR5,433 million, 5.8% of sales for Q4 2022.

Our current generic pipeline for the U.S. market includes 97 ANDAs, and 13 NDAs awaiting approval with the U.S. FDA. Our Specialty R&D pipeline includes five molecules undergoing clinical trials. In the future, R&D investments are likely to increase both for our Specialty and Generic businesses.

The Board has proposed a final dividend of INR4 per share for the year FY '23. This is in addition to the interim dividend of INR7.5 per share paid in FY '23, taking the total dividend for FY '23 to INR11.5 per share compared to INR10 per share for FY '22.

And lastly, on the guidance for FY '24, we expect high single-digit consolidated top-line growth for FY '24. All our businesses are positioned for growth. Ramp up in our Global Specialty business is expected to continue. R&D investments will continue to be 7% to 8% of sales next year.

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

Question-and-Answer Session

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Chirag from DSP. Please go ahead.

Unidentified Analyst

Yes, sir, thank you for the opportunity. Sir, as we look at our US$870 million base on the specialty piece, what are the key products that you think will drive growth from here on over the next two to three years as we look at this business?

Dilip Shanghvi

Abhay, would you like to respond?

Abhay Gandhi

Yes, sure. I think the three major products for us, which can drive global growth will be obviously ILUMYA, CEQUA and WINLEVI. And when you talk about the timeframe that you're talking about, we could also have other interesting products in the pipeline.

Unidentified Analyst

Understood, sir. And sir, is our Specialty business at this US$870 million number, is it EBITDA positive -- significantly EBITDA positive? Just some color around profitability around -- of this business will help, sir.

Abhay Gandhi

So, I mean, you're aware that business-wise profitability numbers, we do not share. So I really can't answer that question, Chirag.

Unidentified Analyst

Would it be fair to say that FY '23 cost base for the Specialty business has not dramatically changed over FY '22, sir?

Abhay Gandhi

Yes, that would be a fair statement.

Unidentified Analyst

Understood, sir. And just one more question if I can squeeze, sir. Deuruxolitinib, do we think this is FY '24/'25 launch event?

C.S. Muralidharan

No, I think our current guidance is that we should be filing the product by second quarter, which I think because of the FDA hold on 12 milligram, we are relooking at what should be the exact date for us to be able to file. And based on that, we can then -- once we have clarity, we will give you some guidance as to by what time we can come to market.

Unidentified Analyst

Okay, sir. Thank you so much for your time.

C.S. Muralidharan

Thank you.

Operator

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

Kunal Dhamesha

Hi, thank you for my -- thank you for taking my questions. So, first one on the goodwill jump that we have seen of around US$200 million from September to March. Could you provide some color there?

C.S. Muralidharan

So, the goodwill in [indiscernible].

Kunal Dhamesha

Sorry, sir. I missed, you. I think there some connectivity issue.

C.S. Muralidharan

Mainly on account of the Concert acquisition, goodwill increased. Mainly driven by Concert acquisition.

Kunal Dhamesha

But as far as I see, this is also increase in intangible under development increase, which is roughly INR427 million, which is roughly INR576 million, minus the cash that they had. So...

C.S. Muralidharan

So, as far as Concert is concerned, we have time to finalize the purchase price accounting one year. Based on the provisional purchase price accounting, there is a share in the goodwill and also the intangibles under development. That's why you see an increase in both.

Kunal Dhamesha

Okay, sure. And would you provide any update on Mohali, what is the situation there? It seems that we -- from the press release, it looks like we are fairly confident of resolving the issue, but any timeline would you like to provide there?

Dilip Shanghvi

What is the question?

Kunal Dhamesha

Mohali plant resolution, when we'll be able to restart the supply from that plant?

Dilip Shanghvi

Yes. What I think, we've already received the, what you call, AIF, and we believe that in a gradual and phased manner, we should be able to start selling products out of Mohali.

Kunal Dhamesha

Sure. And if I can just squeeze in one more. I think in the opening remark, you said the gross margin would revert to a more sustainable level, would you be providing any range, etc., where the gross margin could end up in the next year or maybe what is the kind of one-off part that you see here?

C.S. Muralidharan

So, specifically we are not guiding anything towards gross margins, or as you've said that Q4 expression of gross margins is mainly contributed by the change in product mix and higher Speciality sales. However, there are many moving parts within this increase. As we shared in the readout, it will normalize as a percentage of sales going forward.

Kunal Dhamesha

Sure. I have more questions. I'll join back the queue. Thank you.

Operator

Thank you. The next question is from the line of Damayanti Kerai from HSBC. Please go ahead.

Damayanti Kerai

Hi, thank you for the opportunity. My first question is in fourth quarter, we have seen other operating income as well as other income were substantially higher than what you booked in the previous quarter. So, can you like explain what has come in incrementally there? And also, the milestone income of US$6.8 million, which line item it's going in?

C.S. Muralidharan

So, as far as the other operating income is concerned, there are multiple moving parts or it's related to the export-related incentives and other drawbacks we have. And as far as the milestone is concerned, what we have, it is considered as the revenue.

Damayanti Kerai

Sorry, milestone is considered in? I just missed that.

C.S. Muralidharan

Income -- revenues.

Damayanti Kerai

In revenues, okay. And my next question is, like the deuruxolitinib update, where like your 12 mg strength is, it has got partial hold back from FDA. So, obviously you are evaluating opportunities, but if it doesn't come, do you think the opportunity size will remain similar if you just have to go by single strength instead of two strengths?

Dilip Shanghvi

We are I think evaluating exactly where we might have to launch only 8 milligram. However, our preliminary analysis indicates that even 8 milligram on a longer-term basis is what you call, of course studies are different, but on different studies has an overall response rate much better than reported by competing products.

Damayanti Kerai

Okay. And my last question. Can you update us on Phase 3 studies of ILUMYA in psoriatic arthritis, when the studies will be likely completed?

Dilip Shanghvi

Yes, I don't have -- I think what we indicated is that we will start guiding for when the -- what are the study timelines. Unfortunately, I think we are not ready with that information. Maybe from next call onwards, we will give clarity on what is the status of different studies as a part of the readout. But I don't expect the ILUMYA -- I mean, sorry ILUMYA psoriatic arthritis study to get completed in this financial year. It may take a little bit more than this financial year to complete.

Damayanti Kerai

That's helpful. Thank you. I'll get back in the queue.

Operator

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

Sameer Baisiwala

Hi, thank you very much. Sir, a couple of questions on the Specialty side. One is, how does the annual price increase for these products filter down to your net realization? That's one.

And the second is on ILUMYA, given the positive clinical outcomes for oral IL-23, what could be the implication for your product?

Abhay Gandhi

So, Sameer, I'm trying to understand the nuance of your first question. When you say filter down to net realization, what exactly do you mean there?

Sameer Baisiwala

Abhay, what I'm trying to understand is, does it proportionately, the rebates go out of that or is it any different?

Abhay Gandhi

So, the price increase that we take for the Specialty products, at least in the U.S., I can't answer this question on a global basis, it's very nominal. And when you talk about rebating, it is very product specific again. Every year what we retain or pass on is very product specific. So, I don't want to give a color saying that most of it we are able to retain or most of it at least goes back to the payers. It's like a moving sponge.

Sameer Baisiwala

Okay. But I presume some of that does come to the company?

Abhay Gandhi

Of course.

Sameer Baisiwala

Okay. And for the second one?

Abhay Gandhi

What is the second question, Sameer, if you can just quickly...

Sameer Baisiwala

Yes, sure. On the oral IL-23, the positive clinical trials. So, I know it's four years or so away from any launch, if at all, I mean, but how are you thinking about that?

Abhay Gandhi

I mean, the data that is coming out with the orals are positive, but I think the injectable IL-23 is clearly give a higher response. So, there is a place in therapy for the injectable and especially when you have an injectable which is only four times a year administered by the doctor, we don't see a resistance from the HGPs for the use of injectable IL-23 and our product specifically.

Sameer Baisiwala

Okay, that's great to hear, sir. And quickly on Revlimid. I think Sun is the seventh or the eight player to enter the market. So as things stand, do you think it's a nice good lucrative opportunity, or is it a lot better diluted?

Abhay Gandhi

As of now, which is holding up, but more to come number of competitors coming in during the course of this financial year, we have to observe and see what really happens.

Sameer Baisiwala

Okay, great. Thank you. That's it from my side.

Abhay Gandhi

Yes. Thanks.

Operator

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

Prakash Agarwal

Yes. Hi, good evening. Question on CTP-543, so you mentioned that because of partial or 12 mg we evaluated, but 8 mg -- just a reclarification, 8 mg is on track to be filed by Q2?

Dilip Shanghvi

Q2 is already over. So, we are studying the FDA letter indicating the hold and evaluating what is the best way for us to progress with the filing. So, that is where we are. I think we are -- and it gives us an opportunity to re-look at the data in terms of 12 milligram and what is the differential side effects and all of that. So, I think we want to find a way to file the product in such a way that we still have an opportunity to get both the strengths approved.

Prakash Agarwal

Okay, if I got that correct, so 8 mg also you are we looking with respect to the pros and cons of 12 mg?

Dilip Shanghvi

I think if you see our release, I think what agency asked us to do was to move all the patients of 12 milligram to 8 milligram. So based on the experience and long-term safety study, which we already have on some of the patients have been on treatment over multiple years, it kind of looks like a very safe product.

Prakash Agarwal

Sir, I'm trying to understand the filing time period for 8 mg, sir.

Dilip Shanghvi

I think what we're trying to do is we're trying to see whether we want to only file -- you can't file for one strength and then file for another strength.

Prakash Agarwal

Okay, fair enough. Got it. Understood. And secondly on India business. So, we had added some field force. I see the growth. But what we pickup from the channel is volume growth has been very tepid. Would you...

C.S. Muralidharan

Hello?

Dilip Shanghvi

What he is saying is...

C.S. Muralidharan

I think, we lost him. You can hear us?

Operator

The participant has left the question queue, sir. The line has dropped.

Dilip Shanghvi

Let him come, then we will explain. In the meantime, yes, let's move to the next one.

Operator

The next question is from the line of Ankush Mahajan from Axis Securities. Please go ahead.

Ankush Mahajan

Sir, thanks for the opportunity. Sir, due to the Concert, we have a high R&D cost and that has impacted the consolidated EBITDA margins. Sir, any guidance for the same?

Dilip Shanghvi

No, I think we are on the lower end of the overall R&D guidance. So, what is the question?

Ankush Mahajan

Sir, actually, last quarter there is a 100 basis point impact on the margins on the consolidated basis due to the higher R&D on the Concert, sir. I was just trying to -- just throw some light on it.

Dilip Shanghvi

I think when we are looking at numbers, we don't see what you are asking. So, I think it is best that you separately speak to Abhishek and get the details clarified.

Ankush Mahajan

Thank you, sir.

Dilip Shanghvi

Thank you.

Operator

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

Naushad Chaudhary

Yes, hi. Thanks for the opportunity. Just one update I wanted on the ongoing five molecules which is there in the pipeline. Last quarter, we had indicated that we will come up with some more additional update on this. So, qualitatively just wanted to understand in next one or two years, can we see or do you see at least one or two sizable products coming to our Specialty basket from these five molecules? And at least if you can share us in terms of size of opportunity on the molecules you are working on, currently?

Dilip Shanghvi

I think, indicated that we were to share the development timeline for all these innovative products and what is the plan that we have for these products to be brought to market. So -- and unfortunately, we couldn't do that this quarter, we will start doing it from next quarter, so that you as a part of readout only.

Naushad Chaudhary

Sure, sir. And lastly, last quarter, we had indicated that we had in India portfolio, we had some challenges in our gastro portfolio. Any update on that? Do we continue to feel have that challenge, or have you overcome on that bit?

Kirti Ganorkar

Sure. In the last call what we said is, both in gastro and ortho portfolio, we are seeing some challenges, but now it's too early to say, but we are seeing some improvement in this quarter. Maybe we will be able to update you better after two or three quarters.

Naushad Chaudhary

Okay. Thank you so much, sir. That's it.

Kirti Ganorkar

Thank you.

Operator

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

Prakash Agarwal

Yes, hi. Sorry, I got dropped. On the India business, my question was that in the market level, are we seeing volume coming down quite a bit over the last two, three years? And if so, what are the changes actions we are taking, apart from the field force addition that we have done and also the field force count, please? Thank you.

Kirti Ganorkar

Sure. So, I would at least try and help you out. Like if you look at the IQVIA data for March '23 MAD data, the volume for the industry is almost zero or minus 0.5%. So, to compare to that, the Sun's growth is about 11%. And if you divide this 11% growth into three buckets, the 6% growth is coming from the unit growth, that is a pure volume growth; then 2% of the growth is coming from new products for us; and then the 3% growth is due to price increases. And when we compare Sun among all our peers or the top 10 companies, I think our volume growth is one of the best. There are one or two companies which are like Sun only. But most of the other players, they are not growing by 6% in volume. So I think we are well placed. And this is also reflection that we are able to generate the prescription in the market.

Prakash Agarwal

Any commentary on the new product launches, like we are not among the top 5, top 10 also I think in the new range of DPP-4, Lipton, et cetera?

Kirti Ganorkar

No, that's not correct. I think, we are the leader.

Dilip Shanghvi

I think, you don't see our product in new, because we already have these products here. We have...

Prakash Agarwal

Sir, you have kept the band, but the volume and price both would have come down, right?

Dilip Shanghvi

No. I think price we are competitive. But I think volume has gone up significantly.

Kirti Ganorkar

See, just to give an example, [indiscernible] in terms of volume in both sitagliptin and sitagliptin metformin market we are number one in unit terms, yes. In value term, we'll not because we have reduced the price post-patent expiry. Yes. And then after the post-patent expiry, we have launched a good number of combination products, which will also help us to grow this franchise.

Prakash Agarwal

Okay. And lastly, the field force count, sir?

Operator

Sorry to interrupt you, Mr. Agarwal. May we request that you return to the question queue for follow-up questions.

Prakash Agarwal

Just wanted to know the field force, please.

Operator

Please go ahead.

Prakash Agarwal

Yes. Just the field force number, sir?

Kirti Ganorkar

Field force, we are close to around 10,000 field force, yes.

Prakash Agarwal

This is despite adding the last year 1,000-plus?

Kirti Ganorkar

Yes. See, expansion is a part of our strategy. So, we continuously keep evaluating territories where we can add mass. So, that's a part of our strategy.

Prakash Agarwal

So, 10,000 in terms of...

Dilip Shanghvi

Market dynamics are changing. [indiscernible] are now starting to track this from smaller cities and towns, and we need to find a way to reach out to these people.

Prakash Agarwal

Okay, got it. Perfect. And thank you and all the best.

Operator

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

Krish Mehta

Thank you for taking my question. My first question is on the debt in the balance sheet. So, could you just provide some color on why we've seen an increase in the debt and how you sort of see this going forward?

C.S. Muralidharan

So, debt in the balance increases thing is mainly for the bridge funding for the Concert acquisition.

Krish Mehta

Okay. And can you provide the number for the interest income for FY '23?

C.S. Muralidharan

Interest income, you are talking about interest income or interest expense?

Krish Mehta

Interest income.

C.S. Muralidharan

Maybe, we will get back to you on the specific number.

Krish Mehta

Sure. And lastly, I just wanted to ask if you could provide a number for the full year ILUMYA sales?

C.S. Muralidharan

Yes, we don't -- we are not providing ILUMYA annual number.

Krish Mehta

Okay. No, I just asked because we used to get that annual data, so.

C.S. Muralidharan

We will continue with whatever the practice is, if we were giving, then we will share that number.

Krish Mehta

Okay. I can take that separately. Thank you.

C.S. Muralidharan

Thank you.

Operator

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

Bino Pathiparampil

Hi, thanks. Most of my questions are answered. Just one clarification on Revlimid, is that -- has that significantly contributed to your 4Q numbers, or would it be significant in 1Q?

Abhay Gandhi

For quarter four, it was a significant contributor.

Bino Pathiparampil

Okay. Thank you.

Operator

Thank you. The next question is from the line of Punit Pujara from Helios Capital. Please go ahead.

Punit Pujara

Yes, hi. Thanks for taking my question. My question was on Concert. So, via Concert acquisition, we have got a DCE platform. So, do you wish to continue developing deuterated products through this platform?

Dilip Shanghvi

As on today, I think our primary interest was in deuruxolitinib and we are potentially looking at additional indications of that product in different indications. We have no immediate plan of working on deuteration as a platform.

Punit Pujara

Sure, sir. That answers my question. Thanks for taking question, and I will jump back in the queue.

Dilip Shanghvi

Thank you.

Operator

Thank you. The next question is from the line of Cyndrella Carvalho from JM Financial. Please go ahead.

Cyndrella Carvalho

Thanks for the opportunity. Sir, just wanted to understand on the India piece, would we continue the similar growth that we have reported in FY '23 or do you see opportunities to calibrate this growth further?

Kirti Ganorkar

No, I think what we have said in the past also, it's very difficult to forecast what will be the growth in the coming years. But whatever is a market growth, India business we want to grow in line with the market or slightly better than the market, that will be our effort.

Cyndrella Carvalho

And we would have some benefits of the new added MR force also, right, in terms of FY '24. Is that a correct understanding?

Kirti Ganorkar

Yes, that's correct.

Cyndrella Carvalho

On the U.S. piece, I mean an earlier participant also asked for ILUMYA number. If you would want to share, that would be helpful. However, if I look at the gross margin, so I'm just trying to clarify this again, so is that because largely our mix was tilted towards Specialty business and that's the reason we saw this gross margin? Would that be a correct statement?

C.S. Muralidharan

No. So, what we have said is that, in Q4, the expansion of margins was contributed by, of course, higher sales of Specialty, but there are also other parts leading to which is product mix, so both have contributed, it's not only higher Specialty sales.

Cyndrella Carvalho

Okay. And sir, in terms of the overall growth of Specialty business in the U.S., ILUMYA will continue to be the major driver? And how do we see SEZABY and WINLEVI for at least coming two years? How is the ramp-up? If you could help us understand some nuances there, would be helpful.

Abhay Gandhi

All the three products that you have mentioned will contribute to our growth. However, in absolute dollar terms, I would expect ILUMYA to be the largest contributor to the growth.

Cyndrella Carvalho

And any color on how SEZABY is expected to pan out in in-patients in terms of neonatal coverage? Anything that you would like to share, sir?

Abhay Gandhi

Hi. Your voice was a little patchy for me. Were you referring to SEZABY?

Cyndrella Carvalho

I was asking to some understanding on the SEZABY product, sir, in terms of the market formation, how are we picking up, the coverage?

Abhay Gandhi

So, it's a niche market. So, obviously, it will not be on the same scale as, let's say, on ILUMYA. But in that niche, it's a very interesting product. We are right now in the process of going literally hospital formulary by hospital formulary, trying to sell the concept of our product being the only FDA-approved product and trying to get buying from those. So, it will take some time and it will ramp up, but the scale is completely different from a much larger opportunity, let's say, ILUMYA, or CEQUA, or WINLEVI. This is a niche play.

Cyndrella Carvalho

That we understand, sir. And on the WINLEVI side, sir, anything on the coverage side, do you want to highlight how are we seeing this?

Abhay Gandhi

It improved in the last quarter, and of course, it's always a work in progress, and we hope to continue to improve coverage even further during this financial year.

Cyndrella Carvalho

Thank you so much, sir. All the best.

Abhay Gandhi

Thank you.

Operator

Thank you. The next question is from the line of Chirag from DSP. Please go ahead.

Unidentified Analyst

Yes, sir. Thank you for the follow-up. Sir, our other expenses are almost INR500 crores higher than the past averages. Is there anything specific you want to call out over here, or is this run rate something that we should see as a sustainable number?

C.S. Muralidharan

So, we have said that other expenses is triggered by the higher selling and distribution expenses, and of course, from the year-on-year quarter on Concert and Alchemee business also is there. However, what we have said that, we have almost reached to normalization to some extent. With the growth in operations, some of our old expenses we'll incur towards the growth. Otherwise, I think we are almost near there.

Unidentified Analyst

There is no one-off in the other expenses?

C.S. Muralidharan

No, there is no one-off as such.

Unidentified Analyst

Understood, sir. And sir, second question was on this -- in the notes to accounts, there is a INR164 crore impairment related to an associate. Can you just provide some color around what exactly this is, sir?

C.S. Muralidharan

So, this is running an impairment of a loan on advances given to an associate, we are actively monitoring the progress of associate, with a prudent practice we have provided for it.

Unidentified Analyst

Can we quantify the total outstanding as far -- for towards this transaction, sir? [indiscernible] 100% of what we had?

C.S. Muralidharan

We do not want to comment on the total outstanding or total thing. We have taken based on the current understanding the impairment provision as required.

Unidentified Analyst

Understood, sir. And just, if I can squeeze one more question, sir. This heightened R&D that you are guiding towards, it's almost INR1,000 crores higher than the current annual run rate. I mean, I'm just trying to think what is it that you are kind of thinking about in terms of the INR1,000 crores, US$125 million odd seems like a fairly large number, even for Specialty business. Just what is it that you are kind of baking? Are you baking in incremental products like Concert as products, et cetera, as well in this? Or just what is your thought process around this incremental INR1,000 crore kind of R&D budget?

Dilip Shanghvi

I think like what you identified, Concert R&D would be clearly contributing to a part of that increase.

Unidentified Analyst

And future products as well, if at all, you end up acquiring more or...

Dilip Shanghvi

Or we decide to develop additional indication.

Unidentified Analyst

For your existing products?

Dilip Shanghvi

No, even deuruxolitinib.

Unidentified Analyst

Understood. And do you expect this to kind of come through in like a year or so? I mean in one full 12-month period, you will see this activity just go up to that kind of level?

Dilip Shanghvi

No, I think, my sense is that some of the clinical studies for ILUMYA will start recruiting rapidly during this year. At the same point of time, we may start additional studies for our GLP-1 as well as the Concert product. So, all of that I think there is a much more clearer visibility of why and how this cost will go up.

Unidentified Analyst

Understood. Okay, sir. Thank you so much.

Dilip Shanghvi

Thank you.

Operator

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

Neha Manpuria

Yes, thanks for taking my question. Abhay, one clarification on WINLEVI. You mentioned that the coverage has improved in the quarter, and it's gradually picking up. But if I were to look at the prescription data that is available, WINLEVI has been sort of broadly been in the range of what we have seen for the last couple of months. How should we look at improvement in prescription for WINLEVI? And is it tracking in line with your expectation, better than your expectation? Are you seeing any challenges in ramp-up? Any color there?

Abhay Gandhi

So, what you're seeing is the outcome. And if you're tracking the prescriptions with the improved coverage and also the change in the co-pay, these are far more valuable prescriptions than what we saw earlier. And the coverage has improved, it is like part of the covered population, right. In some cases, other pieces still remain. So, when you made the co-pay change, prescriptions will sort of let go for some time. But with an improved coverage, I think the idea is to grow the prescriptions on the current quarter.

Neha Manpuria

Yes. But when do you start seeing that in numbers? Now, you've seen that come off -- the prescriptions, come off as we change into the co-pay, coverage is improving. So in your view, when do you start seeing the benefit of the improved coverage in prescription numbers stepping up from the current run rate? Is that two quarters away, three quarters away, it take longer?

Abhay Gandhi

I don't think it should take that kind of time. In fact in our budgeting, I mean we are expecting it to happen early.

Neha Manpuria

All right. And, any challenges in terms of...

Abhay Gandhi

But I'd be happy if Q2, Q3 in mind, I would be happy.

Neha Manpuria

Okay, understood. And we're not seeing any challenges in our ability to get more coverage for the product? That's not a concern?

Abhay Gandhi

It's a challenge. I mean it's a process that we have go through, keep explaining to the payers why it makes sense for them to cover this product. So, I mean, getting coverage for any product is always a challenge and it's a challenge that we are expecting to meet.

Operator

We'll move on to the next question from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Tushar Manudhane

Yes, thanks for the opportunity. Most of the questions have been answered. Just if you could quantify the PLI benefits, which has been there for this quarter?

C.S. Muralidharan

So, normally, we do not quantify any type of incentives or grants what we see as part of our achievement of data upgrade or scheme-related investments.

Tushar Manudhane

Okay. This would be in other operating income, right?

C.S. Muralidharan

Other operating income, yes. What I want to say is that this has been consistent between Q4 and Q3.

Tushar Manudhane

Got it. And just on the guidance, while the Specialty sales continues to ramp up nicely, even we continue to outperform in the domestic formulation market and Emerging Markets and ROW also continue to grow at a robust double-digit growth. So what's holding on to guide for a single-digit growth for FY '24?

Dilip Shanghvi

No, I think it's after evaluating all the businesses upside as well as downside and taking a conscious decision that we want to share a number, which has a certain element of stretch, but at the same time, a certain what you call possibility for achievability. Because we don't want to kind of take a number far out and then say that we can't deliver on the number. At the same time, we don't want to give a global number and overperformance.

Tushar Manudhane

Sure, sir. In fact, Revlimid also would be having a full year impact and through certain niche launches as well. That's the reason why the question.

Dilip Shanghvi

Yes. I mean I understand, but we've also shared with you that Halol, we will have certain challenges in terms of being able to sell products. We've also said that Mohali, we will gradually start reintroducing products. So, I think all of those things have potential negative. So that's factored in our guidance.

Tushar Manudhane

Sure, sir. And just lastly, if I may...

Dilip Shanghvi

...it's a achievable guidance.

Tushar Manudhane

Sure, sir. Sure. So while there was import allowed at Halol, that time we had mentioned about the sales from that facility. On the similar lines, given the kind of regulatory action that has happened at Mohali, would it be possible to quantify how much was the sales? And how much has that been got restructured because of the recent regulatory action?

Dilip Shanghvi

I think we actually ourselves are not clear. So, we are not giving a separate guidance on that, because we don't know by what time, what products we want to bring back and how much of -- we might be able to protect the entire business also. So, I don't want to kind of come with a number, which then has no relevance.

Operator

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

Nitin Agarwal

Outlook, given the challenges that we've had this year, I mean how are you seeing the outlook for our business over the next two to three-year period on a qualitative basis? Is there a -- given the fact there is some talk about the market stabilizing prices situation improving at the margin in the overall U.S. market?

Dilip Shanghvi

No. I think -- Abhay, would you like to respond? I couldn't fully hear the question.

Abhay Gandhi

No, same here. I also couldn't really understand the question.

Nitin Agarwal

Basically I was trying to say...

Abhay Gandhi

Was he talking about the generic side of the business or specialty...

Nitin Agarwal

The generic side of the business, yes.

Abhay Gandhi

I couldn't get it.

Nitin Agarwal

The generic side of the business, Abhay.

Abhay Gandhi

So, could you reframe your question, please? I'm really not sure what was you asking.

Nitin Agarwal

I was just trying to ask is that given the fact that we've had challenges this year in the generic business, but at the same time, there are some positive signs in the market stabilizing from a pricing perspective in general. And given the fact with whatever the pipeline that we have, about 97-odd NDAs are waiting approval, qualitatively, where do we see the generic business headed over the next couple of years for us, given where we were in FY '22, '23?

Abhay Gandhi

So, I don't see the price stabilization that you are speaking about. So -- and not just from Sun perspective, but also from an industry perspective, I don't see that. So I think you're -- that basic assumption is probably incorrect. So, in the overall context, I think if I look at the market in general, it's a low growth or a degrowth kind of generic business in the U.S. Volume growth is there, but value growth, I do not see from an industry perspective.

Nitin Agarwal

Okay. And second question, sir, on the acquired assets like the Concert business, what is the typical account amortization policy to be followed sir?

Dilip Shanghvi

Murali, can you respond?

C.S. Muralidharan

So, normally, it depends for the class or type of asset, [various range] (ph) like economic life between eight to 15 years.

Nitin Agarwal

Even for patented clinical assets will take such a long period of amortization, sir?

C.S. Muralidharan

So, that one also driven by the patent expiry, that's one factor we'll consider.

Nitin Agarwal

Okay, sir. Thanks.

Operator

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

Surya Patra

Yes, thank you for this opportunity, sir. First question is on to understand the cost equations better. The first, whether the remediation spend on the two facilities, which is under observation, so whether that expenses are fully factored in the quarter?

C.S. Muralidharan

So, the incremental expense of remediation is broadly been already factored in the quarter.

Surya Patra

Okay. So my -- so practically, the question was that, sir, we have seen already kind of a upswing in the gross margin, which also to some extent supported our margin this quarter, and for future going ahead, we are guiding for a kind of a enhanced R&D spend, 200 to 300 basis points from the current year's base. And we are also indicating that the gross margin scenario is likely to be normalizing going ahead. So I'm just trying to understand how the profitability would be for FY '24. So from that perspective, my first question would be that, how should one really see Taro's performance in the subsequent period? Because it has been very subdued in the current financial year and possibly that could play a kind of a margin-boosting trigger. So, if you can share some idea about it and how should we really look at it?

Dilip Shanghvi

I think we don't guide for overall profitability because there are so many moving parts. At the same point of time, some of your points about increase in some of the costs that we are guiding for are valid.

Also -- however, finally, your question about Taro, I mean if I see the Abhay's statement about overall competition for pricing, dermatological products that Taro currently markets has the highest level of new entrants and new competitors coming. So, it will continue to see significant price competition going forward.

Surya Patra

Okay. My second question, sir, on the India formulation business, we generally having seen a kind of a consistent performance during difficult times of last two year, so most of the players have either expanded their field force, enhanced their market presence, product basket, all that. So that is in a way has the intensified competition I believe. So here we have expanded our field force as well, and we have penetrated in the existing product basket better. So if you can give some sense versus FY '22, in FY '23 how the profitability would have changed? Not any specific number, but qualitatively also if you can share something [indiscernible]?

C.S. Muralidharan

So, specifically on the India business or business-wise profitability, we do not comment as such.

Surya Patra

Sorry, sir. I missed your last statement.

C.S. Muralidharan

So, what I said is that, business-wise or segment-wise profitability, normally, we do not comment.

Surya Patra

Okay. So, that means the full field force expansion cost has been reflected in the last year numbers? And with the...

C.S. Muralidharan

Yes, it has been reflected.

Operator

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

Abhishek Sharma

Thank you, everyone, for joining us at this late hour. If you have any remaining questions, you may write in to me and we'll be happy to respond to your remaining questions. Thank you, and have a good weekend.

Dilip Shanghvi

Thank you.

Operator

Thank you. Ladies and gentlemen, on behalf of Sun Pharmaceutical Industries Limited, that concludes this conference call. Thank you for joining us. And you may now disconnect your lines.