GLAXOSMITHKLINE PHAR

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Cours en clôture Bombay Stock Exchange - 00:00:00 08/02/2023
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Transcript : GlaxoSmithKline Pharmaceuticals Limited - Shareholder/Analyst Call

23/08/2022 | 12:30

Presenter Speech
Unknown Executive (Executives)

Good evening, everyone. For those of you in the room, we have close to 14 people in the room. We also have our Managing Director and our CFO who joined us. And we have about 20-odd who have joined us online. So thank you all for joining. It's 4:00 p.m., and we'll start the presentation. Without further ado, a few housekeeping rules. One is we will be recording this conversation and the presentation, and the transcript as well as the audio recording will be available on the website. And of course, you can ask us, and we'll be happy to share that with you, too, just in case you're unable to access the website.

I know it's been a while. I think it's been over 2 years since we had our last analyst meet, thanks to COVID, but we are back again and hopefully, COVID will be [indiscernible]. Great. Okay. It is being recorded, perfect. Let me kind of with a warm welcome to those online as well as here. We will follow a format which is really an overview by our Managing Director, followed by a financial overview by our CFO, and then, of course, we will take questions.

Before I invite our Managing Director, a few words. I mean, all of you know Sridhar joined us just before COVID. And he joined us from his role in Singapore, and he's now with GSK India for close to more than 2 years. The new addition, for those of you who haven't met Juby, Juby has joined us very recently as our CFO. He is a chartered accountant from the Institute of Chartered Accountants of India. And his previous experience includes roles such as Finance Director, leader roles in Southeast Asia, Vietnam, Turkey and Middle East. Just immediately prior to this, he was Head of Finance, General Global Medicine and was based in Singapore. So welcome, Juby.

And with that, I would now hand it over to our Managing Director, Mr. Sridhar Venkatesh, to take you through the overview of GSK.

Presenter Speech
Sridhar Venkatesh (Executives)

Okay. All right. So, great to be here. Welcome. Fantastic to meet all of you face-to-face. I mean we've been doing this in a small box for many, many years, and I was looking forward to do this once before my tenure ends at GSK India at some point of time face-to-face, but good to be here. And for all those who are online, a warm welcome to all of you.

I promise to you that we will spend most of our time today on Q&A. We will spend around more than -- we'll take probably around 10 to 15 minutes to talk about that, and we have a total of 1 hour 15 minutes is what we have, and we will use potentially an entire hour to try and respond to you and respond to your Q&A, all right?

So I personally think for us at GSK, it's never been more exciting time than for us where we are today. Because globally, we've made a huge stand in terms of what we are going to be, what are we going to do, what therapeutic areas. And I think globally, we have taken a stance around, after the successful split that we have had between our pharma and our consumer team, in terms of what's our clear purpose. I think the more and more you talk about what's happening across the world, it's all becoming a confluence of science, technology and talent. And that's something -- and you need the right kind of people in the right places for us to be successful.

So I personally think -- when I look at some of our global statements that we are making, some of the steps that we have taken, be it post our merge -- post our demerger, if I were to call, all of them have been pointing in this direction. Some of the newer acquisitions that we have made, some of the -- be it in the space of oncology, be it in space of newer vaccines, all have pointed towards that.

Now clearly, as we look at that, what we also want to do through that is to impact around 2.5 billion patients in over 10 years and positively impact through our portfolio. Now where are those 2.5 billion patients going to come? I mean you can't think about -- you can't take out India out of that equation when we talk about 2.5 billion patients. Some bit of rough calculations that we have done, around 60% of the $2.5 billion will be out of India. So a huge part, I can say, of the global GSK purpose will be played out of what we do in India.

And you will see in terms of our ambitions, in terms of what we are attempting to do with our newer portfolios. And clearly, this is also a company where we want everybody to be themselves, really enjoy what they want to do and thrive in the work that we wanted -- that they really allowed to do. So that clearly is our overall purpose and what we are attempting to create globally and what we are attempting to do in India.

Now, what does that mean to India when we talk about this, right? And when we say we want to be ambitious for patients, what does that mean? We want to bring innovation into this country. What does that mean for us in India? Nucala was the first one that we talked about. We just launched Trelegy in the last few months. We are gearing up to launch a world-leading vaccine which is going to be -- which is just pathbreaking again in terms of the treatment of shingles, right? If anybody knows what shingles is, one of the most painful disease that anybody can get. We have 10-year data to showcase that this is one of the best vaccines.

In terms of our -- when I -- what do we mean by when we say accountable for impact? We mean how can we maximize the portfolio that we have. And I'll show you some data out there, which will clearly articulate how we are being accountable for impact in terms of the portfolio that we have, like gaining share and being still being relevant to our marketplace. Of course, underpinning that by saying we do the right thing at all times, right? And that's been something that's been absolutely -- we have zero tolerance and we have no compromises towards on that particular space.

Let me very quickly go to what GSK India means globally at GSK. We are the second highest contributor to emerging markets, okay? So clearly, I keep telling my team that when India gets cold, my boss gets fever, right, because we are a huge part of our overall portfolio. We also contribute greatly to many of the key brands that we have, right, be it Augmentin they are 17% of the emerging markets. Derma, we are around 45%, 50% of emerging markets. Clearly, a huge portfolio. And we clearly feel that in India, we still have a long way to go with our dermatology portfolio.

Now as I look at -- as we look at this portfolio for us at GSK India moving forward, clearly, the goals that we have are pretty simple. Products that we have today are very relevant and what do we need to do with them? Continue to grow faster than the market, have an evolution index greater than 100. Secondly, what Juby is focused on and all of us are focused on, as we grow, how do we continue to improve on those margins. And you will see some examples of what we are doing with Juby's presentation.

Vaccines is something we are extremely excited about. As we speak today, the cohort is around 24 million to 25 million -- I mean both cohort in India is 24 million to 25 million, right? And if you see one of the most penetrated pediatric vaccine in this country is a pneumococcal vaccine, which gets to 1 million kids. The most penetrated vaccine, right? And I'm talking about the -- I'm not talking about the national immunization vaccine, sorry, don't get me wrong. So the national immunization vaccine gets you around 80%, 85%, right? So forget -- I'm not talking about that. But I'm talking about those vaccines, which are outside of the NIP. And clearly, some of these vaccines are real path-breaking vaccines, which can be used by a lot many more patients. So we are very excited about that category of the patients.

Adult vaccination. What COVID has done is expose that space significantly. And if you look at our portfolio, starting with Shingrix, we have flu, plus some of the other globally, you might have heard about RSV. Again, that's something -- it's still under regulatory approval. All of those vaccines are going to be, again, open up the entire space in the adult vaccinations space. And that's something we really want to grow for ourselves in the future, and we think that's a big space that we will grow.

Speciality, of course, Nucala and Trelegy. Nucala again, is a very niche indication, but Trelegy is, again, doing exceptionally well globally. We've just started that in India. We have had some very good early uptake on Trelegy. This is -- the indication that we have is for COPD, and we clearly have a we clearly think this could be another big product for us over a period of next couple of years.

How have we been doing? You might have heard me say earlier on, the 3 things that we wanted to do: build, grow and shred. Build new assets, muscles that we don't have. That's what Nucala is, that's what Trelegy is, that's what Shingrix is going to be. Grow on some of the assets that we have, what can we do to ensure that we simplify our operations, do what is right, focus on those core brands and continue to grow that. And shred some the things that you might have seen, some decisions that we have taken over a period of time. Fundamentally, we want to take away the drag. And that's what we've been attempting to do. I'm not saying that we are done with that journey, that's a continuous process. But we have taken some significant steps on the shred piece.

So what I'm trying to say here is we've gained market share in our key promoted brands, right? Overall, even during COVID, we grew some of the market share. There was a fear that post that COVID, we will drop all that market share and everything will go away when the other generics come back. In fact, we have held on to that market share. And our projection is by the end of the year, we will actually gain through that because this is the key season for us from an acute portfolio, and we possibly are going to see that market share kind of grow.

We continue to lead in our represented market. And we are -- as we say, we are #1 dermatology player in the self-pay market. We continue to be there. We have prescription leadership for our core portfolio, be it in GPs, ENTs, pediatricians. We continue to hold that prescription share position. And some of our core brands, we continue to maintain that #1 position in the represented market.

Vaccines. We've been doing a huge amount of effort -- activities. And now I'm not sure any of you got exposed. This is all about creating more awareness regarding vaccination there were a lot of kids who did not get vaccinated during the period of COVID. We were right out there talking about what more can be done. But of course, a lot of awareness across the various digital programs, doctors' clinics, many other places we created so that people understand what vaccination is all about and especially support them in their old vaccination journey. This is all about pediatric vaccines.

Building speciality. I talked about Nucala. We continue to be encouraged. We launched Nucala right before the perfect storm, which COVID hit us. And during that time, it was -- pulmonologists were, rightly so, super focused on treating COVID patients, right? So -- but overall, and therefore, we saw -- the uptake that we saw earlier on was not exactly the way we would have liked it. But again, very happy to say post-COVID -- well, I can't say post-COVID right now, whatever it is right now, I'm starting to see very good acceleration.

Similarly with Trelegy, we see a good acceleration. It was, again, a unique launch of physical and digital. And again, pulmonologists seemed excited about a device, a device which is once a day. And clearly, a lot of many patients -- I mean, physicians have pulmonologists especially have taken this brand. Shingrix, we are getting ready to launch this in the first half of 2023.

That's a broad, I would say, the commercial part of what we are doing in the business. I'll hand it over to Juby, who will quickly walk you through some numbers, facts and figures. And as I promised, we will be done in the next 8, 10 minutes, and then we'll open the entire hour for Q&A with all of you. Juby?

Presenter Speech
Juby Chandy (Executives)

Good evening, everyone. Thank you, Sridhar. So the next couple of minutes, I'll take you through the high-level financials. And also, I'll articulate some of the progress that we are making over the last couple of years.

So firstly, this is a quick snapshot of 2022, if you see, our sales is at INR 3,190 crores and 11% growth. Now what's really important is our price as well as our volume, both are growing. And each pillar of our portfolio, promoted brands, which is growing around 25%, which is where we are more focused on. All our brands which are promoted, all our resources are allocated into those brands, and that's demonstrating a strong progress in terms of growth.

General Medicine, which forms part of the entire pharmaceutical brands, which is growing 19 percentage. Speciality, which is the new Nucala and all the new assets, where we are getting new products launched, that's growing 86 percentage, almost doubling last year. Vaccines, a decline of 9 percentage. Again, Vaccines, as you know, during COVID times, there was a decline in number of babies visiting the hospitals, and that's a temporary blip we could see in the market. And again, if you see the growth on some of our core brands, Calpol, Augmentin, Supresssa, all are demonstrating very strong growth.

Right-hand side, you can see the margins, 59% margin on a large base, improving our ratio by another 3 percentage. PBT, 24 percentage. Again, improving on a large basis. The ratio, another 2 percentage. EBITDA also improved 3 percentage from '21 to [indiscernible] . And dividend, we have consistently declared in the past.

This is a quick snapshot of the quarter results, which you have seen. The reported growth was 3 percentage, as you could see. But if you see the underlying growth, underlying growth here is excluding the impact of Calpol, which had a higher base last year due to COVID, it's 12% underlying growth, that's coming from 6% price and 6% volume. So the underlying growth is very strong. And if you see all the pillars of our portfolio, General Medicine, Speciality and Vaccines, all the 3 pillars are showing very strong growth. And that's giving us confidence that our strategy is working.

Our promoted brands, as you could see, the market share has got improved and, all the 3 pillars, the underlying growth is very, very strong. And we are continually focusing on gross margin and EBITDA, which you will see in the next slide also, where also we have demonstrated improvement. And those who are following this closely, we are on a seasonal business. Quarter 2 tends to be the -- quarter 1 of the financial year tends to be the lowest quarter, and September-ending quarter will be the highest quarter due to seasonality, and this is a trend which you could see during the past years.

And just to bring you up to speed on what are we talking about our strategy. Over the last 3 years -- last 2, 3 years, we've been doing several things that is demonstrating in our financials. If you see the 3 parts of our financials -- revenue, gross margin and EBITDA, all the 3 are showing strong improvement. Revenue has grown 8 percentage. If you see gross margin, gross margin, despite all the headwinds we had in the market, it has grown 2 percentage. The ratio has grown 2 percentage from 57.6% to 59.4%. And EBITDA, if you see a 5% improvement. So now the EBITDA is from gross margin improvement almost 1.8 percentage.

Employment costs where we are finding efficiencies, we are focusing on promoted brands where it makes sense. That's again giving us a 2% improvement. And also cost efficiencies, we're continuously working on cost efficiencies, and that's also giving us a strong uptick in our EBITDA margins.

Now, just to bring you, for the last 5 years, what's happening on our portfolio. The left-hand side is the reported numbers. Reported numbers has got divestments excluded on the last year, but the base has got some discontinued divested brands. But if you see the 5-year CAGR on the continuing portfolio, like-to-like across all the years, which is the real underlying growth, General Medicines 9% growth; Vaccines 10%; Speciality, again, it's double-digit growth of 100% growth, it's on a small base. And we are consistently delivering very, very strong cash flow. And that's why we could declare dividend also year-on-year.

So the bottom line, the story I'm trying to make here, is our underlying growth despite the divestments, despite the headwinds we have, is very strong in our financials. So lastly, this is my last slide. I just want to bring you again to context. With all these changes, what we are making in the last couple of years, if you see our EBITDA margins, it started at 16 percentage on the left hand. Now as we speak in the last reported financials, it's 23 percentage. So a strong improvement has been made across all the years. Consistent improvement, if you see across all of the years on EBITDA margins.

And that's on the backdrop of several initiatives we were doing. One is the cost efficiencies we are trying to do. The focus on promoted brands where it matters, we were reallocating our resources, we were discontinuing some brands which doesn't make sense for us, which Sridhar was articulating about the new products. And as we move forward, what we try to do, we continue to do well, some of the things which we are working, which is like growing our promoted brands, growing our focus brands, which has got better margin mix.

WPI price increase, which we will be playing out. We will have challenges in terms of NLEM price cuts, but our WPI price increases will be going to help us. New products, the new launches that is going to again drive growth. And also we'll continue to focus on cost savings. So basically, we expect to sustain this EBITDA margins as we go forward and try to further improve upon them.

So over to you, Sridhar, to close the call.

Presenter Speech
Sridhar Venkatesh (Executives)

So look, I just want to also talk about as we've been chugging through this, we've also been very proud of how the teams have been -- how we've been -- we've also been awarded quite a few awards across in terms of one of the best workplaces. I mean you can get a sense of what happen when you walk in, you put in a huge amount of effort; working women, risk awards, I mean, overall, very proud of what we've been able to get.

And at the end of the day, we never forget that we are here for patients every year. We touch around 200 million patients through our medicines, which is a significant number. We do around -- I mean, our medicines touch around 6 million immunizations. Again, never forget that. That's a core of what we do. That's why we come here on a day-to-day basis to work for. That's what keeps us going on an ongoing basis.

With that, I think, as I promised, we'll be done in 15 minutes. And hopefully, we have enough time for Q&A.

Answer
Unknown Executive (Executives)

Thank you, Sridhar and Juby. May I request you to kindly take the mics and also be seated. Okay. So we will now open up for questions. The format will be as follows. Those online kindly raise your hand and the moderator will then unmute and call on your name, and then you can shoot the question that you have. Please introduce yourself, your name, which organization you are from. And specifically, if you would like the question to be post to either Juby or to Sridhar.

Before we start, I think the first preference would then be given to people in the room, because obviously, you guys have taken the time out from your busy schedule. So those of you who would like to raise a question here, kindly come forward because we can then give you a mic or we can pass on the mic to you.

If any of you are thinking in the meantime, let me start with a question that came via e-mail from Sanjeev Vaidyanathan, Partner Eternity Capital. He's put in a set of 3 questions. What is the long-term outlook for growth, margins and returns for the business? It would be ideal if you can split this outlook by business segment, Pharma, Chronic, Acute versus Vaccine, Self-pay, Sponsored. So Juby, may I request you to respond to that question?

Answer
Juby Chandy (Executives)

I think firstly, the chronic versus acute our business is more acute. We've got only 5% chronic segment, which is only one brand, mainly Eltroxin. So majority of our business is from acute business. Now in terms of guidance, forward guidance, as you know, we are not providing forward guidance. Our business is -- on the past performance, you would have seen, in the past year, last year we're growing 19% on the promoted brands. And last 5 years, we demonstrated the growth. Do you want to add anything?

Answer
Sridhar Venkatesh (Executives)

No. Look, the question sounds like how I probably am presenting to my boss out there, right, 5 years growth by flat. But look, fundamentally, just to give you a perspective, you saw the bets that we are making. The bets that we are making is a focused portfolio. We have grown double digits. Our thinking is India is a broadly underpenetrated market, we have an opportunity, so we potentially go in that direction. The big growth that we will potentially see is in our new launches, especially, we think of -- when we launch Shingrix, we think that we have a hugely growing space.

In terms of our pediatric business, as I said, we have a 26 million growth cohort, 1 million most penetrated vaccine, 4 million patients who are in the SECA category, who can afford some of these private vaccines. So look, I mean, you can do your math, but it's -- in my mind, it is -- I think we are here for considerable future growth with most of our portfolio. We will remain focused on the portfolio that we have, but we think there is a massive opportunity with what we have right now.

Answer
Unknown Executive (Executives)

Thank you, Juby. Thank you, Sridhar. The next question -- again, so this is the second of part 3 questions. What are the competitive advantages that you have and continue to build on, which allows you the above long-term visibility? It will be great if you can explain how these advantages compared to those of your most relevant competitors?

Answer
Sridhar Venkatesh (Executives)

Look, I think the way I look at that is the biggest advantage that I have is I can -- I have the entire GSK landscape to play. The amount of innovation that is coming through GSK at a global level, be it oncology, rheumatology, vaccines, adult vaccines, anti-infectives, it is huge, right? And I have the power of bringing all of those into the Indian market. And to me, that innovation is something that's going to drive, number one.

Number two, I think even though I have products like Augmentin and Calpol -- Calpol which incidentally saved the most lives during COVID, the vaccines helped, but Calpol is the one which saved the most lives during COVID time by a small pill. These products are still extremely relevant. And these products have become a household name, and we think there's an opportunity to continue to grow these brands. The strength of the brands, the equity that these brands command, right, is significant -- is very, very significant. We also have an opportunity to continue to generate local data on some of these molecules.

So somebody thought Augmentin is a 50-year-old brand, we still continue to -- they will bring data on antimicrobial resistance. What is happening? We invest a lot. And some of those things, I think, are real competitive advantages. So the strength of the brand, the relevance of the brand, the future of the portfolio and newer areas that we think clearly are, I think, the competitive advantages that we have with GSK India.

Answer
Unknown Executive (Executives)

Thank you, Sridhar. The last question of Part 3. What is the best way to understand the difference in operation of GSK Pharma listed entity and GSK Asia unlisted subsidiary? In that context, why was Iodex Ostocalcium originally sold through the listed entity, but transferred last year to GSK Asia?

Answer
Sridhar Venkatesh (Executives)

I'll leave it to the expert.

Answer
Juby Chandy (Executives)

So firstly, I think all our sales are through the listed entities. Okay, 100% of our sales are through the listed entities. GSK Asia, which the question, is the consumer arm of GSK, which is not a subsidiary, which is not part of pharma business, it's a completely different entity. And the Osto-Iodex sales, we have updated in the public domain in the stock exchanges as part of the new GSK. When pharma and consumer split globally, the consumer brands moved to the consumer division, and that's part of this transfer of Osto-Iodex to the GSK Asia, which is a consumer entity. So it's a completely different business. Nothing to connected it with this pharma entity here.

Answer
Unknown Executive (Executives)

Okay. Thank you. So we'll open up for folks here. He had raised his hand first, then I'll come to you. Just introduce yourself, your name, the company and your question, post to home.

Question
Unknown Analyst (Analysts)

I'm Amir from Haitong. The first question is on the vaccines basically. So last year was not good for us in terms of growth in the vaccine category. So if you can tell whether the post-COVID, the normalization has happened already in the vaccine market? And what was the outlook for the vaccine sales in FY '23? And along with that, if you can also highlight the key products on the vaccine category, which you would be focusing on, especially in the adult side? The Fluarix is the vaccine which has good potential in India, and your competitor has already started doing a lot of ads on the radios and et cetera. So what we are doing to basically compete with them? And also on the outlook of Shingles vaccine, how big that opportunity could be?

Answer
Sridhar Venkatesh (Executives)

Look, I'll attempt to give you how the market doing. Market is still sluggish, okay? So it's still in negative space. A lot of that has got to do with people either postponing vaccines. They -- in some of the -- I talked about the SECA categories, et cetera, we don't have those data, but I'm sure you have seen those anecdotal reports of birth rates coming down a little bit in some of these places, that has all had an impact. As I said, the market is still around minus 10%, minus 12% category, that is where they are. Of course, we are -- we continue to hold our share. So while the market is declining, if you are holding our share, means we are gaining share from our competitors. So which clearly means as we still are a key relevant part of that.

So in terms of -- look, in terms of future outlook, I -- it will not be dependent upon how -- as I said, there is a -- it takes -- most of our vaccines are 0 to 1. So for that, we need more kids to be out there. There is a time for kids -- post all of this, it takes -- there is a cycle. So we remain optimistic -- hugely optimistic based on some of the lead indicators that we see in the hospitals, et cetera. So we think this is going to come back. Remain absolutely committed on that particular space.

You talked about FLUARIX of adult vaccine. Yes, FLUARIX is clearly one. And of course, Shingrix in the future. We've been very pleased with what we have done with FLUARIX. And I think IMS and IQVIA do not do justice to what we do, what we sell. But look, I'm not here to talk -- I mean you've seen those numbers in our -- how we report. But clearly, we are -- what we've been able to do in the last 2 years has really been significant. Probably I need to see which channels you see and I need to get my ads in front of you. There are a lot of those we do, too, especially the ones recently you might have seen, they are not ads.

Let me clarify myself. We don't do ads. We never do ads. What we do is disease awareness campaigns, okay? So they were the disease awareness campaigns, all around getting flu. And you would also the fact that the current strains also protect you against H1N1. So you might have seen some of those. So yes, we do a lot of those activities. Future outlook of Shingrix. Look, I'm not going to sit here and speculate. I can give you the indication, okay? Indication is 50 years plus anybody needs that shot, right? We don't have the other indication yet in India, which is 18-plus immunocompromised, I don't have that indication yet in India. But anything 50-plus, people should be taking it.

Is it going to be -- will everybody take it? No. I mean, I don't know how many of you have taken through shot here in the room or in the call. There is a little bit of an apathy about adult vaccine, and that calls for companies like us to spend more time on disease awareness. So that's something that you will see continuously us doing.

Answer
Unknown Executive (Executives)

Great. The next question, I'll pass on the mic. Maybe you can introduce.

Question
Nikhil Upadhyay (Analysts)

Nikhil Upadhyay from Securities Investment Management. 2, 3 questions. One is on the vaccine side. If we look at the last 2.5 years, what you mentioned is quite relevant, that the whole of the cohort has not been there, people are not going. But what we thought is that there would be a significant pent-up demand whenever the things start opening up. But even in the AGM and you now also you mentioned that the market is still degrowing. So is it that something structurally has changed? Because what we have also seen, government has added also a lot more vaccines in the basket, which was there. So is there anything structural which has changed? Or is it still something which you believe is temporary?

Answer
Sridhar Venkatesh (Executives)

So look, I think -- yes, I think the government has taken some steps, right? And clearly, there are a few patients who are going to private are going to the government category, right? So clearly, around the pneumococcal space, there is some of that, that has happened. But I also think people have postponed quite a few decisions, right? So some of these vaccines that we are talking about are outside of your normal vaccines that you would take, right? So from an economic standpoint, people have postponed some of those decisions. There has been a pent-up demand, but it has not been as if everybody who has not taken that vaccine has come back up.

And also, clearly, the birth cohort. We think there is a time people have postponed. Look, it has taken me really hard, sometimes when I'm speaking to my boss, to say that marriages in India got postponed, therefore, kids gets postponed. And people don't understand that sometimes. And it's taken me time for me to make people understand that. So there is a cycle. We are seeing that cycle slowly turning around, right? There are, as I said, some lead indicators of other medicines that are used, which will help us tell us what's happening to the birth cohort, et cetera. But we have to be patient. I think it's going to take till the end of the year for this to kind of bottom out. And I think slowly, only next year, the markets potentially starting to come back up.

Question
Nikhil Upadhyay (Analysts)

Second, if you look at last 10 years of GSK, we've seen -- and one clarification, you mentioned at the starting before my tenure ends? So is it something closer to date?

Answer
Sridhar Venkatesh (Executives)

So please, please, there's nothing called. Everybody's tenure's end. Mine and some point of time. But I was just making an off-the-cuff comment.

Question
Nikhil Upadhyay (Analysts)

So if over the last 10 years from where you were, you were handed over Glaxo as the MD, and what we've seen is that the company at the MR productivity level or at the growth level has been a laggard. And many of the smaller companies have taken market share from -- and we were the leader at some point. In the early 2010s, it was like Glaxo's MR productivity was come the benchmark. So what has changed and what structural changes you have brought in over the last 3, 4 years, which gives you the confidence that probably now the things are set for us to probably benchmark or make benefit from the steps which we have taken?

Answer
Sridhar Venkatesh (Executives)

A fantastic question. So look, I think 10 years ago, we were a different company. Our outlook was different, what we could launch in this country was different, the regulatory environment was different, the scientific proof of what the bar that GSK has for itself in terms of what I could launch was very different, right? So clearly, over a period of time, some decisions were made over -- rightfully so, we are a global company, we have to kind of work through. One of the things that we have to understand is what products we can launch and what we cannot launch. And clearly, there were some decisions that were made in the last 8 to 10 years on which are the areas that we would focus on.

Clearly, also, the environment externally, some decisions like Zantac, Vemgal along the way have not helped us, okay? But they were all done for the right reasons. I mean, I'm not going to go back into that. So I think it's a little bit -- compared to some of the -- and again, I'm not challenging the growth of other companies, yes, they have done what is right for them, which is good from their perspective. What was good for us was we needed to look at where do we want to play. We made that decision in terms of where we want to play. 10 years ago was a different space and a different time. The last couple of years and 2, 3, we are in this journey for 3 to 4 years, we are very clear about where we want to play. We are very clear about where we don't want to play.

For example, if somebody were to say tomorrow, will you launch a product in diabetes? I can say here sitting now, absolutely not. Do I want to be in cardiovascular? No, that's not a space that I think I have innovation, that I think I can add value. There is enough people out there. So all the numbers that he was talking about is on those 7 or 8 therapeutic key products that we have, vaccines and innovation. I think you will start to see GSK India in the future, something like what we saw 8 or 10 years ago, but with a different set of products, different set of people and a different -- the shape of the P&L will look very different, because the skills that I need for immunology, oncology, adult vaccine is going to be very different from what I need for a mass product, which I need another 2,000 people, right? So the shape of the P&L is changing, the shape of the business is changing significantly. I think we are somewhere 60% in that journey. As we get those products in, you will start to see this very differently.

Question
Nikhil Upadhyay (Analysts)

Just one last, then I'll pass on. In this process, because if you look at 2015, '16 also and go through our annual reports, we used to focus on the generic medicine vaccines and speciality. And if you look at now the way competition is, if a product goes generic, there are 30, 40 players who are competing in also. Probably there is a good road map for a player like GSK to build the speciality pipeline to a much larger extent, create actual brands. For that to happen, how has the organization structure being created? Like for speciality, what is the kind of MR team? How is the team being divided? And what are the KPIs on which each of them being measured?

Answer
Sridhar Venkatesh (Executives)

Look, clearly, 4 years ago, we probably had one large team. Right now, if you were to see, we not only -- of course, we have a General Medicines team and clearly structured under that multiple teams to focus on the various brands. But let's talk about vaccines. We have recently created a completely different team to focus on adult vaccine, which reports straight into me. So somebody who sits in the leadership team -- our business today, which has 0 rupees in sales, but we know that we need to focus on that. So there is a Head of pediatric vaccine, who reports in to me. There is a head of adult vaccines, who report to me. So that's a clear investment for the future, including teams under them, who are trying to get ready.

Speciality, we brought in -- as I said, we brought in somebody, again, our Head of Speciality, whose whole goal is to create this team. Right now, the team under him promotes Nucala and Trelegy. But again, as we are getting closer to oncology launches in this country, we will start to see -- we put people 6 months, 9 months before, do one of the things that we show. It's as I said, I have now 4 commercial team members reporting to me: a general medicine, pediatric vaccine, adult vaccine, speciality, right, and there's somebody else who looks after the various emerging channels. So we are looking at all of this spectrum of portfolio. That's how we kind of structure.

Of course, KPIs are very different in terms of what needs to be done across -- for some, it is the success of new launch for some others, it is how quickly we can get a product into the market. For some others, it is how do you shape the market for the new launch. So they're pretty different.

Question
Nikhil Upadhyay (Analysts)

Why I stressed on the KPI side, is like in the focused brand, we had -- we've talked about Augmentin, Calpol, Derma. But there are also products like Eltroxin where we were the leader, the market is still pretty strong, but we've lost the leadership. So is market share defending an ability to grow the product, also an important part for the whole team?

Answer
Sridhar Venkatesh (Executives)

100%, right? I mean that's what we live and breathe for. And as I said, I'm not saying here that we -- everything is -- we lost -- there are areas where we have won share, there are a couple of products we have lost, Eltroxin is one. But again, I have to say in the last 6 months, you will see it in a year's time. I start to see data much more closely, I think we are coming back on that space very strongly.

Question
Anuj Sharma (Analysts)

Anuj from M3 Investments. On the vaccines, on the pent-up demand, so if you look at your portfolio, what percentage of the vaccines demand will be permanently extinguished or perished because I suppose the children go out of that age bracket? So any thoughts out there that it might not be a pent-up, it might be perished forever?

Answer
Sridhar Venkatesh (Executives)

So I said most of the vaccines are 0 to 1. I think if you look at -- so look, more than some of the vaccines that we are extinguished forever, I think the vaccines that we have -- that we think we are not going to get back are some of those where people are going to the government sector, especially the pneumococcal space, which is really moving over to people who can afford to are moving over to that space. On the piece of what do I think people are not going to come back for vaccines, see, there is -- we think that's going to be a pretty small portion. It's not because -- if you see this, right, as I said, market was showing a negative 17%, 18%, we showed a negative growth of minus 3%. So we actually gained share in most of our key vaccines, right?

So it's very difficult for me to say how much have we -- given what it is, how much have we completely lost. Look, I think it will be around a percentage here or 2, a couple of percentage points. But I really don't want to sit here and hazard a guess at how much I would have completely lost.

Question
Anuj Sharma (Analysts)

All right. And the second question is just regarding pneumococcal. So Serum is competing with us directly. Is it completely playing in the government pay market or it's there in the self-pay market?

Answer
Sridhar Venkatesh (Executives)

They are there in both. I mean we are competing. I mean, look, we don't play in the NIP space at all, we are not there. They are there in the private space, too.

Question
Anuj Sharma (Analysts)

Okay. So just anecdotally, the self-pay market as a percentage of total vaccine market 5 years ago and today, is the self-pay market shrinking continuously?

Answer
Sridhar Venkatesh (Executives)

Yes, absolutely. Right now -- well, last 5 years -- look, last 2 years, as I said, it's been a negative 18%, 20% decline, right? Last 2 years, it's been a decline. But as I said, I think this is -- we think there are enough lead indicators for us to say that this is going to come back.

Question
Anuj Sharma (Analysts)

All right. One question on MR productivity. So if you look at the incentive structure,in the last 3 years or 5 years, how are you directing the incentive structures to evolve and for you to get a productivity to where you were, let's suppose?

Answer
Sridhar Venkatesh (Executives)

So to me, I don't know if I will directly link incentive structure -- incentives to MR productivity, right? So to me, MR productivity is a function of the relevance of my products, what I can do, where I can, right? So I can talk to especially -- specifically separately about my incentive structure. Incentive structure moved away from -- it was at one point of time, we had all reps, then it moved GSK -- I mean, globally, GSK moved to only at a second line sales leader level. From last year onwards, we have the targets right at the rep level. So incentivized at the rep level.

So look, there's been a journey. There has been a different set of things. But clearly, we think our MR productivity, if you were to use that as a terminology, if I look at it within the operating space that I have, I think I'm pretty comfortable. When you look at -- I have a set of products, which is -- which I don't promote, which are there, that's when I think you start to see a different level of productivity. And it's a function of portfolio. My portfolio has shrunk significantly. As I said, be patient with us for a couple of -- as I said, as we launch these new products, these numbers are going to change significantly.

Answer
Juby Chandy (Executives)

Just to add, if you look at the total employment costs in the reported numbers, it's declined 1% despite we have an inflation of 8 to 10 percentage, right? So the decline is a function of productivity where we are rightly allocating our resources to where it matters. At the same time, providing for the inflation, our employment cost has not grown over the last 1 year.

Question
Anuj Sharma (Analysts)

And one last question. If you theoretically could launch much more products from the global portfolio, but you're prioritizing. So what are the parameters you're prioritizing at launch versus others?

Answer
Sridhar Venkatesh (Executives)

So fundamentally, the need in the Indian market, right? I mean not all products, we could we think maybe -- well, let me turn this around and say that most of the products that are coming out of the portfolio will be relevant for India, right, and we will launch. And especially in the oncology space, vaccines, immunology space. Right now -- but if there is a very high niche kind of a product, which is a very rare disease, and right now, I have not come across anything which I'm seeing there, which I'd say I will not launch. Most of the products that we have in the near-term portfolio we will launch.

And as we speak today, they are around -- correct me if I'm wrong, there are 20, 25 global clinical trials happening in India for various products, right? And the intention that we're doing those trials is potentially we will launch them in the future.

We have folks online.

Question
Unknown Analyst (Analysts)

Just want to understand if we look at the WPI benefit, has it flowed in the 1Q entirely? Or we should see it in Q2 to be more specific? And what kind of price growth should we look at for the full year?

Answer
Juby Chandy (Executives)

If you see the quarter 1 published results, it's 6% price impact in the results. Full year, we could expect around 8 to 10 percentage annualized price impact. It will flow through in the coming months.

Question
Unknown Analyst (Analysts)

And if we look at these price increase versus the cost inflations that we might have experienced in terms of our raw material around, is there any set-off that we should expect? Or the number that you just mentioned, we should stick with that?

Answer
Juby Chandy (Executives)

Typically, what we are seeing in the market is 2 types of inflation. One is our raw material, which is the API inflation, as well as the packaging material and the aluminum, all those kind of stuff is used for our packaging in the factories. That's also the inflation is happening. So we expect around 2% to 3% cost increase due to inflation happening. Price increase, of course, will add as a cushion to sustain our margin levels as I explained. So, it's not going to have a material dent in the margin as we speak because it's coming around 2% to 3% cost inflation happening, and our price increase is going to help us there.

Question
Unknown Analyst (Analysts)

If you can explain the volume growth. I mean we are talking about 6% volume growth, which is significantly higher than the overall IPM volume growth. So what is it that is driving these kind of -- are these only mass? Or is there any contribution? Because as we were discussing around the vaccine portfolio being weak, and we expect it to come back, say, only by end of this year, so how should we look at it? And with that, if we look at the EBITDA margin also, because I remember our earlier conversation wherein EBITDA margins for vaccines are kind of much lower and at an arm's length basis. So how should we -- because that indicates that our EBITDA margin should be much higher. But of course, we have seen a dent in this 1Q.

Answer
Sridhar Venkatesh (Executives)

Look, I mean we're getting our growth. As I said, there was a natural transition towards key known brands during COVID, and everybody expected once. And of course, we were able to keep our supply chain running, everything happened, and we gained share. Now people thought we were going to lose share during the -- it didn't happen to the brands I stated. So I think that momentum is helping us. We are fully -- we were first to get back into the field. So all of that, plus the relevance of our brand. So it's fundamentally the mass products, which is helping us get those volumes out there. Now, also, the vaccines coming back is, of course, going to have an impact. So I don't know, what was the second question there?

Question
Unknown Analyst (Analysts)

[indiscernible].

Answer
Sridhar Venkatesh (Executives)

Well, I'm not going to comment on the future with the margins, but...

Answer
Juby Chandy (Executives)

I think if you see the mix of pharma versus vaccine, so pharma products are around 78% and vaccine is 20% to 22% of our portfolio. And pharma is also growing much faster than vaccines, okay? So the margin is not going to dilute just because vaccine is going to come. Vaccine has relatively lower margin, but the ratio will maintain because pharma is growing on a larger base at a much higher rate. So yes, so it's a lower portion of our total sales since the margins will sustain.

Answer
Unknown Executive (Executives)

So I will go online just so that we're not ignoring the folks who joined online. [Operator Instructions]. Dheeraj Pathak, can you introduce yourself from which organization you are and your question? Moderator, if you can unmute the Dheeraj Pathak.

Question
Dheeraj Pathak (Analysts)

Yes. Am I audible?

Answer
Sridhar Venkatesh (Executives)

Yes. Go ahead.

Question
Dheeraj Pathak (Analysts)

I'm from WhiteOak Asset Management. I have 2, 3 questions. First is on -- are there any more OTC-type brands like Ostocalcium or Iodex, which might transfer later on? Or now the portfolio is just prescription brands and there is no OTC?

Answer
Sridhar Venkatesh (Executives)

I hope I had and I would have made some money out of it. But no there aren't any more at this moment.

Question
Dheeraj Pathak (Analysts)

Okay. On pneumococcal vaccine, Synflorix, is that vaccine part of the NIB program? Or it is yet to be part of the NIB program?

Answer
Sridhar Venkatesh (Executives)

Synflorix, as a brand is not a part of an NIP program. I mean pneumococcal has got introduced, we are not a part of that NIP program.

Question
Dheeraj Pathak (Analysts)

No. So just to understand that part probably. So when they say pneumococcal is part, so the same formulation and the strains that is in Synflorix, that is part. But you are not participating in the NIB program, is that what you mean?

Answer
Sridhar Venkatesh (Executives)

So there is a competing molecule from other company, which is a part of the NIP program. So look, you can never say this is exactly the same. They have some strains here and there. But yes, they all have the same indication as given by the drug controller, which is for the pneumococcal space. And we are not -- you are right, we are not a part of the NIP program.

Question
Dheeraj Pathak (Analysts)

So the broader question I wanted to ask here was that if our molecule, if the vaccine comes under NIP, in the private market, do we have to reduce prices? Or the prices are free in the private market, even if the vaccine is part of the NIP and we are not participating ourselves in the NIP program? In the private market, do we have to match prices? Does it come under price [indiscernible], is the question.

Answer
Sridhar Venkatesh (Executives)

No, no, I don't think these are completely different topics. So NIP is a program run by the government. You can choose to participate in it. There are some clearly laid out conditions. There is -- and then you compete. Think of it as a tender, right, a tender for the country. So we cannot compete in that tender for whatever reason. So we are not a part of that tender. Now private market is a completely different market. Everybody has their own prices, MRP. We are run by the rules of what -- how much we can increase, what you can do. So these are 2 completely different parallel streams. Nothing -- they're not linked at all with each other.

Question
Dheeraj Pathak (Analysts)

Okay. And one last question, sir. Vaccine, you said is 22% of the business, then you gave like promoted brands and speciality. Can you also give their revenue share in the total business now?

Answer
Juby Chandy (Executives)

Yes. So total vaccine is 22% of the total business. Promoted brands makes roughly 62% of the pharma business. There are still the 78 percentage, around 62% is promoted brands. So totally, totally, including vaccines, we are talking about, total portfolio, 80% is promoted.

Answer
Unknown Executive (Executives)

Okay. Next question, Dhaval Shah has raised his hand. Hi Dhaval, if you can pose your question, go ahead.

Question
Dhaval Shah (Analysts)

I hope I'm audible.

Answer
Sridhar Venkatesh (Executives)

Yes, you are.

Question
Dhaval Shah (Analysts)

This is Dhaval Shah from Aditya Sun Life Mutual Fund. So first question is I just wanted to understand the market potential for your 3 speciality products, that is Nucala, Trelegy and Shingrix. If you can just articulate what is the market potential that you're looking for each of these products.

Answer
Sridhar Venkatesh (Executives)

Look, I think Nucala is a very niche indication. It's a biologic for eosinophilic asthma. Look, it's -- I don't know if -- that market doesn't exist today, the biologic market doesn't exist. And I think broadly, when I say it doesn't exist, it's a very, very small market. So we are talking about -- again, I don't want to sit here and talk about in crores, but you're talking about patients in thousands who could potentially -- a few thousands who could potentially take that. While you're talking about Trelegy, Trelegy is the entire COPD market, right? That to me is a -- correct me if I'm wrong, if it's in around it's a few thousand crores, right, so it's somewhere in that particular space. The third one was about...

Question
Dhaval Shah (Analysts)

Shingrix.

Answer
Sridhar Venkatesh (Executives)

Shingrix. Again, the adult vaccine does not exist, market doesn't exist. But anybody above 50 is at risk of -- should be getting that vaccine, right? So we think some -- if again, the apathy around vaccine goes away, unlike what you see in some of the other markets across -- developed market across the world, its potential is massive, right? So again, there is no -- these are markets that we are creating, Dhaval. I mean there is, as I said, we will be the market for some of these products.

Answer
Unknown Executive (Executives)

Okay. Dhaval, any more questions?

Question
Dhaval Shah (Analysts)

Yes. The second question that I have is on the derma market, and that has also kind of got impacted because of COVID. And I just wanted to understand how much normalization has happened in that overall context? And how do you see that going forward?

Answer
Sridhar Venkatesh (Executives)

Pretty much normalized. In fact, I go by the metric of are my reps able to see the doctor walking in or they wait for a few hours? So if they are walking in, business is not so great, though they're meeting their doctors, right? So right now, I can see those doctors extremely busy, and I think that market is coming back significantly.

Question
Dhaval Shah (Analysts)

Okay. And the last one is on FLUARIX. I just wanted to understand what possibly Dheeraj was also asking is that do you expect the private market to grow after this getting included in NIP in that overall sense? So would you expect private market growth to continue for Synflorix, say, over the next year and the next 3 years?

Answer
Sridhar Venkatesh (Executives)

No, we see that declining, okay? And as I said, that's not a market. We are seeing that decline. There are patients who are moving over to the NIP. So, I'm not expecting the market to have that pent-up demand and growth of what we saw in the past. There will be other vaccines, which are coming back. We have the meningococcal vaccine, the TDAP, which is the Boostrix. We have the 6 in 1s, but this one, I expect the private market to continue to decline.

Answer
Unknown Executive (Executives)

Thank you, Sridhar. We'll go to Gagan Thareja who's raised his hand. Gagan, if you can go ahead and ask your question.

Question
Gagan Thareja (Analysts)

Yes. I hope I'm audible.

Answer
Unknown Executive (Executives)

Yes. Thank you, ahead.

Question
Gagan Thareja (Analysts)

Yes. So the first question is around the proposed changes to the EM list, where 3 of your products can additionally figure in T Bact, [indiscernible] and rotavirus. If that materializes, what could be the impact on the pricing aggregate basis on all these 3 products versus the pricing methodology followed under the NADL?

Answer
Sridhar Venkatesh (Executives)

Look, we -- again, I'll wait for the government to come in to tell us the pricing. I'm not going to speculate what would be the pricing, what would -- they would do. But what I can, if at all, the price gets released and we have a direct impact, I can say that we have enough experience from the past of having gone through these turmoils and ensure that we come back in terms of our -- in certain cases, volumes, certain cases other productivity improvement measures. So look, I clearly don't want to speculate on what price they would -- what would happen. But whatever would be the scenario, I think we are pretty much ready to kick on the button within 24 hours to do whatever needs to be done.

Question
Gagan Thareja (Analysts)

I'm sorry, sir, you were not audible for most of comment.

Answer
Sridhar Venkatesh (Executives)

Okay. Let me try and -- I'm sorry, am I okay now? Am I audible now?

Question
Gagan Thareja (Analysts)

Yes, you are audible now.

Answer
Sridhar Venkatesh (Executives)

Yes. Look, as I said, I am not -- I don't want to speculate in terms of how much and what would be the price impact, if at all, that happens. I don't know what I don't know. Whatever be the methodology, but let's -- as I said, irrespective of whatever happens, we have gone through the situation a few times in the past. We are ready to manage that carefully, what needs to be done in terms of volume expansion. Or whatever needs to be done, we are ready with that thinking. But clearly, I don't want to go into that space of speculating what would be the amount of price impact on these products.

Question
Gagan Thareja (Analysts)

I understand that, but could you give the salience of these 3 products in your portfolio today? And I mean, what proportion of sales would these 3 constitute for you?

Answer
Sridhar Venkatesh (Executives)

Yes. So I can tell you, Rotarix as good as insignificant now. It's not a focus area. You're talking about Ceftum. Ceftum, I mean -- which is an important product for us. But again, in the larger scheme of things, it's less than 1%, less than -- even less than 1%. And the other one is T-Bact, which is again 2 to 3 percentage points.

Question
Gagan Thareja (Analysts)

Right. You -- last year, you also indicated that the API for paracetamol had seen a very sharp increase while the volumes of Calpol would have taken some sort of an impact, because year-on-year, last year, you had the second COVID wave. In terms of input pricing, are things looking better this quarter? And also, you would have taken some price increases on the final product as well?

Answer
Sridhar Venkatesh (Executives)

Take it.

Answer
Juby Chandy (Executives)

So I think -- firstly, I think most of the raw materials, particularly paracetamol, has gone up roughly 20 to 25 percentage in terms of cost inflation. Now the good thing is we have long-term contracts with the vendors. We have signed long-term contracts on most of the APIs. So we've got a certain level of visibility in terms of how the cost is evolving, that's one thing. Yes, so that's why -- and also the price increase both are kind of cushioning us. So you're not seeing that impact in the reported quarter also, the last quarter also on the margins. We still see the margin improving. So we continue to have this kind of cost pressures, but we'll be carefully managing that.

Answer
Sridhar Venkatesh (Executives)

Yes. I mean, I would say the margin pressures remain, okay? So let's see, the geopolitical situation around us is not improving for the short term. So, we continue to watch it closely. Again, that's the strength of being a global multinational. We have scale and size to kind of globally look at some of these, especially some of our vendors. So that helps us a little bit. But Juby is bang on to say, right now, the cost has helped us a little bit. I mean the price increases have helped us a little bit and the pressures remain.

Answer
Unknown Executive (Executives)

So we'll go to the room yes.

Question
Satish Bhatt (Analysts)

I'm Satish Bhatt from Anvil Share & Stock Group. I'm tracking your company from maybe 1992. So it's more than, I think, 3 decades. And I think in this space, I think some of our past speakers have told that we were once leader, now we are not there to be seen in the -- not to be recognized as a leader. We become more of an acute company than a chronic company. And the presentation which you made, that you want to focus into speciality, especially products like Nucala and Trelegy and whatever oncology portfolio you have, you haven't mentioned how fast you're going to introduce your product. Because Niraparib is already, I think, out in the market for the last 2.5 years, but you're still not launched in India. So why it is?

Niraparib, Zejula, yes. You still haven't launched in India. So -- and sir, you told that I think what I track your speciality is less -- hardly 1% of sales, maybe Trelegy and Nucala put together, maybe. If I consider too, your forthcoming products, which are going to literally change the structure of the company in terms of the product portfolio, which you have presented. So I just wanted to know, sir, I think 2 years back in your annual report, you returned that eosinophilic granulomatosis patients. It's written in your annual report. And today, you're talking something only 1,000 patients.

So what type of investments you will have to require to get those type of patients? Because these are the products which are biologics, maybe you will have to develop the market. So whatever front-end investments you may have to need to make 50 or 100 million products, which will really move a needle for a company like Glaxo, because our size is as big as INR 3,000 crores. So move the needle, you have to make at least 10% of sales. So I just wanted to know your thoughts on those lines.

Answer
Sridhar Venkatesh (Executives)

Happy to. By 1,000, I didn't mean 1,000. I meant thousands, so in a few 5-figure thousands, okay. So that's not -- not the 4 figures. So there is that potential, but it's not millions as what you see in the others. Look, some of these products are, as I said, either first in class or best in class. They need -- so the investment that we are making, you can -- let's -- we talked about Zejula, yes, we will be -- it's been launched globally. We had to do a clinical trial, whatever, and we are filing and so the process is on, committed to bring that in.

Let's talk about Shingrix. A new asset, globally a $1 billion product already. But in India, we're creating -- you're talking about investments, we're creating a team with a set of people. Product is going to be launched in second -- first half -- end of first half. And we are putting investments today to ensure that we understand the market, work with the key stakeholders in the market and ensure that when we launch, people understand what this medicine is for. For speciality medicines, right? I think unlike launching an antibiotic, unlike launching another painkiller, which I'm not demeaning that, they have their own space, these products will require significant investment way before launches, 9 months, 10 months, 12 months.

And I'm not talking something that the industry does not do. Every other company also has the same methodology. We are also in that space. As I said, we will be focusing on some of these -- merely around 8, 9 months prior to launch, and that's a journey we are in. So yes, that's the kind of money and investment that we would need. Will these products be for everybody? I don't think so. They will be for a certain category of people, certain set of people. And for them, we will definitely make it available.

Question
Satish Bhatt (Analysts)

Sir, my basically question what type of investment will it require to make a INR 300 crore, INR 400 crore brand? Maybe you were initially -- first you want to spend INR 50 crores on that. Because maybe that's -- see, you have to come back and -- we have to create the market. If you've been the leader, I have to decide what I have to make the market. If I know I have a product potential of becoming a INR 500 crores, are you going to be shy of investing INR 50 crores in year 1? Because your balance sheet can support any type of investments. And definitely, you would be willing to put...

Answer
Sridhar Venkatesh (Executives)

Yes, absolutely. And the answer to that question is yes. If I can make this product to INR 300 crores, INR 400 crores, we will -- the first few years, definitely, you invest much more than what you would. I mean, you're not looking at the P&L at that point in time. Look, as I said, it all depends upon the nature and the kind of the product that we are talking about. For product like Shingrix, we are making that investment. I'm telling you right now, we are seeing it right now today, right? I'm sure next time around, when I call you, you would say you made so much investment on Shingrix, you don't have the sales yet, what -- so I'm sure you will do that. But we are making that investment right now.

So for a product which is -- now if I had to launch something else, which is in the general medicine space, I may not invest at that level. So the products that I'm looking at in the future will all be, as I said, invest well before 8 to 9, 10 months before launch, create that market. I don't think I'm going to talk about will I launch -- will I spend INR 50 crores, will I spend INR 100 crores. It will be for an oncology product, which is run by maybe 50 key centers, 200 doctors, I may not need INR 50 crores.

Question
Satish Bhatt (Analysts)

Sir, like Nucala, specifically.

Answer
Sridhar Venkatesh (Executives)

Yes, Nucala. Again, what -- I may not. But for a product like Shingrix, which can potentially be -- it is a vaccine, nobody knows about it. It's a path-breaking vaccine. Can be prescribed by every -- potentially by every GP, right? And we have a 10-year data protection as of now, which is fantastic. So for that and where there is an apathy for vaccines, I will have to invest. So those -- and again, I'm not going to talk about numbers. Those investments are going to be significant. So it will depend upon the nature of the product and portfolio.

Answer
Juby Chandy (Executives)

And if you see the last 3 years, new product launches, which we have done, right? So we've done both on vaccines as well as in pharma space products, around 5.2% of our total sales is from these new products. We've got FLUARIX, we got MENVEO , we got Nucala, we got Trelegy, so 3, 4 products. We have around 5% of our base of the last 3 years is from this new products. So it's not that small. In order to move the needle, 5% is significantly big. And the investment is completely dependent on what product we will serve, and we will try to, as much as reallocate from the P&L. It's not all to be incremental, we'll try to find opportunities. As well as incremental, both will be coming through. So it's a commercial decision depending on the potential of that product in the market.

Question
Satish Bhatt (Analysts)

And so one thing I've seen your peak margins, maybe in the area of 32% maybe some 10 years back, 10, 12, 15 years back. So do we see we will leverage or that we can peak out at 25%, 27%? Nothing wrong in growing top line and being at 25%.

Answer
Juby Chandy (Executives)

I don't want to comment on the future margins. But if you bring in perspective, there were an NLEM waves we were going through. So we had significant waves of NLEM, which we had to experience from then what you're talking about 32 percentage. From there, we have gone down to a kind of 16-ish, 15 percentage, and we've gone a long way from there, right? So yes, we are continuously working on that. Whatever happens, we have to bounce back, that's where it is.

Question
Gokul Maheshwari (Analysts)

This is Gokul from Awriga Capital. So my question just on the clarification. You mentioned the promoted brands are 62% of the overall sales and vaccines is another 22%. So 84% is promoted. The rest would be the non-promoted brands. Is that...

Answer
Sridhar Venkatesh (Executives)

That's right.

Question
Gokul Maheshwari (Analysts)

So what is the remaining 16%? Is this that there's something to be shred, is which you mentioned?

Answer
Sridhar Venkatesh (Executives)

No, not exactly. Look, I wouldn't call them shred. Shred is we had to make some decisions, big ones we have done. We are out -- most of it is out. But these are products which have a life of their own. These are products which have a long, long -- sorry, a long carryover effect. Yes, thank you. And we don't think by investing in any of that, I'm going to grow that significantly. So as I said, we made this conscious decision to focus on this 80%. But they are profitable brands. They don't -- they're not dragging me at all.

Question
Gokul Maheshwari (Analysts)

Should we assume that the 16% of the portfolio would be largely inflation-driven growth and not much of volume growth over there?

Answer
Sridhar Venkatesh (Executives)

In some cases, you do get volume growth. Some cases, very slightly have 1%, 2%. But the other ones, it is more or less inflation.

Answer
Juby Chandy (Executives)

Yes, it's more inflation-driven. Very low single digit.

Question
Gokul Maheshwari (Analysts)

And what would be the aspiration on the promoter brands and...

Answer
Sridhar Venkatesh (Executives)

So far, as of now, it's been a double-digit growth.

Question
Gokul Maheshwari (Analysts)

Okay. Secondly, on the parent has vertically divided the business into 3 segments. One is the General Medicine, Speciality and Vaccines. We are a more general medicines business, very little of speciality and 20-odd percent from vaccines. So the parent's focus is to increase margins on the general medicines, while you may want to actually grow that business. So is there a misalignment over there where the R&D focus at the parent level may not be there and, hence, you are constrained by new brands or something which you want to grow these brands in India?

Answer
Sridhar Venkatesh (Executives)

Look, I -- so first of all, I think I'm actually pretty much aligned with what the global teams are doing. So what's my strength? My strength is general medicine. What is it that I don't have? That is speciality. I'm getting that from the global portfolio. And vaccines is a space that I can grow and I'm getting some of the new assets. On the general medicine space, to me, I personally think, given more digitalization that is happening in this country, more online pharmacies, more kind of doctors, all of that. The penetration is going to increase. And these are the most relevant brands that I have with that penetration increases.

As we speak today, what is it, around 35%, 38%, 40% penetration in India for health care. If that increases by another 5%, 7%, 10%, the impact that we could have with some of our current general medicine portfolio is huge. So whatever may be the group's aspirations at a global level, because global level we are driven by innovation in some of the other markets, our aspirations, emerging market aspirations for us, and as I said, we are a big contributor to emerging markets, is continue to grow significantly within the general medicines portfolio. I'm not the only country in that space. Most of my -- most of the emerging markets countries are in a very similar space, and the focus has continued to grow double digits.

Question
Ravi Purohit (Analysts)

This is Ravi Purohit from SIMPL, Securities Investment Management Private Limited. Sir, one clarification on Ceftum. I think in the DPCO, is it Ceftum injectable? Or is it the Ceftum, the tablet form has also been included? Because if it's the tablet form, which has been included, then the...

Answer
Sridhar Venkatesh (Executives)

It's not been [indiscernible].

Question
Ravi Purohit (Analysts)

Because when you mentioned it contributes to 1% of your revenue, I assume it's the injectable. The tablet form would be much bigger, right?

Answer
Sridhar Venkatesh (Executives)

Yes. So yes, it's around 3%. 2% to 3% of tablet. But yes, again, none of that is clarified. As I said, I don't want to sit here and speculate and I have no insider knowledge of what's going to happen.

Question
Ravi Purohit (Analysts)

Sure, sir. I just wanted to clarify that. Second question is at any point of time, how much inventory sits in the system with the chemist shops in the sense of -- in the chemist shop. So for example, so when I do a channel check, I realize that the entire Derma portfolio of us, the pricing has already changed from 1st of April, right? So already 8% to 10% or 7%, 8%, I think a lot of creams when I see the Calpols and Augmentins, I don't see any price changes, right? So maybe the inventory is from the previous fiscal. So at any point of time, what is the duration?

Answer
Sridhar Venkatesh (Executives)

Yes. So I won't be able to really exact chemist shops, but in the markets, it's anywhere between 35 to 45 days is what we have, depending upon the nature of the portfolio, right?

Question
Ravi Purohit (Analysts)

And have we taken price increases on Augmentin and Calpol or we have not? If you could confirm.

Answer
Sridhar Venkatesh (Executives)

What do you mean pricing? You mean they're normal and those price increase? Yes, they have to hit the market, right? I mean we're having enough. Hopefully, look, quarter 3 is our generally the biggest quarter for us, when I say quarter 3, I mean for the for the whole year. So this quarter, and you will see some of those new prices starting to hit the market this quarter around.

Question
Ravi Purohit (Analysts)

The last question. So if we historically see, just like some of the other participants have mentioned, that we were industry leading 10 years back. Today, we are like not even in the top 5 in terms of growth. Same happened with the parent also, right? The pharmaceutical business guys like AstraZeneca, Abbott a lot of companies outgrew GSK at the global level as well, and which is where this need to break up the company and sharpen the focus, consumer division and pharma division.

And now that the division has happened, does the focus sharpen in India as well? And therefore, the question is, are 2, 3 new product launches enough whereas we've seen a lot of your MNC peers, India launching 10, 15, 20 products every year? So is there something that's going to change for us and...

Answer
Sridhar Venkatesh (Executives)

Look, I don't know who's lost 15, 20 -- I mean, I'm not too sure which would that be. But I -- yes, I mean, look, I'm not going to talk about 20 products of those. But look, what I think I will bring in the innovation assets that are coming out of that. Look, in terms of what we were 10 years ago to what we are now, as I said, it's not something -- situation was different, thinking was different. Today, I want to be a leader in the markets that I play and that I can play, right? I'm not in -- yes, if you put in the entire diabetes and cardiovascular market, I'm not even in the top 10, right? So that does have an impact.

But I'm pretty convinced that with the portfolio that I have, I can continue to grow my top line, I can continue to, as Juby was saying, focus on my margins and then I think I have space there. I have 2 phenomenal areas where my muscle, I can increase significantly, adult vaccine portfolio, new assets. New assets, will I launch 10 a year? Absolutely not. I can tell you sitting here. I will -- I don't think I have the bandwidth or the capability or I can do well with that. Will I have at least a few launches every year? Based on what I would see, so I think the focus has been, be selective of what you want to launch, when you want to launch, but do that well, right? And you will see that with Trelegy. You will see that with Shingrix. You will see us getting ready for launches 8, 10 months before. So that when the launch happens, it's not the slow, we take off much faster. So that's how I would state it.

The focus on India, I personally think, again, I'm not going to comment about the group. What I can say about for me in India, this is the best possible thing that has happened for me. Because as I said, India one of the few markets where I have scale and size. I have trust, I have equity. And I walk in -- so that is a big positive for me from general medicines. What I need to build is my speciality portfolio without diluting my current strength that I have and my vaccine. So I'm pretty clear, we are on that path. Will I become a #1, look, honestly, I'm not even thinking about that. I don't think about that at all. I want to be relevant in the spaces that I am in, and I want to grow in the spaces that I am in. And I think if I can do that, that's a win for me.

Answer
Unknown Executive (Executives)

Thank you, Sridhar. We have last 2 questions. If you permit, we'll just extend beyond the allocated time. We have a question from Sameer Baisiwala. Sameer, if you can pose your question either to Sridhar or to Juby. Over to you, Sameer.

Question
Sameer Baisiwala (Analysts)

So the quick question is for the represented market that you are in, which is acute, which is antibiotics, derma, what's the sort of market growth that these categories have? I mean is it fair to say that you are, by definition, in the low growth areas?

Answer
Sridhar Venkatesh (Executives)

Well, on that base, if the market is growing by 8% to 9%, I don't know. I mean, it's -- it's a pretty -- the markets are -- because again, given the underpenetration, I still think these markets will continue to grow at 8% to 9%. The derma market is growing much faster, though.

Question
Sameer Baisiwala (Analysts)

Okay. And if you can share your thoughts on the bigger towns versus smaller towns. So how do you think about these 2 markets? What's the sort of penetration that you have? Are you deploying more field force and tap more doctors in the smaller towns?

Answer
Sridhar Venkatesh (Executives)

No, I think I'm -- so look, in terms of our people, I think we've gone through an exercise. Looked at it very closely. We think there is more for us to gain, greater productivity, of where we are operating in. Look, we cover I think, correct me if I'm wrong, around 160, 170 towns across the country easily. And I think maybe more -- a little bit more. But I think we are not adding any more customers or adding any more feet on the ground. We are looking at enhancing our productivity with our existing customers.

In terms of our growth, obviously, we are getting a higher growth from smaller cities compared to places like -- some other bigger cities. But if you look at cities like Delhi, Bombay, Bangalore, Chennai, given the corporatization that I see in these places, these places have a normal tendency to get a higher set of growth, especially for the kind of products that I have, which is fundamentally in the acute space or the antibiotics.

Question
Sameer Baisiwala (Analysts)

One final, if I may, with your permission. What's the sort of -- how much of your cost is really imported? And have you already felt the impact of the depreciating rupee?

Answer
Juby Chandy (Executives)

Yes. I think we got roughly INR 800 crores of imported cost base, okay? And we have roughly -- if you see the FY '22 financials, we got around INR 5 crore impact in that full year on depreciating U.S. dollar versus rupee. So it's not material from the scheme of things. It's roughly INR 5 crore impact we have in the financials, reported financials.

Answer
Unknown Executive (Executives)

Thank you. Thank you, Sameer. Thank you, Juby. Last question that was actually typed online. And after that, we will close with closing remarks from Sridhar. Mitesh from Nirmal Bang. He says post-COVID, multiple companies have additional capacity in vaccines and are looking to launch different vaccines. Can we see competition intensified?

Answer
Sridhar Venkatesh (Executives)

Yes. I mean -- yes, I do think that vaccine is a space, which is exciting everybody. So yes, do we expect vaccines to come in? Yes. I think what GSK brings to the table is the freshness of its portfolio. The kind of newer assets that are happening globally, the acquisitions that we are making globally. I think, for us, it's going to be how do we continue to bring some of the newer assets of vaccines into this country. So yes, you will see more vaccines coming into the market, I think it's a good thing. There is more noise in the market. There are more people who will understand vaccine. So I'm not averse to more competition coming in. I personally think it's a good thing. More of them come and talk about adult vaccination, it would be fantastic.

But yes, I think I am in a very strong space as GSK given the newness of my portfolio and the pipeline that I'm coming. And on the pipeline, I can be pretty sure, on vaccines, I potentially will get most of those into this country.

Answer
Unknown Executive (Executives)

Thank you. Thank you, Sridhar. With that, before we close, any closing remarks for those.

Answer
Sridhar Venkatesh (Executives)

Well, first of all, thank you for coming. Really wonderful to speak to all of you face-to-face and you get this opportunity a few times. Thank you for coming. And again, from a GSK standpoint, my only message or my only focus is going to be do a few things, do them well, focus where you can, change what you can change and ensure that, at the end of the day, whatever you do makes value for the patients. That's our key mantra. Thank you for all of you who came.

Answer
Unknown Executive (Executives)

Great. Thank you all for joining online, and thank you for all those who came here. Appreciate it. Thank you very much. We will now disconnect the call. Moderator, if you can disconnect the call. Thank you.

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