Sun Pharmaceuticals Industries Ltd. ADR (SMPQY) Q4 2020 Results - Earnings Call Transcript
by SA Transcripts, https://seekingalpha.com/author/sa-transcriptsStart Time: 09:00 End Time: 10:14 January 1, 0000 ET
Q4 2020 Earnings Conference Call
May 27, 2020, 09:00 AM ET
Company Participants
Dilip Shanghvi - Managing Director
Abhay Gandhi - CEO, North America
C. S. Muralidharan - CFO
Kirti Ganorkar - Head, India
Nimish Desai - IR
Conference Call Participants
Neha Manpuria - JPMorgan
Prakash Agarwal - Axis Capital
Tushar Manudhane - Motilal Oswal
Chirag Dagli - HDFC Mutual Fund
Anubhav Aggarwal - Credit Suisse
Sameer Baisiwala - Morgan Stanley
Nithya Balasubramanian - Bernstein Research
Ankush Mahajan - JM Financial
Shyam Srinivasan - Goldman Sachs
Damayanti Kerai - HSBC
Surya Patra - PhillipCapital
Krish Mehta - Enam Holdings
Operator
Ladies and gentlemen, good day, and welcome to the Sun Pharmaceuticals Industries Limited Q4 FY '20 Earnings Conference Call. As a reminder, all participant lines will be in a 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 Mr. Nimish Desai. Thank you. And over to you, sir.
Nimish Desai
Thank you. Good evening and a warm welcome to our fourth quarter FY '20 earnings call. I'm Nimish from the Sun Pharma Investor Relations team. We hope you received the Q4 financials and the press release that was sent out earlier in the day. These are also available on our Web site. We have with us Mr. Dilip Shanghvi, Managing Director; Mr. Abhay Gandhi, CEO of North America; Mr. C. S. Muralidharan, CFO; and Mr. Kirti Ganorkar, Head of India business.
Today the team will discuss performance highlights, update on strategies and respond to any questions that you may have. As is usual, for ease of discussion, we will look at consolidated financials. Just as a reminder, this call is being recorded and a replay will be available for the next few days. The call transcript will also be put up on our Web site shortly.
The discussion today might include certain forward-looking statements, and this 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 rejoin the queue. I also request all of you to kindly send in your questions that may remain unanswered today.
I will now hand over the call to Mr. Shanghvi.
Dilip Shanghvi
Thank you, Nimish. Welcome, and thank you for joining us for this earnings call after the announcement of financial results for the fourth quarter of FY '20. I hope you and your family are safe and healthy. During this pandemic period, our main focus has been to maintain continuity of our product availability and ensure that in this challenging time patients who are on treatment continue to get their medications uninterruptedly.
Our employees have put in significant efforts through this period of crisis to ensure continuity of supply chain and business and done a reasonably good job. Within a few days – I mean not few, but two or three days of the lockdown being announced, I think our IT enabled almost close to 1,000 people to work from home.
In a situation where there were multiple disruptions in manufacturing because of multiple challenges in terms of availability of intermediates, availability of packaging material, I think our supply team ensured that we have uninterrupted supply of all our products across market at all our manufacturing facilities. So I wish to place on record the appreciable work that all of these people did in this time of challenging which is globally a huge challenge.
Now let me discuss some of the key highlights of our performance for the quarter. Consolidated sales for the quarter were 8,078 crores, a growth of approximately 15% over Q4 last year while the full year FY '20 sales were 32,335 crores recording a growth of about 13%.
Key growth drivers for the full year FY '20 include India, our global specialty business coupled with growth in our rest of the world and API businesses. While we continue to focus on controlling costs, improving productivity and improving efficiencies in all of our parts of businesses, COVID-19 pandemic is likely to change the way business will be conducted in future, at least for a short time.
And the key focus area for us in the coming quarter will be employee protection and keeping workplace COVID-19 free, digital engagement with doctors and patients, supply chain protection, ensuring optimum utilization of our factories, working closely with vendors to ensure continuity of supply, while at the same time continuing our focus on improving productivity, improving throughput, enabling work from home for employees wherever and whenever it is necessary, and finally focus on cash collection, cash preservation and where possible finding a way to reduce the overall debt for the company.
We estimate some softening of sales in the near term due to the lockdown and some stockpiling by the customers. It is difficult to quantify the impact at this point of time. Our endeavor will be to ensure that we continue to progress in all our businesses.
Let me now update you on our specialty business. We are witnessing a consistent progress in our global specialty revenue. For Q4, our specialty revenues were approximately 126 million across all markets, while specialty R&D accounted for 24% of our total R&D spend for the quarter. ILUMYA has recorded approximately 94 million sales globally in its first full year of commercialization. Abhay will discuss more details on our specialty business later.
I will now hand over the call to Mr. Murali for a discussion of the financial performance.
C. S. Muralidharan
Thank you, Mr. Shanghvi. Good evening, everyone, and welcome to all of you. Our Q4 financials are already with you. As usual, we will look at key consolidated financials.
Overall, Q4 sales are at Rs. 8,078 crores, up by 15% over Q4 last year. On the expenses side, the year-on-year increase in material costs is mainly driven by product mix and increase in material consumption for Taro. Staff costs went up by 5% over Q4 last year while other expenses up by 1% over Q4 of last year.
EBITDA for Q4 was at 1,256 crores with EBITDA margin at 15.5%. Adjusted net profit for Q4 was at Rs. 660 crores, excluding the impact of exceptional items of Rs. 260 crores. Reported net profit for Q4 FY '20 was at Rs. 400 crores while reported EPS for the quarter was Rs. 1.67.
Let me now discuss the movements versus Q3 of this year. The increase in material costs for Q4 FY '20 over Q3 FY '20 is driven mainly by product mix and increase in the material consumption for Taro. Staff costs increased sequentially and is mainly due to provisions for incentives and bonus in one of our subsidiaries, other expenses were higher in Q4 compared to Q3 FY '20 mainly due to higher SG&A at Taro.
EBITDA margins for Q4 at 15.5% were down compared to Q3 mainly due to the ForEx loss of Rs. 143 crores versus a ForEx gain of Rs. 82 crores, a swing of about 225 crores. Almost 50% of the sequential decline in EBITDA is due to the swing in ForEx while the remaining is due to the increased expenses as mentioned above.
Tax expenses for Q4 at Rs. 83 crores are also significantly lower as compared to Q3 FY '20 resulting in 10% effective tax rate. We have consistently maintained that our quarterly tax rates are volatile and investors should look at our annual tax rate which is at 16.4% for the full year FY '20.
Now we will discuss the full year performance. Net sales were at Rs. 32,325 crores, a growth of 13% over FY '19. Material costs as a percentage of the net sales was at 28.6% which was higher than the same period last year, mainly due to higher material consumption for Taro and overall product mix.
We were able to restrict the year-on-year staff costs increase to single digit despite the full year’s impact of Pola Pharma acquisition. Other expenses were up by nearly 16% over FY '19 due to the marketing spend of the specialty business and the full year consolidation of Pola Pharma. As a result of the above, EBITDA for the full year was at Rs. 6,477 crores, a growth of 9% over the full year period last year while resulting in the EBITDA margin of 20%.
We have been able to maintain our EBITDA margin near to that recorded in FY '19 despite the significant spend on marketing and promotional specialty products. FY '20 finance costs has reduced year-on-year to Rs. 303 crores as compared to Rs. 555 crores in FY '19, mainly on account of debt repayments in FY '20.
Excluding the exceptional items for both FY '20 and FY '19, net profit for FY '20 was at Rs. 4,026 crores, up approximately 4% over FY '19. Reported net profit for FY '20 was at Rs. 3,765 crores while reported EPS for the full year was Rs. 15.69. At today's Board meeting, the Board of Directors have declared the final dividend of Rs. 1 per share.
Let me now briefly discuss Taro's performance. Taro posted Q4 FY '20 sales of US$175 million, down 3% over Q4 last year. For the full year FY '20, sales were at US$645 million, down by 4% over last year. Taro's net profit for Q4 was at US$54 million, down by 7% over the similar period and for the full year FY '20 was at US$244 million, down by 13% over the previous year.
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. For Q4, the sales of branded formulation in India were Rs. 2,365 crores, accounting to approximately 29% of total sales. Sales for Q4 last year included a one-time impact of approximately Rs. 1,085 crores related to the change in the distribution for India business.
If we look at the full year – the financial year '20, India sales were at Rs. 9,710 crores with an adjusted growth of 15%. So we had shown a robust business growth in India business of 15% against the market growth of 10%.
Our India business has done well and we have started witnessing an increase in our market share. While AIOCD AWACS MAT March 2020 market share in 8.2%, now on a monthly basis it is continuously improving and it has now improved to 8.4% in Q4 of '20.
Although medical representatives have not been able to physically visit doctors’ clinics in the past two months, we are reaching out to the doctors and healthcare professional digitally. As government regulation permits physical movement of people, our medical representatives have started visiting clinics and meeting doctors.
Our strong brand equity with the doctors, especially in the chronic segment, has helped us in protecting our business in these difficult times. Although the prescription in the acute segment has suffered, we continue to focus on maintaining our strong brand equity with the doctors and patients.
The Indian formulation market offers a good long-term potential given the favorable macroeconomic drivers of pharmaceutical consumptions. We also continue to remain the partner of choice for in-licensing given our strong number one position in many therapy areas.
With this, now I hand over to Abhay.
Abhay Gandhi
Thank you, Kirti. I will briefly discuss the performance highlights of our U.S. businesses. For Q4, our overall sales in the U.S. were at US$375 million accounting for approximately 34% of overall sales. Although we recorded a 15% decline worldwide, the numbers are not strictly comparable as sales for Q4 last year included a one-time contribution from the special business in the U.S. The U.S. generics business continues to be competitive and we continue to evaluate ways to counter the competitive headwinds.
Let me now update you on developments in our specialty business. Our specialty revenues in U.S. have grown over the December quarter, despite the anticipated seasonal decline in ABSORICA and Levulan sales. This growth is mainly driven by improving sales of ILUMYA, CEQUA and YONSA.
Like in case of all other innovative companies, our specialty sales force was unable to visit doctors’ clinics for brand promotion in the last couple of months. They relied on digital engagement with doctors and healthcare workers for promoting our products. Patients in U.S. have also significantly expanded their digital connect with doctors.
As different states in U.S. gradually lifted lockdown, we expect our sales reps to restart doctor visits. Although we continue to invest in branding and promotion of specialty products, we believe that our ability to absorb these costs will improve in the coming years as our specialty revenues ramp up.
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 sales in emerging markets were at US$187 million for Q4, up by about 8% year-on-year and accounting for 17% of total sales.
As indicated in our previous earnings call, we are witnessing a reduction in tender revenues in our South Africa business. Excluding the impact of the tender sales, we have recorded a double-digit growth year-on-year for our emerging market portfolio.
Key markets, which contributed to the growth, were Russia, Romania and Brazil. Formulation sales in rest of world markets, excluding U.S. and emerging markets, were US$165 million in Q4, up by 1% over the last period last year. Rest of the world markets accounted for 14% of Q4 revenue.
Our API sales for Q4 were at 483 crores. For the full year FY '20, our API sales were at 1,916 crores recording a growth approximately of 11% year-on-year. For Q4, sales of branded – I’m sorry. We continued to invest in R&D for enhancing our pipeline.
Consolidated R&D investments for Q4 is Rs. 536 crores accounting for 6.6% of sales. Our current generic pipeline for the U.S. includes 98 ANDAs and 5 NDAs awaiting approval with the U.S. FDA.
Our overall R&D spend for the full year FY '20 was 1,974 crores at 6.1% of revenues. This R&D spend enables development of future product pipeline, including specialty and differentiated products.
As for the guidance, I wish we could give you guidance. However, given the uncertainties in the near term, we are breaking from our normal practice of giving guidance. We will revisit this stance in the next quarter.
Our endeavor will be to gain market share in each of our business by doing better. Despite the near-term uncertainties related to COVID-19, we hope to be able to do better consistently.
With this, I would like to leave the floor open for questions. Thank you.
Question-and-Answer Session
Operator
Sure. Thank you very much. We will now begin a question-and-answer session. [Operator Instructions]. We take the first question from the line of Neha Manpuria from JPMorgan. Please go ahead.
Neha Manpuria
Thank you for taking my questions. My first question is on the specialty business. We did see the initial traction that was being missed in CEQUA sort of come off due to COVID. So based on your conversations, when do you see CEQUA going back into at least gaining market share again? Could this be – particularly because it’s ophthalmologic, could this be slightly longer than let’s say other categories in the U.S.?
Abhay Gandhi
Thanks for the question, Neha. You’re right. We were ramping quite nicely before the pandemic occurred. And I think all ophthalmologists and optometrists were two of the first categories to actually close shop. So yes, there was a little bit of a downward trend in the prescription till last week. And when I saw the reports in the morning today for the current week, I can see an uptick. But it’s just a week’s data, so let me caveat that and hopefully sooner rather than later we will start getting back to where we were. If I see market share – sure, a number of prescriptions are dropped. But if I see market share, we haven’t lost market share. But the overall category of dry eye has come down because it would be considered like sort of a lifestyle disease. So the number of patients reaching to the doctor also has come down. What I hear is that the number of clinics which are now offering both teleconsultation as well as slowly starting opening up is increasing and this is of course the numbers will keep varying depending on what report you will read and on which day you read it. But I think slowly and steadily the number of clinics opening up is something I can look forward to.
Neha Manpuria
Sure. Just another question on CEQUA. Given the competition scenario, like you said the entire market has slowed down, is there a sales and marketing strategy different for the product now versus let’s say pre-COVID in terms of the amount of investment we had planned?
Abhay Gandhi
I guess in every geography, we had to quickly change track and shift a lot of our direct to doctor kind of promotion and in-clinic promotion to a lot of virtual media. But we haven’t cut back on investments and we kept doing the virtual meetings with doctors, we kept doing virtual group meetings with doctors and speaker programs and so on. So we haven’t deliberately cut back on expenses. Because I think the disruption is going to be short-term. However, I think the potential of the product and in general the products that we have in the specialty business I think we have taken a long-term view of what is possible.
Neha Manpuria
Understood, sir. And secondly on ILUMYA, given new patient getting new prescriptions might be slightly more difficult and with some more competitive products, has our view changed on the product versus let’s say pre-COVID? Do you think it’s more difficult or is it going to be slower to get patients onto ILUMYA?
Abhay Gandhi
Our long-term view is intact. There’s been no change in our thinking at all. I think the durability of the product in terms of the response and the safety profile actually resonates very well with doctors even in today’s situation or specifically in today’s situation. So I think doctors are happy with the product. I think there is a place in therapy even in the competitive market for this product and our long-term view remains intact.
Neha Manpuria
Understood. Thank you so much, sir.
Operator
Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Prakash Agarwal
Yes, hi. Am I audible? Hello?
Operator
Yes, you are.
Prakash Agarwal
Yes. So a question on ILUMYA only. So just wanted to understand if you could share the overall investment made in ILUMYA post acquisition and then the investment thereon? And current profitability and the expectation of future investments over three years and what are we expecting in terms of top line and if you could put some light there, it would be helpful?
Abhay Gandhi
I think most of the questions you have asked are so granular and asking me to give out numbers and strategies, I unfortunately cannot answer you.
Prakash Agarwal
So broad level, like when you bought it was about $100 million, then how much you invested thereon --
Abhay Gandhi
So we have said in different calls that we have made a significant investment on ILUMYA not only on the marketing side in terms of optimal size field force and the SRM teams and MSLs. We also invested in D2C. And apparently we are also doing different trials to improve the label of the product going ahead and also locally done IITs which doctors are interested in doing on the product. So the big investment is definitely heavy on this product. And as we said in the readout also, we feel that with the ramping up of two businesses, we should be able to absorb these costs going ahead and hopefully churn profits going ahead.
Prakash Agarwal
Would it be profitable now, sir, if I can ask that? Like in the sense $94 million global sales.
Abhay Gandhi
If you look at the current year sales versus the expenses, no, it won’t be.
Prakash Agarwal
Okay, fair enough. Thank you for that. Again, just one clarification on one of the comments in the press release says that expectation of soft sales due to obviously lockdown and stocking up. While we saw stocking up in Taro sales in the U.S., India and U.S. we haven’t seen. We have seen a normal growth of 8% and in U.S. also q-on-q is back ex of Taro. So have you not seen stocking up in our business while other competition has talked about similar things also seen in Taro?
Abhay Gandhi
Kirti, would you like to answer the India piece first?
Kirti Ganorkar
Yes, sure. So I will answer the India piece. So in India, we are definitely seeing the stocking in the chronic segment. Just to give an example is like a patient is diabetic or hypertension, he has started purchasing in advance for one or two months with the view that the product may go into shortage. So this is the behavior we are seeing right from the month of March and it continued from say March, April or in the month of May also. So there is an advanced purchase by the patient in an especially chronic segment. But you don’t see the same behavior in a semi-chronic or acute because they don’t like to buy anything in advance which you don’t need on a day to day basis.
Prakash Agarwal
Sure.
Kirti Ganorkar
In U.S., we had some supply challenges in March mainly because of lower attendance in our supply chain area in the U.S. So although we had orders, not all of them could be executed. So we did have extra orders, not all of them we could execute. Specialty business, of course the business is not – most of our brands are in the launch or a year old product, so they are not like $1 billion products where wholesalers will buy in very large quantum. So yes, we did have a little extra sales in March but maybe Taro had a little more than what Sun had.
Prakash Agarwal
Okay, fair enough. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Tushar Manudhane
Sir, just on the domestic formulation, the previous call we had talked about Q4 expansion. So now with this COVID situation, where do we stand?
Dilip Shanghvi
Sure. So last call I said that because we were expanding into India business and that is our long-term strategy. There is no change in our strategy. But due to COVID, our expansion in some of the areas has been selective [indiscernible] and we have a clarity, then we will complete our expansion. Part of the expansion has already been done pre-COVID.
Tushar Manudhane
So now how many MRs from the India business?
Dilip Shanghvi
What I said is we are going to add like 10% of our total field force due to the expansion. The majority of almost like 70%, 75% we already expanded.
Tushar Manudhane
Okay. And just – can you on emerging market and ROW market if you could share chronic, acute composition?
Dilip Shanghvi
It’s very difficult to give that kind of distribution of chronic, acute in different geographies.
Tushar Manudhane
Overall emerging markets and ROW at the overall level?
Kirti Ganorkar
So I think overall there will be a – if in India if our acute business will be a much lower percentage of chronic business, in emerging market it will be a slightly higher percentage.
Tushar Manudhane
Okay, sir. Thanks.
Kirti Ganorkar
Thank you.
Operator
Thank you. The next question is from the line of Chirag Dagli from HDFC Mutual Fund. Please go ahead.
Chirag Dagli
Thank you for the opportunity. So what percentage of our ILUMYA patients would be on the Early Access Program?
Dilip Shanghvi
It’s a question I don’t think I’ll be able to give an answer on the call.
Chirag Dagli
Would you say that majority of your patients are still on Early Access?
Dilip Shanghvi
Definitely not. As I said in my previous comments on calls as well, EAP and how many patients we are able to convert from an Early Access Program to commercial patients are as per industry standards and in some months even better than what I see as an industry.
Chirag Dagli
And what will be industry standards, sir?
Dilip Shanghvi
That will be answering your first question, so I’ll request you to kindly not comment me on that one. Thank you.
Chirag Dagli
Understood, sir. And the second question was on the sales and promotion spends in India, so two parts to this. One is that travel is not happening. So how does this change the cost line item near term and as well as structurally if you see a decline in the operating costs for the India business, especially for this line item sales and promotion?
Kirti Ganorkar
So I think for India business, we will have some saving in terms of travel cost and some of the allowance is given to field force. But in terms of promotions, I don’t think there is any reduction in the cost because we are connected to the customer digitally. We are organizing webinars. We are connecting them digitally. That’s how some of the places we have started working in the field and able to do few calls with the doctors. So the saving is really in terms of some of the allowances and the travel cost.
Chirag Dagli
You don’t see this structurally easing the OpEx item for the business as a whole, sir?
Kirti Ganorkar
Sorry. Can you just repeat what you said? Structurally?
Chirag Dagli
Whatever is happening through COVID, do you think that structurally the cost in the business can come down even when normalcy resumes?
Kirti Ganorkar
It will come down temporary, maybe I should say this first quarter but slowly from second, third quarter it will come back to normal. I don’t see – there will be much saving which is a meaningful saving I think will be there.
Chirag Dagli
Understood.
Kirti Ganorkar
We also don’t have any clarity on how this will pan out, COVID, how long will be the lockdown, when the patient will come back to the doctors, when doctors will start practicing normally. So there are a lot of ifs and buts and unknowns here.
Chirag Dagli
Understood. Thank you, sir.
Operator
Thank you. The next question is from Anubhav Aggarwal from Credit Suisse. Please go ahead.
Anubhav Aggarwal
Hi. Good evening. One question is on ABSORICA. Just wanted to check ABSORICA and lower dosage version, are we promoting both the versions right now? I’m asking from a perspective that the conversion rate that we have seen from one market to the other so far in IQVIA is about sub 10%. So from that perspective I’m trying to understand why the conversion rate is still sub 10%?
Abhay Gandhi
So the answer is yes. We are promoting both the products to the doctors. On the conversion rate, I just want you to keep in mind that we barely had four weeks of promotion before the reps starting working from home and took us two, three weeks for us to then get into a digital kind of promotion to doctors. So it was a setback which I think post-COVID we will get back to promoting it with sales force.
Anubhav Aggarwal
Sure, that’s helpful. And second, just a clarity on the ILUMYA sales that you reported in the press release, up $94 million. Does this include any milestone on deferred revenue as well?
C. S. Muralidharan
It does not include any deferred revenue or milestone.
Anubhav Aggarwal
In the balance sheet when we have a deferred revenue of let’s say 220 crores in the FY '19 balance sheet of other current liabilities, what does that line item correspond to?
C. S. Muralidharan
That corresponds to the approved payments – milestone payments which we receive on license agreements which get amortized along with the supply agreements as per the Indian accounting standards.
Anubhav Aggarwal
And where do you include that, Murali, in the income statement?
C. S. Muralidharan
That goes in the other operating income, other income.
Anubhav Aggarwal
Sure.
Abhay Gandhi
So the deferred revenue I think he is asking which line of income it goes. So what you rightly say, deferred income – there’s a little amount of deferred income which is there for ILUMYA which goes to the sales line. That amount is not very significant but it is over a long period of time it will happen. That is the number he sees in the balance sheet. Plus there are other deferred income where the sales has not yet started.
Anubhav Aggarwal
So you’re saying the 220 crores is not the item that we should attribute. It’s a much smaller number for ILUMYA?
C. S. Muralidharan
220 crores includes other upfront licensing payments also. It’s not attributable only to ILUMYA.
Anubhav Aggarwal
Okay. Thank you.
Operator
Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala
Hi. Thanks. Good evening, everyone. Sir, if you can provide us the outlook for U.S. generic business for next year or two and how does the production look like, what could be a pricing environment and what could be the market share gains for the current portfolio would be very helpful?
Abhay Gandhi
Sure. In the readout itself we have said that our generic pipeline has 98 ANDAs and 5 NDAs. So the pipeline is strong. But I think we still see pressure on pricing and we don’t see that abating in the near term – audible in the midterm, if I say so. So we keep hoping but I haven’t seen that happening. So we have a strong pipeline, but we see continuous pressure which is product specific.
Sameer Baisiwala
Thanks. You have been having 100 ANDAs pending approval for quite some time now. The question here is, what could be the flow to the market or how much can you commercialize? I’m not looking for a specific number, but just qualitatively going forward a year or two? And also do you have substantive filings for non-Halol sites?
Abhay Gandhi
If I see for the new financial year 2021, then without giving specifics on the exact number of products, I’m comfortable with the flow of products that we expect will hit the market and add to our revenue base.
Sameer Baisiwala
And any color on non-Halol filings, if you can?
Abhay Gandhi
So there are different filings we have; Halol of course it is important and then we have non-Halol filings as well. At the same time we are also working with the BD team very aggressively to try and get products through licensing deals with other companies. So all of that adds up to the basket.
Sameer Baisiwala
Okay, great. Thanks. One more from my side on margins. Even if I adjust for the ForEx part, the EBITDA margins are much slower than what we have seen in last several quarters. So is it just a quarterly aberration because of the factors that you mentioned or do you think there’s something that – there’s a structure reset to the margin for the business?
C. S. Muralidharan
Sameer, I would take it as a quarter aberration, it’s not a reset. That’s what I would submit.
Sameer Baisiwala
And so you expect this to go back to your normal level going forward?
C. S. Muralidharan
Our endeavor is to do better than previous level, normal levels.
Sameer Baisiwala
Okay, great. Thank you so much.
Operator
Thank you. The next question is from Nithya Balasubramanian from Bernstein Research. Please go ahead.
Nithya Balasubramanian
Thank you. I just wanted to say a quick thank you for stepping up obviously during these extraordinary times and providing us with essential medicines. I have two questions; one on India and the other one on ILUMYA. So on India business, some of your peers had reported that they had faced logistic issues towards the end of the month. Was that something that Sun Pharma saw as well and can you quantify that impact?
Kirti Ganorkar
Sure. This is Kirti. So what happened is at the end of the March month as we had orders, but we were not able to supply due to the COVID situation. So that’s the reality. And we also faced some of the challenges in terms of availability of the stock during the month of April. But now that things looks more normal, we have all – almost all of our products are available across the retail and there are no major shortages. In terms of quantifying these numbers, I think I will get back to you what was the impact at the end of the month.
Nithya Balasubramanian
Thank you. The next question was actually a follow-up question on ILUMYA. So given the COVID situation and given that patients – immunocompromised patients tend to even want to stay away, do you expect new patients to be put on some of your competing therapies because they’re self administered versus ILUMYA which is a medical benefit drug? And again given that the --
Kirti Ganorkar
Sorry. Your voice broke up for me. Can you repeat yourself please? Sorry.
Nithya Balasubramanian
Sure. I was saying given that during COVID, immunocompromised patients are being asked to stay away from hospitals in the U.S. Do you expect new prescriptions to actually tilt towards some of the self administered competing drugs versus ILUMYA which needs to be infused in the clinic? And given that this is a chronic therapy, do you expect the shift --?
Kirti Ganorkar
Towards the end, you broke up but I think I got the gist of your questions, so I’ll attempt to answer that. If it doesn’t satisfy, kindly then ask a supplementary question. So you’re right. There was initially some talk that immunocompromised patients should be given a biologic at all. But that was quickly resolved by KOLs because, a, it was talking about the entire class not just ILUMYA. And second, I think this is where I think the safety of the product became a very critical factor and a couple of – very big KOLs actually went on record and said that in the current situation, a product like ILUMYA actually won’t be a good choice to prescribe. So that was very reassuring and positive from our perspective. Yes, if you see the category itself, the prescriptions of almost every product in the category has dipped in the last month and a half or so. So I don’t think we have been an exception to that, possibly on a lower base admittedly. Our drop has been lesser than some of the bigger competitors that we have in the market. I hope I have been able to answer your question.
Nithya Balasubramanian
Yes, partially. If I might just add some clarifications. So my question was, for example in Pegfilgrastim, there was a shift in market share to the Onpro self injector.
Kirti Ganorkar
Okay. You’re talking about the medically registered product versus a product which can be used at home also. So I think what we have seen is that many doctors have not changed our prescriptions actually to another product. But because they believe that the product has durable effect, they have said continue until you are able to come back to visit us and then we will give you a new prescription and administer the product. Having said that, in many of the ASOCs, or Alternate Sites of Care, our product is still getting administered to doctors. So while there has been some impact, I won’t deny that, but I think it has been far lesser than what I would have expected. And the credit goes to the doctor who believes in the product both on the safety front as well as the durability of response.
Nithya Balasubramanian
That’s helpful. Thank you.
Operator
Thank you. The next question is from Ankush Mahajan from JM Financial. Please go ahead.
Ankush Mahajan
Hello.
Dilip Shanghvi
Yes, we can hear you.
Ankush Mahajan
Am I audible, sir?
Dilip Shanghvi
Yes, perfectly.
Ankush Mahajan
So as we see that the – my question is regarding to the Indian business. Now our business in the fourth quarter has grown by 15%, while industry is 9% to 10%. So I want to understand what are the – and in the initial remarks, we have said that our endeavor is to increase the market share. So, sir, what are the steps that we are taking to increase the market share and what is the strategy for the Indian market? And second point, so in the month of April there is a lack of new – even in the month of April and May, there’s a lack of new prescriptions as well as supply chain constraints. Would you throw some light on that part also?
Kirti Ganorkar
Sure. I think before I answer your question let me clarify. One thing is what I said is like the India business grew by 15% on an annual like basis, not for the last quarter. So if you look at our numbers for the entire year, we have grown by 15% annual number against the market growth of 10%. This is the situation up to say March. But from April onwards, there was a lockdown and most of the private clinics were closed and even the patients are not visiting to the doctor. So April itself had been impacted. If you look at our numbers in IMS and AIOCD AWACS, then you will see that we have grown by minus 5%. So going forward, what I see some hope in the month of May based on the survey work we have done, there are about 40% of the doctors have started attending their clinic. And depending on the state; you look at some state, it’s about 70; some state it is 20%. But the number of patients who are coming to doctors is less than 25%. If earlier they were seeing 100 patients, now even 20% to 25% of the patients are coming physically to them and another 10% to 15%, they are consulting through telemedicine. So in my opinion maybe this first quarter will be challenging; not for us, for the entire pharmaceutical industry because no new prescriptions are coming and this impact would be more as I said earlier is for acute business and semi-chronic business. Now there are not many infections are happening, there are no elective surgeries. Even in the month of April, hospitals were operating almost like 15%, 20% of their capacity. But we see some change in the month of May. And if this continues, I think June will be much better than this. But at the same time during this challenging period also, we have advantage since our brands are well known to the doctors. The doctors also feel that the bigger brands will have better availability, so we got some benefit in the chronic segment. And we are continuously in touch with the doctor digitally, so we are not losing out any – we are not disconnecting with the customer even if there’s COVID. They are aware of our product and we are connecting through various media, including digital, webinars and scientific promotions.
Ankush Mahajan
And so what are the various steps that we are taking to increase the market share in the Indian market over a longer period of time?
Kirti Ganorkar
Yes, sure. I think as I said in the last call is like we are expanding the business. And so last call we had discussed it like the field force in India, we want to expand by 10%. I think out of that, 7%, 8% we have already achieved so that we cover a large number of doctors and we cover some of the territories which we have not covered. At the same time we still want to build a brand. Our existing brands, we want to make them a mega brand. We want to introduce new products ahead of the competition. And we want to make products available in supply chain. So looking at all these factors long term will help us to increase our market share. As you see – maybe if you track us on a monthly basis right from October, November, you will see there’s a continuous improvement in our growth both in the IMS and AWACS and that also our market share is also improving. Just like an example like in March, our market share in the month of March was 8.54 and on that basis is 8.3. So things are going in the right direction, but COVID pandemic has put a new challenge for us.
Ankush Mahajan
Thank you, sir.
Operator
Thank you. The next question is from Shyam Srinivasan from Goldman Sachs. Please go ahead.
Shyam Srinivasan
Hi. Thank you for taking my question. My first one is on the Halol plant and the regulatory compliance there. Can you provide some update on the kind of dialogues you’re having with the FDA now? And do you think given that there is no inspection possible, is there a possibility that you could remediate this without an actual inspection happening?
Dilip Shanghvi
So we continue to update agency with our remediation plan in terms of monthly updates. As to finding a way to bring facilities back in compliance, FDA has already given a guidance as to what are the various tools that they will use to bring a facility back in compliance in case if they are not able to visit the facility. So they have a process in place and we believe that we will continue to focus on ensuring that they are satisfied with our effort and also satisfied with the solutions that we are proposing for addressing their concerns.
Shyam Srinivasan
Okay. Dilip, in the interim, what are we doing in terms of say like transfers or do you think those efforts are also on and is there any timing that you want to put for this resolution of the plan?
Dilip Shanghvi
So we have facilities currently which possibly we can consider for transfer. But as of today, I don’t think we’ve started any serious effort towards transferring any of the products.
Shyam Srinivasan
Okay. Thank you, Dilip. My second question I think on the opening remarks there was a mention of capital conservation and I think debt reduction as well. If you could actually help us understand what are those things that you’re looking at specifically?
Dilip Shanghvi
No, I think the effort is to reduce the overall debt of the company. And you will see that the total borrowings have come down by almost $400 million plus in one year. And we will continue the same focus reducing the overall debt.
Shyam Srinivasan
Got it. And last question which is just a follow up on CapEx if there is any – given the COVID outlook, I think we have heard companies modernizing plants using – if you can share anything on how you’re looking at the CapEx of fiscal '21?
Dilip Shanghvi
So I think – we don’t have a specific number to share with you, but many of the facilities will be expanding their capacity and in many facilities we would be upgrading. We are not setting up any new greenfield projects at this point of time. But there would be CapEx during the year. So whatever repayment that I am talking about is post the CapEx.
Shyam Srinivasan
Got it. Thank you and all the best.
Dilip Shanghvi
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 regarding clinical trial of ILUMYA in other indications. Can you update us like what is the status currently? Has COVID disrupted our clinical trial plans here?
Dilip Shanghvi
Yes, I think the worst negative impact of COVID has been in all ongoing clinical trials. Fortunately for us I think some of our product trials were more or less done and what was being done was the data analysis and all of those things. Now those things are continuing. But we were to start a Phase 3 study for ILUMYA that we haven’t started. So there is a delay in terms of our ability to start the Phase 3 study.
Damayanti Kerai
So now when are you expecting to resume or start the clinical trial, Phase 3?
Dilip Shanghvi
No, I think it is a function of when doctors come back and we are able to resume, because I think globally most of the clinical trials have come to a significant disruption. So we don’t have a fixed date for resuming the studies.
Damayanti Kerai
Sure. My second question is regarding CEQUA. So have we started a DTC promotion for the product? Like 4Q number reflects DTC cost for CEQUA also or are we yet to start on that?
Kirti Ganorkar
There is a small component of DTC in Q4. The real DTC effort would have started in Q1 and beyond, and it has. The digital DTC piece has already started in quarter one of this year.
Damayanti Kerai
Okay. Just a linked question. For ILUMYA, are we still putting more efforts for DTC promotion? Are we expanding the cost there or it is similar to what we have done in last few quarters, like what are our plans there?
Dilip Shanghvi
We are optimizing the cost, but DTC for ILUMYA will continue with an optimized cost. So it will not be as large last year.
Damayanti Kerai
Sure. Okay, that’s all from my side. Thank you.
Operator
Thank you. The next question is from Surya Patra from PhillipCapital. Please go ahead.
Surya Patra
Thanks for this opportunity. So first question is on the potential opportunity – do you see any structural export opportunity post-COVID situation for any specific business or any specific market or else in terms of replacing certain Chinese export in various market if not in U.S., so anything on that side if you have seen so far and which can be kind of a structural opportunity?
Dilip Shanghvi
So I don’t think that in our business it will very easy to replace a vendor with a new vendor, because you have to file with the new vendor, you will have to ensure that the material meets all the specifications which they were currently using. So it takes time.
Surya Patra
Okay, fine. On the second question on the R&D side, so far – for the current year let’s say we have spent near about $70 million to $80 million odd kind of for R&D and 25% of that is around 70 million is for the specialty business. And the revenue from the specialty side is currently around $100 million. So that means the R&D – the revenue to R&D equation if you consider here versus the rest of the business, so there is a kind of significant mismatch. So do you have any aspirational kind of indication or like is there a kind of a thought process that goes parallelly on that side, R&D spend versus kind of a potential revenue generation from the specialty project or let’s say two-year period or three-year period, can you just give some sense on that?
Dilip Shanghvi
I think before any project is approved, we do return on that investment analysis. Then only the project is approved. And we evaluate the potential by the time the indication or the product will come to market, what will be the competitive scenario, what kind of clinical outcome we are expected to get. So we do all of that. However, to give you some context because I think you are mixing up between quarterly number and annual number, you talked of $100 million of sales which is I think it’s $120 million plus, but that’s a quarterly number.
Surya Patra
Okay.
Dilip Shanghvi
The 80 million that you calculated is the annual number. So I think there is a disconnect there.
Surya Patra
Okay. So that means it is not significantly disconnect, it is 4x versus 8x kind of equation that is there currently. It can improve further.
Dilip Shanghvi
Yes, all I’m trying to say is we evaluate every product for investment before we approve the project, whether it’s a generic product, whether it’s a biosimilar or whether it is a branded investment.
Surya Patra
Sure. Okay. Thank you.
Operator
Thank you. The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Krish Mehta
Hi. Just wanted to ask about R&D, given that it was like around 6.1% this year, like would there be any clarity on FY '21 going forward, whether it would be around the same level or it would be like higher or lower if you can just give some clarity on the R&D going forward?
Dilip Shanghvi
What was your question?
Krish Mehta
My question was on the R&D for FY '21, so wanted to know whether or not the R&D will continue to be at the similar level of 6.1% as of this year because it was guided of 7% I think at the start of FY '20 or whether or not it will be high?
Dilip Shanghvi
I think it was higher. Some of the R&D spend we could not do because some of the trials were planned to be started and there were not able to be started. Hopefully we should be able to do that this year. So we’re not guiding for anything, so I’m not also giving the R&D number. But the effort will be to go to 8% to 9% kind of R&D spend.
Krish Mehta
Okay. Thank you so much. And I had a second question on the Japanese business and how you see with the Pola Pharma acquisition the growth in Japan and like opportunities you see there?
Dilip Shanghvi
So, Kal, would you like to answer? Maybe Kal is not able to – you’re not able to hear him. But we continue to look at opportunities to invest in Japan. The first priority and focus for us of course would be to launch ILUMYA once it is approved in Japan, and for which we would be creating a significant organizational capability to launch our first biologic in the Japanese market. But we will continue to look at attractive opportunities which we can leverage effectively our existing presence and look at opportunity to grow the business.
Krish Mehta
Okay. Thank you so much.
Operator
Thank you. The next question is from the line of Anubhav Aggarwal from Credit Suisse. Please go ahead.
Anubhav Aggarwal
Thanks. A question for Abhay, just a clarity, maybe I missed it. The specialty sales that you mentioned for this quarter, $126 million, was there any stocking benefit in this quarter or this was very much the normal sales for us?
Abhay Gandhi
There is a little bit of stocking but it’s not a very material number.
Anubhav Aggarwal
Okay. Because last quarter you mentioned that sales were significantly benefited from seasonal sales of DUSA level and ABSORICA. So then ideally they would have gone down this quarter from a level and the jump in ILUMYA, CEQUA and YONSA would have been very significant to increase it to 126 levels? Would this be a correct way to look at it?
Abhay Gandhi
I couldn’t understand your question. Can you just rephrase it or repeat it please?
Anubhav Aggarwal
Yes. So in the December quarter, you mentioned that when we reported $118 million sales you mentioned that there were higher seasonal sales for Levulan and ABSORICA that contributed to a sharp jump over there. But assuming that was seasonal sales, those would have come down in this quarter from [indiscernible]. Then when we report – and you’re saying the stocking benefit is not that significant. So then ILUMYA, CEQUA and YONSA sales were significantly ramped up in this quarter to compensate for the decline in Levulan and ABSORICA sales and also grow the business overall.
Abhay Gandhi
So the entire quarter was not a low period for Levulan and ABSORICA. Not to forget, we also launched LD during the same quarter towards the end. Only in the last 15 days of March I can say that Levulan sales actually did below expectations and the season wasn’t as much an impact, but because doctors quickly delayed the surgeries and procedures which were not considered essentials and which were considered to be elective. So last 15 days there has been an impact on Levulan on the downward side, but the first two and a half months was as per our expectations. Having said that, yes, CEQUA did ramp up and YONSA and ILUMYA too. And on these three products there has been a little bit of core stocking towards the end of the quarter. But in the context of the entire industry, my point was that these are not very large products in the context of the industry. For us, it’s of course meaningful, but from the context of industries. So you wouldn’t have wholesalers really stocking up these products. And if you are a leader brand, that pressure to buy more from you will be higher.
Anubhav Aggarwal
Sure. And just some clarification on what you said on ABSORICA LD, sir. The sales that we were getting from ABSORICA and once we launched the low dosage version, are we getting – combined sales are higher or just low dosage version is largely substituting some of the prescriptions for ABSORICA?
Abhay Gandhi
Maybe soon for me. As I said, we could only launch LD for four weeks and then we ran into this pandemic situation. And then of course it was – the April month has not been great for obvious reasons and known to us. So very soon for me to draw any on those conclusions, but of course the hope is that both put together will be a higher number and that’s how we are looking at it any way.
Anubhav Aggarwal
Sure. Just one more clarity on the way you guys report ILUMYA sales, just this last question. Then from a European partner Almirall, we ideally should we getting a royalty, right? So in the $94 million number, we should be only including the royalty that we get from the ILUMYA sales for them, right?
Dilip Shanghvi
Murali?
C. S. Muralidharan
Yes, sir. So you are right. This includes the deferred revenue on the royalty and the ILUMYA original sales of the U.S. which will be a substantial part of that 94.
Anubhav Aggarwal
Okay, sure. Thanks.
Operator
Thank you. Due to time constraints, we will be able to take one last question. We take the last question from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.
Sameer Baisiwala
Thank you. Is there any update on the internal audit – sorry forensic audit being done by Sebi?
Dilip Shanghvi
No, I think nothing that we wish to report at this point of time.
Sameer Baisiwala
Any timelines you’re looking at for the closure?
Dilip Shanghvi
We would like to close it the fastest and that’s our focus.
Sameer Baisiwala
Your focus, fair enough, sir. And just on ILUMYA, I heard a lot has been asked and discussed. It’s been 20 months if I’m not wrong since the launch, so you must have tried many things and it was the first time and the learning curve was steep, I would imagine. How would next 12, 18 months be in terms of your effort to ramp this up, would be easier or harder, what would you be focusing on?
Dilip Shanghvi
The focus is on – you are right. The learning curve was steep and setting up the systems to be able to navigate through the access channel with your medical benefit product and all that was a learning for us. I think those things are in place now and we are looking at executing better in-market and ramping up the product sales. So there’s nothing like easy and difficult, but it’s a question of executing well.
Sameer Baisiwala
Okay. And just on this, what’s the time to convert Early Access Program patients to commercial? Is it six to nine months, higher or lower? And second, would it be fair to say that whatever patients turned commercial, the stickiness next year and the year thereafter would be 70%, 80%, would that be a reasonable assumption?
Dilip Shanghvi
It is easier for me to answer the latter part of your question, Sameer. I think the stickiness is pretty high and possibly it could be something like the numbers that you are giving. There is no direct data which I can give you a very specific number, but fair to say that the stickiness is high and possibly it could be somewhere in the range that you are talking about. EAP, each case is a different case and hopefully it doesn’t take nine months. It should be lesser than that in most cases. And the best I can say is when I look at what time does it take and what anecdotally is what other companies are able to achieve for similar products through the information that we have, we seem to be doing well.
Sameer Baisiwala
Excellent. That’s very helpful. Thank you.
Operator
Thank you very much. We’ll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Nimish Desai
Thank you everybody for joining this call. If any of your questions have remained unanswered, do send them across and we will have them answered. Thank you and have a good day.
Operator
Thank you very much. On behalf of Sun Pharmaceutical, that concludes this conference. Thank you for joining us, ladies and gentlemen, you may now disconnect your lines.