Your US-based business continues to remain under the weather. What sort of recovery can one expect in the second half led by new products?
A few green shoots are visible at this stage. The first of course is the fact that Solosec, We are laying a lot of store by that and it is ramping up. Its acceptance rate has been fairly good. The second part is we do believe that we will have a couple of a new molecules coming up by end of this fiscal. The first is Levothyroxine and the second is Ranexa. We are also working on cost cutting initiatives. We do believe that the second half would be better than first half.
I want to understand how the currency weakness impacts you and what sort of hit or benefit would it have on export earnings for a company like yours?
In a general sense when the rupee depreciates, it is always good for exporters and from that perspective the rupee depreciation is certainly useful to us. These are pretty good tailwinds to have. For every rupee depreciation, we would expect about Rs 40 crore to the bottom line PAT and that is obviously going to be a benefit.
How much of your current revenue is actually in dollar and how much of your total revenue is in cross currency?
About 28% is our India revenues. You could say close to about 35% to 40% have been essentially rupee denominated across APIs and there are exports from API also. So, I would say close to about 70% is foreign currency denominated.
As a company, what hedging policy do you follow? Do you follow a policy of hedging or you do not hedge rupee at all?
So there are two parts to it. There is a natural hedge against in fact some of the imports also. We do import about 20% of our total input. To that extent, the balanced will be essentially the kind of exposures that we have on the forex front. The other part is we do have a hedging policy but it is kind of opportunistic. We take a perspective about 18 months going forward, rolling forward and to that extend between 25% and 30% of our total exposures are indeed hedged.
What about the big picture? Going through the notes from Teva conference calls, I get the sense that the multiplicity of generic drugs between Lupin, Teva, Cipla and Sun portfolios is getting reduced as that was impacting pricing power. They would benefit in some products because you are vacating and you would benefit in other products because they are vacating. Is that true now?
You are right in that the price erosion is indeed the overall cause of all of this. That is certainly being contained. About a few quarters ago, the price erosion was close to about 14% on the back of a couple of things. One, the consolidation which happened in America among the channel partners has actually come to an end.
The second part is that the GDUFA expiates a lot of approvals among the generic companies. That intensified the competition out there and led to a scenario where the manufactures also felt that they need to share certain parts of their portfolios. This happened across the entire gamut of companies operating there.
A lot of companies decided to focus on certain molecules which had a big advantage and to that extent, all of us revisited some of parts of portfolio. The fact that some are not going to focus on certain other molecules would mean that the intensity of competition would go down. The other part which is not being mentioned is the fact that the cost of doing business in America has gone up over time. The kind of capital expenditure that is required, the kind of overheads that is needed to incur all of this has been going up and that would actually mean that the profitability of the newcomers in this industry would be impacted.
A lot of those newcomers in recent times would be perhaps refocusing their own resources and to that extent, the intensity of competition over time in America would come down.
Do you expect exclusivity of Ranexa and a pickup in Levothyroxine will be crucial in driving the US sales in the second half?
Those would be very important parts of our overall strategy. None of these are going to be in the same league as a Glumetza or Fortamet but they are pretty important products. I would imagine that they would be doing about in multiples of 10 and there is a speciality strategy that has been already rolled forward. All of these are the reasons why we are optimistic about the second half.
ET Now: It has been more than three months since Solosec has been launched and weekly prescriptions are still in the range of about 700 to 800. Do you still maintain that 4% market share exit but end of FY19 for Solosec in particular?
Ramesh Swaminathan: That we do. We are very optimistic about it because the acceptance at the formulary level and amongst the prescribers certainly gives lots of reasons for optimism. It is early days yet and we expect this to be ramped up over time. There is a lot of advantages in usage of Solosec because it does away with issues around bacterial vaginosis. To that extent, it is certainly an improvement on existing prescription. There is a lot of acceptance and there is no reason why it should not ramp up to about $200 odd million over the next three years.