Sanofi India Ltd

2023 and also look at some of our product launches. The management will take questions from the investors and participants on the call and the Q&A session will end sharp at 03:00 PM. All investors and participants are requested to keep their questions brief and please avoid repetition. I now hand over the call to Rodolfo and Vaibhav to take us through the presentation. - - All right, thank you. [ 8.40 to 13.19 audio loss] more to come in the future on that one. For the fourth pillar, go to market and operating efficiencies, we have also taken important steps forward. From the beginning of the year, as you know, we have reorganized from eight to three business units, more customer-centric and catering more efficiently to HCPs that use our products and prescribe our products on a regular basis. There are also four digital marketing pilots running in the company at the moment that we believe can have a potential positive impact in the future as we advance with those pilots. - In the second bullet, when you talk about the trade organization, we have deployed a complete full-fledged trade organization in India which did not exist before that has the responsibility and the objective of engaging our partners, including distributors, retail chains, hospitals and institutions in a more structured way with better services provided from Sanofi to them. That organization is ramping up and we expect that organization to have a positive impact in the months to come. Third bullet on that fourth column refers to resource allocation decisions and operating efficiencies where progress has been very significant. In the year-to-date, we have made an improvement in our OpEx base that is close to 10% of the total OpEx base.

So we have become more efficient in our expenses to the tune of 10% of our base of expenses, representing something like 50 crores of improvements in efficiencies.

That is very important and has very important impact in the profitability of the company as well. - Now, coming back to the point on innovation, on the next slide, you will see the projects that we are referring to. So these are the launches that have already happened or about to happen or planned for the near future. Frisium suspension has been launched in October 23. Sanoxaban and Carmada in December 23, it's planned for December 23. Soliqua, Insutage and Cetapine are planned for 2024, beginning of 2024. AllegraM and AllegraD planned for 2025 and beyond. So important projects that have a very high impact in their respective categories and coming through with our commitment to innovate and to rejuvenate our portfolio and energize our portfolio. - So with that, I think I hand it over to you Vaibhav to talk a little bit about the financial results. -

- Thank you Rodolfo. So Rodolfo, in his opening remarks talked about the fact that the NLEM impact, which was felt by the company where there was a significant reduction in Lantus. That part has been largely mitigated and we see a sales growth of 2% compared to the previous year in Q3. The domestic sales are largely flat and that impact has been mitigated. One of the growth pillars, which Rodolfo also talked about was operating efficiencies. And while we focused on the layers and span in the sales and marketing side of the operating expenses, there was also a focus on structured cost as well as G&A, and largely the operating efficiencies which Rodolfo alluded to have kicked in and that's one of the reasons why the profit before tax has increased by 15% versus last year, although the sales have been largely flat. But this shows that the focus on the growth pillar of operating efficiency is working and it's yielding results. Another part which I also wanted to highlight is the commitment that we had made that in case of a price drop in Lantus, in NLEM, we would relook at the purchase price of Lantus, which we are procuring from the group. And that was secured and we said that we would maintain the profit margins of this product on a percentage basis. And therefore that part is also achieved, which is also yielding despite the NLEM impact, which is fully felt on Quarter 3, you can see that the profitability parameters are very healthy. The same applies to year-to-date as well.

The sales are growing by 3%, profit after tax is up by 15, and the operating profit growth is at 16%. So all in all, a very healthy quarter in terms of performance. - I think one more point which I want to highlight is it's not the performance, the good performance is not isolated to Quarter 3. If you look at all the three quarters of 2023, there is consistency in terms of the results. We are growing the operating profits versus the previous year not in terms of absolute value only, but also in terms of a percentage to sales. The operating profit as a percentage to sales has grown up by almost 4-5% quarter versus the previous year. So you see a clear increase in terms of our profitability parameters, and it's reflected quarter-on-quarter. So there is a consistency, and the India for India strategy that Rodolfo talked about is delivering results not only in an isolated quarter like we saw, but it's delivering results across all the quarters of 2023. - So that's the key message in terms of the quarterly results. Back to you, Rodolfo. - - All right, so let's go to the next slide, please. So basically wanted to give you a bit of an update, a quick update on the de merger process. So in the rest of the world as well as in India, we have discussed implementing the global standalone organization for the consumer healthcare business is the best platform to unleash its growth potential. In India, we're following a timeline and a process that we can see in the next slide with those milestones already achieved and some of them ahead of us, right? So back in May 10, 2023, we achieved Board approval for that separation. End of August, we've had a filing with stock exchange and SEBI. Early October filing with

NCLT. November 10, 2023 Court order to conveying the shareholder and creditors meeting was issued. December 18 is the date in which the meeting of the shareholders and creditors for voting the resolution is scheduled. NCLT approval and subsequent listing expected by mid-2024. So that's the timeline that we have. It's largely in line with the timeline that we had anticipated and discussed with all of you last quarter. We continue to be on track with that timeline and expect to be able to execute by May 2024, as it was the case from the beginning of the project. - So I think with that, we come to the conclusion of the slides of the presentation. - - Thank you. That's it from a presentation standpoint. Thank you, Rodolfo and Vaibhav for the presentation. We will now proceed to the Q&A session. In this session, we will respond to the queries within the boundaries of our internal policies and SEBI regulations. As required by law and our policies, we will restrict our responses to clarify on matters which are already available in the public domain through our annual reports, our quarterly financial statements, and other disclosures made through stock exchanges. There are many granular aspects of our business or financials, such as product wise or state wise, or even therapy wise sales or margins or profitability, which we consider confidential and hence, we will not be able to comment on these topics. Also, we do not provide any earnings guidance and hence, we will not be able to respond on queries pertaining to future business, future product launches, margins, profitability, or Capex. You may please raise your queries accordingly. - As we had mentioned on the registration link, we will be taking questions from you in the sequence of your registration. In case of multiple registrations from the same participant, we will take questions from the first registered participant and give others the opportunity at the end of the session. In the interest of time and for giving equal opportunity to all the participants, please restrict the number of questions limited to one or two. Handing it over to Vaishali. - - Thank you. With this, I would like to invite our first speaker, Mr. Abdulkar Poornavala from ICICI Securities. Sir, request you to unmute yourself and proceed. - - So, my first question was basically pertaining to the top line growth. As it was mentioned earlier that the domestic business was flat this quarter, just wanted to understand that how the domestic portfolio growth would look like if we exclude the Lantus impact.

- - So the domestic sales, the retained business, excluding the Soframycin impact and Lantus impact, would have grown by around 4%. - - Abdul, did that answer your question? - - Yes, that did. So I have a follow-on as well. So from a sales force perspective, what is the current strength right now? Considering that Lantus can be a mass product now so are we looking to add further field force here or for any particular brand, if you'd like to highlight? - - Currently, we don't have a plan to make significant changes or expansion in the strength of the Salesforce. We believe we today have a very strong sales force for all the categories in which we're operating. And in particularly for diabetes, we have two strong teams operating in the market and covering all the market properly. So there is no expectation of significant increase. Some changes and some adjustments might happen as a function of certain launches that come, but not significant. - - Sure. So what would be the absolute count now in terms of your sales force? - - 1000 for diabetes? - - Okay. And overall that number would be? - - Overall total number is a 1500. - - Sure, thank you. I will join back the queue. -

- Thank you. Our next speaker is Mr. Girish Bakhru from ObriMed. Sir, request you to unmute yourself and ask your query. Mr. Girish, we have sent you an unmute request. Please accept the request and ask your question. - - Thank you for taking my question. Just one on the consumer business. I know we are not splitting off the segmental revenue and as well as the margin. But just as a qualitative, how far are our margins on the consumer business versus the core business that we report today? And secondly, given that a part of our business is actually imported from the parent company and we have a fixed margins, how far are those margins from the current reported margins for Sanofi? - - So, like I had mentioned during the last call, if you look at the overall margins today, the operating profit margins of Sanofi, the blended margins currently are in the 30% range. So the consumer healthcare margins are almost around 8% to 10% more than the blended margins. And like you rightly alluded to the pharma business, there is an imported component and therefore the overall margins are lower in the pharmaceutical business. - - Correct. After the Lentus price reduction, these margins have remained static. And most of the impact of the price reduction has been taken up by Sanofi SA. - - That's correct. - - Thank you. Thank you for taking my question. - - Thank you. With this, we will move to next speaker. Mr. Neeraj from Axis Securities.

Mr. Neeraj, request you to unmute yourself and ask your query. - Mr. Neerad Gaur, we have sent you an unmute request. Please unmute yourself and ask your question. - We are facing some technical issue with Mr. Neeraj. We are moving to next speaker, Mr. Anil Chaurasia from SMIFS Limited. Sir, request you to unmute yourself and ask your question.

- Mr. Anil Chaurasia – SMIFS Limited: - Sorry, no question from myself. Thank you. - - Thank you, Mr. Anil. We will move to our next speaker, Mr. Jamshed Desai from Fifth Investment Management Limited. Sir, request you to unmute yourself and ask your query. - Mr. Jamshed Desai – Fifth Investment Management Limited: - Hello. Yes. I don't have any questions. Thank you. My question has been answered.  Thank you. We will move to our next speaker Mr. Vinay Bafna, from Bajaj AMC. Sir,  Mr. Vinay Bafna – Bajaj AMC:

 I don’t have any questions either. Thank you so much.  Thank you. We have our next speaker Mr. Mayank from Axis AMC. Sir, request you to unmute yourself and ask your query. Unfortunately, Mr. Mayank has dropped.

Our next speaker is Mr. Rahul from IIFL Securities Limited. Sir, request you to unmute yourself and ask your query.  So sir, you have taken very good efforts in terms of optimising your cost base, which is driving the profit growth this year. But, if we see our topline growth, it’s still very muted. Even on an ex-Lantus and an ex-diversified portfolio basis, our growth in the 3rd quarter was only 4%. So, any efforts which we are taking to improve our growth profile versus IPM?  Yes, very good question. Thank you for the question. You need to take a couple of points into consideration. One is, although the NLEM impact is offset by an adjustment in margin the Sanofi Group and Sanofi India Limited, it does have an impact in our sales, right? So, there’s a reduction on the price of our biggest brand, that has an impact in that equation. We believe that over time, and we are seeing an indication of that, that reduction in price was led to zoom into a significant increase

in volume, that will then end up being positive for Sanofi India Limited altogether.

But, it takes some time for that to happen. So, that’s factor no. 1.  Factor no. 2, you would have seen our slide with the multiple launches that we have lined up between the 2nd half of 2023 and the beginning of 2025. In fact, some of these products were already bringing into the market and were about to be introduced, some are planned for the beginning of next year. Those would have a significant impact in our growth profile and growth trajectory, but it will take some time, right? innovation in pharmaceuticals has a long lead time. So, from the time we set out to strengthen the innovation pipeline, only now we’re able to bring to products to market effectively. And then, these products go through their ramping up curve and separation curve, and then begin to impact significantly all those profiles.  Mr. Vaibhav Karandikar – Whole-time Director & CFO, Sanofi India Limited:  Maybe just to add Rodolfo to what you just mentioned, I think, while we shared the sales growth excluding Lantus, I think Lantus was not the only product impacted by for us; for us there were other products impacted by NLEM like Amaryl, Cardace, Clexane. So, while the impact is not as significant as Lantus, the fact is that the results are after considering the impact, including these products as well. So, just to set the context, it’s not only Lantus which impacted the numbers, there are other sets of products as well.  Did we answer the question?  Mr. Rahul has muted himself. Sir, request you to unmute yourself and let us know if we have answered your question.  Yeah, thanks for that. Then, can you also please call out what would have been our growth excluding the NLEM impact for all products, instead of just Lantus?  Mr. Vaibhav Karandikar – Whole-time Director & CFO, Sanofi India Limited:  I think, it should be in the range of another 1.5%. So, maybe 5.5% odd growth would have been there.

 Sure sir. And, we have launched Toujeo maybe 1 ½ year back. Is the launch of Toujeo also impacting the growth which we are seeing on Lantus, or do you think that hasn’t had any impact as far as Lantus’ growth is concerned.  Toujeo was launched 3 years back. So, the impact of Toujeo on Lantus may have happened, but we don’t think that today it is a factor. Toujeo, in fact, is growing very fast. It’s a strong brand growing very fast. We believe it will continue to do so. It’s a very high-quality medicine that serves to important medical needs, and our HCPs continue to promote and use and adopt the brand more and more. But, we don’t see the impact on Lantus from Toujeo at this point.  Sure sir. And just one last question from my end before I rejoin the queue. So, any plans of launching Insulin Aspart in India?  The answer is no.  Okay. Thank you.  Our next speaker is Mr. Himanshu Upadhyay from o3 Capital. Sir, request you to unmute yourself and ask your query.  Good afternoon. My question is on the previous call, the strategy what we stated.

We stated that one important metrics for us is to reach more patients on the general medicine part. What have you done to increase our breadth and depth in the last one year, and how have these parameters changed in the last one year? So, even if you don’t give the absolute figure, can you give a percentage increase in some of these parameters? Can you also give an idea of… our business is prescription-led. So, in the last one year, how many doctors or prescriptions have we started getting from 2-3 tier towns and cities, versus 2 years back or 3 years back, so that we can understand the progress what we have seen in terms of depth? And what we also see is, one very interesting thought was, that we are starting get more products on the insulin side, launches; pre-products, which is quite heartening to see. Are we thinking of taking these drugs to even interior of the market, or would these be focused on top tier cities only? So, could you give some idea on more qualitative aspects of these things?

 Thank you for your question. Few questions were new questions, so let’s try to tackle the different parts. Yes, we have expanded the reach through the reorganisation that we have done in the beginning of the year from 8 business units to 3 business units. We have driven an expansion of reach to more doctors with the same base of reps that we have in the market. So, that is one component. And then, I’m actually going to get an update from the team in terms of how many exactly the increase. If you can get us the increase? But more important that the increase, we have already been able to obtain in terms of coverage, in the year to date… like I mentioned before, we are studying the potential of partnerships with other pharma companies in India to extend the reach of some of our more established brands in the portfolio. So, this is a study that is ongoing. And then, if we get to conclusions that are positive, that indicate that it is possible to extend the reach through partnerships, this would be something that you’d be hearing from us in the coming months, in the coming quarters. We’re currently looking at it and exploring it, as it is part of the India for India strategy. It’s part of our key elements of India for India plan i.e. expansion of reach through partnerships. We’re currently in the process of studying and analysing whether there are possibilities to effectively extend the reach of our brands. Our brands that are well established, they have more equity, and the potential for the equity of those brands to be explored in more cities and in more capital distribution is there. And we agree with you, we’re exploring different ways to get there.  So, the increase in the reach that we have made so far – 30,000 doctors is what I get from the team, the latest number. That’s an increase of 30,000 doctors from the beginning of the year to date. I hope you got the point there?  Yeah, I got it. And that means, that tier 2 and tier 3 towns are also contributing to the growth?  I think, we’ll be able to expand more in tier 2 and tier 3 if we define and establish partnerships for increase of reach. Through our own base, the improvement that we have made is mostly tier 1.  And my second question is on the consumer healthcare separation of entity, which is going to happen. What is the progress on that company also, if you can give some insights on that? And has a separate marketing tool, finance, etc. already been done? And, what are the gaps they are considering? What is the strategy? Just to get

an idea, because, let’s say, in the next 6-9 months it will be a separate company, and having some idea would be helpful for us.  That is a good question. We’ve ran that business already separately inside of Sanofi India Limited. So today, consumer healthcare is a business unit inside of Sanofi India Limited with dedicated resources, which will make it easier when the separation is finally approved and executed. But as of today, from the beginning of the year, the consumer healthcare business has operated quite independently within Sanofi India Limited as a step of preparation for the future effective separation of the two companies. So, it’s already running with those independencies, if you’re asking about that.  Now, the second part of your question, I think was about gaps that we would be looking for. I think, we mentioned a number of gaps in our India for India plan – doubling down on the success of Allegra, deepening the consumer understanding.

Those are the two key areas that we believe we’ll be able to accelerate, along with improving the policy for consumer healthcare in India. We believe we can help and contribute to shaping the market, shaping the regulation on consumer healthcare in India, which will allow to unlock growth opportunities for Sanofi and for the market in general. In India, consumer healthcare is still sub-developed, or rather under- developed in terms of regulation. Most of the products that today are consumer healthcare, are sold as OTC in many countries around the world. In India, they are still prescription. There is a space for us to make that transition in India and then accelerate the business.  I’ll join back in queue. Thank you.  Thank you. We move to the next speaker, Mr. Yasser Lakdawala from M3 Investments. Sir, request you to unmute yourself and ask your query.  I just had a question on, how are we looking an Toujeo and Lantus as a strategy?

Because one franchise has gone undergone price control. You could probably push it a lot deeper. But at the same time, we as a company globally also want to maintain high margins. So, it makes sense for us to sort of push Toujeo as a franchise, right?

So, how do we handle this quandary? Do we go deeper in the tier 2, tier 3 markets with Lantus? Do we look at tier 1 markets as more of… where peers are able to buy or purchase Toujeo? So, what is our broad level strategy with regards to our insulin portfolio? And just building on top of that, as an entity, some of our global peers like

type-1 as well. So actually, the pipeline for diabetes is quite promising for our business, and we are very enthusiastic about it.  Thanks a lot Rodolfo, that was really helpful. I think a broader level question, as we’ve sort of gone through the portfolio restructuring, either probably driven by the parent and done in India as well. We’ve distributed a lot of the cash to shareholders via dividends. But ongoing, I think this business is probably going to be generating 75 to 100 million dollars, or almost 500 odd crores cashflows. You’re not really putting up any massive manufacturing capacity in the country. So, is there any though process on the management to probably go out? Now that you’ll have a consumer healthcare business that is separate, probably be a bit more aggressive and be tactical in buying out certain brands? Or, will Sanofi be more driven from their internal pipeline and internal brands? If you could help us understand the inorganic strategy, if you do have one for India, that would be very helpful.  Sure. We’re constantly looking for opportunities, organic and inorganic. That’s the big advantage of a large multinational company like Sanofi, would benefit from the global pipeline of innovation that comes from the company. We are constantly looking and scrutinising the market for different opportunities. In fact, when we discussed the demerger of CHC, we even touched on the fact that it is part of the plan, to carefully look for opportunities for inorganic growth for the CHC business.

That applies also for the other categories we play in in India, and it’s an ongoing process, constantly looking for opportunities. If the right opportunity appears, we’ll be ready to make moves.  Sure. Thanks a lot Rodolfo and team. Really helpful. Thank you.  Thank you. Our next speaker is Mr. Hrishikesh Patole from BNK Securities. Sir,  Mr. Hrishikesh Patole - BNK Securities:  No queries from my side.  Thank you sir. We move to the next speaker, Mr. Umang Shah from Edelweiss. Sir,

 Mr. Umang Shah - Edelweiss:  Most of my questions have been answered. Thanks.  Thank you. Our next speaker is Mr. Vaibhav Sahu from Nippon AIF. Sir, request you to unmute yourself and ask your query.  Mr. Vaibhav Sahu - Nippon AIF:  My queries have been answered. No further from my side.  Thank you sir. Our next speaker is Mr. Sahir. Sir, request you to unmute yourself and ask your query. Unfortunately, Mr. Sahir has been dropped out. The next speaker is Mr. Jiten. Sir, request you to unmute yourself and ask your query.  Mr. Jiten:  I too don’t have any questions. Thank you.  Thank you sir. Our next speaker is Mr. Dhruv Duggal from Silver Mount Capital. Sir,  Mr. Dhruv Duggal:  There are no questions from my end at this time.  Our next speaker is Mr. Dhiraj Sachdev from Roha Assets. Sir, request you to unmute yourself and ask your query.  Mr. Dhiraj Sachdev – Roha Asset Managers:  My questions have been answered. Thank you so much. All the best.  Ms. Radhika Shah – Company Secretary, Sanofi India Limited:  Thank Vaishali. I think we’ve answered most of the questions. I think we can now move on towards closing this call. We thank all the participants for attending this investor call. It was a great interaction. Please feel free to write to the management for any further questions.

 Thank you everyone for joining this call. Thanks for the great interactive session. We have made our efforts to give you clarity on your questions. Stay safe. Take care.

Thanks once again for joining. Happy Diwali and Happy New Year!  Ms. Radhika Shah – Company Secretary, Sanofi India Limited:  Thanks Vaishali. Thank you everyone.  We now conclude this session. You may now disconnect your lines. Thank you all for joining.

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