Sanofi India Ltd

In those partnerships both companies will be doing distribution and promotion of these brands.

The company continues to own the brands, produce the brands, book the sales of these brands.

So it is our brands being promoted and distributed by these two large local pharmaceutical companies. The reasoning behind that as we discussed before is that these companies have a much more capillary network and presence allowing these brands now to reach Tier 2, Tier 3, Tier 4, while Sanofi by itself was mostly concentrated in Tier 1 and sometimes Tier 2.

So these are strong brands with leading position, strong equities that were not made available in all tiers of India. Through these partnerships, we expect an acceleration of growth by taking these brands to more tiers of the market and therefore enjoying an additional growth coming from it. But it is, I think in your point is it marketing and distribution?

Yes, it is promotion and distribution. The brands continue to be Sanofi. They are owned by Sanofi, produced by Sanofi, and sales are booked by Sanofi too.

My question was will you stop marketing through our distribution because you are downsizing our team? That's what I heard. I have a hard time getting it.

So I think the question is that the marketing is not we have [inaudible 29:54]. So the marketing now will be done by the respective partnership entities.

Can you repeat the question because I don't think I could hear you clearly. Your connection is not so good.

Mr. Ameya, are you connected on your earphone? So if yes, please switch to your handset.

Yes. What I was asking, we have said that we will be downsizing CVS and CNS teams. So will we stop marketing these products to our own teams? That was my question.

The marketing will be done by the partners. So that's already mentioned. You already answered that.

Yes. The partner is doing the distribution and the marketing. Both.

Let's say if these products pick up really well for us, on a margin, what would be the impact?

How would be the profitability of these products for us?

Thank you. But we don't disclose figures by brand and by group of brands, right? And margins. So that we can't answer it.

Sure. Sure. Thank you so much. I will turn back to queue. Thank you.

But in that sense, I mean, I think that in the spirit of your question, this is, these partnerships, we expect accelerated growth for the reason that I mentioned, because of the expanded capillarity and therefore the expanded reach of these iconic leading brands.

Thank you. The next question is from the line of Varun Bang from Bandhan Life. Please go ahead.

Yes. Hi. Thanks for the opportunity and congratulations for Soliqua launch. And also thanks for the details that are shared in the presentation. They're very helpful. So the first question is, can you share some perspective on the revenue model in the marketing and distribution partnerships that you have signed with Emcure and Cipla? And how should this impact our revenue and operating profits initially? And how should it evolve over a period of time?

You'll take this one? Yes. Regarding the partnership, right? Yes. So, Yes, the model is mainly gross to net model where the partner is taking in charge of the distribution and the marketing.

So we are bidding to the partner and this is what we are booking in our books. So that's in a nutshell, let's say the summary of the partnership.

Any perspective on the revenue model? How should it impact our revenue and operating profits?

I don't know. You are talking about if there is any impact in the operating profit. That's the question, right?

Yes. Overall revenue model, if we can just briefly give some perspective.

Yes. So as you said, it would be gross sales to the partner, gross to net deduction and booking of the net sales in our books. So then the impact, as we said at the beginning, that it's accretive value for the shareholders.

Then the impact, if there is any impact, is already absorbed in the operating profit. So it's already improving, let's say, as we said, accretive value that the analysis is giving positive on the financial statement based on the net present value that was evaluated to take the decision on this project.

Got it. Got it. And what is our MR strength at present? I mean, after signing these partnerships and how is it structured now? And would we look at strengthening our MR count going forward?

Or we will look at optimizing the existing ones?

Sorry, Varun, could you repeat your last question? There seems to be a little bit of a noise.

I'm wondering if it's our system that is bad. Can you repeat the question, please?

The question is on the MR strength. Yes, the question is on the MR strength. What is the MR strength after signing these partnerships? And what is the structure of the MR team? And would we look at strengthening our MR count going forward? Or we look at optimizing the existing?

What is the MR? MR is medical field force. How much do we reduce? The MR is field force. We will not promote.

No, you're asking about the field force, right?

Yes, Yes. He's asking about the field force.

Now, in these categories, the field force that will be pushing and promoting, distributing and promoting these brands are the field force of the partners, right? So, which are large field forces in both cases, larger than we were able to do by ourselves. Now, the numbers we don't disclose and they don't disclose either.

But the whole reasoning behind the partnerships is because you tap into a larger sales force capable of a more capital promotion and distribution in both cases, right? So, it is an increased number of people working with these products, taking it to healthcare professionals in more cities, going down to Tier 2, Tier 3, Tier 4, through Cipla and through Emcure. Now, we don't usually disclose the number by product. I believe they don't disclose that either. But I can tell you that it is more. Otherwise, we would… No, my question is actually, on the Sanofi MR count post this signing this partnership what is the MR count in Sanofi and how is the team structured now would be look at strengthening the MRP?

I think you're saying MR. I don't know what MR is.

So, we don't disclose typically our MR. It's a total employee strength that you could probably write to us and we will give it to you. We don't publish those numbers on a quarter-on-quarter basis. But we're happy to… I just want to verify. MR, you're referring to medical reps. Yes.

Because it's not our language. We don't refer to them as medical reps. We refer to them as a few.

So, MR, we don't disclose by brand and we would not disclose also in the case of the partner, how many are there. There is more. All I can tell you is more. Because otherwise, we wouldn't be able to get more capital distribution and promotion.

And if you want to know the total employee strength, you could write to us and we will get back to you.

No, that is there in the annual report. So, just one last thing on the consumer healthcare business.

What would be our focus areas within our consumer healthcare business, especially from new products perspective? And where would we look to source them? So, the question is on the consumer healthcare business. What would be our focus areas within consumer healthcare business, especially from the new products perspective? And where would we look to source them?

Thank you for the question. And as I mentioned, we operate today in key categories like allergy, physical wellness, and pain. And if you look at our market shares and our presence today, there is still a lot to achieve in this category. So most of our launches, most of our focus will continue to remain on the core for the new launches as well.

Before the next question, just to the people working with us, are we sure that the issue with the sound is not on our end? Because the second question, we had difficulty understanding the question. So can we make sure that we fine-tune and adjust the volume appropriately? So it is getting very distorted here.

Chorus team, please check the sound from your end. Thank you.

We'll take the next question from the line of Abdulkader Puranwala from ICICI Securities. Please go ahead, sir.

Yes, hi. Thank you for the opportunity. So a couple of questions here. So starting with the Soliqua launch, could you please throw some light that how well it complements to the portfolio what you already have? And in terms of your target market, what is the kind of population this brand could address? And Yes, so that could be pretty helpful to start with.

Yes, excellent question. Thank you very much. This is an extremely complementary launch. As I mentioned before, you could envision the insulins market with two main subcategories, the basal insulin and the premix insulin. Up until the Soliqua launch, Sanofi has only played in the basal insulin with Lantos and Tujo, right? With the launch of Soliqua, we now tap into this other segment of premixes insulins where we were not competing.

So it's extremely complementary to our portfolio because it taps into a different need that to date we were not catering to. And we get into that different need with a best-in-class product, with a clear superiority to many of the alternatives that exist today for the healthcare professional when dealing with patients that require today pre-mix insulin. So going forward, you will have a superior option with Soliqua.

And then we anticipate Soliqua to be able to quickly gain a significant share as HCPs upgrade their patients of pre-mix to the Soliqua treatment. Now, you also asked about the source of volume, right? So Soliqua comes to [0:40:47 paleo], auto-anti-diabetic patients and patients that also migrate from basal insulins to pre-mix.

So in those two cases, we were not capturing those patients with anything in our portfolio because we didn't have anything relevant in that segment. Now we have Soliqua in that pre-mix segment capturing that opportunity and offering HCPs and patients a superior solution. So it's a win-win-win.

It's good for patients, good for the HCPs, and good for Sanofi too, and extremely complimentary because it's a very distinct segment of the market where we didn't play at all.

Got it. And some of the second questions that are close to what was asked previously as well.

So as I see your overall employee count in fiscal '22, it was close to 2,600 employees. And that

number after the latest annual report has come down to 2,100 employees. So would it be fair to assume that this rationalization of 500 to 550 employees would be mainly because of this out- licensing few deal?

Yes, and again, we got a difficulty with the sound. I think we really need to check what's going on because every question is becoming difficult and very distorted. But you asked about the headcount by the end of the year 2022 and the end of the year 2023. That is, and what are the explanations on the differences? This is what your question was, right?

So there is one important difference in the way we measure the headcount in '22 and the way we measure the headcount in '23. In '22, we measure headcount with the number of people that have worked with Sanofi in the year, throughout the year. So if an employee worked for six months, it would count in 2022. From 2023 onwards, it is the actual count of employees working in the company by the end of the year, by December 31st, right? Or the last day of the count. So it's a different methodology there too, right?

Okay, fair enough. So this last one on the consumer business, which on the [0:43:16 Dino] there is one question. So the strategy, we'll inform about, but in terms of the new brand, so, I mean, how do we look at this portfolio from a five to 10 year perspective? Whether there would be a similar strategy as what you're calling for your RX business or India for India, where there will be new molecules which may or may not be a part of the parent's portfolio which can be launched. And, we need an entire consumer kind of a business to focus upon?

That's the strategy going forward in terms of launches for products which are owned by the parent to be introduced in the country.

Yes, of course. So, the vision of CHC is bringing health into people's hands and becoming the best FMCH company in and for the world. So there are definitely a lot of good global portfolios which we will be evaluating for the future launches in India. Having said that, again reiterate on our current portfolio itself, there are still a lot of opportunities that we need to leverage, but going forward, new brands, new products will definitely be evaluated from the global portfolio.

Before we go to the next question, I'm going to ask the moderator to repeat the question because in the room, it is getting very distorted. So if you're getting a better, more clarity, I ask you to help us repeating the question that is asked.

Thank you. The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead, sir.

Yes, so the first question pertains to the out-licensing deals. Could you clarify whether the deal is signed between Sanofi India and these companies or between Sanofi Global and these companies?

The deal is signed between Sanofi India and these companies. And there was no out licensing.

It's not an un-licensing deal. It's a distribution and promotion deal. Agreement, yes.

And it's an agreement of distribution and promotion signed by Sanofi India with those companies. Okay. And as I mentioned before, I just want to reinforce, Sanofi continues to own, manufacture, and book the sales on these brands.

Are all of these brands manufactured by Sanofi India in their facilities?

No, some are manufactured in India. Some are imported as well.

The reason I ask this question is that, the brands, while they are marketed by Sanofi India, are owned by Sanofi Global. And if they are going to be distributed and marketed by another entity, what is the, and perhaps not even manufactured by Sanofi India, and what is the rationale of, routing the transaction through Sanofi India? The entire arraignment could be a pure out- licensing arraignment, with these products being marketed by Cipla and by Emcure, with Sanofi India having nothing to do with it at all. I'm just trying to understand, in the future, could something of this sort happen?

It's not in the plans today. I understand your question. It could be one way to arrange it. It's not the way we decided to go forward with. This is a local initiative between Sanofi India and those companies. And it was structured in this way that I just described, and that Rachid also described too.

So we sell products to them. They are another distributor of ours, a strategic distributor, that also does the promotion of these brands in the market. But that's the way it is structured. You're alluding to a potentially different model, which isn't the model that we have utilized in these partnerships. And there is no plan to do it in a different way going forward, which doesn't mean that we couldn't, one day, change the model that we operate today. But today, we don't intend to change the model. The model is the one that we implemented.

So when you report sales pertaining to these brands in your books, you will net out the distribution margin that will be given to these companies. And then you report the sales and adjusted for the cost, you'll report the margins on your books. Is that how it is?

Yes, it's a gross-to-net model. So the invoice is going in gross minus the gross-to-net. And this is the only booking that we have in our books. All the expenses is not related to Sanofi India.

It's what it would be booked at the partner level. It's not at our level. So it's a different model as well. So we are not outsourcing the promotion here. So it's a total gross-to-net models without keeping any expenses at our level.

Okay. Emcure, one of their calls indicated that they might eventually, possibly be manufacturing these brands in our region. And that is the reason why I'm asking this question. I'm sorry if I'm repeating it, but if the counterparty seems to indicate that at some point in time, there's a possibility that they'll manufacture it, then we'll manufacture, we'll market. What will Sanofi India be doing? And therefore, what will accrue on your P&L?

At the moment, it's not part of the agreements that we have. This is not the intention of the agreements. You're right in a way in which everything is possible in the future, but this is not part of the plan today. So today, the agreement and what we're working on is the expansion of reach and acceleration of growth of our established products that currently exist through these partnerships with Cipla and Emcure in the Indian market. Now, if a new extension of one of these brands is introduced to the market in the future and if it happens to be produced by one of them, we'll have to treat that topic in the future, but it isn't a part of the initial plan and we don't have that baked into the initial plan.

Okay. A final question, if I can take one more and that is for the consumer healthcare business.

Is it possible to help us understand what the new OTC regulations bring to the table for companies?

I mean, does it give you the opportunity to expand your distribution through general trade?

Whereas it might not be the case now and have the OTC regulations, new ones been notified already?

So the regulations are still in the draft stage and all OTC companies are partnering with the government to have the right regulations come into field. So to your point and all the things that you mentioned are definitely getting discussed at the right level and the moment it gets notarized and regularized, we come back to you with details.

If I may add to that, Himanshu, I think that when we look at the regulation of OTC in India and compare it to the regulation of OTC in most other markets, we see significant opportunity for evolution. Both in terms of distribution, but also in terms of consumer engagement. Around the world, regulation for OTC is such that allows companies to more directly engage with consumer, educate consumers and therefore drive the business in that way.

Now, in India, we are a few steps behind still and with a big opportunity for modernizing those regulations and then unlocking growth drivers, both in terms of distribution, but also in terms of communication with business. Does that make sense, Himanshu? Absolutely.

On the OTC piece, I mean, if you are facilitated to market through the general trade channels, the three categories that, you showed on your slide, two of them are already going at a double- digit number and one is going at a high single-digit number. If the distribution can ramp up very substantially post the regulations being notified, does it give you any headroom to accelerate your sales growth from the existing brand in a very substantial or sizable way?

And more than about that, you obviously have new brands which you can sort of bring in. So are we looking at an accelerated growth phase for the consumer piece subject to the OTC regulations coming through as you see them or as you intend for them to come?

You're absolutely right. In terms of one of the key levers, as I mentioned, penetration is key for us, which means definitely in terms of expansion in terms of your general trade, in terms of pharmacies, in terms of all the key outlet classes that we have, including modern trade e-

commerce, we still need to accelerate and put in the right inputs there. So the idea again is to go behind it, invest behind it and make the penetration bigger on the brands, which definitely means a promising growth for the business moving forward.

I have one more question. Can I take it or would you? No, I would be... Would you rather that I get back to you?

Sorry, Gagan, we are close to 3 p.m. and I think we need to move to the next one and next one will be the last one, please.

Thank you. We'll take the next question from the line of Premal Sanghvi from Vama Financial Services. Please go ahead, sir. Good afternoon. Can you hear me? Yes. Can you hear me?

Yes, we can hear you. Let's see if we can understand because our sound here is not working so well today, but please go ahead.

My question is on the type 2 diabetes which you have recently launched, Soliqua, in the month of April. I believe the price point is around INR1,800 rupees. Can you just share what will the market size of this opportunity of this drug in India could be like? And the second question would be, what is the diabetes portfolio new launch going forward for the company would be? Right, so what is the second question?

That diabetes portfolio of Sanofi looks like in the next two, three years. What are the new launches happening?

All right, so first one, Soliqua is relevant. So we don't give forward-looking estimates, right?

Much less on a particular brand. But I can speak about the size of the market, which is what you asked. So the size of the market is around INR1,000 crores, right? Yes, I'm trying to convert it to euros and rupees.

INR1,000 crores, which is the same size of the market where we compete with Lantus and 2Gio [55:54], right? It's a very large market where we don't compete. And we believe Soliqua has the strength to achieve leadership in that segment of premix, that segment of INR1,000 crores today.

So then you can make your own projections, if you will. But we think that the advantages of Soliqua is that you give it the credentials to over time achieve leadership in that segment, right?

Now, I can't go beyond that. But it is a relevant market with a launch, with a product with

potential to achieve leadership in that relevant market, right? So that's question one. And then I think that if you want to get to numbers, you have to do your own projections.

But then the second question about the future of the portfolio, we have just introduced a number of products in India. We need to leverage them, make the most of this portfolio. We're gone be focusing on bringing Soliqua up to its full potential in the market in the coming months and years.

That will be a priority for us. Parallel to that, we continue to work on the expansion of Lantus volumes in India. Coming out of the NLEM, with the price reduction on Lantus, we see an opportunity for Lantus to expand its penetration and grow its volume. As I mentioned before, we already see a volume expansion.

We believe that this volume expansion is gone accelerate and be sustained for a prolonged period of time. We're generating more growth for the business and penetration for basal insulins in the market. In addition to that, we still have a recently launched 2 GEL, which is growing at a very fast pace and gaining more and more the preference of HCP for a segment of the patients that they treat for diabetes type two.

So right now we have a relatively ample portfolio in terms of insulins in India, catering to each specific segment, each of the key segments in the market. In addition to these insulins that I mentioned, Lantus, 2 GEL and Soliqua, you will remember that we mentioned insutage, which is the human insulin, locally produced, coming to the market also at this time.

So we have clearly strengthened the portfolio already. And then it's going to be a lot of our focus and work in the coming months and years for us to bring these products to their full potential in our market. Beyond that, you may have read, you may have seen that the Sanofi Group has acquired a company called Prevention Bio, which has developed a product called TZIL.

TZIL is a first-in-class product for diabetes type one. Now, we are also bringing that product to the Indian market as well, as it is a high prevalence of diabetes type one in the Indian market.

So a lot in the portfolio right now in terms of the insulins. We have also strengthened the oral anti-diabetes portfolio with a larger set of PNS. And we may bring soon our first-in-class therapy for diabetes type one as well. So very rich portfolio and very rich pipeline at the same time. I hope that that answers your question, your two questions.

Yes. Thank you very much. And if you can just share, what will your market share in the insulin market in India? If you have some data, what would be your market share in insulin market in India? Total insulin, 8% total insulin.

And total insulin, I don't know, in basal insulin, what is the market share in basal insulin?

I thing, in basal insulin, it would be about 38%. 38%, we today have 38%. Let me put it that way because that's a more important thing for you to understand. Imagine two big segments, basal and premix. Basal, we have 38%. Premix, we had zero. Now we have Soliqua, which we believe can achieve leadership in that segment. So,

and both same sides, right? Basal and, roughly same side, basal and premix. So that's the market share figures you need to have in mind.

Thank you very much. Wish you all the best. Thank you very much.

Thank you. So I think we are almost, we've crossed 3 pm., but thank you very much to all the participants for attending this investor call.

Thank you very much. Very, actually, I want to thank you also for the quality of the questions.

Very good questions, very thoughtful questions, which allows us to address some of the key points with you, which is always a pleasure. I apologize on our side for the distorted sound. We'll work to make sure that next time we don't have that problem, but it was a little difficult for us to capture what you were asking, except for Radhika that seems to be able to get the questions very clearly, despite the distortion, we all, the three of us had a little difficulty, and I apologize deeply for that issue on our end.

Thank you. Ladies and gentlemen, on behalf of Sanofi India Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your line.