Taro Pharmaceutical Industries Ltd (TARO) 2017 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Taro Pharmaceutical's Second Quarter 2016 to 2017 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded.

I would now like to turn the conference over to Mr. William Coote. Mr. Coote, please go ahead.

Thank you. Good morning, everyone, and welcome to our year-end 2016-2017 earnings conference call. Joining me today on the call are Mr. Dilip Shanghvi, Chairman of Taro's Board of Directors; Mr. Abhay Gandhi, Interim CEO; and Mr. Mariano Balaguer, Taro's CFO. We hope you received the copy of the earnings release, which can be found on our website at taro.com. We anticipate that many of you may have questions concerning not only this quarter's and year-to-date financial performance, but also our markets, operations, strategies and other matters. While, we will try to respond to most of your queries, we will not be able to share product-specific and commercially-sensitive information, including pipeline details. We ask that you limit yourself to one question, and if you have more, please rejoin the queue. As a reminder, this call is being recorded and a replay will be made available on our website for the next 24 days. A call transcript will also be placed and remain on our website.

Before I proceed, I must remind you that today's discussion may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward-looking statements will be based on reasonable assumptions, they can give no assurances that expectations will be attained, and should be viewed in conjunction with the risks that our business faces, as detailed from time to time in the Company's SEC reports.

I will now turn the call over to Mr. Dilip Shanghvi.

Thank you, Bill. Welcome all of you and thank you for joining us today for Taro's earning call after the announcement of the fourth quarter and full year fiscal 2016-2017 financial results.

As we have stated for quite some time, we were cautious about the long-term sustainability of some of the product prices that we were experiencing in the US. We continue to see a difficult generic pricing environment, particularly in the US, driven by more intense competition among manufacturers, new entrants to the market, buying consortium pressures and a higher ANDA approval rate from the FDA. This product-specific pricing pressure is expected to continue in future as well.

Despite these challenges, Taro continues to invest in R&D to develop a differentiated product pipeline, which will help us in getting new business in the future. Taro continues to be a preferred supplier with high standards of customer service. It also enjoys healthy market share for many of the products in the US. Approximately 72% of Taro's product lines rank Number 1 and Number 2 within the product segment itself. I believe that Taro will maintain its leadership position, delivering high quality products and creating long-term shareholder value.

I will now hand over the call to Abhay.

Thank you, Mr. Shanghvi. Welcome everyone and thank you for joining us today. Q4 has been a difficult quarter for Taro. As indicated in the past, we have faced pricing pressure in some of our products, which has impacted the performance. While we are faced with a challenging market environment, we did a number of significant accomplishments during the year.

Our facilities are fully compliant with regulatory agencies. During the year, we had two successful FDA inspections; Health Canada and Israel Ministry of Health inspections, which have gone very well; 10 key customer orders that were all successful; our New Jersey distribution facility was [VAWD] certified; we continue to focus on R&D; we had the leading number of generic topical FDA approvals in 2016 among our competitors.

Our customer service is outstanding with 97% service levels. Taro received the Supply Chain Excellence Award from Cardinal Health and the RDC 2016 Manufacturer of the Year Award. We repurchased a total of 2.3 million shares during the year, returning significant value to shareholders, with a large portion of our current authorization remaining.

Finally, we are encouraged by the 3% volume increase in the quarter, our third consecutive quarter of increase as compared to the prior-year quarter, and by the overall 2% volume increase this year. With cash of approximately $1.4 billion, we will continue to evaluate business development opportunities with appropriate targets. However, we will remain disciplined in our approach for deploying this cash, ensuring that our financial and operational targets are met.

In summary, I believe we are well positioned in our target markets. Our strategy is solid with a leadership position in many of our key molecules, the continuing focus on R&D investment, a healthy pipeline, effective new product launches, a strong balance sheet, and excellent manufacturing and customer service capabilities.

I will now hand over the call to Mariano.

Thank you, Abhay. Hello, everyone, and welcome. Let me discuss some of the key financial highlights. The comparisons that I will discuss are with the comparable prior-year periods. First, the Q4 highlights, followed by the full-year comparisons.

Q4 net sales were $196 million, a decrease of $69 million, or 26%, a result of continuing increased competition and challenging pricing environment. Overall volume increased 3%, driven principally by the US generic business. Gross profit of $144 million decreased $80 million, and as a percentage of net sales was 73% compared to 85%.

R&D expenses of $20 million, remained in line with the comparable quarter. Selling, marketing, general and administrative expenses of $22 million, decreased slightly, as we continued to actively manage and remain disciplined with our spending and seek efficiencies wherever it's possible. Operating income of $102 million decreased $80 million and as a percentage of net sales was 52% as compared to 69% in the prior-year quarter.

As a result of the above, Q4 EBITDA decreased 43% to $106 million; EBITDA margins were 54% compared to 70% for Q4 last year. Foreign exchange expenses decreased $42 million to $6 million, principally the result of the weakening of the US dollar versus Canadian dollar at a lower rate than prior periods, and increased US dollar cash and intercompany balances. The FX is mainly balance-sheet driven by US dollar-denominated bank accounts and intercompany accounts receivable balances on our Canadian subsidiary books.

Tax expenses decreased $6 million to $17 million, resulting in an effective tax rate of 17.3% compared to 16.6%. Net income attributable to Taro was $83 million as compared to $115 million, as the decrease in operating income was offset by the decrease in FX expenses and tax expenses and a slight increase in interest income , resulting in diluted earnings per share of $2.05 compared to $2.68 for the same period last year.

Let me now briefly discuss the full-year performance on comparison to last year. Net sales of $879 million decreased $71 million or 8%, while overall volumes increased 2% on the strength of our generic business. Cost of goods increased $38 million, the result of higher volume and product mix. Gross profit of $671 million decreased $108 million; as a percentage of net sales was 76% compared to 82%. While the margin coverage slipped, they are still very strong and among the best in our industry.

R&D expenses of $71 million decreased slightly. SG&A expenses decreased $7 million to $86 million, principally as a result of a reduced Keveyis spend, as well as they remain disciplined with our overall spend.

Operating income of $515 million decreased $100 million or 16% versus last year. EBITDA of $530 million, with a decrease in margin from 66% to 60%, again a healthy margin to highlight.

FX income increased $13 million to $20 million, principally driven by the strengthening of US dollar versus Canadian dollar at a slightly lower rate as compared to the prior year. FX again is mainly balance-sheet driven. Other gain of $11 million increased $9 million, primarily driven by the sale of Keveyis in the fiscal third quarter of fiscal 2017.

Tax expenses increased $8 million, principally the result of certain tax benefits in the prior year, not realized in the current year, resulting in an effective tax rate increase to 18.5% from the 15%. Net income attributable to Taro was $456 million compared to $541 million, an $85 million decrease, as the decrease in operating income was partially offset by the increase of FX and the interest income, resulting in diluted earnings per share of $11.05 compared to $12.62.

Our cash flow and balance sheet remain extremely strong. Cash provided by the operation for the year ended March 31, 2017 of $438 million as compared to $395 million for the year ended March 31, 2016. Cash including short-term bank deposits and marketable securities of $1.4 billion, increased $158 million from March 2016, despite of a $295 million impact on the Company's share repurchase in fiscal 2017.

Recently, we entered in two agreements, one of them on April 25, 2017. We entered into a development and commercialization license agreement with Crescita Therapeutics, under which Crescita has granted Taro an exclusive license to the right to sell and distribute Pliaglis in the US, for a second-generation enhanced version with patent pending. Well, these are relatively small transactions that demonstrate our willingness to pursue opportunities which may farther our portfolio.

We return value to our shareholders through our share repurchase program. In August, we successfully completed our $250 million share repurchase program, repurchasing 1.8 million shares in open market transactions, of which 1.7 million were purchased subsequent to April 1, 2016.

During the fourth quarter, the Company repurchased 208,000 shares at an average price of $103.99. In total, during the fiscal year ended March 31, 2017, the Company repurchased 2.3 million shares at an average price of $130.87. We still have unutilized buyback authorization of $196 million.

I will now turn the floor back to Abhay Gandhi.

Thanks, Mariano. Before we open the floor up to your questions, I want to briefly address the DOJ investigation. While we have nothing new to report on this, we take this matter very seriously and we continue to work with our counsel to cooperate with the DOJ. We also remain committed to strong corporate governance and fostering a compliance culture at Taro.

Finally, I would like to thank the entire Taro team and all of our employees for their continuing outstanding efforts throughout the year during these very challenging times. I'm confident that Taro is well positioned for the future, and that we will continue to meet these challenges to move the Company forward.

With this I would like to open the floor up for your questions. Thank you.

(Operator Instructions) Gregg Gilbert, Deutsche Bank.

I was hoping you could speak to your expectations for revenues and margins for the coming year. And if you can't be specific, could you at least talk qualitatively or directionally around the challenges you're facing now and whether you expect them to sort of abate and stabilize in the next year or so? Thanks a lot.

Directionally, I think the challenges that we have seen in the last quarter would continue in the new financial year, going ahead also. What we talked about in the readout and what we all know, in the consolidation of the buyer groups, which is now down to three buyers with Econdisc also joining the WBAD group, and then the higher number of approvals that we have seen from the FDA, I think the pressure on the business is going to continue, and I think the challenge for us is to find ways and means to hold on to the business that we have and keep increasing the volumes and market share in products where we can get a sensible kind of a price.

Is there hope that the pressure from the consolidation of the buyers will sort of anniversary in 2018 versus 2017 and result in pricing going down less in next year versus this year?

Difficult to estimate. We cannot predict how it will pan out, but logically when you have a consolidation of buying in the hands of just three conglomerates, which will account for 90% of the total market, your guess is as good as mine.

Prakash Agarwal, Axis Capital.

I was trying to understand with the approvals that has come during the last quarter and approvals that we are expecting, given the 30 plus NDAs that we have. So, how good is this to offset the increasing pricing pressure, because we saw the increased pressure in Q4 and if we analyze in fiscal 2018 there could be further markdowns. So, I'm just trying to understand how confident in terms of number of products or qualitatively any key approval that we are looking at , which could help arrest this fall? Thank you.

The new product set we will get during the year will not -- will be available of course through the course of the year at different periods of time, whereas the pricing pressure that we see will be for the duration of the year. So not really sure whether the products that will come in can entirely mitigate the pricing pressure that we are talking about on the size and the scale of the business that we are seeing. Our objective, of course, will be to launch a new product and keep up with the track record that Taro has that we used to be either Number 1 or Number 2 with each of our product launches. That will be our task going ahead and it's a track record that we have, to work hard, to maintain going ahead.

Ram Selvaraju, Rodman & Renshaw.

Hi there, this is [Mitchell] on for Ram. Can you outline the development timeline for Shigamab and do you have the total breakdown of 2016 sales by [paid] Pliaglis?

I couldn't get the second part of your question. So I'll answer the first part and then maybe you could repeat the second part for my benefit. So the first product, I think we should be able to file during current financial year. That's our expectation. And what was the question on Crescita you say?

Yes, do you have the breakdown of sales for 2016 generated by Pliaglis?

I mean we have clearly, but not something that I can share on this call with you.

Anubhav Aggarwal, Credit Suisse.

So one question; with the new environment of more competition, can you give some color of how Taro's R&D program will change from now, in the sense that do you want to spend more on R&D from now or less in terms of selection of product, some color will be useful on the R&D program in the new context.

No I think in the readout and the release also we have said that our investment in R&D will continue. It is not something that we look on a quarter-on-quarter basis. So I think on a long-term perspective, I think we have a good R&D team in place, we are excited about the projects that we are working on and the investment in R&D will continue. And directionally I don't want to take a stand that will increase or remain same, but it depends on the projects and the products that we have in the pipeline and how much each one of them will require to be invested, but it's a continuous investment for the future that we will continue to do.

[Dino], SBI Capital.

Just a couple of quick things. One, would there be any impact of new shelf stock adjustment for prior quarter deliveries that came into the fourth quarter? And second, with the new pricing pressure and competitive pressure that you're seeing in your core area of dermatology, would your R&D programs take in new direction in terms of other therapeutic areas, or other product lines, et cetera?

I'll answer the second part of your question, and it's a continuation of the earlier question, which was asked of me. I think we will continue to invest on R&D. Most of our R&D is derm-focused, but we also have some product, which are not exactly in dermatology, which is especially being developed for the generic part of the business. So, no, there is no sudden change in our R&D strategy. That is the question you're trying to ask. For the first part, I think Mariano, would you like to answer?

It was difficult to understand you. Do you mind please to repeat your question?

The first part of your question. Sorry, could you please repeat the first part of your question? Okay. We'll take it later. Can we go to next question please?

Neha Manpuria, JPMorgan.

Sir, given we have about $1.4 billion of cash in our books, we have done some smaller deals, but how are we looking at inorganic growth opportunities, particularly given the generic dermatology businesses becoming more tough with the competition?

So I don't know whether I heard you correctly, I heard organic opportunity or --

Inorganic, sorry.

Inorganic opportunity. No, clearly, Neha, I mean, we continue to look for opportunities with the same kind of discipline that we have always talked about. If we can find a product or a business, which we think can grow in our hands and we can make it successful and at the right kind of financial metrics and paybacks that we always talk about, I think we will definitely keep looking out for them.

So your preference would be for a more product like approach rather than business, because those are the kind of deals that you seem to be doing, more on the specialty side, would that be fair to say?

No, we have no such preference. I mean, we'll keep looking for opportunities and whatever helps us to grow, we will be open. So, no preference really.

Nimish Mehta, Research Delta Advisors.

I just wanted to clarify; I heard and wanted to make sure, you said that the price erosion was more pronounced in few products this quarter, is that right? And second, also wanted to know, was the price erosion in general more aggravated or it was more aggravated for derma as a segment than the other segments of generic industry? Thank you.

Well, I think, if price erosion does not differentiate between therapy, so it's equally bad, and I think all therapies that we are looking at. As far as Taro is concerned, we are more worried about what happens in the derm space. And naturally in a particular product where you have two or three or four approvals coming in, in a particular quarter, then those are the kind of products where the price erosion is far more than the others. So, the buyer consolidation being like a constant, the other factor which then impacts you is the number of approvals that come in a quarter for a given product.

So it was more because of -- I mean this quarter was more impacted because of few products (multiple speakers).

Last two quarters, the rate of approvals have gone up much higher than what we normally used to see. So what we saw in the Q3, the impact of that would be really felt in Q4, because for the product to then become available, get some share from customer. So you see a little bit of a lag. So as far as approvals are concerned, we saw the peak in Q3, slightly less in Q4, but overall for the last six months, far higher than what we would normally see.

So it was across the board, right, it was not concentrated in few products is what I'm trying to understand?

No, I don't know what you mean by across the board. I mean, I cannot guarantee that each and every molecule that we are marketing, there were large number of competitors which came in. For example, 16 new approvals came in Q3 and approximately 12 new approvals came in Q4. Those are the numbers I can give you, but whether it is for each and every molecule that we are marketing, that's not really true.

Elliot Wilbur, Raymond James.

With respect to price erosion, could you quantify that number for the fourth quarter? I understand, obviously, you've reported sales growth and you gave volumes, but just trying to tease out the differential between price impact on the portfolio and then what the contribution may have been from new products. And I guess if it's possible to discern the difference between the negative impact of new competitive launches against your existing portfolio, versus the impact of the consolidation of the buyers group, maybe not a specific quantitative measure, but if you could talk about qualitatively which of those you think have the greater impact over the last couple of quarters. Thank you.

I really don't know any methodology by which I can differentiate the pricing pressure, how much of that is because of buyer consolidation and how much of that is because of new approvals. So, overall, if you want to see what kind of an impact we had, then you should directionally look at what is the volume increase we have seen in the business and overall decline in the revenues that will give you a fair indicator of by how much the prices have come down, because overall we have run a tight ship, so on expenses we haven't really increased. R&D we continue to invest, so the difference is essentially because of price erosion.

And there is some component of mix as well.

But, no significant positive benefit from new products then year-over-year?

I'm sorry, can you repeat that please?

So there wasn't really a significant positive impact from new launches year-over-year in terms of the reported revenue number?

We did launch one significant product during the year, but just remember on the scale that we are talking about, one new product in the very first year doesn't really help us to move the needle.

Girish Bakhru, HSBC.

Just again on the approval side. Abhay, any concern on some delayed approvals on certain products, given that we have seen some of the markets have gone generic with Taro not getting approval in those products, despite all facilities being clear?

Actually, no Girish. If I see our own R&D productivity, I think during the course of the year, we have been the Number 1 company in terms of the number of approvals that we have received. So, overall, I think we're happy with R&D productivity, the quality of our filing and therefore, I think the approvals that we get from the FDA. I think the task for all of us is to be able to do that sustainably year-on-year.

Actually related question on that is in the pipeline of 35 ANDAs, I mean how do you basically judge then going forward if these pipeline of products are more technical, even those that may be derm products. Are they something of the sort where you would see the number of approvals on day one would not be more than one or two. Is there a possible color that you can give on that?

No, I mean we have our best guess, but that's about it. We would not know for a given molecule how many would have filed and we have no -- we can only guess.

Sameer Baisiwala, Morgan Stanley.

Just a quick one. If I look at your financials Abhay, in last six quarters, they have been coming off, say, on the topline and on the operating profit line. But last quarter was quite peculiar, like early it was some gradual $10 million, $5 million sort of a [time] down, but last quarter it came down $20 million-plus on topline and also on operating profit. So the question here is, A, was there anything one-off in the quarter? And second, should we start working from this new base of roughly $200 million on topline and $100 million on the operating profit for the current business, assuming no new approvals?

Sameer, there is no one-off. So, this is the market reality and the challenge which all of us in this space are going to face. We do our best to try and mitigate the circumstances. So there is no one-off.

And just a related question. I can understand the competitive intensity, but just on the buyer consolidation and the three consortium which are there, is it something to say that this is at some point behind us or is this a recurring theme that every year they will show up on your door and then give you a $50 million tap, what is the right way to think about this pressure?

I don't know. I'm trying to understand your question little more clearly. I know it used to be five, then four, then three. Whether that three will become a two, I do not know. You and I should pray together on this one.

No, Abhay, what I mean to say is, assuming it remains three, is it something to say that they work towards a certain goal in their method in terms of their cost saving or is this a recurring theme with just three around that they will come and ask for their pound of flesh every year -- for a foreseeable future. So it's a recurring pressure.

It will be, Sameer, a recurring pressure. I think rather than look at it as how do they want to run the business or we want to run the business, I think the logic is simple. If you have your sales spread across just three buyers and even if you lose one for a particular product, then the loss is very significant for any company. So you would try and do your best to protect your existing business. And that is where I think then you will not tradeoff between keeping a share of the market or losing a little bit of value on price. So it's more to do with the handling of large buyer groups as an organization in a competitive environment. So it's not that they come with a prefix that every year you have to give me this kind of a reduction. It's more to do with what kind of tradeoffs happen in the process of trying to keep your share.

(Operator Instructions) Kartik Mehta, Deutsche Bank.

I was just trying to understand this, so Abhay is it fair to assume that 3% volume which we gained now, it's more of an option which we have to -- I mean just to ensure that we also participate to maintain and increase our market share in an event when the three overall buyers are consolidating. I'm just trying to understand here that from where did the volume gain happen in this quarter. Thank you.

I think, irrespective of buyer consolidation or otherwise, I think any good business would like to focus on volume gain as a strategy, so that you have more people using your product, you have more customers who are using your products or buying your products. So I think it's a strategic objective of any organization to try and increase volumes wherever they can. I'm not saying every time the company would be successful, but clearly if you ask me that would be an objective, right.

Yes, because we have seen in Q3, this was driven by 1%, now 3% and previously the commentary in the results have been either the volumes have seen very marginal increase or they have decreased. So I'm just understanding, is this a new way in which Taro is approaching existing competition (multiple speakers).

It's not a new way, Mr. Mehta. What I'm trying to say here is that it's been always an objective. Maybe we're seeing the result of it.

Rahul Deshmukh, Private Investor.

My question is more from an ownership structure, and this is to do with the Sun-Taro relationship. Right now, I believe that Sun owns about 81% of voting rights of Taro. So my question is, how does Taro management look at this ownership and what are their thoughts? Once Sun reaches 90% of the ownership, Sun has the right to own Taro completely. So how is this Taro management looking at this?

Taro is an independent company, and all decisions that we take are with the best interest of the Taro as a company and our employees who work for the business. So that has been our overarching principle of operations anyway. So I don't think there is any kind of a pressure or directive from the Sun ownership to try and influence the way Taro functions. So that's very clear, and I don't think there's any ambiguity. I think we need to differentiate ownership from management of a company. And I think we manage the business in Taro in the best interest of the Company.

And my second question was regarding the Phase II product that the clinical trials were completed about 16 months ago on Novexatin for the onychomycosis treatment of the fungal toe infection. And we haven't seen any update whatsoever from Taro and yet we are monitoring the clinical trial sites and stuff, but we don't see anything. All we know is the trials were completed, the Phase IIb and no updates have been provided by Taro as yet, and it's a big market opportunity.

Rahul, I can give you a quick brief right now. So, when you say that the study that we did, the signals are positive, but we are going to do a larger scale Phase IIb study. When that study is completed, only then we can say with any degree of confidence that the product will meet the expected efficacy and safety parameters. The initial results, of course, are encouraging and we hope for the best. The previous study was practically like a Phase IIa, so it helped to design certain parameters in Phase IIb, which is the current one. And right now we are in the middle of -- sorry, you wanted to ask a question while I'm answering.

No, sorry, go ahead please.

So we are in the middle of recruitment of the patients and due to the FDA requirement and the clinical nature of onychomycosis, we do not think the study will end before the 2017 calendar year.

Chirag Dagli, HDFC Mutual Fund.

Sir, this volume growth of 2% for the full fiscal, is this from new product launches or is this existing products that you were gaining some share?

Mix of both actually.

Okay. Meaningfully tilted towards -- I mean, I know the number is too small, but this one product that you launched, has that materially contributed to this volume growth or is that the existing [basis] --

Logically, as I said, one product will not, on total volumes, make an increase of 2%, that's why I said it's a mix of both.

And sir, what would be your tax guidance -- tax rate guidance?

We don't give any tax guidance.

But is there an element of unsustainable tax benefit in this?

I think when you see our announcement on the press release, you can see 2016 we had some one-off benefit there. We do not provide any tax guidance, but we also believe our sustainability of our current situation.

Sameer Baisiwala, Morgan Stanley.

Quick question Abhay, is there any thoughts on geographic diversification, taking your high-class portfolio outside of United States and what you're doing in Canada and Israel?

We are constantly evaluating; in a couple of products we are filing in the EU during the course of this year.

But it looks like a little incremental -- I mean, is there a plan to take, whatever, 50, 100 products to Latin America, Europe, or any other geographies?

From what I see right now, it will not be a big bang stuff.

And second question very quickly on Pliaglis. Looks like the patent is going to expire in 2019. I think it was approved in 2006, if I'm not wrong. So the key attraction is the newer version of the product. I mean is that the key motivation behind this deal?

I think it's a good product and it fits into our basket and also allows us to get into a little bit of a specialty space and that's what is the major attraction. Offhand, I don't recall which year the patent expires, you may be right, it's 2019. But I think it's a product where we don't expect, at least at this point in time, too much of competition. So we feel we can do well, fits into our portfolio and gives us a specialty look.

And you're referring to the in-market product?

Yes.

Rahul Deshmukh, Private Investor.

Sir, my second question was regarding this $1.4 billion of cash that Taro is sitting on and obviously over the years, you have been very frugal and prudent with your investment approach, focusing more on R&D. My question though is, now, looking at the US market, yes, definitely the pharma market was highly inflated at some point, but right now with big companies, pretty much generic big companies in big trouble, it must have become very lucrative. So my question for you is, at this point what is your thought process in defining what does it mean that whatever acquisitions you may explore are lucrative, because you have been saying that many times that we are monitoring and stuff, but at what time that monitoring becomes action?

I really couldn't understand your question, Rahul.

Sorry my question was you have $1.4 billion in cash and now a lot of assets out there in the pharma sector have become lucrative from an acquisition perspective, just because of the fact that their prices have dropped dramatically. So when are you going to --

As I said, Rahul, we don't look at what is an asset cost today and is it lucrative, as you say. But it also has to fit into what we are good at doing, is there a way for us to grow that business, is there a way to make it profitable, if it is not so, all those things come into consideration. We would not just go and buy something just because it is available cheap, or at the right kind of valuation. It also has to do with how does it add value to Taro.

Then maybe what I can ask you is, what kind of areas would add value to current Taro business line, what therapeutic areas?

I think on the other calls itself this question has been answered. We really aren't a global company. So, the business that we are looking at has to be US-focused. It can be in derm, it can be in areas which are specialty and yes, these are the two basic criteria that we will look at, or it has to have a product portfolio which has to be complementary to what we have and we think we can do good with that.

Ram Sivaraju, Rodman & Renshaw.

Hi there, it's Mitchell on again. I'm just wondering if you guys are open to business development opportunities in the orphan disease and medical esthetics domains, if you guys are actively looking or plan to look?

Open to both those options. If there is something, happy to look at.

And thank you ladies and gentlemen. That was our last questions. I will now hand over back to Mr. Coote for closing comments.

Thank you. Thank you everyone for joining us today and taking the time to be on our earnings call. We look forward to speaking to you again after release of our second quarter earnings. And this concludes our conference. Again, thank you and have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program and you may all disconnect. Everyone have a great day.