On the US where you mentioned $2 billion mark in near term - any timeline for that?
We cannot say any time but it could be in the next maybe couple of years, I would think. Our confidence is based on what is going on in terms of acquisitions and some of the business opportunities that we have.
Any indication on the growth rate - low double digit to mid-teens or any number you would like to share?
We are definitely trying to achieve the double digit growth. Considering the current geopolitical situations, we have taken it bit conservatively but we are confident it will be minimum double digit.
$2 billion revenue guidance for US factors in Lannett ($300 million). So this is essentially driven by Lannett. How do you expect base US business to grow ex of acquisitions?
Lannett is probably going to be there for two quarters in the current fiscal, so this is going to be half of Lannett, subject to approval which we are confident of. We are looking at some business opportunities and we are in a good position now. Timing-wise I cannot tell you for certain, but we are heading towards a $2 billion goal and Lannett is part of it. Maybe in the next 1-2 years, definitely we are getting there. Maybe in 1-year plus, if we are lucky. Again it depends on FTC approvals and some of the business development deals getting operational.
Any interesting launches coming up in this segment?
At this juncture it is too early for me to comment because of Eugia III. There are some interesting launches from other plants, but we are at this juncture keeping ourselves on watch for all the regulatory approvals for the plants so that in next quarter I can give more colour.
Now we have all your large peers - Sun, Dr. Reddy's, Lupin - talking about Biosimilars. Is this going to be an interesting phase where we slug it out, and is there something you will do differently?
How can I comment on the slugfest that is going to unfold in the Biosimilar space - it's already happening in Europe. Any product you pick there are about 10 to 11 players. What is important is to ensure you have a basket of products to go into the market, create a brand name, and make sure your COGS setting is good enough to still give you a reasonable margin. I don't think I can do anything differently than what I have done. The most important aspect for CuraTeQ is the execution of the US filings and can we execute it right first time? And if we do, I think we will be having a very different conversation.
Any update on eczema/Polymist drug and on repurposed drugs?
At this point of time we are not looking at any reprofiling or repositioning or repurposing of the drugs. That's still not part of our Aurobindo board's strategic initiatives. But we will look at this space closely. Maybe that's a differentiator at some point, right now not. Let me go back and correct myself if there is something happening somewhere and provide you an answer through the IR.
Aurobindo has been building Europe for 12 years - something pivoted in the last 3-4 years. What changed in your ability to drive this business?
Aurobindo has been an evolving organization. Our understanding of the market and extremely well streamlined team across our footprint country is sitting in and understanding market dynamics. On the supply chain side, we have done a lot of improvements by way of order processing, turnaround times, understanding market upsides, certain competition out of stock that can happen. It's a combination of several items. At the same time it's a very complex market - we are answerable to multiple regulators, expectations are increasing whether it is nitrosamines or other compliance requirements. But despite all, Aurobindo as a team has been able to deliver.
On Eugia, can you give us a split for FY26 and FY25 between US and ex-US?
We don't give separate numbers, but it still contributes around 70% of the overall business. 30% comes from other than US. But going forward, we expect that to be a 60-40.
Operating cost excluding R&D increased 11% QoQ and 17% YoY. Can you throw some light on this and is there any one-off element for the quarter?
One-off elements will always be there in terms of year-end provisions, but that becomes a routine thing. The main factor which has increased the cost is predominantly power and fuel consumption for the Pen-G plant, which has taken off very significantly in the last quarter, i.e. Q4. That is the reason why it has increased.
Should we expect this rate to continue going ahead?
Yes, it will continue like this because now we are using our own 6-APA for our captive consumption. We are not buying it from imported material, and because of that our raw material cost will come down and the other expenses goes up. You can see very clearly why our gross margin has also improved by about a percentage.
How much EBITDA loss have you incurred in FY26 from new projects like Pen-G, Eugia Steriles, Biosimilar and China facility? Do you expect most projects to turn breakeven in FY27?
If you take Pen-G and 6-APA put together, we have got a positive EBITDA contribution last quarter, mainly because of higher operating leverage and we have started getting better yields now. We expect this to continue for the coming year as a whole. Last year as a whole, we would have incurred around Rs. 200 crores plus EBITDA loss on account of Pen-G and 6-APA (Lyfius & Qule). In terms of the China plant also we incurred loss, which is expected to do a profitable EBITDA contribution this year.
Are you on track to close the Lannett deal as indicated earlier?
Yes, we will. Probably there will be some difference in timing. We will probably close by Q2 of the current fiscal. What we did not factor in was the government closure for 76 days between February and April. When the government shuts down, the FTC does not function. There could be some delay but early Q2 may be a better estimate. We feel fairly confident about that.
On Europe business - €1 billion milestone achieved. How will things move from here and given China supply, how to look at FY27?
Having achieved the €1 billion milestone which we have taken as our mission for FY26, we are definitely bullish. We are very confident that we will be moving northwards of this base business. Contributions from China - already more than 10 products have kicked in, in some form or other, whether it is a new launch or tech-transfer products, and progressively that will increase. So, we are quite confident that despite the geopolitical issues we will be growing further on the base that has been built.
On the Biological CDMO unit - when do we start seeing it commercializing and when do we expect first revenue?
About the CDMO unit, Unit-1 will be commissioned by end of this year. My guidance around the first 60 KL capacity installation and commissioning remains the same. With PPQ batches scheduled in 2027 and filings in the markets by the customer also slated to happen in 2027, we expect some stockpiling requirements from the customer in 2028. So, a steady stream of revenues would begin in Unit-1 from 2028. With respect to the recent Product Schedule three, that is a greenfield drug substance manufacturing facility. We expect to close the commissioning of the facility in 2029. Two years from then, 2031, would be the start of revenues from Unit-2.
On Pen-G - when do we start external sales from the unit?
The external supply has already happened in the last quarter. We have sold more than Rs. 100 crores worth of material in the last quarter, both Pen-G as well as 6-APA to the outside market. We have also informed all the customers that they can pick up the material. Because of high imports in Q3 of FY26, the offtake was very low but we expect the offtake will take up strongly in the coming days, coming weeks.
On European business - congrats on €1 billion milestone. Can you update what is the EBITDA for that?
EBITDA is just in excess of 20% and we will be moving northwards of same, as stated by our CFO.
Are these business opportunities NBOs you are targeting or M&A kind of opportunities?
It is not NBOs - it could be business opportunities in terms of in-licensing. We are not going for any big bang acquisition. Right now we are in the process of doing Lannett acquisition. But we do look at opportunities of some in-licensing and some ANDA acquisitions that is ongoing. Now we are focusing a lot on business development in the US, in addition to our own products.
On guidance for European business - double-digit kind of growth, can you clarify that is in constant currency?
Yeah, it is.
On biosimilar business - your 2030 vision, what are we looking at in terms of number of products commercialized and geographical spread by 2030?
We are right now in the early innings of launch since a quarter with biosimilars. Supplies have been initiated to certain territories in EU, tender is being serviced in LATAM and the STADA agreement will start to fructify from end of this year. We have Omalizumab and Denosumab entering filing phase with EMA, Health Canada and FDA this year. Additionally I have also provided guidance that we plan to file Bevacizumab. So 2026 will be a year where we wanted to execute the US filings, at least two but three filings in the US. By 2030, we are looking at biosimilars business having 7-8 products in Europe and growth markets, plus potentially 2-3 products in the US.
In the first wave of launches, since we are coming much behind competition in Europe and emerging markets, do you still see an ability to make reasonable revenues? Is the opportunity still relevant?
In the first wave of launches, the opportunity is relevant to the extent the aspiration is. We are not looking at a 15%-20% market share in those territories. With the right cost of goods, we still believe there is enough opportunity for everyone. From the first wave we are looking at products that have a longer life cycle - Pegfilgrastim even now is a potentially $3.5-$4 billion market globally. In US there are about 4-5 or 5 players there. If you're looking at $50-$60 million revenues and not looking at taking away 20%-25% of market share, you are still in the game. Our COGS will continue to sustain us, but if you are asking will I pick up 20%-25% market share, absolutely not. That's not the aspiration at all.
At what point do you start to be part of the first wave of launches going forward?
Omalizumab, we will be in the first wave. With Omalizumab there are 3 serious players. Celltrion has already made the move. It's a potential $4 billion market. We expect Omalizumab to be a $2 to $2.2 billion product even after biosimilar competition kicks in. With the next wave we are trying to green light the clinical studies for products that go off patent cliff from 2030-31 onwards. But first wave is becoming very subjective these days - if I pick a product from 2034 like Atezolizumab, there are 9 players already developing.
On CDMO - is our CDMO strategy all about these 2 MSD projects or do you see opportunities to significantly go beyond that?
The scales at which we are attempting to become a CMO is a key differentiator in India. Product Schedule one, two and three total drug substance manufacturing scales amount to about 120,000 litres of mammalian cell culture capacities. That's by far the largest CMO space in the country. Lonza has about 570,000 litres, Samsung has around 600,000 litres. Why do I build a business model around one anchor customer? Because India traditionally did not have contract manufacturing organizations in the new biological space. I wanted to derisk the ramp by getting an anchor customer like MSD with a 10-year contract. The vision statement for 2032 is that we wanted to be a multi-modality, multi-customer contract development and contract manufacturing organization. Right now we are a CMO, make no mistake about it. We wanted to backward integrate by 2032 to become a contract development organization.
On biosimilars - at the time of commercialization what kind of gross margins or EBITDA margins are you building in at a portfolio level?
On an average, you are looking at a gross margin (in the US) of around 65%-70%. As the product mix matures to include Omalizumab and Trastuzumab subcutaneous after FY28-29, the gross margins will probably shift to the higher side of 70% to around 75%. It also depends on the countries you would be in. The moment the inflection point in US and some growth markets kicks in, then you are looking at better gross margins. Take anywhere between 65%-75%.
We've witnessed sizable price erosion in biosimilars. What kind of price erosion are you building in for these products?
For the first wave of products we have already built in the price erosion to a great extent. Even with a 75% price erosion, we expect to have around 65% gross margin as a base (in the US) and only then we enter into developing these products. In the US, we are not building more than a 60% price erosion. In Europe we are building close to around 75%-85% price erosion. In growth markets actually the pricing is good. Even after building a very healthy price erosion of around 70%-80% in most markets, this is what we would like to achieve.
Despite price erosion, how are you able to achieve 65%-70% gross margin in biosimilars versus chemical synthesis?
In biologics you should always look at yield versus COGS as a function of capacities. If my capacities are around 5,000-litre scale and my yield is around 4 gram per litre, then incremental improvements even after increasing the scale are going to be very minimal in terms of cost of goods. If you have positioned your titres or yields around 4-6 gram per litre and a capacity of around 2,500 to 5,000 litre bioreactors, you should have cost competitiveness for most monoclonal antibodies. 60%-65% should be very straightforward in biologics (in the US), even with the price erosion of around 70%.
Just to refresh in terms of the overall investment done till date in biosimilars?
About $450 million is the overall investment including CapEx and OpEx that was done in biosimilars from 2018 July to now, including the two COVID years, into 4 European approvals, 2 Health Canada approvals and 3 more product filings now - the fastest in the peer group. The CMO is going to be about $175 million in the greenfield facility.
What is the translation effect from INR depreciation against USD - 1% depreciation, what positive impact on EBITDA?
On EBITDA, we will get around Rs. 100 crores.
And on Euro? INR depreciation against Euro would be addition to that?
Euro is very little because already Euro has achieved the peak. Earlier it used to be around 1.03, now it is hovering between 1.16-1.17. So may not have a big significant one on Euro but EBITDA on dollar-rupee transaction we will get around Rs. 100 crores.
Does the 21% EBITDA margin guidance for FY27 bake in this positive impact of INR depreciation?
Don't look into that. Nothing comes free. When rupee is depreciating, why is it depreciating? Raw material prices are going up and solvent prices have gone by 2.5X. Freight cost actually has gone significantly high in the last month in March and continuing in April and May, solvent prices have gone by 2.7X. You have to look at it in a holistic manner. All the pluses, minuses, etc., we are working - 21% bakes in the net impact of all these positives and negatives.
On Pen-G - 10,000 ton output at 80% cap utilization implies 12,500 tons of total capacity versus our total capacity is 15,000. Is there scope for yield improvement?
Not like that, Kunal. I said it is above 10,000 tons. We have achieved in the month of March itself around 11,300 tons capacity. April we made it around 10,800. The capacity is not 15,000. We have 17 fermenters; we can run any number of fermenters and accordingly the capacity is achieved. So we have to ensure that inventory buildup is not happening, working capital is not locked in, and at the same time we need to achieve the right yields.
On TheraNym contracts - how many products from Merck and are these in development or commercialized?
Product Schedule 1 is for 1 product, product Schedule 2 is for 1 product. In the nutshell, each product schedule is for 1 product. So we signed about 3 product schedules, which means we signed for 3 products. Right now, technology transfer of 1 product, a new biological entity is happening. This is a product that is already commercial. The second product schedule also is a commercial biological entity. One of them is an early commercial product, the other one is a relatively established product. So there is no development product at this stage. Both are commercial assets.
Earlier we said these supplies would initially be used for emerging markets and then Europe and US. Is that correct?
That's correct because capability building and GMP compliance takes time. Initially, I expect MSD to file it in emerging markets followed by Europe. And potentially at some point, maybe they would say they would also like us to become part of the supply chain for the US. But right now, I would keep the aspiration to emerging markets and Europe.
On Specialty injectables - $513 million for the year, 13% growth. How should we look at the outlook for FY27?
You heard it right from Subbu. It is other than the Lenalidomide, it is 13% and I feel like the same double-digit growth is expected going forward. The base number would be around 480 plus. So we expect a similar double-digit growth because this year of '27 onwards, we will not have the Revlimid. So we expect the base business to continue to grow in double digits.
Just QoQ for US, why are the QoQ revenues down? Seasonality?
Yeah, typically the 4th Quarter is less than the 3rd Quarter, typically the 2nd and 3rd Quarter. There are aberrations of course - if the cold season extends to January, March, it could be higher, but otherwise 2nd and 3rd Quarter are the best.
On China and India - has China break-even helped in margins this time? And on India, how much will Khandelwal acquisition contribute to run-rate?
In terms of China, last year we had a loss of around 7 million. This year will not only break-even, will contribute significantly. At least we are working to achieve a low double-digit EBITDA margin for the year. In terms of Khandelwal Labs, it's a very decent acquisition and it is contributing to the EBITDA margin. We expect the entire domestic formulation business will grow in double-digit during this year.
Only Unit III is the remaining larger unit left for the EIR, is that right?
Unit III is - yes we are waiting and even Unit I of Eugia is also audited and we are waiting for that as well. There are two units in Eugia network we are waiting.
Update on eczema drug?
We are right now looking into launching it as soon as possible. Most probably Quarter 2 of our fiscal year is when we are aiming to launch. All the preparation work is going on right now to make sure that we launch this, our first NCE for Aurobindo in a very successful manner.
In Europe - double-digit growth, did you mean constant currency or INR terms?
Constant currency basis, which I already reaffirmed. This year we achieved a double digit. Our growth planning for upcoming year revolves around base business growth plus new launches, annualized revenue on FY26 launches and upcoming FY27 launches. So we are quite confident we will be able to achieve on constant currency basis.
On TheraNym - the 2028 and 2031 dates, calendar year or financial year?
I'm referring to the financial year. Tarang, let me correct myself. If it is 2028 and 2031, then I am talking about calendar years and not financial year. My apologies.
On US eczema product - do we expect to build a significant front end? And update on Ryzneuta?
For ADQUEY, which is the brand name for our eczema drug, we are going to build the suitable infrastructure as required. We will be in a competitive space but in a very good competitive space. Our current presence is in oncology, so we will be having a separate team which focuses on dermatology. For Ryzneuta, though we had an approval for a year and a half, the product launch was delayed and much of the scientific story is still being built. We have started getting some traction in the market now, but the story from a brand perspective still needs to be built. The market is very competitive, so it will take us some time.
Is $400 million a reasonable base for the US business, ex-acquisitions and NCEs?
Yeah, it's reasonable to assume.