FY26 closed 21% EBITDA matching Q3 cut.

On Q3 gross profit and gross margin, even with the Revlimid impact, is there further anything in raw material related to Lanreotide dragging gross profit lower compared to earlier quarter outside Revlimid?

Revlimid has a significant impact sitting in the gross margin. Apart from that, this quarter we purchased certain R&Ds and APIs for our R&D expenditure, which led to a significant explanation for the difference. Other than that, product mix led to small dilution as well, but not a significant amount.

Did Lanreotide have any impact on the raw material side, or were there inventory or related expense adjustments?

No, there has been no adjustment in the inventory on account of Lanreotide. Whatever we have sold in this quarter of Lanreotide, a normal material cost against that is what is booked.

Of the $66 million sequential decline in US sales, how much can be attributed to Revlimid versus Lanreotide?

A significant portion comes from Revlimid, a major portion. There is a small portion that comes on account of Lanreotide as well. Important to note is that, against what we had planned in Lanreotide, there is lower achieved because of this disruption.

On the peptide monetization talked about in '27, none of these are from the partner facility that has been impacted, right?

No, none of them is coming from Pharmathen.

On expected FY'27 US launches - four peptides and four regulatory assets - what comfort and visibility do you have, are there any URLs or roadblocks?

The respiratory assets are progressing well through their assessments and we have been preparing for the launch operations. We are quite confident about those upcoming launches. Likewise for peptide assets, because these are not from the site with the partner pharmacies issue, we do not have any reasons to suspect any issues. Generic Victoza approval is already received.

All peptide assets are from CMO site and respiratory 3 of 4 will come from US and one from India plant - is that correct?

Yes, that is right. The peptide assets are from partner sites and respiratory are from US sites as well as India sites.

On the Rs. 1,100 crores paid for perpetual rights to Galvus, where are these costs sitting in the financials?

That is sitting in intangibles in your capital advance in the financial statement, the 1,100 that we have paid. Nothing is on the P&L.

On Lanreotide, did we see any impact of supply disruption in this quarter or is the development in Q4?

In case of Lanreotide, the inspection took place in November and soon after that they stopped the production. So in December we had no production. There was some impact in comparison to the previous quarter. But as far as our plan, the impact is much larger.

On Yurpeak tirzepatide launch, what is the progress and adoption levels beyond cities, and what scenario post Semaglutide commercialization?

We have all-India marketing rights for Yurpeak with focus outside metros. Good traction in places exposed to the drug and new prescriber cities. Tirzepatide has dual GLP and GIP action making it a preferred option. As Sema genericizes, it might open options at different price point growing the market rather than eating into each other.

Any update on Abraxane in the market?

Our launch coincided with other launches as well, so it has become a competitive market. As of now, we are inching up our market share. Currently it is single digit. We hope to increase that.

Looking at '22 margins around 21% before Lenalidomide, how has that fallen to 17.5%-18% now even with little Revlimid?

R&D was elevated - used to be 5-5.5% in past, now about 7% of sales, straight away 1.5-2% dilution. In the last 1-2 years we have been investing on organic growth, new launches and derisking facilities, all that cost has come into P&L. As they yield revenue, we should normalize back to a higher number. The 17.7% is 1.5-2% off our expectation for the same reasons.

Is the Rs. 1,100 crores Novartis payment related to the April 2023 deal, and any future payments under Pfizer or Lilly deals?

Yes, this is a follow-up. It was earlier in-licensing, now perpetual license for trademark and we can manufacture it in-house. When we shared about Galvus deal it was EPD followed by this perpetual license - kind of acquisition with slight delay. The other deals don't have this kind of provision.

On earlier guidance of US revenues touching $1 billion by FY'27, are we revising post-Lanreotide?

We will have to revise the guidance because if we don't have Lanreo in one quarter, the numbers will be lower. That guidance will have to go down. Directionally we had guided for the US business to continue trajectory supported by new launches. Three products are at advanced stage of launch which would add to the directional guidance.

Among the 8 products you mentioned 3 with rough timeline - are the remaining 5 early or late FY'27?

From 0 to 6 months, two big respiratory launches and one Advair (smaller). Between 6 to 12 months, another big respiratory launch likely Symbicort towards year-end. Plus a smaller peptide launch in 0-6 months and a larger peptide launch potentially exclusive in 6-12 months. The 0-6 month products have gone through multiple rounds of review and launches are more likely than not to happen soon.

On the four respiratory assets, 3 filed from US, fourth is from Goa not Indore - so not contingent on Indore re-inspection?

That is correct.

On opening remarks, US base ex-Revlimid grew double digits - that base includes Lanreotide?

That is right. Your understanding is correct.

What is the share of in-licensing portfolio in India Rx business and how has it grown?

At the moment it is less than 10%. Galvus was appearing as in-licensing, but now we will have own manufacturing benefit and full supply chain margins, so that comes out of the bucket and Yurpeak will grow. That is the evolution.

On Lanreotide, given prior regulatory issues at the same site, have you considered an alternate site filing?

From derisking perspective, we are looking at a second site, not in the same market. Those discussions are advanced with the partner because we need the partner to be able to transfer the product to the new site.

So if relaunching in 1st of FY'27, it has to be subject to USFDA clearance for this site itself?

Yes, the earlier resumption will come from the existing site. For future, the derisking can happen from the second site as well.

Will the new launches be at relatively similar profitability or lower than Revlimid?

It will be lower profitability than Revlimid and depends on timing. Collectively the new launches will make up for the generic side revenue drop. Important to note our respiratory assets are all in-house, so they will come at very good gross margin since you don't share profits or pay milestones to partners. Umang added that the two products average ballpark in top 2 or top 3 product profile for revenue ex-Revlimid.

What is the normalized gross margin for the business on a more secular basis?

We have been averaging about 65% or so, range of 60-65% depending on the mix. Some quarters with more acute will be on lower side. Respiratory etc. typically would be higher. US depends on a small portfolio so there can be product skews.

With Revlimid going away, is there an opportunity to prune operating overhead costs?

Absolutely. We constantly look at opportunities to reduce costs and optimize. We have run a program this year - some benefit may come towards end of this year, more full year benefits next year. The 7% R&D sits in material costs, other costs and people costs. R&D also has litigation costs for products in US baked in.

On increase in R&D from R&D purchases, the absolute quantum seems like 150 odd crores - is that ballpark right?

That is the guidance we have given last quarter as well, where we said R&D expenses estimate has gone up by about 50 basis points. 50 bps would translate to around Rs. 150 crores. From that sense, yes, your number is very close.

Does the 150 crores incremental R&D fit in RM cost?

RM as well as other expenses also, yes. Some bit of capital expense too if buying lab equipment, but small.

On the two big respiratory products in next 6 months, could the size be as big as Lanreotide potential?

It is quite likely that one, if not both, could be one of the largest products for the company. If you take out Lenalidomide and take the next top 2 or 3 products including Lanreotide, this is ballpark in that top 2 or top 3 product type of profile for revenue.

Are you seeing greater traction in trade generics or branded generics, and how does Schedule M implementation play out?

We see opportunities on both sides with slightly different drivers - one is scientific doctor promotion, other is channel-led. Our growth rates have been similar this year. Schedule M is a good initiative to raise quality bar; impact is more for smaller players. From Cipla perspective we have not much impact because we are already at or better than the standards.

Since we launched Tirzepatide, can we still launch Semaglutide in March?

At the moment we are focusing on Tirzepatide - a large opportunity with our Yurpeak partnership with Eli Lilly. As per IQVIA data, last month the molecule was clocking upwards of Rs. 130 crores a month. On Sema we will wait and watch how the market evolves. If we see opportunity at lower price point we can take that call, but not immediately.

On the Rs. 275 crores exceptional item this quarter, do we see any prospective impact in future quarters?

In our assessment, based on the new code as per guidance and FAQ given till now, we have taken the impact. We do not anticipate any material adjustment to this amount. Approvals now because of new code will be higher than every year, but for the past whatever approvals have to be made is all sitting in the 275.

Will there be a structural increase in employee cost going forward?

Your accrual every year now will need to be slightly higher unless you change the structure of salary.

On R&D side, this year has been higher - do we expect it to cool off in FY'27?

The normal range we have been operating in is around 5% to 6% of R&D spend. It gets lumpy at times depending on certain programs where R&D and API costs might get lumpy. We will try to keep it more around that 6%. Quarter-on-quarter depending on timing of projects, some goes up and down during the year.

On Schedule M, are you envisaging trade generics or branded generics seeing short-term blip or benefit?

It is more toward benefiting the patient in terms of quality and preventing adverse events. Given the number of manufacturers in India, we don't see much material difference on our business on either of trade generics or branded generics because of this Schedule M implementation.