ARV guidance upgraded from INR2,500 cr to INR2,800 cr.

Could you break down ARV sales into formulations and API for the quarter and 9 months?

In the 9 months, the formulation is Rs. 865 crores ARV. And the API is Rs. 1,259 crores. Total ARV revenues were Rs. 744 crores for Quarter 3.

On the CAPEX side, how much investment into peptides and ADC for the next 12-24 months, and overall CAPEX for FY27?

ADC is still at the nascent stage right now. We have allocated $25 million to the GMP facility which is under construction right now. We don't expect any meaningful revenues coming from ADCs in the next two years. When it comes to CDMO investment in peptide commercial manufacturing facilities, we expect qualification during this calendar year and we will give you more details as and when we are in position to give feedback to you. The overall CAPEX this year will be about Rs. 1,000 crores and FY'26 based on the current estimate, we do feel it will be over Rs. 1,000 crores next year also.

On the pecking order of gross margin across API synthesis and FDF segments?

Tushar, the order remains same. CDMO, formulation, API. This is in order. Yes, API on the lower side, formulation on the higher side and CDMO is on the top. We expect to maintain gross margins of around 60% for the coming quarter and also next financial year.

Operating cash flow up 600% in 9 months, conversion at 113% vs 10-year 63%. Can you help us understand longer-term sustainable EBITDA-to-OCF conversion?

Sajalji, thanks for your very interesting question. So, this kind of a help happened because of some of the customer advances which helped this year, number one. But, of course, if you look at the absolute number of the NWC is close to the similar number for the March and December, but the revenue has increased, that's really helped. But you are right, from 63% to 80%-90%, but beyond that actually some part has helped through its customer advances.

What is one area where Laurus has chosen NOT to grow despite the opportunity looking interesting?

Very thought provoking question you asked Sajalji. Right now, we decide not to enter into large-scale MAB manufacturing, we don't want to do that. That's the area we decide not to get in. And the other area we decide not to enter right now is also sterile manufacturing. These two areas we decide not to enter, although opportunities looks good but we also need to understand our management bandwidth to handle many things.

Can you elaborate on the joint venture with Krka Pharma?

The joint venture with the Krka Pharma is to manufacture formulations for European market where APIs will be supplied by us and in the Phase-1, we are creating 3 billion solid oral capacity and 100 million solid oral capacity for potent molecules. In the Phase-2, we will create another 5 billion tablet capacity in the solid oral space. Phase-1 we expect to complete by mid of 2027. This unit will primarily will do formulations packaging for various European markets and also some markets in Asia Pacific as well.

On cell and gene therapy update - what revenues will kick in and what are we trying to achieve?

In the cell therapy, our associate company ImmunoACT is already having commercial revenues and when it comes to gene therapy, we are at very initial stage of investments in antibody drug conjugates and gene therapy. Our process development labs were operationalized and the GMP facilities will come in the next 12 months and we don't expect any revenues from ADCs and gene therapy at least in the next 24 months.

For CDMO as well as API and FDF business - is there anything to call out with respect to volume and pricing, especially in API and FDF? Have you benefited on pricing?

The API, FDF we predominantly benefited from the volume gain. Pricing hasn't played a significant role in this the volume gain was significant.

Has currency played any role in your gross margin improvement sequentially given USD-INR movement?

Answer is yes but not very significant. Definitely we will get a benefit because we are a net exporter, but I am saying that it is not a very significant impact or positive impact.

On ImmunoACT, you tied up with Cipla for South Africa. Any comment on that market?

That opportunity will be meaningful only a year from now because of the regulatory approval needed in South Africa. So, clinical trials will start soon in South Africa. So, in FY'28 you will see that. But there are some milestones even already received from Cipla.

Regarding the new greenfield CAPEX of 500 acres in Atchutapuram, when can we expect Phase-1 online? FY'28?

We are expecting the land allotment and handover will happen in the Q4 this year, financial year. And CAPEX will start from maybe second part of FY'27 and we expect to qualification and validations only two years from now.

On generics - 3 billion tablet capacity has come online in Unit II for Krka. When do we expect to generate revenue from this new capacity?

We have already started using the additional capacity and we will see a little bit of increase or jump from next financial year Q1.

On CDMO Q4 growth YOY - will it come from new commercial molecule supply or late-stage? In CY2026, how many new commercial molecules will you supply?

Most of the revenue in Q4 is going to come from commercial supplies of molecules what we supplied earlier. So, in the last 18 months, I can give you because we did had a review internally, so we supplied three commercial NCEs in the last 18 months.

On generics - significant step up in Q3, what is the sustainability and how to look at FY'27?

In the generic space, lion's share of revenues are coming from ARV with both APIs and formulations and that business is pretty stable. Actually, we are able to increase our market share in both API and formulations and our North American formulation and European CMO sales also going up. I think we believe those numbers what we did in Q3 are sustainable.

On the MoU signed with LORDIN South Korea where you announced entry into OLED materials - how does LORDIN enter this structure apart from pharma?

So, similar to our strategy across different areas right like for example human health, animal health and crop science, OLED represents another potential opportunity where we could be a potential player in the OLED materials which are again small molecules or chemically synthesized compounds, right? That is an MoU that we had agreed upon with LORDIN and we don't necessarily expect to see any meaningful revenues this year or the next, but that gives us an opportunity to potentially play in this very lucrative market.

Last year Q4 had other income of ~Rs 40-50 crores leading to higher profitability. Was this a one-off or can we expect similar in this Q4?

We are not expecting Other income in the Quarter 4. Yes, that was a one-off for last year.

What is the current asset turnover?

0.91 actually.

Are you trying to move from being an API or CDMO sector to a biotech company - is that the longer-term vision?

No, see our investments in biotech, for example, cell therapy, gene therapy, ADCs are most emerging fields globally and we wanted to invest ahead of the curve and wet our hands to capture opportunities. In the case of peptides and all we are well established, we have investment, we have programs running right now. So, answer to your question is, we are more focused on large volume CDMO, right now.

How big and long is the CDMO opportunity? Many Indian pharma players are expanding here - what is Laurus's competitive advantage?

I don't say we have an advantage, we were well prepared to take the opportunity. I will put it that way. So, people look at us, if there is a complex chemistry, if there is a scale involved, if it is a flow chemistry, if it is biocatalysis, if it's high energy chemistry and involves scale and we are the perfect partners. So, we have invested in these modalities and created capacities.

On 50% CDMO share target - is that a ceiling or will we look beyond breaching 50%?

I think our first goal is to reach 50%. It's not going to be there in the medium term, it is a long-term goal for us to get there.

On ARVs - you earlier guided stabilization around 2,400-2,500 crores. We seem to be running ahead. Has something changed? Is it sustainable?

See, earlier we guided 2,500 plus or minus 200 crores. But you're right, current run rate is a little beyond that. The main contributor for that is, we have expanded our API capacities to meet our customer demand that is driving our positive growth there and now if I have to restate that currently we are at 2,600 plus or minus 200, I will put it that way. But fundamentally hasn't changed much.

Has the profitability of ARV improved versus the dip a couple of years back? Any change in competitive intensity?

It's profitable if we sweat assets more, that's what we are doing right now. Nitin, actually what happened, actually we suffered for a few quarters because of the steep price reduction but that we could able to recover those things like because of some process improvements, raw material prices and productivity improvements. As we have been indicating for the last 6 quarters that we have been working on ARVs that is being resulted in this quarter.

On non-ARV formulation business - what are the growth drivers for next 12-18 months? Run rate from here?

We expect to sustain those because of additional capacities coming up for our CMO partner in Europe and also volume gain in US and also some new launches in North America both the US and Canada. I think we expect little lumpiness but it is not significant.

On CDMO human health - is there still a human health CDMO contract on track? And on crop science - is the commercial product patented?

In the human health space there are several different programs that we currently working with several partners and as Dr. Satya mentioned there's several commercial supplies ongoing in the human health. Our largest share of CDMO is in the human health space by far and that will continue to be the case. After that we have a sizable portion coming in from animal health and the third one which is again currently very small is in the crop science space. The commercial one is technically a product and some of the other opportunities that we are working on are also on the patented ones that we are looking at.

If ARV will be Rs 2,500-3,000 crores, what is the expected growth in generic API and formulations in next 2-3 years?

We will grow in the next year but significant growth will come in FY'28 because we are having capacities and we are validating some generic APIs and formulations. So, growth will be significant in FY'28 but there will be some growth in FY'27 as well, the generic API as well as the FDF space.

If asset turnover is 0.9, what is the maximum achievable fixed asset turnover ratio?

If you look at one of our slide in the investor presentation, our 5-year average asset turn was 1.1. maybe 0.9 to 1.1 we will reach, but our peak asset turn was 1.4. We are not anticipating 1.4 at this moment but we are targeting 1.1 over a period of time. The 0.9 to 1.1 actually we can do.