Aurobindo Pharma Ltd

Good morning, everyone. Welcome to our first quarter’s FY26 Earnings Call. I am Varun Mali from the Investor Relations and the Corporate Communications team. We hope you have received the Q1 FY26 financials and the press release that was sent out yesterday. These are also available on our website.

Good morning, everyone. A very warm welcome to Aurobindo Pharma's Q1 FY26 Earnings Call. Thank you for taking the time to join us today to discuss the company's financial and operational performance of the first quarter of the current fiscal year. Let me begin with a brief summary of our performance.

Let me now walk you through the key business highlights for the quarter.

U.S. revenues experienced a year-on-year decline of 4% to 408 million, primarily attributable to a significant reduction in the transient product sale gRevlimid, a temporary moderation in customer demand due to seasonal dynamics, de-stocking effects of the last quarter inventory due to anticipated tariffs.

Revenues increased by 9% year-on-year to ₹772 crores or $90 million, supported by strong underlying performance across key countries.

ARV revenue delivered a strong 55% year-on-year increase, reaching ₹355 crores or $41 million. These were primarily driven by volume uptick and new tender wins in several geographies, which we expect to sustain in the near term.

Looking ahead, we remain optimistic about sustaining our growth momentum. Our confidence is supported by expected volume expansion, continued product launches and a stable pricing environment, especially in the U.S. and Europe. Ramping up of commercial operations at new manufacturing sites would further support both topline growth and margin improvement in the upcoming quarters.

Thank you, Sir. We will now open the call for Q&A session. We will wait for few minutes until the queue assembles. We request participants to restrict to 2 questions and then return to the queue for more questions. Requesting you to identify yourself and your company name. Please raise your hand from the ‘Participant’ tab on the screen to ask a question. The first question is from Damayanti Kerai.

Hi. Good Morning, everyone. This is Damayanti from HSBC Securities. Sir, my first question is on gRevlimid. So, just to clarify, this ₹150 crores less number and then ₹550 crores less number versus Q4 is at the EBITDA level, right?

You can take that is at the topline level. EBITDA you can work it out yourself, you must be knowing, I am sure.

Okay, so this is at the revenue level, okay. That was good. My question is, on gRevlimid definitely pricing pressure has intensified and some of your peers have also mentioned this. So, from an opportunity perspective, do you think you can still make some reasonable sales from this product in FY26 or this is an opportunity which is broadly gone now?

Yeah. Damayanti, in fact, I think we mentioned this in the last call as well.

Okay, so it's already exhausted the volume allotment which you have got and nothing much to look ahead.

That’s right.

Okay. My second question is, Sir, if you can explain what has happened in the API and do you think it's a temporary phenomenon and you can see recovery ahead?

API, the turnover has dropped because of the mainly because of the pricing pressures. Otherwise, I think over a period of time it will start recovering because it cannot sustain for a long time, right. That is the main reason.

Okay. And my last question is, you are maintaining your EBITDA guidance for the year. So, basically which will be the key drivers which makes you confident that you can achieve your earlier guidance?

Yeah, because despite low gRevlimid we have been able to maintain. This is the numbers of the last quarter [Q1 FY26], is helping me to retain that confidence.

Okay, Sir. I'll get back in the queue.

The next question is from Tushar Manudhane.

Yeah, thanks for the opportunity. Sir, with respect to the, let's say, operational losses for various plants, if I have to club together for FY26, if you can share that number? And subsequently, how to think about that number for FY27, considering any new plant that might come up in FY27?

See, last year, we have incurred losses predominantly, as you know, in Pen- G, Qule and other things, right. And as I explained in the script itself, I said, we are expecting good EBITDA starting Q3 onwards. So, the losses will come down. So, that's the main thing.

So, this year how much that number for this like first two quarters given that the scale up probably will have benefits coming from second half?

See, last quarter was a very low number, around less than ₹50 crores. But one good thing is we started the production, we had a good production in, I mean, even though the plant has really the first output came sometime in the second fortnight of July, we had a good ramp up. And what is very encouraging is the yields are improving day by day and hopefully it will get stabilized in the month of August and September. So, that is the reason we think by Q3 onwards we’ll be able to do well. That's the main reason.

And, Sir, just to add to that, like how much PLI income to consider for this year?

I think we will be expecting anywhere between 7,000-8,000 tonnes production. That means at least we can take more than half of it, maybe around ₹150 crores.

Understood, Sir. And just one more from my side. So, maybe the basis contract the gRevlimid business is no more. So, any which case increased competition and all, so beyond contract will we be able to sell or it's like because of the contract we will not sell itself and so the other guys have their share and subsequently the pricing still remains steady.

So, Tushar, in general, the entire market will open up from 1st February, 2026. And we are getting prepared to take more market shares starting from February’2026.

Got it, Sir. This is helpful. I have more questions, I will join back the queue.

Thank you. The next question is from Tarang Agarwal.

Hi, good morning. One on the API business you spoke about pricing pressure.

Because of both.

Okay. Because a 16% decline is something, to the best of my knowledge, I've never seen in this business in the last multiple quarters.

Well, it may be a 16% on the topline, it may not be that much percentage in terms of the volume. Plus, you know, this quarter is always a summer quarter, so the offtake is also very low across India.

Got it, okay. Second question is on Eugia. I mean, if you could give us the U.S. sales numbers of Eugia for Q4 and Q1; Q4 of FY25 and Q1 of FY26.

So, we are not giving that number separately, Tarang.

But in general, Tarang, we already mentioned that the regular injectable sales is growing and we have shown a growth of 11%.

This 11% is on a year-on-year basis, correct?

Quarter-on-quarter.

It is year-on-year as well as quarter-on-quarter, it is almost similar number.

Okay. And the European exposure of Eugia or ROW exposure of Eugia continues to be in the ballpark of $35-$40 million a quarter?

Yeah, it is. It's a split of, you can say that it's around $50 million there, then Europe is $100 million and the growth markets like Canada, Brazil continues to grow. So, overall, we are trying to shift the balance of sales. It's around 70-30. We are planning to shift it to 60-40 and we are hopeful of doing that.

Got it. The third question is on TheraNym. Doctor, just wanted to check, I mean, I think the initial estimate of capacity creation was about ₹1,000 crores, which was later appended to about ₹1,500 crores. I think Subbu Sir did call out in his opening comments of some outlay already being done, if you could just rehash in terms of what's happening there and in terms of are you seeing incremental demand in that business?

Good morning, Tarang. TheraNym, as you know, we initially started the project with two 15-kL mammalian cell culture bioreactor lines and the CapEx guidance was around ₹1,000 crores to complete the project and fully commission it.

It does, it does. That's quite helpful. Sir, just a couple of more. One, on the free cash generation, last two quarters consistently almost about $100 million of free cash generation for the business on each quarter basis. Is that the trend that we should work with or some working capital expansion should probably...I mean, the place where I'm trying to get at is the business now at a point of time where $400-$450 million of regular free cash generation is something that's visible for you? That's one.

Yeah, I'll answer the first one and Swami will answer the second one. In terms of the free cashflow, I mean, we have reduced the working capital considerably and that is what's helping. Apart from that, overall CapEx has come down in the last two quarters.

Sure.

Okay. So, on the Lannett acquisition, this is subject to FTC approval. Obviously, there will be a lot of back and forth. We have given 9 months as a matter of abundant caution, it could be earlier. But, obviously, we will do whatever we can to expedite this. If it gets clearance earlier, obviously the integration would happen earlier.

Sir, just wanted to understand, I mean, how difficult or how soon can you integrate this business? What are the synergies that you're looking between both the setup and some metrics on the broader market in which the target is operating?

Sure. So, we believe that integration is very easy because we have similar kind of products, only they are in ADHD segment. They are mostly into controlled substances and even the other product that they have, We believe that those are very close to what we have.

Wonderful, Sir. Thank you and all the best.

Thank you.

Thank you. Next question is from Surya Patra.

Yeah. Thanks for the opportunity, Sir. My first question on the U.S. business, you have commented about destocking impact, what is the nature of this destocking, Sir? Is it anything relating to tariff-related preparation or can you clarify this?

Yeah, Surya, what Subbu had alluded to was primarily, the tariffs were supposed to go into effect from April 1. If you see, there was a huge surge, much more than the normal quarter surge in the quarter ending March. We believe that some of the wholesalers have stocked up the product in anticipation. They were also asking us to keep more inventory and they themselves seemed to have stocked up. We have not seen a decline in the demand of the oral solids in the U.S. nor have we seen any loss of awards, any major award. So, it is our understanding that this is primarily because the wholesalers have stocked up during the last quarter and they are winding down those positions.

Okay. So, it is a quarter-specific issue then, I believe.

Yes, not just that. For Q1, this has been a fairly good quarter, especially on the total volume that has been sold from the wholesalers. Typically, Q1 is a non-seasonal quarter but it has been a fairly decent quarter, I would say.

Sure, Sir. My second point is about the Pen-G plant, Sir. So, now having resumed our operation there, what is the kind of visibility that we are having in terms of the ramp-up?

So, in terms of the Pen-G production, as I said, the production is improving in the last 3-4 days and the yields are improving. We believe, I mean, we are pretty confident this going will be very good in the coming 2 months and we will be able to do very well in the Q3, that is what we believe.

Okay, Sir. My last question is about the European business. Sir, obviously that we have been seeing very strong performance consistently since last few quarters and you have already guided about a kind of strong growth in the FY26. So, my point was about the margin performance there. Sir, with the new capacity addition, what is the kind of outsourcing that we are dependent on external resources for European operation now? And what it is likely to improve to by the end of this year? And hence what margin performance one should anticipate for the European markets.

Yeah, from the market perspective I can handle this, then on the plant related, Subbu, I would suggest you to do that. Surya, first of all pleasure speaking to you, good morning and thank you for your compliments for the European business.

Yeah, so in terms of the production, I'm sure you must be knowing, we have been having a capacity around three to four billion tablets now, as explained in the last or previous call. We have ramped up the capacity further and that has helped in terms of supplying more material and that is also one of the reasons the European team was able to take the sales to greater heights, right? And we will continue to do that and in terms of the margin also, because of the in-house production and we were able to increase the margin percentage also.

Okay, so just whether the injectables have seen any ramp up in Europe?

Yes, in fact, we have been growing at a rate of 20 percent for European market because we find a lot of shortages happening in Europe and Murali's team could take full advantage of the market situation there. So now like what's happening is, our capacity versus demand, the demand is outstripping the capacity. So in fact, we have taken a decision to add two more lines, oncology lines to take care of the European requirements.

Okay, okay, sure sir. Yeah, thank you. Wish you all the best.

Thank you. The next question is from Neha Manpuria.

Yeah, thanks for taking my question. You know, two questions on the U.S. business. Swami Sir, if I look at the oral solid business, could you quantify how much would be this de-stocking impact just to understand, you know, how the business is done both from a year-on-year and a quarter-on-quarter perspective?

You know, it's hard to quantify exactly that kind of amount but what I'm saying is, in terms of total demand for the U.S., it has been pretty stable and we have got our awards intact barring few losses and few gains. So overall, I think we are in good shape there. I am not exactly sure on how much. My guess would be, it could be anywhere between half a month to one month. That's my guess because if the wholesalers have stocked it, they would have stocked it for at least 15 days to one month for the tariffs. That's only my guess. I can't say precisely.

Understood. And then I'm just wondering about the, you know, U.S. business decline quarter-on-quarter and, you know, Yugandhar Sir’s comment that the injectable business seems to be improving. If it's just 15 days of, you know, 15 days or one month of de-stocking, you know, the entire, you know, 550 crores decline quarter-on-

Neha, you cannot do that. No, U.S. business is not only the solid orals and injectables. We have the branded injectable. We have the OTC from direct dispatches from India, which is a significant amount. So it's a combination of everything. So if you say if you deduct it and then is it because of the oral, etc., it is not like that. It's a combination of many things. Okay?

No, sir. What I'm trying to understand is that, you know, how far are we from the injectable business getting back to, you know, the pre-disruption levels? You know, is it 20 percent lower, 30 percent lower? That's what I'm trying to understand.

Let me just clarify a few things. Yes, the G-Revlimid was much higher in Q4. Your assumption is to some extent right. Second thing is we are back to pre-disruption levels with respect to injectable business. I'm very, very confident. My entire injectable business is growing and all the production facilities are back and running and Eugia 3 is back.

Understood. And my last question is on Lanett. Lannett also had a very good portfolio that they were planning to file. I think you also alluded in your presentation in Lannett that, you know, there are some NCE minus 1 opportunities. Are these opportunities still valid, you know, once we finish integration, you know, the acquisition of Lannett? And also will there, do you think, given the portfolio overlap based on IQVIA data that we have with Lannett, there would be direct means that could be required to get FTC approval in your view?

First things first, on the pipeline, we not only get the products in commercial stage, we also get the products in pipeline. There are some good pipeline products.

Understood. Thank you so much, sir. Next question is from Bino.

Hi. Good morning and good evening. First question, Subbu Sir, our gross margin is holding up at about 59%. You mentioned that Revlimid was down Q-O-Q by about, I think $17 million and there was pricing pressure in the APIs as well. So, what's helping us hold up the gross margin at 59%, which is comparable QOQ?

As explained in the original script itself, no, it is a combination of multiple things. There is a positive favourable mix in terms of the businesses when, for example, when the API business percentage of revenue share goes down, automatically, it increases the weighted average because the API does not give the margin same as the company average margin like that and we also had good, Eugia done well, plus we also, the existing product profile also good in the solid orals. So it's a combination of multiple things, Bino.

Okay. And second, what are the Pen-G prices in the market today? And what is your latest estimate about your profitability levels? At what price you would be profitable?

I think the current market price is anywhere north of $20 [per kg]. We'll be profitable somewhere around, I mean, we'll be breakeven somewhere around maybe a couple of dollars plus or minus like that, depending upon the yield in that particular month or the quarter.

Okay, understood. And last one question, for being eligible to get the PLI payment, is there a minimum level of production that we need to have in a year?

No, there is no minimum level of production. Whatever you produce, you will get a percentage on that, you will get the PLI incentive.

Understood! Thank you very much. I'll join back in the queue.

Next question is from Shyam Srinivasan.

Yeah, good morning. Thank you for taking my question. Just the first one on the biosimilar launches in Europe, Dr. Satakarni, if you could just highlight what are the things that we need to keep in mind? I think the presentation talks about Q3, Q4. So the kind of infrastructure, the kind of preparation, maybe initial market shares that we are targeting. So if you could help us outlay the commercial strategy.

Shyam, so to answer your question, we started making the manufacturing quantities for commercial supplies. In fact, we made one supply as well to meet the requirement in the UK market. So the first six months leading up to March would essentially be meeting the launch quantities, enabling our commercial operations teams and our partners to park the launch quantities in the markets they desire to. So I don't have a number guidance for the first six months. It will be a very small single digit commercial revenues trickling in. The focus for us right now is to ensure that we have adequate supplies, the supply chain is sorted out. Our QP testing services that we are stabilizing in Europe through CRO partners and through our own setup in Malta, they function seamlessly in releasing and testing biosimilars, which is required in Europe. You need a qualified personnel [QP] testing. So all this will take about a couple of quarters to stabilize.

Yeah. Thank you, Dr. Satakarni. Just if you could give us, like your credit for the first European launch at your earlier shop. So you know, in the last whatever, you know, five, six, maybe even a decade of doing this, what are some of the big differences you see? Is profitability in Europe for biosimilars distinctly different now and lower perhaps? So, if you could comment on profitability as well.

It is a very subjective question. I have been asked this question on multiple occasions. From my first launch in Europe way back, the India's first launch in Europe way back in 2012 to now, absolutely, there is a big difference in the pricing erosion that we are witnessing, which affects the profitability margins. But what needs to be also understood is that the European landscape is extremely distinct in a manner that, there are few countries which are extremely tender-driven or solely tender-driven, if I may use that word. And there are a few countries where the retail prices are still very exciting, where you can still make a good 85, 80% gross margins. And there will be countries where you will make probably around 15 to 20%.

Yeah, thank you. Thank you, Dr. Satakarni. My second question is…

Dr. Satakarni, maybe I can contribute here in addition to the eloquent reply what you gave. For example, countries like France, the generic substitutability trend is increasing, where it was hardly one or two products earlier, now, as many as nine products are in the list of generic substitutability and similar trend is to be expected in certain other countries as well, meaning there will be a higher volume uptake as we launch some of our products. So this is a positive trend for us, which we would like to encash on.

Helpful! Thank you. Just my last two questions. I will keep it very brief.

Yeah. First, I will take the question on FTC, Subbu. So on the FTC, we do not have any of the critical products that we think will have a conflict where we would be reluctant to look at it or we do not expect that many products where we would have this issue. We think it will be a smaller list based on our understanding, based on the advice that we have received and we think we should not have a problem with that kind of smaller list.

So Shyam, you talked about the 12%, it is year on year.

Sir, which geography? Is it US? Is it overall?

No, no. It is overall. Overall, I am saying. Overall, group as a whole.

Okay, sir. And US would be what? Sorry.

US, we are not given any specific number directly. We never used to give, but this is the overall Aurobindo as a whole on consol basis.

Okay, sir. Thank you. All the best.

Next question is from Srikanth.

Hi, good morning. Thanks for the opportunity. I have three questions. First question is on our annual guidance.

I think Srikanth, my request to you is, since there are three, four people are still waiting, can you restrict to two questions?

Sure sir. No problem. So firstly on the annual guidance, last quarter, we talked about single digit growth. However, with the PEN-G restarting and you are giving

No, I told you no, I will be able to give a better picture in the November quarter. After that, it is your call what you want to do.

Okay. And sir, what are the utilization levels at PEN-G unit currently?

PEN-G unit currently, we are doing around 50 to 60%. We are trying to improve the yields. That is our primary objective to cut down the losses so that better yield will cut down the losses. And once we stabilize that in the next two months, we will scale it up.

Okay. And now that you are restricting, so just one more question. So on the controlled substance business, we have seen some struggle by some of the Indian companies. Now, if you can update what is happening in the controlled substance market and how do you see the kind of growth that can happen in the market and where do we stand to benefit from this opportunity? Thank you.

So actually Shrikanth, I didn't understand your question. What about the Indian companies? What did you mention?

So in the past, we have seen some of Indian companies getting in controlled substance market in the US. However, there have been some challenges and therefore, some companies we have been shutting down their manufacturing units in the US. So now, if you can tell…….

Understood! Understood! Yeah, okay. So controlled substances are primarily put in two buckets. One is opioids. The other one is the non-opioids. Okay. So what we are looking at right now from opioids have some problems, opioids have some legal issues and they also have a lot of other issues, many number of players in that market. Net-net, you know, if you take opioids, it's not so easy. It's got a good market. If you've got the market share but otherwise that can be challenging. Now what we are looking at right now, the controlled substance as far as Lannett is concerned, is mostly in the non-opioid segment and these are ADHD products, which are all in short supply. So that's how we feel very confident about it. And where we have opioids, we will look at it. But essentially, this Lannett is all about the ADHD medication and these are non-opioid.

Yeah, that is helpful, sir. Thank you so much.

Thank you. The next question is from Kunal Dhamesha.

Hi Thank you for the opportunity. First of all, on the Lannett, you know, let's say there are overlapping products and FTC guides you to kind of divest it. Would you be divesting on the Lannett side or would you be divesting on Aurobindo side?

So Kunal, that's not our call. I wish it were. That's not our call. Normally, this is dictated by what FTC tells us because ultimately it is their decision, right? So we have reviewed, if we divest, what the implication and if Lannett has to divest. So we feel confident that our business will still be good, even if we divest our product or their product, wherever the strength is. Ultimately, it is FTC call. If I take the worst-case scenario, I think we are still in good shape.

And on the 15% EBITDA margin that you suggested in the presentation for the Lannett acquisition, so is it for a particular year or do you plan to take it to 15%? How should we think about it?

Well, this is the current run rate. I mean, at this point of time, if I take the TTM trailing 12 months, if I take any period, we are somewhere around that and I believe that's a very conservative estimate. We think that in the future, we will be able to get a margin of 15% or more.

But sir, when I look at the implied gross margin based on the gross profit multiple that you have given, seems like a 30% gross margin business. So I am just wondering how we can achieve 15% EBITDA margin on 30% gross margin.

Yeah. So the 30% gross margin, what do you have? Obviously, I cannot go into product-wise details. We have reviewed that, we have reviewed it product-wise and then we think that there are some synergies, there are some options there. Overall, we think that gross margin will also go up and EBITDA would go up.

Yeah, sure. And then the last one for Subbu Sir, I still didn't get the 12% ex-Revlimid growth, because if I just adjust 150 crore in this quarter, which is the Revlimid loss on a year-on-year basis, we would be at more like 6% growth. So I still don't get how can we jump from 4% to 12% if we adjust for that 150 crore?

You discuss with me offline, I'll explain to you.

Sure. Okay. Yeah! Thank you. Thank you and all the best.

Thank you. The next question is from Devang.

Hello!

Yes, Devang, please go ahead.

My question is, with the US government now prioritising domestic manufacturing of generic drugs reportedly supported by Japanese funding under the trade partnership, what is the outlook on the future of US generic business? Specifically, how do you see this initiative impacting competitive landscape and pricing environment? My first question.

Yeah. So, I can answer that, Devang. First and foremost, I didn't know where the Japanese connection has come from, but yes, US government is pushing for

Sir, Howard Letnick in an interview on CNBC said that $330 billion which are coming from Japan will be used, some part will be used for domestic manufacturing of generic drugs.

Sure. If we are getting $330 billion, the infrastructure for US generics will probably go up if they invest in the generic market. Whatever that amount is, $330 million or $3 billion or whatever the amount, it will definitely go up.

He told somewhere around 15 billion.

Devang, I am not disputing that. If it happens, so be it. But all that I am saying, the operating cost in the US would be higher. If I manufacture US for the same product, it is going to be higher. The only way you can sell is if it is higher. If I am selling it from India, if you have a price, if you manufacture in US, it is going to be a lot different. And if you are forced to manufacture in US, if they say that you have to do it, we will do it and we will be competitive. It is a level playing ground.

Thank you, sir. And second question is, when are we expecting something on tariffs and how much will generics be excluded or not? Any insights?

You know, that is something President Trump can say. We cannot say at this point of time. We have not seen anything so far. It might happen. But I have seen various press statements like you. Somewhere he has said that he is going to do it after a year. He is going to bring in a huge duty. But we don't know. It is definitely the President’s and the President administration’s call.

We will now move to the closing remarks.

Thank you, thank you very much everyone for joining us on the call today. If you have any of your questions unanswered, please feel free to get in touch with the Investor Relations Team at Aurobindo Pharma. The transcript of this call will be uploaded on

Thank you to the management team. Ladies and gentlemen, on behalf of Aurobindo Pharma, this concludes today’s conference. Thank you for joining us and you may now disconnect your line and exit the webinar. Thank you.