Aurobindo Pharma Ltd

Ladies and gentlemen, good day and welcome to Aurobindo Pharma's Earning Conference Call for the second quarter of FY26. Please note all participants' lines will be in ‘listen-only’ mode and there will be an opportunity for you to ask questions after management's opening remarks. Should you need assistance during the conference call, please raise your hand from the ‘Participant’ tab on the screen.

Thank you, Vandit. Good morning, ladies and gentlemen, and welcome to our second quarter FY26 Earnings Call. I am Varun Mali from the Investor Relations and Corporate Communications team. We hope you have received the Q2 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 Q2 FY26 Earnings Call. Thank you for taking the time to join us today to discuss the company's financial and operational performance of the second quarter of the current fiscal year.

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

U.S. revenues stood at $417 million. Excluding gRevlimid, the U.S. Oral Solid delivered a healthy 6% quarter-on-quarter growth, underscoring the strength and resilience of our diversified portfolio. This quarter also saw continued demand from our base business supported by increased volumes and new product launches. Our U.S.

The European business maintained a strong growth trajectory, delivering 18% year-on-year revenue growth amounting to ₹2,480 crores, in Euro terms amounting to €243 million this quarter.

Revenue from the growth markets increased by 9% year-on-year to ₹882 crores or 101 million driven by strong volume growth and resilient commercial footprint.

ARV revenue grew by 69% year-on-year, reaching ₹325 crores or 37 million. This was primarily fuel by higher volumes and new tender wins across multiple geographies and we expect to sustain this momentum over the medium to long term.

Gross margins for the quarter stood at 59.7% compared to 58.8% last quarter, supported by raw material prices and the business mix.

During the quarter, we started the operations of Pen-G on July 1, 2025, after getting the necessary regulatory approval. The scaling above the plant is as planned and is poised to make a meaningful contribution to profitability going forward. During the quarter, we produced around 1,050 MT by operating at 40%-50% capacity, amounting to approximately 6,000 MT production on an annualized basis.

Looking ahead, we remain confident about sustaining our growth momentum and driving value creation across all businesses. Our optimism is underpinned by expected volume expansion and reasonably stable pricing environment.

To summarize, our next 2 years, our growth will be driven by several key factors including ramp-up of our Pen-G facility, commercialization of the biosimilar portfolio and rapid progress in our biologic CMO.

Thank you, Sir. We will now open the call for Q&A session. We will wait for a few minutes until the queue assembles. We request participants to restrict to two questions and then return to the queue for more questions. While asking questions, we request you to please identify yourself and your company. Please raise your hand from the ‘Participant’ tab on the screen for asking questions.

Good morning, everyone. Thank you for the opportunity. Sir, my first question is on Generic Injectable business in the US. Sorry, I missed your comment, you mentioned it grew 6% quarter-on-quarter. So, a few clarifications. Are we broadly back to the level where disruption happened? And how do you see this business shaping up in the next two years? And if you can just talk a bit about some of the key pipeline products which you may have in your pipeline.

Hi Damyanti. So, still we are not back to the pre-disruption levels. I think we still have another 5-10 million dollars to go to reach that level. But it is mainly driven not because of existing products growth but because we don't have the new products to offset the single-digit price decline. So, we still have a quarter or two to go to come back to the pre-disruption levels.

Sure. And if you can just remind us about when you are expecting Eugia III reinspection?

Yeah. Eugia III, like we have already requested FDA in the end of Q2.

Okay. So, majority of new launches which we are expecting is broadly tied up to Eugia III clearance, right, if my understanding is correct?

Yeah. Injectables, yes, but not oral solids. Mainly the Oncology oral solids are all from Eugia I, so I don't have any problem from Eugia I. So, those approvals will continue to happen. But Eugia III, yes. Part of injectables is from Eugia III.

Okay. My second question is on Pen-G plant. Subbu sir, you mentioned now the capacity has reached up to 6000 MT on an annualized basis, right. So, when you go and discuss with government for the PLI benefit, what kind of scale up by then you are expecting and what is the amount?

No, we are not running all the fermenters, we are running only 40%-50% of the fermenters. We have represented to the government and as and when any policy changes take place, we will ramp it up in a very short time.

But the current production, will that enable you for the PLI benefit or not? .

This current, yes, it is enabling me benefit. No doubt about it.

Okay. Okay, I'll get back in the queue. Thank you.

Thank you. We request participants to restrict to two questions and then return to the queue for more questions. Thank you.

Yeah, thanks for taking my question. My first question is on Pen-G. Subbu Sir, what would be the EBITDA loss contribution from Pen-G at the moment? And at what level do we breakeven on the Pen-G plant? And, second, let's say this MIP representation does not come through or gets delayed, what's the Plan B in terms of achieving breakeven?

That's a good question, Neha. As I explained to you, we have been improving on the yield, etc. We are nearing the breakeven from the current operations, etc.

Sorry to harp on this, Subbu Sir, but what would be given where prices are for Pen-G and Pen-G allied products, are we still cost competitive if we get to 8,000 tons per month [800 per month] production levels? Will we still be cost competitive?

Yeah, we are the biggest consumer of 6-APA and Amoxicillin, everything in the country. So, irrespective of that, we will produce it and then we will consume it ourselves. That will help me in terms of improving the overall capacity utilization and I also work on other necessary actions, we will work on that, to improve the capacity, which I would not like to share it now.

Understood. Okay, got it. My second question is on the US business. Swami Sir, are we seeing any change in the erosion trends? Actually, Yugandhar and Swami Sir, are we seeing any change in erosion trends in the market in the recent times? Obviously, one of our competitors has seen issues in their plant, how does that position us to probably scale up our business in the US on the back of that? Any color there?

Yeah, sorry.Neha, I am not sure I understood your question. You are talking about price erosion?

Yeah. So, my question is, have we seen any change in the price erosion trend in the US in the recent months? And with this disruption in one of our competitor’s plant, how does that position us to probably gain more volume in the market? Do you see that as an opportunity in the near term?

So, when we take it as a basket, we think we are close to neutral. We have a little bit of erosion with very low single digit, I would say it's closer to 1 for the quarter. And this is based on an overall basket of products. There are some increases, there are some decreases.

Understood. And, Yugandhar, any colour from you on the Injectable pricing? I think you said single digit erosion, has that increased in the recent months?

No, it is a similar trend. It is only thing, as Swami rightly said, they can be a one-off product here and there where the erosion can be higher or lower but on an overall level it is still single digit.

Thank you. The next question is from Tushar Manudhane.

Good Morning, Sir. Sir, on the EBITDA margin first, like your guidance of 20%-21% for FY26, now that Pen-G plant is largely stable, closer to EBITDA breakeven, Eugia related operational cost is largely done, probably inspection can only move up in terms of profitability from here on. So, if I have to extend this for FY27 maybe without considering the inspection outcome of Eugia III, how do we see the margin trajectory from here on?

I think we will be able to give a clear guidance once we come to know about the status of the Pen-G MIP, right, which hopefully it will happen very soon, maybe a month to two months’ time. So, we will be able to tell you very clearly in the month of February.

Got it. Sir, China plant operational cost, how much that is? Trying to understand that…

No, China, as on date in the quarter I will be incurring a loss of around maybe a million dollar but probably we will be able to achieve the breakeven between Q3 and Q4 and after that China will start moving up in the overall contributing to the growth of the EBITDA growth.

Got it. In fact, trying to understand that even without let's say MIP related benefit on Pen-G, still how much is the scope to improve the EBITDA margin from the current 20%-21% for FY26 or FY27?

Tushar, you are putting a lot of variables like don't consider Eugia III, don't consider Pen-G then it will remain the same because these are all the key drivers which is expected to take it up in the next year.

Understood. Sir, secondly on Europe, which has been sort of a robust growth for now almost 3 years and reaching a billion dollars, so given this size of the business do we think that we will be able to still sustain mid-teens sort of a growth over next 2-3 years?

Sure. Yeah, Tushar, thank you for raising this question. Just one interesting correction, we are now touching billion euros mark, whereas last financial year we were at a touching distance of billion dollars but now we are well on track for billion euros. And, yes, as you have seen in the last 3 years, QOQ we are demonstrating growth and considering my all major countries contributors - France, Portugal, Netherlands and Germany continue to demonstrate this growth trajectory. I am very confident in the coming quarters and period as well there will be sustained growth.

Got it, Sir. That's it from my side. Thank you.

The next question is from Bino.

Hi. Good morning and good evening. Subbu Sir, if I heard correctly, you said the EBITDA excluding Revlimid has improved 14% QOQ, is that correct?

That's right. That’s right.

Sir, what are the drivers of this? Is it mainly coming from lower losses in the Pen-G plant or is there something else to it?

That is also one and Sales has grown up by about 7%, Gross Profit also grown up by 10%. I think overall there is improvement across the businesses which is what driving the overall improvement of the EBITDA.

Okay. And the gross margin QOQ has gone up despite lower Revlimid, what has driven that? What has changed so much in the product mix?

See, one is, if you really see the formulation products have gone up this quarter compared to API, right. That is one small product change. And, second, if you really see Europe has been continuously growing, so the operating leverage is getting increased quarter-on-quarter which is also helping us. And the third point is, there is a product mix which is happening across US also. I may not like to get into the details in terms of which segment, which product, etc. but there is a good amount of product mix changing place in US which is also helping.

Understood. And Revlimid, was it minimal for the quarter and are we completely done with it?

It's a minimal for the quarter.

Okay. And next quarter will be close to zero?

Yes.

Understood! And, sorry, one last question on tax rate. For the first time we have been at a tax rate above 30%, is that likely to be the case for full year as well?

See, basically, some of the businesses are incurring losses, which you know, at a PBT level like Pen-G(Lyfius), some of the other businesses. We don't take tax credit on the losses. We will take only as and when it started making profit, we'll adjust it.

Okay. So, once they become profitable, the reported tax rate can fall below 25%?

Below 25%. Yes, you are absolutely right.

Understood. Thank you very much.

The next question is from Tarang Agarwal.

Hi, good morning. Couple of questions, Sir. Both on US and Europe, if you could give us a sense on what's the portfolio coverage currently? Specifically in US, how does Lannett help it improve say quantitatively and what are the steps to improve? And similarly in Europe, things get a little complicated in Europe because it's a confederation of many countries. So, if you could give a more granular insight on some of your major markets.

Let me talk about US first, Subbu. After that, probably Murali can talk about Europe or you can generally talk about other countries. As far as US is concerned, we have a prescription of about 10.2%, which is the largest. So, that tells you the coverage. It's very fairly large across all segments and we have been growing. We have been growing. Now, this quarter we have seen some momentum in terms of seasonality, so that has also helped us. That's as far as the US is concerned.

Sir, if I could just chip in. I mean, I understand that you've got north of 10% volume share but does it come after covering say 50% of the market or does it come after covering 60% of the market? It's really that's the metric that I was looking for.

So, I didn't get your question. I don't know what is that 50% and 60% you are talking about. You are talking about products?

Portfolio coverage, Swami.

Yes.

Oh! Portfolio coverage. Okay. So, we are into all segments, all therapeutic areas. I would say that we are probably around 50% or more but, you know, it does not cover all the presentations of a product. For example, now foam, let us take foam as one, some of the derma areas we have still not covered. So, I would only say that we have significant coverage in the therapeutic area. So, I don't have the exact percentage but that's where we are.

Sure.

Tarang, maybe I can touch upon the European part of the query. Murali here. So, you touched upon the portfolio breadth and also the complexities in Europe under which we are operating in. So, let me touch the second point. Yes, we are talking of multiple regulators, multiple language packs, different language packs and fragmented market and different market archetypes, whether it is a tender generic market or pharmacy driven or prescription driven. Across all these, we have demonstrated our success. There is a very well-set system - frontend, commercial infrastructure, well-motivated team acting across these different markets and that way we are able to overcome the challenges. In addition to the regulators, we are also answerable to the European Commission, European Medicine Agency. Newer challenges like on nitrosamine we keep hearing but we are able to overcome all these with all our efforts.

Sir, when you say represented markets, what do you mean? Because I felt there was an asterisk to it when you called the term represented market.

That’s where I qualify telling some of the biosimilars range and inhalation range which I have excluded but, otherwise, the generic-generic market in which we are operating in we are able to have over 80% of the portfolio addressed.

Okay. Last on CapEx.

Tarang, in terms of the CapEx, as we communicated, we are not going for any major greenfield projects etc. What we have done, the major CapEx during the quarter is on account ofthe arrangement with a global pharma major for which we have to pay the milestone payments which we have been doing. Plus, the US also has put the new

Okay. Yeah, any comment on biosimsimilars because you specifically spoke about CapEx there, Sir?

Tarang, hi. Biosimilars, as you know that we have invested in capacity expansion 1.5 years ago. So, this is not a new CapEx per se. I told you in the Earnings Call some time back that we have we are adding to two 2,500 litres mammalian bioreactors to the existing CuraTeQ facility. Now, after 18 months of the CapEx approval or maybe 2 years of CapEx approval, those lines are now getting commissioned. Likewise, to make us commercial ready and to ensure a good supply chain, we also needed to add filling capacities. So, as part of the last year's, (2024), CapEx approval, we are adding a vial filling line to the filling capacities at CuraTeQ. So, those equipments will come on line. I think the bioreactors will come on line, will be fully commissioned and qualified this quarter. The filling line will be fully on line and qualified by June or the July quarter next fiscal.

Wonderful, Sir! And I don't know if this was called out before but congrats on the expansion of scope with MSD. Thank you.

Thank you.

The next question is from Shyam Srinivasan.

Yeah, hi. Good morning. Thank you for taking my question. Dr. Satakarni, just sticking to biosimilar commercialization and even the pipeline updates, if you could share, please. Thank you.

So, it's pretty interesting in terms of the last quarter that we had.

Yeah. Thank you, Sir. Just one sub question is on the new biosimilar guidelines in the FDA and from a competitive intensity standpoint do you now see a lot more of your peers who have probably skirted this opportunity, I'm talking Indian peers, to start looking at it seriously and are you worried about it at all?

It's a very interesting question. I can give my perspective. In October’2025, the FDA released a new draft guidance aimed at streamlining and simplifying the biosimilar approval process. Now, the way I read the guidance, the draft guidance, is the key regulatory shift, the language is important, please read the language that I am talking about, the key regulatory shifts include reducing the reliance on comparative efficacy studies. So, it is not about eliminating comparative efficacy studies at this point but, eventually, just like Health Canada, European Medicines Agency and MHRA, I believe USFDA will also reach a point where the need for Phase 3 efficacy studies will be removed. But right now, it is about reducing the reliance on comparative efficacy studies and eliminating the requirement of interchangeability. And if you are following my Earnings Calls for the last 2-3 years, I have been telling that interchangeability designation will go.

Yeah.

So, that is happening. So, there is a clear mandate on eliminating the requirement for interchangeability studies and I have not invested in any interchangeability or switching studies in my portfolio and reducing the reliance on comparative efficacy studies.

Got it. Thank you and all the best.

Thank you.

Thank you. The next question is from Kunal Dhamesha.

Hi. Thank you for the opportunity. Since we are quite confident of getting minimum import price for Pen-G, if you could highlight that would it be only for the Pen-G HS code? And, secondly, what is the range that we are looking at? What is the representation that we have made in terms of what should be the minimum import price? That would be helpful.

Kunal, all the questions are very relevant because it is already in the review by the DOP and the government, we will not able to comment on any of your questions.

Okay, sure. And let's say MIP ideally should not have any impact on the internal consumption of Pen-G for us, right. It only kind of should affect the external sales. Is that the correct understanding?

No, it is not the correct understanding. Once again it is linked to your first question, your understanding is not right but I will let you know after some time because it is linked to the first question.

Okay, I still don't get it so, yeah. Because internal consumption would not get impacted by MIP.

Internal consumption, you have to look into the supply chain as a whole.

Right.

Right, so that is the reason.

But we should be able to offset our internal consumption of Pen-G or 6- APA.

No. Ultimately, Kunal, the representation includes Amoxy also. That is having a bearing on the market price where we both converge, both external and internal.

Yeah. But for us 6-APA shouldn't be an issue, right? We primarily import 6-APA.

Ideally, it should not be an issue.

Okay. So, MIP is not basically leading to that internal consumption part for 6-APA. Amoxy maybe, not 6APA.

I will explain to you; give me a week's time, I'll explain to you.

Sure. Sure sir. And, secondly, for Dr. Satakarni Sir, would you say with all these changes, potential changes, in regulatory landscape, would you say that the plant compliance and good manufacturing practices would be the primary entry barrier for the new player for the biosimilar business given that PK studies, etc., those are not very costly to conduct?

Yeah, I mean I will repeat my answer. So, there are three things here.

Sure. And, Sir, lastly on where do we stand on the plant inspection from USFDA perspective? I mean, what is our preparedness here? When do we expect our first filing and USFDA to inspect the plant?

So, based on my earlier guidance, I was hoping to file a Trastuzumab with USFDA. But considering my supply commitments and it's a lyophilized

Sure, Sir, it's helpful. And all the best. Thank you.

Thank you.

The next question is from Surya Patra.

Thanks for the opportunity, Sir. My first question is on the European market. Is it possible to now share what is the injectable revenue mix within Europe now? And what is the margin performance for the entire European business now we are having?

Yeah, the injectable component is about 10%. We are touching [EUR] 100- million mark. Here, what I wish to state is not all of the products are in copious supplies, we are waiting for some of these products to kick in from Eugia III. So, at that time, we will be having a quantum jump that we expect in FY27.

Okay. Okay. So, means we are anticipating to reach towards 20 level but currently high teens. That is what is the...

Yeah, that’s what.

Okay. Second point is that we are seeing a kind of interesting development on the growth market front by creating multiple kind of fully-owned subsidiaries like that. So, could you discuss something, your kind of moves and initiatives on the growth market side?

Surya, on the overall if you take the rest of the growth markets, they are not concentrated in one but across all the things. And where we are looking for a good impact coming next year is the China one. And other markets like Canada, Brazil, and all the markets are growing reasonably well,the new market which is going to add to the volume, I mean, topline as well as the EBITDA level is the China one which we had talked about it earlier.

Okay. Sir, is it right to think this way that given the large volume opportunity in the name of GLP what is upcoming, so to participate there aggressively in the majority of the emerging market are we becoming a bit aggressive and, hence, creating platforms and presence and positioning? And also, what is our thought process about India, about GLP also, if y can?

No, on the GLP piece, I think we have been very clear that we will be doing this product on our own at our Vizag plant and we will be in the second phase of launches and we are looking at filing the products across all markets sometime next year, okay.

On the India front, probably we may do some small acquisitions, may not be a big one. We will not do a big one because we'll just need to, I mean, slowly take off for the Indian market. As of now, we are doing around a turnover of something like ₹275-₹300 crore per year and probably we may take it by another ₹100 crore; like that only we will do.

Okay. Just last one bit, Sir, about the acquisition plan for the capital allocation plan. So, we have been acquisitive also, so do you have any plan for any larger acquisition, if that is possible? Or what would be our thought process about inorganic growth going ahead?

See, certainly, wherever we are getting opportunities which create a new market or new technological platform. We'll not go do specifically for the existing products.

Okay, okay. Sure, Sir. Yeah. Thank you. Wish you all the best.

Thank you.

The next question is from Kunal Randeria.

Hello. Good morning, Sir. Sir, my question is regarding some of your new plans. So, for example, in China you will spend around $145 million, so I'm just wondering what kind of asset turnover should one expect? And when can this plant achieve its peak sales potential?

I think the plant started invoicing since April this year. We will be able to achieve the breakeven in the first year itself. And going forward what we are trying to see is that in the next three years we should be able to take the turnover to triple digit. Generally, the productivity there is high and the margins will be good. So, we are trying in 2-3 years’ time we will be able to achieve triple digit turnover number.

So, should I kind of assume in 3 years or so you could have an asset turnover of 1x. Maybe around $150 million odd [turnover] is a potentially likely number?

Could be.

Sure. And, secondly, Sir, you did touch upon this M&A that you are looking to do. But you know, there was some news item earlier that you were looking to buy Zentiva

No, as I said, first of all, we said very clearly that we have not given any binding offer, okay. Second is, it is not that every M&A which we are looking into that we are going to buy it, we will go case by case and what are all the synergies, how it will help the company as a whole, institution as a whole and what are all the new technological things which we are able to achieve, new market front, right.

Sure, Sir. No, I understand that. My question was more like, would you be comfortable spending, you know, levering up and maybe going for a $4 billion kind of an acquisition? Not Zentiva specific but more like, you know, $4 billion kind of payout. Would you be comfortable doing that?

No, see, Zentiva also, if you really see, assuming $4 billion, we have not given any number, assuming $4 billion the interest coverage will be more than 2 times, 2.5 times, right, even assuming 100% leverage. So, it all depends upon the case to case and Zentiva is a very unique case, that's what I've been telling.

Got it, Sir. Got it. Thank you.

The next question is from Bino.

Hi. Thanks for the follow-up question. One question on the biosimilar Xolair, in your understanding by the time you reach the market how many other players could be there in the US market?

It depends on product by product, Bino. So, with Omalizumab, which is our primary product for the US market, a potential $4 billion global market with around $2.5-$2.6 billion coming from the US alone, we will be the third player. As of today, we'll be the third player. The product is in two indications - chronic spontaneous urticaria and respiratory asthma. Very recently the innovator also got an approval for accidental food allergies, which is supposed to grow the market significantly.

Understood. Thank you very much.

Thanks, Vandit. Thank you very much everyone for joining us on the call today.

Ladies and gentlemen, on behalf of Aurobindo Pharma, that concludes today's conference. Thank you for joining us and you may now disconnect your lines and exit the webinar. Thank you.