Alivus Life Sciences Limited (ALIVUS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to Alivus Life Sciences Limited Q3 FY '26 Conference Call. [Operator Instructions] I now hand the conference over to Ms. Soumi Rao from Alivus Life Sciences. Thank you, and over to you, Ms. Rao.

Good evening, everyone. I welcome you all to the earnings call of Alivus Life Sciences Limited for the quarter ended December 31, 2025. From Alivus Life Sciences, we have with us Dr. Yasir Rawjee, our MD and CEO; and Mr. Tushar Mistry, our CFO. Our Board has approved the results for the quarter ended December 31, 2025. We have released it to the stock exchanges and updated it on our website. Please note that the recording and transcript of this call will be available on the website of the company. Now I'd like to draw your attention to the fact that some of the information shared as part of this call, especially information with respect to our plans and strategy, may contain certain forward-looking statements that involve risks and uncertainties. These statements are based on current expectations, forecasts and assumptions that are subject to risks, which could cause actual results to differ materially from these statements depending upon the economic conditions, government policies and other incidental factors. Such statements should not be regarded by recipients as a substitute of their own judgment. The company undertakes no obligation to update or revise any forward-looking statements. Our actual results may differ materially from these expressed or implied by these forward-looking statements. With that, I invite Dr. Yasir Rawjee to say a few words. Thank you, and over to you, Doctor.

Thank you, Soumi. Good evening, everyone, and welcome to our Q3 FY '26 earnings call. Thank you for joining us, and I would like to extend my warm new year wishes to all of you. Before we discuss the company's quarterly performance, allow me to outline the broader industry landscape that is influencing our business environment. The global pharma industry continues to evolve amid a dynamic macroeconomic and regulatory environment. Demand remains resilient, supported by an aging population, rising chronic disease prevalence and sustained healthcare spending. We are seeing a gradual pickup across generics, APIs and CDMO services, while tighter regulatory scrutiny and supply chain derisking are reinforcing the need for quality compliance and reliable partners. While some parts of the market continue to face near-term challenges, the long-term outlook for the pharma industry remains encouraging. With this, let me draw your attention to our performance for the quarter and 9 months FY '26. For Q3, we reported our highest ever revenue of INR 673 crores, registering a growth of 14.4% Q-o-Q and 4.8% Y-o-Y. Performance during the quarter was strong across the board with business firing on all cylinders. We saw a strong recovery in the CDMO business as new projects began contributing alongside continued momentum from the API Generics business in reg markets such as Europe, Japan, LatAm, ROW and India. Recording robust performance and contributing meaningfully to overall revenue expansion. As expected, GPL business also saw recovery during the quarter. Revenues for 9 months stood at INR 1,863 crores, registering a growth of 7.2%. More importantly, our non-GPL business grew at 16.1% driven by growth across markets. This reflects the underlying strength of our diversified business across geographies, and we expect this to continue its momentum in the overall growth, driven by strong demand across all markets. Moving on to our profits for the quarter. Our gross margin for the quarter was 58.9%, up 330 bps Y-o-Y. Our EBITDA margin for the quarter was 36.4%, up 510 bps Y-o-Y, our highest ever reported quarterly margins. Margins improved on the back of new product launches, favorable product mix and enhanced operational efficiencies. I am pleased to share that our CDMO segment has made a strong recovery, delivering an exceptional performance in Q3 with revenue growth of 100% Q-o-Q and 85.3% Y-o-Y, in line with our expectations for a second half turnaround. This growth was driven by robust traction in the newer CDMO projects, supported by revenue from the regular CDMO projects. Our expansion initiatives at Solapur, Ankleshwar and Dahej are progressing as planned. Our pipeline remains robust with 595 DMF and CEP filings globally as on December 31, 2025. The high potent API portfolio remains on the development path with 27 products in the active grid, representing a total addressable market of $70 billion. Of these 9 are validated, 7 are in advanced stages of development and the remaining 11 products are progressing through lab development stages. Going forward, we continue to expect high single-digit revenue growth for FY '26, driven by strong and profitable expansion across our diversified non-GPL segment and the continued ramp-up of CDMO projects. We remain confident in maintaining healthy margins and expect it to range between 30% to 32% going forward, higher than our earlier guidance of 28% to 30%. This is catalyzed by operational efficiencies and contributions from new product launches, a reflection of the strength and resilience of our business model. So with this, I now turn the floor to our CFO, Tushar Mistry, who will walk you through our financial performance for the quarter in depth. Tushar, over to you.

Thank you, Dr. Yasir. Good evening, everyone. Welcome to our Q3 FY '26 earnings call. Before we take questions from you all, I would like to highlight the key performance updates for the quarter and 9 months ended 31st December 2025. For Q3 FY '26, revenue from operations stood at INR 673 crores, a growth of 14.4% Q-o-Q and 4.8% year-on-year. Gross profit for the quarter was INR 397 crores, up 16.9% quarter-on-quarter and 11.2% year-on-year. Gross margin for the quarter stood at 58.9%, driven by new launches, product mix and operational efficiency. EBITDA for the quarter was at INR 245 crores, up 26.5% Q-o-Q and 22.1% year-on-year. EBITDA margin for the quarter was 36.4%, up 340 basis points quarter-on-quarter and 510 basis points year-on-year. These are the highest margins we have delivered to date. PAT for the quarter stood at INR 150 crores with PAT margins at 22.3%. For 9 months FY '26, revenue from operations stood at INR 1,863 crores, a growth of 7.2% year-on-year. Gross profit for 9 months was at INR 1,067 crores, up 13.6% year-on-year. Gross margins for 9 months stood at 57.3%. EBITDA for 9 months was at INR 620 crores, up 22% year-on-year. EBITDA margin for 9 months was; 33.3%, up 400 basis points year-on-year. PAT for 9 months stood at INR 402 crores with PAT margins at 21.6%. Turning to the therapeutic mix. CVS and CNS continued to lead the growth during the quarter with both therapies contributing 51% to the top line. Chronic therapies contributed 66% of the top line in Q3 FY '26. R&D expenditure for Q3 FY '26 was INR 23 crores, which was 3.4% of our sales. For 9 months FY '26, it was INR 66 crores, 3.5% of our sales. On the balance sheet and cash flow movement, CapEx for the quarter was INR 105 crores and INR 218 crores for 9 months. For FY '26, we now guide the CapEx to be at around INR 450 crores compared to our earlier guidance of INR 600 crores. The balance of INR 150 crores is expected to be deferred to FY '27. We continue to remain a net debt-free company with strong free cash flow generation of INR 221 crores in 9 months FY '26 and the cash and cash equivalent of INR 733 crores on the books as of 31st December 2025. In closing, we are confident that the continued demand and improved performance in H2 FY '26 will help us achieve steady growth for the year. With that, let us open the floor for Q&A.

[Operator Instructions] The first question is from the line of Pratik Kothari from Unique PMS.

Sir, one question. I mean, despite -- I mean, if you look at our numbers over the last 2, 3, 4 years, so despite PLI going away, despite R&D spend, which used to be 2.5-odd percent of sales to ramping it up to 3.5%, 4%, we still have been able to maintain margins and now we are kind of highlighting that we'll be able to even go beyond that. So this margin differential from what it was 2, 3 years back to now is much higher than what is being reported because of these things that are happening below. So if you can just highlight what has changed in terms of our business, what is it that we are doing? What is it that we're intending to do, which is helping with all of this?

Okay. So see, there are 3 elements here. One is that CDMO has begun to contribute more. There's also launches that are happening across markets. And usually, newer products tend to get us much higher margins, okay? I mean in the first couple of years, we can expect to see pretty good margins with newer launches, and then it begins to settle down. So we've had both of them. Plus on the operational side as well, we've had -- we performed a lot better in terms of both raw material costs as well as on the operations side. So all this put together, and this is sustainable, okay? I mean the thing is that, that's why we feel confident in guiding to a higher margin. So this is what has done it, right? I mean we were also a little bit -- when PLI went away a couple of years ago, I mean, we were also wondering whether we'll be able to bring it back. But we've been able to do that. And it happened steadily. If you see the last few quarters, right, we have been inching up. And so that confidence is very high that we can do this and continue the momentum.

Correct. And sir, lastly, on this capacity. So in terms of a breakup, I mean, it seems there is some delay in this capacity coming up. Also in Solapur, it seems the capacity that we had planned or guided earlier, it seems to be much lower, be it on the first backward integration or even the Phase 1. So if you just highlight what has changed, how is -- from what we had said earlier to now?

Solapur is a little delayed. It's not going to impact business because see, more than 80% of our business comes from the reg markets. Okay? And the Ankleshwar, Dahej capacity expansion is well on track. It -- and it will deliver and basically give us the runway for at least the next couple of years for the reg markets. So no challenge there. We have Mohol as well, right, to service the ROW markets and Kurkumbh. So all that put together puts us in a reasonable position with respect to capacity. Solapur is delayed by like 3 months. So we expect Solapur to start operations by July of this year.

Sir, not delay, I mean, more like first phase, you wanted to do about 600 KL, now we are doing about 450, 500 KL. So even the capacity that we are putting up initially has changed?

Slightly because see, we -- as we moved along, right, there's been a fair amount of mapping that has happened, right? And we've always said that our capacity expansions are going to be calibrated, right? Because there's no point in building too much capacity and not utilizing it. You just create more under-absorption, right? So there, we've sort of gone with a reasonable product mapping that has happened already for Solapur. And as soon as the plant starts in July, we'll be able to see a fair amount of utilization of the asset.

Correct. And in your opinion, sir, how long does it take for -- like Solapur, you start with ROW markets and then gradually shift to regulated markets. So what would that time line be?

See, if we -- we are going to validate products in Solapur this year itself, this calendar year. The idea here is to go for shortage products so that we can trigger an FDA inspection soon. So there will be quite a bit of validation happening as well in Solapur apart from the ROW markets servicing the demand from ROW markets. So it's going to be a kind of dual approach. And hopefully, if we can trigger an inspection in a year's time, then I mean, by FY -- late FY '28, we should see regulated products happening from Solapur as well.

[Operator Instructions] The next question is from the line of Ahmed Madha from Unifi Capital.

Just to understand the margin bit a little better. Can you elaborate or explain a little granularly? I think in presentation, you have mentioned that 3 levers. One is the new launches, second is the CDMO business, and third, the efficiencies. If you can break it up and explain a little bit better how the -- what is explaining the margin improvement in current quarter and your overall guidance as well?

So let's go backwards. When it comes to operational efficiency, that impacts margins pretty much across the board, okay? Because there's -- I mean, it's all common there, right? When it comes to launches, obviously, it's those particular products that we've launched that are contributing much higher margin. And again, I explained in the last call that we've had launches even in Europe, in China, in LatAm, and Russia, okay? So these -- all these launches have contributed very significantly to the margin. Interestingly, the same products will get as patents expire in Europe as well as North America and so on. So this sort of runway with the newer products is going to last us for some time. And that's the second lever. With respect to CDMO, we had expected that Project 4 and Project 5 would kick in, in second half, and that's exactly what has happened. So Project 4 has started off in H1, but the volume pickup has happened much more significantly in H2 and Project 5 has also started kicking in. So again, this also being sustainable going forward is something that gives us the confidence that we can sort of get to those margin levels pretty comfortably.

And when you say efficiencies, is it in terms of yields and the raw material costs? Or is it below the raw material cost line item?

It's both. It's both. So I mean, there's been a fair amount of work on key products that has started giving us that benefit on better yields, so basically less utilization of raw materials. And even on the energy side and basically, we are getting lower overheads on the products. So that has also helped us.

Okay. And in terms of CapEx, you explained to the earlier participant regarding how it doesn't impact our growth. So I mean, with the little bit of delay, a little bit of capacity sort of fine-tuning in terms of how much you will put, does that sort of risk our growth for next year? Or we'll have enough capacity and from existing as well as from Ankleshwar, Dahej from July to deliver us a decent growth for next year? And you can also please comment how you see the next year growth based on the launches and the existing products?

The capacity is no longer a limitation, okay? We were in a sort of bind sometime back about 1 year, 1.5 years back when we were running neck to neck. With the recent brownfield expansions that we've had at Dahej and Ankleshwar and they are going to become operational in the second quarter of next year, both Dahej and Ankleshwar, we should be fairly comfortable to service the reg markets. And like I said earlier, both these expansions on the brownfield side should give us a runway of at least another 2 years comfortably for the reg markets. When Solapur coming in, we have a little more leverage in terms of moving the ROW products into Solapur. And that can further free up capacity if necessary. So capacity is not a challenge anymore. With respect to the growth for next year, again, I'm talking in terms of a fair amount of visibility that we have. And so we want to continue to guide to a high single-digit growth for next year as well. But certainly, the margins will remain in the 30% to 32% range.

Got it. And in terms of -- so our CDMO business, the number of projects that we have, is there any more visibility for new projects getting added? Any conversations are at the second of sort of conclusion or the project addition will be gradual from here on beyond the 5 we have, I'm assuming 5?

Yes. So there is good traction on CDMO. Hopefully, we'll conclude 1 or 2 projects by the end of -- middle of the calendar year. So let's say, first quarter, we should conclude. Things are going well. We have even supplied some early quantities to the customers. So let's see how that goes. Again, because we have focused on the reg markets here for CDMO, there's always that lag time in terms of approval. But to lock in, I'm pretty confident that by first quarter of next year, we should have -- we would have brought in 1 or maybe 2 projects more into the...

Sure. And in terms of pricing environment, has there been any improvement or it continues to be sort of a significant erosion kind of an environment? And from our portfolio perspective, new launches have done well, but is there sort of a pricing issue industry-wide for the sort of base business, existing molecule? Or has there been any change or is it steady state?

I would say it's fairly stable. I mean, on our entire bucket, we are guiding to 4%, 4.5% margin erosion. So it's okay. I mean, we are comfortable. Plus, what happens is we make sure that on those products where we are likely to see a price erosion, we do have the next-generation process lined up. So margins are not going to get impacted as a result of price erosion.

Last bookkeeping question. In the presentation and press release, we have free cash flow number. Tushar, if you can please share the operating cash flow number for 9 months or Q3, either way?

Yes. The operating cash flow is about INR 439 crores before CapEx. So that's the operating cash flow. This is for the 9 months that I mentioned.

The next question is from the line of Yog Rajani from Omega Portfolio Advisors.

My question mainly had to do with the company's growth plans, given that we have a high level of capability and a lot of cash on the balance sheet, why -- is there any reason we aren't willing to be more aggressive either with our organic expansion or our inorganic expansion?

See, organic is pretty well scripted, okay? In terms of the portfolio buildup, the choice of molecules that we are making, the capacities that we are building up to service the growth in the business through launches -- with new launches and so on coming up in the next few years, right? So that is pretty much on track. I hear you, right, in terms of the inorganic part. But see, we want to be sure that -- and even that is well defined within our plans, right, in terms of what kind of where we need to go in terms of inorganic. So we are looking out. It's not like we have shut our minds to that. We are pretty clear that when the right opportunity comes along, we will take the right steps. So -- but obviously, we are not just going to do things willinly. I mean it's hard earn money, and we're going to make sure that it's deployed well.

Okay. Great. My second question had to do with the R&D. As I understand, we will be inaugurating a new R&D facility. So how are we trying to improve our R&D capabilities over the next few years? If you could share some idea with us, like what would it be like?

So there's going to be -- well, I won't say improve, but I would say basically add to what we already have, right? We are turning out molecules pretty quickly and also the complexity of molecules that we have is increasing in terms of complexity. So R&D has been pretty productive in Alivus. The question, though, is what else can we do? So we are looking very -- in a very focused way at flow chemistry because it has already yielded good commercial benefit and that effort is going to increase substantially. There's also opportunities on the green chemistry side, which we are working. And I keep talking about API plus from time to time. So in order to do more there, we are adding things like particle engineering and so on to benefit what we already have for more enhanced formulations. So that -- all that put together is going to give -- make our R&D even much more productive and give us more in terms of new business opportunities.

Okay. Fair enough. My final question is about the risk we are facing. So if you could comment more on the risk we're facing either in terms of, say, getting more CDMO contracts or in general, the market environment, if there's any comment you could give us about that?

Well, I mean, in terms of risks, the geopolitical situation is always something that we worry about because we have an international business, and we don't know what part of the world will heat up when. I mean you know how things are sort of happening everywhere, right? So given the fact that we have a global business, right, something could get impacted somewhere, but then that's also a positive because no particular area in the world is going to impact us very badly, right? I mean this we've seen during COVID, we saw this even before COVID, right? Where we were basically -- because we were well diversified across geographies, right, we were able to manage small hits here and there. So the risks are, I mean, not quantifiable at this point, right? Things seem to be going pretty well. But like I said, the geopolitical environment is extremely fragile right now. So we don't...

My question was more with regards to the CDMO business. Do we see any threats to the CDMO business because it's still a young business, which we plan to grow. So are there any risks you're facing in getting more contracts towards the business? Or is everything all right on that front?

No. In fact, things have only become better because, I mean, having left the Glenmark umbrella, I mean, we are no longer looked at as a kind of part of a big pharma group, right, that innovators do eye with a bit of suspicion, right? Although even when we were under the Glenmark umbrella, we were operating independently, right? And there was no real interference or any kind of thing from the parent. But still, it's a perception, right? People tend to look at you differently. So I mean, now that, that has also gone, we are looked at more favorably by many more companies. So I don't see a risk. Again, we basically are banking on the strength of a very strong process development platform, which we can customize for our customers, along with a well-oiled manufacturing platform, again, with all approvals from major regulatory agencies.

[Operator Instructions] The next question is from the line of Krishnendu Saha from Quantum Asset Management.

[indiscernible] question just Doctor is it ...

Sorry to interrupt you Mr. Saha, we're unable to hear you clearly, sir.

Can you hear me now?

Your voice is sounding very muffled.

Can you hear me now?

Yes, please go ahead.

Yes. When you speak about implementing flow chemistry, are we going to implement it all across -- like what percentage or what portion of our total manufacturing right now is in flow chemistry, so we could generate more cost savings or efficiency in that manner?

So we are targeting the bigger volume APIs that we have, okay? And let me be clear that not everything is amenable to flow, okay? So in a batch process, many times we do in situ conversion and we have like 3 chemical conversions happening in 1 batch. That is not amenable to flow. But where you have long reaction time, a lot of energy consumption, excessive reagents that are being used, there's a good possibility to use flow to optimize both material usage as well as energy usage. So there, it can have a big impact. We've had a very successful product that we brought down the cost to 40% of what it was, okay, in batch.

So shall we go ahead?

Sorry, could you please repeat?

Future -- like the new product revenue-wise, could be implemented -- could we implement more flow chemistry in the future? Or this is -- or could it be limited to some, some very limited portion of the revenue in the future? So let's put it this way. You have high potency APIs, which will come for '28, '29 onwards, will they be flow chemistry or will they be batch?

No, no, high potency doesn't have the volumes to basically enable flow. There is no point.

Okay.

High potency is done in very small reactors.

I get that...

To make small batches and that's more efficient in terms of utilization of the platform. Flow would be used for higher volumes basically.

Okay. I get it. So there's some still scope to implement for the flow chemistry in the future molecules. Right? Just on the turnover side, we are 2.3 right now. Is it like -- and we have the best margins in the last 4, 5 years and the lowest turnover asset front. So is there any scope of including the asset front in the future? Or it will be staying like that to 2.3?

Krishnendu, this 2.3 is on the basis of our existing asset base, which has a historical asset base. Now you would have seen that we are currently in the CapEx cycle. And when you are generally into an investment phase, this asset turnover will come down. We expect it to come down below 2 in the short term. But eventually, we want to stabilize this at around 2 level.

2 level. I see -- and still maintain the same margin, even if it comes down, we still maintain the same margin.

Yes.

And the last question on my side, do we get into the future plan to get into innovation, drug research innovation, pure innovation, novel molecules, something like that? Do we have anything on the thought process?

No, no.

The next question is from the line of Karthik Swaminathan from Catamaran.

Sir, my question is that if we look at the reactor capacity expansion plan, you are going from 14 -- sorry, 1,400 kiloliters to 2,100 kiloliters over the next year, which is like almost a 50% increase in reactor capacity. But when you're talking about revenue growth, you're only talking about a high single-digit growth. So I just wanted to understand why is there such a large difference? I mean, obviously, I understand price erosion and other components will be there. But if you could help me understand why such a big difference in terms of capacity and revenue growth?

So 400 KL is just backward integration, right?

Right.

And this we are doing to protect the larger molecules that bring in like INR 40 crores, INR 50 crores of revenue per molecule. So I mean, we've got to protect those businesses from a supply security perspective as well as from a margin protection. So that will be deployed for BI. And then the remaining is basically for the growth. And like you said, there's price erosion. So the volume growth is much higher than what we are seeing, okay? So that should cover us up. Plus we've been operating at 90% capacity. And that can be pretty risky because if new business comes along, then we don't have any capacity, any kind of surge capacity to be able to grab that business.

The next question is from the line of Nitin Agarwal from DAM Capital.