Aurobindo Pharma Limited ($AUROPHARMA)

Ladies and gentlemen, good day, and welcome to Aurobindo Pharma's Earnings Conference Call for Fourth Quarter FY '26. [Operator Instructions] Please note, this conference is being recorded. I now hand over the conference to Mr. Varun Mali. Thank you, and over to you, sir.

Thank you, Vandit. Good morning, ladies and gentlemen, and welcome to our fourth quarter FY '26 and full year FY '26 Earnings Call. I'm Varun Mali from the Investor Relations and Corporate Communications team. We hope you have received the Q4 FY '26 financials and the press release that was sent out yesterday. These are also available on our website. I would now like to introduce our senior management who is on the call with us today, represented by Dr. Satakarni Makkapati, CEO, Aurobindo Biosimilars, Vaccines, Peptide businesses and Director, Aurobindo Pharma Limited; Mr. Yugandhar Puvvala, CEO, UGI Pharma Specialties Limited; Mr. Swami Iyer, CEO, Aurobindo Pharma USA; Mr. V. Muralidharan, CEO Europe Formulation business; Mr. S. Subramanian, CFO, Aurobindo Pharma Limited. We have also requested Dr. Ashish Anvikar to join us for any questions related to Acrotech Biopharma USA. We will now begin the call with summary highlights from the management followed by an interactive Q&A session. Please note that some of the matters we will discuss today are forward-looking, including and without limitations, statements relating to the implementation of strategic actions and other affirmations on our future business, business development and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors, which may cause developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect in future events or circumstances. With that, I will now hand over the call to our CFO for the business highlights. Over to you, sir.

Thank you, Varun. Good morning, and a warm welcome to our Q4 FY '26 earnings call. I'm pleased to begin the call by sharing that the company has delivered an excellent quarter and a strong financial year. Underpinned by sustained growth and reflected in our highest ever revenues and [indiscernible] EBITDA margin, both quarterly and annual. For FY '26, revenue stood at INR 3,633 crores while EBITDA came in at INR 6,856 crores, translating into a healthy EBITDA margin of 20.4%, which is in line with our revenue as well as EBITDA data for FY '26, supported by favorable product business mix and other factors. For Q4 FY '26, revenues were INR 8,853 crores, and EBITDA stood at INR 18 crores resulting in a robust margin of 20.3%. During the both the quarter and financial year, we witnessed good performance across our businesses, primarily driven by stable volumes. New product launches and sustained momentum in regulated markets supported by pricing conditions. Despite insignificant development product sales compared to Q4 FY '25, EBITDA before ForEx remained flat year-on-year growth and grew by 2% on quarter to INR 1,800 crores. Net profit increased by 2% year-on-year to INR 9 crores. For the full year FY '26, the revenue grew by 6% year-on-year to INR 33 crore 653 crores. [indiscernible], our full year revenue growth was 9.5% and for Q4 year-on-year, [indiscernible] growth was 15.3%. In U.S. terms, it was 7%. Gross contribution also reached the highest ever absolute level of INR 165 crores, reflecting margin 60%. That is an improvement of around 100 bps. The EBITDA before ForEx and other earnings grew by 4% year-on-year to INR 6,800 crores. Combination business. Let me now take you through the business side light, formulation business. Formulation business in Q4 FY '26 witnessed a growth of 5% year-on-year to INR 66 crores and contributed around 86% of the total revenue. The revenues are mainly supported by growth across the market. APA business. For quarter, API business contributed around 14% and revenues improved by 25% quarter-on-quarter to INR 2,200 crores. For the full year, API business contributed 12% and from a revenue of INR 147 crores. Here, for the quarter, revenue from U.S. formulation remained flat. On a constant currency basis, U.S. revenue decreased by 18% year-on-year to USD 387 million. This is mainly on account of IAG reverent sales in Q4 FY '25. Our larger product portfolio helps us to maintain optimally, they maintain the price stability. Revenue from U.S. formulation for the at INR 4, INR 48 crores or USD 631 million, with the growth primarily accounted by lower Europe. For the quarter, Europe formulation close is INR 2,795 crore an increase of 30% year-on-year. In constant currency terms, the Europe revenue was EUR 261 million, against EUR 236 million of Q4 FY '25. The growth was driven by robust performance across all key European geographies. And first time, we have achieved for the full year, European formulation achieved a significant milestone of EUR 1 billion revenue in terms of annual revenues, growth markets. For the quarter, gross market revenue stood at INR 980 crores with a year-on-year growth of 25% and quarter-on-quarter growth of 13%. For the year, growth market revenue was increased by 10% to INR 3,495 crores. In U.S. dollar terms, revenue growth to USD 397 million from USD 376 million in the previous RV business. For the quarter, year business revenue increased by 6% year-on-year to INR 38 crores or USD 36 million. For the year, AMC revenue increased by 33% to INR 1,384 crores or USD 157 million, driven by continued business opportunity, partly offset by pricing pressures, specialty and injectables. Farther portent global specialty and injectable business reported a revenue of USD 122 million. HG development products set the growth business grew by 13% year-on-year. For the full year, revenue stood at USD 53 million yet even growth was 12%, mainly due to improved supply, new product launches, partly offset by pricing pressure. Now going on to other items. The gross contribution product, the highest ever absolute levels of INR 5,424 crores. Gross margin stood at 61.3% increase by 153 bps quarter-on-quarter. R&D expenditure stood at INR 400 crores for the quarter. For the year, R&D expenditure stood at INR 1,590 crores, which is 5% of revenue. Net CapEx for the quarter is 82 million And for the year around 341 million, which includes capacity enhancement projects and plant expansions and CDM over. Improved profitability coupled with the improvement in working capital. The business derated a net cash inflow after payment of purchase consideration of control laboratories, non-oncology business around USD 32 million. As a result, the net cash position of the investments at the end of March 26 improved to $317 million from the net cash position of $276 million in December 26. The average an was 5%. Outlook. As we look ahead, we remain encouraged by the stability across our core businesses and the continued progress on our strategic priority. Our diversified product portfolio continues to provide the resilience and balance earning profit with in disproportionate dependency on any single product or geography. Coming to the U.S. business. We continue to see multiple growth levers through the expansion of the basic businesses, new product chances, ongoing, that is the topical on an ongoing acquisition and the expanding pipeline across oral, transdermal and respiratory products from our Dayton and Raleigh. With this initiative, our U.S. business is aiming to catch $2 billion revenue milestone for the net. Europe continues to remain a strategic growth agent for the company, put in by portfolio expansion improving market penetration, reliable supply capability and stronger customer relations. We expect the business momentum in the region to remain strong going forward. From a long-term value creation perspective, we continue to focus on improving the quality and the predictability of the through balanced mix of scale, specialty and operation. Our biosimilars and biologic CMO strategies continue to progress well and reconcile important long-term growth drivers alongside our core generic franchise. Geographic expansion across the growth market remained a prestrategic priority support to be focused notes, portfolio expansion and selective acquisition. Our China OHD pace continues to scale up steadily with the increasing approvals and supplies into international markets, particularly Europe. India business is evolving into a new growth engine for the company further strengthened through recent acquisitions, continued to expand through new decor, wider therapeutic presence and deeper pan India rate. Our backward integration efforts across Bing and 6P and Namosi continue to strengthen supply securities, reduce import dependency and improve long-term margin profit. Based on current operating levels, we expect annualized production -- HG production to exceed 10,000 metric tons with a capacity utilization levels exceeding 80% at consistent [indiscernible]. Overall, this initiative provides strong visibility on the revenue growth, profitability improvement and cash flow generation over the coming years. Going forward, we remain focused on disciplined execution, operational excellence prudent capital allocation and sustainable long-term weekday. FY '27 financial outlook. We firmly believe that the business is entering into the next phase of calibrated unprofitable growth with visibility towards stronger revenue. We expect the EBITDA margins to sustain and progressively improve to north of 21%, reflecting the scale of our operations execution capabilities and leveraging the new business levers. That concludes my remarks. We'll be happy to take your questions. Thank you.

[Operator Instructions] The first question is from Tausif Shaikh.

Sir, your operating cost, excluding R&D has increased 11% Q-o-Q and 17% Y-o-Y. Can you throw some light on this? And can you tell us, is there any one-off element over here for the quarter?

The one-off at will we be there in terms of the year provisions, et cetera, but that becomes a lot thing. But what is the main factor which has increased the cost, other expenses start. It includes the power and fuel predominantly. Power and fuel consumption for the plant, which has taken off very significantly in the last quarter. That is Q4 of this quarter. That is the reason why it has increased.

And we should expect this rate to continue going ahead?

Yes, it will continue like this because now what is happening is we are using our own pay for our captive consumption. We are not buying it from the imported material. And since -- because of that, our raw material costs will come down, and other expenses growth that you can see very clearly why our gross margin also improved by about 3 percentage.

That's helpful, sir. My second question, can you tell us how many -- how much EBITDA loss you have incurred in FY '26 from your new projects like Peng, just Talal, biosimilar and China facility? And do you expect most of the projects to turn breakeven in FY '27?

Yes. I think if you take NGT and AP has to consider that, we have not a positive EBITDA conservation last quarter. That is mainly because of the higher operating leverage, and we have started getting better deals now. That is the thing. We expect this to continue for the coming years here. Last quarter, last year, as a year as a go, we've incurred around that must be around the INR 200 on INR 200 crore plus EBITDA loss on account of NG Life. And in terms of the China plant also ended at, which is expected to do we a profitable EBITDA contribution this year.

The next question is from Damayanti Kerai.

My first question on the U.S. where you mentioned you are looking ahead for this $2 billion mark in near term. So any time line for that?

Swami?

Yes. So well, we can't say any time be it near future, probably in the next maybe couple of years, I would think. We are -- our conference is based on what's going on in terms of acquisitions and some of the business opportunities that we have.

Okay. So directionally, you are looking at this $2 billion mark, maybe a couple of years down the line, not in immediate or medium term?

One from me say if acquisitions materialize, you may move towards that very fast.

Okay. So on that note, are you on track for track to close the Leonard deal as indicated earlier?

Yes. We will probably -- there will be some difference in timing. We'll probably close by Q2 of the current fiscal. The -- what we didn't factor in was the government closure for 70, 60 days in -- between February and April. And when the government shuts down, the FTC does not function at least the first time we had some flexibility, but second time, it was very long, and it took 76 days. But I think they've largely made up the time. So there could be some delay. But I think early Q2 may be a better estimate. We feel fairly confident about that.

Okay. That's helpful. My second question on Europe business. So where you have now marked 1 billion milestone there. And when we look at the sales in euro terms last 2 quarters, you were somewhere in 61 million range. So can you directionally indicate how things will move up from here? And I understand supply from China will be a big contributor. So as we anticipate higher supplies from China, how should we look at, say, 27% from Europe business perspective.

Muralidharan here. Yes. Thank you for this query, yes, having achieved the $1 billion milestone, which we have taken up on ourselves as our mission for FY '26. We are definitely bullish. We are very confident that we'll be moving northwards of this base business that we have achieved and contributions from China, I mean already more than 10 products have kicked in some form or other, whether it is a new launch or transfer products. And progressively, that will increase and contribute to the business. So we are quite confident that despite the geopolitical issues, we will be growing further in the base that has been built.

Any indication on the growth rate, say, we can comfortably target for double-digit growth, say, low double digit to mid-teens or any number you would like to share?

We are definitely trying to achieve the double-digit growth. And of course, considering the current geopolitical situations, we have taken it a bit conservatively, but we are confident it will be minimum double digit.

The next question is from Charul Agrawal.

My first question is on the CDMO unit -- biological CDMO unit. When do we start seeing it commercializing? And when do we expect the first revenue from the segment?

About the CDMO unit, the Unit 1 will be commissioned by end of this year. So my guidance around the first 60 capacity installation and commissioning remains the same. With the PPQ batches, which are the validation batches ceded in 2027, and the filings in the markets by the customer also slated to happen in 2027. We expect some stockpiling requirements from the customer in 2028. So a steady stream of revenues, to answer your question, would begin in unit from 2028. With respect to the recent product schedule 3 that I have signed and we have informed the exchanges about that's a greenfield drug substance manufacturing facility. We expect to close the commissioning of the facility in '29. 2 years from then 2031 would be the start of revenues from Unit 2. So in the nutshell, between Unit 1 and Unit 2, you would expect the revenues to kick in from 2021, but Unit 1 will have a head start from '28.

My next question is again on the Peng. So when do we start the external sales from the unit while it has been contributing to the internal supply, but when do the tonal supplies start?

The external supplier salt happened in the last quarter, we have served more than INR 100 crores out of materials in the last quarter, both as well as 6 to the outside market. We also already informed all the customers that they can pick up the material because some stuff are there in the market EM because of the high imports in the Q3 of this year the outtake was very low, but we expect the offtake will take up strongly in the coming days, coming weeks.

The next question is from Surya Patra.

My first question is on the European business. So congrats for the $1 billion milestone month that you have received. But if you can update what is the EBITDA per [indiscernible]?

Yes. So here, EBITDA is just in excess of 20%, and we'll be moving towards of same as stated by our CFO. Hello, Hello. I hope you could hear.

I'm able to hear.

Yes. I think there is some network issues with Surya's network. We'll move to the next question. Next question is from Rahul.

Sir, I guess your $2 billion revenue guidance for the U.S. business factors in Lane as well, which alone should contribute to $300 million incremental sales and with that, you should get to $1.9 billion, $1.95 billion. So this guidance is essentially driven by landed. So if you can also talk about, how do you expect the base U.S. business to grow of acquisitions?

So I'll take this question. So first of all, Rahul, Land is probably going to be there for 2 quarters in the current fiscal. So I -- this is going to be half of Lane, right? So that's number one. And then number 2 is once -- that is also subject to approval, which we expect, which we are confident. So that is one. And then we are looking at some business opportunities. And those opportunities, we believe that we are in a good position now. So there is -- we had to be timing-wise, I can't tell you for certain. But we are heading towards a $2 billion goal and landed is part of it. Maybe in the next 1 to 2 years, definitely, we are getting there. And you're already aware that land is about $300 million. obviously, we should be heading towards that $2 billion mark in the near future. That's all I can say, maybe in 1 year plus, maybe in 1 year, we feel lucky Again, it depends on the FTC appeals and some of the business development deals getting operational.

Sure, sir. So these business opportunities. So are these NBOs which you are targeting or these would again be, let's say, M&A kind of opportunities?

So it could be -- it's not NBOs that I'm doing what. So it could be business opportunities in terms of relicensing or we are not going for any big bang acquisition, at least I don't. Right now, we are in the process of doing land integration that needs be completed. But we do look at opportunities of some in-licensing and some ANDA acquisitions that's ongoing. Now we are focusing a lot on business development in the U.S. in addition to our own products. That's why I feel confident that sometime soon, we will touch that $2 billion mark that Subu mentioned. Whether it's going to happen in 1 year, I don't want to commit that at this point. Maybe we'll have a better sense in the next 1 to quarters.

Sure, sir. And sir, my second question is with respect to the guidance for the European businesses. You talked about cautiously looking towards a double-digit kind of a growth. Can you clarify that in constant currency?

Yes, it is.

The next question is from Nitin Agarwal.

Sir, on the biosimilar business, you highlighted our F30 vision, 2030 vision for the biosimilar business. if you can probably just articulate in terms of what are we looking at, especially in terms of number of products are being marketed commercialized by then in the geographies, what kind of geographical spread you're looking at 2030 for the biosimilar business?

Nitin, it's a good question. We are right now in the early innings of launch since the quarter, I suppose, with biosimilars, Nitin. So supplies have been initiated to certain territories in the EU tender is being serviced in LatAm and the state agreement will start to rectify from the end of this year. So revenue recognition will follow as those products will move through distribution channels into procurement, et cetera. In terms of what we are doing, we have omalizumab and denosumab, as they have talked about in the last quarter that will be entering the filing phase with European Medicines Agency, Health Canada and FAA this year. Additionally, I've also provided guidance in Q2 that we plan to file bevacizumab, which is already approved with Health Canada approved with MHRA and currently under review with European Medicine Agency. We also plan to file that in the U.S. So 2026 will be a year where we wanted to execute the U.S. filings, the 3 filings in the U.S., at least 2, but 3 filings in the U.S. So what it does to the business if you look at 2030, is that the first wave of products that have been -- are being commercialized now, plus the 3 more products that will be approved in Europe is a clear base. So you have about 7 products in Europe, emerging markets and the growth markets. As I provided guidance in the earnings presentation, I'm also stitching partnerships in rates where we are more directly present. So for all Mist, strategically certify would take a year or 2. But with the 78 product base model in Europe approved and in growth markets. potential 3 products approval by 28, 29 or 30, even with a slight side, if there is any. By 2030, you are looking at Biosimilars business having 7 to 8 products in Europe and growth markets, plus a potentially 2 to 3 products in the U.S. I would not give any guidance, specific revenue figures at this stage, but the commercial momentum is real. -- and is building, and I expect by 2030 with the 7 plus 3 products that I'm planning in the U.S. biosimilars business will have an inflection point, as I've also guided all through in the last year and the last quarter Anmol. Does that answer your question?

Just to add to that, the fact that we are in the first launches are coming much behind the competition. I mean what kind of opportunity do you still see, right, while you've already talked about it in terms of our cost demands on COGS in the business. Whatever dynamics over the last few years, last few quarters, are you still confident that there is still an element opportunity for us in emerging markets in Europe on these products?

I can't hear you. Can you -- your voice was breaking. Can you repeat the question?

Give me 1 sec. Sir, can you hear me now?

Yes. Be a bit slow.

So I was saying, in the first wave of launches that we have, the fact that we are coming much behind the competition, in Europe and in the emerging markets, do you still see an ability for us to take make reasonable revenues on these products? Is the opportunity still relevant for us the first week of launches?

In the first frame of launches, the opportunity is relevant to the extent the aspiration lanes. So we are not looking at a 15%, 20% market share in those territories. With the right cost of goods, we still believe there's enough opportunity for everyone. Also, if you look at the nature and dynamics of the biosimilars business now, even if you look at products that are going off the patent cliff in 2022, you have about 10 to 11 players who are already doing clinical trials or developing them. So if you want to sustain in this business, you need to really create a COGS model that will allow you to position ourselves in the market. What is also important is creating a basket of products in oncology and immunology, right? Now the choice of products that we have made. I'll give you an example of pegylated forestry, which is a long-acting filgrastim that is expected to increase the neutrophil count in cancer patients who suffer from a condition called neutropenia. So there is no follow-on drug for this product. So what we are looking at from the first wave, Nitin, is products that have a longer life cycle. So pectrilgrastin, even now is a potentially $3.4 billion market and expect it to continue to grow. And in U.S., I think there are about 4 to 5 or 5 players there. I'm sure if you're looking at the $50 million, $60 million revenues, I'm not looking at taking over 20%, 25% of the market share. You are still in the game. In that sense, it's a very calculated move from us to pick products that have a longer life cycle. The another example is ram where we launched the 150 and 420 MG, but the real game with trastuzumab is the subcutaneous that we are developing. The patent goes off in 28, 29. So you should look at it from a strategic perspective of how we are positioning the products that will advance aspirations in this space. Our COGS, I think, will continue to sustain us. But if you are saying will I be picking up a 20%, 25% market share, absolutely not. And that's not the aspiration at all.

That helps. And second is, at what point of time do you start to see you start to be part of the first paper of launches going forward?

So it's a big question. omalizumab, I think we will be in the first way. If you say ashes 3 or 4 players right now with omalizumab, there are 3 serious players. Central has already made the move. It's a potential $4 billion market. There are 2 other players there, and then there is us. We expect there was omalizumab to be a $2 billion, $2.2 billion product even after the biosimilar competition kicks in. So I think that would be the first way. When we have the capacities to sustain the supply chain in markets like U.S. or manage a -- with the next wave of products, we are trying to greenlight the clinical studies for the next flow of products from -- that goes off patent cliff from 2030, 31 onwards. And we may be in the first year. But first were is becoming very subject to the site. If I pick a product from 2034 like atezolizumab, there are mine players who are already developing. So we really see how the dynamics play out. It's quite intuitive and subject to you to answer the question, but I hope you got the clarity of the past that I'm trying to say.

Yes, that is very helpful. So if I can squeeze the last one. So on CDMO, how should we think about CDMO. Our CDMO strategy is all about these 2 MSD projects? Or do you see opportunities to significantly go beyond that? At what point can that happen?

It's a good question. See, the scale at which we are attempting to become a CM go is a key differentiator in India, right? Now if you look at my per Schedule 1 product Schedule 2 and product schedule 3 that we have disclosed to exchanges. The total exceptions manufacturing scales amount to about 120,000 liters of mammalian cell culture capacities. Now that's by far the largest CMO space in the country and which will put us into the lower end bracket of the largest CMOs in the world. For example, Lonza has about 570,000 liters. Samsung has around 600,200 liters. So having 120,000 liters is a statement. Statement and intent that we are here to stay. Now, why do I build a business model around 1 anchor customer because India traditionally has never been a contract manufacturing did not have contract manufacturing organizations in the new biological space. It requires deep competence infrastructure building and the sharing of human resources capability is like no other. And that's the reason why I wanted to derisk the ramp and by mean of derisking the ramp, I wanted to get an acarcustomer like MST, get a contract with them for about 10 years. I see how credibly I can build the business for the next 5 years. But to answer your question, does Trane and Dasa and Aurobindo and the board want us to be a single customer CMO after 2032? No. The visual statement for 2022, which I presented to my Board yesterday also, is that we wanted to be a multi-modality multi-customer contract development and contract manufacturing organization. Right now, we are a CMO, make no mistake about it. We are not a CDMO right now. We want it to be a but we wanted to backward integrate by 2022 to become a contract development organization. So this is not going to be a 1 customer business. But for the first 5 years, until I build credibility around an anchor and services the anchor and create this space that we are also a credible CMO coming out until surveys to new biological entities and become part of the global supply chain Yes, we would like to stay with the mature and learn through the curve. But the long-term aspiration and ambition is to become a multi-modality multi-customer, CDMO and transition from a CMO to CDMO. Does that answer your question?

The next question is from Tushar Manudhane.

So just extending on this biologics venture at the kind of commercialization, what kind of gross margins or EBITDA margins are we sort of building in into our estimates may not be at a product level but maybe at a portfolio level, if you could share?

Tushar, is this about the biosimilars or the biologic CMO?

Biosimilars.

Biosimilars, on an average, you are looking at a gross margin of around 65% to 70%, Tushar. And as the product mix matures to include omalizumab and include trastuzumab subcutaneous, after '28, '29, the gross margins will probably shift to the higher side of to around 75%. So it's still a very healthy margin business. It also depends on the countries you would be in the moment inflection point in U.S. and some of the growth markets will kick in, then you are looking at better gross margins. Some of the products are retail products. For example, product using Pushpala process like the denosumab. So what little you sell there, the margins are going to be higher. So it's a sticky subject. But I would say, take anywhere between 65% to 75% as we continue to evolve in the next 5 to 6 years, we will make the transition from around 65% to 75% with more first wave or differentiating products or retail products adding into the business. Because omalizumab and denosumab, denosumab is a retail product to manage map is a mixed model. So you tend to get higher margins there, Tushar.

And sir, this is after building what kind of -- particularly in biosimilars, we have witnessed a sizable price erosion post competition coming in. So this kind of gross margin basis, the manufacturing skill set, which we have got, what kind of price erosion we try to build for these set of products. And how is that so that we understand that post that kind of price rating he gross margin is 65% to 70%.

So for the first wave of products, we have already baked in the price erosion to a great extent. So even with a 75% price erosion, we expect to have around 65% gross margin as a base and only then we enter into developing these products. In the U.S., we are not building more than a 60% price erosion. In Europe, we are building close to around 75% to 85% price erosion. We have seen that happen in chronic segment in Europe. In growth markets, actually, the pricing is good in some of the growth markets. So to answer your question, even after building a very healthy price erosion of around 70% to 80% in most markets. This is what we would like to achieve, Tushar.

That's pretty interesting, sir. And just to sort of complete this new -- in chemical synthesis probably the scale does help in getting the EBITDA margin. But with respect to biosimilars, so just trying to understand, despite such kind of price erosion, we are able to achieve 65% to 70% gross margin. So if you could just help with that missing link compared to, say, a chemical synthesis process?

It's a very interesting question from a sense that you should always look at -- in biologics, you should always look at yield versus COGS as a function of also capacities, okay, which is true even in small molecules. But in biologics, when I brought and capacities on the primary axis and the secondary y-axis and COGS on the Hargen axis, you see the tapering of the COGS pretty early. So depending on our capacity, my capacities are around 50-millimeter scale and my yield is around 4 grams per liter. Then the incremental improvement even after increasing the scale are going to be very, very minimal in terms of cost of goods. So factoring all these models, we still think if you have bit your capacities right, if you have positioned your titles or the yields around 4 to 6-gram per liter, because after which the downstream costs will start to trade off any benefits that you'll get from the cell countries. Around 4 to 6-gram on later and a capacity of around 2,500 to 5,000 liter bioreactors you should have cost competitiveness for most monoclonal antibodies that direct 100G to 400G filling doses. I think 65% should be very straightforward in biologics even with the price erosion of around 70% that you witnessed. But the trick there is 2 companies have the yields of around 4 to 6 per meter at the right quality. Do companies have the right capacities for the products that are putting in at 4 to 6 gram per liter. And if either of these on the primary and secondary y-axis don't meet together. Then you are looking at numbers and margins that can be significantly less because their costs is going to be higher.

Got it. This is pretty interesting. And just lastly on this aspect. Just to refresh in terms of the overall investment done till date, while we have highlighted in the presentation, the upcoming investment with unit just refresh in terms of the overall investment on [indiscernible].

In biosimilars? .

Yes.

About 450 million is the overall investment, including CapEx and OpEx that was run in biosimilars and that had resulted from 2018 July to now, including the 2 covers in European approvals, 2 health care approvals and 3 more product filings now, the fastest in the peer group that you can look at, and I'm confident that we will continue the momentum.

So 150 to 175 million is the [indiscernible] and above?

No. This is a CMO. Okay. The CMO is going to be about USD 175 million in the greenfield facility.

The next question is from Kunal Dhamesha.

The first 1 for Subu. Sir, can you suggest what's the kind of translation effect that we get from the INR depreciation against USD and euro. Let's say, 1% depreciation in INR what's the positive impact that we get on EBITDA?

See, 1%, which INR depreciation against the dollar.

Yes.

On EBITDA, we'll get around INR 100 crores.

Okay. And euro, depreciation against our would be additional to that, right?

No. Yes, euro is very little okay, because already euro has achieved the peak earlier it used to be around 100 1.03. Now it is hovering between 11.67%. So Manatee big significant 1 on euro. But rupee EBITDA on dollar transaction, we'll get around 100.

And sir, the 21% EBITDA margin guidance for FY '27, does it bake in this positive impact of the INR depreciation?

In that, no. Because I see nothing on free when rupee depreciating, why is it depreciating. Raw material prices are going up. So loan prices are down by 2.4%. Don't look at only rupee depreciation going to transfer. It is a combination of all things we have to see. Price cost actually has gone significantly high in the last month in March and continuing in April and May. Solvent prices have gone by 2.7 raw material or other raw material prices are also growing. So you have to look at it in a holistic manner rather than seeing it in a very limited matter.

So my question has replaced that with all this cost going up, it will still have a positive impact, right? And given the strong depreciation?

No, you asked what is the impact of it. We have said. How will it get outside by other factors, et cetera. Obviously, yes.

Okay. So maybe in the net impact of all these positives and the [indiscernible].

All the pluses by us, et cetera, we are okay.

Okay. And second question on the Benji. We said that the 10,000 tonnes is the output. We are going to reach that kind of level now with an 80% capitalization, to me, a very basic math kind of points to 12,500 tons of total capacity versus our total capacity is 15,000. So is it fair to say in terms of yields, there could be some more improvement going forward?

Not like that. I said it is about INR 10,000. We have achieved in the month of March itself is around 1,300 tons capacity, right? April is maybe around INR 10,800. So the capacity is not the 10,000 to 15,000 are not like that. we have something permits. We can run any number of parameters I want it. Accordingly, the capacity is search. So we have to ensure that the inventory buildup is not happening, working capital is not locked in. And at the same time, we need to achieve the right yields, et cetera. That is what appealing.

Sure. Yes, yes . And lastly for Dr. Satakarni on the [indiscernible] contracts. Sir, can you suggest how many products have we bought right now from [indiscernible] and are these in development stage or already commercialized if they are already commercialized, are they in the early part of their product life cycle, late part of product life cycles. Any color would be helpful.

Kunal, perhaps could [indiscernible] on product, perhaps scheduled 2 is for 1 product in the nation each rig schedule is 1 product. So we signed about 3 product schedules, which means that we sign for 3 products. Right now, technology transfer of 1 product, a new biological entity, had is happening. This is a product that is older commercially. The second product schedule also is a commercial biological entity. One of them is an early commercial product. The other 1 is a relatively established product. So I cannot give you more details about the sponsors products. But we will be into the commercial global supply chain, right from day 1 after receiving the regulatory approvals. And that is the business model of [indiscernible], right from day 1, once you have the regulatory approvals, the product that we are going to manufacture at Trane is going to be used by MSG into the global supply chain for the patients in the territories in the markets, they would like to supply the product to. Does it answer your question? So there is no development product at this stage, both our commercial set.

Okay. And earlier, we had said that this supplies would initially be used for emerging markets and then in Europe and then in the U.S. Is that the correct way of understanding?

That's correct. That's correct because capability building and GMP compliance takes time. Initially, I expect meat to file it in emerging markets, followed by Europe. And potentially, at some point, maybe they would say they would also like us to become part of the supply chain for the U.S. But right now, I would keep the aspiration to emerging markets in Europe.

The next question is from Shyam Srinivasan.

Just the first 1 on the specialty injectables. I think in the opening remarks, you had said USD 513 million has been the total revenue for the year and I think 13% growth. Is, sir, if you could just double-click there? And how should we look at the outlook for it in 27?

Sure. Yes, you heard it right, from Subu. It is the -- other than the [indiscernible], it is 13%. And I feel like the same as double-digit growth is expected going forward.

But there is some element already in '26, right? So 13 million includes Revlimid. So you're excluding and telling us it's what over double-digit growth. Can you just help us what the base number [indiscernible]?

It is actually like the base number would be around 480 plus. So like we expect the similar double-digit growth because this year, 27 onwards, we will not have the travel limit. We expect the base business to continue to grow in double digits.

And any interesting launches coming up in this segment, anything to call out?

I just -- at this juncture, it is too early for me to comment, Shyam, because of UGI 3. And so there are some interesting launches from other plants. But we are at this juncture, keeping ourselves on watch for all the regulatory approvals for the plans so that in next quarter, I can give more color.

Got it. Helpful. And just Swami, just Q-o-Q, I know Y-o-Y there is Revlimid in U.S. total. But QQ, there is some seasonality, is it for why the Q-on-Q revenues are down?

Yes. Typically, the fourth quarter is less than the third quarter. Typically, the second and third quarter, this is what we see. There are average of course. If the pole sees an extent, to January, March, it could be higher. But otherwise, second and third quarter are the best for...

The $30 million drop in 1 can explain just by seasonality?

Yes, that is one, and we also have some partners, will also have to look at that. But broadly, as there is a seasonality.

Understood. And just last question to Dr. Satakarni. Dr. Satakarni, we have all your large-cap peers like large peers all talking about biosimilar. So Sun through the Organon deal has got it, [indiscernible] had. I'm not asking for names, but I'm just saying, is this going to be an interesting phase where we have to now slug it out with some of your other peers? And is there something you will do differently to kind of get your, whatever rightful share?

It's interesting, Shyam. I mean, how can I comment on the slack fish that is going to unfold in the biosimilar space, it's already happening in Europe to 1 of the previous questions from Nitinol, the market dynamics is going to be sold interesting price erosion is going to be so interesting. The competition. Any products that you pick, there are about 10 to 11 players. What is important is to ensure that you have a basket of products that you can go to into the market, create a brand name as long as they are continuing to be brands like in Canada and U.S. and make sure that your COGS sitting is good enough to still give you a reasonable margin. I don't think I can do anything differently than what I have done, the speed and agility with which we have looked at the last 7 or 8 years in building these capabilities. I would like to sustain the momentum. And if that happens, I think we are in a good space right now. The most important aspect for Qurate is the execution of the U.S. filings and can be executed right first time. And if we do I think we will be having a very different formulation.

The next question is from Jigar Valia.

I'm sorry. Sir, firstly, congratulations on the decent set of numbers under the circumstances with API prices and freight and I think your growth markets, et cetera, I think all [indiscernible]. So 1 is with regards to China and India. So has China breakeven helped in margins this time. And as far as India, I think, is about INR 76 crores a quarter. So will this Candela acquisition kind of how much would that kind of contribute to that run rate?

So in terms of the China, as I said, last quarter, we had a loss of around 7 million last year answer last year. But certainly, this year, we'll not only breakeven, we'll contribute significantly. At least we are working to achieve low double-digit EBITDA margin for the year. That is what we are trying to do there. In terms of the container labs, et cetera, it's a very decent acquisition, and it is contributing to the EBITDA margin. And we expect overall the entire domestic formulation business will grow in double digit during this year.

Got it. So 1 is on only Unit 3 is the -- amongst the large unit, which is left for the IR.

Yugandhar?

Unit 3 is yes, we're awaiting. And even Unit 1 of UGI is also audited, and we are waiting for that as well. There are 2 units [indiscernible] a network [indiscernible].

Helpful. Sir, just 1 more question, if you can answer. So if at all, you can update on Eximolymisen also, what's your perspective with regards to repurpose drugs -- you also mentioned of -- Satakarni mentioned of the slackest possible on the biosimilar. But is there something which is getting evolving on the for repurpose drugs as well.

Satakarni, would you like to take that question?

What is the question?

So 1 was -- wouldn't it be possible for you to update on excema and polymers and also your thoughts with regards to repurpose drugs. You mentioned of the Slugfest expected on the biosimilar, but I don't see any of the larger companies probably warming up to repurpose drugs or these things or any of the generic companies also.

I would answer the part 2 of the question, the part 1 of the question be answered by [indiscernible]. What you mean by repurposing is whether we are interested in the practice of finding a new therapeutic use for the existing deal is that what you meant by drug repurposing?

Yes, I think because a lot of it [indiscernible].

I know what's happening around that. At this point of time, I'll get back with my Investor Relations again. But from the little I understand from my Board strategy and all. At this point of time, we are not looking at any reprofiling or repositioning or repurposing of the drug. That's still not part of our Argento Board's strategic initiatives. But we will look at this space closely. Maybe that's a differentiated at some point right now, not. But let me go back and correct myself if there is something happening somewhere and provide you an answer to [indiscernible] for you?

Absolutely. Yes.

Part one, can someone answer part one?

Frankly, we didn't understand the part 1 question of the [indiscernible].

Yes. So is there any update on the excema and polymers that we can have it?

Sorry, Jigar, this is Ashish here. Is your question on the excema drug, which was approved?

Yes.

Yes. So we are right now looking into launching it as soon as possible. the most probably quarter 2 of our fiscal year is when we are aiming to launch. So that's all I can say for now. but all the preparation work is going on right now to make sure that we launched this -- our first NCE for Aurobindo in a very successful manner.

All right. Thanks a lot, and I'm hoping that you will be upward of INR 1,000 crore EBITDA in coming quarter onwards and higher EBITDA levels also with the integration porting increase.

The next question is from Tarang Agrawal.

So on Europe, sir, you spoke about double-digit growth going forward, you mean constant currency or you meant in INR terms?

Constant currency basis, which I already reaffirmed. And this year, we achieved double digit and also our growth planning for the upcoming year revolves around our base business growth plus new launches, annualized revenue on the FY '26 launches and the upcoming FY '27 launches. So we are quite confident we will be able to achieve on a constant currency basis.

Okay. Sir, if I look at the trajectory of this business, right, if -- I mean, Arbindo has been trying to build this business for the last 12 years, something really sort of pivoted in the last 3, 4 years versus the decade before. And in a market which is certainly not growing, especially the sort of products that we are running with, what has changed in terms of your ability to drive this business and at the speed and scale that you've been able to -- so just a couple of pointers. I mean, is there a lot more focus than before? Maybe -- were there some supply chain challenges? Has the market become more interesting with some players exiting? What is it? I mean, just wanted your aerial view in terms of without getting into granularities.

Sure, Tarang. I get the flavor of your question. First of all, thank you for your compliments. And yes, one, RO has been an evolving organization. So our understanding of the market and extremely a well-streamlined team across our footprint countries sitting in and understanding the market dynamics and of course, as you rightly said, on the supply chain side, -- we have definitely done a lot of improvements by way of order processing, turnaround times, understanding the market, what shall I say, the upsides for certain competition out of stock that can happen. And all these things, it's a combination of several items. But at the same time, as you underlined, it's a very complex market. We are answerable to multiple regulators. The expectations or challenges are increasing, whether it is nitrous or other compliance requirements. But despite all this, Arbindo as a team has been able to deliver. I would like to thank our management for the confidence reposed in and constantly providing us new product opportunities, developing more and more products. So it's a combination of all these positives that's happening, and we are very confident this will be sustainable in the coming period as...

Wonderful. That helps. Secondly, sir, on Telenym, whatever progress that you spoke of, when you spoke about consistent delivery for contract 1 in 2028 and then for contract 2 from 2031 onwards, were you referring to calendar year or you referring to financial year?

I'm referring to the financial year.

Okay. That's helpful. On U.S. on the Eczema product, Mr. Aker, do we expect you to build a significant front end? Or would you be continuing with the current cohort that you have? And second, if we could get an update on what's happening with [indiscernible], where is that product? I think about 1.5 years now since the approvals come through. So some update there would be helpful.

Yes. Sure, Tarang. So first of all, for the Adquay, which is the brand name for our eczema drug, we are going to build the suitable infrastructure as it is required because we will be in a competitive space, but in a very good competitive space. So we have to invest in making sure that we are giving the brand the due attention and the resources which is required. So our current presence is in oncology, right? So we will be having a separate team which focuses on dermatology. And for the Resnuta, though we had an approval for 1.5 years, the product launch was delayed. And much of the scientific story is still being built. We have started getting some traction in the market now. But the story from a brand perspective still needs to be built in the marketplace. The market is very competitive. So it will take us some time for that product to be established. But we just want to make sure that the product has a basis of a scientific story, which is a longer-term story like rather than a short-term pricing story.

All right. That's helpful. Swami, sir, is $400 million a reasonable base for the U.S. business, notwithstanding the seasonality going forward, ex acquisitions and some of these NCEs contributing?

No, I didn't understand the question. Yes, 400 -- you're saying $400 million is the base?

Right.

Yes, that's correct.

So because it came down to 387 this quarter. So Ahsish [indiscernible].

Yes. It's reasonable to assume.

Got it. And last on Youjia, if you could give us a split for FY '26 and 25 between U.S. and ex U.S.?

Yes, it is -- anyway because we don't give separate numbers but it still contributes around 70% of the overall business, 30% comes from other than U.S. But going forward, we expect that to be at 60-40.

Got it. And the 5 and 3 is the overall number, right? U.S. as well as ex U.S.?

That's right.

Tarang, let me correct myself. I think I talked about and the 2031 in my earlier commentary and guidance for Unit 1 and Unit 2 of CMO. If it is 28% and 31%, then I'm talking about calendar years and not financial year, my apologies.

Thank you. Requesting management for 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. The transcript of this call will also be uploaded on our website, www.aurobindo.com in due course. Thank you once again, and have a great day ahead.

Thank you very much to Aurobindo's management team. 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.