Gland Pharma Limited (GLAND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '25 Earnings Conference Call of Gland Pharma Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Runjhun Jain. Thank you, and over to you, ma'am.

Thank you, Sagar. Good evening, everyone. We welcome you to the Gland Pharma's Earnings Conference Call for Q4 FY '25. Today, we have Mr. Srinivas Sadu, Executive Chairperson; Mr. Shyamakant Giri, Chief Executive Officer; Mr. Ravi Mitra, Chief Financial Officer from India's Office; and Mr. Alain, CEO of Cenexi, who's connected virtually from France. We will begin the call with business highlights from Mr. Sadu, followed by operational highlights of Mr. Giri. This will be taken up by Mr. -- after Cenexi -- the update from Cenexi from Mr. Alain and lastly, the group financial overview with Mr. Ravi. Before we proceed, I would like to remind everyone that some of the statements made today will be forward-looking and are focused on -- are based on management's current estimates. These statements should be considered in light of the risks associated with our business. The call is being recorded, and the playback and script will be available on our website shortly. With that, I hand over the call to Mr. Sadu for his opening remarks. Over to you.

Thank you, Runjhun. Good evening, everyone. Thank you for joining us today. On behalf of Gland pharma, I welcome you to our fourth quarter and full fiscal year 2025 earnings call. Let me begin by providing a strategic overview of the business, reflecting on the past year and outlining our vision for the company's future. Following this, Shyamakant will discuss our operational performance, Alain will provide updates on Cenexi, and Ravi will conclude with the financial review. Reflecting on the year gone by, FY '25 was a pivotal year. While we face near-term growth challenges at both Gland and Cenexi, I want to assure you that we use this time wisely to strengthen our foundation and sharpen our long-term focus. The global landscape has presented renewed complexities this year, especially with the announcement of reciprocal tariffs by the U.S. administration. We have created an area of uncertainty, particularly for Indian pharmaceutical companies, which have a significant presence in the U.S. markets. Despite these headwinds, we have maintained our flexibility across demand and supply fronts, Gland's value creation journey remains anchored in the strategic execution of our operational model, and we foresee a promising growth trajectory ahead. Let me now take you through the key pillars driving our growth strategy. Starting with the base business expansion. We are expanding geographically with a strong solution into emerging markets across Africa, the Middle East, Latin America, Asia Pacific and Rest of the World region. There is a substantial market opportunity in our approved U.S. India portfolio and market formation opportunity than upcoming pipeline of injectables post patent expiry. In addition to recent successful new product launches, we are leveraging our long-standing relationships with key partners to deepen our global reach. Next, we have made significant progress in expanding our manufacturing capabilities with new lines including contract injectables and new delivery systems like pens and cartridges. A key milestone was our successful entry into the GLP-1 segment with the launch of liraglutide given that we see GLPs is a crucial area for Gland's future. With 2 GLP-1 contracts secured in a strong market demand anticipated, we are scaling our target capacity from the current 40 million units to an additional 100 million by CY 2026. We have broadened our capabilities to include suspensions, hormonal products, [indiscernible] filling while strategically focusing on ready-to-use products like dual and triple chamber bags. Importantly, we're also experiencing significant momentum in attracting major pharmaceutical companies interested in partnering with us for high-value formats like dry powders and have already successfully initiated several new CMO projects. Moving to our R&D and portfolio expansion efforts. Our strategy spans 3 focus areas: in-house R&D, complex products and the co-development model. Our in-house R&D covers a wide range of therapeutic areas, supported by 371 filled and approved ANDAs and 1,748 global registrations. Our future pipeline now targets major therapies like ophthalmology, CNS, cardiology, with near-term generic opportunities covering a $1.25 billion market, which is about 40 new NDAs, a 1- to 3-year pipeline targeting $2.12 billion and a longer-term pipeline in a $ 2.34 billion market. In total, our in-house pipeline includes 71 new NDAs with a $5.7 billion TAM. In FY '25, we launched 31 new products in the U.S. and we expect this momentum to continue. Additionally, we filed 3 RTU infusion backed products with 10 more in development as part of our 14 registered RTU backed products targeting a $530 million U.S. market. We are also focusing on additional complex injectables and have 19 products in this bucket with 6 already launched and 3 more anticipated for approval, addressing an IQVIA market opportunity of approximately $6.5 billion. To accelerate our pipeline and portfolio expansion, we are pursuing codevelopments wherein we are partnering with the specialty injectable development company, 15 products, out of which 6 or 5 are b(2) and 9 ANDA submissions, which are focusing on key therapeutic areas like immunology, chemo adjuvants, mineral supplements, pain management, endocrinology and radio contrast agents. Gland is also building a robust CDMO setup for biologics, leveraging our existing biologics manufacturing capabilities. The biosimilar market is a significant driver in this effort. A key step in our strategic expansion into biologics is our collaboration with Dr. Reddy's Laboratories, which marks a significant step in this direction with revenue contribution expected in FY '26. Furthermore, we have progressed on a nonbinding agreement for CDMO collaboration Shanghai Henlius Biotech, positioning us as a secondary manufacturing site for some of their key biosimilar products. To support this and future growth in biologics, we are expanding our bioreactor capacity by 15,000 liters. These collaborations reaffirm our strategic focus and investment in the growing biologic CDMO area. Turning to Cenexi. While we encountered challenges with dealer expectation performance, however, we have made progress in defining this turnaround strategy. We recognize that the acquisition pieces have taken longer than expected to certify, but our strategy to achieve robust growth and profitability remains centered on high-value products. This necessitates a deliberate shift of our previous business model of low value, high-volume business, which constituted 70% of our current operations towards higher-value products such as prefilled syringes, lyophilized vials and ophthalmic gels. This evolution is expected to expand our net realizable value per unit and improve overall profitability. Cenexi's dedicated business development efforts are aiding results with the successful addition of new customers for prefilled syringes, vaccines and lyophilized vials, aligning with its high value focus. To facilitate these transformations, we're strategically investing in capacity enhancements and building business scale through increased automation. Finally, in parallel with our organic initiatives, we're actively exploring inorganic opportunities via mergers and acquisitions to accelerate the complex product development, gain access to new technologies, expand our product range and enter new markets. In summary, while FY '25 brought challenges, it also reaffirmed our strategic clarity. We believe the steps taken by us across our key pillars will drive a positive impact of Gland Pharma's success and long-term sustainability. Thank you for your continued confidence in Gland. With this, I'll now pass the call to our CEO, Mr. Shyamakant Giri, to share his thoughts with Gland's road ahead. Thank you.

Thank you, Mr. Sadu. Good evening, everyone. Following my initial months at Gland, I have focused on understanding the business in depth and aligning our capability with the strategic levers that will drive our market position and generate value. Broadly, my priority has been to identify key areas of profitability enhancement and new avenues of growth. Before I outline the initiatives underway to strengthen our competitive position, let's discuss our quarter and full year performance. In Q4 FY '25, our consolidated revenue stood at INR 14,249 million with a consolidated EBITDA of INR 3,475 million, reflecting a 24% margin, a 100 basis point increase year-over-year. Excluding Cenexi, our base business reported revenues of INR 10,332 million in quarter 4 FY '25, a 12% year-over-year decline, primarily due to the higher milestone realization in Q4 last year as compared to this year in the U.S. and a few major tender misses in RoW market. This impact was partially mitigated by new product launches, and we anticipate sequential improvement as our pipeline commercialize. Encouragingly, the base business EBITDA margin expanded to 38% from 36% in the prior year, driven by favorable product mix and benefits of cost optimization. For the full year '25, our consolidated revenue reached INR 56,165 million, with an EBITDA of INR 12,689 million, resulting in a 23% margin. Excluding Cenexi, base business revenues were INR 41,248 million, with an EBITDA of 14,451 million, translating to a 35% margin. Our volumes for full year '25 grew overall by 4% including new launches, aided by 9% volume growth in the U.S., again including new launches. Our new product launches in the U.S. are yielding results, thereby quarter 4 full year '25 grew 10% sequentially over quarter 3 full year '25. On a full year basis, our new launches now contribute 6% of the total revenue. In the U.S. market, we launched 4 new molecules during quarter 4, including [indiscernible], RTU bag, dexamethasone and new strength of vancomycin. Other regulated markets, primarily Europe, Canada, Australia and New Zealand grew by 4% and now constitute 23% of total revenues. The RoW market contributed 17% in quarter 4 '25, amounting to INR 2,404 million, a 14% decrease due to tender leases and software order to intake in key regions. The Indian market generated INR 525 million of these, representing 4% of our quarter 4 FY '25 revenue. Our quarter 4 FY '25 R&D expenditure was INR 503 million or 4.9% of the base business revenue. For the full year, our R&D investment totaled INR 1,922 million, that is 4.10% of this business revenue. On the compliance front, we received EIR from the U.S. FDA for our Dundigal and Pashamylaram facilities, confirming successful closure of recent inspection and reinforcing our commitment to stringent quality standards. It's been a challenging year for Cenexi, while foundational groundwork for a turnaround has in place, results has fallen short of expectations. Our quarter 4 FY '25 revenue was EUR 43 million, affected by lower production at the Fontenay facility. And currently, our gross margin improved to 79% from 77% in the prior quarter. Alain will provide a detailed update, but we want to assure you of our intense focus on Cenexi and the implementation of necessary changes to improve its financial performance and achieve our strategic objectives. Finally, a brief update on the key priorities outlined last quarter. We have been fortifying our capabilities and global expansion potential. We are currently refining our strategic direction and growth basis to position Gland for sustained success. On the demand side, our priorities include enhancing our footprint and launching new products in high-value, high-growth RoW markets, leveraging our strength in specific therapeutic areas and exploring inorganic opportunity to achieve significant growth in the India market. In the U.S., the primary focus remains on acquiring new customers and increasing our share of business with existing partners, supported by an accelerated portfolio strategy focused on co-development, in-licensing and partnerships in high-value injectables and newer modalities. On the supply side, our priorities are centered towards maintaining quality and cost leadership. We are continuously improving our operational efficiency to preserve our competitiveness and industry-leading quality and compliance record, sending our leadership team with critical hires and building capabilities across functions. With innovation, collaboration and excellence our guiding principle, I am encouraged by our progress and optimistic about Gland's trajectory. Your continued engagement and insights are invaluable as we move towards building -- as we move forward together to build value. With this, I would like to hand over to Alain for a more detailed update on Cenexi's performance. So over to you, Alain.

Thank you, Mr. Giri, and good evening to everyone. As Mr. Sadu and Mr. Giri outlined, Cenexi's performance showed marginal improvement over previous quarters, and we will continue to make calibrated progress towards achieving sustainable scale with a dual aim of securing profitability and resolving the execution challenges seen in recent quarters. To provide a more granular perspective, let me walk you through key updates at the site level. Production at our Fontenay facility in Q4 was impacted by ongoing remediation activities following the ANSM inspection in Q3 financial year 2025 as well as the breakdown of 2 equipments that affected our performance in the first 2 months of the quarter. These disruptions led to reduced shipments and, consequently, lower sales figures. On a more positive note, I am pleased to report that our new high-capacity ampoule line has started production as planned at the end of January and now enables us to better serve the needs of our customers. While operations at Hérouville remained below breakeven due to suboptimal utilization, we have several ongoing tech transfer projects in development that are expected to contribute to this site growth. We are encouraged by the ramp-up in the commercial production of a new ophthalmic gel and validation batches for the inactivated vaccine projects are progressing as per schedule. Furthermore, we have initiated the installation of a new prefilled syringe line which is projected to be operational beginning of calendar year 2026. This will substantially increase our capacity in the high-demand PFS segment and is expected to drive significant revenue per unit and overall value. I am pleased to share that the Braine-l’Alleud facility has met its target for this quarter. Our 2 new lyophilizers arrived on site and are being installed. Qualification for this new lyo capacity will be finalized at the end of the calendar year 2025. Additional vial and lyo capacities are also planned to be added in our Belgium site in the next 2 years. The long-term prospects for this business remain robust, with high-value projects in our tech transfer pipeline. Finally, our [ only ] site continues to deliver a strong performance thanks to a premium strategic positioning on hormones and anti-allergenic products market segments and strong operational execution. In light of the challenges faced, last year's overall performance remained below expectations, and we believe financial year 2026 will mark the beginning of a meaningful turnaround. We remain firmly focused on achieving our midterm objective of delivering positive EBITDA by Q3 financial year 2026. Thank you for your time. I will now turn the call over to Ravi to discuss our financial performance. Ravi, over to you.

Thank you, Alain, and welcome, everyone, joining us today. We thank you for attending this call as we review our financial performance for the fourth quarter and the full fiscal year 2025. The FY '25 revenues remained flat at INR 56,165 million. However, our key positive was the marginal improvement in gross profit margins. Consolidated revenue for Q4 FY '25 declined as compared to previous year, while it improved from the trailing quarter of this year. This is driven by the reasons as mentioned by Giri in his commentary. In Q4 FY '25, our consolidated EBITDA margin improved to 24% from 23% in the corresponding period of FY '24, led by base business and improvement in Cenexi's profitability. Our base business, excluding Cenexi, exhibited increase in EBITDA margin for Q4 FY '25, reaching 38% compared to 37% in the same period last year. This improvement was primarily driven by enhanced gross margins and more efficient cost management practices. At Cenexi, the losses reduced due to improvement in performance in this quarter. Our EBITDA for the full year ending March '25 amounted INR 12,689 million compared to INR 13,331 million in the previous fiscal year. The reported EBITDA margin for FY '25 stood at 23% on a consolidated basis and 35% for our base business operations. While the base business margin improved due to better contribution and controlling costs, Cenexi's lower performance in some quarters in this full year impacted the consolidated EBITDA margin by 1 percentage point. Gross margin for Q4 FY '25 also reflected positive momentum, increasing to 66% from 61% in Q4 FY '24, primarily due to higher contribution achieved in new launches and better raw material costs in key -- few of the key products. Within our base business, the gross margin in Q4 FY '25 was at 61% compared to 56% in the previous year. On a full year basis as well, the gross margin has improved by 100 basis points as compared to previous year. Our net profit for the fourth quarter decreased by 3% to INR 1,865 million compared to Q4 FY '24 and declined by 10% in the full year as compared to previous year. During the quarter, we achieved a PAT margin of 13%, consistent with the previous year. For the full fiscal year, our PAT was INR 6,985 million, resulting in a margin of 12%. Other income, which is mainly interest earned from bank deposits and foreign exchange gains, amounted to INR 440 million in Q4 FY '25 is lower than as compared to INR 585 million of Q3 FY '25, primarily due to reversal of foreign exchange gain during the quarter. For FY '25, other income was INR 2,136 million, which has increased as compared to INR 1,702 million in previous year due to increase in interest income. Higher finance costs incurred during the year is related to interest charges on a GST refund matter. Total R&D expenses for the fourth quarter were INR 503 million, compared to INR 437 million for the same period of the previous fiscal year, representing 4.9% of revenue from operations on a net Cenexi basis. For the full fiscal year, total R&D expenditure was INR 1,923 million, which constituted 4.7% of our revenue and increased from last year's 4.3%, underscoring our ongoing commitment to R&D. On a stand-alone basis, our effective tax rate was 26% in the fourth quarter and same 26% for the full fiscal year. As of March 31, 2025, at the group level, our total cash and cash equivalents stood at INR 25,562 million. After accounting for Cenexi's debt, our net cash position was INR 22,870 million. Cash flow from operations during FY '25 was INR 9,147 million. Working capital as of March 31, 2025, was INR 21,683 million. Our average cash conversion cycle improved to 172 days for the 12 months ending March '25, compared to 173 days in the corresponding period of the fiscal -- previous fiscal year. Total CapEx during the quarter amounted to INR 886 million and full year FY '25 amounted at INR 3,938 million, allocated to Gland's Indian sites and Cenexi. In India, our growth CapEx is focused on expanding our new backline and increasing packing capacity. We are also in the process of adding a new cartridge line at Suite 9, which will complement the existing package line at our Pashamylaram site. As Alain mentioned, at Cenexi we are investing in additional high-speed and new lines and lyos to enhance overall capabilities. With that, I would now like to request the moderator to open the lines for questions.

[Operator Instructions] Our first question comes from the line of Neha Manpuria from Bank of America.

My first question, just a clarification -- what will be the profit share and milestone number for the quarter?

You want the absolute number?

Yes. The profit share and the milestone number, please?

So it's about INR 145 crores, it's about 14% profit share, milestone is 6%. Milestone is 6%.

If I look at the U.S. business adjusted for these 2, then it seems like we've been in that $70 million to $75 million range per quarter in the U.S. business despite the fact that we've launched 31 new products in the year. How should we think about growth from the U.S. business as we launch more products and gain more volume in terms of growth? What should be the run rate last year and the year after? And just an add-on question to the U.S. market given the noise around tariffs, what are we hearing from our customers in terms of the ability to absorb a pass on that?

Yes. From the revenue, U.S. revenue perspective, while there's -- from the new launches, about 4% growth, which came from U.S. But there also be -- normally over the years, it's been around 8% to 10% growth, which used to come from new launches. What happened was also was the products, there are several key products where the material costs have gone down and the end market price also was reduced, the transfer price. So the revenue came down, but the margin was intact. That's one of the reasons why actually the revenue didn't move that much compared to previous years. On the tariff side, it's too early to comment, but what we hear is for generics, it will not impact that much. And for us also, what we see is probably most of it will be passed on if there are any tariffs, which will levy down Indian imports.

And from the U.S. business, I was thinking about from the $70 million to $75 million that we're doing of milestone and profit share, what should this number be over the next few years? What -- will the new launches now will be able to reset this base higher? Or what should drive this base higher?

Yes, it should contribute more, looking at the historical numbers and also the type of products which are going to get approval in next year or 2 more from the complex side. And also, we are looking at as a business, we're looking at mid-teens as a growth for the coming year.

This is for the U.S. business for the consolidated business?

For the consol business.

Okay. Got it. And on the RoW business, it seems like the Saudi contract tender has been delayed for some time. So what should drive the growth of the RoW business for us given that the Saudi contract is not coming? Are there any more drivers for us? Or this is the new base that we should be operating -- that Gland should be operating at?

So yes, you're right. But what has also happened is the Saudi Lipco, of course, we lost, there's a tech transfer going on right now where we want to -- we engage a local partner to manufacture enoxaparin and the volumes will come back. But what we are doing also is in a place, defining a non-anopsa and non-heparin strategy, okay? So we have clearly earmarked some high-growth countries where we have a very portfolio approach, a targeted registration approach, which will help us going forward. We have approximately upwards of around 500 registrations still pending, which will come over years. And so there are 3 growth levers here. One is how do we push the current registration, okay? How do we use our cost efficiency that we have to win tenders in some of the key tender market? And how do we again a very focused country -- in-country kind of strategy. So we define and play in the country with a very strong portfolio. This quarter also, what has happened was because of the U.S. volume, we dedicated some capacities to RoW, but we are back on track. So that was this quarter. But our long-term vision on RoW is the strongest. We internally have reasons to believe that this business can double over the next 3 to 5 years.

[Operator Instructions] Our next question comes from the line of Bino Pathiparampil from Elara Capital.

Just a follow-up. Did I hear right that you said next year, you are looking at a mid-teen growth at the overall level?

That's correct.

Okay. That is including Cenexi. The consolidated revenue.

That's correct. Yes.

Okay. Got it. And apart from the improvement in Cenexi margins, are you looking at improvements in margins in the rest of the business as well?

So rest of the business actually has been pretty good, I mean stabilized around 37%, 38%, if you have seen in the last 2 quarters. So we continue to maintain around that margin.

Got it. And from your presentation, I can see that you have 27 Para IV filings in the U.S. Out of which -- how many would be of any first-to-file exclusivity?

We can come back to you on that to give you a precise data.

Sure, sir. More, I'm looking at any big exclusivity launch expected in the next couple of years, '26 or '27 financial year.

Yes, we'll come back to you on that, yes.

Our next question comes from the line of Ashish from EverFlow Partners.

So my first question is what sort of growth could the GLP drug be for us in the coming year and over the next 2, 3 years? Would they meaningfully accelerate our growth trajectory?

So GLP right now, our position is around 40 million cartridges. Next year, we'll be one of the top-tier cartridge capacity company with 140 million. Now GLP, as you know, in many markets is going off patent. So this is really a fill and finish opportunity that we are looking at. And our initial success is giving us all the strength to go further and block all the capacities in the coming time. How will the market behave on the demand side, on the patient pricing side is something that partners would answer. But there is only encouragement. There's only good news around GLP. The volumes are -- the kind of volume the partners are discussing are very, very high. So we feel that this market will explode by volumes at least in coming years.

Right. Could you just -- could you please quantify the growth in the next 2, 3 years given the product pipeline and base business?

Ask again.

Could you please quantify the growth over the next 2, 3 years for our business given the product pipeline and base business?

So we -- next year, we said about mid-teens subsequent few years, 2 years, it will be low 20s.

[Operator Instructions] Our next question comes from the line of Aditya Pal from MSA Capital Partners.

Sir, just wanted to quickly understand the thought process on Cenexi. So what I can understand Cenexi is largely a generic CDMO business. But I'm not understanding that why is the employee benefit expenses 60%, 65% of my revenue? And have we overinvested in people where now that we scale up from here on, the margin will flow to directly to the bottom line? So that is question one from my side.

Yes. So yes, the average cost of manpower in Europe is around 40. So yes, comparatively, it's a bit more manpower is higher at Cenexi. I think that's the issue where we need to address. But it's also related to how much revenue we are getting and how efficiently we can manufacture there. So with the investments we're making on the CapEx, so we are installing more efficient lines that will give us a large throughput. At least 2 sites have demand, which is more than what we're able to supply today. With the new lines which we are adding up, that should cover the revenue loss that we're having today. From the strategy perspective, if you see the branded generics is one, as a solid business. If you look at the customer base and the volume base what we have, it's been very consistent over many years. That's the nature of the business. Second, also technologies what Gland do not have, they do have. They do make syringes of oncology products. They also have hormonal products, they do vaccines and some biologics products as well. So from a technology perspective, they have additional. That's the logic behind asset. And of course, derisking ourselves on our business in U.S., which is most of the business was in U.S. And to enter Europe, we need to have this kind of a business. So there are several reasons on why we acquired it. But yes, from an efficiency perspective, that's where we are focusing currently because like you rightly said, the manpower cost as a percentage to revenue is quite high compared to the other companies in Europe.

And sir, so a couple of questions, both are interlinked to each other. In your presentation, you said that we are planning to spend close to EUR 60-odd million over the next 3 years in Cenexi. So one is that -- when will we achieve a double-digit EBITDA margin in this business, that is Cenexi, and what will be my -- what will be the ROCE of this business? Because if you're investing EUR 60 million over the next 3 years, and the base business can do a 25%, 26% ROCE comfortably. And if you are not able to achieve that, then it does not make sense to judiciously use the cash flows investing for land-based business. So that is the thought process that I want to understand from the management.

Yes. So basically, CapEx is an investment for the long term, and we are increasing the capability and capacity. We have sufficient visibility of the pipeline and the business interest. There's a strong funnel we have with the customer. So we will be spending this money in next 2 to 3 years in building, like Alain mentioned and we spoke about it is, one is, of course, adding a new prefilled syringe line in HFC, which will entail a much better realization per unit sale than what currently we do. And then in the Belgium side, we are adding one additional wireline and lyos that will significantly improve the capacity of high-value business, and there is already tied up business and contracts for that. So we are looking at breakeven in this December quarter. And then next year, we should improve the EBITDA margin significantly because there's a high operating leverage there. And we should be getting -- reaching the almost the earlier double-digit EBITDA in the next year after that.

Understand. Sir, just one last question from my side. So in the earlier -- to the early participant, you mentioned that we are aiming to grow at mid-teens growth for the entire business. So how should one look at from overheads perspective? So do we see the overhead that is both the Cenexi and the base business increasing with lockstep with the revenue growth or there is some room for operating leverage now?

No, there's ample room for operating leverage. Like you're mentioning that the overhead in typically in injectable capacity is about 80% or more fixed. And the workforce which they have currently is sufficient to take care of the additional line we are adding. We are not going to hire new people for that. So -- and it's inside the same facility. So the electricity and other overhead will remain the same. So as and when the revenue ramps up, we would see the margin expanding.

The next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, out of that 3 anticipated approval from the in-house complex pipeline, could you just share the market size and, let's say, the competition that can come up at the time of launch by Gland? Without naming the product, maybe.

Yes. So from a pipeline perspective, our -- so we have a total 71 ANDAs in the pipeline with a TAM of around $5.71 billion, of which our generic portfolio has around 40 ANDAs, covers a time of around 1.24. In next 1 to 3 years, our pipeline will -- we have 5 ANDAs with a TAM of around $2.12 billion. And beyond 3 years, our investment that we are doing with co-development partners, the 505(b)(2) NDA, we are targeting a TAM of around $2.34 billion market. So if you see from an R&D standpoint this year also, 33 launches in the U.S. Our new launches are more gross margin than the average gross margin. For example, we have 72% gross margin only from the new launches as compared to the company average about 58%. And therefore, we are very focused on what to launch going forward. And yes, we are a manufacturer. So from a demand estimate standpoint, we do the forecast and all from the partner company. So we are looking forward for, again, a similar kind of revenue contribution from new launches in the coming year.

Sure, sir, how much would be the contribution from enox and Heparin for fourth quarter and FY '25 across the geographies?

Give us a second. About 15%. 14%, Yes.

14% for the quarter as well as FY '25?

14% of the total revenue.

Yes. For the quarter as well as FY '25?

FY '25 is about 14%. And the quarter is about 15%.

Sir, secondly, this milestone as well as profit share, if you see last couple of quarters, this quantum has increased on an absolute basis as well. While difficult to credit per se, but how do we think about this maybe for next few months? Are there any big products which can still sustain such kind of income for us?

The milestone actually in last quarter is lower than before because it's not consistent on a quarter-on-quarter. It depends on what milestone we take in that particular quarter. Some are signing milestones and some are when you get filing or if it's a tech transfer, then if you close it. So the timing will be different. But overall, annual basis, if you see, it's more consistent. So I would say milestone you look at on a yearly basis. For profit share, it depends on how many launches we have done and how it has increased. If you see the launches what we've done in Q3 were more, almost, I think, 13 products we launched in Q3. So that will contribute a higher profit. And that's the reason why we got a higher profit share in Q4.

Got it. Sir GLPs are also contributing to this milestone income profit share?

No, no. It has nothing to do with GLP, nothing to do with that.

Understood. And sir, just lastly on this biologics trend, while 1 contract is expected to sort of start revenue in FY '26. But broadly, if you could share like how much overall, we can expect in FY '26? Is it like $25 million, $30 million to start in the biologics business? Or it will be still a gradual scale up in this segment?

Yes, for FY '26, it will be about INR 100 crores, I would say, then it will gradually increase.

Our next question comes from the line of Shyam Srinivasan from Goldman Sachs.

Sir, when I look at the overall U.S. revenue annually around INR 3,000 crores $350 million. And I'm just trying to tie it up with the growth guidance. So we need to -- the U.S. needs to grow at least 15% given the size, so we're looking at another additional $50 million of revenue. So just want to understand how is fiscal '26 different from '25? I thought we had a similar ambition to grow. So -- and clearly, the launch track record has been very strong. So is that what is going to be driving this 15%, 16%, 17% growth in the U.S., which we have not seen so far, but maybe comes in '26. So what gives us that comfort on guidance?

So FY '26, overall, we are seeing 15% growth. It's a combination of some growth coming from Cenexi because the numbers will improve that. We've already seen that in the last 2 quarters. So some growth will come from there. Some growth will come from the new launches. And some with the tech transfer projects what we started, some dry powder contracts what we have done, that contributes about INR 60, INR 70 crores. Yes, about INR 60 crores, INR 70 crores, then the biologics will contribute another INR 100 crores. So there are different levers which are contributing this combination of -- also, if you see our volume growth in U.S. is substantial. While the prices have come down because of the overall material cost. So the top 10 has kind of from the transfer price-wise, it's stabilized. Now the volumes have gone up. Even if you look at our top 10 products, that has actually contributed, has grown around 24% in terms of volumes. So there's a lot of uptake in terms of our top products, especially even if you consider heparin, enoxa, not just these 2, but there are several products where we got some newer contracts. So added to that, what's happening is what we have invested into the line time and also some of the R&D investments which have gone into life cycle management of products that has helped to reduce our costs. And that made us more competitive, and that's the reason why our volumes have increased. And also while the prices have come down, still we were able to maintain that EBITDA margin. So that kind of consumed some of our line time, which has actually, what we call, mitigated some of our business growth in RoW. So that will also now come back because we have new 3 lines added this year. So that will be coming on track. Yes.

Helpful. So despite all this volume growth, I think pricing or whatever transfer pricing calibrated pressure has been high. How would you quantify that for, say, fiscal '25? And what gives us the confidence that pricing will not even worsen in '26?

When I say the financial -- the end prices have not changed. What we said is the transfer price have gone up because we have reduced our material costs and changed our suppliers to be more competitive in the market. So we get more contracts. That's why the volumes have increased. At the same time, we're able to maintain margins.

The next question comes from the line of Dheeresh Pathak from WhiteOak.

Sir, how much have you spent on that 100 million pen line?

So this package line is due to be installed this year. The overall cost would be about INR 120 crores, everything together, only for this cartridge.

INR 120 crores. Okay. Does Cenexi you also have cartilage lines?

No, only syringe lines. No cartridge. But the syringe line can also handle the cartridges, but restricted to sterile cartridges. They can't do bulk cartridge...

Restricted to?

The top line can be used for the -- syringe top line can be used to fill sterile cartridges.

Okay. Sir, just on Cenexi. So we paid EUR 230 million, then we are spending another EUR 60 million to enhance the capacity then another EUR 30 million, EUR 40 million loss funding. We end up spending EUR 350 million, even if we do EUR 200 million revenue, double-digit EBITDA, barely making -- and then if you add on that tax and maintenance CapEx, this looks like a very -- even if we get to that milestone of double digit, how much we have spent and the bandwidth and all that it has taken, seems like a very poor capital allocation. So is this a business even worth pursuing based on whatever obviously benefit of hindsight and whatever your understanding is currently? Is it a business worth pursuing?

So this -- the Cenexi, the investment thesis is taking longer than what we estimated for sure. But now that we are back on track, so with this additional capacity, which we are adding to this CapEx. This will take our revenue to not EUR 200 million or EUR 300 million in 3 years' time. And then we are looking at EBITDA of about high teens as a percentage. So -- and there is also a strategic lever which we have not yet been able to get the benefit out of it simply because we are currently focusing on getting the things house in order. For example, we are looking at cross-selling to each other's customers. We have not looked at that aggressively yet.

Yes. If you look at the customer base of Cenexi, they have big CDMO players whom actually we don't have access to. Also, these players also sell in rest of the world markets. And they are looking at increasing that market, getting products out of India. So a lot of other benefits we looked at when we invested into this asset. But currently, the focus is on making it a bit more efficient to get that on track and then work on the synergies because there are too many things we can't do at the same time. So from a long-term perspective, the other cases are still there. There are several opportunities where we can use this. Like I said, like controlled substances, we can't make it from India and sell in U.S. There are very few players who supply those products, but Europe can supply. So they also manufacture a few products to other players who supply to U.S. market. And we actually are restricted in that. So we -- the idea was we can actually develop some products in India and then transfer there and supply it to the U.S. in terms of controlled substances. So there are several other areas of synergies what we looked at when we acquired this asset.

Limited point, sir, is that even at EUR 300 million at high teens, it will not be like the best of return on capital investment. It just looks like that doing this kind of a CDMO work in Europe is -- I mean, assuming that when we get to high teens, we would be among -- in terms of operating efficiencies, in terms of top quartile in the European assets. With this kind of an asset price, at least doing this kind of a business in Europe does not look as attractive, unless you're saying that we can scale up even much higher than this -- that's my limited point. I will leave it at that.

Our next question comes from the line of Harsh Bhatia from Bandhan Mutual Funds.

Sir, 2 quick questions. One is sort of adjacent to a comment you made earlier. So in terms of the capacity expansion, again, related to the Cenexi part, so multiple line items and expansions, including ampoules and lyophilization. Is there a situation right now where we are not able to take incremental business because of high level of capacity utilization or some other reason, which is why we are going so aggressively for this capacity expansion plan? I mean I'm just trying to sort of see through that.

Yes, at least 2 sites, I think we are not able to cater to the demand because of, I would say, slower lines or inefficient lines, I would call. So one -- of course, one is, of course, replacing the current line in one of the sites. The other is adding new capacities because of the demand for lyo products, one is for the current products what we have commercialized and also the pipeline what we have. And moving forward, lyo, as you know, contributes more in terms of margin. So we need to invest into those. That's the reason why we are making the investments.

Sure. And what would be the order book looking like for Cenexi as such.

I have to come back to you, yes, give us some seconds.

Sure. Sir, lastly, on the cartridge capacity. So I mean, one could presume that a lot of that capacity as things stand today, at least at the $40 million level and possibly the incremental $100 million, a lot of that would already be booked to that extent. So in terms of the pricing part, if you could throw some more color as well as is there some element of take-or-pay because obviously, your sales would depend on regulatory approvals, depending on market to market. Obviously, you will not be able to -- you will not be selling based on where the client is selling. But irrespective, maybe some points on the pricing part as well as the take-or-pay in the regulatory aspect.

So this is more an unfinished CMO kind of job work. We are speaking to 4 kinds of customers. Indian players who want to launch the GLP in global market. Indian players who want to launch the GLP in India market. Global player who wants to launch the GLP in India market and global in global market. On fill and finish standpoint, I'll give a range, the range is between $1 to $2. That's the range of fill and finish. And as we are preserving some capacities to give it to the best partner so that the whole business is sustained. We did the deal with the Indian company for the global market. So this is what the sense is.

So just one last follow-up.

What did you not hear us?

No. Sorry, just one follow-up. Lastly, by best partner, you mean a customer who is able to give you good visibility in terms of the volumes and capacity bulk up? That would be the right...

Exactly. Exactly. Customers who have a strong presence in that country of launch and the customer who are very serious about taking this product in that country.

But could say for the next 1-, 2-year period, let's say, very broadly put, maybe at the India level or at a global level, there could be certain supply constraints in terms of fill/finish, the cartridge capacity as well as the pen assembly, maybe these 2 components could have some level of supply constraint at the India level or let's say the global level?

It depends on how this market plays up. The time will tell how sema will -- for example, one of the proprietary company has launched sema in a vial, the GLP-1 in India, okay? It really depends on how this market plays out. Yes, but the volumes have increased. And we are getting prepared. We have prepared at $140 million, as I told earlier, it will be one of the top-tier cartridge capacity company in the country.

And there was a question around order book of Cenexi, it's around 100 million.

Next question comes from the line of Alankar Garude from Kotak Institutional Equities.

Sir, firstly, with the 2 contracts on GLP-1, how much of the 40 million capacity is booked out?

No, that will be -- most of it is will be consumed. So that's the reason why we have invested in the second line because I think it will in a phased manner in next few years. So the second line will up and running by end of this year. So the 40 million will not be enough to -- for the new partnerships we are going to enter.

Got it, sir, you spoke about this $1, $2 for the CMO fill/finish on the pricing front. Is there any annual repricing clause?

Yes, it's always there on the contracts, it will be there depending on the cost structures and all that. It's always there. And also, there will be -- especially the CMOs, there are 2 types, right? One is, of course, the tech transfer that happens the product -- the pure CMO. So pure CMO always have these clauses based on volumes. They pick up certain volumes, the pricing and lower volumes, the higher pricing. So it's a tier pricing.

Understood. The second question, you mentioned about passing on most of the tariffs to your clients. Have you had any conversations with your clients on this front? And what has been the initial feedback?

While there are no real concerns from our partners because if you really see the tariffs is on the transfer price, not on the end price. So the impact will be lesser. And there are a couple of conversations, but it was very clear that it will be passed on.

Got it. And one final clarification, did you mention double-digit EBITDA margin in next year in FY '27 or FY '28?

'27.

Thank you. Ladies and gentlemen, with the interest in time, we will be taking one last question from the line of Mr. Vivek Agrawal from Citigroup.

My question is on the U.S. business. So this year in FY '25, overall growth was almost flat. So is it possible for you to give some color how the existing products have done as far as the volume growth is concerned as well as new launches and how the pricing has behaved?

Yes. So Vivek, as I told you, if we -- in the U.S. FY '25, the volume growth has been plus 9%. The price has been minus 5%. On the new product front, for the full year, we have -- the new launches in the U.S. contributed to 6% to the overall revenue. The new product gross margin is 72% for the full year. So yes, these are data, I think, that is around the U.S.

Understood. And for the next year, right, you are giving kind of mid-teen kind of growth at the consolidated level. But how to look at growth in the U.S. Because I think you need to hire in the U.S. in order to achieve that kind of growth is what is my understanding? Or it is the other markets where you are taking up higher growth?

So if you see, Vivek, in the U.S. market, our top 10 molecule revenue grew by 26%. So we are really preserving our top business in many ways. And growth is a function of new launches, new approvals that will come on an average. We launched 33 products this year, and we intend to continue that momentum in the coming year. So it will be a combination of new customer acquisition and it will be a combination of new customer acquisition plus value expansion with new ANDAs and all of that with the existing customers.

So U.S., the estimate is next year, 18%, 12% on the products and 6% from the CMO projects to the U.S. It's about 18%.

Understood, that is good. And lastly, actually, if you can -- so going into front end in the U.S., is it still there in the platter or the plan has been dropped?

Still evaluating. I mean, like I said, everybody is paused. So we are looking at how this tariff thing works out and how it's going to impact and all that. But it's not out of the platter yet. We're still looking at it.

Ladies and gentlemen, we will take that as the last question. I will now hand the conference over to Mr. Runjhun Jain for closing comments.

Thank you, everyone, for joining us today. We truly appreciate your insightful questions and engagement throughout the session. Should any further questions arise, please don't hesitate to reach out to us through our Investor Relations team. We look forward to connecting with you again next quarter. Thank you.

Thank you. On behalf of -- on behalf of Hindalco Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.