Lupin Limited (500257) Earnings Call Transcript & Summary

[Call Starts Abruptly] Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you ma'am.

Good evening, friends. I'm very pleased to welcome you to our Q3 fiscal year '25 earnings call. I have with me our Managing Director, Nilesh; our CFO, Ramesh; and our Head of Investor Relations, Ravi. We look forward to sharing with you our highlights for the quarter as well as outlook for the year ahead. We are very happy to report another quarter of strong performance across our key markets both on a sequential and year-over-year basis. This has been backed by continued improvement in margins and profitability. I would like to highlight that our margins are the highest we have achieved in the last 5 years, despite higher investments in R&D during the period. We feel confident of maintaining our growth momentum going ahead. Margins in the range of 22% to 23% in the current fiscal year. Our U.S. business delivered strong quarter-over-quarter and year-over-year over growth this quarter, with revenues at again a 5-year high. This has been led by volume growth in in-line products and contribution from new products like Mirabegron that helped us offset the anticipated competition in products like albuterol and Suprep. Our respiratory portfolio continues strong, with higher market shares in most of the key products. We look forward to strong close to the current fiscal year, as well as continued momentum in the year ahead. Apart from key products like Tolvaptan, we have an exciting portfolio of injectable products like glucagon, Risperdal Consta, liraglutide which we anticipate bringing to market next fiscal year that should help us deliver strong growth in the year. We continue to improve our profitability in the U.S., led by a better product mix and higher efficiencies in the base business. We are very optimistic of our long-term growth strategy in the U.S., as it continues to evolve from -- our business continues to evolve from a commoditized generic business, to more complex portfolio of injectables, respiratory and biosimilars, to ultimately a portfolio of strategic specialty assets. We believe that our pipeline will enable us, to continue to drive the shift to complex products to over 50% of our portfolio over the next couple of years. Coming to India, we reported growth of 11.9% year-over-year led by growth in India Formulations business, and additional tenders in our global institutional business. Our India Formulations business recorded growth of 9.1% for the 9 months this fiscal year against IPM growth of 8.2%. While key therapies like diabetes, cardiac, GI grew ahead of the market, and we also increased our chronic share. Muted growth in the respiratory category affected our overall performance during the quarter. We were very pleased to strengthen our diabetes portfolio, with the acquisition of the Huminsulin range of products from Eli Lilly and also 3 trademarks from Boehringer Ingelheim for the Indian market. We feel confident on continuing to deliver, above market growth in our India Formulations business, backed by our strong portfolio of innovative medicines, and in-licensed products and extensive reach through the 10,000 people sales force. Switching to R&D, our R&D as a percentage of sales was at 7.7% during the quarter, and 7.4% for the 9 months. We successfully filed ranibizumab in EU during the quarter, and are looking forward to the U.S. filing in the coming quarters. We have an exciting pipeline with more than 20 respiratory products, and 40 injectable products in development and plan to file more than 30 ANDAs in the next 2 years of, which more than 50% will be complex products. As previously guided, we expect R&D to be around INR 1,800 crores for fiscal year '25, which will mean a significant increase in our R&D spend in quarter 4. From a compliance perspective, we received the EIR from the U.S. FDA for a Pithampur Unit-1 manufacturing facility with VAI classification during the quarter. So far this year we have received EIRs for Aurangabad and the Dabhasa and have successfully completed inspections at Somerset and Nagpur injectable facility with 0 observations. We would like to reiterate that we are committed to ensure that all our sites are fully compliant with the U.S. FDA and other regulatory agencies around the world. Before I hand it over to Ramesh, I would like to say that we remain optimistic to grow our business in the years ahead. Our R&D capabilities and pipeline are gaining momentum, be it in our investments in various respiratory platforms like Ellipta and Respimat or the focus on complex platforms in injectables like iron colloids, peptides 505(b)(2)s and long acting injectables, and also our growing portfolio of biologics. We are also creating some unique differentiators like green propellant programs for our respiratory franchise. As I have mentioned earlier, we also continue to evolve our innovation pipeline, to ramp up our specialty business in the years ahead. We believe our approach on the pipeline front, and our commercial strategy will drive long-term sustainable growth for the company, and also build long-term value for our shareholders. With this I will hand it over to Ramesh, for a deeper analysis of our performance.

Thank you, Vinita. Friends, welcome you all to our Q3 FY '25 earnings call. This has been another quarter of consecutive double-digit growth across the top and profit lines. I'm particularly to highlight our EBITDA margins at 24.3% during the quarter, which is the highest that we have achieved in the last 5 years. Now diving into the numbers. Sales for Q3 FY '25 came in at INR 5,619 crores as compared to INR 5,080 crores in Q3 last year a growth of 10.6% year-on-year. On 9 months basis, sales came in at INR 16,630 crores vis-a-vis INR 14,761 crores last year a growth of 12.7% year-on-year. We registered robust growth across most of our key geographies. India business has grown by 11.9% year-on-year. North America has grown 12.3% year-on-year. EMEA grew 20.9% year-on-year, whilst API grew 4% year-on-year. The U.S. business. During the quarter, the U.S. business recorded sales of $235 million, a growth of 10.5% year-on-year and 6.8% quarter-on-quarter on a constant currency basis. On 9 months basis U.S. sales were $682 million, a growth of 12.5% as compared to 9 months of FY '24. As Vinita mentions, whilst we have benefited from volume growth in inline products and new product introductions, this has been offset by low single-digit price declines in base products, and anticipated new generic competition in products like albuterol and Suprep. Respiratory portfolio continued their strong performance, with high market share in most key products like albuterol and arfomoterol. We also continue to execute on our strategy to improve our profitability in this segment. With another quarter of strong profitability from this business. In the long-term, we remain confident of consistent delivery of profitable growth through an increasing share of complex products in our portfolio. On a full year basis, FY '25 basis, we anticipate our U.S. business to deliver double-digit growth ahead of our earlier guidance of high single-digit growth in this segment. India. Coming to India, the India business has grown by 11.9% year-on-year during the quarter and 16% year-on-year during the 9 months period now. Within this, the prescription business has grown by 5.8% year-on-year during Q3 FY '25. On 9 months basis, the prescription business has grown at 9.1% outperforming IPM by 1.1x. Chronic share during the quarter was higher at 65% with key segments, like diabetes and cardiology [ going ahead with ] the IPM growth. The share of in-licensed products is around 12%, similar to the 12% last year, which also positively impacts the profitability going ahead. Other businesses, revenue in your ex-India, ex-North America formulations business, which includes EMEA, ROW and emerging markets has increased 7.5% year-on-year INR 1,277 crores and now constitute 23% of our sales. On a 9-month basis, revenues have grown 12.6% year-on-year to INR 3,685 crores during the period. EMEA. Our EMEA region, which constitutes our EU region business and South Africa business, there stood strong growth of 20.9% year-on-year and 9.8% quarter-on-quarter during this quarter. This has been driven by healthy double-digit growth in EU markets like U.K. and Germany from products like Luforbec and NaMuscla. Emerging markets, emerging markets includes the APAC and LatAm regions and have registered sales of INR 451 crores, a decline of 4.7% year-on-year. On 9 months basis, revenues grew by 10.5% year-on-year to INR 1,456 crores whilst Latin America like Brazil and Mexico grew in local currency terms, overall growth was impacted, due to FX in this region. Coming to the P&L. Other operating income. Other operating income at INR 149 crores has increased INR 32 crores as compared to Q3 FY '24. This increases due to higher PLI and export benefits during the quarter. Gross margins, coming to the profitability Q3 FY '25 gross margins were 69.4% up from 66% in Q3 last year. On a 9-month basis, the gross margins at 69% versus 65.7% recorded in a similar period last year, an improvement of 334 basis points. This improvement is driven by multiple factors, which includes better product mix, tailwinds of the input cost, lower share of in-licensed products, increased volumes and also various cost improvement, and efficiencies which have undertaken over the last several quarters. Employee Benefit expenses. Employee Benefit expense at INR 984 crores constitutes 10.7% year-on-year from INR 889 crores in the previous year translating to 17.5% of sales. On a 9-month basis, employee benefit expenses, came in at INR 2,963 crores, an increase of 14.2% year-on-year translating to 17.8% as compared to 17.6% of the sales corresponding period last year. This change is largely attributed to higher cost, attributable to regular annual increments and business growth during the period. Manufacturing and other expenses, Q3 FY '25 came in at INR 1,696 crores increasing 8.7% year-on-year from INR 1,667 crores in Q2 FY '25 and INR 1,560 crores in Q3 FY '24 translating to 30.2% of sales, we serviced 30.7% last year. On 9-month basis, employee expenses came in at INR 4,936 crores and increased to 7.7% year-on-year translating to 29.7% of sales as compared to 31% of sales in corresponding period last year. The expenses are higher mainly due to R&D costs and higher volumes in the normal course of business. R&D. R&D is at INR 434 crores 7.7% of the sales as compared to INR 448 crores 8.2% of sales in Q2 FY '25. It's almost 2/3 of our R&D directed towards complex portfolio. On a 9-month basis, R&D is INR 1,232 crores or 7.4% of sales. For the full year, we expect R&D to be around INR 1,750 crores to INR 1,800 crores with a significant increase in R&D in Q4. EBITDA. Excluding ForEx and other income, EBITDA was INR 1,366 crores vis-a-vis INR 1,022 crores last year, an increase of 33.7% year-on-year with margins of 24.3% versus 20.1% last year in the same period. On a quarter-on-quarter basis, margins have expanded by 51 basis points. This margin expansion is on the backdrop of higher gross margins, and lower fixed costs during this period. On a 9 months basis EBITDA was INR 3,985 crores up 42.1% year-on-year, with the margin of 24% as compared to 19% the corresponding period last year. Putting all of this together, we believe that we should be able to deliver EBITDA margins in the range 23.5% range in FY '25 Tax. As far as the ETR is concerned it is 19.1% in the 9 months FY '25, for the full year we expect the ETR to be about 20% to 21%. Moving on to the balance sheet, operating working capital was INR 7,071 crores as of 31st December as against INR 5,691 crores of 31st March, '24, which translates to 113 days of net working capital as compared to 105 days in the previous -- as of 31st of March, '24. Net debt was INR 103 crores as against INR 477 crores as of 31st March, '24. Whilst we focus on increasing cash generation from our business, would also like to highlight that we continuously explore strategic allocation of our capital to ensure the long-term growth vision of the company. Moving on to ESG. The last quarter we strengthened our ESG efforts in both environment and social areas through various initiatives and ensuring that our operations remain water positive year-after-year. Our focus on reducing Scope 1 and Scope 2 emissions strengthened, which include various renewable energy projects. I would like to update on ESG ratings. Lupin has received a leadership ESG score of A- by CDP for climate and water. The A- rating from CDP includes Lupin performance in environmental transparency and management. The 2024 scores for climate and water represent an improvement from last year's B rating in climate and C rating in water. Further, we have successfully launched an ESG supplier assessment to the third-party encompassing our critical suppliers. We conduct ongoing ESG webinars, workshops to support key suppliers in enhancing their sustainability capacity. This program focus on providing rural healthcare services to marginal communities. With this, we open the floor for discussions.

[Operator Instructions] We'll take the first question from Kunal Dhamesha from Macquarie.

First one on the limited competition launches for us in U.S. market over the next 2, 3 quarters, we have discussed few names. I just wanted to understand that you know for those names like, generic Jynarque, generic glucagon, and probably Risperdal Consta we on track. And am I missing some key product here, which we might be able to launch over the next couple of quarters?

The major products are Tolvaptan and glucagon, Risperdal Consta and potentially liraglutide. So those will be the key products for next year.

And can you suggest the probable timelines of that? Tolvaptan I believe is quarter 1 FY '26, but on glucagon and Risperdal Consta, is there any update in terms of approval?

Yes, so we're making progress on both applications, with the agency and would expect that, hopefully approval sooner rather than later. But I think it'll be safe to assume that Tolvaptan would be the major contributor in the first half of the fiscal year, and the injectable should ramp up in the second half very nicely.

And the recent inspection at Somerset. Has that anything to do with our Risperdal Consta filing? Was it a PAI?

No. Yes, it was a PAI, but for a suspension product, for Edaravone. The Risperdal Consta product comes from Netherlands, and is manufactured at a CMO and both were inspected by the FDA last year and are progressing well.

And second one on the India business, we have cited that the slow growth is primarily due to issues in respiratory therapy. And I believe the respiratory therapy growth itself was quite low despite being. We are being in a winter season. So what are the factors that is leading to the slower growth in your view?

Yes, I mean, the market seems to be that way. I mean, sequentially the number is as an absolute number up actually for respiratory, but it just seems to -- I mean, it's been lagging for a while versus the rest of the market. Even for 9 months, the market was only at 4%. We were at 3% for 9 months and in the quarter again has been disappointing. I do think it'll bounce back. I mean we've had periods of high double-digit growth on respiratory, but for the last 12, 16 months it's just been slow. I think the focus right now from a respiratory perspective in the market has been more on anti-infectives and the like. Not so much MDI, DPI, inhalation kind of products, but we believe that it'll bounce back hopefully, in the next couple of quarters.

Sir, in your view what would be the split of, the chronic side of respiratory product like inhalers versus acute like anti-infective?

Our focus is primarily on that. So our focus is --

Inhaler side?

Yes, primarily MDI, DPI, a little bit of nebulization, that's it.

We take the next question from Tushar Manudhane from Motilal. Tushar, are you there? Hello?

Hello. I'm audible?

Yes, you are.

Particularly first on the R&D spend. The guidance is that it is going to increase from fourth quarter. So any specific projects, which you would like to highlight which is going to require a higher R&D spend compared to [indiscernible] we have spent?

Your voice was very muffled. But if we got your question correctly, you're asking about the reason for the R&D spend ramping up. A good part of it is our complex genetics portfolio. It's 5 nasal sprays actually that we expect to file in Q4 versus the rest of the year. That mean we have like so majority of the spend is coming into quarter 4. Also injectables, there's a good amount of increase in the second half of the fiscal year. So it's primarily respiratory and injectables.

We'll take the next question from Bino from Elara. Bino?

Just following up on that question on India. So this contribution from this tender business, which has helped us show growth in that line, what's the nature of that? Is it going to be steady next year as well or will it grow or will it drop off next year?

In India on the institution business, I mean the -- it's been fairly flat. It's been a meaningful number. It'll continue into the next year as well. But I mean we always call out the business with and without. The India region formulation business, which is the domestic sales business is 5.8% year-on-year or 9.1% for 9 months.

Understood. So this gender part of the business is likely to stay flat next year?

Yes. I mean it's a good number and it'll continue with that good number.

Understood. Second, on Mirabegron -- what are your thoughts, latest thoughts around the litigation? Are you planning to continue selling it at risk? Any further thoughts since the last call?

Yes. So no change in terms of litigation status. We continue to navigate through that process. In the meantime, the generic substitution has gone up, the overall available market has gone up and our share has ramped up nicely as well. So no real change from a competitive scenario standpoint, from the litigation developments.

Understood. And this is likely to -- the status quo is likely to continue for a few quarters or what are your thoughts?

Also, we will -- as we navigate through all of the outcomes of litigation, I mean, we expect in the first quarter of next fiscal year, to get a decision on Mirabegron 2 patent and continue to litigate the others. So yes well, definitely for this fiscal year, we don't expect any change, and then we'll determine the next fiscal year based on outcome of litigation.

Understood. One last question to Ramesh. We have been benefiting from this PLI-related income. How long is it likely to continue? How many more quarters?

The benefit is there for next 3 years.

But I believe you are booking upfront or so. So at the current level, how long will it continue? How many quarters?

So there would be decline for sure next year. The normal course you would be expected to and look at about INR 200 crores on an annual basis. But you have the benefit of actually taking up to a third more in a particular year alone, which you've taken advantage of this year. But obviously it would impact on the total quantum of monies that you can claim, over the next 3 years.

The next question is from Surya Patra from PhillipCapital.

So first of all, could you clarify what is the nature of this provision that has been created, and have you shared about the specific nature of the dispute also?

Yes, so it's basically coming in from litigations, so we don't, talk about, which litigation and the like. It's a conservative provision and that's what it is.

Okay. There is nothing to anticipate or nothing to see any kind of risk to relating to the Mirabegron right now, right?

No.

Okay. Second question is on the respiratory portfolio as a whole. If I remember right then respiratory has become a more than 30% of revenue contributor putting all geography put together. So and the current period is a kind of a respiratory pro-respiratory season. So what kind of performance that you would have seen for the overall respiratory portfolio for the quarter?

So it's been strong performance in the -- yes, you wanted to complete that question.

Yes, yes. So I mean is there any -- we have seen moderation, let's say in , we have seen some kind of competition in U.S. relating to albuterol to be specific. So given that is there any risk that one should think or consider about this portfolio?

The secular trends would kind of indicate that respiratory is going to be very important for us in America, and in other parts of the globe and of course India as well. There would be some quarter-on-quarter variations and the like. And that doesn't necessarily mean that the secular trend is going to be appended.

But this is a kind of a seasonal peak, seasonal kind of period. During that period we are witnessing relatively underperformance. So that's why the question was?

You can't pinpoint the reason why there is a decline in any part in India and so on. So just take it as it comes that way. But in a general sense our focus on the segment will certainly continue.

So it's really strong contribution both in U.S., Europe, Canada as well as growing in other parts of the world like Australia. And of course in India. We have the respiratory market growth at a muted level that, is contributing to the lower growth. But overall respiratory still continues to be a major therapy area for the organization. It's an area where we expect to bring all the material generic products, to market across the globe. And we expect to also innovate, like we have done in India with the 2 triple novel combinations. We continue to work on respiratory green propellants for U.S. European as well as India, plus other products we have the opportunity to bring to market brands like Xopenex in the U.S. that have been fairly stable. And like, while we have a low growth in respiratory in India, we're seeing the flu season pick up in the U.S. again, we're seeing another peak. So the market shares on the respiratory portfolio, fairly strong.

Okay. Last question from my side is about the cost. It is great to see your cost optimization measures really contributing to the improved margin now, and also possibly that is flowing from improved margin is flowing from the improvement obviously, what we have been seeing in the U.S. business as a whole. So there would be an element of a Mirabegron, which could be a positive surprise and all that. So given that going ahead, let's say in the next 12 month period, what kind of margin performance that we should see for the U.S. business? I may not require the number, but qualitatively, if you can talk something about the next year's U.S. profitability that you are anticipating?

So there are some tailwinds in terms of ForEx, which you cannot be sure about, but the focus on cost is eternal insofar as we are concerned, and we have seen some good results coming in. We have seen also tailwinds when it comes to input costs. But again as I said, there are geopolitical tensions, et cetera. That are actually moving parts. You can't be certain but I think if you talk about overall margins, I did indicate the fact that between 22% to 23.5% would be a good range to kind of aim for the next fiscal as well.

Okay. So are you really worried about the kind of tariff things, which has been talked about? See although it is like sometimes it has been indicated something like 2.5 on the pharma also or any. This U.S. tariff thing is a kind of area of concern, or uncertainty of this - for this moment?

Well, so we are monitoring it very carefully, and the industry has made a strong pitch both from AAM standpoint as well as IPA that tariffs will have a significant impact on the genetic industry. If was implemented in 70% of genetic drugs for the U.S. are imported at present. 50% of generics come from India. So there's clearly a significant role that India plays on the generic front. And we've made that case with all the major stakeholders. So we'll find out with the current visit of the PM to the administration what transpires. But we are hoping that pharmaceuticals and genetic drugs in particular, will be exempted. And if it is otherwise, obviously we'll be looking at other ways and means of mitigating, the impact with a combination of, manufacturing in the U.S. as well as wherever possible, from a cost perspective and otherwise. But watching it very carefully, but hopeful that the case made by the industry is, has been heard and the implications understood that any tariff impact can really cause more product disruption, and drug shortages, which no one wants in the country.

We'll take the next question from Anubhav Agarwal from UBS. Anubhav?

One question is on Radicava. Vinita, which year can you launch it? Is it next 1, 2 years or beyond that?

Which product are you referring to Anubhav?

The Somerset, which you have the PAI on Radicava?

I think it's out for a good number of years. It's not in the next 2 years.

Okay. Second is on the Canada semaglutide opportunity. Would you be in in the first year of the opportunity or are you pursuing that?

The team is working on it. We're hopeful that we'll be in the first wave between '26 and '27.

Okay.

We'll take the next question from Bansi Desai from JPMorgan.

Vinita ma'am, you mentioned about increasing our focus on the specialty business in the U.S. so if you could just elaborate on that. Are we talking about evaluating more acquiring brands like we did in case of Xopenex or are we are, or are we also going to evaluate probably late stage assets? So what would be our strategy here and have you earmarked any investments for this business?

Yes, so we do want to build specialty as the third major arm, or leg for our global business with the U.S. being a major focus and assets like Xopenex is a sweet spot for us. Products that fit strategic aspirations, building on the respiratory front and ideally on market assets. But we know it's difficult to really get on market assets. So we're also looking at late stage assets that are compelling from an investment perspective. And we as you know that we are a debt free company at this point, so have the ability to invest for the right programs. The right opportunities and we haven't earmarked, but are committed for the right assets, to explore as well as close as wherever possible acquisitions. Simultaneously, we are also building a pipeline in the respiratory front with the capabilities we have on the R&D side. The opportunities that we have on the green propellant front, to take the meter dose inhalers and come up with more, climate friendly and achieving both our sustainability goals, and offering a differentiated product to the patients and the market. We continue to innovate on that front on the pipeline. So combination of both pipeline as well as late stage assets, is what we're looking at.

And ma'am, given the, biotech funding has been weak out there in the U.S. is it fair to assume that there is, good assets that are available in the market?

Yes, there's a lot of opportunities right now that, if one could, yes, acquire at least a few assets that are meaningful. So really good opportunity to acquire assets.

Okay, noted. And ma'am, secondly, on the Tolvaptan opportunity post exclusivity, how should we see the competition coming in? Would it be in a staggered manner and would Tolvaptan be a meaningful contributor in fiscal '27 as well for us?

We expect it to have a stronger tail, because it's a specialty product name patient, REMS products. The conversion we expect is going to be slower than what you would expect in a simple oral solid, and the tail should be longer. So we would expect both second half of the fiscal year, as other competition comes in, plus into fiscal year '27, it should be a meaningful product.

And therefore, just lastly in terms of margin trajectory, 2 years out, when I just look at, some of the moving parts probably PLI would have been normalized. Jynarque course would have been, probably at a normalized levels but then again, you have certain businesses in India, which are probably loss making today and that could probably contribute positively. So how should we think about margins say, in fiscal '27, '28? Would it be fair to assume it would be higher than where we are currently?

Given the kind of products that we'd be bringing to the market, obviously, the top line buoyancy would continue. There's also the focus on cost and we have taken up a number of initiatives, which would actually certainly keep that on a tight leash. And the third aspect of the entire program that you spoke about, essentially adjacencies. Clearly, we are losing about a couple of percentage points, because of essentially the losses that these adjacencies are currently lapping up at this stage. But that said, over the next 3 years we expect that to also turn positive. But we also have growth plans in terms of spinning off at some point. So clearly upward movement of on the EBITDA front is certainly to be expected.

The next question is from Neha Manpuria from Bank of America. Hello, Neha? We'll take the next question Saion Mukherjee. Saion, are you there?

Am I audible?

Yes.

So Vinita, Nilesh, if you can talk about semaglutide, other than Canada, which all markets, you already filed, and if you can take us through 2026 and 2027. How should we think about the launches and you prepared this in terms of formulation and API? And how much will be the dependence on partners for this product? So if you can just draw the landscape broadly for this product over the next 2 years, please?

Maybe I can talk about India and then Vinita can add, I think on India, I mean, on the injectable, I mean, there's going to be many players. Obviously, we'll have it in that first wave as well. I think the more interesting part to solve for in India is the oral product. And we're hoping to have that at the time of loss of exclusivity as well. We think that, that will be the more important product, to deliver on and that will come from an internal development. And then for other markets, we're obviously looking across, I mean, Canada we talked about earlier, but Vinita do you want to add for other.

Yes, I mean, for the oral solid, which is an opportunity also in multiple markets, obviously we have an internal development and for the injectable semaglutide. We have partnerships in place for a few markets. We have existing partnerships, others in the works. But we would expect the '27 calendar year to be in at least a handful of the open markets for semaglutide.

And in terms of capacity, anything you can share your ability to service the markets. Have you invested in that from a formulation perspective?

No. So the oral solid, definitely, we have internal capacity as well as injectable. Although we have a partner. We partnered with companies, we have the ability to double up with our Nagpur facility. But right now we are counting on partners for the injectable.

Okay. Understood. And next one was on green propellant. You mentioned about that opportunity. So how should we think about it? When do we get more clarity on this, and how meaningful this opportunity you see at this point?

Yes so we expect the meter dose inhaler market will move materially over the next, maybe start in 5 years, but definitely over the 10 years into the green propellant products. Certainly with the moves that the major pharma companies have made like GSK, AstraZeneca as well as KAC from a European standpoint. We hope to be at the forefront -- as a material player on the respiratory front with a Xopenex brand as well as other MDIs, to bring better propellant products to the market. So we have multiple products in development right now. Not at the stage where we are filing in the next year, but certainly year next fiscal year '27, we should start to see product filings.

Understood. And just if I can ask one more question. This is regarding biosimilars. We sense that, it's investment slowed down in the, in the recent past. Any fresh thoughts there? Are you planning to step up investments in biosimilar? Any view you have on that space and Lupin's participation?

Yes, actually it's a promising trend on the biosimilars front in the U.S., in particular, in the last 12 months. Both from a regulatory perspective, with the FDA easing the requirements on interchangeability, you don't need to do additional studies for interchangeability anymore. And with the trend on private labels from the large PBMs like with Caremark and Humira, what they did with Sandoz -- the Cordavis label that converted majority of the market from Humira to the biosimilar, that is a promising trend on the market front. In the past, as we looked at it, both from a development perspective, we saw, the biosimilars were fairly onerous, capital-intensive. And then from a go-to-market standpoint, you needed commercial infrastructure, and both seem to start easing up at this point. So it's a really positive trend. I mean, we have a good number of products for the near term, so we continue to invest in those. As I mentioned, ranibizumab was filed in EU this past quarter, will be filed in the U.S. So we have pegfilgrastim that we still see as an opportunity as we get the product approved. We have randibizumab, aflibercept and then etanercept in '29 that comes into the market in the U.S. where we should be 1 of 3 in the market. And then we have other products like certolizumab and mepolizumab, respiratory products as well that we are pursuing. So actually it looks like the biosimilar market is starting to open up. And as it does, we'll continue to look at opportunities where -- as it opens up and on the one side the challenges come down, but the competition goes up. So our focus is very much going to be in limited competition products, where we're going to be in the first wave, where we can be 1 of 2, 1 of 3. That is the kind of focus that we will have from a portfolio standpoint. So it will be a fairly selective number of products that we will pursue.

[Operator Instructions] The next question is from Shyam Srinivasan.

Just a --

Hello? Yes, he dropped. We'll take the next question from -- he is back.

I think we can hear him, yes. Go ahead, Shyam.

On the European market, the kind of growth that we have seen, about 20%. If you could kind of articulate what's driven that growth. I think you called out 2 products, but just want to understand the sustainability of the growth in the European market for the path ahead?

Yes. So respiratory portfolio has been a big contributor in the European growth, in particular in U.K. as well as Germany, where we've continued to grow our market share with Luforbec and now with the nalcrom edition in Germany in particular. That's helped us grow Germany with a combination of Luforbec as well as nalcrom. So respiratory portfolio has been a big contributor for the European growth. And we expect, to continue revenues at the current level. So wherever we can we will grow share. We are getting into new markets in Europe as well. Right now we are in 13 countries with, with Luforbec, but have the potential of launching in countries like Spain and others. So continue to make inroads there.

Understood. And just a second question going back to the question on tariffs. If you see there's increasing risk that 10% import tariffs come on critical imports in the U.S. and the critical imports do include pharmaceuticals at this point of time. So I'm just going to ask a hypothetical question in case it gets announced as early as next Feb. 18th February seems to be the date. What are the mitigation efforts in terms of do we have pricing power to increase that onto our customers, or you think we are going to have to absorb it at the start and then negotiate? Because moving manufacturing and other stuff while we have capacity probably takes time. So I just want to understand the push and pulls around. I know it's a hypothetical question, but seems given what is happening on trade a more likely one than not. So just want to see from a management preparedness, in case such tariffs occur, what is the thought process?

So we are looking at multiple different avenues there, to look at the impact and how you mitigate it. But as an industry we have all aligned on the fact that the industry has gone through a lot of pressures and cannot take on critical medicines. High volume, low price medicines cannot bear additional costs. So with 70% of the products imported into the country on the genetic front. 50% contribution overall generics from India, I mean one would expect prices would go up in case uncritical medicines, in case there are tariffs implemented. So again, I mean it's hypothetical but as an industry we have, everyone recognizes the impact that tariffs can have on the cost of goods, and understands that it either leads to, cost increase for the market or you're going to see disruptions in the market.

And you're not reckoning the, the response of the Indian government also they actually reduced tariff on certain rates on certain categories of goods and so on from America. So we don't know their response for this particular category also as yet.

We'll take the next question from Vivek Agarwal from Citi. Hello Vivek?

Okay. I'll guess we'll move on...

Yes, Vivek, we can hear you.

So the question is related to Tolvaptan given that this is going to be an address launch, and you have highlighted that this is going to be a REMS product and conversion is expected to be slower. So what kind of the market share you are expecting during exclusivity? Is it going to be let's say around 15%, 20% or maybe higher like 30%, 40%. So any color if you can provide that would be super helpful?

Yes, we hope that it gets to the 30%, 40% level based on the partnerships we have established with the key channel partners on the product. And yes maybe expected to be hopefully in the 30% to 40% level.

And a related question post to 182 exclusivity, right. How many players you are expecting in this particular product? Maybe 2, 3 or maybe higher?

Yes we're expecting 2, 3 additional players.

This from my side.

We'll take the next question from Nitin Agarwal from DAM Capital.

Vinita, there has been a lot of general concern in the sector with respect to sector facing certain sort of U S sales erosion post you know in F '27 post Revlimid, you know sales going away. While we don't have the Revlimid challenges we do have our set of large ticket products in '26 like Tolvaptan, maybe Mirabegron as you mentioned continuing in '26. So I mean as you see the business looking through a couple of years out in F '27. Do you see a risk of, also so growing or - not growing over the '26 base that you will end up creating?

So we have a strong pipeline that we are pursuing some of these products that, where we expecting maybe competition to come in just gone by how long it has taken for us to get approval on products like say Spiriva, right. That took us 5 years to get FDA approval. One believes that it's going to take longer for competition also to get approved. So we do feel, with the pipeline that we have in place that we should be able to continue to drive growth in the U.S. market, despite pressures on products that you lose exclusivity.

So I mean so if I just read -- this is going to be to double-digit growth in 20?

Sorry.

You will be able to double-digit growth all over in '27 or '26?

It depends on so many things really essentially. So we have a rich pipeline, but as you say there are moving parts, because of various things. But over the next 5 years we are focusing on what we think would be the complex portfolio. And that would help in securing growth over the next 4 years, 5 years.

Yes, we expect fiscal year '26. The U.S. should be at $1 billion plus and then look at how we can sustain the growth from there.

I think it dropped out, ma'am. Okay. We'll take the next question from Neha Manpuria.

Sorry about the last time. Quick question first on the capital allocation, if I were to, ask for a rank order in terms of, where we would pursue M&A, would it be India specialty biosimilars? How should I think about, priorities for capital allocation for Lupin?

So as you correctly point out, the highest priority would obviously be India. There would of course be opportunities in generics up to a particular limit in other parts, including America. And of course, we have a larger chunk of reserve for specialty itself.

And would you like to earmark a number as to what we would like to spend in, let's say, India or U.S. generic, in case of acquisitions?

I think Ramesh meant to say, India specialty and then generics wherever we need it, and in that order.

Okay. Sorry about that.

With specialty and India being the major focus.

Okay. Got it. And we don't have like a, earmark number as to this is what we would like to invest in, let's say India specialty?

No, it's based on the opportunity and what we see in terms of synergies, as well as growth potential.

But having said that, we will be comfortable with a buy size acquisition. $200 million to $250 million should be easy enough for us

In each of these areas?

Several of them. Several of them, yes.

Okay. Yes, got it. Okay. Second, I think in the past we've talked about CDMO opportunity that we're probably exploring, for growth beyond '27. Any update there? Have we looked at Capex? What's the thought process on that?

Yes, so we've spun out Lupin manufacturing solutions and there's a whole team that's been put together, for this as well. So I mean, efforts are on in all earnest now. They're actually putting their strategy together, which they'll have in place, so we'd hope to give some more flavor on this next quarter.

Okay. And have you earmarked a CapEx for this Nilesh?

No, it'll come along with the strategy.

Okay. Got it.

We'll take the next question from Harsh Bhatia, yes. Harsh, are you there?

Just very quickly speeding our market share for FY '25 our target was somewhere around 35%, 40% till December. As for the presentation, it's around 30%, 31%. So what are the plans for speedy on market share at this stage including commercial versus Medicare, Medicaid channel? That's the first one?

Yes. So the team has done a really good job in activating multiple areas from a conversion standpoint, and we're just starting to see early days, but we're starting to see some impact already in January where the TRX share, has become high 30s has gone to 38% level, and NRX is 40% plus. So the multiple efforts on from a copay standpoint to ease the burden on the patient. To access into Medicare, Medicaid through contracting plus other avenues have, are starting to show results. So we are hopeful that we sustain this level into the rest of the quarter, and into the next fiscal year, to get the overall market share to hopefully 40% plus.

Just one clarification on this incremental market share that is panning out. Earlier mentioned that at commercial level you were already at 40% plus. So this incremental market share is sort of coming from the non-commercial side of the business?

That's right.

And again, sorry to harp on this, but this is sort of related to the out of pocket capping that the innovator had undertaken, let's say a few months back. Does that sort of relate to that in any extent?

No maybe we can take this question offline, but it's needless to say the, the efforts that the team has put in to drive conversion to our generic have are starting to show. We'll have to still continue to monitor the trend to see, if it is sustainable, but it's looking good so far in January till February.

Lastly, on this $250 million run rate for the quarter of FY '26 basically a billion dollar number, what is the assumption for Mirabegron if I may ask for this number?

Yes, we assume that additional competition comes in the second half of the year on Mirabegron. We've assumed that albuterol faces competition or impact of competition. That has already started and additional and we've assumed that Tolvaptan helps tremendously in the first half and injectables plus Tolvaptan in the second half.

I think we are at the end of the hour. Maybe we take last 2 questions.

Yes, we are to the last one sir. We'll take one last question from Tushar Manudhane. Tushar, can you hear us?

Yes. Am I audible now?

Yes.

Sorry for the disturbance. Just continuing on R&D spend. While you have highlighted INR 1,800 crores for INR 1,750 to INR 1,800 '25. Could you forward for FY '26 as well? On absolute basis how much R&D spend will be?

I would say as an absolute there would be an increase but as a percentage of sales, it will perhaps be around the same levels. But given the focus, so that we have on more complex stuff and the like, this is inevitable.

The INR 1,800 crore to INR 1,900 crore safe to assume that we spend [indiscernible]

Yes, a slight increase over that, if necessary.

And just if you could share specifically for Canada semaglutide like market in terms of units, how big it could be volume?

We'll take it offline.

We can take that offline please.

I now hand the conference over to the management for the closing remarks.

Thank you. Hopefully we have been able to answer all your questions. We'll be happy to take any that we have not been able to get to offline. There were a lot of questions on what is likely to happen in the U.S., from a tariffs perspective and as I mentioned, we hope that the industry efforts do pay off in terms of to ensure sustainability of the U.S. generic industry, in the interest of patients as well as other stakeholders. From a Lupin standpoint, we are very pleased with how the company has performed this fiscal year, and really excited with the potential in the near term with our major growth drivers looking very clear from a approvability standpoint as well as market launch standpoint and improving market conditions in new areas for Lupin, like biosimilars. So we look forward to continue to execute our strategic plan, to drive growth across key major markets, and evolve our business from genetics into more branded and specialty on top of complex genetics in the year ahead, and certainly in the next couple of years. So thank you again for your support and attention. We look forward to catching up with you, at the end of this fiscal year in May, hopefully in person. Thank you again.

Thank you very much to the entire management team. On behalf of Lupin Limited, that concludes this conference. Thank you for joining us, and you may now exit the webinar. Thank you.