Shilpa Medicare Limited (530549) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the 3Q and 9 Months FY '26 Results Conference Call of Shilpa Medicare Limited. [Operator Instructions] I now hand the conference over to Mr. Monish Shah, Head, Investor Relations and Strategy. Thank you, and over to you, Mr. Monish.

Thank you, and welcome to our 3Q and 9 months FY '26 results conference call. Today, we are joined on the call by Mr. Keshav Bhutada, Executive Director and CEO of Shilpa Pharma Lifesciences; and Mr. Alpesh Dalal, our CFO. The financial results and the presentations are uploaded on the stock exchanges. And the transcript, along with the audio, will be available on the website of the company and the stock exchanges as well. Please note, today's discussion might include certain forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to publicly update or revise any forward-looking statements. With that, I would like to hand the call over to Mr. Keshav for his opening remarks. Thank you, and over to you.

Hi, good evening, everyone. Thank you for joining our call today. Each quarter, our strategy is translating into tangible milestones, and this quarter is no exception. We are pleased to share another quarter of highest revenue and EBITDA numbers for the company. As a company, our focus is on limited-competition products, first-in-class therapies, complex delivery platforms, integrated CDMO offerings and high-value biologics. And our model is simple: invest in R&D, build differentiated assets, launch it with strong margins, scale it through partnership, and we'll continue to focus on it. Now let me start briefing about various business divisions. I'll be briefing my talk on 3 subjects: API, Formulation and Biologics. Let me start with the API business, in which -- on the CDMO side, let me start with the specialty CDMO, in which we have added, in the current quarter, 3 new CDMO programs. And among our existing programs, our first NCE program with a U.S. customer, it's commercialized by our partners. And our second NCE program is -- the Phase III studies are ongoing for our U.S. [Technical Difficulty]

Sorry to interrupt. We are unable to hear the management.

Yes. Sorry, I had a small network issue. And on the specialty CDMO -- So, am I audible?

Yes, you are. Please go ahead, sir.

Yes, sir.

So -- and in the existing CDMO program, the second U.S. NCE program for our partner, the Phase III studies are ongoing. And the third U.S. NCE program, where we have partnered with Unicycive Therapeutics, where a dedicated commercial block we're constructing, and the block will get commissioned in Q4 FY '27 -- FY '26, and we will be taking exhibit batches in Q1 FY '27. And we have also received -- with one of our U.S. partners, we were doing a Phase II NCE program, where we are developing both API and formulation for them. Our partner has received orphan designation and Fast Track designation. And the same program, they are doing it for multiple indications. Now, let me start briefing about oncology and non-oncology business. We have added, in current quarter, 10 new oncology products in grid, which are globally top blockbusters. And 3 new oncology products were validated in current quarter. And we have also completed scale-up of 1 non-infringing oncology API and for which, the validation batches will be completed in Q4 FY '26. And for the same product, we will be doing formulation also. On the peptide side, semaglutide, which is one of the largest blockbusters on GLP-1 side, we are developing both injectable and oral solid product in the formulation side. And on the API side, we are developing both synthetic and semisynthetic API. The planned scale-up and validation batches are initiated, and we are planning to complete in Q4/Q1 FY '27. On the CapEx side, the company is planning to build a large-scale peptide manufacturing capacity, for which, the [ civil ] work has already started, and we are planning to complete this CapEx in second half of FY '27. Now, let me start briefing about Formulation business. So, on the Formulation side, our first NCE molecule, which we have launched in the current -- in the Q3, was NorUDCA, NorUrsodeoxycholic acid, which has exceeded our expectations, and we have had great response from the physicians. And we have great visibility for the product, and we have firm orders already in place for Q4. And molecule has excellent response in patients, and we are confident that it will have significant potential in next financial year. Now, for NorUDCA, the same molecule we are planning to take globally to Europe and U.S. market also. We are planning to start human studies for Europe in next financial year. We are also doing the same product for multiple other different new indications also. On the existing commercial products, where 3 commercial 505(b)(2) products which are already in market, we are seeing good traction. And every quarter, there is a growth quarter-on-quarter. On the Europe market, Nilotinib, which is our current commercial product, we are seeing good traction on volumes every quarter-on-quarter. On the development side, one new complex injectable product, we have completed scale-up batches in the current quarter, and we are planning to complete registration batches by Q4 FY '26, and the same product will be filed globally. In the current quarter, we have successfully received marketing authorization for our first transdermal patch product, which is Rotigotine. And we will be planning to launch this product with our partner in FY '27. And Rotigotine transdermal patch product in U.S. also, we have -- we are planning to file in Q4 FY '26. Now, let me start -- I'll give you a short update on complex pipeline. On complex pipeline, our first product, which is Ondansetron long-acting injection, we have successfully completed Phase III clinical studies, and the product is already filed in India, and we are planning to commercialize in first half of FY '27. For same product, Europe clinical study, we will be planning to start in Q4 FY '26, and we will be planning to complete European Phase III studies in FY '27. Second product, SMLTOP09, which is a topical product for androgenic alopecia, and we are planning to complete human clinical studies in FY '27. For the same product, we have already submitted European scientific advice, and we have got positive outcome on our clinical study design. Third product, which is SMLODS014 (sic) [ SMLOSD014 ], it's the first product -- first of its kind what we are developing in generic side, but a complex 505(b)(2) product, where our registration batches are completed, and we will be starting clinical study in Q1 FY '27. And filing is planned in second half of FY '27 in U.S. In the next financial year, there will be 2 new launches, which will be happening in Europe market on Formulation side. Now, let me brief you about our CDMO agreement, where we are doing in the integrated API with formulation project with Unicycive Therapeutics, where we are planning -- the Unicycive Therapeutics have resubmitted the filing to FDA and where they have received PDUFA date of June 29, 2026. We expect commercialization to happen in FY '27. Now, I'll brief about our Biologics division. Our first biosimilar, which is Aflibercept, which is a complex eye injection, our India Phase III studies is going as planned, and we are planning for submission in first half of FY '27. It will be -- one of the very few generic players will be launching this product in India with great potential, for which already, company has partnered with 2 of the strong ophthalmic partners. We have 2 new biosimilar products, which is -- which are already entering human studies in FY '27. [ SBPL01 ], which is an ADC product -- which is the first ADC product, which company has developed, and the product lab development is completed, and we will be entering human studies of our first ADC product in next financial year. On the NBE [ new MABs ] side, we have partnership with Alveolus and mAbTree, where both Alveolus and mAbTree [ projects ] will be entering Phase I human studies in FY '27. I'm happy to inform everyone that mAbTree product, which -- where we are the CDMO exclusive partner for them, the product has received orphan designation for 2 different indications. GMP facility for our ADC manufacturing, we are planning to commission in Q4 FY '26. It will be first of its kind ADC manufacturing facility in India with integrated payload linker and conjugation facility. On CDMO side in biologics, we have 5 active programs ongoing with multiple partners, in which, 2 programs will be entering Phase I studies in next financial year for our partner. On albumin side, which is a new biological entity, which company is developing, the global CT clinical trial protocol approval is received in current quarter, and IMPD submission for Europe is targeted in Q4 FY '26. In summary, whatever heavy lifting was required for the company on the investment side, we have largely completed in last many years, and the focus now is on execution, scaling and getting maximum ROCE from all our investments. Thank you.

Shall we start with the question-and-answer session?

Yes. There's actually -- the financial update is still pending. This is Alpesh Dalal here.

Please let me know.

Yes. So good evening, everyone. I'll just quickly take you through the financial performance for Q3 and 9 months. As Keshav had mentioned, we have reported the highest ever quarterly revenue of INR 411 crores, recording a growth of 28% year-on-year, whereas our 9 months revenue were at INR 1,110 crores, growing at 14%. Our gross margin for the quarter stood at 68%, and 71% for 9 months period. We also reported our highest ever quarterly EBITDA at INR 115 crores as compared to INR 82 crores in Q3 of FY '25, reflecting a robust growth of 41%. And EBITDA margins for the quarters were at healthy 28% as against 26% last year, whereas EBITDA margins for 9 months were 29% as compared to 26% last year. So this improvement in EBITDA margin was primarily driven by increased revenue, driving positive operating leverage. Now, moving to other financial highlights. Our interest outgo has been -- has seen reduction year-on-year, and we believe it is now stabilized -- it has now stabilized at the current quarter run rate for the near future, as we expect to fund our CapEx program mainly by our internal accruals. And during the quarter, we also had an exceptional item amounting to INR 13 crores pretax on account of change in labor code implemented by the Government of India. Adjusting that, the PAT for the quarter stood at INR 55 crores, and INR 146 crores for 9 months period. The 9-month PAT is nearly double of full year PAT of FY '25, reflecting the acceleration that we are witnessing in our growth. And we have also incurred a CapEx of about INR 87 crores during the third quarter. And I would also like to draw your attention to the fact that despite increased CapEx, we have been able to improve our ROCE profile of the company. Our adjusted ROCE, excluding investments made in our high-growth potential businesses like Biologics and NBE, we have a significant improvement from 3.5% in FY '23 to over 17% in the first 9 months period. With Biologics business pipeline progressing well, we remain confident of improving our operating leverage, resulting into higher ROCE in coming years. Now, a quick highlight on the segmental performance. Our non-captive API business clocked a revenue of INR 186 crores compared to INR 183 crores in the previous year. However, our API unit has been progressively increasing its support for our in-house product portfolio of Formulation business. And including this captive business, the API business witnessed a robust growth of 11% from INR 218 crores in third quarter of previous year to INR 243 crores in the current year. As far as the Formulation business is concerned, the Formulation revenues for the quarter were at 177% -- sorry, INR 177 crores, growing at 50% year-on-year. And ex-licensing income, the base business reported a robust growth in the revenue -- robust revenue growth of 104% quarter-on-quarter and 83% for the 9 months period. And to sustain this revenue momentum in our FDF vertical, we continue advancing the pipeline of complex products. Our strategy of developing and launching niche products globally through strategic partners is gaining traction, as evidenced by our EU Formulation business, which delivered over 100% revenue growth year-on-year. And we -- for our Formulation business, we also launched NorUDCA domestically under a dual strategy, one under our own label and 3 other through a strategic partnership with 3 large pharma companies in India. And the strong initial reception that this product has received has translated into a very healthy order book for the coming quarters as well. During the quarter, we also received approval for our complex transdermal product, Rotigotine, from EMA. With launch preparations underway with our market partner, we expect to launch in Q1 of FY '27. With this, I would now like to open the forum for Q&A.

[Operator Instructions] The first question is from the line of Shubham Sehgal from SIMPL.

So, my first question is that we reported revenues for the Europe region around INR 73 crores for this quarter. And also, like, the scale-up that has been there [ over a few ] past quarters, does this revenue include purely product sales, or it also includes the licensing income for this product?

Yes. So this doesn't include any licensing income. It is only in relation to the products that we have and product sales that we have got.

Okay. So this thing [indiscernible] we report in the license fees line item, right? So this INR 73 crores...

Licensing line item is separate. So this -- what we have reported here under EU is only in relation to product sales.

Okay. And so, similarly, for even the U.S. revenues, it just represents the market [indiscernible]. It does not include any licensing revenue, right?

Correct, correct. That's right.

Okay. Got it. Next question is that -- so actually, yes, so apart from the licensing revenue in the Europe sales only, I wanted to ask like [indiscernible], does it include any profit share in that [indiscernible]?

Profit share is part of product sale only. It's just that profit share comes in a little later, but it is in relation to product sale only. So profit share is included there. Yes.

Okay. So for example, for Nilotinib product, what could be the range, like, in which time, we receive the profit share? So like [ earlier mentioned ], for Amneal, we received half yearly. But for Nilotinib, like how does the profit share range? When -- with how much lag do we receive it?

So basically, we do get updates from our partners quarterly. There are times that we have to do some reconciliation, and also there might be some small adjustment here and there for that. But generally, we do receive all the updates from our partners on a quarterly basis.

Okay. Got it. My next question was about our non-onco API segment. So the [indiscernible] scale-up that we've seen in the revenues, so we actually [Technical Difficulty]

Sorry to interrupt, Mr. Sehgal. But we lost you in between. Can you please repeat?

Yes, sure. So I was asking about non-onco API segment [indiscernible] capacity expansion [indiscernible] scale-up. Is it reflecting that capacity expansion, [indiscernible] capacity? Or is there still like room for more [ scale-up revenue ] in that [ expanded ] capacity?

Sorry, I think we are not at all able to hear you. There is a lot of disturbance.

Mr. Shubham, can you please check your connectivity because there is a lot of voice which is breaking. We are unable to hear you clearly.

Is it better now?

Yes, please.

Yes.

So I was asking about the non-onco API segment. And basically, the revenues that we are seeing right now, the scale-up, is it affecting the capacities that we've expanded? Or is there still room for more scale-up there in the expanded capacities?

Yes, there is room for capacity. So we are not utilizing full year non-oncology capacity because there are some products where the launch and full volumes are expected to grow quarter-on-quarter. So we will see an increase in non-oncology revenues in the upcoming quarters also and even in next financial year.

Okay. And that will -- so like, we do have room, right? Like the capacity expansions that we have done for our products, there is still room left?

Yes, you are right.

Okay. Okay. Got it. My next question was about the CDMO molecule, which has received the U.S. FDA approval and expected to commercialize in Q4 FY '26. Could you provide any color on it, like what could be the scale of the molecule and -- if that's possible?

No. Actually, it is our partner product, and we are bounded by confidentiality under that. So whatever we will be able to -- whatever product sales we will be doing, right, quarter-on-quarter, I think that will be visible in the numbers in quarters to come.

Okay. But are we the exclusive [ supply ] partner here?

Yes.

[Operator Instructions] The next question is from the line of Kiran from TableTree Capital.

Fantastic results, Keshav. All the fructifying of a lot of years of effort is coming through. I had a couple of clarifying questions. On the Formulation scale-up, I mean, it is very heartening to see we had about INR 176 crores total, and ex-licensing is about INR 146 crores. Should we take this as a base revenue because Europe, INR 73 crores, I don't know if it's base, or because it includes profit share, it can vary. But do you think about INR 150-plus crores revenue now seems base case for Formulation?

Yes. You're right, Kiran. It can be assumed at least for upcoming quarters.

Got it. Any reason why RoW has degrown this year, Keshav, not year-on-year. But essentially, in Q4 FY '25, we did INR 44 crores, then INR 36 crores, then INR 25 crores and INR 24 crores. RoW, are we facing any particular challenges within...

No, see RoW is a purely tender-driven supplies. And sometimes, there are a few tender supplies which we would have done in 1 quarter and that is supplied for like 2 quarters, right? So I think, RoW is majorly a tender-driven business market. So you will see that quarter-on-quarter, there may be variation. But overall, if you see on a year-on-year basis, right, RoW business has grown.

Got it. Okay. My second question, Keshav, is in terms of oncology scale-up, we are struggling to cross that INR 140 crores, INR 150 crores mark because Q1 was INR [ 116 ] crores, then INR 141 crores, then INR 111 crores. Any particular direction or challenges in terms of how we can grow this oncology revenue substantially over the next 1 year?

Yes. Kiran, on oncology side, what we are trying to do is, major of our supplies, right, some percentage of it, we are trying to do it more for captive because on captive, right, you will have formulation sales also, and that is very good for the company. But apart from that, there are many other new products which are under validation. So for last 2 years, we had some issues with taking new product validations, which we have resolved, and we have now good capacities available for taking new products. So you will see that in the upcoming financial year, oncology as an overall business also, we will grow.

Got it. Got it. And last -- final question, albumin, in the presentation, we are saying Phase III trials, we have started both for India and Europe in Q4 FY '26. Did we start recently? I mean, we are supposed to start in Q2. So any particular delays? Are we filing from the new facility? If you could just give some color, that would be great.

Yes, Kiran, see, on albumin, I think already I briefed on previous calls also. See, what is important is, we have -- we're getting the clinical study approval. So you will see our global clinical studies is divided into 2 parts. We have patients from India as well as Europe, okay? So from India, whatever patients were there, we have even informed everyone that our India clinical study approval, we have received in Q3, okay, to do global clinical studies from India -- from Indian regulatory body. And same for Europe. What we are planning to do is, in Europe, to start any European clinical study, you have to go for IMPD submission. So IMPD submission is something which we are targeting in Q4. Once that IMPD submission approval is there, then the study will start. So tentatively, our study should start in next quarter, like, I mean, in the first half of FY '27 with IMPD approval.

That is for Europe. India has already started?

Yes. Yes. India, the study will be started from our new facility. Yes, you're right.

New facility. And any timeline, Keshav, on albumin in terms of when you would expect the trials to get completed, especially, India ones -- I mean, Europe can take time.

See, as I already informed in previous call also, we are planning to complete our India study maybe in FY '27 -- end of FY '27, or it can be maybe first quarter of FY '28.

The next question is from the line of Krisha Kansara from Molecule Ventures.

First of all, many congratulations to the entire team on a very impressive set of numbers. My first question is on Nilotinib. So if we look at our European Formulation segment this quarter, it has grown from INR 35 crores to INR 73 crores if we compare it year-on-year. So how much of this growth was contributed by Nilotinib? And also, in earlier calls, we had emphasized on lack of competition from generic players in this case. So has the scenario changed? And -- or is it still the case that competition remains limited? This is my first question.

Yes. It's a very good question. And see, first part, what I want to clarify, Europe is a very tender-driven market, okay? And even today, if you see, we have launched Nilotinib in Europe from now many quarters. Even today, [ innovator ] controls almost 40% market in Europe, okay? So what I'm trying to say is, Nilotinib, as a product by itself in Europe, is a tender-driven product. And what we are -- the situation has not changed as on date currently. And we are seeing good traction on volumes, as well as on sales, which I mentioned in my speech also that quarter-on-quarter, the sales is increasing, okay? And coming to second question, how much of the European sales is Nilotinib? We don't disclose product-specific numbers. So I think that part, it will be difficult for me to explain, sorry.

Okay. No problem. My next question is on our API segment. So if you look at our history of last 7, 8 quarters, there has not been any growth. And we had recently increased our capacity of key APIs, including Tranexamic acid and others. So when can we expect our API segment to start benefiting from this increased capacity base and eventually start recording a double-digit kind of a growth?

So Krisha, I think first part, API segment, if you see our 9 months number itself, right, for the -- if you compare last year against this year, last year, we have done close to INR 622-odd crores. And this year, we have done INR 725 crores. So API by itself in 9 months has grown by almost 17-odd percent, right?

But if you exclude the captive consumption, the growth is not...

Krisha, Alpesh here. As I had mentioned in my speech also, see, the API business is also supporting the Formulation business with the supplies. And that's a strategic call that we have taken because you get end-to-end margins there. So it is not appropriate because it's a sizable supply that happens, right, from the same plant, same this thing. So excluding that and saying that the growth is not happening in API probably is not a correct way of analyzing it.

Yes. Okay. And when can we expect to start seeing the benefits of the increased capacity, like the recent CapEx that we did in API? Like, has the volume ramp-up started?

So you will see volume ramp-up happening in maybe from -- starting from second quarter of next year.

Second quarter of next year. Okay.

Yes.

And just one last question on NorUDCA. It's been a few months since we launched it, and I understand that this could be too early for any sort of guidance. But in our last conversation, you mentioned that from Q1 of FY '27, we could see a meaningful ramp-up in this molecule. So if you can just give an update on that, how is the order book shaping up from, let's say, the 3 marketing partners with whom we have tied up? If you can just give some sense around NorUDCA?

See, especially on NorUDCA, as I mentioned, right, it has -- the launch was very successful, and it has exceeded our expectations. So whatever growth we were expecting to start from Q1, right, we would see that in Q4 itself. So you will see that from -- already, we have a strong order book. At the end of Q3, we had strong order book of Q4 -- by end of Q4. So it means, for the whole of Q4, already, we have order book covered from all 3 of our partners and including our captive sales also. So we are seeing good traction in the molecule. And as and when we have more product being sold and it reaches more patients, I think we'll have more idea of that -- of the product.

The next question is from the line of Amish Kanani from Knowise Investment Managers.

Congrats on a very good set of numbers. Sir, it looks like FY '27 also will be a very good year, and you mentioned that in presentation. The question is, sir, one, which division do you think will really contribute in next year? I know maybe each one is firing, but if you can give some sense for us to model FY '27, which division we should look forward to as something which will really contribute to the higher growth? And second -- you may not quantify it, sir. And second, sir, congrats on this rare cancer drug -- orphan drug confirmation. The question there is, sir, one, since it's a partner drug, should we look forward to some licensing income as it progresses? Or should we be worried that FY '27 will be an investment year for some clinical trial and maybe the benefit will come later? Because it looks like it could be a sizable trial if it gets an approval.

Yes, Amish, I think I'll answer your second question. So, on the product where we have partnered with the partner, right, there -- for this product, which is for orphan designation, we are not expecting any licensing revenue there, and our partner will be doing clinical studies, which you rightly mentioned, it will be done in next financial year. So we have to -- we will have a manufacturing revenue. I think that is the major part of revenue, which we will get as and when the molecule is advancing in the development phase, okay? And on the second -- first question, which you have asked...

The growth across the segments.

Yes, growth across the next financial year, right, the major delta what we will be seeing? I think it will come more from our Biologics and Formulation business. And API will be more like a steady business, which will continue to grow at a steady pace.

Okay. And sir, one last quick question on the albumin side. Sir, is this -- is there a, now, line of visibility that it should be commercialized if we are successful in FY '28, at least in India, one? And two, if you can just remind us, if possible, on the overall market opportunity size for that drug, let's say, in India or globally? What kind of size -- potential size, which we are [indiscernible]?

To answer your first question, yes, FY '28 commercialization in India, yes, it's very much possible for us as on today, okay? And what is the potential, how big it will be? I think that is something we would -- we don't want to commit anything today or even comment on that. It's a good opportunity. Albumin by itself is a shortage product always. It has a lot of complexities on supply chain, right? So bringing a recombinant version, purer version will always have advantage. So I think our -- today's focus, most important is on starting and completing clinical studies, I think, which is the most important milestone for this product. And same, the company is currently focusing.

The next question is from the line of Nikhil from SIMPL.

On NorUDCA, I just want to [indiscernible], we've launched the product. And as you mentioned in the call that the launch has been pretty good, better than our expectations. And in the starting, you mentioned we would look at trials in Europe and U.S. But as we understand, in Europe, there is already a trial which is ongoing, and that player has also out-licensed it to -- for some of the geographies. So based on the -- like the market development, which we have seen, how are you thinking about RoW markets where, based on Indian trials, you may be able to launch? So any thoughts on that?

Yes. See, NorUDCA as a product, okay, I'll divide my answer into 2 parts. One is Europe and rest of the world. So for Europe market, yes, you are right. Already, there is a company which is an innovator, who is doing this product for some indication, okay? What we are doing is completely different. It's for a different indication, okay? And more details on that, which indication, how the market size and all, we will go in -- because to avoid competitiveness, we would inform this to our investors in right time. So currently, what I can tell you, we are going ahead for Europe, and it's a very promising study, which we will be planning, but it will be for a completely different indication, okay? Now, coming to the RoW market question, what you have asked, yes, our India study was covering RoW study design also. And already, in RoW markets, we have started partnering. We have even started filing in some of the RoW markets. And you will see in the next -- our target is, in the next financial year to file in all the majority of important RoW markets.

Okay. So based on India market and RoW market and based on whatever studies you would have done, do you see this product has the potential to like become a significantly large product, like INR 200 crores, INR 300 crores kind of a product? I'm not asking for timeline. But based on the market opportunity and based on the indications what you have received, how do you see it?

Yes. See, as we already mentioned, right, this product -- NAFLD as a disease by itself is very prevailing. And in India itself, there are -- 25% patient population is suffering from NAFLD, which is as per the statistics. So I think, yes, it's a significant opportunity and a meaningful opportunity for the company. How much it will be, when it will be, I think -- as I mentioned already, right, it will be told more in the upcoming quarters.

The next question is from the line of Sanjay Kumar of ithought PMS.

First question on oncology API. Small companies are entering and gaining market share. Large companies, which are present in other therapies, are entering onco and gaining market share, filing DMFs. You alluded to capacity constraints, okay, but that's fine. But even in terms of product development, I think, if I look at the timeline, we were late to file Palbociclib. Our other DMF filings are more of base chemicals like Methotrexate. We are yet to file products like Tivozanib, Relugolix, Ruxolitinib. So where did we lose the plot in terms of new product development, especially in onco, where we are supposed to be ahead of peers?

Yes, Sanjay, I think it's a very good question. And I think I'll give you a very clear answer on that. Oncology has been our main business, and we'll continue to focus on it. And you are right, in last 1 year, we have not taken more oncology new molecules. Only which were required for our captive sales, we have done it. That's a very right observation. But as a company, yes, we have -- even today, we have very strong oncology pipeline. Palbociclib and all, these were validated itself last almost 1 year back, right? So you will see in the next 1 year, there will be a lot of filings which will be coming. And as I already mentioned in my speech, right, each of these molecules are blockbusters. And one differentiation which Shilpa will always have, I feel, is, we'll have something differentiated, either in API or in Formulation, which will either -- which will help us in getting better market share. Like, you have seen classic example of Nilotinib, right, where we have done Nilotinib base, which has given us advantage in launching early, right? Like that, we have already shortlisted products, which are already in various stages of development, close to 4 to 5 products already, which are in advanced stages of development.

Okay. Can you name those products and also give an update on the U.S. FDA remediation work and the warning letter for Jadcherla?

See, molecule names, we will not be able to give currently because you would have seen, even in Nilotinib case, right, we have disclosed that in a very later stage just to ensure that we get maximum market share, okay, and to avoid competition. And coming to your second question on U.S. FDA thing, with -- after the U.S. FDA inspection, we have finished all the CAPA, and CAPA responses are submitted to U.S. FDA. Now, we are waiting for revert from U.S. FDA.

Okay. Okay. Got it. And second, on -- you mentioned about a new peptide capacity. Do you have any visibility there? What kind of products do you want to make? What is the magnitude of the CapEx, the quantum of the CapEx? The reason for asking is, we spent big on albumin, transdermal patches, dispersible films way ahead of time. I understand albumin because the potential is significant. But in terms of IRR, in terms of ROCE, R-O-C-E, I think our CapEx in patches and films will take a lot of time. So have you calculated all those when you want to set up a new peptide capacity?

Yes. Sanjay, I'll give you a very quick answer on that. As a company also, we have very clearly defined ourselves that now, we will not invest anything, which is a long-gestating investment, okay? So peptide investment, if you see API business as a large also, if you see our ROCE ratios, right, they are significant. So API, we always have good investments, which has given us quick returns. And the peptide investment is very strategic for us because, I think, you will be aware, there are already large GLP-1 products, which are getting patent expiry this year. And even globally, right, in multiple markets, there will be patent expiries happening in next 2 to 3 years. And what Shilpa is doing? We are doing already GLP-1, liraglutide, semaglutide. For liraglutide, we have already completed API manufacturing. We have recently filed U.S. DMF also, and formulation registration batches are ongoing. Our second product, semaglutide, where our API validation batches are ongoing. And our formulation already, both injectable and oral solid development, is already completed. And we are planning to take registration batches in first half of next financial year. And same product will be filed globally. So overall, we are seeing good opportunities on the GLP-1 side. And also, there are significant CDMO opportunities, which many inquiries are expected to come on the peptide side because there are a lot of new biotech developments which are happening on the peptides also. So, that is the reason we are planning to build this new capacity. And it is not a very significant capacity -- significant CapEx, which is required for this. We are planning to invest close to INR 40 crores, okay, for this peptide facility.

INR 40 crores would roughly be 40, 50 kgs of peptides?

See, it is more than that. It depends on product, like, which product I'll be taking, but it is a decent capacity.

No, let's say, if your full capacity for semaglutide, can we do 50 to 100 kgs of peptide?

Yes, we can do more than 100 kgs.

Got it. Got it. Okay. Final question. So samples we have sent for nontherapeutic albumin, any feedback? Because when I saw the exports, we have sent it to multiple companies, some in U.K., some in U.S., and for different applications also. So have we received any feedback? That's one. And any competition coming in Nilotinib in Europe? Just these 2 questions.

Yes. On albumin therapeutic, right, which I previously mentioned also, yes, we are seeding our samples in various markets. And in some markets, our initial samples were approved. Now, they are taking further quantities because these all products will be going into their formulations. And once the development is fixed, they will be taking registration batches with our albumin, then filing an approval. It's a long-gestating business. But these are the -- this is a business where already seeding is ongoing. And I think same is visible what you have already seen, okay? And on Nilotinib, what was your question?

Is there any new competition that we are seeing in Europe? Has new players entered? What will be your market share going forward?

Yes. See, currently, we have not seen any significant competition. There is competition. But as you know, right, we have partnered with the #1 generic company of Europe. So we are currently having decent market share. And at least for a couple of quarters, we don't see any competition, any big change in the numbers.

The next question is from the line of Parth Mehta from Vallum Capital.

Congratulations on a good set of numbers. I just had a question on the licensing income, if I see the line...

Sorry to interrupt you, Mr. Parth, but can you please speak a bit louder? We are unable to hear you, sir.

Yes. Am I audible now?

Yes, please go ahead.

Yes. So I just wanted to ask, on the licensing income, if I see on the 9-month basis, the licensing income revenue is down by over 40%. So what would be the reason? And do we see, for the full year, licensing income coming back to the FY '25 levels?

Yes. See, as we previously mentioned also, right, licensing revenue is something which is -- which depends on product, market, when it is getting licensed, what are the milestones we will be realizing in that quarter and upcoming quarters. So there will be some variation in the licensing fees quarter-on-quarter or year-on-year basis. But if you see, we have already mentioned previously also, we will see a steady run rate of close to INR 150-odd crores licensing income every year.

Okay. So for this year also, it should cover up in the fourth quarter is what you are alluding?

Yes.

Okay. Understood. And can you help me with what would be the current utilization of our formulation plant?

Formulation plant, current utilization, we have good capacity available for at least whatever requirement we have for the upcoming launches, right? We have a decent capacity available. Recently, one of our oral solid line, we have already commissioned, and that is, again, additional oncology oral solid manufacturing capacity, which will be available, which will help us in again generating additional revenues in the next financial year.

The next question is from the line of Kiran from TableTree Capital.

Yes. I just had a question on the financial side. In terms of debt reduction, where are we on debt? How much are we planning to pay, let's say, this year and projected next year, given our cash flows are decent now?

Yes. So I think on the debt front, broadly, we are in a comfortable position with our debt-equity in the region of about 0.25, 0.26. We obviously have been investing in our growth CapEx also. So we haven't seen any reduction in absolute terms. But looking at the size and if you look at our presentation also, we mentioned that our debt-to-EBITDA ratio is constantly reducing. So overall, the kind of investments that we are making right now is generating sufficient returns for us.

Sorry, how much is the absolute debt, sir, now -- right now, as of 31st December?

So, as on 31st December, our net debt was about INR 625 crores.

Okay. And essentially, the plan is to keep it at this level even through next year or pay a substantial amount? Because Shilpa generally is known for being net debt free. That's the reason I'm asking.

Yes. No, no. So I think what we are looking at is that we are not looking at increasing our borrowing. So whatever we keep repaying of our term loan, to that extent, it will keep coming down. But there are times we have to take some more commercial and business-related calls where, based on opportunities or requirements of the business, we might have to take some borrowing on our books. But as I mentioned that broadly, we are keeping things under check where we do not exceed certain levels based on our performance.

The next question is from the line of [ Yogesh Shroff ], an individual investor.

Congratulations on very good set of numbers. So over the last 2, 3 years, I think the company is going through a CapEx phase, where we're investing a lot. But in terms of top line, we are not seeing a lot of traction coming up. And this quarter especially stood out because of very solid growth numbers. So do you guys actually forecast that this should actually continue forward? Or we should see -- or was this a one-off quarter where we saw 30% growth and the growth numbers should tail down from here? And if yes, I think, for '27 and -- FY '27 and FY '28, what are the major contributors for that?

Yes, Yogesh, I think thanks for your query. And I think, as I already mentioned in previous calls also, right, previously, we were running through more of an investment cycle. And now, what we are doing more is on burning our assets and getting maximum returns, okay? So you will see, in all the upcoming quarters, where -- as on date, whatever we have visibility, you will see ROCE ratios getting improved. So it means my -- whatever investments are done are converting into revenues.

Also, as I had mentioned during my initial speech, Yogesh, that our base business is growing. So if you -- as we have been mentioning, licensing will always be a part of our business model. But minus of licensing, if you see, our base business is growing across all the verticals. And that is giving a lot of confidence that we should be able to continue with the run rate.

Just last question. On a mix basis, what do you think would be the peak revenue from the capacities that we're doing? Obviously, that might or might not convert into actual revenue. But if you can give us a suggested broader range in terms of this is the peak revenue with the current capacity we can do, I think that will be super helpful.

No, I think as Keshav has been mentioning, right, it is not -- we may not be in a position to put up a number as to what would be the peak revenue. A lot depends on the product mix, right? The way -- even capacity utilization can change based on the product mix and all. But we do plan out our capacities in a manner where we ensure highest level of production efficiency and bring in more productivity to continuously keep churning higher volumes of products, which will end up generating revenues for us. Even in the process, a lot of process efficiency that we build in, in the same capacity, a lot of times, we are able to get more output from the same capacity. So that's why I'm saying we may not be able to put an actual number saying that this would be the peak revenue that we can generate from the existing capacity.

Got it. So I think a suggested number of -- between 2013 and 2020, we had an asset turn of average around 2. So would it be right to assume that this is the possible asset turn that we can have in the future? Or that would be the wrong assumption?

No, it changes because in 2013, a large part was API sales. Now, we have got other assets also coming in, which generate higher revenues and all. So it may not be right to say that 2x will be the peak asset turnover and all.

Ladies and gentlemen, this will be the last question for today, which is from the line of Sanjay Kumar from ithought PMS.

First on the ADC biosimilar, we've stated that it will enter human studies in FY '27. I don't know if I missed it, is it for India specific or is it for global? Now that U.S. FDA has relaxed [ norms ] for biosimilars, are we looking at global trials?

Global. And also just to update you, Sanjay here, see, majorly all our products, right, in Biologics side, even next financial year, you will see majority of the products we will be taking it to global market.

So even Nivo and Pembro, you will go global?

Yes, you're right.

Okay. And I'm already seeing a lot of companies are signing partnerships for these products for various markets. So will you go direct or through partnerships? When will we be signing partnerships?

So we expect some partnerships surely in FY '27, Sanjay.

Okay. Okay. Got it. And I was also -- I wanted to know the KPIs for you and Madhav? And are ROCE, market cap part of your KPIs?

Yes. It's part of our KPIs.

Okay. Okay. And for any project, what would be the internal IRR that you guys usually target?

Yes. I think some of these are fairly strategic for our organization to keep it internal. So we may not be able to provide those guidance.

Okay. Okay. Final question. So was there any one-off in Q3 Formulation revenue? You did say that this is a base, but just trying to get your thoughts again. Was there any one-off in the Q3 revenues?

No. We [indiscernible] saying that we have any one-off. One-offs do get reported separately.

Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Alpesh Dalal for closing comments.

Yes. Thank you, everyone. Thanks a lot for your participation, and we appreciate you making time with us. If you have any follow-on queries, feel free to reach out to our IR team, and we'll be happy to answer your questions. Thank you.

Thank you. Ladies and gentlemen, on behalf of Shilpa Medicare Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.