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 five years, despite higher investments in R&D during the period. We feel confident of maintaining our growth momentum going ahead, with margins in the range of 22%-23% in the current fiscal year. Our U.S.
Business delivered strong quarter-over-quarter and year-over-year growth this quarter, with revenues at, again, a five-year high. This has been led by volume growth in inline 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, and 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 a commoditized generic business to a 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 nine months this fiscal year, against IPM growth of 8.2%.
While key therapies like diabetes, cardiac, and 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 human insulin range of products from Eli Lilly and also three 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-license products and extensive reach through the 10,000-person 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 nine 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 two 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 2025, which will mean a significant increase in our R&D spend in Q4 . From a compliance perspective, we received the EIR from the U.S. FDA for our Pithampur Unit One manufacturing facility with VAI classification during the quarter. So far this year, we have received EIRs for Aurangabad and Dabhasa and have successfully completed inspections at Somerset and Nagpur injectable facility with zero 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 will bring 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 FY25 Earnings Call. This has been another quarter of consecutive double-digit growth across the top and profit lines. I'm particularly pleased to highlight that EBITDA margins at 24.3% during the quarter, which is the highest that we have achieved in the last five years. Now, diving into the numbers, sales. Sales for Q3 FY25 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 a nine-month basis, sales came in at INR 16,630 crores versus 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, while 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 a nine-month basis, U.S. sales were $682 million, a growth of 12.5% as compared to nine months of FY24. As Vinita mentioned, while 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. Our respiratory portfolio continued the strong performance with high market share in most key products like albuterol and arformoterol. We also continue to execute on our strategy to improve our profitability in this segment, with another quarter of strong profitability from this business. On 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, FY25 basis, we anticipate our U.S. business to deliver double-digit growth ahead of our earlier guidance of high single-digit growth in the 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 nine-month period ending FY25. Within this, the prescription business has grown by 5.8% year-on-year during Q3 FY25. On a nine-month 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 in the IPM growth. The share of in-license products is around 12%, similar to the 12% last year, which also positively impacts our profitability going ahead. Other businesses.
Revenue in the ex-India North America formulations business, which includes EMEA, ROW, and emerging markets, has increased 7.5% year-on-year to INR 1,277 crores and now constitutes 23% of our sales. On a nine-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, registered 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 the UK and Germany from products like Luforbec, Kixelle , and Namuscla. Emerging markets. Our emerging markets include the APAC and LATAM regions, and have registered sales of INR 451 crores, a decline of 4.7% year-on-year. On a nine-month basis, revenues grew by 10.5% year-on-year to INR 1,456 crores, while Latin America, like Brazil and Mexico, grew in local currency terms.
Overall growth was impacted due to effects in this region. Coming to the other operating income. Other operating income at INR 149 crores has increased by INR 32 crores as compared to Q3 FY24. And this increase is mainly due to higher PLI and export benefits during the quarter. Gross margins. Coming to the profitability, Q3 FY25, gross margins were 69.4%, up from 66% in Q3 last year. On a nine-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 in the input cost, lower share of in-license products, increased volumes, and also various cost improvements and efficiencies which have undertaken over the last several quarters. Employee benefit expenses.
Employee benefit expense at INR 984 crores was up 10.7% year-on-year from INR 889 crores in the previous year, translating to 17.5% of sales. On a nine-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 sales in the corresponding period last year. This change is largely attributed to higher costs attributed to regular annual increments and business growth during the period. Manufacturing and other expenses for Q3 FY25 came in at INR 1,696 crores, increasing 8.7% year-on-year from INR 1,560 crores in Q3 FY24 and from INR 1,667 crores in Q2 FY25, translating to 30.2% of sales versus 30.7% last year.
On a nine-month basis, manufacturing and other expenses came in at INR 4,936 crores, an increase of 7.7% year-on-year, translating to 29.7% of sales as compared to 31% of sales in the 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 FY25, which almost two-thirds of our R&D directed towards complex portfolio. On a nine-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 1,750-1,800 crores, with a significant increase in R&D in Q4. EBITDA. Excluding forex and other income, EBITDA was INR 1,366 crores. Versus 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 nine-month basis, EBITDA was INR 3,985 crores, up 42.1% year-on-year, with a margin of 24% as compared to 19% in the corresponding period last year. Putting all of this together, we believe that we should be able to deliver EBITDA margins in the region of 23% and 23.5% range in FY25. Tax. As far as the ETR is concerned, it was 19.1% in the nine-month FY25. 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 for 31 March 2024, which translates to 113 days of net working capital as compared to 105 days in the previous as of 31 March 2024. Net debt was INR 103 crores, as against INR 477 crores as of 31 March 2024.
While we focus on increased cash generation from our business, we'd 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, in 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 includes various renewable energy projects. We'd like to update on ESG ratings. Lupin has received a leadership ESG score of A minus by CDP for climate and water. The A minus 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've 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 will focus on providing rural healthcare services to marginal communities. With this, we open the floor for discussions.
Thank you very much for the wonderful insights. We'll now begin the question and answer session. Please raise your hands from the participant tab on the screen to ask questions. We will wait for 30 seconds for the queue to assemble. Thank you so much. Thanks for the patience. We'll take the first question from Kunal Dhamesha from Macquarie.
Hi, good evening. Can you hear me?
Yes, yes.
Yes. Hi, thank you for the opportunity and congratulations on a good set of numbers. First one, when the limited competition launches for us in the U.S. market over the next two, three quarters, we have discussed a few names. I just wanted to understand that for those names like Jynarque, generic Glucagon, and probably Risperdal Consta, are we on track? And am I missing some key product here which we might be able to launch over the next couple of quarters?
No, the major products are tolvaptan and glucagon, Risperdal Consta, and potentially Liraglutide. So those will be the key products for next year.
Sure. And ma'am, can you suggest the probable timelines of the tolvaptan, as I believe it's Q1 FY26, 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.
The recent inspection at Somerset has had anything to do with the Risperdal Consta filing? Was it a PAI?
Yeah, it was a PAI, but for a suspension product for edaravone. Yeah, no, 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.
Sure. Thank you for that update. And the 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 slow despite being in the winter season. So what are the factors that are leading to the slower growth in your view?
Yeah, I mean, the market seems to be that way. I mean, sequentially, the number is 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 nine months, the market was only at 4%. We were at 3% for nine months, and I mean, the quarter again has been disappointing. I do think it will 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 will bounce back, hopefully, in the next couple of quarters.
Sir, in your view, what would be the split of the chronic side of respiratory products like inhalers versus acute, like anti-infective and?
Our focus is primarily on that. So our focus is.
Inhalers, right?
Yes, primarily MDI, DPI, a little bit of nebulization. That's it.
Sure, sir. I have more questions. I'll join back the team. Thank you.
Thanks, Tushar. Thanks, Kunal. We'll take the next question from Tushar Manudhane from Motilal. Tushar, are you there? Hello?
Hello. I'm on the line.
Tushar, yeah, yeah, you are.
Thanks for the opportunity, sir. First, particularly on the R&D spend, the guidance is that it is going to increase in FY24. So any specific projects which you would like to highlight which are going to require higher R&D spend compared to FY24, FY25, 600-700 basis points spend?
You know, your voice was very muffled, but 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 generics portfolio. It's five nasal sprays, actually, that we expect to file in Q4 versus the rest of the year. I mean, the majority of the spend is coming into Q4 . Also, injectables, there's a good amount of increase in the second half of the fiscal year. So it's primarily respiratory and injectables.
Okay. Hello. Tushar, are you there? Okay, we'll take the next question from Bino Pathiparampil. Bino?
Hi, ma'am. Good morning and good evening. Following up on that question here, 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?
Which one are you talking to, Bino?
In India on the institutional business. I mean, 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 nine months.
Understood. So this tender 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?
Yeah, 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 be status quo is likely to continue for a few quarters? Or what are your thoughts?
We will, as we navigate through all of the outcomes of litigation, I mean, we expect in the Q1 of next fiscal year to get a decision on Mirabegron 2 patent and continue to litigate the others. 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 the next three years.
But I believe you are booking upfront also. So at the current level, how long will it continue? How many quarters?
So there will be a decline for sure next year. In the normal course, you would be expected to look at about INR 200 crore 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 money that you can claim over the next three years.
Got it. Thank you.
Thanks, Bino, for your question. The next question is from Surya Patra from Phillip Capital. Surya? Hello?
Yes, yes. Yeah, thank you. Thanks for the opportunity. 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?
Yeah, 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 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 more than 30% of the revenue contributor, putting all geographies together. And the current period is a kind of a respiratory peak respiratory season. So what kind of performance that you would have seen for the overall respiratory portfolio for the quarter?
There's been strong performance in the. Yeah. You wanted to complete that question?
Yeah, yeah. So I mean, is there any? See, we have seen moderation, let's say, in India. We have seen some kind of competition in the U.S. relating to albuterol, to be specific. So given that, is there any risk that one should think or consider about this portfolio?
You know, the secular trends would kind of indicate that respiratory is going to be very important for us in America and other parts of the globe, and of course, India as well. There will be some quarter-on-quarter variations and the like. And that doesn't necessarily mean that the secular trend is going to be upended.
Okay. But this is a kind of a seasonal, peak seasonal kind of period. During that period, we are witnessing relatively underperforming. So that's why the question was.
You can't pinpoint a 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 would certainly continue.
So it's really strong contribution both in the 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 two triple novel combinations. We continue to work on respiratory green propellants for U.S., Europe, 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 while we have a low growth in respiratory in India, then 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 are 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, the 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've seen some good results coming in. We have seen also tailwinds when it comes to input cost. But again, as I said, there are geopolitical tensions, etc., that are actually moving parts. Can't be certain. But I think if you talk about overall margins, I did indicate the fact that between 22.5% to 23.5% would be a good range to kind of aim for the next fiscal as well.
Okay. Sir, are you really worried about the kind of tariff things which has been talked about? Although it is like sometimes it has been indicated something like 2.5% on the pharma also. Or this U.S. tariff thing is a kind of area of concern or uncertainty 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 generic industry if it was implemented. I mean, 70% of generic 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 generic 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 the 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 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.
So, ma'am. Thank you.
Thanks, Surya. We'll take the next question from Anubhav Agarwal from UBS. Anubhav?
Yeah, hi.
Yeah, hi. One question is on Radicava. Bino, which year can you launch it? Is it next one, two years, or beyond that?
Which product are you referring to, Anubhav?
The Somerset, which you had a PAI on Radicava.
I think it's out for a good number of years. It's not in the next two years.
Okay. Thanks. Second is on the Canada semaglutide opportunity. Would you be in the first year of the opportunity, or are you pursuing that?
The team is working on it. We are hopeful that we'll be in the first wave between 26 and 27.
Okay. Thank you.
Thank you. We'll take the next question from Bansi Desai from JPMorgan. Hello?
Yeah, hi. 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 also going to evaluate probably late-stage assets? So what would be our strategy here? And have you earmarked any investments for this business?
Yeah, 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 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 there were 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 metered-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 a combination of both pipeline as well as late-stage assets is what we're looking at.
Ma'am, given the biotech funding has been weak out there in the U.S., is it fair to assume that there are good assets that are available in the market?
Yeah, there's a lot of opportunities right now that if one could 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 2027 as well for us?
We expect it to have a stronger tail because it's a specialty product, many patients, 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 2027, it should be a meaningful product.
Just lastly, in terms of margin trajectory, two years out, when I just look at some of the moving parts, probably PLI would have been normalized. Jynarque also would have been probably at a normalized level, 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 2027, 2028? Fair to assume it would be higher than where we are currently?
Given the kind of products that we've been bringing to the market, obviously, the top-line volatility 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 three years, we expect that to also turn positive. But we also have growth plans in terms of spinning it off at some point. So clearly, upward movement on the EBITDA front is certainly to be expected.
Great. Thank you.
Thanks, Bansi. The next question is from Neha Manpuria from Bank of America. Hello, Neha. Okay, we'll take the next question from Shayan Mukherjee. Shayan, are you there?
Yeah, hi. Am I audible?
Yes.
Yes, yes.
Yeah. Hi. Thanks. So Vinita, Nilesh, if you can talk about semaglutide other than Canada, which all markets you've already filed, and if you can take us through 2026 and 2027, how should we think about the launches? And you've 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 two years, please.
So 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, you want to add for other?
Yeah. I mean, for the oral solid, which is an opportunity also in multiple markets, obviously, we have our 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 2027 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 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 the next one was on green propellant. You mentioned, Vinita, 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?
Yeah. So we expect the metered-dose inhaler market will move materially over the next maybe start in five years, but definitely over the 10 years into the green propellant products, certainly with the move that the major pharma companies have made like GSK, AstraZeneca, as well as Chiesi from a European standpoint. We hope to be at the forefront as a material player on the respiratory front with our Xopenex brand as well as other MDIs to bring the better propellant products to the market. So we have multiple products in development right now, not at a stage where we are filing in the next year, but certainly next year, fiscal year 2027, we should start to see product filings.
Understood. And just if I can ask one more question, this is regarding biosimilars. We sense that the investment slowed down in the recent past. Any fresh thoughts there? Are you planning to step up investments in biosimilar or any view you have on that space and Lupin's participation?
Yeah. 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 the Sandoz, the Cordavis label that converted the 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 the EU this past quarter. It 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 Ranibizumab, aflibercept, and then etanercept in 2029 that comes into the market in the U.S., where we should be one of three 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 one of two, one of three. 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.
Understood. Thank you. Thank you very much.
Thanks, Shayan. Before we move on, can we request everyone to limit your questions to a maximum of two so that we can accommodate more callers? You can always get back in the queue for more questions. Thank you. The next question is from Shyam Srinivasan.
Good evening. Yeah, thank you for taking my question. Just a quick.
Hello.
I think you heard me.
Yeah, yeah. He dropped. He dropped.
Yeah. Okay.
We'll take the next question from HSBC. I think we can hear him. Yeah.
Hello, Shyam.
Go ahead, Shyam.
Okay. Let's see. Maybe move to the next one before we yeah.
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've called out two products, but just want to understand the sustainability of the growth in the European market for the path ahead.
Yeah. So the respiratory portfolio has been a big contributor in the European growth, in particular in the UK as well as Germany, where we've continued to grow our market share with Luforbec. And now with the Namuscla edition in Germany, in particular, that's helped us grow Germany with a combination of Luforbec as well as Namuscla. So the 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 have three countries with Luforbec but have the potential of launching in countries like Spain and others. So continue to make inroads there.
Understood. Thank you. 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 February, 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 do 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-priced medicines, cannot bear additional costs. So with 70% of the products imported into the country on the generic front, 50% contribution or overall generic from India, I mean, one would expect prices would go up in case on critical 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 a cost increase for the market or you're going to see disruptions in the market.
Thank you.
And you're not reckoning with the response of the Indian government also. They actually reduced tariffs on certain rates on certain categories of goods and so on from America. We don't know their response for this particular category also as yet.
Thank you. Thank you, Ramesh. Thank you.
Thanks, Shyam. We'll take the next question from Vivek Agarwal from Citi. Hello, Vivek. Okay. I'll just move on to.
Hello.
Yeah, Vivek. We can hear you.
Hi. So the question is related to Tolvaptan. Given that this is going to be an authorized launch, and you have highlighted that this is going to be a branded product and conversion is expected to be slower. So what kind of 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.
Yeah. 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 yeah, we expect it to be hopefully in the 30%-40% level.
Thanks. And a related question, what about 180-day exclusivity, right? How many players you are expecting in this particular product? Maybe two, three, or maybe?
Yeah. We're expecting two, three additional players.
Thanks. That's from my side.
Thanks, Vivek. We'll take the next question from Nitin Agarwal from DAM Capital.
Hi. Thanks for taking my question. There has been a lot of general concern in the sector with respect to sector low, some sort of U.S. sales erosion post FY 2027, post-Revlimid sales going away. While we don't have the Revlimid challenges, we do have a set of large ticket products in 2026 like Tolvaptan, maybe Mirabegron, as you mentioned, continuing in 2026. So I mean, as you see the business looking through a couple of years out in FY 2027, do you see a risk of being also growing or not, degrowing or not growing over the 2026 base that you will end up creating?
So we have a strong pipeline that we are pursuing. Some of these products that we are expecting maybe competition to come in, just gone by how long it has taken for us to get approval on products like Spiriva, right, that took us five years to get FDA approval. One belief 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 just to reiterate, we're going to be able to double-digit growth in 2026.
Sorry?
I think we are positioned to double-digit growth all over 2027 and 2026.
Next? 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 five years, we are focusing on what we think would be the complex portfolio, and that would help in kind of securing growth over the next four years, five years.
Yeah. We expect fiscal year 2026, the U.S. should be at a billion-plus, and then look at how we can sustain the growth from there.
I think it dropped out. Thank you. Thank you. We'll take the next question from Neha Manpuria.
Yeah. Hi. 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, of course, the 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.
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, in that order.
Okay. Okay. Sorry about that.
Specialty and India being the major focus.
Yeah.
Yeah. Okay. Got it. And we don't have an earmark number as to this is what we would like to invest in, let's say, India or 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 would be comfortable with a bite-sized acquisition, $200-$250 million should be easy enough for us.
In each of these areas?
Several of them. Several of them. Yeah.
Okay. Yeah. Got it. Okay. Second, I think in the past, we have talked about CDMO opportunity that we are probably exploring for growth beyond '27. Any update there? Have you looked at CapEx? What's the thought process on that?
Yeah. 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 the CapEx for this mileage?
No. It'll come along with the strategy.
Okay. Got it. Thank you so much.
Thanks, Neha. We'll take the next question from Harsh Bhatia. Yeah. Harsh, are you there? Yeah. Thank you. Yes.
Yeah. Thank you. Just very quickly, CDMO market share for FY25, our target was somewhere around 35%-40%. In December, as per the presentation, it's around 30%-31%. So what are the plans for CDMO market share at this stage, including commercial versus Medicare, Medicaid channel? That's the first one.
Yeah. 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, 30 has gone to 38% level, and NRx is 40% plus. So the multiple efforts from a copay standpoint to ease the burden on the patient, to access into Medicaid, Medicaid through contracting, plus other avenues have 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 50% plus. So this incremental market share is sort of coming from the non-commercial side of the business?
That's right.
Again, sorry to hop 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 sense?
So maybe we can take this question offline, but it's needless to say the efforts that the team has put in to drive conversion to our generic are starting to show. We'll have to still continue to monitor the trend to see if it's sustainable, but it's looking good so far in January and February.
Thank you. Very lastly, on this $250 million run rate for the quarter for FY26, basically a billion-dollar number, what is the assumption for Mirabegron, if I may ask, for this number?
Yeah. We assume that additional competition comes in 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.
So thank you so much.
I think we're at the hour. Maybe we take last two questions. Yeah. We're on to the last one, sir. We'll take one last question from Tushar Manudhane. Tushar, can you hear us?
Yeah. Am I audible now?
Yeah, yeah.
Yeah. Sorry for the disconnect. Just continuing on R&D spend that you have highlighted, 1,800 crores for 1,750 to 1,800 for FY25. Would you forecast for FY26 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 that we have on more complex stuff and the like, this is inevitable.
So INR 1,800 crores safe to assume in the total spend to be happening?
Yeah. Just slight increase over that if necessary.
Just if you could share specifically for Canada's semaglutide market in terms of units, how big it could be? Volume?
You can take that offline, please.
Okay. All right. That's it from me. Thank you.
Thank you, Tushar. Thank you very much. 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 tariff 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 major growth drivers looking very clear from an 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 generics into more branded and specialty on top of complex generics 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 the 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.