Ladies and gentlemen, good day, and welcome to Alkem Laboratories Q3 FY 2026 Results Call, hosted by Motilal Oswal Financial Services Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I hand the conference over to Mr. Tushar Manudhane from Motilal Oswal Financial Services Ltd. Thank you, and over to you, sir.
Thanks, Ikra. Good evening and warm welcome for Third Quarter FY 2026 Earnings Call of Alkem Laboratories. From the management side, we have Mr. Sandeep Singh, Managing Director, Dr. Vikas Gupta, CEO, Mr. Nitin Agrawal, CFO, Mr. Kaustav Banerjee, CEO, Alkem Medtech, and Ms. Purvi Shah, Head of Investor Relations. Over to you, Purvi.
Thank you, Tushar. Good evening, everyone. On behalf of Alkem, we welcome you all to today's Quarter Three FY 2026 Results Call. Earlier today, we released our financial results, press release, and results presentation, all of which are available on our website and have also been filed with the stock exchanges. We hope you've had a chance to review them. Before we begin the call, please note that this call is being recorded, and the audio transcript will be made available on the exchanges and on our website shortly after the call concludes. Also, today's discussion may include certain forward-looking statements, so this should be viewed in the context of the risk and the uncertainties associated with our business.
Since we have made a major acquisition announcement today for Alkem Medtech, we also have our MD, Mr. Sandeep Singh, with us on the call, who will throw some light on the same. And all the questions pertaining to the Medtech business will be answered by Mr. Sandeep Singh, along with Alkem Medtech CEO, Mr. Kaustav Banerjee. So with this, I now hand over the call to Mr. Sandeep Singh.
Yeah. Thank you, Purvi. So guys, it's great news that we have got into medical devices. I think after biotech, this could be one very valuable subsidiary that we will create in the long term. I would just like to share some facts about this market, and then, of course, you know, Vikas will talk about the business operations, and then we can go through Q&A. So largely, Medtech in India is a $10 billion market with significant headroom for growth, and India is still an underpenetrated market. Per capita is $7 for India. It's $50 for China, and even Brazil is at $40, so we all know there's large headroom left in India. There are technological advances leading to proliferation of in-use cases across disease areas, and there's low competitive intensity.
Historically, smaller value pools, limited tech know-how, and lack of at-scale domestic players even yet. And let's not forget, Medtech can be like Generic Two, you know, Version 2.0, and India can become a supplier globally to the, to the best parts of the world, to the most advanced countries in the times to come. So shift towards localized manufacturing and emergence of Indian players will happen, and we are very sure of it. The two areas which you want to focus is ortho and cardio, and though we-- I spoke about India, but, play is global. I believe Enzene and Alkem Medtech both can be value accretive, not just in valuation, but even on pure EBITDA margins. In four to five years, both businesses will have an EBITDA margin of 25%. With this, I'll pass it on to Vikas, and I'm happy to take questions later on. Thank you.
Thank you so much, Mr. Sandeep. Good evening, everyone, and thank you for joining us for Q3 FY 2026 Earnings Call. In Q3, we delivered a stable performance in a dynamic operating environment, supported by strong fundamentals in our domestic business and consistent execution across our international businesses. We remain bullish on the growth opportunities in domestic as well as in the international businesses and are on track to deliver our full- year guidance. We are seeing good revenue growth across our core markets, core markets. In domestic market, if we look at our YTD numbers, you know, we have grown at close to 10%. During Q3 of last year, we undertook major adjustment to our distribution setup in certain areas, which was aimed at strengthening the channel effectiveness and improving the service levels and supporting overall long-term growth.
So we had realized certain sales in Q3 FY 2025, which led to a high base for that quarter. So if we adjust the base effect, there has been a still strong double-digit growth of domestic business that continues even in Q3 of FY 2026. Our chronic business is seeing very strong growth trajectory, both YTD as well as quarter, for this year. We also have carved out our Alkem Wellness business as a separate entity, which is seeing certain headwinds. However, our prescription business is growing at a strong rate, which is reflected in IQVIA data as well. We continue to gain market share across specialties, as reflected by the prescription research data as well. I will now present some of the key highlights for Q3 FY 2026 financial performance.
The total revenue is at INR 37,368 million, with a YOY growth of 10.7%. International sales were at INR 12,157 million, with a YOY growth of 26.6%, while India sales, like I mentioned, you know, is looking at YOY growth of 5.5% with INR 24,959 million. EBITDA margin of 22.2%, and EBITDA stands at INR 8,280 million, with a 9% YOY growth. R&D expenses for the quarter were INR 1,390 million, which is 3.7% of the total revenue from our operations.
PBT was INR 7,812 million, with a YOY growth of 7%, and net profit at INR 6,360 million, with a YOY growth of 1.6%. There is an exceptional item for the quarter, which includes the impact of INR 528 million, on a preliminary basis related to the notification by the government of India regarding the labor codes. According to IQVIA data, we have outperformed IPM in six therapies, which is anti-infective, which is our core. We are growing 1.4x. Vitamins and minerals, we are growing 2x of the market. Pain at 1.4x. Anti-diabetic is 1.2x, but if I adjust for the GLP-1, it is more than 2x, you know, of the market.
Respiratory, 1.2x, and Derma, 1.8x. So we, we are seeing a very strong trajectory, both in IQVIA as well as internal business performance. We are encouraged by the opportunities ahead, supported by our expanding portfolio, upcoming launches and investments in the new growth areas. We will continue to navigate the evolving operating environment with agility. Thank you for your continued trust and support. I would now like to hand over the call to the moderator, so that we can open the session for questions.
Thank you very much. We will now begin the question- and answer- session. Anyone who wishes to ask the question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Damayanti Kerai from HSBC. Please go ahead.
Hi, thank you for the opportunity. My question is on Medtech, to Sandeep. So Sandeep, you clearly mentioned this could be generic, too, in terms of growth opportunities which are available. And, from Alkem perspective, I just want to understand what kind of scale you want to build over the next three to five years? And then what kind of investment or cost will be required to build that scale?
For sure. Thank you. So yes, I do believe in that. So in the next three to five years, revenue could be around INR 1,000 crore, and EBITDA would be around, say, 20%-22%. 25% would take higher, but since your question was two to five years, I've answered that. And, Kaustav, you can give more color to it, please.
Yeah.
Kaustav, go ahead.
Yeah. So if you look at from the business of Ortho and Cardio, our Ortho business is more like organically, you know, growing, and we just introduced. The tech transfer product that we did last year, that is under manufacturing, and we expect to launch it in the end of June next year. If I give you a volume perspective, we should be around 10% of the market by in the next five years' time. And if you ask me in terms of numbers, that would be around 250,000 implants in five years' cumulative numbers. So it will be a very strong growth, and we have already launched the product, the Indian brand manufactured product, in the second quarter of this year.
And if you look at the sequentially, we are growing at a number, which is 50% quarter-over-quarter. And, you know, and if I look at the, you know, overall EBITDA, I think, which Sandeep already mentioned. And your question was on incremental cost. So I think more or less, maybe it will take INR 200-300 crore more of investment in the next 3-4 years. Significant investment, I would say is, is almost done. Yes, thank you.
Sorry. So out of the INR 200-300 crore expected spends, majority are already done. That's, that's what you're saying?
Yeah, yeah. Yeah, yeah.
Okay, just continuing with that, we understand the Medtech is very different than pharma, right? So what gives you so much of confidence that you can really scale up big in just a matter of three to five years? And what could be the major challenges, if you can just talk on this business?
So, yeah, so Kaustav, maybe you can go ahead, but I'll just say this, that of course it's different. Therefore, we have a different team, we have a different company, and that's why we acquired this company, because those skill sets, we don't have it. So we are very clear about it. We will run it independently, and it is different, but it falls under healthcare. Yeah. Kaustav, please.
Yeah. So if you look at Medtech, we are in the process of building the team, and with the ortho we have already built the team. The people we have brought in are from large global companies with significant experiences, anything between 15-20 years. If you look through my background, you will see that I have grown in the Medtech sector before joining X, Alkem, and I was hired to build this portfolio. I have spent around 26 years into Medtech, starting with large three global companies, Medtronic, St. Jude Medical, and then Zimmer Biomet. So it has been, and I have worked through, cardiology and orthopedic all through my 26 years before Alkem.
Sure. Thank you. I'll get back in the queue. All the best.
Thank you.
Thank you. The next question is from the line of Saion Mukherjee from Nomura. Please go ahead.
Yeah. Hi, thanks for taking my question. If you can provide some more color on this acquisition of Occlutech. If you can give some history about the company, you know, the product segment, geography, any concentration risk, and then, you know, and beyond the profile, if you can just talk through the strategic rationale for this particular deal as to how this will sort of help in your long-term aspiration. And then the financial metric, how does it make sense? Is that it is, you know, what's the EBITDA margin for the company? Whether it will be earnings accretive or not, if you can give color on that, and any, any break-even timeline for, for this acquisition.
Good questions, actually, from your side. So let me start with the rationale and what the company is about. Very briefly, this is a research-oriented company, which has, you know, solved one of the biggest Medtech problem in the world, which is being in high entry market barrier markets. I mean, entry barrier markets, which include United States and Western Europe, as well as Japan and Australia. And this segment is a very niche segment of cardiology, so for us, it's more like a platform. So if you look at intervention cardiology, this is a subsegment of that intervention cardiology, where the occluders, which is basically treating the septal defects of the heart. And the three primary areas is definitely number one is atrial septal defects.
Number two is the treatment of heart failure, and number three is, you know, prevention of stroke. So that's a therapeutic area. Now, why, you know, this is important to us? This is a— In this particular segment, they are the third-largest company in the world, and given their revenue coming from Western Europe and U.S., to the tune of 85% of their total revenue, it's a very, very strong portfolio, which is waiting to be, you know, expanded across the globe. And in Europe, this company is already holding a number two position.
Apart from this, this company has a very strong R&D setup with their own, own, research lab, multiple research lab, own clean room, and own testing facility, which is not very, you know, commonly seen any of the other, companies that you come across in the segment. As a result of this, this company has a very strong product pipeline, and one of these product pipeline is another occluder, which is left atrial appendage, where, I mean, the global market size is $1.4 billion, and which is an oligopolistic market today. I would still say duopoly, being shared by Abbott and Boston Scientific. These are two companies which are leading this occluder segment, and this is a product which is in the pipeline, will be very soon getting approval.
Another important thing you need to recognize, while they have got into US industry in last one and a half years, and within this 1.5 years, with one product, they have already achieved 5% market share. PFO is about to be launched, and we are expecting a market share. I mean, we are expecting a approval by 2027. That can significantly help us scale up in a high-value market. Now, coming to your question on EBITDA. First, this company is EBITDA positive in the present year, which is, you know, financially year, sorry, calendar year 2026. And our estimate is to have 10% EBITDA by FY 2027, which will take us to around 23%-24% in three years' time.
Our market share, if you see in Europe, already is 23%, and we expect to replicate the same experience in the United States. Given the company do not have significant presence in emerging markets, that's a huge opportunity for us to grow.
Okay.
If you have more financial questions, you can ask. I think all of us are able to answer.
Please go ahead.
Yeah, I just, yeah, I just wanted to, you know, like, you've got, 55%, so who owns the company, and, why not owning 100%? Is there a plan to own 100% at some point in time?
So, if you look at the shareholding, there are around more than 150 shareholders currently in the company, and majority, around 32%, is held by the founder himself. And, so, the reason why we are buying 55%, because the balance shareholders, they want to retain their shareholding, and again, as part of the, say, value creation, which we are going to do in next five years together. So the current management will also continue, the current promoters will also, grow the company along with us. And, maybe over years or, let's say, next four to five years, they may look for an exit, but as on date, there's no such plan, and, and they want to grow the company with us. So that's the reason that. We are buying 55% stake, but yeah, maybe after three to four years, we can again look at buying the balance stake from them.
30-odd% for the promoter, the promoter is still owning that much stake?
No, he will sell some part of it, but definitely he will own significant stake after we take control.
Okay. Can you share, like, how much stake he would own after the transaction?
So we'll share once we sign the SPA, still in the discussion process. But yeah, but we will acquire, overall, we'll acquire 55% stake that has been decided. In terms of the promoter stake, how much they will continue, that exact number we'll come to know once we reach the signing of SPA stage.
The promoter will continue as the CEO of the entity. Is that, like, already decided?
Yeah, I think, yes. So, the plan is that the same management will continue, and definitely we have taken a commitment from him to continue at least for a year. And even for the other management, say, senior management staff also, the commitment has been taken. So the plan is that this company will run as it is because of the strength we have bought, this company, their R&D and manufacturing capabilities. And, as Kaustav said, that there are a lot of opportunities to use the brand name of Occlutech and launch more number of products in the structural heart and other, similar, say, cardiovascular segment. So definitely, this is a big, big brand which we have bought, and we want to retain, the brand image as it is.
Okay. Thank you. Well done. Bye.
Thank you. The next question is from the line of Neha M from BofA. Please go ahead.
Yeah, thanks for taking my question. Sorry, I missed the number for what is the incremental investment that we are planning, you know, on growing the Occlutech asset?
So the initial investment will be of around INR 1,100 crores. But yeah, over two years, since we want to also accelerate few of the R&D projects, as Kaustav spoke, that they have LAA, which is a great product in this segment, and we want to definitely accelerate launch of LAA in at least in Europe market over the next three years. So we will maybe invest INR 100 crores-200 crores more over the next two years to fund their R&D program. But definitely for, I think at operations, at operations level, they will be cash flow positive, and there I don't see any challenge from operating cash flow end.
This INR 100 crores-INR 200 crores is largely R&D?
Yeah, mostly to fund or accelerate their R&D program. Otherwise-
And to launch-
They are already EBITDA positive. I think there are some concerns on the PAT numbers because they have a loan also in their books of around INR 450 crores-INR 500 crores. That loan is currently at 10%, but yeah, definitely we have plans to reduce the interest loan since Alkem has such, say, cash equity in the market. So definitely the PAT will also improve once the loan is supported by a corporate guarantee so much.
Is there the plan to, you know, launch more, I think that product that you mentioned in 2027 in U.S. and expand it in other markets, that wouldn't require too much investment, or that would be over and above this INR 100 crores-INR 200 crores?
No. So, as Kaustav spoke about PFO launch in U.S., that will be June 2027. So most of the R&D spend, or investment on that project is already done. So we are just waiting for the approval to come, and we will most probably launch that in June, from June 2027 onwards, we'll start marketing that product.
Okay. So what I'm trying to understand is, this INR 200 crore number includes all marketing spend as well?
Yes, yes. As we said that we are already, say, if you look at cash flow at the operating level, we are already we have positive cash flow, so we don't need to invest further in sales and marketing. The current business can manage its own sales and marketing expenses. But for R&D program and to accelerate the R&D program, definitely there will be some amount of investment which we will do in the clinical trials and also the clinical programs.
Thank you.
What would be the payback period for this acquisition based on your initial assessment?
See, as we said, that this will be more for us, this will be a platform to access developed markets like Japan, U.S., and Western Europe. And there is a plan to also launch more number of, say, products in cardiovascular using this platform. But if you don't consider the additional portfolio, which we are going to launch, or you don't consider LAA, which is a big opportunity, the payback is around 10 years on this asset. But after considering LAA or, say, new set of products which can be launched under this platform, the payback will significantly be lower. As, as I said, it is 10 years, it can be significantly reduced, but it's very difficult to predict as of yet.
Okay, and sorry, my last question, you know, the additional, Cardio, Cardiology assets that you're mentioning, are we looking at more acquisitions, asset acquisitions to add on to this portfolio? Is that the eventual idea other than what's there in the pipeline for this asset?
The idea is not about acquisition. See, when we get a-- If you understand the business, and this company is very well manufacturing a simple scaffold kind of technology, which is based on nitinol. There are many adjacent technology to that, which can be very easily, you know, manufactured by them, doesn't require an inorganic acquisition, but product can be developed and manufactured through the same organization. Because they have already mastered one of the most difficult skill of delivery system. And given that they have already done it, I feel that, whatever investments and R&D Nitin mentioned, that should help us and suffice to introduce our newer products.
Understood. Okay, thank you so much.
Thank you. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi, the first question on the, our domestic formulation business. Dr. Vikas alluded that we had, some higher base last year, same quarter. But if I can see, last year, same quarter also, we had kind of mid-single-digit growth, right? And if I look at the two-year CAGR, you know, removing that, whatever restructuring we did, we are still at mid-single-digit, growth, right? So what is, happening in our domestic formulation business, you know, that continues to grow at a lower level, much lower than the IPM level?
So I, I would disagree here, because if you look at our YTD numbers, you know, I think we are close to 10%. And if I split that out even further, you know, like I mentioned, you know, we have, this year, some headwinds in the generic business, and we carved it out as a special, separate entity. So if you, if you remove that, we are actually, you know, close to around 11% or 12%, you know, in that range. Now, in a market which is growing at around 7.5%-8%, you know, YTD numbers are looking at around, you know, early, early double-digit, kind of numbers. So in fact, we are, we are seeing very good traction across segments, you know, within our domestic business.
Chronic, you know, which always has been a portion that, you know, people have asked or whether you look at IQVIA numbers, whether you look at our internal performance numbers, I think it's the growth story is at its high. You know, we have a high teens kind of growth that we are registering in our overall chronic segment. So I think if you are-
On YTD basis.
Yeah
We also have Adroit adding the inorganic growth and Adroit also getting added, right?
That's hardly, y ou know, if you ask me the number for YTD for Adroit, it's hardly INR 40 crore. You know, so that's not a very big number, which is e ven otherwise, you know, if you look at our prescription business is seeing a you know very strong growth, and you can see even it in IQVIA. So we have, I think, we do not have any challenges. In fact, our growth is very good. We are very bullish on the same. In fact, now with we all getting ready for semaglutide launch also, which will be, we are also geared up for day one entry into semaglutide.
You know, in fact, that would require addition of some people, but even in other therapies, you know, looking at our growth trajectory, you know, we are very bullish on our domestic market, and we will add some more, you know, manpower to drive the growth further in the coming years as well.
Sure, sir. The second one on the Occlutech business, how is the gross margin profile of the business? And when we say that, we'll improve the EBITDA margin from around 4% to more like 25% over the next three to five years, is it more driven by operating leverage, gross margin improvement? And does the company have manufacturing facility? If yes, where is it, and you know, what kind of utilization it is currently working?
Yeah. So first of all, you know, the gross, the gross margin of the company is, as of now, close to 73%. There are multiple things that will be driving our, our, margins going forward. Definitely, one of them is operating leverage. And number two is there is a lot of opportunities to optimize cost, utilizing the, the significant, back office that Alkem already has, including the GCC. And also, you know, one of the things we need to recognize that there are certain new products that will be introduced in very high AC market. For example, when we launch our PFO in U.S., the ASP is almost to the tune of, $9,500.
And number four, that is going to drive the margin going forward, while we recognize the fact anything that is labor-oriented or that can help us build labor arbitrage or anything which is labor-intensive process, we will move to India, but we still want to retain the you know organization's international you know DNA. So we will continue to make investment on optimization, but ASP, increased coverage, operating leverage, and utilizing Alkem's strong back end to reduce operating costs.
Sir, regarding the manufacturing facility?
Yeah, the manufacturing facility, as I said, it will take time because it is also regulated. Already currently, it is in Germany and Turkey as well. And, this manufacturing facility will continue to operate, and, eventually, we will see opportunities to utilize, optimize.
Sure, sir. And lastly, the INR 450 crore-INR 500 crore debt on the balance sheet, which is at a high interest rate. So is there a plan to kind of, provide loan from the Alkem balance sheet, at a lower percentage point, or you would refinance from the market? How should we think about it?
So, we will not provide loan from Alkem India, but definitely we will get it refinanced. With help of corporate guarantee, the rate can be reduced from current 10% to 5%-6% easily. And this is the rate we pay for our other specialties also for working capital loans. Yes, to answer your question, it will not be from Alkem, but it will be a refinancing.
Sure, sir. Thank you, and all the best.
Thank you. The next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.
Yeah. Hi, good evening. So I wanted to understand the India numbers a bit better. There is a divergence, what you were suggesting between the primary sales and the secondary sales. 1 Q, 2Q were much better, possibly, on the secondary side, and so on the primary side, and this quarter, the primary is worse off than secondary. Any particular reason for this divergence between the two? When do you see this anomaly getting corrected in the business?
So let me clarify it once again. There is no divergence or no anomaly in this number. See, it is just a cut-off adjustment. You know, when we had changed our distribution setup in last year, Q3, there were certain markets, you know, where we could realize, you know, the spillover impact, which already got corrected, you know, in Q3, so there is no divergence. It is looking at, like, a 5% growth. But if you see YTD, you know, this year numbers, there is no divergence in primary and secondary. And YTD numbers are 10%, kind of growth, which is overall domestic. And as you know, in our overall domestic, there is a large component of the generic business as well.
Now, that generic business this year has been more flattish. So if you, you know, look at only the, you know, core business, the branded generic business, then you know the growth trajectory is, is strong. It is, you know, early, double-digit kind of growth, and we are also bullish of ending this whole year also at that, number only. So just to clarify, there is no divergence in any primary or secondary. It is just because last year, because of the cut-off, you know-
More of a base impact.
More of a base impact in the last year, Q3, because of which only this quarter is looking a little, you know, sluggish. Otherwise, you know, there is no... I hope it is clear, Nikhil.
You'll be back to a 10% growth level from 4Q. Is that the-
Yes. So we are already at YTD also, we are at that number, and Q4 also will be, you know, that number, because that base was only for Q3, you know, which got corrected. Now, after that, it has been the same cut-off principle, you know, that we have followed. So even in Q4, you will see, touch wood, if everything goes well, you know, a similar,
Add what Dr. Gupta said. If you look at billing to billing growth for the quarter, it was 10%+ for the prescription business. So it was just because of cut-off adjustment that the reported growth looks lower. But billing to billing, if you compare the growth, it is 10%+ for quarter three also.
Understood. Slightly medium term, let's say FY 2027, FY 2028. Now, this generics business, I don't know, I mean, if you want to grow this business or not. Would it drag your overall growth in FY 2027, 2028 if you don't--
No, it won't. See, as I said, it's a large business for us, and we would definitely want to grow it. Of course, because we had carved it out as a separate entity, you know, whenever you do that, you know, we have seen that in the short term, business goes through, you know, certain headwinds. And even in the market, you know, you know that it has become a highly competitive market. I think we will be back to our high single digit to, you know, early double-digit kind of growth, even in generic business, from next year. So this year we have taken certain conscious calls also in the interest of keeping the margins intact, you know, from that business. So we are very hopeful.
So overall, if I have to give you a domestic story picture, then I, then we are very bullish. On this, I have always maintained that we will continue to grow at 100-150 basis points more than the IPM growth. In the recent months, we have seen even IPM growth, you know, getting recovered. And similar trajectory, you know, we are seeing actually in the recent months in our overall, domestic business as well. So, you know, I think, this kind of growth, you know, would persist and continue even in the coming year.
Got it. And I wanted some... I have a question on Occlutech as well. Before that, just final question on, on, the core business. So you are at a 66% gross margin now. If I look at nine months, somewhere around 60% or 66%. So, any particular guidance on the gross margin going into FY 2027, 2028, especially in light of the, MIP that has been announced for, PenG and its derivatives? Does that create some sort of a headwind?
So, of course, you know, MIP is a very recent event. We are just waiting and seeing, you know, how the market pricing would unfold. If the India players, you know, increase their supply, then clearly the cost impact, you know, would be lesser, you know, on our balance sheet. But as of now, the way it looks like, it looks like overall, you know, close to, say, INR 80 crore-INR 100 crore impact, but some of this, you know, would get, should get nullified by some of the market pricing, because even our trade generic business, you know, we have a big, you know, portfolio on that front, so we can pass it on, you know, to the customer. So we will try and see, you know, how we minimize that impact.
And then, you know, there would be certain other products as well, you know, where we are working on improving our overall, you know, procurement. So I think put together, as of now, we are looking at, say, a similar guidance on the gross margin, maybe 0.5-1 percentage basis points here and there. But we'll try and we'll, we'll actually get to see it closer to how the market unfolds, you know, in the coming quarters.
How many months of inventory do you usually hold off these derivatives, PenG and-
We have close to five, four to five months of inventory. You know, it with regards to the number of days.
Got it. I have a set of questions on Occlutech as well. Now, Sandeep, sir, h istorically, Alkem has been very conservative with regards to capital allocation.
Correct.
Only recently we are seeing these acquisitions. What gives you confidence on these acquisitions, especially this one? Given your conservative nature and the accompanying risk-taking, it seems a bit departure from your past practices.
So, you said I have many acquisitions, so I think this is the first one, not many. You can't count Bombay or-
Sorry, that was just one.
That's a sneeze. Don't even bring it up. So this is the first one. And many times you all kept asking that you all should acquire and acquire, so maybe we listened to you all. Now, what gives me confidence is what we answered in the first question. I think we believe in people. I think we have the best people in the medical devices. We have acquired a company, which I'm kind of repeating, so this is not a in-house development or in-house management. This is an acquisition not only of company, but of talent. And yeah, and Kaustav, you can add on that, if you want anything.
No, I think you-
Yeah.
Enough.
So, yeah, yeah, yeah.
Continuing off the current promoter as--
Sorry to interrupt, Mr. Mathur. Please rejoin the queue for follow-up questions. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Chirag Dagli from DSP Mutual Fund. Please go ahead.
Yeah, so thank you for the opportunity. Sir, you know, when you think about the acquisition, in three years, this incremental growth that is going to come, if it's a lot, this is going to come in several markets or, similar products in, newer markets. If you can just flesh out some details here, that will be helpful. And the second one was that, as and when you get comfortable with the Share Purchase Agreement, we need a lot more color around, you know, how the balance sheet looks like, what you paid, and what the historic finances of this company look like, and maybe some literature around what product approvals they have, et cetera. That will really help, because this is a fairly large acquisition, large capital allocation, but a lot more details required with the feedback that I just wanted to sort of.
Yeah. So your, I'll take the first question, first, that is your question on how are you going to grow, right? So fundamentally, there are three things that will drive our growth. One is, definitely newer products that will be introduced, which are awaiting, you know, regulatory approval. For example, PFO in the United States, which is a very large opportunity. Similarly, increasing the footprint in emerging markets, that's the second large opportunity that we have with this product. And, you know, third thing is, we will. It's about going deep into markets, where we just have a little bit of presence, where we have low market share. Because Western Europe, we already have a very good and very high market share. Thereafter, APAC and EMEA are the markets where we have the headroom to grow.
So multiple factors. And U.S., said the PFO launch and the deeper penetration with ASD.
Did you flesh out any guidance on these numbers, on the next three years kind of growth?
Yeah.
Okay.
So we have around, you know, INR 600 crore, we are estimating in the, you know, calendar year 2026. And then, subsequently, we will grow that number up to INR 780 crore approximately 14% CAGR for the next five years.
That is not counting your bolt-on.
Not counting our bolt-on.
Conservative number, if I can say, Kaustav.
Yeah. Correct.
This 15%, 14, 15% growth equally split across all the three aspects that you talked about, your geographic expansion, newer markets, and of course, existing markets, higher penetration. Almost equally is how we should think about it?
It would be very difficult to say equally, because in certain markets, you will drive higher volumes, may not be at the very high ASP, and certain markets like U.S., where you will have very high ASP, may not be at the same volume. So it will be distributed, but largely our, our estimate says we'll grow at 14% CAGR over the next five years.
Just to add on what Kaustav said, that this 14% CAGR is without any new product, as we have LAA also in our product pipeline, and also without adding any portfolio, any addition to the portfolio, like we can add TAVI or Stent or other products also, going forward. So 14% CAGR is only from the existing products.
It's a conservative estimate.
Yeah.
I understand. So the reason I'm deliberating on this point so much is that the execution hurdles across these three buckets is very, very different, right? Getting newer products in developed markets versus getting the developed product markets sold in India versus, you know, all of these are very different execution products, right? So, and I get the point that you're bullish about the business, but when you think about just we have to kind of understand, you know, get some sense on how you are thinking about these three multiples in terms of the contribution to growth.
We are already having a full-blown team with Occlutech. We are just acquiring 55%. The team remains, the management continues, and we would like to continue with the DNA of an international company.
Understood. Okay, fair point. [crosstalk]
Sorry to interrupt, Mr. Bagli. Sorry to interrupt. Please rejoin the queue for more questions. Yeah, thank you. The next question is from the line of Bharat Celly from Equirus Private Limited . Please go ahead.
Yeah, hi, good evening. So I just want to understand on Occlutech, so we are doing this acquisition. From a company's perspective, what do they expect? What we, we will be adding as a value to them overall?
What we are going to add as a value?
Right.
Yeah. So definitely, number one is we are going to put muscles into the company by making investments. We are a strategic investor, investor into it. Number two, we are going to add is in terms of Alkem's strength in building organizations across the globe. And third is Alkem's, you know, large infrastructure and GCC to reduce the SG&A.
When you say to reduce the SG&A, what you are doing there per se, because we don't have a manufacturing facility. So what exactly we are pursuing there?
SG&A is outside manufacturing. We are talking about faster sales. So faster sales, eventually, we will look at optimizing by moving some of the labor-intensive activity. But SG&A, I'm talking about is more on the expenses side, admin expenses side.
For the support function.
For the support function.
Right. Right. And when it comes to the future acquisitions, are we geared up to even further invest into Medtech any longer, or the future investments is going to be in different areas? If you could explain that.
No, I think so. First, I mean, we, we'll look at investments, but, as you know, somebody said we have been conservative, so we are very selective. So coming to Medtech, I think more or less is done. We might look at something small, but nothing significant for sure. I think a large part is done. Yes, we will look into our core business as well, obviously, like pharmaceuticals. At a reasonable valuation, something reasonable, we will look at it. But we continue to be a company which doesn't have acquisition as its main thing, so don't look at it as we'll do some big-ticket acquisitions.
Right. And what will be the ROIC expectation if we go for future acquisition on the pharma side?
I think on a business which generates 20% is great return on equity.
That will be the threshold for us as well, then we are investing.
Yes, but you know, just theoretically, if it's a great growth, we can compromise the return on capital. It depends. Right? I mean...
Surely. And Vikas, if, since you were mentioning about trade generics, are you giving any absolute number? What was our trade generic business during this quarter?
So I think that we will, you know, we will n ot disclose. We'll, we've not called out that, but we know that, you know, our percentages in terms of our overall business. I think you have, you know, you know how it has been. I can say that it has been flattish, you know, for this year.
So you see, you're saying YTD, right?
Sorry? Yeah.
You are saying YTD.
YTD.
On quarterly basis?
For the quarter, it was flat. For the YTD, at YTD level, it's about a lower- single digit.
Yeah, lower- single digit.
Well, thanks a lot. I will get back into the queue. Thank you.
Thank you. The next question is from the line of Sandeep from Silves. Please go ahead.
Thank you for the opportunity. Could you please provide some insights about the denosumab biosimilars in the U.S. and what was recently submitted? And as well as, like, what is the recent status in the Europe region, and when will the Xgeva biosimilar be submitted?
So, great. So, I mean, denosumab, we have both Xgeva and Prolia, both. Number one answer is that. U.S., we are undergoing FDA inspection as we speak, and our entry date would, maybe it would be later on, not during this year, because of litigation with Amgen. Even though there are many players, Amgen still litigates on it. So U.S. entry is going to be 2026 end, hopefully. And Europe, we'll be in, we'll be entering very, very soon, in the next couple of months.
Okay. Thank you. Thank you so much.
Sure.
Thank you. Before we take the next question, a reminder to all the participants, if you wish to ask a question, please press star and one. The next question is from the line of Kunal Dhamesha from Macquarie. Please go ahead.
Hi, thank you for the opportunity. Mr. Kaustav, the PDA occluder device, which is currently under filing, so is it already filed, or is it under clinical trial, and we are yet to file? June 2027 is the approval date, so June, does it refer to calendar year 2027?
Yeah. So your question is PDA or PFO? PDA is already an approved product. If you are talking about PFO, the filing, not only filing, even the clinical, you know, trials are being conducted. The results will be shared with the U.S. FDA. We are expecting by mid-June 2027, and when I say June 2027, it's specific, like, it's out of our calendar.
Calendar, yeah, yeah.
That's a target action date we have already received, or it's a clinical trial is still going on?
Clinical trial is done. It's the data that w ill be submitted and done.
Okay, okay. And, you know, on some of the antibiotic portfolio, we have, where Dr. Gupta alluded that we can pass on some of the increases, MRP-related increases to customer. But my understanding is a lot of these products are under NLEM, right? And, the price increases are linked to the WPI index.
Yeah, let me clarify. I didn't mention on MRP. What I said in the trade generic business, you know, where it is sold at a, say, a higher discount, right, to MRP, is where we can look at increasing the pricing. So that is where, you know, I mentioned we can pass on some of the cost to the customer, but I don't know. You know, we will see how it how it goes and how it plays out in the market.
So, sir, of our anti-infective portfolio, how much is in the generic division and how much is in the prescription division? If you can share the broad, you know, percentages.
Our large brands, you know, we have. That's a branded generic market, say, Clavam, say, Taxim-O, you know, the injectable range, Xone, et cetera. So it, it's a mix, you know, of the breakup of the same we've not shared, but we'll have to look at overall, if we get to dig out.
The IQVIA numbers which you get is only for the prescription.
Branded generics.
So for generic, I think, trade generic, the IQVIA numbers, they don't cover it.
Yeah.
So you can take off IQVIA number, what is our prescription?
Yeah.
Size of anti-infective.
My understanding is IQVIA do capture some of the prescription, but we can take that offline.
Some is, some doesn't make it representative.
Yeah, yeah. I agree. I agree.
Yeah.
But some gets captured, yeah.
Yeah, that's good. Yes.
Yeah. Thank you.
Thank you. A reminder to all the participants, if you wish to ask a question, please press star and one. The next question is from the line of Chirag Dagli from DSP Mutual Fund. Please go ahead.
Yes, sir, thank you for the follow-up. Sir, the trade generic business nine months, the margin on that, just given that you've been flattish, would the percentage margin on the trade generic business be better this year versus last year?
Sir, Chirag, come again?
EBITDA margin.
Chirag, I think we mentioned that the growth was flat for the quarter, and at YTD level, the sales growth for trade generic was in lower- single digits. If you look at EBITDA, as we have given or shared in previous calls also, the EBITDA for generic business is 2%-3% lower than our corporate EBITDA, but not very much. It's not very different from our corporate EBITDA. Varying from quarter- to- quarter, but it's on the same line as corporate EBITDA.
Understood, sir. Just the second one, sir, on the anti-malaria business or basically the PenG, you know, volume through the brand business. We just whatever is dependent on PenG and generic.
I think, you know, we will have to do that calculation, but it's more or less similar.
In fact, because trade generic and anti-infective is equally big as t he impact will be almost similar because the volumes are higher in trade generic.
Understood. This INR 100 crore is a total number, sir?
It's a total. A part of that gets offset by people.
Understood. Okay. Thank you. Thank you.
Generic always higher as compared to prescription, so the impact will be more on generic business.
Yes, understood. Yes. Thank you.
Thank you. Anyone who wishes to ask a question, please press star and one. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to the management for closing comments.
Thank you, everyone, for joining us today and for your thoughtful questions and active participation. I'd like to, you know, inform all the participants that we have organized an investor meet on the 18th of February, that's Wednesday, to outline the strategic direction of the Alkem Medtech, and the invite will shortly share on the chat with the registration link. So kind of just yourself, and we wish to see you in person. We look forward, we look forward to engaging further with you there. The venue is St. Regis, so you'll have all the details on the registration form. Please feel free to connect with us in case if you need any further help, and should you have any follow-up question, you can reach out to us. We appreciate your continued interest and support. Have a pleasant evening and a happy weekend. Thank you.
Thank you. Great, sir.
Well done.
Thank you very much. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.