...Welcome to Aurobindo Pharma Q4 FY 2024 earnings call. Please note that all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the opening remarks. Please note that this conference is being recorded. I now hand the conference over to management for opening remarks. Thank you.
Thank you, Mandeep.
Over to you, sir.
Thank you, Mandeep. Good morning, and a warm welcome to our fourth quarter FY 24 earnings call. I am Srinivas Dange from the Investor Relations team. We hope you have received the Q4 FY 24 financials and the press release that was sent out on Saturday. These are also available on our website. I would now like to introduce my senior management team on the call with us today, represented by Dr. Satakarni Makkapati, CEO of Aurobindo Biosimilars, Vaccines, and Peptide Businesses, and Director, Aurobindo Pharma Ltd. Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialities Limited. Mr. Swami Iyer, CEO, Aurobindo Pharma USA. Mr. V. Muralidharan, President, Europe Formulations Business, and Mr. S. Subramanian, CFO. We will begin the call with the summary highlights from the management, followed by an interactive Q&A session.
Please note that some of the matters we will discuss today are forward-looking, including and without limitations, statements relating to the implementation of strategic actions and other affirmations on our future business, business development, and commercial performance. While these forward-looking statements exemplify our judgment and future expectations concerning the development of our business, a number of risks, uncertainties, and other important factors may cause actual developments and results to vary materially from our expectations. Aurobindo Pharma undertakes no obligation to publicly revise any forward-looking statements to reflect in future events or circumstances. With that, I will hand over the call to Mr. S. Subramanian for the highlights. Over to you, sir.
Thank you, Srinivas. Good morning, and a warm welcome to our Q4 and full year FY 2024 earnings call. This has been a good year of performance across the businesses, mainly driven by volume gains, new product launches, our expansion into new growth markets, and stable pricing. The profitability of the company has also improved significantly, backed by softening of raw material prices, favorable product and business mix, and improved operating efficiency with better capacity utilization. We had the highest ever sales and EBITDA for the quarter and the year. For the year FY 2024, we achieved INR 29,000 crore of sales, exceeding our internal target of INR 28,500 crores plus, and achieved EBITDA margin of 20.1% against our guidance of 20%.
Now, let me take you through the details of the results for the fourth quarter of FY 2024 and full year FY 2024 declared by the company. For the Q4, the company registered a revenue of INR 7,850 crores, with an increase of 17% year-on-year. The EBITDA before Forex and other income grew by 68% year-on-year and by 5% quarter-on-quarter to INR 1,687 crores. The EBITDA margin for the quarter was at 22.3%, and against the 15.5% for the last year, same quarter. Net profit increased by 80% year-on-year and decreased by 3% quarter-on-quarter to INR 909 crores. The quarter-on-quarter decline was mainly on account of the one-time exceptional loss of INR 122 crores.
For the full year FY 2024, the company registered a revenue of INR 29,000 crore, with an increase of 17% year-on-year, supported by growth across the businesses. The EBITDA before Forex and other income grew by 55% year-on-year to INR 5,843 crore. EBITDA margin for the year was 20.1%, against 15.1% of last year. Net profit increased by 65% year-on-year to INR 3,173 crore. In terms of the business breakdown, formulation business, excluding Puerto Rico, in Q4, witnessed a growth of 21% year-on-year to INR 6,510 crore, and contributed around 86% of the total revenue. The revenues are mainly supported by growth across the growth markets and Europe.
For the full year, FY 2024, formulation business, including, excluding Puerto Rico, witnessed a growth of 19% year-on-year to INR 24,419 crore, and contributed around 84% of the total revenue. For the quarter, APA business contributed around 13%, and the revenue remained flat year-on-year to INR 1,019 crore. For the full year FY 2024, APA business contributed around 15% and clocked a revenue of INR 4,241 crore, registering a growth of 10% year-on-year basis. The growth in the APA business is mainly driven by higher volumes on account of the improved asset utilization and debottlenecking. For the quarter, the revenue from US formulation without Puerto Rico increased by 22% year-on-year to INR 3,588 crore.
On a constant currency basis, the US revenue increased by 20% year-on-year to $432 million. The growth was mainly driven by volume gains, stable demand, and new product launches. Our large product portfolio basket helped us to optimally maintain the product stability, price stability. The QoQ decline of around 4%, however, was mainly on account of the lower sale from Eugia and seasonality. The Eugia sales volume in US are expected to pick up during the quarter. Revenue from US formulation for the year increased by 23% to INR 13,867 crore or $1,675 million. During the quarter, we have filed 11 ANDAs, received approval of 17 ANDAs, and launched seven products.
Revenue from oral generic product in USA has increased by 23% year-on-year to $279 million in Q4 FY 2024. Also, for the full year, the revenue from oral generic products in USA increased by 18% to $1,078 million. Revenue from injectables and specialty business in USA increased by 28% year-on-year to $104 million. The year-on-year growth was driven by new product launches and volume gains, albeit the quarter-on-quarter decline was mainly on account of the Eugia 3 plant temporary shutdown. The total injectable and specialty sales globally increased by 26% year-on-year, and stood at $143 million for Q4. For the full year revenue, the revenue from injectables and specialty business in USA increased by 38% year-on-year to $397 million.
The total global injectables and specialty sale for the year increased by 31% year-on-year, and stood at $541 million for the year, against last year's $414 million. We have a total of 223 injectables and specialties ANDA filings as on March 31, 2024. Out of that, we received 169 received final approval, and remaining 54 under review or are tentative approval. The company as on March 31, 2024 has 830 ANDAs, out of which 658 has final approval and 27 has tentative approval. For the quarter, European formulation clocked a revenue of INR 1,832 crore, an increase of 10% year-on-year. In constant currency terms, the Europe revenue was EUR 203 million against EUR 188 million of last year, Q4.
For the full year, the European formulation revenues grew by 12% and clocked a revenue of EUR 798 million. For the quarter, growth markets revenue increased by 15% year-on-year to INR 852 crore. In US dollar terms, revenue grew at $103 million in Q4 FY 2024. The revenue increase was mainly driven by sales across the markets. For the growth markets, revenue increased by 29%. In US dollar terms, revenue grew to $281 million from FY 2024, from $243 million in the previous year. For the quarter, ARV formulation revenue increased by 31% to two hundred and thirty-eight crores, or $29 million.
For the year, ARV business is decreased by 11% to INR 868 crores or $105 million, mainly due to pricing pressures partially offset by volume gain. During the quarter, the raw material costs eased up further, supporting our gross contribution, which stood at INR 4,519 crores. Gross margin for the quarter of 59.6%, against 57.1% of the previous year, which was supported favorably by the favorable business and product mix and other item. For the year, the gross contribution stood at INR 16,399 crores, with a gross margin of 56.5%, against 54.6% of last year. R&D expenditure stood at INR 392 crores for the quarter, which is 5.2% of the revenue.
For the year, the R&D expenditure stood at INR 1,480 crore, which is 5.1% of revenue. Improved capacity utilization seen during the last few quarters has resulted in continued operating leverage benefit during the Q4 as well. Consequently, EBITDA improved to INR 1,687 crore. For the full year, the operating leverage benefit has reflected in 20.1% against 15.1%. Net CapEx for the quarter is $70 million, which mainly includes approximately $33 million towards the Pen-G project. Net CapEx for the year is $422 million, which includes approximately $146 million towards Pen-G project. Cumulative CapEx for the Pen-G project amounts to $285 million. The average USD INR exchange rate is 83.04 against 83.24 in Q3 FY 2024.
The business had a net cash flow of $12 million during this quarter, before the Pen-G investments and investments in new market. As a result, the net cash position, including the investments at the end of March 2024, was US dollar $18 million. The gross debt is $758 million. Recent changes in the composition board. Our board structure comprises of 10 board members, out of which 5 are independent directors, including 2 women directors. Mr. M. R. Kumar, ex-chairman of LIC India, has been appointed as the Chairman of the Board of Directors of the company from April 1, 2024. Dr. Deepali Pant Joshi, retired from, retired as Executive Director of RBI, joined the Board of Directors during the year. Outlook.
Our financial performance in Q4 FY 2024 and the full year FY 2024 was driven higher sales on back of new product launches, expansion into new growth markets, volume gains, and stable pricing. During the quarter, we commercialized four manufacturing facilities, including Pen-G, 6-APA, and injectables. During the next few quarters, we expect the operation of these plants to ramp up and start contributing to the top and bottom line meaningfully. With our continued investment in R&D, we continue to develop the strong growth pipeline. We are focusing on our key strategic priorities to enable a long-term growth. Our growth levers include backward integration to build resilient supply chain for key raw material, reflected in the recent commercialization of Pen-G and 6-APA facility. Expanding manufacturing footprint with capacity enhancement, depot linking the existing capacities and new facility creation.
At present, we are manufacturing around 47 billion units of formulation. Expanding growth market presence with our recent foray into the Indonesia market with acquisition of certain brands. Long-term growth with biosimilars. Our biosimilars and complex products progressing, the clinical trials are advancing. Mr. Satakarni, CEO, will elaborate on that, ensuring a well-diversified product portfolio reflected in 830 US ANDA filings, and continued focus on R&D investment. With the continued ramp-up of our recently added capacity, R&D efforts, and focus on our strategic growth lever, we are confident of continuing our growth trajectory during the FY 2025 as well. We expect to achieve around a 21%-22% EBITDA margin target set internally for the year. This is all from my mind. Now, our business leader will give more clarity on any specific aspects in our Q&A session. We are happy to take that presence.
Thank you.
...Thank you very much. We will now begin the question answer session. Anyone who wishes to ask questions may raise your hand from the participant tab on your screen. Participants are requested to use headphones or earphones while asking the question. The first question is from Kunal Ramesh.
Hi, good morning. Can you hear me?
Yes.
Yeah. Thank you for the opportunity, and congratulations on a good set of numbers. Just, you know, the first question on the growth outlook for the FY 25. While we have said that we'll continue to grow, would you be able to give any range, you know, for the outlook for FY 25?
We are not giving any growth outlook overall as a company, but, our respective business leaders will talk about it when they are addressing their businesses.
Okay, sure. So then, you know, given that now Eugia three is classified as an OAI and, there are 29 pending ANDAs, what is our plan to de-risk our growth for the next couple of years till we are able to resolve this official action indicator?
Hi, Kunal. Morning. Yeah. I’m sure you are aware that, like, we have built the Vizag plant as a backup for de-risking plant for Unit 3. Now, Vizag plant audit is completed, and hopefully we should get our first approval sometime very soon. So we will start actually, like, filing more products from our Vizag plant. We also have a plan to de-risk Unit 3 by doing dual filings from Vizag. So that, that’s been the plan for almost two years now, and now, like, it is getting actualized with the audit getting over.
Sir, you know, how many filings, because of this OAI for, let's say, next 2 years, will get stuck from Unit III out of this 29?
It's around 20 plus, will stuck. But what we are working, Kunal, is in terms of... because we have taken all proactive actions, and we have never waited for FDA to come back. And we hope that, we will be in a position to show to FDA that, like, we are in state of compliance. And, I expect at least 1 year getting impacted, but hopefully the second year we should come back. That's our internal estimates on this.
Sure, sir. Thank you on that. And, second question on the, for Satakarni sir, on the biologic CMO, LOI that we have signed with MSD. Any update, on that, you know, LOI to contract signing as of now? And, and, and in terms of whatever CapEx that we are putting, capacities, et cetera, are we through, in terms of basic infra? What is the update there?
Hello, Kunal. With respect to the letter of intent, limited letter of intent that we signed with Merck, I have updated the exchanges that I would attempt to close the definitive agreement by 31st of May. Now, I think we are truly on track to closing the definitive agreement with MSD, Singapore entity by 31st of May, so I don't see any showstoppers there. Sure, there are a few nitty-gritties that we are still ironing out, but I'm optimistic about closing it by 31st May. If there are any delays by a couple of weeks, then we'll keep the exchanges informed about it, but at this point, I don't see any showstoppers. What is your next second question? What was your second question, Kunal?
Yeah. So in terms of capacities, how many, you know, liters worth of bioreactors we are putting and, you know, what's the CapEx that we are planning for that contract?
So-
What's the outlook on that in terms of where it is, in terms of, you know, finalizing?
Correct. So we have already started our project work. As I have told before, this is a large mammalian cell culture manufacturing facility, which is being done in 2 phases. The phase 1 capacities would be 2 into 15 KL mammalian cell culture, stainless steel bioreactors, with associated purification lines to manufacture the drug substance, as well as isolator-based vial filling line, to convert the drug substance into the finished product. So this is an integrated CMO offering end-to-end services in manufacturing, both drug substance, drug product, and the QC release. The project is shaping well. If you remember the details about the MSD letter of intent, we have capped ourselves to an exposure of around $24.5 million to the point where we sign the definitive agreement.
In case we, for any reason, we don't sign the definitive agreement, we are covered for the $24.5 million. So right now, we are well within that cap and I think the deal is going through. So, exciting times for us, and this is the update that I have on the project. It's going well. It's on time. It's already been five months that we started the civil work, and by 2026, the capacities will be aligned to and commissioned to start the water and engineering runs in the facility at Turkapally.
Perfect. Thank you, and all the best, sir.
Thank you.
Thank you. The next question is from Damayanti Kerai.
Hi, good morning. I hope I'm audible.
Yes.
Okay. Thank you. So my first question is again on Eugia 3. So, as Dr. Yugandhar mentioned, the de-risking process is on, and dual filing is one of the process which you are taking. So just want to understand, out of the 29 ANDAs which are pending from the Eugia 3 plant, have you filed it, filed any products from Vizag, so far, or this process will start now?
It will start now, Damayanti, like, because we, frankly, like, let me, let me put it that other way around.
Mm-hmm.
In all the new filings and some of the site transfer projects is what we are planning to do it in Vizag, but none of the existing filings, we have no plans of transferring the existing filings of Eugia 3 to Vizag, okay? I hope that clarifies your question. So we are still confident that we are- we will be in a position to resolve issues, and we will secure approvals from Eugia 3. That's our internal confidence level at this point.
Okay. And, in terms of remediation, what kind of timeline you are anticipating? Say, like, you already started, when the FDA update came first, and, you took obviously some, precautionary measures, et cetera. So now in terms of remediation, what are the plans? Say, like, you, you'll be hiring third-party consultant, and what will be approximate timeline, anticipated by your team, within which you can, resolve the FDA queries satisfactorily?
Damayanti, like, as you are aware, we have taken the remediations even in the middle of the audit itself. In fact, when we voluntarily stopped the manufacturing, that was of the first step what we have taken when we observed there are some deficiencies. So our remediation activity started immediately after the audit. So we are already into the fourth month of remediation, okay?
Mm-hmm.
We expect probably like it'll go on for another 3-4 months. Post that, as and when the management feels confident that we have addressed all the concerns raised by the auditors, we will approach the FDA again.
Got it, clear. And very, broadly in terms of impact, in terms of sales, the fourth quarter number, is broadly representative of what we may say for next few quarters while remediation is on, or, like it could, come down, say, second-
No, in the fourth quarter, I have taken the hit. I think, I, I told this last time to one of the analysts, that I... Because we stopped the manufacturing, we stopped the distribution out of abundant caution, and we got the everything retested, and we, with full confidence, we started releasing the products. So we have taken whatever sales hit what we wanted to taken in Q4 of last year, okay? Now, Q1 onwards, it should be normal.
Okay.
So we expect a run rate of around $150 million every year across the globe. That's the Eugia run rate now, and we feel like we will maintain that.
Okay, that's clear. Thank you. My second question is for Dr. Satakarni. If you can update us on some of the key biologics project in terms of approval, timeline, et cetera, and like when we should be seeing first product coming in market.
Hello, Damayanti. So I would like to update the progress we are making in the biosimilars business with the recent trastuzumab marketing authorization we received in India. This is our first product authorization. We have promptly applied for a manufacturing license, which we expect to obtain very soon. So the plan is to manufacture the batches and launch the product in the second half of this year into the domestic market. As you know, this product, which is used in treating early and metastatic breast cancers that are HER2 positive, is also filed with the European Medicines Agency, and the review procedure has already started. We are getting slightly delayed with the U.S. FDA filing for this product, as we could only complete a Type 4, a mandatory Type 4 pre-submission meeting with the FDA in May.
So the Type 4 pre-submission meeting went really well. I believe we should be able to complete the U.S. FDA filing also in the next three months. So I don't see any further showstoppers. If the procedure unfolds well with the European Medicines Agency without any glitches or without any additional data requirements, then I see a decision coming out somewhere towards the end of Q3 or early Q4 for this product. So this is about the first product. Then we have two more biosimilars both in the oncology space, which were also filed with the European Medicines Agency. Again, the guidance on these two biosimilars will also be somewhere towards the end Q3 or early Q4.
If the regulatory procedure unfolds, without any procedural clock stops, that require, any remediations, et cetera, where I extend my clock stops and stuff, then we are expecting a Q3, Q4, approval for these products or otherwise.
Okay.
So that's about the three biosimilars which are filed. Now, with the other biosimilars, as you know, I have told in the last earnings call that we have advanced two immunology biosimilars and also gave a press release last quarter, I think in February, I'm not sure, but February, I guess, that we are working on a biosimilar to Xolair, which successfully met its PK/PD endpoints in a three-arm, phase 1 study conducted in 165 healthy volunteers. The results are extremely encouraging. We met both the key parameters of PK and PD within the equivalence ranges that we expect. I think this product is now in phase 3 across multiple European countries and is progressing well to conclude the recruitment phase by September, October.
So I expect to file this product both with the EMEA as well as the FDA, sometime in Q2, Q3 of the next fiscal. Likewise, our Denosumab biosimilar, which also I talked about in the last earnings call, I'm happy to state that we have completed the phase 3 recruitment across 40 sites in Europe for this product. So this is about 436 osteoporotic patients, that we completed the recruitment for. The primary objective of this study is to compare efficacy of our biosimilar versus the originator's Prolia. And, I hope that I would be able to submit this product also with the EMEA and FDA between Q2 and Q3 of the next fiscal year. Along with these two, there are two more products, an ophthalmic product and an oncology product in phase 3 for a long time now.
The oncology product is inching towards the closure of recruitment. I hope to complete the recruitment by October this year, and the filing phase would be Q4, the next fiscal. The ophthalmic product will be delayed. The ophthalmic product, the recruitment rate is slow across Europe, so I would be able to probably, hoping to file this product only in 2026, 2027. So that's about the, biosimilars products and what's happening with my seven products in wave one and wave two.
Dr. Satakarni, that's very helpful. Thank you for your response. I'll get back in queue.
Great. Thanks.
Thank you. The next question is from Neha Manpuria.
Yeah, thanks for taking my question. My first question, you can just start on Eugia or broader injectables. Is it fair to assume that this will be a year of very little growth outside of, you know, generic Revlimid for the injectable business? Because, you know, even with Vizag, et cetera, your first approvals probably start coming through only in the second half of the year. Or, you know, in your view, how should we look at growth of the business? Because the $150 million, you know, per quarter that you mentioned is very similar to the number that you're doing, you know, you've done the fourth quarter.
You are right, Neha. In fact, it'll be a year of, muted growth. So we do expect a double-digit growth, but definitely not the way like we have grown from FY 2023 to FY 2024, and that was always the plan. Like, this year, FY 2025, was supposed to be a year of a muted growth, because there are no blockbuster product approvals expected in FY 2025, as per the original plan itself. So we expect, things to be much better starting FY 2026, when oncology OSCs and other significant, filings where the settlements have been done will come. So FY 2025 is going to be a muted growth.
Understood. And, you know, in terms of remediation, because we've been doing this for four months, you know, in your view, what additionally does the FDA expect, you know, Aurobindo, Eugia to do on that facility, you know, for which you think it'll take another three, four months? If you could give us some color on that.
No, in fact, the FDA never said anything, okay.
Mm.
In fact, we have done whatever we have done; we have done it voluntarily based on the observations, and we expect to continue the same things, which obviously there are some things which we would have completed in 2 months, some things which takes 4 months, some things which take 6 months.
Mm-hmm.
This is all absolutely voluntary. FDA never advised us what to be done, because when we received the letter away-
Yes.
It said, didn't say anything. Okay?
Yeah.
So, like, it is basically. I'm assuming that whatever we have committed as part of our response, they are fine with it. I have to complete it, that's all.
Understood. My second question is on the European business. You know, we've been able to grow the European business base, you know, constant currency growth this time was around 80%. You know, with the commissioning of, you know, Vizag and also the China facility, how should we look at the growth trajectory for Europe in the next year?
... you're asking me or, like, should I ask-
No, no. Sorry, I was asking, you know, any of the other management team.
Yeah. Murali, like, would you like to?
Yeah, good morning, and yeah, happy to answer this. Yes, in Europe at this moment, we are definitely growing a little ahead of the market growth rate, and the Vizag unit's contribution is going to be substantial. And of course, China unit is yet to come and supplies. We expect that to happen in FY 2025.
Understood. One last question, if I can squeeze in one more. Subbu Sir, you know, in FY 25, given that global specialty isn't growing as much, you know, is it fair to assume that margin expansion might be limited or limited to additional generic Revlimid? How should we look at, you know, margins for FY 26, 25, sorry?
Megha, as I said in my earlier one, we are targeting to achieve an EBITDA margin of 21%-22%. We are working on the ramping up of the Pen G will be complete by September. We'll be able to give a better number in the month of November earnings call. Once we know what are all the issues and what is the sort of margins we are getting in the Pen G process, in the Pen G business, et cetera, we'll be able to tell. But we are very positive about the growth margin for this year as well as the EBITDA margin.
Got it. Thank you so much, sir.
Thank you. The next question is from Surya Patra.
Yeah. Thanks for the opportunity, and congrats for the great set of numbers, sir. So my first question is on the, let's say, Pen-G. What are the kind of operation or utilization level that we have, it's raised, or what are the kind of utilization that we are targeting in the, you know, for the current year? And have you really commercialized the things, and have you seen any kind of price impact in the market for Pen-G?
Surya, in terms the last one, price of Pen G is hovering around $25 per kg.
Hmm.
Having said that, our consumption or Indian consumption of Pen G is not very big, actually. It is only 50%, 50% only. What is more important is the conversion of the Pen G into 6-APA, which has successfully done it.
Yeah.
Because that consumption is more, and that price remaining stable in the last two years, and it is, I mean, incommensurate with the Pen-G prices now.
Okay.
Right? So it is there. In terms of the entire Pen-G business, we have taken a test batch in the month of March and come out well, and we have done, I mean, one big batch, and it is also going well. And hopefully, from June first week onwards, I mean, starting in the next two days-
Hmm.
We'll be doing a little bit expanding the number of batches, et cetera. So the entire lot of batches at the same time running, all the fermenters will take place in the month of September.
Okay.
Because the fermentation is not an easy process, it's a very complicated process. There are multiple issues we are coming across, and we have been resolving them one by one, and we were able to succeed in the first major batch.
Okay.
Hopefully in another 2-3 days, we will come to know the outcome of that. Okay?
Yeah. But, is there any sense about the yield that you have so far got, sir?
No, see, the first thing is, from test batch, we have to take a bigger batch one.
Hmm.
After the bigger batch, expand the same bigger batch into multiple batches. I mean, we are having 10 sets of batches and, I mean, starting batches. So we will expand from one to nearly five, like that, or three, or four, five, like that. And after that, we will expand to 10. So yield is not the main issue right now. Yield we'll be addressing only in the month of September.
Sure. Sure. Okay. My second question is about, possibly Yugandhar, sir, you can respond. Our preparedness about the launch of Ryzneuta in the US, you have already indicated that that launch is likely to happen in the second half of the current financial year. So how important this launch could be for us and, how important it could be as a trigger? Because, knowing the fact that this is a kind of a $1.8 billion size, what is your preparedness for this launch, and, how important that you do think about it?
Which product are you interested in?
No, I, Yugandhar, I think I'll take this question. Don't worry.
Yeah. Okay.
I think he's referring to the product that we are getting from Evive.
Yeah.
Yeah, right. So we, we have briefly talked about it, the last call.
Yeah.
So we expect to launch it in the second half of the current calendar year, that is sometime in July. And we also mentioned that there are a number of competitors in the market, and we had also indicated that we don't believe that the volume or the pricing is going to be so high. But we'll have to see as we launch this product. We are somewhat guarded in. We are somewhat not so optimistic, I mean, in terms of what you are saying.
Hmm.
regarding the value, but we think it's a good product. We'll, once we launch, we'll have a better feel of it.
Okay. So just, if I get some more clarification about it. See, if the size of the product is, let's say, $1.7 billion-$1.8 billion, and the competition is generally from the biosimilars. And we know that the penetration of the biosimilar is kind of not so great. And generally the interest of the payer in US biosimilar business, if you see, is not generally aligned with biosimilar manufacturer, rather it is more aligned with the innovators. And since it is an innovative molecule, is it not fair to believe more positively than what you have indicated?
So, I leave that to you on how you want to look at it. But we have done a study, and typically we like to do it conservatively.
Sure.
I think we have a fairly conservative estimate.
Mm-hmm.
This is not a biologic product, as you're aware, and this is something different, so we have to see as we go.
Okay. This is not a biologic molecule, sir?
I don't believe so.
Okay. Okay. Okay, so my third question is about the biosimilar opportunity as a whole, sir. So far, what are the kind of money that we have spent towards this biosimilar portfolio creation and all that, sir? And whether this cost is currently capitalized and or it is expensed currently. And once you start commercializing the product, what is the likelihood that it will have some impact on the overall margins of the company? So if you can give some sense about it.
I will comment some later, but the impact will be informed by Satakarni.
Yeah.
We have spent around $340 million so far, and only we have capitalized around $75 million.
Okay.
Balance has been charged to PNL, right? Overall impact on that, Satakarni will be able to answer.
Okay.
Surya, I mean, the spend numbers have been provided by Subbu.
Yeah.
Now, in terms of impact, as you can see, we have completed the licensed clinical trials for three biosimilars. You should also realize that we have been in existence only from 2018, 2019, seriously.
Yeah.
So we completed three clinical trials and filed them for three products. Filed three products. Now we have four more in global phase 3 clinical trials. Now, if you, if you see, how much does the competition spend versus what we spend on developing a product all the way from this line to, to bringing it to clinical efficacy trials, it's, it's very prudent, it's very objective. We, we, we are very guarded in what we spend because we push the regulatory barriers, when we design our clinical trials. Now, in terms of the impact, while I hate to put certain numbers against these products, there is a good opportunity with both wave one and wave two of the products if they get launched in Europe and if US also comes by.
Especially, I am very optimistic about a product like Omalizumab, where we will be probably one of the four companies to vie for the U.S. and the European market. It's a $4 billion product with probably four players in it by 2026, 2027. So I expect, I expect a good revenue stream once the product gets into the European and the U.S. market. So all these seven products, while I hate to put any numbers against it, our business is sustainable. The cost of goods ensures that we have a margin base of around at least 60%-80%, depending on which market we are. To your question about how much will this increase the margin points of Aurobindo overall, there will be an impact, depending on what share of the business that we get in.
But biosimilars with a higher margin will definitely increase, to certain extent, the margin base of Aurobindo as a whole. But I expect it to make substantial contributions from the year 2029, 2030, the biosimilars business to the overall Aurobindo margin base.
Okay. Just last, sir, in fact, are you really worried about the kind... about the fact that the progress of biosimilars for adalimumab, what we have seen in the U.S., looking at that scenario, are you worried about your pipeline or your entry into the U.S. business with your pipeline?
To be honest, no, because the biosimilars landscape, especially the market opportunity and the market landscape, is fast evolving. Adalimumab is a specific case that people would like to discuss, but I would like to look at the better growth stories that we have. For example, you look at the pegfilgrastim space, where a biosimilar player has taken at least $700 million-$800 million of the revenues from the U.S. market alone. So adalimumab is a curious case because it is a chronic segment product, which means that you need repeated doses of the product. And in chronic segment, I expect the markets to behave in a slightly disruptive manner, especially if someone comes in with a disruptive pricing strategy. But whether that will happen across all the products and primarily across products in oncology, I personally don't think so.
Come what may, our business model has been built in a manner that we will be resilient with respect to any price disruptions that happen. For example, we are building our price model versus Europe right now, where you are already seeing in the chronic segment a bleeding of around 85% and 80% from the innovator pricing. Even if there is such a price erosion, our products will be able to still sustain the margin of around 50%-75% very easily, even if there is further price erosion. Only then we are entering. We are developing the product and entering into the market. We hope to enter into the market.
So, as much as you are very cautious about what's happening in the U.S., I am also watching that space closely, but I think biosimilars are required in the U.S. especially to reduce the healthcare burden, and the normalization will happen very soon. Adalimumab is a one-off case, and it might happen in the chronic segment, where products like adalimumab are prescribed. But in oncology segment, I still think there will be very healthy margins in the U.S., not so much in Europe.
Sure, sir. Yeah. Thank you. Wish you all the best.
Thank you.
Surya, just to clarify, my apologies, it's, it's a biologic. I'm sorry. I meant it's not a biosimilar, right? So this is something different. It's a biologic. So we are, we are competing against number of players who are there in the biosimilars.
I would just add a point there to what Swami said, Surya. It is a biologic, but it's a biologic going against the filgrastims and the pegylated filgrastims. So that's the reason why Swami is conservative with his numbers. Once he gets a feel of the market, when he launches it, then he will tell you how the product is shaping up. I mean, it is, it is as good as a guess that you have, that we have also in the U.S. market with this product.
Thank you. As we have a long queue of questions, I would request everyone to refrain to two questions per participants. The next question is from Shyam Srinivasan.
Yeah, good morning. Thank you for taking my question. Just a quick about housekeeping. The specialty and injectable revenue in the US, $104 million. Yugandhar sir, this is-- this had a $20 million hit, right? I'm just trying to get the number right in terms of what we stopped for quarter four.
That's right.
Okay. And when you're now guiding for it to go back to, you know, 150, I'm assuming whatever, 110 was the last quarter number.
No, it's actually like it's a global number versus, Shyam, it is a local US number. So the global number, what we expect, is a global revenue of $150 million.
Understood.
US will continue to be in the range of $100-$110. That's the range out of the $150.
Understood. And do you expect a ramp-up in Revlimid for next year? Fiscal 25, I meant. Fiscal 25, sorry.
Yeah, depending on the settlement percentages, normally, like, we do expect a slight improvement every year.
Sure. Okay, that's helpful. Second question is on the gross margins. Subbu Sir, I think, has reached almost, if I round up, 60%. So it's a number we've not seen for some time. So just want to get the sense of what is sustainable, which are the cyclical elements in it, which will probably go away, maybe like what about low raw material cost you called out earlier? What can sustain from a mix perspective? And when we do the 21-22 guidance from EBITDA margins, you know, what are the things that could be below the gross margin lines that could be growing faster?
Yeah, last year we did 20.1-
Subbu Sir, you're not audible. You're very feeble.
Last year, we did around 20.1%. So against that, when you are saying 21%-22%, one is the overall gross margin has improved considerably by about 2%-3%, right?
Mm-hmm.
Between last quarter, this quarter, if you recall, last quarter, we had a big hit on account of the Clawback Tax, which we had explained to you, around EUR 13 million we are taking a hit.
Mm-hmm.
Again, that, that is around INR 122 crores, if I recall, which has been given in the press release. Again, that we are around 35-40 crores only this quarter. So this is expected to continue. Why? Because the government has, France government has come with a clawback notification, which helps us to have a lower clawback tax this year. That is one thing. In terms of the raw material price, the prices have come down considerably in the last four quarters, and it is now remaining slightly lower to flat, right? I don't see a major improvement, decrease in the raw material prices.
What is more important is, as we said, U.S. business is doing well, and they have continued to ramp up, and which has helped us to drive the operating efficiency, which can help us to improve the overall EBITDA margin. Also, as Swami has explained or touched upon it, there are a lot of new product launches which he has done, which is also helping us, and the pricing environment is stable. So we don't see a major down in the EBITDA margin as well as the gross margin. Once the Pen-G comes, which I explained in the month of September, what is the additional gross margin improvement which will come out of the Pen-G will be disclosed sometime in November earnings call.
...Understood, sir. My last question again, you talked about Pen G prices at $25. Last calendar year, this was $30. So are you seeing, you know, action from some of the big three, big four in Pen G already in anticipation of your, whatever, 15,000 metric ton total? I'm saying maybe global will be lower, but just are you seeing some signs that they are starting to drop prices? At what dollar per kilogram or ton do you think it starts becoming less feasible? Like, if it goes below $20, let's assume, does this become, difficult? So I'll stop there. Thank you.
My chief buyer does not believe there will be a big drop in the Pen G prices. Having said that, the Pen G price has no relevance in terms of the overall consumption of the entire penicillin G, because we are going to consume it, convert it, and then consume it as 6-APA or some other product, other forward derivatives. So really, the Pen G price has no meaning actually, because we are not importing any Pen G at all. We are importing grams, KGs, single digit KGs only. So Pen G price has no relevance for us. What is important is how much we are going to convert it into 6-APA, how much we are able to further convert it into amoxicillin bulk and then sell it in the market, or sell it as 6-APA, is what really matters.
That price, 6-APA price, is always stable, so let's forget what is the Pen-G price. Pen-G price has no meaning actually, relevance actually.
Got it, sir. Helpful. Thank you, and all the best.
Thank you. The next question is from Tarang Agrawal.
Hi, good morning, and congrats on an extremely strong FY 2024. Couple of questions, one on CapEx. You know, quite a few projects have been commercialized, Pen G, 6-APA, Vizag, granulation, China. If you could give us a sense on when of, you've suggested Pen G will probably start in September, both Pen G and 6-APA. But if you could give us a sense on the other three projects, when will they start, you know, fully contribute? And a further, you know, CWIP in as of March 31, 2024, was about INR 2,550 crores. And intangibles under development was about INR 1,130 crores. So if you could just give us some sense on, you know, what are they referring to, what plants or what specific products are they referring to?
My sense is $75 million of biosimilar capitalization, a large part of it would be under intangibles under development, but I'll leave for you to comment on that. And then I have a couple of questions after. Thank you.
We have four projects commissioned in the last quarter. That is, one is the Pen-G, and the second is the 6-APA. We will able to, the meaningful contribution will start coming from Q3 onwards, right? And we also capitalize part of, Vizag facility, injectable facility, and, AuroActive project, right? Which we have done only partial capitalization, the front end only we have done it. So those things are also, Vizag, as Yugandhar already informed, the inspection took place, is waiting for the next steps. He has elaborated it earlier. In terms of the AuroActive, it will also start moving in the, by August, September, it will start moving up.
In terms of the total overall, INR 2,739 crores or $325 million, as I rightly said, CuraTeQ forms around $78 million, and USA Dayton facility in USA will be around $70 million. And we have other projects which are very, I mean, small projects. These two are ... In terms of the intangible asset and development, which you said around INR 1,129 crores are, INR 1,129 crores are $135 million. Once again, there are certain or, I mean, Acrotech products which are under WIP. I think they're just increasing the volume. Yeah.
Or, I mean, Acrotech, which is around $75 million, which they are doing a clinical trial, and Eugia Specialty, which Yugandhar has already explained, that is after the settlement, et cetera, it will go by 2026. So like that, these are, then other things are very small. So we are actually, our plan is very clear, and we will be capitalizing, and we will be started seeing a meaningful contribution starting September, October onwards.
Perfect. Okay, thank you. On US and Europe, I mean, US, can we expect the current OSD run rate of about $280 million to edge up to about $300 million, as we move forward? And similarly for Europe, EUR 200 million seems to be the new base. How should we look at it, for FY 2025?
Subbu, you want me to-
Yeah.
Yeah.
I'll help. Thank you.
Yeah. So on the U.S., we are very optimistic. We are fairly optimistic about the outlook for the coming fiscal with new launches being the main drivers. I think I cannot quantify any particular amount, but you know, we have a large base, and compounding growth on this base will be difficult. But we do believe that you know, there is a reason to be optimistic about the growth.
... Yep, on Europe?
Pardon me?
On Europe, yeah, Tarang, as you rightly said, EUR 200 million plus is the new base. At least we have started hitting this in the last two quarters. Even though in Q3 it was short of EUR 200 million, but you, account for the clawback, we were crossing EUR 200 million, and, this quarter also we could do it. So the expectation in FY 2025, all the quarters will be doing north of EUR 200 million, and the idea is to grow further.
Perfect. Last question, sir. You know, AuroPeptides as a business was incorporated somewhere in 2013, 2014, and while we see an exhaustive list of peptide DMFs on your website, we're not sure what's happening in this business in terms of what is the traction that Auro has, both on the API and the formulation space. So if you could just give us a sense on where this business is, and, you know, it's been vintage has been quite long, about 10 years now.
Tarang, hi. I would take the question. I would start with an update on AuroPeptides. AuroPeptides, the manufacturing facility was inspected by the U.S. FDA from 12th February to 16th February, and FDA has determined that the inspection is closed with 0 observations. We are particularly glad for this outcome as you have rightly mentioned in your question, that we have been steadfast in developing synthetic peptides, these are very difficult peptides, for over 10 to 12 years now. We have 14 DMFs filed, cutting across oncology segments and others, and some of these have contributed to 5 ANDA approvals for our customers, including Aurobindo and Eugia. Right now, our work is in primarily oncology and diabetes. Our work in GLP-1s, compared to our industry peers, is very less talked about.
We have an active DMF for one of the GLP-1 products, and our second GLP-1 product is now fully developed, with the process validated as well. We hope to file a DMF in the next two or three months for this product. Right now, we are expanding our synthesis and purification capabilities for GLP-1s as we are aligning some additional capacities that will become available by early next year. So in all, our focus on diabetes and oncology segments will hopefully build momentum in this business. I am quietly confident and pleased at how we are starting to relook at our peptides business, mixed with a bit of caution when it comes to GLP-1s. At the same time, with both optimism and prudence in how we reinvigorated our pipeline.
One more update is that recently, through APL, through Aurobindo, we have received an approval for linaclotide. Linaclotide is a peptide, a synthetic 14 amino acid cyclic peptide. It is used in the treatment of constipation and irritable bowel syndrome. So we are going to launch that product through a very trusted partner. This is a first-in-class peptide to be available for Indian population. The probably becomes the first launch in the next three or four months space. So you can see that we are shaping up the business. We are trying to do a few things there. And going forward, you will get constant updates on what we are doing in AuroPeptides.
Got it. Just last, I mean, in terms of accounting, the peptides revenues would be bunched up in the API business or would be bunched up elsewhere?
Subbu, do you want to take that?
Yeah. See, as of it, if the ANDA is in the name of Aurobindo, it will go into that, but we'll look into the possibility of putting it as part of the peptide. We'll do some work on that, Tarang. Ideally, we'd like to go into peptide, but let's look into the issues beyond that.
Okay. Thank you.
Thank you. The next question is from Harith Ahamed.
Hi, good morning. Thanks for the opportunity. On biosimilars, you touched on your filing plans for Trastuzumab in the US. Can you share that again? I missed that. And for Pegfilgrastim, how should we think about our US plans? Because as you mentioned, the market opportunity is quite significant, and it's been a while since we filed in Europe, but we haven't talked about any US filings till now.
I think the part two of the question is very interesting, but I will address the Trastuzumab one, which is easier. Trastuzumab with the U.S. FDA, we have completed a Type Two, followed by a Type Four meeting. A Type Four meeting is considered to be the pre-submission meeting, where any differences or any additional data requirements from the FDA will be pronounced. We had a successful Type Four pre-submission meeting. Now, what does this mean? A successful Type Four pre-submission meeting means that we can go ahead and file the product. So I'm expecting to file the product and make some changes to the dossier as required by the FDA in the next two months, and file the product. Probably by next quarter end, we should be filing this product with the FDA.
The procedure unfolds, the procedure would be anywhere between 9-12 months' time. Now, with respect to Pegfilgrastim, Harith, as you know, that we haven't done an extensive phase 1, phase 3 clinical trial for Filgrastim or Pegfilgrastim. We have gone with an abbreviated clinical pathway, where we have only conducted a phase 1 PK/PD study in healthy volunteers, that too a very small number, and pushed the regulatory barrier, especially in Europe and with MHRA, to file this product with them. Now, FDA, in terms of their totality of evidence approach that is required for the biosimilars, they will ask for a phase 1 and phase 3. With Filgrastim and Pegfilgrastim, it is slightly different. We haven't ever developed this product for the U.S. market.
The thought is very recent that while we had a meeting with FDA, and FDA is convinced with our approach of doing a phase one, they wanted a small additional immunogenicity trial while they were okay with us not doing a phase three efficacy trial. So in this sense, that the data that we have generated for the European trial is good enough, plus some additional data on immunogenicity has to be generated in healthy volunteers, and then the Pegfilgrastim will also be readied for the US FDA filing. Now, the timing of it, originally I was thinking that I will file it somewhere before Q3 this year, but that might get slightly pushed into Q4 or into Q1 next year. But, Pegfilgrastim, we are definitely going to take it to the US market.
We will take it, not just the PFS, to the US market. We would like to take the auto-injector also to the PF- to the US market. We are working with the agency very closely. We have completed a Type 2 meeting on pegylated filgrastim. I'm hoping to have a Type 4 meeting, a pre-submission meeting also with the FDA, sometime in the next quarter. Does that answer your question, Harith? He's on mute. He's on mute, I think.
I think-
Yeah. Yeah, sorry. Sorry about that. So, next one is on the, you know, significant capacities that-
Already 9:30 A.M., there are many, multiple people are there. I just want... Already it's beyond 9:30 A.M., huh?
Yeah. So, last one.
We'll have offline queries, et cetera. Okay, other people, let them get a chance.
All right. I'll get back with you. Thanks.
Thank you, Harith. Next question is from Nithin Agarwal.
Hi, sir. Thanks for taking my question. Sir, two quick ones. Sir, what CapEx should we assume for F 25?
We are not planning to put any big CapEx, because all the major CapEx have been done and then capitalized. So probably we must be having around a sustenance capital, what would be the debottlenecking, et cetera, must be around INR 200 million, is what we are thinking.
Yes, sir.
Plus any-
Thank you.
Any market authorization, if it comes very lucrative, et cetera, we will do that. Okay? Bye.
Sir, sir, on this inorganic, we've been acquiring about $100 million or thereabouts of assets, as and when the market opportunities have been attractive.
Yeah.
I mean, is there a number that we have in mind to spend on buying out?
No, no, it is not like that. If any opportunity comes only, we will look into that. We are not scouting for any market authorizations on our own. If it comes, we'll look into it.
Okay. Sir, last one, other growth markets did extremely well this quarter. This number which you've done in this quarter, $100 million plus, how should we think about it on a, as a base for... Should we look at it as a base now for the next year onwards?
I think, we have done well this quarter. Probably we must be doing something like 75, I mean, around $300 million is what we should be aiming for next.
Okay, sir. Thank you.
Thank you. The next question is from Sangeeta.
Hi. This is Andre, Sangeeta's partner. I had two questions on biosimilars. One was that, can you explain to me generally what are the trends in the U.S. and Europe towards biosimilars, particularly when the competition is not a biosimilar? What are the advantages, et cetera, of a biosimilar that may be trending the market in favor of biosimilars? That was the first question. And the second question was that, could you give some more color as to when will the biosimilar be opportunity, be effectively monetized? What should be a, what should our assumption be? Should, are we talking about F 2026 or F 2027 or calendar 2027, 2026? You know, could you give us some kind of idea on the timelines of when we can expect the biosimilar opportunity to be monetized?
To answer your question one, to be very honest, I did not understand the question one in entirety, but I will try and answer that. A biosimilar is against an innovator product, an existing biological entity.
Yeah.
So, I did not understand that, because you have a biological entity which is already there, and it goes off patent when you launch a biosimilar into the market. So, does that answer your question, or do you want me to phrase it differently?
No, my, my question was, what are the trends in the US that are favoring biosimilars, if any, in the US?
Essentially, look, the biosimilars or the biologics was a huge healthcare burden with the pricing and all. So, not just the US, but all the developed countries across the world would like to have cost-effective alternatives to the biologics. And that's the reason why biosimilars find traction in these markets. Now, with the case of products like adalimumab, where the innovator also becomes very disruptive over a period of time because he had made his margins. And when the biosimilars come in, then there will be additional price debates, et cetera. And to switch from a biologic to a biosimilar requires some interchangeability studies with the FDA, et cetera. That slows down the uptake of biosimilars. But right now, the trends have been encouraging.
There are a lot of good companies which are doing well in the U.S. with respect to biosimilars. So I expect with the next wave of patent cliff, more biosimilars will be in the market, especially across oncology and immunology segments. And the market continues to be favorable in terms of... the U.S. market continues to be favorable in terms of the uptake of biosimilars. I see the regulatory guidelines also easing out a bit over the next 6-7 years, that, that prompts more, that prompts more biosimilar players to come into the market. That's part one of the question. What is part two of your question?
Part two was as to when do you expect to start monetizing the biosimilar opportunity? Rough timeline.
The real opportunity for us in terms of the commercial space starts from the 1 quarter of this year, possibly, and from the next year. I would say you should wait for at least 2-4 years time frame. Around 2027, 2028 would be the opportunity to monetize this. Subbu, do you want to add that, add to that?
Yeah. I think one is, as Satya said, you know, Q3, Q4 you'll do to the Indian market, and after that, probably that's a very small portion, Indian market, but its major things are going to come from Europe and US, which is around 2026, 2027. Am I right, Satya?
That's right. That's right.
Yeah.
Okay. Thank you very much. Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you all for joining us on the call today. If you have any of your questions unanswered, please feel free to keep in touch with the investor relations team. The transcript of this call will be uploaded on our website, www.aurobindo.com, in due course. Thank you, and have a great day.
On behalf of Aurobindo Pharma, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar. Thank you.