Start the meeting.
To Aurobindo Pharma's earnings conference call for the third quarter of FY25. Please note all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the management's opening remarks. Should you need any assistance during the conference call, please raise your hand from the participant tab on the screen. Please note this conference is being recorded. I now hand over the conference to management for opening remarks. Thank you, sir, and over to you.
Thank you, Vandeep. Good morning and a warm welcome to our third quarter FY25 earnings call. I'm Shriniwas Dange from the investor relations team. We hope you have received the Q3 FY25 financials and the press release that was sent out yesterday. 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 Limited. Mr. Yugandhar Puvvala, CEO of Eugia Pharma Specialties Limited. Mr. Swami Iyer, CEO, Aurobindo Pharma USA. Mr. V. Muralidharan, CEO, 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, Shrini. Good morning, all, and a warm welcome to our Q3 FY25 earnings call. I'm pleased to share that we have delivered an exceptional performance in Q3 FY25, continuing our strong growth trajectory. This quarter, we have achieved our highest-ever quarterly revenues, reaching INR 7,979 crores, with a remarkable growth both year-on-year and quarter-on-quarter. Our performance was fueled by robust base product sales in the US, sustained momentum in Europe, and ongoing expansion in high-growth markets. We saw impressive volume growth, successful product launches, and maintained stable pricing, all contributing to a strong quarter. Gross contribution also stood at the highest level at INR 4,663 crores. Gross margins remained at 58.4%, increased by 130 basis points year-on-year, despite low transient sales but owing to high benign raw material prices.
Our EBITDA stood at INR 1,628 crores, with a healthy margin at 20.4%, even after observing a higher R&D cost of around INR 50 crores over Q2 FY24 level, given our strategic focus on the development of complex products, including specialty and biosimilars. EBITDA before R&D stood at 25.8%, or INR 2,056 crores, against INR 1,975 crores in Q3 FY24. Our net profit for the quarter stood at INR 846 crores. Our cash flows have improved significantly on the backdrop of a strong working capital management, leading to a reduction in net debt of $84 million. Now, let me take you through the business highlights for the quarter. Formulation business. In Q3 FY25, our formulation business witnessed a robust year-on-year growth of 11% to INR 6,973 crores, contributing approximately 87% of the total revenues. The APA business recorded a revenue of INR 1,006 crores.
Pricing pressures continued. These are partly offset by the volume gains and improved asset utilization. USA. During the quarter, our US formulation business recorded revenues of $435 million against $421 million in Q2 FY25, reflecting a strong quarter-on-quarter growth. The price erosion on an overall basis remained neutral, supported by our well-diversified portfolio. Revenue from overall generic products in the USA increased by 4% year-on-year to $297 million, driven by volume gains and new product launches. The injectable and specialty business in the US remained at INR 76 million, mainly due to low transient business sales and cut-off-related issues due to Christmas. As of December 31, 2024, we have a total of 226 specialty and injectable ANDA filings, with 170 having final approvals and 56 under review. During the quarter, we filed four ANDAs, received final approvals for eight, and launched seven products in Europe.
Our Europe formulation segment continues to deliver strong results, registering a revenue of INR 2,121 crores, a significant growth of 23% year-on-year. In constant currency terms, our revenues stood at INR 236 million against EUR 229 million in Q2 FY25. This growth was driven by robust performance across all key European geographies. Growth market. Revenue from the growth market saw a remarkable 39% year-on-year increase, reaching INR 873 crores, or $104 million, driven by our successful geographical expansion and strong sales momentum. ARV. The ARV business stood at INR 307 against $36 million. The growth in ARV business was driven by additional opportunities. Now, going to the other highlights, the raw material continued to be at the level supporting our gross margins, which stood at 58.4% against 57.1% of the previous year. Net CapEx for the quarter is around INR 106. The business had a net cash flow of INR 49 million during the quarter.
This is supported by improved working capital position. As a result, the net debt after investments at the end of December improved to $8 million from $133 million in September 2024. We expect the net debt to improve further by the end of the fiscal year FY25. The average finance cost for the quarter was 5.6%. The average USD INR exchange rate was at 84.46 against 83.76 in Q2 FY25. New initiative. Manufacturing capacity. We have the present formulation annual manufacturing capacity of 50 billion units, where we intend to further increase the capacity to drive further growth. We have commercialized our China plant with an annual OSD of around 2 billion units, which is expandable further over near to medium term. The plant is expected to contribute to revenues in FY26. We expect our US-based OSD plant at Dayton to be commercialized in the next fiscal year.
Our other plant in US, at Raleigh, which is currently manufacturing topicals, is expected to be fully operational next fiscal year to include transdermal and respiratory products. Building a strong portfolio with respiratory and nasal, we are working on multiple respiratory products. Recently, we have partnered with a global pharma major for the development of respiratory products, highlighting our commitment towards the complex portfolio. Our backward integration, we are witnessing good yield improvements in the capacity ramp-up process in our strategic investments, namely the Pen G and Forward Direct is on track. WeG expect to break even by March 2025 and strong biosimilar product line. The recent certificates, followed by positive opinions, emphasize our commitment and capabilities in our space. Looking ahead, we are confident to continue our growth trajectory, driven by our robust and diverse product portfolio, coupled with significant capacity enhancement, multiple upcoming launches, and favorable market conditions.
Our backward integration is expected to drive enhanced operational efficiencies and deliver strong contributions to our financial performance in FY26, which not only offsets the anticipated decline in transient sales but also strengthens and sustains our revenue and profitability growing forward. The growth momentum in Europe and other key markets is expected to sustain further accelerating our revenue stream. At the same time, our proactive efforts to optimize the working capital cycle will further enhance our balance sheet and improve cash flow, reinforcing our financial stability and long-term growth potential. We are on track to achieve our EBITDA margin of 21%-22% for FY25. The next quarter is expected to be stronger, driven by increased transient sales, execution of strategic initiatives, and improved operational efficiencies. This concludes my remarks. Now, our business leaders will give more clarity on any specific aspects in our Q&A session.
We are happy to take your questions. Thank you.
Thank you, sir. We will now open the call for Q&A session. We will wait for a few minutes until the queue assembles. We request participants to restrict to two questions and then return to the queue for more questions. While asking questions, we request you to please identify yourself and your company name. Please raise your hand from the participant tab to ask the question. The first question is from Tushar Manuthane.
Am I audible?
Yeah.
Yes. Yeah. Good morning, sir. Sir, just on Peji, to start with, what kind of operational loss currently do we have for the quarter?
We had around INR 60 crore operational loss, and the plant has gone for a small shutdown, including or modifying some of the equipment, which has completed, and we started it 10 days back.
What kind of pricing outlook are we sort of building once we break even or, let's say, for the external sales?
See, you have to look at it like that. The current pricing of Peji is around $26. However, having said that, we are not depending on the Peji sales alone. We have created capacities across the value chain of Peji, so we will be able to supply it as a Peji or 6-APA or Amoxilin or whatever may be. So we have enough. We are able to manage it even if the price goes down, and we will be able to do it better.
Understood, and secondly, on the, let's say, in terms of the raw material prices, what's the outlook? Do you see the inventory in the industry itself lowering down so that you benefit in terms of raw material prices for us going forward?
I think the current raw material prices continue to be there, and what will happen because of the inventory going down is a very futuristic question. But I think we, at any point of time, will be having around three to six months' stock, so it may not be a big issue in our view.
Sir, just lastly on Nujia, when do we see the production scaling up or, let's say, the sales scaling up? We've seen now, like, second quarter, where sales have been a little trending downward.
Yeah, my colleague Yugandhar will answer, but I would request you to restrict everyone to two questions because we need to give an opportunity. Last time, we could not give.
Hi. So, as you rightly said, it is basically like we are scaling up the production, mainly from UJP, and we have completed all the remedial actions, and this quarter onwards, we will be reaching to our original what we used to do, which is around 60%-70% of capacity utilization. Right now, we are still doing around 50% capacity utilization, so I expect this quarter onwards, we should go back to the previous levels, and I don't expect any further decline happening from here on.
Awesome. Thank you.
Thank you. The next question is from Kunal Randhilia.
Good morning, sir. So my question is around your plans in China. So how should we look at this market shaping up? Because in the past, you and several of your peers have spoken of this opportunity, but I don't think there has been any material contribution yet. So just wondering if you can share some details, the kind of products you have, the time it takes to get approval, the reimbursement process, the launch pipeline you have, and the revenue projection for the next two to three years.
Yeah, Kunal, we started our China plant in the last week of November, and it is in the ramping-up process. The China plant will start building sometime in the month of April, mainly to the European markets. We also have certain approvals in for China also, right? And also, we are getting the. We already got the European approval, so we can supply to Europe. China, we are in the process of getting it, and after that, there may be an inspection for the U.S. also. So in the next year, it will ramp up fully, and probably in another two to three years, we will see good traction coming out of the China plant.
So, the kind of products? And just curious, why would you be, I mean, not trying to supply more to the Chinese market?
No, immediately, we are having the European approval, so we'll supply to Europe. As and when we get the approval from China regulatory authorities for the China plant, we will supply to China also.
Right. And any revenue number would you like to call out now for the next three years?
This being the first year, we may not like to tell because we are also moving ahead, so we may not like to give it in the first year, but certainly, in two to three years, I see a significant revenue coming up in two to three years' time.
Sure. Just one more, if I can. For the fourth quarter, should your Revlimid sales be higher than the fourth quarter of last year? Will we have a significant—
I think yes, and beyond that, I don't want to say anything, but yes.
Sure. Thank you, sir.
Thank you. The next question is from Kunal Dhami.
Hi. Thank you for the opportunity. So when I look at, we have said that our revenue growth in this quarter on a year-on-year basis, excluding the transient product, is around 12% year-on-year. So that's a good outcome. Can you help us with a similar number for nine months FY25?
I'll work it out, Kunal. I don't have it right now. I'll get it done.
Sure. Sure. And on the transient product, how do we expect it to evolve in FY26 since there is a patent expiry also coming in for us because there'll be some buying pattern change as well? So how are you thinking about it?
Yugandhar?
Sorry, Kunal. I didn't get. Is it specific to some product or like?
It's specific to generic Revlimid, right? Because there's patent expiry in, let's say, January, and everyone has given particular market share. So is there a meaningful change that you expect early on in the year, let's say, FY26, in terms of buying pattern, price erosion, volumes, or would it be more?
A lot of things are possible, Kunal. That's why we are trying to do, because we don't know exactly how the market will shape up going forward into FY26. So we are conscious of that. And whatever volume we have, we wanted to maximize the opportunity in Q4 and Q1. That's our thought process. Now, how things will shape up, I won't be in a position to clearly tell, but yes, the closer you go towards January 2026, things are going to change dynamically. Okay? So I don't know what others will do, but I know what I will do. Okay? Obviously, we do have plans of continuing generic Revlimid post the patent expiry, starting from 1st February 2026. And it'll be like any other generic, but we want to be there, okay, even the post.
Sure. Sure. And one for Dr. Satakarni on the positive CHMP opinion that we have got on Philgrasim now. So what's our launch plan? I believe we need to still get the marketing authorization approved, and then we can launch. So what's the timeline there, and then how the pipeline is looking?
Good morning, Kunal. So with respect to the positive opinions that we have received from CHMP for Filgrastim and the long-acting Filgrastim, I expect the marketing approvals in two months' time. That's the usual timeline from receiving a positive opinion to completing the European Commission formalities for receiving a positive opinion. So considering denosumab or the pegfilgrastim gets approved in April and Filgrastim slightly before that, we already have a bevacizumab biosimilar approval in the UK. So I think we will be starting our commercial supplies into the EU starting the quarter of July. So in all likelihood, I expect a quarter and quarter and a half of revenue bookings to begin from this year. That's part one of your question. Now, what was the part two about the pipeline, right? Kunal?
In terms of how we have evolved, let's say, quarter two to quarter three, any clinical trial updates, etc., that we have for the pipeline products?
We have four more products in the phase three clinical trials. As I told you, I think last quarter, the biosimilar to Xgeva and Prolia, which is a denosumab biosimilar being tested in postmenopausal osteoporosis. We are on track to conclude the clinical study by May this year, which means that we will have the clinical study report available with us by September. I hope to, if there are no further delays, because this trial was completely conducted in eight European countries and 65 sites. If there are no further delays in gleaning the data, then I expect the European filing to be in the October quarter and the US filing to be in the Q4 of the next fiscal.
With respect to omalizumab, which is a biosimilar to Xolair that is being tested in chronic spontaneous urticaria across the European sites in Caucasian population, we are slightly delayed by about four to five months in closing out the recruitment. I think I talked about it last quarter, but what is important to note is we made up for a couple of months by increasing the number of sites in India. Earlier, India was not part of the recruitment plans, which means that I'll still have a delay of three months in closing out the study. But I am quietly confident that by the end of this year, the omalizumab clinical study will be concluded as well. We already announced positive phase one results with omalizumab versus the European and the U.S. innovator product, I think, last year.
We are quietly confident of closing out the omalizumab clinical study by the end of the year. Q4 filing, at least in Europe, still looks for a possibility in the next fiscal. That's about the omalizumab clinical study. The bevacizumab clinical study has been going on for about three years now. We are inching towards the closure. I think in two quarters' time, we will conclude the recruitment phase, and probably we will have a filing in Q1, Q2 of the next fiscal, which means 2026, 2027 for bevacizumab. With the MHRA approval that we received for bevacizumab, we are talking to a few regulatory agencies in the emerging and the semi-regulated markets where we can position the dossier based on the MHRA approval alone.
It's still very dynamic in the way regulatory agencies look at how a product gets approved only based on phase one and what is the process forward in approving it. So if there are any approvals that I receive in emerging markets or semi-regulated markets, I'll let you know. The ophthalmic product is slow. We have an ophthalmic product in clinical trials. We are only at around 50% of the recruitment. So I don't think we'll be able to complete the recruitment in 2025 as estimated before. I think we will be well into the second half of 2026 when we conclude the phase three clinical trial for the ophthalmic product. So in a nutshell, except for the ophthalmic product, the pipeline is advancing fairly well.
With the approvals that we have received or the positive opinions that we have received, we are quietly confident by 2026 we'll be able to at least have six to seven products in the European and the semi-regulated markets. I hope that answers your question.
Yes, yes. Thank you, sir, for the detailed update and all the best.
Thank you.
Thank you. The next question is from Anubhav Agarwal.
Yeah. Hi, guys. Good morning to all. Two questions. One is for Yugandhar, sir. First, on the injectable business, when I look at IQVIA data, I do not see significant ramp-up over the last two or three quarters. The sales are just languishing. I understand that you guys have been shipping this quarter, had cut-off effect, etc. But is it just a production problem where you say that you have 50% capacity utilization, or there is an unwillingness from the customer side to take product because of UJ issue situation?
No. It is mainly the production problem, Anubhav. I can tell you that with full confidence. It is that we are ramping up slowly, and we don't want to rush anything. And all our contracts and interest from the customers is very much, very, very high, and we are not in a position to meet the demand. But I don't want to rush anything just to meet the demand. That's why I said it is mainly like I expect Q4 and Q1 of next year to be much better. But in terms of customer interest and all the contracts, very much in place. Absolutely no issues.
On the utilization, the reason utilization is low is because CAPA progress is happening. Does the facility still have a lot of consultants over there?
No. Consultants are no longer there. We just have transient consultants like just public. I think you are aware that we had a meeting with FDA, and everything has been sorted out in October itself, and we have just transient consultants who are just two or three people working with us. Beyond that, we don't have any consultants no longer available and no longer required even as per FDA, and so what we are doing is because we have put in a lot of CAPAs, we are recruiting more people to ensure that we meet up to our CAPAs, and the recruitment process has taken time because you know injectables getting good manpower is also not easy, so now we have all the people in place. We have 95% of our requirement in terms of number of people. All have joined. They're under training.
From February onwards, everybody is on the job. So that's why from March onwards, I expect the production ramp-up to happen to the original levels.
That's very helpful. My second question is on the biosimilar front, and this is both for Subramanian, sir, and Satakarni, sir, both. I'm just trying to understand. Today, as a fact, when we have R&D about 1,700 crores for the year, how much of that is going to biosimilar? That's one part of the question. Secondly, how much freedom has Satakarni, sir, got in terms of expense that he can do on the biosimilar front? What is the target that when does biosimilar as a business become profitable for Aurobindo?
Anubhav, I would take the question and ask Subbu to chime in with the numbers. The part one of the question, I think we spend roughly about, as a company, 30%-35% of our R&D spend goes into funding the development of biosimilars. Subbu will be able to give the exact numbers. But this is primarily driven by the phase three clinical expenditure. So out of the overall spend that we make on biosimilars, around 70%-75% of the expenditure is incurred towards conducting the pivotal phase three efficacy studies. So in a nutshell, around 30%-35% of the overall Aurobindo R&D spend is spent towards biosimilars. Now, to the part two of the question, what was the part two of the question?
Part two of the question is, one, when does Biosimilars as a division become profitable? Secondly, you are only using R&D as part of R&D as a resource right now. Aurobindo has a very strong balance sheet also. So do you have the liberty to buy products also as your peers are doing versus developing all yourselves?
That's a very interesting question. I am actually dabbling with those thoughts, Anubhav, myself, because any company of the size of us cannot do all biosimilars by ourselves. It requires an enormity of resources allocation to conduct and develop these many products and clinical studies that we are doing. If you look at when we started out in 2018, July to now, we have conducted about, I think, six phase three clinical trials, around eight or nine phase one clinical trials. So that's the size of biosimilar studies that companies like Sandoz and the Mylan do. But having said that, any licensing opportunity that comes our way that we believe will lend advantage to our businesses in Europe and US, we are open to those. We are scouting for a couple of opportunities, but we are more internally focused right now.
In fact, our second wave of products or the third wave of products, that you may call them, post 2028, most of the product pipeline is now in a decent development stage where we may begin the phase one and phase three clinical studies starting end of 2025 and early 2026. So any products that we miss out from our portfolio, which we think will make a significant addition to our commercial base in regulated or semi-regulated markets, we are open to licensing opportunities. There is enough freedom to go out and scout for products and then license them when and if required, Anubhav. But right now, we covered most of the important products that we think will position us both in oncology, dermatology, and the immunology segments. Dermatology is part of immunology. So we seem pretty confident with the broader pipeline that we already have.
To answer the next part of your question, when we think as a business, we will be breaking even. As I told you, 2028-2030 will be the inflection point of this business. You can already see that we have three products which are approved: two with a positive opinion in Europe, one in the UK, and we are expecting one more this year, and with the denosumab, omalizumab, and one more in the next year, we expect at least seven products to be commercialized fully by the year 2027, and 28-30 will build in a good revenue base for us where I think the company takes off by itself.
So, we are expecting we are enthusiastic about the progress that we are making, and we are very sure, very sure-footed in our investment and very prudent about the product choices we are making in the biosimilar segment, Anubhav.
Thank you. That's very comprehensive. Thank you very much.
Thank you.
The next question is from Yash Dharan. Hi, Yash. Thanks.
Can you go to the next question?
Hello. Am I audible?
Yes.
Yeah, yeah. Yeah.
Yeah. So can you please state with regard to the operationalization status of Pen G, and at what % of utilization are we currently working, and how do we see it progressing forward?
Yeah. Yash, the question of talking about utilization is secondary. The first thing what we have done is how do we improve the yields, etc., which we have been working. And we have been fairly successful after the modification, slight modification, etc., we have been done. And we have been seeing very good results, really. And next two months, we'll continue that, and the ramp-up will take place starting April.
Okay. Thank you.
See, it is not the question of capacity utilization. You need to achieve that desired yield level. That's what we are working on.
So do we expect the sales to ramp up from April?
I think that is what we are planning. In fact, if we touch wood, everything goes well. In March also, we may be able to do that. But let's take it as April.
Okay. And secondly, sir, there was a PLI scheme which was introduced in the budget with regard to amounting to INR 2,445 crores. Are we expecting to benefit from that?
That is more of R&D, no? If I'm right?
Yes. With regards to APIs.
Yeah. I think I have not seen in the last four days any guidelines, etc. Probably I was busy with the board papers and other things. Certainly, if there is an opportunity, we'll apply to them. I think a lot of good will be planned by the various business teams, starting biosimilar, injectable, peptides, everything. So certainly, respiratory and other things. So certainly, we will look into every possible opportunity, but we have not seen the guidelines as on date.
Understood, so then.
At least I have not seen it.
Yeah. Yeah. Understood. And the final question with regards to the EBITDA margin. When we guide for 21%-22% of EBITDA margin, is it excluding the R&D, or is it including the R&D?
See, we don't know R&D. See, everything put together, only we talk to.
Because we haven't been able to achieve the guided target in these three quarters. So are we still confident of achieving the 21%-22% EBITDA margin guidance?
Yes.
Okay. Okay. Thank you. That's all from that.
The next question is from Surya Patra.
Thanks for the opportunity, sir. My first question is on the respiratory product opportunity, what you have talked in the opening remark also. So we know that there has been around 14 odd products that have already been there in the various stages of development. And I think last quarter that we have also collaborated with one of the U.S. companies to develop even a basket more. So could you give some sense what is the progress on those products, what kind of product that we are talking about there, and by when that we will really start seeing revenue contribution coming from that side?
I can take this question, Subbu.
So primarily, we are talking about the MDI and DPI. Yes, you're right. We had announced last month, last quarter, about the tie-up with the international firm. Now, apart from that, we have a good R&D setup. We are developing a few products. And we are in the various stages. In some cases, the filing has been done. And then at least two of them filing has been done, and a few more in advanced stage. We believe that these are good products with fairly good dollar values. And we anticipate some of these products to come in late in FY26 or maybe in the mid first half of FY27. And then from there, we would have regular products coming in.
Okay. This collaboration, if you can just add some color on that?
See, we have already announced what we had already talked about it earlier. We are tied up with the firm for the development of the product, and we will be launching it. This is a little medium term. It's not short term. Obviously, the development takes some time. We believe that this product has got a large market, and we also feel confident that we should be able to launch it without any IP constraints. We have taken care of that, we believe. So beyond that, what can I tell you? This is a large company that we are tied up with, and there is another party which is helping in the development too.
Okay. Okay. My second question is on the U.S. business front, sir. I think we have seen there is a kind of uptick in the branded oncology business beyond the kind of run rate of 25 to 30, what it has been indicated earlier. And similarly, even the OTC also has seen a kind of sequentially as well as YY uptick. And on the UGR front, around sequentially in the last two quarters, $20 million kind of sequentially decline that we are witnessing. So is it entirely because of that UGR facility issue? So if you can address these three segments.
Sure. So, UGR part, I would leave it to Yugandhar to handle. Other than UGR, I can talk about the oral solids and RX oral solids and the OTC. So, Yugandhar, would you like to take up UGR first?
Yeah. I think I already clarified that the last two quarters have been. It is mainly related to supply-related issues. And it is per quarter, we were impacted by around $10 million. And I expect from this quarter onwards, we'll be back to normal run rate. It is mainly driven by the supply challenges, not related to the demand challenges. Okay? So, I hope I clarified multiple times. I hope that addresses your question.
Thank you, sir.
Okay, so I'll talk about the oral solids and OTC. On both sides, we had a very good quarter with all-round progress. There has been steady progress, and we believe that this will continue going forward, and we are focused on sustainable long-term-based business, and we are making more efforts to try and achieve that growth. We have a robust set of commercial products already in almost all therapeutic segments, and we are rapidly moving to a future with much more diversified portfolio. You had mentioned about the MDI, the inhalation product. Similarly, we have in the transdermal area, and we are trying to diversify into different presentations, more value-added, value-creating products, and we have also amassed an expansive pipeline with great potential to sustain.
Our goal is to be the global generic powerhouse, which we are to an extent at this point, but we expect to continue being there and doing better.
Awesome.
Okay. On the OTC, I'm sorry. I just briefly mentioned about OTC. So finally, we have seen some traction in the OTC business in the last two quarters, and the December quarter was fairly significant in terms of some breakthrough. We think that OTC would continue to grow over the next few quarters. I think you would hear more about it, and we would see fairly good growth in OTC business.
So with your permission, can I just ask one more question? So this is about oral peptide. Now, Satakarni sir, can you give some sense about what is our preparedness about the GLP-1s and also the kind of competitive edge that we would be having? Because here, most of the competing peers are indicating about integrated operation there. So if all are kind of.
So.
Yeah. Hello?
With oral peptides.
Manufacturing.
Can you hear me, Surya?
Yeah, yeah. Yes, sir. Yes, yes.
Oral peptides is into the manufacturing of APIs. So with respect to GLP-1s, right now, we have one GLP-1 peptide with an active DMF. The other one, we are going to file the DMF this year. And we are investing in the development of another GLP-1 peptide. Anything on the finished product, you should talk to Yugandhar. He will be able to answer that.
Yeah. Yes, please.
Yes. So yeah, we have the entire GLP product range. In fact, our YZAC plant, we have a significant capacity cartridge line where we'll be filing all the GLP-1 products: Lira, Sema, teriparatide. Okay. Everything in the GLP pipeline is covered by us, and we'll be filing from our new YZAC plant.
Okay, and even the devices are captive?
Device is always outside because either it is from BD or from somebody else. But device manufacturing is always by any company, for that matter, that all devices are procured from outside. But device assembly along with the medicine happens in our plant. But device per se is always from outside companies. Nobody produces devices. Pharma companies.
Sure. Sure. Yeah. Thank you, sir.
Next question is from Vinod Thappan.
Hi. Good morning. A couple of questions from my side. We have seen exceptionally strong growth in Europe and ROW for the quarter as well as nine months. What is driving this?
Which one? Vinod?
Europe, ROW.
Yeah. Murli, please.
Yeah. Hi. Good morning. This is V. Muralidharan. Yeah. Thank you for raising this question. Yes, Europe has been contributing close to 27% of the global revenues for Aurobindo. Currently, we are doing this based on the wide portfolio of the products and the efficient supply chain and increased supplies originating mainly from India and faster turnaround of the products at our quality lab, mainly at Malta. Some of these factors are well-oiled front-end infrastructure and machinery, commercial infrastructure. So all these are working in our favor at this moment. Also, we are availing the market opportunities in a big way. And other mechanisms, standard ones like the demand forecasting and timely supplies, all these are contributing to this robust performance. And we expect the momentum to continue in the coming year and quarters ahead.
Having said that, we are looking for further launches that will happen from UGR space as well as biosimilar space, and that will further take us to the higher levels.
Got it. But most of these things would have been a work in progress over the years. But what has really happened this year that suddenly there is a growth spurt?
No. You're right in it. But at the same time, over the last several quarters or last couple of years, we were fine-tuning. We were missing out on a couple of these aspects to happen in the right tandem. And definitely, things are happening in the right perspective as of now.
Got it. Got it.
Just to add, I guess there can be supply challenges from a lot of companies, and we are in a position to take a, in fact, even UGR has been growing at a rate of 20% in Europe. So we don't want to comment on other organizations. But yes, we have been seeing supply challenges from multiple companies, and we are in a position to fill the demand wherever the gaps are.
Understood. Thank you. My second question is about India. So you have this trastuzumab approval already. How do you plan to sell it? Have you partnered with other companies? And second, when the GLP-1 opportunity opens up in India, how do you plan to sell it? Do you have partners already in place?
I'll take the trastuzumab question, Vinod. So we have an approval by the CDSCO board for trastuzumab. We are putting together a domestic marketing and sales team, which will kick in probably by the end of this year. But until then, the first two quarters, the sales will be through co-marketing partners. But going forward in the domestic market, we are going to add a good sales team, essentially, to take our biosimilars to the patients and the prescribers. So that's the strategy that you will see evolving in the next two to four quarters' time.
Understood. And the sales team is only for biosimilars? You won't have any other products?
For the biosimilars, we are having a separate sales team because they specialize in branding it, and importantly, there is a lot of network that is required to put forward biosimilars to the prescribers convincingly, but having said that, any support to medication or concomitant medication that goes with biosimilars will also be marketed by the same team.
Understood. And the GLP-1 plans?
For India, GLP-1, we have our plans. We are talking to the agencies to see what sort of study requirements must be met. But you will see some announcement from me in the next two quarters' time about our strategy in the domestic market for GLP-1s.
Yeah. Okay. And do you expect your product?
No, my suggestion is there are 10 people waiting. Let's restrict. You have been keeping on asking questions. There are 10 people waiting in the queue, only 10 minutes left out.
Sure. Thank you.
The next question is from Prashant Aggarwal.
Hi. Good morning. Am I audible?
Yeah.
Okay. On UGR, so you said that UGR utilizations currently are at about 50% for UGR3. Does this also include the expanded capacity of UGR3?
No, sir. It's actually like expanded capacity is line 13, line 14, and I'm not even considering. I'm talking about the existing capacity of because those lines are not approved so far. So I don't consider them as a capacity available. But up to whatever lines we have, we have been using around 70-75% in the past. Right now, we were using around 50%. So we are confident that we will come back to our original levels of 65-70% capacity utilization of the previous capacity. As in when the new line gets approved, that will be an additional capacity.
Got it. So practically, what is the utilization that the business can go through? Number one. Number two, between line 13, line 14, and the Vizag plans, when do you expect the approvals to come through? And if one were to consider line 13 and line 14 capacity to be theoretically available and Vizag to be theoretically available as on date, what would be the utilizations of the injectables business?
Actually, I see. YZAC is still in nascent stages because we got approval for terminally sterilized lines. Now, we will be going for the aseptic lines approval. That audit is due. Then we will be adding different varieties of things in YZAC. The cartridge lines will be all exclusive only for YZAC. And there is a PFS, BFS, all those lines what we will be adding. So between UGR3 and the YZAC facility, we will have significant capacity to take care of our till up to FY30 in terms of the capacity available for the business and our business growth plans.
Got it. And would it be fair to presume that for the normalized injectables business, $85 million-$90 million of US revenue and about $45 million of Europe revenue should be a good base to go from Q4 onwards?
Yes.
Got it. Thank you, sir. And the last question on Europe, sir. Fantastic execution over the last three years, I would say. Euro revenues have been growing at a range of anywhere between 10%-13% if I look at it from a nine-monthly basis. Just wanted to get a pulse of how are the margins on this business? Because as we understand, at some point of time, the margins were low middle digits, and there was an inflection point that the business was looking for those margins to really inch up. So a comment there would be helpful. And how should we see this EUR 235 million run rate going forward on a quarterly basis?
Yeah, thank you for this. Yeah. I mean, on the margin side as well, as we are very constantly looking at the opportunity sales to be availed. Definitely, we are clocking better margins. Of course, the specific numbers, Subbu will be able to comment at the appropriate time, and coming to the run rate of 230 million plus, we are confident of sustaining this in the coming period as well. If I have to take January as a benchmark, definitely we are on it, but yes, we will announce the full quarter results as we come to the end of the financial year.
Okay. Thank you, sir. All the best.
Thank you.
Bearing in mind the time, we will restrict to one question only. The next question is from Neha Manpuria.
Yeah. Thanks for taking my question. Swami sir, the 2 billion units in China that will free up capacity probably in the India manufacturing for the US market and the fact that we are also adding capacity in Raleigh, etc., how much additional capacity would you have for the US market going into next year? And how confident are we of being able to actually capitalize on that without necessarily putting pressure on the market given how large we have become in the US?
Thanks, Neha. I'll take the second question first on the ability to sell the volume that's being generated. We are happy to take on more volumes. We have a good market. As you know, we are number one in U.S. in terms of prescription. We have a large base, but we believe that we have scope to grow. We are today 11% market share. We think that there's scope to grow given our background, given our infrastructure in India. Now, the North Carolina facility is nothing to do with the oral solid. It's a differentiated presentation. One is the topical transdermal and the inhalation. So that we don't have to count towards the normal 2 billion odd we are selling here. As far as China is concerned, China is not only for U.S., it's also for other markets. So we are looking for contribution from China in terms of volume.
And even our own units, I think they are adding balancing equipment. They're able to ramp up. We could see some more volume surge in the next few quarters, and we'll be able to take it on. We don't see a situation at this point where we would have these facilities being underutilized, except for pockets. There may be a seasonal issue at that time. It may be an issue. Otherwise, we think we are good.
Understood. So we don't see a situation where the additional capacity in India does not necessarily get absorbed in the U.S. We have that much of visibility.
Yeah. Not in the short to medium term, definitely.
Understood. And my last question on the CDMO capacity. I see that we've announced an expansion in the presentation. We've mentioned we are adding, I think, another 30 KL. Is this still for MSD, or is this a new CDMO contract, or this is in anticipation of demand?
Neha, this is in anticipation of the demand. The reason being that when we conceptualize a facility for 4 into 15 KL bioreactor capacities, building two lines and leaving out the other two for phase two addition, we'd not want to leave it too late, so we just wanted to make sure that as we construct the facility now, we have the scope of adding these two lines so that there are no future design changes that would be required. So it's more of an engineering prudence that drove the decision, and the business prudence would be that we, at some point, would expect more demand. And to meet the demand, it is better to have the capacities in place than arrange it then with some sort of a delay, so it's more of in anticipation of the demand and considering the engineering requirements now.
Got it, sir. Thank you so much.
Thank you. Keeping in mind the time, we will now take last two questions. The next question is from Shyam Steele.
Thank you. Good morning. Thank you for taking my question. Most of my questions have been asked, so just one on the macro and new administration in the U.S. I just want to understand there's a potential tariff on pharmaceuticals. So as a company, as an industry, what are some of the pushbacks that we give like a lobby back to the U.S. government, which probably may think of tariffs? Is it our footprint in the U.S. in terms of manufacturing? When we talk about new capacity additions in the U.S., is there more onshoring as the theme that you will probably suggest to them? And what would be some of the mitigation efforts on this one? So I know it's a hypothetical question at this point of time, but want to understand what are some of the broad contours that the management is thinking about.
Yeah. Thanks, Shyam. Subbu, I'll take this question. So as yet, we don't know what's the final outcome. We don't know what the tariff is. There's a lot of noise right now. We do know that from China, there is some input tariff. But there's nothing that we don't believe is going to be a challenge for us. We would continue to import from India. And what happens here in the competitors would be in the same state as we are in. That's one. You're right, not just as a mitigation strategy, but as a strategy itself. We have built up good infrastructure in the U.S. We have a data plan that's coming up. And we also have the Puerto Rico plan, which we can commercialize very soon with short notice.
So we believe that we are well geared up to meet any challenges that come up as far as the U.S. market is concerned.
And Subbu sir, just if I may squeeze in, in terms of ROCEs, are these investments or is there a way to make sure these ROCEs are higher than where our corporate averages are? Because that's the prime reason why we moved manufacturing out in the first place. So is there any other way to recoup margins or returns?
No. I mean, Shyam, the units like Penicillin or Eugia or China, these are all in the ramping up and then incurring losses. Once the full ramp-up is taking place, you see it will get converted into positive, which will help us to improve the ROCE, right? And plus the capital expenditure, which you're doing more of adding lines to the existing plants, etc., more of, which also will help to improve the ramp, which will also help to improve the ROCE in a significant manner. Probably you can see the big actions. I mean, all these actions will be coming in the second half of the next fiscal. Clearly, you'll be able to see that. That's what my belief.
Got it. Thank you and all the best.
One question.
Nandit? Who is that?
Can we go to next question, Nandit?
Looks like there is a problem, Srini. Nandit himself is not there. He got knocked off from the list. Okay. So I think, Srini, you can take it now.
Yeah. So the next question is from the line of Mr. Vivek Agarwal. We'll take this last question and then conclude. So Nandit, can you please unmute Vivek Agarwal?
Yeah. Thanks, sir. Thanks for the opportunity. The question is related to gross margins. Currently, we are in the range of around 58%-59% over the last few quarters. And again, it's a decent number. Just want to understand, will you be able to maintain this margin, let's say, around one to two years down the line? Because there's a couple of moving parts like PenG is coming. There may be like Revlimid, etc., might be coming down. So any broader color would be helpful for a one to two years perspective how we should look at this number. Thank you.
Vivek, so you're asking a question. You're already given the answer. What else I can add beyond what you're saying? Already all these products, PenG and other things should start contributing, which will help to retain the gross margin certainly.
Understood. Thank you, sir. I'm just trying to understand, can this margin move up from here on meaningfully, or you will be able to maintain this margin? Thank you.
I think let's park this question for the next call.
Okay, sir. Thank you.
Thank you.
Good luck.
Srini, close it.
Okay. 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.
Thank you.