Ladies and gentlemen, good day and welcome to Cipla Limited Q3 FY 2026 earnings conference call. We have with us today from the management, Mr. Umang Vohra, MD and Global CEO; Mr. Achin Gupta, MD and Global CEO Designate; Mr. Ashish Adukia, Global CFO; Ms. Diksha Maheshwari, Head Investor Relations. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Diksha Maheshwari, Head Investor Relations. Thank you, and over to you, Ms. Maheshwari.
Thank you, Ranju. Good afternoon and a very warm welcome to Cipla's Q3 FY 2026 earnings call. I'm Diksha Maheshwari from the Investor Relations team at Cipla. Let me draw your attention to the fact that on this call, our discussion will include certain forward-looking statements which are predictions, projections, or other estimates about future events. These estimates reflect management's current expectations of the future performance of the company. Please note that these estimates involve several risks and uncertainties that could cause our actual results to differ materially from what is expressed or implied. Cipla does not entertain any obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. I hope you have received the investor presentation that we have posted on our website. I would like to request Umang to take over.
Thank you, Diksha. Good afternoon to all of you, and we appreciate you joining us for our quarter three FY 2026 earnings call. Over the last five years, we've delivered strong performance, sensing our market position and significantly enhancing our profitability. Together, we've built a strong leadership bench and sharpened our execution focus, consistently creating value for the company. As I prepare to hand over my responsibilities, it is my privilege to invite Achin to take charge and lead the next phase of our growth and journey. I would now like to invite Achin to give a commentary on the business, and subsequent to that, Ashish Bhai for his commentary on finance.
Thank you very much, Umang. Thank you for your steady leadership and for strengthening the foundation on which the company continues to grow. I look forward to carrying the momentum ahead. Turning to this quarter's performance, we have focused our efforts in growing our base business, and we continue to invest for the future. Our diversified portfolio enabled us to deliver revenues of over INR 7,000 crore this quarter, despite the known drop in generic revenue-based sales. Our One India business delivered a strong quarter, 10% year-on-year growth, reinforcing its momentum and commitment to sustainable long-term growth. In our branded prescription business, we delivered a double-digit growth of 10%. Our key therapies continue to outperform the market with robust growth. Respiratory grew 11%, while antidiabetes and cardiac grew 13% each, and urology grew 15%.
Cipla Respiratory crossed the threshold of INR 5,000 crores for the first time in IPM as per IQVIA MAT, December 25. Respiratory also outperformed the therapy IPM growth by 400 basis points as per IQVIA quarter-ended December 25. Our overall chronic mix further strengthened to 62.3% YoY. Foracort continued its leadership as the number one brand in IPM. We added four new brands to the INR 100-plus growth class, taking our total to 30 such brands. Our presence in IPM's top 300 brands remains strong with 22 brands, reinforcing the depth and resilience of our portfolio. Cipla continues to be the largest pharma company in terms of volume, and we own 10 billion-plus unit sales in IPM as per IQVIA MAT, December 25. During the quarter, we entered into a strategic agreement with Pfizer for exclusive marketing and distribution rights of four well-established Pfizer brands in India.
We also signed a definitive agreement to acquire Esperer Onco Nutrition, a strategic move that brings together Esperer Onco Nutrition's portfolio of pediatric pharmaceutical and wellness products within Cipla's robust distribution network. We further strengthened our diabetes portfolio with the launch of Afrezza, India's first and only inhaled rapid-acting insulin, marking a significant milestone in transforming insulin therapy. In addition, through our partnership with Eli Lilly, we launched Mounjaro, a modern once-weekly tirzepatide therapy for obesity and Type 2 diabetes, bringing a convenient and advanced treatment option to millions of patients across India. Our trade generic business delivered a healthy growth during the quarter on the back of rigorous execution and distribution, new product launches, and technological advancements. Expanding our portfolio remains a key growth driver with eight new launches this quarter, which address specific patient needs.
Our consumer health business continued its upward trajectory, with Nicotex, Omnigel, and Cipla dine consolidating number one positions in their respective segments. The business is driving healthy secondary growth and actively exploring opportunities to invest in products and channels to further expand our distribution network. Operating profitability improved, reflecting the strength and scalability of our consumer health strategy. In North America, we delivered quarterly revenue of $167 million, which included a small contribution from Lenalidomide. We faced certain supply challenges in some of our key products and increased competition in new launches, yet our base business, ex Lenalidomide, delivered a double-digit growth YoY. We expect upcoming launches to help cushion the decline in Lenalidomide revenues and provide long-term growth.
Cipla continues to hold number one position in the overall U.S. Albuterol MDI market this quarter, with our market share at 22% as per IQVIA data for the week ending December 26, 2025. Lanreotide remains one of our key strategic assets. Recently, however, our partner, Pharmathen, underwent a U.S. FDA inspection at their manufacturing facility, which resulted in nine 483 observations. As part of their remediation efforts, production has been temporarily paused. We currently expect lanreotide resupply to resume in H1 FY 2027. Until this manufacturing restarts, the product will remain in limited supply, subject to quality clearance of existing stock. While this may cause some short-term disruption, we are working closely with Pharmathen and other relevant stakeholders to explore every viable option to restore normal supply levels as quickly as possible. In parallel, we are evaluating alternate sites for this product. A quick update on our U.S. pipeline.
By this time, our pipeline includes four significant respiratory launches, including generic Advair. During the quarter, we will be launching generic Victoza, and we further expect to launch three more peptide assets in FY 2027. Notably, three of the four respiratory assets are filed from our US facilities. These strategic introductions will not only strengthen our portfolio, but will also serve as key drivers of sustainable longer-term growth. Moving to South Africa, in the private market, we achieved strong secondary growth of 6.3%, outperforming market of 5.7% as per IQVIA MAT, November 25. The business faced weakness in primary revenues this quarter due to in-country channel restocking. However, we expect normalization by next quarter. In EMU, we delivered our fourth successive quarterly revenue above $100 million, recording a 7% YoY growth in USD terms. This was fueled by exceptional execution across both DTM as well as B2B segments.
Our continued focus on big market penetration has provided a strong foundation for sustained growth. Notably, we maintained margin stability while effectively leveraging internal pipeline assets, which demonstrates the strength and agility for our operating model. On the regulatory front, we are expecting the reinspection of our Indore facility to take place anytime soon. With that, I would like to invite Ashish to present the financial and operating performance.
Thank you. Thank you, Achin, and thank you, Umang Vohra, as well. Thanks for your leadership. Now, I would like to present the key financial highlights for the quarter. We reported revenue of INR 7,074 crore, which is flat YoY. The EBITDA margin, excluding other incomes, stood at 17.7%, to be precise, for the quarter. The decline in EBITDA margin was primarily driven by lower generic revenues. The reported gross margin after material costs stood at 62.8%, again, largely driven by a decline in Lenalidomide, as well as partly because of product mix. Also, notably, the gross margin or material cost also has your R&D material cost of APIs or R&Ds that we purchased sitting out there. The total expenses for the quarter stood at INR 3,187 crore, reflecting a 13% increase over the previous year.
This was primarily due to planned investment in R&D, manufacturing, and talent to support our new launches and build readiness for upcoming products in the pipeline. We remained focused on innovation and future readiness. R&D investment for the quarter was INR 4,194 crore at about 7% of revenue. This was a growth of 37.4% YoY, directed largely towards product filing and key development programs. As noted earlier, R&D spend is trending higher this year, driven by select opportunities that strengthen the depth and vibrancy of our pipeline. The profit after tax for the quarter stood at INR 676 crore, representing 9.6% of the sales. This includes one-time impact of INR 276 crore from new labor code, which is sitting in the exceptional item rather than above EBITDA. The ETR for the quarter stood at 24.5%. Our free cash flow generation and operating efficiency continues to drive healthy net cash position.
As of 31st December 2025, debt on our balance sheet includes lease liabilities stood at INR 489 crore, with net cash equivalent balance at INR 10,229 crore. This is after adjusting for dividend that we paid in the previous quarter, and this quarter we paid for Galvus as well. This quarter, our EBITDA internal expectation by about 1.5%-2%, which will affect the overall guidance for the year. This was primarily a reflection of lower than anticipated lanreotide performance and the completion of generic Revlimid billing cycle, with most of the shipment concluding in September quarter and a small portion in December quarter. In parallel, we stepped up growth priorities, including spend towards the commercialization of our new launches and readiness activities at our U.S. manufacturing facilities ahead of near-term and imminent regulatory approvals.
In line with the last quarter's guidance, we continued to prioritize targeted R&D investments in select opportunities within our U.S.-focused oligonucleotide portfolio, where we see potential to secure an attractive and competitive market entry position. Now, these are deliberate strategic choices and will lead to FY 2026 EBITDA margin guidance to land at around 21%. Going back to our key priorities for the market for One India, the aim is to focus on execution to sustain the growth momentum and outperform the market in both branded generic and trade generic. We'll further strengthen our presence in chronic therapies, including diabetes, cardiology, urology, and dermatology, while maintaining the robust trajectory we've built in respiratory. In North America, we'll concentrate on enhancing commercial execution and accelerating the new product introductions that we're expecting. In South Africa, our focus will be on improving the private sector mix while being selective in tenders.
EMU, our top priority, is to drive top-line growth by deepening penetration in four markets while maintaining a strong margin trajectory. Lastly, on FY 2027 guidance, we will further provide that as we finalize our annual operating plan for FY 2027 in due course. That's it from my side. Thank you for your attention. Over to the moderator for Q&A.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on a touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Tushar Manudhane with Motilal Oswal Financial Services Limited. Please go ahead.
Thanks for the opportunity, sir. So firstly, on the Q3 gross profit margin, even if the Lenalidomide related impact is there, is there further anything in the raw material maybe related to lanreotide, which is dragging the gross profit much lower compared to earlier quarters outside Lenalidomide impact?
Sure, sure, Tushar. So Lenalidomide is a significant impact sitting out there in the gross margin that you see. I think apart from that, in case of R&D, this quarter was a quarter where we purchased certain R&Ds and APIs as well for our R&D expenditure. That led to a significant explanation for the difference that you see out there. Other than that, there's a product mix that led to small valuation as well, but that is not a significant amount.
Does lanreotide have any impact on the raw material side while sales would have got impacted more so on the raw materials as well as in certain inventories related expenses?
No, no, no. There has been no adjustment in the inventory that we've had on account of lanreotide data. Whatever we have sold in this quarter of lanreotide and normal material cost against that is what is booked.
And so extending this, given that there is now disruption, so effectively the US sales will then get further lower, at least with respect to lanreotide reduction in the upcoming quarters. Is that a fair assessment?
On account of lanreotide, depending on how that situation evolves, the lanreotide sales can get further impacted. We are not commenting on the other part of the U.S. as of now.
Okay. Thank you so much for joining the question.
Thank you. Next question comes from the line of Kunal Dhamesha with Macquarie. Please go ahead.
Hi. Thank you for the opportunity. So of the $66 million of decline in the U.S. sales on a sequential basis, how much directionally we can attribute to Lenalidomide versus lanreotide?
So a significant portion of that comes from Lenalidomide, major portion of that. And there is a portion that comes on account of lanreotide as well. But important to note is that, as against what we had planned in lanreotide, it is lower than that we have achieved because of this shortage.
Then if I remove just both, Lenalidomide, because there's still some residual revenue-based there, and lanreotide is also there, is it fair to say that we are at more like a pre-revenue-based era where we were doing more like $125 million-$130 million quarterly run rate for U.S.? Is that a fair understanding? Without lanreotide, we should be there?
So that your assessment is not entirely correct in our lagging at the base because we can't share the numbers of Lenalidomide, unfortunately. It's so difficult for us to explain the entire gap. But actually, Umang Vohra, if you want to just comment. I think directly just to say we have minimal Lenalidomide now in that case, and we're looking at very significant launches which are coming up. So I think that the direction of travel of the business will be to grow on the back of all of the products, including some of the launches which have already happened this year.
Would you provide more details on the one we know which is generic Advair, but beyond that, the three respiratory assets, if you could provide some colors in terms of what is the total addressable market, how is the competitive landscape there?
Yeah. So we have mentioned four respiratory assets. One of them is generic Advair. There are two other fairly large material opportunities where we believe we have a full generic opportunity, which would stay like that for a certain period of time. So we are very excited about those, and we're awaiting the approvals, which will materially create revenue as well as profitability impact for us.
So large means like hundreds of millions or the total addressable market size. How to look at those? One is definitely SYMBICORT, right, of the four. One is Advair, one is SYMBICORT. So the remaining two, the large opportunity which you are suggesting where we could be sold one, can you give us the time?
I think for competitive reasons, it's hard to comment on that, but these are fairly large.
Sure, sir. Thank you and all the best.
Thank you.
Thank you. Next question comes from the line of Neha M with Bank of America. Please go ahead.
Yeah. Thanks for taking my question. My first question is on the peptide monetization that we have talked about in 2027. None of these are from the partner facility that's been impacted, right? Would that be a fair assumption, or some of this is linked to Pharmathen facility getting cleared?
No, none of them is coming from Pharmathen.
Understood. That's helpful. And second, on the gross margin impact that you said, at least from the API for R&D, could you quantify how much would that be, and should we assume that that was just restricted to this quarter and should normalize from next quarter onwards?
Yeah. So without necessarily giving the risk, if you set that your R&D expenses is about 7% of revenue, part of that 7% sits as material that you purchase, procure as well, which is both R&D and API, and we did that for certain molecules, including oligonucleotides. So what happens is that it is not a quarter regular consistent quarter phenomenon. In this quarter, we purchased, so therefore it can be lumpy as well. So you may not have it coming back in quarter four.
Understood. And how should we think about defending the 21% margin that we have guided to this year into next year when Revlimid fully goes away? Initially, we have the lanreotide disruption, but then we also have the launch pipeline. If you could just give us some sense on how we should look at margins for 2027?
2027 margin, we are not currently guiding towards for a reason that we've not completed our annual operating plan for the year, which needs to go to the board, and then we can give that guidance next quarter. FY 2026 is for which we've given guidance that we should land the year at about 21%. That is just one quarter left, and we, of course, have to do a better YoY to achieve that if we do the math. And we don't have any Lenalidomide now in quarter four, which is what you are all aware of.
Ms. Neha, please go ahead.
I'm done. Yes, I'm done with my questions. Thank you.
Sure. Thanks.
Thank you. Next question comes from the line of Damayanti Kerai with HSBC. Please go ahead.
Hi. Thank you for the opportunity. I have two questions. So first, on your expected launch for FY 2027 in the U.S., so you mentioned four peptides and four respiratory assets. So just want to understand what kind of comfort and visibility you have on these assets, whether you have got tag dates from the FDA on basis of which you are confident that you should be able to launch these products. And also want to understand, in any of these, are there any PRL, permits, or block which you are yet to resolve?
Yeah. So thank you for that question. The respiratory assets that we have are progressing well through their assessments, and we've been preparing for the launch as well in terms of operation-related activities that need to happen to prepare for the launch. So we are quite confident about those upcoming launches. Likewise for the peptide assets as well, because these are not from the site which is having that issue currently with the partner pharmacy. So we don't have any reasons to suspect any issues on the launch. And Victoza approval is already received, so that we will be able to launch soon.
Sure. And for the respiratory, just to understand, all the peptide assets are from CMO sites, and respiratory, as you mentioned, three out of four will come from the U.S. and one maybe from the India plant. Is that the status?
Yeah. Yeah. So yeah, that's right. So the peptide assets are from partner sites, and respiratory are from U.S. sites as well as India sites.
Okay. My second question is on your note to the consolidated financials where you mentioned you have paid around INR 1,100 crore for acquiring perpetual rights to manufacture Galvus and combination products. So can you help us understand where these expenses or costs are sitting in the financials?
No. So that's, yeah. So that's sitting in intangibles in your capital allocation in your financial statement, the INR 1,100 that we've paid.
That's sitting in balance sheet and intangibles, right? Nothing on CNS side?
Nothing in the CNS.
Okay. Okay. I'll get back in the queue. Thanks.
Thank you. Next question comes from the line of Surya Narayan Patra with PhillipCapital. Please go ahead.
Yeah. Thanks for the opportunity, sir. First question is on the lanreotide whether we have this is just a clarification first whether we have seen any impact of supply disruption in this quarter because the inspection and all that would have happened in the current quarter, but I think the development what we have seen, it is in the fourth quarter.
In case of lanreotide, the inspection took place in November, and that's when, after that, soon after that, they stopped the production. So in December, we had no production out there. Okay? There was some impact in comparison to the previous quarter, but as per our plan, the impact is much larger.
Okay. So then my first question is on the margin side. Now we are guiding kind of a 21% margin for the full year, FY 2026, wherein the fourth quarter, obviously, we know that it is a relatively weaker quarter for us, and hence the impact also would be there alongside the impact of lanreotide that would also be visible. But going ahead, is it I mean, how should one see what are the kind of swinging factors for our margin? Because obviously, the Lenalidomide would not be there next year, and there would be possibly in the first half, the lanreotide disruption also would be there. And the spend from the R&D side that is likely to continue. So in that case, the overall margin, if we see, it looks like below 20%. Am I thinking whether directionally I'm thinking right, or how should one think?
If you can just talk about the moving factors for the margin for next year?
So Surya, let me just try and give you some color. So the Lenalidomide is a planned tapering phase which was known for quite some time. So that's happening as we speak. And in preparation for that, we've been working on the pipeline. And as we already mentioned, that pipeline is now looking closer. So as we go along and as we start getting those approvals, we will be able to obviously share that. So that will be the way to offset all of whatever happens, whatever is tapering off on Lenalidomide. In addition, our other markets continue to grow strongly. So India, which is a large presence for us, continues to grow. EMU continues to grow. South Africa continues to grow. And we will obviously be providing some more visibility on how we are looking at R&D and the other expenses to invest in the business.
But I think the broad guidance is that this is lanreotide is a temporary issue, and Lenalidomide was a plan going away for which the pipeline comes into play. That's how we would look at it. So more as it should be until the time this lanreotide disruption is there, more as a temporary operation than a longer-term plan.
Okay. Otherwise, our profitability going ahead, excluding the impact of the lanreotide, should be better than the profitability what we would be having prior to the Lenalidomide scenario?
I think best for us to answer this question will be when we have rolled up our annual plan. We'll give you much better visibility after that.
Sure, sir. Okay. Just last one question then from my side, sir, about your Mounjaro, the tirzepatide launch. So what is the kind of progress and whether you have any assessment about the kind of adoption levels in the areas beyond cities where the focus will also be there for you? And what scenario that you are anticipating post-commercialization of semaglutide for tirzepatide?
Okay. So we are the full all-over India marketing rights for Mounjaro. So we are covering pretty much all of the countries with obviously more focus on outside of metros. But this is a very fast-growing space, so we're seeing good traction coming through in all of the places, those which had been exposed to the drug earlier by the partner as well as the cities and new prescribers where we are able to bring the treatment for the first time. So I think there's good amount of traction there, and it's a very large medical need across the country. Patient pool is very vast and widespread across the country, which we are looking to serve. Now, with respect to semaglutide generic, as and when that happens, we believe it will open up a new segment in the market because the molecules are different.
Tirzepatide has dual action, GLP and GIP, which we believe makes it a preferred option. However, from pricing perspective, when genericization of semaglutide happens, it might open up options at a different price point to certain segments of the market, which effectively will grow the market as opposed to eating into each other.
Okay. Sure, sir. Thank you. Wish you all the best.
Thank you.
Thank you. Next question comes from the line of Bino Pathiparampil with Elara Capital. Please go ahead.
Hi. Good afternoon. First question on Abraxane. Any update on how it's doing in the market?
No. Sorry. You said Abraxane?
Abraxane. Abraxane, which you have launched last year.
Yeah. No. So I think our launch coincided with other launches as well, so it's become a competitive market. So as of now, we are inching up our market share. Currently, it's mid-single digit. We hope to increase that.
Understood. I was looking at your 22 margins before Lenalidomide. You were around 21%. How has that fallen to 17.5%, 18% now without, I mean, that too with a little bit of revenue?
Sure. See, I think we explained some of the reasons, right? There was R&D, which is elevated. We used to be at about, I think, 5%, 5.5% in the past, which has now come to about 7% of sales. So it's straightaway about 1.5%, 2% kind of a dilution from what we used to be. That explains one of the reasons. And then in the last almost about 1, 2 years, we've been investing on organic growth and for new launches, for de-risking our facilities. So all that cost has also come into the P&L. I think as they start to yield revenue for us, both R&D pipeline as well as all the de-risking benefits, etc., that we are likely to get, we should normalize back to a higher number.
The 17.7%, we've already mentioned that it's 1.5%-2% off from our expectation for the same similar reasons that we mentioned.
Got it. And this INR 1,100 crore payment to Novartis, is this related to the deal that you entered in April 2023?
Yeah. That's right. This is a follow-up. So it was earlier just an ILD, sorry, in-licensing kind of a deal. And now it's a perpetual license that we've got for the trademark, and we can also manufacture it in-house.
I mean, was it publicly disclosed earlier that such a payment is due under this deal?
Yes. Yes. When we announced the in-licensing, then this was disclosed.
Okay. And I'm sorry, I looked up your public statement. I couldn't find it. Maybe I missed it. Is any such payment in the future involved with the current deal with Pfizer or with the Lilly deal for tirzepatide?
No. So when we shared about the Galvus deal, it was an EPD followed by this perpetual license. So it's kind of an acquisition with a slight delay, right? So a couple of years of marketing exclusivity followed by the purchase. The other deals don't have this kind of provision.
Okay. Thank you.
Thank you. Next question comes from the line of Abdulkader Puranwala with ICICI Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity. So my first question is pertaining to your earlier guidance on U.S. revenues where we saw U.S. revenues starting around close to $1 billion by FY 2027. So I mean, post-lanreotide, are we revising that guidance?
Yeah. I think we'll have to revise the guidance. Yeah. The guidance will have to be revised because if we don't have lanreotide in one quarter, the numbers will be lower, right? So I think that guidance will have to go down because lanreotide, if we forecast quarter four not coming in, it will have an impact on the overall guidance for the U.S. business. Now, what we had also directionally guided was for the U.S. business to continue at that trajectory supported by new launches. And I think based on some of the questions earlier, it's pretty clear that the launch trajectory of the business is at least at a very, if not almost at the stage of launch, but at a very advanced stage of launch for three products.
So I think that would also add to the overall guidance towards the directional guidance we gave for the business in the U.S.
Okay. Okay. Thanks for that. And just along the 8 products, you mentioned 3 you have out of timeline. How about the balance 5? So are these kind of an early FY 2027 opportunities or late FY 2027? Any directional guidance with that?
Yeah. No. So effectively, I think what is immediate, let's say from 0 to 6 months, right? We are calling for from 0 to 6 months, 2 big respiratory launches and 1 smaller launch, right, on respiratory. Let's say 2 big respiratory launches and 1 Albuterol. That's what we are calling for in this year, in the next 6 months. Between the 6 months to 1 year, there could be another big launch in respiratory that we are calling out, right? That could be another one. And that is likely to be around the SYMBICORT and more towards the end of the year. Then we have peptide launches, which the team has called out. I think the peptide launches, there will be a smaller one in the 0 to 6 month period.
And then hopefully, if things work out the way we are thinking, there will also be a larger launch, which again could be a pretty exclusive sort of a scenario for one of the peptide products in the 6 months to 12 months trajectory. So that's how the launch calendar looks like. Now, for whatever is between the zero to 6-month category, there is a fair amount of belief that this has gone through multiple rounds of review, etc., and therefore the launches are more likely than not to happen soon.
Got it. Thanks for that.
Thank you. Next question comes from the line of Shashank Krishnakumar with Emkay Global. Please go ahead.
Hi. Thanks for taking my question. The first one was on the respiratory effects before which we are guiding to over the next year. And 3, I think, are filed from the U.S. The fourth one will be filed from Goa and not Indore. Is that right? I think we have said that in the past. The partner decided it's from Goa, so that is from Goa, right? That's not contingent on Indore getting reinspected here.
That is correct. That is correct.
That's right.
Got it. Got it. And just the second one on the opening remarks which you had made, the U.S.-based ex-Revlimid revenue grew in double digits, right? And that base, when we are referring to that, obviously includes lanreotide. Is that the right understanding?
That's right. You're on the 7th.
Okay. Thank you. So that's it. That's it from me.
Thank you. Next question comes from the line of Vivek Agarwal. Please go ahead.
Yeah. Thank you. The question is related to India business. So what is the share of in-licensing portfolio in India RX business and how that has grown?
At the moment, it is less than 10%. Now Galvus was appearing as the in-licensing, which now we will have the benefit of own manufacturing and therefore full supply chain margins. That will come out of the bucket, and your peak will grow. That's the evolution of it.
Thank you. That's only from my side.
Thank you. Next question comes from the line of Tushar Manudhane with Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Thanks for the follow-up. So just on lanreotide, while the first, when we had launched at that time at CL, there were certain regulatory issues. If you could clarify, it was to do with the same site and now with this USFDA thing. So in the over a period of time, have we thought of having any alternate site filing for this product? That's my first question.
Yes. So from de-risking perspective, we're looking at a second site, not in the same market. And those discussions are advanced with the partners because we need the partner to be able to take transfer the product to the new site.
So which means if we are thinking of launching in first of FY 2027, are we launching in first of FY 2027? It has to be subject to the USFDA clearance for this site itself.
Yeah. The earlier resumption will come from the existing site. For future, the de-risking can happen from the second site as well.
Got it. Sorry if I would be dragging on this, but there's 0 -6 months, 2 big respiratory launches while you might not call out individual market size of products. If you could just combine the two and just give us an idea in terms of when you say big, how big is the market size? And is there organized generics already there in these products or not there?
No. In the 0-6 months, go ahead, Achin. Go ahead.
Yeah. I think so we have guided that two of those opportunities are quite large, and we expect to be the sole generic in those for substantial periods of time. The third one in that same bucket is the generic Albuterol, which already has competition.
Yeah. I get your service. Sorry, but just to reduce the subjectivity and just trying to understand when you say big, what would be the market size? If not individual product, combined, if you could highlight.
Like we've said, that collectively our new launches will make up for the lanreotide revenue drop. I think that should give you some indication of.
Relatively less as compared to Revlimid while it would help to make up for the sales. Will it be at a relatively similar profitability or lower profitability?
Yeah. So see, no, it will be lower profitability than Revlimid. And it also depends on, by the way, on timing. So when you launch it, collectively, I'm saying that it'll make up. It'll be lower profitability, but important to note is that our respiratory assets are all in-house. Okay? So they will come at a very good gross margin. So only when you go outside with partners, then you have to share some profits or pay some milestones, etc. So in this case, all of them are in-house.
Well, maybe we can give you color. Let's give you some color in this manner, right? If you take away Revlimid, right, the next set of products are a certain size for the business, right? And including lanreotide, including lanreotide, I think the two products we're talking about, ballpark as an average, they would come at that size as being leading products for the market outside of Revlimid.
Well, it's not a big one. Thank you.
Thank you. Next question comes from the line of Nithin Agarwal with DAM Capital. Please go ahead.
Hi. I think only the business, what do you think is the normalized gross margin for the business on a more secular basis?
No. So see, I think we've been averaging about 65% or so. So range of about 60%-65% depending on the mix. Some quarters will have more acute, so that will be more on the lower side. And when it is respiratory, etc., then typically it would be higher, right? And then, of course, U.S., it all depends on a small portfolio that you have. So there can be product skews that can be there.
On the fixed cost, let's say we've had obviously some pickup in the business fixed cost overhead which will happen. Obviously, there's been a Revlimid cushion over the years which has been there. Now, with Revlimid not being there, is there an opportunity for us to take out some of to prove some of the operating overhead costs?
No. Absolutely. I think we constantly look at opportunities to reduce costs and optimize it. So there are opportunities. We've run a program as well this year. Part of that program, some benefits may come towards the end of this year, but more full-year benefits will start kicking in in the next year. So there are definitely constant continuous improvement programs that we run on the cost side. And please, again, for the sake of repetition, the R&D cost that you see out there of 7% of revenue sits in material cost, other cost, and people cost as well. So all the three line items will have those sitting. But you see increase in those line items, that's also because of R&D. Not so much in people because we've not really invested big time in people on the R&D side.
But on material and other expenses increased, you can see it's on account of R&D. And R&D also has litigation costs that you do for the product in the U.S. or any other country. So those costs also take place.
Thank you so much. And Achin, best of luck for your term going forward.
Thank you.
Thank you. Next question comes from the line of Chirag Dagli with DSP Asset Managers. Please go ahead.
Yeah. So thank you for the opportunity. Ashish, on your comment of the increase in R&D, some bit of that being led by the R&D purchases that you've done, the absolute quantum seems like INR 150-odd crore. Is this in the ballpark, or is this way off in terms of if you were to estimate? Because you're not calling it out separately, but that INR 150-crore kind of an increase versus the run rate that you've been having, is this broadly right?
Yeah. See, that's the guidance Chirag had given in the last quarter as well, where we said that our R&D expenses and estimate have gone up by about 50 basis points. Your 50 basis points would translate to somewhere around INR 150 crore. From that sense, yes, your number is very major.
That sits in the RM cost is what I'm trying to.
RM as well as other expenses also, yes. And some bit of capital expense, that would be very small. If you're buying large plan, it would be better. But that's a small number. That won't be a.
Ashish, the incremental versus the average run rate that we've been having largely sits in the RM cost line item?
RM and other expenses. Yeah.
I see. Understood. Understood. Fair point. The other bit is in terms of the quarter-on-quarter dip in the U.S. business, roughly about $65 million. You said largely this is lenalidomide. Should we extrapolate this to an annualized number to get the sense of what our annual lenalidomide sales would be in the base, or would it be lower, higher? Just how should we think about it?
Yeah. So Chirag, they are fortunately we can't guide yet because of the agreement arriving.
Is the run rate going to be materially different in the coming quarters on the U.S.?
No. So I think the future guidance on U.S.-led lanreotide stabilize, I think there'll be good opportunity for us to give you that guide.
Understood. Thank you for that color . Just in terms of clarification, Umang, you said the 2 assets, the big respiratory product that you're expecting in the next 6 months. In terms of the opportunity size, it could be, did I get this right, that the size could be as big as lanreotide potential, or what were you trying to indicate in terms of?
Yes. Yes. What I was trying to say is that it's quite likely that 1, if not both, could be 1 of the largest products for the company. That's what I was trying to say. So if you take out Lenalidomide, right, and if you take the next top 2 or 3 products of the company that we sell, including lanreotide, this is ballpark in that top 2 or top 3 product type of a profile for Revlimid.
Understood. Thank you so much.
Thank you for that color .
Thank you. Next question comes from the line of Siddharth Negandhi. It's Chanakya Wealth Creation. Please go ahead.
Hi. Thanks for the opportunity. I just wanted to understand if you are seeing greater traction in trade generics or branded generics within the India business. If you could give some color on that. In context of the Schedule M implementation, how are you seeing the actual implementation on ground, and do you expect either the branded or the trade generics business to gain share because of that? That's question one. Question two was in line with the peptide launches that you mentioned in the developed markets in the US, if you could give some color in terms of launches in the emerging markets for some of these peptides where we're seeing lots of exclusivity. So these are my two questions.
Okay. I'll start with the trade generic and branded generic question first. We see opportunities on both sides, and I think slightly different drivers for each. One has an element of scientific doctor promotion. The other is more channel-led. But given the breadth of the market, we see equal opportunities on both sides, and our growth rates have also been similar in this year. As far as Schedule M is concerned, that's a good initiative from the government side to raise the quality bar on all the manufacturing that is happening in the country. It is more of an impact for smaller players who will need to ramp up to meet those quality standards. From Cipla perspective, we do not have much or any impact because we're already at or better than the standards that are asked for.
In terms of EM launches on peptides, so you know that the lanreotide we've already launched, and then we have some other products in the pipeline. It would be difficult to call out individual assets because the quantum would not be as large as it is in the U.S. But we are looking at having the same level of complexity and differentiation on our EM portfolio as we have in the U.S. portfolio. And sometimes there are assets which are more differentiated, which are registered in branded markets, which are not available as opportunities for the generic market in the US. So we are focusing on building out these EM front ends as well as EU and South Africa front ends.
Thank y ou. Mr. Negandhi, please join the group for more questions. Next question comes from the line of Shrikant Akolkar with Nuvama. Please go ahead.
Thank you so much for taking my attention. My question. I have two questions. Firstly, since we have launched tirzepatide, can you say that we still will be able to launch semaglutide in March, in the month of March?
So at the moment, we are focusing on tirzepatide. That's a fairly large opportunity with our European partnership with Lenalidomide. As you see from IQVIA data last month, the molecule was dropping upwards of INR 130 crore a month. So our efforts are primarily focused on that. On Sema, we will wait and watch as to how the market evolves. And then if we see an opportunity at a lower price point to cover some of the market, we can take that call, but not immediately.
Understood. Just follow up on that because we have an agreement with Lenalidomide. Does that agreement stop it from entering in semaglutide?
So we cannot share the specifics of that. But as I said, we can see how the market shapes up. And if we see an opportunity to play in that market, we can take that call over time.
Okay. And the second question, just to check up whether we have Generic Spiriva in the development?
Can you please repeat the question?
Yes. Sure. I was asking if we have generic Spiriva in the development at the moment or maybe in the future.
Because your voice is not clear.
Well, it depends on which market. No, no. I think I got this question. The question is on Spiriva, right?
Yes, sir.
Yeah, yeah. That depends on which market you're talking about. I think for some part of the world, we have it. And for some part of the world, we can't disclose because it's competitive.
Okay. Understood. Thank you so much. And thank you, Umang, for last 10 years. Your service and all the best to Achin. Thank you.
Thank you very much.
Thank you.
Thank you. Thank you. Next question comes from the line of Kunal Dhamesha with Macquarie. Please go ahead.
Hi. Thank you for the follow-up. Just one question on the INR 275 crore exceptional item this quarter. Ashish, do we see any prospective impact which could happen in the future quarter as well that this INR 275 crore some amount continues to remain?
No. So, in our assessment, we have the data with us. We've based on the new code to ask for guidance and FAQ even till now. We've taken the impact. So, we don't anticipate any material adjustment to this amount, except, of course, your accruals now because of the new code will start to be higher than the accruals every year that you were making. But for the past, whatever the accruals have to be made is all sitting there in the INR 275. No material adjustments we see after this.
But there could be some lingering residual or the structural increase in employee cost because of this, right? Because we will now have to provide for graduating.
Yeah. So your accrual every year now will need to be slightly higher unless you change the structure of the battery.
Okay. Okay. And on R&D side, this year has been higher, but given we would have timelines about the projects that we are currently doing. So do we expect that R&D can cool off, let's say, in FY 2027?
I think the normal range which we have been operating in is around 5%-6% of R&D spend. Gets lumpy at times depending on certain programs where the R&D and API cost might get lumpy. But I think we'll try and keep it more around that 6%. But quarter-on-quarter, depending on the timing of projects, some of it goes up and down during the year.
Sure. Thank you and all the best.
Thank you. Next question comes from the line of Siddharth Negandhi ` with Chanakya Wealth Creation. Please go ahead.
Hi. Thanks for the follow-up. Just on the Schedule M, what I wanted to understand is given the challenges that the smaller guys will have on implementation, are you advertising your trade generics or branded generics business seeing any short-term blip or benefits from this? That's the question I actually had.
I think it is more towards benefiting the patient in terms of quality and preventing unnecessary adverse events. Given the number of manufacturers which exist in India, we don't see much material difference on our business on either of trade generics or branded generics because of this Schedule M implementation.
Got it. Thanks.
Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I would now like to hand the conference over to Diksha Maheshwari for closing comments.
No. Thanks everyone for joining the call. If any scale questions are left, we're happy to address that. Just that one comment that was asked on Galvus at 1100, that sits in the capital commitment in our balance sheet in Note 38 that clarifies the amount that is sitting there for Galvus capital commitment that we have made. It was not there in the initial press release. I checked that. Thank you.
Thank you.
Thank you. Thank you everyone for joining in. If you have any further questions, please write it to investor.relations@cipla.com.
Thank you. On behalf of Cipla Limited, that concludes this conference. Thank you for joining us. You may now disconnect or land.