Ladies and gentlemen, good day and welcome to the Cipla Limited's Q4 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. We have with us today Mr. Achin Gupta, MD and Global CEO, Mr. Ashish Adukia, Global CFO, and Ms. Diksha Maheshwari, Head, Investor Relations. I would now like to hand the conference over to Ms. Diksha Maheshwari. Thank you a nd over to you ma'am.
Thank you Sagar. Good afternoon. Welcome to Cipla's Q4 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 undertake any obligation to publicly update any forward-looking statement, whether as a result of new confirmations, future events, or otherwise. I hope you have received the investor presentation that we have posted on our website. I would like to request Achin to report.
Thank you Diksha. Good afternoon everyone, and thank you for joining us for our fourth quarter earnings call for financial year 2026. 2026 was a year of milestones for us. We completed our 90th anniversary for the business, and we achieved significant milestones across all of our businesses, One India, North America, One Africa, and EMEU. In India, we crossed a significant threshold with the business surpassing INR 12,500 crores in revenues, underscoring the strength and resilience of our domestic franchise, which is our largest franchise. In North America, the successful generic Ventolin approval from our U.S. facility marked an important strategic inflection point and reinforced our R&D capabilities. Our One Africa business continued to deliver market-leading growth, and our EMEU operations scaled meaningfully to become an INR 400 million-plus business unit.
Together, these achievements highlight our disciplined execution and our commitment to sustainable as well as diversified growth across geographies. Let me touch upon the individual businesses. Our One India business delivered a robust performance this quarter, growing at 15% year-on-year, driven by strong double-digit growth across branded prescription, trade generics, as well as consumer health. Full year growth stands at 9% year-on-year. On the branded prescription business, our key chronic therapies, respiratory, anti-diabetes, cardiac, and urology delivered a strong double-digit market growth. Our chronic mix stands at 60% as per IQVIA MAT, March 26. Foracort, our leading inhalation brand, surpassed a revenue of INR 1,000 crores, reaffirming its position as a respiratory market leader. Our cardiac brand, has established itself as an INR 650 crore brand, delivering 25% year-on-year growth.
This year we expanded our presence in the IPM by adding four brands with revenues exceeding INR 100 crores, bringing the total to 33 such brands. Our footprint in the top 300 brands in the industry now has 23 such brands. This year our growth has also been helped by a series of successful differentiated product launches across the core therapies. In respiratory, we launched products into the inhalation franchise, including Foracort G Syncrobreathe, Ciphaler, and the triple combination Vilterio Trio, which are strengthening adherence while delivering therapeutic benefits. In antimicrobial resistance, we launched ZEMDRI, Sipandmet, Esplusip, which underlines our presence and leadership in resistant and critical infections and AMR. In urology, we launched a novel product called HUENA, which expands our leadership in non-antibiotic management of recurrent UTIs. In our diabetes franchise, we launched SGLT2-led portfolio, including empagliflozin.
In dermatology, we launched an innovative solution, Pirfesca, for scar management. Together, these launches reflect our execution strength. It reflects our focus on complexity and our commitment to driving sustainable growth through improved patient outcomes. During the year, we also enhanced our pipeline and portfolio through strategic partnerships. We entered into a collaboration with Eli Lilly for Yurpeak, making our entry into the fast-growing obesity segment with best-in-class molecules. Our partnership with MannKind Corporation of U.S. brought Afrezza, India's first rapid-acting inhaled insulin, reinforcing our focus on differentiated diabetes solutions. We also gained exclusive rights to Pfizer's key established brands, further strengthening our access to strong brands in the IPM. Additionally, the acquisition of Inzpera Healthsciences enhanced our portfolio on pediatric and wellness product types.
Put together, these efforts meaningfully enhance our portfolio and reinforce Cipla's long-term growth ambitions. Trade generic side, we continued the strong growth momentum, delivering double-digit growth year-over-year for the quarter as well as for FY 2026. This performance was driven by a focused execution across distribution, a robust pipeline of strategic new product launches, and meaningful advancements in technology-enabled operations. We will continue to expand portfolio and use that as a key driver for growth, with 70 new launches planned this year. Our consumer health business continues its strong upward growth trajectory with Nicotex, Omnigel and Cipladine consolidating their number one positions in their respective segments. The business is driving very healthy secondary growth and actively exploring opportunities to invest in products and channels to further expand our distribution network. Operating profitability has improved in CHL, reflecting the strength and scalability of our consumer health strategy.
Coming to North America, the business reported quarterly revenue of $155 million and an annual revenue of $780 million, supported by demand in our differentiated portfolio and a steady base business. Albuterol market share increased to 19.6% as per IQVIA Math March 26. During the year, we advanced our portfolio with several key assets, including liraglutide, lixisenatide, and dapagliflozin. Notably, we received regulatory approval for the first AB-rated generic Ventolin with CGT, representing the first commercial MDI product to be manufactured from our U.S. facility. This milestone reinforces our growing confidence and capability to deliver complex generics, not just from India, but also from our U.S. manufacturing facility. We are expecting to launch this product within the coming months.
Our Goa facility, together with two U.S. facilities, is well-equipped to support the launch of all four respiratory assets planned for FY 2027, enabling a seamless and well-coordinated supply to the market. Our One Africa business grew at an impressive 14% year-on-year growth rate during the quarter, with a full-year growth of 7% year-over-year in USD terms, powered by strong performance across key markets. In the private market, our secondary growth outpaced the market growth with 6.6% versus 4.8% for the market. In EMEU, our focus strategy on deep penetration has built a strong foundation, enabling the business to breach the $400 million U.S. revenue mark. This is despite the significant volatility that has been happening in the recent months because of the war.
The business remained resilient during the quarter, navigating geopolitical uncertainty and disruptions with strength and discipline. It was led both by GTM and B2B categories, alongside consistent margin stability and internal pipeline assets. On the regulatory front, during the year, U.S. FDA conducted and concluded inspections at three of our manufacturing facilities in India, Bommasandra in Bangalore, Sitec at Mumbai, and Medispray in Goa. All of these inspections resulting in a VAI or NAI classification. This accomplishment reflects our sturdy dedication to quality, compliance, and operational excellence. A quick update on our U.S. pipeline. We continue to prioritize organic investments with sustained focus on advancing R&D capabilities for the U.S. market in particular.
We remain very confident in our U.S. business outlook, which is supported by a pipeline of nearly 40 to 50 products to be filed over the next three years, and this includes 12 first-to-files and 8 B2 opportunities that we are targeting. In the respiratory portfolio, five assets have been filed, including the generic Ventolin. Four of these are expected to be commercialized in FY 2027. We are also going to deepen this pipeline with four additional respiratory assets scheduled for filing over the next 24 months. Importantly, we remain committed to sustainability and innovation, with two respiratory assets incorporating green propellants expected to be filed over the next 24 months as well. In peptides and complex generics, eight assets are already filed, with select launches projected between FY 2027 and 2028.
We aim to file three more peptides and complex generic assets in the next 12-24 months. Additionally, we are working on oligonucleotides, and we are also having two global biosimilar assets. One is undergoing clinical study under an IND, and the other is in earlier stage of development. We see biosimilars as a very large and under-penetrated opportunity, and with the recent change in some of the guidelines, we believe this to be an upcoming almost $200 billion opportunity, with around 100 such biologics expected to lose exclusivity over the next decade. We are going to enhance our efforts on biosimilars. We have a JV with Kemwell, which is focused on execution, which has an initial pipeline of respiratory assets and oncology assets.
We are looking at adding at least 1 to 2 assets on in-house biosimilar development through this JV, which will really build our presence in the biosimilar space over the next 5 to 7 years. On the back of these ambitions and with a very solid foundation of execution, we are also accelerating our AI-led transformation. Our strength has always been on execution across quality manufacturing and regulatory. With the AI transformation, we aim to become a leading AI-led pharma organization. We have invested in robust data and technology foundations, which allows us to scale this up in a structured and sustainable way, and also in a very timely fashion.
We will be focusing a lot on driving efficiency, productivity and better decision-making with the help of AI over the coming two, you know, coming years. I would now like to invite Ashish to present the financial and operational performance.
Thank you. Thank you Achin . I'd like to present the key financial highlights for the quarter and the financial year. We reported a quarterly revenue of INR 6,541 crore. As a result of that, we ended the year with INR 28,163 crore. The EBITDA margins for the quarter stood at 15.2% and 21% for the year. Like every time, this does not include the other income. The gross margin after material costs stood at 65.6% for the quarter and 66% for the full year. This was primarily driven by the product mix in the revenue.
Total expenses for the quarter include the employee costs and other expenses, which stood at INR 3,296 crore. This was higher by about 10% year-over-year. Annually, the expense were INR 12,689 crore, which was again the similar percentage increase year-over-year. The increase in employee costs reflects our planned investment in talent, both to support our markets as well as to strengthen our manufacturing readiness in both India as well as in the U.S. Overall, the operating expenses also include continued investment in R&D, which stood at INR 509 crore, which is at about 7.8% of the revenue for the quarter. For the year, it was INR 1,974 crore, which is at about 7% of the revenue.
These investments are aligned with our pipeline priorities. It enables our new launches, and it builds readiness for the upcoming products. As a result, we are scaling up our annual filings, like it has been highlighted by Achin. In addition, we have started to see some impact of ongoing geopolitical situation within the operating expenses, which we are closely monitoring. In the near quarters, we don't see much a meaningful impact. In the future quarters, as the revenue inventory gets consumed, you'll see that impact coming through. For the quarter, PAT stood at INR 555 crore, representing 8.5% of sales with an effective tax rate of 22.2%.
On the full year basis, the PAT amounts to INR 3,879 crore, accounting to 13.8% of sales, while the ETR for the year is 25.9%. Our ROIC stood at 22.9% for the year. Of course, PAT also assumes a certain impairment that we've had during the quarter. Our free cash flow generation and operating efficiency endures to drive healthy net cash position. As of 31st March 2026, the debt on our balance sheet, including the lease liabilities, stood at INR 614 crore, with net cash equivalent balance at INR 10,526 crore.
Looking ahead, our key priorities will include, for One India, it would be to focus on execution to sustain the growth momentum and to outperform the market in branded generic, trade generic, as well as in consumer wellness. We will further strengthen our presence in chronic therapies, including diabetes, cardiology, urology and dermatology, while maintaining the robust trajectory that we've built in respiratory. In North America, we will concentrate on enhancing our commercial execution and accelerating new product introductions. Our aim is to cross $1 billion mark as a run rate towards the end of this financial year, i.e., FY 2027. In South Africa, our focus will be on improving the private mix with correction in tender contribution.
In EMEU, our top priority is to drive top line growth by deepening penetration in core markets while maintaining a strong margin trajectory. Looking ahead to FY 2027, supported by a ramp-up of new launches and investments that we've made across our manufacturing facilities and ongoing expense optimization initiatives, we expect the EBITDA margins to be in the range of 18.5%-20%. This would be actually achieved with a sequential improvement quarter on quarter.
Being in the second half of the year. An overall basis, you'll have 18.5%-20% kind of a range. This guidance does not include any contribution from lanreotide in FY 2027. I'd like to thank you for your attention, and we'll revert back to the moderator to open up for the questions and answers.
Should we open the floor for questions?
Yeah, sure. Please.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their cellphone. If you wish to remove yourself from the question queue you may press star and then two. I'd request we use the handset when asking the question. Ladies and gentlemen hold on for a moment as we assemble the questions. Your first question comes from the line of Vishal Manchanda from Systematix. Please go ahead.
Hi good evening and thanks for the opportunity. During the quarter, did we kind of book any shelf stock adjustment for REVLIMID?
No. I think we had shared this in the last quarter as well. We did not have any SSA adjustments.
Okay. Second, on generic Ventolin launch that you are expected to do next month. Just wanted to understand if the innovator is supposed to launch a green version of Ventolin sometime by third quarter of this financial year. As hypothetically, if the innovator is able to replace all of their Ventolin product with the new version, would that impact Cipla?
Right now, generic to the existing Ventolin. The switching to another variant is, I think that will be a process, you know, which is not an automatic process under the U.S. law at this point of time. We do not anticipate any near-term impact of that change as and when the transition starts to happen.
Okay. If you could update on the respiratory pipeline, the key assets, ADVAIR, SYMBICORT, QVAR, Flovent.
I think as we had guided, we were expecting four approvals this year. Ventolin has already got approved. We are, you know, having different goal dates for different products. During the year, we are expecting, you know, ADVAIR, SYMBICORT, and then one other asset to get approved. This will happen during, I think, you know, H1 and one is H2 as well.
Okay. What is holding back ADVAIR for so long?
I think your question is probably more historic. If you recall, we had OAI at our Indore facility, so we had to tech transfer to the U.S., which caused the delay. Now we're ready with everything. It's just a matter of receiving the approval.
Just one final one.
And we are actually-
Right. Sorry.
We are even to complete. We've been through a pre-approval inspection on our U.S. facility for this particular product.
Got it. Just one final one. Do you expect to see any benefit out of the EU FTA for your respiratory portfolio? Because you source a lot of the basic devices from Europe.
At this point, we are not expecting any meaningful impact of that. It's more business as usual at this point in time.
Is there a change in the duty structure there or it remains the same pre and post U-EU FTA?
No, it remains the same, so there is no benefit as such. In EU, we are already selling respiratory devices which are in-house. You know, there's no significant benefit that we see coming from EU FTA.
My question was more from a sourcing standpoint. Like the key raw materials that come from Europe, would they be cheaper for you?
no. We get some raw materials from there, especially on the devices side. There's no any such benefit that we have out there.
Okay. Okay. Thank you.
Thank you. The next question comes from the line of Siddharth Negandhi from CWC. Please go ahead.
Hi. Thanks for the opportunity. Just wanted to understand the specific initiatives around AI which you mentioned. If you could share any specific initiatives that you've taken and anything, any other pilot initiatives that you see scaling up in future.
AI is a broad-based implementation that we're targeting, which will focus across multiple functions. The difference between what used to happen in the past versus now is we are focusing on end-to-end processes versus small, limited use cases. We have implementations across the corporate functions, and a lot of the R&D related use cases as well. The idea is to use it in a way that helps obviously faster and better decision-making, but also ultimately gives us productivity benefits.
Right. On the biosimilars front, just want to understand in terms of your strategy for biosimilars, are you looking at in-licensing or are you looking at your own development? What sort of a pipeline and timeline are you looking at for that, both from a U.S. and EU perspective? Is that sort of accelerated given the new FDA draft guidelines?
Yes. We have a predominantly in-house strategy, where we have 2 assets currently under development for developed markets. One of them is already under clinical trials under an IND of U.S. We will be adding 1 to 2 assets each year, which will therefore, you know, start resulting into a pipeline of 6 to 8 in-house assets over the next, you know, 5 to 8 years. On top of that, we are considering a, you know, limited amount of in-licensing where there are near-term opportunities that are not within our in-house portfolio. For those, we are open to considering some in-licensing opportunities as well.
We see this as a newer space, more so because of the changes to the guidelines which have, you know, placed us in a good position, where we, you know, can run these like the other complex projects and we can benefit from the overall economics of developing these projects as well.
Okay, that's fine. Thank you so much.
Thank you. The next question comes from the line of Surya Patra from PhillipCapital. Please go ahead.
Thank you for this opportunity, sir. My first question is on the U.S. revenue guidance, what you are talking about $1 billion by the end of this year. Sir, also simultaneously you have mentioned that in your guidance for 2027 you have not factored lanreotide. That means, in your expectation for FY 2026 you are not considering lanreotide, and obviously this lanreotide is not there. If we kind of deduct these two product revenue from the $780 million annualized revenue of FY 2026 for U.S., the number what you're talking about is almost like double the size of base U.S. business of FY 2026. What is the kind of bridge that you are talking about, where from this revenue build-up that will happen? Can you give some clarity, sir?
The guidance, I just wanted to clarify, is a billion-dollar run rate by the end of the year. We are not guiding for a billion-dollar revenue during the year. Right? The reason for that is because a lot of this is contingent on pipeline maturing. We have one approval already in hand. As we mentioned, there are three other respiratory approvals. There's one big peptide approval, and there are three other products which already got approved in the year, smaller assets, et cetera.
As these products get approved, our run rate will keep improving, and we will get to that $1 billion by the end of FY 2027. Which puts us in a very good position because historically, you know, we were shy of that. We would want to see the year ending at a good run rate of $1 billion in the U.S.
Okay. That means kind of in the second half, so we will see a run rate of almost like $100 million incremental revenue versus the quarterly run rate in the first half.
Yeah. Yeah. Yeah.
Okay. Is it fair means, since you have mentioned that lanreotide you have not factored while guiding the margin for the year, what is the outlook that we are giving for lanreotide for this year and for the subsequent period, given the kind of a total disruption that we are currently seeing for that molecule?
Yeah. For lanreotide, we have, you know, the partner who's working on the remediation efforts.
That's in full swing, and we are helping them as much as possible on navigating that path. I think maybe by next quarter we'll have closer visibility on their exact remediation timelines. Which will also include a re-inspection from the FDA. We can come back and guide after a quarter. In parallel, we have also identified alternate supplier for this. Alternate manufacturing site, you know, which will be based out of the U.S. The objective is to be able to file by early next year, next calendar year or so, Q4 of this financial year.
Okay.
That gives us a two-pronged approach to overcome this. I think, you know, it will, it will come back. It's a very interesting opportunity, being a long-acting injectable. You know, once we are able to resolve either of these two, and now we have two shots at goal, we will be back in this, definitely from an FY 2028 perspective, it will be.
Sure, sir. Sir, on Ventolin, that is the next question. We already mentioned that we have around 22% kind of or more than 20% kind of market share in the Albuterol market itself in the U.S. Now with another variant of Albuterol is getting approved, do you find any changes to the kind of market dynamic in terms of the pricing or in terms of the competition or in terms of your scope in Albuterol as a whole, whether it will lead to incremental business or not, since it is a variant of Albuterol only, and the prescription would be based on Albuterol HFA that way.
Yeah, yeah. No, these are different products because they get substituted to the different innovator products. It's a different NDC, different market, and we have CGT on the generic Ventolin, so we will actually be exclusive, you know, for a 6-month period. We expect a significant uptake. There is no cannibalization that will happen on the other variant, which is a generic to, you know, another variant of same molecule.
We're more likely to take the share from, you know, the existing Ventolin suppliers rather than, you know, going to each from the other franchise.
Okay. Just last one question from my side, sir. Is there any scope of rationalization of the cost on the cost front? Because if the revenue is likely to slide on the U.S. front, particularly, are we likely to see any reduction in any cost line item for FY 2027?
Look, there are two parts. Working on number of productivity enhancement measures, which will help us optimize. Including some of the tech related transformation that we spoke about. You know, the short term, there are disruptions because of the war situation on sourcing side. Right now we're having visibility to what we've seen so far. You know, if it prolongs, that's something that is, you know, still yet to be quantified. To answer your question on basic efficiencies and productivity, yes, we are working on that, and it will materialize as we go through during the year. There's one more point which I think you should keep in mind is we had invested in our North America facilities for these complex products, and so far the cost has been there in the last quarter or two, but the revenues have not commensurately come.
We will see that corresponding revenue with the new launches, and therefore the economies of scale will improve as we go along.
Sure, sir. Yeah. Thank you. Wish you all the best.
Thank you. Your next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah, thanks for the opportunity. Just on the R&D, connecting R&D spend, overall almost INR 2,000 crore. At the same time, very few ANDAs being filed. Is it that the R&D spend per ANDA is significantly higher, maybe for FY 2026, 2025, compared to the earlier, let's say the philosophy of R&D spend per ANDA? That's my first question.
Yes. Actually, we have gone up products, including some first-to-files, which are on oligonucleotide side as well. We've gone into more respiratory, more peptide and more oligo, which is resulting in higher spend per filing.
Some of these also involve litigation cost as well. That also leads to higher R&D spend. It has got everything in that R&D spend that you see, both API cost, your R&Ds that you buy, litigation, et cetera, et cetera. Of course, some of these oligonucleotides, et cetera, we go outside to CRO, CMOs as well. There is also cost involved in that.
Sir, typically, at least for, without getting into product specific detail, but let's say for respiratory and oligo products, like per ANDA R&D spend broad number you would like to call out?
I think that's very case specific, so it's difficult to call out an average number. We are guiding towards, you know, 7%- ish on R&D spend as a percentage of sales. We're also going to, I think in the mix, the mix will also change slightly in the coming year because as I said, 14-50 filings with respiratory, with first-to-files and certain number of peptides, et cetera. Hard to put a metric on per filing because the nature of that filing changes a little bit. Our endeavor is to go after complex opportunities which keeps the business sustainable and NPV per project has to be high, right?
Got it sir. Secondly, the Albuterol market share has sort of reduced quarter-to-quarter, while the number was at 19.5, then it moved up to 22, and we are now back to 19.5. Anything to read through in that?
I think it's hardly a reduction that you see out there of 0.4% or so that we've seen. I think 19%-20%, or rather 19.5%-20% is something that you should pencil in. We are ranked 1 out there and if supply was, if you could supply more then we could, you know, there's a potential to increase the share as well.
Just to complete on that, the R&D part, is this Indore site regulatory issue also one of the reason for, let's say, is it delay in filing because of the regulatory issue at Indore site or the Indore site classification has got nothing to do with the filing of the assets?
No. Now we have de-risked out of Indore, so our assets are filed from U.S. and one of the assets we are doing from Goa because Goa is cleared.
No, no, I was referring to, let's say, prospective filing, not the ones which are already filed. Let's say where we do R&D spend, where the product probably from a validation or exhibit batches are ready, but because of classification at Indore site, the acceptance of filing by U.S. FDA, is there that kind of a delay also happening?
It's same. Likewise, for potential filings also, we are focusing more on Goa and U.S. sites. Yeah. Indore, I think we will accelerate as and when, as soon as it clears, yeah.
Got it, sir. Just lastly on Ventolin, this product will see a gradual pickup in terms of market share? What's your strategy, if you could highlight? Given while we have exclusivity, but will the pickup be gradual enough or we can have a sizable business in, say, 2-3 quarters timeline?
Yeah. You will see it towards second half, a ramp up happening in generic Ventolin. Though we will launch it within the quarter one, yeah. But the ramp up will happen in half two.
Capacity won't be the constraint for this product?
No, we've, we have U.S. facility for it.
From the device combination as well, prospective.
From which? Sorry. Come again.
From the drug device, while drug would be there from like-
Oh, yeah. Not a problem at all on the devices side.
Got it, sir. Thanks. Thanks a lot for
The device,
Thanks. Thanks a lot, sir. Thanks.
Thank you. The next question comes from the line of Damayanti Kerai with HSBC. Please go ahead.
Hi. Thank you for the opportunity. My question is again on your U.S. exit guidance of $1 billion in FY 2027. You indicated couple of interesting products in respiratory peptides, et cetera, which can help you to achieve this rate. My two questions there. What kind of visibility you have on these products which gives you confidence that you can receive approval in this year? Second is for some of the bigger assets, what kind of risk mitigation strategies you which you have already implemented? If you can elaborate on these two points. Thank you.
No. See, I think it, you know, it's in terms of confidence in each of these assets, we are seeing some developments happening. Like, for example, in ADVAIR, now you've had a PAI that has happened. Okay, Ventolin, where we were expecting around the same time, we've got the approval. In certain other assets also, there is an ongoing, you know, discussion readiness that is there. Of course, we can't anticipate when the approval will come through, but in some of them we are aware of the goal date, et cetera. Puts us well for quarter three, quarter four, you know, ramp up to happen to a billion-dollar kind of a run rate. That's what we have envisaged in our business plan.
From facility point of view, all these facilities are also de-risked. From internally, it's only pending approval. From internally, we are ready to, you know, kind of launch these assets as soon as the approval comes through.
Sure. When you say facilities, issues are de-risked. So, most of these filings are filed from two sites, say one from India and one from U.S. Is that the case?
No, that won't be the case. Right now these these are filed from U.S. or from Goa, you will have one or two assets filed. These are respiratories that I'm talking about. The peptide is with a partner site. We don't anticipate any. That's why I'm suggesting that we don't anticipate any risk in the facility. Goa has recently got inspected as well. There are two observations we are waiting. We have responded to those observations. We are waiting for the classifications. Can't comment on that. Nevertheless, that's the status of our facilities there.
Sure. My second question is on your India business. Obviously fourth quarter I believe is very strong. Full year you ended at 9% growth for this segment. When we look ahead to say 2027, 2028, do you think you can outpace IPM growth in, say, next one or two years, or it might take slightly longer? Market growth also improved in recent time. We are seeing around low double-digit growth for market. On that perspective, you are just like close by but not outpacing the market as of now.
Yeah. We are confident that we'll be able to deliver a strong double-digit growth as well as a market-beating growth in FY 2027, 2028. We've been seeing that consistent trend over the last, you know, couple of quarters.
Okay. You think it's possible. Okay. My last question is on your gross margin trends. If qualitatively you can give some color. Given now your product pipeline is becoming more complex, generics heavy. In that sense, how should we look at your gross margins in senior term or in medium term?
Yeah. See, it's a large, mixed bag in the gross margin. There are many factors that go into it. Like, in the last quarter, I had highlighted that we had, you know, R&D costs, material costs going up due to which the gross margin had got impacted. Some bit of that has got re-reversed in this quarter where the margin is better because also, you know, not just the product mix, but also because the R&D material cost was lower in comparison to the previous quarter that you saw. I think, the way I look at it is that, of course, lenalidomide was a high margin product. Most of our pipeline assets that are coming are mostly in-house products.
In-house products will always give you a higher end of the margin, more than the company average that you're seeing today. It'll only accrete to your company gross margin. But at the same time, you know, some of the peptides that we're talking about and Oligo is much later, but peptides that we're talking about, they are partnered products. While the gross margin could be high out there, but there is also a profit share as a royalty that we end up paying, which goes into gross net. Therefore, your gross margin in those products will be after the profit share.
which kind of brings it down. At the same time, the S&D, et cetera, in the U.S. at least is not much, so it is accretive significantly to your EBITDA margin. In India, we are moving more and more towards chronic. Chronic will definitely come with a 5%-10% better gross margin. We are keeping a very tight control on how much, what IVs we do. Keeping all these things in mind, I think gross margin should have a positive bias. The last thing that I just want to highlight is that generally you will see in the results also there's a strong control that we have over costs. Every year we take some target to actually reduce the costs such that it's lesser than the revenue growth that you see out there.
I think these are the things that we take care of. Of course, there is this whole geopolitical and war risk that is there. We had some impact of that in Q4 . We have some impact in Q1 . Not significant though. You know, some of these inventories that you're buying today, as it gets consumed in second half, there may be some costs, but that's temporary. Like, I think your question was more around longer-term sustainability.
Yeah.
Longer term I've talked about, but there may be some blips here and there because of the reasons that I mentioned.
Sure. Thank you. Thank you very much for your response. All the best.
Thank you. Our next question comes from the line of Nikhil Mathur with HDFC Mutual Fund. Please go ahead.
Yeah. Hi, good afternoon. I'm sorry to be harping on the U.S. guidance. One clarification. When you were saying that you'll be at a billion-dollar exit run rate, does it include lenalidomide or does it doesn't include any contribution from lenalidomide?
At the moment, we've left that out of this guidance, so that will be an upside to plan, if we can successfully, you know, get back in the market before that.
Okay. If I analyze this quarter's U.S. revenue, you are at around $620 million. We are talking about a billion-dollar exit, this is about $380 million of incremental revenue. Just wanted to understand the skewness of this $380 million. There are, I think six, seven products that you're launching this year. What kind of contribution will be from one or two products in this incremental revenue? Will it be a skew towards one or two products or can there be an equitable distribution among six, seven products? I'm just asking so that it doesn't create a big risk in FY 2028 because if competition comes in, then again you kind of face a situation which you faced in REVLIMID this year.
Nikhil, in terms of annualized revenues from these products, I think couple of them we are expecting INR 100 million plus annualized opportunities. The others were also significant. This is respiratory, there's a peptide asset which is also big. We are expecting big contributions. I think the reason we are not able to give a quarter-wise kind of breakup or a product-wise breakup is because the timing of launch, if it moves 1 or 2 months, you know, that affects the full year number. Run rate-wise, assuming we have these launches, you know, we will be able to cross that run rate by the end of the year. There are, you know, 2, 3 big opportunities and couple of medium-sized opportunities.
Got it. What kind of a tail are we looking at in these plus 100 million opportunities? I mean, can they continue for, let's say, two years, 2028-2029, or in 2028 onwards only we can see some bit of erosion starting to happen?
See, these are not like the six-month exclusivity kind of opportunities. You know, even if competition enters, they will taper off slowly, right? They are more like The way to look at it is what you saw on our albuterol or what you saw on our lanreotide prior to supply disruption issues. These are more steady opportunities, so where we have to manage some level of price erosion, but not a cliff kind of scenario, right? These are steady opportunities. If there is a price erosion, with new competition coming in, you may see some volume going up. You'll have to manage it as a dollar value rather than looking at it as volume or a price gain.
Understood. On the India business, can you quantify the contribution from Yurpeak in four Q? I imagine it's only four Q where Yurpeak would have contributed, not in three Q, right?
Yeah, it wasn't that large because, you know, real sales started happening in January. January, February, March, you know, we've seen growth internally in secondaries. April also we saw an improvement over March on secondaries. Yeah, I mean, it's not out of the 15% overall One India we've reported, it's not gonna be a meaningful percentage.
sub 1%, is that the Sub 1% or sub 2%, is that how we should read it?
I think those figures are broadly available in the market. If you look at IQVIA, I'll give you a direction of how much primary we are doing.
Okay. Is there any M&A component or in-licensing component that I might have missed, which is also leading to this double-digit growth in 4Q?
Yes, we had in-licensing of some Pfizer products. We had a small acquisition of a business called Inspera.
Okay. It's like that?
The base will still be double digits. I think the presentation also we had mentioned, We've always announced the 3, 4 ILDs and acquisitions that we have made.
Okay. Understood. Thank you so much.
Thank you. Our next question comes from the line of Saion Mukherjee with Nomura. Please go ahead.
Yeah hi. Thanks for taking my question. Achin, over the next, let's say 2, 3 years, how should we think about, you know, your capital deployment, both, let's say organically or inorganically? If you can give any color, the kind of assets and capabilities that you're looking at.
Yeah. Look, I think we are preparing for a solid growth over the next five years and beyond. For that, I think the number 1 deployment is going to be on R&D side. We have plans to accelerate R&D pipeline. Respiratory assets, we have some under approval, some more which we are filing. Complex products which we outlined was peptides, other differentiated products. Also we're going to step up on biosimilar side, where we would want to do roughly 6 to 8 internally. If we find a couple of good opportunities, we can supplement through inorganic as well, so that will consume some capital. We have CapEx, which we have increased steadily over the last three years.
This cycle will probably reduce after another year or so because, you know, we've built enough capacity for the products that we want to supply. Beyond that, we will be led more by productivity initiatives. On top of that, inorganic, you know, we are interested in looking at assets. We, you know, we evaluate several assets. Our bias is more towards differentiated specialty kind of products for developed markets, you know, which is U.S. and Europe, which give us a more sustainable growth and some capabilities as well. I think those are the areas where we would want to deploy capital in order to, you know, sustain the entire trajectory over a longer period of time.
Yeah. Anything in India or emerging markets, like more in branded generic space, do you think Cipla would be looking at or this would be largely organically built?
India, you actually put a slide in the investor deck on the partnerships we've done. Acquisition, a large acquisition in India is, you know, little difficult for us because we are a number two, number three player. You know, we're actually number one by volume. Whenever we start looking at some of these, you know, there's a significant overlap that we have to, you know, account for. Emerging markets remains a very good opportunity for us. We're looking at that. If we find opportunities where we get, you know, business plus capabilities, that would excite us a little bit more because then that gives us a platform for future growth as well.
Right. Actually, just one clarification, because your cash on balance sheet is pretty large now, and you know, the kind of expansion organically and inorganic opportunity, it appears that, you know, it won't get consumed. I mean, are we then thinking about high dividend payout? What, what are your thoughts on the cash that you have on your books now?
As I said, you know, see, there are opportunities to deploy. We need to be selective. You know, when we look at it as, you know, in absolute rupee term, it looks high, but if you were to change 1 or 2 large transactions, meaningful transactions, you know, this is not a very high amount of cash. I don't think, you know, we are worried about the cash on our books. It gives us flexibility, and it gives us opportunities to look at options which, you know, which can help the future growth of the organization. At the same time, we do remain selective because, you know, of the kind of opportunities that we are looking at, you know, have to really pass all of our filters in terms of, you know, diligence and adding strategic value.
Right. Thanks and all the best. Thank you.
Thank you. The next question comes from the line of Neha Manpuria with Bank of America. Please go ahead.
Yeah. Thanks for taking my question. A quick question on the India business. I think you mentioned we grew double-digit in the trade generic business, and I see we are growing double-digit in consumer healthcare as well in FY 2026. Is it fair that the branded generic business has actually been pretty muted for the entire year? What gives us confidence that we'll be able to beat India growth in the next year?
Yeah. I think, you know, we mentioned that, you know, all the three segments of the business have done really well in especially Q3 and Q4. Q1, we had a muted quarter on the branded RX business, but that is behind us now, right? There were reasons related to seasonality, et cetera, but we've not seen those similar reasons as we started, you know, this particular financial year. With the products we have and the strategies that are there, we are, you know, we are quite confident, and we've seen that trend now over, you know, at least two quarters, which gives us confidence that this will continue.
You know, also we should still acknowledge that acute is a fair representation in our mix in comparison to other players and market. Okay. That is season dependent. Last couple of years we've had a challenging season, so we have to work much harder in other part of our portfolio to achieve that growth, which at least we've been able to do in the second half of the year.
In that case, given that we've had a, you know, fairly low base on seasonality, ideally even a normal season should give you that tailwind for India growth this year, right? That would be a fair assumption. Even if we didn't have, like, even a normal season should help.
That's why we're saying, you know, we are confident about a double-digit growth, because these seasonal patterns, you know, don't happen too many years in a row, right? I think the base was low for last year on some of these acute things. Also the chronic portion, particularly diabetes, cardiology, has grown significantly. We have also diversified beyond that seasonality dependent portfolio. Yes, we will overcome this.
Okay. My second question is on the margin guidance that we mentioned, 18.5%-20%. Given that a lot of the, you know, U.S. growth will be the high value launches will be second half weighted, is it fair to assume that in the second half our margins could be north of the 20% range and therefore the average that you've given, would that be a fair assumption?
Yeah. That's exactly what I had mentioned initially, that in 18.5%-20% that we're guiding, it will be more in the favor of H2, where you'll have better than average.
First two quarters where we don't have the benefit of new launches, we will see a lower margin than the average that we're giving. Yeah, that's the trend that you will see.
Thank you. We take our last question for today from the line of Vivek Agrawal from Citigroup. Please go ahead.
Yeah, thanks for the opportunity. I'm just again trying to understand your EBITDA margin guidance. Given the outlook you provided for the U.S. business, $1 billion plus run rate and India double-digit, double-digit growth in FY 2027. This 18.5%-20% appear a bit conservative. Just trying to understand, have you baked in significant impact of, let's say, input cost increase or impact of geopolitical situation, et cetera, or anything that is holding you back from giving a better guidance? Thank you.
See, I think, you know, we have made a lot of investment in the last 1 or 2 years, both on people as well as on R&D. Okay. Both these cost is going to sustain. People cost will continue to be high because we have made certain manufacturing facilities needed and to add free ports, et cetera. I think more or less that investment phase is coming to an end. Of course, the people cost is now sitting with us and revenue of that will start coming in, like Achin had said, later with the new launches coming in. R&D also, while it is discretionary on hand, but still will continue to be at about 6%-7%, but more biased towards 7% because we are increasing the number of programs, et cetera.
I think, you know, 18.5%-20% is a fair margin to assume. You know, we are baking in more moderate kind of worries, and we are hoping that it's temporary and not really going to sustain. If it sustains, of course, you know, this margin will still try to mitigate through other measures. Nevertheless, we're not factoring in a very long-term kind of a sustained impact of that.
Given that you are suggesting 2H margins to be better than 1H and it will factor new launches in the U.S. Is it fair to understand that 2H margins or FY 2028 margins can be materially different or better than FY 2027?
That would be our target, right? We will obviously work towards continue to improve our targeted margin. You know, to be fair, I think it should 20 plus is something that we should anyway sustain going forward.
Last question on one product named Dettol AL. How material this product can be? Is it a very short-term opportunity for 2, 3 months, or it can last throughout this year? If you can help us understand. Thank you.
It's not a very large product, but, you know, we've got good market share, so I think it's doing well for us. We've had a few other launches as well already in the year. These are not, I would not call them out separately. They're not of that magnitude.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Diksha Maheshwari for closing comments.
Thank you everyone for joining in. If you have any further questions, please write it to investor.relations@cipla.com. Thank you.
Thank you. On behalf of Cipla Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.