Ladies and gentlemen, good day, and welcome to the Gland Pharma Ltd Q3 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 call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Shriniwas from the Investor Relations team. Thank you, and over to you, sir.
Thank you, Rayo. Good evening, everyone. We welcome you to Gland Pharma earnings conference call for Q3 of FY 2026. I'm Shriniwas Dange from the Investor Relations team at Gland Pharma. Today, we have Mr. Srinivas Sadu, Executive Chairman, Mr. Shyamakant Giri, Chief Executive Officer, Mr. Ravi Mitra, Chief Financial Officer from India office, and Mr. Alain, CEO of Cenexi, who is connected virtually from France. We will begin the call with the business highlights from Mr. Sadu, followed by operational highlights from Mr. Giri. This will be taken up by updates about Cenexi from Mr. Alain, and lastly, the group financial overview by Mr. Ravi. Before we proceed, I would like to remind everyone that some of the statements made today will be forward-looking and are based on management's current estimates. These statements should be considered in light of the risk associated with our business.
This call is being recorded. The playback and our website shortly. I hand over the call to Mr. Sadu for his opening remarks. Over to you, sir.
Thank you, Shriniwas. Good evening, everyone, and wishing you all a very happy and prosperous New Year. Welcome to Gland Pharma's earnings call for Q3 and nine months ended FY 2026. I will begin with a brief strategic overview, following which our CEO, Mr. Shyamakant Giri, will provide operational updates. Alain will then share an update on Cenexi, and Ravi will walk you through our financial performance. Now, let me give you our performance overview. I'm pleased to report that quarter three FY 2026 was a strong quarter, marked by solid revenue growth and improved profitability, reinforcing our confidence in full year FY 2026 performance. During the quarter, revenues grew by 22% year-on-year to INR 1,695.4 crore, with broad-based growth across businesses, including Cenexi.
Adjusted EBITDA increased by 25% year-on-year to INR 449 crore , supported by higher base business revenues, continued traction in CDMO programs, cost efficiency initiatives, and a visible EBITDA turnaround at Cenexi. For the nine months ended FY 2026, revenue grew by 12%, while adjusted EBITDA increased by 26%. This reflects strong execution, better operating leverage, and disciplined capital allocation. We remain confident in sustaining this momentum, supported by upcoming product launches, ramp-up of recently secured CDMO contracts, and incremental contributions from new capacities. Looking at the growth drivers and pipeline expansion, we're significantly expanding our cartridge fill and finish capacity from 40 million to 140 million units. Beyond cartridges and GLP-1s, our pipeline of complex products, including hormones, suspensions, peptides, RTU bags, co-development programs, biosimilars, and specialty injectable platforms, provides long-term growth visibility.
We also secured multiple new CDMO partnerships across oncology, peptides, and pre-filled syringes. What are our strategic focus areas? Our strategy is anchored on growth, capability, efficiency, and ROCE, with a clear objective of building Gland Pharma into a high-end, innovation-led CDMO and specialty injectables company. This translates into focus on CapEx and brownfield expansions to build differentiated capabilities, R&D investments to strengthen the product pipeline, cost efficiency initiatives to protect margins, new contract wins to drive sustained revenue growth, and Cenexi turnaround to enhance profitability. On the brownfield expansion front, over the next five years, we plan to invest approximately INR 2,000 crore in CapEx, primarily towards BFS and ophthalmic lines, as well as CapEx towards CDMO contracts. Brownfield expansions will include new lines, lifelines, and additional warehouse capacity. India's pharmaceutical industry is undergoing one of the most exciting transformations in global healthcare.
Rising R&D investments are fueling complex molecules, novel therapies, and deeper manufacturing capabilities. This is not just growth, it's strategic evolution. India pharma is moving from being the pharmacy of the world to becoming a global innovation hub. Our investments are aimed at not only to support growth of base business, strong pipeline of CDMO contracts, but also pipeline of complex, differentiated, and higher value products, and will help us grow not just from volume-led, but also from value-led products as well. Selective and disciplined capital deployment will ensure strong ROC, healthy cash generation, and effective working capital management. Cost efficiency and margin sustainability is key to success. While driving growth, maintaining healthy margins remains a key priority. Our cost savings initiatives include yield improvement, alternate vendor development, alternative energy sourcing, enhanced line efficiencies, operational excellence programs, and automation.
These measures typically deliver savings of 1-2 percentage points, helping offset any pricing pressure or product mix impact. Sustained base business is supported by process optimization and alternate API sourcing, portfolio rationalization focusing on higher-margin products, reallocation of capacity toward complex and niche formulations, increased automation and digitalization to improve productivity and reduce waste. R&D is also becoming a core differentiator, both in speed and delivering differentiated products for Gland. Our R&D investments continue to increase, reflecting our commitment to differentiated pipeline. During this quarter, we invested 5.4% of revenues in R&D, primarily focused on complex injectables, advanced delivery systems, and platform-based development. We filed nine ANDAs, received four approvals, and launched 10 new products in the U.S.
Our RTU bag portfolio continues to scale, with 20 products filed, 16 approved, and 13 under development, addressing an estimated market opportunity of $685 million. Our core development pipeline now includes 15 products under active development across high-potential categories, including seven 505(b)(2) filings and eight ANDAs, reinforcing our focus on differentiated injectable platforms. There are new contract wins during the quarter. Long-term growth is being driven through new, superior, and technically differentiated CDMO contracts with large pharma companies, in addressing opportunities for complex products and expansion beyond traditional B2B models. We have entered into a few long-term CDMO contracts for already commercialized products. While these require dedicated lines, it can add revenues over the medium term with durable revenue visibility. In the GLP-1 and CAR-T segment, new partnerships are getting added, further strengthening our medium to long-term growth outlook.
I'm pleased to inform you that our partner has received approval for liraglutide in the U.S., and we are ready for the U.S. launch in this quarter. On Cenexi turnaround update, Cenexi delivered revenues of EUR 50 million and EBITDA of EUR 1 million during the quarter, in line with our guidance. Performance improved through focused capacity debottlenecking, contract repricing to account for inflation, workforce optimization, higher utilization, and deeper operational integration with Gland. We continue to see steady progress in stabilizing the business and building a foundation for profitable growth, with additional synergies expected over the coming quarters. We expect Cenexi to remain on a growth trajectory through the mid to long term. The overarching objective of these initiatives is to enhance not just scale, but also the quality of earnings and capital productivity, ensuring sustainable value creation for shareholders.
Our strategic direction remains clear: to build Gland Pharma into a global, innovation-led, injectable and CDMO company that consistently delivers revenue growth, margin expansion, and superior capital efficiency. Thank you for your continued trust and support. I will now invite our CEO, Mr. Shyamakant Giri, to share his perspective on the operational and business performance. Over to you.
Thank you, Mr. Sadu. Good evening, everyone, and my best wishes for the new year. Thank you for joining us today. This was a strong quarter, with 22% revenue growth and solid profitability. Adjusted EBITDA margins were 26% and adjusted PAT margins 16%. Growth was broad-based, with strong results in both Gland's core business and Cenexi, where we met our near-term quarterly sales target of EUR 50 million. In quarter three FY 2026, we posted robust growth in regulated markets. Revenue rose 19% in the U.S. and 54% in Europe, driven partly by 39% top-line growth at Cenexi. Given this momentum, we are confident we can maintain full-year FY 2026 growth. Let me now walk you through our consolidated performance. In Q3 FY 2026, consolidated revenue was INR 1,695.4 crore , up 22% year-on-year.
Consolidated adjusted EBITDA grew 25% to INR 449 crore , supported by Cenexi reaching breakeven. Consolidated EBITDA margin was 26%. Our year-to-date numbers show strong progress. For the first nine months of FY 2026, consolidated revenue reached INR 4,687.9 crore , up 12% over nine months FY 2025. Adjusted EBITDA was INR 1,158.2 crore , with margins up to 25% from 22% last year, driven by better base business performance and the Cenexi turnaround. I will now highlight the performance of our base business and Gland, excluding Cenexi, before detailing performance by each key market segment. The U.S. market, we launched nine molecules in Q3 FY 2026, including Argatroban, Acetazolamide, and Doxycycline.
U.S. revenue grew 16% year-over-year, INR 829 crore in quarter three, and reached INR 2,344.6 crore for nine months FY 2026. In other regulated markets like Europe, Canada, Australia, and New Zealand, they generated INR 88.1 crore in quarter three FY 2026, reflecting a 16% year-over-year increase. For the nine months ended FY 2026, revenues from this market reached INR 245.4 crore , marking a 17% year-over-year rise. In the RoW market, it grew by 12%, contributing to INR 187.6 crore in Q3 FY 2026. In RoW, own product revenue grew 7%, while tech transfer and CMO revenues increased 44%. For nine-month FY 2026, RoW revenues were INR 544.4 crore , up 5%.
India generated revenues of INR 0.7 crore-INR 4.4 crore in Q3 FY 2026, up 32% year-on-year. For nine-month FY 2026, India business revenues were INR 200.2 crore , which is 6% to the total base revenues. Cenexi delivered a strong performance. Quarterly revenues were EUR 50 million, up 21% in constant currency. For nine months, FY 2026, Cenexi revenue rose to EUR 138 million from EUR 121 million last year, a 14% constant currency increase. This performance reflects disciplined execution over the past year, including higher capacity utilization, contract renegotiations, workflow rationalization, new product ramp-ups, and stronger integration with Gland in business development, tech transfer, and shared functions.
With several strategic initiatives underway, including expanding the ampoule line at Fontenay and adding a vial and a combo lines at BLA, we are confident in Cenexi's medium- and long-term growth, despite inherent quarter-to-quarter fluctuations. Overall, this quarter, we strengthened our market footprint, driven by broader reach and more traction from our differentiated high-value product portfolio. Our commitment to quality and regulatory compliance is unwavering, and so is the strong cost discipline, operational efficiency. We remain focused on building capabilities through organic and inorganic investments, talent development, and leadership. We believe these efforts position us for sustained growth and long-term value. In summary, our strong results this quarter reaffirm our strategic direction and ability to deliver sustained value. We are well positioned to seize future opportunities and drive long-term success. I will now invite Alain to provide more details on Cenexi's performance. Over to you, Alain.
Thank you, Mr. Giri. Good evening, and happy New Year to everyone. This has been a strong quarter at Cenexi, and we are pleased to have delivered on our guidance. Cenexi recorded EUR 50 million in revenue this quarter, a 21% increase over the same period last year, and the highest quarterly revenue during CY 2025. All sites showed a major revenue improvement compared to the previous year, with a pickup in revenues from Hérouville and Fontenay. We are happy to inform you that we delivered an EBITDA of EUR 1.4 million in Q3 of FY 2026, in line with our guidance. This underscores that our turnaround strategy is gaining momentum. During the first nine months of FY 2026, revenue stands at EUR 138 million, reflecting a 14% growth year-over-year, and an EBITDA improvement by EUR 10 million.
I will now provide key site level updates. First, at Fontenay, we are investing in a new high-capacity ampoule line, 30 million in capacity by 2027. This will strengthen the position of the site on the market as the largest ampoule manufacturing site in Europe. The site will continue to improve realization by passing on price increases to customers in line with inflation and regulatory requirements. The activity of our Hérouville site continues to grow strongly, supported by the continuous ramp-up in production of two products launched in 2025, an inactivated vaccine and a sterile ophthalmic gel. Both sites in Braine-l'Alleud and Osny maintain strong momentum and profitability. At Braine, we are planning to install a new vial line under an isolator. Also, we will install a new combo line for prefill syringes and cartridges in 2026.
This line will significantly increase our manufacturing capacity and allow us to attract new high-value projects. We remain confident in our outlook for calendar year 2026. The strategic initiatives and investments made so far are expected to begin delivering meaningful results from 2026 onwards, setting the stage for sustained momentum. Thank you for your attention. I now invite Ravi to take you through our financial performance in more detail. Ravi, over to you.
Thank you, Alain. Good evening, and a very Happy New Year to everyone. Thank you for joining us today as we review our financial performance for the third quarter and nine months FY 2026. I am pleased to share that Q3 FY 2026 was a strong quarter for us, marked by healthy revenue momentum across key markets and continued improvement in profitability. Our consolidated revenue for the quarter stood at INR 1,695.4 crore, reflecting a year-on-year growth of 22%. The base business performed well, with revenues of INR 1,179 crore , reflecting a year-on-year growth of 16%, supported by broad-based improved gross margins. Cenexi also delivered a solid performance, with revenues increasing 39% year-on-year to INR 516.4 crore .
Overall, gross margins for the quarter was 66%, broadly in line with the previous year and higher compared to 63% of previous quarter. Excluding Cenexi base business, gross margins stood at 61% versus 63% last year, primarily due to product mix and similar to Q2 of FY 2026. Our performance for nine months, FY 2026, has been equally robust. Consolidated revenue for the nine-month period reached INR 4,687.9 crore , a year-on-year increase of 12%. Base business revenues came in at INR 3,296.5 crore, as Cenexi revenues rose 26% year-on-year to INR 1,391.3 crore. Overall, gross margins improved to 65%, up from 62% last year, driven by a favorable business and product mix. Excluding Cenexi, base business gross margins were 60%, compared to 57% in the previous year.
Expenses during both Q3 FY 2026 and nine months FY 2026 were higher, primarily on account of increased R&D investments, employee costs, and certain one-time items. R&D expenses for the quarter stood at INR 65 crore, representing 5.4% of sales, up from INR 43.7 crore last year, demonstrating increase in R&D efforts and filings. Our R&D programs, including complex pipeline, continue to progress well. For the nine-month period, R&D expenses were INR 172.5 crore, or 5.2%, compared to INR 141.9 crore last year. During Q3 FY 2026, adjusting for ESOP-related non-cash expense of INR 14.1 crore, EBITDA stood at INR 449 crore, of 26%. The EBITDA margins were in line with Q3 FY25, despite increased R&D spend.
For the base business, excluding Cenexi, adjusted EBITDA was INR 434.2 crore, with a margin of 37%. We are particularly pleased that Cenexi delivered positive EBITDA of INR 14.8 crore during the quarter. For nine months FY 2026, adjusted EBITDA, after excluding ESOP-related expense and one-off items, stood at INR 1,158.2 crore with a margin of 25%. For the base business, excluding Cenexi, adjusted EBITDA was INR 1,196.5 crore, with margin of 36%. Cenexi's EBITDA loss narrowed significantly to INR 38.3 crore compared to INR 128.1 crore last year, a meaningful improvement. Other income, comprising mainly foreign exchange gains and interest from bank deposits, amounted to INR 63.2 crore in Q3 FY 2026 and INR 204.9 crore for nine months FY 2026.
After adjusting for an exceptional wage code related impact of INR 24.3 crore and its consequent tax effects, net profit for the quarter stood at INR 279.7 crore, translating to adjusted PAT margin of 16% against 15% in Q3 FY 2025. Adjusted net profit for nine months FY 2026 came in at INR 678.9 crore with margin of 14%, compared to 12% last year. On a standalone basis, our effective tax rate for the quarter was 25%. As of December 31st, 2025, total cash and equivalents at the group level were INR 3,052.5 crore, including non-callable deposit of INR 396 crore. External debt at the Cenexi level stood at INR 336.3 crore.
Cash flow from operation was INR 33.7 crore for the Q3 FY 2026, and INR 626.9 crore for nine months FY 2026. Our cash conversion cycle averaged 166 days for the first nine months, an improvement from 172 days at the end of FY 2025, largely driven by better inventory and receivable management. Total CapEx during the first nine months of FY 2026 amounted to INR 356.6 crore, primarily directed towards new projects at Cenexi, capacity and capability upgrades at our India facility, and regular maintenance CapEx. For this full year, FY 2026, CapEx for the base business is expected to be around INR 250 crore and EUR 25 million at Cenexi. With that, I would now request to open the line for questions. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on the 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity. So firstly, on this CMO contract, if you could also share what the size of this contract and the timeline for, you know, completing this contract and starting timeline for this contract? The one with respect to oncology with big company.
Tushar, you're referring to the-
New CMO contract.
New CMO contract. That's the timeline is 2028, probably third or fourth quarter, end of 2028. And that the expected revenue is INR 2.5 crore-INR 3 crore per year.
INR 2.5 crore-INR 3 crore per year, starting end 2028, correct?
Yeah, correct. Yes.
This would require certain CapEx from our side, and which is why this contract timing is end of 2028?
Yes. So, it's a dedicated, it's a complex product, so we have to create some dedicated, compounding area for this product. So that's why we need this time, and then the tech transfer, and then the, variation filing. It's a commercial product in Europe and many countries, so the variation filing has to happen in Europe, several countries. So that's why the commercialization happen in third or fourth quarter of 2028.
How much CapEx would you be requiring for this project?
About INR 80 crore.
Got it, sir. So just secondly, on if you could also share, U.S., Europe constant currency growth for the quarter on a year-on-year basis.
About 5%.
In U.S. and in Europe?
Overall, it's around 5%, if you take overall.
For the base business?
Yeah.
Got it. And just lastly, if I may, if you could share milestone and profit share for the quarter.
Profit share is around 9%, and milestone around 7%.
Thank you, sir. I have no question. I'll join the meeting. Thank you.
Yeah. Yeah.
Thank you. The next question is from Tarang Agrawal from Old Bridge. Please go ahead.
Hi. I have two questions. One, if you could give us a sense on how the Cenexi trajectory should play out, more going forward from here on. And second, in your initial address, you did call out about investing INR 2,000 crore. If you could give more color in terms of what is the timeline within which you're looking at investing it, you know, the approval timelines and kind of, you know, asset turns that you would look out of these investments, given that it's gonna be a mix of both volume as well as value. Thanks.
So I'll take the CapEx question first. So, we would be building a brownfield expansion for capacity, which would be adding to existing while lyo other delivery formats. And that is considering the increased demand and other expectations we have. In addition to that, we are also putting a BFS line. We are putting up new ophthalmic line, which is suspension line. And this would be spent over a period of next 5 years. So next year, our CapEx should be around more than INR 400 crores. And the asset turn should be more than around 3x, considering the high-value business we are expecting in this new facility.
On the Cenexi question,
Yeah, go ahead, Tarang.
Yeah, just to follow-up on this, I mean, what is driving this kind of confidence? I mean, from the point of view of customers, you did call out demand, you did call out India being an innovation hub. So if you could just elaborate in terms of the structure of the industry, you know, because it's a sizable portion now, from the point of view of where your gross block is today and the kind of investment that you're committing?
So one is on the ophthalmic side. The current capacity, we have almost, we're not able to cater to actually the demand, and we have several products under approval stage, and we need additional capacities. Ophthalmic line, which also has capability of suspensions. Today, we don't have ophthalmic line suspension capability, so that's a need. There are several key products in that space. So that's one line we're investing into. The BFS, there are some specialty products and Blow-Fill-Seal technology which we want to get into. And we also see in the market, in several markets, the three-piece is also moving to BFS technology. And currently, we only have a three-piece line, and we're not able to sell or cater to the RoW business because of lack of this BFS technology also.
So as an injectable company, we need that technology. And also the way the market is moving, we need to be ahead of the curve. So that's one of the reason we want to invest into BFS. But there are also several. We have done some CDMO projects we're doing, which falls under BFS, which are under specialty category. So, you know, that's the other one. In terms of additional capacities, we are running. I would say next one and a half year, we'll be running out of lyo capacities. If you see the growth coming from our, if you look at last three quarters growth, the volume growth is larger. Even last quarter, if you see, volume growth is almost 19% in the U.S., so while the price has dropped.
While we have reduced our costs internally, we have become more efficient. So we are utilizing that gain to get more contracts in the U.S., and that's why we did mention in our last couple of quarters that we worked on efficiencies, we got our costs down, and that's why we're able to win a lot of contracts, and GPO contracts in the U.S. And the supply started from this quarter. So the volumes are higher, so we need those capacities as well. So it's as it is. And also, the fourth aspect is the CDMO contracts, which are entering. Some contracts are backed by commercial quantities, where the players are entering into different segments and trying to move the commercial products to our sites.
So we need to invest into that as well. So there are a lot more focus on, the CDMO contracts last 12-18 months. So that, that business we are trying to grow substantially. But not into me-too generic kind of products, more complex, specialty kind of products, and also focusing on commercialized products, where the revenues are-- You have clear visibility on revenues in next 2-3 years, with, worst case, take-off agreements, I would say.
Tarang, on your Cenexi question, you know, the performance in this quarter reflects a disciplined execution over past so many, so many quarters, including capacity utilization, workforce, you know, rationalization, optimization, ramp-ups, and all of that. So there will be quarter-to-quarter fluctuation, but overall on an annualized basis, we expect EBITDA to remain positive, and we are confident in Cenexi's medium to long-term growth.
Just a follow-up on Cenexi. So would it be fair to presume that EUR 50 million is a good baseline to work with now?
So on an annualized basis, yes, you can take it to 100, but there could be some quarter-to-quarter fluctuations. Yes.
Thank you.
Thank you. The next question is from Neha Manpuria from Bank of America. Please go ahead.
Yeah, thanks for taking my question. My first question is again on the CapEx number. The INR 2,000 crore that we had mentioned, how much of this would be for Cenexi versus the base business?
This is for base business, Neha.
Okay, sir. So that means we're nearly doubling the gross block, or nearly doubling the gross block in, you know, once this CapEx is completed?
Yeah, that's correct. Yeah.
Okay. And what would be the average utilization of the existing capacity that we have? And, you know, at what point do you think, you know, capacity becomes a constraint for growth? I mean, how soon do we need to get this capacity up and running to maintain, you know, the mid-teen growth that you've guided to?
It depends on the lines, but most of the lines we are running at 80%-90% capacity. Some lines are almost chock-a-block. On the pre-filtering, we have enough capacities, and we're not investing into that. And of course, the cartridge, these are new new technology we got into. Those we have enough capacities. But if you look at lyophilizers or liquid vials, and also, I think those are almost, we're running at most of the lines are at 90% capacity, a few lines at 40%-50%. So at least for next two years, we need to invest into additional capacity. So this INR 2,000 crore will be spread across next few years.
Yes, understood. My second question is on, you know, the overall guidance. I think we had mentioned a mid-teen guidance. I think we're tracking it about 12%, and there was hope of a large product, launched by a partner in the U.S., which seems to have been delayed. You know, based on the 12% growth in the 9 months, do we still have confidence in that 15%? And what's the update on the Dalbavancin launch by the partner?
Good thing is Dalbva approved in six countries in Europe, so we launched in December in six of the European countries, so more countries gets launched out of U.S. U.S., we have a go date in February, so hopefully, we're just waiting for an approval. So, they need an additional data, which was submitted this month in January, so we should be able to get some.
Let's assume, you know, Dalbva does not come through instead. Would we still be able to maintain the mid-teen growth that we've been guiding to?
So there are actual batches, actual demand, which came from Europe, so that will at least offset some of the gain, even some of the losses, if you don't get an approval. But hopefully, they're also trying to get a player so that we can ship out some batches. So if that happens, you know, we'll see some numbers coming for the U.S. as well.
Okay. And how should we think about the growth from here for FY 2027, you know, for the base business? Cenexi, like you mentioned, it's, you know, to the EUR 200 million base, which we should grow on. But for the base business, what's the, you know, growth? Because even, for Europe, if we see the CMO contract is ramping up much slower than what we would have expected. So is it possible for us to maintain this mid-teen growth, you know, going, or should we see this growth momentum possibly improve, you know, given the investments we're making?
I think overall, as a, as a company, we should be growing at 12%-13%. At least that's the minimum confidence we have. And if the CMS get faster approval in Europe, where the variation filing is happening, and if you get that earlier than anticipated, so we thought it at least in second half of this year, we should get some quantities. If that happens, it will be a bit more, but I think, I think 13%, 12%-13% is, I think the best bet.
So the CMS approval is expected this year, in fiscal 2026, right? Does it mean in two months?
That's a meaningful business. The variation filing is happening in different countries in Europe.
Okay.
Approval is expected in six months. Yeah, if that happens, then it could be a little higher. Yeah.
Okay. All right. Thank you so much.
Yeah.
Thank you. Next question is from Ashish, from Leo Capital. Please go ahead.
By when do we expect the 140 million pen cartridge capacity for GLP-1 to be operational? And, what sort of orders from customers or commitments do we have on it?
So, first and foremost, let me take this. 140 million is a fungible capacity. It has both cartridges and vial, number one. Number two, you know, we have launched our first GLP in Canada last quarter, Liraglutide, and we are. There's a U.S. approval coming through.
Already approved.
Already approved in the U.S.
Launched in January.
We are-
Launched in January.
Launched in January already in the U.S. We are contracted 2-3 more GLP players, and there is a pipeline of around 6-7 players more to be contracted. So when FY... We are also looking beyond the GLPs, you know, for this cartridge line, like insulins and insulin analogs. So we are in talks with one of a very important big insulin player, to, for, you know, to, for the, for the capacity that we have. So overall, looking at things, you know, we can look at in FY 2027, around 15 million-20 million utilization. It will take some time for us to completely utilize 140. Okay? But this is what the visibility is as of now.
Okay.
So as of now, the capacity is 40 million, just to be clear, and then 100 million is getting added, this year.
Right.
Right. But the idea is not, you know, you're going to fill up the line with GLP-1 in near term. The idea is to have this capacities ready because of the contracts what we have. In the meantime, we also... And that's the reason why we have a fungible line, where we can fill vials and cartridges in one line, and syringes and cartridges in the other line. So you can utilize for other products also.
Got it.
But I think the 40 million probably will fill up faster because of the insulin discussions what we're having with the partners.
Got it. Would you say capacities for fill and finish on the pen cartridge sides are in shortage right now, and there is significant capacity build-out ahead of the patent expiry?
It depends how the market pans out, right? I mean, if it really pans out like what they're saying, there's not enough capacity, but we also need to see how the molecules will pan out. So our next, at least next three, four years forecast, we are not considering too much of GLP-1. You know, because, because one is, of course, the patent situation and also the other, how the pricing will pan out. So the numbers, what we are projecting is very minimum, revenue numbers we're allocating to GLP-1. If it really happens like the market is saying, then it will be a add, additional numbers what we could get to, in addition to the guidance what we, what we are giving.
Got it. Got it. Thank you. Thank you for taking my question.
Thank you. The next question is from Bino Pathiparampil, from Elara Capital. Please go ahead.
Hi. Good evening. You partly answered my question, but just wanted to know, have you already tied up some Semaglutide contracts for FY 2027 within your capacity, or is it all Liraglutide as of now?
No, we have signed up with several, Semaglutide, the generics also. Yeah, even, even that we have signed up.
So, including Semaglutide, you are saying only 30 million of your 40 million capacity will be utilized in FY 2027?
See, if you add up, you know, what the customers are estimating, and you project it, it will be a huge number. So we don't want to be too optimistic on that. You know, we have to be a little conservative on how the market is behaving, because we also need to look at one of the key areas is we don't want to sell at a price where it's not workable. So from capacity perspective, we have built in, but as a de-risking strategy, we took a fungible line so that we can also use it for other products, so. But what we're saying is, in addition to GLP, we are also... Because we're already making insulin for Eli Lilly for several years, so we also have that experience.
So we're talking to insulin manufacturers who have commercialized this product in large numbers. So that could be as big item for this line, at least for the 40 million line. In the meanwhile, we look at how the market behaves, and if we have to sign more contracts or if other contracts what they sign is good enough to fill those lines.
Got it. And, but by when do you expect the additional 100 million capacity to be online?
That will be next 5 months. The line is actually getting delivered this week, next week, sorry. So by the time validations and everything will happen, maybe 4 months. So by second quarter, the line will be ready to take exhibit batches.
Oh, okay, understood. One last question. After several quarters of U.S. revenue around high $90 million per quarter, this quarter you have shown some improvement in U.S. or developed markets around $100 million. Do you think there is a chance that this can dip below that further? Or, you know, this would be a new base on which you will grow on a quarterly basis?
I did mention in today's call and also previous calls, that some of the contracts of our top ten products, what we launched, the GPO contracts few years ago, we got it 3 quarters ago. The supplies would be starting from third or fourth quarter of FY 2026, and that's why you're seeing the uptick. I mean, if you see the volumes compared to previous quarters, it's higher. I mean, the volumes are almost 19% higher if you look at year-on-year, and I think 16% on quarter-on-quarter. So these volumes are some coming from the new contracts what we have signed up, and, you know, this will get annualized next year. So it's basically what we lost, we got it back this year, I would say.
Great. Thank you. I will turn back to you.
Yeah.
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Sajal Kapoor, from Antifragile Thinking. Please go ahead.
Yeah, thank you for taking my questions. And, Mr. Sadu, beyond the reported turnaround at Cenexi, and congratulations, by the way, you have been sounding very positive over the previous few earnings call that this business will turn around. Now that the turnaround has happened, the question or the optics will now obviously shift to the EBITDA margin and the ROCE, because it's relative to our base business, where we were before the acquisition, we were a lot higher on the EBITDA, as well as the ROCE, and both those metrics have been diluted by Cenexi. So what is the steady state, maybe a midterm, three-year kind of a roadmap, to try and bridge the gap both on the ROCE as well as the EBITDA between our base business and Cenexi?
I mean, one of the initiatives, I mean, of course, we are still working on efficiencies at Cenexi to improve the EBITDA. On the BD front, we have integrated Gland and Europe BD. Sometimes it may not reflect directly into Cenexi business, but it also, as a concerned company, you should start looking at it. I mean, if you look at this quarter itself, our milestone income in the U.S. actually is come down drastically, but overall it's only 2% decrease because most of the actually milestones came from our contracts in Europe. So you should also see that how, well, how the Cenexi and Gland together is also helping the company, which we talked about initially, but the focus was mostly on how to turn around.
But also you should see in parallel what are the synergies we can get out of this business, which will not directly seen from Cenexi business, but as a concerned business, what you can get out of this. So you will see the European business growing. And we also have to see, you know, the 35% business is great, but also we have to see how dependent on, are we on U.S. We have seen two years back when we had a setback, you know, we are so dependent on U.S., we decided, okay, we need to de-risk ourselves, right? So we should also look at. Now, today, we are dependent on U.S. for 50% of business, so 25% is in Europe. Now, the quality of the business we do, we have to improve for sure.
One is, of course, getting the efficiencies back. Second, how to improve the portfolios of Cenexi. That's the reason why you see investments going into higher-end products, not just ample business, which is there. And, you know, in pharma, it takes time. So you know, it's that transition we are doing. And also it has capabilities which Gland can exploit, whether it is hormonal products, you know, which we can't make, or the controlled substances, which we can't make. Now, again, you have to look at from a synergy perspective. So as Gland, we cannot do those kind of products. With Cenexi, we can do the products. So in the future, you might see revenues coming out of Gland base business, but it wouldn't have happened if we don't have Cenexi.
So as a company, I think we should start looking at how Cenexi has contributed to Gland, how Gland has contributed to Cenexi, rather than independently looking at Cenexi and see. Because that's how when you make an acquisition, we just don't look at the single business. We see as a whole how the business works. And I think that's what we tend to tell that, "Okay, fine, we are turning it around, but how Cenexi is also contributing to us?" So you'll see several our development projects now, we have started-
... R&D and some products where Gland cannot do it because of the facilities what we don't have, where Cenexi has, so we start manufacturing from there. So I think from a long-term strategic perspective, it, it's a move we consciously took. Yeah, it took time for two years to get it turned around, and, you know, this is our first acquisition, and we are integrating it so you see more, positive results independently for Cenexi and also as a consolidated company.
Sure. That's very helpful, and thank you for detailing the response, which kind of helps us better understand the overall synergies and the dynamics, because you just absolutely agree that you can't just look at the individual businesses as individual parts, you have to look at the whole. So I completely appreciate that. Thank you. My second and last question is regarding this biologic CDMO. So we are tripling the capacity, right? If I'm not mistaken, from 8 million or 8 KL to 23 KL. And what is the expected ROCE and is this capacity expansion all backed by sort of contracts that we have signed either with Dr. Reddy's or otherwise?
I mean, how confident are we in terms of utilizing this enhanced capacity and what is the hurdle rate in terms of return on capital?
So this is a greenfield. We'll be building this capacity in Shamirpet, beside our existing 8 KL. So we are in a stage where we don't have you know, because in typical CDMO business, you have to build the capacity and then you know, sign the contracts. But we are in active discussion with some players for the products there. So at this point of time you know, we'll not be able to put a number to that but our hurdle rate for any investment is, of course, 20% IRR. So that we keep in mind when we make our internal investment projections.
That's helpful. Thank you so much, and all the very best. Thank you.
Thank you. The next question is from Saion from Nomura. Please go ahead.
Yeah, hi, good evening, and thanks for taking my question. Ravi, in case of, you know, the ESOP charges that you take, how should we think about this year, next year, and will it sort of come down going forward?
So, current quarter is INR 14 crore, and typically it would go down for this grant as we see next year. And of course, this ESOP started from middle of Q1, so full year, if you annualize, it'll be little higher than this year's cost. But, if... And then it's not the full ESOP scheme, so we may have future grants also given. In that case, the, you know, cost may go up. So we'll not be able to exactly quantify what's going to be the ESOP cost next year. But typically, we have a where the vesting is over a period of three years, so it gets distributed over a period of three years, any new grants.
Okay. And also this, 15 million-20 million that you mentioned about utilization for the new cartridge line for fiscal 2027, how should we think about in 2028, if you have any visibility around that?
So there is. So we spoke this capacity utilization with insulin. As Mr. Sadu also told, we are talking to a big pharma company on the insulin side. And on the other hand, there is a pipeline of 7-8 GLP-1 customers also, where the talks are going on. So I think 2028 will be far, far better than 2027. I don't have a number now, but we are looking very positive and very, very optimistic about, you know, taking this line ahead.
Great. So just, you know, for fiscal 2028, as you see GLP scale up, you see the CDMO contract coming through, and also, you know, you talked about synergy benefits coming out of Cenexi. So for the base business, should we expect stronger growth in fiscal 2028 versus 12%-13% that you talked about for fiscal 2027?
We are looking at 15% CAGR, five years, as a company, other than the inorganic what we may do in next few years. As organic, we look at 15% CAGR for five years.
Okay. And just one question, if I can ask, you know, regarding the synergy from Cenexi now since it's stabilizing, how should we think about that? I mean, if you can give some color on the kind of discussions you are having, that the base business can get affected, you know, impacted and the trajectory around that. Like, I would assume, you know, these things take time. So is there a point where you see inflection happening on account of Cenexi, the synergy benefits for the base business?
So as Mr. Sadu said, you know, Saion, we have integrated the BD, which means we have a lot of customers who wanted to make in Europe, you know, this integrated BD team will cross-sell each other's capacity.
... This is one part of it. The second part of it is also, we will have full year of Line G, which is a high-speed line that we installed last year. Okay? We are also installing another high-speed line there. We have seen ramp-up in HSC of the inactivated vaccine, you know, and also on the Opthalgel. With respect to synergy, yes, BD, as I told you, there's a tech transfer synergy, you know, there's a knowledge transfer happening between both the tech transfer team. There is a synergy around efficiency, there is a synergy around quality teams and all of that. Yes, a lot of synergies, lot of synergies are at play, okay? Difficult to quantify at this point in time, but we have seen...
We have taken baby steps, and we have seen benefit coming out of this synergy.
Just to add to on the softer aspects from the BD perspective, several customers, you know, we are doing a joint tendering now, especially we have, you know, we discussed about capacities earlier in the call. We have a lot of ampoule capacities, and there are a lot of tenders, global tenders coming from the big pharma to consolidate the ampoule business. So we have actually participated in two tenders where some volumes, you know, we have quoted from Cenexi and probably 70% from Gland. So these kind of stuff will happen. I mean, when I'm saying 15% CAGR, we have not included these because these are happening.
But we are pretty confident because, if you look at how the entire market scenario is, even the companies are trying to integrate 15, 16 CMO services to one company, and we have all that under one roof. So we did participate in two large tenders, 60 million-70 million ampoule tenders jointly. And, you know, there are also products, the companies who are taking CDMO services from Cenexi, they're actually talking to us to in-license products from Gland. So that will open up. So we have licensed four products last quarter in Europe. That's why you see some milestone income from Europe as well. So that has also panned out well. So if you start launching those products in Europe, you'll see some revenue coming out of in that market also.
So that's again, you know, ongoing process there. It's a new entry for us in terms of filing dossiers in Europe. We have just four approvals, which we have licensed out, but that is a growing business. So in that sense, a lot of companies are trying to in-license products. That's one area we're looking at, and also, we are also giving the companies opportunity to grow their business because of the cost structure in Europe, they're not able to compete well in the RoW markets, so they're losing share. So we are offering services to them in India so that they can get a better pricing, so they can increase the volumes as well. So yeah, so several areas we are working together.
Understood. Okay, thank you.
Yeah.
Thank you. Next question is from Abdulkader Puranwala from ICICI Securities. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity and congratulations on a good set of numbers. So my first question is pertaining to your Europe business. So for Gland and Cenexi, you know, both of these segments, we are seeing very good growth this particular quarter. So just wanted to understand here that, you know, what is the kind of opportunity you're seeing in Cenexi, first, on this inactivated vaccine and, you know, this is sterile gel. And for Gland as well, you know, would this, quarterly run rate be sustainable, in the quarters ahead as well?
Okay. So on these two products, inactivated vaccine, you know, and sterile gel, there is a ramp-up that we have seen, and these are products from the innovative pharma side. Okay, inactivated vaccine, though, is seasonal, but we have seen a more ramp-up quarter by quarter. This will continue to grow, and similarly, the ophthalmic sterile gel. On the other question that you asked on the growth, yes, as I told you in the past, that all the effort, the effort still continues, but all the effort that we started at beginning of 2025 is now showing results in some way.
We'll push the pedal more, and we make sure that on an annualized basis, Cenexi remains on course, and we, we're confident on Cenexi's medium and long-term growth.
Understood. And this is on your, I know, gross margins for the base business. So despite, you know, your share going up significantly as compared to where you were last year, I think the gross margins are still better. So would it be fair to assume that new businesses are at par at what you are currently doing in U.S. or in Europe itself?
To be honest, actually, if you look at the price-wise, it has just down. But, we become more efficient, I would say, with initiatives which we took. So that's, that's how we're able to maintain the margins and be more aggressive in terms of pricing. So if you see there was a price drop of almost 5%-6% if you compare to the previous year, but still we're able to maintain margins because our costs have come down. And that's why we are seeing more volumes, same margin, but lower pricing. So it kind of nullified that, and that's more only because of the internal initiatives. We came out increasing batch sizes, we have invested. There was a question around CapEx, actually, we invested into large capacity tanks, so that will increase the batch size.
So some investments have went into that. So, to reduce our costs, and that's what you're seeing now. So basically, it's aggressive pricing, reduce cost internally to be more attractive in terms of market scenario, which gave us volumes also.
Okay. And, so, one more on the co-development partnership products. So the 15 products what you have, which will begin in 2028, so what is the span for these 15 products? And, you know, and from an FY 2028 perspective, how many products of that, you know, we should see getting commercialized?
Give me a second.
We will come back to you on this question. Can you hear us? Hello?
Mr. Abdulkader, can you hear us?
Hello? I think we lost him.
Due to time constraints, we'll have to take that as the last question. I would now like to hand the conference over to the management team for closing comments.
Thank you, everyone, for joining us today. We appreciate your participation in the question-and-answer session during the call. If you have any follow-up questions, please feel free to reach out to us. We look forward to connecting with you again next quarter. Thank you.
Thank you very much. On behalf of Gland Pharma Ltd, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.