Ladies and gentlemen, good day and welcome to Laurus Labs Limited Q3 FY2025 earnings conference call hosted by DAM Capital Advisors Limited. 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 the star then zero on your touch-tone phone. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors Limited. Thank you, and over to you, sir.
Thanks, Steve. Hi, good afternoon, everyone, and a very warm welcome to Laurus Labs Q3 FY2025 earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Laurus Labs Management, Dr. Satyanarayana Chava, founder and CEO, Mr. V. V. Ravi Kumar, Executive Director and CFO, and Mr. Vivek Kumar, EVP Investor Relations. I will hand over the call to the management team to make the opening remarks, and we'll open the floor for questions. Dr. Chava, please go ahead, sir.
Thank you, Nitin, for organizing this call. Good afternoon to all our stakeholders. We continue to demonstrate our unique platform capabilities for some of the difficult-to-make small molecules and effectively addressing the evolving needs of our customers. We're delivering on our key strategic priorities and successfully executing on the major pipelines that we have. Interestingly, the strong progress we are making on the CDMO-CMO business increases the confidence in our ability to achieve long-term success and create sustainable value for our stakeholders. We're applying our important platform technologies into some of the advanced clinical projects, which we believe have significant commercial potential, and we're further augmenting it with value-creating business development efforts like new small molecule high-potent R&D center, which elevates our one-stop development and manufacturing service capability with our innovators, and parallelly enhancing our business teams across the globe.
We also recently announced strategic investment by Eight Roads Ventures into our biotech arm. This new development further expands our efforts towards building commercial-scale sustainable manufacturing capability, which will focus on creating large-scale microbial precision fermentation capacity, as well as enhancing our enzymatic engineering applications as well. I would say, through continuing excellent scientific and operational execution, we are achieving significant milestones for our company and also to our customers. Moving on to our financial results, our Q3 operating results have progressively improved, and we've delivered strong growth along with the continued resilience in our financial health. For the current quarter, we delivered revenue of INR 1,415 crores. Strong growth is driven by robust demand in our CDMO business, supported by healthy performance of formulations business. The growth was partially offset by lower offtake in our API business.
Gross margins were healthy and maintained well above 50% for the last several quarters, and EBITDA margins increased to 21.1% following better operating leverage and then product mix. Healthy commercial execution is our top priority, and our performance remains well on track to deliver full-year growth with the revenues accelerating in the near term. To begin, I would like to share key updates on our CDMO business. There's continued robust demand for commercial offerings, and coupled with strong operational performance, we recorded highest quarterly sales for the CDMO division in the last eight quarters, close to INR 400 crores. On a nine-month basis, CDMO division recorded 33% growth, reflecting continued uptake with our new assets ramping up. I would say the division portfolio continues to shift towards high-value complex small molecules. We also saw encouraging RFPs and continue to see signing in early to mid-stage projects involving complex chemistry.
This movement was partially enabled by increasing collaboration with our new R&D center with new big pharma partners. Additionally, we are actively promoting our BD efforts to successfully deliver clinical projects to broaden project pipeline for long-term accelerated growth. The broader outlook for the CDMO industry with small molecules is positive, and we remain committed to our 2024 growth outlook, supported by scheduled project deliveries for a few late-stage projects in the Q4. We're working on over 90 active projects, mostly in human health and also some in the animal health and cooperation as well. In the generic APIs, we reported revenues of INR 531 crores with a decline of 7%. This was mainly due to lower volume of ARV APIs. For nine months, the business was more or less very stable, declined slightly about 3%.
The softer ARV performance was essentially due to prioritized capacity allocations towards high-yielding long-term business opportunities. Having said that, we would like to reassure that our order book in ARV is healthy, and Laurus will fulfill all confirmed orders and contractual obligations. Also, we have indicated in previous calls that our combined ARV performance, APIs, and formulations have done better than over the last year and stabilizing franchise revenues. On the non-ARV portfolio, we have seen some sequential recovery as part of ongoing strategic initiatives. We continue to work towards expanding our CDMO offerings in our small molecule APIs. Overall, we see API growth returning next year with positive order book that we have. During the nine-month period, we filed four DMFs, three in non-ARV category. With this, the total number of DMFs filed is 87. In our formulation division, we delivered strong progression in Q3, improving our year-to-date performance.
Overall revenues for the quarter were INR 436 crores. For nine months, we have returned to growth of over 5%. ARV business and developed market business portfolio increased on higher activity. We have a couple of ANDA launches that we expect to provide meaningful growth in the next financial year. Cumulatively, we have a total of 43 ANDAs filed to date. Of these, we have a total of 21 final approvals and 14 tentative approvals. We continue to have diverse pipeline, including product franchises comprising of ARV, cardiovascular, diabetes, and CNS, apart from gastrointestinal as well. I'm also pleased to report that our collaboration with KRKA is progressing well. We have already initiated the validation of a few products under the new CMA agreement for integrated generic contract manufacturing. On the R&D front, we are spending about 5% of our sales for the nine months of the current financial year.
We continue to invest in portfolio with product-specific approaches based on complexity and scale challenges. When coming to Laurus Bio, this division reported Q3 sales of INR 48 crores, with a growth of 14% year-on-year. If you look at the nine-month performance, the underlying growth is very healthy, excluding the impact of advanced treatment last year, and also with discontinuing some low-margin non-core nutrition business. Q3 continued to see increased customer pipeline with AOF, animal origin-free ingredients, and the CDMO customer base increased significantly. We are further expanding our R&D capacity with the installation of high-throughput systems to meet our increasing demand of our R&D services. Regarding our plan to set up a large-scale fermentation capacity in Genome Valley, we are pleased to join forces with Eight Roads as our partner. We believe our strong collaboration will enable us to expand and accelerate high-quality CDMO services capability to global partners.
The proposed investment will be more than double our fermentation capacity, and we expect to be ready by the end of calendar year 2026. Let me share briefly on the quality side. In nine months, the company underwent close to 120 quality audits by multiple drug regulatory agencies and also customers. The company has successfully passed these audits without any critical findings. To conclude, I want to again acknowledge the focus and commitment of our team. Based on our continued progress across diverse portfolio and pipeline projects, we are more confident about our long-term future and value creation for our stakeholders in the coming years. With that, I'd like to hand it over to Ravi to share some financial highlights.
Thank you, Doctor, and very warm welcome to everyone on our quarter three and nine-month FY2025 earnings call. Total income from operation for nine months is around INR 3,834 crores, with a growth of 6%. For the quarter, we have done INR 1,415 crores, with a growth of 18% year-on-year. The fundamentals of our business have remained healthy, led by order book position and continued progress in CDMO business. Gross margins maintained healthy level for quarter three, which came at 56.9%, and for nine months, 55.8%, mainly due to better product mix as well as process improvements done in some of the key large volume APIs. Our EBITDA for quarter three stands at INR 285 crore, with EBITDA margin at 20.1%, which has progressively improved. For nine months, EBITDA came at INR 638 crore, with a margin of 16.6%. This is versus 15% in last year.
The margins are suppressed due to continued operational deleverage, even though some of the assets may have started to ramp up. We expect quarter four will ramp up further. Our profit after tax for quarter three is at INR 92 crore, and for nine months, at INR 125 crore. Our ROCE was 6.8% due to lower operating results and continued CapEx investments towards growth projects. On the CapEx front, we invested close to INR 186 crore for the quarter and INR 448 crore for nine months FY2025. Our net debt stood at INR 2,766 crore, and debt to EBITDA is around 3.1% versus 3.4% in the last quarter. As we have articulated in the past, we are expecting gradual deleveraging following acceleration in operating performance in the near term.
On the capital allocation front, our strategy remains unchanged, and we will continue to prioritize investment into high-value business segments like CDMO. You can refer to our IR presentation for more details. With this, I would request the moderator to open the lines for the question and answers.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. In order to ensure that the management is able to answer questions from all participants, please limit your questions to two or one per participant. First question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah, hi, thanks. Good afternoon, everyone. First question is related to Laurus Bio. Recently, a 59-year-old female patient from Netherlands traveled to India for CAR-T cell therapy, and her treatment was successful. Of course, this is a wonderful outcome for Indian scientists, doctors, and healthcare infrastructure in the country in particular, and I'm, of course, so proud to be an investor in ImmunoACT through Laurus Labs, of course. My question is about both ImmunoACT and our gene therapy phase I progress at IIT Kanpur. Can these individually become multi-therapy assets at scale?
Thanks so much. Sajal asking a very interesting question. As we are speaking, our associate company, ImmunoACT, obtained DCGI approval to conduct a clinical trial for BCMA. So it is not a one-product company anymore. So they are going to start dosing the first patient in BCMA soon, and they are also starting to work on other clinical assets as well. So we are moving from one-product company to multi-asset company at ImmunoACT. Coming back to your question on IIT Kanpur, our commitment to progress the three assets that we are licensed from IIT Kanpur are progressing well, and we'll have more to share about the timelines and all in the coming quarters.
That's helpful, Dr. Satya. And my second and last question is, given our reactors are interchangeable or fungible, we can always stop ARV and switch to NCE or higher margin product in the same block where we are currently doing ARV today should an opportunity arise in the future. So, I mean, logically thinking, instead of doing a 35% gross margin in a fungible reactor, we would rather do a 70% gross margin molecule. I mean, is that how you would think as well?
Currently, we are not struggling for capacities. At the same time, ARVs, both APIs and formulation put together, is a sizable business. It is a cash cow. We don't want to disregard that and then defocus. We have enough capacities to cater to NCE programs, Sajal. Yeah.
Yeah, yeah, definitely. So we want, yeah, it's a cash cow for sure, but if there is a dramatic shift in the external environment, so U.S. pulling out of WHO, causing a near-term knee-jerk reaction on PEPFAR tender or any such kind of a scenario emerging, we always have the capability and the capacity to make a different product in the same infrastructure. That's my question precisely.
You are absolutely right. It is definitely doable. If you look at our journey in the last six, seven years, we used to make more than 1,000 tons of Efavirenz per year. Now we are making 50 tons per year. So that capacity converted to something else. So the reactors are fungible, as you mentioned. If there is a need arises, our ability to repurpose it to other APS is quite possible.
Yeah, that's helpful. Thank you so much. I'm done. Thank you.
Thank you.
The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
So just a bookkeeping question first. How much will the ARV formulation sales for the quarter?
I have a second question. We will answer the first question.
So with respect to this investment by Eight Roads in the fermentation business, we are already implementing the CapEx for 2 million fermentation facility. So this investment goes into this 2 million facility, or this is separately 400 kiloliters capacity, which we are going to come up under the deal with Eight Roads?
Actually, the deal with Eight Roads, we are not creating capacity for Eight Roads. We are creating capacity for our own purpose. And we took the partner for their technical advice and their portfolio companies. But otherwise, the 400 kilo capacity will come for Laurus Bio. So we will do our own products. And going back to the first question in the Q3, our ARV sales were a little over INR 300 crores, precisely INR 304 crores.
I'm looking at FDF.
Yeah, INR 304 crores is the FDF ARV sales in the Q3.
Okay. Sorry for this confusion, but the facility which we are building up, that is that 2 million fermentation facility, that is another project, and then 400 kiloliters capacity is another project. Is that the right way to understand?
Actually, if you look at our large-scale bio capacity, we have two large-scale capacities will come up, one in Vizag, one in Mysuru. So both plants are intact. So we have accelerated construction of facility at Vizag because of operational reasons. But eventually, we'll also have another facility coming to Mysuru. Both are active.
Got it. All right, sir. I have more questions, and I'll come back to you.
Thank you.
The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Thank you for taking my question. I just wanted to follow up on the previous participant's question on the ARV versus non-ARV mix. Is it right to assume that your ARV total revenue for this quarter was INR 617 crores? Or if you could just break up the total ARV versus non-ARV?
You're right. That's about INR 619 crores. Yeah.
If I could follow up, how do you see this trajectory going forward as our API sales sort of stabilize a bit in the next, say, one to two years?
We can give you a broad range. We are not anticipating any growth coming from these franchises, both AP and formulation put together. If you sum it up, it is INR 650 crores per quarter. We expect it will remain in that range next year, year after also. So that's kind of stabilization we expect in the ARV franchise, between 23 and 2500 crores, somewhere in between. And we believe that's quite possible even now. Yeah.
Okay. Thank you so much.
Thank you.
Thank you. The next question is from the line of Bharat from Quest for Value Capital. Please go ahead.
Hello. Hi. Good evening. May I know when is this Bio R3 plant going live, sir?
By end of 2026.
End of 2026. Okay. And regarding this FDF INR 3 billion capacity for KRKA, may I know by when this will be starting delivering revenue for us? From year two, I'm talking about.
See, what we started doing, we started doing validation of the products which will go into the increased capacity already, and then the new capacity will come from November, December this year onwards in a phased manner. Yeah.
Okay. And my last question regarding this U.S. BIOSECURE Act. Now that this act is delayed, because of this, do you see any slowdown on the momentum of this supply chain diversification effort from innovators?
We haven't seen any degrowth in visits or RFP flow. Yeah.
Okay. Okay. Yeah. Thank you. Thank you very much. That's it from my side.
Thank you.
The next question is from the line of Chirag Shah from White Pine Investment Management. Please go ahead.
Thank you. Sir, first question is on Q4 of current financial year. So last quarter, you had indicated H2 margins could be around 25%. So that our annualized margin would be 20%. Now, we have done around 20% in Q3. So do you still hold to your H2 guidance of 25%? And has there been any delay in Q3 revenue which led to lower margins? That's my first question.
I think we, as I mentioned in the initial comments, we are still confident in what we have committed to bring the entire financial year EBITDA closer to 20%. Yeah.
Okay. And the second is for next year, FY2026, given the efforts we've been putting on CDMO over the last two, three years, can we expect 26 could be the year of the breakthrough phase and we can cross or reach INR 2,500 crores of revenue? On a full-year basis, there could be seasonality, but on a full-year basis.
I don't want to comment on the quantum of business we do next financial year, but the prospects in the CDMO division look very bright, and we expect to have growth.
When you say growth, will it be substantial over FY2025? Because FY2025 has been a subdued year.
I think we'll reserve comments on this. So I can still say that the FY2025 will be a good year for CDMO. FY2026 will be a better year for CDMO. Yeah.
Okay. Great. Thank you. And margin guidance, any margin guidance you have for 2026? Even though there are a lot of moving parts in the business.
We are not giving any margin guidance.
Okay. Thank you very much.
The next question is from the line of Jeevan Patwa from Sahasrar Capital. Please go ahead.
Yes, sir. So congratulations first to the entire team. So we are seeing very good trajectory on the CDMO side. I think CDMO is going to fire from here on. That's what I feel. And Q4 and onwards, I think we will have different numbers from CDMO. Just wanted to understand, and if you are able to give some details on this, any number of commercial molecules getting commercialized in FY2026, any idea on that in terms of also the animal health business? How do you see that animal health business is going to shape up? And also the agrochemical business, how is it going to shape up in the CDMO side I'm asking?
I think next year will be a good year for our animal health. So we expect significant growth will come from there. And we will commercialize our Crop Science facility, and we will also expect sales coming from that unit. When it comes to human health, CDMO, we have a lot of clinical programs. I don't want to comment on how many we commercialize, how many we phase three. We never gave that number of breakup of programs. But we have a very good pipeline. As I mentioned, we are not offering RSMs or intermediates. So we moved one orbit, and we are giving APIs, which are also volume and which are also complex APIs. So that's the game we are playing, and we are happy. We have invested significantly in those, and our customers are also very happy with what we are delivering.
Perfect. So no, sir, I am also very happy with the numbers this quarter. I think next quarter is going to be really good in terms of CDMO. One more thing, sir, in terms of gene therapy, so we are saying we are going to commercialize the vector manufacturing facility in FY2026. So is it going to be utilized for contract manufacturing also?
Yes, you are right, so the facility will also sell GMP-grade viral vectors and also have the ability to do plasmids CMO work, and it will be a combination of both.
How big it would be? How much we are putting investing there?
Our investment into GMP-scale facility is about INR 120-INR 130 crores. And we invest if there is a need. So our initial philosophy continues to invest ahead of the time. And then we have licensed patents. We have licensed technology for viral vectors. I think as we committed, FY2026, we will have the GMP facility up and running.
Perfect. So INR 100 crores is a big amount for, I think, this viral vector. That's great, sir. That's great. And the last question, I think, a little difficult question again. So when do you think the kind of FY2021 kind of growth we can expect in the formulation and the APIs side? Do you think FY2026 will give that kind of growth in the formulation, or it will be FY2027?
I think we are broadening our pipeline in our API and also in formulations. That will take some time. It will not be a quantum jump in FY2026. But the kind of pipeline we are developing will have unique offerings, and we expect significant growth will come in the medium term. I don't expect significant growth coming in the near term, but medium term, we are very confident.
So can we expect FY2027 to be the year for formulation and API?
If we don't want to.
I think, see, we can discuss closer to when we are filing DMFs in the new portfolio. Yeah.
Perfect. Perfect. Thank you, sir. Thanks a lot.
Thank you, Jeevan.
The next question is from the line of Madhav from Fidelity. Please go ahead.
Hi, good evening. Thank you so much for your time. Sir, I just wanted to understand that you mentioned that we've shifted from doing RSM and intermediate to doing high volume complex APIs. I mean, could you explain a little bit more? What's happening is that customers are asking us to do the final API itself, or sort of what's changed there? I mean, just trying to understand the thought process.
I think when people come and they want volume, we're able to provide what volume our partners are asking. And also, what technology platforms we created also enables us to do complex things. We do significant work in flow chemistry, biocatalysis, high-potent manufacturing, high-energy chemistry, iodination. So we created some technology platforms which helps us to add value to our partners' programs. So that's the reason we moved from RSMs to very advanced intermediates or APIs.
Is this a recent shift in the pipeline? Because if I understand right, one or two years back, we did do some KSM intermediates. So I mean, this is the first time I'm hearing this shift. So is this something more recent that we've kind of realigned the portfolio or something which has been happening for some time?
We have realigned our portfolio. We are getting that kind of projects. I'll put it that way.
Progressive.
Yeah. It's a progressive. Yeah.
Okay. Okay. Got it. Got it. So, just, I have one request. Given a lot of your peers, they do give a breakup of, let's say, we have 70, 80 human health projects. I think you do mention how many are commercialized. But if it's possible, just to give a breakup into different phases, like how many in phase three, phase two, phase one, that will just be more clear for the investor community. So, just a request from my side. Yeah. Thank you so much.
As I mentioned, Madhav, we don't want to delve into finer details. See, this CDMO business is very dynamic in nature, and we don't want people to start guessing projects and so yeah. We also have confidential agreement. We don't want to reveal too much. So when it is commercialized, people know very easily on the export data nowadays. So people are dissecting so much. So we don't want to give more data further. Yeah.
Got it. Just the last question from my side was the KRKA JV, which we are implementing. I don't know if you've called it out before, but how much CapEx are we putting in for that JV? And sort of in two, three years, what kind of revenue can come from that JV separately? If you could give us some sense, that will be really helpful. Thank you.
I think we are formulating our strategy correctly right now. The blueprint stays on the facility and also products. Maybe we'll be able to give more details maybe middle of next financial year. Yeah.
Understood. Understood. Thank you.
Thank you.
The next question is from the line of Deepak Malik from Carnelian Asset Management & Advisors. Please go ahead.
Yeah. Thank you for giving the chance, and congratulations for a good set of numbers. Sir, my first question is on the CDMO business. Can you please highlight what drove this strong growth in this quarter? Is it human CDMO, or was it animal in this quarter? So what actually drove the performance? And is it sustainable for quarter four?
I think the growth came from both. Both human health. Majority came from human health, but partly also came from animal health CDMO, and we expect our pipeline is robust, and we are also doing very late-stage intermediates and APIs. We expect to continue to do well in this division, Q4 and beyond.
In this human health and animal health, has there any new capacity which has gone into commercialization, or was it a new product which got launched? So if you can give a little more color exactly, so what exactly led to this kind of strong growth, launch of new products, commercialization of new facility, or ramp-up of existing contracts or whatever?
I think no new capacities came online. We have a lot of capacity which we have created for this division, and we started utilizing, and we are delivering some projects which we delivered small quantities in the previous years, so it is a gradual growth, so this business, one has to have a lot of patience. And we patiently waited for the programs moving from earlier clinical phase to late clinical phases, and this growth is effort what we have put in the last two years.
Okay, sir. Okay. Got it, sir. And you think this is something which will further scale up going forward from Q4 and Q1 and Q2? So this is just a start, and then things will further scale up from here onwards?
Here and here. Yes. Yes. Yeah. We expect definitely this division will grow in FY2026. I'll leave at that stage. I'll not quantify how much growth comes right now.
Yeah. Okay. And second, sir, you have given one very good slide in the presentation, the seventh number slide where you have given that there is INR 3,000 crores of total CapEx from FY2022-FY20 25 you have done. And in that, around 72% CapEx is into the API and CDMO. And then you have given the breakup also that, okay, there is 50% which is ongoing CapEx, and the operational is only just 21%, and ramp-up stage is only 28%. So that means more than half of the CapEx is still not commercialized, and that is still to come in this INR 3,000 crores. Only INR 1,500 crores is something which is in the various stage of scaling up.
I think I'll answer that question a little differently. The capacity is there, but we are not doing regular production there. So when we do scale-up batches or validation batches of multi-stage, so utilize your block very inefficiently. So the real value comes when we do commercialize.
Okay, sir.
So yeah.
Okay. Got it. And in this, so if I have to say that, so approximately what kind of sale must be coming in from this INR 3,000 crores means INR 1,000 crores or maybe even less than that? This new capacity.
We don't want to quantify that way, but on the left-hand side, you might have seen at the highest, we have done 1.4 asset turnover ratio. At the lowest, currently, we have 0.8. So when we go commercial, I think revenues will be somewhere in between. Yeah.
So you have given there that it's 0.8x. When you say 0.8x of the overall INR 3,000 crores, or is it just the one which is in the.
Overall gross block, including INR 3,000 crores.
Okay. Okay. Got it. And whatever CapEx which will be coming in going forward, that will be over and above this?
Yes. Yes.
Okay. Thank you very much, sir.
Thank you. The next question is from the line of Venkata Anand, Ridge Investors. Please go ahead.
Thank you, sir, for giving me this opportunity. I just wanted to know, I mean, what is the impact on ARV business that USAID do from WHO?
See, WHO is a policy-framing organization. WHO don't fund any ARV procurement. They do make policies. They do approve the dossiers, guidelines, and all. So as the U.S. is moving away from membership of WHO, we'll have some impact on the guidelines, approval timelines of files, and all. But in the near to medium term, we don't expect any impact on the drug purchases because the amount of money spent on drug purchases is 10% of the money spent on the HIV eradication program. So we don't expect significant impact on that.
Okay, sir. One more question. Sir, earlier when we purchased Richcore , we thought to put up two million fermentation facility in Bangalore. Why was it moved to Mysuru, sir? I mean, just try to understand.
We have used Bangalore as a ward, but otherwise, our initial plan was to put up a facility near Tumkur or Mysuru, so that was the idea. We moved the phase of construction to Vizag for operational reasons, so our plan of creating large volume facility of two million liters is still intact. Yeah.
When is it expected to complete, sir?
The Vizag facility will be operational by end of 2026.
It's going beyond end of 2026 in Mysuru time, right?
Yes. Yeah. Yes.
Thank you, sir. All the best for future growth. Thank you very much.
Thank you.
Thank you.
The next question is from the line of Mayur from Wealth Managers (India) Private Limited. Please go ahead.
Good evening, sir. Thank you. I hope I'm audible.
Yes.
Sir, just one broad question, and it may appear to be a little financial, but I think from a strategic standpoint, the Eight Roads stake, 14%, when we look at broadly, the value comes to around INR 850 crores-INR 860 crores for the overall Laurus Bio. And when we look at the annualized current revenue run rate, it is just slightly south of INR 200 crores. Our own entire Laurus is valued much higher than that. And the bio segment is supposed to be much more high, should have been a little more qualitatively more higher valuation if it commands, so to say. So just wanted to understand your thought process when we looked at this and what kind of benefit shall it accrue? And is it a right way to look at, and what are your thought processes when we looked at that kind of an arrangement?
The primary objective for us to bring Fidelity as a partner is to work closely with their portfolio companies across the globe. That's the primary intention. The second is, see, you might be aware, we acquired the majority of the Laurus Bio stake from Fidelity itself. So they are coming back. It will be a good indication that they see value right now into this. Not just money purpose, we got Fidelity into the picture to broaden our management bandwidth there and also work with their portfolio companies. I'll put it that way.
The valuation is a fair valuation. It's not that. In fact, the same valuation, even Laurus is also investing. So we will invest around another INR 40 crores by before end of June 2025.
Right. Right. And we further have both either of the partners at INR 35 crores additional. That is also at the similar valuation?
Yes. Yes. You're right.
Okay, sir. That's it from my side. Thank you.
Thank you.
The next question is from the line of Ankur Bhadekar from ULJK Financial Services. Please go ahead.
Hi, sir. First of all, congratulations for the good set of numbers. So a couple of questions from my side. One was during the quarter, the Onco API contribution has been low, around 8% or so. So I wanted to know the reason behind the same. And also, do we still hold a higher market share in the Gemcitabine API?
If you look at the 12-month period, the answer is yes. Not quarter-on-quarter. The answer is yes. And for many of the oncology APIs, we hold significant market share. And see, it is kind of some kind of an order book shift from quarter to quarter. Otherwise, our onco pipeline looks healthy.
Okay. And how do you look at the business going forward in terms of the bio business? With Eight Roads coming in, what is your future growth strategy? And how do you see the contribution from the bio business going ahead?
I think we'll be able to answer that once our new additional capacity comes online. See, until such time, we will only de-bottleneck existing capacity. We don't expect FY2026 will see significant growth in bio. So the quality of business may vary, but quantum of business may not be very significant in FY2026. But year after, we will see a big growth in the bio division. But we are not quantifying how much we'll do in FY2027 and onwards. But we will see growth there.
Okay. That's helpful. Thank you so much.
The next question is from the line of Dheeraj Kumar from Tankya Wealth. Please go ahead. Dheeraj Kumar, your line has been unmuted. Please go ahead with your question.
Hello, sir. Am I audible?
Yes.
Yes. Yes, sir. So my first question is around, I hope we supplied registration batch in Q3, and we are doing in Q4 as well. So my question is around, and I'm not expecting any number, but my question is around, are you supplying more than one product or molecule for this Q3 and Q4, or it's for one product or molecule?
I can give a broad answer. So this is the deliveries that we have done in Q3 and what we're going to do in Q4 are for multiple products, not for one product.
Okay. Okay. Then, I mean, we are good. I mean, in 2021, we supplied Paxlovid, and that's the only one product. And when it vanished, our, I mean, revenue has been significantly declined. That's why I asked. Thank you.
There are multiple products. I think, yeah.
Okay. Thank you. Yeah, that's it from my end.
Thank you. Interesting question. Yeah.
The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Thanks for taking my question, sir. On the CDMO bit, in your presentation, you mentioned that you're working on 70+ projects, including several breakthrough designated molecules. Sir, from a CDMO partner perspective, is there any implication we should read into this designation of molecules as fast track as breakthrough molecules? I mean, does it have any implication? What implication does it have as a CDMO service provider?
The approval should be faster for our partner.
Okay. And you mentioned that there are multiple of such products which are there in a pipeline.
Yes. Yeah.
Okay. And is it typically such molecules typically would be what? Typically the off-patent molecules with smaller sort of scales, or these are not necessarily off-patent products? It's typically in such designations.
I think I will not answer this question.
Right. And sir, the other point that you mentioned on the ecosystem for CDMO, sir, I mean, some of the trends that you mentioned, I mean, how are they? I mean, what implications do they have for positive or negative for Laurus as a business in whatever changes that you've seen in the landscape over the last few quarters and the things that you're seeing changing for now?
I think there are changes, but those are all positive for us.
I mean, the point that you mentioned about supply chain optimization by big and mid-size pharma, I mean, what kind of changes are you seeing on that account, sir?
I think they are trying to add some key vendors to diversify their supply base. That's what is happening, and we're happy the way things are going right now.
Okay. And the last question, what kind of programs do we have for the peptides? Various kinds of peptide drugs they are right now the big talk of town in terms of GLP-1s and the other sort of products. What kind of capabilities do we have on peptides, and how do we see that part of our business scaling up?
I think, see, we are not giving what products we are working, what therapies we are working, we are not giving. So that's giving too much of details. We don't want to give very minute details, which is against our policy now.
Okay, sir. Thank you so much.
Thank you.
Thank you. Next, we have a follow-up question. It's from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Yeah. Thanks for the opportunity again. Sir, just on the CDMO, our custom synthesis piece, if you could just clarify, this is more of the exhibit batches traction which has come in this quarter, or this is subsequent to product approval, the initial build-up commercial activity that has driven the custom synthesis business quarter- over- quarter?
We supplied one commercial large quantity and multiple registration quantities.
So the commercial size, given that this is more liquid?
Tushar is not audible.
Yeah. Sorry. Can I audible now?
Yeah.
So this commercial build-up activity will then probably take a breather and then drive the business, or this is more like a sustainable number to work for?
The commercial API, what we supplied in this quarter, will continue to be there. We know the forecast. I think that's good for us, and there are several, as I mentioned, the growth doesn't come from one product. Growth came from multiple products, so we're happy that our CDMO division also well-diversified. Yeah.
Understood. Understood. And lastly, when do we see pickup in the formulation business per se, where we've seen certain products piled up to approval of subsequent launches?
I think overall, our formulation business grew this quarter, and we expect it will do well.
Great, sir. Thank you.
Thank you.
All the best.
Thank you.
The next question is from the line of Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yeah. Thank you for taking my follow-up. Dr. Satya, culture is always the hidden factor in delivering high science and innovation. And I'm sure you know that more than anyone else. And according to some empirical studies, employees who eat together and kind of engage in social activities out of their labs and workplaces, they tend to perform better at work. So, I mean, this is in the context of this mushrooming of life sciences global capability centers around Hyderabad. I mean, do you think this poses a threat in terms of attracting or retaining talent? And if yes, what is Laurus doing in terms of culture, work-life balance, and creating a more fun-at-work kind of a climate for disruptive innovation to foster? Thank you.
I think, see, at Laurus, most of our mid to senior leadership feels this is their company because we give liberal stock options. Also, since any employee spends significant time in the office, unless the workplace is up here, the organization will not be up here. We put a lot of effort to make the workplace an up here, safer place. Most of the time senior leadership thinks about how we are helping our colleagues to do their job better, happily. As I mentioned, we also moved from employee well-being to family well-being. We do a lot of programs for not only employees, but for their kids, for their spouses as well. We think we are treating our colleagues as a bigger family.
That's helpful, Dr. Satya. So in terms of our recent R&D, so this new R&D center in the Genome Valley, given the mushrooming of these GCCs, I mean, was there any sort of a struggle, or we were finding it difficult to attract the kind of talent that we were looking for that new R&D center, given what all is happening in Hyderabad? I mean, there are far too many CDMOs and GCCs in the region. Have you faced any sort of difficulty or employee attrition on the R&D side?
That is a very interesting question, Sajal. See, when it comes to Global Capability Centers, they are more on regulatory IT back office kind of, which Laurus is not part of any of the programs. When it comes to other CROs, CMOs in the region, I think your point is valid. It is a challenge we have to overcome when we do that effectively. See, the kind of recruitment drive we do, the kind of opportunities our colleagues see, I think we're happy to take that challenge and then recruit the right talent.
Perfect. Perfect. That's helpful, Dr. Satya. Wish you all the best. Thank you.
The next question is from the line of Bharat from Quest for Value Capital. Please go ahead.
Hello. Hi. Thanks for taking my follow-up question. Regarding this PEPFAR tender, sir, I think it's for three years. May I know when is the current tender getting expired?
The Global Fund tenders are for three years, and they started last year. So it continues for two more years.
Okay. And the next tender cycle is from 27, then?
Yeah. Yeah.
Perfect. Yeah, and may I know the split-up of this 531 growth for this API? Can you please give the split-up between ARV, Onco, and other API?
The ARV is 315 growth.
Okay. And Onco and other API?
216. Yeah.
Okay. Okay. Yeah. Thank you.
Thank you.
Yeah. That's it.
The next question is from the line of Malhar Sanghavi from Bodhi Capital. Please go ahead.
Yeah. If you hear me.
You're audible.
So first of all, congratulations on a good set of numbers. So my first question is, have you tried to reduce the CapEx in that report?
Mr. Malhar, can you please use your handset and speak?
Is it better now?
Yeah. Yeah.
Yeah. The question was, have you tried to reduce CapEx percentage at the end of this year? 7% last year, 17%. So is it better than CapEx?
Malhar, your voice is cracking. Can you please rejoin the queue again? The next question is from the line of Chirag Shah from White Pine Investment Management. Please go ahead.
Yeah. Thanks a lot for giving the opportunity again. Sir, I have a question on CDMO again. Sir, if you can just highlight the predictability of the revenue of CDMO versus how it was a bit more volatile, at least on quarterly basis. So what is the change or the nature of the CDMO revenues that we'll have which will make it more predictable versus the past? It will be volatile. I understand that, but I'm just trying to understand, is there a major change in the nature of CDMO revenue stream? We did INR 400 crores, for example, and looking at the synthesis business altogether, INR 400 crores in Q3. If we take that as a base, how should one look at the predictability going ahead of the CDMO business?
I think, as I mentioned, the pipeline in the CDMO business is robust, and growth came from multiple projects, not from one. And we have a large number of clinical programs running. So I think all of us are aware it is absolutely impossible for all programs to succeed. It is also difficult to guess all programs fail. And these are coming from multiple big pharma for us. So we believe the chances of success of a CDMO pipeline is very high right now because of the therapy areas where we are involved in those programs. We expect the chances of success are bright. I'll leave it at that stage. Yeah.
Is it right to worship the history if there is a much bigger pipeline executing at the same time? The probability of those achieving success is also higher versus the past. That will bring in a bit more predictability versus our past. That is the right way to understand?
You're right. Absolutely. So yeah. See, previously, the large PO came, and then after that, there is a gap. Now, so this growth, we believe, is sustainable growth. Yeah.
Okay. Thank you.
Thank you. Yeah.
The next question is from the line of Vivek Agarwal from Citigroup. Please go ahead.
Hi. Thank you for the question. So the question is on 4Q NTV product deliveries that you were talking, right? So any deliveries happened in 3Q as well, or it is going to be completely the new supplies that are going to reflect in the 4Q on top of what we have done in 3Q?
The combination. Yeah. So yeah.
So some part of supplies you also made in 3Q as well, right?
Yeah. Yeah. We do more products in Q4. We continue to augment our supplies of the large quantities what we gave in Q3. We continue to do in Q4 as well. So I think I would say the pipeline is robust. So yeah, we're happy our efforts came to this stage. Yeah.
Thank you, Satya. So just one more question on the six ongoing growth projects that you're talking about, including three small molecules, one drug product, and two CGTs. So is it possible if you can give some more color on what stage these products are, whether it's a phase one, phase two, later stages, or either filed with the FDA, etc.?
In the generic portfolio, two products approvals, we expect this quarter or next quarter, so we hope to launch those. Then CGT is very early for us to give any guidance, and because our facility is only coming up in FY2026, GMP facility, so I think our CGT, we're only investing, nurturing that. And I think we're happy for the investment what we're doing. As we mentioned earlier, our commitment to put about INR 120 crore in the facility itself is a good commitment, and we're happy to do that. And we believe our facility will cater to not only for the viral vectors, but also the ability to make plasmids for others.
Thank you, Satya. Sir, and just one more, I think, repetitive question. Earlier participants have also asked, I think. It would be super helpful if you can highlight how many new products that you see that can be commercialized in the next, let's say, one year, or even if you can give a broader range, let's say that at least in the next three years, we are going to commercialize this number of molecules, especially in the CDMO. That would be super helpful.
I think it's difficult to give that. But yeah, it's difficult to give that number. Yeah.
No problem at all. Thank you. Thank you very much. All the best.
Thank you.
Thank you. Ladies and gentlemen, this will be the last question. It's from the line of Malhar Sanghavi from Bodhi Capital. Please go ahead.
Am I audible now?
Yeah. Malhar, I'm very audible now.
Great. Yeah. So my question was, in the presentation, you mentioned that there are around 2,600 scientists and around 1,250 R&D scientists. So I just wanted to know if you have front-ended the hiring and if we can handle a much more amount of molecules than we currently have the same number of team?
That is the intention. We opened a new R&D last quarter, and that R&D is as big as our current R&D. Currently, we are not doing much early-phase programs because our late-stage programs are taking away a lot of resources, so we will offer more early-stage work that will also fill our pipeline. We are augmenting, and we'll augment further our scientific talent to take more clinical programs.
Right. Thank you. And one more question. Are you planning to reduce the CapEx going forward in the next couple of years? Because that's been the trend over the last two years. So is it going to continue?
I think CapEx-wise, if we see an opportunity to invest, that's the way our philosophy, and we continue to do that. If somebody comes and is looking for a project, we're happy to invest.
Right. Of course. Perfect. Thank you so much, sir.
Thank you. Thank you, Malhar.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to the management for their closing comments.
Thank you, Nitin, for organizing this call. And also, thanks for all the participants of the call for their outside in view. And some of the questions asked by you are very thought-provoking and also help us to guide our business forward. Thank you.
Thank you.