Sir, should we open the floor for questions?

Yes. Sure, please.

Thank you very much. We will now begin with the question and answer session. Your first question comes from the line of Vishal Manchanda from Systematix.

During the quarter, did we kind of book any shelf stock adjustment for Revlimid?

Okay. And second, on generic Ventolin launch that you are expected to do next month. So just wanted to understand if the Innovator is supposed to launch a green version of Ventolin sometime by third quarter of this financial year. So hypothetically, if the innovator is replaced - - is able to replace all of their Ventolin product with the new version, would that impact Cipla?

Generic to the existing Ventolin. The switching to another variant is -- I think that will be a process, which is not an automatic process under the U.S. law at this point of time. So we do not anticipate any near-term impact of that change as and when the transition starts to happen.

Okay. And if you could update on the respiratory pipeline, the key assets, Advair, Symbicort, Qvar, Flovent?

So I think as we had guided, we were expecting four approvals this year. Ventolin has already got approved. We are having different goal dates for different products. So during the year, we are expecting Advair, Symbicort and then one other asset to get approved. So this will happen during, I think H1 and 1 is H2 as well.

Okay. And what is holding back Advair for so long?

I think your question is probably more historic. If you recall, we had OAI at our Indore facility. So we had to tech transfer to the U.S., which caused the delay. But now we are ready with everything. So it's just a matter of receiving the approval.

And just one final one.

Sorry just to complete w ent through a pre -approval inspection on our U.S. facility for this particular product.

Got it. And just one final one. Do you expect to see any benefit out of the EU FDA for your respiratory portfolio because you source a lot of the basic devices from Europe?

At this point, we are not expecting any meaningful impact of that. I think it's more business as usual at this point in time.

So is there a change in the duty structure there? Or it remains the same pre and post EU FDA?

It remains the same. So there is no benefit as such. And in EU, we are already selling Respiratory devices, which are in-house. So there's no significant benefit that we see coming from EU FDA.

My question was more from a sourcing standpoint, the key raw materials that come from Europe, would they be cheaper for you?

No. So it's -- we get some raw materials from there, especially on the devices side, but there's no any such benefit that we have out there.

Just wanted to understand the specific initiatives around AI, which you mentioned. If you could share any specific initiatives that you've taken and anything -- any other pilot initiatives that you see scaling up in future?

Yes. So AI is a broad -based implementation that we are targeting, which will focus across multiple functions. And the difference between what used to happen in the past versus now is we are focusing on end-to -end processes versus small limited use cases. So this will be -- we have implementations across quality, regulatory, corporate functions and a lot of the R&D - related use cases as well. So the idea is to use it in a way that helps obviously faster and better decision-making, but also ultimately gives us productivity benefits.

Right. And on the biosimilars front, I just wanted to understand in terms of your strategy for biosimilars, are you looking at in-licensing? Or are you looking at your own development? And what sort of a pipeline and time line are you looking at for that, both from a U.S. and EU perspective? And is that sort of accelerated given the new FDA draft guidelines?

Yes. So we have predominantly an in- house strategy where we have 2 assets currently under development for developed markets. One of them is already under clinical trial under an IND of U.S. We will be adding 1 to 2 assets each year, which will then, therefore, start resulting into a pipeline of 6 to 8 in-house assets over the next 5 to 8 years. On top of that, we are considering a limited amount of in-licensing where there are near -term opportunities that are not within our in-house portfolio. So for those, we are open to considering some in-licensing opportunities as well. But we see this as a newer space more so because of the changes to the guidelines, which have placed us in a good position where we can run these like the other complex projects, and we can benefit from the overall economics of developing these projects.

Your next question comes from the line of Surya Patra from PhillipCapital.

My first question is on the U.S. revenue guidance, what you are talking about, about $1 billion by the end of this year. Sir -- and also simultaneously, you have mentioned that in your guidance for '27, you have not factored Lanreotide. So that means in your expectation for FY '26, you are not considering Lanreotide. And obviously, this Lenalidomide is not there. So if we kind of deduct these two product revenue from the $780 million annualized revenue of FY '26 for U.S. So the number what you're talking about is almost like double the size of base U.S. business of FY '26. So what is the kind of a bridge that you are talking about where from this revenue buildup that will happen? Can you give some clarity, sir?

Yes. So the guidance, I just wanted to clarify is a $1 billion run rate by the end of the year. We are not guiding for $1 billion revenue during the year, right? And the reason for that is because a lot of this is contingent on pipeline maturing. So we ha ve 1 approval already in hand. As we mentioned, there are 3 other respiratory approvals. There's one big peptide approval, and there are 3 other products which have already got approved in the year, smaller assets, et cetera. So as these products get approved, our run rate will keep improving, and we will get to that $1 billion by the end of FY '27. Which puts us in a very good position because what -- historically, we were shy of that, we would want to see the year ending at a good run rate of $1 billion in the U.S.

Okay. So that means kind of in the second half, we will see a run rate of almost like $100 million incremental revenue versus the quarterly run rate in the first half?

Yes.

Okay. And now is it fair -- I mean since you have mentioned that Lanreotide, you have not factored while guiding the margin for the year. So is it -- so what is the outlook that we are giving for Lanreotide for this year and for the subsequent period given the kind of total disruption that we are currently seeing for that molecule?

Yes. So for Lanreotide, we have the partner who is working on the remediation efforts. And that's in full swing, and we are helping them as much as possible on navigating that part. So I think maybe by next quarter, we'll have closer visibility on their e xact remediation time lines, which will also include a reinspection from the FDA. So that we can come back and guide after a quarter. But in parallel, we have also identified alternate supplier for this -- alternate manufacturing site, which will be based out of the U.S. So the objective is to be able to file by early next year -- next calendar year or Q4 of this financial year. That gives us a two-pronged approach to overcome this. And so I think it will come back. It's a very interesting opportunity being a long-acting injectable. And once we are able to resolve either of these 2 and now we have two shots at the goal. We will be back in this definitely from an FY '28 perspective, it will be.

Sure, sir. Sir, on Ventolin, that is the next question. So when we already mentioned that we have around 22% kind of -- or more than 20% kind of market share in the Albuterol market itself in the U.S. So now with another variant of Albuterol is getting approved, do you find any changes to the kind of market dynamic in terms of the pricing or in terms of the competition or in terms of your scope in Albuterol as a whole, whether it will lead to incremental business or not since it is a variant of albuterol only and the prescription would be based on Albuterol HFA that way?

No. These are different products because they get substituted to the different innovator products. So it's a different NDC, different market. And we have CGT on the generic Ventolin. So we will actually be exclusive for a 6 -month period. And we expect a signifi cant uptick. There is no cannibalization that will happen on the other variant, which is a generic to another variant of same molecule. So we're more likely to take the share from the existing Ventolin suppliers rather than going from the other franchise.

Okay. Just last one question from my side, sir. Is there any scope of rationalization of the cost on the cost front, see because if the revenue is likely to slide on the U.S. front, particularly, so are we likely to see any reduction in any cost line item for FY '27?

So look, there are two parts talking on a number of productivity enhancement measures, which will help us optimize the cost, including some of the tech-related transformation that we spoke about. But the short term, there are disruptions because of the war situation on sourcing side. So right now, we're having visibility to what we've seen so far. But if it prolongs, that's something that is still yet to be quantified. But to answer your question on basic efficiencies and productivity, yes, we are working on that, and it will materialize as we go through during the year. There's one more point which I think you should keep in mind is we had invested in our North America facilities for these complex products. And so far, the cost has been there in the last quarter or 2, but the revenues have not commensurately come. So we will see that corresponding r evenue with the new launches. And therefore, the economies of scale will improve as we go along.

Your next question comes from the line of Tushar Manudhane from Motilal Oswal Financial Services.

Sir, just on the R&D connecting R&D spend overall almost INR 2,000 crores and -- but at the same time, very few ANDAs being filed. So is it that the R&D spend for ANDA is significantly higher maybe for FY '26, '25 compared to the earlier, let's say, the philosophy of R&D spend for ANDA? That's my first question?

Yes. Actually, we have gone up products, including some First -to-Files, which are on Oligonucleotide side as well. So we've gone into more respiratory, more peptide and more Oligo, which is resulting in higher spend per filing.

And some of these also involve litigation cost as well. So that also leads to higher R&D spend, which has got everything in that R&D spend that you see, both API cost, your R&D that you buy, litigation, et cetera, et cetera. And of course, some of these O ligonucleotide, et cetera, we go outside to CRO, CMOs as well. So there is also cost involved in that.

So sir, typically, at least for without getting into product specific details, but let's say for Respiratory and Oligo products, like per ANDA R&D spend broad number you would like to call out?

I think that's very case specific. So it's difficult to call out an average number. We are guiding towards 7%-ish on R&D spend as a percentage of sales. And we're also going to -- I think in the mix, the mix will also change slightly in the coming year because, as I said, 40 to 50 filings with Respiratory with First-to-Files and certain number of peptides, et cetera. So hard to put a metric on per filing because the nature of that filing changes a little bit. But our endeavor is to go after complex opportunities, which keeps the business sustainable and NPV per project has to be high right, that's the internal criteria.

Got it, sir. And secondly, the Albuterol market share has sort of reduced quarter -over-quarter while the number was at 19.5% it moved up to 22%, and we are now back to 19.5%. Anything to read through in that?

No. I think it's hardly a reduction that you see out there of 0.4% or so that we've seen. So I think 19% to 20% or rather 19.5% to 20% is something that you should pencil in -- we are ranked out there. And if the supply was -- if you could supply more, then we could -- there's a potential to increase the share as well.

And just to complete on the R&D part, is this Indore regulatory issue also one of the reason for, let's say, is the delay in filing because of the regulatory issue at Indore site or the Indore site classification has got nothing to do with the filing of the assets?

No. So now we have derisked out of Indore. So our assets are filed from U.S. And one of the assets we are doing from Goa because Goa is here.

No, no. I was referring to, let's say, prospective filing, not the ones which are already filed. Let's say, where we do R&D spend, where the product probably from validation or exhibit batches are ready but because of classification at Indore site, the acceptance of filing by U.S. FDA, is there that kind of a delay also happening?

Same likewise for potential filings also, we are focusing more on Goa and U.S. sites. And Indore, I think we will accelerate as and when -- as soon as it clears. Yes.

Got it, sir. And just lastly on Ventolin, this product will see a gradual pickup in terms of market share? Like what's your strategy, if you could highlight, given while we have exclusivity, but will the pickup be gradual enough or we can have a sizable business in, say, 2 to 3 quarters time line?

Yes. So you will see towards second half a ramp-up happening in generic Ventolin. Though we will launch it within the quarter 1 and quarter 1, yes, but the ramp-up will happen in half 2.

Capacity won't be the constraint for this product?

No. We have U.S. facility for it.

From the device combination as well perspective?.

From big, sorry, come again?

From the drug device while drug would be there from...

Not a problem at all on the devices side.

Your next question comes from the line of Damayanti Kerai with HSBC.

My question is again on your U.S. exit guidance of $1 billion in FY '27. So you indicated a couple of interesting products in respiratory peptides, et cetera, which can help you to achieve this rate. So my 2 questions there. What kind of visibility you ha ve on these products, which gives you confidence that you can receive approval in this year? And second is for some of the bigger assets, what kind of risk mitigation strategies which you have already implemented? So if you can elaborate on these 2 points?

No, see I think it's -- in terms of confidence in each of these assets, we are seeing some developments happening. Like for example, in Advair, now you've had a PAI that has happened. Okay. Ventolin where we were expecting around the same time we've got the approval. In certain other assets also, there is an ongoing discussion readiness that is there. Of course, we can't anticipate when the approval will come through. But some of them, we are aware of the goal date, et cetera. Well for quarter 3, quarter 4 ramp -up to happen to $1 billion kind of a run rate. And that's what we have envisaged in our business plan. And from facility point of view, all these facilities are also derisked. So from internally, it's only pending approval from internally we are ready to kind of launch these assets as soon as the approval comes.

Sure. So when you say facilities issues are derisked, so most of these filings are filed from 2 sites, say from India and from U.S. Is that the case?

No, that won't be the case. Right now, these are filed from U.S. or from Goa, you will have 1 or 2 assets filed. But -- and these are respiratories that I'm talking about. The peptide is with a partner site outside. So we don't anticipate -- that we don't anticipate any risk in the facility. Goa has recently got inspected as well. There are 2 observations we are waiting -- we have responded to those observations. We are waiting for the classification. I can't comment on that. But nevertheless, that's the status of our visibilities here.

Sure. My second question is on your India business. So obviously, fourth quarter, I believe, is very strong. And full year, you ended at 9% growth for the segment. So when we look ahead, say, '27, '28, do you think you can outpace IPM growth in, say, next 1 or 2 years or it might take slightly longer because the market growth also improved in recent time, we are seeing around low double-digit growth for market. So on that perspective, you are just like close by, but not outpacing the market as of now?

Yes. So we are confident that we'll be able to deliver a strong double-digit growth as well as a market beating growth in FY '27, '28. And we've been seeing that consistent trend over the last couple of quarters.

Okay. So you think it's possible. Okay. And my last question is on your gross margin trends. If qualitatively, you can give some color given now your product pipeline is becoming more complex generics heavy. So in that sense, how should we look at your gross margins in the near term or in medium term?

Yes. See, it's a large mixed bag in the gross margin. So there are many factors that go into it. So like in the last quarter, I had highlighted that we had R&D cost, material costs going up due to which the gross margin had got impacted. So some bit of that has got reversed in this quarter where the margin is better because also not just the product mix, but also because the R&D material cost was lower in comparison to the previous quarter that you saw. I think the way I look at it is that, of course, Lenalidomide was a high margin up. But most of our Respi assets that are coming are mostly in-house products. So in-house products will always give you a higher end of the margin more than the company average that you're seeing today. So it will only accrete to your company gross margin. But at the same time, some of the peptides that we're talking about in Oligo, Oligo is much later, but peptides that we're talking about, they are partnered products. So while the gross margin could be high out there, but there is also a profit share as a royalty that we end up paying, which goes into gross to net. So therefore, your gross margin in those products will be after the profit share, which kind of brings it down. But at the same time, the SNDA et cetera, in the U.S. at least is not much. So it is accretive significantly to your EBITDA margin. In India, we are moving more and more towards chronic. So chronic will definitely come with 5% to 10% better gross margin. And we are keeping a very tight control on how much what ILDs we do. So keeping all these things in mind, I think gross margin should have a positive bias. And the last thing that I just w ant to highlight is that generally, you will see in the results also there are strong control that we have over cost. So every year, we take some target to actually reduce the cost such that it is lesser than the revenue growth that you see out there. So I think these are the things that we take care of. Of course, there is this whole geopolitical and war risk that is there. We had some impact of that in quarter 4. We have some impact in quarter 1 not significant though. But some of these inventories that you're buying today as it gets consumed in second half, there may be some cost, but that's temporary. Like I think your question was more around longer-term sustainable?

Yes.

From the term I've talked about, but there may be some blips here and there because of the reasons that I mentioned.

Our next question comes from the line of Nikhil Mathur with HDFC Mutual Funds.

I'm sorry to be hopping on the U.S. guidance. One clarification. When you're saying that you will be at a $1 billion exit run rate, does it include Lanreotide or it doesn't include any contribution from Lanreotide?

At the moment, we've left that out of this guidance. So that will be an upside to plan if we can successfully get back in the market before that.

Okay. So if I analyze this quarter's U.S. revenue, you are at around $620 million. We are talking about $1 billion exit. So this is about $380 million of incremental revenue. Just wanted to understand the skewness of this $380 million. So there are, I thi nk, 6, 7 products t hat you are launching this year? How -- what kind of contribution will be from one or two products in this incremental revenue? Will it be skewed towards one or two products or can there be equitable distribution among 6, 7 products? Because it's -- I'm just asking so it doesn't create a big risk in FY '28 because if competition comes in, then again, you kind of face a situation which you faced in Revlimid this year?

So Nikhil, in terms of annualized revenues from these products, I think a couple of them, we are expecting $100 million plus annualized opportunities, right? And the other 2 are also significant, right? So -- and then there's -- so this is respiratory and then there's a peptide asset, which is also big. So we are expecting big contributions. I think the reason we are not able to give a quarter -wise kind of breakup or a product -wise breakup is because the timing of launch, if it moves 1 or 2 months, that affects the full year number. But run rate -wise, assuming we have these launches, we will be able to cross that run rate by the end of the year. So there are 2, 3 big opportunities and a couple of medium-sized opportunities.

Got it. And what kind of a tail are we looking at in these plus $100 million opportunities? I mean, can they continue for, let's say, a couple of years, '28 and '29 or in '28 onwards only, we can see some bit of erosion starting to happen?

So see, these are not like the 6 -month exclusivity kind of opportunities. So even if competition enters, they will taper off slowly, right? So they are more like the way to look at it is what you saw in our Albuterol or what you saw in our Lanreotide prior to supply disruption issues. These are more steady opportunities. So where we have to manage some level of price erosion, but not a cliff kind of scenario, right? So these are steady opportunities.

And if there is a price erosion with new competition coming in, you may see some volume going up. So you'll have to manage it as a dollar value rather than looking at it as volume or a price gain.

Understood. On the India business, can you quantify the contribution from your peak in 4Q? I imagine it's only 4Q where your peak would have contributed, not in 3Q, right?

Yes, it wasn't that large because real sales started happening in Jan, so Jan, Feb, March. We've seen growth internally in secondaries. April also, we saw an improvement over March on secondaries. But yes, I mean, it's not out of the 15% overall One India we've reported, it's not going to be a meaningful percentage.

Sub 1%? Is that the sub-1% or sub-2%? Is that how we should read it?

I think those figures are broadly available in the market. If you look at IQVIA, I'll give you a direction of how much primary we are doing.

Okay. And is there any M&A component or in -licensing component that I might have missed, which is also leading to this double-digit growth in 4Q?

Yes, we had in-licensing of some Pfizer products. We had a small acquisition of a business called Inzpera. Yes. So base will still be double digit.

I think the presentation also we had mentioned, I think the 4 last time or we've always announced the three, four IDs and acquisitions that we've made.

I think over the next, let's say, 2, 3 years, how should we think about your capital deployment, both, let's say, organically or inorganically, if you can give any color the kind of assets and capabilities that you're looking at?

Yes. So look, I think we are preparing for a solid growth over the next 5 years and beyond. And for that, I think the number 1 deployment is going to be on R&D side. So we have plans to accelerate R&D pipeline. So Respiratory assets, we have some under approval, more which we are filing. Complex products, which we outlined was peptides, other differentiated products. But also we're going to step up on biosimilar side, where we would want to do roughly 6 to 8 internally. And if we find a couple of good opportunities, we can supplement through inorganic as well, so that will consume some capital. Then we have capex, which we have increased steadily over the last 3 years. So this cycle will probably reduce after another year or so because we've built enough capacity for the products that we want to supply. And beyond that, we will be led more by productivity initiatives. On top of that, inorganic, we are interested in looking at assets. We evaluate several assets. Our bias is more towards differentiated specialty kind of products for developed markets, which is U.S. and Europe, which give us a more sustainable growth and some capabilities as well. So I think those are the areas where we would want to deploy capital in order to sustain the entire trajectory over a longer period of time.

Yes. Anything in India or emerging markets like more in branded generic space you think Cipla would be looking at or this would be largely organically built?

So India, we've actually put a slide in the investor deck on the partnerships we've done. Acquisition, a large acquisition in India is a little difficult for us because we are a number 2, number3 player. We're actually number 1 by volume. So whenever we start looking at some of these, there is a significant overlap that we have to account for. So emerging markets Europe remains a very good opportunity for us. We're looking at that. And if we find opportunities where we get business plus capabilities, that would excite us a little bit more because then that gives us the platform for future growth as well.

Right. Actually just one clarification because the cash on balance sheet is pretty large now. And the kind of expansion organically and inorganic opportunity, it appears that it won't get consumed. So I mean, are we even thinking about high dividend payout? What are your thoughts on the cash that you have on your books now?

So see, there are opportunities to deploy. We need to be selective. We -- when we look at it as in absolute rupee terms, it looks high. But if you were to chase 1 or 2 large transactions, meaningful transactions, this is not a very high amount of cash. So I don't think we are worried about the cash on our books. It gives us flexibility and it gives us opportunities to look at options which can help the future growth of the organization. At the same time, we do remain selective because the kind of opportunities that we are looking at have to really pass all our filters in terms of diligence and adding strategic value.

The next question comes from the line of Neha Manpuria with Bank of America.

A quick question on the India business. I think you mentioned we grew double digit in the trade generic business, and I see we are growing double digit in consumer health care as well in FY '26. So is it fair that the branded generic business has actually been pretty muted for the entire year? Therefore, what gives us confidence that we'll be able to beat India growth in the next year?

Yes. So I think we mentioned that all the 3 segments of the business have done really well in -- especially Q3 and Q4. Q1, we had a muted quarter on the branded Rx business. But that is behind us now, right? There were reasons related to seasonality, et cetera, but we've not seen those similar reasons as we started this particular financial year. So -- with the products we have and the strategies that are there, we are quite confident, and we've seen that trend now over at least 2 quarters, which gives us confidence that this will continue. And also, we should still acknowledge that acute is a fair representation in our mix in comparison to other players and market, okay? So -- and that is season dependent. And last couple of years, we've had a challenging season. So we have to work much harder in other part of our portfolio to achieve that growth, which at least we've been able to do in the second half of the year.

So in that case, given that we've had a fairly low base on seasonality, ideally, even a normal season should give you that tailwind for India growth this year, right? That would be a fair assumption, even if we didn't have like even a normal season should help.

Yes. So that's why we're saying we are confident about the double -digit growth because we -- the seasonal patterns don't happen too many years in a row, right? So I think the base was low for last year on some of these acute things, but also the chronic p ortion, particularly diabetes, cardiology has grown significantly. So we have also diversified beyond that seasonality dependent portfolio. So yes, we will overcome this.

Okay. And my second question is on the margin guidance that we mentioned, 18.5% to 20%. Given that a lot of the U.S. growth will be -- the high -value launches will be second half weighted. Is it fair to assume that in the second half, our margins could be north of the 20% range and therefore, the average that you've given? Would that be a fair assumption?

Yes. So that's exactly what I had mentioned initially that in 18.5% to 20% that we're guiding, it will be more in the favor of H2 where you will have better than average and first 2 quarters where we don't have the benefit of new launches, we will see a l ower margin than the average that we're giving. So yes, that's the trend that you will see.

I'm just again trying to understand your EBITDA margin guidance. Given the outlook you provided for the U.S. business, $1 billion plus run rate and India double-digit growth in FY '27, this 18.5% to 20% appear a bit conservative. So just trying to underst and, have you baked in significant impact of, let's say, input cost increase or impact of geopolitical situation, etcetera or anything that is holding you back from giving a better guidance?

See, I think we have made a lot of investment in the last 1 or 2 years, both on people as well as on R&D. And both these costs is going to sustain. People costs will continue to be high because we've made manufacturing facilities and to add the field force etcetera. I think more or less that investment phase is coming to an end. But of course, that people cost is now sitting with us and revenue of that will start coming in, like Achin had said later with the new launches coming in. R&D also, while it is discretionary and in hand, but still will continue to be at about 6% to 7%, but more biased towards 7% because we are increasing the number of programs, etcetera. So therefore, I think 18.5% to 20% is a fair margin to assume. We are taking in more moderate kind of war risk and we are hoping that it's temporary and not really going to sustain. If it sustains, then of course, this margin we'll still try to mitigate th rough other measures. But nevertheless, we're not factored in a very long-term kind of sustained impact of that.

Understood. And given that you are suggesting 2H margins to be better than 1H, and it will affect new launches in the U.S. So is it fair to understand that '28 margins or F '28 margins can be materially different or better than F '27?

I think that would be our target, right? So we will obviously work towards continue to improve our targeted margin. To be fair, I think it should 20 plus is something that we should anyway sustain going forward.

Last question on one product Nintedanib. So how material this product can be? So is it a very short-term opportunity for 2, 3 months or it can last throughout this year. You can help us understand.

It's not a very large product, but we've got good market share. So it's doing well for us. We've had a few other launches as well already in the year. But these are not -- I would not call them out separately. They're not of that.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Diksha Maheshwari for closing comments.

Thank you, everyone, for joining in. If you have any further questions, please write it to investor.relations@cipla.com. Thank you.

Thank you. On behalf of Cipla Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.