Thank you very much. We will now begin the question and answer session. The first question is from Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
GLAND · FY2026 Q3
Gland Pharma Limited analyst Q&A
Thanks for the opportunity. Sir firstly, on this CMO contract, if you could also share what is the size of this contract and the timeline for completing this c ontract and starting timeline for this contract. The one with respect to oncology.
Tushar you're referring to the new CDMO contract? For that the timeline is FY28 probably third or fourth quarter [or] end of '28. The expected revenues are around $25 million to $30 million per year.
USD25 million to USD30 million per year, starting end '28, correct?
Yes, correct.
This would require certain capex from our side, and which is why this contract timing is end of '28?
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 this time, and then the tech -transfer, and then the variation filing. It's a commercial product in Europe and many coun tries. So the variation filing has to happen in Europe and several countries. So that's why the commercial ization will happen in third or fourth quarter of '28.
And how much capex would you be requiring for this project?
About INR80 crores.
Got it, sir. Sir, just secondly, 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%. You can take overall.
For base business?
Yes.
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 a milestone around 7%.
Thank you, sir. I have more questions. I will join back the queue. Thank you. Gland Pharma LimitedJanuary 28, 2026With that, I would now request operator to open the line for questions. Thank you.Moderator:Thank you very much. We will now begin the question and answer session. The first question isfrom Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.Tushar Manudhane:Thanks for the opportunity. Sir firstly, on this CMO contract, if you could also share what is thesize of this contract and the timeline for completing this contract and starting timeline for thiscontract. The one with respect to oncology.Srinivas Sadu:Tushar you're referring to the new CDMO contract? For that the timeline is FY28 probably thirdor fourth quarter [or] end of '28. The expected revenues are around $25 million to $30 millionper year.Tushar Manudhane:USD25 million to USD30 million per year, starting end '28, correct?Srinivas Sadu:Yes, correct.Tushar Manudhane:This would require certain capex from our side, and which is why this contract timing is end of'28?Srinivas Sadu:Yes. So it's a dedicated — it's a complex product. So we have to create some dedicatedcompounding area for this product. So that's why this time, and then the tech-transfer, and thenthe variation filing. It's a commercial product in Europe and many countries. So the variationfiling has to happen in Europe and several countries. So that's why the commercialization willhappen in third or fourth quarter of '28.Tushar Manudhane:And how much capex would you be requiring for this project?Srinivas Sadu:About INR80 crores.Tushar Manudhane:Got it, sir. Sir, just secondly, if you could also share U.S., Europe constant currency growth forthe quarter on a year-on-year basis?Srinivas Sadu:About 5%.Tushar Manudhane:In U.S. and in Europe?Srinivas Sadu:Overall, it's around 5%. You can take overall.Tushar Manudhane:For base business?Srinivas Sadu:Yes.Tushar Manudhane:Got it. And just lastly, if I may, if you could share milestone and profit share for the quarter?Srinivas Sadu:Profit share is around 9% and a milestone around 7%.Tushar Manudhane:Thank you, sir. I have more questions. I will join back the queue. Thank you.
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 going forward from here on? And second, in your initial address, you did call out about investing INR2,000 crores. If you could give more color in terms of what is the time line within which you're looking at investing at, the approval time lines and kind of asset t urns that you would look out of investments given that it's going to be a mix of both volume as well as value?
So I'll take the capex question first. So, we would be building a Brownfield expansion for capacity, which should be adding to existing vial, Lyo and 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, a suspension line. And this would be spent over a period of next 5 years. So next year, our capex should be around more than INR400 crores. And the asset turn should be more than around 3x. Considering the high - value business, we are expecting in this new facility.
Just a 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, because there'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 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 with suspension capability. So that's a need. There are several key products in that space. That's one line we're investing into. The BFS, there are some specialty products on blow-fill seal technology, which you want to get to you. And we've also seen several markets, the 3 piece is also moving to BFS technology. And currently, we only have a 3 -piece line and we're not able to sell cater to the RoW business because of lack of the 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 it, so that's why we want to invest into BFS. But there are also several - - they have done some good projects we're doing, which falls under BFS, which are on the specialty category. So that's the other one. In terms of additional capacity, we are running out, I would say, next 1-1.5 years running out of Lyo capacities. If you see the growth coming from our -- if you look at last few quarters growth, the volume growth is larger . Even last quarter, if you see volume growth is almost 19% in the US while the price has dropped. So we are aggressively looking to reduce our cost internally, become more efficient. So we are utilizing that game 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 on our cost down, and that's where
Thank you. The next question is from Tarang Agrawal from Old Bridge. Please go ahead.Tarang Agrawal:Hi, I have two questions. One, if you could give us a sense on how the Cenexi trajectory shouldplay out going forward from here on? And second, in your initial address, you did call out aboutinvesting INR2,000 crores. If you could give more color in terms of what is the time line withinwhich you're looking at investing at, the approval time lines and kind of asset turns that youwould look out of investments given that it's going to be a mix of both volume as well as value?Ravi Mitra:So I'll take the capex question first. So, we would be building a Brownfield expansion forcapacity, which should be adding to existing vial, Lyo and other delivery formats. And that isconsidering the increased demand and other expectations we have. In addition to that, we arealso putting a BFS line. We are putting up new ophthalmic line, a suspension line. And thiswould be spent over a period of next 5 years. So next year, our capex should be around morethan INR400 crores. And the asset turn should be more than around 3x. Considering the high-value business, we are expecting in this new facility.Tarang Agrawal:Just a follow-up on this. I mean, what is driving this kind of confidence? I mean from the pointof 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, because there's a sizableportion now from the point of view of where your gross block is today and the kind of investmentthat you're committing?Srinivas Sadu:So on the ophthalmic side, the current capacity, we have almost — we're not able to cater toactually the demand. And we have several products under approval stage and we need additionalcapacities. Ophthalmic line, which also has capability of suspensions. Today, we don't haveophthalmic line with suspension capability. So that's a need. There are several key products inthat space. That's one line we're investing into.The BFS, there are some specialty products on blow-fill seal technology, which you want to getto you. And we've also seen several markets, the 3 piece is also moving to BFS technology. Andcurrently, we only have a 3-piece line and we're not able to sell cater to the RoW businessbecause of lack of the 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 it, so that's why we want to invest into BFS. But there are also several -- they have done some good projects we're doing, which falls under BFS, which are on thespecialty category. So that's the other one.In terms of additional capacity, we are running out, I would say, next 1-1.5 years running out ofLyo capacities. If you see the growth coming from our — if you look at last few quarters growth,the volume growth is larger. Even last quarter, if you see volume growth is almost 19% in theUS while the price has dropped.So we are aggressively looking to reduce our cost internally, become more efficient. So we areutilizing that game to get more contracts in the U.S. And that's why we did mention in our lastcouple of quarters that we worked on efficiencies, we got on our cost down, and that's where 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 has is -- and so the fourth aspect is the CDMO contracts, which we're entering. Some contracts are that by commercial quantities where the players are entering to different segments and we're trying to move the commercial products to our sites. So we need to invest into that as well. So there's a lot more focus on the CDMO contracts last 12 to 18 months. So that business, we're trying to grow substantially, but not at kind of products, more complex specialty kind of products and also focusing on commercialized products where you have clear visibility on revenues in the next 2 to 3 years with worst-case take-or-pay agreements, I would say.
And Tarang, on your Cenexi's question, the performance in this quarter reflects a disciplined execution over past so many quarters, including capacity utilization , workforce rationalization or optimization, ramp-ups and all of that. So there will be quarter -to-quarter fluctuation. But overall, on 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 EUR50 million is a good base kind of work with now?
So, on an annualized basis, yes, you can take it [EUR] 200 [million], but there could be some quarter to quarter fluctuations.
Thank you. The next question is from Neha Manpuria from Bank of America.
My first question is again on the capex number, the INR2,000 crores that we had mentioned, how much of this would be for Cenexi versus the Base business? .
This is for Base business, Neha.
Okay. So that means we're really doubling the gross block or really doubling the gross block once this capex is completed.
Yes, that's correct. Yes.
Okay. And what would be the average utilization of the existing capacity that we have? And at what point do you think capacity becomes a constraint for growth ? And how soon would we need to get this capacity up and running to maintain the mid-teens growth that you've guided to?
So it depends on the lines, but most of the lines are running at 80%, 90% capacity. Some lines are almost top of that. On the prefilled syringe, we have enough capacities. And we're not investing into that. And of course, the cartridge, these are new technology we got into those we have enough capacities. But if you look at l yophilizers or liquid vials , I think those are almost -- they're running at -- most of the lines are at 90% capacity, a few lines at 40%, 50%. So at least for the next 2 years, Gland Pharma LimitedJanuary 28, 2026we're able to win a lot of contracts and GPO contracts in the U.S. and the supply started fromthis quarter.So the volumes are higher. So we need those capacities as well. So it has is — and so the fourthaspect is the CDMO contracts, which we're entering. Some contracts are that by commercialquantities where the players are entering to different segments and we're trying to move thecommercial products to our sites. So we need to invest into that as well.So there's a lot more focus on the CDMO contracts last 12 to 18 months. So that business, we'retrying to grow substantially, but not at kind of products, more complex specialty kind of productsand also focusing on commercialized products where you have clear visibility on revenues inthe next 2 to 3 years with worst-case take-or-pay agreements, I would say.Shyamakant Giri:And Tarang, on your Cenexi's question, the performance in this quarter reflects a disciplinedexecution over past so many quarters, including capacity utilization, workforce rationalizationor optimization, ramp-ups and all of that. So there will be quarter-to-quarter fluctuation. Butoverall, on annualized basis, we expect EBITDA to remain positive. And we are confident inCenexi's medium- to long-term growth. .Tarang Agrawal:Just a follow-up on Cenexi. So would it be fair to presume that EUR50 million is a good basekind of work with now?Ravi Mitra:So, on an annualized basis, yes, you can take it [EUR] 200 [million], but there could be somequarter to quarter fluctuations.Moderator:Thank you. The next question is from Neha Manpuria from Bank of America.Neha Manpuria:My first question is again on the capex number, the INR2,000 crores that we had mentioned,how much of this would be for Cenexi versus the Base business? .Ravi Mitra:This is for Base business, Neha.Neha Manpuria:Okay. So that means we're really doubling the gross block or really doubling the gross blockonce this capex is completed.Ravi Mitra:Yes, that's correct. Yes.Neha Manpuria:Okay. And what would be the average utilization of the existing capacity that we have? And atwhat point do you think capacity becomes a constraint for growth? And how soon would weneed to get this capacity up and running to maintain the mid-teens growth that you've guided to?Srinivas Sadu:So it depends on the lines, but most of the lines are running at 80%, 90% capacity. Some linesare almost top of that. On the prefilled syringe, we have enough capacities. And we're notinvesting into that. And of course, the cartridge, these are new technology we got into those wehave enough capacities.But if you look at lyophilizers or liquid vials, I think those are almost — they're limning at —most of the lines are at 90% capacity, a few lines at 40%, 50%. So at least for the next 2 years, we need to invest into additional capacity. So this INR2,000 crores will be spread across the next few years.
Understood. And my second question is on the overall guidance, I think we had mentioned a mid-teens guidance. I think we're tracking at about 12%, and there was more of a large product launch by our partner in the U.S. It seems to have been delayed. Based on the 12% growth in the 9 months, do we still have confidence in that 15%? And what's the update on the Dalba launch by the partner?
Good thing is Dalba is approved in 6 countries in Europe. So we launched in December in 6 of the European countries. So more countries gets launched out [side] of U.S. U.S., we have a goal 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.
And let's assume Dalba does not come t hrough instead, would we still be able to maintain the mid-teens growth that we've been guiding to?
So the additional batches -- additional 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 batc hes. So if that happens, we will see some numbers coming from the U.S. as well.
Okay. And how should we think about the growth from here for FY '27 for the base business? Cenexi, like you mentioned the EUR 200 million base, which we should grow on for the base business, what's the growth? Because even for Europe, if we see the CMO contract is ramping up much lower than what I would have -- we would have expected. So is it possible for us to maintain this mid-teens growth going or should we see this growth momentum possibly improve given the investments we are making?
I think overall, 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 at least in second half of this year, we should get some quantities, if that happens it will be little bit more. But I think I think 12% to 13% is, I think, the best fact.
CMS approval is expected this year in fiscal '26, is the remaining two ones?
That's a meaningful business. The variation sizing has happened -- is happening in different countries in Europe. Approval is expected in 6 months. Yes. If that happens, then it could be a little higher.
Okay. Got it. All right. Thank you so much.
Thank you. Next question is from Ashish from Leo Capital. Please go ahead.
Yes. 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? Gland Pharma LimitedJanuary 28, 2026we need to invest into additional capacity. So this INR2,000 crores will be spread across the nextfew years.Neha Manpuria:Understood. And my second question is on the overall guidance, I think we had mentioned amid-teens guidance. I think we're tracking at about 12%, and there was more of a large productlaunch by our partner in the U.S. It seems to have been delayed. Based on the 12% growth inthe 9 months, do we still have confidence in that 15%? And what's the update on the Dalbalaunch by the partner?Srinivas Sadu:Good thing is Dalba is approved in 6 countries in Europe. So we launched in December in 6 ofthe European countries. So more countries gets launched out [side] of U.S. U.S., we have a goaldate in February. So hopefully, we're just waiting for an approval. So they need an additionaldata, which was submitted this month in January. So we should be able to get some.Neha Manpuria:And let's assume Dalba does not come through instead, would we still be able to maintain themid-teens growth that we've been guiding to?Srinivas Sadu:So the additional batches — additional demand, which came from Europe. So that will at leastoffset 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, wewill see some numbers coming from the U.S. as well.Neha Manpuria:Okay. And how should we think about the growth from here for FY '27 for the base business?Cenexi, like you mentioned the EUR 200 million base, which we should grow on for the basebusiness, what's the growth? Because even for Europe, if we see the CMO contract is rampingup much lower than what I would have — we would have expected. So is it possible for us tomaintain this mid-teens growth going or should we see this growth momentum possibly improvegiven the investments we are making?Srinivas Sadu:I think overall, as a company, we should be growing at 12%-13%, at least that's the minimumconfidence we have. And if the CMS get faster approval in Europe, where the variation filing ishappening. And if you get that earlier than anticipated. So we thought at least in second half ofthis year, we should get some quantities, if that happens it will be little bit more. But I think Ithink 12% to 13% is, I think, the best fact.Neha Manpuria:CMS approval is expected this year in fiscal '26, is the remaining two ones?Srinivas Sadu:That's a meaningful business. The variation sizing has happened — is happening in differentcountries in Europe. Approval is expected in 6 months. Yes. If that happens, then it could be alittle higher.Neha Manpuria:Okay. Got it. All right. Thank you so much.Moderator:Thank you. Next question is from Ashish from Leo Capital. Please go ahead.Ashish:Yes. 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 the 140 million is a fungible capacity, which has both cartridges and vial, number one. Number two, we have launched our first GLP in Canada last quarter Liraglutide and we are -- there's a US approval coming through, a lready approved in U.S. We have launched in January already in the U.S. We have contracted two to three more GLP players, and there is a pipeline of around six to seven players more to be contracted. And we are also looking beyond the GLPs, for this cartridge line like insulin and insulin analogue. So we are in talks with one of very important big insulin players for the capacity that we have. So overall, looking at the things we can look at in FY '27 around 15 million to 20 million utilization. It would take some time for us to completely utilize 140 million. But this is what the visibility as of now.
So as of now capacity is 40 million just to be clear, and then 100 million is getting added this year. But the idea is not -- you're going to fill up the line with GLP -1 in near term. The idea is to have this capacity ready because of the contracts 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. 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 capacity for fill and finish on the pen cartridge side 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 you'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 3-4 years forecast, we are not considering too much of GLP-1 because one is, of course, the patent situation and also the others [like] how the pricing will pan out. So the numbers, what we are projecting is very minimum revenue numbers we are allocating to GLP-1. If it really happens like the market is saying, then it will be additional number what we could get to, in addition to the guidance, what we're giving.
The next question is from Bino Pathiparampil from Elara Capital.
You partly answered my questions. But I just wanted to know, are you -- have you already tied up some semaglutide contracts for FY '27 within your capacity? Or is it all Liraglutide as of now?
No, we have signed up with several semaglutide generics also. Even that we have signed up.
So including semaglutide, you're saying only about 30 million of your 40 million capacity in the like in FY27.
If we add up the -- what customers are estimating and projected, it will be huge numbers. So we don't want to be too optimistic on that. 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
So first and foremost, let me take the 140 million is a fungible capacity, which has both cartridgesand vial, number one. Number two, we have launched our first GLP in Canada last quarterLiraglutide and we are — there's a US approval coming through, already approved in U.S. Wehave launched in January already in the U.S. We have contracted two to three more GLP players,and there is a pipeline of around six to seven players more to be contracted.And we are also looking beyond the GLPs, for this cartridge line like insulin and insulinanalogue. So we are in talks with one of very important big insulin players for the capacity thatwe have. So overall, looking at the things we can look at in FY '27 around 15 million to 20million utilization. It would take some time for us to completely utilize 140 million. But this iswhat the visibility as of now.Srinivas Sadu:So as of now capacity is 40 million just to be clear, and then 100 million is getting added thisyear. But the idea is not — you're going to fill up the line with GLP-1 in near term. The idea isto have this capacity ready because of the contracts we have. In the meantime, we also — andthat's the reason why we have a fungible line where we can fill vials and cartridges in one lineand syringes and cartridges in the other line. So you can utilize for other products also. But Ithink the 40 million probably will fill-up faster because of the insulin discussions what we'rehaving with the partners.Ashish:Got it. Would you say capacity for fill and finish on the pen cartridge side are in shortage rightnow and there is significant capacity build out ahead of the patent expiry?Srinivas Sadu:It depends how the market pans-out, right? I mean if it really pans-out, like what you'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 3-4 years forecast, we are not considering too much of GLP-1 because one is, ofcourse, the patent situation and also the others [like] how the pricing will pan out.So the numbers, what we are projecting is very minimum revenue numbers we are allocating toGLP-1. If it really happens like the market is saying, then it will be additional number what wecould get to, in addition to the guidance, what we're giving.Moderator:The next question is from Bino Pathiparampil from Elara Capital.Bino Pathiparampil:You partly answered my questions. But I just wanted to know, are you — have you already tiedup some semaglutide contracts for FY '27 within your capacity? Or is it all Liraglutide as ofnow?Srinivas Sadu:No, we have signed up with several semaglutide generics also. Even that we have signed up.Bino Pathiparampil:So including semaglutide, you're saying only about 30 million of your 40 million capacity in thelike in FY27.Srinivas Sadu:If we add up the — what customers are estimating and projected, it will be huge numbers. So wedon't want to be too optimistic on that. We have to be a little conservative on how the market isbehaving 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 a 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 are 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 a big item for this line, at least for the 40 million line. And the meanwhile, we look at how the market behaves and if you have to sign more contracts, other contracts, what we have signed, are good enough to fill those lines.
Got it. And when do you expect the additional 100 million capacity to be online?
That will be next 5 months, the line is actually getting delivered next week. So by the time validations and everything will happen, 4 months. So by second quarter, the l ine will be ready to take exhibit batches.
Okay. Understood. And one last question. After several quarters of U.S. revenue around high $90 million per quarter. This quarter, you have shown some improvement in US or developed markets around $110 million. Do you think that it can dip below that further? Or this will be a new base on the growth on a quarterly basis?
I did mention in today's call and also previous calls that some of the contracts of our top 10 products what we launched GPO contracts, a few years ago, we got it 3 quarters ago. The supplies would be starting from the third or fourth quarter of FY '26. 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 coming from the new contracts what we have signed up, and 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 join back the queue.
Thank you. The next question is from Sajal Kapoor from Antifragile Thinking. Please go ahead.
Yes. Thank you for taking my questions. M r. 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 in 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 as those metrics have been diluted by Cenexi. So what is the steady state, maybe a midterm 3 -year kind of a road map to try and bridge the gap both on the ROCE as well as the EBITDA between our base business and Cenexi?
One of the initiatives. And of course, we are still working on efficiencies at Cenexi to improve the EBITDA. On the BD front, we have integrated plan and Europe BD. Sometimes it cannot Gland Pharma LimitedJanuary 28, 2026where it's not workable. So from a capacity perspective, we have built in, but as a de-riskingstrategy, we took a fungible line so that we can also use it for other products.So — but what we are saying is, in addition to GLP, we are also — because we're already makinginsulin for Eli Lilly for several years. So we also have that experience. So we're talking to insulinmanufacturers who have commercialized this product in large numbers. So that could be a bigitem for this line, at least for the 40 million line. And the meanwhile, we look at how the marketbehaves and if you have to sign more contracts, other contracts, what we have signed, are goodenough to fill those lines.Bino Pathiparampil:Got it. And when do you expect the additional 100 million capacity to be online?Srinivas Sadu:That will be next 5 months, the line is actually getting delivered next week. So by the timevalidations and everything will happen, 4 months. So by second quarter, the line will be readyto take exhibit batches.Bino Pathiparampil:Okay. Understood. And one last question. After several quarters of U.S. revenue around high$90 million per quarter. This quarter, you have shown some improvement in US or developedmarkets around $110 million. Do you think that it can dip below that further? Or this will be anew base on the growth on a quarterly basis?Srinivas Sadu:I did mention in today's call and also previous calls that some of the contracts of our top 10products what we launched GPO contracts, a few years ago, we got it 3 quarters ago. Thesupplies would be starting from the third or fourth quarter of FY '26. And that's why you'reseeing 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% onquarter-on-quarter. So these volumes are coming from the new contracts what we have signedup, and this will get annualized next year. So it's basically what we lost, we got it back this year,I would say.Bino Pathiparampil:Great. Thank you. I will join back the queue.Moderator:Thank you. The next question is from Sajal Kapoor from Antifragile Thinking. Please go ahead.Sajal Kapoor:Yes. Thank you for taking my questions. Mr. Sadu, beyond the reported turnaround at Cenexiand congratulations by the way you have been sounding very positive over the previous fewearnings 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 in the ROCE becauseit's relative to our base business, where we were before the acquisition, we were a lot higher onthe EBITDA as well as the ROCE as those metrics have been diluted by Cenexi. So what is thesteady state, maybe a midterm 3-year kind of a road map to try and bridge the gap both on theROCE as well as the EBITDA between our base business and Cenexi?Srinivas Sadu:One of the initiatives. And of course, we are still working on efficiencies at Cenexi to improvethe EBITDA. On the BD front, we have integrated plan and Europe BD. Sometimes it cannotPage 13 of 18 reflect directly into Cenexi's business, but it also as a consol company, you should start looking at it. I mean, if you look at this quarter itself, our milestone income in the U.S. actually has come down drastically. But overall, it's only 2% decrease because most of the actually milestones also came from our contracts in Europe. So you should also see that how the Cenexi and Gland together helping the company which you 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's business, but as a consol business what you can get out of this. So you will see the European business growing. And we also have to see 35% business is great, but also we have to see how dependent on -- are we on U.S. we have seen 2 years back when we had a setback, we are so dependent on U.S., we decided, okay, we need to de-risk ourselves. So you should also look at now today, we are dependent on U.S. of 50% of business, 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 do we improve the portfolios of Cenexi. And that's the reason why you see investments going into higher -end products, not just ampoule business, which is there. And in pharma, it takes time. So it's the transition we are doing. And also, it has capabilities which Gland can exploit, whether it is herbal products, which we can't make or the controlled substances, which we can't make. Now again, you have to look at it from a synergy perspective. So as Gland, you cannot do those kinds of products , with Cenexi, we can do the product. So in the future, you might see revenues coming out of Gland base business, but it won't have happened if you don't have Cenexi. So as a company, I think we should start looking at how Cenexi contributed to Gland, how Gland is contributed to Cenexi rather than independently looking at Cenexi . Because that's how when you make an acquisition, we just don't look at single business. You 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 this is several our development projects. Now we have started R&D and so products where Gland cannot do it because of the facilities that we don't have, where Cenexi has. So we start manufacturing from there. So I think from a long-term strategic perspective, it's a move we consciously took. Yes, it took time of 2 years to get it turn around and this is our first acquisition. And we are integrating it. So you see more positive results independently for Cenexi and also as a consol 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, I agree that you can't look at the individual businesses as an individual part, you have to look at the whole. So I completely appreciate that. My second and last question is, regarding this biologic CDMO. So we are tripling the capacity, right, if I'm not mistaken, we are tripling the capacities from 8 KL to 23 KL, and what is the expected ROCE and this capacity expansion all backed by contracts GLAND] Gland Pharma LimitedJanuary 28, 2026reflect directly into Cenexi's business, but it also as a consol company, you should start lookingat it. I mean, if you look at this quarter itself, our milestone income in the U.S. actually has comedown drastically.But overall, it's only 2% decrease because most of the actually milestones also came from ourcontracts in Europe. So you should also see that how the Cenexi and Gland together helping thecompany which you talked about initially, but the focus was mostly on how to turn around. Butalso you should see in parallel, what are the synergies we can get out of this business, which willnot directly seen from Cenexi's business, but as a consol business what you can get out of this.So you will see the European business growing.And we also have to see 35% business is great, but also we have to see how dependent on — arewe on U.S. we have seen 2 years back when we had a setback, we are so dependent on U.S., wedecided, okay, we need to de-risk ourselves. So you should also look at now today, we aredependent on U.S. of 50% of business, 25% is in Europe.Now the quality of the business we do, we have to improve for sure. One is, of course, gettingthe efficiencies back. Second, how do we improve the portfolios of Cenexi. And that's the reasonwhy you see investments going into higher-end products, not just ampoule business, which isthere. And in pharma, it takes time. So it's the transition we are doing.And also, it has capabilities which Gland can exploit, whether it is herbal products, which wecan't make or the controlled substances, which we can't make. Now again, you have to look at itfrom a synergy perspective. So as Gland, you cannot do those kinds of products, with Cenexi,we can do the product. So in the future, you might see revenues coming out of Gland basebusiness, but it won't have happened if you don't have Cenexi.So as a company, I think we should start looking at how Cenexi contributed to Gland, how Glandis contributed to Cenexi rather than independently looking at Cenexi. Because that's how whenyou make an acquisition, we just don't look at single business. You see as a whole, how thebusiness 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 this is several our development projects.Now we have started R&D and so products where Gland cannot do it because of the facilitiesthat we don't have, where Cenexi has. So we start manufacturing from there. So I think from along-term strategic perspective, it's a move we consciously took. Yes, it took time of 2 years toget it turn around and this is our first acquisition. And we are integrating it. So you see morepositive results independently for Cenexi and also as a consol company.Sure. That's very helpful. And thank you for detailing the response, which kind of helps us betterunderstand the overall synergies and the dynamics because you just absolutely, I agree that youcan't look at the individual businesses as an individual part, you have to look at the whole. So Icompletely appreciate that. My second and last question is, regarding this biologic CDMO.So we are tripling the capacity, right, if I'm not mistaken, we are tripling the capacities from 8KL to 23 KL, and what is the expected ROCE and this capacity expansion all backed by 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 will be building this capacity in Shamirpet beside our existing 8 KL. So we are in a stage where we don't have -- because in typical CDMO business, you have to build the capacity and then sign the contracts, but we are in active discussion with some players for the products there. So at this point of time, 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.
Yes. Good evening and thanks for taking my question. R avi, in case of the ESOP charges that you take, how should we th ink about this year, next year a nd will it sort of come down going forward?
So the current quarter is INR14 crores. And typically, it would be -- 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 we annualize, it will be a little higher than this year's cost. But I'll -- and then it's not a full ESOPs scheme. So we may have future grants also given. In that case, the cost may go up. So we will not be able to exactly quantify what's going to be the ESOP cost next year. But typically, we have -- where the vesting is over a period of 3 years. So it gets distributed over a period of 3 years in any new grants.
Okay. And also this 15 million to 20 million that you mentioned about utilization for the new cartridge line for fiscal '27, how should we think about in '28 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 to 8 GLP-1 customers also where the talks are going on. So I think '28 will be far, far better than '27. I don't have a number now. But we are looking very positive and very optimistic about taking this line ahead.
Great. So just for fiscal '28 as you see G LP scale up, you see the CDMO contract coming through. And also, you talked about synergy benefits coming out of Cenexi. So for the base business, should we expect stronger growth in fiscal '28 versus 12%-13% that you talked about for fiscal '27?
So we are looking at 15% CAGR 5 years as a company, other than the inorganic what we meant to in the next few years. As organic, we look at 15% CAGR for 5 years.
Okay. And just one question, if I can ask 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 Gland Pharma LimitedJanuary 28, 2026that we have signed either with Dr. Reddy's or otherwise? I mean, how confident are we in termsof utilizing this enhanced capacity? And what is the hurdle rate in terms of return on capital?Ravi Mitra:So this is a Greenfield. We will be building this capacity in Shamirpet beside our existing 8 KL.So we are in a stage where we don't have — because in typical CDMO business, you have tobuild the capacity and then sign the contracts, but we are in active discussion with some playersfor the products there. So at this point of time, we'll not be able to put a number to that. But ourhurdle rate for any investment is, of course, 20% IRR. So that we keep in mind when we makeour internal investment projections.Sajal Kapoor:That’s helpful. Thank you so much and all the very best. Thank you.Moderator:Thank you. The next question is from Saion from Nomura. Please go ahead.Saion:Yes. Good evening and thanks for taking my question. Ravi, in case of the ESOP charges thatyou take, how should we think about this year, next year and will it sort of come down goingforward?Ravi Mitra:So the current quarter is INR14 crores. And typically, it would be — it would go down for thisgrant as we see next year. And of course, this ESOP started from middle of QI. So full year, ifwe annualize, it will be a little higher than this year's cost. But I'll — and then it's not a full ESOPsscheme. So we may have future grants also given.In that case, the cost may go up. So we will not be able to exactly quantify what's going to bethe ESOP cost next year. But typically, we have — where the vesting is over a period of 3 years.So it gets distributed over a period of 3 years in any new grants.Saion:Okay. And also this 15 million to 20 million that you mentioned about utilization for the newcartridge line for fiscal '27, how should we think about in '28 if you have any visibility aroundthat?Shyamakant Giri:So there is — so we spoke this capacity utilization with insulin. As Mr. Sadu also told, we aretalking to a big pharma company on the insulin side. And on the other hand, there is a pipelineof 7 to 8 GLP-1 customers also where the talks are going on. So I think '28 will be far, far betterthan '27. 1 don't have a number now. But we are looking very positive and very optimistic abouttaking this line ahead.Saion:Great. So just for fiscal '28 as you see GLP scale up, you see the CDMO contract comingthrough. And also, you talked about synergy benefits coming out of Cenexi. So for the basebusiness, should we expect stronger growth in fiscal '28 versus 12%-13% that you talked aboutfor fiscal '27?Srinivas Sadu:So we are looking at 15% CAGR 5 years as a company, other than the inorganic what we meantto in the next few years. As organic, we look at 15% CAGR for 5 years.Saion:Okay. And just one question, if I can ask regarding the synergy from Cenexi, now since it’sstabilizing, how should we think about that? I mean if you can give some color on the kind ofPage 15 of 18 discussions you are having that the base business can get effect -- impacted? And the trajectory around that, I would assume 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, we have integrated the BD which means we have a lot of customers who wanted to make in Europe, this integrated BD team will at cross sell each other's capacity. This is one part of it. The second part of it is also we will have a full year of Line G, which is a high- speed line that we installed last year. We're also installing another high speed line there. We have seen a ramp-up in HSE of the inactivated vaccine and also on the opthal gel. With respect to synergy, yes, BD, as I told you, there's a tech transfer synergy of -- there's a knowledge transfer happening between both the tech transfer team. There is a synergy around efficiency, there's synergy around quality teams and all of that. Yes, a lot of synergies, a lot of synergies are at play, okay? It is difficult to quantify at this point in time. But we have taken baby steps and we have seen benefit coming out of this synergy.
So just to add to on the softer aspects, from the BD perspective, several customers, we are doing a joint tendering right now, especially we have -- we discussed our 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 were quoted from Cenexi's and probably 70% from Gland. So this kind of stuff will happen. I mean when I'm saying 15% CAGR, we are 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 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 4 products last quarter in Europe. That's where 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 that market also. That's again ongoing process there. It's a new entry for us in terms of filing dossiers in Europe. We have just 4 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 companies the opportunity to grow the business because of the cost structure in Europe. They're not able to compete too w ell 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 share -- so yes, so several areas we're waiting together.
Understood. Okay. Thank you.
Thank you. N ext question i s from Abdulkader Puranwala from ICICI Securities. Please go ahead. GLAND] Gland Pharma LimitedJanuary 28, 2026discussions you are having that the base business can get effect — impacted? And the trajectoryaround that, I would assume these things take time. So is there a point where you see inflectionhappening on account of Cenexi, the synergy benefits for the base business?So as Mr. Sadu said, we have integrated the BD which means we have a lot of customers whowanted to make in Europe, this integrated BD team will at cross sell each other's capacity. Thisis one part of it. The second part of it is also we will have a full year of Line G, which is a high-speed line that we installed last year. We're also installing another high speed line there.We have seen a ramp-up in HSE of the inactivated vaccine and also on the opthal gel. Withrespect to synergy, yes, BD, as I told you, there's a tech transfer synergy of — there's a knowledgetransfer happening between both the tech transfer team. There is a synergy around efficiency,there's synergy around quality teams and all of that. Yes, a lot of synergies, a lot of synergies areat play, okay? It is difficult to quantify at this point in time. But we have taken baby steps andwe have seen benefit coming out of this synergy.So just to add to on the softer aspects, from the BD perspective, several customers, we are doinga joint tendering right now, especially we have — we discussed our capacities earlier in the call.We have a lot of ampoule capacities. And there are a lot of tenders, global tenders coming fromthe big pharma to consolidate the ampoule business.So we have actually participated in two tenders where some volumes were quoted from Cenexi'sand probably 70% from Gland. So this kind of stuff will happen. I mean when I'm saying 15%CAGR, we are not included these because these are happening. But we are pretty confidentbecause if you look at how the entire market scenario is even the companies are trying tointegrate 15-16 CMO services to one company and we have all that under one roof. So we didparticipate in two large tenders 60 million, 70 million ampoule tenders jointly.And there are also products, the companies who are taking CDMO services from Cenexi, they'reactually talking to us to in-license products from Gland. So that will open up. So we havelicensed 4 products last quarter in Europe. That's where you see some milestone income fromEurope 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 thatmarket also. That's again ongoing process there. It's a new entry for us in terms of filing dossiersin Europe. We have just 4 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'relooking at. And also, we are also giving companies the opportunity to grow the business becauseof the cost structure in Europe. They're not able to compete too well in the RoW markets. Sothey're losing share. So we are offering services to them in India so that they can get a betterpricing, so they can increase the volumes share — so yes, so several areas we're waiting together.Understood. Okay. Thank you.Thank you. Next question is from Abdulkader Puranwala from ICICI Securities. Please goahead.
Congratulations on a good set of numbers. Sir, my first question is pertaining to your Europe business. So for Gland and Cenexi, both of these segments, we have seen very good growth this particular quarter. So I just wanted to understand here that what is the kind of opportunity you're seeing in Cenexi first on this inactiv ated to vaccine and the sterile gel and for Gland as well, would this quarterly run rate be sustainable in the quarters ahead as well?
So on the se two product, inactivated vaccine and sterile gel, there is a ramp -up that we have seen. And these are products from the innovative pharma side. In activating vaccine is seasonal, but we have seen more ramp up quarter -by-quarter. This will continue to grow. And similarly, the ophthal sterile gel. On the other question that you asked on the growth, yes, as I told in the past that all the effort still continues. But all the effort that we started 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're confident on Cenexi's medium and long-term growth.
Understood. And sir, on your gross margins for the base business. So despite your share going up significantly as compared to where you were last year, the gross margins are still better. So would it be fair to assume that the 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 prices wise, it is down, but we are -- we become more efficient, I would say, with initiatives which we took -- so 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 period, we still were able to maintain the 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 only because of internal efficiency. We came out increasing batch sizes. We have invested -- there was a question around capex side, actually invested into large capacity tanks so that will increase batch size. So some investments have went into that to reduce the costs . And that's what you're seeing now. So basically, it's aggressive pricing, reduced cost internally to be more attractive in terms of market scenario, which gave us volumes also.
Okay. And sir, one more on the co -development partnership products. So the 15 products you have, which will begin in '28. So what is the TAM for these 15 products and from '28 perspective, how many products of that we should see getting commercialized?
We will come back to you on this question Abdul.
Due to time constraints, we'll have to take that as a 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.
Congratulations on a good set of numbers. Sir, my first question is pertaining to your Europebusiness. So for Gland and Cenexi, both of these segments, we have seen very good growth thisparticular quarter. So I just wanted to understand here that what is the kind of opportunity you'reseeing in Cenexi first on this inactivated to vaccine and the sterile gel and for Gland as well,would this quarterly run rate be sustainable in the quarters ahead as well?Shyamakant Giri:So on these two product, inactivated vaccine and sterile gel, there is a ramp-up that we haveseen. And these are products from the innovative pharma side. In activating vaccine is seasonal,but we have seen more ramp up quarter-by-quarter. This will continue to grow. And similarly,the ophthal sterile gel.On the other question that you asked on the growth, yes, as I told in the past that all the effortstill continues. But all the effort that we started beginning of 2025 is now showing results insome way. We'll push the pedal more and we make sure that on an annualized basis, Cenexiremains on course, and we're confident on Cenexi's medium and long-term growth.Abdulkader Puranwala:Understood. And sir, on your gross margins for the base business. So despite your share goingup significantly as compared to where you were last year, the gross margins are still better. Sowould it be fair to assume that the new businesses are at par at what you are currently doing inU.S. or in Europe itself?Srinivas Sadu:To be honest, actually, if you look at the prices wise, it is down, but we are — we become moreefficient, I would say, with initiatives which we took — so that's how we're able to maintain themargins and be more aggressive in terms of pricing. So if you see there was a price drop ofalmost 5%-6%, if you compare to the period, we still were able to maintain the margins becauseour costs have come down. And that's why we are seeing more volumes, same margin, but lowerpricing. So it kind of nullified that. And that's only because of internal efficiency.We came out increasing batch sizes. We have invested — there was a question around capex side,actually invested into large capacity tanks so that will increase batch size. So some investmentshave went into that to reduce the costs. And that's what you're seeing now. So basically, it'saggressive pricing, reduced cost internally to be more attractive in terms of market scenario,which gave us volumes also.Abdulkader Puranwala:Okay. And sir, one more on the co-development partnership products. So the 15 products youhave, which will begin in '28. So what is the TAM for these 15 products and from '28 perspective,how many products of that we should see getting commercialized?Shriniwas Dange:We will come back to you on this question Abdul.Moderator:Due to time constraints, we'll have to take that as a last question. I would now like to hand theconference over to the management team for closing comments.Shriniwas Dange: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 outto us. We look forward to connecting with you again next quarter. Thank you.
Thank you very much. On behalf of Gland Pharma Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines. This transcript is provided without express or implied warranties of any kind and should be read in conjunction with the accompanying materials published by the company. The information contained in the transcript is a textual representation of the company's event and while efforts are made to provide accurate transcription, there may be material errors, omissions, or inaccuracies in the reporting of the substance of the event. The transcript has been edited wherever required for clarity, correctness of data, or transcription error. The company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy. GLAND] Gland Pharma LimitedJanuary 28, 2026Thank you very much. On behalf of Gland Pharma Limited, that concludes this conference.Moderator:Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines. This transcript is provided without express or implied warranties of any kind and should be read in conjunction with theaccompanying materials published by the company. The information contained in the transcript is a textual representation ofthe company's event and while efforts are made to provide accurate transcription, there may be material errors, omissions, orinaccuracies in the reporting of the substance of the event. The transcript has been edited wherever required for clarity,correctness of data, or transcription error. The company takes no responsibility for such errors, although an effort has beenmade to ensure a high level of accuracy.