Aurobindo Pharma Limited — Q1 FY26 earnings call

Call held 5 Aug 2025

Management summary

Aurobindo Pharma reported a steady Q1 FY26 with 4% YoY revenue growth, primarily driven by strong performance in Europe and the ARV segment. However, the US formulations business saw a 4% decline due to lower gRevlimid sales and destocking, while the API segment declined 16% due to pricing pressures. The company successfully resumed Pen-G plant operations and is confident in achieving its internal target margin of 20%-21% for FY26, supported by new project ramp-ups and strategic acquisitions like Lannett.

Highlights

  • Consolidated revenues grew by 4% year-on-year to ₹7,868 crores, reflecting a steady start to FY26.

  • European business continued its strong trajectory, delivering 9% year-on-year revenue growth to €241 million.

  • ARV revenue delivered a strong 55% year-on-year increase, reaching ₹355 crores, driven by volume uptick and new tender wins.

  • Secured renewal of consent to operate and wastewater disposal clearance for the Pen-G manufacturing plant, which successfully resumed operations on July 1st.

  • Generated a net cash inflow of $98 million during the quarter, improving net cash position to $140 million as of June 30, 2025.

Concerns

  • US Formulations revenue experienced a 4% year-on-year decline to $408 million, primarily due to a significant reduction in gRevlimid sales and temporary customer destocking.

  • API business declined 16% year-on-year to ₹916 crores, impacted by geopolitical challenges, business mix, and pricing pressures.

  • EBITDA for Q1 FY26 includes a substantially lower contribution from gRevlimid, approximately ₹150 crores lower than Q1 FY25 and ₹550 crores lower than Q4 FY25.

Key financials

  1. Revenue ₹7,868 Cr +4%YoY
  2. EBITDA ₹1,603 Cr
  3. EBITDA Margin 20.4%
  4. PAT ₹824 Cr
  5. R&D Expenditure ₹367 Cr
  6. R&D % of Revenue 4.7%
  7. Gross Margins 58.8%
  8. Finance Costs 4.9%

What they filed

Q1 FY27: revenue up 16.3%, net profit up 25.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue7,796 7,979 8,382 7,868 8,286 +6%8,646 +8%8,853 +6%9,150 +16%
EBITDA1,566 1,578 1,760 1,603 1,678 +7%1,773 +12%1,750 −1%1,880 +17%
Net profit817 846 903 824 848 +4%910 +8%921 +2%1,032 +25%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Formulations
    ₹6,953 Cr Revenue88% Share of Total Revenue
  • US Formulations
    408 Mn Revenue
  • European Formulation
    241 Mn Revenue
  • Growth Markets
    ₹772 Cr Revenue90 Mn Revenue USD
  • ARV Formulation
    ₹355 Cr Revenue41 Mn Revenue USD
  • API
    ₹916 Cr Revenue12% Share of Total Revenue

Capital allocation

high confidence
  • Capex $73 Mn
    • Expanding manufacturing footprint, enhancing compliance and automation
    • Biosimilars China facility investment $145 Mn
    • Two US facilities (Dayton) investment $70 Mn
    • Biologics CMO investment (spent) $30 Mn
    • Biologics CMO investment (balance expected) $100 Mn
    Net CapEx for the quarter stood at $73 million, aligned with our investment priorities in expanding manufacturing footprint, enhancing compliance and automation. (Page 4); Approximately $145 million invested in China facility... (Page 5); Approximately $70 million in two U.S. facilities, Dayton... (Page 5); Approximately $30 million spent in Biologics CMO, balance $100 million plus expected to be invested between now and March′27. (Page 5)
  • Debt Gross $884 Mn Cost 4.9%
    Gross Debt reduced to $884 million, down from $930 million at the end of March’25, reflecting ongoing deleveraging and disciplined capital allocation. (Page 5); Our Finance costs declined to 4.9% from 5.5% in the previous quarter, benefiting from prudent treasury management. (Page 5)
  • M&A Lannett Acquisition · Pending regulatory

    Integration is very easy because we have similar kind of products, only they are in ADHD segment. They are mostly into controlled substances... 70 plus active products... in niche area where the products are in short supply... good CMO business... manufacturing capability for oral solids, liquids and potent substances. The manufacturing capacity is not fully utilized, they utilize only to the extent of ballpark around 40%... can revive those products, especially for the government markets.

    Expected to achieve 15% EBITDA margin or more.

    So, on the Lannett acquisition, this is subject to FTC approval. Obviously, there will be a lot of back and forth. We have given 9 months as a matter of abundant caution, it could be earlier. (Swami Iyer, Page 8); So, on the Lannett acquisition, this is subject to FTC approval. Obviously, there will be a lot of back and forth. We have given 9 months as a matter of abundant caution, it could be earlier. (Swami Iyer, Page 8); So, we believe that integration is very easy because we have similar kind of products, only they are in ADHD segment. They are mostly into controlled substances... (Swami Iyer, Page 10); The other synergy, they have got 70 plus active products and many of them are in controlled substances. They're all in niche area where the products are in short supply. (Swami Iyer, Page 10); They also have manufacturing capability for oral solids, liquids and potent substances. The manufacturing capacity is not fully utilized, they utilize only to the extent of ballpark around 40%... (Swami Iyer, Page 10); We think that in the future, we will be able to get a margin of 15% or more. (Swami Iyer, Page 18)
  • Liquidity Cash $140 Mn Net cash position includes investments.
    We generated a net cash inflow of $98 million during the quarter, improving our net cash position, including investments to $140 million as of June 30, 2025, up from $42 million as of March 31, 2025. (Page 4)

Guidance & targets

Margin

  • Internal Target Margin Margin · FY26 · High confidence 20%-21%
    We are confident of achieving our internal target margin of 20%-21% range in FY26. (Page 5)
  • Biosimilars Europe Overall Margin Margin · High confidence 50%
    any company, any biosimilar developer and manufacturer who wants to be serious in their European business needs to at least prepare them for an overall 50% margin from the entire European market. (Page 15)

    — Dr. Satakarni Makkapati

  • Lannett EBITDA Margin Margin · High confidence 15% or more
    We think that in the future, we will be able to get a margin of 15% or more. (Page 18)

    — Swami Iyer

Revenue

  • European Business Annual Revenues Revenue · end of FY26 · High confidence €1 billion
    With this consistent performance across all European major markets, we will cross the milestone of €1 billion in annual revenues for the region by the end of FY26. (Page 4)
  • Biosimilars Revenue Start Revenue · Q3-Q4 FY26 · High confidence Q3-Q4
    In Biosimilars, the approvals have started coming in from EU. We expect revenue to start from Q3-Q4 with well above the company average EBITDA margins. (Page 5)

Profitability

  • China Facility EBITDA Break-even Profitability · Q3 FY26 · High confidence Break-even
    This facility with an initial capacity of 2 billion units + is ramping up as expected and will begin contributing to revenue in the coming quarters and expected to break even at EBITDA level by Q3 FY26. (Page 5)
  • PLI Project EBITDA Profitability · Q3 onwards · High confidence Healthy EBITDA
    We are confident of generating healthy EBITDA from Q3 onwards. (Page 5)
  • Pen-G Breakeven Price Profitability · Medium confidence North of $20 [per kg]
    I think the current market price is anywhere north of $20 [per kg]. We'll be profitable somewhere around, I mean, we'll be breakeven somewhere around maybe a couple of dollars plus or minus like that, depending upon the yield in that particular month or the quarter. (Page 14)

    — S. Subramanian

Production

  • Dayton US Facilities Production Start Production · Q2-Q3 FY26 · High confidence Start producing
    Approximately $70 million in two U.S. facilities, Dayton, will start producing from Q2-Q3 FY26. Waiting for approval from the regulatory authorities. (Page 5)
  • Pen-G Production Production · this year · Medium confidence 7,000-8,000 tonnes
    I think we will be expecting anywhere between 7,000-8,000 tonnes production. (Page 7)

    — S. Subramanian

Product Filings

  • Eugia-V Vizag Product Filings Product Filings · next two years · High confidence More than 20 products
    On Eugia-V Vizag plant, we expect to file more than 20 products in the U.S. and Europe from this site over the next two years. (Page 5)

Capex

  • Biologics CMO Investment Balance Capex · between now and March′27 · High confidence $100 million plus
    Approximately $30 million spent in Biologics CMO, balance $100 million plus expected to be invested between now and March′27. (Page 5)

PLI Income

  • Pen-G PLI Income PLI Income · this year · Medium confidence ₹150 crores
    That means at least we can take more than half of it, maybe around ₹150 crores. (Page 7)

    — S. Subramanian

What to watch in Q2 FY26

Pen-G plant stabilization and EBITDA contribution

Q3 FY26
Current Production started July 1st, yields improving, Q1 contribution less than ₹50 crores.
Target Stabilized yields and healthy EBITDA contribution from Q3 FY26 onwards.

Why it matters

The Pen-G plant was a major loss-making unit last year, and its successful stabilization is crucial for overall profitability improvement.

See, last quarter was a very low number, around less than 50 crores. But one good thing is we started the production, we had a good production in, I mean, even though the plant has really the first output came sometime in the second fortnight of July, we had a good ramp up. And what is very encouraging is the yields are improving day by day and hopefully it will get stabilized in the month of August and September. So, that is the reason we think by Q3 onwards we'll be able to do well. (S. Subramanian, Page 7)

Risks & concerns

  • Decline in gRevlimid sales contribution

    high

    gRevlimid sales are largely exhausted, leading to a significant reduction in contribution compared to previous quarters (₹150 crores lower YoY, ₹550 crores lower QoQ).

    Both acknowledged

  • API business pricing pressures

    medium

    API turnover dropped 16% YoY due to pricing pressures from both domestic and import competition, though management expects recovery.

    Both acknowledged

  • US Formulations customer destocking

    medium

    The 4% decline in US formulations revenue was attributed to temporary destocking by wholesalers in anticipation of tariffs, not a fundamental demand issue.

    Both acknowledged

  • FTC approval for Lannett acquisition

    medium

    The Lannett acquisition is subject to FTC approval, which could take up to 9 months and potentially require divestments, though management is confident in the overall deal value.

    Both acknowledged

Q&A highlights

7 direct
gRevlimid contribution to EBITDA vs. topline Partial
You can take that is at the topline level. EBITDA you can work it out yourself, you must be knowing, I am sure.

Clarified that the stated gRevlimid impact was on revenue, not EBITDA, prompting analysts to calculate the EBITDA impact themselves.

Asked by Damayanti Kerai

Future sales potential of gRevlimid Direct
Most of our Revlimid settlement quantities, we have sold it. We have nothing more to sell other than a minimal this thing [remaining quantity]. So, the price impact will not have any bearing on our future revenues. But at the same time, we don't expect significant sales coming from gRevlimid because we already sold off.

Indicated that gRevlimid, a significant past contributor, will not generate substantial sales going forward, impacting future revenue expectations.

Asked by Damayanti Kerai

Reasons for API business decline and recovery outlook Direct
API, the turnover has dropped because of the mainly because of the pricing pressures. Otherwise, I think over a period of time it will start recovering because it cannot sustain for a long time, right. That is the main reason.

Explained the 16% decline in the API segment due to pricing pressures but offered a qualitative expectation of recovery.

Asked by Damayanti Kerai

Operational losses from new plants (Pen-G, Qule) and timeline for improvement Direct
See, last year, we have incurred losses predominantly, as you know, in Pen-G, Qule and other things, right. And as I explained in the script itself, I said, we are expecting good EBITDA starting Q3 onwards. So, the losses will come down. So, that's the main thing. Out of the total, Pen-G was the biggest loss last year and hopefully that will not get continued.

Addressed a key drag on profitability and provided a clear timeline (Q3 onwards) for these units to become EBITDA positive.

Asked by Tushar Manudhane

Impact of US destocking on US Formulations revenue Direct
the tariffs were supposed to go into effect from April 1. If you see, there was a huge surge, much more than the normal quarter surge in the quarter ending March. We believe that some of the wholesalers have stocked up the product in anticipation... So, it is our understanding that this is primarily because the wholesalers have stocked up during the last quarter and they are winding down those positions.

Clarified that the US formulations decline was a temporary destocking event by wholesalers anticipating tariffs, rather than a fundamental demand issue.

Asked by Surya Patra

FTC approval process for Lannett acquisition and potential divestments Direct
So Kunal, that's not our call. I wish it were. That's not our call. Normally, this is dictated by what FTC tells us because ultimately it is their decision, right? So we have reviewed, if we divest, what the implication and if Lannett has to divest. So we feel confident that our business will still be good, even if we divest our product or their product, wherever the strength is. Ultimately, it is FTC call. If I take the worst-case scenario, I think we are still in good shape.

Addressed concerns about potential divestments required by FTC, with management expressing confidence in the overall value and strategic fit of the Lannett acquisition.

Asked by Kunal Dhamesha

Implications of US government's push for domestic manufacturing Direct
manufacturing in US and if any company is prepared for it, I think we are best suited for it. We have a manufacturing facility in New Jersey, which has already started some products... Plus, we have a fourth facility that we can always do it with some time. So we are best suited for enhancing our footprint in the US.

Highlighted Aurobindo's existing US manufacturing capabilities and readiness to adapt to potential policy shifts favoring domestic production.

Asked by Devang

Biosimilar launch strategy and stabilization in Europe Direct
the focus for us right now is to ensure that we have adequate supplies, the supply chain is sorted out. Our QP testing services that we are stabilizing in Europe... function seamlessly in releasing and testing biosimilars, which is required in Europe. You need a qualified personnel [QP] testing. So all this will take about a couple of quarters to stabilize.

Provided insight into the initial operational focus for biosimilar launches in Europe, emphasizing supply chain and quality control stabilization before significant commercial ramp-up.

Asked by Shyam Srinivasan

3 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Aurobindo Pharma reported consolidated revenues of ₹7,868 crores in Q1 FY26, marking a 4% year-on-year increase. EBITDA for the quarter stood at ₹1,603 crores, achieving a margin of 20.4%. The company's PAT was ₹824 crores. R&D expenditure amounted to ₹367 crores, representing 4.7% of revenue, reflecting an ongoing commitment to innovation. Gross margins remained stable at 58.8%, supported by favorable raw material prices and an improved product mix.

Segmental Revenue Performance and Key Drivers

The formulations business grew 7% year-on-year to ₹6,953 crores, contributing 88% of total revenues. This growth was primarily fueled by strong performance in Europe, which saw a 9% increase to €241 million, and the ARV segment, which surged 55% to ₹355 crores ($41 million) due to volume uptick and new tender wins. In contrast, US formulations revenue declined 4% to $408 million, mainly due to reduced gRevlimid sales and temporary customer destocking. The API business also faced headwinds, declining 16% to ₹916 crores, impacted by pricing pressures and business mix.

New Projects and Capex Update

Net CapEx for the quarter was $73 million, aligned with strategic investments in manufacturing footprint expansion and compliance. The Pen-G manufacturing plant successfully resumed operations on July 1st, with healthy EBITDA expected from Q3 FY26. The $145 million China facility, which commenced invoicing in Q1 FY26, is ramping up and projected to break even at the EBITDA level by Q3 FY26. Additionally, two US facilities in Dayton, with a $70 million investment, are expected to start production in Q2-Q3 FY26, pending regulatory approvals. The company does not anticipate further greenfield CapEx in the near to mid-term.

gRevlimid and API Business Outlook

The contribution from gRevlimid was significantly lower in Q1 FY26, impacting EBITDA by approximately ₹150 crores compared to Q1 FY25 and ₹550 crores versus Q4 FY25. Management indicated that most of the gRevlimid settlement quantities have been sold, and significant future sales from this product are not expected. The 16% decline in the API business was attributed to pricing pressures from both domestic and international sources, but management anticipates a recovery over time as these pressures are deemed unsustainable in the long run.

Lannett Acquisition Strategy and Synergies

The acquisition of Lannett is currently awaiting FTC approval, with an estimated closure timeline of up to nine months. Management expressed confidence in the integration process, citing the target's similar product portfolio, particularly in the ADHD segment and controlled substances. Lannett's underutilized manufacturing capacity (currently at 40%) for oral solids, liquids, and potent substances, along with its CMO business and strong business development team, are expected to provide significant synergies and growth opportunities, especially in government markets. The company aims for Lannett to achieve an EBITDA margin of 15% or more.

European Market Growth and Biosimilars Commercialization

The European business continued its robust growth, with revenues reaching €241 million, a 9% year-on-year increase. The company is on track to achieve €1 billion in annual revenues for the region by the end of FY26. Aurobindo has received four biosimilar product approvals in Europe and expects revenue generation from Q3-Q4 FY26, with above-average EBITDA margins. The initial focus for biosimilar commercialization is on ensuring adequate supplies, sorting out the supply chain, and stabilizing QP testing services in Europe to support launch quantities.

US Market Dynamics and Domestic Manufacturing Initiative

The temporary decline in US formulations revenue was primarily due to customer destocking in anticipation of tariffs, rather than a fundamental issue with demand or market share. Management confirmed that demand for oral solids remained stable. Addressing the US government's push for domestic manufacturing, Aurobindo highlighted its existing US facilities in New Jersey and the acquired Lannett capacities, positioning the company favorably to adapt to potential shifts in manufacturing requirements and maintain competitiveness.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Healthcare earnings calls