Detailed Narrative
Q2 FY26 Financial Performance Overview
Aurobindo Pharma reported a consolidated revenue of ₹8,286 crores for Q2 FY26, marking a 6% year-on-year growth. EBITDA stood at ₹1,678 crores, reflecting a 7% YoY increase and achieving a margin of 20.3%. The company's PAT for the quarter was ₹848 crores, with R&D expenditure at ₹414 crores, representing 5% of total revenue. Gross margins improved to 59.7% from 58.8% in the previous quarter, supported by raw material prices and business mix.
Formulations Business Drives Growth Across Key Markets
The overall Formulation business grew 10% year-on-year, contributing approximately 88% of total consolidated revenues with ₹7,325 crores. US Formulation revenues reached $417 million, with US Oral Solid (excluding gRevlimid) growing a healthy 6% QoQ and US Injectable sales also up 6% QoQ. The European business maintained strong growth of 18% YoY, amounting to ₹2,480 crores (€243 million), and is on track to achieve a $1 billion annual revenue milestone by FY26. Growth markets also saw a 9% YoY increase to ₹882 crores.
Pen-G Plant Progress and Profitability Outlook
The Pen-G facility commenced operations on July 1, 2025, producing around 1,050 MT at 40-50% capacity, equating to an annualized 6,000 MT. Management stated the plant is nearing breakeven from current operations and can quickly ramp up to 800 tons/month, which would contribute to EBITDA. The company is seeking Minimum Import Price (MIP) policy changes from the government to support achieving 100% capacity utilization of 15,000 MT, which is expected to significantly boost gross margins to over 60% once fully operational.
Biosimilar Pipeline Advancements and Regulatory Tailwinds
Aurobindo provided significant updates on its biosimilar pipeline, including successful Phase 3 outcomes for Denosumab and Omalizumab. EMA submissions for Denosumab are planned for April 2026, and FDA in July 2026. Omalizumab EMA application is set for June/July 2026, with the US a quarter later. Notably, the company received an EMA Phase 3 clinical study waiver for Tocilizumab, with submission planned for July next year. Management highlighted that recent FDA draft guidance aims to streamline approvals by reducing reliance on comparative efficacy studies, potentially shrinking timelines and investment.
Strategic Investments and Capacity Expansion
Net CapEx for the quarter was $106 million, focused on manufacturing capabilities, compliance, and automation. Biosimilar-related CapEx includes commissioning 2x 2,500L mammalian bioreactors at CuraTeQ this quarter and a vial filling line by June/July next fiscal. The TheraNym project, a ₹1,000 crore capital investment for a 2x 15kL mammalian bioreactor commercial scale facility, is expected to be ready by June/July next year. Additionally, two more 15kL bioreactor lines are being added as part of an expanded collaboration with MSD.
China OSD Facility and Lannett Acquisition Progress
The China OSD facility is ramping up towards a 2 billion capacity, with 10 European and 3 local product approvals. It is on track to achieve EBITDA breakeven by Q3-Q4 FY26 and aims for triple-digit turnover (potentially $150 million) within the next 2-3 years. The Lannett acquisition, currently awaiting FTC approval, is expected to strengthen Aurobindo's market position and expand its portfolio, particularly with ADHD products, contributing to medium-term growth.
Outlook and Margin Targets Reaffirmed
Aurobindo reiterated its internal margin target of 20-21% for FY26, driven by sustained business momentum, volume expansion, and a stable pricing environment. The company expects continued improvement in its Injectable business, supported by supplies from the China plant to Europe, new launches, and the Lannett acquisition. The period of 2027-2028 is anticipated to be an inflection point for the biosimilar business, with several approvals expected in Europe and the US, further solidifying future growth.